Gallagher takes legal action against Chris Giles-backed company

Arthur J Gallagher has taken legal action against several former Giles staff who are part of a start-up backed by Chris Giles.

The High Court order prevents Jonathan Cook, Jason Mole, Martin Hall and Chris Price from taking any Gallagher staff or clients to their new company, PIB, until May 2015.

The foursome worked at Giles’ Birmingham professional indemnity (PI) branch when the company was bought by Gallagher for £233m last November.

Cook ran the 13-strong branch, while Hall was a UK retail PI development director, Mole was broking manager for the branch and Price was an account executive.

However, they all resigned over a four-week period between 31 March and 28 April this year and joined PIB.

Gallagher claims they broke their employment contracts by setting up PIB to compete with it in the PI market.

Two of the main allegations are that, firstly, they illegally dealt with Gallagher clients to benefit PIB, and secondly, they used confidential information such as the key contact, details of the premium and commission paid by the client, and their current insurer, in their dealings.

Chris Giles named

Gallagher later named Chris Giles as a defendant in the case, and claimed he was involved in a plan to set up PIB.

It cited an email he sent to his finance director Derek Gardner about “doing Giles again, on a smaller scale”.

Giles sent another email to PIB director Mike Fletcher about using a particular individual “for PIB”.

Gallagher also discovered an email sent by Cook to Giles after a meeting. Cook asked if Giles could arrange for someone to have a look at his contract with a view to “understanding what we can and can’t do”.

Cook said: “AJG will be aggressive here.

“Our ability to bring across some clients will have a bearing on our numbers sooner rather than later, so if someone could have a look at our T and C agreement with your background experience of the firm, that would help. We aren’t squeamish about this element of the business by the way”.

PIB is registered to trade in the UK insurance market as an appointed representative of EC3 Brokers, of which Chris Giles owns 42%.

Settlement

The order did not mention Chris Giles but a Gallagher spokesman confirmed: “Matters have been resolved and no claim exists between parties, who have both put this behind them.”

The settlement order, agreed in the high court, states that the defendants could face imprisonment, a fine, or having their assets seized if they break the order. The same applies to anyone who knows about the order and helps the defendants to break it.

Concerns over FCA action

Insurance Times has also obtained the defence papers, filed at the High Court, in which Cook argued he was not bound by his covenants because he had been constructively dismissed by Gallagher.

He made a number of allegations against Gallagher including that its insurer placement strategy “left him personally exposed to FCA sanction”.

Gallagher required him to recommend an Allianz insurance scheme, which Cook considered an inferior product, over HCC’s. He claimed Gallagher required him “not to draw these deficiencies to the attention of clients” and feared this left him personally exposed to FCA sanction. Gallagher did not take any effective steps in response to his concern, the defence added.

Gallagher strongly refuted the allegation. A spokesman said: “Arthur J Gallagher treats all regulatory matters seriously, in line with its approach that clients come first. Following best practice, this facility was subject to compliance overview from the appropriate professionals, as are all our facilities. It was deemed an appropriate product to be offered to clients and to fully satisfy regulatory requirements.”

Mole also alleged that Gallagher prevented his team from using external wholesale brokers to place PI business, which made his role “extremely difficult”.  He was also concerned that imminent acquisition of Oval would put his job at risk.

Cook, Mole, Price and Hall denied collectively planning to join PIB to work as a team in competition with Gallagher in the PI market.

All defendants denied that they had co-ordinated their walk out.

PIB director Mike Fletcher said it would be inappropriate to comment on the settled case.

But he said that PIB would continue to look to build a “high quality, niche, entrepreneurially run commercial lines insurance business”.

He added: “We will continue to look to grow the business by recruiting and adding experienced, talented hires from the industry in areas and sectors we believe are of interest, and equity ownership will be made available for like-minded people.”

Chris Giles could not be reached for comment.