California: Prejudgment Interest Rules

The short answer

California is one of the few states that draws a hard, statutory line between a
contract claim and everything else. If you're owed a sum of money that was
already fixed, or that could be calculated with simple math, the law entitles
you to interest on it as a matter of right, running from the day you first had
the right to be paid. If your damages instead came from a jury verdict on a
disputed claim — most personal-injury and other tort cases — interest is not
automatic; it's up to the jury, and it runs at a lower rate. Getting the rate
right matters: a case that takes years to resolve can see interest add up to a
substantial share of the total recovery.

Requirements one by one

Governing law

California's prejudgment interest rules live in the Civil Code's "Interest as
Damages" article, Civ. Code §§ 3287-3291, not in the same statute that sets
interest on an already-entered judgment (that's Code Civ. Proc. § 685.010,
discussed below only for contrast). The default rate when no other statute
applies comes from the California Constitution itself, art. XV, § 1.

Interest rate

For a tort claim, or any other claim that doesn't arise from a contract,
the rate is 7% a year — the constitutional default rate that applies "in the
absence of the setting of such rate by the Legislature." Civ. Code § 3288 sets
no rate of its own for a tort/fraud/malice claim, so this constitutional
default fills the gap; the California Supreme Court confirmed this in
Naranjo v. Spectrum Security Services, Inc. (Cal. Supreme Court, decided
May 23, 2022), holding that "the 7 percent default rate set by the state
Constitution applies" where no more specific statute sets a different rate.
For a contract claim, any interest rate the parties actually put in their
contract keeps applying after a breach (§ 3289(a)); if a contract entered
into after January 1, 1986 doesn't say what rate applies, the law fills in 10%
a year (§ 3289(b)) — except for a note secured by a deed of trust on real
property, which this default doesn't cover.

When interest starts running

For the mandatory rule in § 3287(a), interest starts on the day the right to
be paid vested — the day the debt became due, or the day the loss occurred if
the amount was already fixed or easily calculated. For an unliquidated
contract claim under § 3287(b), the court sets the start date itself, but
never earlier than the date the lawsuit was filed. For a discretionary tort
award under § 3288, there's no fixed statutory start date at all — it's up to
the jury, though courts routinely allow the jury to start the clock on the
date each item of loss was actually incurred.

Contract vs. tort claims

California doesn't treat these the same way, and the differences stack up:
different section, different default rate (10% vs. 7%), and different
mandatory-or-discretionary status (see below). A claim that looks
contract-adjacent but isn't a true breach-of-contract claim can still land on
the tort side of this line, so don't assume every dispute "in contract" gets
the 10% rate automatically.

Mandatory or discretionary

Interest is not optional once § 3287(a)'s conditions are met — a certain or
calculable sum, with a vested right to collect it — the statute says a
person "is entitled also to recover interest." An unliquidated contract claim
under § 3287(b) is different: the court has discretion whether to award
interest at all, and if so, from what date. A tort, fraud, malice, or
oppression claim under § 3288 is discretionary in the same way, but the
decision belongs to the jury, not the judge.

Simple or compound

Prejudgment interest in California is simple interest — it does not compound
— unless the parties' own contract calls for compounding. Westbrook v.
Fairchild, 7 Cal.App.4th 889, 894 (1992), is the leading authority for this
rule.

Claims against the government

Section 3287(a) says in its own text that it reaches "any debtor, including
the state or any county, city, city and county, municipal corporation, public
district, public agency, or any political subdivision of the state" — so the
general mandatory-interest rule, and its ordinary rate, applies to a
government defendant just as it would to anyone else. There's one carve-out:
for a tax or fee claim specifically, § 3287(c) replaces the ordinary rate with
a narrower one tied to the weekly average one-year Treasury yield, capped at
7% a year (and capped at that Treasury rate plus 2%, still no higher than 7%,
once the judgment becomes enforceable against the public entity).

Other exceptions

Civil Code § 3291 gives a personal-injury plaintiff a real incentive to make
an early settlement offer: if the defendant turns down a formal offer to
compromise under Code Civ. Proc. § 998 and the plaintiff ends up with a more
favorable judgment, the judgment earns interest at 10% a year — not the
ordinary 7% tort rate — running from the date of that first exceeded offer,
all the way through satisfaction of the judgment. That enhanced rate has its
own carve-out, though: § 3291 says plainly it "shall not apply to a public
entity, or to a public employee for an act or omission within the scope of
employment," and neither one can be held liable for interest under this
section at all.

What trips people up

The single most common mix-up is confusing California's 7% prejudgment tort
rate with the 10% rate everyone hears about. That 10% figure is real, but it
comes from two different places: Civ. Code § 3289(b)'s default rate for an
unspecified-rate contract breach, and Code Civ. Proc. § 685.010(a)(1)'s flat
rate for interest on money judgments that have already been entered and
remain unpaid ("interest accrues at the rate of 10 percent per annum on the
principal amount of a money judgment remaining unsatisfied"). Neither of
those is the rate for prejudgment interest on a tort claim, which stays at
7% unless another statute says otherwise.

The "certain or capable of being made certain by calculation" language in
§ 3287(a) is doing a lot of work. Courts read this to mean the defendant
either actually knew the amount owed, or could have computed it from
reasonably available information — not that the plaintiff simply alleged a
specific dollar figure. A disputed personal-injury verdict almost never
qualifies; that's why tort prejudgment interest usually runs through the
discretionary § 3288 route instead, at the lower 7% rate, if it's awarded at
all.

The § 3291 settlement-offer enhancement is easy to miss because it only
helps the plaintiff, only applies to a personal-injury-type tort claim
(wrongful death included), and only kicks in if the defendant's own
side rejected a formal Section 998 offer that the final judgment beat. Miss
the procedural details of making that offer, and the enhanced 10% rate and
earlier accrual date are both off the table.

Common questions

Is prejudgment interest automatic in California?
Only for a "damages certain" claim under § 3287(a) — a debt that was already
fixed, or simple to calculate. For everything else (an unliquidated contract
dispute, or any tort claim), a court or jury has to decide whether to award
it at all.

What rate applies to a car accident or other personal injury case?
7% a year, under the constitutional default in Cal. Const. art. XV, § 1,
unless the injured plaintiff made a Section 998 settlement offer the
defendant rejected and then beat at trial — in that case the rate on the
judgment jumps to 10% from the date of that offer.

Does prejudgment interest compound?
No. California prejudgment interest is simple interest unless the parties'
own contract says otherwise.

Can I get prejudgment interest against a city or the state of California?
Generally yes, under the same § 3287(a) rule that applies to any other
debtor — except for a tax or fee claim, which instead gets a lower,
Treasury-yield-based rate capped at 7% under § 3287(c).

Statutes and sources

• Cal. Civ. Code § 3287 — "A person who is entitled to recover damages
  certain, or capable of being made certain by calculation, and the right to
  recover which is vested in the person upon a particular day, is entitled
  also to recover interest thereon from that day, except when the debtor is
  prevented by law, or by the act of the creditor from paying the debt. This
  section is applicable to recovery of damages and interest from any debtor,
  including the state or any county, city, city and county, municipal
  corporation, public district, public agency, or any political subdivision
  of the state." Subdivision (b): "Every person who is entitled under any
  judgment to receive damages based upon a cause of action in contract where
  the claim was unliquidated, may also recover interest thereon from a date
  prior to the entry of judgment as the court may, in its discretion, fix,
  but in no event earlier than the date the action was filed." Subdivision
  (c) sets the Treasury-yield-based, 7%-capped rate for a tax or fee claim
  against a public entity. Accessed 2026-07-05:
  https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=CIV&sectionNum=3287.
• Cal. Civ. Code § 3288 — "In an action for the breach of an obligation not
  arising from contract, and in every case of oppression, fraud, or malice,
  interest may be given, in the discretion of the jury." Accessed 2026-07-05:
  https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=CIV&sectionNum=3288.
• Cal. Civ. Code § 3289 — "(a) Any legal rate of interest stipulated by a
  contract remains chargeable after a breach thereof, as before, until the
  contract is superseded by a verdict or other new obligation. (b) If a
  contract entered into after January 1, 1986, does not stipulate a legal
  rate of interest, the obligation shall bear interest at a rate of 10
  percent per annum after a breach. For the purposes of this subdivision,
  the term contract shall not include a note secured by a deed of trust on
  real property." Accessed 2026-07-05:
  https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=CIV&sectionNum=3289.
• Cal. Civ. Code § 3291 — "If the plaintiff makes an offer pursuant to
  Section 998 of the Code of Civil Procedure which the defendant does not
  accept prior to trial or within 30 days, whichever occurs first, and the
  plaintiff obtains a more favorable judgment, the judgment shall bear
  interest at the legal rate of 10 percent per annum calculated from the
  date of the plaintiff's first offer pursuant to Section 998 of the Code of
  Civil Procedure which is exceeded by the judgment, and interest shall
  accrue until the satisfaction of judgment. This section shall not apply to
  a public entity, or to a public employee for an act or omission within the
  scope of employment, and neither the public entity nor the public employee
  shall be liable, directly or indirectly, to any person for any interest
  imposed by this section." Accessed 2026-07-05:
  https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=CIV&sectionNum=3291.
• Cal. Const. art. XV, § 1 — "The rate of interest upon a judgment rendered
  in any court of this State shall be set by the Legislature at not more
  than 10 percent per annum. Such rate may be variable and based upon
  interest rates charged by federal agencies or economic indicators, or
  both. In the absence of the setting of such rate by the Legislature, the
  rate of interest on any judgment rendered in any court of the State shall
  be 7 percent per annum." Accessed 2026-07-05:
  https://leginfo.legislature.ca.gov/faces/codes_displayText.xhtml?lawCode=CONS&division=&title=&part=&chapter=&article=XV
• Cal. Code Civ. Proc. § 685.010(a)(1) — "Except as provided in paragraph
  (2), interest accrues at the rate of 10 percent per annum on the principal
  amount of a money judgment remaining unsatisfied." Cited here only to
  distinguish it from prejudgment interest, which this survey covers.
  Accessed 2026-07-05:
  https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=CCP&sectionNum=685.010
• Naranjo v. Spectrum Security Services, Inc. (Cal. Supreme Court, decided
  May 23, 2022) — confirms that "the 7 percent default rate set by the state
  Constitution applies" where no other statute sets a more specific
  prejudgment interest rate. Cited by name/court/date; the official reporter
  citation could not be independently confirmed through available tools,
  cross-checked against the court's own opinion text.
• Westbrook v. Fairchild, 7 Cal.App.4th 889, 894 (1992) — the leading
  authority that California prejudgment interest is simple interest, not
  compound, absent a contract term providing for compounding. Citation
  verified via legalresearch.