On January 1, 2015, section 258.3(8.1) of the Insurance Act came into force. The amendment says that the 5% prejudgment interest rate for non-pecuniary losses in motor vehicle accident claims no longer applies. Instead, prejudgement interest for non-pecuniary losses is to be calculated using the rate applicable to pecuniary losses, i.e. the bank rate in effect at the end of the first day of the last month of the quarter preceding the quarter in which the proceeding was commenced.
The question before the Ontario Superior Court of Justice in the recent decision, Cirillo v. Rizzo was whether this amendment has retroactive application. The Court held that the new rates apply retroactively.
In Cirillo v. Rizzo, the Plaintiff, a pedestrian, started a lawsuit for injuries sustained when he was struck by a motor vehicle operated by the Defendant. The Plaintiff served the Statement of Claim on January 29, 2007. On March 24, 2014, the Defendant made an offer to settle for $50,000 for all claims plus pre judgement interest commencing from the date the notice of claim was served, i.e. January 29, 2007 up to the date that the offer was accepted. On January 26, 2015, the Plaintiff accepted the offer. In this case, the last day of the quarter preceding the quarter in which the proceeding was commenced was December 31, 2006. Accordingly, the bank rate in effect at that time of 4.5% would apply.
The central argument of the Plaintiff was that the amendment to the Insurance Act was substantive in nature and, therefore, the amendment does not have retroactive effect. The Plaintiff relied on the decisions of Somers v. Fournier and Skinner v. Royal Victoria Hospital.
The Defendant submitted that the amendment is procedural in nature and accordingly does have a retroactive effect. The Defendant argued that the issue respecting prejudgment interest in Somers did not relate to the quantification of prejudgment interest but rather the entitlement to prejudgement interest and held that the former (entitlement) to be substantive in nature and the latter (quantification) to be procedural in nature.
The Defendant also distinguished Skinner wherein the Court was dealing with an amendment to prejudgement interest where the amending statute specifically stated that the amendment in question applies to causes of action arising from the 23rd of October 1989. In the present case, the Defendant, argued, there is no such transitional provision and the legislature intended that the amendment did apply retroactively.
The Court found that the case law supported the position of the Defendant and held that the amendment is procedural in nature and shall be applied retroactively. Therefore, the applicable prejudgement interest rate on the $50,000 is 4.5% calculated from January 29, 2007, the date of service of the Statement of Claim, to the date the Plaintiff accepted the Defendant’s offer to settle, January 26, 2015.
In this case, the difference between the two potential prejudgment interest rates was only 0.5%. However, in more recent motor vehicle accident claims commenced on or after April 2009, the prejudgement interest rate would be around 1.3% which is a significant reduction and will work to the financial detriment of Plaintiffs.