By: AgencyEquity.com
An exclusive insurance agent in Louisiana sued her carrier after, in her opinion, the carrier blocked her attempts to sell her book of business.
She had been with the carrier for more than three decades, starting as a trainee in 1989 and eventually acquiring ownership of her own agency. The exclusive agency contract gave an agent two options upon its termination:
- Sell her economic interest in her book of business to a buyer approved by the carrier.
- Accept a termination payment if the agency was not sold within 90 days after termination.
The agent later alleged that termination payments were typically less than half of a book of business’s sale value.
In 2018, a carrier sales territory manager urged her to sell her agency to a fellow agent. She declined as she wished to continue working for another four years before retiring at age 65. The next year, he asked her to sell the agency to another agent who also happened to be his girlfriend. She rejected the request, believing that the agent was inexperienced and might not be properly licensed.
According to her, the manager took this personally. He stopped taking her phone calls and acknowledging her at meetings. Finally, in February 2020 she decided to sell the agency.
Over the next year, eight potential buyers of the agency were considered by her and the carrier. The territory manager allegedly played a role in blocking at least three of them. One buyer was disapproved because she failed the Series 6 licensing exam, though the carrier later permitted her to buy another agency without the license. Another withdrew his offer when he was told he would have to keep her physical office open. The last one communicated interest in buying the agency until the carrier told him he could have the book for free. He did receive the book shortly after the agent’s contract was terminated.
In December 2020 the carrier served her with a termination notice, triggering the countdown for either sale or the termination payment. In February 2021, since she had not sold the agency, she received a $148,000 termination payment. Two of the rejected potential buyers had verbally offered her $420,000. In August 2022, she sued the carrier for breach of contract, alleging that they prevented her from selling the agency for fair market value.
In September 2024, a federal trial court judge dismissed some of the claims against the carrier but refused to dismiss another. She noted what appeared to be an error in the carrier’s defense: They moved to have the claim of acting in bad faith dismissed but did not contest the breach of contract claim. The judge found it “counterintuitive” to address one claim when the carrier did not dispute a claim closely tied to it. Therefore, she refused to dismiss two of the claims.
However, she did rule that the agent had not provided enough evidence of interference with business relations or violations of state law. Those claims were dismissed. This action was in mid-September 2024; litigation over the agent’s other two claims is ongoing.
Essentially, the agent argued that her poisoned relationship with the territory manager resulted in her being unable to sell the agency. The judge was not convinced of that, but the carrier could yet lose the claim of acting in bad faith. It appears that the agent complied with her contract and made every effort to find a buyer acceptable to the carrier. Her failure to find one cost her more than $200,000. The carrier could yet end up compensating her for that loss.
This agent has attempted to hold the carrier accountable for what may have been unfair actions. She may very well succeed.
