Allstate Franchisee Lawsuits: Old Slip, NAPAA, and Canchola

Allstate is facing three active lawsuits from its exclusive agents and franchisees: Old Slip Benefits & Insurance Services v. Allstate in New York, which tests whether the exclusive agency agreement is really a franchise; NAPAA v. Allstate in Illinois, a breach-of-contract case brought by the national agents’ association; and Canchola v. Allstate in California, a certified class action alleging Allstate misclassified its agents as independent contractors. All three challenge different parts of the same standard contract — Allstate’s R3001 Exclusive Agency Agreement — and all three remain live as of mid-2026.

Old Slip Benefits v. Allstate (New York)

In September 2024, Old Slip Benefits & Insurance Services, an agency owned by investment adviser James Lukezic, sued Allstate in Westchester County Supreme Court, alleging Allstate fabricated a reason to cancel its agreement roughly six months after the agency opened.{¹}

Lukezic had run a FINRA-registered broker-dealer and advisory firm, Old Slip Capital Management, since 2019. In 2023 he decided to acquire two Allstate agencies in Mamaroneck and Mount Vernon and consolidate them in White Plains. He signed the Exclusive Agency Agreement on February 21, 2024, with a ten-year, 9% loan from Allstate financing the deal.{¹}{²}

About thirty days in, according to the complaint, an Allstate salesperson pressed Lukezic to give up his FINRA licenses and transfer his advisory clients to an Allstate affiliate. He refused. On June 25, 2024, Allstate notified him the agreement would end September 30, 2024, citing “maintaining an outside business interest which creates a conflict of interest and unauthorized brokering.” Old Slip calls that accusation false and alleges Allstate’s real motive was to capture his financial services clients for its own salespeople.{¹}

The Claims

Old Slip pleaded breach of the implied covenant of good faith and fair dealing, violation of the New York Franchise Sales Act, fraudulent inducement, and tortious interference. The franchise claim alleges Allstate never provided the disclosure documents New York law requires and pressured Lukezic to sign with fewer than 48 hours’ notice, warning delay would jeopardize his financing. Old Slip also argues the contract’s restrictive clauses (Section 1(E) of the Agency Agreement and Section 9 of the Key Person Confidentiality Non-Competition Agreement) bar only outside insurance business, not a separate investment advisory practice.{³}

How the Court Has Ruled

In January 2025, Justice Linda Jamieson dismissed the straight breach-of-contract claim, finding the agreement’s 90-day “with or without cause” termination clause was enforceable and citing Rahman v. Allstate Insurance Co., where a federal court dismissed an identical claim.{²}

Two claims survived. On the implied covenant, the court held that “even an explicitly discretionary contract right may not be exercised in bad faith so as to frustrate the other party’s right to the benefit under the agreement.” On the Franchise Sales Act, the court found the fee structure and level of control Allstate exercised could qualify the arrangement as an unregistered franchise regardless of the contract’s label, noting the statute is “designed to protect investors in franchise-like relationships regardless of the label used.”{²}

Justice Jamieson had entered a temporary restraining order in September 2024 blocking termination. In February 2025 the case was removed to the U.S. District Court for the Southern District of New York, and under federal procedure the state-court TRO expired 14 days after removal. On May 21, 2025, Judge Jessica G. L. Clarke confirmed the TRO had lapsed but stayed her order to June 5, 2025, so Old Slip could seek an emergency stay from the Second Circuit.{⁴} Whether that stay was granted, and whether Allstate has since terminated, is not confirmed in available records.

A FINRA Complication

In May 2026, a FINRA hearing panel found that Lukezic executed unauthorized mutual fund exchanges totaling about $1.1 million across five customer accounts at Old Slip Capital Management, and that he gave false statements during the investigation. He was barred from associating with any FINRA member firm. Lukezic disputes the findings, calls the evidence “hearsay,” and appealed to FINRA’s National Adjudicatory Council on May 15, 2026; the sanctions are stayed pending review.{⁵}{⁶} That proceeding is separate from the franchise suit, but it involves the same outside financial services activity Allstate cited when it terminated the agency.

NAPAA v. Allstate (Illinois)

The National Association of Professional Allstate Agents, joined by individual agents Scott Verbarg, Ross Shales, Brad Rehonic, and Joseph Rehonic, sued Allstate in the Circuit Court of Cook County, Illinois (Case No. 21-L-7947). The verified first amended complaint, filed May 23, 2022, pleads ten counts of breach of the R3001 Exclusive Agency Agreement.{⁷}

What the Complaint Alleges

A “blanket policy” of refusing to approve qualified existing exclusive agents as buyers when an agent tries to sell a book of business, allegedly forcing sellers to accept below-market prices or lower termination payments.
Territorial encroachment through authorizing hundreds of independent agents to sell Allstate products in territories meant to be served exclusively by exclusive agents.
Customer “poaching” through Allstate’s Customer Contact Center and internet portal, which allegedly bind coverage for prospects agents are already working with, cutting the agent’s commission to roughly 2% instead of the 9% earned on the agent’s own sales.
A 2020 mandate that all agents use Allstate Agency Voice, a centralized VoIP phone system. Agents pay implementation costs and $23 per line per month, deducted from commissions, which the complaint says violates the R3001 provision requiring agents to “supply and maintain” their own telephone systems.
Individual instances of steering agency sales to favored buyers, discouraging particular purchasers, or denying qualified buyers on pretextual grounds. Brad Rehonic alleges Allstate refused to approve a sale because the buyer would not sign an Integrated Services Agreement the buyer was not required to sign.{}⁷

In January 2022, an Illinois state court judge declined to dismiss NAPAA’s breach-of-contract claims, and the case has continued to move forward.{⁸}

Canchola v. Allstate (California)

Canchola, et al. v. Allstate Insurance Company (Case No. 8:23-cv-00734-FWS-ADS, C.D. Cal.) is a class action alleging Allstate illegally classifies its California exclusive agents as independent contractors when they function as employees.{⁹}

The Misclassification Theory

The suit turns on California Labor Code § 2802, which requires employers to reimburse employees for necessary business expenses. Plaintiffs argue that despite the contractor label, agents bear substantial costs (office rent, advertising, staff, technology) while Allstate controls the work: dictating office hours of at least 45 per week, controlling the appearance and location of agencies, requiring branded email and websites, monitoring performance through a management hierarchy, keeping ownership of the book of business and customer information, and reserving the right to terminate at will on 90 days’ notice.{¹⁰}

The complaint alleges Allstate cut commissions on auto policies by 84%, from a 25% rate to 4%, while agents continued shouldering the same operating expenses. The controlling legal test is the multifactor analysis from the California Supreme Court’s S. G. Borello & Sons decision, which looks past the contract label to determine employee status for the specific statute at issue.{¹⁰}

Class Certification and Trial Date

On March 28, 2025, Judge Fred W. Slaughter certified the class. Allstate petitioned the Ninth Circuit for immediate appellate review; the Ninth Circuit denied the petition.{⁹} The class covers everyone who signed an Allstate R3001, R3001A, R3001S, or R3001C Exclusive Agency Agreement and worked as an exclusive agent in California between March 22, 2020, and March 28, 2025.{¹¹} Of 975 potential class members, 9 opted out, leaving 966.{¹²}

Class counsel was ordered to collect business-expense documents from participating agents by February 27, 2026. Trial is scheduled for October 20, 2026.{¹²}

Is an Allstate Agency a Franchise? Courts Have Split

Whether the exclusive agency agreement is really a franchise, and therefore subject to state franchise disclosure and termination laws, is the pivotal question in the New York case and has come up before elsewhere. The answers depend on the state statute and the record.

In New York, Justice Jamieson’s January 2025 ruling in Old Slip found the fee and control elements could qualify the arrangement as a franchise under the New York Franchise Sales Act, letting that claim proceed past the motion to dismiss.{²}

New Jersey went the other way. In DeLuca v. Allstate N.J. Insurance Co. (2014), a state appellate court held the New Jersey Franchise Practices Act did not apply to Allstate agents, finding no “community of interest” requiring tangible capital investments like a building or special equipment, and concluding that franchise protections would conflict with the insurance-code regime governing insurer-agent relationships. Franchise law generally requires “good cause” for termination; insurance regulations permit termination for a broader set of reasons.{¹³}

There is no settled national answer. Whether an exclusive agency counts as a franchise remains contested and state-specific.

The R3001 Contract Underneath All Three Cases

Every one of these lawsuits circles back to Allstate’s R3001 Exclusive Agency Agreement, the standard contract in use since 1999. It lets Allstate terminate an agent with or without cause on 90 days’ notice. On termination, Allstate keeps the book of business, customer lists, phone numbers, and agency operating assets. The agent keeps whatever personal investment they made in office space and equipment, and typically faces non-compete restrictions barring contact with former Allstate customers or operation within a mile of the old office.{¹⁰}

The contract also binds agents to changes Allstate makes to its supplement, manual, and agency standards, which agents say lets the company modify the deal’s economic terms unilaterally. Allstate markets the opportunity as a chance to “own your own insurance agency” and “earn equity”; the Canchola plaintiffs call that language “false and misleading,” arguing agents own nothing of lasting value and cannot sell the agency as a standalone business.{¹⁰}

The Old Slip franchise fight, the NAPAA breach-of-contract suit, and the Canchola misclassification class action each attack a different clause and consequence of that same contract, and each remains active heading into the fall 2026 trial calendar.

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Risk & Insurance. Brokers Lose Franchise Fight