Sask. AG 'pleased' court sided with insurance companies in investment fight – Saskatoon StarPhoenix

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Saskatchewan’s attorney general says he is “pleased” with a decision from the province’s top court, which sided with three large insurance companies, ruling that new regulations prevent some of their policies being used for unlimited investment.

The province introduced those regulations during a civil trial over the policies, which are held by a group of investors, three years ago, after lobbying by Manufacturers Life Insurance Co., one of the companies involved in the case.

In a prepared statement, Attorney General Gordon Wyant noted the Court of Appeal for Saskatchewan determined the regulations capping contributions apply to all insurance policies since they came into effect.

The regulations “continue to provide important consumer protection by ensuring that insurers do not engage in conduct that undermines their financial viability” or that interferes with their obligations to policy holders, he added.

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Wyant said he could not comment further, as the case may be appealed. A request for leave to appeal to the Supreme Court of Canada was considered likely, regardless of how Saskatchewan’s highest court ruled.

A lawyer representing Mosten Investment LP, one of the three partnerships that own the policies in question, said he was “disappointed” the court set aside the original trial judge’s decision that the regulations do not apply to its policies.

“The result permits the interference by the government in the contract between Mosten and Manulife and unfairly denies Mosten the benefit, without compensation, of a contract issued by Manulife decades before the regulations were passed,” Ronald Miller said in a statement.

Described by Institutional Investor as the Trojan Horse that could bring down the Canadian insurance industry, the case centres on a series of universal life insurance policies with investment accounts offering a guaranteed rate of return.

According to the court, those rates “well-exceed what is currently available under comparable investment products.”

The partnerships that own the policies and are named for Saskatchewan towns — Mosten, Ituna and Atwater — contend that there is no limit on the amount of premiums that can be paid into the policies’ investment accounts.

The three insurance companies, Manulife, BMO Life Assurance Co. and Industrial Alliance Insurance and Financial Services Inc. say the policies were never intended to be used that way, and doing so could bankrupt them.

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The case was tried at Court of Queen’s Bench in Saskatoon in 2018.

After the trial concluded, but before the judge handed down his decision, the provincial government, after being lobbied by Manulife, quietly introduced new regulations aimed at ensuring capping of premiums paid into all policies.

The government was criticized for interfering in a live trial, and then-Attorney General Don Morgan subsequently acknowledged it could have been more transparent about its actions affecting the case.

The new regulations led to a second hearing, after which the judge concluded that while they did not apply retroactively, the policies in question could not be used for “unlimited stand-alone investment opportunities.”

The investors and insurers filed appeals and cross-appeals, and the Saskatchewan Court of Appeal heard the case over threedays in January 2020. The court’s decision was handed down earlier this week.

In their unanimous decision, Justices Brian Barrington-Foote, Neal Caldwell and Jerome Tholl found that the policies owned by two of the three investment partnerships, Mosten and Atwater, “do not set a limit on the amount an insured may invest.”

The judges also found the original judge erred, and that the regulations introduced during the trial three years ago apply to all life insurance contracts, “including the insurance contracts that are the subject of these appeals.”

All three insurance companies issued statements welcoming the ruling, which they said limits deposits into life insurance contracts.

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Miller noted in his statement that Mosten was “pleased” the court found it has the right “to invest without limit in the investments provided by the side account” of its Manulife policy.

amacpherson@postmedia.com
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