ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: CV-09-0382-00
DATE: 2015 Nov 13

BETWEEN:

WADE BRETT COBB and ERICA MAE COBB

Plaintiffs

– and –

THE ESTATE OF MARTIN T. LONG

Defendant

K. Bonn, for the Plaintiffs

S. Baldwin, for the Defendant

HEARD: October 13, 2015

Belch, J.

decision on TERMS OF judgment

BACKGROUND

[1] This motion is brought to settle the terms of the judgment. On October 5, 2015, the jury delivered answers to the questions posed and returned with the verdict that the plaintiff was entitled to the following:

General Damages

$ 50,000

Past loss of income

50,000

Future loss of income

100,000

Past housekeeping loss

5,000

Future housekeeping loss

10,000

FLA

5,000

Total

$ 220,000.00

[2] Counsel for the parties agreed the following issues must be determined to obtain a trial judgment.

a. the appropriate deductions for collateral benefits received from the Statutory Accident Benefits insurer;

b. the statutory deductibles related to general and FLA damages; and

c. the appropriate rate for prejudgment interest.

[3] Applying the positions advanced by each of the parties, the net amount of the judgment owing was estimated by the defence at $19,310; by the plaintiff, it was estimated at $157,612.

APPROPRIATE DEDUCTIONS FOR COLLATERAL BENEFITS

[4] Plaintiff’s counsel filed an affidavit from the lawyer who handled Wade Cobb’s Statutory Accident Benefits file and that lawyer was cross-examined on the affidavit on the return of this motion. The lawyer, based on independent memory and from reviewing the file, deposed the company’s response to the claim was delayed and sporadic which put stress on the plaintiffs. Initially the company did not pay, then paid, but reduced the weekly benefit which remained a contested issue. The lawyer further deposed the settlement discussions came together on June 29, 2010 when settlement was reached in the global amount of $152,000 followed by the execution of the usual Settlement Disclosure Notice and Release. This lawyer testified the Notice was not based on any specific calculation or quantification, but simply numbers were put on the documents to allocate the global settlement of $152,000. The $130,000 figure listed for past and future income replacement benefits was not based on any specific quantification. In summary, the 152,000 was a compromise, taking into account the risks of litigation, the uncertainty of future accident benefits being paid, Mr. Cobb’s desperate need for money to pay for urgent expenses including his family’s living expenses and the couple’s mental exhaustion from their lengthy dealings with the AB carrier.

[5] From the cross-examination, the court learned negotiations were conducted which eventually led to some payments being received for income replacement benefits, initially at $400 weekly, but later reduced to $348 weekly, said to be 80% of the net income Mr. Cobb had been earning. In addition, the insurer’s initial global settlement offer was $86,000 in response to the plaintiff’s initial request for $204,000. The insurance company’s tardiness, in the view of the plaintiffs’ SAB lawyer, inflamed the negotiations causing an issue of bad faith to arise.

[6] On June 28, 2010, the insurance company offered a global settlement of $150,000 which was rejected, however, the plaintiff’s counteroffer of $152,000 was accepted and the usual Settlement Disclosure Notice and Release were signed by the parties. The Notice allocated $130,000 to income replacement benefits, $20,000 for medicals and $2000 for costs.

[7] The defendant argues to avoid double recovery, the $130,000 allocated together with the $29,300 previously received by the plaintiff for income replacement benefits, should be deducted from the $50,000 for past income replacement benefits and $100,000 for future income benefits awarded by the jury. If this argument is accepted, the tort insurer would not owe any money on account of income replacement benefits.

[8] The plaintiff argues the company’s June 28th offer of $150,000 included the provision the plaintiff could allocate the $150,000 in his own discretion. The Release signed by the plaintiff was for a global amount of $152,000 which was not allocated. The plaintiff argues the bad faith allegation together with the wording of the Release: “…this Release pertains to all claims for damages including, but not limited to, aggravated, exemplary and punitive damages or damages for allegedly bad faith arising as a consequence of the accident and/or the handling of any claims by or on behalf of York fire…”, resulted in a global, unallocated settlement. The plaintiff further argues defendant tort insurers can only deduct amounts that match up, line for line, in both the SAB settlement and jury award. For example, what was allowed in the SAB settlement for income replacement benefits can be deducted from what the jury awards for income replacement benefits: “apples to apples, oranges to oranges.” Here, the SAB award being global, could include monies for the bad faith allegation as well as medicals and income replacement benefits thus preventing a “line for line match up” meaning this defendant tort insurer is not entitled to any deduction except for amounts which can clearly be attributed to income replacement benefits. The plaintiff concedes the total of $29,300 for income replacement benefits already previously received. The case law referred to was:

Bannon v. Hagerman Estate, 1998 4486 (ON CA), [1998] O. J. No. 1673

Mikolic v Tanguay, 2013 CarswellOnt 16028

Cromwell v Liberty Mutual Insurance Company, 2008 3409 (ON SC), 89 O.R. (3d) 352

[9] Accordingly, the plaintiff submitted the defendant tort insurer was entitled to a deduction of $29,300 for past loss of income benefits paid and nothing more.

ANALYSIS AND CONCLUSION, COLLATERAL BENEFIT DEDUCTION

[10] I reject the plaintiff’s argument on this issue. The parties entered an agreement. The plaintiff was invited to allocate; in making a counteroffer of $152,000 on June 29, 2010, he did allocate. The plaintiff allocated $130,000 for income replacement benefits, $20,000 for medical benefits, and $2000 for costs. The Settlement Disclosure Notice allocated the same $130,000 for income replacement benefits, $20,000 for medical benefits, and $2000 for costs for a total of $152,000. That document was signed by both parties. The Release signed by the plaintiff carried forward the same total amount of $152,000. There was no mention of any amount for bad faith in any of the documents. I am satisfied the identified documentation comprises the agreement of the parties and the total sum, $152,000, is consistent as is the allocation of $130,000 for income replacement benefits, $20,000 for medicals, and $2,000 for costs.

THE STATUTORY DEDUCTIBLE

[11] Given the jury only awarded $5000 for Erica’s Family Law Act Claim, that statutory deductible need not be considered. This leaves for consideration the statutory deductible for general damages. That deductible has stood at $30,000 since 2003. Now, Section 5.1(1) of the Regulation under the Insurance Act provides: for the purpose of sub-subparagraph 3(i)(b) of subsection 267.5(7) of the Act, the prescribed amount is the amount determined in accordance with the following rules:

1. Until December 31, 2015, the prescribed amount is $36,540.

[12] The defendant argues the sum of $36,540 can 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.

[13] The plaintiff disagrees. The plaintiff argues at every step of the preceding 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 collision, the Ontario government implemented a new regulation to increase the deductible. The regulation and the statute are silent on whether the increased deductible is to be applied retrospectively. The plaintiff urges the court accept the decision in El-Khodr v. Lackie, 2015 ONSC 4766 which set the deductible at $30,000. The change to the Insurance Act was not to be applied retrospectively.

[14] The plaintiff also cites the Court of Appeal decision in Wong v. Lee, 2002 CarswellOnt 742 which held the deductible is a matter of substantive law. The case of Somers v. Fournier, 2002 CarswellOnt 2119 is also cited for the position 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 the deductible is substantive and therefore, the August 1, 2015 change cannot be applied retrospectively.

[15] The defence argues the duty of the court is to ascertain the intention of the legislature by reading and interpreting the language used in the statute and/or regulation. If the legislative purpose is clear, the courts can neither disregard nor decline to carry it out. If the legislature has provided unequivocal direction, the court must accept this direction. The court is only to declare what the law is, not what it ought to be. The changes to the Act and Regulation are neither ambiguous nor vague. The intention of the legislature is unequivocal and therefore the $36,450 deductible as prescribed by the regulation applies retroactively. Further, the defence argues that contrary to the plaintiff’s assertions about fairness, if the plaintiff is to be paid in today’s dollars, as the legislature has clearly directed, the damage award must be reduced by today’s deductible.

CONCLUSION

[16] I prefer the reasoning in El–Khodr that the change is substantive and should not be applied retrospectively. I accept the plaintiff’s argument that the insurers have been setting premiums based on the deductible of $30,000 not $36,540 and would reap a windfall having collected higher premiums for seven years based on a $30,000 deductible, but now getting the benefit of the more favourable $36,540 when paying out damages. Given the length of time since the accident occurred, and the recent date when the amendment to the Insurance Act took place, I reject the defendant’s submission and set the statutory deductible for general damages at $30,000.

APPROPRIATE RATE FOR PREJUDGMENT INTEREST

The Law

[17] The trial judge in El- Khodr sets out the applicable law in paragraphs 13 – 18 and 44 of her decision which I reproduce here.

13 As noted above, s. 128(1) of the CJA creates a presumptive entitlement to prejudgment interest.

14 The rate of prejudgment interest is determined according to s. 127(1) of the CJA:

127.(1) "prejudgment interest rate" means 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, rounded to the nearest tenth of a percentage point.

15 However, s. 128(2) sets out an exception for non-pecuniary losses:

128.(2) Despite subsection (1), the rate of interest on damages for non-pecuniary loss in an action for personal injury shall be the rate determined by the rules of court made under clause 66(2)(w).

16 Rule 53.10 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 [the Rules], provides for an interest rate of 5% per year.

17 On January 1, 2015, the Insurance Act was amended through the inclusion of a new provision, s. 258.3(8.1), which provides that "[s]ubsection 128(2) of the Courts of Justice Act does not apply in respect of the calculation of prejudgment interest for damages for non-pecuniary loss" in an action for loss or damage from bodily injury or death arising directly or indirectly from the use or operation of an automobile. Thus, the 5% interest rate under Rule 53.10 no longer applies to amounts awarded for non-pecuniary damages for bodily injury or death caused by motor vehicle accidents. Rather, prejudgment interest for such amounts would be calculated the "usual" way pursuant to s. 127(1) of the CJA, i.e., the bank rate.

18 Section 52(4) of the Legislation Act, 2006, S.O. 2006, c. 21, Sch. F, codifies the common law presumption that procedural legislation applies immediately, not only to future proceedings, but to on-going or pending proceedings that relate to events that took place prior to the amendments.

52(4) The procedure established by the new or amended Act or regulation shall be followed, with necessary modifications, in proceedings in relation to matters that happened before the replacement or amendment.

And at para.44, writes:

44 …, the Court's reasoning in this part of Somers is specific…. It does not apply to the statutory "cap" on the prejudgment interest rate applicable to such awards -- which is not really a cap at all as a judge has some discretion to vary this rate under s. 130(1). [CJA]

[18] The defence submits the new interest rate of .5% as opposed to the old interest rate of 5% should be used to calculate prejudgment interest. The plaintiff is opposed. The issue is what is the applicable prejudgment interest rate to be used by the court in quantifying prejudgment interest? Is the change substantive or procedural? The defendant agrees entitlement to prejudgment interest is a substantive right, but argues the substantive nature of entitlement to prejudgment interest does not trump the procedural mechanism to which the entitlement is granted and Rule 53.10 is a procedural rule that quantifies the entitlement to prejudgment interest. Accordingly, section 258.3(8.1) is procedural in nature and thus applies retroactively. The defendant submits the applicable prejudgment interest rate on the general damages is .05% per annum. This is in accordance with the decision in Cirillo v. Rizzo 2015 ONSC 2440.

[19] The plaintiff submits the better reasoned decision is that of El-Khodr cited earlier in these reasons. That case follows Angus v. Hart 1988 5 (SCC), [1988] 2 SCR 256, in which the Supreme Court of Canada held:

This case is a good illustration of the policy reasons why statutes should not be given retrospective operation in the absence of an intention to do so that either expressed in, or is necessarily implied by the statute… Insurance companies calculate their premiums according to the known risk factors. When the rates for the contract in question here were calculated, it was “no one” that this particular risk-suit in tort by Diane Angus against her husband- was precluded by section 7. The insurance company relied upon that “knowledge” in setting its rates. A retrospective change to the circumstances should not be lightly implied.

[20] The trial judge in El-Khodr went further writing at paragraph 51:

51 The 5% prejudgment interest rate for general damages was a known risk factor, and insurance companies took this into account in setting their premiums. I see no reason 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. While in Angus the Supreme Court was concerned with a situation in which a retrospective change would disadvantage insurance companies, I think the reasoning should apply equally to a situation in which the retrospective change would essentially result in a windfall for insurance companies and a disadvantage to insured persons who paid higher premiums.

[21] As mentioned, El-Khodr holds the change to the Insurance Act is not to be applied retrospectively. If I follow that finding, the interest rate remains at 5%. If I accept the Defence position, the rate is .5%. There is a third choice.

[22] I am advised the decision in El-Khodr is under appeal. In the past, in similar circumstances, I was able to withhold delivering my judgment until the Court of Appeal had adjudicated on the issue, saving the parties the possible appeal of my decision. I retired October 15, 2015 and given there is no date yet established for the hearing of the appeal of the decision in El-Khodr, I could well be functus by the time the Court of Appeal is in a position to deliver its decision.

[23] Section 130(1)(b) of the Courts of Justice Act provides the court may, where it considers it just to do so, in respect of the whole or any part of the amount on which interest is payable, allow interest at a rate higher or lower than that provided in either section 128 or 129. For the purposes of this section, the court shall take into account the factors identified in section 130(2)(a-g) of the Courts of Justice Act.

[24] This motor vehicle collision occurred seven years ago and the plaintiff has been without compensation from the defendant tort insurer for this entire period of time. There has been no interim payment from the defendant. I exercise my discretion and order prejudgment interest be paid at the rate of 3%. I have taken into account the factors set out in section 130(2) of the Courts of Justice Act. I have considered the overall circumstances of the case. Prejudgment interest is to compensate for the loss of use of money. It is not to be used as a means of punishing or rewarding a party. Having been the trial judge during this civil jury trial which lasted in excess of four weeks, I am of the view I am in a position to take into account and balance the various factors set out in the section. I am satisfied the rate of 3% is entirely just and reasonable after taking all of the considerations into account.

COSTS

[25] In the event counsel are unable to settle costs, I will do so provided the court receives the positions of the parties, limited in length to five pages, legal size, on or before November 30, 2015.

Honourable Mr. Justice Douglas M. Belch

Released: November 13, 2015

COURT FILE NO.: CV-09-0382-00
DATE: 2015 Nov 13

ONTARIO
SUPERIOR COURT OF JUSTICE

BETWEEN:

WADE BRETT COBB and ERICA MAE COBB

Plaintiffs

– and –

THE ESTATE OF MARTIN T. LONG

Defendant

decision on terms of JUDGMENT

Belch, J.

Released: November 13, 2015