Friday, April 27, 2012

(No.195) The London Life/Great-West case: back to court



"The London Life/Great-West case: back to court"

by

Alastair Rickard

There have been developments involving a class action lawsuit [Jeffery v. London Life Insurance Company] led by D'Alton 'Bill' Rudd, a former London Life senior executive . He opposed the use of London Life participating policyholders' funds by Great-West Lifeco (controlled by the Desmarais family) in its Oct. 1997 takeover of London Life.

I have written several columns on this case for RickardsRead.com as well as an article for Joseph Belth's INSURANCE FORUM, a leading American publication in its field [see the references at the end of this column].

My view has long been that Canada's federal insurance regulator -- the Office of the Superintendent of Financial Institutions (OSFI) -- should not have allowed the use of ANY of London par policyholders' funds by Great-West to help finance its takeover of London Life.

After a decade or more the class action finally came to trial in Sept. of 2009 and the Oct. 2010 decision awarded $455 million to the par policyholders. London/Great-West appealed the Ontario Superior Court decision and on Nov.3, 2011 the Ontario Court of Appeal released its decision which, according to my somewhat inelegant interpretation, said in effect that London Life par policyholders had been screwed but they were not to be allowed to get anything very much back because of it.

More politely:  the decision had the effect of negating the financial compensation awarded by the Superior Court judge to the par policyholders while upholding certain aspects of the appealed decision. The judgement ended up cancelling the raiding of the par policy accounts but without upholding the $400+ million payout to the policyholders.

In writing about the Ontario Appeal Court's decision in a Jan. 13, 2012 column on RickardsRead.com I said that "one can still hope that the decision in this class action is appealed to the Supreme Court of Canada. If it is I think it likely that both the rights of par policyholders generally and a tougher look at OSFI insurance regulation might well be part of the benefit of a Supreme Court ruling."

In fact in early January this year a Leave to Appeal to the Supreme Court was filed by those leading the class action. A response was filed by Great-West/London Life to which, in turn, a reply was filed in mid-February. It is expected that by June it should be known whether the Supreme Court will hear the appeal. If it agrees to do so, it may not occur for a year or more.

If the Supreme Court of Canada does not grant leave to appeal, the leaders of the class action will then go back to the original trial judge (as instructed by the appeal court in Ontario) to seek clarification and to decide any differences with Great-West arising from the Ontario appeal decision.

Selected references:
  1. "Class action appeal: London Life & Great-West", posted to Rickards.Read.com Jan.13, 2012 (column No. 185).
  2. "Great-West '0', par policyholders '1' ", posted to RickardsRead.com Oct.8, 2010 (column No. 118).
  3.  "An Important Court Decision Relating to Rights of Participating Policyholders in Canadian Stock Companies" by Alastair Rickard, INSURANCE FORUM Dec. 2010 (Vol. 37, No.12)
************************************

email: Alastair.Rickard@sympatico.ca

blog: www.RickardsRead.com

to set a "Google Alert" for new columns as they are posted on RickardsRead.com, go to

www.google.com/alerts