Banker’s Life Former Agent Chargebacks

Here’s an excerpt from the courts recent Order denying in part motion to dismiss our class action lawsuit against Banker’s Life for former agent chargebacks.

“Joseph Woerner was an insurance agent for Bankers Life and Casualty Company. He alleges that his hiring by Bankers Life was part of a pyramid scheme in which Bankers Life hires more agents than it needs in order to exact the fees it charges new agents, and to claw back sales commissions under false pretenses when surplus agents inevitably leave the company. Woerner alleges that Bankers Life’s conduct constitutes: a violation of his agency contract (Count I); a violation of the covenant of good faith and fair dealing under Illinois law (Count II); and a violation of the Illinois Consumer Fraud Act (Count III). R. 1-1. Bankers Life has moved to dismiss for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). R. 16. For the following reasons, that motion is denied in part and granted in part.


Bankers Life also has permission to “deduct”
any commissions an agent is obligated to return to Bankers Life from any future
commissions (or other payments Bankers Life may owe to the agent). Id. at 41 (¶
14). When Bankers Life requires an agent to return a commission it is known as a
“chargeback.” Id. at 5 (¶ 4). Agents generally continue to receive commissions on
premiums for renewal of policies they sold even after they have left Bankers Life.

Woerner alleges that Bankers Life’s business model “requires a huge number
of agents,” and that many agents quit or are fired within less than a year of their
state date. Id. at 8 (¶ 13). Bankers Life requires new agents to pay “hundreds of
dollars in non-refundable fees,” including “licensing fees [and] list fees.” Id. at 8 (¶
15). Bankers Life also requires new agents to pay “approximately $300” to create a
“holdback” account out of which Bankers Life deducts chargebacks. Id.

Woerner alleges that “it is common company practice at Bankers Life for
senior agents to ‘re-write’ policies [sold] by former agents in order to justify commission chargebacks and to reassign the policy [renewal] commission stream
from the [former agent] to a current senior agent.” Id. at 5 (¶ 4). According to
Woerner, “the ‘re-writing’ of the policies is pretextual, with Bankers Life typically
making nothing more than an immaterial change, such as altering the policy
name.” Id. Bankers Life then seeks repayment of commissions from the former
agent based on these “re-writes,” while a current agent receives the commission for
the “rewritten” policy.

In the form letter Bankers Life sends to former agents seeking repayment of
commissions, Bankers Life does not provide a specific justification for the
chargeback, but instead lists the potential reasons for the chargeback. According to
the form letter, these potential reasons include the following: the relevant policy
“lapsed, canceled or issued as out for signature and not completed [sic],” or the
policy’s “automatic bank draft was canceled,” the policy’s “Errors and Omissions
Insurance premiums were unrecovered,” or “other contractual charges were
applied.” Id. at 11 (¶ 24). Woerner alleges that none of these stated reasons “is a
legitimate basis for requiring a [former agent] to refund a commission” under the
terms of the Agent Contract. Id. at 11 (¶ 25). Indeed, according to Woerner, the “rewrite”
process does not “typically” involve refunding the premium to the policyholder,
id. at 11-12 (¶ 25), and Woerner contends that a premium refund is the only
basis for a chargeback under the terms of the Agent Contract.

Woerner alleges that his agency agreement with Bankers Life was
terminated because he expressed that he did not want to participate in the “re-write” process. Id. at 12-13 (¶¶ 28-30). After his termination, Woerner received a
letter from Bankers Life requesting the return of $473.96 in commissions. Id. at 14
(¶ 33). The letter did not specify the relevant policies for which premiums had been
returned. Woerner alleges that Bankers Life responded to his request for an
accounting with “a largely indecipherable account log which does not validate the
debts or otherwise explain the charges or how they are derived.” Id. at 15 (¶ 38).
Bankers Life sent two additional letters to Woerner explaining that the amount of
commissions he was obligated to return had increased to $696.58. Id. at 14-15 (¶¶
34, 37). Woerner then received a notice from a debt collator regarding this amount
due. Id. at 15 (¶ 39). Woerner’s complaint includes many statements posted to the
internet by other former Bankers Life agents complaining of similar chargeback
demands by Bankers Life. Id. at 16-28 (¶¶ 40-57).”