Pre-judgment interest is an important issue for insurers because it can often significantly alter the sums awarded to plaintiffs depending on the length of time between the loss and the judgment.
Within the last two years, an amendment to the Insurance Act has raised new considerations regarding the calculation of pre-judgment interest. One of the purported goals of the amendment is to curtail costs associated with escalating bodily injury claims that are resulting in increased premiums to drivers.
This article explores a recent Alberta Court of King’s Bench decision, Jackson v Cooper, 2022 ABKB 609 (“Jackson”), which examined the retroactivity of the new legislation.
On December 9, 2020, the Insurance (Enhancing Driver Affordability and Care) Amendment Act came into force. This amendment added a new section to the Insurance Act that would affect the calculation of pre-judgment interest for non-pecuniary damages where those damages arose from the use or operation of a motor vehicle.
Specifically, section 585(2) of the Insurance Act now states that “interest in respect of 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 must be calculated in accordance with section 4(2) of that Act in the same manner as interest awarded on pecuniary damages”.
Prior to the amendment, the Court calculated interest on non-pecuniary damages at 4% per year according to section 4(1) of the Judgment Interest Act. Until recently, the amendment has raised considerable intrigue in the insurance industry about whether it will apply retroactively to motor vehicle accidents that occurred before its enactment.
THE COURT’S DECISION
In Jackson, delivered on September 9, 2022, the Court held that the amendment does not apply prior to its enactment. As such, the plaintiff was awarded pre-judgment interest on his non-pecuniary damages at 4% per year until December 8, 2020. After that, from December 9, 2020, until the date of trial, the plaintiff was awarded interest pursuant to section 585(2) of the Insurance Act.
FACTS AND ANALYSIS
The plaintiff was injured when the defendant ran a stop sign and T-boned the plaintiff’s vehicle on October 21, 2015. The defendant admitted 100% liability for the accident, and the plaintiff made numerous claims for compensation, including non-pecuniary damages.
In its analysis, the Court made several comments with respect to retroactivity of legislation in general. Importantly, it held that there is a strong presumption against retroactivity and to displace this presumption normally requires direct language or necessary implication of the legislation. That presumption was not displaced in Jackson.
Pre-Judgment Interest as Substantive Right
The Court further considered whether pre-judgment interest is a procedural or substantive provision. Substantive provisions are those that attach new consequences to past acts or change the substantive content of a right, defense, or cause of action. Conversely, procedural provisions depend on litigation to become operable. The Court agreed with the plaintiff that pre-judgment interest is a substantive right and therefore the presumption against retroactivity applied.
Pre-Judgment Interest as a Vested Right
The defense argued that pre-judgment interest is not a vested right, but rather it crystalizes only after the trial judge has given a decision. This position was generally uncontested by the plaintiff, and the Court agreed that the right to pre-judgment interest does not vest until there is a determination made by the trial judge.
Insurance Amendment Act as Protection of the Public
The Court disagreed with the defendant’s argument that the presumption against retroactivity should apply because the purpose of the amendment is to protect the public. The Court ultimately found that the exception to the presumption against retroactivity that applies to protective legislation only applies in the penal context.
The Minor Injury Regulation
As a secondary issue, the Court was asked to determine whether the Minor Injury Regulation (“MIR”) capped the plaintiff’s recovery of general damages (e.g., pain, suffering, and loss of enjoyment of life). The MIR sets a monetary cap on non-pecuniary loss for all minor injuries, which at the time of the loss was $4,892. Section 4(1) of the MIR describes a “minor injury” as a sprain, a strain, or a WAD injury caused by the accident that does not result in serious impairment.
Because the accident was in 2015, the Court found that the version of the MIR in force on that date governs. Ultimately, the Court held that the cap on general damages did not apply to the plaintiff’s injuries because he sustained chronic myofascial pain, which is not a sprain, strain, or WAD injury.
While the defendant may still appeal this decision, as it stands, the new provision in the Insurance Act does not apply retroactively. This means that plaintiffs injured in motor vehicle accidents prior to December 9, 2020, may expect to accrue pre-judgment interest at a rate of 4% per year on non-pecuniary damages up until December 8, 2020. From December 9, 2020, until trial, interest on non-pecuniary damages will apply at the prescribed rate applicable to each year.