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American Family Insurance Wins 1st Battle with Agents

Posted By Staff reporter, Tuesday, February 5, 2019

American Family Insurance wants to change how it interacts with the agents selling its brand of insurance. The company says its agents are contractors. Agents see things differently and say they’re employees.

A suit was filed.

In 2017 a federal jury from the United States District Court for the Northern District of Ohio said the company violated the Employee Retirement Income Security Act of 1974 (ERISA) and improperly classified its agents as contractors.

ERISA is the federal law protecting retirement benefits.


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The court agreed with the agents who argued the company regarded them as independent contractors on paper. However, they were required to purchase items for operation and could not sell their agencies unless they cut all ties with American Family.

The company disagreed and said its managers only work with agents on sales goals and the outcome of those goals. How those goals are achieved is up to the agent. Plus, American Family contends it has offered an extended earnings benefit based on the years of service. It’s a lifetime annuity and one that American Family said has been described to agents as a retirement plan.

The original court agreed with the agents. The case was then appealed to the US Court of Appeals for the Sixth Circuit in Ohio. It overturned the lower court’s ruling.

Had the agents prevailed, American Family Insurance would have been responsible for $1 billion in retirement. Company spokesman, Dave Holman said the company is pleased with the ruling.

“How we work with our agents is customary in the insurance industry and of company-independent contractor relationships across the country,” he said. “They are paid by commission, hire and pay their staff, set their work hours, and create and execute plans to run their businesses. They file taxes as independent contractors with the Internal Revenue Service and take tax deductions for their business expenses.”


No word yet on whether the agents will appeal.


Source link: Insurance Business America, Insurance Journal 

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