Locke Lord QuickStudy: Illinois Enacts Prompt Payment Statute - New Law Requires Timely Settlement Releases and Payment in Many Civil Cases Seeking Money Damages

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    On August 26, 2013, Governor Patrick Quinn signed into law Illinois Senate Bill 1912 (Public Act 098-0548). The new law applies to “personal injury, property damage, wrongful death or tort actions involving a claim for money damages” and becomes effective January 1, 2014. It amends the Illinois Code of Civil Procedure, sets deadlines for tendering a release, and provides for enforcement of settlement agreements reached in lawsuits that are not paid within 30 days of executing the agreement.

    The new law requires a “settling defendant” to tender a release to the plaintiff within 14 days of written confirmation of the settlement. Where the settlement requires court approval, the plaintiff is required to provide the settling defendant a copy of the order approving the settlement. Additionally, if there is a known third-party right of recovery or subrogation interest such as attorney’s liens or healthcare provider liens, the law says that the plaintiff “may” protect the third-party’s rights of recovery or subrogation interest by tendering to the defendant a signed release of the attorney’s lien, and, as to any healthcare liens, a signed release of such lien or documentation of the agreement with Medicare or a private health insurance company as to the amount of the settlement in satisfaction of recovery, or documentation of any other resolution of the liens as agreed by the parties.

    The new law also provides a financial consequence for a settling defendant’s failure to pay within 30 days of tender by the plaintiff of the executed release and the necessary documents regarding court approval or third-party rights of recovery. If the defendant fails to tender full payment in a timely manner, after a hearing, the court, according to the law, “shall” enter judgment against the defendant for the full amount provided in the executed release plus the cost to obtain the judgment and 9 percent interest from the date of the plaintiff’s tender of the required documents.

    The law does not apply to class action lawsuits, any municipality or units of local government, the State of Illinois, and state employees. Also, importantly, parties can, by mutual agreement, opt out of the requirements of the new law.

    Many opponents to the legislation contended that the deadlines were unrealistic and that concerns over the requirements could slow or even thwart settlement efforts and prolong litigation. All Illinois defendants and, as appropriate, their insurers should be mindful of the provisions of this new law before entering into settlement negotiations. Also, the opt-out mechanism should be considered in negotiating the terms of a settlement. Insurers should also be aware of these requirements so as to prevent potential claims from their insureds alleging failure to make timely payment on an insured’s behalf. Importantly, this legislation solidifies what various observers see as a “pro-plaintiff” sentiment in some Illinois courts which appears to underlie the passage of the bill.

    For more information on the matters discussed in this Locke Lord QuickStudy, please contact the authors:

    Mark Deptula | 312-443-1728 | mdeptula@lockelord.com 
    Julie N. Johnston | 312-443-1845 | jjohnston@lockelord.com 
    Molly McGinnis Stine | 312-443-0327 | mmstine@lockelord.com

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