By: Scott Hobson
On Tuesday, state assemblyman and chair of the Assembly Insurance Committee, Joseph Morelle (D, Irondequoit) introduced legislation which would bring New York’s astronomical interest rate on judgments in line with market rates. The legislation is sponsored in the Senate by Joseph Griffo (R, Utica), Chair of the Senate Banking Committee.
In New York and most other states, interest accrues on a judgment from the date the judgment is made. This makes sense – it ensures that the monetary award will not lose real value if the case is appealed or payment is delayed for some other reason. A reasonable rate of interest on judgments is critical to ensuring that victims are fairly compensated.
But while the markets rise and fall, New York’s rate of interest on judgments stays fixed at 9%. You won’t find a return that high in this market – it’s more than ten times the current federal funds rate. It represents a major windfall to plaintiffs – they end up receiving more than the jury intended.
This can create serious access to justice issues. The appeal process can take years, and as the size of the award grows, so too does the cost of getting justice. The potentially high cost of losing an appeal can force defendants to simply settle, even if they feel they have a strong case.
Assemblyman Morelle and Senator Griffo support linking the rate of interest on judgments to the market rate, a rational approach which treats both sides fairly. We applaud their leadership – this is the kind of common sense reform that New York has long needed.