Prejudgment Interest

What Is Prejudgment Interest?

Prejudgment interest is interest for the time between a defined starting point and the entry of judgment. It is distinct from post-judgment interest, which runs from the judgment until the defendant pays. Together they ensure that an award keeps its value from the moment the law fixes the starting date until the money actually changes hands. The interest is added to the judgment by the court; the jury does not calculate it.

States differ on when the clock starts. Some run interest from the date of injury, some from the date of a demand, and some leave it to the jury. North Carolina picked a bright line, the date the action is commenced, which the Rules of Civil Procedure define as the filing of the complaint. Nothing that happens before filing, including a demand letter or months of negotiation, earns interest.

What Does North Carolina’s Prejudgment Interest Statute Provide?

N.C. Gen. Stat. § 24-5(b) governs actions other than contract, which includes every negligence claim. Any portion of a money judgment that the fact finder designates as compensatory damages bears interest from the date the action is commenced until the judgment is satisfied. Any other portion of the judgment, other than costs, bears interest only from the date of entry of judgment. The rate for both is the legal rate, and N.C. Gen. Stat. § 24-1 fixes the legal rate at eight percent per year, no more.

The phrase “designated by the fact finder” has a practical consequence. The verdict form must separate compensatory damages from anything else, such as punitive damages, so the court can apply the two different starting dates. Punitive damages, which N.C. Gen. Stat. § 1D-25 already requires the jury to determine separately, earn interest only from the judgment. Contract claims follow a different subsection: under § 24-5(a) the amount awarded on the contract bears interest from the date of breach.

How Much Is Prejudgment Interest Worth In An Injury Case?

A worked example: Keisha is injured in a Raleigh crash in March 2025. Negotiations stall, and her lawyer files suit in January 2026. The case is tried in January 2028 and the jury awards $300,000 in compensatory damages. Under § 24-5(b), that award bears interest at 8% per year from January 2026, the date the action was commenced. Two years of interest on $300,000 is about $48,000, so the judgment entered against the defendant is roughly $348,000 before costs, and it keeps growing at $24,000 a year until it is paid. Had Keisha’s lawyer let negotiations drag on for another year before filing, that year would have earned nothing.

The arithmetic explains two things injured people often find puzzling. It explains why experienced lawyers file suit even when they expect to settle: filing starts the interest, and the interest is leverage. And it explains why insurers raise their offers as trial approaches, because every month of delay after filing costs them 8% on the compensatory value of the case. Whether a liability insurer must pay interest that pushes a judgment above its policy limits depends on the policy’s terms and should be confirmed with an attorney, but the interest is part of the judgment against the defendant either way.

• Start date: the filing of the complaint, not the injury and not the demand.
• Rate: 8% per year under § 24-1.
• Base: the compensatory damages the jury designates; punitive damages earn interest only from judgment.
• End date: when the judgment is satisfied, including through any appeal.

How Does Prejudgment Interest Affect Settlement Negotiations?

It changes the value of time. Before suit is filed, delay costs the defendant nothing, so an insurer can take months to request records, re-evaluate, and respond. After filing, the same delay accrues interest on whatever the jury will ultimately award. A settlement reached after filing is usually negotiated with that accrued interest in mind, and a reasonable insurer evaluates the case as the compensatory value plus interest to the expected trial date, not as the compensatory value alone.

The rule also interacts with offers of judgment. A defendant may make a formal offer under the Rules of Civil Procedure that shifts certain costs to a plaintiff who rejects it and then wins less at trial. How accrued interest is counted when a judgment is compared with such an offer is a technical question that depends on the offer’s terms, and it is one more reason the decision to accept or reject a formal offer should be made with counsel.

What Happens To Prejudgment Interest If The Plaintiff Is Found Contributorily Negligent?

It disappears, because there is no judgment for it to attach to. Prejudgment interest under § 24-5(b) is a percentage of compensatory damages designated by the fact finder; a jury that finds the injured person contributorily negligent awards no damages, and 8% of nothing is nothing. Under North Carolina’s rule, any negligence by the plaintiff that was a proximate cause of the injury bars recovery entirely, and under N.C. Gen. Stat. § 1-139 the defendant must prove it.

That is the sobering counterpart to the favorable interest rule. Filing early maximizes interest on a verdict, but the verdict still depends on winning the fault question outright. The same discipline that protects a claim from contributory negligence, early evidence preservation and a clean record of the injured person’s conduct, is what makes the interest worth calculating in the first place.