American Family Insurance in hot water with possible $1 billion in legal liability
The insurer may be faced with the massive penalty if a federal judge accepts a jury ruling.
American Family Insurance could have to pay legal liability as high as $1 billion depending on a federal judge’s decision. Last week, a jury decided that thousands of the insurer’s independent agents are entitled to full employee retirement package benefits. If the judge adopts that ruling, the company, also known as AmFam would be required to comply.
The jury’s ruling was made after a two week trial held at an Ohio U.S. District Court.
The jury’s decision was unanimous and stated that American Family Insurance procedures are not appropriate or fair. The insurance company had been classifying its agents as independent contractors. This occurred regardless of the fact that AmFam agents were permitted to sell only the company’s own coverage products.
Should the federal judge accept the decision of the jury, American Family will be required to alter its retirement package funding accordingly. The insurance company would need to comply with the Employee Retirement Income Security Act (ERISA) terms. ERISA provides federal retirement benefits protection regulations.
By calling its agents independent contractors, American Family Insurance was able to avoid providing retirement packages.
“The jury apparently agreed that AmFam cannot have it both ways,” said one of the class-action lawsuit attorneys, Erin Dickinson. She went on to say “A company cannot just call its agents ‘independent contractors’ to avoid following the federal law protecting retirement benefits and then insist on controlling how those agents do their work.”
AmFam spokesperson Ken Muth underscored that “the jury’s advisory verdict is not final.” He also pointed out that U.S. Judge Donald Nugent would continue to hear the arguments from both sides. Muth insisted that the insurance company would not stop their effort to “vigorously present” their side of the case to the judge and that they “strongly disagree” with the jury’s advisory verdict from last week. Moreover, Muth insists that the insurer continues to feel it has made the right choice in its designation of agents as independent contractors.
American Family Insurance also insists that the $1 billion in legal liability was “grossly overstated and premature.” The judge will make his final ruling this summer in June or July.