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Illinois State Legislature Casts a Dark Shadow Over All Litigants With New Bill Setting 9% Prejudgment Interest To Accrue From Notice Of Injury

Illinois State Legislature Casts a Dark Shadow Over All Litigants With New Bill Setting 9% Prejudgment Interest To Accrue From Notice Of Injury

At the urging of the Plaintiffs’ bar, the Illinois State Legislature—at the last minute in a lame duck session, passed a draconian and unconstitutional new measure that will harm tort litigants for years to come if it is signed by the Governor and becomes law. Currently, prejudgment interest does not accrue on personal injury claims. The legislation—House Bill 3360, provides that prejudgment interest would accrue from notice of the injury, not the date of filing suit, and at a rate of 9%.

A 9% prejudgment interest that accrues from the time of notice of injury is essentially a windfall to Plaintiffs and is unreasonable and punitive. Under the proposed prejudgment interest rate, a Plaintiff with a $100,000 claim could wait up to 2 years under the Illinois statute of limitations to file his case and, in doing so, would gain $18,000 in prejudgment interest with prejudgment interest still accruing while the case is pending until the time of judgment. In this regard, the Defendant is being unnecessarily penalized at a 9% prejudgment interest for the Plaintiff’s delay, which could easily be prolonged during the pendency of a case prior to judgment. Moreover, the true irony of this scenario, as is allowed under the proposed legislation, is that it achieves precisely the opposite of what prejudgment interest is traditionally meant to do, which is to ensure prompt and efficient payments on claims without unreasonable and vexatious delay.

In fact, the 9% prejudgment interest could impede settlement of claims by incentivizing plaintiffs to demand 9% interest on settlement. This puts defendants in a predicament because every attempt to leverage a settlement incorporating a 9% prejudgment interest will cost time—and only add onto the amount of the 9% prejudgment interest Plaintiff can collect.

Generally, Illinois has recognized a 5% prejudgment interest outside of tort in creditor’s claims of indebtedness, such as on a promissory note or an instrument. 815 ILCS 205/1. However, applying any prejudgment interest to a tort claim would be inequitable and difficult because, unlike creditor claims, damages in torts are not generally ascertainable at the time of injury. For example, under the proposed legislation, jury awards for noneconomic or subjective injuries, such as for loss of consortium or pain and suffering, would retroactively accrue a 9% prejudgment interest from the date of notice of injury. Unfortunately, a defendant would have no ability to mitigate against the 9% prejudgment interest because it is impossible to know the amount yet owed on a future judgment.

Lastly, the sheer rate of 9% prejudgment interest proposed is excessive, especially since prejudgment interest on tort claims have never otherwise been allowed. In many cases, the 9% prejudgment interest alone will have the potential to confer to Plaintiffs tens of thousands to hundreds of thousands of dollars. Therefore, under the proposed legislation, many Plaintiffs would be obtaining additional money beyond the compensatory and/or punitive damages awarded in judgment and, thus, extracting a profit from defendants.

While a small, few number of defendants may allegedly be able to “take the hit” from a 9% prejudgment interest, most defendants will not be able to afford to pay a 9% prejudgment interest. Defendants, including small businesses and individuals, will be directly harmed by the proposed legislation. Governor Pritzker should veto the proposed legislation.

James Cook is an associate at McKenna Storer and sits on the Illinois Defense Counsel (IDC) Toxic Tort Committee. For any questions, contact James Cook at jcook@mckenna-law.com.

Categories General Litigation Legal Updates

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