What Does it Mean to Own Expirations’ Lawsuit Aims to Find Out

At the heart of a lawsuit filed against Allstate Insurance Company by an independent agent in Garza County, Texas, are the issues of who owns the right to renew policies of customers of an independent agent; what it means to own those expirations; and the nature of the American independent agency system.

The lawsuit, Jimmy Norman d/b/a The Norman Agency vs. Allstate Insurance Company (and subsidiaries), was filed on December 27, 2001, and is currently in arbitration. It stems from the termination in 1998 of Norman’s contract to place business with Allstate and the company’s subsequent actions regarding the renewals of policies that Norman handled for Allstate.

According to documents on file in the Garza County courthouse, Norman bought the Tom Power Insurance Agency in Post, Texas, in 1990, and renamed it The Norman Agency. At the time, the Power Insurance Agency had been designated as having the authority to sell Allstate policies, and Norman also contracted with the company to sell insurance on its behalf.

In February 1998, the company notified Norman that it was terminating his contract with Allstate effective September 1, 1998. Norman accepted Allstate’s right to terminate their agreement, but claimed in his petition that Allstate subsequently endeavored to take his customers by diverting their policies to other agencies, including company-owned agencies.

Norman asserted that Allstate had a duty to (1) renew his customers’ policies one final time during the year that followed his effective termination date and pay him the appropriate commission for those renewals, and (2) provide those customers with non-renewal notices indicating that they will no longer be Allstate policyholders once the current policies expire, and that Norman no longer represents Allstate as an agent. But, said Norman, Allstate failed to do those things consistently.

“The bottom line and the crux of an independent agency system is the renewal rights,” Norman said, “that’s the value of my business.”

Allstate declined to comment on the case stating, “Allstate’s duties and obligations in this case are being decided by arbitration pursuant to Allstate’s contract with Mr. Norman. Until the arbitrators have made their decision, Allstate feels that it is inappropriate for either side to comment on this pending dispute.”

However, in court documents, Allstate acknowledged it accepts its responsibility to pay Norman commissions on policies renewed after the termination of his contract and on which he was still the agent of record, but disavowed any “duty to non-renew” Norman’s policies. “Mr. Norman did not own a right to have Allstate non-renew its insureds. Mr. Norman’s ownership of ‘expirations’ does not mean that Mr. Norman had a right to demand insurance cancellation or non-renewal,” the company stated in the filed documents. Allstate also commented that it “is unaware of any non-renewal in which it did not provide notice to both Mr. Norman and the insureds in a timely manner…. Allstate provided the appropriate notice of non-renewal to the policy holders.”

Norman’s attorney, Keith Thompson of the Lubbock law firm, Agnew & Thompson LLP, said around 70 percent of Norman’s customers never received non-renew notices. “But the real crazy thing about this,” Thompson said, “is that there’s really no one thing that they did consistently. In some cases they sent out non-renew notices, but 15 months late. In some cases they sent out no non-renew notices at all.”

Thompson added that the problem lies in the fact that the agent contract doesn’t specifically say, “‘After you terminate you will non-renew,’ it says ‘after you terminate you will provide one more renewal’ and then it’s silent after that.” However, he said it is a tenet of the American independent agency system that the independent agent is allowing the company to provide insurance to his clients, not the other way around. If Norman had been an employee-agent for Allstate, that might have been different, but he was not, asserted Thompson.

Thompson noted that in the renewal notices it sent out Allstate told the insureds that Norman was no longer under contract with the company. The notices also instructed the insureds to contact their Allstate agent to discuss future coverage. Thompson claimed such wording was misleading.

In the filed papers, Allstate countered that while the policies remained in effect, Norman was still the agent representing Allstate to the insureds. Allstate also indicated that it encouraged the insureds to obtain insurance elsewhere.

Allstate asserted it had a duty to continue providing insurance to its insureds and stated, “neither the agreement nor the statute expressly limits Allstate to one renewal.” The company agreed that Norman owns the expirations, but questioned what such ownership means. It commented that the expirations are merely information and while Norman has the right to use and possess that information, he does not have exclusive rights to it. Stating, “Expirations are not Mr. Norman’s ‘business’ nor are they his right to sole contact with the insureds,” Allstate took the position that his “ownership of expirations does not obligate Allstate to cease all relationships with Allstate insureds serviced by Mr. Norman.”

However, in a letter to the Texas Department of Insurance dated Dec.18, 2001, concerning the non-renewal of one of Norman’s clients, Allstate stated that because “Norman is an independent agent, the insurance contract with [the client] belongs to Mr. Norman’s agency rather than Allstate.” It further stated that the client would have to contact Norman for future coverage.

Thompson said he is also representing another agent in the Lubbock area with a similar disagreement with Allstate. That case, filed in Lubbock County, involves an independent agent in Levelland, whose lawsuit concerns expirations that were in place at the time he bought an agency with Allstate contracts and the company’s actions regarding renewals of those policies.

Topics Lawsuits Texas Agencies