Monday, October 22, 2007, 10/22/2007 07:43:00 AM

Trade Secrets and Insurance Underwriting

From Business Insurance, a story concerning the temporary injunction against Arch Capital Group Ltd. issued by a Connecticut state court judge who found that several Arch facultative reinsurance officials misappropriated General Re Corp. trade secrets when they left Gen Re to join Arch earlier this year.

In a classic employee raiding scenario, this April four of Gen Re’s top property facultative underwriting executives — Steven Franklin, Jennifer Apgar, Philip Augur and Kenneth Vivian — quit to start a new facultative operation for Arch. Within a week, 26 other Gen Re facultative employees followed suit.

Although Business Insurance notes that none of the four top officials had employment contracts or noncompete agreements with Gen Re, it nevertheless sued Arch and the four executives for breach of fiduciary duties, tortious interference with business contracts and violations of a state trade secrets law.

The judge's ruling noted that Gen Re had withdrawn initial charges that its former employees physically took proprietary material when they quit. But, the judge concluded that the defecting executives made a “concerted effort” to tap their collective memories for loss cost data that Gen Re had developed to price facultative accounts. These memories proved “exceedingly accurate,” and Arch was able to replicate Gen Re’s loss cost figures in at least a dozen fire risk categories.

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