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October 2017

The Court of Appeal's Take on Deductible & Prejudgment Interest in MVA Claims

First presented at a Client Seminar


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, a statutory deductible applies. Previously, this deductible was $30,000.00 and only applied to general damages awards under $100,000.00.

On August 1, 2015, legislative reform to the Insurance Act2 took effect. The statutory deductible applicable to damages for a non-pecuniary loss was increased from $30,000.00 to $36,500.00. The $100,000.00 vanishing deductible limit was also increased to $121,799.00. 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 general damages when a tort award does not exceed the monetary threshold of $124,616.21 is $37,385.17.

For example:

Pain & Suffering Awarded
$37,385.17 $0.00
$50,000.00 $12,614.834
$124,616.21 Full Amount

In addition to damages, a plaintiff is entitled by statute to prejudgment interest. In automobile accident 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


The amendments to the Insurance Act did not contain specified dates upon which the increased deductible and lower prejudgment interest rate were to come into effect. Naturally, the questions that arose from the above-described legislative changes were as follows:

  • What deductible amount should be applied for accidents that occurred prior to August 1, 2015? In other words, is it $30,000.00, or the increased amount further to legislative reform?

  • What prejudgment interest rate should be applied for accidents that occurred prior to January 1, 2015? For instance, is it 5% as prescribed by rule 53.10 of the Rules of Civil Procedure, or the lower prejudgment interest rate prescribed by the Court of Justice Act?

These issues have recently been resolved by the Ontario Court of Appeal...

These issues have been recently resolved by the Ontario Court of Appeal in Cobb v. Long Estate8 and El-Khodr v. Lackie.9 The Court of Appeal concluded that both the statutory deductible and prejudgment interest rate changes are retrospective, meaning that they apply to all current actions, and going forward regardless of the date of loss.

Retroactive or Retrospective Debate

To understand this debate and resolution by the Court of Appeal, a brief primer on the laws of interpretation and temporal application is required.

A Primer

Is it retroactive or retrospective?

Justice Iacobucci of the Supreme Court of Canada in Benner v Canada (Secretary of State)10 helpfully explains the distinction. A retroactive statute is one that operates as of a time prior to its enactment. Conversely, a retrospective statute is one that operates for the future only. It is prospective, but it imposes new results in respect of a past event. A retroactive statute operates backwards. A retrospective statute operates forward, but it looks backwards in that it attaches new consequences for the future to an event that took place before the statute was enacted.

Presumption against retroactivity

Ordinarily, if the law is changed while an action is pending, the rights of the parties are decided according to the law as it existed when the action was started, unless the new Act (or amendments) clearly shows an intention to vary those rights creating a "vested right". An exception to the principle – that Acts are not retroactive – is that an Act relating only to procedure applies to actions and transactions started before the enactment as well as to those started after. "Procedure" is used in a restricted sense. It has to do with the method of prosecuting an existing right of action, not with the taking away of an existing right of action or right of defence. The presumption does not apply if the consequences are purely procedural in character, even if the new law might be less advantageous to a litigant than the former law.

What is a procedural law change?

Legislation that is purely procedural law is law that does not affect substantive rights in any way. A procedural law merely sets out modalities for the enforcement of existing rights, obligations, or prohibitions. It is well established that procedural law applies immediately to pending cases, that is, to cases that have not been definitively dealt with by the courts.

The Court of Appeal settled the debate and determined that both deductible and prejudgment legislative changes are retrospective.


The Court of Appeal settled the debate and determined that both deductible and prejudgment legislative changes are retrospective.

The prejudgment interest debate

In a reverse of the trial level decision, the Court of Appeal rejected the holding in Cobb Estate and determined that the default prejudgment interest rate prescribed by the Courts of Justice Act applies to all actions within the system regardless of the date of loss. This was also confirmed in the sister case of El-Khodr.

In the trial decision, Justice Toscano Roccamo set the prejudgment rate at the 5% standard. She found that the Insurance Act amendments, which set the new rate for interest, was substantive law and did not apply retrospectively. Moreover, the court found it persuasive that the 5% prejudgment interest rate for general damages was a known risk factor to insurers. She reasoned that insurance companies took this into account in setting their premiums; there was no reason in her opinion to depart from the Supreme Court's position that statutes should not be given retrospective operation in the absence of an express or implied intention to that effect, especially when the statute impacts the calculation of insurance premiums.

The Court of Appeal rejected this reasoning in Cobb. The court, led by Justice MacFarland, examined the context of the statutory regime for prejudgment interest to make this conclusion. Section 127 of the Courts of Justice Act defines "the prejudgment interest rate" as "the bank rate at the end of the first day of the last month of the quarter preceding the quarter in which the proceeding was commenced".11 Nevertheless, the court examined s. 128 (1) and (2) of the Courts of Justice Act and described that prejudgment interest has two default rules: one for non-pecuniary loss in personal injury actions, and another for all other awards where prejudgment interest is available. However, s. 130 of the Courts of Justice Act also gives a court discretion to disallow, reduce, or increase a prescribed rate of interest. Due to this section, the court held that any prejudgment interest is subject to the overriding discretion of the court regardless of the rate set by the default rules.

In coming to this conclusion, Justice MacFarland examined the legislative intention and rebuttable presumptions that apply to the interpretation of legislation, as described above. The court first concluded that the Courts of Justice Act does not create a vested right to a rate of prejudgment interest, and second, the court held that the presumption of immediate application of "procedural legislation" applies in this case.

Regarding the first issue, Justice MacFarland determined that a plaintiff does not have a "crystallized or certain right to a particular rate of prejudgment interest".12 The court reasoned that since interest rates fluctuate over time, interest rates set by the court should follow in tandem. This is because prejudgment interest is to compensate for the loss of the use of the settlement from the injury to the time of the judgment in addition to having a goal to fairly compensate an injured party. Reading this together with the option set out in s. 130 of the Courts of Justice Act to vary the prejudgment interest rate, a court has the option to vary the prejudgment interest rate to align with economic realities. Accordingly, while the right to damages for an accident is vested at the time of the accident, it can be differentiated from the entitlement to prejudgment interest as it's subject to judicial discretion, meaning that there is no inherent right to any rate of interest until it is determined by a judge.

For the second issue, the court determined that it was not necessary to determine whether the prejudgment rate was substantive or procedural in nature but rather held that the legislative intent of the change intended to apply to causes of action that had already arisen but had not yet been tried. Justice MacFarlane examined the history of prejudgment interest in previous versions of the Courts of Justice Act and the former Judicature Act. It found it highly relevant that the absence of temporal language in previous amendments intended the change to be retrospective. This was buttressed through an examination of the expressed goal of the amendment (in Bill 15), with the court stating that:

[The] goal [of the amendment] was to bring down the cost of claims to achieve a reduction in automobile insurance rates within a two-year window and the adjustment of the prejudgment interest rate was one part of that strategy.13

Therefore, to achieve the cost reduction goal as quickly as possible, Justice MacFarland held that the amendment intended to apply to cases already within the system, with s. 130 of the Courts of Justice Act ameliorating any concerns to this relating to any legitimate interests of tort plaintiffs in individual cases.

These issues have recently been resolved by the Ontario Court of Appeal

The deductible debate

In the Cobb decision, Justice MacFarlane also held that the statutory deductible is retrospective, utilizing similar reasoning for the prejudgment interest rate. The court examined the issue of what deductible will be required, considering the deductible rate is variable and is amended every year for inflation. Justice MacFarlane held that the statutory deductible is retrospective because the absence of temporal language implies that the province intended the deductible to have a "rolling interpretation" as stated in s. 59 of the Legislation Act, 2006, and the language of the statute clarifies that the provincial government intended for the deductible to be retrospective.

Regarding the first point, Justice MacFarlane examined s. 59 of the Legislation Act, 2006, noting that this section "ensures application of the current version of a regulation to which a statutory provision refers".14 Because of this presumption that a regulation is "rolling", it was inferred by the court that the regulatory changes were meant to be retrospective and not "stuck in time".

Buttressing this point, the court examined the context of the Insurance Act and held that the changes indicated that they would apply to accidents that occurred both before and after the amendment. Justice MacFarlane described that the index inflation-adjustment regime promulgates the proposition that the statutory deductible changes are retrospective. Particularly, s. 5.1(1) of the Court Proceedings regulation prescribes the identical inflation-adjustment regulation as the amount to which the statutory deductible does not apply as prescribed in s. 267.5(8.3), further indicating that the deductible was meant to be retrospective.


The issues of prejudgment interest and statutory deductible have been resolved on appeal in Cobb Estate and El-Khodr. It can now be said that the prejudgment interest rate prescribed by the Courts of Justice Act, and the monetary deductible at the time of settlement or judgment, applies to all actions regardless of the date of loss. However, one cannot discount the fact that s. 130 of the Courts of Justice Act provides courts with discretion to disallow, reduce, or increase a prescribed rate of interest. It remains to be seen if either of these cases will be appealed to the Supreme Court of Canada. In any event, the deductible and prejudgment interest debate has been meticulously answered by the courts which provide clarification for actions within the judicial system that have not yet been tried.

1 See "Bouncers at the door: A summary of threshold decisions from 2016-2017 - Which got through, and which got bounced" for application of the threshold test.
2 RSO 1990, c I.8.
3 Awards made to family members of a person injured or killed in a motor vehicle accident to compensate for a loss of "care, guidance and companionship" will also now be subject to a deductible of $18,692.00 if the award is under $62,307.59 (the deductible was previously $15,000.00, and applied only to damages awards under $50,000.00). As most family law awards are relatively minimal, this deductible may well eradicate many family law act claims. These amounts will also be revised yearly for inflation.
4 $50,000.00 - $37,385.17 = $12,614.83.
5 RRO 1990, Reg 194.
6 RSO 1990, c C 43.
7 Prejudgment interest rates for causes of action arising after October 23, 1989
8 2017 ONCA 717.
9 2017 ONCA 716.

[1997] 1 SCR 358.
11 Para 69.
12 Para 85.
13 Para 86.
14 Para 118.


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