Arbitrators sided with a California couple in their dispute with Minnesota Life Insurance Company and a former representative for Securian Financial Services, Financial Advisor reports.
Daniel M. Shapiro and his wife Rhoda Shapiro claimed they were steered into placing a large sum of money into a variable life insurance policy that led to high commissions and excessive premiums. A Financial Industry Regulatory Authority arbitration panel ordered Minnesota Life and the representative Brian Freeman, to pay a total of $975,000 in fees and damages to the couple.
The matter involved a term life insurance policy purchased by the Shapiros in the 2000s that became a variable adjustable policy worth $2 million. In a filing in the California Superior Court, the Shapiros claimed that Freeman told them that after a $275,000 lump sum injection, their premiums on the policy would be $24,000 per year through the age of 85. Instead, the policy Freeman arranged required an annual premium of $147,600, according to the lawsuit.
Daniel Shapiro also said Freeman told him to put $270,000 into the policy to extend its coverage, but that the change generated a $107,000 commission for Freeman.
The couple sued Minnesota Life and Freeman for “intentional mispresentation including omission of material facts; negligent misrepresentation; professional liability; breach of fiduciary duty; breach of contract; financial abuse of an elder.”
They said the insurance policy was “inherently deceptive” and “abusive”, and that it encourages agents “to impose policy acquisition charges and pay its agents sales commissions over and over again for the same policy, which is unheard of wholly inconsistent with the market.”
After the California state court sent the matter to arbitration, the FINRA panel ordered Minnesota Life and Brian Freeman to pay $295,200 in compensatory damages to the plaintiffs, while also awarding the couple $106,720.00 in damages for return of commissions; $246,312.00 in costs for expert witness fees; $293,355.00 in attorneys’ fees; and $33,710.00 in costs for the stenographer.
Calls to Freeman were not returned, and Securian said in an email that it does not comment on litigation. Two other representatives were named in the filing but were not held liable in the arbitration.
Daniel Shapiro told Financial Advisor that he will continue to pursue state charges against Minnesota Life in a class-action suit.
Handling financial services disputes requires counsel with a significant understanding of the industry, the laws, rules and regulations that impact our clients and the forums in which disputes are adjudicated. At Hyman Cotter PC, our attorneys’ unparalleled litigation experience comes from leveraging their industry-specific knowledge developed from working at firms such as Morgan Stanley, UBS Financial Services, serving as outside counsel for some of the world’s largest law firms, and through prior affiliations with the SEC. For more information about our arbitration and litigation services, please contact us at 833-665-0784 or through our online contact form.
