Barbados policyholders in Manulife suit get their day in Canada court
BRIDGETOWN, Barbados, Thursday March 8, 2012 – After over a decade of frustration, Barbadian policyholders in the defunct Barbados operations of Manufacturers Life Insurance, have seen their class-action lawsuit go to trial this week.
The trial to determine the outcome of the lawsuit began in Toronto this week and pits 8,000 Barbados policyholders who signed on to the suit against Canada’s second-largest insurer by stock market value.
At issue is the ownership rights of policy holders in mutual insurance companies when those companies “demutualize,” or convert to a traditional corporate structure.
Mutual insurers are essentially owned by their participating policy holders. In a demutualization, their ownership is converted into shares of the company. Manulife paid out $8.3-billion in cash and shares to participating policy holders around the world, primarily in Canada, when it demutualized in 1999 – about three years after selling its operations in Barbados.
The lawsuit alleges that Manulife already knew that it would be demutualizing when it did the sale, yet took no steps to protect the Barbadian policy holders’ rights to a piece of the action.
Lawyers for the policyholders Harvey Strosberg and Patricia Speight have argued that when Manulife sold its block of its Barbados business to the Life of Barbados Insurance Company on December 31, 1996, it was negligent and in breach of its fiduciary duties by failing to include at the time of de-mutualisation of the company the persons who had purchased Manulife policies in Barbados. The representatives from the Ontario-based Sutts, Strosberg Lawyers have alleged that Manulife ought to have protected policyholders’ ownerships rights since it was a mutual insurance company and therefore owned by its policyholders, in effect making those persons in Barbados who owned life policies were the equivalent shareholders in a stock company.
The case comes to trial just as Ottawa is in the process of determining the rules by which Canada’s property and casualty insurers will be allowed to demutualize.
Among the thousands of plaintiffs in the class is retired insurance executive and former Supervisor of Insurance Wismar Greaves, who bought three participating policies from Manulife before he became a government regulator.
The trial, which is expected to last for eight weeks, began on March 5 and will be heard during the weeks to come by Justice Frank Newbould of the Ontario Superior Court.
A lawyer for Manulife told the court that the class members had no right to demutualization benefits because they were no longer holding policies with Manulife when it announced it was demutualizing and it is possible for firms to demutualize without paying distributions, she said.