An issue which periodically arises in the insurance context is whether an insurer can be liable for prejudgment interest above the policy limit even in the absence of bad faith.

At the outset, it is important to distinguish between two distinct types of prejudgment interest under the governing statute, CPLR 5001.

Prejudgment interest that forms part of the "loss" covered by the policy accrues from the time the underlying claim arose and will ordinarily be subject to the policy's limits of liability. Insurers in New York are not bound as a matter of law to pay such prejudgment interest in excess of policy limits. Rather, the insurer's obligation is assessed on a case-by-case basis in light of the relevant policy language. Carlson v. American Int'l Group, 199 A.D.3d 1363 (4th Dep't 2021); Government Employees Insurance Co. v. Saco, 2017 WL 1214433 (E.D.N.Y. 2017); Alejandro v. Liberty Mutual Insurance Co., 84 A.D.3d 1132 (2d Dep't 2011); Ashkenazy v. National Union Fire Insurance Co., 245 A.D.2d 326 (2d Dep't 1997) (citing Cleghorn v. Ocean Accident & Guarantee, 244 N.Y.166 (1926)).