Court of Appeal decision could have major implications for insurance business

Class-action suit against Transamerica Life Canada appears headed for trial

The decision by the Ontario Court of Appeal to dismiss an attempt by Transamerica Life Canada (now Ivari) to overturn a previous ruling by a Divisional Court could have far and wide implications for the insurance industry, believes the lead lawyer in the case.  

The case in question – Fantl v Transamerica Life Canada – is a class-action lawsuit where investors have alleged misrepresentation in segregated fund disclosure documents.

Speaking to Life-Health Professional, David O’Connor of Toronto law firm Roy O'Connor LLP said the entire insurance business will likely have one eye the trial, given the impact a victory for the class could have.

“Of course the defendant is not admitting to doing anything wrong and will strenuously defend the case,” says O’Connor. “But if the case is successful, it would be a message that statements that insurance companies make have to be accurate and fair. I think it would provide a strong incentive for some behaviour modification among the large providers in the industry.

When the case originally began, 53 insurance contracts were under scrutiny in the suit, but motion judge Justice Perell refused to certify 48 of those contracts for negligent misrepresentation.

Central to the dispute is the issue of “best efforts" and whether the contracts contained such a clause.

Under the microscope is the Can-Am Fund, available through a number of variable annuities and universal life policies sold by NN Life Insurance Co. of Canada and Transamerica Life Insurance Co. of Canada between October 1992 and March 2001.

The fund was intended to replicate, on a “best efforts” basis, the performance of the S&P 500 Total Return Index, and the misrepresentation claim arose from this statement.

At certification, Justice Perell found that a class proceeding was not the preferable procedure for resolving the class members’ negligent misrepresentation claim because the individual issues of reliance, causation and damages would “overwhelm or subsume” the common issues. This decision was reversed by the Divisional Court and most recently the Court of Appeal.

The representative plaintiff in the suit is Joseph Fantl, an investor who bought units of the fund in 1996, and believes the “best efforts” side of the contract was not fulfilled.

Now that the Divisional Court’s decision has been upheld, tens of thousands of investors could conceivably add their names to the class, which means Transamerica has quite the day in court on its hands.

The lead lawyer in the class outlines how the suit will now likely proceed.

“The defendant could technically attempt to seek leave from the Supreme Court of Canada, but I don’t know if there is any real possibility of that,” says O’Connor.  “The next stage we call the merit – that is where we litigate the very substance of the allegations. Transamerica would defend the claim and produce relevant documents, we would examine them and after that we go to court.”

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