A key concept is good faith dealing. If I deal in good faith with my customers, suppliers and employees (themselves, de facto suppliers) then I can expect to ideally be unencumbered by excessive regulations. Have levels of regulation gone overboard? Definitely! But, should I, as argued by newgeezer, as an employer, have the "freedom" to use my hiring and firing authority to craft, in microcosm, a liberal utopia that is not even a real microcosm of the lion's share of society? It would seem that doing so violates the notion of good faith, therefore inviting targetted interference by political pressure groups, government or both. Allstate deserve to be hammered, irrespective of the letter of the law, due to their bad faith dealing in this case.
Many may recognize my line of thought from contract law ...