Canada: Ontario Court Of Appeal Certifies Class Action Against Sun Life

Last Updated: September 17 2018
Article by Jeffrey S. Leon, Preet K. Bell and Jason M. Berall

On September 5, 2018, the Ontario Court of Appeal released its decision in Fehr v. Sun Life Assurance Company of Canada,1  overturning certain parts of the motion judge's decision and certifying a class action against Sun Life brought by life insurance policyholders.  The Court of Appeal applied a "consumer-focused approach" that places emphasis on the viewpoint of insurance policy consumers. 

Background

The action involved "universal life" insurance policies that, in addition to providing life insurance, also serve as an investment vehicle.  The Court noted that many of these policies were sold when interest rates were high; therefore, premiums were relatively low and returns were favourable.  When interest rates fell in the mid-1990s and thereafter, premiums increased and returns decreased.

The plaintiffs brought a proposed class action against the insurer.  Justice Perell, the motion judge, declined to certify the action and granted the defendant's summary judgment motion dismissing the action on the basis that the claims were limitations-barred.2 When the case reached the Court of Appeal, there were a number of appeals and cross-appeals.  However, the following three claims were central to the appeal:

  1. The plaintiffs alleged that sales agents made numerous misrepresentations regarding the policies, including that they would provide guaranteed interest and become self-sustaining.
  2. The plaintiffs alleged that the insurer breached the insurance policies by increasing the cost of insurance based on criteria not identified in the insurance policies.
  3. The plaintiffs sought a declaration interpreting the "maximum premium" provision in the policies.

In addition, as the defendant had argued that the claims were limitations-barred, there were issues relating to whether there was concealment of the claims (in other words, when the claims were discoverable).

The Court's focus at this stage of the proposed class proceeding is whether the claims should be certified to proceed as a class action.  The actual merits of the claims will be determined at a future date, should certification be granted and the action proceed.

The Court of Appeal's Decision

Misrepresentation Claim

The Court of Appeal upheld the motion judge's decision that the misrepresentation claim was not suitable for certification on the basis that various misrepresentations were alleged that were personal to each policyholder; the experiences of the representative plaintiffs were idiosyncratic rather than common.  As noted by the motion judge, "[t]he alleged misrepresentations were made over the breadth of the class period, 13 years, by thousands of different sales agents who were not uniformly trained about four different policies some of which had revised standard forms over the course of their offering to the public."3 

Breach of the Insurance Policies

In considering class certification of the breach of contract claim, the Court of Appeal began its analysis by describing the policies as "complex contracts" in which "the language is technical and legalistic", "important terms are undefined" and "key provisions...are opaque".

The Court also critiqued various aspects of the motion judge's decision on this issue. For example, the insurer had delivered evidence of industry practice which was considered by the motion judge.  The Court of Appeal held that the motion judge should not have considered this evidence at the preliminary certification stage because it was not clear that a "policyholder can be said to contract with reference to a custom of an industry in which he or she is simply a consumer."

The motion judge had found that there was no basis in fact for the allegation that the insurer breached the contracts.  The Court of Appeal found that the motion judge erred by assessing whether the insurer actually breached the contract, rather than by simply determining whether there was some basis in fact for the common issue, which is the relevant consideration for certification.  The Court stated that the underlying issue of whether the contract was breached should be decided at the common issues trial – not the certification motion.

Therefore, the Court of Appeal found that this issue should be certified and proceed as a class action.  The Court also certified related common issues, including a question regarding corporate predecessor liability.

Declaratory Relief

One proposed common issue asked whether the "maximum premium" identified in the policies was the highest premium the policyholder would be required to pay.  The term was not defined in the policies.  The motion judge declined to certify this common issue because no class member had yet been charged a premium greater than the "maximum premium".  As such, this issue was seen as premature.

The Court of Appeal reversed the motion judge's decision, finding that this was a "case in which a declaration would be appropriate, to define the rights of the contracting parties so they can govern themselves accordingly and avoid future disputes."

Limitation Period

The motion judge found that the misrepresentation and breach of contract claims were limitations-barred.  The Court of Appeal reversed that finding.  The key question for the limitations issue is when a plaintiff knew, or ought to have known, that her or she had a claim.  The Court held that in determining when a consumer ought to have discovered a claim, an individualized analysis was required in light of, among other things, the "relationship of vulnerability between insurer and insured".  Therefore, the claims were allowed to proceed, but the insurer was permitted to raise limitations defences on a complete record when the merits of the claims are adjudicated in the future.

Takeaways

From the Court of Appeal's decision, the following can be noted:

  • This may be another example of a court applying a "consumer-focused approach" to conflicts between sophisticated companies and consumers.4
  • In drafting insurance policies, it may be important to use defined terms to avoid ambiguity, and also avoid terms that rely on industry practice or custom.
  • It is not yet known whether leave will be sought to the Supreme Court of Canada. In addition, it is important to note that this decision is not a determination on the merits. However, this case still provides some guidance on how a court may approach issues relating to the interpretation of insurance policies.

Footnotes

1 2018 ONCA 718.

2 2015 ONSC 6931; 2016 ONSC 455; 2016 ONSC 7659; 2017 ONSC 2218.

3 2015 ONSC 6931 at para 292.

4 For example, the Supreme Court released a decision last year in which it appeared to apply a consumer-focused approach to refuse to enforce a forum selection clause in Facebook's standard terms of use: Douez v. Facebook, Inc., 2017 SCC 33.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Jeffrey S. Leon
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions