In a decision released on April 15, 2015, the
Ontario Superior Court of Justice addressed the impact of a
recent amendment to the Insurance Act for the first time.
The amendment provides that the 5% prejudgment interest rate for
non-pecuniary losses in actions arising from motor vehicle
accidents no longer applies. Rather, prejudgment interest for
non-pecuniary losses is to be calculated using the rate applicable
to pecuniary losses. The amendment came into force on January
1, 2015, and the Court has now held that the new rates apply
In Cirillo v. Rizzo, the plaintiff sought damages for
injuries sustained on October 1, 2005 when he was hit by a motor
vehicle operated by the defendant. He served the Statement of
Claim on January 29, 2007. On March 24, 2014, the defendant
made an offer to settle for $50,000 for all claims, plus
prejudgment interest. On January 26, 2015, some three weeks
after the amendment to the Insurance Act came into force,
the plaintiff accepted the offer to settle. The parties agreed
that the $50,000 represented non-pecuniary losses.
The plaintiff moved for judgment. The issue in the motion was
what rate should be used for calculating prejudgment
interest. The plaintiff argued that the amendment to the
Insurance Act did not have retroactive effect, and accordingly
prejudgment interest should be calculated using a rate of
5%. The defendant argued that the correct prejudgment interest
rate was 4.5%, the prejudgment interest rate for pecuniary losses
as set out in the Courts of Justice Act.
The Court held that, as the amendment addresses the manner in
which prejudgment interest is calculated, it is a procedural
amendment and would apply retroactively to motor vehicle accidents
which occurred before January 1, 2015. Therefore, the correct
prejudgment interest rate was 4.5%.
In Cirillo v. Rizzo, the difference between the two
potential prejudgment interest rates was only 0.5%. In actions
arising from more recent motor vehicle accidents, the impact of
this amendment could be much greater. For instance, in any
motor vehicle accident claim commenced on or after April 2009, the
prejudgment interest rate would be 1.3% or less. This could
potentially represent a significant reduction in the amount paid
for prejudgment interest by insurers and other defendants,
including unprotected defendants such as road
There is an issue regarding how the Court determined the correct
prejudgment interest rate in Cirillo v. Rizzo. Section 127
of the Courts of Justice Act provides that the prejudgment interest
rate is the bank rate "in the quarter preceding the quarter in
which the proceeding was commenced." These rates are
contained in the Courts of Justice Act. It appears
that in Cirillo v. Rizzo, the Court applied the rate from
the quarter preceding the date the Statement of Claim was served,
as opposed to the date it was issued. Given that the
prejudgment interest rate was 4.5% for five consecutive quarters in
2006 and 2007, this issue made no difference in the circumstances.
Clearly, however, care will have to be taken when identifying the
correct prejudgment interest rate in the future.
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