Allstate New Jersey Wins Lawsuit Asking Whether Agents are Franchisees

A New Jersey state court has sided with Allstate New Jersey Insurance Co. in a lawsuit questioning whether exclusive agents should be considered franchisees of the company. The court determined agents are not franchisees under New Jersey law and therefore, Allstate had done nothing wrong when it terminated its agreement with the agents.

Last year, three agents filed suit against the company, seeking to prevent the termination of their agency agreements for failing to meet certain business objectives.The agents alleged they had franchise relationships with Allstate New Jersey and were protected under the New Jersey Franchise Practices Act.

But the Superior Court of New Jersey disagreed with those arguments and entered judgment in favor of Allstate New Jersey Insurance Co. The court dismissed all of the plaintiffs' claims and their application to stop their termination was denied.

The court noted in its decision the "insurance industry has never been found by any court in New Jersey, or elsewhere, to be home to an insurance company franchisor, or agent franchisee."

"Allstate</org> has maintained that exclusive agents are independent contractor agents and not franchisees. The court decision affirms the company’s position," the company, a subsidiary of Allstate Insurance Co., said in a statement.

Efforts to reach the company for additional comment were unsuccessful.

Allstate New Jersey Insurance Co. currently has a Best's Financial Strength Rating of A- (Excellent).

Allstate Insurance Co. has been involved in a number of legal cases in recent months. The company has been taking an aggressive approach to potential fraud in New York.

In December, Allstate Insurance Co. filed its seventh insurance fraud lawsuit of 2011, charging that 83 defendants in the New York area allegedly submitted fraudulent and misleading bills for payment.

Allstate is seeking to recover $6.3 million in damages in that case (Best's News Service, Dec. 22, 2011).

(By Jeff Jeffrey, Washington Correspondent: [email protected])