Brown & Brown faces off against its former executives in legal dispute

A response from the ex-employees claims that betrayal and nepotism led to a messy break-up

Brown & Brown faces off against its former executives in legal dispute

Insurance News

By Alicja Grzadkowska

A legal spat between Brown & Brown, the sixth largest independent brokerage in the US, and some of its former executives has escalated. Foundation Risk Partners, which was accused of betrayal in a lawsuit brought in October by the insurance giant, has hit back with its own accusations, stating in a legal response, “This is indeed a case of betrayal — a betrayal of executive loyalty, and a betrayal of a company’s core values.”

Foundation Risk is led by CEO Charlie Lydecker, who was once a regional president for Brown & Brown, but departed the company in 2016. His company is seeking dismissal of all claims against chief administrative officer Tom Tinsley, previously the Brown & Brown retail division CFO, who was picked out as the defendant alongside Foundation Risk in Brown & Brown’s lawsuit.

Lydecker, Tinsley, and a handful of other former Brown & Brown executives were accused by Brown & Brown, in a lawsuit filed in October, of conspiring to form a competing insurance agency while they were still working at the brokerage. The lawsuit’s claims read like a spy novel, with the then-Brown & Brown employees allegedly using burner phones, secretly taping a talk that Brown & Brown chairman Hyatt Brown gave to employees, and stealing trade secrets, as well as organizing “clandestine meetings.”

The real betrayal however, according to Foundation Risk, came in 2009 when Hyatt Brown chose his son J. Powell, COO at the time, as his successor to the CEO post, even though the legal response claims that “longtime Hyatt loyalist Jim Henderson (Brown & Brown’s then-vice chairman)” had been promised the position. The response continues that the company had called itself a meritocracy for many years, but the elevation of the younger Brown to chief executive “created a crisis of confidence in the current and future leadership of (Brown & Brown) that, in one fell swoop, shattered the trust of a workforce who was led to believe in the meritocracy Hyatt had preached.”

The legal response added that the highest ranks of the company began to look like the “Brown family employment center,” where nepotism reigned. Coupled with an indecisive and odd leadership approach, “the awkward and disconcerting behavior of Powell as the president and CEO, and the disingenuous explanation of his sudden and extended leave of absence in 2012, set the company on a course that ultimately saw 52 senior leaders leave the company over a short period of time,” stated the legal response.

The employees then negotiated separation agreements and banded together to start their own agency, which was permitted in their agreements with Brown & Brown, according to the response, which also refuted Brown & Brown’s accusation that Lydecker and others attempted to undermine Brown & Brown while still employed there.

“Foundation Risk was not created until almost a year after Tinsley’s and Lydecker’s departures and is the ad-hoc morphing and integration over time of several separately created entities,” read the legal response.

In response to the document, Brown & Brown’s legal representation issued the following statement: “We are reviewing the document, but conspicuously absent from the defendants’ motion is any suggestion that the defendants did not do that which they are alleged to have done in the complaint.

“Instead, the motion (by Foundation Risk) focuses on legal technicalities that the defendants argue should allow them to avoid the consequences of their actions,” the statement continued. “Brown & Brown will be filing a vigorous response to the motion to dismiss and will set a motion for a hearing at the earliest possible date.”

Today, Foundation Risk has operations in eight states and $155 million in annualized revenues.

It’s not Brown & Brown’s first brush with disputes featuring former employees. In 2011, Henderson and Tom Riley, another Brown & Brown executive, left together and formed AssuredPartners along with other former Brown & Brown employees. They were subsequently sued by the brokerage for violating employment contracts, and Brown & Brown won an industry-record $20 million settlement from the new insurance agency, but without admission of wrongdoing.

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