Insurer increased 'investment spread' annual rate charged against policyholders, claim alleges
The underlying claims in a recent class proceeding involved universal life insurance policies sold by Metropolitan Life Insurance Company in the 1980s and 1990s, specifically these four products: Universal Plus, Universal Flexiplus, Universal OptiMet, and Interest Plus.
The class action began in 2010 and related to events “as early as before the turn of the century.” The court certified it on issues narrower than originally pleaded.
The present case arose when the plaintiffs attempted to amend their claim to add a new common issue about the insurer’s alleged increase of the “investment spread” annual rate charged against Flexiplus policyholders’ accumulation fund balances from 1.25 percent to 1.75 percent. They also asked for the certification of this new issue.
The plaintiffs argued that the proposed new common issue had already been pleaded and that there was no limitations period defence because they could not have discovered the issue’s particulars earlier. Their expert report was proper, the plaintiffs also claimed.
The defendant insurer asserted that the new cause of action was time-barred and that a new certification motion was required. The insurer also moved to strike certain allegedly irrelevant paragraphs from the plaintiff’s expert report.
New claim is out of time
In Fehr v. Sun Life Assurance Company of Canada, 2023 ONSC 2554, the Ontario Superior Court of Justice dismissed the plaintiffs’ motion to amend. It granted the insurer’s motion to strike some portions of the plaintiff’s expert report.
The court found the plaintiff’s proposed new claim to be time-barred, so it did not go further to consider whether it was abusive. The claim was discoverable in 2016 when the plaintiffs received a document attached to an affidavit filed by the insurer, which included information that should have alerted them to the investment spread issue, the court said.
The court refused to exercise its discretion to add a new common issue, even assuming that the investment rate spread claim was not time-barred and that it could add a new common issue without requiring a full certification motion.
According to the court, allowing the amendment and the addition of a new common issue would do the following:
- fundamentally change the nature of an already certified action
- expand the action to include duties of good faith and fair dealing after this court and the Ontario Court of Appeal already refused to certify other alleged breaches of the duties of good faith and fair dealing
- expand the factual matrix, which would require further discoveries and further production that could take months to finish
- indefinitely delay the case proceeding by summary judgment motions
- go against two objectives of Ontario’s Class Proceedings Act, 1992 because permitting the amendments would not make efficient use of judicial resources and would not promote access to justice since there would be a significant delay in the resolution of the class action on its merits
The court presumed that the insurer would be prejudiced, given the unexplained 12-year delay between the commencement of the proceeding and the proposed amendment.
Next, the court ruled that striking portions of the plaintiff’s expert report relating to profitability would ensure that the evidence would be relevant, prevent wasting the court’s and the parties’ resources, and promote access to justice with minimal delay.
The court struck those parts of the report for the following reasons:
- The evidence about profitability went beyond the common issues
- The report focused on the insurer’s alleged motive for the increases allegedly made in breach of contract when the motive had nothing to do with the common issues
- No evidence suggested that the insurer’s profit was relevant to the actuarial principles underlying the increases in insurance costs or administration fees
- Retaining the irrelevant portions would require the insurer to incur costs for extraneous issues, would require the court to expend resources on such issues, and would lead to significant additional discovery and further delay