Dellwood executives urge court to reject AIG’s ‘Hotel California theory’ in breakup suit

A trio of former American International Group executives are asking a New Jersey court to dismiss a lawsuit brought by the insurance giant alleging misappropriation of confidential information.

The executives launched Dellwood Insurance Group, an excess and surplus lines insurer, earlier this year. AIG claims the founders – Thomas Connolly, Kean Driscoll and Michael Price – took confidential information before departing AIG.

In their July 31 motion for dismissal, Dellwood attorneys sought to paint AIG as an insurance behemoth out to crush a little startup company. The New York City law firm Cohen Ziffer Frenchman & McKenna also showed an appreciation for The Eagles’ 1970s soft-rock efforts.

“AIG’s theory of the case is built on the false belief that it is solely responsible for the creation and development of the E&S market and, as such, leaving AIG to go to a competitor is per se unlawful for former AIG employees,” the motion reads. “AIG’s Hotel California theory that you can check out at any time you like but you can never leave AIG restrains trade.”

AIG initially filed a lawsuit in April in the District of New Jersey federal court, alleging that Price and Driscoll, who departed AIG on June 30, 2023, and March 3, 2024, respectively, were covered by noncompete clauses.

Restrictions include: competing with AIG, soliciting AIG employees, disclosing confidential information or “disparaging” AIG. The noncompete clauses included expiration dates of Sept. 30, 2023, for Price and March 4, 2024, for Driscoll, the AIG lawsuit states.

“On information and belief, Price and Driscoll breached their obligations to AIG long before their non-competes expired. Indeed, Dellwood’s own publicly-filed documents reveal that the Dellwood legal entity was formed in Delaware no later than December 28, 2023, and registered to do business in New Jersey no later than January 30, 2024,” the lawsuit reads. “By March 7, 2024, Price and Driscoll had already raised more than $250 million in seed capital from various investors.”

Alleged 'secret agent'

AIG’s lawsuit goes on to claim that Price and Driscoll “convinced Connolly to work for Dellwood as a secret agent during at least his final month at AIG, which concluded March 15, 2024.”

Connolly served as chief financial officer for North America General Insurance, a key AIG division.

On May 24, AIG dismissed its lawsuit against the three executives, while stressing its right to revive claims against Dellwood. An amended lawsuit was filed against Dellwood only on July 10.

In its motion to dismiss, Dellwood attorneys say AIG pulled the plug on its initial lawsuit to avoid a request for “advancement of defense costs in this litigation (as required by AIG’s bylaws).” The insurer cannot revive the same claims it just dismissed “with prejudice” only weeks ago, Dellwood attorneys say.

“AIG’s dismissal of the Individuals with prejudice constitutes an adjudication on the merits,” the motion reads. “Dellwood and the Individuals are also in privity, as AIG itself concedes by alleging that Dellwood’s liability is based on the conduct of the Individuals, who it argues are Dellwood’s agents and employees.”

Defendants cite the legal principle of “res judicata,” which states that a thing or matter that has been decided on its merits cannot be litigated again between the same parties.

The amended complaint “cannot extricate AIG from the knot in which AIG has trapped itself,” the motion reads. “Having dismissed its claims against the Individuals with prejudice, its claims against Dellwood are barred by res judicata.”

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.