A Mississippi insurance producer left his agency because of disagreements with the management. The agency sued him when he struck out on his own.
He began working for the agency in January 2015. In June 2016, he was asked to sign a producer employment agreement. According to him, it was not a request; he was told that he must sign it to continue his employment and receive his earned commissions. The contract included non-compete and non-solicitation provisions. They barred him from competing with the agency “in any manner” for 24 months after termination of his employment. They also prohibited him from even indirectly soliciting insurance business from any of the agency’s “customers, insureds or prospects,” regardless of whether he had solicited them or written their policies. Contact by phone or in writing constituted a violation of the contract.
In addition, the contract prohibited him from opening or operating an insurance agency or obtaining appointments from any of the agency’s carriers, again for 24 months. He also could not become a principal of an existing agency that was within a 50 mile radius of two of the agency’s offices.
Over the next few years, conflicts arose between the agency’s management and the producer. According to him, he became concerned about management’s business practices including misappropriation and misuse of client funds. He feared that his involvement could cost him his insurance license, so he informed management that he was leaving.
In the management’s version of events, he asked about acquiring an ownership interest in the agency. The agency incurred unspecified costs to facilitate this transaction, but the producer did not go through with the purchase. To his displeasure, the agency deducted those costs from his commissions.
In March 2019, the producer’s lawyer wrote to agency management and proposed that they part ways and that he be permitted to take his clients with him. The agency responded two weeks later by firing him. In May, he took steps to open his own agency, and the agency promptly sued him. They accused him of violating the terms of his contract; he claimed that their non-compete and non-solicitation clauses were ambiguous and vague. Further, he never opened the agency because of the lawsuit. Instead, he assumed a position with another agency.
In September 2020, the trial court ruled in the producer’s favor and the agency asked for a new trial. After that request was denied, the sides traded various motions, and the agency filed an appeal in April 2023.
In May 2025, the agency lost the appeal. The court found the non-compete and non-solicitation agreements to be unreasonable, saying they “would essentially leave (him) without any potential insurance agent work he could legally perform and still be in compliance with the agreement.” The judges also ruled that some of the provisions contradicted each other, creating confusion as to what the producer was permitted to do. Lastly, they said that the undefined terms “prospective insured” and “prospect” could be interpreted in different ways and were therefore ambiguous.
Having lost twice, the agency is likely negotiating a settlement with the producer.
Courts will uphold non-compete and non-solicitation agreements that are tightly drafted and limited. The contract in this case left the exact dimensions of the geographic area in question unclear. It also left key terms undefined. Specific definitions would have hampered the producer’s ability to claim that they were unclear. Finally, while the contract permitted him to work for another agency, it prohibited him from soliciting anyone who might have eventually become an agency client. This left him to wonder who might not be a potential agency client. A contract that leaves so many unanswered questions is unlikely to pass muster in court.
This case illustrates the importance of agencies seeking expert help when drafting producer agreements. A well-drafted agreement protects the agency and the producer’s ability to make a living. A poorly drafted one produces court decisions like this one.
