Insurance industry - Agents - Termination of employment contract - Restraint of trade; Administrators and agents of insurance contracts - Duties and liabilities of agent; Injunctions - Interlocutory - Availability
March 2008PennCorp Life Insurance Co. v. Oswald
[2008] O.J. No. 77
Ontario Superior Court of Justice
D.K. Gray J.
January 11, 2008
The former agent had been employed under a contract with the Insurer from 1999 to March 2006. The contract prohibited disclosure of any confidential information obtained in the course of the employment relationship and stated that, upon termination of the contract, the agent would return the original and all copies of any "confidential information" received during the course of his employment. The contract further provided that the agent would not make use of or disclose the confidential information or cause or permit it to be used by any person. Clause 12 of the contract restricted the agent's ability for two years following his termination to either directly or indirectly induce any existing policyholder to switch insurers.
The Insurer claimed that, after the agent's termination on March 15, 2006, he had started soliciting the Insurer's policyholders, pursuading a number of them to switch carriers. The evidence showed that as of March 15, 2006, the agent had been responsible for 330 of Insurer's policies of insurance. As of November 30, 2007, 93 of those policies had been cancelled, lapsed, terminated or replaced. The Court found that while there was no direct evidence that the agent had solicited or induced policyholders to switch insurers, it was a reasonable inference from the evidence filed that he had engaged in solicitation or inducement of at least some of the policyholders who had switched insurers or cancelled their policies.
The Insurer sought an injunction to restrain the agent from inducing existing policyholders to cancel or switch policies and to require the agent to deliver up any confidential information and to restrain him from using or disclosing such information. The agent argued that his contracts with the Insurer were invalid, but assuming that the contracts were valid, there was insufficient information to show that he violated the terms of the contract.
Justice D.K. Gray reviewed the criteria for granting interlocutory injunctions as set out in the Supreme Court of Canada's decision in R.J.R. MacDonald Inc. v. Canada, [1994] 1 S.C.R. 311, noting also that an injunction is an extraordinary remedy and is not to be granted lightly. He took into account the fact that there had been an element of delay on the part of the Insurer in requesting the return of all confidential information and that the Insurer had made no effort to pursue this issue until bringing its claim in December 2007 and applying for an injunction shortly thereafter. The Court also found that the Insurer could, by due diligence, have discovered the agent's activities in soliciting policyholders and inducing them to switch insurance carriers well before August 2007.
Despite these facts, the Court found that the Insurer had made out its case for an injunction and ordered that the agent be restrained from soliciting and inducing the Insurer's policyholders, but only for the balance of the two-year period prescribed by the terms in the contract. The Court limited the injunctive relief concerning return of confidential information to the return of the physical manifestations of the confidential information in the agent's possession. The injunction did not prohibit the agent from utilizing his own knowledge of who the policyholders were and when their policies might expire.
This case was digested by Shanti Davies of Harper Grey LLP. If you would like to discuss this case further, please feel free to contact her directly at 604.895.2877 or sdavies@harpergrey.com
