Five brokers lose Ohio National lawsuit over annuity commissions

Judge rules the brokers weren't beneficiaries of the selling agreement between the insurer and broker-dealers

Nov 22, 2019 @ 1:51 pm

By Greg Iacurci

A group of five brokers lost a lawsuit against Ohio National Life Insurance Co. over the insurer's termination of commission payments for certain variable annuity policies.

Judge Emily C. Marks of U.S. District Court in Alabama dismissed all claims made by the brokers — Susan Moore and Chris Noone of LPL Financial, Keith Bowers of Next Financial Group, Tracy Lentz of Securities America and Trip Whatley of ProEquities Inc.

The ruling, delivered Tuesday, comes shortly after Ohio National won early-October victories in two similar cases brought by brokers Lance Browning and Stephen Cook, who are respectively affiliated with LPL and Next Financial.

A judge has yet to rule in cases brought against Ohio National by several broker-dealers.

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The cases revolve around the insurer's termination of the trail commissions brokers had been receiving for selling clients certain Ohio National variable annuity policies. In some cases, brokers stand to lose tens of thousands of dollars as a result of the policy, which took effect in December 2018 and which industry executives say is a first-of-its-kind move for an annuity provider.

In the most recent case, Trip Whatley et al v. The Ohio National Life Insurance Co. et al, plaintiffs argued that they are intended third-party beneficiaries of selling agreements Ohio National had in place with broker-dealers, and that the insurer therefore breached a contract with them by terminating those selling agreements.

However, Ms. Marks, the Alabama judge, sided with Ohio National in ruling that the brokers are not intended third-party beneficiaries under the selling agreements.

This was the case, she said, because Ohio National paid commissions directly to the broker-dealers rather than the brokers, and a separate agreement governed the payment of commissions from broker-dealers to their representatives.

The reasoning was similar to that of the Ohio judge who had dismissed the "nearly identical cases" brought by Mr. Browning and Mr. Cook.

"The analysis in Browning and Cook is on point and persuasive," Ms. Marks wrote.

Ms. Marks also dismissed claims of unjust enrichment and promissory estoppel (basically, the principle that a promise in enforceable by law).

"We are pleased with the dismissal of this suit," Angela Meehan, an Ohio National spokeswoman, said of the ruling. "We believe the court has reached the right decision as the individual registered representatives who filed this suit are not parties to Ohio National's selling and servicing agreements. We hold ourselves, the relationships we build, and the products we deliver to the highest standards of quality."

Attorneys for the plaintiffs didn't respond to a request for comment.

In a separate case, a jury ruled in late October that Ohio National must pay $213,000 in damages to an insurance agent formerly employed by the company after it breached recruiting agreements it had in place with the agent.

The agent, Elisia Lattimer, subsequently filed a complaint against the firm with the Ohio Department of Insurance alleging an executive broke state law by offering to pay half of a customer's monthly life insurance premium, and that three executives tried to cover up the activity.


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