What is the Insurance Duty to Defend in Utah?

Rock climbing the world-famous cobblestone cliffs of Maple Canyon near Fountain Green, Utah

The duty to defend is the duty that an insurance company owes its insureds to hire an attorney and take action to defend the insured when the insured gets sued. It’s a bit of complex law that is often at the heart of any bad faith action against an insurance company. Utah typically follows the majority of jurisdictions when it comes to the duty to defend in insurance contracts. Here’s what you need to know:

Continue reading “What is the Insurance Duty to Defend in Utah?”

The Utah Supreme Court Again Requires Reasonable Conduct Under the Circumstances

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The Utah Supreme Court ruled against a debtor who asserted a novel defense to repayment of a $250,000 loan in default. The case is Crapo v. Zions Bank. The debtor claimed that once the bank sent him a Form 1099-C discharging his debt, the bank could no longer attempt to collect the bad debt from him. Failure to act reasonably by the debtor, however, ultimately barred the debtor’s defense. And, while the debtor’s defense appeared a bit stronger on its face than it actually was, you can see in details are below it appeared he was gaming the system by not getting more information before purportedly relying on the bank’s conduct. Continue reading “The Utah Supreme Court Again Requires Reasonable Conduct Under the Circumstances”

Basic Contract Terms in Utah

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The Utah Court of Appeals recently provided a quick and dirty summary of basic contract terms in Lebrecht v. Deep Blue Pools, 2016 UT App 110. The case also provides a primer for creating an enforceable settlement agreement without an attorney. Let’s take a look. Continue reading “Basic Contract Terms in Utah”

How to Use a Liquidated Damages Clause in Utah Contracts

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Not your car. Not my car. Note the little sticker on the front bumper: don’t touch.

What happens when you suffer harm from a breach of contract that you cannot prove or would have a very difficult time proving? Such as for a delay? Often your damages will go unreimbursed.

One typical situation is for delay in contract performance– “Time Is Money,” right? The proof of damages under this axiom is often nearly impossible or at least impractical. For example, if a construction delay causes you to open your new business four weeks later than planned, how do you prove damages? You have no history of income and it would be claimed that any damages would be pure speculation. Enter liquidated damages. Continue reading “How to Use a Liquidated Damages Clause in Utah Contracts”

Utah Law Governing Non-Competition Agreements – April 2017 Update

20150823_175608The Utah Legislature recently passed and Governor Herbert signed a law in 2016 limiting non-competition agreements. It can be found at Utah Code Ann. 34-51-101, et seq. Please note that I updated this article as of April 2017. When the law initially started through the Legislature, it seriously limited non-competition covenants. The end result was much tamer.

Here are the highlights of the non-competition statute:

  • Post-employment restrictive covenants, i.e., non-competition agreements, are limited to one year from the date of separation;
  • The statute does not apply to clauses concerning non-solicitation, non-disclosure, or confidentiality;
  • Exceptions to the one-year time limitation include the following:
    • Severance agreements that are reasonable and mutually and freely agreed upon in good faith after separation; and
    • Agreements in conjunction with the sale of a business.
  • Attorney fees: The employer will be liable to the employee if the non-competition agreement is found to be unenforceable. Although Utah has typically found attorney fee provisions to be reciprocal (i.e., both sides can be the recipient of fees, depending on who prevails), the statute does not expressly provide for fees to the employer. The prudent employer, therefore, will include an attorney fee provision providing fees to the prevailing party to ensure that the employer can recoup attorney fees if it prevails.

The statute defines non-competition agreements as any agreement in which an employee or former employee agrees they “will not compete with the employer in providing products, processes, or services that are similar to the employer’s products, processes, or services.”

One other note: the law in Utah is unsettled as to confidentiality agreements that act like a non-competition agreement but you should tread carefully. Utah courts are often pragmatic and if it talks like a duck and walks like a duck, the court will likely call it a duck. See Is Your Non-Disclosure Agreement a Non-Compete Agreement in Disguise? This simply means that you should carefully draft your confidentiality and non-competition agreements. You may find yourself with a void agreement if it is poorly drafted.

Effective Date: The law affects any agreement entered on or after May 10, 2016. The statute is not expressly retroactive.

Bad-Actor Employers Warned: Lastly, the statute imposes damages against an employer who seeks to enforce non-competition provisions that are found to violate the statute. The damages available to an employee include any costs of an arbitration, attorney fees and court costs, and actual damages.

Take-Away: Employers should reevaluate their severance agreements and employment agreements to ensure that such agreements are consistent with this new law. For many employers, the non-competition provisions are part of the employment contract signed when the employee is hired. Its effect is not felt until (hopefully) many months or years later when the employee leaves. It is important, then, that employers review their employment contracts now since later is too late.

There are issues and nuances that cannot all be addressed here. If you have questions, you should get specific legal advice. If you would like more information about employment, non-competition, non-solicitation, confidentiality, or non-disclosure agreements, call me, Utah attorney Ken Reich, directly. I have represented both companies and individuals in business matters and disputes involving employment agreements and related matters, including non-competition issues. Using my many years of experience and backed by a firm of legal specialists in nearly every legal field, I can help you or your company evaluate your situation and help you make smart decisions about your business and your life that will best fit your circumstances.