ONTARIO SUPERIOR COURT OF JUSTICE (COMMERCIAL LIST)

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1 ! ~ ': r [ f ONTARO SUPEROR COURT OF JUSTCE (COMMERCAL LST) Court File No. CV CL N THE MATTER OF THE NSURANCE COMPANES ACT, S.C. 1991, c. 47, AS AMENDED, AND THE MUTUAL PROPERTY AND CASUALTY NSURANCE COMPANY WTH NON-MUTUAL POLCYHOLDERS CONVERSON REGULATONS, SOR/ AND N THE MATTER OF A PLAN OF CONVERSON OF ECONOMCAL MUTUAL NSURANCE COMPANY FACTUM OF THORNTON GROUT FNNGAN LLP (Motion to Appoint Committee Members Returnable November 29, 2016) (Moving Party) November 15, 2016 THORNTON GROUT FNNGAN LLP 100 Wellington Street West Suite 3200, P.O. Box 329 TD West Tower Toronto-Dominion Centre Toronto, ON M5K 1K7 Fax: (416) John L. Finnigan (LSUC# 24040L) Tel: (416) jfinnigan@tgf.ca Denisa Mertiri (LSUC# ) Tel: (416) dmertiri@tgf.ca Counsel for the Non-Mutual Policyholders of Economical Mutual nsurance Company

2 - 2 - TO: TO: SUPEROR COURT OF JUSTCE Commercial List 330 University Avenue Toronto, ON MSG 1R7 MCCARTHYTETRAULTLLP PO Box 48, Suite 5300 Toronto-Dominion Bank Tower Toronto, ON MSK 1E6 Geoff R. Hall (LSUC# ) Tel: (416) Byron Shaw (LSUC# 57745V) Tel: (416) Counsel for the Mutual Policyholders of Economical Mutual nsurance Company AND TO: OSLER, HOSKN & HARCOURT LLP 100 King Street West 1 First Canadian Place Suite 6200, P.O. Box 50 Toronto, ON M5X 1B8 Mark A. Gelowitz (LSUC# 31857J) Tel: (416) Laura K. Frie (LSUC# 36545Q) Tel: (416) Geoffrey J. Hunnisett (LSUC# 57138G) Tel: (416) Counsel for Economical Mutual nsurance Company

3 Court File No. CV CL ONTARO SUPEROR COURT OF JUSTCE (COMMERCAL LST). N THE MATTER OF THE NSURANCE COMPANES ACT, S.C. 1991, c. 47, AS AMENDED, AND THE MUTUAL PROPERTY AND CASUALTY NSURANCE COMPANY WTH NON-MUTUAL POLCYHOLDERS CONVERSON REGULATONS, SOR/ AND N THE MATTER OF A PLAN OF CONVERSON OF ECONOMCAL MUTUAL NSURANCE COMPANY FACTUM OF THORNTON GROUT FNNGAN LLP (Motion to Appoint Committee Members Returnable November 29, 2016) PART - OVERVEW 1. This motion is made pursuant to the requirements of this Court's Order dated July 15, (the "nitial Order") to appoint members to the committee representing the 630,000 non-mutual policyholders (the "NMP Committee") of Economical Mutual nsurance Company (the "Company") in its statutorily governed process to demutualize. The NMP Committee will negotiate with a committee appointed by this Court to represent the approximately 880 mutual policyholders of the Company to determine the method by which the benefits arising from the 1 Order of Justice Hainey dated July 15, 2015, Exhibit A, Affidavit of James H. Grout sworn on November 15, 2016, at para. 3 ("Grout Affidavit"), Thornton Grout Finnigan LLP Motion Record ("TGF Record"), Tab2.

4 - 2 - Company's demutualization will be allocated among eligible policyholders as well as, potentially, others persons. The Court appointed Thornton Grout Finnigan LLP ("TGF") as counsel to the eligible non-mutual policyholders (the "NMP"). 2. TGF is recommending the appointment of six eligible NMPs to the NMP Committee. Each has experience in negotiations, business and financial affairs and will fairly and adequately represent the interests of the NMPs. PART -BACKGROUND 3. The Company is in the process of demutualizing pursuant to the Mutual Property and Casualty nsurance Company with Non-Mutual Policyholders Conversion Regulations 2 (the "Conversion Regulations"). 4. The nitial Order sets out information and documents to be published on its website, the process for making applications and filing submissions, the manner of effecting service, the date, time and location of any hearings and the procedure for submitting costs and expenses On September 22, 2016, this Court appointed TGF as representative counsel for the NMPs The next step in the process is the appointment of committees of eligible mutual and non-mutual policyholders to conduct the negotiation mandated by section 12 of the Conversion Regulations. 2 SOR/ ["Conversion Regulations"]. 3 Exhibit A; Grout Affidavit, at para. 6, TGF Record, Tab 2. 4 Exhibit C; Grout Affidavit, at para. 7, TGF Record, Tab 2.

5 n the negotiations, the policyholder committees will attempt to reach an agreement on the method by which the benefits of demutualization will be allocated among the eligible policyholders and whether there are any other persons that should benefit from the demutualization Pursuant to the nitial Order, TGF reviewed the 40 applications for membership received and makes this motion recommending the appointment of the applicants to the NMP Committee TGF invited each applicant to participate in an interview. One of the applicants did not respond to TGF's invitation and one other was unavailable for an interview n selecting the recommended committee members, TGF considered their experience in negotiations, business and financial affairs, 8 their apparent level of sophistication and experience in complex problem solving and working cooperatively in groups, their knowledge of the process of demutualization as well as their geographical location. 9 1 t s Conversion Regulations, supra at s. 12(1). 6 Exhibit A at para. 13, Grout Affidavit at para. 8, TGF Record, Tab 2. 7 Grout Affidavit, at para. 17, TGF Record, Tab 2. 8 Conversion Regulations, supra at s. 9(6). 9 Grout Affidavit, at paras , TGF Record, Tab 2.

6 Each recommended applicant possesses experience in negotiations, business and ~ financial affairs 10 and other qualities and professional experiences that will allow them to fairly and adequately represent the interests of the NMPs TGF recommends the following applicants for membership on the NMP Committee: 12 (a) Adriana Davies is from Edmonton, Alberta. Dr. Davies was the Executive Director of the Heritage Community Foundation and Executive Director of the Alberta Museums Association. She has served on several federal and. provincial committees and task forces including the Alberta provincial Charitable Fundraising Committee, the federal Non-Profit and Voluntary Sector Task Force, and the federal Review Committee for the Museums Assistance Program. She holds a BA in English and French, an MA in English, and PhD in comparative literature. n 2010, Dr. Davies was awarded the Order of Canada for her role in creating the Alberta Online Encyclopedia and in promoting and preserving Alberta's cultural heritage. (b) Paul Duncan is from Nanaimo, British Columbia and holds CPA, CMA and CF A designations. He also holds an MA in Economics as well as an [! : MBA in Finance. Mr. Duncan has many years of senior executive experience managing member owned banks. From 1999 to 2002, he was 10 Grout Affidavit, at para. 18, TGF Record, Tab Grout Affidavit, at paras. 14 and 21-22, TGF Record, Tab Grout Affidavit, at para. 21, TGF Record, Tab 2.

7 i-- 1 l 1.. (c) President and CEO of Coast Capital Savings. He has actively participated in industry consolidations including merger negotiations. George Fowlie is from Toronto, Ontario and holds an MBA as well as the CD.D designation. Mr. Fowlie was Managing Director for nvestment Banking at First Marathon Securities ( ) where he was part of the financial institutions group that earned a syndicate position in all four life company demutualizations. He has also held management positions with W estwind Capital Partners, Edgestone Capital Partners, and most recently as Chairman and Director of Crown Capital Partners. ( d) Guy Legault is from Ottawa, Ontario and holds CPA and CGA designations as well as an MBA. Mr. Legault is currently the Chief Operating Officer of the Canadian Chamber of Commerce. He was previously a Vice President at Engineers Canada, President and CEO of the Canadian Payments Association, and President and COO of CGA-Canada. (e) William Paul McCrossan is from Toronto, Ontario. He is an actuary and holds the FSA, FCA, and MAAA designations. Mr. McCrossan is a former Member of Parliament for York Scarborough ( ), as well as a! former President of the Canadian nstitute of Actuaries. Mr. McCrossan previously worked with Eckler Partners Ltd., the nternational Monetary Fund, the Ontario Teachers' Pension Plan, and, most recently, with the New Brunswick Pension Reform Task Force. Mr. McCrossan has been an NMP for approximately 45 years.

8 - 6 - (f) Wilberdien (Willy) Robinson is from Halifax, Nova Scotia and she holds r,. CMA and CPA designations as well as an MBA. Ms. Robinson was the General Manager of inova Credit Union. She previously worked as a branch manager at CBC and as a management consultant. She has been a board member of the Co-operative Development Foundation since n making its recommendation, TGF has considered the Company's input regarding any background information that could disqualify or otherwise call into question the candidacy of the proposed committee members. 13 J 14. The proposed committee members have no interests in conflict nor any perceived interests in conflict with the NMP. 14 PART - ARGUMENT SSUE 1: The Qualifications of the Proposed Committee Members 15. The Conversion Regulations provide for the appointment of at least three and not more than nine eligible policyholders to be members of each policyholder committee. 15 This Court must assess whether each applicant is able to fairly and adequately represent the interests of the NMPs, including by taking into account 13 Grout Affidavit, at para. 16, TGF Record, Tab Grout Affidavit, at para. 24, TGF Record, Tab Conversion Regulations, supra at s. 9(6)...

9 - 7 - [ - their experience in negotiations and business and financial affairs and by having regard to any objections filed TGF's background in business negotiations and representative appointments as well as its review of the committee applications and interviews of the applicants led it to the view that the NMP Committee should be comprised of six members. n proposing this committee size, TGF was cognizant of: (a) the requirement that at least two-thirds of the members of each committee approve of the methods of allocating the value of the converting company pursuant to the Conversion Regulations. 17 (b) the need to have a committee that was representative of the broader policyholder group; and ( c) the need for operational efficiency in a process that will be complex and time-constrained The six proposed NMP Committee members stood out among many other qualified candidates. 19 They are highly accomplished professionals with a diverse skill set and are expected to be able to grasp and effectively deal with the complex issues that will be raised in these negotiations. 20 \.!. 16 Conversion Regulations, supra at s. 9(6). 17 Conversion Regulations, supra at s. 12(5). 18 Grout Affidavit, at para. 20, TGF Record, Tab Grout Affidavit, at para. 21, TGF Record, Tab Grout Affidavit, at paras , TGF Record, Tab 2. l..

10 None of the proposed committee members oppose the Company's demutualization. They also understand the importance of a resolution in such a complex and expensive process and are expected to proceed on a good faith basis towards such a resolution. All the proposed committee members, however, understand their responsibility in ensuring that they fairly and adequately represent the interests of 630,000 NMPs and are expected to proceed on a principled basis to advocate for the NMP's interests. 21 SSUE 2: The Proposed Committee Members have no nterests in Conflict with the NMP Constituency f f 19. The Conversion Regulations also require that applicants to the NMP Committee not have any interest in conflict with the eligible policyholders they seek to represent and that they are not officers, employees or related parties to the Company. 22 No such conflict of interest has been found or brought to the attention oftgf. 23 SSUE 3: Payment of Costs by the Converting Company 20. Section 11(1) of the Conversion Regulations contemplates that this Court should determine the reasonable amounts payable by the Company to committee members in the negotiation process for reimbursements of their travel, accommodation and [. [ 21 Grout Affidavit, at paras , TGF Record, Tab Conversion Regulations, supra at s. 9(2). 23 Grout Affidavit, at para. 24, TGF Record, Tab 2.

11 - 9 - meal expenses and remuneration in respect of their attendance at policyholder committee meetings TGF proposes that the committee members be paid a reasonable per diem amount for dedicating their efforts, professional skills as well as time to this negotiation. The committee members will, for example, regularly review complex financial and actuarial information, strategize approaches to the negotiation and deploy their professional experiences to navigate the inevitable challenges of this negotiation process. As such, TGF submits that a per diem amount of $800 and a half day amount of $400 is reasonable in the circumstances. 25 SSUE 4: Limitation of Liability 22. Court officers such as receivers, monitors and representative counsel are routinely.. protected from liability (gross negligence and wilful misconduct excepted) in the discharge of their duties. 23. t is submitted that, in addition to the indemnity protections provided in section 9(8) of the Conversion Regulations, the six committee members, TGF as representative counsel and any expert retained to assist the NMP Committee should not incur any liability or obligation as a result of their appointment or the carrying out of their duties pursuant to the Conversion Regulations, save and except for any gross negligence or wilful misconduct on their part. Additionally, nothing should 24 Conversion Regulations, supra at s. 11 (1 ). 25 Grout Affidavit, at para. 25, TGF Record, Tab 2.

12 ,. [ l ' l derogate from the committee members' protections granted by the Conversion Regulations. 26 PART V - ORDER REQUESTED 24. TGF respectfully requests an order appointing the applicants Adriana Davies, Paul Duncan, George Fowlie, Guy Legault, William Paul McCrossan and Wilberdien (Willy) Robinson as members of the NMP Committee in the form of the Order attached to the Notice of Motion. ALL OF WHCH S RESPECTFULLY SUBMTTED this 15th day ofnovember, ( Toronto-Dominion Centre Toronto, ON M5K 1K7 John Finnigan (LSUC# 24040L) Tel: (416) l. l 26 Grout Affidavit, at para. 26, TGF Record, Tab 2. Counsel for the Non-Mutual Policyholders of Economical Mutual nsurance Company

13 SCHEDULE "A" RELEVANT STATUTES MUTUAL PROPERTY AND CASUALTY NSURANCE COMPANY WTH NON MUTUAL POLCYHOLDERS CONVERSON REGULATONS, SOR/ nterpretation Definitions 1 The following definitions apply in these Regulations. eligible mutual policyholder means a person who holds a mutual policy if (a) they held it on the eligibility date; (b) they applied for it before the date specified in the resolution passed under section 3 and it was issued after the eligibility date but before the day on which the special resolution referred to in section 5 is passed; or. ( c) they held it before the eligibility date but it lapsed before that date and was reinstated after that date but before the day on which the special resolution referred to in section 5 is passed. (souscripteur admissible d'une police mutuelle) eligible non-mutual policyholder means a person who. (a) holds a non-mutual policy and has done so for the 12-month period ending on the eligibility date; or (b) belongs to any other group of policyholders specified in the resolution passed under section 3. (souscripteur admissible d 'une police non mutuelle) eligible policyholder means (a) an eligible mutual policyholder; or (b) an eligible non-mutual policyholder. (souscripteur admissible) Application Companies with non-mutual policyholders 2 These Regulations apply to mutual property and casualty insurance companies in which some of the policyholders hold non-mutual policies.

14 Negotiations Between Classes of Policyholders i. Committee membership 9 (1) Any eligible policyholder may submit to counsel for the class of policyholders to which they belong, in the time and manner set out in the initial order, an application for membership on the policyholder committee for that class. Restrictions (2) Applicants must not have any interest that is in conflict with that of the eligible policyholders they seek to represent and must not be an officer, employee or related party of the converting company. Filing and service (3) Counsel must file with the court all applications received under subsection (1) and must serve on counsel for the other class of policyholders and on the converting company the names of the applicants from the class of policyholders they represent. Publication ( 4) The converting company must publish on its website the names of all applicants for membership on each policyholder committee. Objections (5) Any eligible policyholder or counsel for a class of policyholders may file, in the time and manner set out by the court in the initial order, an objection to the candidacy of a policyholder who has submitted an application for membership on a policyholder committee. Appointment (6) The court must appoint at least three and not more than nine eligible policyholders to be members of each policyholder committee and must notify the converting company and counsel for the class of policyholders represented by that committee of its decision following a hearing at which the court assesses the ability of each applicant to fairly and adequately represent the interests of the class of policyholders in question, including by taking into account their experience in negotiations and business and financial affairs and by having regard to any objections filed under subsection (5). Publication r (7) The converting company must publish on its website the names of the members of each policyholder committee. Obligations of company in respect of policyholder committee members

15 (8) n any legal proceeding, the converting company is bound to take up the interest for and assume the defence of any member of the policyholder committees for anything done or omitted to be done in good faith in the performance of their functions and, if applicable, indemnify that member. Duration of representation (9) The policyholder committees are disbanded on the day on which the notice referred to in subsection 14(1) is sent or the day on which the conversion process is terminated, whichever is earlier. Costs payable by converting company 11 (1) The court must determine, having regard to their reasonableness, the amounts payable by a converting company in relation to the negotiations referred to in section 12, including the costs of counsel and any experts consulted by the policyholder committees, remuneration for policyholder committee members and reimbursement of their expenses for travel, accommodation and meals in respect of attendance at policyholder committee meetings. Payment (2) All amounts determined by the court must be paid by the converting company no later than the day on which it seeks the Superintendent's authorization to send the notice referred to in paragraph 237(1.2)(a) of the Act or the day on which the conversion process is terminated under section 21, whichever comes first, or on any other day that the court may set. Method and Benefits Purpose of negotiations l. 12 (1) The policyholder committees, with the assistance of the counsel appointed by the court, must enter into negotiations to establish the method of allocating the value of the converting company and to determine whether any benefits will be provided to any persons or classes of persons - other than eligible policyholders - as a result of the conversion. Method of allocating value of converting company (2) The method of allocating the value of the converting company among eligible policyholders and, as the case may be, any persons or classes of persons - other than eligible policyholders - must be described in detail and set out

16 (a) the basis on which any variable amount of benefits will be calculated; theni; (b) any fixed, minimum or maximum amount of benefits to be provided to each of ( c) the rationale for choosing the method of determining and allocating the benefits; and (d) the aggregate value of the benefits.. Calculation of variable amount (3) The variable amount of benefits referred to in paragraph (2)(a) must, in respect of each eligible policyholder, be calculated having regard to at least the following factors: (a) their obligations, rights and benefits; (b) the premiums paid by them; (c) the length of time they have held a policy with the company; and (d) the historical growth of the company's surplus account. Persons or classes of persons other than eligible policyholders (4) f benefits will be provided to any persons or classes of persons - other than eligible policyholders- as a result of the conversion, the policyholder committees must establish a list of those persons or classes of persons to whom benefits will be provided including, any persons or classes of persons suggested by the converting company and approved by the policyholder committees. Approval by policyholder committees (5) The method of allocating the value of the converting company and, if any, the list of persons or classes of persons - other than eligible policyholders - are considered approved by the two policyholder committees once at least two thirds of the members of each committee approve them.

17 N THE MATTER OF THE NSURANCE COMPANES ACT, R.S.C. 1991, c. 47, AS AMENDED, AND THE MUTUAL PROPERTY AND CASUALTY NSURANCE COMPANY WTH NON-MUTUAL POLCYHOLDERS CONVERSON REGULATONS, SOR/ Court File No.: CV CL ONTARO SUPEROR COURT OF JUSTCE (COM:MERCAL LST) Proceedings commenced at Toronto FACTUM OF THORNTON GROUT FNNGAN LLP (MOTON TO APPONT COM:MTTEE MEMBERS RETURNABLE NOVEMBER 29, 2016) THORNTON GROUT FNNGAN LLP 100 Wellington Street West Suite 3200, P.O. Box 329 TD West Tower Toronto-Dominion Centre Toronto, ON M5K 1K7 John Finnigan (LSUC# 24040L) Tel: (416) Denisa Mertiri (LSUC# ) Tel: (416) Counsel for the Non-Mutual Policyholders of Economical nsurance Company