A Pennsylvania federal judge on Thursday dismissed an insurance agents' association's employment lawsuit against Nationwide Mutual Insurance Co., saying the agents needed to show they'd been harmed by changes to their Nationwide contracts in order to sue.
U.S. District Judge Mary McLaughlin dismissed the suit for lack of standing because it was brought by an association of agents, Nationwide Insurance Independent Contractors Association Inc., rather than the agents themselves. Although NIICA said it could challenge the contract changes without extensive participation from its individual members, the judge ruled that it needed to include at least agents who had been adversely affected. Judge McLaughlin gave the plaintiff 30 days to amend its complaint if it chose to do so.
"In considering a motion to dismiss, a court should accept the plaintiff's assertion that it can prove its allegations without extensive individual participation, even if the court suspects that this will be difficult to do," the judge wrote.
Instead of naming members who were harmed by each of the contractual changes, NIICA could alternatively establish standing under a more lenient standard if it showed that the majority of its members were harmed by the changes, Judge McLaughlin said.
"The plaintiff's conclusory statement of universal harm to all of its members under all of the relevant contracts does not raise a plausible claim," the judge wrote.
Although NIICA provided a declaration from one Pennsylvania agent, David Gardner, he was not named in the complaint and was affected by only two of the seven claims that NIICA brought against the insurer, according to the order.
NIICA sued Nationwide in May over changes made in the contractors' compensation plans in 2009. According to the complaint, Nationwide discriminates against agents who won't sign an agent-choice addendum under which they would forfeit future accruals to a deferred compensation incentive credits program, a tool the insurer has used to attract agents. The credits program allows agents to build a secure, retirement-fund-like account from commission earnings.
Those who sign the addendum to forfeit accruals receive better treatment, such as higher commission rates on certain products and services, than those who decide to continue accumulating DCIC benefits, according to the suit.
The group also took aim at a fee that it claims Nationwide plans to impose on agents to support a centralized policyholder servicing facility. The fee will be based on a percentage of renewal premiums with opportunities for reimbursement, according to the suit, which says the company eventually wants to make the program mandatory.
NIICA also filed similar suits against Nationwide in New York and Texas.
NIICA is represented by William Tedards Jr. and Gerhard P. Dietrich of Ward Greenberg Heller & Reidy LLP.
Nationwide is represented by Daniel F. Attridge, Elizabeth Locke and Thomas A. Clare of Kirkland & Ellis LLP and by Scott Bennett Freemann of Freemann Law Offices PC.
The case is Nationwide Insurance Independent Contractors Association Inc. v. Nationwide Mutual Insurance Co., case number 2:11-cv-03085, in the U.S. District Court for the Eastern District of Pennsylvania.
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