We wish to highlight a significant legal development from the recent case of Hossfeld v. Allstate Ins. Co., 2024 WL 1328651 (N.D. Ill., March 28, 2024), which may have profound implications for businesses using telemarketing services through third-party agents.
Case Overview
In this case, the court addressed, by deciding cross motions for summary judgment, whether Allstate was vicariously liable for telemarketing calls made by its agents’ subcontractors, which violated the Telephone Consumer Protection Act (TCPA). Despite the plaintiff’s number being on Allstate’s internal do-not-call (DNC) list, third-party telemarketers, hired by Allstate’s independent insurance agents, made unauthorized calls, including calls to numbers on Allstate’s internal DNC. The subcontractors had no access to that list, such that it was not checked before the calls were made. The court found Allstate vicariously liable because it had granted actual authority to its agents to hire telemarketing vendors, thereby establishing a chain of subagency and resulting vicarious liability for Allstate when those subagents violated the law.
Key Takeaways
- Vicarious Liability and Agency Relationship: The court’s decision underscores the potential for businesses to be held vicariously liable for TCPA violations committed by their agents and any of an agents’ subcontractors. This is especially true when the business has provided actual authority to its agents to engage third-party services.
- Due Diligence and Oversight: Merely having contractual terms that dictate the use of third-party telemarketers is not enough to shield a company from liability. There must be active oversight and due diligence to ensure that third-party actions comply with the TCPA and other regulatory requirements, as well as the terms of the agency contract.
- Internal Control Measures: Businesses must have robust internal control measures to monitor and verify that their telemarketing practices, and those of their agents (including subagents), comply with the TCPA. This includes ensuring access to and compliance with internal DNC lists.
- Evidence Management: The failure to present authenticated evidence of consent underscores the necessity of rigorous evidence management. Reliance on unauthenticated email records for Allstate’s legal defense was deemed inadequate, stressing the importance of obtaining and presenting verified documentation in legal proceedings.
Recommendations
- Review and Strengthen Agreements: Ensure that contracts with agents and third-party service providers explicitly define responsibilities and compliance obligations with respect to telemarketing laws and regulations.
- Implement Rigorous Oversight: Establish and enforce strict, regular, ongoing oversight mechanisms to monitor the compliance of all parties involved in telemarketing activities.
- Regular Compliance Audits: Conduct regular audits of telemarketing practices, including those conducted on your behalf by third parties, to ensure adherence to the TCPA and other relevant regulations.
- Training and Education: Provide training to agents and third-party vendors on the legal requirements of the TCPA, emphasizing the importance of adhering to internal do-not-call lists.
The Hossfeld v. Allstate decision serves as a critical reminder of the legal risks associated with outsourcing telemarketing activities. Proactive measures and diligent oversight are essential to mitigate the risk of vicarious liability under the TCPA.
Any business that uses non-employee agents to sell its products and services or contact prospective customers, especially when those agents might use the services of third-party telemarketers, needs to review its agency contracts to ensure that there are adequate safeguards to ensure that agents compliance with all telemarketing rules, including new restrictions on the use of AI-generated communications. Those agency contracts should address the use of third-party telemarketing services. The business will also need to implement reasonable practices for monitoring their agents compliance with applicable laws and agency contracts.
