SENATE BILL REPORT

SB 5732

BYSenators Nelson and Johnson

Changing provisions relating to prejudgment interest.

Senate Committee on Law & Justice

Senate Hearing Date(s):February 20, 1989

Senate Staff:Dick Armstrong (786-7460)

AS OF FEBRUARY 15, 1989

BACKGROUND:

Statutes control the rate and duration of interest accrual on judgments.  Separate provisions apply to judgments based on certain contracts, to judgments against governmental entities for their tortious conduct, and to all other judgments.

If a written contract itself provides for interest, then any judgment based on the contract bears interest at the contract's rate.  Judgments against governmental entities for their tortious conduct, and all other judgments not based on a contract accrue interest from the date of entry of the judgment and at the usury rate.

The usury rate applicable to judgments is the higher of 12 percent or 4 percent above the interest rate on 26-week treasury bills.

SUMMARY:

Prejudgment interest is provided for judgments not based on a contract or on a tax refund.  Prejudgment interest applies only to economic damages.  Prejudgment interest accrues from the date that the defendant receives written notice of the cause of action to the date of judgment.  The interest rate is 2 percentage points above the rate for treasury bills.

Prejudgment interest is not applied to periods where only the judgment creditor has requested a continuance.  Money advanced to a judgment creditor accrues prejudgment interest from the date of notice to the date of payment.

If an offer of settlement is made which is not less than 75 percent of the judgment amount, then prejudgment interest is calculated on the portion which exceeds the settlement offer.

Provisions of the bill apply to nongovernmental entities and governmental entities (except for Department of Revenue tax refund cases).  Attorneys do not receive as compensation any part of the prejudgment interest.  The act applies to cases filed after the effective date of the act.

Appropriation:    none

Revenue:    none

Fiscal Note:      requested February 16, 1989