Insurance rules at centre of court battle changed

The Saskatchewan government acknowledges amending insurance regulations to prevent the “misuse” by investors of certain life insurance policies that are at the centre of an ongoing court battle.

One of the companies involved in the case, Manufacturers Life Insurance Co. (Manulife), lobbied the premier and two cabinet ministers around the time the government brought in the new regulations on which the dispute hinges.

Both the lobbying effort and the new regulations were discussed at a court hearing last week.

Gordon Kuski, the lawyer representing an investor, posed the question, “Why are they running off to the government?” and suggested the company was asking the government to pick a winner and a loser.

Kuski acknowledged there is nothing inherently wrong with lobbying, but said in this case the company put its best arguments forward at trial last September, and then asked the government to change the regulations.

At issue in the court case is whether a group of investors has the right to put unlimited money into a set of universal life insurance policies, some of which were purchased in Saskatchewan, and collect a guaranteed minimum interest rate.

The investors argue that the terms of their contracts allow them to do that, while the three insurance companies involved, in general, maintain that the policies were never intended to be used that way and could bankrupt them.

The three-day hearing, which will determine whether the new regulations can be applied retroactively and therefore apply to the disputed policies, concluded on Feb. 14.

Justice Brian Scherman reserved judgment, but gave no date for his decision.

In an emailed statement, Financial and Consumer Affairs Authority spokeswoman Shannon Mcmillan said the government could not comment on questions regarding the ongoing litigation.

However, speaking generally, the possible “misuse” of policies by investors looking to treat them as bank accounts came to the government’s attention in the fall of 2018 “from a number of sources,” Mcmillan wrote.

“For the safety of policy holders, we amended the (regulations) to clarify the conditions under which an insurer may accept funds … in relation to certain life insurance polices by setting a cap on the amount of money an insurer may accept for payment of a life insurance policy and its associated side account.”

Judgment in the original case was reserved following a threeweek civil trial in Saskatoon Court of Queen’s Bench last September.

The new insurance regulations were brought in about a month later, on Oct. 25, according to government records.

The parties were back in court last week to argue whether the new regulations can be applied retroactively to the policies in question.

The investors insist they cannot, while the insurance companies argue they can.

Scherman has also reserved his decision on that matter.

According to Saskatchewan’s lobbyist registry, Manulife lobbied Premier Scott Moe, Justice Minister and Attorney General Don Morgan — who is also responsible for the FCAA — and Trade and Export Development Minister Jeremy Harrison.

The registry makes clear that Manulife approached them “to discuss regulations under the Insurance Act and the new Insurance Act.”

However, the company declined to provide specific details of its lobbying activities, including what it asked of government.

Manulife’s registry with the province was effective Oct. 22, 2018. The company also declined to provide the dates when the lobbying took place.

“As a company in a highly regulated industry, we seek open and transparent dialogue with government and regulatory officials on matters of policy relevant to our business,” Manulife spokesman Wojtek Dabrowski said in an emailed statement.

“We value the opportunity to provide context, answer questions, and advocate for the industry. Our communications comply fully with all applicable laws and regulations, as well as our code of business conduct and ethics, and are reported and disclosed appropriately. At the same time, these are non-public conversations, and we do not comment on their content.”

Under current provincial regulations, corporate executives can lobby elected officials and civil servants for up to 100 hours per year before being forced to register and disclose their activities. Third-party lobbyists must register and report immediately.

The other two companies involved in the case, Industrial Alliance Financial Group and Bank of Montreal, said they did not lobby the provincial government on the insurance regulations in question.

Saskatchewan’s Registrar of Lobbyists, Ron Barclay, has repeatedly recommended that the 100-hour threshold be eliminated to ensure all lobbying is transparent. The provincial government has said it is open to lowering the threshold but not eliminating it entirely.