As a cutting-edge firm always tuned in to the latest developments of the law across the country, The Cook Group brings news of an Illinois law going into effect this summer, with a significant impact on Illinois cases and clients. For the first time in Illinois history, Pre-Judgment Interest has been enacted, applying to all personal injury or wrongful death claims derived from the negligence, willful and wanton misconduct, intentional conduct, or strict liability of a person or entity.
Recently, Illinois’ Governor J.B. Pritzker signed Illinois General Assembly – Full Text of Public Act 102-0006 (ilga.gov) into law, effective on July 1, 2021. This law provides for statutory 6% per year pre-judgment interest to be recovered by a Plaintiff on all judgment damages, (except punitive damages, sanctions, statutory attorney’s fees, and statutory costs) adding the total interest to the judgment amount to be paid by the judgment defendant(s).
While Illinois has long allowed for post-judgment interest to be accrued on unpaid judgment debt, this new law creates a wholly separate “pre-judgment interest” to be paid to plaintiffs upon receiving a judgment against the trial defendants. For all cases filed after July 1, 2021, the pre-judgment interest begins accruing on the date the complaint is filed, though tolling will apply to a defendant during the time that party was voluntarily dismissed. Importantly however, this law also applies retroactively to all active cases, with the interest accrual date beginning on July 1, 2021 for any case where a complaint is already on file.
The sole way for a defendant to reduce or avoid pre-judgment interest from being added to a judgment is to make a settlement offer within the statutory time period allowed. The statute provides that if the judgment is greater than the amount of the highest written settlement offer made by the defendant within 12 months after July 1, 2021, or the date of filing of the complaint, whichever is later, and the Plaintiff rejects or did not accept that offer in 90 days, then the judgment amount by which the interest is to be calculated on is reduced by the amount of that offer. For example, if the judgment is $100,000 and the Plaintiff rejected the highest first year offer of $25,000, the pre-judgment interest will only be calculated off of the remaining $75,000 and not the full $100,000 judgment. Further, if the judgment is equal to or less than the highest rejected settlement offer, then no pre-judgment interest will be added to the judgment. One potential trap is that if a defendant withdraws the highest first year offer rather than a Plaintiff rejecting it, then no offset will apply, and the full pre-judgment interest will be added from the date of accrual.
The maximum amount of time the pre-judgment interest will accrue is 5 years from July 1, 2021, or the date of filing of the Complaint, whichever is later. This law does not apply to State, local government, school districts, or other governmental entity defendants.
Public Act 102-0006 is problematic for Illinois defendants, raising the potential value of trial verdicts as pre-judgment interest will be applied non-economic damages such as pain and suffering, as well as to future damages like future lost wages or future medical expenses. Each of these items are very difficult to predict the value of at trial, even more so early in litigation, so this new law puts defendants at a disadvantage, where in some circumstances having to make a settlement offer while investigation of the claims is still ongoing.
By contrast, this law is a significant weapon for plaintiffs during settlement negotiations and to accelerate litigation, as the law incentivizes:
- Early settlement offers from defendants by establishing a cutoff time of one year from the date of filing of the Complaint (or July 1, 2021, if the Complaint was filed prior to July 1, 2021) for the settlement offer to be used to offset the pre-judgment interest amount;
- High settlement offers to be presented very early in the case, as the higher the rejected first year settlement amount is, the greater the reduction in the pre-judgment interest amount; and
- Trial to proceed forward on an expedited basis in order to reduce the amount of time that the pre-judgment interest accrues.
We see potential pitfalls growing from this law, including plaintiffs who delay the progress of their case to recover higher amounts of pre-judgment interest, as there is no exception or tolling due to a plaintiff’s dilatory actions other than the above stated tolling related to a voluntary dismissal. Additionally, in many complex cases, discovery will be ongoing and potentially at an early stage, by the time of the one-year cutoff for settlement offers, creating a challenge to determine the appropriate value of a claim at that point. Currently in the Law Division of Cook County, Illinois, discovery schedules are routinely 14 to 36 months, so in the vast majority of those cases a defendant may be forced to extend a settlement offer before a key piece of evidence is developed. In a worst-case scenario, this could leave open the possibility of plaintiffs delaying discovery disclosures of information beneficial to a defense issue until after the statutory settlement offer cutoff, so the plaintiff can ensure that a strong settlement offer is received prior to making the disclosure. As the law also does not allow withdrawn settlement offers to be applied to pre-judgment interest amounts, this will also create an imbalance where plaintiffs will continue to be able to make time-limited settlement demands to create leverage on defendants, but defendants will now be required to leave settlement offers open for at least 90 days (or until explicit rejection) for that offer to offset pre-judgment interest under the statute.
Another issue that will be ripe for challenges is how this law interacts with Illinois’ joint and several liability laws that allow a plaintiff to recover the total judgment amount from any or all defendants. Public Act 102-0006 provides no guidance on this issue, so it is unclear how a court will determine the manner that payment of the pre-judgment interest is to be divided or paid among the remaining trial defendants. It also remains to be seen how Illinois courts will handle post-trial allocation, application, and setoff of settlement funds to the trial defendants’ verdict total under the new law, as well as whether the courts will apply setoff funds to the pre-judgment interest amounts.
Illinois courts’ handling of such issues will be key to ensuring defendants are not further prejudiced by this new law, but it will be imperative for defendants to raise these issues with the court to establish a record and protect their interests, in the event that the law or its constitutionality is later challenged.
As part of our comprehensive and forward-thinking representation of our clients, beginning immediately, we will provide case-specific analysis on this issue for all of our Illinois clients and cases. Included in this analysis will be a detailed application of the new law to the case, highlighting all pertinent deadlines as to settlement offers that would offset pre-judgment interest, as well as a calculation of the estimated pre-judgment interest amount that would be added to the judgment amount recovered at trial, to ensure that our clients have the most complete and accurate picture possible when weighing complex litigation claims, all while ensuring that every necessary action is timely taken to protect our clients’ rights on any issue stemming from this law.
As new issues come to the forefront on Illinois’ Public Act 102-0006, we will continue to provide updates with immediate analysis to give our clients every advantage possible in this rapidly changing legal landscape.