Province under fire for changing regulations
Saskatchewan’s former deputy attorney general says it was “not really ” appropriate for the provincial government to make a regulatory change that could affect the outcome of a civil case while it was still before the courts.
Late last year, after a trial but before the decision, cabinet quietly changed insurance regulations that three major insurance companies involved in the case are now asking a judge to rule can be applied retroactively.
John Whyte, a constitutional lawyer who served as the top civil servant in the Ministry of Justice from 1997 to 2002, said “political interference” in civil cases can only be justified when it serves the broad public interest, and must be made public.
“Just as a matter of good government, if you’re going to interfere in the course of civil liability in this direct way, you’d better state what the compelling public purpose is for doing so,” Whyte said in an interview.
“Otherwise, people suspect the worst,” he said, adding that regardless of whether the public interest is served, retroactive legislation is always “unfair” and “unjust” for at least one of the parties involved.
The case in question will test whether a group of investors has the right to put unlimited money in universal life-insurance policies, some of which were purchased in Saskatchewan, and collect a guaranteed minimum interest rate.
The investors maintain the terms of the insurance contracts allow them to do exactly that, while the three insurance companies involved, in general, insist that the policies were never intended to be used that way and could bankrupt them.
The case went to trial at Saskatoon Court of Queen’s Bench in September. On Oct. 25, while Justice Brian Scherman’s decision in the case was pending, the provincial cabinet approved new regulations intended to close the loophole the investors used.
The regulation changes came around the time one of the insurance companies, Manufacturers Life Insurance Co. (Manulife), lobbied Premier Scott Moe and Attorney General Don Morgan regarding regulations under the provincial Insurance Act.
Manulife’s registration in Saskatchewan’s lobbyist registry became effective on Oct. 22. Under current Saskatchewan law, corporate officials can lobby elected officials for up to 100 hours per year before they have to register.
The insurance giant has declined to provide specifics of its lobbying activities, including the dates when the lobbying took place. However, the registry makes clear that Manulife wanted to “to discuss regulations under the Insurance Act.”
The government did not publicize its decision at the time except in a cabinet order outlining the changes. The three-page document does not explain the reasoning behind the changes or mention the ongoing court case.
A request for an interview with Morgan was declined. In a written statement provided instead, the attorney general said he “was aware of the civil trial involving Manulife when the regulations were amended.”
“It was in the public interest that these changes were made as there was a potential gap in the regulatory framework that could have significantly impacted policy holders and insurers,” he said in the statement.
“Cabinet can notify the public about decisions made through Orders in Council posted online.”
Last month, all of the parties involved were back in court, where the three insurance companies argued that the regulations should be applied retroactively and therefore apply to the disputed policies; the investors argued they should not.
Lawyers for the investors have said in court documents and open court that the changes are a “desperate attempt” by the insurers to have the government rescue them from unfavourable contracts, and that they are asking the government to pick winners and losers.
Scherman reserved judgment once the three-day hearing concluded. A decision date has not been set.
Whyte questioned whether making the regulations retroactive would serve the public good. While the insurance companies’ liability could harm the people they insure, that liability will end under the new rules, he said.
The government likely should have avoided passing regulations in the middle of litigation and “taking a definite side against citizens in favour of industry when the mistake is the industry’s” unless there is a “broader” purpose, he said.
“I think that when you do something like this … there should be a press release, and the press release really needs to state the public interest which is being served by the interruption in the litigation that is already underway.”
Speaking in court last month, a lawyer for the Bank of Montreal — one of the other companies involved in the case — argued that to not apply the new regulations retroactively would allow the “mischief” to continue.
“All you need is one policy to do this and you can do it forever,” Munaf Mohamed said.