An Ohio law firm that represented a former Nationwide Insurance agent for a $42.8 million jury verdict is getting ready to file a class action against the insurer “in the near future.”
Attorney Caryn Groedel and her law firm Caryn Groedel & Associates in Cleveland represented former agent Christine Lucarell. In November, a jury in Mahoning County, Ohio, handed down $42.8 million in damages for Lucarell for her claim that the insurer imposed unrealistic terms on her agency intended to make her fail and withheld support services.
Since then, the Columbus, Ohio-headquartered Nationwide has filed motions requesting judgment in its favor notwithstanding the verdict or, in the alternative, a new trial. Nationwide has denied all allegations made by Lucarell.
“Nationwide believes there were significant legal and factual errors made at the trial. It’s important to note that our objective is to recruit agents and set them up to succeed, not to fail,” according to a Nationwide statement provided to Insurance Journal.
Nationwide is also arguing that the $42.8 million damage amount awarded by the jury in the civil suit is not feasible under Ohio’s tort-reform statutes. These statutes require the total award to be under $10 million, according the insurer.
Groedel told Insurance Journal that since the verdict was announced, she has so far heard from some 70 former Nationwide agents with similar complaints. She will be the lead attorney in the forthcoming class action. Lucarell’s case is “just the tip of the iceberg,” said Groedel.
Lucarell’s Case ‘Just the Tip of the Iceberg’
In Christine Lucarell v. Nationwide Mutual Insurance Company in the Court of Common Pleas, Mahoning County, Ohio, former Nationwide agent Lucarell alleged that Nationwide recruited Lucarell and hundreds of others around the country through the insurer’s Agency Executive (AE) program as exclusive agents — with a chance to become independent agents after a successful completion of a pre-agreed 36-month production time. Lucarell was one of around 500 agents that took part in the insurer’s three-year AE program.
In her complaint, Lucarell alleged that she was required to take out a loan from Nationwide’s Federal Credit Union (NFCU), now called Nationwide Bank, to cover initial business expenses. But Lucarell charged that Nationwide later required her to sign modified plans that set increasingly “unrealistic” and “flawed” quotas — with the alleged goal of setting up AE program agents to fail and taking away their profitable books of business.
The complaint alleges that Nationwide’s intent was to “fail AE agents and terminate their agencies once agents had generated a profitable book of business for Nationwide, but before the agents completed their production period.”
The complaint also alleges that after Lucarell began operating her Nationwide agency in February 2006, Nationwide withheld necessary support services. Lucarell also alleged that Nationwide decided to stop loan disbursements in early 2009, and when she was no longer able to make interest payments on her loans, the insurer allegedly told Lucarell that the company would keep some of her future commissions in lieu of interest payments. Lucarell left the company in July 2009. She alleges that her forced resignation and Nationwide’s taking away her profitable book of policies resulted in her losing her home and her car. She also alleged that it ruined her credit and her ability to find work as an insurance agent.
The complaint alleges that Nationwide used similar tactics against the majority of agents in the AE program. Attorney Groedel alleged there was a widespread, systemic plan within Nationwide to lure these agents to the AE program and then find a reason to terminate them and take away their books of business.
The $42.8 million jury verdict consisted of $36 million in punitive damages and $6.8 million in compensatory damages ($5.7 million in lost profits, $1 million in emotional damages, and $100,000 for retaliation).
Nationwide Disputes Lucarell’s Story
In its court filings, Nationwide categorically denied all allegations made by Lucarell.
“Most small businesses would be happy to receive $265,000 loan with no payments due for three years and another $373,000 in free cash infusions. Christine Lucarell claimed it ruined her,” Nationwide stated.
Lucarell started her small agency at the beginning of 2006, according to Nationwide. “By the fall of 2007, she told Nationwide she was running out of cash. She reported in her own e-mails to Nationwide that she needed $8,000 per month to stay afloat. During the next 20 months, Nationwide gave her $323,000 to stay afloat,” according to Nationwide. “This was on top of the $50,000 it had already given her — a grant, not a loan.”
Nationwide alleged that despite these substantial cash infusions far in excess of the monthly expenses she represented to Nationwide, during this time she constantly described herself as desperate for cash.
The company alleged that during those times, Lucarell made numerous purchases for her and her family. “Lucarell never produced any records showing how she spent the money Nationwide gave her,” Nationwide alleged in its court filings.
“And she never contested Nationwide’s analysis that over $400,000 of the $800,000 in loans, grants and commission she received was unaccounted for.”
In one four-month period toward the end of the relationship, she received $110,000 cash from Nationwide, according to the insurer.
Part of the $110,000 cash was a single lump sum payment of $60,000 at the beginning of November 2008, according to Nationwide.
“She kept the money and chose not to make her first loan payment of $2,000 due December 1, 2008. Nationwide gave her another $25,000 in January 2009 and she stopped paying rent on her agency’s offices the next month. She then skipped the next four monthly loan payments, even though she received four notices that she was in default,” Nationwide alleged.
Nationwide argued that even after she defaulted on her loan, and even after she fell below her performance targets, Nationwide still gave her another $25,000 cash in May 2009 after she sought more money.
“She never disclosed to Nationwide that while pleading for more money, she was applying for appointments with other insurance companies and that she was shutting down her agency,” Nationwide alleged. The company also charged that Lucarell maintains active appointments to write many types insurance, including auto, home, life, accident and health, and variable annuity.
Nationwide also argues that it doesn’t make much financial sense to set agents up for fail, as the plaintiff alleged: “Lucarell argued that Nationwide provided almost $800,000 to Lucarell in the form of loans, grants, and commissions just so it could secure premium income of $600,000, which was the size of the book she serviced at the time of her resignation.”
Nationwide alleged that the disarray resulting from her abrupt resignation caused policyholders to leave Nationwide so that within a year of her departure, the book of policies shrank to $240,000. The insurer said it makes about 5 percent profit on premium in the best of years, or $12,000 on $240,000.
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