HOUSE BILL REPORT

EHB 1643

BYRepresentatives Appelwick, Padden, Inslee, Miller, R. King, P. King, Dorn, Cole, Wineberry, Belcher, Dellwo, Leonard, Heavey, Crane, R. Meyers, K. Wilson,  Wolfe, Rector, Prince, Brekke, Brough, Pruitt, Jacobsen, Fuhrman, Locke, Wang and Ferguson

Changing provisions relating to prejudgment interest.

House Committe on Judiciary

Majority Report:  The substitute bill be substituted therefor and the substitute bill do pass.  (13)

      Signed by Representatives Appelwick, Chair; Crane, Vice Chair; Padden, Ranking Republican Member; Belcher, Brough, Dellwo, Hargrove, Inslee, R. Meyers, H. Myers, Schmidt, Scott and Wineberry.

Minority Report:  Do not pass.  (4)

      Signed by Representatives Moyer, Patrick, Tate and D. Sommers.

House Staff:Steve Masciocchi (786-7377)

AS PASSED HOUSE MARCH 10, 1989

BACKGROUND:

Under current law civil judgments accrue interest from the date judgment is entered.  If judgment is appealed and affirmed, interest dates back and accrues from the date the verdict was entered.

Civil judgments accrue interest at the rate specified in the contract, if any, or at the maximum rate allowable under the state usury statute, which is the higher of either (a) 12 percent or (b) four percentage points over the 26-week Treasury Bill rate.

SUMMARY:

Prejudgment interest is provided for.  As a general rule, judgments bear interest from the date the defendant receives written notice of the claim or, where no notice has been given, from the date a lawsuit is initiated.

There are a number of qualifications to this general rule.

First, if a defendant pays part of a claim to a plaintiff or to a third party on behalf of the plaintiff prior to the date of judgment, interest on the part paid accrues from the date of notice to the date of payment.

Second, future damages do not bear prejudgment interest.

Third, if the judgment debtor makes a settlement offer at least 90 days prior to trial, and the offer is at least 75 percent of the judgment amount, prejudgment interest after the date of the settlement offer accrues only on the portion of the judgment that exceeds the settlement offer.

Fourth, if a trial date is continued at the plaintiff's request, prejudgment interest will not be applied during the period of the continuance whether or not the defendant joined or concurred in the request.

Finally, if the judgment amount differs from the amount claimed in the notice, interest accrues only on the judgment amount.

The bill also provides that a plaintiff's attorney shall not receive any prejudgment interest as compensation.

Fiscal Note:      Not Requested.

House Committee ‑ Testified For:    Keith Kessler, Washington State Trial Lawyers Association.

House Committee - Testified Against:      Dick Ducharme, Washington Beer and Wine Wholesalers Assoc.; Greg Morse, Washington Hospital Liability Insurance Fund; Bob Seeber, Washington Restaurant Association; Craig McGee, PEMCO Insurance Co.; Jim Bush, Department of Transportation; Basil Badley, American Insurance Association; Ellen Higgins, Group Health Cooperative; Jeff Tilden, Washington Defense Trial Lawyers Assoc.; Bruce Shafer, Physicians' Insurance.

House Committee - Testimony For:    Insurance companies currently have an incentive to stall and then settle right before trial in order to use plaintiff's money for investment.  Due to insurance company delays, plaintiffs must often wait a year or more to receive any compensation for medical injuries and other damages.

House Committee - Testimony Against:      Plaintiffs will not have an incentive to stall during discovery.  Insurance companies do not have an economic incentive to delay because lawyers' fees cost more than interest earned on the plaintiff's money damages.  There should be no prejudgment interest on future economic damages because future damages are not incurred before judgment.  Liability insurance premiums will increase if this bill passes.