Prejudgment Interest Rules in Kentucky
At a glance
| Governing law | KRS 360.010(1), (3)-(4) sets the legal and written-contract rates; *Nucor Corp. v. General Electric Co.* supplies the liquidated/unliquidated entitlement rule; KRS 360.040 governs postjudgment interest. |
|---|---|
| Interest rate | Legal rate 8% annually (§ 360.010(1)); a written obligation with its own rate uses that rate after default, while an eligible writing without one uses the legal rate (§ 360.010(3)-(4)). |
| When interest starts running | A liquidated contractual amount ordinarily runs from the due date (*Nucor*; § 360.010(4)); for unliquidated damages the court assesses interest equitably and fixes the period. |
| Contract vs. tort claims | The case-law distinction is liquidated versus unliquidated damages, which may cut across contract and tort claims (*Nucor*). |
| Mandatory or discretionary | Liquidated damages: interest follows as a matter of course; unliquidated damages: court decides in equity, rather than a jury (*Nucor*). |
| Simple or compound | Prejudgment compounding is not specified by § 360.010; an appellate court allowed it in a contract case as a matter of trial-court discretion (*Reliable Mechanical*). Postjudgment interest compounds annually (§ 360.040(1)). |
| Claims against the government | Board of Claims awards under KRS 49.040(1) are capped at $250,000 per claimant or $400,000 total for multiple claims from one negligent act; limits are exclusive of interest and costs. |
| Other exceptions | A written contract rate governs eligible after-default interest (§ 360.010(3)); *Unifund CCR Partners v. Harrell* disallowed fallback to 8% after a creditor had contracted above that rate and charged off the account. |
Requirements one by one
Governing law and rate
KRS 360.010(1) states an 8% annual legal rate. Subsections (3)-(4) distinguish a written obligation that specifies its own after-default rate from one with no applicable rate, which uses the legal rate. KRS 360.040(1) separately provides for 6% annual interest compounded after an ordinary judgment is entered, including a judgment containing prejudgment interest.
Liquidated and unliquidated damages
In Nucor Corp. v. General Electric Co., 812 S.W.2d 136 (Ky. 1991), Kentucky’s Supreme Court said prejudgment interest on liquidated damages “follows as a matter of course.” An unpaid fixed price or note is a familiar example. The court, rather than a jury, decides whether equity supports interest on unliquidated damages. This distinction does not depend solely on whether the underlying claim is labeled contract or tort.
Compounding
KRS 360.010 does not fix a prejudgment compounding schedule. Reliable Mechanical, Inc. v. Naylor Indus. Servs., Inc., 125 S.W.3d 856 (Ky. App. 2003), held that simple interest is traditional but not legally required in every prejudgment award; on the facts before it, the trial court could compound. The distinct postjudgment rule in KRS 360.040(1) expressly compounds annually.
Board of Claims
KRS 49.040(1) caps a single Board of Claims award at $250,000, or $400,000 divided among claimants when one negligent act causes multiple claims, with a $250,000 individual ceiling. Its words “exclusive of interest and costs” place those items outside the stated dollar caps.
What trips people up
An agreed rate does not always let a creditor abandon the contract and claim the 8% default later. In Unifund CCR Partners v. Harrell, 509 S.W.3d 25 (Ky. 2017), a creditor that had contracted for a rate above 8% and charged off the account could not fall back to KRS 360.010(1). The holding arose from that credit-card agreement and charge-off record.
Common questions
Does a disputed amount always bar interest? No. Nucor distinguishes whether damages are fixed or readily ascertainable from a claim whose amount requires the court’s equitable judgment.
Does the 6% postjudgment rate replace the prejudgment rate? KRS 360.040(1) starts when judgment is entered; KRS 360.010 and the applicable case law address the earlier period.
Statutes and sources
- KRS 360.010(1), (3)-(4), official Kentucky statute PDF, accessed 2026-10-06: https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=47989
- KRS 360.040(1), official Kentucky statute PDF, accessed 2026-10-06: https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=45719
- KRS 49.040(1), official Kentucky statute PDF, accessed 2026-10-06: https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=51453
- Nucor Corp. v. General Electric Co. (1991), Reliable Mechanical, Inc. v. Naylor Indus. Servs., Inc. (2003), and Unifund CCR Partners v. Harrell (2017), full opinions retrieved 2026-10-06.
Source links
Every statute quoted above, linked, with the date we checked it.
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