Opinion ID: 1518134
Heading Depth: 1
Heading Rank: 2

Heading: Interest : Rate on Judgments; in Tort Actions.

Text: ( a ) Rate. Judgments, awards and orders for the payment of money and taxed costs shall bear interest at 6% per annum from the date of entry, except as otherwise ordered by the court. ( b ) Tort Actions. In tort actions, including products liability actions, the court shall include in the judgment interest at 6% per annum on the amount of the award from the date of the institution of the action or from a date 6 months after the date of the tort, whichever is later. The contingent fee of an attorney shall not be computed on the interest so included in the judgment. It will be noted that paragraph (a) deals with interest upon judgments. We dealt in that rule with post-judgment interest because the Legislature had amended the usury statute, N.J.S.A. 31:1-1, to permit the rate upon ordinary loans to go as high as 8% if the Commissioner of Banking and Insurance so provides. By adopting paragraph (a), we advised the bar and the clerks of the courts that judgments would continue to carry interest at the rate of 6%, in accordance with our prior practice. That paragraph has not drawn fire, although the constitutional challenges addressed to paragraph (b) would be no less appropriate if they have substance. We could have waited until some litigant raised the issue, but we thought it good sense and good administration to inform all concerned through the vehicle of a rule incorporated in our rules of civil practice. As we have said, our doing so has not excited criticism. It is subparagraph (b), relating to prejudgment interest, which is attacked. We repeat there is no conflict with any statute; there is no statute on the subject. Nor can it be doubted that the Court has the power and the continuing responsibility to change these judge-made rules of law as justice may require. In short, had the proposition in paragraph (b) been announced in a case of A against B, there could be no claim that the Court lacked the power or in any way transgressed upon the area constitutionally allotted to the Legislature. Thus it is not our power to act that is questioned; it is the method we chose to exercise that power. But if we erred in adopting that method (we will demonstrate in Point II below that we did not), this litigation would not end. For plaintiffs here are entitled to ask for the same result which the challenged rule provides. They cannot be denied their due merely because we mistakenly expressed our view in a rule of court. The underlying issue is thus before us. The merits have been argued fully, and the litigants thus afforded a hearing. Nothing new, however, emerged. This is not surprising, for the subject is not new, and was fully explored at a public hearing before we adopted the rule. We turn then to the merits. Interest is not punitive, Wilentz v. Hendrickson, 135 N.J. Eq. 244, 255-256 (E. & A. 1944); here it is compensatory, to indemnify the claimant for the loss of what the moneys due him would presumably have earned if payment had not been delayed. We mentioned earlier the judge-made limitation that interest should not be allowed if the claim was unliquidated. That limitation apparently rested upon the view that a defendant should not be deemed in default when the amount of his liability has not been adjudged. But interest is payable on a liquidated claim when liability itself is denied, even in good faith, Kamens v. Fortugno, 108 N.J. Super. 544, 552-553 (Ch. Div. 1970). The fact remains that in both situations the defendant has had the use, and the plaintiff has not, of moneys which the judgment finds was the damage plaintiff suffered. This is true whether the contested liability is for a liquidated or for an unliquidated sum. For that reason, the concept of a liquidated sum has often been strained to find a basis for an award of interest. It is said there is now, in general, a willingness to allow interest on unliquidated claims as justice may dictate. 22 Am. Jur. 2 d, Damages, § 181, pp. 259-260. In upholding the retrospective application of a New York statute providing for interest in contract actions upon unliquidated damages, the United States Supreme Court observed that The statutory allowance is for the purpose of securing a more adequate compensation by adding an amount commonly viewed as a reasonable measure of the loss sustained through delay in payment, and that It has been recognized that a distinction, in this respect, simply as between cases of liquidated and unliquidated damages, is not a sound one. Funkhouser v. J.B. Preston Co., 290 U.S. 163, 168, 54 S.Ct. 134, 136, 78 L.Ed. 243, 246 (1933). So also, a refusal to allow interest in tort matters has been criticized. See Moore-McCormack Lines v. Amirault, 202 F. 2d 893 (1 Cir.1953). It is questioned whether justice is thereby done as between parties to the suit. But beyond their interest, there is also a public stake in the controversy, for tort litigation is a major demand upon the judicial system. Delay in the disposition of those cases has an impact upon other litigants who wait for their turn, and upon the taxpayers who support the system. And here there is a special inducement for delay, since generally the claims are covered by liability insurance, and when payment is delayed, the carrier receives income from a portion of the premiums on hand set aside as a reserve for pending claims. See In re Insurance Rating Board, 55 N.J. 19 (1969). Hence prejudgment interest will hopefully induce prompt defense consideration of settlement possibilities. In that meaningful way, prejudgment interest bears directly upon the judicial machinery and the problems of judicial management. It is this facet, added to the consideration of justice between the litigants, which warrants our holding that prejudgment interest be payable in these matters. The proposition we thus accept is not uniquely ours. There are a number of States which so provide by statute. See Colorado: Rev Stats. 1963, Ann., § 41-2-1; Louisiana: LSA-R.S. 13:4203; Michigan: Stat. § 27A.6013, M.C.L.A. § 600.6013, New Hampshire: RSA § 524:1-b (Supp.); New York: CLPR § 5001(a) (damages to property); North Dakota: § 32-03-05; Oklahoma: 12 Okla. St. Ann. § 27(2); Rhode Island: Gen. Laws, § 9-21-10. We add, parenthetically, that it is of no moment that there the principle was established by the Legislature. As we have already noted, the subject of interest on claims rests wholly in case law in our State, and, assuming as we do for the moment that the issue is one of substantive law, the power and responsibility of the judiciary to deal with the subject in the absence of a statute cannot be questioned. We see no strength in the assertion that the allowance of interest duplicates some element of damage or constitutes a payment with respect to damages not yet experienced. The jury is not instructed to add interest to its verdict in tort cases. In any event an instruction to the jury can obviate the risk. And with respect to the criticism that a verdict may embrace losses not yet suffered, the answer is that a verdict necessarily anticipates future experience, and the interest factor simply covers the value of the award for the period during which the defendants had the use of the moneys to which plaintiffs are found to be entitled. We think the equities are met when the date for the commencement of liability for interest is fixed as set forth in paragraph (b) of R. 4:42-11 (the rule here under attack). The question arises whether our holding that prejudgment interest be paid should be imposed retrospectively. We see no reason not to apply the usual rule that judge-made law is retrospective. Under our holding plaintiffs merely receive what in justice is their due, and defendants are required to turn over a gain they received at the plaintiffs' expense. We note that where liability for prejudgment interest was established by statute, the statutes were held to be remedial and hence applicable to actions brought before the statute's effective date, and this notwithstanding the usual rule that statutes operate prospectively. Pepin v. Beaulieu, 102 N.H. 84, 151 A. 2d 230 (Sup. Ct. 1959); Foster v. Quigley, 94 R.I. 217, 179 A. 2d 494 (Sup. Ct. 1962); Kastal v. Hickory House, Inc., 95 R.I. 366, 187 A. 2d 262 (Sup. Ct. 1963); Ballog v. Knight Newspapers, Inc., 381 Mich. 527, 164 N.W. 2d 19 (Sup. Ct. 1969); see also Wilcoxon v. Sun Oil Co., 49 Misc. 2d 589, 267 N.Y.S. 2d 956 (Sup. Ct. 1966). Finally we add that we see no merit in the proposition advanced by the intervenor, that the usual insurance policy, which provides for payment of interest upon a judgment, does not cover prejudgment interest and therefore we should not impose such liability. It is enough to say the carrier's obligation to pay the judgment plainly includes the obligation to pay the constituent elements of damage incorporated in that judgment, among which, of course, is the item of prejudgment interest.