Prepare Forcefields Against DOL Lawsuits, Lawyers Say
WASHINGTON, D.C. -- Lawsuits will be inevitable under the Department of Labor's new fiduciary rule but the insurance and securities industries will be able to set the stage to withstand them, according to panelists at the Insured Retirement Institute's Government, Legal and Regulatory Conference on Monday.
The DOL rule places new regulatory burdens on the sale of annuities and investment products within qualified retirement plans and IRAs. It adds hefty disclosures and commits the advisor to a "best interest" standard of care. It also opens the door for lawsuits from dissatisfied clients.
Speaking as part of a panel on litigation risks, litigator Phillip Stano said the industry has a golden opportunity to shape the landscape.
"It's going to depend mostly on you to a large extent," said Stano, a partner at Sutherland, Asbill & Brennan, a Washington, D.C., law firm. "Are you setting yourself up for failure or for success? You will be well prepared to face the suit that's about to come. And they will come."
Disclosures, procedures and websites are all areas an eager attorney will search out for potential claims, the panel agreed. And when investments inevitably don't pan out as expected, some clients will be in a lawsuit mood, Stano said.
"Any plaintiff's attorney will tell you if they have an opponent who's a fiduciary in a fiduciary status ... they're pretty well certain they can find cause of action," he added.
The potential for a class-action lawsuit involving many investors is great, the panel agreed.
"I do think there will be firms looking down that disclosure" to find a flaw they can apply to a large class of plaintiffs, said Wilson G. Barmeyer, counsel for Sutherland, Asbill & Brennan.
"It will be something that affects a large group of people." Stano added. "That's why something like your website could be very important."
As for lawsuits to short-circuit the DOL rule, Brian P. Perryman, shareholder with Carlton Fields Jorden Burt, a Washington, D.C., law firm, noted the complaints filed last week by the National Association for Fixed Annuities and a joint action headed by the U.S. Chamber of Commerce.
"We do anticipate additional suits coming in, maybe this week," he added.
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected].
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