Appeal court restores allegations in proposed Sun Life class action

The suit has not been heard, nor has it been certified as a class action, and the allegations have not been proven.

In a decision released Monday, the appeal court reversed a lower court decision from 2011, which struck out numerous paragraphs of the plaintiffs’ claim on the basis that they were improperly pleaded, were irrelevant, or did not disclose a reasonable cause of action.

According to the decision, the plaintiffs in the case only appealed the parts of their claim that were struck out on the basis that they didn’t disclose a reasonable cause of action; including a claim for breach of duty of good faith and fair dealing, and claims for breach of contract, deceit and fraud, and a claim from class members who signed releases.

The proposed suit concerns the sale and administration of universal life insurance policies by Metropolitan Life Insurance Co. between 1983 and 1998. In 1998, MetLife sold most of its Canadian life insurance business to Mutual Life Assurance Co. of Canada, which was later itself sold to Sun Life. The plaintiffs claim that there are approximately 150,000 class members who bought these universal life insurance policies, and they are seeking $2 billion in general damages, $500 million in punitive damages.

The plaintiffs allege that MetLife agents made misrepresentations when they sold the policies; a claim that was not struck out by the lower court. But the lower court did strike out claims for breach of duty of good faith and fair dealing, breach of contract, deceit and fraud, and breach of fiduciary duty (a move the plaintiffs did not appeal). The lower court also struck claims related to releases the firm obtained from some class members without disclosing to them that their policies had been sold on the basis of misrepresentations.

“The motion judge viewed the plaintiffs’ claim as a claim based on negligent or fraudulent misrepresentation in the sale of the policies, for which Sun Life is responsible. The other claims advanced by the plaintiffs either replicate the misrepresentation claim or are not tenable in law,” the appeal court noted. It says the firm supports that view, but that the plaintiffs argue the lower court took too narrow a view of their claims.

The appeal court has sided largely with the proposed plaintiffs in the case. “Even if the plaintiffs face an uphill battle on the first branch of their duty of good faith and fair dealing claim, I am not satisfied that the balance of the claim is doomed to fail,” it said, adding that the “jurisprudence on the duty of good faith and fair dealing, generally and as it applies to the insurance relationship, is not settled in this country… the contours of the duty of good faith and fair dealing in Canadian law have yet to be determined.”

Similarly, the appeal court found the proposed claims for alleged breach of contract and deceit and fraud are not doomed to fail, and that those claims should stand. However, it found the motion judge was right in striking out the parts of the claim relating to the releases.

Sun Life Assurance is a subsidiary of Sun Life Financial Inc. (TSX:SLF).