On April 27, 2020, the Ontario Superior Court of Justice (OSCJ) released a short decision in Watt v TD Insurance.[1] While not a ground-breaking decision, the OSCJ confirmed that insurance companies do not receive special treatment from the courts. Insurers, like other parties to litigation, are required to pay prejudgment interest on damages awards.
Summary and analysis
In the main action between the parties, Watt v TD Insurance, 2019 ONSC 6454,[2] the Plaintiff (Watt) succeeded in recovering damages for the destruction of his home and its contents, caused by a fire. After the judgment was rendered, TD Insurance (TD), opposed an award for prejudgment interest.
TD argued that the OSCJ should exercise its discretion under s. 130 of the Courts of Justice Act[3]and refuse an award of prejudgment interest. TD’s position was that an award of prejudgment interest should not be given because:
- It would run contrary to the purposes of insurance in terms of indemnification; and
- Watt did not suffer a loss of money, but rather a loss of chattels, for which judgment was already given.
The OSCJ held that there was “no principled reason why a payment under an insurance policy would not attract an award of prejudgment interest.” Payments made pursuant to an insurance policy are contractual payments. Seeing as the cost or cash value of a loss is calculated at the moment of loss, a potential plaintiff should be entitled to the amount in question at that time. Since a damages award from a court is only levied later on, prejudgment interest is a method of remedying this delay.
Exempting insurers from the payment of interest would potentially incentivize delaying payment of amounts owed under a policy. This would allow an insurance company to earn interest on premiums but save money by systematically delaying payments to its insureds. Therefore, one of the primary goals of the insurance system, timely indemnification, would be greatly compromised to the benefit of insurers.
The OSCJ also stated that if insurers were meant to be exempt from paying prejudgment interest, the Insurance Act[4]would provide for the exemption.
In the result, the Plaintiff was awarded prejudgment interest.
[1] Watt v TD Insurance, 2020 ONSC 2539. https://www.canlii.org/en/on/onsc/doc/2020/2020onsc2539/2020onsc2539.html?searchUrlHash=AAAAAQAJaW5zdXJhbmNlAAAAAAE&resultIndex=13
[2] Watt v TD Insurance, 2019 ONSC 6454. https://www.canlii.org/en/on/onsc/doc/2019/2019onsc6454/2019onsc6454.html
[3] Courts of Justice Act, RSO 1990, c C.43.
[4] Insurance Act, RSO 1990, c I.8.
