In Bean v. Pacific Coast Elevator Corporation, 2015 DJDAR 2864 (“Bean”), the California Court of Appeal, Fourth Appellate District, held in the published portion of its opinion that courts may not award prejudgment interest on costs in personal injury actions.
In Bean, an employee of defendant Pacific Coast Elevator Corporation (Pacific Coast) drove his vehicle into plaintiff Daniel William Bean’s truck while Bean was stopped at a red light. Bean suffered serious injuries and sued Pacific Coast. A jury found Pacific Coast negligent and awarded Bean $1,271,594.74 in damages. This amount exceeded Bean’s $999,999.00 statutory offer to compromise issued to Pacific Coast prior to trial, which Pacific Coast rejected.
The trial court denied Pacific Coast’s motion for new trial, granted Bean’s motion for prejudgment interest, and awarded Bean costs. The court entered judgment in the amount of $1,306,424.74 in Bean’s favor, and ordered that prejudgment interest be calculated on the entire judgment, including costs. Pacific Coast appealed and contended, among other things, that the trial court erred in awarding prejudgment interest on costs. Pacific Coast argued that pursuant to Civil Code section 3291, prejudgment interest should only have been awarded on the damages, not on the entire judgment which included costs.
The Court of Appeal applied a de novo standard of review, as the issue raised was one of statutory interpretation. In reaching its opinion the Court relied on the California Supreme Court’s opinions in Lakin v. Watkins Associated Industries (1993) 6 Cal.4th 644 (“Lakin”), and Hess v. Ford Motor Co. (2002) 27 Cal.4h 516 (“Hess”).
In Lakin, the Supreme Court considered whether a party may recover prejudgment interest under Civil Code section 3291 on that portion of a jury’s award attributable to damages other than for personal injury. The Lakin court acknowledged that the second paragraph of Civil Code section 3291 could be read to suggest that prejudgment interest is properly awarded even on components of a judgment that are not personal injury damages, because it provides that if a pretrial offer to compromise is not accepted and the offering party then “obtains a more favorable judgment, the judgment shall bear interest…” The Lakin court reasoned, however, that when read as a whole the statute is best interpreted as permitting prejudgment interest only on damages:
The first paragraph of [Civil Code] section 3291 permits the plaintiff in ‘any action brought to recover damages for personal injury…to claim interest on the damages alleged (italics added). We understand the Legislature to have intended this narrower language, which confined the availability of prejudgment interest to ‘damages for personal injury,’ to limit the broader language of the second paragraph. To adopt the broader reading of the second paragraph would render the narrower language of the first paragraph nugatory.
Similarly, in Hess, the California Supreme Court considered whether a plaintiff may recover interest on interest accrued under Civil Code section 3291 from the date of a section 998 offer to the date of judgment, because this prejudgment interest was required to be included in the judgment pursuant to [former] rule 875 of the California Rules of Court. The Court held that prejudgment interest accrued under Civil Code section 3291 is not part of the judgment, and a plaintiff may not obtain interest on this prejudgment interest.
Based on Lakin and Hess, the Bean court found it was “clear that the purpose of Civil Code section 3291 is to compensate plaintiffs for the damages, not for the loss of use of money for costs.” As such, the Bean court held in the published portion of its opinion that the trial court erred in awarding prejudgment interest on costs, and remanded the matter to the trial court with directions to recalculate prejudgment interest solely on the damages portion of the jury’s award, and to enter an amended judgment.
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