|"ING Hit With Suit Over Axed Annuity"
February 7, 2011
By Beagan Wilcox Volz
A man who liquidated his Nationwide annuity in early 2009 and transferred the proceeds of more than $340,000 to ING to purchase another annuity is now suing the Dutch-owned firm for breach of contract.
In a lawsuit filed in district court Monday, Michael Malone, a Fort Myers, Fla., resident, says that ING breached its contract with him by unilaterally rescinding or failing to honor the annuity contract, including the optional living benefit riders.
Malone claims that in March 2009 he sent an initial premium payment to ING through a Section 1035 exchange for its GoldenSelect ES II annuity. ING received the payment and, according to the complaint, “thereby entered into a contract with Plaintiff for the ING GoldenSelect ES II Annuity” — a group and individual deferred combination variable and fixed annuity.
But in late April 2009, ING, “for unknown reasons,” issued a check to Nationwide Life for an amount about $3,000 greater than what it had received from Malone. Nationwide accepted the check and reissued an annuity contract to the plaintiff, although it was at a lower guaranteed minimum withdrawal rate than the ING annuity, the lawsuit claims.
The plaintiff says he never received a copy of the contract from ING, but claims the firm has a copy of it.
ING announced in January 2010 that, effective in March, it would discontinue sales of the GoldenSelect line of annuities.
In a document distributed to broker-dealers, ING states that for 1035 exchange and transfer business, both the application and exchange or transfer paperwork must have been signed and dated on or before March 12, 2010, and received before March 15, 2010.
While ING had stated publicly in 2009 that it would discontinue sales of the product, it’s unclear what kind of communication the firm had with potential investors and existing policyholders about this during that time.
In March 2010, the firm announced it was rolling out a new variable annuity, ING Select Opportunities, to replace the GoldenSelect line.
The case appears to be an outgrowth of a wider trend in which insurance carriers were forced in the wake of the financial crisis to scale down guarantees sold with variable annuity contracts, raise prices or remove products altogether.
To that end, ING ended sales of its Select Opportunities variable annuity in December and no longer sells retail variable annuities, Ignites has reported. Genworth also recently announced that it was getting out of the retail VA business, and Prudential and Nationwide announced they are each trimming the guarantees on one of their VA riders.
A spokesman for ING declined to comment, saying the firm does not comment on pending litigation.
Firms don’t have to file a regulatory supplement that they’re discontinuing sales of annuities, but they sometimes do, says Tamiko Toland, managing director of retirement income consulting at Strategic Insight.
J. Andrew Meyer, an attorney at Morgan & Morgan who represents the plaintiff, says his client is seeking damages because he could not get as advantageous a rate with another firm, not because of surrender charges. Meyer also says ING has not provided information about the interaction between the firm and his client.
“They may have justifications, but they’ve not provided them,” says Meyer. “We’ll be interested to see what their defense is to this suit.”
Meyer says that from his firm’s perspective, it’s a simple breach of contract case.
But others are not so certain.
“The big question is: Does the fact that a premium payment was sent in consummate the deal or not?” says Steven Davis, partner at Stradley Ronon and co-chair of the firm’s insurance practice group. “The answer to that question is likely not as straightforward as the plaintiff makes it out to be and may depend on state law, which all makes a national class even more questionable.”
Meyer says there are enough people like his client to warrant a class action, but could not provide a precise number. He says he does not know of other similar lawsuits filed against ING.