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Illinois Partner Summarizes Prejudgment Interest Act—effective July 1, 2021

Summary
Recently, the State of Illinois legislature presented Governor J.B. Pritzker with Illinois Senate Bill 72, known as the Prejudgment Interest Act. This legislation amends 735 ILCS 5/2-1303 to add Section (c) to allow for prejudgment interest on all damages rendered in personal injury and wrongful death actions at a rate of six percent per year. The Prejudgment Interest Act allows for the calculation of prejudgment interest to begin accruing in certain cases immediately on the effective date of July 1, 2021.

Background
Until now, Illinois law did not recognize an award of prejudgment interest in actions based on personal injury or wrongful death. Rather, litigants that obtained a judgment were permitted to seek post-judgment interest at a rate of nine percent per year following the judgment. See 735 ILCS 5/2-1303.

Earlier this year, Gov. Pritzker vetoed a similar bill presented by the Illinois House that attempted to impose prejudgment interest at a rate of nine percent per year which also permitted retroactive application of the new bill to then-pending cases. Following the Governor’s publicized veto, Illinois lawmakers crafted a new bill, with a lower per annum prejudgment interest rate, with more specific application to currently pending actions, as well as carved out exceptions and/or set offs to appeal to the defense bar throughout the state.

The new section (c), known as the Prejudgment Interest Act, amends 735 ILCS 5/2-1303, and provides that in all actions seeking damages for personal injury and/or wrongful death, Plaintiff is permitted to recover prejudgment interest from a Defendant on any damages awarded by a jury at an interest rate of not more than six percent per year.

Notably, prejudgment interest will only be applied to judgments against Defendants rendered by a jury in personal injury and/or wrongful death actions. The Act does not allow for prejudgment interest on attorney fees awards, court costs, punitive damage awards or sanctions entered by the court. By these terms, the Act sets forth the date on which an action is filed as the trigger point for application of prejudgment interest; however, for all cases pending prior to the effective date of July 1, 2021, prejudgment interest will begin to accrue on the effective date.

The Act provides a credit for early settlement offers, within twelve months of filing of the actions if after July 1, 2021, or within twelve months of the effective date of the Act for all pending actions. In practice, this credit is akin to an offer of judgment. There are also various carved out exceptions as to the application of prejudgment interest altogether. Prejudgment interest will not be permitted as against the State of Illinois, any local governmental, school district, community college district or other governmental entities. Further, application of prejudgment interest will be tolled if plaintiff voluntarily dismisses an action. Finally, prejudgment interest will be capped at a maximum of five years.

Going Forward
While there will now be prejudgment interest available against certain Defendants, those same Defendants can avoid maximum impact if they timely convey settlement offers within one year of filing or the effective date of the Act. It will be important to track deadlines to do so to ensure maximum protection against needless application of excessive interest, particularly in cases where liability is likely.

To review Alan’s complete analysis, including examples of how to apply the Illinois Prejudgment Interest Act, download his Litchfield Alert.

Alan focuses his practice on insurance defense litigation in the areas of construction negligence, catastrophic personal injury and wrongful death and commercial litigation relating to labor and employment disputes. He has extensive experience in professional malpractice including defending executives and employers, corporate and business litigation, products liability and trucking liability. Alan has represented clients in arbitrations and in numerous jury trials to verdict in state courts throughout Illinois.