This personal injury negligence action arose out of a motor vehicle accident occurring on August 4, 1973. Suit was instituted on or about July 30, 1975. Settlement negotiations between the parties proved unfruitful and on November 6, 1978 defendant filed an offer to allow judgment to be entered pursuant to R. 4:58-1 et seq. in the amount of $3,500 plus costs. Plaintiff filed an acceptance of defendant's offer on November 10, 1978 and submitted an order for the entry of judgment with costs and interest. Defendant objects to that portion of the proposed order which provides for the addition of prejudgment interest.
The issue presented is a narrow one: Where plaintiff in a tort action accepts a defendant's offer to allow judgment in a specified amount, may the court allow an award of prejudgment interest on the judgment?
Plaintiff argues that the court has the authority to make such an award based on R. 4:42-11(b), which states:
Except where provided by statute with respect to a public entity or employee, the court shall, in tort actions, including products liability actions, include in the judgment simple interest at 8% per annum on the amount of the award from the date of the institution of the action or from a date of 6 months after the date of the tort, whichever is later, provided that in exceptional cases the court may suspend the running of such prejudgment interest.
Plaintiff contends that under this rule prejudgment interest is mandatory in all cases except where "exceptional" circumstances exist, Ford v. Garvin , 127 N.J. Super. 391 (App. Div. 1974), and that a court's discretion to withhold an award of prejudgment interest should be "most cautiously exercised."
Pressler, New Jersey Court Rules , 707 (1977). Indeed, in Kotzian v. Barr , 152 N.J. Super. 561 (App. Div. 1977), the Appellate Division stated:
The court went on to say, in Kotzian , that the purpose of a prejudgment interest award is not punitive, but rather compensatory,
Also, the Supreme Court in Busik v. Levine , 63 N.J. 351, 359 (1973), harbored the expectation that by exposing a defendant to an award of prejudgment interest, it would "induce prompt defense consideration of settlement possibilities."
Defendant contends that court rules, R. 4:42-11(b) (prejudgment interest) and R. 4:58-1 et seq. (offer of judgment), read together, do not support plaintiff's demand for prejudgment interest on an accepted offer of judgment. R. 4:42-11(b) specifically provides for prejudgment interest at the rate of 8% a year on the "amount of the award." Defendant further contends that the "award" referred to is the amount of damages awarded by a judge or jury and not pursuant to an offer of judgment by a nonclaimant under R. 4:58-1 et seq.
The term "award" has been stated as a judgment formed and pronounced, Hoff v. Taylor , 5 N.J.L. 829, 833 (Sup. Ct. 1820), and has been said to mean a judgment, sentence or final ...