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October 2008
   VOICES FROM THE FIELD
The Nola Patterson Affair Clifford Orr was destined to preside over the National Association in one of its most difficult years. It would be up to him and his colleagues to clear the NALU of charges that it had functioned as a labor organization in violation of the National Labor Relations Board Act. The incident reflects a kind of schism that had developed in the field force between the general agents and managers on one side and the soliciting agents on the other. A move to give personal producers more voice in NALU decisions had first surfaced at the 1947 midyear meeting in Milwaukee. Life Association News reported:
At that meeting, the largest midyear meeting so far, a poll of the delegates showed an even representation of agent and field management. Nevertheless, pressure continued to mount and at the Boston convention an amendment to the bylaws created a thirty-two member Committee of Agents. This was obviously an effort to diffuse the mounting criticism and stifle the murmurs of discontent heard in various quarters. Headed by NALU trustee John P. Costello of Dallas, membership was limited to "life underwriters who do not have supervisory or managerial duties." Among its more prominent members were Vivian Anderson, Grant Taggart, D.L. Myrick, Stanley Collins, David Fluegelman and Richard Imig. "We conceive it to be our duty to keep fully informed as to all NALU activities of special interest to agents and to offer suggestions for the use of and to otherwise aid and support the committees handling such activities," Costello told the National Council at their 1948 midyear meeting in Louisville. One of the first proposals dealt with by this committee was the feasibility of having a separate association of agents. The group concluded "the best interests of agents can be served by NALU rather than by a separate organization from which field management would be excluded," Costello reported. "With two separate organizations, neither would have funds with which to do as much as NALU is now doing without doubling or tripling dues," he commented. One source of the trouble was the very practical matter of finances. Unlike established general agents and managers, producing agents were not always in a position to spend days away from their offices several times a year and bear the expense of traveling to the various meetings of the national organization. Still, it was not an insuperable barrier, as Costello pointed out:
Many agreed with Mrs. Nola E. Patterson, an agent for Reliance Life in Atlanta, Georgia, who had helped initiate the movement to give agents a greater voice in NALU affairs. The daughter of a crusading newspaper editor, she was a cool, soft-spoken woman of rather aristocratic bearing. She viewed the general agent or manager, whether he was on a commission or salary, as a "home office boy" essentially committed to the company's interest rather than the agent's. Patterson was a prominent member of the Quarter Million Dollar Round Table. She was also active and vocal in association circles in Atlanta where she developed a considerable following among the rank and file in the field force. "She was a very militant woman," recalls Donald Barnes. "Feeling that the ordinary agents in America had no bargaining agency, she decided that she would try to make the NALU fish or cut bait. Either it would be a bargaining agency—in which case she would be delighted—or it would not be, in which case she would form her own organization. One way she attacked the NALU was through the Agency Practices Agreement which she considered an altogether too chummy arrangement between the companies and the field force."[xvii] Dr. Buley notes in his history of the American Life Convention:
The NALU's initial reaction was to dismiss her with frigid indifference. "We gave her short shrift," recalls David Fluegelman, who was a trustee at the time. "She approached the officers, asking for an opportunity to address the convention. We didn't give it to her." Patterson, however, wasn't to be gotten rid of so easily. The whole controversy became front-page news in the financial sections of the nation''s newspapers in September 1948 when she filed charges against 183 life insurance companies with the regional office in Atlanta of the National Labor Relations Board (NLRB). The charges alleged the National Association of Life Underwriters was a labor organization within the meaning of the National Labor Relations Act of 1935 (the Wagner Act and as amended by the Taft-Hartley Act of 1947) and that life insurance companies were violating that act by the unfair labor practice of dominating the NALU. By March 1949, when the regional office transferred the case to the National Labor Relations Board in Washington, the leaders of the NALU were in a difficult position. The issuance of a complaint would affect the future course of the organization. Some of the associated agents' most cherished projects might have to be scrapped. As Orr explained, "It appears that under the law the Association doesn't have the act as a collective bargaining agency to be held to be a labor organization." And Buley observes, "If it could be proved that the National Association of Life Underwriters was company-dominated in any way and stood in the way of the formation of a regular union, then it would have to change itself completely." Confronted with this possibility, the NALU Executive Committee retained Atlanta attorneys G. Maynard Smith and Alexander E. Wilson, Jr., whose specialty was labor relations cases, to represent the Association's interests and to "contest the charges to the utmost." It was in an atmosphere of crisis that the officers and local association leaders assembled for their midyear meeting at Miami's Hotel Flamingo in March. They passed a resolution reaffirming their status as a "a professional association," which neither has nor seeks to engage in collective bargaining activity or other tactics associated with labor unions on behalf of any agent or group of agents. But this meant very little in view of the charges. As Orr explained:
The prospect that a point of law could so curtail the NALU's activities as to render it ineffectual as a force for good in the industry aroused the ire of more than one observer. In a strongly worded editorial the United States Review commented on "the seriousness of the position in which the NALU finds itself as a result of twists given to labor laws of the nation." Noting the Association's long history of invaluable service to the life insurance business, the editor concluded:
Nola Patterson did not cripple the NALU, nor did she seriously affect its progress. It came through the ordeal without any loss of prestige, with its honor intact and the centerpiece of an enormous amount of publicity. Nevertheless, the case did force the NALU to reassert its commitment to professionalism and to limit its activities in certain areas. The companies were also affected. In settling the Patterson case, the industry signed the death warrant for the Agency Practices Agreement. The NALU's emasculated agent compensation committees eventually disbanded, and we no longer hear of the NALU offering the companies suggestions about how agents are paid for their work. After 1949 the Association's leadership encased any comments on that subject in the most general, diplomatic and euphemistic terms. As to how the case was resolved, Buley relates:
Nola Patterson wasn't Orr's only problem. One morning early in the new year, former NALU president Andrews received an interesting letter from Rutherford. Dated February 9, 1949, and marked "Personal & Confidential," the letter said:
His resignation certainly surprised the members of the executive committee. Since the "great blow-up of 1945," when Rutherford twice submitted his resignation and gained major concessions by agreeing to stay on, most Association leaders assumed that, on the whole, he was perfectly satisfied with his position. He probably was. But, as he told Andrews, with the Prudential's offer of vice president debit agency came a better salary with more generous benefits. Unquestionably, he could leave the NALU content that he had brought the organization a long way. "Jim Rutherford had more to do with molding the present structure of the NALU than any other individual," declares Don Barnes. He explains:
Rutherford had waited until the final moments of the board meeting to drop his bombshell. His list of complaints was as long and it offers a close-up shot of the NALU's managerial problems during this period. "There are two ways this job can be run," he said, "1) do only what you are told and don't start anything; or 2) run the show as you would a business. I cannot bring myself to accept the first method and as the job is now constituted it is not so easy to run it on the second basis." Seriously displeased, he vented his anger and frustration:
The threatened resignation may not have given him a significant raise in pay or markedly better benefits but, as Barnes points out, it gained Rutherford the concessions he needed to pursue his own management style. "The board ultimately agreed, and gave Rutherford the two powers he wanted: full control over management of headquarters, and full board consensus on issues of national importance," Barnes explains. "This put the executive vice president in the driver's seat, a position his successors have consolidated over the years."[xxiv] During Rutherford's six and one-half years as executive vice president, the headquarters staff increased from fifteen to twenty-three. In accepting his resignation Orr said, "During the years Jim Rutherford has served the field forces as the executive head of their organization, he has endeared himself to and gained the respect of thousands of men and women engaged in this business, both in the field and in the home offices. He has proved a strong and able leader, an untiring worker in what he believed were the best interests of the field, and his long-range thinking coupled with his sound and practical approach to problems have been responsible for many of the progressive measures that have been introduced into the National Association's wide program of activity."[xxv] With Rutherford's departure in July, the NALU lost a valuable asset. Finding a suitable replacement was not easy and the Association was to experience an unsettling period of managerial turnover before a permanent executive could be found. NALU trustee Richard Imig, an agent with New York Life in Sheboygan, served as "acting executive president" until October when Zalinski was named executive vice president. Obviously, this meant a double burden, forcing him to divide his time between the expanding LUTC program and the management of the NALU—a situation that could not last very long. As the Staff adjusted to theses shift, Jones became the NALU's director of public relations, leaving much of the responsibility for getting out the magazine to James M. Partridge, who had been working as assistant editor for some time. Pasquale Quarto, LUTC's director of training, took over the "Trends in Training" column. Imig lingered on the executive staff as director of association development for some time before he finally decided to return to Wisconsin. Understandably, he felt somewhat ill used by the board, having given up his position to manage the association only to learn that his service would not be needed after all. Benjamin N. Woodson, who was aware of the situation and sympathized with Imig's plight, comments, "He simply lacked the stature and breadth of background for the job. I voiced the opinion that Imig should be dealt with very generously, since he had been led to believe he was being considered for the position, when he was not." [xxvi] Zalinski continued in his dual capacity until July 1951 when he was relieved by Woodson. Besides wrestling with the Nola Patterson case at its midyear meeting in Miami, the governing body of the NALU also took up the group insurance question again and endorsed the group life insurance definition adopted by the National Association of Insurance Commissioners at its meeting the previous December. In opposing unlimited group insurance, the agents were often accused of denying the public protection at low cost merely to protect their own interests. Defending their position, the editor of United States Review asserted that what agents object to was the lack of permanent protection and "perversion of the social concept of group insurance to the advantage of very highly compensated people in the industry who, in some instances, receive much larger amounts of insurance than any underwriter would issue in his right mind, even at ordinary rates." Pointing out "Jumbo risks are bad, no matter how they get on the books, "and noting the risk was greater when there was no medical examination, the editor warned that the large number of modestly compensated members of the group would get stuck with the bill in the long run. "Agents also see the need for life insurance after employment is terminated, when there it is by loss of a job or old age," he said "They see group insurance letting people down when their need for protection is greatest." There were other motives, too, he argued:
Reviewing the NALU's long campaign for the adoption of a "realistic" definition to replace the one proposed in 1917, staff actuary Gordon McKinney explained that the NALU had rejected the one adopted by the commissioners in 1946 because there were too many loopholes. Rutherford and successive NALU presidents Hobbs and Baumann had given numerous speeches pointing out the weaknesses of the proposal. "As a result of these activities, together with the fact that many of the insurance commissioners recognized that further changes were desirable," McKinney said, "further hearing were held by the Life Committee of the National Association of Insurance Commissioners in 1948 which resulted in the adoption of the 1948 Group Life Insurance Definition." Outlining the main points of the emended definition, McKinney aid that the commissioner proposed confining sales to employer-employee groups, creditors insurance, labor union groups and trusteeship cases. The maximum amount of group insurance permitted on the life of one person was $20,000. The definition also stipulated that a policy under an employer-employee or labor union group had to cover at least 25 employees.[xxviii] During the summer of 1949, the national organization initiated a program for grooming new association leaders. "For a good many years," observed Life Association News, "one of the seemingly irremovable thorns in the administrative side of the NALU has been the problem of orienting members who each year are elected to take office, in either the state or local associations." Previously, the talk of acquainting new officer with their duties was left to state associations conducting orientation sessions at their headquarters. This was often unsatisfactory because someone might be in office for months before the annual training sessions met. There was no uniformity, and instruction was superficial and perfunctory in many cases. The solution, it was hoped, lay with the NALU's Leadership Training Program. Material for conducting training sessions, developed during a series of pilot seminars, had been designed by members of the headquarters staff. National headquarters could now supply associations with outlines covering the duties of each office and administrative committee on both state and local levels. By the fall of 1949, membership in local associations amounted to a little over 54,000. The agents assembled at Cincinnati's Hotel Gibson for the NALU's 60th annual convention applauded Ohio Senator Robert A. Taft's speech on "Insurance and the Welfare State" in which he denounced further extension of Social Security. Obviously at home with insurance people, this nationally known apostle of conservatism had addressed agent groups on a number of occasions. "The principle of insurance has become so popular, " he said, "that the process by which the state proposes to furnish free services to all its people had tried to steal the name of insurance. It is not insurance at all. It is the levying of a tax to provide an increased Government activity by giving free service to all the people of the country." The Russell award that year went to John Marshall Holcombe, Jr. In citing him for the award the committee noted, "As the founder and continuous director of the Life Insurance Sales Research Bureau, later the Life Insurance Agency Management Association, he has been a trailblazer in the field of studying human nature in the life insurance sales forces and applying to them the knowledge which American industry had developed in recent years." The delegates endorsed the selection of vice president Judd C. Benson of Cincinnati as president for the coming year. After graduation from the School of Business Administration at the University of Kansas, he had spent a year teaching high school. He started his career with the Equitable in Kansas, later transferring to the Union Central at the home office agency in Cincinnati where, as a protégé of Vivian Anderson, he became its very successful manager. Woodson remembers him as brilliant, argumentative, often quarrelsome, colorful, vital, and skillful parliamentarian. "After Anderson, Benson was NALU's consummate politician," Barnes believes. "He was not only interested in the politics of the NALU, but also federal legislation. It was practically the only thing that the executive staff worked on the entire year. And I think that was really the first time that the NALU began to have any influence at all in Congress."[xxix] The influence was considerable. On August 28, 1950, the passage of H.R. 6000 made full-time life insurance agents eligible for Social Security benefits. "No piece of legislation previously received such close and almost daily NALU scrutiny," commented NALU's attorney, James Hallett. This was a significant breakthrough. Until then only industrial agents and managers who were clearly "common-law employees," as well as some ordinary agents whos companies had specifically recognized them as employees, would receive benefits under OASI. Now all career agents could participate. "NALU has worked on this legislation for two straight years," Hallett reminded the agents. 'The fact that the full-time ordinary life agent will be covered as of January 1, 1951, as an employee, sharing the tax with his company or his general agent, is due to NALU's legislative effort on this one point which has long been a major item on the agenda." The law stated:
Although victorious on Capitol Hill, the associated agents still faced a number of battles in the state capitols where there remained much to be done in the field of state legislation regarding the licensing of agents and group life insurance. "Little more than half of the state and territorial jurisdictions require a written examination before the life underwriter may solicit," Hallett pointed out, adding that "only a small proportion of the states have statutes that impose, by law, certain underwriting restrictions on the tremendously expansive and relatively new philosophy of group coverage."[xxxi] By the end of summer, Charles Cleeton, chairman of the Committee on Membership, was able to announce that there were 51,256 full-time agents enrolled in life underwriters associations throughout the country. John D. Monynahan, manager for Metropolitan Life's debit agency at Berwyn, Illinois, succeeded Benson in September 1950 when the NALU held its 61st convention at the Statler Hotel in Washington, D.C. O. Sam Cummings was given the John Newton Russell Memorial Award. With the election of Eunice Bush, agent with Mutual life of New York in Baton Rouge, to the Board of Trustees, the NALU had its first woman officer in nearly thirty years. Not since Florence E. Shaal's election as vice president in 1920 had a woman served on the Associations Executive Committee. Long a prominent member of the Quarter Million Dollar Round Table, Bush was the third woman to qualify for the MDRT. She was a popular speaker at association gatherings where she willingly shared the secrets of her success as a saleswoman. In the years since a number of women have served as trustees, including Elsie Doyle of Cincinnati who followed Bush; Ellen Putnam of Rochester, New York; Laura M. Benham of Lewiston, New York; Dorothy B. Austell, Raliegh, North Carolina; Mary Fort of Chevy Chase, Maryland; and Mary Anne Cannady of Walterboro, South Carolina. The Washington convention was novel in other respects, too. There were a lot of new faces and the setting was not quite what everyone was used to. The Statler was a new hotel, typical of the ones beginning to alter the skylines of cities around the world. Often designated with the idea of capturing the big convention trade, they represented the hotel chain phenomenon spearheaded by Conrad Hilton and E.M. Statler. For those familiar with NALU meeting in the past, this was a new experience. Staying at the Statler meant encountering the Fifties pace with the Fifties look. Guests actuated the unattended, push-button elevators themselves. Here stainless steel and plate glass replaced the familiar brass and mahogany of such grand old ladies as the Drake, the Mayflower or the Bellevue-Stratford. Taxis pulling up to the 16th Street entry were just as likely to come from National Airport as from Union Station. This is the way it was going to be from now on. With the disruptions of the previous two years well behind them and their recent victory on Capitol Hill, Association leaders displayed more self-assurance than they had a year before in Cincinnati. The opening event was a television broadcast of the "American Forum of the Air," featuring Benson on a panel that discussed "Should Permanent Disability Benefits Be Added to the Social Security Program?" Emanating from the Statler's Congressional Room and telecast nationwide over NBC, the show was rebroadcast for radio listeners the next day over the same network. The "Iron Curtain," the Cold War and America's military involvement in Korea dominated much of the news in those days. Addressing the American Life Convention on October 4, 1950, NALU President Moynahan said that just as the 38th parallel represented a division between democracy and totalitarianism, life insurance could be thought of as a line of demarcation between dependence and economic freedom. Extending the comparison, he told the company executives:
Moynahan's administration witnessed a series of changes in personnel as well as the location of NALU headquarters from the 29th floor of 11 West 42nd Street to larger quarters on the 25th floor. Hallett resigned at the end of the year to join the legal staff of the Travelers Insurance Company in Hartford. He was replaced by Carlyle M. Dunaway, a University of Virginia graduate in his early forties who had seen combat in the Pacific during World War II as a lieutenant in the Navy. In March 1951, the NALU's actuary Gordon McKinney, resigned to become vice president of Security Mutual and by summer there was a new top executive at headquarters. "Benjamin N. Woodson, CLU, of Indianapolis, executive vice president of the State Life Company of Indiana," Life Association News announced, "has been appointed to the post of executive vice president of the National Association of Life Underwriters. …Concurrently Ralph G. Engelsman, Penn Mutual Life, New York City, president of the Life Underwriter Training Council, confirmed the appointment of Mr. Woodson as managing director of LUTC. He assumed office on July 1. In both posts he succeeds Edmund L.G. Zalinski, CLU, who on the same date assumed office as an assistant vice president of the New York Life." While serving the industry in other capacities, Zalinski continued to keep a hand in agent education. Appointed to LUTC's Board of Trustees, Zalinski served as president of the Council in 1954 and later as assistant treasurer. By 1957 he had given up his position with New York Life to become executive vice president of the Life Insurance Company of North America, and for a number of years he was a trustee of The American College of Life Underwriters. Board members had agreed at the midyear meeting that the position of NALU administrator should be enhanced, not only with a higher salary, but also by giving the chief executive of the Association wider discretionary powers, with is probably one reason Woodson agreed to take it. "It is understood," Life Association News reported, "that the NALU Board at its annual meeting in Los Angeles in September will ask the National Council to change the title of this position to that of managing director to broaden the scope of the job, and to effect a five-year working agreement designed to obviate further turnover in the post." Pointing to Woodson's wide experience as an agent, an agency manager and company official, plus his eight years' experience in institutional work, the article provided a biographical sketch of the NALU's new executive:
The article concluded with a summary of Woodson's more recent career, mentioning his work with the Research Bureau and as a company executive. Few ever called him Ben. Almost universally he was known as "Woody." Whatever preconceptions they may have had, members of the staff soon learned that Woodson was both well-organized and exacting. He had enormous energy and limitless capacity for detail. A gifted writer as well as a natural rhetorician, one of his first acts was to introduce his column "The Back Page" into Life Association News. Drawing the readers' attention to the myriad uses and benefits of life insurance, with a full supply of inventive marketing stratagems, these sparkling essays were immensely popular—so much so that the column was repeatedly revived during the years following Woodson's departure from NALU headquarters. Reappearing in Life Association News during the 1960s and again in 1981, it is still being published in the monthly issues of the Association's magazine. At the NALU convention that fall in Los Angeles, a completely surprised Charles J. Zimmerman was given the Russell award and Charles E. Cleeton, general agent for Occidental life at Los Angeles, became president of the National Association. Cleeton had long been active in NALU committee work. Short of stature, he was a strong personality who held considerable sway in association circles and exercised a heavy influence over members of the NALU board. Foreword by Alan Press, 1988-1989 NALU President Preface by Jack E. Bobo, 1989 NALU Executive Vice President Chapter 1 Laying the Foundation—A Meeting at the Parker House Leading Figures—Ransom, Carpenter, Blodgett and Plummer Conditions Leading to the Foundation of the NALU Rise of Modern Life Insurance and the General Agency System Issues and Accomplishments of the First 15 Years Chapter 2 In the Wake of the Armstrong Investigation A Royal Commission Investigates Life Insurance Operations in Canada A Period of Growth and Visibility for the NALU Under Strong Leadership The NALU Plays a Leading Role in Insurance Education Chapter 3 The NALU's Extension of Activity The Agents Move for Recognition Chapter 4 Annual Conventions and Midyear Meetings The NALU Celebrates Its 50th Anniversary Chapter 5 The NALU Joins the Industry in Legislative Battles The NALU Establishes the National Quality Award Chapter 6 Controversies and Schisms (1946-1956) The Nola Patterson Affair Chapter 7 Dispute Over Minimum Deposit Insurance Plans GAMC Stages First LAMP Meeting The NALU Celebrates Its Diamond Jubilee Year The NALU Increases Political Activity U.S. Senate Antitrust and Monopoly Subcommittee Investigate Life Insurance The NALU Responds to Consumerist Activism Chapter 8 The NALU Reaches the Century Mark FTC Releases a Study Critical of the Insurance Industry Formation of the Women Life Underwriters Conference The NALU Issues Statements on AIDS The NALU Combats a New Wave of Attacks The NALU Celebrates a Century of Service [xv] LAN, April 1948, pp. 679. [xvi] LAN, April 1948, pp 666-667 [xvii] Barnes: Interview Washington, D.C. March 1985. [xviii] Buley, The American Life Convention, 1906-1952, Vol. II n., p. 1030. [xix] LAN, April 1949, p. 693. [xx] United States Review, April 2, 1949 [xxi] Buley, The American Life Convention, 1906-1952, Vol. II pp. 1030-1032 [xxii] Barnes: Letter to the author, January 12, 1989 [xxiv] Barnes: Op. Cit, [xxv] LAN, March 1949, p. 627 [xxvi] Woodson: Interview, July 1985 [xxvii] United States Review, August 8, 1954, p.2 [xxviii] LAN, May 1949, pp. 797-798. [xxix] Barnes: Interview March 1985 [xxx] LAN, September 1950, p. 9. [xxxi] Ibid., December 1950, p.9. [xxixi] LAN, July 1951, p. p. 884 © Advisor Today 2008. All rights reserved.
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