insuring the death benefit; the costs of administration; and the acquisition
of investments. Income on the investments is added to the policyholder’s
Thus, in addition to providing life insurance, the policy serves as
an investment vehicle. It has tax advantages, because income in the
investment fund accrues on a tax-deferred basis. The policy’s cash value
may enable the policyholder to borrow money from the policy.
Alternatively, surplus funds can be used to pay future premiums from time
to time (a so-called “premium holiday”) or for the remaining life of the
policy (sometimes referred to as a “vanishing premium”).
But universal life insurance is not without risks. Because
premiums are not fixed, poor investment returns, due to low interest rates
or market declines, can cause premiums to increase and reduce the value
of the accumulation fund. If the accumulation fund is depleted, the insured
will have to pay increased premiums or see the entire policy lapse.
It is unnecessary to provide a detailed description of the terms of
the various policies in order to address most of the issues on this appeal. I
will discuss some of the pertinent provisions of the policies when I
examine the motions judge’s analysis of the common issues.
These policies were fairly complex financial instruments. The
manner in which they operated was not obvious from the policy language.
It is not surprising, therefore, that MetLife’s sales agents frequently used
standard sales pitches and illustrations to demonstrate the operation of the
policies to their clients.
Many of these policies were sold during times of high interest
rates. Most projections given to prospective policyholders were based on
those rates continuing. Everything was rosy when interest rates were high.
Premiums were low, accumulation funds grew, and policyholders were
happy. But when interest rates began to fall in the mid-1990s and into the
2000s, MetLife’s profits also fell. As did the income on policyholders’
accumulation funds. Correspondingly, premiums and administration costs
charged by MetLife and its successors went up. Some of these increased
charges were paid out of policyholders’ accumulation funds.
 I have noted that the policies are relatively complex financial
instruments. They are also relatively complex contracts. The language is
technical and legalistic, and important terms are undefined. For example,
there is no definition of “minimum premium” or “maximum premium”.
The actual meaning of those terms is a matter of controversy. According
to Sun Life, “minimum premium” does not mean the lowest premium that
a policyholder is required to pay in order to keep the policy in good
standing. And “maximum premium” does not mean the highest premium
that can ever be charged to a policyholder. Some technical terms, such as
“non-rated classification”, are undefined. Other terms, such as “premium”,
“monthly cost of insurance” and “monthly insurance charge”, are
confusing. Key provisions, such as the manner in which Sun Life could
adjust the COI from time to time, are opaque.