An executive of Turner Construction Co. produced an affidavit in connection with surety business it decided to give to Alliant on behalf of Turner's parent company, Hochtief.

From the standpoint of executives at Aon, the big, Chicago-based insurance brokerage, June 13, 2011, is a day that won't soon be forgotten.

That was when a couple of top construction insurance and surety executives, Peter Arkley and Michael Cusack, who had been longtime employees of Aon, left the firm to join Alliant, a comparative upstart based in California. On their way out the door Arkley and Cusack took 36 years of Aon experience and about 100 clients who represent about $20 million of annual revenue.

The exit set in motion a torrent of lawsuits, spilling into three states and entangling major national contractors, such as Turner Construction and Tutor Perini, whose executives have had to produce affidavits and other evidence, and may be called on to testify in new proceedings. Courts in all three states have ruled against Alliant and the executives that departed, but a New York State Supreme Court judge made a more extensive ruling based on a hearing.

Within 72 hours of Arkley and Cusack departing, according to court filings, 50 Aon employees moved over to Alliant and another 10 have followed suit since then.

In the past, top construction insurance executives have switched employers, but few can recall a migration of this scale. “From what I read, this is an extreme case,” says one broker who asked not to be identified.

What does it mean? Even in an industry wracked by recesson, smaller margins and fewer good clients, insurers battle for talent that brings in business from top construction-insurance and surety-brokerage accounts. In good times or bad, individual brokers or producers cultivate close relations with contractors and wield considerable market power even when employed by large brand-name brokerage firms. And if a company wants to build up fast a construction insurance unit there's no faster way than to buy a company or bring over the rainmakers from an established competitor.

At the center of the current legal storm are two former Aon executives: Cusack, a managing director and longtime construction insurance expert, and Arkley, who since 2006 served as president and chief executive of Aon Construction Services Group and, prior to that, as a managing principal of Aon Risk Services Inc. Both had been with Aon 18 years.

The unsettled question at the nub of the lawsuits is whether the departures also involved solicitation of clients that violated non-compete clauses in employment contracts, as Aon claims, or whether the departing brokers made no solicitation violating their Aon contracts, as Alliant maintains. The accounts that have left Aon for Alliant will stay there, but there could be a large damage award if the matter is ever fully tried on its merits, says an attorney for Aon.

A key part of Alliant's defense has been the primacy of the relationship between individual broker/producers and their clients. Arkley has close relationships with some of the biggest companies in the industry, including Turner and Tutor Perini, where he has been a director. Some of these relationships originated before he joined Aon. Following a broker/producer from one company to another isn't unusual.

Alliant Seeks Growth

Alliant has been scaling up in size by acquiring insurance companies; in 2007, the company itself was acquired by the big private equity investor, the Blackstone Group, the big financial company that has $37 billion in assets under management as part of its private equity business.

Late in December, a New York Supreme Court judge, Bernard Fried, extended the duration of some limits he had placed on Aon's former employees in a September, 2011 temporary restraining order. In granting Aon's request for a preliminary injunction, Fried continued to bar the former Aon Risk Services Northeast staff with restrictive covenants in their employment agreements from soliciting business from Aon clients or soliciting any more Aon construction-group employees to go to work for Alliant.

Citing evidence that Alliant had put a pricetag on negotiating a settlement with Aon, Fried wrote in his decision that Alliant had conducted “a systematic and coordinated raid” on Aon’s clients and employees. Alliant had planned to spend $19.2 million on a legal settlement and pay Cusack and Arkley a combined $11.5 million for their first year’s annual salary and a combined $9.5 million in bonuses for signing and meeting certain goals, Fried said in his ruling.

Aon’s attorney, Shand S. Stephens, says Fried’s decision is a good example of how the judge saw the evidence collected during a two-day hearing in a Manhattan courtroom in November.

Alliant, for its part, said in a statement that the ban and lawsuit were “a clear attempt by Aon—an industry giant—to protect its diminishing market share by misleading customers about the Court’s ruling and by using litigation to prevent talented employees from pursuing more compelling professional opportunities.”

An attorney for Cusack could not be reached for comment. But an Alliant spokesman also said the ruling narrowed the scope of restrictions and Aon's claims against Alliant. And Judge Fried did not put much weight on Aon's claim that Alliant had stolen trade secrets and misappropriated proprietary data.

No doubt there will be other episodes in the legal struggle, with some likely to make the contractors involved uncomfortable.

Court filings by Alliant indicate that both Arkley and Cusack, plus two other key executives, were at the end of employment contracts with Aon that expired April 30. Aon offered Arkley a short-term contract conditioned on renewing a couple of key accounts, says Alliant.

Pivotal Meetings

As the clocked ticked down on those contracts in early 2011, Arkley and Cusack each met separately with a top Alliant executive, Richard Ferrucci. He had worked with members of the Aon construction unit while he headed that unit and while he was employed at Willis Inc., another large broker. Ferrucci serves as trustee of Arkley’s life insurance trust and is godfather to Arkley’s wife.

Aon and Alliant dispute the details and significance of what was discussed. Alliant says Ferrucci was scrupulous in meeting separately with Arkley, Cusack and other Aon managers. No confidential Aon information was discussed. Ferrucci and Cusack did discuss Alliant's privately held status, finances and service platform. But Ferrucci testified that he never mentioned in meeting with any one Aon employee that he was speaking about jobs with their Aon colleagues, too.

Even after playing a round of golf in New York and driving back to Boston together on June 12, Cusack testified that he and Ferrucci never discussed other Aon employees or Aon clients.

Also disputed is whether Arkley was terminated by Aon or resigned.

On June 5, says Alliant, Aon terminated Arkley. Aon denies it.