CRC Loses 100 Employees; Possible Legal Action to Follow

When 10 percent of an organization’s entire workforce resigns in one day, the fallout can be devastating. That’s exactly what happened to CRC Insurance Services Inc. (CRC) – one of the largest wholesale insurance brokers in the United States – on May 4 when approximately 100 CRC brokers and staff in Illinois, California and Pennsylvania fled the company, reportedly to join a competitor.

CRC’s CEO and Founder Tom Curtin said in a memo that: “CRC regrets these employees’ decision and is committed to immediately reorganizing and appropriately restaffing.” Curtin said he believes many of the former CRC employees intend to work for a competitor but added they have continuing obligations to CRC. “While CRC focuses on its clients, CRC’s counsel is closely monitoring and evaluating the situation to ensure that CRC and its clients are protected,” Curtin said in the statement to IJ.

While CRC would not name the competitor, a number of sources say the employees may have left to join Ryan Specialty Group (RSG), a new specialty services insurance organization founded this year by Patrick Ryan, founder and retired chairman and CEO of Aon.

One former high-ranking executive to leave CRC in February 2010 is Timothy W. Turner. Turner is now a managing director with RSG. Prior to RSG’s formation, Turner served as CRC’s president of CRC Insurance Services Inc. and formerly ran CRC’s Chicago office and Midwest and Western regions.

RSG’s Managing Director and Chief Financial Officer Diane Aigotti would not confirm that the company hired any of the CRC employees, but said: “I’m afraid it’s our policy not to comment on any matter that is pending legally. We don’t have any comment.”

Possible Legal Claims

Stephen Hirschfeld, partner at the San Francisco-based law firm Curiale Hirschfeld Kraemer LLP, says CRC may investigate a few legal claims due to the nature of the employees’ departures.

The first thing a company like CRC should do is very carefully check its files, its servers, the database to find out whether the former employees took anything, he said. “Did they take any contracts, expiration lists, contact information, pricing materials, any other documents that might be considered confidential and proprietary to the company?”

The second thing to review would be who owned the business.

“If there was an understanding, an agreement that the employer owned these files and owned this business and the broker took it with him, well, then we have a possible issue over taking trade secrets and also misappropriating clients,” Hirschfeld said.

In every state except California, a non-compete agreement is enforceable, he added. “As a general rule, outside of California most states find those agreements enforceable so long as they’re reasonable in scope and duration.”

The third issue, Hirschfeld mentioned, would be to examine what, if any, efforts the employees made, while they were working at CRC, to conspire to leave and go work for a competitor.

“The law in California is clear that, particularly management folks and other upper-level supervisory and executive employees, have a duty, a loyalty, to their employer. So to the extent to which upper-level management talked to lower-level employees, to try to convince them they ought to go with them and leave – that would trouble me, if I represented that company.”

Hirshfeld added that in situations where there was knowledge and encouragement from upper-level management, possible legal claims could be brought up, not just against the former employees, but their new employer too.

Despite the 100 resignations, CRC’s Curtin told Insurance Journal the company will not be closing any offices or exiting any markets. “While we regret these employees’ decision, our focus continues to be on our clients and ensuring that any transition is seamless,” Curtin said.

CRC, a wholly-owned subsidiary of BB&T, operates 29 offices across the United States and has more than 1,052 employees, according to its Web site. The wholesale insurance brokerage firm wrote more than $2.4 billion in combined written property/casualty and professional premiums during 2009.

Topics California