‘Churned and Burned’ at NYLife, Ex-Agent Says

MANHATTAN (CN) - New York Life Insurance illegally reverses commissions its agents earn, while charging them for office space and other overhead expenses, a class claims in court.

Lead plaintiff Brian Chenensky was an insurance agent for New York Life from May 2003 until September 2006. His complaint in New York County Supreme Court names the defendants as: New York Life Insurance Co., New York Life Insurance and Annuity Corp., NYLife Insurance Co. of Arizona.

The action comes five years after Chenensky filed the same claims against the same defendants in Federal Court, only to have U.S. District Judge William Pauley III toss the case for lack of federal subject matter jurisdiction this past March.

New York Life was quick to highlight the case's history when asked about the new lawsuit.

"Plaintiff has been attempting to make out this claim for almost seven years now," New York Life senior vice president William Werfelman said. "Despite his persistence, we remain confident that both the law and the facts strongly support our position that we have paid our agents wholly consistent with the law. We will continue to defend these baseless claims vigorously."

Chenensky says New York Life deducted agent wages or required them to pay additional money for overhead costs such as office space, telephone service, computer support and liability insurance.

He also says the company illegally reversed commissions for things beyond an agent's control, like when a customer canceled a policy, failed to pay anticipated premiums or withdrew funds. Similar reversals allegedly occurred when New York Life rescinded the product or recalculated commissions.

Such deductions are described nowhere in all the employment contracts agents sign, according to the complaint.

"New York Life follows an antiquated and illegal 'company store' model in which compensation given with one hand is significantly reduced or entirely eliminated with the other hand," the complaint states. "At the same time that New York Life agents work extraordinarily long hours, New York Life charges them thousands of dollars per year for their necessary work expenses such as office space, telephone service and computer support."

Chenensky says New York Life recruits as many as agents as possible, then works them as a trainee for up to three years. Once they have gone through making clients of family members and friends, however, they allegedly have a hard time generating new business.

"As a result, of every hundred agents that are hired, fewer than 10 typically make it past the first or second year, and only two or three ever become an established agent," the lawsuit states.

Once an agent leaves the company, New York Life allegedly stops paying commissions on the continuing premiums received on policies that the agent wrote.

"The company thus retains the fruits of the agents labor of working long hours and paying significant portions of the company's overhead, even while the agent might, at the end of the day, owe the company for any deductions and charges that were not sufficiently offset against commissions," the lawsuit states.

Such a move allegedly shifts the risk of economic loss onto the agent. "Thus, not only do many agents generate minimal commission earnings, they often terminate their employment at New York Life owing thousands of dollars," Chenensky claims.

He seeks damages, restitution and an accounting of all deducted wages.

John Halebian with Lovell Stewart Halebian Jacobson represents him.

The complaint notes that New York Life's cross-appeal in the federal action with Chenensky remains pending.

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