California Agents Win Case Against State Farm

By Timothy F. Kirn
November 6, 2009

State Farm Fire and Casualty Company is going to have to pay the defense costs of the two former agents the insurance company fired, and then sued, according to a court decision handed down last week.

The well-known dispute between the two agents against one of the largest insurance companies in the nation now has been going on for 10 years, long enough that one of the agents, Richard Pyorre, said in an interview this week says that he no longer talks about it with his neighbors in the small, Northern-California town where he lives.

The residents of Fort Bragg, a cohesive community located right on the coast, about 4 hours north of San Francisco, where it is cold and foggy as often as not, know about the case, and are aware it has thrown their tiny town in the national spotlight, he said. But, by now, they find the subject tedious as conversation.

"Nobody brings it up anymore," he said.

In the decision last week, the Superior Court of California in Sonoma County found in favor of Richard Pyorre and the other independent insurance agent involved, John Wier, of Crescent City, Calif. State Farm had sued the two to recoup about half of the $2 million that State Farm had paid for their defense in another case, also against State Farm.

The disputes between the two agents and State Farm began when the two agents were fired by State Farm in 1999. Pyorre, who had been a State Farm agent for 27 years, skipped a company meeting. He contends that State Farm had never required attendance at the meetings, up until that time. Moreover, Pyorre says that State Farm has used the fact that meetings are not mandatory as evidence that its agents are independent contractors.

The meeting was billed as an 'ethics' training session, but it was really training in banking products that State Farm was going to begin to offer, Pyorre says.

Wier reportedly was terminated as an agent because he refused to sign a contract without modifying it first. The contract called on agents to transfer their client records out of their office to a computer system in Arizona, a computer system that was password protected.

With no income from State Farm, the two agents began selling policies for another company, Mercury Insurance. State Farm then sued them for disclosing trade secrets, since they were soliciting policyholders to represent under carriers other than State Farm. Wier and Pyorre countersued, claiming wrongful termination and interference on the part of State Farm when the agents tried to place business with Mercury.

The two agents made a claim with State Farm to pay for their legal expenses, and State Farm paid.

In 2002, a jury awarded Pyorre and Wier about $6 million each. But that verdict was overturned about 6 months later, and has gone back to trial.

In 2003, State Farm stopped payments to the agents on the claim.
State Farm spokesperson said that the company had no comment on the decision, except to say that it was "disappointed."

Pyorre said: "The first 10-15 years I was a [State Farm] agent, I never would have believed the relationship would ever come to this."