Jackson, Miss.-based LPL Financial broker Chris Noone is the latest to file a lawsuit against Ohio National Life Insurance Company and its affiliates for cutting trail commissions on annuity contracts with guaranteed minimum income benefit riders.
In September, Ohio National notified broker/dealers that it was terminating selling agreements as of Dec. 12 and ceasing payments of trail commissions on annuity contracts with a GMIB rider. An Oct. 29 email from Ohio National says the company will offer clients a buyout of their variable annuity contract with GMIBs from Nov. 12, 2018 to Feb. 11, 2019.
The move is the latest in a string of similar legal actions against the insurer: last month, UBS sued over the lost commissions in a New Jersey district court; Cetera Financial Group filed FINRA arbitration claims in late November; Veritas Independent Partners filed a suit in Ohio Southern District Court; another LPL broker, Lance Browning, also filed a class action suit in that court; and Commonwealth Financial Network is suing the company in a Massachusetts district court.
Noone filed the lawsuit in the U.S. district court for the Southern District of Mississippi in late December, claiming breach of contract, unjust enrichment, tortious interference with business relations, promissory estoppel and declaratory relief. He’s seeking $75,000 in damages, not including interest and costs.
“By announcing that it will cease paying trailing commissions as of Dec. 12, 2018, Ohio National has breached the selling agreements as to existing annuities that haven’t been surrendered or annuitized,” the claim said. “Servicing a GMIB Annuity is complicated. A GMIB Rider affects, among other things: the amount of withdrawals allowed per year on the contract; the timing of withdrawals; the timing of annuitization; and the expected return per year from the annuity contract.”
Angela Meehan, spokeswoman for Ohio National, declined to comment specifically on Noone’s lawsuit, but said the company continues to support advisors with clients in these annuities. She did say the services an advisor provides to clients doesn’t fall under Ohio National’s contractual agreements; rather, those services are under the purview of the b/ds and should be governed by agreements with those firms.
“Specifically, there is no language in our contracts or product prospectuses that provide for this type of arrangement,” Meehan said in a statement. “While the advisor and client may have a relationship, there is no annual fee or charge that the policyholder pays to Ohio National in order to receive advisory services.”
In early September, the insurer announced plans to exit the annuities and retirement plan business and focus solely on its life and disability income insurance lines. Other insurers have taken similar steps. In August 2017, Metlife completed the spin-off of its life insurance and annuities businesses, creating Brighthouse Financial, a separate entity.