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Illinois' Pre-Judgment Interest Statute -- An Initial Assessment as the Law Takes Effect July 1, 2021

June 30, 2021

Governor Pritzker recently signed into law Public Act 102-0006 (SB 0072), amending Section 735 ILCS 5/2-1303 of the Illinois Code of Civil Procedure (Interest on Judgments). This Amendment provides for the award of pre-judgment interest (PJI) in all actions seeking damages for personal injury or wrongful death caused by the negligence, willful and wanton conduct, intentional conduct, or strict liability of another. 

(See the most recent development re Illinois PJI here.)

Section 1303(a) previously provided for the award of post judgment interest in the amount of 9% per annum from the date of judgment until the date of satisfaction, 6% if the defendant was a governmental entity and 5% if the judgment was entered on a consumer debt as defined in the Act.  A defendant can stop the accumulation of post judgment interest by tendering to the plaintiff an amount equal to the judgment, including costs and interest accrued to date.

Prejudgment Interest Amendment
The 2021 Amendment adds Section (c) to the Interest on Judgments Act.  As noted, Section (c) provides for the award of pre-judgment interest in all actions seeking damages for personal injury or wrongful death caused by the negligence, willful and wanton conduct, intentional conduct, or strict liability of another. 

Pre-judgment interest begins to accrue on the date of filing of the action, unless the filing date precedes July 1, 2021, in which case interest begins to accrue on the later of July 1, 2021 or the date of filing of the action.  Pre-judgment interest is tolled where plaintiff voluntarily dismisses an action and then refiles the action.

Prejudgment interest shall be awarded in the amount of 6% per annum.  Prejudgment interest accrues on the entire judgment but not on amounts awarded for punitive damages, sanctions, statutory attorney's fees, and statutory costs.  There is a five-year cap on the accrual of prejudgment interest.

The Amendment provides a Rule 68 feature to the award of prejudgment interest.  The Amendment provides that prejudgment interest shall only be awarded on the difference between the judgment and the highest written settlement offer, where the judgment exceeds the last written settlement offer made within 12 months of the later of July 1, 2021, or the date of filing of the action, and the plaintiff either fails to accept the offer or rejects it within 90 days of the offer.  Withdrawal of the offer is not considered a rejection of it under the Act.  No prejudgment interest is to be awarded where the judgment is equal to or less than the highest written settlement offer made. 

Governmental entities are exempt from prejudgment interest.

Legal Questions Occasioned by the Amendment
The Amendment to the Illinois Interest on Judgments Act raises questions of law and

On the law side of the equation, one must ask whether there are special legislation/equal protection issues created by the governmental exemption from pre-judgment interest?  Certainly, private defendants are being treated differently than public defendants under the Amendment with no rational legislative purpose apparent when one considers that governmental entities are not exempt from post judgment interest awards.  Why the difference in treatment?  This issue should be considered in all actions affected by the Amendment.  One might also argue the constitutionality of the Rule 68 feature for pre-judgment interest awards when it does not exist on post-judgment interest awards. 

Staying on the legal questions, since pre-judgment interest accrues upon the date of filing rather than the date of service, should a defendant be liable for pre-judgment interest prior to being served with a suit, or worse, added and served as a defendant up to 12 months after filing of the suit?  Staying on the constitutionality side of the equation, defendants who are unable to utilize the Rule 68 feature of the Act may have a constitutional challenge to the application of the Act if they are not served for months after the filing or named and served months to years after the suit was filed.  The Act uses the “date of filing” as the date for accrual of PJI.  However, how can a defendant be charged for PJI on a case before the date the defendant was named or even served? Defendants added to a case more than 12 months after its filing date should argue the PJI Act does not apply to it since it did not have the ability to utilize the 12-month Rule 68 feature. 

Another issue to address is what, if any, discretion the courts will have in the award of pre-judgment interest?  The Amendment uses the word “shall” throughout the Act such as “the plaintiff shall recover” and “the court shall add to”.  Best practices suggests that a defendant make a record of delays in the proceeding occasioned by the plaintiff in support of an argument that the court has discretion in the amount of pre-judgment interest to award despite the “shall” language in the Act.  Asking the court to control pre-judgment interest through its orders might be a better practice than asking the court to stay the running of pre-judgment interest for delays occasioned by the plaintiff.  For instance, if a plaintiff requests a 7-month delay in discovery or a trial date, the court could require the plaintiff to waive pre-judgment interest as a condition for entering the continuance order.

In cases such as medical practice cases, will pre-judgment interest accrue against respondents in discovery (RID)?  Should it accrue against a named hospital while the plaintiff figures out who to convert into defendants? 

How does pre-judgment interest work in cases with defendants that are only severally liable?  One would assume PJI only applies on the amount of the several judgments, not the gross judgment.

Will pre-judgment interest awards be covered by a defendant’s policy of insurance? Presumably, the answer is yes, it will be covered just as post judgement interest is covered.   Interest payments are considered Supplemental Payments in a CGL policy. I assume there are similar provisions under a PL policy. These payments do not reduce policy limits.

The Amendment to the Interest on Judgments Act has the potential to significantly increase a defendant’s exposure in personal injury and wrongful death actions.  We now must include this potential exposure in our case analysis and take the appropriate steps to utilize its Rule 68 features.

If you have questions about how this statute may affect your case management strategies, please contact the Johnson & Bell attorney with whom you regularly work.

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