Illinois Prejudgment Interest Legislation – UPDATE
As we reported in January, Illinois’ judgment interest statute imposes post-judgment interest in tort actions at the rate of 9 percent per year from the date of the judgment’s entry through the date of the judgment’s satisfaction. See, 735 ILCS 5/2-1303(a) (Section 1303). Prejudgment interest currently is not recoverable. The Illinois General Assembly aimed to change this through its passage of House Bill 3360, which sought to amend Section 1303 to impose prejudgment interest in tort actions.
House Bill 3360 would have imposed prejudgment interest at the rate of 9 percent per year in all tort actions seeking recovery for personal injury or wrongful death beginning “on the date the defendant has notice of the injury from the incident itself or a written notice.” House Bill 3360 also would have been effective immediately upon enactment into law, including in cases where the alleged personal injury or wrongful death occurred before the bill’s effective date.
On March 25, 2021, Governor J.B. Pritzker (D) vetoed House Bill 3360. In his veto message, Governor Pritzker stated that he “support[s] joining the majority of states that allow prejudgment interest in personal injury cases in order to encourage their prompt resolution,” but “the provisions of HB 3360 would be burdensome for hospitals and medical professionals beyond the national norm, potentially driving up health care costs for patients and deterring physicians from practicing in Illinois.” Governor Pritzker stated further that he would prefer a prejudgment interest rate that is “more reasonable” and tied to “market conditions such as the federal prime rate, as opposed to a flat rate.”
Governor Pritzker also expressed concern that House Bill 3360 would allow for prejudgment interest on non-economic damages: “Again, when we compare this legislation to states that have prejudgment interest, many of them exclude non-economic damages from the calculation.” Finally, Governor Pritzker “urged” House Bill 3360’s sponsors “to return to negotiate a compromise that includes stronger protections for health care providers while encouraging the faster resolution of these cases that can leave families devastated for years. It is in the best interest of all Illinoisans for this issue to be fully negotiated with an opportunity for input from all stakeholders, advocates, and other interested parties.”
Compromise legislation is already in the works. Pursuant to Senate Bill 72, which passed both houses of the General Assembly on March 25, 2021, the Illinois judgment interest statute would be amended to impose prejudgment interest in all actions for personal injury or wrongful death as follows:
Prejudgment interest will accrue “on all damages, except punitive damages, sanctions, statutory attorney’s fees, and statutory costs.”
Prejudgment interest will begin to accrue “on the date the action is filed.” However, if the plaintiff voluntarily dismisses the action and refiles, “the accrual of prejudgment interest shall be tolled from the date the action is voluntarily dismissed to the date the action is refiled.”
Prejudgment interest will be imposed at the rate of 6 percent per year and will not accrue “for longer than 5 years.”
“Neither the State, a unit of local government, a school district, community college district, nor any other governmental entity is liable to pay prejudgment interest in an action brought directly or vicariously against it by the injured party.”
“For any personal injury or wrongful death occurring before the effective date of this amendatory Act” – July 1, 2021 – “the prejudgment interest shall begin to accrue on the later of the date the action is filed or the effective date of this amendatory Act.”
Finally, Senate Bill 72 also includes provisions for capping prejudgment interest within the context of settlement offers:
Where the judgment is greater than the defendant’s highest written settlement offer made within 12 months after the filing of the action or the effective date of the bill (July 1, 2021), whichever is later, and that settlement offer either is not accepted or is rejected by the plaintiff within 90 days after the date of 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.
Where the judgment is equal to or less than the defendant’s highest written settlement offer made within 12 months after the filing of the action or the effective date of the bill (July 1, 2021), whichever is later, and that settlement offer either is not accepted or is rejected by the plaintiff within 90 days after the date of issuance, no prejudgment interest shall be added to the judgment.
Current Status of Senate Bill 72
Senate Bill 72 now heads to Governor Pritzker for signature. Under Illinois’ legislative process, a bill passed by both houses of the General Assembly must be sent to the governor within 30 days. The governor then has 60 calendar days to sign the bill or return it with a veto. If the governor does nothing, the bill will automatically become a law after the 60-day period. If the governor vetoes the bill, the General Assembly may override the veto with a 3/5 vote in both houses.
While Senate Bill 72 is an improvement over House Bill 3360, it is still problematic. If enacted into law, Senate Bill 72 would impose prejudgment interest on non-economic damage awards for pain and suffering. Pain and suffering awards can never be anticipated with mathematical precision and often constitute the lion’s share of a personal injury or wrongful death verdict. Senate Bill 72 also can be read to apply to currently pending lawsuits, all of which have been subject to lengthy delays as the result of court closures and slow-downs necessitated by the COVID-19 pandemic. The accrual of prejudgment interest during this particular time could therefore result in a windfall for the plaintiff through no fault of either side.