Auto insurers: Take interest in this interest-rate exception

By now, insurance industry insiders know well the default interest rate for overdue benefits payable under the Statutory Accident Benefits Schedule – Effective September 1, 2010 (SABS). That rate is 1% per month, compounded monthly.

However, you need to be aware of an important exception: the 1% rate only applies up to when a claimant makes an application to the Licence Appeal Tribunal (LAT).

This detail comes courtesy of an amendment to subsection 51(4) of the SABS, which came into force on January 1, 2015, as amended in March 2016. Subsection51(4) of the SABS applies in the case of a dispute in respect of an insured person's entitlement to statutory accident benefits or in respect of the amount of statutory accident benefits to which an insured person is entitled. It stipulates that interest on the benefits in dispute is calculated at the prejudgment, simple rate of interest described in subsection 128(3) of the Courts of Justice Act that is used for past pecuniary loss. Further, it is payable for the period that begins on the date on which an application to the LAT is brought under subsection 280(2) of the Act and ends on the date a settlement is reached or a decision is issued that finally disposes of the dispute.

Since subsection 51(4) of the SABS came into force on January 1, 2015, its exception to the 1% interest rate does not apply if payment of the benefit was overdue on December 31, 2014. In this case, interest is payable on the overdue amount at the rate of 1% per month, compounded monthly from the date on which the amount became overdue until the date on which the overdue amount is paid, pursuant to subsection 51(5) of the SABS.

For more information on this matter, please contact us.

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