Illinois adopts prejudgment interest in tort cases: Part 2 -- a look at the statutory language

Updated June 4, 2021

It turns out that Gov. Pritzker vetoed the bill discussed in this post on March 25 -- the same day that the legislature passed a different prejudgment interest bill. For more about the bill that actually became law, see this post.

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For Part 1 of this article, scroll down or click here.

A Google search Friday revealed that, according to the FDIC, as of August 27, 2020, the national average for interest paid on savings accounts is 0.05% -- higher for online banks, perhaps, but lower at traditional brick and mortar banks. So 9% would be better -- 180 times better than the national average.

The interest rates on most judgments in Illinois has long been 9% per annum (6% on judgments against governmental entities). Judgments, when and if collectible, are a great investment. The key words here, however, as so many of us have learned to our great sorrow, are "when and if collectible."

The high post-judgment interest rate is the reason why appeal bonds are typically set at 150% of the judgment amount. (Illinois Supreme Court Rule 305(a) provides, in pertinent part, "The bond or other form of security ordinarily shall be in an amount sufficient to cover the amount of the judgment and costs plus interest reasonably anticipated to accrue during the pendency of the appeal.")

HB3360 was actually the second change made by the 101st General Assembly to §2-1303 of the Code of Civil Procedure. The first came in P.A. 101-168, effective January 1, 2020, which added a subsection (b) to §2-1303. Widely touted as a pro-consumer enactment, P.A. 101-168 lowered the interest rate, to 5%, for judgments on "consumer debt," such as credit card defaults. And it passed just in time for the destruction of the economy, too. But so many judgments of this kind fall into the not collectible category that the lowered interest rate (still, as you presumably noticed, 100 times the national average for savings acounts) was largely symbolic.

The changes made to §2-1303 this week add new sections (c) through (f). Here is the new language:

 (c)  In all actions brought to recover damages for personal injury or wrongful death resulting from or occasioned by the conduct of any other person or entity, whether by negligence, willful and wanton misconduct, intentional conduct, or strict liability of the other person or entity, the plaintiff shall recover prejudgment interest on all damages set forth in the judgment. Prejudgment interest shall begin to accrue on the date the defendant has notice of the injury from the incident itself or a written notice. In entering judgment for the plaintiff in the action, the court shall add to the amount of the judgment interest on the amount calculated at the rate of 9% per annum.

 (d)  Notwithstanding any other provision of law, a local public entity is not liable to pay prejudgment interest in an action brought directly or vicariously against it by the injured party.

 (e)  For any personal injury or wrongful death occurring before the effective date of this amendatory Act of the 101st General Assembly, the prejudgment interest shall begin to accrue on the later of the effective date of this amendatory Act of the 101st General Assembly or the date the alleged tortfeasor has notice of the injury.

 (f)  The trial court may, in its discretion, apportion any amount of prejudgment interest between the plaintiff and any agency or department of the State. In apportioning prejudgment interest as provided in this Section, the court shall consider, among other factors it deems relevant, the plaintiff's hardship from the time of injury to the date of judgment and the effort required to obtain the judgment.

Note that local governments are exempt from prejudgment interest under new §2-1303(d).

And while prejudment interest will start accruing in all pending Illinois tort cases just as soon as the Governor signs the bill (and the objections of the Illinois Insurance Association notwithstanding, I think the Governor's approval will be swiftly forthcoming) prejudgment interest is not retroactice. It begins to accrue from and after the date that this bill becomes law. A paragraph or two about the amount of prejudgment interest owed will be added to every demand letter written from here on out.

But will prejudgment interest make a real difference in the actual amounts paid by insurers in tort cases? For Illinois PI attorneys, the fact that damages in their cases will soon begin 'earning' interest may ameliorate, at least to some extent, their frustration at being unable to get meaningful jury trial dates so long as this Never Ending Pandemic persists. It's not because plaintiffs' lawyers are all necessarily panting to try cases. Non-lawyers may be surprised to learn that most civil cases are settled or otherwise disposed of without trial.

In fact, I was taught that a lawyer who tries a case has already lost, even if he or she wins a verdict. Trials may be fun (I have usually found this to be true, at least once a trial finally gets underway, after all the last-minute motions and posturing) but they are all-consuming. The lawyer in a trial is not settling other cases, or signing up new ones. And I know it is an article of faith among the plaintiffs' bar that insurers generally try to stall every case until prospective jurors are herded into the courtroom, but that's not been my experience: While there are well-known and infamous exceptions, in 40+ years at the bar, many of them representing persons and business entities on behalf of insurance companies, I have found that most insurance companies take a dim view of settling cases at the 11th hour. Defense costs soar during the last few weeks before trial. And I have heard more than one adjuster berate defense counsel for advocating a last-minute settlement, accusing counsel of milking every last tenth-of-an-hour out of a file before recommending settlement. Plaintiffs' lawyers are not wrong when they assert that insurers try and maximize profits -- insurance companies are not charitable institutions -- but most insurers do this by trying to identify which cases should be settled at the earliest possible date. Otherwise they pay defense costs and the cost of settlement.

Admittedly, the suspension of trials changes has changed the normal calculus -- open-ended delay is a fact of life at present and, until now, there has been no adverse consequence to defendants and their insurers arising from same. Moreover, the setting of a case on a date certain for trial is necessary for some insurers to more seriously evaluate their exposure... and reach for their checkbooks (remember that defense costs soar in the weeks and months before trial). So, in the short term, probably, prejudgment interest will be a boon to the plaintiffs' bar.

But long-term? Though prejudgment interest in tort cases has long been an objective of the Illinois Trial Lawyers Association, I am not certain that the prospect of prejudgment interest will cause most carriers to actually put more dollars on their files.

I can think of two categories of tort cases in which the new amendments to §2-1303 would potentially increase settlements or judgments, and they are typically viewed as being at the opposite ends of the litigation food chain: medical malpractice cases and soft tissue auto accident cases where a substandard carrier insures the defendant. These are not coinicidentally the two most common types of tort cases to go to trial. In soft tissue cases with substandad carriers, the prospect of prejudment interest may prompt some behavior modification -- the low-ball final settlement offer may come sooner, or be made in a few more cases. But substandard carriers and med mal carriers take their very different types of cases to trial for the same reason: They generally do pretty well. There's no interest to pay on a defense trial verdict.

There will be some contention that this enactment, which at least potentially increases costs to Illinois insurers, will actually increase costs to Illinois insureds. There is an argument to be made that almost any action taken by our General Assembly leads to an increase in insurance rates.

But other events, including in particular large claim payouts after the "unrest" of this past summer, and the unprecedented surge in carjackings, will drive insurance costs up much farther and faster than the adoption of prejudgment interest.

Many other states have adopted prejudgment interest and insurers have somehow managed to do business in them. A 2015 survey done by Cozen O'Connor, linked here, may be a bit dated, but it suffices to show that Illinois is hardly alone in adopting some sort of prejudgment interest regime in tort cases. That probably won't stop the Judicial Hellhole folks from castigating our legislature on this issue, but I think the General Assembly will not crumble under criticism from that quarter.

On balance, at least in my opinion, the most alarming thing about prejudgment interest is not the concept itself, but the way in which it was adopted. Of course, I think the General Assembly will not crumble under this criticism either.