Devnew v. Flagship Group, Ltd.

75 Va. Cir. 436, 2006 Va. Cir. LEXIS 291
CourtNorfolk County Circuit Court
DecidedDecember 29, 2006
DocketCase No. (Civil) CH05-3173
StatusPublished
Cited by2 cases

This text of 75 Va. Cir. 436 (Devnew v. Flagship Group, Ltd.) is published on Counsel Stack Legal Research, covering Norfolk County Circuit Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Devnew v. Flagship Group, Ltd., 75 Va. Cir. 436, 2006 Va. Cir. LEXIS 291 (Va. Super. Ct. 2006).

Opinion

By Judge Norman a. Thomas

On September 11,2006, counsel presented oral argument and evidence on plaintiff’s request that this court declare his employment agreement with Flagship Group, Ltd.1 (“Flagship”) unlawful, null, void, and unenforceable. Specifically, Devnew asks this court to declare that the employment agreement he signed in January 2001 with Flagship (“employment agreement”) is unenforceable because the non-competition related restrictions in it are overbroad, exceeding the limitations reasonably necessary to protect Flagship’s interests, are unnecessarily harsh and restrictive on Devnew’s ability to earn a livelihood, and are contraiy to Virginia public policy. During and after the trial, the Court received and reviewed the parties’ briefs, depositions, and exhibits and has maturely considered Devnew’s request for declaratory relief.

[437]*437I. Factual Background

The court makes the following factual findings based upon the record before it.

The defendant, Flagship, is a full service insurance intermediary (agency/broker) offering a wide variety of commercial and personal insurance products, including property and casualty insurance for businesses2 and individuals3 and employee benefits.4 (Joint Stipulation 1.) To round out its business, Flagship also writes a small number of surety bonds. Id.

Although Flagship sells to all types of customers, its market niche is with companies engaged in maritime commerce. Id. at 2. Flagship’s primary source of revenue is the commissions it receives when it successfully places insurance coverage for its clients. The majority of Flagship’s customers are located in the mid-Atlantic area but it also serves commercial customers throughout the world. Id. It services approximately 15% of the marine customer market in the New Jersey through North Carolina service area but also plays a small role in the national and international marine insurance industry. (Preliminary Hearing 175, 181.)

Flagship primarily works as a retail agent for insurance products, dealing directly with its customers to place insurance and does not underwrite risk. (Joint Stipulation 2.) Rather, it negotiates with the insurance underwriting company to place insurance. Id. In certain cases, the underwriters with whom Flagship has existing relationships are unwilling or unable to insure the specific risk that a Flagship client desires to cover. (Devnew’s Proposed Findings 12.) Under those circumstances, Flagship will contact an insurance wholesaler or a managing general agent for purposes of locating an underwriter that is willing and able to issue the required policy. If Flagship is successful, an underwriter issues an insurance policy to Flagship’s client and Flagship receives a portion of the premium that the client pays to the underwriter as a commission payment for Flagship’s services. When Flagship goes through a managing general agent or an insurance wholesaler, Flagship shares the commission with the agent or wholesaler. Id.

[438]*438The marine insurance industry is a relationship-driven business generated by professional contacts and knowledge of the industry, industry-related products, and specific vessels. (Joint Stipulation 4.) In fact, the most valuable asset of an insurance agency is its goodwill. (Trial 202.) Unlike a manufacturing company, largely dependent on capital investment, the value of an insurance agency is in its employees and its ability to utilize its employees’ relationships to generate commissions. Id. at 203. Given this nature of the insurance business, brokers who have knowledge of the customer’s operations, experience, existing coverage policy, expiration dates, and rate structure have a competitive edge to renew and generate new business with an existing client when the client’s policy comes up for renewal. (Joint Stipulation 4.) Typically, Flagship’s customers’ renew their contracts on a yearly basis. (Joint Stipulation 18.)

In early 1994, Flagship lost much of its fishing vessel business to a competitor. Id. at 3. Shortly thereafter, Flagship’s President, Stephen Johnsen, and its Executive Vice President, Robert O’Sullivan, met Devnew, who possessed some eighteen years of commercial fishing experience. (Devnew’s Proposed Findings 2.) At that time, Johnsen told O’ Sullivan that Devnew would make agood addition to Flagship’s staff as an insurance producer because ofhis ability to relate well with those in the commercial fishing industry and his extensive knowledge of and relationships in that industry. Not long after their initial meeting, Johnsen sent Devnew an offer of employment to “Service, Develop, Market, Sell Marine insurance services and facilities to fishing vessel and other marine clients.” Id. Devnew accepted Flagship’s offer and signed a standard employment agreement, which included a confidentiality provision and a post-employment covenant not to compete for insurance business with Flagship’s customers. (Devnew’s Proposed Findings 3.)

When Flagship hired Devnew, he had no prior experience in the insurance field, yet he quickly learned the trade. (Flagship’s Proposed Findings 5.) Within three months of starting his employment with Flagship, Devnew became licensed to sell property and casualty insurance in Virginia5 [439]*439and shortly began working for Flagship as a Producer. (Joint Stipulation 3.) Producers are referred to interchangeably as “Account Executives,” “Producers,” or “Agents.” Producers are typically certified to broker property and casualty lines of insurance. (Flagship Proposed Findings 2-3.) After taking maritime insurance courses and receiving on-the-job training and an initial book of business from Flagship, Devnew focused his efforts on insuring fishing vessels, concentrating on the marine insurance field and regaining lost clients. Id. Devnew successfully regained for Flagship several of the fishing vessel accounts it had lost and was able to grow Flagship’s commercial fishing vessel portfolio. (Joint Stipulation 10.)

Although Devnew primarily sold fishing vessel policies, he also was responsible for several non-fishing vessel accounts and traditional property and casualty exposures for fishing vessel clients. (Preliminary Hearing 109-12, 144-45, Devnew Dep. 87-8, Trial 116-20.) To service his clients, Devnew spent forty to fifty percent of his time traveling outside of the Hampton Roads region. (Joint Stipulation 4.)

In November of 2000, Brown & Brown acquired Flagship’s stock in exchange for six million dollars of its own stock. (Trial 198-99.) Much of the purchase price was for Flagship’s goodwill, the relationships with its customers and carriers and its confidential client information. Id. at 199. After the acquisition, Johnsen, acting then as Executive Vice President of Brown & Brown and the Profit Center Manager of Flagship, requested that Devnew sign a new employment agreement. That draft agreement, inter alia, included a confidentiality provision, a post-employment covenant not to compete, and a section prohibiting the hiring away of Flagship employees. (Preliminary Hearing 97-98, Defendant’s Exhibit 8.) Devnew refused to sign. Id.

Following a series of negotiations, Brown & Brown agreed to eliminate a restriction from competing with prospective customers and made several other changes to the draft agreement.

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Cite This Page — Counsel Stack

Bluebook (online)
75 Va. Cir. 436, 2006 Va. Cir. LEXIS 291, Counsel Stack Legal Research, https://law.counselstack.com/opinion/devnew-v-flagship-group-ltd-vaccnorfolk-2006.