Allstate looks to Seventh Circuit to avoid liability in telemarketing suit

CHICAGO (CN) — Allstate Insurance Company maintained to a Seventh Circuit panel Monday morning that it shouldn’t be held liable for its subcontractor’s violations of the “do not call” list.

According to Allstate attorney James Tyse, two independent contractors licensed to sell Allstate insurance hired a third-party telemarketing company, Transfer Kings, that itself hired another telemarketing company. That company, Atlantic Telemarketing, is the one responsible for the calls a Texas man suing the insurance company received, Tyse argued.

“The total lack of any relationship between Allstate and Atlantic — the entity that actually committed any [Telephone Consumer Protection Act] violation — should have precluded liability for Allstate as a matter of law,” Allstate wrote in a brief.

The plaintiff, Robert Hossfeld, says he received twelve phone calls attempting to sell him insurance, despite putting his name on the national “do not call” list.

U.S. Circuit Judge Ilana Rovner, who appeared remotely at Monday’s proceedings, pressed Tyse on whether Allstate inadvertently encouraged this sort of layered subcontracting.

“Given the structure that was set up by Allstate, in which the use of noncontracted vendors was so expected as to be expressly approved and regulated, why doesn’t that recognition of the need for subagents to carry out the work, at least imply consent for the appointment of subagents in series?” the George H.W. Bush appointee asked. “And what in that structure or language indicates that Allstate expected the use of noncontract vendors to be limited to the very first level?”

Tyse responded that because the agency relationship is a fiduciary relationship, delegation of authority cannot be implied unless there was some sort of manifestation of assent. He reiterated before the three-judge panel that if Transfer Kings had made the calls, this would be a different story.

“We would be in a normal agency situation where the only question was whether Transfer Kings was operating as a subagent of Allstate. Here, we don’t need to get into that complicated factual question, though, your honor, because this was an agency that was appointed in series based on language in the contract that did not say anything about multiple different levels of subagency,” Tyse said. “And I think that would really kind of open a Pandora’s box where you could have unlimited liability long down an agency chain. There’s no reason why the liability would have to stop at Atlantic.”

But plaintiff attorney Alexander Burke maintained that a lower court correctly found Allstate liable for the underlying TCPA violations and granted summary judgment to Hossfeld. He argued that Allstate created the telemarketing system, and then delegated the responsibilities to agents, who violated the “do not call” list.

“You seem to be describing a claim for direct liability rather than vicarious liability, but this was not litigated on a direct liability for negligent supervision or something, a theory like that,” U.S. Circuit Judge Amy St. Eve said, a Donald Trump appointee, said. “What’s your best evidence for that manifestation of assent, for the creation of a sub-subagency relationship, given the common law rule against the delegation of that authority?” .

Burke said that he wasn’t trying to argue direct liability. In response to St. Eve’s question about the manifestation of assent, he pointed to the agency’s standards for compliance with the TCPA.

“The first sentence, where it says, agencies should ensure that an external provider offering services through these channels, complies with all components of these corporate policies and applicable state and federal laws and regulations,” he said.

“That’s the sub-agency layer, or level. This case concerns a sub-subagency,” St. Eve responded.

Burke replied that he read this provision as being extremely broad.

“Allstate didn’t say, ‘agencies should ensure that providers they hire offer services through these channels,’” he said. “Instead, Allstate elected to use broader language that did not so limit the authority to engage vendors or for those vendors to engage subvendors.”

St. Eve wasn’t so sure about Burke’s characterization of the agency’s standards. She said that provision “read more like a limitation on the insurance agent’s authority, not permission for the insurance agent to contract with subagents and then sub- subagents in a permissive way that would violate Allstate’s policy.”

“What are the limits of your argument?” St. Eve asked. “Could Atlantic then hire a subagent who could hire a subagent and then Allstate would continue to be liable, several times removed?”

Burke said they would, because Allstate created the system that allowed external providers to engage in telemarketing on its behalf.

U.S. Circuit Judge Diane Sykes, a George W. Bush appointee, joined Rovner and St. Eve on the panel, which took the case under advisement, and did not indicate when it might rule on the matter.

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