Illinois’ proposed bill to allow for prejudgment interest (PJI) in personal injury and wrongful death cases is raising eyebrows among the defense bar, insurers, and businesses. We can provide some insight based on our experience practicing in Indiana which also allows for recovery of PJI in tort cases. Indiana has had a statutory provision for PJI in tort cases since 1988 (codified at IC 34-51-4-1 through -9). Indiana’s statute, however, is significantly different from the Illinois’ bill.
The Indiana statute is triggered only when the plaintiff sends a written qualified settlement offer (QSO) to the defendant within 9 months of the filing of the case. If the case does not settle and the verdict is at least 75% of the plaintiff’s demand in its QSO, the plaintiff is eligible to have PJI added to the judgment. However, if the verdict is less than 75% of the defendant’s offer in its QSO, the plaintiff cannot have PJI added to the judgment. And even then, the rate (between 6 and 10%), period of accrual (up to 48 months), and even the decision to award PJI at all rest with the trial court’s discretion.
Illinois’s proposed bill, HB 3360, is much different. Indiana requires action by a party to trigger PJI, places the risk of PJI on both parties, limits its applicability based on the relative amounts of the verdict and QSO, and provides a range of interest and accrual periods. Illinois will do none of that. Instead, the very fact of a plaintiff’s verdict triggers an automatic PJI award at 9% interest and the accrual period begins to run on the date of loss, or when the defendant learns of the loss. Interest will start to accrue on January 1, 2021 for losses accruing before that date. The defendant can do nothing to preclude or limit the applicability of prejudgment interest (Does not apply against local governments).
PJI now is a consideration in valuing Illinois personal injury and wrongful death claims. The amount of anticipated PJI needs to be calculated and added to any adverse jury verdict assessment as well as in settlement estimates. Contrary to the usual situation where prejudgment interest is limited to circumstances when liability and amount of damages are known, this bill would impose interest before either are known and likely contested. Indeed, in many situations, the bill would impose interest on damages, such as future medical care costs, that have not even been incurred yet. As a consequence, this bill would serve to coerce defendants to unreasonably settle simply to avoid the potentially draconian effects of this bill’s onerous provisions and deprive defendants of their right to a jury trial guaranteed by Art. I, Sec. 13 of the Illinois Constitution.
The timing of the proposed bill’s passage also is troubling. To impose this penalty upon defendants, at a time when the COVID-19 pandemic has caused substantial delays in the civil justice system and imposed significant and widespread financial strain on Illinois residents, consumers and businesses, alike seems unduly harsh. The penalties of HB3360 will have a rippling effect, negatively impacting the already fragile economic status of Illinois business and the services available to Illinois residents and consumers.
In addition, the Illinois Defense Counsel has outlined numerous problems with this proposed law including:
- Previously, prejudgment interest was not available on personal injury actions because the extent of the damages could not be calculated in advance. This will still be true if this bill is passed. Defendants will have no ability to determine the extent of their potential liability, if any. Indeed, in most cases, the question of whether the defendant has any liability for the injuries is not clear.
- The 9% interest rate is substantially higher than the interest either the plaintiffs or the defendants could earn on these undetermined damages if it were paid to them immediately and is higher than the interest rates in most other states. It is also higher than the prejudgment interest available currently under Illinois law, which is set at 5% for cases where the damages can readily be determined.
- In litigation, interest is employed and appropriate only when liability is clear and the amount of damages are easily determined. Here, we have neither and the imposition of interest is patently unfair.
- The award of prejudgment interest will include interest on non-economic damages, such as pain and suffering. There is no justification for awarding interest on non-economic damages.
- The award would also include interest on future damages that have not been incurred, such as future medical expenses and future lost wages. Again, there is no justification for an award of interest on money that the plaintiff has not spent.
- The award takes no account of the delays in the litigation process attributable to the plaintiffs or the plaintiff’s attorneys. For example, plaintiffs often wait to file suit until just before the applicable statute of limitations has run. It is unfair to impose an interest penalty on defendants for delays caused by plaintiffs.
In sum, PJI is far from an arcane procedural move. It has very real financial implications for both defendants and insurers. The approach Illinois has chosen places all risk of PJI on defendants, and will have the effect of automatically inflating claim valuation in Illinois.
There are some constitutional and other defenses that can and should be raised as affirmative defenses in all pending actions as well as actions to be filed. Defendants should also seek a stay of the application of the Act during the time period covered by Governor Pritzker’s emergency pandemic orders, or any closure orders of local courts. Governor Pritzker can still reject the bill, which is unlikely, or he can amend the bill, which is a possibility. We certainly expect the PJI bill to be signed into law in one format or another.
Now is the time to assess PJI in all of your pending personal injury or wrongful death cases. If you have questions about how this development might impact your organization, please contact the Johnson & Bell attorney with whom you work.