Personal injury lawyers are eagerly awaiting the Ontario Court of Appeal’s determination on prejudgment interest and which rate applies to non-pecuniary damages in pre-2015 motor vehicle cases following a change in the law earlier this year.
In recent months, Ontario courts have come down on either side of the issue following changes in legislation at the start of this year that replaced the former rate of five per cent with the lower current bank rate.
The issue stems from an amendment on Jan. 1, 2015, that changed the amount of prejudgment interest for some cases. The question before the appeal court is whether it’s retroactive.
Until recently, the Courts of Justice Act allowed for prejudgment interest and defined it as the bank rate with the exception of non-pecuniary losses determined by the rules of the court. The Rules of Civil Procedure set the interest rate for non-pecuniary damages in motor vehicle cases at five per cent. Among the amendments made to the Insurance Act earlier this year was the provision that the Courts of Justice Act doesn’t apply to the calculation of prejudgment interest for damages for non-pecuniary losses related to injury or death arising from an automobile accident.
One decision earlier this year, Cirillo v. Rizzo, found the change to be retroactive while another one, El-Khodr v. Lackie, later found that earlier ruling to be wrong. The latter case is under appeal.
“They’re both the same level of court and they’re both contradictory,” says Emily Casey, a lawyer with Tkatch & Associates. “Right now, it’s a stumbling block when you’re talking about settlement.”
And both cite the same case law, interpreting it differently and coming to different conclusions.
It’s an unusual situation that ultimately provides no direction for lawyers until the Court of Appeal clarifies the situation.
Casey points out that in El-Khodr, Justice Giovanna Toscano Roccamo noted that insurance companies have been basing their calculations on the old rate of five per cent. She noted the companies had already passed the cost to their customers through their premium payments. As a result, many plaintiff lawyers suggest a retroactive lower rate is nothing short of a windfall for insurance companies. On the plaintiff side, lawyers have quantified their cases based on the old rate.
In El-Khodr, Kossay El-Khodr sued Raymond Lackie, the driver who rear-ended him, and John McPhail, the owner of the vehicle that hit him. On April 29, 2015, after four weeks of trial, the jury awarded El-Khodr a total of $2,931,006.
“The question to be answered in deciding this issue boils down to whether or not s. 258.3(8.1) is substantive or procedural law, as this will determine the issue of retrospective application. This was the precise issue recently dealt with in Cirillo. Essentially, the motion judge in that case decided that the amendment was procedural law,” wrote Toscano Roccamo. “With respect, I agree with the plaintiffs that Cirillo is wrongly decided.”
The judge pointed out that the reason for the recent amendment was to better match the award for prejudgment interest to the actual loss of interest incurred due to the delay in getting damages, which was much less than five per cent, and, as a result, help lower insurance premiums.
David Zuber of Zuber & Co. LLP, who successfully argued for the defence in Cirillo, says he continues to use that judgment as guidance.
“I believe Cirillo is correctly decided and understand that Ottawa case is under appeal,” he says of the other ruling.
“I am sure other judges will weigh in on the debate since the Ottawa case will be a while before it gets to the Court of Appeal. All of my insurer clients follow Cirillo.”
Both cases referred to the 2002 decision in Somers v. Fournier but interpreted it differently.
In Somers, Don Rollo of AMR LLP successfully argued that the law should be substantive, as opposed to procedural, and won.
“I happen to think the Court of Appeal decision in Somers was very clear,” says Rollo.
The basic point in El-Khodr, he adds, was that the insurance company had had use of the money throughout the period that any awards were pending while the plaintiffs went without.
“Those are traditional common laws behind the theory of awarding prejudgment interest in the first place,” says Rollo. “Legislation is basically not retrospective anyway.”
He points out that interest becomes a large part of the coverage for cases that linger and the difference between the bank rate, which currently hovers at around the one-per-cent mark, compared with five per cent under the old rules can add up to a significant amount of money for the insurance companies.
Connolly Obagi LLP’s Joseph Obagi says that the difference between the two interest rates in Cirillo amounted to about $2,000, suggesting that arguing the issue of prejudgment interest was perhaps an effort to establish a precedent that would later favour the insurance companies and result in a “multimillion-dollar windfall” for them in subsequent cases. Obagi, with Beth Quigley, represents El-Khodr. In his case, the difference amounts to more than $45,000. He expects the profession may have to wait a year or more for the Ontario Court of Appeal to hear the case.
“There’s no question that the previous case seems to have missed some important jurisprudence,” says Obagi. “What Justice Roccamo points out very clearly was the reverse onus was wrongly applied by the previous judge.”
While lawyer Darryl Singer agrees with El-Khodr, he understands the reasoning in Cirillo. And while he notes that the monetary difference in the latter case isn’t substantial, the overall issue for insurance companies is.
“It can’t possibly be fair for them to, many years later, take advantage of the legislative change,” says Singer. “It’s an important issue for the personal injury bar.”
Charles Gluckstein, a personal injury lawyer who specializes in catastrophic injury cases, notes that settled law has accepted that when something is procedural, it changes everything and goes back retroactively. But when it’s substantive, it’s only prospective unless the legislation backdates it.
“I like the reasoning in El-Khodr. It goes through a much more thorough analysis,” says Gluckstein. “The other result is totally unjust by giving the insurance companies a windfall. But the law is in flux. Right now, there’s no certainty how this is going to end up.”
Gluckstein also feels the legislative change is a terrible development. “It’s another part of their rights being stripped away,” he says, referring to those who buy insurance.
While the Court of Appeal will consider the issue, he expects that until then, the incentive to settle cases has evaporated and many will end up going to trial.