AssuredPartners (AP) filed a lawsuit in December 2024 against EPIC Insurance Brokers & Consultants and three former employees — Rick Frechmann, Joleen Mayfield, and Brad Snitzer — alleging breach of contract, misappropriation of trade secrets, tortious interference, unjust enrichment, and breach of the duty of loyalty. The lawsuit claims that after leaving AP, the defendants improperly solicited AP clients and took confidential information.

Court Denies AP’s Request for Temporary Restraining Order

As part of its lawsuit, AP sought a temporary restraining order (TRO) to prevent the former employees from conducting business with AP’s clients. The company argued that their actions had caused financial losses and irreparable harm to its goodwill. However, US District Judge Sarah E. Pitlyk denied AP’s TRO request, citing a lack of evidence proving that an injunction was necessary.

In her ruling, Judge Pitlyk emphasized that:

• AP’s primary alleged harm—the loss of six clients and 21 insurance policies—was a financial loss that could be addressed through monetary damages, rather than requiring injunctive relief.
• The company did not provide sufficient evidence that its reputation or goodwill had suffered beyond measurable financial losses.
• The court was not convinced that AP would continue to lose clients at a rate that justified emergency legal intervention.

While the ruling does not dismiss AP’s broader claims, it allows EPIC and its newly hired employees to continue their business operations without court-imposed restrictions.

Legal Issues at the Center of the Case

The lawsuit centers on the enforcement of Restrictive Covenant Agreements (RCAs) that the former employees signed while at AP. These agreements include:

• Non-solicitation clause: Prevents former employees from soliciting, selling, quoting, placing, or servicing insurance products for AP clients for two years after leaving the company. It also prohibits them from influencing AP’s business partners to diminish or end their relationships with AP.
• Confidential information clause: Prohibits former employees from using or disclosing non-public information related to AP’s clients, contracts, pricing, business strategies, and insurance markets.
• Restricted clients clause: Identifies AP’s clients from the past two years as “restricted clients,” meaning former employees cannot conduct business with them during the restricted period.

Frechmann, Mayfield, and Snitzer have denied soliciting former AP clients but stated that some clients reached out to them after seeing public announcements about their new employment.

Next Steps in Litigation

The court has ordered both parties to establish a schedule for limited discovery and briefing on a potential preliminary injunction. This schedule, due by March 14, 2025, will set the timeline for the next phase of litigation.

The case raises broader legal questions about the enforceability of restrictive covenants in the insurance industry and the extent to which former employees can engage with previous clients. As the lawsuit moves forward, further rulings will determine the validity of AP’s claims.

For now, EPIC and the former AP employees can continue working without legal restrictions imposed by the court.

Arthur J. Gallagher & Co. has announced that the anticipated closure of its $13.45 billion acquisition of AssuredPartners Inc. will likely be pushed to the second half of 2025. Initially expected to be finalized in the first quarter, the revised timeline follows a request for additional information under the Hart-Scott-Rodino (HSR) Act, a regulatory process overseen by the Federal Trade Commission (FTC) and the Department of Justice (DOJ).

Regulatory Scrutiny Extends Review Period

Strategic Impact of the Acquisition

What Comes Next?

The aftermath of the recent wildfires in Los Angeles, particularly in the Pacific Palisades area, has left displaced residents facing significant challenges in rebuilding due to insurance constraints. While city officials and developers are working on recovery plans, securing homeowners’ insurance has become a significant obstacle, according to a recent Wall Street Journal (WSJ) article.

Insurance Industry Pullback

The WSJ reports that California’s largest property insurer, State Farm General, has announced it is not writing new policies in high-risk wildfire areas, stating, “Writing new policies doesn’t make any sense at this time.” The company has also requested a 22% rate increase for 1.2 million homeowners to maintain financial stability. The insurance commissioner, Ricardo Lara, acknowledged that outdated state regulations, particularly Proposition 103, have limited insurers’ ability to charge rates that fully account for wildfire risks.

Scale of the Damage and Insurance Costs

The January wildfires caused extensive damage, burning over 50,000 acres, destroying more than 16,000 structures in Pacific Palisades alone, and leading to an estimated $40 billion in insurance claims. The WSJ notes that California’s FAIR Plan, the state’s insurer of last resort, provides coverage up to $3 million per home, leaving many high-value properties significantly underinsured. Some homeowners choose to self-insure, accepting the financial risk themselves due to the difficulty of obtaining traditional policies.

Challenges in Rebuilding and Recovery Plans

According to the WSJ, Los Angeles officials, led by newly appointed Chief Recovery Officer Steve Soboroff, are working on rebuilding strategies that include fire-resistant construction materials and infrastructure improvements, such as burying power lines. However, political disputes have emerged, particularly over housing density and affordability concerns. Meanwhile, billionaire developer Rick Caruso has initiated a separate effort to restore the area with private investment, opposing the inclusion of affordable housing.

State Farm's Financial Position and Rate Increase Request

At a February meeting in Oakland, State Farm disclosed that it expects $7.9 billion in payouts from the wildfires and has already faced financial strain due to inflation and increasing natural disaster claims. The company previously sought a 30% rate increase, which was denied without a public hearing under Proposition 103. Now, it is requesting a 22% hike, which the state is still reviewing. Consumer advocacy groups argue that State Farm has not sufficiently justified its need for higher rates.

Uncertainty for Homeowners

The WSJ reports that many residents are uncertain about returning, with some estimating that three out of four former homeowners in Pacific Palisades may not rebuild due to financial and insurance-related hurdles. Even those committed to rebuilding, like architect Arika-Paloma Urquidez, are primarily focused on whether their new homes will be insurable rather than aesthetics.

The WSJ article highlights the broader implications of wildfire risk and insurance availability across California, raising concerns about whether insurers will continue to provide coverage in high-risk areas and how state regulations will adapt to the increasing frequency of natural disasters.