Ohio National is facing yet another lawsuit over the firm’s termination of trail commissions on variable annuity contracts.
In late March, Somerset Securities filed a case in U.S. District Court in Oregon. The broker-dealer alleges breach of contract, breach of duty of good faith and fair dealing, and unjust enrichment. The firm is seeking to have its 2015 selling agreement reinstated, and it is asking for monetary damages to be decided by a jury.
In 2018, Ohio National made the highly controversial decision to end trail commissions for advisers whose clients bought VAs with guaranteed minimum income benefit riders. The move, which took brokers by surprise, prompted a wave of lawsuits.
“The majority of variable annuities sold by [Somerset] contained the death benefit or GMIB rider, while the fixed index annuities paid a lifetime income benefit similar to the variable annuities,” Somerset's lawsuit stated. “Most customers of plaintiff anticipated keeping their annuities for decades due to the attractive living and death benefits offered in defendants’ annuities.”
A trail commission was one compensation option that Somerset selected for the sale of Ohio National annuities, with the benefit to advisers being ongoing payments from the insurer over time.
Firms including UBS, RBC and Veritas Independent Partners, among others, have filed cases against Ohio National, and much of the litigation is pending. The Veritas case, in which Avantax Investment Securities is also a plaintiff, is a class action and could eventually have wider consequences for other lawsuits.
In January, Kestra Financial reached a confidential settlement with the insurer, and that case has since been closed.
Ohio National declined to comment on the recent lawsuit filed by Somerset.
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