Canada Life premium offset settlement
Notice to mail to policyholders
Draft 14 – March 22, 2001

Notice of certification and approval of settlement agreement

Premium offset class actions
regarding Canada Life policies in Canada

Please read this entire notice carefully. It may affect your legal rights.

Why you have received this notice

You have received this notice because you own one or more participating whole life insurance policies issued in Canada by The Canada Life Assurance Company (Canada Life) between January 1, 1980 and December 31, 1997, that either

  • were in effect on February 1, 2001 or
  • ended between January 1, 1992 and February 1, 2001 because they lapsed or were surrendered.

This notice does not apply to any policy you may own that was originally issued by New York Life Insurance Company, New York Life Insurance Company of Canada or Crown Life Insurance Company.

Class action legal proceedings were initiated in Quebec, Ontario and British Columbia against Canada Life relating to the sale of these participating whole life policies.

A class action is a legal proceeding started by one or more people on behalf of a larger group. This group is called a class. You have received a copy of this notice because you own one or more of the policies listed above. This makes you a member of the class affected by these legal proceedings.

The letter from Canada Life in this package includes a list of the policies you own that meet the above criteria, and whether you are a member of the Quebec, Ontario or British Columbia class.

This notice:

  • informs you that the courts have authorized (or certified) the legal proceedings as class actions. This means that the courts have decided that these lawsuits meet the requirements to be designated as class actions
  • informs you that a settlement agreement to resolve these legal proceedings has been reached between Canada Life and the plaintiffs, the individuals who began the lawsuits against Canada Life in Quebec, Ontario and British Columbia
  • informs you that the courts in these provinces have approved the settlement agreement
  • informs you that Canada Life, with the courts’ approval, has decided to extend the same settlement terms to policyholders in all other provinces and territories in Canada
  • describes your rights and options as a class member under the settlement agreement.

In this notice, you and your refer to you, the policyholder and class member.

The reason for the legal proceedings

The legal proceedings were initiated by certain policyholders who feel that they were given incorrect or incomplete information about premium offset or premium abridgement when they bought their policies. This information relates to the number of premium payments policyholders would have to make.

The settlement agreement

The settlement agreement applies to the owners of participating whole life policies described above. Canada Life has entered into the settlement to provide a fair response to policyholders’ concerns and to resolve the lawsuits, not as an admission of liability.

The courts approved the settlement agreement, and authorized the class action proceedings on the following dates:

  • in Quebec, on March 30, 2001 by the Honourable Mr. Justice Crête
  • in Ontario, on April 4, 2001 by the Honourable Mr. Justice Cumming
  • in British Columbia, on April 2, 2001 by the Honourable Chief Justice Brenner.

What the settlement agreement means to you

Under the settlement agreement, Canada Life will provide settlement benefits that will be added to the benefits provided under your policy. This applies to any policy you own with Canada Life that meets the criteria listed above. If you accept the settlement benefits under the settlement agreement, you won’t be able to start legal proceedings or make any other claim against Canada Life relating to the sale of your policy, other than what is provided for in the settlement agreement.

You have three options under the settlement agreement. You can:

1. Receive the general settlement benefits.
You don’t have to do anything to receive the general settlement benefits.
See the section General settlement benefits for a description of what you’ll receive.

2. Request an independent review of your situation.
You may want to choose this option if you feel you received incorrect information about premium offset when you bought your policy. Depending on the outcome of your review, you may receive additional settlement benefits as well as the general settlement benefits.

See the section Independent review process for information on what you have to do to initiate this review.

3. Opt out of the settlement agreement.
Choosing this option means that you will not be part of the class action and you don’t agree to the terms of the settlement agreement. You won’t receive any settlement benefits under the settlement agreement if you choose this option.

See the section Opting out of the settlement agreement for information on what you have to do to choose this option.

General settlement benefits

General settlement benefits for class members who still owned their policy on February 1, 2001.

You will receive the first benefit listed below and, depending on your policy, you may also receive the second benefit. You don’t have to do anything to receive these settlement benefits. They will be automatically applied to your policy, unless you opt out of the settlement agreement.

1. Increase in your annual policy dividend
Since you are a participating policyholder, you receive policy dividends annually. Dividends vary from year to year and are not guaranteed. Under the settlement agreement, your annual dividend will be increased. Canada Life will calculate the dividend by using an interest rate that is 0.25% higher than it would otherwise have been. This increase will apply for three years, starting on the anniversary of your policy after December 31, 2001.

2. Reduction in the cost of additional term insurance
Some policies use policy dividends to buy additional one-year term insurance, for example, policies with an enhanced coverage option. If your policy currently uses dividends in this way, under the settlement agreement Canada Life will reduce the cost of this term insurance by 10%. You will receive this reduction for three years, starting on the anniversary of your policy after December 31, 2001.

General settlement benefit for class members whose policy ended between January 1, 1992 and February 1, 2001 because it lapsed or was surrendered.

Under the settlement agreement, policyholders in this category may buy a new life insurance policy and Canada Life will reduce the amount of the premium for the first year by 50%. You must meet Canada Life’s standard requirements for issuing a policy.

Independent review process

You may submit a claim to have your situation reviewed through the independent review process if you want to apply for additional settlement benefits as well as the general settlement benefits.

What is the independent review process?

The independent review process provides you with an opportunity to have your claim reviewed by an independent adjudicator. The independent adjudicator will assess your claim based on criteria approved by the courts.

Depending on the outcome of the review, you’ll receive the additional settlement benefits described below as well as the general settlement benefits.

Why would you participate in the independent review process?

You may want to participate in the independent review process if you feel that the sales representative who sold you your policy made a misrepresentation about premium offset to you. For this purpose, the misrepresentation must be an incorrect statement that meets all of the following conditions:

  • the sales representative told you that one of the following was fixed and could not change:
    – the date on which dividends accumulated in your policy, together with future dividends, would be sufficient to pay all future premiums. This is called the premium offset date or abridgement date
    – the number of payments you would have to make to pay for the policy in full
  • the sales representative made the misrepresentation to you before you bought your policy, or at any time up to 10 days after your policy was delivered, and
  • you relied on the misrepresentation when you bought your policy, or when your policy was delivered and you decided to keep it.
  • What do you need to do to participate in the independent review process?
  • If you want to participate in the independent review process, here are the steps you’ll need to follow:
  • complete the election form on page 3 of your letter from Canada Life, indicating you would like to make a claim
  • tear off the form and return it to Canada Life within 45 days of receiving this notice.

Canada Life will then send you a claims package, including a policyholder claim form. You must fill out this form, ensure it is fully and properly completed, and attest to the truth of the contents of the form. To do this, you must go to someone authorized to administer oaths. You must then return the form to Canada Life within 30 days of receiving it.

On this form, you must state that a misrepresentation as described above was made and that you relied on it when you bought your policy. You will also need to include any relevant written evidence, which will be explained on the claim form.

Once Canada Life has received your claim form, they will send a form to the sales representative who sold you your policy. If Canada Life doesn’t receive the completed sales representative form within 30 days of sending it, you will have an opportunity to follow up with the representative. Canada Life will send the sales representative form to you along with that person’s last known address. If you want the independent adjudicator to review evidence from the sales representative as part of your claim, you’ll then have 30 days to locate the sales representative, have them complete the form and return it to Canada Life.

How will the independent adjudicator review your claim?

The independent adjudicator will review all the documents relating to your claim. These documents will consist of your completed claim form, a completed sales representative form if one is provided, evidence you give to Canada Life and any evidence from Canada Life’s files.

The independent adjudicator will group the evidence as follows:

  • written evidence that clearly and unambiguously confirms the misrepresentation. This evidence must have been given to you before the sale of your policy or at any time up to six months after your policy was issued
  • written evidence that clearly and unambiguously contradicts the misrepresentation. This evidence must have been given to you before the sale of your policy or at any time up to six months after your policy was issued
  • other evidence that tends to confirm the misrepresentation, called plus factors
  • other evidence that tends to contradict the misrepresentation, called minus factors.

The courts have approved a list of the specific plus and minus factors as part of the settlement agreement. Please see Appendix A at the end of this notice for a list of these factors.

Once the evidence relating to your claim has been sorted into the above groups, the independent adjudicator will decide what additional settlement benefits you should receive.

If there is written evidence that clearly contradicts your claim, your claim will be dismissed.

When you bought your policy, your sales representative may have given you sales materials produced by Canada Life or a printed document (called an illustration) showing the payments you would have to make on your policy and when the premium offset date could occur. If the sales materials or illustration are the original standard ones used by Canada Life and haven’t been changed in any way, they will not count as written evidence.

What are the additional settlement benefits you may receive from the independent review process?

Depending on the strength of the evidence in your claim, claimants will be assigned to one of the following four categories. Claimants in all categories will receive the general settlement benefits. Claimants in Categories A, B and C will also receive additional settlement benefits, consisting of a new premium offset date guaranteed by Canada Life, called the guaranteed premium offset date.

Category A

Claimants in this category will have all of the following:

  • a fully completed policyholder claim form
  • written evidence that clearly confirms the misrepresentation, or at least three more plus factors than minus factors
  • no written evidence that clearly contradicts the misrepresentation.

If the independent adjudicator concludes that you’re in this category, you won’t have to make any cash premium payments after the premium offset date you were advised of when you bought your policy. This date will be your guaranteed premium offset date.

Category B

Claimants in this category will have all of the following:

  • a fully completed policyholder claim form
  • at least two more plus factors than minus factors
  • no written evidence that clearly contradicts the misrepresentation.

If the independent adjudicator concludes that you’re in this category, you won’t have to make any cash premium payments after a date determined as follows:

Canada Life will first calculate the number of months between the premium offset date you were advised of when your policy was issued and the premium offset date determined on February 1, 2001

Canada Life will then calculate the number of months equal to 30% of this number

Canada Life then adds the additional number of months to the premium offset date you were advised of when your policy was issued.

This new date will be your guaranteed premium offset date.

Category C

Claimants in this category will have all of the following:

  • a fully completed policyholder claim form
  • one more plus factor than minus factors
  • no written evidence that clearly contradicts the misrepresentation.

If the independent adjudicator concludes that you’re in this category, you won’t have to make any cash premium payments after a date determined as follows:

Canada Life will first calculate the number of months between the premium offset date you were advised of when your policy was issued, and the premium offset date determined on February 1, 2001

Canada Life will then calculate the number of months equal to 70% of this number

Canada Life then adds the additional number of months to the premium offset date you were advised of when your policy was issued.
This new date will be your guaranteed premium offset date.

Category D

Claimants in this category will have one or more of the following:

  • a number of minus factors that is equal to or more than the number of plus factors
  • written evidence that clearly contradicts the misrepresentation
  • a claim that doesn’t meet the definition of misrepresentation as described above
  • an incomplete policyholder claim form.

If the independent adjudicator concludes that you’re in this category, you will only receive the general settlement benefits described above.

Canada Life may, at their discretion, give increased benefits to policyholders or award them the benefits under Category A without a review by the independent adjudicator.

Conditions for receiving the additional settlement benefits

Once the independent adjudicator has completed their review, Canada Life will send you an agreement that you must sign before you can receive any additional settlement benefits awarded. The agreement states that:

You will pay premiums in cash up to the guaranteed premium offset date you are awarded in the independent review process. After the guaranteed premium offset date, premiums will be paid from the annual dividend and built-up dividend values. If the annual dividend and built-up dividend values are not sufficient to pay the premiums, they will be paid from an additional dividend from Canada Life. If you have paid premiums after the guaranteed premium offset date, they will be refunded to you out of the dividend values.

Canada Life will not be required to award the guaranteed premium offset date if you do any of the following:

  • borrow from, withdraw or surrender the dividend values of your policy
  • change your policy’s dividend option
  • transfer the policy to another person or make any other changes unless Canada Life agrees
  • fail to pay premiums when they are due, up to the guaranteed premium offset date.
    However, you may still change your beneficiary, borrow against the policy’s guaranteed cash value and surrender the policy.
  • You will transfer to Canada Life your rights against the sales representative. This means you can’t start any legal proceedings against the sales representative.
    Can you appeal the decision of the independent adjudicator?

    • You can appeal the decision of the independent adjudicator to the court and the rules of the court will apply. Your appeal will succeed only if the decision is clearly unreasonable.

    Other information about the independent review process

    If you’ve made changes to your policy that could have caused the premium offset date to be delayed, you must, at your expense, reverse the change and put your policy back to the way it was before the change was made before you can receive any additional settlement benefits in the independent review process. For example, if you borrowed money from your policy, you may have to pay the loan back in full.

    You can’t participate in the independent review process if:

    • you’ve already made a claim or submitted a complaint to Canada Life about your premium offset date, and
    • Canada Life agreed that you wouldn’t have to pay any premiums after the premium offset date you were advised of when you bought your policy.

    If you’ve already made a claim or submitted a complaint to Canada Life about your premium offset date but Canada Life did not adjust your premium offset date to the date you were advised of when you bought your policy, you can still receive additional settlement benefits in the independent review process. However, if Canada Life adjusted your policy in any other way, you must reverse the change and put your policy back to the way it was before the change was made, at your expense, and pay a $200 fee to Canada Life. You must also give up your rights to any other benefits you received.

    You can’t participate in the independent review process if, at the time you bought your policy, you were:

    • a licensed life insurance representative
    • a corporation controlled by a licensed life insurance representative
    • a spouse or child of a licensed life insurance representative.
    • If your policy ended between January 1, 1992 and February 1, 2001, because it lapsed or you surrendered it, you may only receive additional settlement benefits if:
    • the lapse or surrender was a result of a misrepresentation made to you as described above under Why would you participate in the Independent review process? and
    • you put your policy back to the way it was before it lapsed or you surrendered it, at your expense.

    Opting out of the settlement agreement

    If you wish, you may choose to opt out and exclude yourself from the settlement agreement. If you do this, you will not be entitled to receive any of the general settlement benefits provided under the settlement agreement or make a claim under the independent review process.

    However, you will be entitled to exercise any other options available to you as a policyholder, such as starting your own legal proceeding or making any other claim against Canada Life or a sales representative regarding your policy.

    To opt out, you need to do the following:

    • fill out the opt out section on the election form on page 3 of your letter from Canada Life
    • tear off the form and return it to Canada Life within 45 days of the day you receive this notice.

    Other considerations

    You are bound by the terms of the settlement agreement, unless you opt out. This means that you will not be able to initiate any other claim or legal proceedings against Canada Life or their sales representatives for:

    anything that was represented, misrepresented or omitted when you bought your policy

    anything that may occur as a result of offering or administering the settlement benefits under this settlement agreement.
    If there is any difference between the settlement agreement and this Notice of certification and approval of settlement agreement, the terms in the settlement agreement will apply.

    Canada Life isn’t responsible for any income tax consequences as a result of any settlement benefits you receive. You may wish to consult a tax adviser about your situation.

    If you have questions or need help

    If you have any questions about the settlement process or would like to receive a copy of the settlement agreement, you can call the Canada Life toll-free information line at 1-866-285-5502. Please note that there is a $20 charge to cover the cost of copying and mailing the settlement agreement. You can also read the settlement agreement at www.canadalife.ca/en/premoffset.

    The law firms representing class members in Quebec, Ontario and British Columbia are also available to answer any questions you have about the settlement process and the independent review process. However, they are not able to assist you in preparing a claim in the independent review process. Their contact information is on the next page. Canada Life will pay the reasonable legal fees and expenses of these law firms, for services in connection with negotiating and implementing the settlement agreement.

    You don’t need to have a lawyer to participate in the independent review process. However, if you decide to hire a lawyer, you’re responsible for paying their fees and expenses.

    The following courts have approved the publication of this notice:

    Ontario Superior Court of Justice
    361 University Avenue
    Toronto, Ontario M5G 1E6
    Case name: Gibbs and Jarvis v. Canada Life
    Court file number: 1712/97, Hamilton

    Supreme Court of British Columbia
    The Law Courts
    800 Smithe Street
    Vancouver, B.C. V6Z 2E1
    Case name: Godding v. Canada Life
    Court file number: C975356, Vancouver registry

    Quebec Superior Court
    1 Notre Dame Street East
    Montreal, Quebec H2Y 1B6
    Case name: Cope v. Canada Life
    Court file number: 500-06-000051-975, Montreal.

    Law firms representing the class members

    Listed below are the law firms representing the class members in the three class actions. These law firms are available to answer any questions you have about the settlement process and the independent review process.

    Ontario
    Scarfone Hawkins LLP
    Barristers & Solicitors
    Standard Life Centre
    Suite 1050
    120 King Street West
    Box 926, Depot #1
    Hamilton, Ontario L8N 3P9
    Telephone number: (905) 523-1333
    Fax number: (905) 523-5878
    Website: www.classactionlaw.ca

    Quebec, New Brunswick, Newfoundland, Nova Scotia and Prince Edward Island
    Lauzon Belanger
    Barristers & Solicitors
    511 Place D’Armes, bureau 200
    Montreal, Quebec H2Y 2W7
    Telephone number: (514) 287-1000
    Fax number: (514) 844-7009
    Website: www.lauzonbelanger.qc.ca

    British Columbia, Alberta, Saskatchewan, Manitoba, Yukon, Northwest Territories, Nunavut
    Poyner Baxter Poyner
    Barristers & Solicitors
    408 – 145 Chadwick Court
    North Vancouver, B.C. V7M 3K1
    Telephone number: (604) 988-6321
    Fax number: (604) 988-3632
    Website: www.poynerbaxter.com

    Law firms representing Canada Life

    If your lawyer wishes to discuss the settlement agreement with the lawyers representing Canada Life, they may contact them at the addresses and numbers below.

    McCarthy Tetrault
    Attention: Tom Curry
    Suite 4700, Toronto Dominion Centre
    T-D Bank Tower
    Toronto, Ontario M5K 1E6
    Telephone number: (416) 362-1812
    Fax number: (416) 601-8245

    McCarthy Tetrault
    Attention: Louis Brousseau
    1170 rue Peel
    Montreal, Quebec H3B 4S8
    Telephone number: (514) 397-4100
    Fax number: (514) 875-6246

    Branch MacMaster
    Attention: Ward Branch
    1210-777 Hornby Street
    Vancouver, B.C. V6E 3G2
    Telephone number: (604) 654-2966
    Fax number: (604) 684-3429

    Appendix A

    Plus and minus factors

    If you submit a claim to the independent review process, an independent adjudicator will review your claim based on the evidence submitted. This may include evidence which can be categorized as plus and minus factors. Below is a list of the specific plus and minus factors that have been approved by the courts.

    For complete details on the independent review process, including an explanation of misrepresentation, please see the section Independent review process.

    Plus factors

    Evidence that tends to confirm that a misrepresentation was made as described in the section Why would you participate in the independent review process? is called a plus factor. A plus factor must meet one of the following conditions:

    • any written document that the sales representative gave you that tends to support the claim of misrepresentation, but does not clearly and unambiguously confirm it
    • a sales representative form completed by the sales representative, confirming that they made the misrepresentation. The sales representative must have attested to the truth of the contents of the form before someone authorized to administer oaths
    • a written statement from anyone, other than the sales representative, who witnessed the presentation the sales representative made to you at the time you bought your policy. This statement must independently confirm the misrepresentation. The person making the statement must have attested to the truth of the statement before someone authorized to administer oaths
    • prepayment of all the policy premiums required up to the premium offset date you were advised of when your policy was issued. These premiums must have been paid no later than six months after your policy was issued
    • a material change made by the sales representative to the original standard illustration used by Canada Life. The sales representative must have made this change no later than six months after your policy was issued.

    Minus factors

    Evidence that tends to contradict that a misrepresentation was made as described in the section Why would you participate in the independent review process? is called a minus factor. A minus factor must meet one of the following conditions:

    • any written document you received that tends to contradict the claim of misrepresentation, but does not clearly and unambiguously contradict it
    • a sales representative form completed by the sales representative, denying that they made the misrepresentation. The sales representative must have attested to the truth of the contents of the form before someone authorized to administer oaths
    • a written statement from anyone, other than the sales representative, who witnessed the presentation the sales representative made to you at the time you bought your policy. This statement must deny the misrepresentation. The person making the statement must have attested to the truth of the statement before someone authorized to administer oaths
    • the fact that, before you bought your policy, you received advice regarding the cost and value of your policy from an accounting, tax, legal, financial, insurance, actuarial or estate planning advisor not associated with Canada Life
    • the fact that you received more than one original standard illustration used by Canada Life and the only difference between them was the dividend level used.