Prejudgment Interest on Personal Injury Claims Becomes Law in Illinois
Prejudgment Interest Act Takes Effect on July 1, 2021, and Interest Will Begin to Accrue on Pending Cases of Record in Illinois Courts
- Illinois Senate Bill 72 (Prejudgment Interest Act) has been signed into law by Gov. JB Pritzker, providing for prejudgment interest on all damages rendered in personal injury and wrongful death claims at the rate of 6 percent per year.
- Previously, Illinois law did not recognize the award of prejudgment interest in tort actions for personal injury or wrongful death. Instead, Illinois' judgment interest statute merely imposed post-judgment interest in tort actions that accrued at the rate of 9 percent per year after a court issued a judgment award.
- This Holland & Knight alert summarizes the impact and effect of the Prejudgment Interest Act, which takes effect on July 1, 2021.
Illinois Gov. JB Pritzker has signed Senate Bill 72 (Prejudgment Interest Act) into law, which provides for prejudgment interest on all damages rendered in personal injury and wrongful death claims at the rate of 6 percent per year.
The Prejudgment Interest Act allows for the calculation of prejudgment interest to begin accruing in certain cases described further below and will have an immediate impact on cases pending in the courts of Illinois.
This Holland & Knight alert summarizes the impact and effect of the Prejudgment Interest Act.
Until Gov. Pritzker's execution of Senate Bill 72, Illinois law did not recognize the award of prejudgment interest in tort actions for personal injury or wrongful death. Instead, Illinois' judgment interest statute merely imposed post-judgment interest in tort actions that accrued at the rate of 9 percent per year after a court issued a judgment award. See 735 ILCS 5/2-1303.
Gov. Pritzker had earlier vetoed a similar bill from the Illinois House that sought to add prejudgment interest at the rate of 9 percent per year, expressing concern about the statute's potentially adverse impact on the state's healthcare industry, particularly given the impact of COVID-19 on that sector of the Illinois economy. After the veto, Illinois lawmakers passed a new version of the bill under Senate Bill 72, which lowered the prejudgment interest rate to 6 percent. (See previous Holland & Knight alert, "Illinois Legislature Submits Revised and Amended Prejudgment Interest Bill," March 31, 2021.)
Application and Effect
The Prejudgment Interest Act provides that in all actions for personal injury or wrongful death, with certain exceptions as detailed below, a plaintiff shall recover prejudgment interest on all damages rendered in a judgment against a tortfeasor at an interest rate of 6 percent per year.
Prejudgment interest would apply only in personal injury and wrongful death cases that reach verdict. It would not apply nor be calculated with punitive damages, sanctions, attorney fees or court costs added to a judgment.
The new law sets the beginning of the accrual of prejudgment interest on the date that a lawsuit is filed against the tortfeasor. However, the law also takes into account personal injuries and related lawsuits that may have occurred and or were filed before the effective date of this statute.
The law becomes effective on July 1, 2021. The Prejudgment Interest Act provides that for claims that occurred before the effective date, prejudgment interest shall begin on the date the action is filed or the effective date of the bill, whichever is later.
Therefore, if a claim occurred before July 1, 2021, and if a lawsuit for that claim is filed on Aug. 1, 2021, prejudgment interest will be calculated from the date of Aug. 1. However, if the claim occurred before July 1, 2021, and the corresponding lawsuit was already filed and of record in the Illinois court before July 1, 2021, prejudgment interest will begin to be calculated from the date of July 1.
The Prejudgment Interest Act also includes a provision that provides defendants with an opportunity to reduce prejudgment interest through early settlement offers. The value of settlement offers made within the first 12 months of the filing of a lawsuit are to be credited against the judgment amount rendered at trial before calculating prejudgment interest, and if that settlement offer meets or exceeds the judgment, no prejudgment interest will apply.
Therefore, for example, if a tortfeasor makes a settlement offer of $100,000 within the first 12 months of a) the effective date of the Act in cases that were pending before July 1, 2021, or b) the filing of the lawsuit and verdict amounts to $75,000, no prejudgment interest will apply. Conversely, if the highest settlement offer by any tortfeasor amounts to $75,000 and the verdict on the judgment is $100,000, the highest settlement offer will act as a setoff to calculation and prejudgment interest will be assessed only against $25,000.
Prejudgment interest will also not be calculated and will be tolled during the period of time after which a claimant voluntarily dismisses an action and until it is refiled with the court.
Finally, the proposed law will not apply to lawsuits filed against the state, a local unit of government, a school district, community college district or any other governmental entity nor continue to be calculated after a period of five years.
This important change to the Illinois judgment interest statute will mark the first time that prejudgment interest will be allowed against tortfeasors for personal injury or wrongful death claims, and tortfeasors need to be aware of this new law for the potential immediate impact on pending cases in the Illinois courts.
Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.