The Additional Cost of an Adverse Judgment: Illinois’ New Prejudgment Interest Act

Faegre Drinker Biddle & Reath LLP

Faegre Drinker Biddle & Reath LLP

For many years, Illinois plaintiffs in personal injury and wrongful death actions have been entitled to statutory postjudgment interest, currently at a rate of 9% per year. (735 ILCS 5/2-1303(a)). Prejudgment interest, however, has not been available under the Illinois judgment interest statute. That is about to change. The Illinois legislature recently passed Senate Bill 72, the Illinois Prejudgment Interest Act (“the Act”), which goes into effect on July 1, 2021, and imposes prejudgment interest on defendants at a rate of 6% per year. That statutory provision will have a significant impact on the evaluation of personal injury and wrongful death cases across Illinois.

The Practical Effect

The Prejudgment Interest Act affects all manufacturers of products engaged in litigation in Illinois. Some key highlights to consider:

  • The Act applies to all actions for personal injury or wrongful death, if those cases reach a verdict adverse to the defendant.
  • The Act does not apply to punitive damages, sanctions, attorney fees or court costs.
  • Generally, interest begins running the date the lawsuit is filed.
  • For cases that are already filed, prejudgment interest will begin to run on July 1, 2021.

The Act includes an important provision that defendants can potentially utilize to reduce prejudgment interest: early offers of settlement. Pursuant to the Act, the value of a settlement offer made within the first 12 months of filing are credited against the judgment amount rendered at trial and will not be counted in calculating prejudgment interest. As a result, if the judgment at trial does not exceed the settlement offer, there will be no prejudgment interest imposed. If a plaintiff voluntarily dismisses a lawsuit and refiles later, prejudgment interest does not accrue during that time.

The Takeaways

The Act is consistent with legislation in the majority of states that already provide for prejudgment interest on personal injury and wrongful death judgments. Similar to legislation in other states, the Act incentivizes manufacturers to take the earliest opportunity to assess the legitimacy of claims and evaluate early resolution. By design, it is intended to encourage early settlement offers. As a result, even if a defendant has no interest in settling a lawsuit at an early stage, an early offer of settlement may be strategic in limiting or even precluding the amount of prejudgment interest in connection with a potential adverse verdict. One partially positive note — the original version of the bill that led to the Act included a prejudgment interest rate of 9% per year. That bill was vetoed by Governor Pritzker in favor of the current version of the statute and the 6% interest rate.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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