The long-running class action against Great-West Life Assurance Co. (GWL) and London Life Insurance Co. over the use of GWL’s policyholder funds to acquire London Life back in 1997 has finally come to an end.

After years of trials and appeals by both sides, in which claims were into the hundreds of millions, the Ontario Superior Court of Justice (OSCJ) issued a final notice of judgement in early October that orders the payout of funds to the accounts of participating (“par”) policyholders. The notice comes a year after the Supreme Court of Canada (SCC) declined to hear an appeal by the policyholders.

The SCC’s refusal to review the case means the February 2014 decision of the Ontario Court of Appeal (OCA), which awarded only about $52 million to the policyholders, is now final; that decision was viewed by many as a victory for the insurance companies, which had offered that amount in settlement.

The amount of the final award declined steadily as the case went from one phase to another. In 2010, $455.7 million was awarded to the plaintiffs by the OSCJ after a 45-day trial. That amount was reduced to $284.6 million by an appeal court in 2013. In making the final reduction last year, the OCA’s ruling stated that while generally accepted accounting principles had not been complied with, there was no evidence of any impact on policyholder dividends. (Par accounts are invested pools; under normal circumstances, they yield a dividend to policyholders.)

Affected policyholders will see the funds returned to their par accounts. In the final notice of judgment, the OCA ordered the companies to pay $56.43 million to the par accounts of the two companies from shareholders’ accounts.

Par accounts allow policyholders to participate in the profits of the insurance company, but par account investments are managed in accounts that are separate from those of shareholders. Huge amounts – $180 million from London Life and $40 million from GWL – were removed from par accounts to help fund the 1997 acquisition of London Life for $2.9 billion, a move that all courts found breached rules in the Insurance Companies Act that are designed to protect policyholders. The lawsuits were triggered by Bill Rudd, then a retired chief actuary for London Life and a shareholder, who noticed the transactions in the firm’s 1997 annual report.

According to the final notice of judgment, GWL and London Life made “unlawful transfers of money” from the companies’ par accounts to the shareholders’ accounts, contrary to Section 462 of the Insurance Companies Act. The OCA’s ruling also found that the two firms charged unlawful expenses to the par accounts in the form of annual amortization charges from 1997 to 2011, contrary to Section 458 of the act.

The class encompasses 1.6 million London Life policyholders and 130,000 GWL policyholders.

A spokeswoman for GWL says the judgment won’t have any impact on the company’s capital position or on par accounts’ policy contract terms and conditions.

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