Prejudgment Interest Has Hit Illinois
Governor Pritzker has signed into law SB72 (PA102-0006), which imposes a 6% prejudgment interest on personal injury and wrongful death actions effective July 1, 2021.
The prejudgment interest has been a threat since HB3360 was first proposed on January 13, 2021. The first proposal, a 9% per annum interest with unlimited scope and running from the date of the accident, was vetoed on March 25, 2021. After the veto, the General Assembly made amendments to SB72 and those modifications became PA102-0006 on May 28, 2021.
The effects of this new law will be vast. The law applies a 6% per annum interest to personal injury or wrongful death actions arising out of any theory of tort liability. The prejudgment interest applies to most categories of damages, including non-economic and future damages, and is effective July 1, 2021. For current claims, the interest begins to accrue from the time of the accident or the enactment of the statute, whichever is later. Otherwise, the interest starts accumulating at the time the cause is filed.
The law does have some limitations for the prejudgment interest, such as limiting the total years for it to run to five. Settlement offers will also play a part in limiting the amount of prejudgment interest. The interest can be cut off by the highest written settlement offer made within 12 months of the suit being filed and not accepted within 90 days or rejected by the plaintiff. If the judgment is greater than the highest offer, then the plaintiff only gets prejudgment interest on the difference between the highest offer and the judgment. If the judgment is less than or equal to the highest offer, then the plaintiff gets no prejudgment interest.
There are many issues with the statute that cannot be answered. Such as what happens to defendants who are added after the suit is filed, at what point does their time start running to make a qualified offer or how do you deal with third-party plaintiffs. Who gets taxed with discovery deadlines and compliance delays? It will also bring up coverage interest and could expose insurers to pay covered damages in excess of the limits.
Defendants need to be mindful of the prejudgment interest and its ramifications to the case as well as the vast number of unanswered questions regarding the full effect of the new law. If you have questions about how this new law will impact you or your organization, please contact the author or Baker Sterchi.