News Update – April 23, 2019

The Clock Kept Ticking

15 Years IRB Awarded
The plaintiff, injured in a 2002 MVA, sought IRB from the date of a February 2004 denial ongoing. While the plaintiff initially filed mediation with FSCO March 2006, and then again in March 2007, the jury trial to pursue unpaid IRB was not held until February 2019. With the jury finding in favour of the plaintiff, the defendant was obliged to pay IRB from February 2004 to February 2019, a period of 15 years.

Interest – What is the Prevailing Rate?
Following an eleven day trial, the Court rendered their decision as to whether interest on the sum awarded was to be calculated and payable pursuant to s.46(2) of the SABS at 2% per month compounded monthly or whether the claim was limited to interest pursuant to the Courts of Justice Act (CJA) at 4.5% per year on IRB payments outstanding from time to time, on a non-compounded basis.

Interest – Mandatory and Automatic
The Court affirmed that the interest provisions of s.46, “unlike the discretion conferred on the court under s. 130 of the CJA to vary or disallow pre-judgment interest, the payment of interest under s. 46(2) is mandatory and automatic. Defendant would therefore have understood its statutory liability for s. 46(2) interest for unpaid amounts, even without the initiation of a claim by plaintiff or an express reference to s. 46(2) in the Statement of Claim.”

The Argument Remains the Same
The Court further confirmed that “the claim for interest under the SABS arises from the same specific factual matrix that underlies the claim for unpaid IRBs. In fact, the claimed SABS interest must be calculated based on the balance of unpaid IRBs. The interest claim thus stands or falls based on the underlying IRB claim, of which defendant has had ample notice and has defended vigorously. Defendant cannot reasonably assert that, after mounting its vigorous defence of the determining issue, it would have conducted itself differently had the proposed amendments been pleaded from the beginning.”

Illogical and Overly Narrow Interpretation
While noting further that “arguably…s. 46(2) interest does not apply to sums ordered to be paid by an arbitrator or a court”, in dismissing this notion, it was found to “be illogical to interpret the section in that fashion, and an overly narrow interpretation of the regulation. It makes no sense to create a dispute resolution mechanism that provides for arbitrators and courts to determine insureds’ entitlement to unpaid benefits, yet to exempt those determinations from the application of s. 46(2) interest.”

As a result…
The Court finally confirmed that:

• the SABS dispute resolution system is included in and forms part of Part X of the SABS regulation and in ss. 280 and following of the Insurance Act
• a judicial or arbitral determination in favour of an insured, pursuant to that dispute resolution system, amounts to a finding that the insurer has failed to pay a benefit within the time required under Part X; and
• as a result, such a determination triggers the application of s. 46(2).

Some Small Relief
The Court however considered the defendant’s reliance upon a January 2004 OCF-3 that indicated there to be no entitlement to IRBs. Under the circumstances, the “plaintiff created unusual circumstances that, for a time, justified defendant’s decision not to pay IRBs”. However, while there may have been cause to discontinue IRB in February 2004, “by March 2006 [the] defendant was aware that plaintiff was disputing that discontinuance”.

At the End of the Day
As a result, “in the circumstances, it would be unfair to visit on defendant the high interest rate set out in s. 46(2) for the period between February 20, 2004 and March 15, 2006, the date of the first mediation hearing. For that period, I would award pre-judgment interest under the Courts of Justice Act, only.” However, “section 46(2) interest accrues on any overdue amount from the date the amount became overdue. I would therefore fix March 30, 2006 (the date that was 11 business days after March 15, 2006) as the date from which plaintiff’s IRB payments became overdue and the date from which s. 46(2) interest should accrue.”

Read the full text CanLII Here