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Old 08-03-2017, 08:56 PM   #11
DHK
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What Are my Rights As a Producer Re: What Are my Rights As a Producer
She's the agent of record and a producer for the brokerage.

On the securities side, if I worked FOR Merrill Lynch (as an EMPLOYEE with a salary/draw, benefits, etc.), I would be the advisor of record, but Merrill Lynch would be the firm.

If I left ML to a new firm, without a non-solicit agreement in place, I would have EVERY legal right to contact clients and to move those accounts.

I don't see this any differently.

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Let me clarify: The ACCOUNTS/policies would still belong to the brokerage.

However, permission to CONTACT the clients and CHANGE THEM to your new company would be allowed - if there is no non-solicit agreement in place.

Don't count on leaving the brokerage and taking the existing accounts/policies as they are now... but you should be able to keep in touch and they can change to your new firm.
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Old 08-03-2017, 11:34 PM   #12
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What Are my Rights As a Producer Re: What Are my Rights As a Producer
Originally Posted by DHK View Post
However, permission to CONTACT the clients and CHANGE THEM to your new company would be allowed - if there is no non-solicit agreement in place.

Don't count on leaving the brokerage and taking the existing accounts/policies as they are now... but you should be able to keep in touch and they can change to your new firm.
As I mentioned before, per the uniform trade secrets act, you may be wrong. I'm in my phone now, but there are a bunch of cases about this and it could easily favor the agency.

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Old 08-04-2017, 08:44 AM   #13
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What Are my Rights As a Producer Re: What Are my Rights As a Producer
Originally Posted by Josh View Post
As I mentioned before, per the uniform trade secrets act, you may be wrong. I'm in my phone now, but there are a bunch of cases about this and it could easily favor the agency.
A lot will depend upon CA law and how well opposing attorneys research their cases.

This I can say with absolute certainty. If Dawn has built a book of business before, she should be capable of doing it again. And whoever has the deeper pockets will probably win. Finally, even if Dawn does win, she will be damaged goods.

How many agencies are going to be in a hurry to hire a producer who tried to take clients from her last agency and got sued over it?

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Old 08-04-2017, 09:06 AM   #14
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What Are my Rights As a Producer Re: What Are my Rights As a Producer
It's a common practice in the broker/dealer world. If they wanted to avoid this, they should've had agreements and/or paid as a w2 employee.
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Old 08-04-2017, 11:57 AM   #15
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What Are my Rights As a Producer Re: What Are my Rights As a Producer
Your questions are largely legal ones and require a definitive answer from an attorney with labor law expertise or an agency management consultant. You may find some useful articles at Home - Agency Consulting Group.

That being said, you may actually be an employee rather than an independent contractor. If there is no employment or engagement contract in place, then there is likely no anti-piracy provision that would prevent you from leaving and encouraging your customers to go with you. There may be existing case law in your state that governs this. Again, the only way to know for sure is to have a real expert address your issues.
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Old 08-04-2017, 12:24 PM   #16
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What Are my Rights As a Producer Re: What Are my Rights As a Producer
Any one who wants to go down this road should ask Somarco for his story about a non-compete. At this point I can't recall if it happened to him personally or someone he knew. Either way, they may have won but they still lost.

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Old 08-04-2017, 01:18 PM   #17
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What Are my Rights As a Producer Re: What Are my Rights As a Producer
Originally Posted by InsCommentary View Post
Your questions are largely legal ones and require a definitive answer from an attorney with labor law expertise or an agency management consultant. You may find some useful articles at Home - Agency Consulting Group.

That being said, you may actually be an employee rather than an independent contractor. If there is no employment or engagement contract in place, then there is likely no anti-piracy provision that would prevent you from leaving and encouraging your customers to go with you. There may be existing case law in your state that governs this. Again, the only way to know for sure is to have a real expert address your issues.
I've mentioned this a few times, but employer or independent contractor doesn't matter, a customer list is a trade secret and a trade secret is a trade secret is a trade secret. There is no provision preventing her from specifically taking the fax machine with her when she leaves, but that wouldn't mean it's not theft.
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Old 08-04-2017, 01:30 PM   #18
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What Are my Rights As a Producer Re: What Are my Rights As a Producer
What To Do If a Producer Leaves...With YOUR Accounts!
Author: Al Diamond

The primary value of an insurance agency is its book of business. The solicitation of an agency's accounts represents THEFT, pure and simple. This theft is worse than the burglary of jewelry from your home. In the case of jewelry, you have lost the value of the pieces once (and any emotional attachment you may have had to them). In the theft of accounts, you lose the revenue value of the accounts EVERY YEAR.



A sage once said that the real crises in life are not those about which we worry. The real crises tend to arise out of the blue on a Tuesday afternoon when you are generally feeling pretty good about life. That's when the call came in from the agency - referred by his association.

"Mr. Diamond, we've just lost our key producer and we don't know what to do!"

My first question in this case was exactly the same as it has been in the last 20 such calls.

"Did you have an employment contract?"

When an employment contract has not been executed with valid non-competition clauses, I tend to get a sinking feeling. We can still work with the client to save his business. After all, the producer sold the business as an employee of the agency and the agency has serviced, marketed and administered the account, not the producer. But we've lost the contractual high ground that makes retention or pursuit of damages much easier.

In this case, the agency had executed an employment agreement with the producer when he was first hired over ten years ago. That lead to the important second question, "Was the Non-Compete and/or Non-Piracy clause territorial, or pertaining to a stated book of business?"

So many agencies still have contracts that are territorial as well as time sensitive. They state that an employee cannot compete within a specified space (25 miles, a city, county or stated territory). Unfortunately, the courts have generally not agreed to the validity of territorial non-compete clauses. The general principal accepted by the courts is that you can't stop a person from continuing his career in his chosen field in the area in which he resides or with which he is familiar.

The best non-compete terms involve a prohibition from competing on those active accounts that the producer produced during his employment at the agency. Further, the non-piracy clause prohibits the producer from soliciting any other policies or clients that are active in the agency, were active in the last year, or were solicited by him or anyone else in the agency during the last year. Of course, the clause extends beyond solicitation to any type of involvement or association with an agency soliciting these accounts and puts a reasonable time element on the clauses (2-4 years). This permits the producer to continue his career (selling insurance), but not to his former employer's clients and prospects.

Happily, our new client had such a contract with account sensitive, not territorial-sensitive non-compete and non-piracy clauses. The third question is just as important to the validity of the contract as the first two: "Was signing the contract a condition of employment...or was there consideration given for signing the contract if the employee was already employed by the agency?"

If the contract was signed as a condition of initial employment, you are safe. If you had employees sign a contract after they were employed (or revised the contract to take any benefit away or reduce its liberalism), the only way to assure validity is by rendering consideration (usually money) and having the employee sign the contract (or revision) with a signed notation that consideration was given and accepted by the employee. By the way, that consideration should not be nominal. $100 to have a producer sign a non-compete and non-piracy for the first time may not be considered valid by a court, especially if there are remedies spelled out in the contract because it constricts his rights without consideration or remuneration. It appears (whether right or wrong) that the producer would have jeopardized his job if he didn't sign away his competition rights.

The producer in this case signed the contract as a condition of employment, so we were safe so far. "What's the problem?" I asked. It seems that the employee joined another local agency and suddenly our client was facing a spate of BOR (Broker of Record) letters, surprise non-renewals and clients who would no longer return our agent's phone calls. Obviously, the producer was soliciting. The agent could prove this because some of his clients who were also his friends tipped him off to their solicitation by the producer with exceptional knowledge of their accounts. Obviously, the producer had stolen agency information to prepare him for the theft of agency clients.

The agent said he didn't want to make a big deal of the solicitation if we could only make him stop! He would even SELL the producer some accounts that he seemingly controlled. I told the agency that if that was the attitude that he wanted to take, I would give him my advice FREE, but would not represent him. This surprised the agency and he asked my why I would take that position in such a clear-cut situation.

If an agency has valid contracts with non-competition and/or non-piracy clauses and does not pursue them one time, it virtually invalidates the contracts in the future. After all, how does he pursue the next departure when the second lost producer simply states in court that since the agency did not pursue the first lost producer, he felt that pursuing those clauses in this case is discriminatory (and it is)? We always seek what is RIGHT and pursue it with dogged determination until the situation is resolved. Luckily, RIGHT has prevailed in most instances.

In this scenario we advised the agent to take the following steps:

Write a personal letter to all of the clients generated or serviced by the producer advising them of his departure and that the agent (or a representative) will visit them soon to assure continuity of coverage and service. Note that persistency with a carrier will assure the best treatment on renewal or in the event of a loss.

Send a Newsletter or Bulletin to all other clients with a few articles of general interest and a notice that the producer has left, wishing him well, and naming the successor producer and/or servicers that are available to meet any insurance needs.

Working with his attorney, get restraining orders on both the producer and the agency specifying the offenses that have been committed and offering to avoid prosecution if they a) return the accounts that have been lost to them, and b) avoid any further solicitation of any accounts covered by the contract.

If the solicitation continues, SUE THE BASTARDS! In the old West, when someone took your cattle, you first asked for them back (in case the herds just got mixed up). If they proved their criminal intent by denying or continuing the wrongdoing, they were prosecuted and hung (not necessarily in that order)!

WHAT ARE THE DAMAGES?
Too many contracts do not specify the damages done or the values of those damages. Those contracts that do specify the levels of damages are rarely broken.

Level One Damages - The revenue value of the lost accounts. The lost accounts will accumulate lost commissions for every year they would have stayed in the agency. Each agency has two types of business, that of average duration and that of extended life. If you randomly sample your dead files you will identify the average life of accounts that have died (initial inception date to termination date) and, with enough in the sample, could determine the average life of accounts by type. Measure the life to termination of the accounts lost to the departed producer to determine if they fall into the average category and calculate the remaining revenue value to each policy/account. If an account has been with the agency more than double the average life, it is an extended life account and should be valued as if its life to the point of theft was its "half-life."

Level Two Damages - Asset value decline to the agency. If your agency is worth $X intact including the book of business and growth generated from that book in the future, how much less is it worth without that book of business? Agency Consulting Group, Inc. or other agency valuors can determine the value of your agency with and without the stolen business to add that measure of damages.

Level Three Damages - If a stolen book of business has proven to be a generator of referrals, the value of the expected referral accounts over their lifetime is another measure of damages.

The best contracts will spell out the damage calculations in the event of a theft of accounts. Once this form of contract is accepted and signed, there is little chance of a producer breaking the non-compete or non-piracy clauses upon his termination.

Please make no bones about it. The primary value of an insurance agency is in its book of business. The greater the retention and growth of the accounts, the more the agency is worth. The solicitation of an agency's accounts represents THEFT, pure and simple. This theft is worse than the burglary of jewelry from your home. In the case of jewelry, you have lost the value of the pieces once (and any emotional attachment you may have had to them). In the theft of accounts, you lose the revenue value of the accounts EVERY YEAR. Offering to "sell" the stolen accounts to the thief makes as much sense as telling the burglar that you'll forget about the theft if he will compensate you for the lost jewelry.

Copyright 1999-2009 by Agency Consulting Group, Inc. Used with permission.
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Old 08-04-2017, 02:06 PM   #19
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What Are my Rights As a Producer Re: What Are my Rights As a Producer
When an employment contract has not been executed with valid non-competition clauses, I tend to get a sinking feeling. We can still work with the client to save his business. After all, the producer sold the business as an employee of the agency and the agency has serviced, marketed and administered the account, not the producer. But we've lost the contractual high ground that makes retention or pursuit of damages much easier.
Are you an attorney? How familiar are you with what a trade secret is and isn't? Here's what one law firm has to say on the subject:

" The Legislature did so by specifically including, "customer lists" and "business records" as examples of potential trade secrets protected"
Stealing Customer Lists, a Criminal Issue? - Crowe & Dunlevy

Employee or not, the notion that a person can walk into a business they've been working with/for as an agent, grab the paintings on the wall, the fax machine, and the coffee maker, then walk out with the argument "I had no contractual argument to not take them" is almost as legally farcical as the notion that you can just take a companies customer list.

As an employee or an independent contractor, legally it makes no difference; the burden would be on here to prove that it was hers free and clear. To go back to the office example, if she can prove it was her coffee maker and she was simply taking what was already hers, fair enough. As she explained it she isn't the agent of record on it, the agency is. That's the beginning and end of that; even a bad attorney could argue that successfully.
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Old 08-04-2017, 02:09 PM   #20
DHK
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What Are my Rights As a Producer Re: What Are my Rights As a Producer
Makes you wonder how competent an agency is if they cannot manage their own internal business control risks.
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