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Prejudgment interest legislation causing controversy for Illinois lawmakers

Prejudgment interest legislation causing controversy for Illinois lawmakers

Generally, U.S. courts apply the common law rule that prejudgment interest is not available in tort actions in the absence of a statute or court rule. While Illinois does not currently recognize prejudgment interest, that was threatened to change if legislation (HB 3360[i] as amended by Senate Floor Amendment 1[ii]) was signed by Governor Pritzker.

The original measure, advanced by the Illinois Trial Lawyers Association (ITLA) in early January, would change how interest is calculated for personal injury and wrongful death lawsuits. Most often, these personal injury cases are brought against a wide range of businesses, including healthcare, manufacturing, retailers, insurers, hotels, and airlines. As a result, the proposal would allow plaintiffs to recover 9 percent annual prejudgment interest in any personal injury lawsuit or arbitration where damages are awarded — this applies to economic and noneconomic damage awards alike.

Proponents of the legislation argue that it would only apply to a fraction of cases because 97 percent of civil cases reach a settlement. ITLA claims having this law would encourage settlements, lessen the burden on the court system, and save taxpayers money. According to one news report, the ITLA president has claimed “deep-pocketed defendants often ‘drag out’ cases to wear down injured patients who may not be able to afford” necessary medical treatment.

Opponents argue that the “notice” requirement triggering the interest is vague, undefined, and will introduce uncertainty into the system. They contend that the interest rate is high or out of step with states that allow prejudgment interest, and that noneconomic damages are generally excluded from any interest calculation.

Cries to veto HB3360 grew too loud to ignore.

Over the last few months, efforts against the legislation quickly materialized and continue to grow. Illinois trade groups, including the Manufacturers’ Association, the Retail Merchants Association, State Medical Society, Health and Hospital Association, and Chicagoland Chamber of Commerce, have been holding editorial board meetings to voice their opposition[iii]. The Chamber indicated that the bill would force settlement of “unfounded claims … crawling through an already overcrowded system floundering under the weight of COVID-19 pandemic.”

Lawmakers are also weighing in on the controversial topic — State Representative and House Republican Leader Jim Durkin penned a plea to the governor, voicing opposition to the bill.

You can read his full letter here.

Gubernatorial action

The measure was sent to Governor Pritzker for his consideration on February 4, 2021. The governor had 60 calendar days to act – either veto the bill, issue an amendatory veto (which will kill the bill), sign it, or do nothing and it becomes law. With the Governor messaging that he would veto the bill, ITLA pushed to file a trailer bill SB 72.

The first filed amendment noted below, while it passed committee, saw significant pushback from hospitals (specifically “safety net hospitals”) and concerns raised by majority Democratic legislators in what was a 90-plus minute committee debate. So, ITLA went back to the drawing board, and crafted a new House Floor Amendment 2 to SB 72 that was debated and ultimately passed on March 18th by the House, on a partisan rollcall vote.  Key provision in Floor Amendment 2, among other changes:

  • It is de-coupled from the original prejudgment interest bill, the lame-duck HB 3360 ;
  • Lowers prejudgment interest from 9% to 6% (Amendment 1 to SB 72 was 7%), which now applies on all damages except punitive damages, attorneys’ fees, or statutory costs;
  • Interest begins to accrue from when the action is filed and cannot accrue for more than five (5) years;
  • Makes various changes related to the timing and acceptance or rejection of settlement offers, and the application of prejudgment interest in those instances;
  • Continues to exempt state and local governments, (which was added in Amendment 1); and
  • Applies to injuries or deaths that occurred before the effective date of the act, with interest accruing on the later of the date the action is filed or the effective date of the act (7/1/21 if signed), whichever is later.

As expected, Governor Pritzker vetoed the original bill, HB 3360 on March 25, 2021, the same day the Senate concurred in the House’s changes to SB 72, in a not so coincidental move. Despite some continued opposition from business interests, with the Hospital Association and a few other medical stakeholders neutral, we expect the compromise measure to be signed into law by the governor.

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