On January 1, 2015, new rules came into effect, which affect prejudgment interest on non-pecuniary damages in motor vehicle accident claims. The new rules were part of Bill 15, otherwise known as, the Fighting Fraud and Reducing Automobile Insurance Rates Act. Prior to Bill 15, prejudgment interest for non-pecuniary damages in all personal injury claims was set at 5.00% per year.[1] Section 258.3(8.1) of the Insurance Act states that section 128(2) of the Courts of Justice Act, does not apply to motor vehicle accident claims[2] and states:
258.3(8.1): Subsection 128 (2) of the Courts of Justice Act does not apply in respect of the calculation of prejudgment interest for damages for non-pecuniary loss in an action referred to in subsection (8).[3]
Therefore, non-pecuniary damages in motor vehicle accident claims will now follow sections 127(1) and 128(1) of the Courts of Justice Act. Section 127(1) states:
“prejudgment interest rate” means the bank rate at the end of the first day of the last month of the quarter preceding the quarter in which the proceeding was commenced, rounded to the nearest tenth of a percentage point.[4]
Currently, this amount is at 0.8%. This illustrates the impact that Bill 15 has had on prejudgment interest in a motor vehicle accident claim.
Bill 15 has also created confusion in the prejudgment interest rates which apply to motor vehicle accidents. The confusion is centred on whether the change will apply prospectively to motor vehicle accidents occurring on or after January 1, 2015, or whether the changes should apply retrospectively to motor vehicle accidents occurring prior to January 1, 2015. The regulation and the statute are silent on how these changes would apply. Section 52(4) of the Legislation Act,[5] states that a procedural amendment to legislation will apply immediately and retroactively. However, a substantive amendment will only apply from that point forward.
The debate about whether Bill 15 applies retrospectively or prospectively, can likely be resolved through an analysis of whether the new section of the Insurance Act is procedural or substantive. Attempts at resolving this issue are illustrated in recent decisions of the Ontario Superior Court, in Cirillo v. Rizzo,[6] and El-Khodr v. Lackie.[7]
In Cirillo, the Court relied upon Somers et al. v. Fournier et al.,[8] in reaching a decision. In Somers, the Court determined that an entitlement to a head of damage was substantive, whereas, a quantification of the damage was procedural. In its decision, the Court in Cirillo, stated that section 258.3(8.1) of the Insurance Act, was procedural as it dealt with the calculation of the rate of prejudgment interest, which they saw as a form of quantification, and therefore held that section 258.3(8.1) of the Insurance Act should apply retrospectively.
In El-Khodr, Justice Toscano Roccamo determined that the Cirillo decision had been incorrectly decided, stating that the Court had wrongly interpreted Somers. Further, Justice Toscano Roccamo, stated that the Court in Cirillo had neglected to review prior decisions, which held that entitlement to prejudgment interest was substantive. Justice Toscano Roccamo explained that the prior decisions had held prejudgment interest to be the same as damages, and therefore as was held in Somers, damages are a substantive right.
Justice Toscano Roccamo, also referred to Angus v. Sun Alliance Insurance Co.,[9] for the principle that absent legislative intention, either expressed or implied, amendments to legislation should not apply retrospectively. Justice Toscano Roccamo further supported her view by referencing the calculation of premiums which would have been completed by Insurers prior to the legislative change, and which would have likely included prejudgment interest as one of the risk factors in calculating premiums. Therefore, to interpret Bill 15 as applying retrospectively would create an unfair gain for the Insurer who based premiums on a 5% prejudgment interest rate; whereas, the Insured who paid the higher premium would only receive 0.8% despite the accident occurring prior to the legislative change.
A further decision by the Ontario Superior Court, Cobb v. Long Estate,[10] added to the debate, when Justice Belch determined that there were three options to choose from:
1) The Insurance Act should not be applied retrospectively – El-Khodr
2) The Insurance Act should be applied retrospectively – Cirillo
3) As per section 130(1)(b) of the Courts of Justice Act, the Court may, where it considers it just to do so, allow interest at a rate higher or lower than that provided in either section 128 or 129.
Justice Belch determined that the third option was the most appropriate as the El-Khodr decision was under appeal. Justice Belch took the factors identified in section 130(2)(a-g) of the Courts of Justice Act,[11] into account when determining the appropriate prejudgment interest rate. Due to the lengthy time since the accident, and the lack of compensation from the defendant Insurer throughout the entire period, Justice Belch determined that 3.00% was an appropriate prejudgment interest rate.
Finally, in the recent decisions, Vickers v. Palacious,[12] and Markovic v. Richards,[13] both Courts considered the Cirillo and El-Khodr decisions, and both stated that they agreed with the observations in El-Khodr, that the decision of Somers had been wrongly interpreted in Cirillo. Justice James, in Vickers, went further to explain, that in his view, the distinction in Cirillo between entitlement and quantification of prejudgment interest was unwarranted. In Markovic, Justice Milanetti stated that prejudgment interest is akin to a head of damages and hence is a matter of substantive law. Therefore, both Courts in the recent decisions held that prejudgment interest is a substantive right, and should be applied prospectively.
It appears that the predominant view is that prejudgment interest is substantive, and that section 258.3(8.1) of the Insurance Act, should be applied prospectively. However, it is important to note that all of these decisions are from the Superior Court. It remains to be seen what the result will be if the issue is appealed to the Court of Appeal.
[1] See Courts of Justice Act, R.S.O. 1990, c. C.43 at s. 128(2); Rules of Civil Procedure, R.R.O. 1990, Reg 194 at Rule 53.10.
[2] Insurance Act, R.S.O. 1990, c. I.8,
[3] Ibid at s. 258.3(8.1).
[4] Courts of Justice Act, R.S.O. 1990, c. C.43 at s. 127(1)
[5] Legislation Act, S.O. 2006, c. 21, Sched. F, s. 52 (4).
[6] 2015 ONSC 2440 (Sup. Ct.) [Cirillo].
[7] 2015 ONSC 4766 (Sup. Ct.) [El-Khodr].
[8] [2002] OJ No 2543 (CA) [Somers].
[9] [1988] 2 SCR 256.
[10] 2015 ONSC 6799 (Sup. Ct.).
[11] R.S.O. 1990, c. C.43, s. 130.
[12] 2015 ONSC 7647 (Sup. Ct.) [Vickers].
[13] 2015 ONSC 6983 (Sup. Ct.) [Markovic].
