CRC: Survival ‘In Jeopardy’ as Ryan Specialty Group Grabs Customers, Workers

CRC Insurance Services has taken the recently established Ryan Specialty Group to court, accusing the startup of poaching more than 100 of its employees and asking the court to enforce departing employees' non-compete clauses. Otherwise, CRC faces "imminent catastrophic harm," it said in court filings.

Ryan Specialty Group and its affiliates -- specifically RT Specialty -- "have plotted and undertaken a coordinated scheme to steal the business of CRC Insurance Services Inc.," according to the complaint from CRC filed in U.S. District Court in Chicago. "RSG and its subsidiary, RTS, set about to raid CRC's employees and steal CRC's customers. Beginning on May 4, 2010, the newly formed RTS and RSG convinced over 120 CRC employees to leave CRC's well-established wholesale insurance brokerage business and go to work for RTS and RSG."

CRC asked for an order disallowing former CRC employees from working for a competitor or soliciting business from CRC customers for two years, "in accordance with the terms contained in their employment agreements." CRC also asked the court to stop the former employees from using confidential market information acquired during their CRC work.

"If CRC's former employees are not enjoined from violating the noncompete, non-solicitation, and non-accept provisions in their employment agreements and if RTS, RSG and Ryan are not enjoined from soliciting and accepting CRC's clients, CRC's very survival is in jeopardy," it said in court documents.

But the former employees argued the agreements were overly restrictive, constituting "a significant overreaching on the part of CRC, and accordingly are unlawful and contrary to public policy." The employees also contend that BB&T Corp. (NYSE: BBT), the parent company of the wholesale brokerage CRC, has undermined CRC's independence since the 2002 acquisition, creating conflicts of interest -- a claim CRC denied.

Attempts to reach CRC, RSG or either company's legal representatives for comment wasn't immediately successful.

CRC first tried to pursue its complaint in the Circuit Court of Jefferson County in Alabama, but the judge there -- in the state where CRC's headquarters is located -- declared he didn't have appropriate jurisdiction. So, the case was moved to federal court in Chicago, under Judge George W. Lindberg.

Patrick G. Ryan founded Ryan Specialty Group and its related companies at the end of 2009. Ryan had retired in 2008 as chairman and chief executive officer of Aon, which is the world's largest insurance and reinsurance broker, according to Best's Review. In February, Ryan told BestWire his companies wouldn't pursue the retail brokerage business and wouldn't be competing with Aon (NYSE: AON). "In today's world, it's important to have wholesale brokers be independent of retail brokers," he said, noting "obviously not everybody agrees with that" (BestWire, Feb. 10, 2010).

Among the RSG executives is Timothy Turner, former president of CRC Insurance Services, now a managing director under Ryan and also president and CEO of RT Specialty -- the letters R and T standing for Ryan and Turner.

The shares of BB&T, whose BB&T Insurance Services Inc. was the seventh-largest global broker in 2008 according to Best's Review, were trading at $30.22 the afternoon of June 2, up 1.51% from the previous close.

(Jesse A. Hamilton, Washington bureau manager: [email protected])