SENATE 3rd Reading Unamended May 5, 2016 SENATE 2nd Reading Unamended May 4, 2016Second Regular Session Seventieth General Assembly STATE OF COLORADO REENGROSSED This Version Includes All Amendments Adopted in the House of Introduction LLS NO. 16-1062.02 Jerry Barry x4341 SENATE BILL 16-184 SENATE SPONSORSHIP Cadman and Scheffel, HOUSE SPONSORSHIP Willett, Senate Committees House Committees Judiciary A BILL FOR AN ACT Concerning market-based rates for interest on judgments. Bill Summary (Note: This summary applies to this bill as introduced and does not reflect any amendments that may be subsequently adopted. If this bill passes third reading in the house of introduction, a bill summary that applies to the reengrossed version of this bill will be available at http://www.leg.state.co.us/billsummaries.) The current rate of postjudgment interest is 2% over the Kansas City discount rate with a floor of 8%. The bill eliminates the floor. The current interest rate for judgments for personal injury damages caused by a tort is 9%. The bill ties this interest rate to the current rate of postjudgment interest. Be it enacted by the General Assembly of the State of Colorado: SECTION 1. Legislative declaration. (1) The general assembly finds and declares: (a) The general assembly instituted statutory interest on judgments to account for the time value of money between the filing of an action and the ultimate satisfaction of a judgment in a civil action. Interest can be awarded both prejudgment and postjudgment. (b) The Colorado supreme court has repeatedly stated that the purpose of prejudgment interest is to reimburse a plaintiff for inflation and lost return. The purpose of interest is not to excessively compensate a plaintiff, punish a defendant, or influence the outcome of lawsuits. As the Colorado supreme court has written, "In keeping with precedent, we hold that the legislative purpose behind awarding interest under section 13-21-101 is to compensate the plaintiff for the time value of the amount of his or her judgment.", Morris v. Goodwin, 185 P.3d 777, 780 (Colo. 2008). (c) Statutory interest rates are intended to be a stand-in for inflation, as the Colorado supreme court has noted. The current interest rate was set by the general assembly at nine percent in 1975 when inflation, as measured by the consumer price index, was 9.1 percent. In 2015, inflation was just 0.1 percent. Since 1975, inflation has varied between a high of 13.5 percent and a deflationary low of negative 0.4 percent. (d) Arbitrarily fixing interest rates, which constantly fluctuate, in statute harms either the plaintiff or the defendant depending on current market conditions. That is why twenty-three states tie prejudgment interest rates to the federal reserve discount rate or some similar analog for inflation. Twenty-six states do the same for postjudgment interest. (e) In order to properly, but not excessively, compensate a plaintiff for the time value of money, Colorado's statutory interest rates on judgments should accurately reflect market reality by floating with inflation. SECTION 2. In Colorado Revised Statutes, 5-12-106, amend (2) as follows: 5-12-106. Rate of interest on judgments that are appealed. (2) (a) The secretary of state shall certify the rate of interest shall be certified on each January 1 by the secretary of state to be two percentage points above the discount rate, which discount rate shall be the rate of interest a commercial bank pays to the federal reserve bank of Kansas City using a government bond or other eligible paper as security, and shall be rounded to the nearest full percent. Such The secretary of state shall establish the annual rate of interest shall be so established as of December 31, 1982 January 2, 2017, to become effective January 1, 1983 2017. Thereafter, as of December 31 January 2 of each year, the secretary of state shall establish the annual rate of interest shall be established in the same manner, to become effective on January 1 of the following same year. (b) Notwithstanding any other provision of this subsection (2), the rate of interest shall be no lower than the percentage authorized in section 5-12-102 (4) (b). SECTION 3. In Colorado Revised Statutes, amend 13-21-101 as follows: 13-21-101. Interest on damages. (1) In all actions brought to recover damages for personal injuries sustained by any person resulting from or occasioned by the tort of any other person, corporation, association, or partnership, whether by negligence or by willful intent of such other person, corporation, association, or partnership and whether such injury has resulted fatally or otherwise, it is lawful for the plaintiff in the complaint to claim interest on the damages alleged from the date said suit is filed; and, on and after July 1, 1979, it is lawful for the plaintiff in the complaint to claim interest on the damages claimed from the date the action accrued. When such interest is so claimed, it is the duty of the court in entering judgment for the plaintiff in such action to add to the amount of damages assessed by the verdict of the jury, or found by the court, interest on such amount calculated at the rate of nine percent per annum on actions filed on or after July 1, 1975, and at the legal rate on actions filed prior to such date, and as provided for in section 5-12-106, C.R.S., calculated from the date such suit was filed to the date of satisfying the judgment and to include the same in said judgment as a part thereof. On actions filed on or after July 1, 1979, the calculation shall include compounding of interest annually from the date such suit was filed. On and after January 1, 1983, if a judgment for money in an action brought to recover damages for personal injuries is appealed by the judgment debtor, interest, whether prejudgment or postjudgment, shall be calculated on such sum at the rate set forth in subsections (3) and (4) of this section section 5-12-106, C.R.S., from the date the action accrued and shall include compounding of interest annually from the date such suit was filed. (2) (a) If a judgment for money in an action brought to recover damages for personal injuries is appealed by a judgment debtor and the judgment is affirmed, interest, as set out in subsections (3) and (4) of this section section 5-12-106, C.R.S., shall be payable from the date the action accrued until satisfaction of the judgment. (b) If a judgment for money in an action to recover damages for personal injuries is appealed by a judgment debtor and the judgment is modified or reversed with a direction that a judgment for money be entered in the trial court, interest, as set out in subsections (3) and (4) of this section section 5-12-106, C.R.S., shall be payable from the date the action accrued until the judgment is satisfied. This interest shall be payable on the amount of the final judgment. (3) The rate of interest shall be certified on each January 1 by the secretary of state to be two percentage points above the discount rate, which discount rate shall be the rate of interest a commercial bank pays to the federal reserve bank of Kansas City using a government bond or other eligible paper as security, and shall be rounded to the nearest full percent. Such annual rate of interest shall be so established as of December 31, 1982, to become effective January 1, 1983. Thereafter, as of December 31 of each year, the annual rate of interest shall be established in the same manner, to become effective on January 1 of the following year. (4) The rate at which interest shall accrue during each year shall be the rate which the secretary of state has certified as the annual interest rate under subsection (3) of this section. SECTION 4. Act subject to petition - effective date - applicability. (1) This act takes effect January 1, 2017; except that, if a referendum petition is filed pursuant to section 1 (3) of article V of the state constitution against this act or an item, section, or part of this act within the ninety-day period after final adjournment of the general assembly, then the act, item, section, or part will not take effect unless approved by the people at the general election to be held in November 2016 and, in such case, will take effect on January 1, 2017, or on the date of the official declaration of the vote thereon by the governor, whichever is later. (2) This act applies to judgments entered and causes of action accruing on or after the applicable effective date of this act.