On May 28, 2021, Illinois Governor JB Pritzker signed Illinois Senate Bill 72 (the Prejudgment Interest Act) into law, which allows 6% prejudgment interest in personal injury or wrongful death lawsuits. The new legislation takes effect on July 1, 2021 and will have an immediate impact on personal injury cases in Illinois.
Governor Pritzker previously vetoed a similar bill introduced in January 2021. That bill sought to add prejudgment interest at the rate of 9% and started the accrual of the interest "on the date the defendant has notice of the injury from the incident itself or a written notice."
For injuries that occur before the effective date of the new law, prejudgment interest will begin to accrue on the later of July 1, 2021 or the date the lawsuit is filed. No prejudgment interest will accrue for longer than five years. Another limitation of the new law is that it does not apply to lawsuits filed against the state, a local unit of government, a school district, a community college district, or any other governmental entity.
The new law does include a provision that allows defendants to potentially reduce or eliminate prejudgment interest through an early settlement offer. If a defendant makes a written settlement offer within the first 12 months of the filing of a lawsuit, said offer can be credited against the judgment amount rendered at trial. If the settlement offer meets or exceeds the judgment, no prejudgment interest will apply.
Opponents of the legislation raised numerous concerns, including the fact that the prejudgment interest will accrue on pain and suffering as well as future damages. Additionally, the legislation does not consider litigation delays caused by plaintiffs themselves, which would increase the prejudgment interest. Due to these factors, the new law may increase defendants' financial exposure in Illinois lawsuits involving personal injuries or wrongful death.
Previously, plaintiffs were not entitled to prejudgment interest in personal injury cases, because the nature and extent of a plaintiff's damages cannot be calculated in advance and liability is uncertain (compared to, for example, a breach of contract claim). Illinois law permitted post-judgment interest in tort actions, which accrued at a rate of 9% per year following a judgment award.
The legislation will amend 735 ILCS 5/2-1303 to read as follows:
(c) In all actions brought to recover damages for personal injury or wrongful death resulting from or occasioned by the conduct of any other person or entity, whether by negligence, willful and wanton misconduct, intentional conduct, or strict liability of the other person or entity, the plaintiff shall recover prejudgment interest on all damages, except punitive damages, sanctions, statutory attorney's fees, and statutory costs, set forth in the judgment. Prejudgment interest shall begin to accrue on the date the action is filed. 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. In entering judgment for the plaintiff in the action, the court shall add to the amount of the judgment interest calculated at the rate of 6% per annum on the amount of the judgment, minus punitive damages, sanctions, statutory attorney's fees, and statutory costs. If the judgment is greater than the amount of the highest written settlement offer made by the defendant within 12 months after the later of the effective date of this amendatory Act of the 102nd General Assembly or the filing of the action and not accepted by the plaintiff within 90 days after the date of the offer or rejected by the plaintiff, interest added to the amount of judgment shall be an amount equal to interest calculated at the rate of 6% per annum 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 highest written settlement offer. If the judgment is equal to or less than the amount of the highest written settlement offer made by the defendant within 12 months after the later of the effective date of this amendatory Act of the 102nd General Assembly or the filing of the action and not accepted by the plaintiff within 90 days after the date of the offer or rejected by the plaintiff, no prejudgment interest shall be added to the amount of the judgment. For the purposes of this subsection, withdrawal of a settlement offer by defendant shall not be considered a rejection of the offer by the plaintiff. Notwithstanding any other provision of this subsection, prejudgment interest shall accrue for no longer than 5 years.
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