This article will discuss what damages or civil penalties, in addition to the insured amount, may be awarded by an American Court against a marine property insurer for wrongful failure to pay the insured’s claim. Since State law may often be controlling but is not uniform, the law of several States will be examined. Also, on some aspects, pertinent Federal law or general maritime law will be mentioned.

Under general maritime law the allowance of pre-judgment interest rests within the sound discretion of the trial Court, though “the general practice” is “to allow interest [at the legal rate] on the loss from the date of loss”. If, however, a marine policy provides for payment within a stated interval after filing proof of loss, it seems altogether likely that the expiration of such interval will be the date from which interest will be allowed. Otherwise, the few insurance cases dealing with an interest issue show that the Court may start interest at a date after the loss, may reduce the rate below the legal rate, or may disallow interest entirely.

In New York interest has, by statute, long been mandatory in contract actions despite which in 1954 the State Court used the discretionary maritime rule to disallow interest on the amount of a hull loss. Recently, however, in a Federal diversity action on hull policies the District Judge held that “we must look to the law of New York to determine the plaintiffs’ right to pre-verdict interest”. So the Judge awarded interest to the plaintiffs “as a matter of right”, and, as his opinion was “adopted in toto” by the Second Circuit Court of Appeals, one may conclude that, currently, the insured who sues successfully at law on a marine policy in New York will automatically recover pre-judgment interest pursuant to the State statutory mandate, at least if the policy was issued in New York.

Some years after it had become settled that pre-judgment interest could be recovered against an insurer (or other defendant who refused to pay money due by contract), the United States Supreme Court ruled in New Orleans Ins. Co. v. Piaggio (1872) 83 U.S. (16 Wall.) 378 that the insured could not recover damages beyond interest on the insured sum for the insurer’s delay in payment. The plaintiff sued at law for total loss of his insured vessel and cargo, and also for damages sustained from the defendant-insurers’ non-payment.

Pursuant to a plaintiff’s verdict the trial Judge entered judgment for the insured sums with interest from Sept. 29, 1870, and for $5,000 damages with interest from Dec. 14, the date of “judicial demand”. In striking out the damages award, the