Texas prejudgment interest: rules & calculator

What prejudgment interest is

Prejudgment interest compensates a plaintiff for the time between the injury (or notice of the claim) and the judgment — the lost use of money that should have been paid earlier. In Texas it comes from two sources:

• Statute. Finance Code §§304.101–.108 apply to wrongful death, personal injury and property damage cases. A judgment in those cases earns prejudgment interest (§304.102).
• Common law. For other claims, such as breach of contract, Texas courts award prejudgment interest as a matter of equity. In Johnson & Higgins v. Kenneco Energy (Tex. 1998) the Texas Supreme Court held that those awards should follow the statutory accrual rules and rate.

The statutory rules

Prejudgment interest on insurance claims

When a Texas insurer pays a claim late, the policyholder’s main remedy is the §542.060 statutory interest — 18% a year, or the floating rate for weather claims. That interest is labeled “damages,” and the statute adds: “Nothing in this subsection prevents the award of prejudgment interest on the amount of the claim, as provided by law.” So prejudgment interest is available in principle on top of §542.060 interest. In practice, insurers argue that both should not be awarded on the same dollars for the same days, and courts have handled the overlap in different ways. Keep both numbers separate when you present a claim.

Postjudgment interest then runs on the whole judgment — including court costs and prejudgment interest — at the same §304.003 rate until it is paid (§304.003(a)).