Opinion ID: 1198908
Heading Depth: 3
Heading Rank: 5

Heading: Commencement date for interest rate reduction

Text: Under former Rule 68(b)(1) and former AS 09.30.065(1), [27] the normal statutory rate for prejudgment interest is reduced by 5% per year when a party's award of damages proves less favorable than an offer of judgment. After determining that PCI's jury verdict was less favorable than TH's pretrial offer of judgment, the trial court reduced the rate on PCI's prejudgment interest award from 10.5% to 5.5%. Because the trial court did not separately calculate prejudgment interest for the malpractice and underlying claims, however, its reduction of the prejudgment interest award reached back to December 18, 1985  the accrual date for prejudgment interest on the underlying claim. PCI claims error: Neither Rule 68 nor A.S. 09.30.065 clearly address[es] a malpractice action where part of the damages would be the prejudgment interest on the loss from the underlying action. This argument has merit. As we have previously indicated, prejudgment interest on the underlying claim in a legal malpractice action becomes part of the underlying judgment; as such, it stands apart from interest awarded on the judgment for the malpractice claim. Within the malpractice case, the interest component of the underlying judgment is part of the principal upon which interest is awarded. It follows that a reduction of interest under former Rule 68(b)(1) and former AS 09.30.065 should reach back only to the accrual of the malpractice claim. On remand, the trial court should recalculate the reduction accordingly.