Will Appeals Court Decision End Manulife’s Battle With This Investor?

A decision by a court in Canada yields mixed results for insurance companies and some investors in old contracts.

Manulife Financial Building in Ottawa, Canada. (Brent Lewin/Bloomberg)

Manulife Financial Building in Ottawa, Canada.

(Brent Lewin/Bloomberg)

A group of investors in Canada who have been fighting to start earning a guaranteed interest rate under benefits of their universal life insurance policies won part of what they’ve been after for years.

The Court of Appeal for Saskatchewan ruled earlier this month that the investors — including Mosten Investment, which hold policies from Manulife — can deposit an unlimited amount of money into universal life contracts issued by both Manulife and Bank of Montreal’s insurance arm and earn a guaranteed rate of interest. The plaintiffs didn’t get a similar go-ahead for contracts issued by another insurance company.

The court ruled that the Manulife contract “does not limit the amount an insured may pay to the insurer as premiums” and “does not limit when or how often the insured may pay premiums to the insurer,” according to court documents.

But the investors lost when it came to arguing that 2018 Saskatchewan insurance regulations that limit those deposits don’t apply to their contracts, which were issued years before. The investors lost on that point, even though the regulations were put in place at the request of Manulife after a trial brought by the investors against the insurance companies for not honoring the contracts.

Still, the investors should be able to start depositing money in the Manulife and BMO contracts that were issued in other Canadian provinces.


“Mosten is pleased the Court of Appeal granted its appeal and the declarations sought by Mosten. Those include that Mosten has the right under the terms of its contract with Manulife, to invest without limit in the investments provided by the side account of the policy,” said Mosten’s lawyers in an emailed statement. But the lawyers noted that, “Mosten is disappointed that the Court chose to set aside the decision of the trial Judge that regulations passed by the Government of Saskatchewan at the behest of Manulife following the trial, do not apply to the contract held by Mosten. The result permits the interference by the government in the contract between Mosten and Manulife and unfairly denies Mosten the benefit, without compensation, of a contract issued by Manulife decades before the regulations were passed. Mosten is reviewing the decision.”

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The investors filed the appeal in April 2019 against a court ruling the previous month that dealt a blow to the investor’s strategy — but saved the insurers from the payouts, which they argued would lead to a potential collapse of their companies.

The decision limited the amount that can be deposited in the investment accounts of the universal life contracts dating back to the 1990s that offered guaranteed minimum interest rates. The investors have been in a long-running battle with the insurers, arguing that the contracts are straight forward and allow policyholders to make unlimited deposits into the accounts.

The insurers countered that the policies were not intended for investment purposes and that if they were used in the way the investors wanted, they could go bankrupt and damage the Canadian insurance industry.

The case dates back a decade, when Michael Hawkins, a farmer and longtime insurance actuary, started searching for and buying universal life insurance contracts from existing owners that had lucrative benefits. Insurance companies had issued contracts that gave policy holders the ability to deposit an unlimited amount of money into accounts that offered guaranteed rates between 3 and 5 percent, far above what is now offered on similarly safe investments. Hawkins later created partnerships, including Mosten, to hold the policies.

Manulife issued a statement after the Appeal Court’s decision, saying, “We are pleased with the Court of Appeal’s ruling prohibiting unlimited deposits into universal life insurance contracts in Saskatchewan. The Court affirmed that the Government of Saskatchewan regulation applies to all universal life policies, including the policies that are at issue in this litigation. The decision confirms that policyholders cannot make unlimited deposits into universal life insurance contracts and makes clear deposits must relate to amounts required to pay the life insurance premium.”