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Illinois Prejudgment Interest Act Effective July 1, 2021

By Michael A. Airdo

On May 28, 2021, Illinois Governor J.B. Pritzker signed into law Senate Bill 72 providing for prejudgment interest on all damages in personal injury and wrongful death claims at the rate of six percent (6%) per year. Prior to now, Illinois law did not provide for the award of prejudgment interest in tort actions for personal injury or wrongful death. Instead, the judgement interest statute in Illinois imposed post-judgment interest in tort actions that accrued at the rate of nine percent (9%) per year after a court issued a judgment award. The Prejudgment Interest Act, now codified at 735 ILCS 5/2-1303, and which becomes law on July 1, 2021, allows for the calculation of prejudgment interest to begin accruing in most personal injury and wrongful death cases, and will take effect immediately on cases that are currently pending in the Illinois courts.

History of the Act

We previously reported on the Illinois General Assembly’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, Governor Pritzker vetoed House Bill 3360. After this veto, the Illinois Legislature passed a new version of the legislation under Senate Bill 72, which has now been signed into law. Among other things, this revised legislation lowers the prejudgment interest rate to six percent (6%) and provides that interest will not accrue “for longer than five (5) years.”

Prior Law

Up until this new enactment of the Prejudgment Interest Act, Illinois law did not provide for prejudgment interest in personal injury or wrongful death tort cases. Up until now, plaintiffs were entitled to accrue interest in tort cases only after a court entered a monetary judgment against a defendant. Specifically, pursuant to the Illinois Code of Civil Procedure, a defendant owed a plaintiff interest on the judgment at a rate of nine percent (9%) per year. However, this interest was calculated from the date of the judgment, not before. There was no provision in the law to award prejudgment interest in personal injury or wrongful death cases.

Prejudgment Interest Act

Prejudgment Interest is Assessed at 6% Per Year and is Capped at 5 Years

Senate Bill 72 modifies the current judgment interest statute in most cases alleging personal injury or wrongful death cases to provide for prejudgment interest.  The new provisions of the law apply to personal injury and wrongful death cases that arise out of “negligence, willful and wanton misconduct, intentional conduct, or strict liability of the other person or entity.”

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 “for longer than five (5) years.” And, although prejudgment interest will be applied in both common law and statutory causes of action that are allowable in personal injury and wrongful death cases, interest will not be applied to punitive damages, sanctions, statutory attorney’s fees, or court costs which are added by the court to the final judgment.

Interest against the defendant begins to run on the date that a lawsuit is filed. If a plaintiff voluntarily dismisses the action and refiles it, “the accrual of prejudgment interest shall be tolled from the date the action is voluntarily dismissed to the date the action is refiled.”

Settlement Offers Cap Prejudgment Interest Calculation

It is important to note that the law caps prejudgment interest in the context of settlement offers. That is, the law allows defendants the opportunity to reduce prejudgment interest through early settlement offers. Where the judgment is greater than the defendant’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 judgment (minus punitive damages, sanctions, statutory attorney’s fees and statutory costs) and the amount of the settlement offer. On the other hand, if, during that same time periods noted above, the defendant’s settlement offer meets or exceeds the judgment, the court is not to add prejudgment interest to the final judgment sum.

As applied, if a defendant offers to settle a case for $50,000 within the first 12 months of either the effective date of the Act in cases that were pending before July 1, 2021, or within the first year of the filing of the lawsuit for those cases filed after July 1st, and the verdict comes in at $25,000, no prejudgment interest would apply. However, if the verdict comes in at $75,000, the $50,000 settlement offer will act as a “setoff” to the prejudgment interest calculation, and prejudgment interest will be assessed only against the $25,000—the difference between the offer and the verdict amount.

Public Entities are Exempt from Prejudgment Interest

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.

July 1, 2021, Effective Date

The new law takes effect on July 1, 2021. For cases where injuries occurred before July 1st, 2021, prejudgment interest begins to run on the date the action is filed in the trial court or, if the case is already in suit, interest begins to run on July 1st.  For example, if a claim occurred before July 1, 2021, and if a lawsuit for those damages is filed on September 1, 2021, prejudgment interest will be calculated from the date of September 1st. But, if the claim occurred before July 1, 2021, and the lawsuit arising from that claim is already filed in an Illinois court before July 1, 2021, prejudgment interest will begin to accrue on July 1st

If you have questions regarding this Prejudgment Interest Act, please contact Michael Airdo at [email protected].