Zacharias v. Zurich Insurance Company
[Indexed as: Zacharias v. Zurich Insurance Co.]
Ontario Reports
Court of Appeal for Ontario,
Sharpe, Epstein and Pepall JJ.A.
July 16, 2013
116 O.R. (3d) 342 | 2013 ONCA 482
Case Summary
Insurance — Automobile insurance — Statutory accident benefits — Interest — Section 24(4) of Statutory Accident Benefits Schedule 1990 providing that insurer will pay interest on overdue payments from date they become due "at the rate of 2 per cent per month" — Section 24(4) not ambiguous — Section 24(4) providing for compound rather than simple interest — Statutory Accident Benefits Schedule — Accidents before January 1, 1994, R.R.O. 1990, Reg. 672.
The plaintiff sought weekly benefits from the defendant insurer pursuant to Part IV of the Statutory Accident Benefits Schedule -- Accidents before January 1, 1994 ("SABS 1990"). The defendant initially paid benefits, but terminated them in 1996. The plaintiff sued, claiming past and ongoing benefits and interest on the overdue amounts that the defendant allegedly owed to her. Section 24(4) of SABS 1990 states: "The insurer will pay interest on overdue payments from the date they become overdue at the rate of 2 per cent per month." The defendant brought a motion to determine whether s. 24(4) provides for simple or compound interest. The motion judge found that it provides for compound interest. The defendant appealed.
Held, the appeal should be dismissed.
Section 24(4) is not ambiguous. A consideration of the provision in its grammatical and ordinary sense and in a manner that corresponds with the scheme of the legislation and its intent leads only to one interpretation -- that interest is compounded. Section 24(4) provides that at the end of the month during which a payment is overdue, 2 per cent interest is added to the amount that is overdue. As long as that overdue amount remains unpaid, interest continues to accrue at [page343] 2 per cent per month on both the increasing principal and on the interest that has been calculated monthly. As both the principal and interest are "overdue payments", interest must be calculated and paid on amounts that include interest.
Bell ExpressVu Ltd. Partnership v. Rex, [2002] 2 S.C.R. 559, [2002] S.C.J. No. 43, 2002 SCC 42, 212 D.L.R. (4th) 1, 287 N.R. 248, [2002] 5 W.W.R. 1, J.E. 2002-775, 166 B.C.A.C. 1, 100 B.C.L.R. (3d) 1, 18 C.P.R. (4th) 289, 93 C.R.R. (2d) 189, REJB 2002-30904, 113 A.C.W.S. (3d) 52, apld
Other cases referred to
ATCO Gas & Pipelines Ltd. v. Alberta (Energy & Utilities Board), [2006] 1 S.C.R. 140, [2006] S.C.J. No. 4, 2006 SCC 4, 263 D.L.R. (4th) 193, 344 N.R. 293, [2006] 5 W.W.R. 1, J.E. 2006-358, 54 Alta. L.R. (4th) 1, 380 A.R. 1, 39 Admin. L.R. (4th) 159, EYB 2006-100901, 145 A.C.W.S. (3d) 725; Attavar v. Allstate Insurance Co. of Canada (2003), 2003 CanLII 7430 (ON CA), 63 O.R. (3d) 199, [2003] O.J. No. 213, 186 O.A.C. 268, 47 C.C.L.I. (3d) 8, 37 M.V.R. (4th) 1, 119 A.C.W.S. (3d) 1009 (C.A.); Bathurst Paper Ltd. v. New Brunswick (Minister of Municipal Affairs), 1971 CanLII 176 (SCC), [1972] S.C.R. 471, [1971] S.C.J. No. 124, 22 D.L.R. (3d) 115, 4 N.B.R. (2d) 96; McMaster v. Dominion of Canada General Insurance Co., [1994] O.I.C.D. No. 122; Mercier v. Royal & SunAlliance Insurance Co. of Canada (2004), 2004 CanLII 5551 (ON CA), 72 O.R. (3d) 94, [2004] O.J. No. 3264, 189 O.A.C. 1, 12 C.C.L.I. (4th) 161, 132 A.C.W.S. (3d) 981 (C.A.); Meyer v. Bright (1993), 1993 CanLII 3389 (ON CA), 15 O.R. (3d) 129, [1993] O.J. No. 2446, 110 D.L.R. (4th) 354, 67 O.A.C. 134, 17 C.C.L.I. (2d) 1, 48 M.V.R. (2d) 1, 45 A.C.W.S. (3d) 1136 (C.A.); R. v. H. (A.D.), [2013] S.C.J. No. 28, 2013 SCC 28, 358 D.L.R. (4th) 1, 444 N.R. 293, 2013EXP-1661, J.E. 2013-905, EYB 2013-221977, 295 C.C.C. (3d) 376, 414 Sask. R. 210, 106 W.C.B. (2d) 640; Rizzo & Rizzo Shoes Ltd. (Re) (1998), 1998 CanLII 837 (SCC), 36 O.R. (3d) 418, [1998] 1 S.C.R. 27, [1998] S.C.J. No. 2, 154 D.L.R. (4th) 193, 221 N.R. 241, J.E. 98-201, 106 O.A.C. 1, 50 C.B.R. (3d) 163, 33 C.C.E.L. (2d) 173, 98 CLLC Â210-006, 76 A.C.W.S. (3d) 894; W. (J.) v. Canadian General Insurance Group, [1999] O.F.S.C.I.D. No. 22
Statutes referred to
Insurance Act, R.S.O. 1990, c. I.8, ss. 280(1) [as am.], 282(10)
Insurance Law, N.Y.C. 5106: Fair Claims Settlement; 11 NYCRR 65, s. 65.15(h)
Rules and regulations referred to
Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 21.01
Statutory Accident Benefits Schedule — Accidents before January 1, 1994, R.R.O. 1990, Reg. 672, Parts II [as am.], III, IV [as am.], V, VIII [as am.], ss. 24(1), (2), (3) [as am.], (4)
Statutory Accident Benefits Schedule — Effective September 1, 2010, O. Reg. 34/10, s. 51(2)
Authorities referred to
Report of the Automobile Insurance Board (Ontario: Ministry of Financial Institutions, 1989) [page344]
APPEAL from the order of Stevenson J. (2012), 111 O.R. (3d) 611, [2012] O.J. No. 3703, 2012 ONSC 4209 (S.C.J.) on a motion for a determination of a question of law.
Chris T. Blom, for appellant.
Allan Rouben and Russell J. Howe, for respondent.
The judgment of the court was delivered by
EPSTEIN J.A.: —
Introduction
[1] For claimants injured in motor vehicle accidents between 1990 and 1994, the governing Ontario accident benefits regulation provides for interest on overdue benefit payments. The issue in this appeal is whether that interest is compound or simple.
[2] The respondent, Nancy Zacharias, was in a car accident on December 18, 1990. Based on injuries she claims to have suffered in that accident, Zacharias sought weekly benefits from her insurer, the appellant, Zurich Insurance Company, pursuant to Part IV of the Statutory Accident Benefits Schedule -- Accidents before January 1, 1994, R.R.O. 1990, Reg. 672 ("SABS 1990"). Zurich honoured the claim and from December 25, 1992 to January 26, 1996, paid benefits to Zacharias in the amount of $216.37 per week.
[3] Zurich terminated Zacharias' benefits on January 26, 1996 on the basis that Zacharias was, in fact, not injured, or if she were, her injuries did not arise from the accident. As a result of the termination of benefits, Zacharias commenced this action against Zurich, claiming past and ongoing benefits from December 18, 1990 at the rate of $600 per week.
[4] Zacharias also claims interest on the overdue amounts that she maintains Zurich owes to her. She claims interest pursuant to s. 24(4) of SABS 1990, that provides as follows:
The insurer will pay interest on overdue payments from the date they become overdue at the rate of 2 per cent per month.
[5] A dispute over Zacharias' entitlement to interest gives rise to this appeal. Zacharias' position is that s. 24(4) requires Zurich to pay interest of 2 per cent per month, compounded monthly. Zurich disagrees, saying that s. 24(4) provides for only simple interest.
[6] Whether Zurich has any outstanding liability to Zacharias has yet to be determined. However, to resolve the important issue of whether Zurich is obliged to pay compound or simple [page345] interest on any amounts it is found to owe to Zacharias, Zurich moved under rule 21.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 for determination of whether s. 24(4) provides for simple or compound interest.
[7] I refer to the issue as important. Depending on the amount of Zurich's liability to Zacharias, if any, the difference between simple and compound interest could be in excess of $10 million.
[8] The motion judge concluded that s. 24(4) of SABS 1990 provides for compound interest.
[9] Zurich appeals.
The Statutory Framework
The Ontario Motorist Protection Plan and SABS
[10] In 1990, the Ontario legislature enacted the province's first extensive no-fault insurance plan: see Meyer v. Bright (1993), 1993 CanLII 3389 (ON CA), 15 O.R. (3d) 129, [1993] O.J. No. 2446 (C.A.). Known as the Ontario Motorist Protection Plan (the "OMPP"), the new regime introduced a threshold system whereby individuals could pursue remedies in tort for injuries sustained in motor vehicle accidents only where the injuries were physical, permanent and serious. In exchange for significantly restricting the scope of traditional tort rights, the OMPP provided for enhanced no-fault benefits and a structure to ensure prompt payment of those benefits. The details of the no-fault benefits regime are provided by regulation, commonly referred to as SABS.
[11] As set out above, the focus of this appeal is the interpretation of s. 24(4) of SABS 1990. However, subsequent SABS, summarized in the next three paragraphs, provide context.
[12] In 1994, the legislature amended aspects of the no-fault regime and a new benefits schedule came into force: see Statutory Accident Benefits Schedule -- Accidents after December 31, 1993 and Before November 1, 1996, O. Reg. 776/ 93 ("SABS 1994"). Section 68 of SABS 1994, the provision relating to interest on overdue amounts owed to a claimant, is differently worded than s. 24(4) of SABS 1990. Section 68 provides as follows:
- 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.
(Emphasis added)
[13] The interest provision in the next iteration of SABS contained the same language as that found in s. 68 of SABS 1994: [page346] see Statutory Accident Benefits Schedule -- Accidents on or after November 1, 1996, O. Reg. 403/96, s. 46(2).
[14] Section 51(2) of Statutory Accident Benefits Schedule -- Effective September 1, 2010, O. Reg. 34/10, the most recent benefits schedule, contains the same language as the previous two SABS, with the exception of a reduction in the rate of interest from 2 per cent compounded monthly to 1 per cent per month compounded monthly.
The Insurance Act
[15] The enabling statute, the Insurance Act, R.S.O. 1990, c. I.8, is also relevant for the purposes of the interpretive analysis. Section 282(10) of the Insurance Act, a section that came into force at the same time as SABS 1990 and has not been amended over the applicable time period, requires an arbitrator to make an additional award to a claimant in circumstances where the arbitrator finds that an insurer has "unreasonably withheld payments".
Special Award
282(10) 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 the 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 Motion Judge's Analysis
[16] The motion judge identified the interpretive question as "whether or not, in the absence of the words 'compounded monthly' that were later added to similar provisions, those words can be inferred [in s. 24(4) of SABS 1990] from the overall context, scheme and object of the Regulation" (at para. 36).
[17] Since s. 24(4) of SABS 1990 does not, in referring to interest, specify "simple" or "compound", the motion judge decided that "a reading of the words [of s. 24(4)] in their 'grammatical and ordinary sense' is impossible" (at para. 36). Even after reading the words in "their entire context", the motion judge found "genuine ambiguity with respect to s. 24(4) of [SABS 1990] and that resort needs to be made to external interpretive aids and extrinsic materials in order to determine the issue" (at para. 38).
[18] The primary external interpretive aid upon which the motion judge relied is the Report of the Automobile Insurance Board (Ontario: Ministry of Financial Institutions, 1989), [page347] commissioned by Order-in-Council in March 1989. Further to its commissioned mandate, the Automobile Insurance Board conducted lengthy hearings and in July 1989, delivered a comprehensive report (the "Kruger report") to the Lieutenant Governor-in-Council. The report, tabled during the legislative process, played a central role in the debates leading to the passage of SABS 1990.
[19] The report recommended that Ontario adopt a no-fault benefits system similar to the one then in place in New York State.
[20] With respect to interest on overdue benefit payments, the Kruger report explicitly advocated that Ontario's new regime follow the analogous New York State scheme. Although the Kruger report did not explicitly refer to it, the New York law contains a provision that requires, through regulation, insurers to pay insureds interest on overdue amounts at 2 per cent per month compounded monthly: see Insurance Law, N.Y.C. 5106: Fair Claims Settlement; 11 NYCRR 65, s. 65.15(h).
[21] The motion judge's view that the Kruger report represented the best evidence of legislative intent and that the report implicitly recommended that insurers be required to pay interest on overdue amounts at the rate of 2 per cent per month compounded monthly, factored prominently in her conclusion that s. 24(4) provides for compound interest.
[22] The motion judge reasoned that the "absence of the words 'compounded monthly' in the interest provision of [SABS 1990] may be a drafting error and the inclusion of those words in [SABS 1994] was an instance of language polishing and not a substantive amendment" (at para. 50).
[23] The motion judge therefore held that Zacharias is entitled to compound interest on any arrears of benefits ultimately found to be owing to her by Zurich.
The Parties' Positions on Appeal
[24] Zurich submits that the motion judge erred in concluding that the language in s. 24(4), relating to interest, is ambiguous. Zurich argues that the only interpretation that is reasonably available, having regard to the entire context of the statutory framework, is that, under SABS 1990, overdue payments attract simple interest.
[25] Relying heavily on the canon of construction that to express or include one thing implies the exclusion of the other, Zurich submits that the specific use of the words "compound interest" in section 282(10) of the Insurance Act precludes interpreting s. 24(4) in SABS 1990 as providing for compound interest. [page348] Zurich points out that Arbitrator Makepeace in McMaster v. Dominion of Canada General Insurance Co., [1994] O.I.C.D. No. 122, and in W. (J.) v. Canadian General Insurance Group, [1999] O.F.S.C.I.D. No. 22, relied on this argument in concluding that s. 24(4) provides for simple interest.
[26] Zurich also submits that the change in the wording of s. 24(4) of SABS 1990 to that found in s. 68 of SABS 1994, which explicitly specifies compound interest, should be regarded as purposive. Zurich relies on the presumption that amendments to the wording of a legislative provision are made for some intelligible purpose. Zurich refers to the decision of Laskin J. (as he then was), who applied this presumption in Bathurst Paper Ltd. v. New Brunswick (Minister of Municipal Affairs), 1971 CanLII 176 (SCC), [1972] S.C.R. 471, [1971] S.C.J. No. 124. Zurich contends that in changing the wording the drafters intended to replace the insurer's interest obligation from simple to compound.
[27] Zacharias' primary argument is that the motion judge was correct in finding that s. 24(4) is ambiguous. For interpretive assistance, it was therefore open to the motion judge to look to the external aid that provided the most reliable insight into the legislative intent of s. 24(4) -- the Kruger report.
[28] The Kruger report recommended that the legislature implement a regime, specifically including a component requiring insurers to pay interest on overdue amounts, fashioned after the no-fault benefits regime in New York State. Since that regime provided for interest on overdue payments of 2 per cent per month compounded, logic dictates that s. 24(4) be interpreted as imposing the same obligation.
[29] According to Zacharias, the motion judge correctly interpreted s. 24(4) in a manner consistent with its plain wording and with its clear legislative intent.
The additional issue
[30] In this court, Zacharias, for the first time, submitted that even though s. 24(4) does not explicitly refer to compound interest, the effect of the provision is to require insurers to pay interest at 2 per cent compounded monthly. The argument is as follows. Since s. 24(3) provides that weekly income benefits are payable every second week, and since s. 24(4) provides that overdue payments bear interest at the rate of 2 per cent per month from the time they become overdue, interest is a component of the overdue payment and hence compounded. Put differently, interest owed on an overdue payment is added to the amount of the payment, thereby becoming part of the overdue amount to which any further overdue payments are added and [page349] upon which interest is calculated. Because interest is calculated on amounts that include interest, the effect of s. 24(4) is to require insurers to pay compound interest.
[31] Since this argument had not been made before the motion judge and was not extensively addressed by the parties in their written or oral arguments on appeal, supplementary written argument was requested.
[32] In her written submissions, Zacharias seeks to fortify her position that s. 24(4) implicitly provides for compound interest by referring to the wording of s. 68 of SABS 1994. Zacharias relies on two differences between the language found in s. 68 of SABS 1994 and that found in s. 24(4) of SABS 1990. First, s. 68 stipulates that interest accrues on the "amount" of an overdue "benefit", whereas s. 24(4) provides for interest on an overdue "payment". Second, s. 68, unlike s. 24(4), expressly provides that interest be compounded monthly.
[33] For convenience, I set out s. 68 again:
- 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.
[34] Zacharias submits that the significance of these two changes is as follows. Section 68, through the way in which it is worded, restricts the "amount" overdue to a benefit. Since benefits do not include interest, in order to compensate an insured for the loss of the time value of money, in the same fashion as s. 24(4), s. 68 had to specifically provide for compound interest. In other words, s. 68 does explicitly (with the word "compounded") precisely what s. 24(4) does implicitly (with the word "payment").
[35] Zurich submits that s. 24(4) cannot be read as Zacharias suggests. For Zacharias' argument to succeed, "overdue payments" must include accrued interest. That is not possible, argues Zurich, as s. 24(1) and (2), define an amount payable in a manner that specifically excludes interest.
24(1) Amounts payable under Parts II, III and V are overdue if not mailed or otherwise delivered by the insurer within thirty days after it has received a completed application for statutory accident benefits.
(2) Amounts payable under Part IV are overdue if not mailed or otherwise delivered by the insurer within ten days after it has received a completed application for statutory accident benefits or if the insurer fails to make a payment required by subsection (3).
[36] In providing when an amount payable is overdue, s. 24(1) and (2) refer to payments under Parts II, III and IV and V of the [page350] regulation. The obligation to pay interest under s. 24(4) is in Part VIII of the regulation. Zurich contends that because interest is not included in amounts payable for the purpose of determining when an amount payable becomes overdue, Zacharias' argument, one that is premised on interest being added to and treated as an overdue amount, must fail.
Issues
(1) Is the wording of s. 24(4), regarding interest to be paid on overdue amounts, ambiguous?
(2) If not, what is the ordinary meaning to be attributed to the wording, taking into consideration legislative intent?
(3) If the wording of s. 24(4) is ambiguous, what is the appropriate interpretation of the interest insurance companies are required to pay having regard to the use of other interpretive aids?
Analysis
[37] The oft-repeated Driedger approach to statutory interpretation has been explicitly approved by the Supreme Court in Rizzo & Rizzo Shoes Ltd. (Re) (1998), 1998 CanLII 837 (SCC), 36 O.R. (3d) 418, [1998] 1 S.C.R. 27, [1998] S.C.J. No. 2, at para. 21:
Today there is only one principle or approach; namely, the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament.
See, also, R. v. H. (A.D.), [2013] S.C.J. No. 28, 2013 SCC 28, at para. 19.
[38] There is no dispute over the legislative intent of the requirement that insurers pay interest on overdue amounts owed to insureds. That intent is to compensate insureds for the loss of the time value of money and to encourage insurers to pay accident benefits promptly: Attavar v. Allstate Insurance Co. of Canada (2003), 2003 CanLII 7430 (ON CA), 63 O.R. (3d) 199, [2003] O.J. No. 213 (C.A.).
[39] The interpretation of s. 24(4) in SABS 1990 must therefore be guided by this intention and the approach endorsed by the Supreme Court in Rizzo.
(1) Is the wording of the provision ambiguous?
[40] In Bell ExpressVu Ltd. Partnership v. Rex, [2002] 2 S.C.R. 559, [2002] S.C.J. No. 43, 2002 SCC 42, at paras. 28-29, Iacobucci set out the test for ambiguity and explained the importance of the determination: [page351]
What, then, in law is an ambiguity? To answer, an ambiguity must be "real" (Marcotte, supra, at p. 115). The words of the provision must be "reasonably capable of more than one meaning" (Westminster Bank Ltd. v. Zang (1965), [1966] A.C. 182 (H.L.), at p. 222, per Lord Reid). By necessity, however, one must consider the "entire context" of a provision before one can determine if it is reasonably capable of multiple interpretations. In this regard, Major J.'s statement in Canadian Oxy Chemicals Ltd. v. Canada (Attorney General), 1999 CanLII 680 (SCC), [1999] 1 S.C.R. 743 (S.C.C.), at para. 14, is apposite: "It is only when genuine ambiguity arises between two or more plausible readings, each equally in accordance with the intentions of the statute, that the courts need to resort to external interpretive aids" (emphasis added), to which I would add, "including other principles of interpretation".
[41] Applying the Bell ExpressVu test, I come to the conclusion that s. 24(4) is not ambiguous. In my view, a consideration of the provision in its grammatical and ordinary sense and in a manner that corresponds with the scheme of the legislation and its intent, leads to only one interpretation -- that interest is compounded.
[42] Black's Law Dictionary, 8th ed. (St. Paul, MN: Thomson/West, 2004), at p. 830, defines compound interest as "interest payable on both the principal and the previously accumulated interest".
[43] If a benefit an insurer owes an insured is not paid in accordance with the SABS 1990 time requirements and is therefore "overdue", then at the expiry of 30 days, 2 per cent interest is calculated on the overdue amount. That interest is then added to the principal amount owing and becomes part of the amount that is overdue. If the next benefit payment is not made on time, the amount of the benefit is added to the amount that is overdue. At the end of 30 days, 2 per cent interest is calculated on the total overdue amount and is added to that amount.
[44] Simply put, s. 24(4) provides that at the end of the month during which a payment is overdue, 2 per cent interest is added to the amount that is overdue. As long as this overdue amount remains unpaid, interest continues to accrue at 2 per cent per month on both the increasing principal and on the interest that has been calculated monthly. As both the principal and interest are "overdue payments", interest must be calculated and paid on amounts that include interest. Section 24(4) therefore provides for compound interest.
[45] I do not agree with Zurich's argument that s. 24(1) and (2) of SABS 1990 prevent interest from being treated as part of the "overdue payment" for the purposes of s. 24(4). These subsections define when an amount an insurer owes an insured becomes overdue: see Mercier v. Royal & SunAlliance Insurance Co. of Canada (2004), 2004 CanLII 5551 (ON CA), 72 O.R. (3d) 94, [2004] O.J. No. 3264 (C.A.). [page352] They simply cannot be read as restricting what may be included as part of an overdue payment.
[46] Moreover, the practical implication of Zurich's argument leads to an improbable conclusion. If interest is precluded from being considered part of an overdue amount, then arguably an insurer's interest obligations to an insured never become overdue.
[47] I also do not accept Zurich's submissions that the change in the wording in s. 24(4) of SABS 1990 to that found in s. 68 of SABS 1994 and the fact that compound interest is specified in section 280(1) of the Insurance Act support interpreting s. 24(4) as providing for simple interest.
[48] In my view, the change in wording from s. 24(4) of SABS 1990 to s. 68 of SABS 1994 should be seen as purposive. However, I view that purpose as increasing the effectiveness of the legislative intent to compensate insureds for the loss of the time value of their money and to encourage the prompt payment of benefits.
[49] This purpose becomes apparent when all of the wording changes are taken into account including that, unlike in s. 24(4) of SABS 1990, s. 68 of SABS 1994 specifies that "the insurer shall pay interest on the overdue amount for each day the amount is overdue from the date the amount became overdue".
[50] Considering all of the differences in wording between the two provisions, it is clear that s. 24(4) of SABS 1990 provides for 2 per cent interest compounded monthly and calculated monthly. Section 68 of SABS 1994 provides for 2 per cent interest compounded monthly and calculated daily.
[51] The implications of this difference in terms of legislative intent of compensating insureds for the loss of the time value of money, and encouraging the prompt payment of benefits, are significant.
[52] Through the daily calculation of interest, s. 68 comes closer to providing full compensation for the insured's loss of the time value of money as interest is calculated on fluctuating overdue amounts.
[53] Through the daily calculation of interest, s. 68 also increases the incentive for insurers to make timely payments as it eliminates the benefit of an interest-free period of payment delay. This benefit can be substantial, particularly when SABS 1994 came into effect, a time when the prevailing interest rates were high.
[54] Therefore, in my view, taking the entire context into consideration, s. 24(4) is only reasonably capable of only one meaning -- interest must be paid on a compound basis. [page353]
(2) What is the ordinary meaning to be attributed to the wording, taking into consideration legislative intent?
[55] The interpretive exercise should go beyond the ordinary grammatical meaning and take into account its context consistent with the legislative scheme and intent. See ATCO Gas & Pipelines Ltd. v. Alberta (Energy & Utilities Board), 2006 SCC 4, [2006] 1 S.C.R. 140, [2006] S.C.J. No. 4, at para. 38. I have already factored context and legislative intent into the analysis that lead me to conclude that s. 24(4) provides for compound interest and need only add a few brief comments.
[56] Simply put, in my view, interpreting s. 24(4) as providing for compound interest fits within the legislative scheme and advances the legislative intent. Interpreting s. 24(4) as providing for simple interest does not.
[57] Compound interest fits into the legislative scheme that imposes clear, tight, timelines for the payment of benefits. The scheme specifies when payments are overdue and requires an insurer to pay interest on overdue amounts in a manner that compensates the insured for the loss of the time value of money.
[58] It is important to note that compound interest does not penalize. It compensates. A penalty for conduct that goes beyond benign delay is provided for in section 282(10) of the Insurance Act, set out above, that requires an insurer to be sanctioned in circumstances where a finding is made that the insurer has demonstrated an unreasonable lack of regard toward its obligations to pay benefits on a timely basis.
[59] I return to the decision of this court in Attavar to explain the significance of compound interest in advancing legislative intent. This significance is made clear by the strong words of Laskin J.A., at para. 49, where he says, "[w] ithout a provision [requiring an insurer to compensate the claimant for the loss of the time value of money, in other words without compound interest], insurers would have an incentive to delay paying benefits properly owing, thus forcing insureds to litigate their claims".
[60] To summarize, the practical effect of s. 24(4) of SABS 1990 is to provide for compound interest. Indeed, as I see it, such is the only interpretation consistent with the legislative intent and scheme.
[61] I therefore reach the same conclusion as the motion judge -- that s. 24(4) provides for compound interest. However, as can be seen, I have followed a different analytical route than that followed by the motion judge. [page354]
Disposition
[62] I would dismiss the appeal. In my view, Zacharias is entitled to her costs of the appeal, which, based on the parties' costs submissions, I would fix at $20,000, including interest and applicable taxes.
Appeal dismissed.