U.S. appeals court revives investor lawsuit against annuity company

By Jody Godoy

(Reuters) – An insurance company owned by private equity firm Eldridge Industries must face a lawsuit claiming it misrepresented how much investors stood to gain on certain fixed annuities, a U.S. appeals court ruled on Tuesday.

The 10th U.S. Circuit Court of Appeals ruled 2-1 to revive the proposed class action alleging Security Benefit Life Insurance Company (SBL) engaged in fraud and racketeering by misleading investors in its Secure Income Annuity and Total Value Annuity products.

The Kansas-based company with $47.6 billion in assets under management was acquired in 2017 by Eldridge Industries, a Greenwich, Connecticut investment firm led by sports team owner Todd Boehly.

Andrew Friedman, a lawyer for the investors, said they are pleased with the decision.

An attorney for SBL did not immediately comment on Tuesday.

The lawsuit filed in 2019 seeks damages on behalf of a nationwide class of purchasers allegedly misled by offering materials for the two annuities tied to proprietary stock indices. The investors claimed they were misled into believing the annuities offered above-market returns, when the products included several features that they say effectively limited returns.

In Tuesday’s decision, U.S. Judge Veronica Rossman wrote that a Kansas judge who dismissed the case in 2021 failed to consider the complaint as a whole, which alleged the company concealed the “collective impact” of the terms of the annuities.

U.S. Circuit Judge Harris Hartz dissented, saying the decision would require sellers to not only disclose the risk of investments, but to analyze “whether, given the disclosed facts, the investment is a good one.”

“Courts should eschew assuming the role of becoming the final backstop to protect disappointed investors,” he wrote.

The case is Clinton et al. v. Security Benefit Life Insurance Company, 10th U.S. Circuit Court of Appeals, No. 21-3035.

(Reporting by Jody Godoy in New York)