Legal battle continues over right to use policies for investment and retroactivity of change to regulation
A decision to disallow certain policies issued in the 1990s from being used for “unlimited stand-alone investment” has been revisited in a multi-day hearing in the Court of Appeal for Saskatchewan.
During a three-day session last week, Justices Neal Caldwell, Brian Barrington-Foote and Jerome Tholl heard arguments from lawyers representing three of Canada’s largest insurance companies and other counsel representing investors arguing that they should be allowed to make contributions beyond the $22.94 monthly cost of maintaining the insurance.
“What my client wants to do is what it is entitled to do under the policy,” said Shaunt Parthev, who represents the investors’ partnership Ituna LP, according to the Saskatoon StarPhoenix.
The 26-page contract for the policies, he noted, made no mention of any cap on the contributions that could be made into them. Since acquiring the policies about one decade ago, Ituna has reportedly moved approximately $8 million in and out of the policy, with $4 million being left in the policy by the time Industrial Alliance Insurance and Financial Services, one of the three insurers in question, stopped them from continuing to use it for investment purposes.
Patricia Jackson, counsel for IA, argued that an insurance contract is not meant for investment, explaining that the “flexible premium program” was only ever intended to cover the cost of the insurance.
“Until the issue arose, nobody was really monitoring what went into [one of the accounts associated with the policies],” Jackson said, adding that Ituna could pour “multi-millions” of dollars into a policy that they want to use for something other than its original purpose.
Parthev argued that his client’s interpretation of the contract is in line with how a reasonable person would read it, though Jackson countered that “threats” to expose the investment opportunity that were made by Ituna suggest they knew an ordinary person would not interpret it that way.
Both sides also grappled over a change in regulations introduced by the Saskatchewan government in October 2018, which effectively closed the loophole used by the investors. In a decision issued last year, Queen’s Bench Justice Brian Scherman ruled that the regulations are not retroactive.
During last week’s hearings, the insurers reaffirmed their stance that regulations “declare” the existing law and apply retroactively to prevent the alleged “mischief” of the investors from continuing. David Outerbridge, who also represents IA, said the purpose of insurance law is to promote the health of insurance funds so they are viable enough to pay out legitimate claims.
“There’s no question … the regulation was enacted to protect the public,” Outerbridge said, asserting that the government has enough authority to declare that the regulation be applied retroactively.
While the appeal court’s decision has not yet been revealed, it’s fully expected that the judgment will be further referred to the Supreme Court of Canada.
