What is pre-judgment interest?

Pre-judgment interest refers to the interest that accumulates on a monetary award leading up to the final judgment in a legal case. This type of interest is intended to compensate the plaintiff for the loss of use of the funds they would have received had the case been resolved more quickly. It recognizes the time value of money, meaning that a dollar today is worth more than a dollar in the future.

This financial mechanism encourages fair and timely resolution of disputes and can influence how quickly settlements are reached, as parties are motivated to avoid the accrual of additional financial liabilities in the form of pre-judgment interest. The accumulation of this interest generally starts from the time the claim is made or when the injury occurs until the court issues its judgment.

Understanding pre-judgment interest is important for both plaintiffs and defendants in litigation as it can significantly affect the total financial outcome of a case. The other options, while related to the legal process, do not encapsulate the essence of pre-judgment interest in the same way, as they address aspects of litigation or penalties without focusing on the specific financial compensation that pre-judgment interest represents.