2018 0905 – LC – Fehr v Sun Life Assurance Company of Canada – Decision – Ontario – Court of Appeal – 73p

2018 0905 - LC - Fehr v Sun Life - Decision - Ontario - Court of Appeal - 73p

2016 ONSC 7659,
2018 0905 - LC - Fehr v Sun Life - Decision - Ontario - Court of Appeal --- [BonkNote] --- 73p
2010 - LC - Sun Life Assurance Company of Canada v. Metropolitan Life Insurance Company - Judgement - Ontario - Superior Court --- [BonkNote] --- 8p

p6 - [18] To begin, I will explain the nature of the insurance policies at issue.
- (1) The insurance policies
- [19] This action involves four variations of "universal life" insurance policies sold by MetLife in Canada.³ The four policies had different features, catering to different consumer preferences.
  - ³ The policies, and the years in which they were sold are: (1) Interest Plus (1985-1998); (2) Universal Plus (1987-1998); (3) Flexiplus (1992-1998); and (4) Optimet (1998).
- [21] Thus, in addition to providing life insurance, the policy serves as an investment vehicle.
p7 - [Bonk: P1P2]
- Surplus Funds
- [24] These policies were fairly complex financial instruments. The manner in which they operated was not obvious from the policy language. It is not surprising, therefore, that Metlife's sales agents frequently used standard sales pitches and
  illustrations to demonstrate the operation of the policies to their clients.
p8 - Some of these increased charges were paid out of policyholders' accumulation funds.
p8 - (2) Policyholder complaints, remedial programs, and Indemnity Litigation
- [26] As a result of these developments, some policyholders complained to Metlife's successors that Metlife's sales agents had misrepresented the anticipated performance of their policies.
- [27] In response to customers' protests, Sun Life established remedial programs to provide relief to some policyholders (the "remedial programs").⁵
- [28] Policyholder complaints also inspired Sun Life to take action against MetLife.
p9 -⁵ In 2006, Sun Life implemented an "Under-Funded Life Policies Replacement Program", offering to provide permanent life insurance policies to certain Universal Plus and Interest Plus policyholders whose policies were underfunded and at risk of lapse.
See Sun Page: 2010 Life Assurance Company of Canada v. Metropolitan Life Insurance Company, 2010 ONSC 558
- [canlii.org///2010onsc558/
[33] Sun Life appealed, but later withdrew the appeal, on terms that have not been disclosed.
[34] However, Sun Life's own evidence in the Indemnity Litigation, which echoed the complaints made by the plaintiffs in the proposed class action, was identified as a smoking gun by the plaintiffs on the certification motion.
p15 - [4 7] The key misrepresentation common issue was common issue 4, which asked whether MetLife engaged in a repeated practice of misrepresenting the nature, provisions, financial elements, and benefits of the policies. These misrepresentations included the use of misleading illustrations and marketing
materials, and the failure to disclose the effect of lower interest rates and rising costs on class members' premiums and accumulation funds.
[48] The individual proposed representative plaintiffs testified that they had been misled by Metlife's agents about the features and benefits of the policies. However, each plaintiff's claim for misrepresentation is unique.
[49] For the purpose of illustration, I will briefly describe the claims of two would be representative plaintiffs, Eldon Fehr and Leslie Michael Lucas.
[53] The record included affidavits of twelve former MetLife agents who deposed that Metlife's educational courses, manuals, and other sales materials were misleading and caused them to misrepresent the terms of the insurance policies they were selling. On the other hand, seventeen former agents deposed that they had not misrepresented the policies they sold.
p16-17 - [54] The plaintiffs pointed to Metlife's marketing materials, which were used by sales agents to paint an optimistic picture, based on high interest rates, demonstrating a secure future of low premiums and high investment returns. Customers were not given the insurance policy until after they had completed a purchase application. While policyholders were told to read the policy, the plaintiffs argued that a policyholder would not have appreciated, simply from reading the policy, that declines in interest rates would have serious implications on premiums and on the growth of the accumulation fund.
(p17) - The motions judge went on to find, at paras. 298-306 of his reasons, that the misrepresentation claims did not satisfy the commonality requirement.
[56] Notwithstanding the plaintiffs' submission that consumer protection and access to justice concerns favour the certification of the misrepresentation common issues, it is my view that the judgment below should be affirmed on this issue, largely for the reasons articulated by the motions judge and by Rosenberg
J.A. in Williams v. Mutual Life Assurance Co. of Canada (2003), 170 O.A.C. 165 (C.A.), 226 D.L.R. (4th) 112, leave to appeal refused, [2003] S.C.C.A. No. 283.
- ⇒ The resolution of the proposed common issues based on "systemic" misrepresentations would not materially advance the claims of the class members.
- The class action would founder on the host of individual issues raised by the claims of tens of thousands of class members.
(p18) - [57] The motions judge noted, at para. 292 of his reasons, that, based on the evidence before him, the experiences of the representative plaintiffs were idiosyncratic rather than common. "The 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."
[58] I agree with this observation.
- The evidence of Mr. Fehr and Mr. Lucas, which I briefly summarized above, and the evidence of the other representative plaintiffs, demonstrates that a trial of each individual claim of misrepresentation would be required in order to fairly determine, not just whether the representations were relied upon, but what representations were actually made to each class member and whether those representations were false.
- ⇒ This could require the evidence not only of each class member, but of each sales agent involved, as well as an examination of what marketing materials were provided to each class member and what he or she was told about them.
p18-19 - [59] The observations of Rosenberg J.A. in Williams v. Mutual Life, at para. 47, are apt:
- In this case, establishing that Prudential was negligent in any of the ways suggested by the appellant would not represent a substantial ingredient in each of the class members' claims.
  - It would not, to use Campbell J.'s phrase in Anderson, "move the litigation forward".
- As the motions judge pointed out, since Prudential had no direct dealings with any of the class members at the time the policies were sold, the class members would still at least have to show that the agents with whom they dealt made representations about premium offset, that those representations constituted negligent misrepresentations about the premium offset feature, and that the prospective policyholder reasonably relied upon the representation.
- As was stated in Rumley at para. 29, "Inevitably such an action would ultimately breakdown into individual proceedings."
p20 - [64] I have noted that the policies are relatively complex financial instruments. They are also relatively complex contracts. The language is technical and legalistic, and important terms are undefined. For example, there is no definition of "minimum premium" or "maximum premium".
- The actual meaning of those terms is a matter of controversy.
- According to Sun Life, "minimum premium" does not mean the lowest premium that a policyholder is required to pay in order to keep the policy in good standing.
- And "maximum premium" does not mean the highest premium that can ever be charged to a policyholder.
- Some technical terms, such as "non-rated classification", are undefined.
- ⇒ Other terms, such as "premium", "monthly cost of insurance" and "monthly insurance charge", are confusing.
- Key provisions, such as the manner in which Sun Life could adjust the COI from time to time, are opaque.
[65] The motions judge himself required extensive additional evidence, including expert evidence, before he could determine whether Sun Life had breached the policy by adjusting the COI based on factors not enumerated in the policy.
- ⇒ He was unable to do so by simply interpreting the policy and comparing it to what Sun Life claimed it was entitled to do. This was a key breach of contract issue, to which I now turn.
p20 - Common issue 6: cost of insurance ("COI")
p24 - Your monthly costs of insurance -- This is the amount we charge to provide your life insurance protection.
- The costs of insurance (the rate charged per $1,000 of life insurance benefit) is increasing due to interest rates that have declined steadily since the Universal Flexiplus product was first introduced.
- Your policy states: "the monthly rate for the Cost of Insurance will be set by us from time to time."
- ⇒ It is now necessary to increase the costs of insurance to better reflect current interest rates.
- ⇒ [Bonk: Performance / Values / Results] - Your agent ... can provide you with your new monthly insurance charge and illustrate how these changes will impact the future value of your policy's accumulation fund. [Emphasis added.]
[... Deposition Excerpts]
[78] However, instead of certifying the proposed common issue, the motions judge concluded that he could not determine how the increase in the COI had been calculated.
p28 - [84] [Judge] He concluded, at para 55: In the case at bar, the truth of the matter is that the Plaintiffs plead what the contract means...
p30 - intent, Communications between parties. sophistication level, terms of art
p30 - [89] This point was made by the Alberta Court of Appeal in 885704 Alberta Ltd. v. Oxford Properties Group Inc., 2005 ABCA 274, 371 A.R. 178, at para. 43:
- An interpretation of a contract is a search for intent of the
  parties to that particular contract.
  - While standard terms of a trade may be found to have the intended meaning of the parties to the contract, that can only be true where both parties are members of the same trade. Industry practice that might identify one party's intention is not sufficient.
  - It must be of such a nature that a trial judge can comfortably conclude that both parties would have known of that practice and therefore have intended that meaning.
  - Here, we are concerned that the trial judge relied too heavily on expert opinions and standards of an industry without determining whether Met Centre was part of the industry and could be said to have known those industry terms.
p33 - Common issue 8: maximum premium
- ⇒ Kevin Morrissey, a Vice President of Sun Life, had deposed in the course of the Indemnity Litigation that "the year 2030 is the median point at which Universal Plus policyholders are likely be required to pay an amount in excess of the 'Maximum Premium' set out in their policy specifications pages."
.................
p49 - [150] In view of what the motions judge described as an ample evidentiary record, he ignored the presumption in s. 5(2) of the Limitations Act, 2002 that the day on which a reasonable person ought first to have known of his or her claim is the day the act or omission occurred - that is, the day on which the representation was
made.
- On the facts of this case, when the representations were made before class members even received their policies, it could not possibly be said that the presumption applied.
(49-50) - [151] In determining when each plaintiff knew or ought to have known that a misrepresentation had been made, the motions judge applied what he described as "venerable law", that "once an insurance policy is delivered to an insured, he or she is taken to have read the policy and accepted its terms".
- ⇒ He referred in particular to The Provident Savings Life Assurance Society of New York v. Mowat (1902), 32 S.C.R. 147.