Mr. Michael Cox and his wife, Kelly Cox, had sold their Raynham insurance agency, Eagle Insurance, to People’s United Insurance Agency (People’s Insurance”), a subsidiary of People’s United Bank, in 2016 for $2.4 million. As part of the sale agreement, Mr. Cox entered into an employment agreement with People’s Insurance that had a five-year covenant not to compete.
As Agency Checklists’ article of January 5, 2020, “Raynham Agent’s Non-Compete Escape Clause Included In Agency Sale Still Valid After Subsequent Stock Sale” relates in more detail, Mr. Cox believed that People Insurance’s sale on November 2, 2020, to a national broker had triggered a provision of his employment contract that terminated his covenant not to compete for five years within one-hundred miles of Raynham when he left the employ of Peoples United. His employment agreement provided, at Mr. Cox insistence, that “in the event of the bankruptcy, receivership, or dissolution of [People’s Insurance] or the cessation of business by [People’s Insurance]” he would be “released from the restrictions and covenants set forth in [the employment agreement’s covenant not to compete].”
On the day People’s Insurance was sold to AssuredPartners, Mr. Cox through counsel notified People’s that he was terminating his employment because as far as he was concerned, the sale of People’s Insurance meant the agency had ceased business and therefore, he was released from his obligation not to compete.
After Mr. Cox and his wife, who also had a covenant not to compete based on the 2016 sale, established a new insurance agency, Encore Insurance, LLC in Raynham, they were quickly able to obtain broker of record letters from some of People’s Insurance’s commercial insureds.
People Insurance files suit and obtains a temporary restraining order against the Coxes
AssuredPartners responded to Mr. Cox’s competition and his claimed release from a covenant not to compete by filing suit in the name of People’s Insurance against Mr. and Mrs. Cox and their new agency in federal court. In its suit, it presented evidence, which Mr. Cox did not successfully rebut, that People’s Insurance continued as an ongoing business because AssuredPartners had purchased People’s Insurance’s stock and not its assets.
Based on the evidence of People’s Insurance continuing as an ongoing business, a federal judge entered a temporary restraining order on December 16, 2020. The temporary restraining order effectively prohibited the Coxes and Encore Insurance from continuing in the insurance business with their new agency.
Suit settles with a three-year hundred-mile injunction against the Coxes
On January 12, 2021, People’s Insurance and the Coxes settled the suit with the Coxes agreeing to a permanent injunction that barred the Coxes for three years from operating an insurance business within one-hundred miles of Raynham and requiring them to dissolve Encore Insurance.
The final permanent injunction and orders signed by the judge on January 21, 2021, provided in separate paragraphs that Michael L. Cox, and Kelly Cox, shall not (directly or indirectly) perform any of the following activities through November 2, 2023:
- Own, manage, operate or control, or be employed by, or otherwise associate in any manner with, engage in or have a financial interest in any company, venture, business or other entity which operates as an independent or captive retail insurance agency business and/or is otherwise engaged in the sale or distribution of insurance products or services within 100 miles of Raynham, Massachusetts, except as an employee of Plaintiff People’s United Insurance Agency, Inc. (and its successors and/or assigns) (the “Company”);
- Except for on behalf of the Company, induce, promote, facilitate, bring about, solicit, quote rates for, receive, write, bind, broker, transfer or accept replacement or renewal insurance coverages or services for any of the Company’s current brokers, insureds, customers, or clients (or any other brokers, insureds, customers, or clients who were brokers, insureds, customers, or clients at any time during the three (3) year period preceding such prohibited action), or induce or seek to induce the discontinuance or lapse of such insurance coverage or services;
- Solicit or encourage any employee or consultant of the Company to leave the Company, nor be involved in the hiring, retaining, or recruitment of any person who was an employee or consultant of the Company at any time during the three (3) year period preceding the hiring, retaining, or recruitment of such person; or
- Disparage any of the Company, its employees, officers, directors, agents, or other affiliates.
The Coxes ordered to dissolve Encore Insurance and cancel its producer license
As part of the final settlement, the Court’s order provided that:
IT IS FURTHER ORDERED that Defendants Michael L. Cox and Kelly Cox shall immediately dissolve Encore Insurance Group, LLC, including cancelling the license it obtained with the Massachusetts Division of Insurance, and not form, or take steps to form, any other similar entity for purposes of competing, directly or indirectly, with the Company until the non-competition covenants under this Agreed Permanent Injunction expires.
The final provision of the Court’s order barred the Coxes from disclosing:
…to any unauthorized person or use for their own benefit or for the benefit of any third party any “Confidential Information” of the Company, which includes any and all: (a) trade secrets or other intellectual property; (b) non-public information concerning the Company’s services, accounts, and clients; and (c) on-public information concerning the Company and its business, however documented.
Owen Gallagher
Insurance Coverage Legal Expert/Co-Founder & Publisher of Agency Checklists
Over the course of my legal career, I have argued a number of cases in the Massachusetts Supreme Judicial Court as well as helped agents, insurance companies, and lawmakers alike with the complexities and idiosyncrasies of insurance law in the Commonwealth.
In addition, I have helped many independent agents with the successful sale of their agency.
Interested in speaking with me? Email me via the link below:
