John Hancock, Nationwide Targeted in Life Insurance Lawsuits

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Carmen Castro-Pagan

John Hancock Life Insurance Co. of New York and Nationwide Life Insurance Co. are in the crosshairs of a pair of lawsuits challenging their involvement with a disbarred attorney who mishandled millions of dollars of employer-sponsored cash value life insurance policies ( Hausknecht v. John Hancock Life Ins. Co. of N.Y. , E.D. Pa., No. 2:17-cv-03911, complaint filed 8/31/17 ; Corman v. Nationwide Life Ins. Co. , E.D. Pa., No. 2:17-cv-03912, complaint filed 8/31/17 ).

At issue in the case is the multiple-employer welfare arrangement designed and created by disbarred attorney John Koresko and his entities—commercially known as REAL VEBA. The arrangement drew multiple lawsuits by the Labor Department and participants who suffered losses due to Koresko’s mishandling of several aspects of the REAL VEBA.

John Hancock and Nationwide are accused of selling their life insurance products through the arrangement and encouraging their agents to recommend it despite allegedly knowing that its nature was misrepresented, according to two separate lawsuits filed Aug. 31 in federal court in Pennsylvania. The insurers also allowed Koresko to convert plan assets by authorizing loans in violation of ERISA, the lawsuits alleges.

Nationwide hasn’t been served with the lawsuit yet, Nationwide’s spokesman Ryan Ankrom told Bloomberg BNA Aug. 31 via email. “We’ll examine the allegations carefully and explore all our legal options,” Ankrom said.

The lawsuit against Nationwide was filed by James Corman, Energy Alternative Studies Inc., and its welfare benefit plan. Nationwide allegedly sold at least 13 policies through the REAL VEBA to at least 12 plans.

The Ohio-based insurance company changed the owners and beneficiaries of 13 policies despite knowing that Koresko lacked the authority to make those changes, the lawsuit said. In addition, Nationwide converted plan assets by allegedly making at least eight separate loans to Koresko for $2 million and concealing it from participants. The loans were secured by the cash value in policies owned by the plans.

Aric D. Hausknecht, the Complete Medical Care Services of New York PC, and its welfare benefit plan filed the lawsuit against John Hancock. They claim that John Hancock sold at least 31 policies through the arrangement to at least 21 plans. The Michigan-based insurer allegedly converted plan assets by making at least six separate loans to Koresko for $2.9 million, the lawsuit alleges.

John Hancock didn’t immediately respond to Bloomberg BNA’s request for comment.

Koresko in 2015 was ordered to pay more than $38 million for violating the Employee Retirement Income Security Act by transferring plan assets from plans that he sold to employers for his personal benefit or for the benefit of companies he owned and controlled. Last year, a law firm agreed to pay $980,000 to settle a lawsuit challenging its involvement with the Koresko scheme.

Ira B. Silverstein represents the participants.

To contact the reporter on this story: Carmen Castro-Pagan in Washington at ccastro-pagan@bna.com

To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bna.com

For More Information

Text of the Nationwide lawsuit is at http://src.bna.com/r9C.

Text of the John Hancock lawsuit is at http://src.bna.com/r9A.

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