Allstate Insurance Co. of Canada v. Larocque

In this matter Ken represented the Defendants, Rod Larocque his company Local Insurance Brokers Inc. in a motion brought by the former employer, Allstate Insurance Co. of Canada seeking an injunction to restrain the Defendants for two years from soliciting insurance of any kind from individuals to whom the defendants personally sold an Allstate insurance policy. As part of the injunctive relief, Allstate also sought to restrain Larocque from selling insurance from an office located within one mile of the Defendants’ former Allstate office located in Sudbury, Ontario for the same period of two years.

In effect, Allstate was attempting to enforce a non-competition, restrictive covenant which would have had the effect of stopping Mr. Larocque from accessing any of his former clients for future business while also requiring him to open an office at least one mile away from his former Allstate office.

Mr. Larocque had started working with Allstate in 1985. In the years leading up to 2007, Allstate changed their business model and the way agents like him were remunerated. Specifically, a new agent distribution model announced in July of 2007 and taking effect on September 1, 2007 had the effect of reducing Mr. Larocque’s commission by $50,000 per year in addition to there being other changes in the way Mr. Larocque was to conduct business. This was not acceptable to Mr. Larocque. By August of 2007, he had taken the position that the new model amounted to constructive dismissal.

In his decision, the Honorable Justice Kane made it clear that interlocutory injunctions “are considered an “extraordinary” and “drastic” remedy and should only be granted pursuant to strict principles in circumstances which warrant taking “such a drastic and extraordinary step”.”

Mr. Larocque had been cross-examined and he had also sworn an affidavit which “alleges the injunction sought will put him out of business thereby rendering his continued defence of this action meaningless and financially impossible.”

Justice Kane analyzed the law on interlocutory injunctions and concluded as follows:

“84 For all of the above reasons, I am not prepared to grant the interlocutory injunction requested. I do however order Mr. Larocque and the defendant corporation to take all necessary steps to establish and maintain full and complete records of all insurance of any kind sold by them commencing September 1, 2007, until trial. Without limiting that requirement, such records must include information as to the purchaser and insurer for each new or renewed policy of insurance, correspondence or documents concerning the same and, in the case of customers dealt with while Mr. Larocque was at Allstate; how that business originated and specifically whether he or someone from the defendants solicited such business.”

Mr. Larocque won the motion. Also, Justice Kane outlined the kinds of records he was supposed to keep with respect to his business in advance of a trial in this matter.

Further submissions were made with respect to costs. The parties agreed that the costs for this motion on a partial indemnity scale were $14,500. Allstate took the position that the costs  ought to be “in the cause”. This meant that they would have been allowed to wait until a trial after which the costs of the motion would be addressed as the over all costs of the matter were dealt with.

Justice Kane rejected Allstate’s position and ordered the costs of $14,500 to be paid to Mr. Larocque within 30 days.

Allstate sought leave to appeal Justice Kane’s decision not to grant the injunction. This was a case in which the losing party had to first seek leave to appeal before actually being permitted by the Court to appeal. In some matters the losing party does not have to seek leave to appeal and can proceed directly with an appeal.

Allstate took the position that there were conflicting decisions and that Justice Kane did not deal with the conflict in the case law. In considering this position, Justice Rivard concluded that although there are conflicting decisions, involved in Allstate’s proposed appeal, “it would not be desirable in this case to grant leave to appeal”. Justice Rivard also agreed with Justice Kane’s analysis and awarded Larocque costs for Allstate’s motion for leave to appeal in the amount of $10,000:

“15 There does not appear to me to exist any good reason to doubt the correctness of Justice Kane’s order. His analysis was thorough and well reasoned. It is one with which I agree.

16 As a result, leave to appeal will be refused.

17 The defendants will be entitled to recover from the Plaintiff their reasonable partial indemnity costs of this motion, fixed at $10,000.”

It is common for employers to include non-compete clauses in their contracts with employees. This kind of clause is meant to protect the employer in the event there is a breakdown in the employment relationship. An employee may cause significant financial damage to the former employer if the employee is able to walk away with a large number of former clients.

Alternatively, while the employee may have agreed to this before the outset of employment, after a breakdown in the relationship this kind of clause may have a detrimental impact on the employee’s ability to earn a living. As such, the Court must be careful in considering all the facts and balancing all the factors in determining whether to grant injunctive relief.

Motions for injunctions like the one in this case are often brought on a urgent basis and can be very stressful for the litigants involved. Furthermore, a motion for an injunction is another procedural step that usually takes place well ahead of an eventual potential hearing or trial on the merits and increases the costs of the parties significantly.

Ken was successful in preventing Allstate from obtaining an injunction against his client, winning Allstate’s motion seeking leave to appeal, and in obtaining significant cost awards for his client.

This result meant that Larocque was not prohibited from competing with his former employer and was able to continue work in the insurance field.

Full citations:
Allstate Insurance Co. of Canada v. Larocque, 2008 CarswellOnt 541, [2008] O.J. No. 414, 164 A.C.W.S. (3d) 277, 64 C.C.E.L. (3d) 119
Allstate Insurance Co. of Canada v. Larocque, 2008 CarswellOnt 2127, [2008] O.J. No. 1444, 166 A.C.W.S. (3d) 835
Allstate Insurance Co. of Canada v. Larocque, 2008 CarswellOnt 2152, [2008] O.J. No. 1453, 165 A.C.W.S. (3d) 525