Caution for Illinois Medical Providers – State enacts Prejudgment Interest

by

Timothy R. Bone

Vice President of Claims

The Illinois Code of Civil Procedure has included payment of post-judgment interest at the rate of 9% per year for a long time.  This is the interest on a verdict for the plaintiff from the date the judgment is entered by the court until it is paid in full.

Now, the Illinois Legislature has decided to amend this portion of the Code of Civil Procedure by requiring the court to add 6% “pre-judgment interest” to the judgment for the plaintiff in all personal injury and wrongful death lawsuits.

Effective July 1, 2021 this new law will apply to all existing lawsuits, and to all lawsuits filed after that date.  The new law applies only to verdicts, which are rendered after a trial.  If the case is resolved by settlement before or during a trial, then prejudgment interest does not apply.

The prejudgment interest of 6% will be applied to economic damages (e.g., lost wages and medical bills) as well as non-economic damages (e.g., pain and suffering, loss of a normal life); and will apply to both past and future damages.

Prejudgment interest will not apply to punitive damages, sanctions, statutory attorney’s fees, and statutory costs.  It also will not apply to the following defendants:  the State of Illinois, a unit of local government, a school district, a community college district, nor any other “governmental entity.”

The Illinois Legislature did provide a way in which a defendant may attempt to limit its liability for this prejudgment interest as follows:

1. If a defendant makes a written offer of settlement within one year of the case being filed (or by July 1, 2022 for all pending cases) and the offer is either rejected by the plaintiff or not accepted within 90 days of the offer, then the plaintiff will only be able to recover prejudgment interest on the amount of any judgment that exceeds the highest written offer.
2. If there is a defense verdict, no interest is owed.
3. If there is a verdict for the plaintiff that is equal to or less than the written offer, then the court will hold that no prejudgment interest has accrued.
4. This prejudgment interest will not be allowed to accrue for longer than five (5) years.

Here are three hypothetical examples to illustrate application of the new law.  All assume a trial being held three (3) years after the filing of the lawsuit.

1. Defendant makes a timely offer to settle of $750,000, which is rejected by the plaintiff.  The verdict is $1,000,000; thus, interest is awarded only on the difference of $250,000, at 6% per year.   Prejudgment interest:  $250,000 x .06 x 3 = $45,000.
2. Defendant makes an offer to settle of $100,000, which is rejected by plaintiff.  The verdict is $100,000.  No interest is awarded.
3. Defendant makes no offer.  The verdict is $1,000,000.  Prejudgment interest:  $1,000,000 x .06 x 3 = $180,000.

The stated intent of this new law is to encourage insurance companies to settle cases earlier than is now being accomplished, though many unanswered questions remain.  It is anticipated that appellate courts will eventually be reviewing multiple cases challenging various aspects of this new law.