The action by Ohio National means that they will no longer pay commissions on existing VA annuities as the agents and brokers claim was promised to them in their servicing agreements. As a result of the insurance company’s letter terminating commissions, numerous lawsuits across the country have been filed by its brokers and agents.
The Lawsuits: Background
Between 2012 and 2018, brokers and agents sold Ohio National’s variable annuities that guaranteed buyers a 6 percent interest rate no matter what happened in the economy. They would get the benefit of rising interest rates, but if interest rates fell below 6 percent, they would still get 6 percent.
The contract the company had with its broker/agents guaranteed that they would receive trail commissions until the annuity they sold was either “surrendered or annuitized.” Annuity sellers claim the termination of the trail commissions violated this clause of their contract with Ohio National.
The termination of this agreement affects thousands of brokers. One broker who filed a lawsuit says this means he will lose approximately $90,000 a year in commissions.
As of March 12, 2019, lawsuits have been filed in Alabama, California, Indiana, Massachusetts, Minnesota, Mississippi, New Jersey, Ohio, and Texas. Defendants in the lawsuit are Ohio National Life Insurance, Ohio National Life Assurance Corp., Ohio National Equities Inc., and Ohio National Financial Services Inc.
The lawsuits essentially claim that Ohio National is in breach of contract and the defendants “are unlawfully retaining millions of dollars that rightfully belong” to the plaintiffs “in the form of unpaid commissions.” Ohio National refuses to make any public comment about the lawsuits, but is vigorously defending itself in court.
Ohio National’s Defenses
To date, in two separate court cases, Ohio National had presented two defenses. In two separate court cases, it has filed summary judgment motions. In each case, it presented a difference defense.
1) Agreement to pay commissions terminated with termination of selling contract with the agents. Ohio National claims the agreements it had with agents for the trail commissions terminated when the contract terminated its contract with the agents. Approximately 11,000 independent agents were affected by the termination decisions. Another 4,000 career agents were not affected.
One attorney for one group of plaintiffs disputes that representation of the contract. He says the selling contracts are all similar and all essentially say the commissions will be paid “beyond the life of the contract.”
Some agreements do contain a provision allowing Ohio National to change the commission rate, but there was nothing in the agreements that gave it the right to completely terminate payments and keep the commission money for its own use.
2) The company is not in breach of contract according to the contract language. Ohio National has claimed that the language of the selling agreements clearly says that the commissions would be paid while the selling agreement was in force and until the annuity was surrendered or annuitized.
An attorney for Ohio National claims that trail commissions were to be paid only if both clauses were in force. Therefore, since the company only terminated commissions to those with whom it no longer had selling agreements, the lawsuits should be dismissed.
An attorney for the plaintiffs says this defense “is a real stretch.” That the clause means that the commissions will be paid “as long as the person has the policy and hasn’t surrendered it.” The clause is the same as one used by many insurance companies that are still paying commissions.
So far, there has been no move to consolidate the large number of lawsuits although reports are that some of the lawyers for plaintiffs have discussed doing this. Neither of the two courts where summary judgment has been filed has made a ruling.
Watch this space for updates as they become available.