A New Nine Percent Prejudgment Interest

The Illinois General Assembly passed a bill on January 13, 2021, amending the state’s interest statute for all tort actions seeking recovery for personal injury and wrongful death to include 9 percent prejudgment interest. (HB 3360; amending 735 ILCS 5/2-1303). Prior to the proposed amendment, the statute only applied to postjudgment interest. As of this writing, the bill has not yet been signed into law. The bill will automatically become law on April 5, 2021, if the governor does not take action (signing or vetoing) beforehand, and efforts by the bill’s opponents on the defense side to secure the governor’s veto are not expected to succeed.

The bill is considered controversial due to its high rate, atypical application compared to other states’ laws, and practical effects that incentivize delayed litigation.

First, the 9 percent interest rate on personal injury verdicts is among the highest in the nation, especially when added to the 9 percent post-judgment interest that currently exists. It also applies to “all damages set forth in the judgment,” opposed to just liquidated and calculable damages.

Second, the application of the law from a pre-litigation accrual date is drawing criticism. The bill states, “Prejudgment interest shall begin to accrue on the date the defendant has notice of the injury from the incident itself or written notice.” Accordingly, interest accrues from, for example, the date of a workplace injury or notice of alleged product defect without any lawsuit or allegation of liability. This accrual precedes other jurisdictions applying prejudgment interest upon filing of the complaint or a bona fide settlement offer.

Third, arguments that the bill would speed litigation or induce settlement is mistaken. Because prejudgment interest begins to accrue from the date of the incident or notice, future claimants may be incentivized to delay filing to the end of the applicable statute of limitations, as a 9 percent rate of return exceeds what the market would potentially deliver. For example, waiting until the end of the two-year limitation period for personal injury cases would yield an additional 18 percent return (9 percent multiplied by 2) on the date of judgment.

Also, the bill may not actually induce settlement. Personal injury cases routinely involve complex issues that need to be explored before settlement is even considered. Unlike other jurisdictions, Illinois’ prejudgment interest bill accrues interest from the date of the “incident itself,” rather than seeking to encourage settlement by requiring plaintiffs to make a realistic settlement offer before interest accrues. In Connecticut, for example, prejudgment interest is only available following a formal “offer of compromise” that is filed with the court. Only if the offer is rejected, and plaintiff recovers an “amount equal to or greater than . . . plaintiff’s offer of comprise,” will the court allow prejudgment interest to accrue from the filing of the complaint. See, CT Gen Stat § 52-192(a) (2012). Other jurisdictions have similar statutes, allowing cases to develop and forcing meaningful settlement discussions before prejudgment interest accrues. Plaintiffs in these states cannot begin collecting prejudgment interest by simply giving notice pre-suit, and defendants are given time to analyze the merits and an incentive to settle to avoid additional interest with an adverse verdict exceeding the proposed settlement. Illinois’ bill has no similar provision to encourage early resolution. Thus, there is little or no added incentive for the parties to engage in meaningful settlement discussions.

Key Takeaways:

• If passed, Illinois will include 9 percent prejudgment interest on all personal injury actions, effective immediately.
• Interest will begin to accrue on the date of the incident or notice of the incident, regardless of any potential or allegation of liability.
• Advocates from the plaintiffs’ bar claim this law is necessary to speed litigation and encourage settlement.
• The practical effects of the bill’s automatic accrual, however, incentivize delayed filing and do not require bona fide settlement discussions.
• This law may encourage Illinois forum-shopping to the detriment of manufacturers, developers, medical providers, and other defendants, without delivering any offsetting benefits to the judicial system. 

Michael T. Baier is an associate at Greenberg Traurig, LLP, in Chicago, Illinois.

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