An Essay

The Allstate R3001 Exclusive Agency Agreement (Main, 12 pages) and accompanying integrated documents, which are as follows: Exclusive Agency Independent Contractor Manual (“Manual,” 47 pages, revised 38 times at the time of 4/1/2021), the Supplement for the R3001 Agreement (“Supplement,” 264 pages, revised 79 times at the time of 6/1/2021), and Exclusive Agency Independent Contractor Reference Guide (“Guide,” 99 pages, revised 13 times at the time of 7/11/2016). The total contract consists of 422 pages and Allstate has the sole power to alter the terms of the contract – in this case, 130 times. It is, in short, a one-sided/imparity employment contract. The three accompanying integrated documents are normally in the case of other companies described and classified as the rules and regulations of the employing company; thus, an auxiliary part of a contract, which should not consist of terms which are major and fundamental to the agreement between the Company and the agent-signee. The 12-page agreement is the main contract between Allstate and the agent which consists of 10 pages of text delineating the terms of the contract and 2 pages of an exhibit, which is termed “Appendix A: Confidentiality and Non-Competition Agreement,” which made certain the signing agent remains captive and his/her office becomes inoperable as an insurance agency, if TPPed (TPP stands for Termination Payment, which enables Allstate to take an immediate possession of Agent’s economic interest of the book of business with a subsequent 12-24 installment payments without interests and with an exclusion of a significant portion of the book which Allstate arbitrarily deems having a birth defect because the policies were written by the employee-agents), within one year after the termination of the EA agreement. The EA Agreement under question is an adhesion-like contract and Its Paragraph I.C allows Allstate to amend freely without accommodating the principle of meeting of the minds of the contract law. This “fluid” one-sided nature of the contract should be executed under the scrutiny of the Federal and State laws which imbue in all contracts the obligation of good faith and fair dealing. There are several characteristics of the present contract to be delineated as follows:

1. The EA Agreement is an IC (Independent Contractor) contract. IRS’s principle of can-not-be-controlled by an employer should be applicable here. There is the norm and tradition of Independent Agent (“IA”), which was predated before 1999, when Allstate had introduced to the world the R3001 EA Agreement and started the program of EA force. It is reasonable to assume that Allstate will observe and follow the norm and tradition of IA in the insurance industry. For example, it would not listen into agent’s “quiet enjoyment” conversation with his/her customers for the purpose of monitoring his/her ways of conducting business. And it would respect agent’s property right of the economic interest of the book of business just as it would on the IA agent’s ownership of the policy. Paragraph 1.D., II.E., II.G., V.A., and VIII characterize the IC status of the agent.
2. In addition to being an IC contract, it is also an exclusive agent (commonly known as “captive agent” or “exclusive captive agent”) contract, which is entitled, “Allstate R3001S Exclusive Agency Agreement,” and which should follow the norm and tradition of this type of agencies, the exclusive agency, in the insurance industry. In exchange for being exclusive or captive, the employer/captor has the moral obligation to follow the moral principle of reciprocity, or, in the legal context, the doctrine of consideration. To put it in an everyday context, should a spouse who demands faithfulness from his/her partner be faithful himself/herself. In the context of the insurance industry, in exchange for the restriction imposed by the employing/captor company to selling only the brand of the employer, would the employer be required to refrain from opening a super mega agency to sell its products and distributing to non-captive independent agencies to sell its products, as the obligation of good faith and fair dealing demand of both parties of the contract? However, Allstate preempts the significance of name of the title of the contact by adding in Paragraph XX.E and F the following statements, “The authority granted to you under this Agreement is nonexclusive (The title of the Agreement lies!). The term ‘Exclusive’ as used in the title of this Agreement refers to the obligations assumed by you under Section I.E.” and “The descriptive headings of this Agreement are intended for reference only and will not affect the construction or interpretation of this Agreement.” Does it mean that “the descriptive headings of this agreement” is only a front/a sheep’s clothing to fool the agent-signee of the contract? Has the obligation of good faith and fair dealing been violated; thus unlawful?
3. Are Allstate’s criteria and execution for termination in line with the other companies who also have exclusive captive agents? The title of the contract indicates that Allstate should.
4. Are Allstate’s procedures, in terms of due process of resolving disputes and grievances, in line with the other companies who also have exclusive captive agents? The title of the contract indicates that Allstate should.

5. An additional relevant point should be made about the ownership of insurance policies. The IA agent (say, Travelers) owns the policies. The traditional EA agent (say, State Farm) has no ownership of policies whatsoever; however, the employing/captor company grants tenure-ship[1] to the agent by promising that it would not institute production quota to the agent so that he/she is independent from the threat of termination because of production quota requirement to guarantee his/her IC status, as IRS demands. Allstate made a marriage or cross-breed between the two by creating the concept of the economic interest of a book of insurance policies (Paragraph XVI.B.), which is, an agent does not own the policy itself but has an ownership of a percentage of the commission received by the Captor-company; and the agent pays a sum of money as much as the ownership of the policy itself paid by an IA to acquire this economic interest. It is a leasehold interest (in a metaphorical sense) of the commission of a policy, which is as expensive as the ownership of the policy itself. Is this leasehold interest ownership sacred? Can Allstate forfeit/appropriate/null this sacred ownership at will?

6. On the issue of ABO (Allstate Business Objectives), which was coined in 01-01-2013 with a definite quota of 4 standard auto policies per month and with alternative ways/conditions to circumvent or replace this requirement. It was said among agents that ABO of 2013 had never been implemented. Around January 2019 Allstate notified agents that, starting 4-1-2019, a new stricter ABO of higher quota would be implemented. Hundreds and thousands of agents lost their agency due to this 2019 ABO quota systems since then. In fact, the term Business Objectives (“BO”) without the name “Allstate” is stated in the Main Agreement (II.B) in the areas of “profitability, growth, retention, customer satisfaction and customer service.” Before 2013, OB was mentioned in prior Manuals, e.g., 2012 Manual states under Agency Evaluation as follows, “The key areas that are currently considered in evaluating your agency’s results include: Standard Auto IIF Growth · Allstate Financial (Production Credit) · Agency Loyalty Index · Loss Ratio/ Profitability (Established Agencies only) · Standard Auto Retention (Start-up Agencies only).” (p. 14.) These conditions somewhat echo the areas listed in the main contract. However, the requirements of the 2019 ABO are not: which is a total divorce from the concerns of the main contract.

7. Neither IC nor EA in the insurance industry in the observation of IRS guidelines for IC (Independent Contractor) has production quotas for its agents. Allstate has observed this norm and tradition of IC and EA when it first adopted the Allstate R3001 Exclusive Agency Agreement in 1999-2000, when it had converted agent-employees (who had production quota) to agent-IC (who had no production quota), up until 2013, when it sneaked into the rules and regulations section of the contract (Manual) a flexible production quota requirement. It is said that, while the production quota had been created in 2013 Manual, it had never been announced and executed. In January 2019 it was announced that a rigid production quota was in place and would have been executed vigorously, starting 4-1-2019. Hundreds and thousands of agents had been ABOed since then. ABO is the hallmark of an employee. By re-inventing ABO, Allstate has reclassified EA from IC to an employee; thus, Allstate should pay for all the office expenses of the agents, in addition to pay 50% of SS and Medicare.

8. Paragraph XX.A of the main contract states, “This Agreement may not be modified except by a written agreement between the Company and you which expressly states that it modifies this Agreement.” The meeting of the minds stated in XX.A has never been executed by the Company about ABO, which is buried in the haystack of the Manual, even though it is a fundamental term of the Agreement, and which would wipe out the hundreds-and-thousands-dollar investment made by the agent-signee. In short, it violates the Federal and State laws which imbue in all contracts the obligation of good faith and fair dealing; hence, unlawful.

9. The EA Agreement and agent’s ownership of the economic interest of the book of business are two separate legal entities. The cancellation of the Agreement does not imply the null of the agent’s ownership of the economic interest of the book of business. If TPP were unlawful, it would mean the transfer of interest through TPP from agent to Allstate is legally invalid; thus, Allstate is required to pay agent the economic interest (the commission cut) of the book of business until a legal transfer of interest has been executed.

10. The contract is deceptive in a tongue in cheek fashion in the sense that it announces to the world that it is an exclusive agency contract and immediately in the main contract in Paragraph XX.F, which says, “The descriptive headings of this Agreement are intended for reference only and will not affect the construction or interpretation of this Agreement.” That is, it has no intention of observing the norm and tradition of the exclusive agency, as discussed under Point 2. Same for the discussion under Point 8. Paragraph XVI is about the topic of Transfer of Interest of the economic interest; however, it only talks about the transfer of interest among agents or future agents without discussing the transfer of interest between the Company and the agents. When the Allstate recruiter discussed the transfer between the Company and the agent, he/she would use the term “buy back” (not TPP), just as Ted Paris, the executive director of NAPAA (National Association of Professional Allstate Agents) used the term “buy back,” when a 2-year-9-month-agent asked, “What is TPP?” on the FB All Agents Page platform on 9-1-22. A genuine Buy Back is a lawful practice to null another party’s ownership of the book of business; however, TPP is not a Buy Back but an appropriation of another party’s personal property.

Conclusion

1. The term “Exclusive” used in the title of the Agreement is only a sheep’s clothing to fool the world.
2. TPP is an act of appropriation, not an act of buying as implied in the term “buy back” used by the Allstate recruiter to the potential buyer of the economic interest of the book of business.
3. ABO demarcates an employee-agent from an independent agent – a fact recognized by Allstate when it transformed the entire agency force from former to the latter since 1999 until 2013.
4. The cancellation of the EA Agreement does not automatically follow that agent’s ownership of the economic interest of the book of business is nulled.

[1] A potential agent is employed as an employee-captive agent, who had to meet very tough production quotas in order to be “graduated” or vested or tenured in 1-3 years to become an independent contractor-captive agent, a “tenured” agent, with no production quotas to be imposed on him/her. While he/she receives commissions from his tenured book, he/she cannot sell his/her tenure-ship on the book. Therefore, when the contract between captor and captee is terminated, the tenure-ship ceases to exist, and the agent shall cease to receive commission from the Captor on his/her tenured book.