In a case where prejudgment interest counts toward the policy limit and damages exhaust the limit, who pays the prejudgment interest?

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Multiple Choice

In a case where prejudgment interest counts toward the policy limit and damages exhaust the limit, who pays the prejudgment interest?

Explanation:
Prejudgment interest, when it counts toward the policy limit, becomes part of the total damages recovered. If those damages plus the prejudgment interest reach the policy’s limit, the insurer’s obligation is considered fulfilled up to that limit. Any remaining amount, including the prejudgment interest that would push beyond the limit, isn’t covered by the insurer. Since the insured is the person ultimately responsible for the judgment amount beyond what the policy pays, the insured must cover the prejudgment interest in this situation.

Prejudgment interest, when it counts toward the policy limit, becomes part of the total damages recovered. If those damages plus the prejudgment interest reach the policy’s limit, the insurer’s obligation is considered fulfilled up to that limit. Any remaining amount, including the prejudgment interest that would push beyond the limit, isn’t covered by the insurer. Since the insured is the person ultimately responsible for the judgment amount beyond what the policy pays, the insured must cover the prejudgment interest in this situation.

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