Non-compete clause

[4star]

How strict are companies regarding non-compete clause ? It states that you cannot take their clients when you no longer work for the company for two years. I left a company recently on bad terms due to incompetent managers and supposedly lost my valuable book of business.

I have a good group of clients with term policies and thinking about moving them to companies with better rates but are afraid of this "non-compete clause". Have anyone ever had experience with this?

 

[James]

How strict are companies regarding non-compete clause ? It states that you cannot take their clients when you no longer work for the company for two years. I left a company recently on bad terms due to incompetent managers and supposedly lost my valuable book of business.

I have a good group of clients with term policies and thinking about moving them to companies with better rates but are afraid of this "non-compete clause". Have anyone ever had experience with this?

I've not had the expierence in insurance field with this but in other endeavors they are not worth the paper they are written on. I don't see how it would vary that much with insurance?

 

[Sam]

I think that a lot will depend on those "incompetent managers". If they will be penalized for low persistancy, you can bet your butt that they will do everything they can to enforce it. Even if they lose, you will lose also. It may seem like a long time, but 2 years is not forever. If you are talking about a large group of clients, my recommendation is to wait it out.

 

[Crabcake Johnny]

I can guarantee that if you have a signficant amount of business on the books and you try to blow out that book of business you'll absolutely be contacted and you won't be happy. If it's just a few clients no one would probably notice. But you try contacting a large book and try to move them over and you might be looking at a lawsuit.

 

[somarco]

I fought a non-compete 10 years ago over nothing. My former employer was convinced I was taking their clients, even though I had been gone for 22 months when they decided to sue.

When I left that employer there was close to $10M in annual premium on the books and within 6 months it was cut in half. By the time they sued me there was less than $3M left on the books.

It took me a year of battling and lawyers in 2 states to prove I had not taken any business. Cost me $20,000 before they finally agreed to drop their suit, only if I agreed not to counter-sue for damages.

So, the bottom line is $20,000 in legal fees plus a years distraction from writing new business. Two trips out of state for depositions and they got nothing.

They had no case and knew it. Figured I would roll over & pay them $50,000 and they would go away. They were wrong.

My lawyer told me I won. Somehow I just don't see it that way.

 

[Crabcake Johnny]

If I knew it was a slam dunk case and could absolutely proove that I didn't violate the agreement I probably would have spent zero and not even hired an attorney. Instead I probably would have contacted my clients and had a few of them write a letter stating that they did not lapse due to me.

If they would have pushed on I probably would have represented myself. Remember, if they're sueing you they have the burden of proof. That means they'd need either signed affadavids or actual client testimony that I contacted those clients and lured them away. Basically I would have said "nope, not showing up for any depositions, not getting any attorney, just mail me with the trial date." That would have called their bluff and most likely there would never have been a trial date.

What happened in your case was they saw business falling off the books and instead of actually doing client research they took the path of least resistance - which was trying to scare you.

 

[indaville]

I think if the client contacts you and wants you to help them then you can work with them and you are not violating the non-compete.

I had a non-compete when I left a firms a few years ago. I took every client with me, the other firm said they were going to sue me, but they never did.

 

[somarco]

The guy who took my place, 6 months after I left, never was a good fit for the territory. Much of what I had written (self funded groups with stop loss) had already started to leave by the time this guy came in. A year later he was in danger of losing his job, as was his boss, because that territory was the only one losing ground and no longer profitable.

My replacement claimed to have been told by former clients (we marketed our products to TPA's) that I had solicited them to move business from that carrier to my new carrier. In fact, I had gone out of my way to refuse to quote on former cases. There was too much other business available without having to fight over former clients.

So he told his boss this BS story and the two of them conspired to get the company attorney involved. Their "proof" consisted of A) a 70% reduction in the block since I left and B) an "idea" that I had about $5M on the books with my new carrier.

In their suit they wanted all records of cases quoted, written business, phone records, letters, files, etc. of everything I had done since leaving their employ. This was an unreasonable request but I had 30 days to respond to the suit or else they would move for a summary judgment. Most of the legal battle was proving their request to be unreasonable and of course depositions supporting my side.

This was a nightmare I would rather have not gone through, and in fact did everything I could before the suit to make sure they had no reason to come after me. The judge who authorized the suit really didn't care that they had no proof. That is not needed to FILE a suit, only to win it. It was their contention they had been irreparably harmed and I had stolen client lists and trade secrets. They contended that I had all the proof they needed to support their suit and the only way to get those records (without supporting statements from THEIR clients) was to get them from me.

This is something I would never wish on anyone.

Most non-competes are frivolous suits and difficult to prove (except where the action is blatant) but that does not stop them from using deep pockets to try and ruin someone's credibility or ruin them financially.

 

[Crabcake Johnny]

They were basically making you do their homework. Again, I would have responsed "go F yourself and see you in court."

Now they'd have to actually put on a case -which means they would have needed client testimony or notarized client statements to win their case. That means their attorney would have needed to contact all those clients who lapsed which really burns up a lot of THEIR money and time.

Most likely after the 20th or so call where they couldn't get the client to agree that you forced them to lapse you never would have heard another word from them.

I'm actually surprised you got an attorney for this. You can indeed represent yourself. And knowing for a fact that they'd need to have former clients take the stand and say that you contacted them to pull them away and also knowing they could never produce such a client I would would have all but not even returned their calls.

 

[4star]

Somarco, sounds like some rough days behind you. Anyways, I think I'll try my best to be more careful regarding switching them over for now. It will be tough though since I have good, personal relationships with some of them (friends, referrals from friends, etc.), and I see them every so often socially.

It just sucks because of the fact that they bought the insurance not because of the company, but because they wanted me as their agent. They really don't care about the company, and most of them probably don't even remember what the company name is. The clients just wanted insurance coverage and to deal with an agent they can relate to and trust, so they gave me their business. And now, they are in the hands of my damn ex-manager who is literally one of the worst character I've ever met, personally and business-wise. :x And I can't do a thing about it because of the fear of being sued. urggg!!!

Basically, I feel guilty for not being able to continue serving these clients.