Hartford Sues Arch For Allegedly Poaching Execs
By Mark E. Ruquet
National Underwriter News
July 2, 2009
The Hartford Financial Services Group is suing Arch Insurance Group for allegedly poaching its financial products division of executives and stealing trade secrets.
The suit, filed on July 2 in New York State Supreme Court in Manhattan, accuses Arch and several former Hartford executives of "egregious, ongoing misconduct," charging that Arch raided the Hartford Financial Products division of at least 60 employees.
The Hartford accuses its former company executives, now with Arch, of contacting employees in their division and urging them to leave the company because the division is "a sinking ship."
The Hartford alleges that David McElroy, formerly a senior vice president of The Hartford and president of its Hartford Financial Products (HFP) division, "retired" on June 5 with a substantial compensation package, only to begin work days later at Arch setting up a division similar to HFP.
The division handles underwriting of such products as errors and omissions, directors and officers, employment practices and other liability coverage.
Soon after Mr. McElroy began with Arch, employees of HFP began receiving "threatening and bullying" e-mails, phone calls and text messages urging them to leave the company, the suit alleges.
Beginning June 8, HFP employees were told they better ‘"jump ship fast,' that ‘there isn't to be an HFP anymore,' and that employees ‘better come to Arch' or they ‘will never work in this industry again,"' according to the suit.
Arch is also accused of "endeavoring to destroy HFP's business and its ability to compete" by soliciting all of the division's employees, including trainees.
The Hartford goes on to say in its suit that the solicitation extended to its technology employees in an effort to "interfere with HFP's daily technology operations, and potentially to steal technological information from HFP."
The Hartford said the actions also interfered with negotiations in securing its reinsurance program for the division as HFP executives left in the middle of negotiations.
Arch's actions, The Hartford said, "makes a mockery of Arch's code of conduct, which purportedly sets a high ethical bar…that would withstand public disclosure and scrutiny. In this case, it plainly does not."
This is not the first time Arch has engaged in raiding a company of talent and proprietary information, The Hartford contends--citing a 2007 Connecticut court decision which found Arch guilty of raiding the reinsurance division of General Reinsurance Corp., with the court finding the company had engaged in a plot to move a substantial part of GenRe's business to Arch.
The Hartford said in its suit that it has contained the damage Arch sought to inflict on the company, "but such egregious behavior cannot go unchecked." The lawsuit seeks to stop Arch's action and recover damages.
Dave Snowden, a representative for the Hartford, told National Underwriter that "we have a deep bench of talent and dedicated employees within HFP, and we have capable and experienced senior leaders to manage the division going forward."
He added that "HFP actively continues to write new business and service its existing business. We filed this lawsuit because we will not tolerate illegal or unethical behavior."
Arch officials could not be reached for comment as this story broke.
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