2222222222

Brokers

Brokerage Prevails on Restrictive Agreements

Brown & Brown won a temporary injunction against a competitor and the former employees who it accused of taking clients with them when they left.
By: | November 2, 2016 • 4 min read

Recruiting the right people is crucial for insurance brokers. Retaining them can be a challenge.

It’s especially difficult when “nothing short of a corporate raid” takes place, and a broker not only loses key producers, but clients as well. Those are the charges laid against AssuredPartners of Lake Mary, Fla., by Brown & Brown, one of the largest global brokerages.

Advertisement




On Oct. 24, a Florida circuit court judge issued a temporary injunction ordering AssuredPartners to “divest themselves of the former customers of Brown & Brown that are now customers of Assured.”

Brown & Brown was ordered to post a $1.6 million bond, which is “the best estimate we have as to the amount of business employees have effectively stolen in accounts from Brown & Brown through the wrongful solicitation,” said Katheleen Ehrhart, a partner in the litigation practice group at Freeborn & Peters, which represented B&B.

AssuredPartners was formed by two former Brown & Brown executives: Jim Henderson, CEO and chairman of AssuredPartners, was B&B’s vice chairman and COO until his retirement in 2010; and Thomas Riley, president and COO of AssuredPartners, was B&B’s chief acquisition officer.

Katheleen Ehrhart, partner, Freeborn & Peters

Katheleen Ehrhart, partner, Freeborn & Peters

“We disagree with the ruling,” said Walter Smith, chief counsel of AssuredPartners.

“This [lawsuit], I think, was an unnecessary thing that occurred because we’ve always been clear that we wanted to pay for the accounts that followed.”

He said it is a very common practice for brokerages to pay for accounts that want to follow employees to a new firm.

He said the judge “didn’t find there was solicitation of any customers and they are now our customers. The judge ruled that if there was harm to the customers they could stay with us. We believe it would be harmful [to force the clients to move],” Smith said.

According to the lawsuit, at least 10 accounts, representing more than 50 policies transferred their accounts to AssuredPartners.

“The point is we are going to protect our customers and employees from being solicited to compete against Brown & Brown for two years. That’s very reasonable.” — Katheleen Ehrhart, partner, Freeborn and Peters

“Each of them [the former employees] is free to make that decision on their own to go work for a competitor,” Ehrhart said. “It’s the collusion, if you will, of them doing it together that we say is a violation of the restrictive covenant. But the real focus here is the customers.

“The point is we are going to protect our customers and employees from being solicited to compete against Brown & Brown for two years. That’s very reasonable.

“We also recognize when a customer may … choose to go to another broker, but our employees should not be free to go to a competitor and lure that customer to that competitor,” she said.

The restrictive covenant violations “caused substantial harm and loss of customers to [Brown & Brown],” wrote Judge Dennis Craig in his order issuing the temporary injunction.

The order provided, however, that “if evidence arises that a former customer of Brown & Brown which is now a customer of Assured will suffer harm as a result of this order, the defendants may file a motion asking this Court to reconsider or modify this Order as to that customer.”

The litigation accused Assured of “poaching” eight former employees, who were mostly top executives and producers in B&B’s senior care sector (which brokers insurance for nursing homes, assisted living facilities and continuing care retirement community) or for habitational insurance (for condominium boards and units, and other multi-residence properties).

The employees, who left B&B within 15 days, had signed employment agreements with restrictive covenants, in which they agreed not to disclose confidential information, not to solicit clients or to inform clients of their leaving B&B for two years following their voluntary or involuntary termination.

The agreement also required the employees to not “directly or indirectly solicit or seek to induce any of the company’s employees to leave the company’s employ for any reason.”

The ruling did not require the employees to leave their new jobs, but said they must comply with the restrictive covenants.

On June 23, AssuredPartners announced the hiring of Phil Masi as senior vice president, and Negar Sharifi as vice president, to focus on new commercial property and retail clients. Masi had been SVP at Brown & Brown while Sharifi was a commercial insurance agent.

Advertisement




Also named in the suit were Henderson and Riley of AssuredPartners; and former Brown & Brown employees, Richard Schwarz II, Brian Lindahl, Jennica Mandarano, Kathryn Bloodwell, Michael Randall and Danielle Mattson.

The ruling did not require the employees to leave their new jobs, but said they must comply with the restrictive covenants.

Ehrhart said a date has not yet been set for a trial on a permanent injunction.

If Brown & Brown ultimately prevails, she said, damages could include loss of revenue, loss of investment in business lines, loss of investment in employees, and loss of reputation and good will.

Anne Freedman is managing editor of Risk & Insurance. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Risk Management

The Profession

The risk manager for Boyd Gaming Corp. says curiosity keeps him engaged, and continual education will be the key to managing emerging risks.
By: | May 1, 2018 • 4 min read

R&I: What was your first job?

I was trained as an accountant, worked in public accounting and became a CPA. Being comfortable with numbers is helpful in my current role, and obviously, the language of business is financial statements, so it helps.

R&I: How did you come to work in risk management?

Working in finance in the corporate environment included the review of budgets and the analysis of business expenses. I quickly found the area of benefits and insurance — and how “accepting risk” impacted those expenses — to be fascinating. I asked a lot of questions. Be careful what you ask for — I soon found myself responsible for those insurance areas and haven’t looked back!

R&I: What is the risk management community doing right?

Advertisement




I have found the risk management community to be a close-knit group, whether that’s industry professionals, risk managers with other companies or support organizations like RIMS and other regional groups. The expertise of the carriers and specialty vendors to develop new products and programs, along with the appropriate education, will continue to be of key importance to companies going forward.

R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?

As I’m sure many in the insurance field would agree, Hurricanes Katrina and Rita in 2005 changed our world and our industry. It was a particularly intense time and certainly a baptism by fire for people like me who were relatively new to the industry. This event clearly accelerated the switch to the acceptance of more risk, which impacted mitigation strategies and programs.

Bob Berglund, vice president, benefits and insurance, Boyd Gaming Corp.

R&I: What emerging commercial risk most concerns you?

The fast-paced threat that cyber security represents today. Our company, like so many companies, is reliant upon computers, software and IT expertise in our everyday existence. This new risk has forged an even stronger relationship between risk management and our IT department as we work together to address this growing threat.

Additionally, the shooting event in Las Vegas in 2017 will have an enduring impact on firms that host large gatherings and arena-style events all over the world, and our company is no exception.

R&I: What insurance carrier do you have the highest opinion of?

Advertisement




With the various types of insurance programs we employ, I have been fortunate to work with most of the large national and international carriers — all of whom employ talented people with a vast array of resources.

R&I:  How much business do you do direct versus going through a broker?

We use brokers for many of our professional coverages, such as property, casualty, D&O and cyber. We are self-insured under our health plans, with close to 25,000 members. We tend to manage those programs internally and utilize direct relationships with carriers and specialty vendors to tailor a plan that works best for team members.

R&I: Who is your mentor and why?

I have been fortunate to have worked alongside some smart and insightful people during my career. A key piece of advice, said in many different ways, has served me well. Simply stated: “Seek to understand before being understood.”

What this has meant to me is try everything you can to learn about something, new or old. After you have gained this knowledge, you can begin to access and maybe suggest changes or adjustments. Being curious has always been a personal enjoyment for me in business, and I have found people are more than willing to lend a hand, offer information and advice — you just need to ask. Building those alliances and foundations of knowledge on a subject matter makes tackling the future more exciting and fruitful.

R&I: What have you accomplished that you are proudest of?

Our benefit health plan is much more than handing out an insurance card at the beginning of the year. We encourage our team members and their families to learn about their personal health, get engaged in a variety of health and wellness programs and try to live life in the healthiest possible way. The result of that is literally hundreds of testimonials from our members every year on how they have lost weight, changed their lifestyle and gotten off medications. It is extremely rewarding and is a testament to [our] close-knit corporate culture.

R&I: What’s the best restaurant you’ve ever eaten at?

Advertisement




Some will remember the volcano eruption in Iceland in spring of 2010. I was just finishing a week of meetings in London with Lloyd’s syndicates related to our property insurance placement when the airspace in England and most of northern Europe was shut down — no airplanes in or out! Flights were ultimately canceled for the following five days. Therefore, with a few other stranded visitors like myself, we experimented and tried out new restaurants every day until we could leave. It was a very interesting time!

R&I: What is the riskiest activity you ever engaged in?

I am originally from Canada, and I played ice hockey from the time I was four years old up until quite recently. Too many surgeries sadly forced my recent retirement.

R&I: What do your friends and family think you do?

That’s a funny one … I am a CPA working in the casino industry, doing insurance and risk management, so neighbors and acquaintances think I either do tax returns or they think I’m a blackjack dealer at the casino!




Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]