Ohio National Answers Lawsuits On Trail Commission Cut

Ohio National headquarters in Cincinnati.

In a pair of very different responses, Ohio National responded last week to lawsuits filed in the Southern District of Ohio court.

In an 11-page, point-by-point response to a lawsuit by Veritas Independent Partners, an independent broker-dealer based in Conway, Ark., Ohio National either denied allegations or cited a lack of "sufficient information" to most of the claims.

Veritas is one of many disgruntled former partners with active claims against Ohio National over its decision to abandon contracts, and by extension, trail commissions to be paid out on select variable annuity contracts.

At issue is the contract language cited by Veritas: "Trail commissions will continue to be paid to the broker-dealer of record while the selling agreement remains in force and on any particular contract until the contract is surrendered or annuitized."

Responding to the italicized portion of the claim, Ohio National said: "deny that the proffered construction of certain highlighted language ... is correct."

In a second response, Ohio National attorneys asked the Southern District court to dismiss a lawsuit filed by Lance Browning, an LPL Financial broker based in Whitehouse, Texas.

The insurer accused Browning of making "a grab bag of claims" to which he "is neither a party nor a third-party beneficiary."

Browning sold annuities with Morgan Keegan and UBS/Paine Webber prior to joining LPL in 2012, court documents say. He has sold more than 100 annuities with trailing commissions that yield him $89,000 annually.

Browning's class-action lawsuit claims Ohio National is guilty of "breach of contract" and "unjust enrichment," among other claims.

'An End Run'

But Ohio National, represented by Zeiger, Tigges & Little, a Columbus, Ohio law firm, said its contracts are with the broker-dealer, not the broker.

"As a stranger to the underlying contracts upon which he seeks relief, Browning lacks standing to seek the same -- whether directly via his claims for breach of contract and declaratory relief, or indirectly via his other 'claims' that are plainly designed to make an end run around his lack of contractual privity."

An Ohio National spokeswoman has said the company does not comment on pending litigation.

Ohio National informed broker-dealers in a Sept. 28 letter that it would terminate "any and all servicing agreements" on Dec. 13. That means all compensation, specifically trail commissions, stopped on that date.

The decision is believed to be the first of its kind in the industry and affects variable annuity contracts purchased with a guaranteed minimum income benefit rider. The GMIB is appealing to clients looking for guaranteed income in retirement.

"Ohio National devised a scheme to save money by refusing to pay owed trail commissions to Veritas," the Veritas lawsuit reads.

Ohio National distributes life and annuities through an independent producing general agent channel with about 11,000 agents, and through a career agency channel with about 4,000 agents, the company said. Career agents are apparently unaffected by the decision to stop paying trails on VAs with a GMIB.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected].