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.

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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.

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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

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.

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That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.

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Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]