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June 30, 2014

Supreme NY Enjoins Use of Customer Lists Even In Absence of Restrictive Covenant

Hudson Insurance Co. was seeking to enjoin their former employees, and their new employer, Axis Insurance Co., from using, among other proprietary information, their client lists. The former employees were not subject to a restrictive covenant.

On behalf of Axis, Gregory Serio, the former New York State Superintendent of Insurance, argued that Hudson's information should not be considered confidential because much of the information could be compiled from responses that prospective insureds supply to a carrier's underwriting inquiries and is the property of the insureds.

Hudson insurance company argued that there "no publicly available meaningful data" to be used by a carrier, and that this information is confidential because the files reveal Hudson's work product in the form of actuarial and underwriting analyses, pricing models, and rating tools, and because "Axis could never replicate an exact copy" of this work product.

Serio acknowledged that "proposed rates and draft forms" are sometimes considered to be confidential and that "special actuarial models or other unique mechanisms used by an insurer actually to underwrite or rate a specific risk may" also be considered proprietary and confidential

The Court noted that Axis's argument ignored that Hudson's confidential information is not any single piece of information that may belong to an insured, but Hudson's voluminous compilation of such information, which was made over the course of a decade for all of Hudson's customers, at significant expense.

The full decision can be found at: http://www.courts.state.ny.us/reporter/pdfs/2014/2014_31614.pdf

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