Security Benefit is asking a Florida court for a stay in a lawsuit challenging its use of proprietary indexes until a similar lawsuit is decided in a Kansas City appeals court.
To recap, the two lawsuits are:
A class-action lawsuit filed in the U.S. District Court for the Southern District of Florida originated in November. Nine plaintiffs say Security Benefit manipulated clients to invest most of their fixed indexed annuity account values in the company's synthetic index, which performed worse than portrayed.
Ogles v. Security Benefit was filed in May 2018 by Albert Ogles. He made similar claims, which were denied by a U.S. District Court for the District of Kansas judge in July. Ogles immediately appealed to the Tenth Circuit Court of Appeals.
Both lawsuits claim the company’s use of the proprietary index amounted to racketeering. It is one of many substantially similar allegations in both lawsuits, Security Benefit attorneys argue in requesting the stay.
The request cites the “first-filed rule,” which states that “when parties have instituted competing or parallel litigation in separate courts, the court initially seized of the controversy should hear the case.”
Final briefs are due in the Ogles case on Feb. 25 and the Tenth Circuit Court has told parties that “no further extensions of time” will be granted. Security Benefit is asking for a stay until 30 days after the Tenth Circuit decision is handed down.
Attorneys: Many Similarities
Security Benefit, represented by attorneys from the West Palm Beach firm Akerman LLP and Alston & Bird LLP, a Los Angeles firm, say the following similar claims are made in both lawsuits:
That after being acquired by Guggenheim Partners in 2010, "Security Benefit, in collaboration with Independent Marketing Organizations and other entities, embarked on a fraudulent scheme to defraud annuity purchasers."
That a "fraudulent scheme" centered around the development and marketing of non-traditional indexes, including the ALTVI, which was available on Security Benefit’s Total Value Annuity product. Both actions allege that Security Benefit with IMOs and other entities, fraudulently engineered and “rigged” the ALTVI such that the crediting option associated with the ALTVI "could and would never perform as represented by Security Benefit."
That the TVA and the ALTVI crediting option were falsely represented as providing “uncapped” performance, and this alleged misrepresentation purportedly drove policyholders to allocate premiums to the ALTVI crediting option instead of “capped” options also available in the TVA.
That Security Benefit misrepresented, and omitted information about, the operation, impact, and import of the ALTVI’s “volatility control overlay” feature, including this feature’s potential adverse impact on the ALTVI’s performance and index credits on the TVA product.
That Security Benefit misrepresented the future performance of the ALTVI through purportedly deceptive illustrations that were designed to inflate the potential returns on the ALTVI crediting option.
That this "fraudulent scheme" was conducted through the affairs of a RICO enterprise comprised of Security Benefit, the IMOs, and other entities, and that the insurer used interstate mail and wire to transmit, among other things, consumer brochures, illustrations, and annuity applications in furtherance of the alleged scheme to defraud.
Michael T. Castino, director of public relations for Security Benefit, has said in a brief statement: “SBLIC believes that it has substantial defenses to the claims alleged and intends to vigorously defend itself in the action.”
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]. Follow him on Twitter @INNJohnH.