Holy moly.

Let’s talk about insurance real quick.

Insurers often sell their products using a combination of employees, captive and independent agents and affiliated brokers. While insurers understand they are liable for the action of their employees, most assume–in most instances at least–they are not liable for the actions of independent agents or brokers.

And they certainly assume they are not liable for the actions of third-party contractors (or their contractors) hired by the independent agents.

Well hold on to your hats folks, because that entire model is about to change–and it looks very much like what we’ve seen recently in the real estate context.

But one quick reminder. Back in February we reported on how Allstate narrowly avoided a certification effort by a pack of hungry Plaintiff’s lawyers in a TCPA class action in Illinois.

While a certification victory is always huge for a Defendant, the win just took on a whole new importance given Allstate’s stunning LOSS on critical substantive issues this week– and the ruling will create even more problems for lead generators and companies that rely on them.

In Hossfield v. Allstate, 2024 WL 1328651 (N.D. Ill. March 28, 2024) the Court entered summary judgment AGAINST Allstate, finding that it had violated the TCPA through the actions of independent Allstate agents in Texas.

Here are the facts–and they are worth following closely so you can get the most out of this decision:

• Allstate worked with two independent agents in Texas;
• Each of these agents in turn hired a lead gen company called Transfer Kings to bring in work to them;
• Unbeknownst to the agents (or Allstate) Transfer Kings hired another lead gen called Atlantic Telemarketing to generate leads for them;
• Atlantic, in turn, bought data leads from Policy Genius;
• Relying on a lead form submission on a Policy Genius website, Atlantic called Plaintiff and transferred the call through Transfer Kings to the two Texas Allstate agents.

Plaintiff claims he never submitted a lead on any website and sued Allstate in a putative nationwide class action over the phone calls.

Both Allstate and Plaintiff moved for summary judgment. Allstate argued the consent on Policy Genius prevented Plaintiff–a repeat TCPA litigator–from suing. It also claimed it was not liable for the calls made by the subagent of a subagent of its independent agents. Plaintiff argued the consent form was inadmissible and that Allstate was liable for the conduct of Atlantic, even though Allstate never knew it existed.

The Court agreed with Plaintiff.

On the data lead issue, Allstate failed to meet the basic rules of evidence. A party cannot just lob hearsay and unauthenticated records at the court and expect to win. Instead a party must do the hard work of gathering admissible evidence in discovery ahead of a summary judgment effort. But Allstate didn’t do that.

Instead Allstate attempted to enter into evidence a spreadsheet of purported lead data emailed from Transfer Kings’ owner, Ahmed Basit. But rather obviously an email is not sworn testimony–and is not admissible. But even if Basit’s email were admissible the data record was not created by TK or Basit–but by Policy Genius. So Allstate’s lawyers needed to obtain authenticated data directly from Policy Genius in order to introduce the evidence of consent into the record. Apparently they failed to do this.

As a result the Court had no problem (correctly) excluding the purported evidence of consent. It was simply not admissible. Hence it found Plaintiff never consented to the calls at issue.

That just leaves the issue of vicarious liability.

The Court went step by step in assessing Allstate’s liability in light of the position of the parties in chain. First it had little trouble concluding that if the calls had been placed by the independent agents themselves Allstate would be liable for the calls. While the Court made this seem like a forgone conclusion–this step alone is a big deal since most insurers assume they are not liable for the conduct of such independents.

Regardless, it gets worse. Much worse.

The Court next concluded Allstate had taken no steps to prevent its agents from hiring subagents to engage in marketing. Thus if TK was properly an agent of Allstate’s agents then Allstate was responsible for the conduct of TK. And reviewing the evidence the Court found TK was sufficiently subject to the agents’ control to be deemed an agent.

The same analysis was performed for the upstream sub–since Allstate’s agents did not ban subagents they two were liable based on TK’s hiring Atlantic. And that liability flowed back to Allstate as well by virtue of the agency between the independents and Allstate.

So as a result the Court found Allstate was liable for the conduct of everyone in the chain–even the companies it had no knowledge of.

Nuts right?

It gets worse.

The Court determined Allstate had WILLFULLY violated the TCPA. The analysis here is short–and likely wrong. The Court found Allstate’s agents had knowingly hired TK and TK had knowingly hired Atlantic and Atlantic had knowingly made calls to Plaintiff. So the whole thing was willful.

Umm, yeah. That’s not right. Prevailing case law is clear that the Defendant must have knowledge of the facts that give rise to liability–here that would mean Allstate would have to know the consent was invalid. And it didn’t. So a willfulness finding should not have been possible here.

so at bottom:

1. Insurance companies need to understand they CAN be liable for calls made by their independent agents, and even calls made by subagents;
2. Insurance companies (and companies using independent agents to sell their product) need to protect themselves by banning the use of subagents;
3. Lead buyers need to have a clear line of sight to the data providers and should also consider banning subagents;
4. TCPA class action litigators need to actually understand the rules of evidence and never try to admit an unauthenticated record provided via email– source records must be obtained in authenticated and admissible form.

That last point really irks me. No responsible attorney would attempt to introduce an emailed record from a third-party in my view. That is so obviously inadmissible. You have to do the hard work of issuing subpoenas up and down the chain and taking deposition testimony in these suits.

I don’t know if the result here was because the lawyers didn’t know what they were doing, the insurer didn’t want to pay for the work that was needed, or that policy genius ghosted them. But regardless this simply cannot happen.