Ohio National Facing New Lawsuit Over Trail Comp Cut

A new lawsuit was filed Monday challenging Ohio National's decision to stop paying trail commissions on certain variable annuity contracts.

Stephen K. Cook, an investment advisor representative with Triad Advisors, a Dallas, Texas broker-dealer, filed the class-action lawsuit in U.S. District Court for the Southern District of Ohio. Ohio National faces several lawsuits over its September decision to stop paying trails.

The insurer informed broker-dealers in a Sept. 28 letter that it would terminate "any and all servicing agreements" on Dec. 12, 2018. 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.

Cook filed a class-action lawsuit on behalf of "thousands of members" that his complaint concedes must be found and identified.

"Plaintiff will fairly and adequately protect the interests of the Class and has no interests that are adverse to, or which materially and irreconcilably conflict with, the interests of the other members of the Class," reads the lawsuit filed by Helmer, Martins, Rice & Popham, a Cincinnati law firm.

The class-action process is the fairest way to resolve the claims against Ohio National, the lawsuit claims.

Can 'Take Years'

Another plaintiff suing Ohio National initially filed a class-action claim. But attorneys for LPL Financial broker Lance Browning refiled it as an individual lawsuit in January, with an attorney telling InsuranceNewsNet that class-action claims can "take years" to resolve.

Otherwise, the Cook lawsuit makes the same claims as the others, all relating to the loss of commission compensation.

"Defendants have breached the Selling Agreement and are unlawfully retaining millions of dollars that rightfully belong to Plaintiff and the Class in the form of unpaid commissions," the lawsuit reads.

Ohio National does not comment on legal matters, a spokeswoman has said.

But the insurer's attorneys have asked the Southern District of Ohio court to dismiss Browning's lawsuit. The insurer accused Browning of making "a grab bag of claims" to which he "is neither a party nor a third-party beneficiary."

A third lawsuit is pending in the Southern District, filed by Veritas Independent Partners, an independent broker-dealer based in Conway, Ark. In a response to Veritas, Ohio National either denied allegations or cited a lack of "sufficient information" to most of the claims.

Ohio National also faces a lawsuit filed in New Jersey challenging the decision to cut trail commissions.

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 john.hilton@innfeedback.com.

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.