by W. Anthony Andrews
In January 2021, on the same day that a controversial police reform bill passed the General Assembly during its lame-duck session, legislators quietly and quickly approved a significant bill impacting civil defendants. During the early morning hours on January 13th, through a Senate Amendment to House Bill 3360—which was originally designed to address mortgage foreclosures—legislators amended the Illinois Code of Civil Procedure, establishing an annual 9% pre-judgment interest for judgments on personal injury claims.
Currently in Illinois, when a judgment is entered against a defendant, interest begins accruing at 9% per year (pro-rated for each day) post-judgment. That post-judgment interest is designed to motivate defendants to pay their judgments quickly. With HB 3360, the annual interest would also be charged to days accruing before a judgment is entered for “all actions brought to recover damages for personal injury or wrongful death resulting from or occasioned by the conduct of any other person or entity, whether by negligence, willful and wanton misconduct, intentional conduct, or strict liability of the other person or entity.” That interest would not be applied unless a judgment is actually entered, however.
Moreover, the interest starts to accrue “on the date the defendant has notice of the injury from the incident itself or a written notice.” That means simply knowing that someone was injured on your premises might subject your business to years of extra interest costs, if a verdict is ultimately entered against your business. The annual pre-judgment interest will apply to currently pending lawsuits starting on the law’s effective date (upon Governor J.B. Pritzker’s signature).
The chief sponsor of the bill, Jay Hoffman (D-Belleville), noted that the bill is meant to “get litigation moving” and speed up the court system. In the Illinois Senate, the bill was sponsored by Senate President Don Harmon (D-Oak Park) who asserted that plaintiffs still have the risk of leaving trial empty-handed.
Some lawmakers, however, argued that the bill was imprecise and highly favored plaintiffs. In particular, Representative Deanne M. Mazzochi (R-Westmont) expressed concern that the accrual timing was not anchored to the date a complaint is filed but attached to the notice of the injury, which could result in pre-judgment interest for the entire two-year statute of limitations period even before the plaintiff files suit. There were also concerns that the pre-judgment interest amount would create a windfall for plaintiffs or put plaintiffs in a position to inflate settlement demands.
For example, if it took four years for a slip and fall accident to get to a jury from the date of the incident, and a jury awarded $50,000, the plaintiff would get an additional $18,000 in prejudgment interest on the claim. Because notice accrues in many personal injury cases from the date of the incident/injury, getting a disputed claim in front of a jury within four years of the incident is the best-case scenario – especially given a tendency by plaintiffs to file at the end of the two-year statute of limitations.
This bill was supported by the Illinois Trial Lawyers Association (“ITLA”). Those supporting the measure argued that Illinois was only one of four states that did not have prejudgment interest related to tort claims. While other states do allow for prejudgment interest on tort claims, many of those allowances are tied to later accrual dates such as the filing of a complaint or the rejection of a demand. (See 408.040 RSMo. (Missouri) or Mich. Comp. Laws § 600.6013). ITLA argued that the new provision would discourage any delay by defendants and insurers in resolving meritorious injury claims.
The Illinois Defense Counsel and the American Tort Reform Association opposed the bill and pressed Governor Pritzker to veto the bill. Those groups argue the 9% annual interest is substantially higher than the 5% rate which is set for cases where damages are readily determined; unfairly applies to future medical damages that haven’t even been incurred yet as well as non-economic damages such as pain and suffering; incentivizes plaintiffs to delay filings and prolong litigation to accrue additional interest awards; and increases the costs for insuring small businesses and other private entities in Illinois.
Fortunately for many of our clients, the change does not apply to local government bodies. However, it will have a significant impact on most other civil tort defendants:
- Pending claims will more likely be filed at or close to the statute of limitations, whereas currently many are filed sooner, since this change creates an incentive to delay the filing of lawsuits.
- Plaintiff’s counsel will now be more aggressive with settlement demands, and defendants may be more hesitant to reject those demands, knowing that interest is already potentially accruing.
- Once in litigation, defense counsel will likely be leerier of delays caused or continuances sought by plaintiff’s counsel.
- Judgement on jury verdicts will now be increased by 9% per annum.
- Insurance premiums for all property and casualty lines will undoubtedly increase to cover this additional unexpected exposure.
We suspect the Governor will sign this bill but whether it will withstand scrutiny by the courts remains to be seen. Recall that several years ago in a lame-duck session the General Assembly, at the behest of the plaintiff’s bar, passed the six-person jury provision which was subsequently thrown out by our Illinois Supreme Court. However, to actually test this amendment a judgment would have to be entered imposing interest, which may take some time given the lack of trials in northern Illinois during the pandemic.
As of the publication date of this article in late March, the governor vetoed House Bill 3360 and an amended bill, Senate Bill 72, with more favorable terms passed both houses. It is expected to be signed by the governor. This revised bill lowers the rate to 6%, starts the interest clock at the time of suit (not notice of the event), provides for a reduction if the defendant made an offer within a year of suit, and does not apply to units of local government.