The Ontario Superior Court of Justice recently held that an
insurer who wrongfully denied a US$121 million claim must pay
prejudgment interest based on the actual cost of borrowing, and not
the rates stipulated in the Courts of Justice Act.
The case, MDS Inc v Factory Mutual Insurance Company,
arose out of a leak at a nuclear reactor in Chalk River, Ontario.
The business of MDS Inc. involved purchasing the radioisotopes
produced at that reactor and processing them for eventual sale.
When the reactor shut down for fifteen months following the leak,
MDS turned to its insurer to cover its business interruption
losses. The Court held in favour of the insured on all coverage
issues, finding that all the exclusions and exceptions at issue
should be interpreted in MDS's favour. While a lot of digital
ink has been spilled on the Court's handling of those coverage
issues, the Court's decision regarding prejudgment interest has
received relatively little attention.
