Court Of Appeal Clarifies Pre-Judgment Interest Rate

Insurance companies use their long experience paying out claims, including the payment Appealof pre-judgment interest, in setting premium rates. Premiums are based on the pre-judgment interest rate in force at the time they are paid. It can take several years for a complex motor vehicle accident that results in serious injuries, to wind its way through the litigation process. During that time period the insurance company has the benefit of the investments it made with the at fault driver’s insurance premium. It seems unfair to penalize an injured party by retroactively applying a lower interest rate to their damages for pain and suffering when the insurer reasonably expected to pay a higher rate when it set and collected the premium from the at fault driver.

In 2015 we published several blogs on the interest rate that should apply to claims for pain and suffering in motor vehicle accident cases. Our most recent blog on August 24, 2015 ended with the Statement that “we will have to await the decision of the Court of Appeal for Ontario for a final determination of this question.” Well the Court of Appeal has now spoken.

In El-Khodr v. Lackie the innocent driver, Mr. El-Khodr, was seriously injured when the tow truck he was operating was rear-ended. Following a trial the jury awarded Mr. El-Khodr damages totaling $2,931,006 of which $89,167 was pre-judgment interest on general damages for his pain and suffering. The trial judge had decided that prejudgment interest on the general damages should be calculated at 5 per cent (the rate that was in effect prior to January 1, 2015 when the pre-judgment interest rate was reduced by an amendment to s. 258.3(8.1) of the Insurance Act).

The Court of Appeal decided that the reduced interest rate was effective from the day the amendment to s. 258.3(8.1) of the Insurance Act came into force. The reduced rate applied to all actions that had been started before the amendment. As a result, the interest rate to be applied on Mr. El-Khodr’s general damages was 2.5 per cent. As a result of the reduction in the interest rate the interest on his general damages should have been $44,583 and not the $89,167 awarded by the trial judge.

In Cobb v. Long Estate, the plaintiff Cobb suffered chronic pain that prevented him from working and performing household tasks. A jury awarded him $220,000 in damages but after deducting other insurance benefits Cobb had received and a statutory deductible that applied to general damages, the judge calculated a final judgment amount of $34,000.

When addressing the issue of pre-judgment interest on general damages the trial judge did not decide whether the amendment in s. 258.3(8.1) which reduced the rate of prejudgment interest for pain and suffering from five percent applied retrospectively. Instead, the trial judge exercised the discretion he was given by s. 130 of the Courts of Justice Act and set the prejudgment interest rate at three percent.

The Court of Appeal found that the trial judge properly exercised the discretion he had to set the rate of pre-judgment interest payable on the general damages awarded to Cobb and did not apply the lower statutory rate.

Edward (Ted) Masters is a personal injury lawyer in Ottawa with over 35 years of experience representing those seriously injured in car accidents. He can be contacted by his direct phone number, 613-566-2064, or by email at ted.masters@mannlawyers.com.

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Changes to the Ontario Insurance Act that will directly impact on your Auto Insurance Benefits – Consumers Beware

Auto Insurance

Effective June 1, 2016, the Ontario Government has introduced changes to the automobile insurance system which will greatly affect the coverage consumers select and the price they will pay for auto insurance.   Many of these changes affect the statutory accident benefits that a person will receive if they have been injured in an automobile accident regardless of who is at fault.   Some of these benefits have been reduced and some options for increased coverage have been eliminated or changed.

Accordingly, it is absolutely vital for an individual to speak with their auto insurance broker to determine what the best coverage is for them and in many cases the increased coverage can often be provided at a minimal cost.

These changes will apply only to auto insurance policies issued or renewed after June 1, 2016.

Previously, medical and rehabilitation benefits for non-catastrophic injuries (less serious) provided a maximum of $50,000.00 in benefits with an additional $36,000.00 available for attendant care if deemed necessary.   Under the June 1, 2016 changes these benefits have been combined and reduced to $65,000.00 total.    A party can now choose to increase the benefits to a total of $136,000.00.

The 2016 changes also effectively cut in half coverage available to those with catastrophic injuries (serious brain injuries/spinal cord injuries).   Prior to June 1, 2016, the limit for medical care and rehabilitation and attendant care was 1 million dollars each.   Under the new policy these benefits have been combined and reduced to 1 million dollars in total.    An insured can now choose to add on an additional 1 million dollars for a total of 2 million dollars available for catastrophic injuries.

Disability claim

Prior to June 1, 2016, if an individual is unable to work they can receive income replacement benefits reflecting 70% of one’s gross income up to a maximum of $400.00 per week.   The new policy does not cause any changes.  However, an individual can now choose to increase their weekly limit of income replacement benefits (if eligible) to $600.00; $800.00; or $1,000.00 per week.

Other benefits/coverage including housekeeping and home maintenance expenses, death and funeral benefits and dependent care benefits can all be increased or modified for additional premiums.

It is important to speak to your auto insurance broker to determine what the best option for you is and how much any additional premiums will be.

It may very well be that a very minor increase in premium can afford you significant increased benefits.   If no changes are made one’s insurance, coverage will automatically default to the current new low standard benefits.

Change in Pre- Judgment Interest: Retroactive or Not?

We blogged about the change in the pre-judgment interest rate in March and April of this year.  As of January 1, 2015, the Insurance Act was amended to provide that the 5% pre-judgment rate set out in the Rules of Civil Procedure does not apply in motor vehicle accident cases.  As a result, pre-judgment interest on general or non-pecuniary damages in motor vehicle accident cases will now be based on the rate that applies to all other damages.  That rate is presently 1.0%.

In a recent Ottawa case that is apparently now on its way to the Court of Appeal, Justice Toscano-Roccamo held that the reasoning of the Judge in Cirillo v. Rizzo (which held that the change in rates applied retroactively to accidents before January 1, 2015) was not persuasive and that both entitlement to pre-judgment interest and the specific rate at which interest was calculated was a substantive right that could not be interfered with in a retroactive fashion in the absence of specific statutory language providing the change was to be applied retroactively.  Thus, according to her Honour the change in the interest rate should apply prospectively and only affect persons injured in motor vehicle accidents that occurred after January 1, 2015.

We will have to await the decision of the Court of Appeal for Ontario for a final determination of this question.

Important Change to Motor Vehicle Accident Benefits!

Effective DececTK7JOaHmber 2014 persons who are injured in motor vehicle accidents will have to pay out of their own pocket for approved medical treatment and then seek reimbursement for this expense from their insurer unless the medical services provider who provides the treatment is licensed with the Financial Services Commission of Ontario (“FSCO”). Only those service providers who are licensed with the FSCO will be able to bill for their services directly for approved treatment that is provided to those who have been injured in an accident.

If you have been injured in an accident and are seeking treatment from a medical service provider, make sure that the provider is licensed with the FSCO before you start treatment.

Victims of the OC Transpo/Via Rail crash and their families are eligible for Accident Benefits.

OC Transpo crash

Victims of the OC Transpo/Via Rail crash, along with their families, are eligible for Accident Benefits. (Photo: Wayne Cuddington/ Postmedia News)

Those individuals injured on the OC Transpo bus on Wednesday September 18, 2013 and the families of those who lost their lives are eligible to apply for and receive Statutory Accident Benefits or “SABS”.  These benefits may include death benefits, income replacement and medical/rehabilitation benefits.

Due to the priority payment rules in the Insurance Act, the application for accident benefits (OCF-1) must be submitted to the insurer that insures the injured person.  If the injured person is not insured under any policy of motor vehicle insurance then the application must be submitted to the City of Ottawa, Rick Management, 110 Laurier Avenue West, Ottawa K1P 1J1.  The city processes claims that are made in connection with OC Transpo.

 The OCF-1 form may be obtained from the Financial Services Commission of Ontario website (www.fsco.gov.on.ca/en/auto).

On behalf of Mann & Partners, LLP, Jonathan and I wish to extend our thoughts and prayers to all those affected by this tragedy. If you need any assistance with the forms, we would be pleased to help at no cost.

Kevin Butler and Jonathan Wright are Ottawa-based lawyers practicing in civil litigation, including personal injury, motor vehicle accidents and insurance litigation at Mann & Partners, LLP. The articles on this blog are not intended to provide legal advice. Should you require legal advice, please contact Mann & Partners, LLP at 613-722-1500 or fill out our form to be contacted within 24 hours.

Motor Vehicle Accidents in Ontario

Ontario has a two-pronged system for compensating people who are injured in motor vehicle accidents.  It is a mixed fault/no-fault system.  The no-fault component is referred to as the Accident Benefits claim.  The fault component is referred to as the Tort claim.

A tort claim may be available in cases where the accident is the fault of someone other than the injured party.  Regardless of the issue of fault, any person who is injured in a motor vehicle accident is entitled to put forward a claim for Accident Benefits.

Accident Benefits are prescribed by statute.  Eligibility for these benefits as well as the rules governing payment of these benefits may be found in the Regulations to the Insurance Act.  These benefits are paid by the injured party’s motor vehicle insurer.  In cases where the accident was the fault of someone other than the injured party, the payment of these benefits should not affect the party’s risk assessment and premium level.  In cases where the injured party is not covered by a policy of motor vehicle insurance, the motor vehicle insurer of the party at fault for the accident or the party in whose vehicle the injured party was riding is required to provide the injured party with Accident Benefits.

Accident Benefits have changed over the years.  Recently, substantial changes were made to the level and availability of benefits effective September 1, 2010 (these changes will affect consumers when their current insurance policies are renewed).  These benefits have continuously been paired down over the years by successive governments as a result of the insurance lobby.  The recent amendments enacted by the McGuinty government are intended to give consumers choice.  McGuinty is confident that consumers will inform themselves of the options available and purchase the needed protection.

Accident Benefits include income replacement benefits (up to a maximum of $400 per week), medical and rehabilitation benefits and housekeeping and caregiving assistance (if available).  Of note, people who suffer a whiplash associated disorder (WAD injury) are only entitled to receive a maximum of $3,500.00 in medical and rehabilitation benefits even though it is an accepted medical fact that a significant minority of whiplash injuries result in ongoing chronic pain that gives rise to various levels of ongoing functional impairment or functional limitations.  Under the new Regulation, all cases of whiplash are categorized as “minor injuries”.

For those persons injured in a motor vehicle accident that is the fault of someone else, a tort claim may be available.  The tort system itself is a bit of a mixed bag.

An injured person who suffers or is expected to suffer a pecuniary (financial) loss may sue the party responsible for the accident for the full amount of the loss.  The only exception to this rule applies in the case of medical and rehabilitation costs.  An injured person may only sue for medical and rehabilitation costs if they suffer from ongoing functional impairment that is serious in nature.  The person must have a permanent and serious impairment of an important physical, mental or psychological function.

An injured person may not sue the party responsible for the accident for non-pecuniary loss (loss of enjoyment of life, pain and suffering) unless the person has sustained a permanent and serious impairment.  Assuming this threshold has been reached, two other factors must be considered.  Firstly, the Insurance Act provides that an insurer is not liable to pay the first $30,000 in damages awarded for loss of enjoyment of life and pain and suffering unless the award equals or exceeds $100,000 in total.  This is commonly referred to as the statutory deductible (coverage can be purchased which reduces this amount to $15,000).  So, if the court assessed an injured person’s damages at $50,000, the insurance company for the tortfeasor (responsible party) would only be liable to pay the injured person the sum of $20,000.  Secondly, in 1978 the Supreme Court of Canada mandated a maximum award of $100,000.  Adjusted for inflation this figure now sits at approximately $325,000.  It is only available for the most serious injuries including paraplegia, quadriplegia and severe brain injury.

Further, the insurer for the tortfeasor is entitled to a credit for any amounts that are paid to the injured person as Accident Benefits.  An injured person who is receiving the maximum income replacement benefit of $1,600 per month may not sue the tortfeasor for the first $1,600 of lost monthly income (rule against double recovery).

In addition, the insurer for the tortfeasor is entitled to a credit for any “collateral benefits” that are paid to the injured person.  An injured person who qualifies for and receives the Canada Pension Plan Disability Benefit must deduct the amount of this benefit from his or her claim against the tortfeasor for loss of income.

Bringing forward a tort claim is akin to taking part in a grueling marathon.  It is frustrating, incredibly time consuming and expensive and physically, emotionally and mentally exhausting.  These claims typically last between two to five years.

If you have been injured in a motor vehicle accident you should consult immediately with a motor vehicle accident lawyer so that you are aware of your legal rights and entitlement to Accident Benefits, as well as to other compensation for your injuries that may be available from the insurer of the tortfeasor or at-fault driver.

Given the very adversarial nature of these claims and the length and complexity of the claims process you want a lawyer who is:

(i)              Flexible;

(ii)            Responsive to your communication and needs;

(iii)           Attentive and a good listener;

(iv)           Knowledgeable;

(v)            Detail oriented;

(vi)           Firm, and tough when necessary; and a

(vii)         Straight-shooter.

Kevin Butler and Jonathan Wright are Ottawa-based lawyers practicing in the areas of Civil Litigation and Personal Injury at Mann & Partners, LLP. The articles on this blog are not intended to provide legal advice. Should you require legal advice, please contact Mann & Partners, LLP at 613-722-1500 or fill out our form to be contacted within 24 hours.

When is a Minor Injury not a Minor Injury for Accident Benefit purposes?

Entitlement to medical and rehabilitation services changed for persons injured in motor vehicle accidents after September 1, 2010 (see Ontario Regulation 34/10).  As of this date, persons who suffer a ‘minor injury’ in an automobile accident are subject to the Minor Injury Guideline and the benefit limits set out in the regulation.  Essentially, persons who suffer a minor injury are only entitled to receive the sum of $3,500 for medical and rehabilitation benefits, inclusive of all fees and expenses that are incurred by their insurance company for medical assessments and examinations the usual purpose of which is to serve as a foundation to deny a claim for services made by the injured person!

A ‘minor injury’ is defined as “…one or more of a sprain, strain, whiplash associated disorder, contusion, abrasion, laceration or subluxation and includes any clinically associated sequelae to such an injury”.

When an injury may be classified as a minor injury has been the subject of a recent Ontario decision that has relieved against the apparent rigidity of the regulation and Statutory Accident Benefits System.

The recent case of Scarlett v. Belair Insurance Company Inc. was decided on March 26, 2013.  This was a decision of Arbitrator John Wilson who was appointed to hear the case under the Insurance Act.  The full case may be found on our website or in the Arbitration Database maintained by the Financial Services Commission of Ontario.

The facts of the case are straightforward.  Mr. Scarlett was injured in an auto accident on September 18, 2010.  He suffered sprains and strains and a whiplash injury to the lumbar and cervical spine.  In addition, he subsequently developed TMJ syndrome and was diagnosed with PTSD, depression and a chronic pain disorder.

Belair had Mr. Scarlett assessed by a chiropractor, psychologist and dentist all of whom confirmed that his injuries fell within the Minor Injury Guideline or MIG for short.  As a result, Belair refused Mr. Scarlett’s claim for medical expenses above the $3,500 limit and for attendant care.

The issue squarely before Arbitrator Wilson was whether Mr. Scarlett suffered a minor injury.

Mr. Wilson reasoned that while Mr. Scarlett did indeed suffer sprains, strains and whiplash as a result of the accident he also suffered other significant problems including TMJ and psychological issues.  Mr. Wilson concluded that the totality of Mr. Scarlett’s injuries was such that his case fell outside of the MIG.  Mr. Scarlett was determined not to have suffered a minor injury on the totality of the evidence.

Mr. Wilson criticized Belair for what he viewed was the “…‘cookie-cutter’ application of an expense limit in every case where there is a soft tissue injury present.  Such does not respond either to the spirit of the accident benefits system or the policy enunciated in the Guideline of getting treatment to those in need early in the claims process.”

This decision is important for several reasons.  Firstly, Arbitrator Wilson confirmed the MIG was not intended to be binding even though it was incorporated in the regulation in light of the fact it was nothing more than a guideline prepared by the Financial Services Commission.  As such, the requirement in the MIG that an insured has the burden to lead ‘compelling evidence’ that the MIG should not apply in his or her case was denounced as being contrary to the fundamental insurance law principle requiring an insurer to prove any exception to or limitation of coverage on the civil balance of probability.  This conclusion enabled Mr. Wilson to rule in favour of Mr. Scarlett even in the of face of conflicting evidence as to the nature and degree of his impairment on the basis that Belair had not satisfied the burden of proving that Mr. Scarlett’s claim was restricted to the MIG.

Secondly, Mr. Wilson opined that the development of chronic pain syndrome with a psychological and neurocognitive component might be sufficient to reclassify what would otherwise be considered a minor injury under the regulation.

This is a very important development when it comes to the application of the MIG since it is not uncommon for those injured in motor vehicle accidents to go on to develop chronic pain that is often influenced by pre-accident depression or other psychological issues.

I have seen evidence in my practice of the reclassification of these chronic pain cases so that the MIG does not apply.

It should not be a surprise to anyone that this important decision is on appeal to the Superior Court of Justice.  There is simply too much at stake for the insurance industry.

Kevin Butler and Jonathan Wright are Ottawa-based lawyers practicing in the areas of Civil Litigation and Personal Injury at Mann & Partners, LLP. The articles on this blog are not intended to provide legal advice. Should you require legal advice, please contact Mann & Partners, LLP at 613-722-1500 or fill out our form to be contacted within 24 hours.