Captives Soon to All Be W2 Employees? Jammal Vs American Family

Discussion in 'P&C Insurance Forum' started by AZDave, Apr 11, 2017.

  1. AZDave
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    AZDave Well-Known Member

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    A very important case is being tried in Ohio, with jury selection beginning this week: Jammal vs American Family Insurance. The court has reserved three weeks for this trial. The basis is as follows:

    The Complaint alleges that American Family improperly classifies its agents as independent contractors when they are actually employees, reserving the right to exercise complete control over every important aspect of the agent-employees’ businesses. Examples of American Family’s control include, but are not limited to, maintaining ownership over their books of business, requiring them to sell only American Family insurance (excluding even products which American Family does not offer), requiring them to follow American Family’s policies and procedures, and controlling the day-to-day operations of every aspect of the agent-employee’s business, like business hours, computer and telephone systems and who the agent-employee can hire and fire.

    This has turned into a class action status for all AMFAM agents who were denied benefits under the Employment Retirement Income Security Act (ERISA). The outcome will effect not only AMFAM current and past agents, but most likely all other captives out there.

    Over $2 billion has been reserved by AMFAM, and as hard as their lawyers tried, they could not get this case shut down and delayed any longer. Believe me, they tried every delay and venue change in the book.

    Tip of the iceberg, if you ask me. For my 22 years of service, I expect to at least get a couple free car washes.!

    Let's all root for the little guy!

    Dave
     
  2. djs
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    djs Super Moderator Moderator

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    This has been tried (several times) before and it always comes out that insurance agents are independent agents. Look up the Murray vs Principal Financial case. There have been several others as well.

    Some court will change this, but I wouldn't hold my breath.

    Dan
     
  3. todd02
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    todd02 Well-Known Member

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    This is nuts. Farmers requires business hours, branding standards, staff requirements and retains control and limits who I can sell my book too. Seems like a W-2 to me.
     
  4. whatyouwantfinally
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    whatyouwantfinally Well-Known Member

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    Be careful what you wish for...

    First, as has been pointed out, this has been ruled on multiple times and always in favor of independent contractor status.

    But let's say this somehow changes everything. Sounds like the beginning of the end for captive agents. Where do you think the added $ in payroll tax is going to come from? Hint, commissions. Also, every time a captive agent breaks a law, guess who's liable? We're talking major liability. Is the captive model even viable at that point? And do you think they'd give agents any equity in their books at all in that scenario? BEST cast scenario you'd all be living on the hamster wheel like Liberty Mutual agents.

    A good number of them have already been flirting with the independent channel, this would probably send them all in that direction full throttle. But, again, not gonna happen.
     
  5. AZDave
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    AZDave Well-Known Member

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    Other cases may have been tried and lost, but this case has won its way up this far - AMFAM losing 5 previous attempts to get it tossed. It is real, and is one to watch. They are now paying all their new agents W2.

    Just saying.


    Jammal, et al. v. American Family Ins. Group, et al.
     
  6. insurance1822
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    insurance1822 Well-Known Member

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    None of it matters. AmFam won't exist, nothing will exist soon except for Agency MVP & Farmers.
     
  7. shawnmwalker
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    shawnmwalker Well-Known Member

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    I think DJS hit it.

    They'll say they need to have those controls in place to assure regulation and standards are kept to acceptable levels in a highly regulated environment.

    Contractor can choose to contract or not knowing what is expected of them...I bet AMFAM wins.

    Would be interesting to see how industry changed if they lose.
     
  8. indienoise
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    indienoise Well-Known Member

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    It will start with lowball renewal rights purchase offers, then termination of contract notices for those who won't play ball. In stricter states, they'll probably settle to limit perpetuation.
    Then captives will all either be like either geico or LM. Renewals disappear, carrier profit skyrockets.
     
  9. todd02
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    todd02 Well-Known Member

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    This guy..... if it makes you feel better in two weeks over 50 Farmers Agents out of 52 have signed up and paid for MVP. (Haven't tried marketing yet) Telling ya, it's going to change the entire industry. Agents love it.
     
  10. indienoise
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    indienoise Well-Known Member

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    Is it just me who thinks access to this information, consumed mostly by farmers agents, will cause the number of farmers agents to suddenly decrease???
    Food for thought.
     

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