Either way, Arkley was still working for Aon when he and Cusack met with top executives of Turner Construction in midtown Manhattan on June 8. Aon was aware of the meeting and raised no issue about it, says Alliant. The meeting was called to discuss surety credit that Aon could arrange for Hochtief, Turner’s German parent company, which has other operating units in the U.S. (Turner has internal insurance and surety capabilities).
Aon served both Cusack and Arkley with legal papers as they left the meeting with Turner, says Stephens.
It isn't clear if Turner realized Cusack's and Arkley's relationships with Aon had deteriorated as the meeting finished.
To establish a new account, a contractor provides a broker a "broker of record," or BOR, letter. On June 9, Turner delivered a BOR letter to Aon making Aon broker for a separate surety program for Hochtief. Cusack informed Aon about it, says Alliant, but Stephens, speaking for Aon, says Cusack put the letter aside in a file.
Rescinded Broker-of-Record Letter
After learning that Cusack and Arkley were leaving Aon, Turner rescinded the BOR and instead gave the work to Alliant.
Cusack and Arkley solicited Turner in violation of their contracts, claims Stephens, noting that Alliant agreed to indemnify Turner against liability related to switching the BOR to Alliant.
On June 13, Arkley and two Aon colleagues sued Aon in Los Angeles Superior Court to declare unenforceable, in effect, to nullify, the restrictive covenants in their employment agreements.
In an affidavit submitted for the New York lawsuit, a Turner vice president, Christopher Beck, says Arkley had called the company on June 13 to say he and Cusack were leaving Aon to join Alliant. Based solely on Alliant's qualifications, Turner decided later in June and July to award to Alliant the Hochtief surety program, Beck says.
In a brief e-mail, a spokesman for Turner Construction Co. says only that “Turner has established relationships with several brokerage companies. As Turner is not a party to this dispute, we respectfully decline to offer further comment.”
Fried, in his ruling, relied partly on Aon's version of events and even made one important mistake. He portrays Gilbane Building Co. as having “transferred its business to Alliant” and cites a hearing transcript in his ruling.
But Wes Cotter, a spokesman for Gilbane, says his company has “maintained our relationship with Aon and never had any intention of leaving and has a terrific, close relationship with them.”
Broker Fees v. Premiums
The big payments Fried says were offered to Arkley and Cusack won’t help contractors understand how much of the insurance premium paid to the underwriter the broker gets to keep. Ace Group, an underwriter, says on its website that standard commissions for workers’ compensation and other liability insurance ranges from 1% to 30% and that surety commissions range from 3% to 40%.
The split between an individual broker or producer and the brokerage company that employs them can range from the single digits to 30% or more.
In his ruling, Fried claims Alliant offered to pay Cusack $1.5 million in annual salary, a $3.25-million signing bonus and another bonus of the same size if Alliant’s construction group had $20 million in revenue near the end of 2012. Alliant planned to pay Arkley $10 million in his first year and, if revenue for the unit hit $20 million, a $3-million bonus, Fried claims.
Other than Turner and Gilbane, none of the contractors and construction managers mentioned in the court documents could be reached or returned calls for comment on this story by ENR.
Arkley and Cusack could not comment because of the lawsuit and allowed Alliant to handle inquiries. “We will continue to vigorously defend ourselves against Aon’s pressure tactics,” Alliant said in its statement.
Reflection of the Times?
One insurance and surety broker suggested the dispute reflects the times.
“There’s a lot of this going on, but it seems like an extreme time with a lot of people moving around in our industry,” he says. “You invest a lot of time and money in people. In many cases, they are highly compensated, so you expect a certain amount of loyalty.”
Close business friendships come into play in the dealings between insurance brokers and contractors.
According to Alliant’s argument, many of Arkley's clients, such as Tutor Perini, Valley Crest and Bernard Brothers, had followed Arkley when he switched to Aon from Marsh & McLennan Cos. in 1994. Aon did little to cultivate separate relationships with Arkley's clients while it employed him, says Alliant.
“As long as they don’t interfere with the business, they can go anywhere they want,” says another broker. “But don’t actively recruit other staff members to go with you or approach clients. We expect that in most states, the person who leaves won’t be able to also recruit [the company's] staff. There’s a lot of linking that goes on in that stuff.
