Since the advent of state "franchise laws" restricting the ability of franchisors to terminate their "franchisees," commissioned agents have tried to take advantage of these laws. Over time, a line of cases consistently denied commissioned agents the protection of state franchise laws on the grounds that commissioned agents were not franchisees, finding that the agents only had the authority to solicit orders but did not have the right to consummate a sale.A recent Connecticut court decision, Charts v. Nationwide Insurance Company, 397 F.Supp. 2d 357 (D. Conn. 2005), called into question this line of cases denying agents the same protections accorded franchisees. Connecticut’s unusually broad franchise law had strictly been applied to traditional dealerships. The recent decision, however, applied Connecticut’s franchise law to a commissioned agent and upheld a multi-million-dollar jury award to an insurance agent terminated without the required "good cause." The Charts decision is significant because it is the first in recent years to apply a franchise law to the insurance business. At this point, it is difficult to predict the impact of the Charts decision on other jurisdictions. The Connecticut decision, if adopted by other courts, would allow for future suits against insurance companies from commissioned agents terminated without cause. Many states have franchise statutes similar to Connecticut’s which restrict a party’s right to terminate any business relationship that is considered a franchise.
The Charts decision has not been adopted by Illinois courts. In Durst v. Illinois Farmers Insurance Company, 2006 U.S. Dist. LEXIS 2870 (N.D. Il. 2006), the U.S. District Court, applying Illinois law, explicitly declined to follow the Connecticut decision. In Durst, an insurance agent claimed he was terminated because of age and disability and without "good cause." The court was asked to determine whether Illinois’ franchise law applied to an agreement between an insurance agent and an insurance company. The court held that a franchisor-franchisee relationship did not exist because the agent did not have the authority to sell insurance without insurance company approval. As Durst indicates, Illinois courts have decided to reject Charts and follow the line of cases denying commissioned agents the protection of state franchise laws on the grounds the agents are not franchisees because the agents did not have the right to consummate an insurance company sale.
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