Agent Informer - National Association of Professional Allstate Agents ...
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<strong>Agent</strong> <strong>Informer</strong><br />
News stories <strong>of</strong> interest to <strong>Allstate</strong> Agency Owners published by the <strong>National</strong> <strong>Association</strong> <strong>of</strong><br />
Pr<strong>of</strong>essional <strong>Allstate</strong> <strong>Agent</strong>s, Inc. This complimentary issue <strong>of</strong> <strong>Agent</strong> <strong>Informer</strong> is meant to acquaint you with our<br />
email publications. NAPAA membership includes weekly newsletters as well as other membership benefits.<br />
July 29, 2008<br />
<strong>National</strong> <strong>Association</strong> <strong>of</strong> Pr<strong>of</strong>essional <strong>Allstate</strong> <strong>Agent</strong>s, Inc.<br />
To: <strong>Allstate</strong> Agency Owners<br />
From: The <strong>National</strong> <strong>Association</strong> <strong>of</strong> Pr<strong>of</strong>essional <strong>Allstate</strong> <strong>Agent</strong>s, Inc.<br />
Subject: Windows Mobile for NRG<br />
After reviewing the latest <strong>of</strong>fering from Sprint/Micros<strong>of</strong>t, NAPAA is impressed with its features, accessories<br />
and overall value. This special <strong>of</strong>fer is outlined below. We believe it is a good deal for <strong>Allstate</strong> agents and think<br />
you’ll agree.<br />
<strong>Allstate</strong>, in preparation for the roll out and implementation <strong>of</strong> its NRG initiative, has been working with various<br />
vendors to bring agencies new technologies to make it easier for them to do business. The Sprint/Micros<strong>of</strong>t<br />
deal, recently announced by <strong>Allstate</strong>, lets agents access company email on mobile devices, allowing them to<br />
send and retrieve emails from allstate.com from nearly any location. So, even when you’re away from the<br />
<strong>of</strong>fice, you can create and send new messages or respond to emails in real time. We believe this technology will<br />
be a huge benefit for busy agency owners. With this tool, agency owners could almost manage their agencies<br />
from home!<br />
In addition to special pricing, <strong>Allstate</strong> agents will also receive the following as part <strong>of</strong> the package:<br />
- Free Mobile Phones from Sprint (Brand New Windows Mobile 6 devices - see below)<br />
- Free Training from Micros<strong>of</strong>t<br />
- Free Bluetooth Accessory Pack (Retail Value $109.99)<br />
- Custom ordering and Support (<strong>Allstate</strong><strong>Agent</strong>.CallSprint.com)<br />
There are two ways to order your Free Phone:<br />
*To order online click here www.<strong>Allstate</strong><strong>Agent</strong>.CallSprint.com<br />
*To order by phone call (888) 804-8591<br />
Both the Website and the toll free number are specific to this <strong>of</strong>fer. You can also ask questions and choose the<br />
right device and plan for your business.<br />
Once you receive your free phone, it will be necessary to set up your email account with <strong>Allstate</strong>. To set up<br />
your account, please visit the Agency Gateway and search for “PDA.”<br />
This is a revolutionary change in the way agents can conduct business at <strong>Allstate</strong>. NAPAA felt it was important<br />
to bring this message to you. You should also know that NAPAA is not being compensated for sending this<br />
email to you. I hope you found this information useful.<br />
Best regards,<br />
Jim Fish<br />
Jim Fish<br />
Executive Director<br />
<strong>National</strong> <strong>Association</strong> <strong>of</strong> Pr<strong>of</strong>essional <strong>Allstate</strong> <strong>Agent</strong>s, Inc.
NAPAA President conducts <strong>Agent</strong> Communication Meetings<br />
July 28, 2008, NAPAA Headquarters<br />
NAPAA will be hosting a series <strong>of</strong> <strong>Agent</strong> Communication Meetings across the country in the upcoming months.<br />
We begin this road show in Florida, where a series <strong>of</strong> meetings will be held this week to answer questions and<br />
concerns facing Florida <strong>Agent</strong>s.<br />
NAPAA President, Bob Isacsen, NAPAA Attorney Dirk Beamer, and NAPAA Lobbyist Keri Rayborn will<br />
conduct the FL meetings which are open to all <strong>Allstate</strong> agents and staff.<br />
Wed - July 30<br />
1:30pm – Hilton Miami Airport – 5101 Blue Lagoon Drive, Miami 305-262-1000<br />
6:00pm – Marriot Coral Springs – 11775 Heron Bay Blvd, Coral Springs, 954-753-5598<br />
Thurs - July 31<br />
9:30am – Embassy Suites Palm Beach Gardens, 4350 PGA Blvd. (at I95) 561-622-1000<br />
6:00pm – Hilton Garden Inn Ft Myers, 12600 University Dr, 239-790-3500<br />
Friday - August 1<br />
10:00am – Hampton Inn Sarasota I-75 Bee Ridge, 5995 Cattleridge Rd. 941-371-1900<br />
3:30pm – Embassy Suites Tampa Airport/Westshore, 555 North Westshore Blvd. 813-875-1555<br />
Admission is free; for more information, please call : 877.627.2248
The <strong>National</strong> <strong>Association</strong> <strong>of</strong> Pr<strong>of</strong>essional <strong>Allstate</strong> <strong>Agent</strong>s, Inc. is a nonpr<strong>of</strong>it pr<strong>of</strong>essional trade<br />
association for <strong>Allstate</strong> agents. NAPAA provides its members with reliable communications on issues<br />
that affect agency owners and their customers every week. NAPAA further serves its members by<br />
acting on their behalf and speaking with a distinct and unfettered voice on a wide range <strong>of</strong><br />
issues. Our operations, including our publications, Website and <strong>of</strong>fice expenses are funded by<br />
member agents who pay membership dues.<br />
NAPAA is dedicated to advancing the interests <strong>of</strong> <strong>Allstate</strong> agency owners and their customers by<br />
promoting pr<strong>of</strong>essionalism and ethical practices. By becoming a member <strong>of</strong> NAPAA, you are joining a<br />
special group <strong>of</strong> <strong>Allstate</strong> agents.<br />
As a rule, NAPAA members are the first to find out about breaking news about the company and the<br />
industry. As an example, NAPAA broke the news about what happened to agents in Canada last year<br />
– no one else was covering the story. We continue to follow this story and our members hear the<br />
latest updates first. The Canadian Experiment story is just one <strong>of</strong> several that the company would<br />
prefer you didn’t know about.<br />
Staying informed so that you are better able to make educated decisions about your business and<br />
your career is just one <strong>of</strong> the many benefits <strong>of</strong> NAPAA. Unity and strength are essential for a strong<br />
agent association. By joining NAPAA today you can help us grow even stronger. Please support<br />
NAPAA with your membership today.<br />
Click here to join online: Join NAPAA or Make a 2 minute call now – 877-627-2248 – We’ll complete your<br />
membership application for you!<br />
NAPAA is a pr<strong>of</strong>essional trade association, membership dues are $350 per year, or $29 per month by EFT,<br />
and are tax deductible as an ordinary business expense.<br />
Analysts lower full-year estimates on <strong>Allstate</strong><br />
Analysts lower <strong>Allstate</strong> estimates, concerned by life insurance segment, investment portfolio<br />
July 24, 2008, Associated Press<br />
NEW YORK (Associated Press) - Following a 98 percent drop in <strong>Allstate</strong> Corp.'s second-quarter pr<strong>of</strong>it, analysts<br />
expressed concern over the future <strong>of</strong> the insurer's life insurance segment and the inherent risk in its investment<br />
portfolio.<br />
Late Tuesday, the Northbrook, Ill.-based company reported net income below Wall Street's estimates, due to a<br />
record level <strong>of</strong> second-quarter catastrophe losses. The company also said its net investment income declined 14<br />
percent, due to exposure to certain real estate and financial services-related assets, while operating income from its<br />
life insurance segment, <strong>Allstate</strong> Financial, also declined.<br />
Lehman Brothers analyst Jay Gelb subsequently lowered his full-year pr<strong>of</strong>it estimate to $5.40 per share from $5.45<br />
per share. Analysts polled by Thomson Financial, on average, forecast earnings <strong>of</strong> $5.50 per share for the year.<br />
Gelb cut his estimate due to management's outlook for <strong>Allstate</strong> Financial. The company expects this business to<br />
generate quarterly operating income in the range <strong>of</strong> 65 percent to 75 percent <strong>of</strong> recent periods, which Gelb<br />
estimates as being in the $100 million range going forward. Management could seek strategic alternatives for this<br />
segment, said Gelb, who has an "Equal Weight" rating and a $49 target price on the stock.<br />
On the other hand, Wachovia Securities analyst Susan Spivak Bernstein, is concerned by the company's investment<br />
portfolio.<br />
"While <strong>Allstate</strong> is proactively seeking to mitigate its investment risk, we can't foresee a situation where there will not<br />
be additional writedowns," she wrote in a note to clients.<br />
Bernstein's "Market Perform" rating on the stock reflects uncertainty surrounding the investment portfolio, as well as<br />
the company's high catastrophe exposure.<br />
Lower forecasted investment yields also led Friedman, Billings, Ramsey & Co. analyst Bijan Moazami to lower 2008<br />
estimates on the company, to $5.55 per share from $5.70 per share.<br />
Shares dipped 83 cents, or 1.8 percent, to $45.34 Thursday. Shares have traded between $42.51 and $59.23 in the<br />
past 12 months.
Employer Has Burden Of Pro<strong>of</strong> In Age Cases, Says High Court<br />
June 19, 2008, By Arthur D. Postal, NU Online News Service [Excerpt]<br />
The Supreme Court ruled today that it is an employer’s responsibility to prove that an employee was laid <strong>of</strong>f for<br />
reasons other than age.<br />
Interpreting the Age Discrimination in Employment Act <strong>of</strong> 1967, the court held that an employer bears “both the<br />
burden <strong>of</strong> production and the burden <strong>of</strong> persuasion” for the “reasonable factors other than age.” The decision<br />
was handed down in Meacham vs. Knolls Atomic Power Laboratory, 06-1505.<br />
The case dealt with whether the burden <strong>of</strong> pro<strong>of</strong> will rest with employees who file suit claiming age bias, or with<br />
the employer letting them go.<br />
Paul Mickey, a partner and employment practices specialist at Steptoe & Johnson here in Washington, said he<br />
is advising that, as a result <strong>of</strong> this decision, “it is vital for an employer taking steps that may disproportionately<br />
affect older workers--such as implementing a reduction-in-force--to be prepared to support its actions with solid<br />
analysis and documentation, so as to meet its burden <strong>of</strong> persuading the judge or jury that it was motivated by<br />
good business justifications and not by age bias."<br />
The case that was decided involved Knolls Atomic Power Laboratory, a government-owned naval research<br />
facility. The justices, by 7-1, said employers defending themselves in certain age discrimination cases must<br />
provide convincing evidence that factors other than age were the basis for their decisions involving a worker.<br />
At the Knolls research facility there were involuntary lay<strong>of</strong>fs in 1996 that were based on number <strong>of</strong> years on the<br />
job, performance and skills.<br />
Justice David H. Souter said the “text and structure <strong>of</strong> the reasonable factors other than age” affirmative<br />
defense under the ADEA showed that Congress meant to create an “affirmative defense for which the burden<br />
<strong>of</strong> persuasion falls on the employer.” He said earlier court precedents made clear that a disparate-impact claim<br />
under the ADEA must isolate and identify “the specific employment practices that are allegedly responsible for<br />
any observed statistical disparities.”<br />
Justice Souter said, “This is not a trivial burden, and it ought to allay some <strong>of</strong> the concern that recognizing an<br />
employer’s burden <strong>of</strong> persuasion on an RFOA [reasonable factor other than age] defense will encourage strike<br />
suits or nudge plaintiffs with marginal cases into court; but in the end, such concerns have to be directed at<br />
Congress, which set the balance by both creating the RFOA exemption and writing it in the orthodox format <strong>of</strong><br />
an affirmative defense.”<br />
Customer moving out <strong>of</strong> state<br />
Do your customer a favor. Call 877-627-2248 or go to www.napaausa.org and click on <strong>Agent</strong> to <strong>Agent</strong><br />
Referral. We'll give you the name <strong>of</strong> a NAPAA member who can help your client in their new area.<br />
Join NAPAA now to get your name on the referral map.
<strong>Allstate</strong> Settles Bad-faith Lawsuit<br />
July 10, 2008, By Dan Margolies, The Kansas City Star<br />
A bad-faith case against <strong>Allstate</strong> Insurance that drew national attention and prompted the judge to levy fines<br />
against the insurer topping $7 million has been settled on undisclosed terms.<br />
A court hearing on whether to approve the settlement has been scheduled for July 21, the day the case was<br />
scheduled to go to trial before Jackson County Circuit Judge Michael Manners.<br />
Attorneys for both sides declined to disclose the terms <strong>of</strong> the settlement. Mike Siemienas, a spokesman for<br />
<strong>Allstate</strong>, the nation’s second-biggest home and auto insurer, said the company was pleased the case had been<br />
resolved but declined to elaborate.<br />
The case stemmed from a collision on Interstate 70 near the U.S. 65 exit. On Sept. 15, 2000, Warrensburg<br />
resident Dale Deer stopped in a construction zone. Some time later, a car driven by Paul Aldridge <strong>of</strong> Hawaii<br />
and traveling an estimated 70 miles an hour slammed into the rear <strong>of</strong> Deer’s pickup truck.<br />
Deer staggered out <strong>of</strong> the truck. He was taken to a hospital and released later that day. In 2003, he was<br />
diagnosed with severe damage to his back and neck, which doctors attributed to the accident.<br />
Deer sued <strong>Allstate</strong> and Aldridge for his medical expenses, which ran into the hundreds <strong>of</strong> thousands <strong>of</strong> dollars.<br />
<strong>Allstate</strong> eventually agreed to pay him $750,000 plus interest. That would have ended the matter, but <strong>Allstate</strong><br />
did not pay him. Deer sued the insurer again. This time <strong>Allstate</strong> settled for about $1.2 million.<br />
In the meantime, Aldridge also sued <strong>Allstate</strong>, claiming that it had mishandled his case and acted in bad faith.<br />
Attorneys for both Aldridge and Deer sought <strong>Allstate</strong> documents to show how the company set up a claims<br />
payment system in the 1990s that low-balled clients and allowed the company to reap huge pr<strong>of</strong>its.<br />
<strong>Allstate</strong> refused to produce the documents, which it said contained trade secrets used to create policies and<br />
claims procedures. Releasing them, it said, would give the plaintiffs’ lawyers information on trial strategy.<br />
The documents included slides prepared in the early 1990s by McKinsey & Co., a consulting firm that allegedly<br />
advised <strong>Allstate</strong> to settle claims quickly for pennies on the dollar and fight claimants who resisted — for years,<br />
if necessary. One slide was titled “Good Hands or Boxing Gloves,” an allusion to the insurer’s “You’re in good<br />
hands with <strong>Allstate</strong>” slogan.<br />
After <strong>Allstate</strong> refused to turn over the documents, Manners last September held the insurer in contempt and<br />
fined it $25,000 per day. The fine eventually grew to more than $7 million.<br />
In November, the Missouri Supreme Court ordered <strong>Allstate</strong> to disclose the documents. <strong>Allstate</strong> turned over<br />
more than 120,000 pages.<br />
The documents have figured prominently in other litigation and regulatory proceedings. In January, Florida’s<br />
insurance commissioner, Kevin McCarty, suspended <strong>Allstate</strong>’s authority to sell insurance in that state after it<br />
resisted subpoenas to produce the documents. A Florida appeals court later upheld McCarty’s ruling.<br />
The suspension was lifted after <strong>Allstate</strong> furnished a sworn affidavit stating that it had turned over the<br />
documents and would comply with additional document requests.<br />
In April, <strong>Allstate</strong> posted on the Internet 150,000 pages <strong>of</strong> documents related to its claims-handling practices. In<br />
an accompanying statement, <strong>Allstate</strong> said, “Public criticisms by people with a vested interest in creating an<br />
inaccurate picture <strong>of</strong> the company’s claim practices have been based unfairly on only snippets from the<br />
documents taken out <strong>of</strong> context. Because <strong>of</strong> the need to address misunderstandings resulting from the growing<br />
misplaced focus by our critics on very small pieces <strong>of</strong> the whole, we have decided to make the documents<br />
public.”
Study Reveals Worst Insurers<br />
July 9, 2008, By Anita Lee, the Sun Herald<br />
<strong>Allstate</strong> is the nation's worst insurance company for consumers, an association <strong>of</strong> lawyers who sue big<br />
business concludes in a report released Wednesday. "The rankings show a distinct pattern <strong>of</strong> insurance<br />
industry greed amongst 10 companies that refuse to pay just claims, employ hardball tactics against<br />
policyholders, reward executives with extravagant salaries, and raise premiums while hoarding excessive<br />
pr<strong>of</strong>its," the American <strong>Association</strong> for Justice concludes.<br />
Researchers spent six months compiling information from court documents, SEC and FBI records, state<br />
insurance department investigations and complaints, nationwide news accounts, and testimony <strong>of</strong> former<br />
insurance agents and adjusters.<br />
"We're not surprised we're being targeted by the trial and personal injury lawyers because <strong>Allstate</strong> has been at<br />
the forefront <strong>of</strong> the fight against insurance fraud and the effort to resist unreasonable demands made by<br />
lawyers," <strong>Allstate</strong> spokesman Michael Siemienas said Wednesday.<br />
"If trial lawyers and personal injury lawyers don't like <strong>Allstate</strong>, the facts show that consumers do." The AAJ<br />
says the U.S. insurance industry collects more than $1 trillion in premiums annually, and has $3.8 trillion in<br />
assets, surpassing the Gross Domestic Products <strong>of</strong> all countries but the United States and Japan.<br />
Robert Hartwig <strong>of</strong> the industry-sponsored Insurance Information Institute said consumers should consider the<br />
source: litigious attorneys who help drive up insurance costs. He also said the industry has paid out nearly<br />
$300 billion to tens <strong>of</strong> millions <strong>of</strong> policyholders across the country over the past 20 years.<br />
The top 5 <strong>of</strong>fenders on the list:<br />
1. ALLSTATE - CEO, Thomas Wilson; 2007 compensation, $10.7 million; 2007 pr<strong>of</strong>its, $4.6 billion; assets:<br />
$156.4 billion. "According to investigations and documents <strong>Allstate</strong> was forced to make public, the company<br />
systematically placed pr<strong>of</strong>its over its own policyholders... The amount <strong>Allstate</strong> paid in claims dropped from 79<br />
percent <strong>of</strong> its premium income in 1996 to just 58 percent 10 years later. In auto claims, payouts dropped from<br />
63 percent to just 47 percent.<br />
2. UNUM - CEO, Thomas Watjen; 2007 compensation, $7.3 million; 2007 pr<strong>of</strong>its, $679 million; assets, $52.4<br />
billion. "Unum, one <strong>of</strong> the nation's leading disability insurers, has long had a reputation for unfairly denying and<br />
delaying claims.."<br />
3. AIG - CEO, Robert Willumstad; 2007 compensation for former CEO, 14.3 million; 2007 pr<strong>of</strong>its: $6.2 billion;<br />
assets, $1.06 trillion; "AIG executives have also come under fire for opportunistically seeking price increases<br />
during catastrophes. Now the company has been labeled 'the new Enron' because <strong>of</strong> charges <strong>of</strong> multibilliondollar<br />
corporate fraud."<br />
4. STATE FARM - CEO: Edward B. Rust Jr.; 2007 compensation, $11.7 million; 2007 pr<strong>of</strong>its: $5.5 billion;<br />
assets, $181.4 billion. "In many cases, the company has gone to extreme lengths to avoid paying claims,<br />
including forging signatures on earthquake waivers after the deadly Northridge earthquake, and altering<br />
engineering reports regarding damage after Hurricane Katrina."<br />
5. CONSECO - CEO, C. James Prieur; 2007 compensation: $2.6 million; 2007 pr<strong>of</strong>its: $179.9 million; assets:<br />
$33.5 billion. "Conseco sells long-term-care policies, typically to the elderly. Unfortunately, Conseco uses the<br />
deteriorating health <strong>of</strong> its policyholders to its advantage because the company knows if it waits long enough to<br />
pay out claims, its customers will die."
July 10, 2008<br />
Email letter to <strong>Allstate</strong> President Tom Wilson<br />
Hi Tom,<br />
I’m sure you’ve seen the news article [above]. This is the kind <strong>of</strong> press that makes it difficult for agents to sell<br />
the <strong>Allstate</strong> brand to new clients. This story, along with others from Florida, Missouri and Canada, only serve to<br />
tarnish the <strong>Allstate</strong> brand.<br />
NAPAA believes it is paramount for the success <strong>of</strong> the company and its agents to preserve the dignity and<br />
integrity <strong>of</strong> the <strong>Allstate</strong> brand. We could be invaluable in helping the company better understand what is<br />
happening at the field level.<br />
NAPAA representatives stand ready to meet personally with you in order to help resolve this and other critical<br />
issues. To arrange a mutually convenient meeting, please contact me at your convenience.<br />
Respectfully,<br />
Jim Fish<br />
Jim Fish<br />
Executive Director<br />
<strong>National</strong> <strong>Association</strong> <strong>of</strong> Pr<strong>of</strong>essional <strong>Allstate</strong> <strong>Agent</strong>s, Inc.<br />
877-269-3474<br />
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Go to NAPAAUSA.ORG – Agency Resources – Lead Sources<br />
Romero vs <strong>Allstate</strong> Update<br />
July 28, 2008, NAPAA Headquarters<br />
The Romero plaintiffs and EEOC each filed briefs on June 2, 2008 in connection with the appeals taken from<br />
Judge Fullam's decision <strong>of</strong> June 20, 2007, which granted summary judgment in favor <strong>of</strong> <strong>Allstate</strong>. <strong>Allstate</strong> was<br />
to have filed its opposition within 30 days. NAPAA has learned that <strong>Allstate</strong> has requested and been granted<br />
additional time to respond. We will continue to monitor the case, and update agents as we learn more. See<br />
details and history at the <strong>Allstate</strong> <strong>Agent</strong>s Litigation Website.<br />
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What’s Next in Florida<br />
July 23, 2008, NAPAA Headquarters, Gulfport, MS<br />
Many Florida <strong>Allstate</strong> agents believe that the events regarding the suspension <strong>of</strong> <strong>Allstate</strong>’s Certificates <strong>of</strong><br />
Authority in Florida are over. Not true.<br />
If you recall, on May 14th the First District Court <strong>of</strong> Appeal's Final Opinion denied <strong>Allstate</strong>’s motions for<br />
rehearing, lifting the stay on the suspension. The suspension lasted only two days before the Florida Office <strong>of</strong><br />
Insurance Regulation stayed the suspension following receipt <strong>of</strong> an affidavit from <strong>Allstate</strong> certifying that it had<br />
complied with Florida law by freely providing all documents requested by the Office <strong>of</strong> Insurance Regulation.<br />
<strong>Allstate</strong> continued its appeal to the Supreme Court <strong>of</strong> Florida, where on June 18th, The Court denied <strong>Allstate</strong>'s<br />
petition for review, declining to accept jurisdiction. Case 08-782 Documents<br />
In the interim, the Florida Division <strong>of</strong> Administrative Hearings was drawn into the fray. Initially, the hearing had<br />
been set for June 16th. On May 20th, <strong>Allstate</strong> and the OIR filed a joint Motion for Continuance with the DOA,<br />
requesting the June 16th hearing be rescheduled to a later date. On May 29th, The State <strong>of</strong> FL Division <strong>of</strong><br />
Administrative Hearings granted the Motion for Continuance and moved the June 16th hearing to September<br />
15th. DOA Order. This proceeding involves three allegations:<br />
1. <strong>Allstate</strong>’s alleged failure to comply with the document request<br />
2. Falsely asserting trade secrets and<br />
3. False certification <strong>of</strong> its September rate filing.<br />
So, <strong>Allstate</strong> still has to clear at least one more hurdle before this matter can be put to rest. The company could<br />
be in for an uphill battle, however. The mood <strong>of</strong> the regulators and the insuring public are not industry friendly<br />
at the moment.<br />
<strong>Agent</strong>s in Florida will now watch closely as the OIR begins the process <strong>of</strong> reviewing the State Farm request for<br />
47.1% rate increase filed this week. The State Farm request will be the subject <strong>of</strong> a hearing scheduled for<br />
August 12th, in Tallahassee. This also figures to be a contentious hearing.<br />
NAPAA continues to closely monitor the events in Florida. NAPAA President Bob Isacsen, attorney Dirk<br />
Beamer, and lobbyist Keri Rayborn will be conducting agent communication meetings in several Florida cities<br />
from July 30th through August 1st.
UPS Versus FedEx in Ohio Tax Showdown<br />
June 24, 2008, By John Hughes, Bloomberg [Excerpt]<br />
A secret report from a lobbyist who represents United Parcel Service Inc. prompted an Ohio state investigation<br />
into employment practices <strong>of</strong> FedEx Corp., leading to a finding that FedEx owed back taxes and interest.<br />
Kenneth Kies, a Washington tax lawyer and lobbyist whose firm has been paid US$540,000 by UPS since<br />
2002, sent Ohio <strong>of</strong>ficials a 562-page report in December 2006 alleging that FedEx misclassified truck drivers<br />
as contractors. A copy <strong>of</strong> the report, including a cover letter in which Mr. Kies asked for confidentiality, was<br />
released to Bloomberg News by Ohio <strong>of</strong>ficials.<br />
"We took it and opened our own investigation," said Judi Cicatiello, Ohio's unemployment compensation<br />
deputy director. She said it was "very" unusual to get such detailed allegations. Her agency determined in May<br />
2007 that the drivers were employees and FedEx owed US$654,000 in taxes and interest. The company is<br />
appealing.<br />
The report is the first disclosure indicating that UPS may have played a role in prompting an investigation <strong>of</strong><br />
FedEx's employment <strong>of</strong> 15,000 drivers as independent contractors. The strategy gives FedEx a cost<br />
advantage over UPS, whose 91,800 drivers are covered by a contract with the Teamsters Union.<br />
The benefit for companies such as Memphis, Tennessee-based FedEx may be as much as 30% compared<br />
with treating the workers as employees and providing retirement and health benefits, said Marick Masters, a<br />
pr<strong>of</strong>essor at the University <strong>of</strong> Pittsburgh's Katz School <strong>of</strong> Business who studies labor issues.<br />
Since 2002, FedEx has gained 9 percentage points in market share on Atlanta-based UPS. Neither company<br />
discloses wage and benefit expenses by employee type.<br />
The dispute may affect other industries. Companies that use some <strong>of</strong> the 10.3 million people working as<br />
independent contractors in the U.S. include Home Depot Inc., <strong>Allstate</strong> Corp. and Avon Products Inc., FedEx<br />
Chief Executive Officer Fred Smith said Jan. 10 on a call with analysts. Newspaper publishing companies also<br />
have faced scrutiny over whether their carriers are employees or independent contractors.<br />
FedEx's labor practices have been under investigation in 25 states and prompted a lawsuit as a class action<br />
covering drivers in 20 states. FedEx said in December that it may have to pay US$319-million in back taxes<br />
and penalties to the Internal Revenue Service for worker misclassification in 2002.<br />
California Orders <strong>Allstate</strong> to Cut Home Insurance Rates 28.5%<br />
July 10, 2008, By Lilla Zuill, Reuters<br />
<strong>Allstate</strong> Corp. will have to lower its rates on California homeowner policies by 28.5 percent making an<br />
estimated $255 million in annual savings for consumers, the state's Insurance Commissioner Steve Poizner<br />
said.<br />
<strong>Allstate</strong> spokesman Peter DeMarco, in a statement, said the company was "disappointed" in the order but<br />
planned to comply.<br />
Northbrook, Illinois-based <strong>Allstate</strong> had initially filed for a 9.3 percent increase in homeowners insurance rates,<br />
according to Poizner's statement.<br />
He ordered the rate reduction after an administrative law judge recommended the cut. Consumers will save an<br />
average <strong>of</strong> $242 per policy on an annual basis, according to the statement.<br />
The rate order follows one earlier this year, forcing <strong>Allstate</strong> to cut its auto policy rates in California by 15.9<br />
percent
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<strong>Allstate</strong> Insurance Faces $60 Million Lawsuit after Restructuring<br />
June 25, 2008, Canadian Employment Law Today<br />
<strong>Allstate</strong> Canada’s attempts to cut costs by consolidating <strong>of</strong>fices has left it facing a $60 million class-action<br />
lawsuit from some <strong>of</strong> its former agents.<br />
On July 24, 2007, the insurance company announced it would be moving its 450 agents from 256<br />
neighbourhood <strong>of</strong>fices across Canada into 100 larger <strong>of</strong>fices, beginning in May 2008. Most agents weren’t<br />
pleased, particularly senior agents, some <strong>of</strong> whom ran the neighbourhood <strong>of</strong>fices as their own businesses,<br />
handling the hiring <strong>of</strong> staff and management <strong>of</strong> finances. However, under the consolidation, the 100 new<br />
<strong>of</strong>fices will be owned and run by <strong>Allstate</strong>.<br />
The consolidation also outlined significant changes to the contract terms <strong>of</strong> the agents, including taking away<br />
sales commissions on policy renewals. <strong>Allstate</strong> said it would guarantee agents’ level <strong>of</strong> pay for two years, but<br />
most didn’t bite as the changes would result in overall pay cuts for many, some by as much as 50 per cent.<br />
<strong>Agent</strong>s tried to discuss the situation with the company but it wouldn’t budge from its position. More than 70<br />
agents have since quit, though <strong>Allstate</strong> told the Toronto Star it had hired sufficient replacements. When some<br />
tried to continue working with clients as independent brokers, <strong>Allstate</strong> sued them for breaching non-compete<br />
agreements they had signed.<br />
However, in March, the Ontario Superior Court <strong>of</strong> Justice found the agreements weren’t valid, considering the<br />
way <strong>Allstate</strong> and changed their contract terms and ruled the company couldn’t enforce them. On May 20, three<br />
agents, Mark Cassels <strong>of</strong> Hamilton, along with Esther Kafka and Ken Patel <strong>of</strong> Windsor, launched a class action<br />
lawsuit on behalf <strong>of</strong> all the agents for making “substantive material changes to the employment contract terms<br />
with all <strong>of</strong> its sales agents,” which was a breach <strong>of</strong> contract and the Employment Standards Act. They also<br />
claimed <strong>Allstate</strong>’s guarantee <strong>of</strong> their level <strong>of</strong> income for two years was unlikely to be borne out.<br />
The case hasn’t been heard yet, but in the March decision that struck down the non-compete agreements, the<br />
court said there was a good chance <strong>Allstate</strong> will be found to have repudiated its employment contracts with the<br />
changes.
<strong>Allstate</strong> Comments on California Homeowners Rate Ruling<br />
July 10, 2008, Company Press Release [Excerpt]<br />
<strong>Allstate</strong> Senior Corporate Relations Manager Peter DeMarco today issued the following statement regarding<br />
the California Department <strong>of</strong> Insurance's order to lower <strong>Allstate</strong>'s homeowners rates in California by 28.5%:<br />
"While we are disappointed in this order, we respect the authority <strong>of</strong> the Department and will comply. We are<br />
reviewing the order in detail and communicating with the Department about the process for adjusting the rates<br />
<strong>of</strong> our 850,000 homeowners policyholders in the state. Californians can continue to rely on more than 1,300<br />
<strong>Allstate</strong> agents to help them with insurance and retirement needs."<br />
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Florida Supreme Court Declines Jurisdiction in <strong>Allstate</strong> Matter<br />
June 20, 2008, By Brent Kallestad, Associated Press [Excerpt]<br />
The Florida Supreme Court declined Wednesday to grant <strong>Allstate</strong> Corp. an injunction to force Florida insurance<br />
regulators to let the company write new car insurance and other policies in the state.<br />
The company sought the action after the Office <strong>of</strong> Insurance Regulation ordered it to stop writing the policies<br />
for failing to comply with requests for documents on its business practices. However, <strong>Allstate</strong> since turned over<br />
most <strong>of</strong> the documents and was allowed to resume its entire line <strong>of</strong> business in Florida.<br />
The company had turned to the Supreme Court after the 1st District Court <strong>of</strong> Appeal rejected its effort for an<br />
injunction last month.<br />
"The Supreme Court's decision reassures Floridians that the <strong>of</strong>fice has full access to insurers' books and<br />
records and upholds the <strong>of</strong>fice's actions in its efforts to protect consumers,'' state Insurance Commissioner<br />
Kevin McCarty said June 18.<br />
<strong>Allstate</strong> <strong>of</strong>ficials did not immediately return phone messages for comment on the court's decision.<br />
If the high court accepted the case it could have effected <strong>Allstate</strong>'s scheduled September hearing before the<br />
Department <strong>of</strong> Administrative Hearings, said Ed Domansky, spokesman for the Office <strong>of</strong> Insurance Regulation.<br />
The scheduled weeklong hearing involves the alleged failure <strong>of</strong> <strong>Allstate</strong>'s 10 Florida companies to comply with<br />
the document request, falsely asserting trade secrets and the false certification <strong>of</strong> its September 2007 rate<br />
filing.<br />
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Report: Data Breaches Up 69 Percent<br />
July 11, 2008, NU Online News Service<br />
A study by a nonpr<strong>of</strong>it group that works to prevent fraud takes note <strong>of</strong> a news report that insurers and other<br />
businesses, governments and universities disclosed a 69 percent increase in data breaches in the first half <strong>of</strong><br />
2008 compared with a similar period in 2007.<br />
The Identity Theft Resource Center in San Diego tracked 342 data-breach reports from Jan. 1 to June 27, said<br />
a Washington Post story. More than one-third <strong>of</strong> the reports came from businesses, a 27 percent increase over<br />
total breaches in 2007. The center found that data breaches among health care providers and banks also<br />
increased. They now account for 15 percent and 10 percent <strong>of</strong> the breaches, respectively.<br />
Hacking was the least-cited cause <strong>of</strong> data breaches in the first six months <strong>of</strong> this year. Instead, lost or stolen<br />
laptops and other digital storage media remain the most frequently cited cause <strong>of</strong> data breaches, accounting<br />
for more than 20 percent <strong>of</strong> all reported cases, the article noted.<br />
Within the insurance industry, Willis Group Holdings brokerage said recently that the company along with<br />
police was investigating the loss <strong>of</strong> an unspecified amount <strong>of</strong> computer data affecting a number <strong>of</strong> clients and<br />
employees.<br />
In a statement that was limited in detail Willis said it was looking into the loss <strong>of</strong> data on backup tapes. The<br />
loss occurred recently while in transit to a storage facility. Willis said the tapes “were inadvertently misplaced.”<br />
The brokerage is working with law enforcement to recover the tapes and an investigation is continuing. Citing<br />
the involvement <strong>of</strong> law enforcement, a spokesman for the firm said he could not say where the tapes were lost<br />
or how many individuals could be affected. He did say the loss was not global and it affected a small portion <strong>of</strong><br />
clients and Willis associates.<br />
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Note on letters: The opinions expressed in letters are not necessarily those <strong>of</strong> NAPAA. Letters should be brief and are subject<br />
to editing. We will publish letters anonymously; however, we will not accept letters sent anonymously.<br />
The views expressed by NAPAA, or any <strong>of</strong> its positions relative to its activities and those <strong>of</strong> its members' actions on behalf<br />
<strong>of</strong> this organization, are expressly those <strong>of</strong> NAPAA, and do not reflect the views or opinions <strong>of</strong> <strong>Allstate</strong> Insurance<br />
Company, or any <strong>of</strong> its affiliates.<br />
This newsletter may not be redistributed or reproduced in any form, including electronically, without prior written<br />
permission from NAPAA.<br />
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Fax: 866/627-2232<br />
<strong>National</strong> <strong>Association</strong> <strong>of</strong> Pr<strong>of</strong>essional <strong>Allstate</strong> <strong>Agent</strong>s, Inc. (NAPAA)<br />
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