Alabama: Prejudgment Interest Rules
The short answer
Yes, but Alabama gets there by two different roads depending on claim type. A contract claim earns interest automatically under a statute, from the day the money should have been paid, at 6% a year (or the contract's own rate, up to a legal cap of 8%). A tort claim has no statute at all -- prejudgment interest instead comes from 150-year-old common law, available only when the damages can be pinned down by computation or a known standard of value at a fixed point in time, at the same 6% legal rate. Ordinary personal-injury damages like pain and suffering usually don't qualify; a fixed, calculable loss (a specific sum wrongly withheld, a crop destroyed with an ascertainable market value) does. The State of Alabama itself cannot be sued at all, so the question of prejudgment interest against it doesn't arise; counties and cities can be sued in tort subject to separate damages caps that don't mention interest either way.
| Governing law | Contract claims: Ala. Code § 8-8-8 (interest accrues on breach of contract), read together with § 8-8-1 (the general legal/maximum interest rate). Tort claims: NO statute -- the right comes entirely from Alabama common law (Nelson v. AmSouth Bank, N.A., 622 So. 2d 894 (Ala. 1993); Lapeyrouse Grain Corp. v. Tallant, 439 So. 2d 105 (Ala. 1983)), borrowing the same § 8-8-1 legal rate |
|---|---|
| Interest rate | 6% a year in the absence of a written contract; a written contract can set its own rate up to a statutory cap of $8 per $100 per year (8%). The 6% "legal rate" is the same rate courts apply to a qualifying tort claim's prejudgment interest by common law, since no separate tort rate exists |
| When interest starts running | Contract: from the day the money (or thing, valued in money) should have been paid or the act performed, per § 8-8-8's own text. Tort: from whenever the loss became fixed and ascertainable by a known standard of value or by mathematical computation -- for example, the date of injury to property with a market value, or the date a legal determination fixed a previously-disputed share of a fund -- not automatically from the date of injury or the date suit was filed |
| Contract vs. tort claims | Genuinely different mechanisms, not just different rates: contract prejudgment interest is a statutory entitlement running from the day payment was due, full stop. Tort prejudgment interest doesn't exist by statute at all -- it's a common-law rule that applies only where the damages themselves are provably certain or reducible to certainty by computation or known valuation standards; the Alabama Supreme Court has been explicit that § 8-8-8 does not apply to tort claims (Nelson v. AmSouth Bank) |
| Mandatory or discretionary | Contract: effectively automatic once a payment date passed -- the statute says such contracts "bear interest," not that a court may award it. Tort: not discretionary once the ascertainability test is met -- the Alabama Supreme Court has REVERSED a trial court's denial of prejudgment interest where the damages were in fact fixed and calculable, treating it as something a qualifying tort plaintiff is entitled to, not a favor a court can withhold |
| Simple or compound | Neither statute nor the common-law tort rule mentions compounding; Alabama's interest and usury statutes speak throughout in terms of a flat rate "per annum," consistent with simple interest, and no case was located describing Alabama prejudgment interest as compounding |
| Claims against the government | The State of Alabama itself cannot be sued in any court at all (Ala. Const. art. I, § 14), so a judgment against the State -- and therefore prejudgment interest on one -- generally cannot arise in the first place. Counties and municipalities are not shielded by that same absolute immunity and can be sued in ordinary negligence (Ala. Code § 11-47-190 for municipalities), but any judgment against a governmental entity is capped at $100,000 per person (or $300,000 in the aggregate when more than two people are injured in one occurrence) and $100,000 for property damage under § 11-93-2 -- a statute that caps damages but does not itself mention prejudgment interest either way, and no case was located resolving whether interest counts toward that cap |
| Other exceptions | Punitive damages against a governmental entity are barred outright (Ala. Code § 6-11-26). A written contract's own interest rate controls over the 6% default, up to the 8% statutory ceiling; a rate above that ceiling risks the separate consequences of Alabama's usury law |
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The short answer
Alabama splits prejudgment interest by claim type, but not the way most
states do it -- one side has a statute, the other has none at all. If
you're owed money on a contract, Alabama Code § 8-8-8 gives you interest
automatically from the day payment was due, at 6% a year (or your
contract's own rate, up to a legal ceiling of 8%). If you're pursuing a
tort claim, there's no statute to point to -- the right comes entirely from
more than a century of Alabama case law, and it only exists if your damages
are the kind that can be pinned down by computation or a known valuation
standard at a fixed point in time. Ordinary pain-and-suffering damages
almost never qualify; a specific, calculable loss often does. The rate,
when tort prejudgment interest is available at all, is the same 6% legal
rate used on the contract side.
Requirements one by one
Governing law
Contract claims are governed by Ala. Code § 8-8-8, a short statute dating
back to Alabama's earliest codifications, read together with § 8-8-1's
general legal-interest-rate rule. Tort claims have no governing statute at
all -- the right and its conditions come from Alabama Supreme Court
decisions applying old common law, most recently restated in Nelson v.
AmSouth Bank, N.A., 622 So. 2d 894 (Ala. 1993).
Interest rate
6% a year is the default legal rate under § 8-8-1, absent a written
contract. A written contract can set a different (and higher) rate, but
Alabama law caps that contractual rate at $8 per $100 per year (8%). When a
tort claim qualifies for prejudgment interest under the common-law rule,
courts apply this same 6% legal rate -- there's no separate, tort-specific
statutory rate to reach for.
When interest starts running
On a contract claim, interest starts on the day the money (or, for an
in-kind obligation, its money value) should have been paid, exactly as §
8-8-8 states. On a qualifying tort claim, interest starts whenever the loss
became fixed and capable of being determined with certainty -- the date
property with an ascertainable market value was destroyed, for example, or
the date a legal ruling resolved a previously-disputed entitlement to a
fixed sum. It does not automatically run from the date of injury or the
date suit was filed; the trigger is when the AMOUNT became certain, not
when the wrong occurred.
Contract vs. tort claims
This is the real fork in Alabama's rule, and it's a difference in kind, not
just rate. Contract prejudgment interest is a statutory entitlement --
Alabama's courts have said in as many words that § 8-8-8 does not apply to
tort claims at all. Tort prejudgment interest instead depends entirely on
whether the damages themselves are "ascertained by mere computation," or
"complete at a given time so as to be capable of determination... in
accordance with known standards of value." A contract debt almost always
clears that bar automatically; most personal-injury damages -- pain and
suffering, disfigurement, future impairment -- never do, because a jury has
to invent the number rather than calculate it from an objective standard.
Mandatory or discretionary
Contract interest is effectively automatic once a payment date has passed
-- the statute doesn't frame it as something a court may choose to award.
Tort prejudgment interest, once the ascertainability test is actually met,
isn't treated as discretionary either: the Alabama Supreme Court has
reversed a trial court for denying it where the damages were, in fact,
fixed and calculable. The real judgment call in tort cases is upstream --
deciding whether the damages meet the ascertainability test in the first
place -- not whether to award interest once they do.
Simple or compound
Alabama's interest and usury statutes are written entirely in terms of a
flat rate "per annum," with no mention of compounding anywhere in the
sections governing contract or tort prejudgment interest, and no case was
located describing Alabama prejudgment interest as anything other than
simple interest.
Claims against the government
The State of Alabama itself is essentially unsuable: the Alabama
Constitution bars the State from ever being made a defendant in any court.
That makes a judgment against the State -- and therefore prejudgment
interest on one -- largely a non-issue in practice. Counties and
municipalities don't share that absolute shield and can be sued for
ordinary negligence, but any judgment against a governmental entity is
capped at $100,000 per person for bodily injury or death (or $300,000 in
the aggregate when more than two people are hurt in the same occurrence)
and $100,000 for property damage. That cap statute doesn't say whether
prejudgment interest counts toward it or sits outside it, and no case was
found resolving the question -- so this survey doesn't guess at an answer
either way.
Other exceptions
Punitive damages can't be recovered against a governmental entity at all.
A written contract's own stated interest rate always controls over the 6%
default rate, subject to the 8% statutory ceiling; setting a rate above
that ceiling raises separate usury concerns beyond the scope of this
survey.
What trips people up
Assuming a personal-injury claim automatically earns prejudgment interest
the way a contract debt does is the single biggest trap in Alabama -- there
is no statute to fall back on for tort claims, and most personal-injury
damages simply don't meet the "ascertainable by computation" test that
common law requires.
Confusing this section's 6% PREjudgment rate with Alabama's separate 7.5%
POSTjudgment rate (Ala. Code § 8-8-10, for judgments entered on or after
September 1, 2011) is an easy mistake, since they sit in the same short
chapter of the code but apply to different periods and use different
numbers.
Trying to hold the State of Alabama itself liable for anything, including
interest, runs into the state's near-absolute constitutional immunity
before the question of interest is ever reached; a claim against a county
or city is a different, more viable path, but is capped regardless of how
interest is calculated.
Common questions
What's Alabama's prejudgment interest rate?
6% a year by default, or your written contract's own rate (up to an 8%
statutory ceiling), for a contract claim. The same 6% legal rate applies
to a tort claim, but only if the damages are fixed and calculable.
Can I get prejudgment interest on an Alabama personal injury claim?
Only if the specific damages are the kind a court can pin down by
computation or a known valuation standard at a fixed point in time -- a
concrete, ascertainable loss, not open-ended damages like pain and
suffering that a jury has to set.
Does Alabama prejudgment interest compound?
No. Nothing in the statutes or the common-law tort rule describes
compounding; both speak in terms of a flat annual rate.
Can I get prejudgment interest against the State of Alabama or a city?
Not against the State itself -- it cannot be sued in any court. A county or
municipality can be sued in tort, but any judgment against it is capped at
$100,000 per person (or more in the aggregate for multiple injured people)
and $100,000 for property damage, and Alabama law doesn't specify whether
prejudgment interest is included in or excluded from that cap.
Statutes and sources
- Ala. Code § 8-8-8 -- "All contracts, express or implied, for the payment
of money, or other thing, or for the performance of any act or duty bear
interest from the day such money, or thing, estimating it at its money
value, should have been paid, or such act, estimating the compensation
therefor in money, performed." Accessed 2026-07-05:
https://law.justia.com/codes/alabama/title-8/chapter-8/section-8-8-8/ - Ala. Code § 8-8-1 -- "Except as otherwise provided by law, the maximum
rate of interest upon the loan or forbearance of money, goods, or things
in action, except by written contract is $6 upon $100 for one year, and
the rate of interest by written contract is not to exceed $8 upon $100
for one year." Accessed 2026-07-05:
https://law.justia.com/codes/alabama/title-8/chapter-8/section-8-8-1/ - Ala. Code § 11-93-2 -- "The recovery of damages under any judgment
against a governmental entity shall be limited to $100,000.00 for
bodily injury or death for one person in any single occurrence...
$300,000.00 in the aggregate where more than two persons have claims or
judgments... $100,000.00 for damage or loss of property arising out of
any single occurrence." Accessed 2026-07-05:
https://law.justia.com/codes/alabama/title-11/title-3/chapter-93/section-11-93-2/ - Nelson v. AmSouth Bank, N.A., 622 So. 2d 894 (Ala. 1993) -- states the
common-law ascertainability test governing tort prejudgment interest and
confirms § 8-8-8 doesn't reach tort claims. Accessed 2026-07-05:
https://www.courtlistener.com/opinion/7695638/ - Lapeyrouse Grain Corp. v. Tallant, 439 So. 2d 105 (Ala. 1983), quoted
within Nelson -- illustrates the ascertainability test applied to a jury
verdict based on a calculable price differential. Citation verified via
legalresearch (courtlistener id 1676878).
Source links
Every statute quoted above, linked, with the date we checked it.