Applied Underwriters’ Centauri Files $30M ‘Poaching’ Suit Against Wellington Insurance

By | May 14, 2020

A Florida-based managing general agency has filed a $30 million poaching lawsuit against three former executives and the agency they jumped to while it was in the process of being acquired.

Centauri Specialty Insurance Holdings (CSIH) and Centauri Specialty Managers (CSM) allege in a suit filed May 1 that Wellington Insurance of Texas breached non-solicitation provisions and a confidentiality agreement put in place after they began to pursue a business relationship in 2018.

In addition to $30 million in damages, the suit, filed May 1 in Sarasota County, Fla., seeks an injunction to stop Wellington from employing its former employees and from using Centauri’s confidential information and trade secrets.

On May 12, Judge Andrea McHugh in the 12th Circuit Court in Sarasota granted Applied Underwriters’ request for expedited discovery in the case.

The suit specifically names Wellington and Centauri Specialty Managers’ former chief risk officer Brian Biggs; its actuary and director William Bryan; director of product management Marlene Omlor; and its former vice president of sales and agency relations Felicia Cox as defendants. Centauri claims all four were hired by Wellington, but Wellington says Cox is not currently employed.

In addition to the breach of contract, the suit alleges a breach of confidentiality and of proprietary rights agreements signed between CSM and Biggs, Bryan, Omlor and Cox. The suit claims there was a violation of a non-solicitation agreement that precluded Wellington from either “directly or indirectly” soliciting any current employees.

The damages Applied is seeking are also linked to the timing of the alleged violations, coming at a time Centauri is seeking to expand.

“We are arguing that former employees Biggs, Bryan, and Omlor’s departure from CSM was timed purposely to cause maximum disruption following the sale, entitling us to compensation for damages,” stated Jeffrey Silver, who is representing Centauri. He is general counsel for CSM’s new owner, Applied Underwriters, a national provider of workers’ compensation insurance, other commercial insurance, and risk transfer and financing plans.

Silver said Centauri had just expanded to nine states and “would be harmed by this unethical, illegal action giving a decided advantage and confidential information to Wellington, a Texas competitor.”

Texas-based Wellington denies that it or the employees committed any wrongdoing. General Counsel Steve Polston told Insurance Journal that the allegations “are not supported by contract, facts, or law, and such reckless and meritless litigation will be vigorously defended.”

In its May 8 response to the suit filed in court, Wellington maintains that Centauri is “dissatisfied with the contractual obligations they have agreed to” with Wellington and the former employees and are “attempting to either shoehorn meritless claims into existing contractual obligations or misrepresenting existing contractual obligations in order to get their way.”

Exploring Expansion

According to the court documents, CSM and Wellington in the summer of 2018 were exploring ways to work together and help Wellington expand outside of Texas. As part of these ongoing efforts, the parties signed non-solicitation and confidentiality agreements in 2019 aimed at “protecting against any unauthorized use or disclosure of confidential information which one learned about the other while reviewing the proposal and issues attendant thereto,” according to CSM’s documents.

The agreement, with a two-year effective date beginning July 18, 2019, also stated that each party “will not, directly or indirectly, solicit any current employees of the other party or its subsidiaries or affiliate companies…”

The effects of the 2019 agreement and a subsequent agreement signed in March of this year are in dispute. CMS argues that the more recent agreement addressed sharing of confidential information and the 2019 agreement that included provisions against solicitation remained in effect.

However, Wellington argues that the 2020 agreement replaced and superseded the 2019 agreement and the 2020 agreement does not include any provision on non-solicitation. Wellington does not take issue with the confidentiality aspect of CSM’s complaint and maintains those provisions have not and will not be violated.

According to Centauri, “volumes of confidential, proprietary and trade secret information” were provided to Wellington through CSM employees as part of the discussions to work together.

Applied Underwriters acquired Centauri Specialty Managers on March 31, 2020 from its primary shareholder AXA/XL, and third party administrator Siebels-Bruce. That acquisition resulted in Centauri receiving immediate additional capital and surplus that allowed it to retain its “A” rating from ratings firm Demotech.

CMS alleges that while the negotiations for this acquisition were underway, Wellington solicited employees of CSM in violation of the agreements initiated in July 2019.

“We are holding that a civil conspiracy existed between the defendants to use Centauri’s confidential information to gain an unfair competitive advantage, in clear violation of Florida’s trade secrets act covering actions of former employees,” said counsel Silver.

According to a spokesperson from Applied, immediately before the deal with Applied for CSM was consummated on March 31, Wellington had attempted to acquire the Centauri companies in two separate unsuccessful bids.

Ultimately, Centauri did not move forward with Wellington on any joint business plan.

Wellington Response

“Plaintiff’s entire breach of contract claim against Wellington … is fatally based on the assumption that the 2019 agreement, including the non-solicitation provision, is operative and was not superseded by the 2020 agreement, which contains no non-solicitation provision,” Wellington argues in its filing.

Wellington acknowledges that Cox and Biggs met with Wellington’s chief operating officer in February, but maintains that no offers of employment were extended to Bryan and Omlor until April 2020, “well after the non-solicitation obligation in the 2019 agreement was superseded by the 2020 agreement.” Wellington says it did not offer employment to Cox.

According to Wellington, Centauri rejected its efforts to work on the transition of the employees and, Wellington claims, Centauri fired Biggs, Bryan and Omlor before their resignations had been offered.

“Biggs, Bryan and Omlor were not formally hired with Wellington, and start dates were not provided to the employees, until after Centauri terminated their employment,” the response states.

Wellington says no exchange of protected information was ever provided by the employees to Wellington and “Wellington does not want such information, has no use for such information, and has informed the employees multiple times not to use such information in the performance of their duties for Wellington.”

Wellington states that it, Biggs, Bryan and Omlor agree to all of Centauri’s requested injunctive relief except the injunction prohibiting Wellington from employing Biggs, Bryan and Omlor.

Applied’s Purchase

Applied Underwriters said that as part its purchase of CSM, it also has an exclusive option to buy the Centauri holding company’s two insurance carriers Centauri Specialty Insurance Co. and Centauri National Insurance Co. Applied said it plans to complete the acquisition of the Centauri carriers upon regulatory approval later this year. The acquisition was structured in steps, with the first step completed on March 31, to ensure the continuity of Centauri’s Demotech A rating, according to Applied.

Applied, known as a workers’ compensation expert, said it will use the Centauri companies to expand nationally into other lines of property/casualty insurance. Centauri writes residential property, commercial lines, flood and other lines.

Last year, Applied Underwriters and its subsidiary, North American Casualty Co., were re-acquired by Applied Underwriters founder Steve Menzies, along with the Quasha Group led by Quadrant Management. The deal was valued at $920 million, and included the buyout of all other shareholders, including the 81% of the 25-year old company’s stock held by Berkshire Hathaway Inc.

About Amy O'Connor

O'Connor is the Southeast editor for Insurance Journal and associate editor of MyNewMarkets.com. More from Amy O'Connor

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