Don't Discount Potential Prejudgment Interest Recovery
April, 2003
Subrogation specialists, and sometimes even their counsel, too often discount the possibility of prejudgment interest as a component of their recovery. Too easily the assumption is made that because the damages in an action for the negligent damage or destruction of property are “unliquidated,” prejudgment interest cannot be recovered. A sampling of property damage case law on the subject shows how wrong the assumption can sometimes be.
Certainly, not all states allow prejudgment interest on tort claims. Among states that have recognized prejudgment interest in tort actions for property damage, a usual requirement is that the value of the property destroyed can be readily calculated by reference to market values or expert testimony. See, e.g., Levy-Zenter Co. v. Southern Pac. Transp. Co., 74 Cal. App. 3d 762 (1977). A property subrogation case can be well-suited to satisfying the rule because by the time the action is brought, the damages often already have been determined and the loss paid. Generally, prejudgment interest accrues from the date of demand, not from the date of loss. Filing of a complaint can be deemed a demand, especially if it includes a request for prejudgment interest.
Following is a sampling of representative cases and states where prejudgment interest has been awarded for property damage.
Damage Caused By Fire
AZ. In Alta Vista Plaza, Ltd. v. Insulation Specialists Co., Inc., the Court of Appeals of Arizona held that the claim of a shopping center owner and its insurer was a liquidated claim entitling plaintiffs to an award of prejudgment interest, notwithstanding the fact that the case had to be tried, where plaintiffs’ repair costs and architect fees were ascertainable by accepted standards of valuation.
FL. The Florida appellate court held that the award for property damage caused by a fire originating in a copy machine should have included prejudgment interest in a strict liability action against the lessor of the machine. Enfield’s Miami Photo, Inc. v. Keyes Co., Inc.
GA. In Barbush v. Oiler, a case for fire losses by tenants against the landlord, the Georgia appellate court noted that under that state’s Unliquidated Damages Interest Act, interest may be added to a judgment award from the date of loss to date of judgment if proof is offered that the plaintiff informed the defendant of the amount claimed by certified mail and at trial judgment is entered for plaintiff in at least that amount.
NY. In Phelps v. A.R. Gundry, Inc., the appellate court held that plaintiffs were entitled to prejudgment interest on property damage from a fire caused by negligence of the defendants computed from the date of the loss. The court also approved prejudgment interest on lost profits from the date of filing the complaint.
MN. In Summit Court, Inc. v. Northern States Power Co., the Minnesota Court of Appeals held that the owner of a hotel was entitled to recover prejudgment interest for loss of use arising from a gas explosion and fire at a hotel at the rate of six percent, calculated from the date the owner made its claim for prejudgment interest against the utility.
UT. The Utah Supreme Court, in Uinta Pipeline Corp. v. White Superior Co., held that the trial court erred in disallowing interest from the time of a negligently-caused explosion and fire which destroyed a compressor station used to increase gas well pressure, where the cost of rebuilding the compressor was subject to computation.
WA. In Walla Walla County Fire Protection Dist. No. 5 v. Washington Auto Carriage, Inc., the fire district filed a subrogation action for negligence and breach of warranty against the company which designed, constructed and installed fire-fighting apparatus on a truck chassis after the new truck caught fire and was destroyed. The court of appeals reversed the trial court’s denial of prejudgment interest on the damages because the reviewing court found that the damages were easily computed by the jury.
Shipping Loss
MD. In Robert C. Herd & Co., Inc. v. Krawill Machinery Corp., the Fourth Circuit reviewed Maryland law on prejudgment interest as it pertained to a crated press which was damaged when it fell into Baltimore Harbor.
Admiralty
LA. The Fifth Circuit, applying Louisiana law, in Geotechnical Corp. of Delaware v. Pure Oil Co., awarded prejudgment interest from the date of loss in a case where a ship was completely destroyed as a result of an explosion.
Damage to Vehicles
AL. In Hunt v. Ward, the Alabama Supreme Court approved an award of prejudgment interest for damage to plaintiff’s truck which was caused by a collision with defendant’s oncoming automobile.
W.VA. The Fourth Circuit, interpreting West Virginia law in Chesapeake & Ohio Ry. Co. v. Elk Refining Co., approved an award of prejudgment interest on the value of a tractor which was damaged and a trailer which was destroyed as a result of being struck by a train.
Building Collapse
TX. In Torrans v. Tri-State Iron and Metal Co., the defendant caused a building to collapse when a boiler it was dismantling plunged through a wall of the building. The Texas court of appeals awarded prejudgment interest from the date of loss.
Learning Point:
While some states, such as Illinois and Missouri, still adhere to the general rule that prejudgment interest is not awardable in suits for negligence, courts in other states are willing to entertain and award prejudgment interest in a tort case where the damages are readily ascertainable. In a property subrogation case, a careful analysis of applicable state law, liability facts and damages must be undertaken to determine whether prejudgment interest can be added to the recovery. For more information on this topic or any of the cases discussed herein, please contact the author directly at kbaer@clausen.com.
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