Allstate faces $15M lawsuit
[The Daily Independent, Ashland, Ky.]
July 09, 2012
By Kenneth Hart, The Daily Independent, Ashland, Ky.
McClatchy-Tribune Information Services
July 09--ASHLAND -- A former Allstate insurance agent from Greenup County has filed a $15 million breach-of-contract and fraud lawsuit against his former employer, alleging the insurer engaged in a scheme to squeeze him out of business and redirect his clients to a newer, younger agent.
In the suit, filed June 29 in U.S. District Court by attorney Michael C. Wilson, Larry Stevens alleges Allstate was behind a "hostile takeover" of his client base, which began in 1999 when the company terminated its employment contracts with all its agents.
"Allstate publicly stated that this move was designed to 're-energize' its insurance sales force," the suit states.
The insurer offered to let each so-called captive agent continue its affiliation with Allstate as an independent contractor if the agent agreed to sign a nonnegotiable exclusive agency agreement with Allstate, Stevens alleges.
However, not all the agents took the deal, and Stevens claims in the suit when the task of replacing the lost agents was near completion, Allstate realized it could negotiate more favorable contractual terms with newer, and often younger, agents.
"Allstate made absurd production demands on incumbent agents. When these demands were not met, Allstate systematically attempted to force the incumbent agents to sell their books of business, threatening termination of the agency agreement if a sale was not completed," the suit states.
If incumbent agents refused or could not sell their agencies' books of business, Allstate terminated those agents' agreements, Stevens alleges.
"It is believed that Allstate saw the incumbent agents as bad for morale and lacking the energy and productivity of the newer, younger agents," the suit states.
Even though he performed well, Stevens claims Allstate still terminated its agency agreement with him, causing him a "sudden and dramatic decline in income."
Stevens began working for Allstate in 1970, according to the suit. In 1999, Allstate announced it was terminating its employer/employee relationships with all of its 6,500 incumbent captive agents, including Stevens, as of June 30, 2000, so it could market insurance through independent contractors who would own their own businesses.
"As a result, Mr. Stevens had three options: (1) enter into an exclusive agent independent contracted agreement and continue to sell Allstate insurance and related products, but that he do so an independent contractor; (2) temporarily become an independent contractor for the purpose of the (sale) of the agent's book of business; or (3) accept a forced severance," the complaint states.
At the time, Allstate represented to Stevens and other captive agents in exchange for giving up benefits such as pension, health insurance and profit-sharing, they would have ownership interest in their businesses and "would be able to grow their businesses in a more profitable way," the suit states.
Based on those representations, and because he had been an Allstate agent for a number of years, Stevens chose to become an exclusive independent contractor with the company, according to the suit. As an independent contractor, he was responsible for all operating business expenses, including, but not limited to, building rental, advertising and professional licensure, the complaint states.
"Throughout the time of both his employment by and as an independent contractor for Allstate, Mr. Stevens, and not Allstate, was responsible for building and maintaining his personal book of business," the suit states.
Eventually, Allstate severed its relationship with Stevens and as a result he said he had two options: sell his business to an approved buyer or turn over his entire book of business to Allstate for Allstate to allocate in its own discretion.
"As part of its overall plan, Allstate took all steps necessary to remove incumbent agent Mr. Stevens from Allstate in such as way to retain his sizable book of business to the benefit of Allstate and a newer, younger agent," the complaint states.
Claims made in civil lawsuits state only one side of an issue. As of Friday, Allstate had not filed a response to Stevens' complaint.
KENNETH HART can be reached at email@example.com or (606) 326-2654.