The Ontario Superior Court of Justice has ruled that Great-West Lifeco must pay $456 million in compensation to policyholders of its Great-West Life and London Life subsidiaries. However, the parent insurance company has announced that it will appeal the decision.
The Ontario court agreed to hear the case at the end of 2008. It was launched following the acquisition of London Life by Great-West. The plaintiffs, two retired actuaries who had been employed by London Life and one business man, criticized Great-West for having used funds from London Life and Great-West's participating policy accounts to finance the purchase of London Life in 1997.
Justice Johanne Morissette agreed with the plaintiffs' arguments, ruling that Great-West and London Life had acted in violation of the Insurance Companies Act. In a statement published in response to the decision, Great-West Lifeco said that the ruling "confirms in many respects the companies' position," but added that "there are significant aspects of the decision which the companies believe are in error." As a result, the insurers intend to appeal the decision.
Great-West Lifeco also stated that, even if the appeal is unsuccessful, the decision should not have a significant effect on the capital of its subsidiaries. In addition, it reiterated that all of the participating policy contract terms and conditions would still be honoured.
Earlier this year, Great-West Lifeco settled another class action suit in Manitoba concerning its purchase of Canada Life. The plaintiff estimated that the insurers would be required to pay $400 million in compensation, but Great-West Lifeco told The Insurance and Investment Journal that the amount would be lower.
