Update to Illinois Bill Seeking to Impose Prejudgment Interest in Tort Actions
By Michael A. Airdo
We previously reported on the Illinois General Assemblyâ€™s passage of a prejudgment interest bill that would have imposed interest at a rate of nine percent (9%) per year on all damages in personal injury and wrongful death lawsuits in Illinois. (See February 23, 2021, Blog). On March 25, 2021, Illinois Governor J.B. Pritzker vetoed House Bill 3360. After this veto, the Illinois Legislature passed a new version of the legislation under Senate Bill 72. Among other things, this new legislation lowers the prejudgment interest rate to six percent (6%) and provides that interest will not accrue â€śfor longer than five (5) years.â€ť This Bill has passed both the House and the Senate and was sent to Governor Pritzker on April 1, 2021. The Governor has 60 days to sign the Bill into law or veto it. If he takes no action, the Bill automatically becomes law after that 60 days expires, or in this case, on May 31, 2021.
Up until now, Illinois law has not provided for prejudgment interest in personal injury or wrongful death tort cases. Under current Illinois law, plaintiffs are entitled to accrue interest in tort cases only after a court enters a monetary judgment against a defendant. Specifically, pursuant to the Illinois Code of Civil Procedure, a defendant owes a plaintiff interest at a rate of nine percent (9%) per year. However, this interest is calculated from the date of the judgment, not before. See 735 ILCS 5/2-1303(a). There is no provision in the current law to award prejudgment interest in personal injury or wrongful death cases.
Proposed Amended Law: Sente Bill 72
Senate Bill 72 modifies the current judgment interest statute in cases alleging personal injury or wrongful death cases, except as discussed below, to provide for prejudgment interest. Should plaintiffs prevail at trial and reach a verdict, they will be entitled to recover prejudgment interest at a rate of six percent (6%) per year. This interest is capped and will not accrue â€śfor longer than five (5) years.â€ť Moreover, unlike in the vetoed version of the legislation, interest would not apply to punitive damages, sanctions, statutory attorneyâ€™s fees, or court costs which are added by the court to the final judgment. In the prior version of the legislation, there was no cap on the number of years interest could accrue.
Interest against the tortfeasor begins to run on the date that a lawsuit is filed. If a plaintiff voluntarily dismisses the action and refiles it, â€śthe accrual of prejudgment interest shall be tolled from the date the action is voluntarily dismissed to the date the action is refiled.â€ť In the prior version of the legislation, prejudgment interest began to accrue when the defendant-tortfeasor had â€śnotice of the injury.â€ť The vetoed version of the law provided that a defendant would have been deemed to have â€śnoticeâ€ť depending upon whether the defendant was aware of the injury â€śfrom the incident itselfâ€ť or upon â€śwritten noticeâ€ť of the injury. As such, the prior version of the legislation would have allowed plaintiffs to â€śearnâ€ť interest on a prospective judgment before making a claim or filing a lawsuit.
Senate Bill 72 also contains an entirely new provision that was not provided for in the prior version of the legislation that caps prejudgment interest in the context of settlement offers. That is, the new legislation allows defendants the opportunity to reduce prejudgment interest through early settlement offers. Where the judgment is greater than the defendantâ€™s highest written settlement offer made during the first twelve (12) months after the filing of the lawsuit or the effective date of the bill (July 1, 2021), whichever is later, and that offer is either not accepted or is rejected by the plaintiff within 90 days of its issuance, prejudgment interest shall accrue only on the difference between the amount of the judgmentÂ (minus punitive damages, sanctions, statutory attorneyâ€™s fees and statutory costs)Â and the amount of the settlement offer. On the other hand, if, during that same time periods noted above, the defendantâ€™s settlement offer meets or exceeds the judgment, the court is not to add prejudgment interest to the final judgment sum.
The new proposed law makes it clear that public entities are exempt from the prejudgment interest rule. These entities include the State of Illinois, a local unit of government, a school district, a community college district, and all other governmental entities. The amended version of the act removes the prior provision setting forth that the trial judge had the discretion to apportion the interest award between the State and the individual plaintiff in cases where a State agency or department was also on the plaintiffâ€™s side.
The new legislation states that the amended bill will become law on July 1, 2021. For cases where injuries occurred before July 1st, prejudgment interest begins to run on the date the action is filed in the trial court or on the effective date of the bill, whichever is later.