Life insurance companies have scored yet another victory, as an appeal court ruled in their favour over a long-running legal dispute on whether universal life insurance contracts could be used as high-interest investment vehicles.
In a recent decision, the Saskatchewan Court of Appeal ruled in favour of Manulife, iA Financial, and BMO Life Assurance. The court found that regulations introduced by the province in 2018 – which limited the amount of money investors could place into universal life insurance policies – applied also to the universal life insurance products involved in the case.
The court heard the three separate, but closely tied cases brought against the insurers by hedge funds Mosten Investment, Atwater Investment, and Ituna Investments. The three hedge funds had appealed an earlier decision in 2019 by the Saskatchewan Court of Queen’s Bench, which dismissed the investors’ claims against the insurers.
When the appeal court finally ruled in favour of the insurers earlier this week, the insurers involved all praised the decision.
“We are pleased with the Court of Appeal's ruling prohibiting unlimited deposits into universal life insurance contracts in Saskatchewan. The Court affirmed that the Government of Saskatchewan regulation applies to all universal life policies, including the policies that are at issue in this litigation,” a statement from Manulife said.
“iA Financial Group has always maintained that the position taken by Ituna was legally unfounded and that life insurance contracts were never intended to be used as deposit accounts and for purposes unrelated to life insurance,” iA Financial’s own statement read.
The rest of the life insurance industry has also welcomed the decision.
"In the interest of protecting consumers, many other provinces including Ontario, Prince Edward Island, Alberta, New Brunswick, and Nova Scotia have introduced legislation to provide similar clarity and reinforce the separation of banking and insurance," commented Canadian Life and Health Insurance Association (CLHIA) president and CEO Stephen Frank. "Millions of Canadians rely on the life and health insurance industry to provide life, disability, and health insurance as well as for their pensions and retirement savings. We are pleased that governments continue to support a solid regulatory framework that protects consumers and allows the industry to serve Canadians."
Mosten has revealed that it would review the appeal court’s decision.
“Mosten is disappointed that the Court chose to set aside the decision of the trial Judge that regulations passed by the Government of Saskatchewan at the behest of Manulife following the trial do not apply to the contract held by Mosten,” said Ron Miller, an attorney at McDougall Gauley who represents Mosten, in an email to Reuters.
