Court Reverses $20 Million Jury Award to Ex-State Farm Agents

The Missouri Court of Appeals on Tuesday threw out a $20 million jury award to five former State Farm Insurance agents who claimed they were improperly terminated for criticizing the company’s treatment of policyholders.

A three-judge panel of the court’s Western District ruled that as independent contractors operating their own businesses selling State Farm policies, the agents could be terminated by State Farm “at will.”
Nothing in the open-ended agreements the agents signed with Illinois-based State Farm gave them contractual rights or obligated the company to show good cause for terminating the working relationship, the court said. The agreements also allowed the agents to stop selling State Farm policies at any time.

The five agents, one each from Missouri, Ohio and Texas and two from Maryland, filed suit in Missouri’s Jackson County Circuit Court over their January 2000 terminations by State Farm.

After a three-week jury trial in mid-2005, the agents were awarded actual damages totaling $9 million and punitive damages totaling $11 million.

Joseph J. Kelly, a Joplin resident who was the lead plaintiff, testified at trial that he was frequently concerned about the company’s treatment of its policyholders.

In December 1999, the five agents allowed their names to be used in a letter critical of State Farm that was sent to the Texas insurance commissioner.

The letter alleged in part that the company overcharged for homeowner’s insurance, engaged in sales discrimination and attempted to defraud accident victims of the full amounts they were due. Two of the plaintiffs already had signed a similar letter to the Senate Commerce Committee and taken part in a news conference in Washington.

In their lawsuit, the agents contended they had been told they could be terminated by State Farm only for good cause. They also argued that their agreements with State Farm contained ambiguous language that created a good-cause obligation on State Farm.

But the Court of Appeals found no such obligation and said the trial judge had erred in siding with the plaintiffs’ interpretation of their employment agreement.

“The agreement was clearly terminable at-will by either party,” the court said.