Law Times

Page 10 January 7, 2019 • Law Times www.lawtimesnews.com Court of Appeal certified $2.5-billion class action Insurance companies should consider wording carefully BY MICHAEL MCKIERNAN For Law Times I nsurance companies may want to rethink the word- ing of their consumer-facing policies after the Court of Ap- peal for Ontario restored a class action by life insurance policy holders against their insurers, according to a Toronto lawyer. In Fehr v. Sun Life Assurance Company of Canada, a three- judge panel of the province's top court certified the $2.5-billion class action, overturning the deci- sion of a motion judge who grant- ed Sun Life summary judgment dismissing the claim. Although a judge has yet to tackle the merits of the underlying claim, civil liti- gator Jeffrey Leon says the latest ruling is just one in a series of de- cisions by Canadian courts inter- preting agreements between large corporate entities and relatively unsophisticated individuals with a "consumer-focused approach." "The Court of Appeal's rea- sons ref lect the consideration given to the differences between the companies who draft these complicated agreements, and the consumers who are bound by them," says Leon, a partner in the Toronto office Bennett Jones LLP, who is not involved with the case. "Regardless of how the case ultimately turns out, and the bar is set fairly low for certification, one of the lessons to be taken from it is that it's increasingly important to draft insurance policies in a way that avoids am- biguities by using defined terms wherever possible," he adds. "It may also no longer be suf- ficient to rely on terms that are based on industry practice or custom if they're not able to be understood by someone who is actually acquiring the life insur- ance coverage." The case concerns at least 230,000 life insurance policies sold in the years between 1985 and 1998 by the Metropolitan Life Insurance Company, whose Canadian business was subse- quently subsumed by Sun Life. According to the decision, the variable-premium "universal life" insurance policies combine a life insurance policy with an investment vehicle to realize tax advantages. Although most were sold in the high-interest-rate era of the mid to late 1980s, the lower rates prevailing since the mid- 1990s drove premiums and ad- ministrative costs up, prompting complaints from policyholders who claimed they were not ade- quately warned about the poten- tial downside of the scheme. The plaintiffs launched their class action in 2010, alleging mis- representation in the sale of the policies and breach of contract. In a series of decisions between 2015 and 2017, Ontario Superior Court Justice Paul Perell declined the certify any of the claims and granted Sun Life summary judg- ment dismissing much of the action as time-barred. A costs order was also granted in favour of the insurer for $1 million. Despite the setback at the summary judgment motion, the plaintiffs' lawyer Megan McPhee says she always retained "full confidence in our case." "When we went to the Court of Appeal, our firm was on the hook for a $1-millon cost order, but there was no point at which we considered any other option," says McPhee, a principal at class actions boutique Kim Spencer McPhee Barristers PC. "So it was wonderful to see our confidence vindicated by the decision." Writing for a unanimous three-judge panel, Ontario Court of Appeal Chief Justice George Strathy found Perell got it right when he refused to cer- tify the part of the claim that related to negligent misrepre- sentation common issues. While each individual representative plaintiff testified they were mis- led by agents of the insurance company, the judge noted that each had a unique claim. "It is not enough for a com- mon issue to provide 'context.' The resolution of the common issue must advance the reso- lution of each class member's claim," Strathy wrote. "The proposed misrepresen- tation common issues would not do so." However, when it came to claims for breach of contract, which related to alleged adjust- ments to the cost of insurance and administrative fees, as well as the potential for premium charg- es in excess of the maximum identified in the policies, the ap- peal court noted that the com- plexity of the policies as financial instruments came into play. "The language is technical and legalistic, and important terms are undefined," reads the deci- sion, which notes that even the meaning of apparently straight- forward phrases, such as "maxi- mum premium" and "minimum premium," were a matter of con- troversy between the parties. "Other terms, such as 'premi- um,' 'monthly cost of insurance' and 'monthly insurance charge,' are confusing. Key provisions, such as the manner in which Sun Life could adjust the COI from time to time, are opaque," the ap- peal court judges wrote, adding that Perell required the filing of "extensive additional evidence" before reaching his decision. But the appeal panel ruled Perell ultimately overstepped the mark in his decision deny- ing certification for the breach of contract issues, instead per- forming the task reserved for a common-issue trial judge. "In my view, it is entirely rea- sonable for a certification mo- tion judge to expect the parties to produce evidence relevant to whether there is some basis in fact that the issue is common across the class," Strathy wrote on behalf of his colleagues. "However, by requiring the parties to file additional evidence and analyzing that evidence to assess whether or not Sun Life had actually breached the con- tract, the motions judge went be- yond determining whether there was "some basis in fact" for the common issue. Rather, he decid- ed the proposed common issue by interpreting the contract and making a finding that there was no breach." In addition, the ap- peal court found that Perell had erred in dismissing some of the plaintiffs' key claims on a sum- mary basis as time-barred. While the judge concluded they should have discovered their misrepresentation claims when they received their poli- cies, the appeal court ruled that FOCUS TheCannabisChannel.ca THE CANNABIS CHANNEL.ca C C What are the implications of the Cannabis Act? 7JTJUUIFXFCTJUFUIBUQSPWJEFTSFMJBCMF OFXTBOBMZTJTFYQFSUTBOESFTPVSDFTGPS QSPGFTTJPOBMTMPPLJOHGPSBOTXFSTȋXIFUIFS UIFZȎSFEFBMJOHXJUIDBOOBCJTJOUIF XPSLQMBDFJOUFSQSFUJOHMFHJTMBUJPO NBOBHJOH."USBOTBDUJPOTPSOBJMJOHEPXO JOUFMMFDUVBMQSPQFSUZSJHIUT Untitled-3 1 2019-01-02 10:45 AM See Ruling, page 12 Jeffrey Leon says 'it's increasingly impor- tant to draft insurance policies in a way that avoids ambiguities by using defined terms wherever possible.' It is not enough for a common issue to provide 'context.' The resolution of the common issue must advance the resolution of each class member's claim. Chief Justice George Strathy CanadianLawyerMag.com Fresh Canadian legal news and analysis available on any device. Get More Online

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