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Am I entitled to interest on overdue payments from my insurance company?

Yes, for accidents that occur after September 1, 2010, the rate of interest on overdue accident benefits payments changed from 2% per month, compounded monthly to 1% per month, compounded monthly.   The decisions of Arbitrator Maggy Murray in Federico v. State Farm Mutual Automobile Insurance Co., [2012] O.F.S.C.D. No. 20 and Arbitrator JeffreyRogers in Subramaniam v. Wawanesa Mutual Insurance Co., [2012] O.F.S.C.D. No. 100 have clarified that interest will accrue at the rate of 2% per month for accidents that occurred prior to September 1, 2010 and 1% per month for accidents that occurred on or after September 1, 2010.  In other words, it does not matter that the benefits may have become overdue after September 1, 2010 but rather whether the accident occurred before or after September 1, 2010.

The Court of Appeal in the recent decision, Zacharias v. Zurich Insurance Company 2013 ONCA 48 in addition to other things clarified what is meant by compounded interest.  At the end of the month during which a payment is overdue, 2 per cent interest is added to the amount that is overdue. As long as that overdue amount remains unpaid, interest continues to accrue at 2 per cent per month on both the increasing principal and on the interest that has been calculated monthly. As both the principal and interest are “overdue payments”, interest must be calculated and paid on amounts that include interest.

 

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