I fired my manager because they were doing nothing. I signed with a new agency. Now, my old manager is suing me for 10% of everything I make for the next 3 years, citing a “Sunset Clause” in our contract. They want $200,000. I turned to my insurance for help.
Key Takeaways
- Breach of Contract Exclusion: This is the #1 denial reason. Insurance covers negligence. It does not cover contract disputes. If you signed a bad deal, insurance won’t bail you out.
- Sunset Clauses: These are standard but negotiable. A “Sunset” means they get paid on deals they booked after you fire them. Sinking $200k into this is a contract issue, not an insurable event.
- Legal Defense (Maybe): If the manager alleges “Fraud” or “Misrepresentation” (torts) alongside the contract breach, your D&O (Directors & Officers) insurance might cover the defense costs.
- Union Protection: If you are SAG-AFTRA, the union limits how much agents can take.
The “Why” (The Trap): “Voluntary” Obligation
Insurance covers “Fortuitous Events” (accidents).
Signing a contract is a “Voluntary Act.”
If you agree to pay 10%, and then refuse, you broke your word. Insurance doesn’t cover broken promises.
The Policy: “We do not cover any claim based upon, arising from, or in consequence of any actual or alleged breach of contract.”
[IMAGE: Graphic illustrating a “Sunset Clause” timeline – Commission tapering off over 12 months]
The Investigation: I Called Them
I asked, “I’m being sued over a contract dispute.”
1. Travelers (General Liability)
- The Answer: Denied. Contractual liability is excluded.
2. Chubb (Directors & Officers – D&O)
- The Answer: Possible defense coverage if the manager claims I breached my fiduciary duty or committed fraud. But if it’s a straight “He didn’t pay me” claim, D&O won’t pay.
3. Entertainment Lawyer
- The Reality: You need a lawyer to audit the contract. Often, sunset clauses are unenforceable if the manager was not a licensed talent agent (in CA/NY).
Comparison Table
| Claim Type | General Liability | D&O Insurance | Contract Lawyer |
| Unpaid Commission | No | Unlikely | Essential |
| Allegations of Fraud | No | Yes (Defense) | Essential |
| Bodily Injury | Yes | No | N/A |
Step-by-Step Action Plan
- Read the Sunset Clause: precise wording matters. Does it say “deals booked” or “income received”?
- Check Licensure: Is your manager a licensed Talent Agent? In California, managers technically cannot “procure employment.” If they did, the contract might be void under the Talent Agencies Act.
- Settlement: It is usually cheaper to settle for a lower % than to fight in court.
- Future Contracts: Never sign a contract without a “Key Man” clause (if your agent leaves, you can leave) and a limited Sunset (6 months max).
FAQ
Can I sue them for being bad managers?
Yes, for “Breach of Fiduciary Duty.” If you win, you might offset what you owe them.
Does LegalShield cover this?
They might review the contract, but they won’t represent you in a high-stakes civil lawsuit for $200k.
What is D&O Insurance?
Directors and Officers insurance. It protects the “decisions” you make as a business owner. Helpful for partnership disputes.