An arbitration decision that should be of interest to all parties is Federico vs. State Farm. Mr. Federico's accident occurred prior to September 1, 2010 when reforms became effective in Ontario. One of the issues in dispute was the amount of interest to be paid to Mr. Federico on overdue benefit payments.
On September 1, 2010 the amount of interest paid was reduced from 2% per month compounded monthly to 1% per month compounded monthly.
The transition provisions in the new SABS (section 2 of Ontario Regulation 34/10) state that "Parts VIII and IX...apply with such modifications as necessary in respect of benefits provided under the Old Regulation with respect to accidents that occurred on or after November 1, 1996 and before September 1, 2010." The section dealing with overdue amounts is found in Part IX of new SABS.
An analogous amendment was made to the old SABS (section 3 of Ontario Regulation 403/96) stating that "Parts X, XI, XII, XIII and XV do not apply after August 31, 2010." The section dealing with overdue amounts is found in Part X of the old SABS.
On April 26, 2010, the Superintendent issued a bulletin (A-04/10) covering the transition to the new SABS. The bulletin stated that as of September 1, 2010, as a general rule the new SABS will govern claims processing relating to old accidents and the determination of amounts payable by insurers on account of expenses paid to establish benefit entitlements arising out of old accidents. One of the examples provided in the bulletin was that interest on amounts that become overdue on or after September 1, 2010, in respect to old accidents, will accrue at the new SABS rate of 1% per month compounded monthly.
The bulletin went on to provide some exceptions to the general rule and included interest on amounts that become overdue before September 1, 2010, in respect to old accidents, will accrue at the old SABS rate of 2% per month and be compounded monthly both before and after September 1, 2010. That means that an amount that is overdue prior to the reforms continues to accrue interest at the same rate. The rate for these overdue amounts does not change on September 1, 2010. However, the intent of the SABS was that new overdue payments (for example delayed payment for treatment provided after September 1, 2010) falls under the new SABS and the new interest rate.
So it is not surprising that the arbitrator ruled that the interest rate that applied to overdue amounts in this claim was 2% for the periods before and after September 1, 2010. This was consistent with the direction provided by the Superintendent in his bulletin.
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