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Retirement Planning > Social Security

Commission Case Stays In Texas

By Allison Bell

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National Group Underwriters Inc. has won a fight to keep a commission suit in the U.S. District Court near its offices in Fort Worth, Texas.

U.S. District Judge Terry Means blocked an effort by the defendant, Southern Security Life Insurance Company, Lake Mary, Fla., to move the case to a court near the Salt Lake City headquarters of its parent company, Security National Financial Corp.

“Although its corporate parent is located in Salt Lake City, Utah, [Southern Security] is a Florida corporation with its principal place of business in that state,” Means wrote, explaining his ruling.

Because National Group is based in Texas, and Southern Security in Florida, moving the case to Utah makes little sense, the judge added.

The ruling deals only with procedural matters, not with the underlying allegations.

Representatives for Southern Security were not available for comment.

Christian Tucker, a lawyer for National Group, praised the ruling. “I think the court made the right decision.”

NGU agreed in October 1997 to distribute small whole life insurance policies for Southern Security.

Agents were supposed to get a high commission for the first year each policy was in force, and a small renewal commission in subsequent years, according to a brief filed by National Group.

The rate of the commission, which is in dispute, was either 88% or 110% of the first-year premium, along with a 27% production bonus NGU says.

Southern Security could charge back the unearned portion of commissions when policies lapse, but it also paid NGU a small percentage of the commissions in the form of an “override,” NGU says.

Security National acquired Southern National in 1999. NGU sued Southern National in state court in March 2000 over what it said were problems with Southern National commission calculations.

Southern Security responded by accusing NGU of interfering with its relationship with insurance agents. It also asked the court to transfer the action to Utah, under a federal law that permits courts to transfer cases for the convenience of the parties.

“The moving party bears the burden of proving that transfer is appropriate,” Judge Means wrote in his opinion.

Relevant factors include the plaintiffs choice of a forum, the convenience of parties and witnesses, the place of the alleged wrong, the location and cost of lawyers, and the relative congestion of the courts, the judge wrote.

NGUs preference is especially important, because it is the plaintiff, and its own principal place of business is in North Texas, the judge said.

Moreover, the judge wrote, leaving the case in North Texas should be convenient for most witnesses, because six of the seven key witnesses who live in Utah are employees of Security National or its subsidiaries.

Reproduced from National Underwriter Life & Health/Financial Services Edition, December 10, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

Copyright 2001 by The National Underwriter Company. All rights reserved. Contact Webmaster

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