Allstate is suing one of its former agents in United States District Court for the District of Massachusetts, alleging the agent breached a one-year non-compete clause by misusing Allstate’s confidential information and trade secrets.
Defendant Abner Joseph executed an exclusive agency agreement (EA Agreement) with Allstate around December 3, 2014. In the contract, he agreed not to compete with Allstate from any office or business within a mile of his Allstate Exclusive Agency for one year after the EA Agreement’s termination, according to Allstate’s complaint. Joseph also agreed, upon termination of his EA Agreement, to transfer all phone numbers to Allstate that he used to conduct business under the EA Agreement.
He also acknowledged that a failure to comply with the duties and obligations he owed Allstate under the EA Agreement, including not competing with Allstate within one mile of his former Allstate Agency location, failing to transfer all telephone numbers Joseph used to conduct Allstate business, and using and/or failing to return all confidential Allstate information, would be a breach of the EA Agreement, the complaint says.
“Unfortunately, Joseph refused to honor this obligation by setting up a competing agency in the very same office as his former Allstate Exclusive Agency, and then lying about it to Allstate by claiming that he was only operating a tax business out of his former Allstate Agency location,” alleges the complaint, filed by Allstate’s attorneys, Erik W. Weibust and Dawn Mertineit of law firm Seyfarth Shaw LLP.
Allstate, a corporation with its principal place of business in Northbrook, Ill., appoints independent exclusive agents through its Exclusive Agency Program to sell Allstate products.
The corporation and its customers trust Allstate Exclusive Agents to safeguard and protect their private information from unauthorized use or disclosure, according to the complaint. This includes information relating to their personal data, date of birth, social security numbers, types of policies, amount of insurance, premium amounts, description and location of assets and property, claims histories, insurance needs, pricing information and other insurance coverage information.
The complaint states that it is believed Joseph owns and operates Damelia Insurance Agency, which serves as an Allstate competitor. It suggests that Damelia Insurance Agency provides both personal and business insurance products and services, including the same products and services that Joseph sold on behalf of Allstate.
It also alleges Damelia’s phone number is the same phone number Joseph used on behalf of Allstate, and since June 1, 2017, more than 50 Allstate customers have cancelled their policies with Allstate. According to the complaint, this number is significantly higher than Allstate’s normal cancellation rate.
In addition to allegedly operating a competing insurance agency, the complaint also suggests Joseph neglected to transfer all phone numbers to Allstate that he used to conduct business under the EA Agreement and is instead using the numbers to support his competing insurance agency, as well as misappropriating Allstate’s confidential information and trade secrets in violation of the EA Agreement and the federal Defend Trade Secrets Act.
This comes after Allstate sent Joseph a 90-day termination notice in February of 2017 informing him that the EA Agreement was terminated effective June 1, 2017, and he must cease representing Allstate as of that date.
The Termination Notice stated Allstate was terminating the EA Agreement because Joseph failed to obtain required Financial Industry Regulatory Authority (FINRA) licenses within the contractually required time frame.
On May 31, 2017, Allstate’s field sales leader, Rick DiBattista, traveled to Joseph’s office to retrieve any Allstate materials and Allstate customer information and to gain access to the Allstate phone numbers, as is customary, according to the complaint. The complaint adds that DiBattista provided another copy of the Termination Agreement to Joseph at that time.
Joseph, however, claimed he did not have any hard copies of Allstate materials or Allstate customer information and refused to provide any information that would allow Allstate to retrieve the phone numbers, the complaint states, adding that Allstate has since made multiple other attempts to remind Joseph of his obligations under the EA Agreement.
Allstate explains in the complaint that it had been inside Joseph’s Exclusive Allstate Agency several times before May 31, 2017, and had seen hard copies of Allstate materials and customer information sitting on Joseph’s desk.
This led Allstate to believe Joseph kept hard copies of Allstate customer information after May 31, 2017, in order to compete with Allstate and to solicit its customers and prospective customers on behalf of his competing insurance agency.
In addition, DiBattista instructed Joseph to place a sign in the store to redirect Allstate’s customers to another Allstate Exclusive Agent because Joseph’s EA Agreement was terminated. In response, Joseph told DiBattista that he would not put up the sign and would tear down any signs DiBattista placed in the store after he left, the complaint says.
In October 2017, this suit was filed by Allstate against Joseph for breach of contract, interference with advantageous relations and violations of the DTSA. Through this action, Allstate is asking that the court order Joseph to cease competing with Allstate out of his current office location or any other location within one mile for one year, to transfer Allstate phone numbers back to the company and to cease using or disclosing, as well as immediately return, all confidential information and trade secrets.
“Allstate’s customer relationships and goodwill are threatened with irreparable harm by Joseph operating a competing insurance agency out of his former Allstate Exclusive Agency location…” the complaint says. “…The harm to Allstate’s confidential information and customer relationships is neither knowable nor easily calculable in terms of monetary damages.”
Joseph declined to comment when contacted by Insurance Journal as the case is ongoing.