A second lawsuit this week was filed Thursday against Ohio National over its decision to abandon trail commissions to be paid out on select variable annuity contracts.
Veritas Independent Partners, an independent broker-dealer based in Conway, Ark., filed the lawsuit in the Southern District of Ohio court. Lance Browning, an LPL Financial broker based in Whitehouse, Texas, filed a similar lawsuit Tuesday against Ohio National.
Ohio National informed broker-dealers in a Sept. 28 letter that it will terminate "any and all servicing agreements" on Dec. 12. That means all compensation, specifically trail commissions, stops 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 tortiously devised a scheme to save money by refusing to pay owed trail commissions to Veritas," the lawsuit reads.
In addition to its decision to stop paying trail commissioners, Ohio National followed up with an Oct. 29 email to clients offering a buyout of the VA contracts with the GMIB rider.
"That illicit effort seemed designed to pressure plaintiff to counsel their clients to purchase substitute financial products or result in advisors providing less service to GMIB annuity clients," the lawsuit alleged.
Veritas asked the court to issue an injunction maintaining the current contract provisions, as well as to certify rights to all trail commissioners in the contracts.
An Ohio National spokeswoman said the company does not comment on pending litigation.
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 firstname.lastname@example.org.
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