Arizona Supreme Court holds that the post-judgment interest rate in A.R.S. § 41-622(F) applies to the full judgment amount paid out of the State’s risk management revolving fund, even if a portion is reimbursable under an insurance policy.

Ordinarily, the post-judgment interest rate in Arizona is the lesser of 10%, or the prime rate plus 1%, per year.  A.R.S. § 44-1201(B).  When a judgment against the State is paid out of the risk management revolving fund, however, A.R.S. § 41-622(F) provides for a reduced interest rate while an appeal is pending.

The plaintiff, in this case, obtained a $7.8 million judgment against the State.  After unsuccessfully appealing issues unrelated to post-judgment interest, the State satisfied the judgment.  But the State accidentally paid the money out of a construction fund instead of the risk management revolving fund.  The State quickly discovered the error and reimbursed the construction fund for the full amount out of the risk management revolving fund.

This payment mix-up led to a dispute between the parties about the appropriate interest rate.  The plaintiff argued that the normal interest rate should apply during the course of the State’s appeal, because the judgment had not actually been paid out of the correct fund.  The State contended that the reduced interest rate should apply because it had rectified the error by transferring the full judgment amount from the risk management revolving fund. 

After an evidentiary hearing, the trial court sided with the State.  The Court of Appeals subsequently affirmed in part and reversed in part.  The court agreed that the reduced interest rate should apply during the course of the State’s appeal because the judgment was ultimately paid out of the risk management revolving fund.  The court also held, however, that the reduced interest rate should not apply to the portion of the judgment that would eventually be reimbursed under the State’s excess insurance policy.  

The Arizona Supreme Court granted the State’s petition for review and vacated in part and remanded.  The Court agreed that the reduced interest rate applied because the judgment was paid out of the risk management revolving fund.  It disagreed, however, that the portion of the judgment covered by excess insurance was ineligible for the reduced rate.  Observing that the plain statutory text provides a reduced interest rate for “any judgment . . . paid for out of the risk management revolving fund,” without exception or qualification, the Court held that the reduced interest rate in § 41-622(F) applies to the full judgment amount paid, regardless of third-party insurance coverage.

Justice Brutinel authored the unanimous opinion.