Which prejudgment interest rate applies in car/motor vehicle claims?

November 14, 2015, Kitchener, Ontario

Posted by: Robert Deutschmann, Personal Injury Lawyer

Prejudgment interest changes – retroactive?

The Ontario government amended the Insurance Act effective January 1, 2015, changing the rate at which prejudgment interest (PJI) is to be charged in personal injury motor vehicle accident matters.    The Courts of Justice Act had allowed for a PJI rate of 5%.  After the Ontario government changes the rate of interest for non-pecuniary (general) damages in car accident motor vehicle claims is the bank rate at the end of the first day of the last month of the prior quarter in which the proceeding was commenced.   Unfortunately the Ontario government did not indicate when the change would apply.   This led to the usual efforts by the insurance industry to take the most favourable interpretation and insist that the change applied to all outstanding car accident motor vehicle claims, regardless of when the car accident motor vehicle action commenced. 

If the change is considered a change of a procedural nature, then the change would apply to all claims retroactively.  However, if the change is considered a change to a substantive right, then the change would apply to claims commenced after January 1, 2015. 

In Cirillo v Rizzo (2015) ONSC 2440, both parties agreed that the plaintiff’s entitlement to pji was a substantive right.  The issue though was whether the quantification of the interest was a procedural or substantive right.  The court decided the quantification was a procedural right, applied retroactively and therefore applied the amended rate, not the 5% rate.

However, just to add to the confusion, and perhaps correct an incorrect interpretation, the Ontario Superior Court came to a different conclusion in El-Khodr v Lackie (2015) ONSC 4766.  The court in El-Khodr decided that Cirillo was wrongly decided based on a misinterpretation of a prior decision, Somers v Fournier (2002) ONCA.   The judge in El-Khodr noted several prior cases that had held that entitlement to PJI was a substantive right and therefore would not apply the legislative changes to PJI retroactively.

The judge in El-Khodr also noted the policy rationale for not applying the changes retroactively, essentially saying that the changes should not be applied retroactively unless the government expressly stated that the change should be applied retroactively.  The comments from the Minister of Finance at the time of the change clearly indicated that the purpose of the change was to allow car/auto insurance companies to align the rate of PJI to reflect market conditions.  At the time the rate of 5% was higher than market rates.   The rate at the time was 1.3%.  The court also noted the Supreme Court of Canada decision in Angus v Sun Alliance Insurance Co. (1988), supporting the position that the 5% PJI rate for general damages was known to the car/auto insurers and the insurers took that into account when they were establishing their premiums.  So without an implied or expressed intention from the government to be retroactive, the court in El-Khodr applied the 5% PJI rate. 

Recently,  Justice Milanetti, in Markovic v Richards (2015) ONSC 6983, preferred the reasoning in El-Kohdr and awarded PJI interest at 5%.  Justice Milanetti reviewed Somers and determined that PJI is like a head of damage and therefore a matter of substantive law.  If the right is substantive, it should not be applied retroactively.  If the legislative change was considered to be procedural in nature then it would be applied retroactively and immediately.

We are currently waiting for the Ontario Court of Appeal to rule on the Cirillo and El-Khodr decisions.   The expectation is that the El-Khodr decision will be prevail.

Posted under Car Accidents, Chronic Pain, Fractures, Pain and Suffering, Personal Injury

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Deutschmann Law serves South-Western Ontario with offices in Kitchener-Waterloo, Cambridge, Woodstock, Brantford, Stratford and Ayr. The law practice of Robert Deutschmann focuses almost exclusively in personal injury and disability insurance matters. For more information, please visit or call us toll-free at 1-866-414-4878.

The opinions expressed here, while intended to provide useful information, should not be interpreted as legal recommendations or advice.

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