Twelve Month Non-Solicitation Covenant Upheld For Insurance Broker

Author:Mr Bryan Dunne
Profession:Matheson
 
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When Andrew Templeton resigned from his employment with Romero, after he was notified that his role was being put at risk of redundancy, he began working at another insurance company the very next day, bringing a number of ex-Romero clients with him. This was in breach of a clause in his contract restricting him from soliciting clients or doing business with clients of Romero with whom he had had dealings with in the six months leading up to his termination, for a twelve month period post-termination. Romero then issued proceedings against him in order to enforce the restrictive covenants contained in his contract of employment and to prevent him taking such steps.

The primary issue before the court was whether the twelve month non-solicitation covenant was valid. The court found that the covenant was reasonable, taking into account the fact that the legitimate purpose of the covenant was to give Romero time to build a connection with clients who had previously been looked after by Mr Templeton.

Generally speaking, restrictive covenants imposed for twelve months can be difficult to enforce, as such covenants should provide for no greater a degree of protection than is reasonably necessary. However, in this case, the court commented that, as most insurance contracts are renewed on an annual basis, and as such the client contact and opportunity to establish a new relationship was a once...

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