Hold on to your pocketbooks if interest goes up on civil lawsuits

The cost of doing business and owning a home or car in Illinois could increase soon if a last-minute amendment from January’s lame-duck session is signed into law.

House Bill 3360 was set to die, but at the 11th hour, Senate President Don Harmon of Oak Park introduced a loaded amendment that will drastically alter civil lawsuits. It passed the House a few days later on January 13 around 3 a.m. and is now before Gov. J.B. Pritzker for his review.

Excessive litigation already costs Illinois businesses more than $18.9 billion annually. At a personal level, that comes out to a loss of nearly 100,000 jobs across the state and an annual “tort tax” of $761.81 per person due to frivolous lawsuits. In Chicago, that number jumps to $811.13 per person.

If Gov. J.B. Pritzker fails to veto H.B. 3360, interest rates applied while lawsuits slowly weave through an overburdened court system will nearly double. Unfortunately, it’s small businesses and their employees who will ultimately pay the price when astronomical litigation costs force businesses to raise prices across the board, simply to keep up. In turn, this will increase the “tort tax” burden on consumers, while simultaneously increasing payouts for trial lawyers.

Nearly 80% of Illinoisans think lawmakers aren’t doing enough to combat lawsuit abuse as it is, and a bill like this will only exacerbate that problem. Further, Cook County, along with Madison and St. Clair Counties, are ranked the No. 8 worst Judicial Hellholes in the country, according to the American Tort Reform Foundation.

While H.B. 3360 originally dealt with mortgages, the unrelated amendment creates a law with far-reaching implications for the state’s civil justice system. Pre-judgment interest rates in Illinois’s civil court system – interest added on top of an award in a lawsuit to account for the time period during a trial – would jump from 5% to 9%.

For comparison, mortgage rates are under 3% and the 30-year Treasury rate is 1.25%. A 9% interest rate is clearly off-base and bears no relationship to current economic conditions. One estimate projects interest on the state’s Top 10 verdicts in 2019 would explode from $51 million to nearly $96 million under the proposed law.

The bill’s financial impacts go even farther by expanding when these interest rates apply. By extending interest accrual from the time a party was notified of an injury, rather than from the time a case is filed, means that a defendant’s potentially on the hook for interest before even learning they’re facing a claim.

This would make Illinois an outlier, even among states where pre-judgment interest is allowed. California, Iowa, Michigan, Minnesota, Ohio and several others don’t allow this interest to accrue until after a lawsuit is filed.

H.B. 3360 is an unfair and abusive change to long-standing Illinois law – it creates new allowances for damages in certain lawsuits and would be ripe for abuse by trial lawyers. Doubling pre-judgment interest rates will incentivize personal injury lawyers to file even more cases.

This would open defendants in civil cases to unnecessary financial exposure, and at a time when many businesses across the state already are struggling.

Heading into the regular session, we hope Illinois lawmakers will prioritize COVID-19 aid and protection for small businesses from frivolous lawsuits, rather than pet projects for plaintiffs’ lawyers.

We urge Gov. Pritzker to veto this rushed and misguided bill. Given the state’s dire economic standing, we hope he follows the lead of his fellow midwestern governors and seeks solutions to create a stronger economy – and not serve the interests of trial lawyers.

John Pastuovic is president of the Illinois Civil Justice League

Sherman “Tiger” Joyce is president of the American Tort Reform Association