On May 28, 2021, Governor J.B. Pritzker signed Senate Bill 72 into law as Public Act 102-0006. i The Act amends 735 ILCS 5/2-1303(a).ii The amendment became effective on July 1, 2021. Pursuant to Public Act 102-0006, the Illinois judgment interest statute now imposes prejudgment interest in all actions seeking damages for personal injury or wrongful death, including claims based on negligence, willful and wanton misconduct, intentional conduct, or strict liability. Prejudgment interest of six percent will begin to accrue on the later of the effective date of the Act or the date the action is filed. 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 nine percent per year after a court issued a judgment award.iii Prejudgment interest does not apply to punitive damages, sanctions, statutory attorney’s fees, and statutory costs, nor to certain classes of defendants.
For example, if a claim occurred before July 1, 2021, and if a lawsuit for that claim is filed on August 1, 2021, prejudgment interest will be calculated from the date of August 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. Regardless, no prejudgment interest will accrue for longer than five years. Additionally, prejudgment interest will not be calculated and will be tolled during the period of time after plaintiff voluntarily dismisses her 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.
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 (or the Act’s effective date) are to be credited against the judgment amount rendered at trial before calculating prejudgment interest. If the timely settlement offer meets or exceeds the judgment, no prejudgment interest will apply. Consider these examples:
- Where the judgment is greater than defendant’s highest written settlement offer made to plaintiff 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 is either not accepted or is rejected by 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 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 is either not accepted or is rejected by plaintiff within 90 days after the date of issuance, no prejudgment interest shall be added to the judgment.
- For example, if a tortfeasor makes a settlement offer of $200,000 within the first 12 months of: a) the effective date of the Act in cases pending before July 1, 2021, or b) the filing of the lawsuit, and the verdict amounts to $175,000, no prejudgment interest will apply. Conversely, if the highest settlement offer by any tortfeasor amounts to $175,000 and the verdict on the judgment is $200,000, the highest settlement offer will act as a setoff to the calculation and prejudgment interest will be assessed only against $25,000 shortfall.
The Act imposes prejudgment interest on noneconomic damage awards for pain and suffering. Such awards oftentimes account for the lion’s share of plaintiff’s claim and are difficult to calculate with any degree of mathematical certainty. The applicable provisions requiring defendant to make a settlement offer within the applicable 12-month period in order to reduce or eliminate prejudgment interest do not account for the fact that typically, written and oral discovery will be needed in order to assess a reasonable settlement offer. Depending upon the complexity of the case and the number of parties, the full nature, extent, and duration of plaintiff’s damages may not be truly appreciated within this relatively short period of time.
Obviously, this new law has the potential to significantly increase defendant’s financial exposure in actions involving personal injuries or wrongful death, and additional pressure and consideration will impact defendant’s early decision-making process in regards to not only if and when to make a settlement offer, but the amount of the offer, knowing there can be financial implications to “undervaluing” a settlement offer.
i 2021 Illinois Senate Bill No. 72, Illinois One Hundred Second General Assembly – First Regular Session, 2021 Illinois Senate Bill No. 72, Illinois One Hundred Second General Assembly – First Regular Session.
ii 735 Ill. Comp. Stat. Ann. 5/2-1303. The Public Act amended the section titled, “Interest on Judgement.”
iii See 735 Ill. Comp. Stat. Ann. 5/2-1303. The previous version of the law was effective from January 1, 2020 to June 30, 2021, and can still be found on Westlaw and other legal databases.