In Watt v TD Insurance,1 the Superior Court of Justice confirmed that interest is payable on judgments against insurers, even where the damages awarded are only to compensate for the loss of chattels. The decision followed an earlier Court of Appeal case that held an insured was entitled to interest notwithstanding that policy limits had already been reached. Together, the two decisions underline that insurance considerations do not negate a policyholder's entitlement to interest payable under ordinary litigation principles.
Background
The insured brought an action against TD Insurance after it refused to fully compensate the insured for his losses following a fire that had damaged his house. The insured was successful, although the quantum of additional compensation was minimal. The insured then sought prejudgment interest.
TD Insurance opposed the insured's request on two grounds: (i) the award of pre-judgment interest would run counter to the purposes of insurance in terms of indemnifying the insured, and (ii) the insured did not suffer a loss of his money, and only received an award to compensate him for lost chattels.
Reasoning
The court swiftly disposed of TD Insurance's arguments and held there was no principled or legal basis to deny interest:
- First, payment under an insurance policy is a contractual payment for losses suffered by the insured, which is often either based on the replacement cost for the insured item or the actual cash value for the item. If the insured was deprived of the contractual payments that he was entitled to in order to replace something for some time after he had lost it, then he should be entitled to interest on that payment.
- Second, if insurers were allowed to avoid the payment of interest as a 'principle of insurance', they would be incentivized to refuse to pay awards for as long as possible, and to earn interest on the money.
- Third, if the payment of interest ran counter to the principles of insurance, then the Insurance Act would likely prohibit it, but it does not.
Conclusion
The interest awarded in Watt was a nominal $2,531.72, but the implications of the decision are welcomed in all disputes with insurers that fail to indemnify policyholders in a timely manner. Ultimately, the goal of the court is to ensure that the insured is in the same position it would have been if the money had been paid when due. That principle does not depend on the insured loss being financial, and is not restricted by policy limits.
Footnotes
1 Watt v TD Insurance, 2020 ONSC 2539.
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