Neutral Citation: 2003 ONFSCDRS 137
FSCO A99-000521
FINANCIAL SERVICES COMMISSION OF ONTARIO
BETWEEN:
LUCIA STARGRATT
Applicant
and
ZURICH INSURANCE COMPANY
Insurer
REASONS FOR DECISION
Before:
John Wilson
Heard:
July 11, 2003, by teleconference
Appearances:
Andrew Kerr for Ms. Stargratt
Arthur R. Camporese for Zurich Insurance Company
Issues:
The Applicant, Lucia Stargratt, was injured in a motor vehicle accident on March 14, 1998. She applied for statutory accident benefits from Zurich Insurance Company ("Zurich"), payable under the Schedule.1
Following a lengthy arbitration which took place on various dates between March and June 2001 in both Toronto and Sudbury, I rendered a decision on October 4, 2001, ordering that certain benefits be paid, as well as a special award. Zurich appealed that decision, and on March 31, 2003, Director's Delegate Nancy Makepeace issued her reasons on the appeal.
The Director's Delegate upheld my decision in awarding a special award of 50 per cent, but found that the form of my order did not conform to the requirements set out in the recent Persofsky and Liberty Mutual appeal decision.2 Neither the precise amount of the outstanding benefits, nor the exact amount of the special award were set out in my decision. Consequently, the Director's Delegate referred the matter back to me for a decision on the exact quantum of the outstanding benefits and the special award.
The issues in this hearing are:
What are the amounts of the caregiver and attendant care benefits to which Ms. Stargratt is entitled for the 104 weeks after the accident?
What is the amount of the interest to which Ms. Stargratt is entitled on the overdue attendant care and caregiver benefits pursuant to section 46(2) of the Schedule?
What is the amount of the special award to which Ms. Stargratt is entitled?
Result:
The amount of the outstanding caregiver and attendant care benefits was $33,748.53.
The amount of interest outstanding as of October 4, 2001 was $36,814.62.
Ms. Stargratt is entitled to a special award of $35,281.58.
EVIDENCE AND ANALYSIS:
This hearing raised fairly simple questions about the calculation of benefits owing to an applicant. Due to the efforts of both counsel, an agreement was reached on the day of arbitration that the amount of attendant care and caregiver benefits owed to Ms. Stargratt at the 2-year mark totalled $33,748.53. I am grateful to both counsel for having so narrowed the issues.
The appeal decision raised the possibility that caregiver benefits might have been claimed past 104 weeks. The pre-hearing letter dated May 2, 2003, relating to this resumed arbitration, however, stated that "Mr. Kerr advised that Ms. Stargratt's claim for caregiver benefits beyond the 104-week mark is withdrawn." Consequently all calculations have been made based on caregiver benefits not exceeding the 2-year mark.
While the parties were ultimately able to agree on the issue of the amounts owing up to the 2-year mark, they were not able to agree on the amount of the interest that should be credited to Ms. Stargratt, nor on the interest component that should be used in the calculation of the special award.
Interest may form a significant part of any applicant's claim in accident benefit matters. Section 46 of the Schedule provides:
(1) An amount payable in respect of a benefit is overdue if the insurer fails to pay the benefit within the time required under this Part.
(2) If payment of a benefit under this Regulation is overdue, the insurer shall pay interest on the overdue amount for each day the amount is overdue from the date the amount became overdue at the rate of 2 per cent per month compounded monthly.
Subsection 46(2) is mandatory. If a payment is overdue, interest is payable. It is not payable at the discretion of the insurer or even the arbitrator. An overdue payment automatically attracts interest.
I have found that Ms. Stargratt's benefits were properly payable to her on an ongoing basis, following the accident. That finding has not been appealed. Therefore, interest is payable by the Insurer on all amounts owed to Ms. Stargratt. That interest runs from the date the benefits first became due, not from the date of the order.3
It is agreed by the parties that the interest payable on the outstanding benefits as of October 4, 2001 would be $33,748.53.
The Insurer has submitted that although this amount is owed as interest it should not be included in any computation of the special award ordered against it.
Subsection 282(10) of the Insurance Act provides:
If the arbitrator finds that an insurer has unreasonably withheld or delayed payments, the arbitrator, in addition to awarding the benefits and interest to which an insured person is entitled under the Statutory Accident Benefits Schedule, shall award a lump sum of up to 50 per cent of the amount to which a person was entitled at the time of the award together with interest on all amounts then owing to the insured (including unpaid interest) at the rate of 2 per cent per month, compounded monthly, from the time the benefits first became payable under the Schedule.
The Schedule makes it clear that unpaid interest makes up a portion of the gross amount of benefits outstanding which forms the basis for the calculation of the special award. Consequently, the special award should be calculated upon the figure of $70,533.15, which the parties agreed would be the total amount of outstanding benefits and interest, provided that interest was to be included as of July 11, 2003.
The amount of the special award should be, therefore, $35,281.58.
The special award was ordered on October 4, 2001 and became due and payable at that time. Consequently, interest runs from that date at the statutory interest rate on this benefit.
Although the exact amount of the special award was not given in the October decision, it was clearly ascertainable by the parties, as their joint submissions on quantum in this matter bear out. Had there been a serious problem in settling the exact amount of the order, the parties could have requested guidance in performing the calculation.
The Insurer made no payment of any nature pursuant to the October 2001 order, and, consequently, took the risk that it would be ordered to pay interest, should its challenge of the 50 per cent special award not be upheld. Consequently, I find that interest on the special award relates back to and begins from the date of the original order made on October 4, 2001.
That said, there remains the question of interest after the date of the order, that is, post-judgement interest. The Insurer has submitted that post-judgement interest should be calculated as in the courts, since an arbitral decision may be registered with the court and enforced in the same manner as a court order. It suggests that the rate would be as ordinarily calculated pursuant to section 129 of the Courts of Justice Act, R.S.O. 1990, c. C.43, a rate substantially below that mandated by the Schedule.
The Applicant, on the other hand, does not fundamentally disagree with this approach. Her counsel, however, submits that when an instrument bearing a fixed interest rate, such as a mortgage, is the subject of litigation, the resulting judgement will continue to bear interest at the fixed rate, notwithstanding that it may be higher than the interest set by subsection 127(2) of the Courts of Justice Act.
Indeed, subsection 129(5) of the Courts of Justice Act provides that "Interest shall not be awarded under this section where interest is payable by a right other than under this section."
The consequence of this section is that post-judgement interest may be ordered at a rate set by a mortgage [Central Guaranty Trust Co. v. Dixdale Mortgage Corporation 1994 CanLII 1429 (ON CA), 24 O.R. (3d) 506] or by a contract [Mayfair Tennis Courts Ltd. v. Nautilus Fitness & Racquet Centre Inc. (1996) 50 C.P.C. (3d) 1].
The statutory interest rate in accident benefit matters is set by the Schedule. Subsection 46(2) provides that it is payable on overdue amounts. An amount does not cease to be overdue as defined in subsection 46(1) until it is finally paid.
Subsection 268(1) of the Insurance Act provides:
Every contract evidenced by a motor vehicle liability policy, including every such contract in force when the Statutory Accident Benefits Schedule is made or amended, shall be deemed to provide for the statutory accident benefits set out in the Schedule and any amendments to the Schedule, subject to the terms, conditions, provisions, exclusions and limits set out in that Schedule.
One of the provisions incorporated into every motor vehicle accident policy in Ontario is subsection 46(2) of the Schedule, which provides for compound interest at 2 per cent per month. It is clear then that interest is payable on statutory accident benefit matters "by a right other than under this section," as established by subsection 129(5) of the Courts of Justice Act. Consequently, I find that post-judgement interest shall continue to run at the rate of 2 per cent per month, compounded monthly, until such time as the overdue amounts and interest are paid in full.
EXPENSES:
Since Ms. Stargratt has been successful in this matter, I find that the Insurer should be required to pay her reasonable expenses. Should the parties not be able to agree on an amount for the expenses, within 60 days of this decision a date may be set with the case administrator to deal with the quantum of the expense order.
September 12, 2003
John Wilson
Arbitrator
Date
Neutral Citation: 2003 ONFSCDRS 137
FSCO A99-000521
FINANCIAL SERVICES COMMISSION OF ONTARIO
BETWEEN:
LUCIA STARGRATT
Applicant
and
ZURICH INSURANCE COMPANY
Insurer
ARBITRATION ORDER
Under section 282 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:
Zurich shall pay to Ms. Stargratt a total of $161,144.87, being outstanding benefits, special award and accrued interest to July 11, 2003.
This award shall continue to bear interest at 2 per cent per month, compounded monthly, as specified by subsection 46(2) of the Schedule and the contract of insurance from July 11, 2003 until such time as it is paid in full.
September 12, 2003
John Wilson
Arbitrator
Date
Footnotes
- The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended by Ontario Regulations 462/96, 505/96, 551/96, 303/98, 114/00 and 482/01.
- Persofsky and Insurance Bureau of Canada and Ontario Trial Lawyers 'Association and Ministry of Finance, (FSCO P00-00041, January 31, 2003).
- See Attavar v. Allstate 2003 CanLII 7430 (ON CA), 63 O.R. (3d) 199, Ontario Court of Appeal decision of Laskin J.A.