Where an insurance agent’s contract with Allstate was terminated for failure to meet performance goals, and the insurance company subsequently denied the agent’s request to transfer the book of business to the agent’s husband, instead selling to the wife of the agent’s former supervisor, the trial court erred in dismissing agent’s claims for breach of contract and breach of the covenant of good faith and fair dealing.

In 2004, Ray McKnight, a territory manager for Allstate Insurance began recruiting Mary Slay to become an exclusive Allstate insurance agent in Lake City, Florida. Ray offered Mary the opportunity to purchase an existing book of business from a retiring agent, Rick Bringger. Ray, however, failed to disclose that he had a conflict of interest, as his wife, Faye McKnight, wanted to purchase an Allstate agent’s book of business and open up her own office in Lake City in direct competition with Mary. Ray also failed to disclose that Allstate was in the process of canceling approximately 30% of the policies in Bringger’s book of business and that Allstate had begun the process of non-renewing all mobile home policies, commercial policies, and landlord and rental policies in Florida.

In reliance on Ray’s representations, Mary retired from her job, obtained an $800,000 loan to purchase Bringger’s book of business, and signed an exclusive agency agreement with Allstate. Mary worked as an exclusive agent reporting directly to Ray, and she subsequently grew her book of business. A few months later, Ray’s wife Faye opened an exclusive Allstate agency, competing directly with Mary’s agency. Mary’s business was also harmed by the subsequent announcement by Allstate that it would no longer write commercial insurance policies in Florida and that it would not renew 95,000 homeowner insurance policies. Allstate also implemented substantial price increases, and in 2008 had its license to write new policies suspended by the Florida Insurance Commission due to its failure to comply with a subpoena.

As a result of these circumstances, Mary lost more than 30% of her book of business. In September 2011, Allstate terminated Mary’s exclusive agent agreement for failure to meet production requirements. Following the termination, Mary attempted to transfer her economic interest in her customer accounts to her husband Buddy. Allstate rejected this transfer and sold Mary’s interest to Faye McKnight. Allstate then offered Mary a $40,000 termination payment. Mary eventually filed suit against Allstate, alleging breach of contract. Allstate filed a motion to dismiss, arguing that its decision to deny the transfer of Mary’s economic interest to Buddy was within its discretion under the agent agreement. The trial court agreed with Allstate, finding no breach of contract or breach of the covenant of good faith and fair dealing. Mary then appealed.

The appellate panel began by finding that dismissal was not warranted under section 2-615 of Mary’s complaint. The panel stated that the complaint alleged facts sufficient to plead that Allstate abused its contractual discretion when it denied the proposed transfer to Mary’s husband Buddy, in breach of its implied duty to exercise its discretion in good faith. The panel stated that, at the instant stage, Mary only needed to plead facts supporting reasonable inferences, and that the parties were entitled to explore whether there was evidence to support Mary’s allegations in discovery. The panel, therefore, reversed the decision of the circuit court and remanded the case for further proceedings.

You can read the decision here.Super Lawyers named Illinois breach of contract and employment termination trial attorney Peter Lubin a Super Lawyer and Illinois breach of contract and employment termination attorney Patrick Austermuehle a Rising Star in the Categories of Class Action, Business Litigation, and Consumer Rights Litigation. Lubin Austermuehle’s Illinois business trial lawyers have over thirty years of experience in litigating breach of contract, complex class action, copyright, partnership, and shareholder oppression suits, noncompete agreement, trademark and libel suits, consumer rights and many different types of business and commercial litigation disputes.  Our Wheaton  and Orland Park employment termination lawyers, civil litigation lawyers and copyright attorneys handle emergency business lawsuits involving copyrights, trademarks, injunctions, and TROS, covenant not to compete, franchise, distributor and dealer wrongful termination and trade secret lawsuits and many different kinds of business disputes involving shareholders, partnerships, closely held businesses and employee breaches of fiduciary duty. We also assist Chicago, Naperville and Oak Brook area businesses and business owners who are victims of fraud. You can contact us by calling (630) 333-0333 or our toll-free number (833) 306-4933.  You can also contact us online here.