Appeal court to rule on government intervention in insurance battle
The Saskatchewan government had every opportunity to clarify loophole-closing insurance regulations at the centre of a multi-million-dollar court battle when it reintroduced them ahead of new legislation coming into force earlier this month.
“They knew that a judge at the Court of Queen’s Bench found these regulations to be prospective (forward-looking) only,” Shaunt Parthev said during the second day of a marathon hearing before the Court of Appeal for Saskatchewan.
“They had nine months to change the law, yet the government chose to pass the same regulations,” added Parthev, who represents one of the investment partnerships arrayed against three of Canada’s largest insurance companies in the case.
The suit was originally limited to the question of whether there is a cap on the amount of money the investors — whose partnerships, Ituna, Mosten and Atwater, are named for Saskatchewan towns — can put into life insurance policies with a guaranteed rate of return.
That changed in October 2018, when the Saskatchewan government, after lobbying by one of the companies, quietly introduced new regulations to close the loophole used by the investors. Last year, Queen’s Bench Justice Brian Scherman ruled the regulations are not retroactive.
Scherman’s decision, which also found the investors cannot use their policies for “unlimited standalone investment,” is the subject of appeals and cross-appeals filed with the province’s top court and argued this week by more than a dozen lawyers representing the various parties.
While the insurers have said allowing the policies, which Institutional Investor described as the Trojan Horse that could bring down the Canadian insurance industry, to be used for unlimited investment could bankrupt them, the investors dismissed that notion as “ridiculous.”
The companies — Manufacturers Life Insurance Co., BMO Life Assurance Co. and Industrial Alliance Insurance and Financial Services Inc. (IA) — argued this week that the regulations “declare” the existing law and apply retroactively to prevent the investors’ “mischief ” from continuing.
The lawyer representing IA in its dispute with Ituna LP — the three broadly similar cases have been rolled into one set of hearings — said insurance law is intended to promote the health of insurance funds to ensure their viability when it comes to paying out legitimate claims.
The investment partnerships are seeking to use the policies they own in a way that could harm the average insured person, which is “obviously” not the intention of life insurance, David Outerbridge told the court Thursday morning.
“There’s no question … the regulation was enacted to protect the public,” Outerbridge said, adding that the government had ample authority for the regulation to apply retroactively. The insurers have previously said to do otherwise would not address their problem with the investors’ activities.
The hearing began Wednesday and ran until early evening. On Thursday morning, Justice Neal Caldwell — one of three judges assigned to the case — observed that he cannot remember another civil case consuming more than a full day of the appellate court’s time.
While the provincial government does not have standing at the hearing, Attorney General Don Morgan has said previously that the change was made to protect the companies, and by extension the people they insure, and that it was “deliberately” left to the courts to rule on retroactivity. Morgan has also acknowledged the government could have been more transparent when it made the change, which was enacted in the middle of the Queen’s Bench trial by way of a three-page cabinet order that mentioned neither lobbying nor the ongoing court proceedings.
The appeal court is expected to reserve its decision after more hearings on Friday. It is expected that its judgment will result in a request for leave to appeal to the Supreme Court of Canada.