NASFA Files Suit against State Farm

December 11, 2001

The National Association of State Farm Agents Inc. filed suit recently against State Farm in Federal District Court on behalf of members, claiming breach of contract. The action was taken due to alleged raiding of the agents’ books.

It is alleged that between July and August, the company started using agent customer lists to solicit additional insurance and financial business. As a result, agents received no commission from sales, and in some instances, the company tried to move clients to other agents with financial service licenses.

The suit looks to protect agents from changes to their contracts without their consent, protection of their relationship with policyholders, and protection of their business.

Along with the allegations that the company’s “partner” program allows for the raiding of their business, the suit also charges that State Farm requires payment of $1 per insured for the use of the company’s customer service center.

The suit proceeds to say that the company’s practice of selling insurance over the Internet violates the agreement that they would be free of encroachment.

The Plaintiffs are seeking a declaratory judgment that State Farm Agents are entitled to (a) protection from State Farm’s attempted unilateral alteration, modification or amendment of its contractual relationship with State Farm Agents without their consent; (b) the protections of various state franchise laws including protection from termination or alteration of the Agents’ relationship with State Farm; (c) protection from interference with their contractual relationships with policy holders; and (d) protection from encroachment upon their businesses.

NASFA seeks to enjoin State Farm from, among other things, unilaterally altering the terms and conditions of member Agents’ agreements with State Farm, including requiring them to “partner” with other agents; unlawfully encroaching on the member Agents’ businesses through Internet sales; wrongfully discriminating against the member Agents; and otherwise diminishing the value of member Agents’ franchises.

NASFA is a District of Columbia corporation with its principal place of business located in Baltimore, composed of a large number of State Farm Agents throughout the United States.

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