A Divided Court On Deductible And Prejudgment Interest In Motor Vehicle Accident Claims

Background

Non-pecuniary damages (also called general damages) are awarded to a plaintiff that sustained a non-monetary loss. These damages are not capable of exact quantification. Examples of such losses include, inter alia, pain and suffering.

Claims for general damages in automobile cases are subject to a statutory threshold test.1 If a person injured in a motor vehicle accident meets the threshold test, then a statutory deductible applies. From October 2003 to July 2015, the deductible was $30,000 and only applied to general damages under $100,000. On August 1, 2015, legislative reform to the Insurance Act2 took effect. The statutory deductible applicable to damages for non-pecuniary loss was increased from $30,000 to $36,540. The $100,000 vanishing deductible limit was also increased to $121,799. The deductible and threshold amount to which it applies is revised each January to account for inflation.3 For example, in the case of damages arising from automobile accidents from January 1, 2017, until December 31, 2017, the deductible for non-pecuniary loss when a tort award does not exceed the monetary threshold of $124,616.21 is $37,385.17.

In other words, if the pain and suffering is worth $37,385.17, the plaintiff is left with $0. If the pain and suffering is worth $50,000, the plaintiff only collects $12,614.83.4 If the pain and suffering is worth more than $124,616.21, the plaintiff receives the full amount.

In addition to damages, a plaintiff is entitled by statute to prejudgment interest. In automobile cases, prejudgment interest is calculated from the date on which the defendant was first given notice of the claim to the date of judgment or settlement. Amendments to the Insurance Act reduced the prejudgment interest rate in cases involving automobile accidents occurring after January 1, 2015. Prior to January 2015, prejudgment interest accruing on damages for non-pecuniary loss in personal injury actions was governed by rule 53.10 of the Rules of Civil Procedure,5 which provided for interest at the rate of 5% per year.

On January 1, 2015, the Insurance Act was amended to provide that rule 53.10 no longer applies to non-pecuniary losses arising from automobile accidents. This legislative reform dropped the 5% prejudgment interest rate and adopted the lower general prejudgment interest regime governed by s. 128(1) of the Courts of Justice Act6 which is currently 0.8%.7

Issues

The amendments to the Insurance Act do not contain specified dates upon which the increased deductible and lower prejudgment interest rate are to come into effect. The questions that have arisen from the above-described legislative changes are as follows:

For accidents that occurred prior to August 1, 2015, what is the appropriate deductible to be applied to the non-pecuniary damages? In other words, is it $30,000 or the increased amount further to legislative reform? For accidents that occurred prior to January 1, 2015, should the applicable pre-judgment interest rate for the plaintiff's non-pecuniary loss be calculated in accordance with section 128(1) of the Courts of Justice...