MEMORANDUM IN OPPOSITION

S.6365 (Senator Maltese 2007)

An ACT to amend the Civil Practice Law and Rules, in relation to the computation of interest in personal injury actions.

On behalf of NYTortReformNow.org, a broad based coalition of businesses, professionals, municipalities, not-for-profits and concerned citizens, we are writing in OPPOSITION to the above referenced bill. NYTortReformNow.org and its members are very concerned about the consequences of this and similar legislation imposing prejudgment interest with respect to personal injury actions in New York.

The bill generally provides that prejudgment interest be recoverable in actions based on personal injury.  Interest on an award in a personal injury action would be computed from the earlier of 180 days after commencement of an action or from a date one year after the date that the cause of action arose.  While this bill is currently not “alive”, this memorandum is intended to address the potential reintroduction of this measure and prejudgment interest proposals in general.

Those who proposed awarding interest on a judgment from the date on which the injury occurred, or from such other prejudgment date, claim that the allowance of prejudgment interest will expedite the settlement of suits and lighten the burden of the courts.  The defendant, it is alleged, will come to terms with the plaintiff sooner if interest is being attached to the damages he must eventually pay.

This argument rests on the false assumption that the failure to settle a claim before trial is necessarily the fault of the defendant.  Proponents who presume that the delays in settlement are cause exclusively by insurers are simply ignoring the fact that delays are often caused by continuances requested by and granted to plaintiffs.  Furthermore, litigation exists because bona fide disagreements arise regarding the amount of loss or even the legitimacy of claims.  It is well known that the amount of damages in a personal injury claim is often highly speculative.  Nevertheless, proponents of the prejudgment interest awards, who speak of equity, fairness, and preserving the integrity of our judicial system, insist that a defendant be penalized for not settling a claim, even in an instance where a legitimate amount of damages cannot be agreed upon.  These proponents place the onus on the defendant for exercising his or her legal rights by bringing the case to trial.

In addition, a study of auto accident cases by The Institute for Civil Justice (ICJ) has shown that juries already implicitly include interest with their awards.  According to ICJ economic models, there is no level of interest which will always be a simultaneous deterrent for delays on both sides of a dispute; depending upon financial circumstances of an individual or company, the interest cost may be too high or too low.

NYTortReformNow.org is extremely concerned about the increasing costs which result from insincere settlement negotiations, prolonged litigation, and court congestion.  However, for the reasons stated above, we feel that prejudgment interest award statutes only serve to aggravate the situation by rewarding plaintiff’s intransigence with increased interest accrual.

Finally, the effect of this legislation will be to substantially raise liability costs for all insureds and self-insureds.  A 2008 report, prepared for the Medical Liability Mutual Insurance Company, examining the impact of S 6365 on medical liability insurance costs, concluded that a 9% prejudgment interest rate would increase physician professional liability rates by 24%.  According to estimates from the property and casualty insurance industry automobile liability rates (BI) could increase 20%; personal injury protection (PIP) could increase 10%; and homeowners’ liability coverage could increase 5%.  New York consumers, businesses, municipalities, and New York State itself are facing severe economic strains as the State struggles to compete nationally and internationally. Accordingly, the timing of this legislation could not be worse. For all of the foregoing reasons, it is urged that this bill be defeated.

Respectfully,

Mark C. Kriss
Executive Director
NYTortReformNow.org