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Mississippi Supreme Court Clarifies Pre-Judgment Interest Rule in Breach of Contract Cases

In Arcadia Farms Partnership v. Audubon Ins. Co., 77 So.3d 100 (Miss. 2012), the Mississippi Supreme Court overruled its 1995 decision holding that the trial court could only award prejudgment interest from the date of the filing of the complaint in breach of contract cases where no interest rate was provided for in the contract.  In Arcadia Farms, a fire destroyed a cotton-picking machine owned by the insured.  Though insurance coverage initially was denied for a lengthy period of time, the insurer eventually paid $100,000 for the loss.  The insured filed suit against the insurer asserting a bad faith breach claim based on the insurer’s failure to submit prompt payment.  The insurer filed for summary judgment asserting that since the insured had been paid before the filing of the suit, the only compensatory damages that could be awarded would be prejudgment interest.  However, based on Miss. Code Section 75-17-7, the insurer asserted that since prejudgment interest could not be awarded prior to the filing of the complaint, the insured suffered no compensatory damages and, therefore, could not recover any punitive damages on its bad faith claim.  The trial court granted summary judgment in favor of the insurer.

On appeal, the Court of Appeals reversed the granting of summary judgment and held that the insured could collect pre-judgment interest from the date of breach.  The Mississippi Supreme Court granted certiorari to address some uncertainty in the law surrounding Section 75–17–7.  In affirming the Court of Appeals, the Supreme Court clarified that, in contract cases, Section 75–17–7 does not restrict prejudgment interest to the post-complaint period. Therefore, based on the Court’s decision, prevailing parties in a breach-of-contract suit may request the trial court to award interest from the date of breach – not the date of filing the complaint.

John A. (Jack) Crawford, Jr.