THE DECLARATORY RELIEF ACTION (DRA) IS REBORN

Thanks to an archaic and generally forgotten provision in the California Civil Code of Procedure, the DRA has been reshaped, refined, and re-filed. The DRA has been REBORN.

For those new to Farmers or those who rarely had the opportunity to read The Voice or visit www.ufaa.com, let’s go back nearly seven years to the beginning. Later in this article we will explain the tremendous new opportunity UFAA is now taking advantage of.

A DRA is not your typical lawsuit, because we are not seeking monetary damages from the management company (Farmers Group Inc) or the Exchanges. The purpose of a DRA, which is normally filed by one of the parties to an agreement (in this case, the Agent's Appointment Agreement), is to seek the court’s interpretation of one or more provisions of the document in question. In our case, UFAA’s initial purpose was to seek the court’s concurrence that the management company was reinterpreting or misinterpreting certain provisions of the Agent Appointment Agreement (AAA). The plaintiffs in the original complaint were Jack Ravet, a long time UFAA member and agent, and UFAA, on behalf of all our California members.

At the beginning of 2002, UFAA was forced into removing Jack Ravet as a named plaintiff after he was terminated by the management company for “unacceptable business results” (the DARG Program). Instead of being a negative, Jack’s removal from the DRA, led us to a new and even more important reason for the DRA. After Jack's termination and removal from the DRA, the management company attempted to have the DRA thrown out because, they claimed, UFAA was not a party to the AAA and therefore could not represent its agents. UFAA realized the importance of being able to represent its members both then and in the future for two extremely important reasons:

That the management company could always terminate any agent or agents taking legal action against them by invoking the three-month termination provision in the AAA

AND

That a suit filed by an individual agent or a small group of agents, could have no affect on agents in other parts of the country or even in the same state, assuming it was successful, unless an Appellate Court confirmed the trial court’s decision and that confirming decision was published, thereby becoming case law.

Five specific issues were included in the original DRA filing although twice that many could have been included. The five issues were:

1. Was the management company obligated to pay for access to policyholder records?

2. Are agents obligated to rewrite policies placed with non-Exchange Companies, during moratoriums or when that business was ineligible, once the moratorium ended or the business becomes eligible?

3. Are agents obligated to sell “Farmers Brand Products” that are not underwritten by the Exchanges, Mid-Century or FNWL?

4. Is the management company required to provide educational and sales training at its expense, such as, the Series 6 & 63 licensing?

5. Can agents place business with other than the Exchanges, Mid-Century or FNWL if those companies do not offer policy features or benefits required or desired by a prospect or policyholder?

So, thanks to the management company's use of an archaic and seldom used provision in the California Civil Code of Procedure, the DRA has been reshaped, refined and re-filed. The DRA has been reborn. The DRA is better than ever.

The new and improved DRA, just filed in San Francisco, has taken on more significance than the original for five specific reasons:

1. It has been filed on behalf of ALL UFAA members, nationwide.

2. It seeks an absolute determination that UFAA can represent it members.

3. A DARG Program cause of action has been added as the First Cause of Action after the UFAA standing issue.

4. Two of the original issues have been replaced or been redefined.

5. Farmers Group Inc. (FGI), the attorney-in-fact/management company for the Exchanges Mid-Century and the owners of FNWL has been added as the first named defendant.

Here is a brief summary of the new and improved DRA.

First Cause of Action: That the management company (FGI) has developed the DARG Program as a management tool to pressure agents toward increased production, with particular emphasis on life insurance sales. We are asking the court to find the imposition of detailed performance levels coupled with the threat of termination a breach of the AAA.

Second Cause of Action: That FGI has taken the position that insurance business that was placed with other insurers because it was ineligible for Farmers when first written must be rewritten back to Farmers if it later becomes eligible. We are asking the court to declare that agents have no obligation to rewrite or rollover business.

Third Cause of Action: That FGI is demanding that agents must market and sell insurance products that are not underwritten by the Exchanges, Mid-Century or FNWL, which is in direct conflict with Section B (1) of the AAA and, therefore, constitutes a breach of contract.

Fourth Cause of Action: That FGI is pressuring agents to market and sell financial products and those that don’t are discriminated against, which is a breach of the implied covenant of good faith and fair dealing.

Fifth Cause of Action: That FGI is demanding that agents reject policyholders who are not eligible for Farmers products, which is a direct contradiction of the 1968 Agent Appointment Agreement Explainer and Farmers Annual Report to the SEC for the year ending December 31, 2001.

While some may feel we have wasted the last seven years, we feel that is certainly not the case. The majority of the past seven years were spent in the discovery process and more than two of those years were consumed by our successful appeal of the trial court’s dismissal of the DRA in the latter part of 2002. We believe the majority of the discovery process has been completed and will not need to be repeated. Also, the Appellate Court's decision strongly implied that UFAA had the right to represent its members, even though it is not a party to the AAA, and that decision should be easily reaffirmed by the new court.

Because the stakes couldn’t be higher, we need the continued financial support of not only our members but also the entire agency force. For a number of reasons, the entire agency force will benefit when UFAA is victorious in court, but obviously not initially to the same extent as our members. UFAA realizes that its ranks will swell with a court victory, as its members will no longer have to worry about being DARGed, discriminated against for not getting or maintaining their securities license or selling security products, being terminated for not rolling back outside business or placing a policyholder or prospect with another company because Farmers didn’t offer a needed or requested benefit or feature.

We would like to thank all the members and non-members that have generously contributed to the DRA Fund since its inception. We are personally appealing to those agents that have yet to contribute, as well as our members and non-members that have supported the DRA to this point, as all of your help is needed to continue the fight.

As an incentive to non-members who help fund the DRA, by contributing now so we can have our day in court, UFAA will credit every dollar you contribute now towards your dues when you join UFAA. So, please help us help you, by sending in a check, payable to the DRA Fund, to the UFAA National Office, or fill out the credit card authorization form below and fax it to 314 631-7963.

Thank you.
 

• Attached document:  Download and view DRA court filing

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