Insurance Agents Fight Nationwide Mutual

     PHILADELPHIA (CN) – A professional association of Nationwide Mutual Insurance agents claims the company is forcing agents to submit to sweeping, unfair changes to its business model.

     The new model, which was tested in a Pittsburgh pilot program, impinges on agents’ contractual right to operate as independent contractors, the Nationwide Insurance Independent Contractors Association claims in Federal Court.
     The Association, suing on behalf of 54 Pennsylvania agents, describes itself as “a voluntary membership organization … protecting the professional interests of its members and improving their working conditions.”
     Among the changes is the “imposition of a fee for a centralized servicing function to be operated by Nationwide,” the Association says.
     “The ostensible purpose of the fee is to support a centralized policyholder servicing facility to be operated by Nationwide,” but the agents’ contracts with the carrier give agents “the right to exercise independent judgment as to … servicing policyholders,” according to the complaint.
     “When it becomes mandatory, the imposition of a fee for outside policyholder servicing will contradict and breach the provisions of the contract specifying that the agent is an independent contractor ‘for all purposes’ with the ‘right to exercise independent judgment’ as to the ‘time, place, and manner of … servicing policyholders,'” according to the complaint.
     The agents say that Nationwide has delivered an unfair ultimatum: Accept the new business model, relinquish your retirement and benefits arrangement, or receive lower commission rates.
     Agents who agree to the new rules, which are articulated in a document called the “2010 Agent Choice Addendum,” “will be given better commission rates on certain products and services than agents who do not sign and will also receive other forms of different treatment, but they will have to forfeit any further DCIC [retirement] benefits. Agents who refuse to sign can continue to accumulate DCIC benefits but will be denied the better rates and different treatment,” according to the complaint.
     Agents who want keep their current retirement-benefit model, and who don’t sign up for the new arrangement, will be paid lower commissions for auto and property policies, and will be charged more for the servicing fee than those who accept the new model, the Association says.
     The bottom line, the complaint states, is that “the Addendum does not benefit any of the agents who do sign … all types of agents are worse off under the Addendum.”
     “The new arrangement will discriminate in favor of larger agents,” as agents with smaller sales volumes who sign the addendum will be saddled with requirements not demanded of agents with larger sales volumes, the group says.
     Nationwide also wants to seize exclusive control over policyholder information generated by its agents, claiming the information constitutes trade secrets, according to the complaint.
     “The policyholder information is not definable as a Nationwide trade secret. The agents develop this information in the ordinary course of business, using their own time and resources. Nationwide sees the information only because the agents transmit it to Nationwide … in order to write insurance policies. To the extent that the trade secret laws are designed to protect innovation, it would be the agents who are deserving of protection, not Nationwide,” the complaint states.
     It adds: “Prior to 2000, the Nationwide contract [with agents] did not contain provisions designed to control the ownership or use of policyholder information.”
     But now the company wants to implement new provisions that “are designed to give Nationwide exclusive and permanent ownership and control over all policyholder information developed by the agent and transmitted to Nationwide during the course of the contract,” the Association claims.
     “Nationwide appears to have invented the trade secret claim recently, simply as another tool to restrict competition and limit the options of policyholders after a contract has been terminated,” the group says.
     “Anticipating this inconsistency, the 2010 Addendum specifies that, if the Addendum conflicts with any previous contract form, the Addendum will control.
     “There is no legitimate business purpose for Nationwide’s assertion that it should have exclusive ownership and use of the policyholder information. This is information generated in the ordinary course of business that originates with, and is developed by, the agent. Nationwide is aware of the information only because the agent has transmitted the necessary information to Nationwide in the form of an application for an insurance policy and then transmitted updating information where appropriate.”
     In a further effort to ram through the unfair changes, the group says, Nationwide is treating its administrative handbook as part of its contracts with the agents.
     “The Nationwide legal department is taking the position that the Handbook is a part of every contract. That position is incorrect. The Handbook is a Nationwide management tool, which may express Nationwide’s view with respect to how it wishes to interpret the contract, but it is not part of the contract, itself, and it cannot be used to modify the contract or add provisions,” the complaint states.
     The Association seeks declaratory relief.
     It is represented by Gerhard Dietrich with Ward Greenberg Heller & Reidy in Philadelphia.

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