It is human nature to believe that the people who work for you are honest and honorable. Agencies want to believe that about their producers. Wise agencies have backstops in place in case it turns out not to be true.
A Kansas agent joined a managing general agency that specialized in selling crop insurance in 2009. In 2018, he signed a confidentiality, non-compete and non-solicitation agreement with the agency. It applied to a wide variety of confidential information, including client information such as names, contact persons, past and current needs and requirements and history, and renewal dates. The agreement prohibited him from using the information “for (his) own private or commercial use or for the private or commercial use of any other person or entity …”
Thirteen months later, the agency fired him after he admitted forging customer signatures on 58 acreage reports. He took a sales position with a company that sold seeds to farmers. Many of the farmers he called on were his former insurance clients. However, his former employer soon learned that he was selling more than seeds.
In February 2020, he emailed one of his former clients with a request that the client sign a form asking to cancel its policy with the MGA. He told them the form was for a name change. It didn’t work because it confused the insured. He sent the email under the name of his future son-in-law, who had recently formed a crop insurance agency. He also used a Gmail address with the new agency’s name in it.
Crop insurance applications are due by February 28 each year. If policies are not cancelled by that date, they are automatically renewed. The MGA received several cancellation requests as the 2020 deadline approached. They concluded that their former producer had been in contact with all the clients he worked with when he was employed there. Further, they believed that he was using information he gained during his employment with them to directly compete with them.
The agency sued the producer for misappropriation of trade secrets, among other things. The producer asked the court to dismiss the allegations, arguing that the agency did not adequately describe or identify trade secrets and that they had not sufficiently alleged that keeping their information secret gave it economic value.
The judge was unpersuaded. She found that the MGA had alleged sufficient facts to support a claim that the producer misappropriated its confidential customer list and customer information, and these constituted trade secrets. Second, she noted that the information was difficult for others to assemble and maintaining its secrecy required effort, giving it value.
Lastly, she referred to the confidentiality agreement the producer signed, which acknowledged that the information gave the MGA a competitive advantage. Based on these findings, she refused to dismiss the case.
This agency protected itself by having its producer sign clear confidentiality and non-compete agreements. These types of agreements exist for just this scenario. Though he wasn’t charged with a crime, what this producer did amounted to theft of the MGA’s property. When they discovered his activities (only three months after he was fired,) they took prompt action to enforce the contract. The producer can still attempt to make a living as a crop insurance agent, but he has to fill his sales pipeline through his own work, not using lists that do not belong to him.