Agents allege red-lining by ANPAC in Texas court case

By | February 20, 2006

A group of agents recently won a round in a Texas court in their fight to have documents released. Deemed “trade secrets” by American National Property & Casualty Co., they were made available to the public through the Travis County District Clerk’s Office under cause number GN404136. Travis County District Judge Margaret Cooper turned down the company’s bid to keep the documents sealed.

According to Austin attorney Joe Longley, the disputed documents describe ANPAC’s creation, use and yearly adjustments of agent profile scores, which are at issue in a case brought by former ANPAC agents, Bradley Dixon and Curtis Rothe, alleging that the system resulted in “agent red-lining.” The lawsuit alleges violations of the Texas Insurance Code, the DTPA, the Texas Antitrust act and the common law of both Texas and Missouri.

The plaintiff’s second amended petition and jury demand says that in 2000, the two high-ranking ANPAC agents learned the company had begun using a profile system to evaluate agents. The “Agent Profile System” (APS) assigns a profile score to ANPAC agents based upon performance. It was set up in 1999 on a 1,000-point scale with a built in bias against monoline customers. Agents would get zero points in the monoline category if their percentage of monoline business exceeded a certain amount (37.5 percent by 2005).

According to the “background” section of the plaintiff’s response to defendant’s motion for protective order, the purpose of the APS was to reward agents for selling bi-line and tri-line policies and punish agents who did not limit or reduce their percentage of monoline customers.

By receiving zero or decreased points in the monoline category, an agent could face “no new business” status or termination. The agents allege this happened to them.

Court documents show that the agents’ profile scores declined to the point of being cut off from writing new business. They were told to drop monoline clients and those with low credit, low income and bad geographical locations. Since their clients in these categories had low loss ratios, the agents questioned ANPAC executives and an affiliated managing general agent as to the lawfulness of the profiling system. Later, their contracts were terminated.

After the termination, the lawsuit alleges, ANPAC claimed the agents did not own their book of business and that all their business would be given to other agents who stood to receive hundreds of thousands of dollars in commissions derived from accounts they never developed. Both Dixon’s and Rothe’s accounts were given to another ANPAC agent, while other accounts of similarly terminated agents went to two APS key implementers.

Longley said the profile scores were designed to restrict binding authority and to limit selling to only existing customer bases during specific periods of time described as “no new business” status. The former agents allege this practice breached their agent agreement, discriminated against the agents and prospective customers, and violated various Texas anti-discrimination and unfair insurance practice laws.

A representative for ANPAC told Insurance Journal the company is preparing a formal response to the allegations. However, the company’s statement was not available at press time.

Six cases involving seven former agents are on file in Travis County, Texas. Assigned to Judge Cooper, the first is scheduled to go to a jury trial July 31, 2006.

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Insurance Journal West February 20, 2006
February 20, 2006
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