Non-compete liability insurance, also known as non-compete insurance or covenant-not-to-compete insurance, is a type of insurance that protects businesses against financial losses that may arise from a breach of a non-compete agreement. A non-compete agreement is a contract between an employer and employee that restricts the employee from engaging in certain activities, such as working for a competitor or starting a competing business, for a specified period of time after leaving the employer.

Non-compete liability insurance typically covers legal expenses and damages that a business may incur as a result of a former employee violating the terms of a non-compete agreement. This type of insurance may also cover costs associated with defending against a claim that the non-compete agreement is unenforceable or invalid.

The coverage provided by non-compete liability insurance varies depending on the specific policy and may include coverage for breach of confidentiality or trade secrets, breach of fiduciary duty, and other related risks. This type of insurance is typically purchased by businesses that rely heavily on proprietary information or intellectual property, to protect against the potential financial risks associated with a breach of a non-compete agreement.

It’s important to note that non-compete liability insurance is not a substitute for a well-drafted non-compete agreement, and it may not cover intentional breaches of the agreement or other types of misconduct by the employee.