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


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


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 Act or as prescribed by rule 53.10 of the Rules of Civil Procedure? Said otherwise, is it 5% or the lower prejudgment interest rate prescribed by the Courts of Justice Act?

The question to be answered in deciding these issues boils down to whether or not the legislative changes are substantive or procedural law, as this will determine the issue of retrospective application.


Is it Retroactive or Retrospective?

Justice Iacobucci of the Supreme Court of Canada in Benner v Canada (Secretary of State)8 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. 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.


If the 2015 amendments are procedural, then they would apply retrospectively, meaning all actions commenced prior to the legislative reform would be subject to the higher deductible and lower prejudgment interest rate. On the other hand, is the 2015 amendments are substantive, then they would not apply retrospectively, meaning all actions commenced prior to the legislative reform would be subject to the lower deductible and higher prejudgment interest rate.

The problem is that the courts cannot seem to decide if the amendments to the Insurance Act are procedural or substantive.

The deductible debate

1. The change to the deductible is not retrospective:

In Cobb v Long Estate,9 Justice Belch of the Ontario Superior Court grappled with the issue of retrospectivity of the deductible. In that case, the defendant argued the sum of $36,540 (the 2015 deductible) could be deducted from the $50,000 in general damages awarded by the jury, leaving a balance owing of $13,460 by the defendant tort insurer. The plaintiff disagreed. The plaintiff argued that at every step of the proceeding leading up to the start of trial on September 8, 2015, the parties were operating under the law that stipulated the deductible was $30,000. On August 1, 2015, just five weeks before the start of trial and more than seven years after Mr. Cobb's motor vehicle accident, the Ontario government implemented the new regulation to increase the deductible.

The plaintiff argued that the change in deductible conveyed by the Insurance Act was not to be applied retrospectively citing another 2015 court decision. El-Khodr v Lackie10 (discussed below) set the deductible at $30,000. To argue this, the plaintiff cited the Court of Appeal decision in Wong v Lee11 which held the deductible is a matter of substantive law. Additionally, the case of Somers v Fournier12 is cited for the position that the deductible is part of the threshold provisions of the Insurance Act, and the reasonable conclusion from the two Court of Appeal decisions of Wong and Somers is that the deductible is substantive. Therefore the August 1, 2015, change cannot be applied retrospectively.

Justice Belch agreed with the plaintiff and the reasoning in El-Khodr concluding that the change is substantive and should not be applied retrospectively. Justice Belch also accepted the plaintiff's argument that insurers have been setting premiums based on the deductible of $30,000 and not $36,540. As such, the insurer would reap a windfall having collected higher premiums for seven years based on a $30,000 deductible, while getting the benefit of the more favourable $36,540 deductible when paying out damages to the plaintiff.

2. The change to the deductible is retrospective:

In Corbett v Odorico,13 Justice Hackland concluded the opposite of Cobb finding that a regulation which varies the amount of deductibles for general damages for fixed annual periods is procedural in nature and should apply retrospectively. Part of Justice Hackland's reasoning was that the new regulations were designed to fix deductible amounts in current dollars, just as jury verdicts and other court judgments were in current dollars, allowing for more symmetry between judgment and deductible. Justice Hackland accepted the position of the defendant which argued that the wording and the policy behind the amendment indicated its intended immediate application to ongoing motor vehicle personal injury actions. Legislative intent is one of the ways to override the presumption against retroactivity. Lastly, Justice Hackland addressed Justice Belch's decision in Cobb finding that the authority Justice Belch relied on to conclude that the deductible was not retroactive was not directly comparable. Instead, Justice Hackland concluded that the increase in the deductible was a matter of procedural law that should apply retrospectively.

An earlier case in line with Corbett is Vickers v Palacious.14 Justice James concluded that legislative intention was clear, and that the revised deductible was to apply to all pending actions. He reasoned that the plaintiffs did not have vested legal rights that were interfered with; they had a claim that had not gone to trial and in respect of which there had been no award or other disposition when the new deductible was enacted. In the alternative, if he was going to rely on statutory interpretation and temporal law, he would have concluded that the deductible issue is a matter of procedural law and ought to be presumed to apply retrospectively.

The prejudgment interest debate

1. The changes to pre-judgment interest rates are not retrospective15

In El-Khodr mentioned above, 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. She came to this conclusion by finding that the court in Cirillo v Rizzo16 (discussed below), misread the authority in Somers. Instead, Justice Toscano Roccamo reached her conclusion by applying the Supreme Court's holding in Tolofson v Jensen.17 (discussed below), misread the authority in Somers. Instead, Justice Toscano Roccamo reached her conclusion by applying the Supreme Court's holding in Tolofson v Jensen.

2. The changes to pre-judgment interest rates are retrospective

In Cirillo, Justice MacKenzie adopted the defendant's position and rejected the plaintiff's argument that prejudgment interest was an element of substantive law. Defence argued that the quantification of prejudgment interest is procedural whereas the entitlement to prejudgment interest substantive. The argument that the prejudgment rate is procedural is grounded in the idea that the Rules of Civil Procedure are the means or mechanism by which the end or objective inherent in a substantive right or obligation is conferred or imposed. As such, rule 53.10 of the Rules of Civil Procedure was construed as a procedural rule meaning that there would be retrospective application.


The issue of the retrospective impact of the deductible and prejudgement interest changes will soon be resolved on appeal. With the appeal abandoned in Vickers and no appeal in Corbett, observers wait keenly for the Ontario Court of Appeal to release its decision in Cobb (judgment pending) and El-Khodr (judgment pending). Until these appeals are addressed, decisions relating to motor vehicle accidents occurring before August 1, 2015, could be subject to either deductible depending on which line of cases the presiding judge finds more persuasive. Similar to the deductible, the prejudgment interest rate applied in cases for accidents occurring before January 1, 2015, could go either way. However, there is an alternative to be aware of. In Cobb, Justice Belch followed much of the logic in El-Khodr to rule on the deductible and found an alternative compromise on the issue of prejudgment interest. Justice Belch, who retired the same year of rendering his decision in Cobb, pegged prejudgment interest at 3%. Justice Belch used his judicial discretion to find 3% as entirely just and reasonable after taking into account the factors set out in section 130(2) of the Courts of Justice Act as well as the overall circumstances of the case. Pending determination of this issue by the Court of Appeal, prejudgement interest at the rate of 3% may be a sound compromise between counsel when canvassing settlement of automobile claims for accidents that occurred prior to January 1, 2015.


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 if the award is under $62,307.59 (the deductible was previously $15,000, and applied only to damages awards under $50,000). 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 - $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 [1997] 1 SCR 358.
9 2015 ONSC 6799 [Cobb]. Under appeal but not perfected; Court of Appeal File No.: C61467. Heard on April 3, 2017, judgment reserved.
10 2015 ONSC 4766 [El-Khodr]. Under appeal but not perfected. Court of Appeal File No.: C60918 Judgment Reserved.
11 2002 ONCA 742.
12 2002 ONCA 2119.
13 2016 ONSC 1964 [Corbett]. No appeal.
14 2015 ONSC 7647 [Vickers]. Court of Appeal File No.: C61538. Appeal abandoned August 17, 2016 .
15 Markovic v Richards et al., 2015 ONSC 6983 (no appeal), and Carr v Modi, 2016 ONSC 1300 (no appeal), also follows this position.
16 2015 ONSC 2440 [Cirillo]. Appeal abandoned.
17 [1994] 3 SCR 1022.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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