The Ontario Court of Appeal has reduced the amount that the province’s Superior Court had awarded to members of a class action lawsuit. The plaintiffs claimed that funds belonging to London Life and Great-West Life participating policyholders were reallocated to finance the acquisition the London Insurance Group (the parent company of London Life Insurance Company) in 1997. The award amount has been lowered from $284.6 million to $51.6 million.The class action lawsuit includes any person who held a participating life insurance policy with London Life and Great-West Life between November 1997 and September 3, 2008, which adds up to about 1.8 million policyholders. The plaintiffs accused the two Great-West Lifeco subsidiaries of having used funds from London Life and Great West participating policies to buy London Life in 1997.
The newly-awarded amount is divided into two parts, with $27 million allocated to London Life and $24.6 to Great-West. The applicants claimed that Great-West had removed $180 million from participating policies at London Life and $40 million from par policies at Great-West.
The Ontario Court of Appeal held that the plaintiffs benefited from savings which were due to synergies resulting from the merger. On an amount of $371.8 million, attributable to the participating accounts and which served as the base in the first case, the Court of Appeal has subtracted $250.1 million for these economies.
The court also subtracted the return earned by policyholders on these savings at a rate of 6.91%, or $70.1 million, ultimately arriving at new amount of $51.6 million. The calculation period was from 1997 to Dec. 31, 2011.