The Hartford Financial Services Group Inc. filed a lawsuit this week that includes a lengthy, detailed complaint against its competitor New York-based Arch Insurance Group Inc., and its Bermuda-based parent Arch Capital Group Ltd., accusing Arch of stealing trade secrets in addition to many of its underwriters.

The lawsuit, filed in New York Supreme Court, also alleges individual complaints against former Hartford executives who helped Arch try to "destroy" the division they had departed—most notably David McElroy, a Connecticut resident who spent nine years at the Hartford, and was president of New York-based Hartford until June 5, according to a MarketWatch report. The complaint, which details "egregious, ongoing misconduct orchestrated by a competitor and several former senior executives," also names John Rafferty and Michael Price.

McElroy spent nine years working at Hartford, retiring as president of its Hartford Financial Products division (BestWire, June 3, 2009). Days later, Arch announced McElroy had joined its executive management team (BestWire, June 8, 2009). And days after that, Arch announced McElroy was heading the new Arch Financial & Professional Liability Group, and that another senior Hartford executive, John Rafferty, had left to work under McElroy (BestWire, June 15, 2009), MarketWatch reported.

Arch is accused of convincing more than 60 of Hartford's 250 financial products employees to join Arch, including "the vast majority" of the division's underwriters, according to the suit.

Arch faced similar accusations two years ago, when General Reinsurance Corp. was awarded an injunction against Arch on accusations that Arch had deliberately poached 29 employees. (BestWire, Oct. 19, 2007).

In this most recent case, the "raid" for Hartford employees was "characterized by threats, bullying and repeated disparagement," according to the lawsuit. "In a particularly brazen tactic, Arch began soliciting Hartford employees with e-mails sent directly to their e-mail address at The Hartford," the New York Supreme court papers reveal.

The suit seeks punitive damages and "many millions of dollars" in compensatory damages, to force the former executives to return all compensation earned "in connection with their disloyalty to The Hartford" and to stop Arch's "dishonest trade practices," reports the Hartford Courant.

Arch did not comment.

The Hartford's financial products division had about $720 million in premiums in force at the end of 2008, according to the lawsuit. Its business in the specialty financial arena made up about 6.8% of overall premiums in 2008, according to the company.

David Snowden, a Hartford spokesman, said the financial products division is in a good position to weather difficult circumstances.

"Our ability to place appropriate reinsurance for the Hartford has not been affected," he said. "We filed this lawsuit because we will not tolerate illegal or unethical behavior."

Both company members have current financial strength ratings of A (Excellent) from A.M. Best.

Back in 2002, Hartford Life Insurance Co. was a defendant against a lawsuit from Bancorp Services LLC in which it lost a $118.4 million judgment for “misappropriation of a trade secret” and “breach of contract,” reported BestWire, March 25, 2002.

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