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Recent decision on emerging issues in motor vehicle litigation

5 minute read

In Markovic v Richards et al,[1] Justice Milanetti of the Ontario Superior Court of Justice considers two issues which are emerging in personal injury motor vehicle litigation. The two issues are:

  1. Whether the premium paid by a plaintiff for after-the-event (“ATE”) insurance is a compensable disbursement?
  2. What is the applicable rate for prejudgment interest on an award for non-pecuniary general damages?

After the event insurance is not a recoverable disbursement

Many plaintiffs and plaintiff law firms are now obtaining ATE insurance for coverage against adverse cost awards in the event that they receive an unfavourable judgment at trial. Justice Milanetti was the first judge in Ontario to consider whether the premium paid by the plaintiff for ATE insurance is a disbursement that is recoverable from the defendant. Her Honour held that it is not.

In Markovic, the plaintiff provided Justice Milanetti with two cases from the United Kingdom to support his position. However, Her Honour differentiates the case before her from those decisions. She explains that there was legislative reform in the United Kingdom to allow a plaintiff to recover the cost of the ATE premium from the defendant if the plaintiff's claim succeeds. As a result, Justice Milanetti held that the British decisions address discreet issues related to interpretation and therefore “are of no assistance to the decision before [her].”[2]

Justice Milanetti also states that she could not think of a policy reason for the premium to be compensated as a taxable disbursement and added that while ATE insurance may provide comfort for a plaintiff it: (a) is entirely discretionary; (b) does nothing to advance the litigation; and, (c) may act as a disincentive to thoughtful and well-reasoned resolution of claims. As a result, Her Honour held that it is not fair and reasonable to expect an insurer to cover the payment of the premium as a disbursement. In doing so, Justice Milanetti stated:

While it is clearly the plaintiff's prerogative to obtain ATE insurance, I do not accept that such premium should be reimbursed by the defendants as a compensable disbursement.[3]

Pre-judgment interest amendments do not apply retroactively

On January 1, 2015, the Insurance Act[4] was amended to include s 258.3(8.1). In short, s 258.3(8.1) establishes that the 5% interest rate under Rule 53.10 of the Rules of Civil Procedure[5] no longer applies to amounts awarded for non-pecuniary damages for bodily injury or death caused by motor vehicle accidents. Therefore, prejudgment interest on non-pecuniary damages in these circumstances is calculated in accordance with s 127(1) of the Courts of Justice Act[6] (i.e. the bank rate). However, the legislation is silent on whether the amendment applies retrospectively.

Justice Milanetti, in Markovic, held that the amendments affect a right that is substantive in nature and therefore should not be applied retroactively. Therefore, Her Honour held the plaintiff was entitled to prejudgment interest on his general damages at the pre-January 2015 rate of 5% per annum from the date of notice.

Justice Milanetti referred to the conflicting decisions of El-Khodr v Lackie[7] and Cirillo v Rizzo[8] on this issue and found that she preferred the reasoning of Justice Toscano Rocccamo in El-Khodr. Her Honour states that: (a) if a legislative amendment is procedural in nature, then it applies immediately and retroactively; and, (b) if a right is substantive in nature, then the amendment should not be applied retroactively. Justice Milanetti held that the Court of Appeal in Somers et al v Fournier et al[9] confirms that prejudgment interest is akin to a head of damages and therefore is a matter of substantive law. As a result, Her Honour held that the plaintiff is entitled to prejudgment interest on his general damages at a rate of 5% per annum.

Three judges of the Superior Court of Justice have now addressed this issue and two justices have held that the amendments are substantive and therefore do not apply retrospectively.[10] It is important to note, however, that the decision of Justice Toscano Rocccamo in El-Khodr has been appealed to the Ontario Court of Appeal. It will be interesting to see which side of the debate the Court agrees with.


[1] 2015 ONSC 6983.

[2] Ibid, para 6.

[3] Ibid, para 7.

[4] RSO 1990, c I.8.

[5] RRO 1990, Reg 194.

[6] RSO 1990, c C.43.

[7] 2015 ONSC 4766 under appeal to the CA [El-Khodr].

[8] [2015] OJ No 1881 (Sup Ct).

[9] [2002] OJ No 2543 (CA).

[10] But see Cobb v Long Estate, 2015 ONSC 6799 (Justice Belch, pursuant to s 130(1)(b) of the Courts of Justice Act, exercised his discretion to allow interest a different rate and ordered that prejudgment interest be paid at a rate of 3%).

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