Allstate Said To Lose A Round In Age Case

"It allows small claimants to be aggregated to have a bigger economic impact. It's kind of a unitary act that, by combining small claimants, their lawyers can bring the case with skill and competence," Mr. Isquith told National Underwriter.

The suit stems from Allstate's decision to take away in 2000 the "employee agent" status of some 6,200 agents in 47 states, 90 percent of whom were over the age of 40.

These agents were given choices to either continue to work as independent contractors representing Allstate–but without the prior benefits including pensions and health insurance–or sell their books of business to other agents. Otherwise they could resign with a severance package, provided that they all sign a form not to sue Allstate down the road.

"At the time of conversion, about 60 percent of them chose to become independent contractors and remain with the company–most of them are still with the company. And about 400 took the enhanced severance option," said Michael Trevino, spokesman for the Northbrook, Ill.-based Allstate.

Since the suit was filed by 29 agents, Allstate has counter-sued 28 of them, because those 28 had signed the waiver not to sue the insurer. He also said the judge's order is just a "procedural matter" and is in no way a commentary on the case's merit.

Mr. Trevino added that the discrimination charge in the case is a "complete nonsense" since almost all Allstate agents can now be categorized as "independent contractors," and so that those 6,200 agents weren't treated any differently compared to other agents working for Allstate.

But Mr. Isquith offered a different perspective on the matter. "It's one of those cases that are appropriate for a class action treatment. It was about a firing of employees, being forced to a Hobson's choice of retirement or giving up their benefits," he commented.

Mr. Isquith suggested that Judge Fullam, by issuing his order last week, may have hinted that the case does have sufficient merit. "He also denied the Allstate's motion to dismiss the case, and I suspect that plaintiffs have an excellent case," Mr. Isquith said.

"According to the opinions, plaintiffs are attempting to demonstrate that there was a corporate policy which had the intent of eliminating more expensive agents for the purpose of getting less expensive, younger, and perhaps more energetic agents," he said. "And if plaintiffs can demonstrate that, I think they have a reasonable chance of succeeding in this case."

And more importantly for the overall insurance industry, if this Allstate case turns out favorably for the plaintiffs, either through jury awards or settlements, it could trigger a host of other similar litigation for other insurance companies.

Mr. Isquith noted that there may be other similar claims in the works. And Michael Wilson, attorney for Washington, D.C.-based law firm Zevnik Horton and the co-lead counsel for the agents in the current case, told National Underwriter, "I heard from more than a dozen agents from other major insurance companies who believe their agency appointments were terminated because of their age."

He also noted that he has been contacted by some former managers at Allstate who feel they were terminated because of their age. He said that the ongoing litigation against Allstate could "absolutely" trigger other similar lawsuits against major insurance companies.