# Jones v. Ohio National Life Insurance Company

> District Court, S.D. Ohio · April 15, 2022

URL: https://www.frixlaw.com/law-library/cases/10379984

## Case

- **Court:** District Court, S.D. Ohio
- **Decided:** April 15, 2022
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

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## Opinion text

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION

RHONDA F. JONES,

Plaintiff,
Case No. 1:20-cv-654
v. JUDGE DOUGLAS R. COLE

OHIO NATIONAL LIFE
INSURANCE COMPANY, et al.,

Defendants.
OPINION & ORDER
This cause comes before the Court on Defendants Ohio National Life Insurance
Company and Ohio National Life Assurance Corporation’s (together “Ohio National”)
Motion to Dismiss (Doc. 9) Plaintiff Rhonda Jones’s Complaint (Doc. 1). For the
reasons discussed below, the Court GRANTS IN PART and DENIES IN PART
Ohio National’s Motion to Dismiss (Doc. 9).
BACKGROUND1
This Complaint stems from Plaintiff Rhonda Jones’s purchase of an insurance
policy she contends was unsuitable for her needs. At all times relevant to the
Complaint, Jones was working as a part-time bookkeeper for her husband’s small
business, making approximately $54,000 per year. (Compl., Doc. 1, #42). As part of
Jones’s investing strategy, she maintained brokerage accounts with financial advisor

1 For purposes of a motion to dismiss, the Court accepts as true the factual allegations in the
Complaint. Thus, the Court reports those allegations here, but with the disclaimer that these
facts are not yet established and may never be.
2 Refers to PAGEID #.
James Flynn, who was at that time associated with broker-dealer Voya Financial
Advisors located in Greenville, South Carolina. (Id.). Jones alleges that in 2016 she
approached Flynn with an interest in long-term investments, including variable life

insurance policies. (Id.). Relying on Flynn’s advice, Jones applied for what she
believed was a “standard” variable life insurance policy issued by the Defendant, Ohio
National Life Insurance Company. (Id. at #6). In recommending the policy to Jones,
Flynn told her that it was a “solid investment” and that the premiums on the policy
were tax deductible. (Id.).
According to Jones, however, the policy was not “standard.” It was in fact a
“key man” policy, a type of insurance typically “purchased by companies to insure the

lives of key executives and ensure business continuity in case of their death.” (Id.).
On this type of policy, Jones says, the company for which the executive works
generally pays the premiums and stands to benefit if the insured executive dies. (Id.
at #6–7). Ohio National originally issued the policy to Jones in the amount of
approximately $5,000,000, which was increased, on Flynn’s advice, to $6,000,000 a
few months later. (Id. at #6).

Jones alleges that this policy “was entirely unsuited” to her needs as a “middle-
aged bookkeeper with a relatively modest income.” (Id. at #7). Moreover, she alleges
that Ohio National should have known its unsuitability because the premiums—
approximately $200,000 per year—were paid directly by Jones, but the policy was for
the benefit of her husband’s company. (Id.). Although she asserts that Flynn “falsely
inflated [her] income and assets on the application,” she says that Ohio National
nonetheless acted unreasonably in failing to investigate the “red flags” in her
application. (Id.). And Ohio National was not merely ignorant, Jones contends,
because Flynn told her he had “spoken to several representatives at Ohio National,

and everyone, including the president of the company, [had] made [issuing the policy]
a top priority.” (Id. at #6).
Jones also addresses the alleged relationship between Ohio National and
Flynn. Specifically, she alleges Ohio National maintains “Just In Time”
appointments, by which independent brokers-dealers may be appointed authorized
agents of Ohio National. (Id. at #4). On Jones’s information and belief, Flynn was
acting as an authorized agent of Ohio National when he recommended the insurance

product at issue in this suit. (Id.).
According to Jones, financial pressure incentivized Flynn to suggest this
unsuitable product. Selling Jones this particular policy would have benefited Flynn
because “key man” policies are “extremely profitable,” generating “substantial
premiums” for the issuer and “high commissions” for the selling agent. (Id. at #9).
And Jones alleges that Flynn was in financial straits when he recommended the key

man policy, having filed for bankruptcy in 2013 claiming debts of over $3.5 million.
(Id. at #5). Before he recommended this policy to Jones in 2016, at least one customer
had filed a dispute against Flynn, claiming more than $120,000 in damages for
“unauthorized, unsuitable trades” on the customer’s account. (Id.).
Jones filed her Complaint in the Northern District of Ohio on February 18,
2020, asserting claims of securities fraud, violation of Ohio consumer protection law,
common law negligence, and unjust enrichment. (Id. at #9–15). Ohio National filed a
motion to dismiss or, in the alternative, to transfer venue to the Southern District of
Ohio, on April 2, 2020. (Doc. 9). Jones timely responded in opposition (“Opp’n,” Doc.

10) on April 22, 2020, and Ohio National replied in support of its Motion (Doc. 11) on
May 5, 2020. Without addressing the merits of the Motion to Dismiss, the then-
assigned Judge granted the alternative Motion to Transfer venue on August 19, 2020,
thereby transferring the case to this Court. The matter is now before the Court on
the Motion to Dismiss (Doc. 9).

LEGAL STANDARD
At the motion to dismiss stage, a complaint must “state[] a claim for relief that
is plausible, when measured against the elements” of a claim. Darby v. Childvine,
Inc., 964 F.3d 440, 444 (6th Cir. 2020) (citing Binno v. Am. Bar Ass’n, 826 F.3d 338,
345–46 (6th Cir. 2016)). “To survive a motion to dismiss, in other words, [Jones] must
make sufficient factual allegations that, taken as true, raise the likelihood of a legal
claim that is more than possible, but indeed plausible.” Id. (citations omitted).

In making that determination, the Court must “construe the complaint in the
light most favorable to the plaintiff, accept its allegations as true, and draw all
reasonable inferences in favor of the plaintiff.” Bassett v. Nat’l Collegiate Athletic
Ass’n, 528 F.3d 426, 430 (6th Cir. 2008) (internal quotation omitted). That is so,
however, only as to factual allegations. The Court need not accept “‘naked assertions’
devoid of ‘further factual enhancement.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(brackets omitted) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 557 (2007)).
Likewise, the Court need not accept as true any legal conclusions alleged in a
complaint; “labels and conclusions” or a “formulaic recitation of the elements of a
cause of action” will not suffice. Id.

With that in mind, the well-pled facts must be sufficient to “raise a right to
relief above the speculative level,” Twombly, 550 U.S. at 555, such that the asserted
claim is “plausible on its face.” Iqbal, 556 U.S. at 678. Under the Iqbal/Twombly
plausibility standard, courts play an important gatekeeper role, ensuring that claims
meet a threshold level of factual plausibility before defendants are subjected to the
potential rigors (and costs) of the discovery process. Discovery, after all, is not meant
to allow parties to discover whether a claim in fact exists, but rather to provide a

process for gathering evidence to substantiate an already plausibly-stated claim.
Green v. Mason, 504 F. Supp. 3d 813, 827 (S.D. Ohio 2020).
LAW AND ANALYIS
A. Jones Adequately Alleges That Flynn’s Alleged Violation Of Rule 10b-
5 May Be Imputed To Ohio National.
Jones’s first cause of action asserts Ohio National violated § 10(b) of the
Securities and Exchange Act of 1934, and its implementing regulation, Securities and
Exchange Commission (“SEC”) Rule 10b-5. More specifically, Jones alleges Ohio
National violated Rule 10b-5 by failing to undertake a “suitability determination”
with respect to her purchase of the “key man” insurance policy. (Compl., Doc. 1, #10).

The Sixth Circuit has recognized (though only infrequently) a securities
“suitability” claim as “essentially [a] fraud claim[].”Craighead v. E.F. Hutton & Co.,
899 F.2d 485, 493 (6th Cir. 1990); see also Robert N. Clemens Tr. v. Morgan Stanley
DW, Inc., 485 F.3d 840, 848 (6th Cir. 2007) (“A suitability claim is a type of section
10(b) fraud claim.” (citing Banca Cremi, S.A. v. Alex. Brown & Sons, Inc., 132 F.3d
1017, 1032 (4th Cir. 1997))). Other circuits have likewise recognized such claims. See

Banca Cremi, 132 F.3d at 1032 (citing “unsuitability” cases in the Tenth, Sixth, First,
and Second Circuits).
Rule 10b-5, which implements § 10(b) of the Securities and Exchange Act of
1934, prohibits three categories of conduct. The rule makes it unlawful for any person:
(a) To employ any device, scheme, or artifice to defraud,
(b) To make any untrue statement of a material fact or to omit to state
a material fact necessary in order to make the statements made, in the
light of the circumstances under which they were made, not misleading,
or
(c) To engage in any act, practice, or course of business which operates
or would operate as a fraud or deceit upon any person,
in connection with the purchase or sale of any security.
17 C.F.R. § 240.10b-5. Jones does not make clear in her Complaint exactly which of
these three categories she claims Ohio National violated. That may matter, as the
category potentially impacts the relevant analytical framework. For example, the
Tenth Circuit has differentiated between “suitability” claims based on
misrepresentation or omission (i.e., 10b-5(b)) and those based on other fraudulent
conduct (i.e., 10b-5(a) and (c)), the latter of which it treats as analogous to “churning”
claims. O’Connor v. R.F. Lafferty & Co., 965 F.2d 893, 897–98 (10th Cir. 1992)
(observing that “[s]ome courts … have analyzed [unsuitability] simply as a
misrepresentation or failure to disclose,” and contrasting an unsuitability claim
based on fraud by conduct, which is “a violation of Rule 10b–5(a) and (c) and is
analogous to a churning claim”).
The Court concludes that 10b-5(b) is the most appropriate vehicle to analyze

Jones’s claim. Cf. O’Connor, 965 F.2d at 897 (“In [a suitability] case, the broker has
omitted telling the investor the recommendation is unsuitable for the investor’s
interests. The court may then use traditional laws concerning omission to examine
the claim.”). The case at bar presents no similarities to a classic “churning” case,
wherein “the broker ‘overtrades’ a relying customer’s account to generate inflated
sales commissions.” Craighead, 899 F.2d at 489 (citing Armstrong v. McAlpin, 699
F.2d 79, 90 (2d Cir. 1983)). Moreover, although Jones does not explicitly identify a

particular subsection of Rule 10b-5, both parties appear to treat her claim as arising
under subsection (b), that is, as a “misrepresentation or omission” claim. (See Br. in
Supp., Doc. 9-1, #50 (“To state a valid claim under SEC Rule 10b-5, a plaintiff ‘must
allege, in connection with the purchase or sale of securities, the misstatement or
omission of a material fact ….’”); Opp’n, Doc. 10, #71 (“Ohio National is liable for
Flynn’s fraudulent misrepresentations and omissions in relation to issuing Mrs.

Jones this wholly unsuitable key man policy.”)). Thus, in analyzing the plausibility of
Jones’s claim, the Court will refer to traditional 10(b) misrepresentation and omission
cases.
To prevail on a Section 10(b) “suitability” claim predicated on
misrepresentation or omission, a plaintiff must establish five elements: “(1) that the
securities purchased were unsuited to the buyer’s needs; (2) that the defendant knew
or reasonably believed the securities were unsuited to the buyer’s needs; (3) that the
defendant recommended or purchased the unsuitable securities for the buyer
anyway; (4) that, with scienter, the defendant made material misrepresentations (or,

owing a duty to the buyer, failed to disclose material information) relating to the
suitability of the securities; and (5) that the buyer justifiably relied to his detriment
on the defendant’s fraudulent conduct.” Rhinehimer v. U.S. Bancorp Invs., Inc., No.
CV2011136WOBREW, 2013 WL 11303921, at *1 (E.D. Ky. May 8, 2013) (quoting
Banca Cremi, 132 F.3d at 1032); see also Brown v. E.F. Hutton Group, Inc., 991 F.2d
1020, 1031 (2d Cir. 1993); Bourbonnais v. Tesch, No. 14-C-966, 2015 WL 778627, at
*3–4 (E.D. Wis. Feb. 24, 2015).

Thus, an unsuitability claim strongly resembles a typical 10(b) fraud claim,
but additionally requires “(a) proof of the knowing purchase or recommendation of
unsuitable securities, and (b) that the misrepresentations and omissions in question
relate to the suitability of the securities.” See Robert N. Clemens Tr., 485 F.3d at 850
(emphasis added) (quoting Louros v. Kreicas, 367 F.Supp.2d 572, 587 (S.D.N.Y.
2005)). Ultimately, “an investment is unsuitable for an investor if what the broker

recommends contradicts the investment goals communicated to the broker by the
investor.” Id. at 849 (citing Brown, 991 F.2d at 1031).
In addition to pleading the necessary substantive elements, a plaintiff must
meet the heightened pleading standards of Fed. R. Civ. P. 9(b) and the Private
Securities Litigation Reform Act (“PSLRA”) of 1995 to survive a motion to dismiss a
securities fraud claim. Rule 9(b) requires that a plaintiff “state with particularity the
circumstances constituting fraud or mistake.” See also Craighead, 899 F.2d at 493.
And the PSLRA states that, for any materially false statement or omission alleged,
“the complaint shall specify each statement alleged to have been misleading, the

reason or reasons why the statement is misleading, and, if an allegation regarding
the statement or omission is made on information and belief, the complaint shall state
with particularity all facts on which that belief is formed.” 15 U.S.C. § 78u-4(b)(1).
The PSLRA also requires the complaint “state with particularity facts giving rise to
a strong inference that the defendant acted with the required state of mind.” Id.
§ 78u-4(b)(2)(A).
In seeking dismissal, Ohio National argues Jones has failed to make out a

securities fraud claim against the company because liability under Section 10(b)
requires a misrepresentation or omission. Jones has failed to allege such a
misrepresentation or omission, Ohio National contends, for the simple reason that
Jones has failed to allege that Ohio National itself made any representations or
omissions to Jones at all. (Br. in Supp., Doc. 9-1, #50). Rather, according to Ohio
National, the Complaint alleges that it was Flynn who recommended and made

representations about the Policy. (Id.). Nor can Ohio National be directly liable for its
own alleged failure to undertake a suitability analysis, it says, as the law places
responsibility for any suitability review solely on Flynn and Voya, the third-party
broker-dealer that sells the security, not the issuer itself.
Jones offers three responses. First, she argues that Flynn was an “authorized
agent” of Ohio National, and therefore that his misdeeds may be attributed to Ohio
National as the principal. (Opp’n, Doc. 10, #71). Second, Jones claims that federal
securities laws require Ohio National itself to engage in a suitability determination,
even if Flynn was not its agent. Jones cites Cooper v. Pacific Life Insurance Co., 229

F.R.D. 245 (S.D. Ga. 2005), for the proposition that an insurer’s “failure to undertake
suitability reviews, or [to] engage in suitability oversight” can constitute a violation
of Rule 10b-5. (Compl., Doc. 1, #10). Third, Jones says that an insurer’s duty to
investigate the suitability of an annuity is embodied in the Ohio Administrative Code.
(Opp’n, Doc 10, #76 (citing Ohio Admin. Code § 3901-6-13(F)(3))).
Of those three arguments, the Court starts (and ends) with the agency issue.
On that front, Jones’s Complaint alleges that Ohio National “maintain[s] a ‘Just In

Time’ appointments procedure that permits independent brokers-dealers to be
appointed [Ohio National’s] authorized agents,” and that “[o]n information and belief,
Flynn was … an authorized agent of Defendants, selling their products.” (Compl.,
Doc. 1, #4). For its part, Ohio National seems to concede that it had some kind of
agency relationship with Flynn. However, it argues that Flynn was authorized to act
only in a “limited role”—as an insurance agent who “cannot by law sell a security.”

(Reply, Doc. 11, #87–88; id. at #90 (“That Flynn also happened to be authorized to act
as a limited agent of Ohio National for purposes of selling insurance policies has no
bearing on his alleged recommendation of an unsuitable security ….”)). It says Jones’s
claims arise “entirely and exclusively out of Flynn’s status as a registered
representative associated with the securities broker-dealer Voya Financial,” rather
than out of any relationship between Flynn and Ohio National. (Id. at #88). In other
words, Flynn may have been an agent, Ohio National says, but not for the purposes
of the misrepresentations or omissions at issue here.
The Court is disinclined to rely on Ohio National’s proposed distinction, at least

at the motion to dismiss stage. For one thing, a variable life insurance policy is
generally recognized as a “hybrid” product—part insurance, part security. Lander v.
Hartford Life & Annuity Ins. Co., 251 F.3d 101, 105 (2d Cir. 2001) (“Variable
annuities are typically characterized as ‘hybrid products,’ possessing characteristics
of both insurance products and investment securities.”). Thus, Ohio National’s claim
that Flynn is an agent only for insurance purposes may not be the cure-all that Ohio
National claims. For example, in Nelson v. Pacific Life Insurance Co., a factually

similar case involving the sale of variable annuities, the Southern District of Georgia
denied an insurer’s motion to dismiss, in part because the plaintiff alleged that the
insurer-defendant had “a principal-agent relationship with the individual NASD
registered representatives that [sold] the company’s variable annuities, making [the
insurer] primarily liable for the alleged omission of a material fact.” CIV.A. CV203-
131, 2004 WL 1592617, at *3 (S.D. Ga. July 12, 2004). The court denied the motion

to dismiss despite the facts—similar to the facts Ohio National relies on here—that:
(1) the defendant was an insurance company; (2) the point-of-sale representatives
were associated with independent broker-dealers, see id. (alleged agents were
“individual NASD registered representatives that sell the company’s variable
annuities”); and (3) the allegedly unsuitable products were “hybrid,” see id. at *1 (“A
variable annuity is an insurance contract that is subject to regulation under state
insurance and [federal] securities laws.” (Citation omitted)). In short, whether Flynn
was merely selling an “insurance policy” or an “unsuitable security” is not so simple
an inquiry as Ohio National suggests, meaning that whether his conduct was outside

the scope of agency, even on Ohio National’s account of events, may require further
factual investigation.
But even more fundamentally, as the discussion in Nelson also aptly
illustrates, the existence and scope of an agency relationship is generally a question
of fact, rather than law, a point equally applicable under whichever State’s law (Ohio
or South Carolina) applies here.3 Fuller v. Anchor Pointe Marina, 100 N.E.3d 1281,
1287 (Ohio Ct. App. 2017) (“The existence of an agency relationship is a question of

fact.” (quoting Dickinson v. Charter Oaks Tree & Landscaping Co., No. 02AP-981,
2003 WL 1924638, at *4 (Ohio Ct. App. Apr. 24, 2003))); Whitt v. Serv. Mut. Ins. Assn.,
No. 1264, 1981 WL 10261, at *3 (Ohio Ct. App. Feb. 26, 1981) (“The scope of Kennedy’s
agency, as most questions of scope of agency, is a question of fact.”); Holmes v. McKay,
513 S.E.2d 851, 854 (S.C. Ct. App. 1999) (“Usually, whether an agency relationship
exists and the scope of the alleged agent’s authority are questions of fact for the jury.”

(citing Am. Fed. Bank v. Number One Main Joint Venture, 467 S.E.2d 439, 442 (S.C.
1996))).
Here, Jones has alleged that Flynn was an appointed agent of Ohio National,
and Ohio National has conceded that he was, at least for purposes of selling

3 Jones asserts that “South Carolina law … governs the agency issue because Flynn was a
broker in that state.” (Opp’n, Doc. 10, #72). Ohio National does not address the choice-of-law
question. The Court need not decide precisely which State’s law controls at this stage,
however, because the result appears the same under either.
insurance. Although agency for the purpose of selling insurance does not
automatically establish agency for the purpose of giving investment advice, Brainard
v. Am. Skandia Life Assurance Corp., 432 F.3d 655, 662 (6th Cir. 2005), the only

question at this stage is whether Jones has stated a plausible claim. The Court
concludes that she has. Her allegation that Flynn was Ohio National’s “agent” for
purposes of the advice he gave her suffices, if barely, to set forth a plausible claim. Of
course, if it ultimately turns out of as a matter of undisputed fact that Flynn’s agency
relationship with Ohio National did not extend to the representations at issue here,
the Court will certainly revisit the scope issue on summary judgment. But that is a
question for another day.

Because the Court determines that Jones’s claim survives based on her agency
allegation, it does not reach her alternative theories of liability—that (1) federal
securities laws require Ohio National itself to engage in a suitability determination,
and (2) the Ohio Administrative Code creates a duty for an insurer to investigate the
suitability of an annuity. That is because “the number of legal theories for holding a
defendant liable for securities fraud does not multiply the number of the plaintiff’s

claims. Therefore, what matters for present purposes is that [Jones] [has] stated
claims against [Ohio National] under principles of agency law.” Bourbonnais v.
Ameriprise Fin. Servs. Inc., No. 14-C-966, 2015 WL 12991000, at *6 (E.D. Wis. Aug.
20, 2015) (internal citation omitted).
Nevertheless, while not strictly necessary, the Court offers a word on whether
Ohio National itself is primarily liable for its failure to undertake a suitability review.
The only case Jones cites on that issue is Cooper, 229 F.R.D. 245. While that court
found that “a variable annuity issuer’s failure to undertake suitability reviews, or
engage in suitability oversight, could constitute securities fraud,” it simultaneously

recognized that “the responsibility for determining suitability at the point of sale is
typically the domain of the broker-dealer.” Id. at 255–56 (emphasis added).4
Cooper’s rationale for extending the suitability duty beyond its “typical
domain” included that the insurance company was “in a better position to determine
suitability” when placing tax-deferred annuities within qualified (tax-deferred)
retirement plans, and that plaintiffs had “presented some evidence that [the
insurance company] actually increased the difficulty of the suitability determination

4 Other courts have expressed a similar understanding: that the broker primarily shoulders
responsibility for determining an investment’s suitability. See, e.g., O’Connor, 965 F.2d at
897 (“In such a case, the broker has omitted telling the investor the recommendation is
unsuitable for the investor’s interests.”) (emphasis added). This includes the Sixth Circuit,
which has more than once couched the “suitability” analysis in terms of the “broker.” See
Rhinehimer, 787 F.3d at 806 n.3 (“In essence, unsuitability fraud occurs where a broker
knows or reasonably believes certain securities to be unsuitable to a client’s needs, but
recommends them anyway.”) (emphasis added); Robert N. Clemens Tr., 485 F.3d at 849–50
(noting that a plaintiff would normally plead an unsuitability claim “by alleging facts
regarding his or her investment objectives at the time of investment, that those objectives
were communicated to the broker, and that the broker nonetheless recommended securities
that did not further those investment goals”) (emphasis added).
Imposing such a duty on the broker seems particularly reasonable given the essence of an
unsuitability claim: that the recommended security is inconsistent with the plaintiff’s
investment objectives. In a typical stock-based security transaction, the security’s issuer has
no reason to know of the plaintiff’s investment goals, and therefore placing a suitability duty
on the issuer in that case would make little sense. Admittedly, such a consideration might
apply with less force to a situation where, as here, the issuer of an insurance policy ultimately
must approve the purchaser’s application. Jones certainly proceeds under this theory,
alleging that the information on her application should have put Ohio National on notice of
an unsuitable investment choice. Again, however, the Court need not, and does not, decide
whether such an allegation succeeds in stating a claim for securities fraud.
by issuing a misleading prospectus.” Id. at 256. The court concluded by emphasizing
the narrowness of its holding, confining it “to the unique facts presented.” Id.
Moreover, that decision came in the context of a motion for class certification,

and after significant discovery had already occurred. Here, on the basis of the
Complaint—which fails to allege the sort of unique circumstances in Cooper—and
limited briefing, the Court is unable to determine the propriety of extending the
rationale of Cooper to this case, and therefore declines to decide that question.
In sum, the Court DENIES Ohio National’s Motion to Dismiss (Doc. 9) with
respect to Jones’s Section 10(b) securities claim.

B. Jones Fails To State A Claim Against Ohio National Under Ohio’s
Consumer Sales Practices Act.
Jones’s second cause of action alleges that Ohio National violated Ohio’s
Consumer Sales Practices Act (“CSPA”). The Ohio CSPA prohibits suppliers from
engaging in unfair or deceptive acts or practices “in connection with a consumer
transaction.” Ohio Rev. Code § 1345.02(A). The definition of “consumer transaction,”
however, excludes “transactions between persons, defined in sections 4905.03 and
5725.01 of the Revised Code, and their customers.” Id. § 1345.01(A). And “persons” in
§ 5725.01 includes an “[i]nsurance company,” which is in turn defined to include
“every corporation, association, and society engaged in the business of insurance of

any character, or engaged in the business of entering into contracts substantially
amounting to insurance of any character.” Id. § 5725.01(C). Ohio National argues
that Jones’s second cause of action fails as a matter of law because the transaction at
issue amounts to a transaction between an insurance company and its customer, thus
exempting it from the CSPA. (Br. in Supp., Doc. 9-1, #53 (citing Dillon v. Farmers
Ins. of Columbus, Inc., 47 N.E.3d 794, 794 (Ohio 2006)).
Jones responds that Ohio National misreads the Ohio Supreme Court’s

statement in Dillon v. Farmers Insurance of Columbus, Inc., that the CSPA “exempts
transactions between insurers and their customers from its definition of consumer
transaction.” Dillon, 47 N.E.3d at 798. According to Jones, that case “applies
narrowly to instances where an insurer fails to notify its insured that it has repaired
an automobile using non-OEM compliant parts.” (Opp’n, Doc. 10, #77–78). Jones is
correct that the court in Dillon was focused on the obligations imposed on “insurers
who provide their customers with automobile-repair estimates.” See Dillon, 47 N.E.3d

at 798 (citing Ohio Rev. Code § 1345.81). But Ohio National need place no reliance in
that case—the plain language of §§ 1345.01(A) and 5725.01 of the Ohio Revised Code
forecloses Jones’s claim in this respect. And, in any case, Ohio National cited the case
only for the Ohio Supreme Court’s explanation of the insurance exemption. See
Dillon, 47 N.E.3d at 798 (citing Ohio Rev. Code § 1345.01(A)).
In light of the statute’s plain language, the Court concludes that it is Jones

who overreads Dillon. Jones emphasizes that, according to Dillon, a “consumer may
… seek a declaratory judgment, an injunction, or other appropriate relief against an
act or practice that violates [Chapter 1345 of the Ohio Revised Code].” (See Opp’n,
Doc. 10, #78) (quotation marks omitted). Based on that, she argues that she should
be allowed to re-plead her CSPA claim to seek these other forms of remedy. (Id.). To
be sure, § 1345.09 provides for declaratory, injunctive, or other appropriate relief
“against an act or practice that violates” Chapter 1345. But the Ohio Supreme Court
made that statement specifically in the context of Revised Code § 1345.81, which
“imposes obligations on insurers who provide their customers with automobile-repair

estimates that are based on the use of non-OEM parts.” Dillon, 47 N.E.3d at 798. In
that statement, the court was merely explaining that an insurer may violate
1345.81(B)(1) by failing to notify a customer that their automobile has been repaired
using non-manufacturer parts. But such a violation does not constitute an “unfair
and deceptive act or practice” (and therefore does not qualify under the remedial
provision § 1345.81(E)). None of this discussion provides any help to Jones, however,
because she has not pointed to any way in which Ohio National allegedly violated

Chapter 1345. The only provisions Jones cites are §§ 1345.02 and 1345.03, but Ohio
National cannot run afoul of those because, as detailed above, it was acting purely as
an insurer, and therefore its acts were not “in connection with a consumer
transaction.”
Alternatively, Jones says Ohio National violated the OCSPA because it
violated Ohio Administrative Code § 3901-6-13(4)(b).5 (Compl., Doc. 1, #12 (citing

Frey v. Vin Devers, Inc., 608 N.E.2d 796, 799–800 (Ohio Ct. App. 1992)). This
argument fails for two reasons. First, as above, the sale of an insurance policy is not
a “consumer transaction.” Second, there is an important difference between the Ohio
Administrative Code section at issue in Frey—the case on which Jones relies—and

5 The Court notes that the specific Ohio Administrative Code section cited in the Complaint
(§ 3901-6-13(4)(b)) does not appear to exist; however, the Court’s conclusion applies
regardless of which section of Rule 3901-6-13 Jones relies on.
the OAC provision here. In particular, the Attorney General promulgated the OAC
provision in Frey specifically to further “define … any act or practice that violates
R.C. 1345.02(A).” 608 N.E.2d at 799. Here, by contrast, the OAC section Jones cites

resides in a separate Chapter, one that vests enforcement authority “exclusively in
the superintendent of insurance.” Ohio Admin. Code § 3901-6-13(H)(3). That
precludes Jones from seeking to rely on this OAC provision as support for her CSPA
claim. The Court thus DISMISSES that claim WITH PREJUDICE.
C. Jones Fails To State A Claim For Negligence Against Ohio National
Under Ohio Law.
Jones’s third cause of action alleges Ohio National’s negligence under Ohio
common law. (Compl., Doc. 1, #13–15). In order to recover on a negligence claim, a
plaintiff must prove “(1) the existence of a legal duty, (2) the defendant’s breach of

that duty, and (3) injury that is the proximate cause of the defendant’s breach.”
Beckemeyer v. Gelco Corp., 828 F. App’x 251, 253 (6th Cir. 2020) (quoting Wallace v.
Ohio Dep’t of Com., 773 N.E.2d 1018, 1025–26 (Ohio 2002)). In negligence, the concept
of “duty,” though sometimes “elusive,” “refers to the relationship between the plaintiff
and the defendant from which arises an obligation on the part of the defendant to
exercise due care toward the plaintiff.” Wallace, 773 N.E.2d at 1026. The existence of
a duty generally depends upon the foreseeability of harm: “if a reasonably prudent

person would have anticipated that an injury was likely to result from a particular
act, the court could find that the duty element of negligence is satisfied.” Id. (citing,
e.g., Texler v. D.O. Summers Cleaners & Shirt Laundry Co. 693 N.E.2d 271 (Ohio
1998)).
Ohio National argues Jones’s negligence claim must be dismissed because she
has failed to allege any duty Ohio National owed to her and because her damages are
purely economic and therefore barred by Ohio’s economic loss rule. (Br. in Supp., Doc.

9-1, #55–56). These contentions are interrelated, in that they both relate to the source
of Ohio National’s alleged duty.
Start with the economic loss rule. Ohio National quotes the Ohio Supreme
Court: “[T]he well-established general rule is that a plaintiff who has suffered only
economic loss due to another’s negligence has not been injured in a manner which is
legally cognizable or compensable.” (Id. at #55 (quoting Corporex Dev. & Constr. Mgt.,
Inc. v. Shook, Inc., 835 N.E.2d 701, 704 (Ohio 2005))). Absent a contractual

relationship, then, there is generally “no … duty to exercise reasonable care to avoid
intangible economic … losses to others.” Floor Craft Floor Covering, Inc. v. Parma
Cmty. Gen. Hosp. Ass’n, 560 N.E.2d 206, 208 (Ohio 1990). “The primary purpose of
the economic-loss doctrine,” though, “is to ‘maintain the line of demarcation between
tort law and contract law’ in situations in which both tort and contract theories could
apply.” Motorists Mut. Ins. Co. v. Ironics, Inc., __ N.E.3d __, 2022 WL 852346, *7

(Ohio Mar. 23, 2022) (quoting Lesiak v. Cent. Valley Ag Coop., Inc., 808 N.W.2d 67,
82 (Neb. 2012)). “The economic-loss doctrine therefore prevents the tortification of
contract law.” Id. (quotation omitted).
Consistent with that latter understanding, “where a plaintiff has suffered only
economic harm as a result of a defendant’s breach of duty, the economic-loss rule will
bar the tort claim if the duty arose only by contract.” Mulch Mfg., Inc. v. Advanced
Polymer Sols., LLC, 947 F.Supp.2d 841, 856 (S.D. Ohio 2013) (emphasis added)
(quoting Campbell v. Krupp, 961 N.E.2d 205, 211 (Ohio Ct. App. 2011)). But a
corollary must also then be true: the rule is inapplicable, and a plaintiff suffering only

economic damages may proceed in tort, if the defendant breached a duty that does
not arise solely from a contract. Id.; see also Corporex, 835 N.E.2d at 705; accord
Campbell, 961 N.E.2d at 205 (in determining whether the economic-loss rule applies
to tort claims, courts must examine whether the defendant owes any duties to the
plaintiff “that [are] imposed by law instead of by contract”). In other words, “where a
tort claim alleges a duty was breached independent of the contract, the economic loss
rule does not apply.” Navistar, Inc. v. Dutchmaid Logistics, Inc., 171 N.E.3d 851, 861

(Ohio Ct. App. 2021) (emphasis added); see also Windsor Med. Ctr., Inc. v. Time
Warner Cable, Inc., 167 N.E.3d 23, 29 (Ohio Ct. App. 2021) (same).
A duty is independent of a contract if the defendant would owe that duty “even
if no contract existed.” 425 Beecher, LLC v. Unizan Bank, Nat’l Ass’n, 927 N.E.2d 46,
59 (Ohio Ct. App. 2010) (quoting Textron Fin. Corp. v. Nationwide Mut. Ins. Co., 684
N.E.2d 1261, 1270 (Ohio Ct. App. 1996)). One such “preexisting” tort duty that may

support recovery of purely economic damages, for example, is the “duty not to
negligently supply false information to those relying upon it”—that is, the duty
underlying the tort of negligent misrepresentation. Sona Techs., LLC v. Barber, No.
2:08-CV-468, 2010 WL 11537997, at *5 (S.D. Ohio Mar. 12, 2010) (citing 425 Beecher,
927 N.E.2d at 58–60); see also Corporex, 835 N.E.2d at 705 (“Liability in Haddon View
was based exclusively upon this discrete, preexisting duty in tort and not upon any
terms of a contract or rights accompanying privity. … DSI fails to identify any duty
in tort analogous to the duty identified in Haddon View.”)).
At bottom, for Jones to proceed with her negligence claim, she must point to

“some positive legal duty imposed by law because of the relationship of the parties,”
duties that have nothing to do with the insurance policy. Solid Gold Jewelers v. ADT
Sec. Sys., Inc., 600 F.Supp.2d 956, 960 (N.D. Ohio 2007). She says she can. (Opp’n,
Doc. 10, #81 (quoting Campbell, 961 N.E.2d at 211)). Specifically, Jones points to two
potential candidates. First, Jones argues that OAC § 3901-6-13(F)(1) requires Flynn
to recommend only suitable insurance products, and that his breach of that duty is
imputed to Ohio National as Flynn’s principal. (Id. at #79). Second, Jones says Ohio

National, as the insurer, directly owed her a duty under another provision of the same
section, § 3901-6-13(F)(3), which, according to Jones, requires that “an insurer shall
not issue an annuity recommended to a consumer unless there is a reasonable basis
to believe the annuity is suitable based on the consumer’s suitability information.”
(Id.). The Court takes them in that order.
There is an insurmountable problem with Jones’s reliance on the first of those

two provisions. Another section of the same rule, § 3901-6-13(C)(2), unequivocally
states that:
Nothing herein shall be construed to create or imply a private cause of
action for a violation of this rule or to subject an insurance agent to civil
liability under the best interest standard of care outlined in this rule or
under standards governing the conduct of a fiduciary or a fiduciary
relationship.
§ 3901-6-13(C)(2) (emphasis added). That forbidden maneuver (i.e., subjecting an
insurance agent to civil liability) is precisely what Jones seeks to do here—she seeks
to subject Ohio National to civil liability (on an agency theory) for Flynn’s breach of
the duty the rule imposes. As Section (C)(2) precludes direct liability for Flynn,
though, Ohio National cannot be subject to derivative liability under that theory.

As for the second, Jones’s attempt to attack Ohio National itself under § 3901-
6-13(F)(3) fares little better. Consistent with the Chapter’s specific disclaimer of any
private right of action, Section 3901-6-13(H) expressly provides that, “[i]f a violation
[of the rule] occurs, … the superintendent may order” certain remedies, including
“[a]ppropriate penalties and sanctions.” (Emphasis added). And it further declares
that “authority to enforce compliance with this rule is vested exclusively in the
superintendent of insurance.” (Emphasis added).

As the court in Strack v. Westfield Companies, 515 N.E.2d 1005 (Ohio Ct. App.
1986), observed, inferring a private cause of action from a provision of the Ohio
Administrative Code that is silent on the matter “would be inconsistent with the
existing administrative enforcement scheme” and would “not necessarily further the
policy behind” the code. Id. at 1008; see also Ohio Admin. Code § 3901-6-13(C)(2)
(“Nothing herein shall be construed to create or imply a private cause of action … or

to subject an insurance agent to civil liability ….”). But the same inconsistency that
the Oho court disclaimed in Strack would arise if a plaintiff could accomplish an
identical end through the mere artifice of (1) citing the Administrative Code provision
to create a duty, and then (2) using a negligence theory to sue on that duty. In short,
Jones cannot rely on those two code provisions as the basis for a negligence claim,
and she has failed to articulate or cite authority for any other common law duty.
Alternatively, Jones argues that, even if the Administrative Code does not
supply the necessary tort duty with respect to the policy’s suitability, the Court
should permit her to re-plead her Complaint because “the facts … would support a

claim for negligent hiring and supervision of Flynn by the principal, Ohio National.”
(Opp’n, Doc. 10, #80). As the Sixth Circuit has observed, though, “[a] request for leave
to amend[, presented] almost as an aside, to the district court in a memorandum in
opposition to the defendant’s motion to dismiss is … not a motion to amend.” La. Sch.
Emps. Ret. Sys. V. Ernst & Young, LLP, 622 F.3d 471, 486 (6th Cir. 2010) (internal
quotation marks omitted). Jones is not “entitled to an advisory opinion from the Court
informing [her] of the deficiencies of the claim and then an opportunity to cure those

deficiencies.” Id. (quoting Begala v. PNC Bank, Ohio, N.A., 214 F.3d 776, 784 (6th
Cir. 2010)) (emphasis omitted).
If Jones believes that she can set forth a claim for negligent supervision, she
should seek leave to do so. The Court notes, however, that, as one element of any such
claim, “a plaintiff must demonstrate that the employer knew or should have known
of the employee’s … tortious propensities.” Collins v. Flowers, No. 04CA008594, 2005

WL 1763615, at *6 (Ohio Ct. App. July 27, 2005) (citation omitted). The employer’s
ability to foresee the employee’s allegedly tortious conduct is determined by
considering the totality of the circumstances, and “it is only when the totality of the
circumstances are ‘somewhat overwhelming’ that the [employer] will be held liable.”
Staten v. Ohio Exterminating Co., Inc., 704 N.E.2d 621, 624 (Ohio Ct. App. 1997)
(citing Evans v. Ohio State Univ., 680 N.E.2d 161, 173 (Ohio Ct. App. 1996)). That is
a demanding standard.
In sum, Jones has failed to identify an appropriate legal duty on which to base

her negligence claim. Given Jones’s invocation of a potential negligent supervision
theory, though, the Court DISMISSES her negligence claim as pled, but WITHOUT
PREJUDICE.
D. Jones Plausibly Alleges A Claim For Unjust Enrichment Against Ohio
National.
Jones’s fourth and final cause of action alleges unjust enrichment under Ohio
common law. (Compl., Doc. 1, #15). To state a claim for unjust enrichment in Ohio,
Jones must plausibly allege that (1) she conferred a benefit on Ohio National; (2) Ohio
National had knowledge of the benefit; and (3) the Ohio National retained the benefit

under circumstances where it would be unjust to do so without payment. Hambleton
v. R.G. Barry Corp., 465 N.E.2d 1298, 1302 (Ohio 1984). Recovery under unjust
enrichment is designed to compensate the plaintiff for the benefit he or she has
conferred upon another, not to compensate the plaintiff for a loss suffered. Hughes v.
Oberholtzer, 123 N.E.2d 393, 397 (Ohio 1954).
The Court understands Jones to allege that her payment of premiums under
the key man policy constitutes a “benefit” conferred by her on Ohio National. And one

may assume that Ohio National “had knowledge” that it was receiving those
premiums. The trouble with that theory, though, is that a contract indisputably
governs the payment of premiums, and an unjust enrichment claim will not lie when
it “arises directly from the parties’ agreements.” Jones v. Petland, Inc., No. 2:08-CV-
1128, 2010 WL 536894, at *6 (S.D. Ohio Feb. 11, 2010); see also Wuliger v. Mfrs Life
Ins. Co., 567 F.3d 787, 799–800 (6th Cir. 2009) (“[T]he payment of premiums to
[defendant] was not a ‘benefit’ conferred on [defendant], but was consideration for

[defendant’s] commitment to insuring the viators’ lives. Accordingly, … an unjust
enrichment claim … would be without merit.”).
That said, alternative pleading is permissible under federal law, meaning that
a party may plead both a breach of contract claim and an unjust enrichment claim,
in the alternative, without negating the validity of either, at least so long as the
existence of a contract claim is in dispute. Ortega v. Wells Fargo Bank, N.A., No.
3:11CV01734, 2012 WL 275055, at *11 (N.D. Ohio Jan. 31, 2012); see also Fed. R. Civ.

P. 8(d). And a claim for unjust enrichment may be maintained despite the existence
of an express contract where there is evidence of fraud, bad faith, or illegality. Res.
Title Agency, Inc. v. Morreale Real Est. Servs., Inc., 314 F. Supp. 2d 763, 772 (N.D.
Ohio 2004).
Here, because the Court allows Jones’s securities fraud claim to proceed, the
existence of a contract is at least arguably in dispute, insofar as rescission is a viable

measure of damages under the securities laws. See Nolfi v. Ohio Ky. Oil Corp., 675
F.3d 538, 550 (6th Cir. 2012) (recognizing that, at least in some circumstances,
rescission is an appropriate measure of damages for a § 10(b) claim (citing Stone v.
Kirk, 8 F.3d 1079, 1092 (6th Cir. 1993))).
As such, at least for the time being, Jones may maintain her unjust enrichment
claim notwithstanding the apparent existence of an insurance contract covering the
“benefit” she allegedly conferred on Ohio National (i.e., her insurance premiums).
That said, the Court also notes that Jones cannot receive double recovery. If she
prevails on her securities fraud claim, her relief likely would lie under that claim,

rather than under unjust enrichment. Conversely, should it become clear that her
fraud claim fails—meaning that the insurance contract is valid—her unjust
enrichment claim likely will fail, as well, at least in the absence of any other bad faith
or inequitable conduct. See Res. Title Agency, Inc., 314 F. Supp. 2d at 772; Sindell v.
Fifth Third Bank, No. 1:18 CV 479, 2019 WL 3318571, at *8 (N.D. Ohio Jan. 24, 2019)
(“Ohio law permits a plaintiff to recover under the theory of unjust enrichment only
when an express contract does not cover the same subject ….”). Either way, it is

difficult to imagine how she would recover on an unjust enrichment theory here (as
in the former case, it would constitute double recovery, and in the latter case, the
claim would fail). Nonetheless, the Court will allow the claim to go forward as an
alternative pleading, at least for now.
CONCLUSION

For the foregoing reasons, the Court GRANTS IN PART and DENIES IN
PART Ohio National’s Motion to Dismiss (Doc. 9) Jones’s Complaint (Doc. 1). In
particular, the Court GRANTS Ohio National’s Motion (Doc. 9) with respect to
Counts II and III of Jones’s Complaint (Doc. 1) and accordingly DISMISSES Count
II WITH PREJUDICE and Count III WITHOUT PREJUDICE. The Court
DENIES Ohio National’s Motion (Doc. 9) in all other respects.
SO ORDERED.
April 15, 2022
DATE DOUGLAS R. COLE \.
UNITED STATES DISTRICT JUDGE

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10379984. Public record. Not legal advice.