Understanding Prejudement Interest and How it Can Be Applied to a Georgia Car Accident Settlement
Learn how Georgia law may allow you to earn interest while waiting for payment if your case goes to court.
If you were injured in a car accident in Georgia and your case goes to court, you could wait months or even years for compensation. However, under Georgia law, you may be entitled to additional money through “prejudgment interest.” Let’s break down how this interest accrues, how it’s calculated, and what you need to know to protect your claim.
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What Is Prejudgment Interest and Why Should You Care?
After a car accident, medical bills and financial constraints due to lost wages can intensify while insurance companies delay settlement. Georgia law allows interest to accrue during this period, encouraging insurance companies to promptly settle claims.
How It Works After a Car Accident: Amanda’s Story
Let's look at a common scenario:
Amanda was rear-ended at the intersection of Highway 85 and Upper Riverdale Road in Riverdale by a distracted driver. She suffered neck and back injuries that required surgery and caused her to miss work for four months. Her medical bills totaled $35,000, her lost wages were $15,000, and she endured significant pain and suffering.
Amanda and her attorney sent a demand letter via certified mail to the at-fault driver, citing O.C.G.A. § 51-12-14 and requesting $100,000. However, the driver’s insurance company only offered $60,000, which Amanda rejected.
After 18 months of litigation, a jury awarded Amanda $120,000 in compensatory damages. However, since the amount exceeded what she initially asked for in her demand letter, Amanda is entitled to prejudgment interest, which started accruing 30 days after sending her demand letter until the date the judgment was made by the jury.
Her prejudgment interest was calculated based on the prime rate of interest when she sent the demand letter, which was 4.5%, plus 3%, totaling 7.5%. Over the 18 months of waiting for her case to be resolved, she earned $11,250 in prejudgment interest, bringing her total compensation to $131,250.
When Prejudgment Interest Starts and Stops
Prejudgment interest starts 30 days after you send your formal demand letter. This gives the at-fault driver and their insurance company a month to evaluate and potentially pay your claim. Prejudgment interest continues accruing until the date of judgment.
Insurance Companies May Try to Stop Prejudgment Interest Accrual
Insurance companies may take certain actions to limit the amount of prejudgment interest they have to pay. If they realize they might lose at trial, they can send you a written offer to pay your full demand plus the prejudgment interest that has accrued up to that point. If you don't accept within 30 days, you'll lose the right to collect any more prejudgment interest after those 30 days, even if you win at trial.
How Your Judgment Is Calculated For Prejudgment Interest
When determining whether your final judgment meets or exceeds the amount you originally demanded for prejudgment interest purposes, only compensatory damages are considered. Compensatory damages are the money you are awarded to cover your actual losses, such as medical expenses and lost wages. Punitive damages, which are awarded to punish the wrongdoer, are excluded from this calculation.
Additionally, if you’ve already received some money related to your claim, such as from your insurance company, that amount is subtracted from the judgment amount when calculating whether you’re entitled to prejudgment interest.
You'll only get prejudgment interest if your final judgment, after these deductions, still meets or exceeds your original demand.
Post-Judgment Interest
If your case continues after judgment, such as during an appeal, you’ll receive post-judgment interest, but only if on the principal amount awarded by the jury, not on the prejudgment interest itself. This prevents "interest on interest."
How to Get Your Prejudgment Interest
After winning your court case, prejudgment interest isn’t automatically added to your total compensation amount. Your attorney will have to file a post-trial motion to get the judge to amend your judgment to include prejudgment interest, typically requiring:
- Proof of proper demand: Submit a copy of your demand letter showing it specifically referenced O.C.G.A. § 51-12-14, along with certified mail receipts or delivery confirmations proving when and how it was sent.
- Prejudgment interest calculation: Present a detailed calculation showing:
- The prime rate on the 30th day after your demand letter was sent
- The exact date interest began accruing (30 days after demand)
- The interest rate (prime plus 3%)
- The number of days interest accrued
- The total interest amount
- Comparison of verdict to demand: Demonstrate that your compensatory damages award (excluding punitive damages) equals or exceeds your original demand.
Most judges will schedule a brief hearing on your motion where your attorney will present this evidence. The defense may object if they believe your demand didn't comply with statutory requirements, so proper documentation is essential for success.
Does Uninsured/Underinsured Motorist (UM/UIM) Insurance Include Prejudgment Interest?
If you’re in a car accident and the other driver doesn’t have enough insurance or no insurance, your UM/UIM policy may help cover your losses. In Georgia, UM/UIM coverage generally includes prejudgment interest as part of the covered damages, but with important limitations:
- Policy limits control: Your UM/UIM insurer is only obligated to pay up to your policy limits, including both damages and prejudgment interest combined. If your $50,000 policy limit is already exhausted by your injury damages, there may be no additional coverage for prejudgment interest.
- Demand letter requirements: To recover prejudgment interest from your UM/UIM insurer, you must send a formal demand letter directly to your own insurance company, not just to the at-fault driver.
- Excess versus traditional coverage: If you have "excess" (add-on) UM/UIM coverage rather than "traditional" (reduction) coverage, you may have more room under your policy limits to recover prejudgment interest.
For example, if James has a $100,000 UM policy and is hit by an uninsured driver, he can send a demand for $75,000 to his own insurance company, citing O.C.G.A. § 51-12-14. If he later receives a verdict of $90,000, his UM insurer would be responsible for the verdict plus prejudgment interest, as long as the total doesn't exceed his $100,000 policy limit.
Note: Always review your policy language carefully, as some insurers include specific provisions addressing prejudgment interest that may limit an insurance company’s obligations.
Why This Matters to You
Understanding how prejudgment interest works gives you leverage and can help resolve your case sooner. When an insurance company delays settlement, you and your attorney can remind them that every month of delay could cost them more money.
Take Action To Protect Your Rights
If you've been injured in a car accident in Georgia, take the following steps to protect your right to prejudgment interest:
- Work with an attorney who understands prejudgment interest rules.
- Ensure your demand letter specifically references O.C.G.A. § 51-12-14.
- Send the demand via certified mail directly to the at-fault driver and not just their insurance company.
- Keep track of when prejudgment interest begins accruing (30 days after sending your demand letter).
- Consider carefully any offer that includes accrued prejudgment interest.
Getting paid promptly after a car accident is crucial, especially when you're dealing with medical bills and lost income. Prejudgment interest ensures you’re getting every dollar you deserve, including extra money for delayed payment.
In Georgia, the interest rate is the prime rate plus 3%, starting 30 days after your demand letter. For cases filed after July 1, 2003, this variable rate typically ranges between 6-8% annually.
No, prejudgment interest only applies when your case goes to trial and results in a judgment that equals or exceeds your demand. Settlement agreements made outside of court typically resolve all claims, including any potential prejudgment interest.
Generally no, as the law requires sending the demand directly to the at-fault person via certified mail or an approved overnight delivery service. However, if you also send it to the driver, or if the insurance company specifically directed all correspondence to them, you may still qualify.
No, they must offer to pay your full demand amount plus accrued prejudgment interest to stop the clock. Any partial payment will reduce the principal amount on which prejudgment interest is calculated but doesn’t stop interest from accumulating.
No, because only the $50,000 in compensatory damages would count toward meeting your demand. Punitive damages are excluded when determining if you've met the threshold for prejudgment interest.
Yes, you're still entitled to prejudgment interest even if you didn't borrow money or incur finance charges. Prejudgment interest compensates you for the financial loss of not having your money sooner, regardless of how you managed your expenses during the delay.
