New White Plains agency fights Allstate for franchise deal

A White Plains insurance agency is suing to stop Allstate Insurance Co. from terminating its franchises.

Old Slip Benefits & Insurance Services accused Allstate officials of concocting a false accusation to cancel a new franchise deal, in a Sept. 12 complaint filed in Westchester Supreme Court.

Termination of the franchise agreement, the complaint states, “will result in immediate, irreparable harm,” including destruction of the business, loss of jobs, and loss of future opportunities.

Old Slip is owned by James J. Lukezic, a Midtown Manhattan investment adviser, broker-dealer and insurance agent.

Last year he decided to buy the assets of Allstate franchises in Mamaroneck and Mount Vernon, and consolidate them at an office on Main Street in downtown White Plains.

His plan was to cross-sell Allstate products to his investment clients, according to the complaint, and to buy and consolidate more Allstate agencies.

Lukezic claims that he made it clear to Allstate that he would continue to service clients of his separate investment advisory business, according to the complaint, as he marketed Allstate to thousands of investment clients.

Old Slip could only sell Allstate insurance products, the complaint states, but the sale of non-insurance products was not restricted.

Lukezic was required to undergo extensive training with Allstate. He had to buy Allstate signs, computers and software, telephone system, business cards and stationery. Allstate had to approve his location. Old Slip had to use a bank approved by Allstate. Lukezic took out a 10-year, 9% loan with the insurer.

Old Slip opened in March. Customers paid Allstate directly, and the insurer paid the agency about 7% from the collected premiums.

But about 30 days after Old Slip began operations, an Allstate salesperson allegedly demanded that Lukezic relinquish his financial services licenses and transfer his financial service customers to an Allstate financial services company.

Lukezic says that was never part of the deal. What’s more, he says the request made no sense because Allstate offered only one type of financial service product, a Fidelity brokerage account, and his customers expected a broader range of products.

As a broker-dealer, the complaint states, Lukezic has a fiduciary duty to offer a range of products to ensure that clients end up with suitable investments.

Lukezic claims that Allstate had put a freeze on new insurance business and that sales people were not earning new commissions. By forcing him to transfer his financial services business to Allstate, the complaint speculates, “they could earn more personal commissions.”

On June 25, an Allstate sales leader notified Lukezic that his agency agreement would be cancelled as of Sept. 30, “for reasons that include maintaining an outside business interest which creates a conflict of interest and unauthorized brokering.”

Lukezic says the accusation is false and will create a permanent, negative mark on his record. Other companies that have agreements with his Old Slip affiliates will probably terminate their deals, the complaint states, and regulatory agencies could take actions that jeopardize his entire financial services business.

Old Slip charged Allstate and four sales people with breach of contract, violation of the covenant of good faith and fair dealing, violation of the New York Franchise Sales Act, and interference with contracts and relationships.

It is asking the court to stop the termination of the franchise agreement.

Allstate’s attorney, A. Christopher Young, of Philadelphia, did not reply to a request for comment.