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Prejudgment Interest is a Matter to be Decided by the Finder of Fact in Maryland

June 10, 2021 By James S. Liskow

In Maryland, whether to award prejudgment interest against an insurer which breaches its duty to defend is a question to be resolved by the fact finder (jury). In Nationwide Ins. Co. v. Selective Way Ins. Co. , an insurer for a general contractor brought suit against an insurer for one of its subcontractors for failing to promptly accept a tender of a defense and indemnity, resulting in more than a decade of litigation. After the underlying matter was resolved, the general contractor’s insurer filed suit against the subcontractor’s insurer for not accepting the tender. A trial was held and the jury found in favor of the general contractor’s insurer. The jury was never asked whether to award prejudgment interest. Post-trial the general contractor’s insurer moved for prejudgment interest, which was awarded. The matter was appealed on several issues to the Court of Special Appeals, which affirmed the judgment, including the award of prejudgment interest.

The Court of Appeals granted certiorari on the sole issue of prejudgment interest. In overruling both the Circuit Court and the Court of Special Appeals, the Court of Appeals explained that for prejudgment interest to be awarded as a matter of right It must be liquidated, fixed by agreement, or ascertainable at the time of breach. Here, the award was unliquidated because there was no indication as to when the interest would cease, nor was it fixed or ascertainable at the time of breach for the same reason. As such, it prejudgment interest was to be awarded, it was for the jury to decide. As the jury was never asked the question, and it was not for the Circuit Court to answer, the Circuit Court was without authority to enter prejudgment interest. As such, the award of interest was stricken.