$80k surrender charge at stake as Navy vet, Ameritas do battle in court

A retired Navy veteran and his wife are awaiting a court ruling on the fate of $80,000 in surrender charges tied to an equity-linked annuity bought from Ameritas.

Andrew and Jennifer Johnson sued Ameritas Mutual Holding Co., Ameritas Life Insurance Co., and broker Allison Terlip. The case is being heard in the District Court for the Eastern District of North Carolina.

Ameritas claims the plaintiffs agreed to a mediation settlement in August and is asking the judge to enforce that agreement – with the Johnsons on the hook for the $80,000.

Last week, the Johnsons filed for a stay of that decision until their own petition to return the case to state court can be heard. On Monday, the couple filed a memorandum response to an Ameritas motion to enforce the settlement agreement.

“Defendants ask this Court to enforce a ‘settlement’ the parties never signed and never completed – and to do so by converting silence into an $80,000 charge against Plaintiffs,” the memo reads.

Scheme to defraud alleged

In its lawsuit filed Aug. 27 in Warren County state court, the Johnsons claim that Ameritas is liable for a “sophisticated scheme … to defraud” them via the sale of unsuitable equity-linked annuities. In addition, the insurer allegedly withheld information about Terlip.

The Johnsons liquidated about $926,000 in “diversified treasury securities and mutual funds held in their Thrift Savings Plan and Vanguard accounts, the lawsuit states. They used those proceeds to purchase three “concentrated, illiquid, and unsuitable proprietary” equity-linked annuities from Ameritas.

The Johnsons allege that Ameritas deliberately concealed Terlip’s felony aggravated assault with a deadly weapon charge and her subsequent no-contest plea in July 2023, calling it “material information that Defendants knew would have prevented Plaintiffs and other customers from ever doing business with Terlip or the Ameritas enterprise.”

According to court documents and BrokerCheck, Ameritas fired Terlip in October 2023.

“Defendants concealed this fact from Plaintiffs and allowed Terlip to remain an active insurance agent for ALIC and complete the sale of EIAs to Plaintiffs after she had been terminated by AIC,” the lawsuit claims.

As for the three annuities, the Johnsons describe them as “complex products with lengthy surrender periods, substantial penalties for early withdrawal, opaque fee structures, and risks entirely unsuitable for the Johnsons’ stated need for liquidity and conservative investment approach.”

Settlement in dispute

On Jan. 5, Ameritas filed a motion to enforce a settlement agreement, stating that the Johnsons’ attorney agreed to it in early August. According to the insurer, the Johnsons sued Terlip and Ameritas Investment Co., and the two parties engaged in mediation talks as part of the Financial Industry Regulatory Authority‘s dispute resolution process.

Those talks took place Aug. 8-9, the motion said, and resulted in agreement on a payment from Ameritas to resolve all claims. The Johnsons were to surrender the three annuities as part of the resolution, Ameritas noted.

Counsel for the Johnsons accepted the mediator’s settlement agreement in an Aug. 9 email that read: “Agreed. Thanks gents[sic]. Enjoy your weekend.”

The Johnsons disputed that characterization in their memo, calling it “at most, a post-session term sheet expressly contemplating a later written agreement to be drafted by defense counsel, subject to Plaintiffs’ counsel’s approval.”

Five days later, Ameritas circulated a draft that inserted the language that the plaintiffs had rejected from the outset: shifting approximately $80,000 in annuity surrender charges to the Johnsons, the couple say in the memo.

“The mediator’s August 8 email contemplated a later written agreement subject to Plaintiffs’ approval and execution by the parties, and it is silent on surrender charges,” the memo states. “Defendants’ after-the-fact attempt to impose approximately $80,000 in surrender charges is not a minor drafting dispute; it is a material economic term on which there was no mutual assent.”

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