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Two former Markel Corp. executives at its troubled insurance-linked securities unit who were fired for having an “undisclosed personal relationship” sued the insurer Thursday, alleging they were denied more than $70 million in incentive payments as a result of the terminations and defamed in the process.
In suits filed in U.S. federal courts, Anthony Belisle and Alissa Fredricks allege Markel improperly searched their cellphones as part of an internal investigation into loss reserves, discovered they were in a personal relationship, then amended corporate documents to bar such relationships before firing the executives last month.
Mr. Belisle was CEO of Markel CATCo in Bermuda, and Ms. Fredricks was Markel CATCo CEO-Bermuda. Markel announced in December that U.S. and Bermuda authorities had made “inquiries” related to the unit’s loss reserves. The insurer began an internal review and on Jan. 18 announced that Mr. Belisle and Ms. Fredricks had left the company after the review uncovered violations of company policy related to their personal relationship.
Markel said in a statement Friday it believes “the claims in these complaints have no merit and (we) intend to vigorously defend against them.”
In his suit filed in U.S. District Court in Concord, New Hampshire, Mr. Belisle alleges that Markel refused to pay him vested incentives of nearly $66 million after he was fired and “tarnished” his reputation “to prevent him from competing with Markel or Markel CATCo in the future.”
In her suit filed in U.S. District Court in Boston, Ms. Fredericks makes similar allegations and says Markel refused to pay her nearly $7.5 million in incentive payments after she was fired.
According to Mr. Belisle’s suit, Markel “wrongfully terminated Mr. Belisle’s employment based on a pretextual, purported violation of company policy that was not in fact a violation of the policy at the relevant time; they amended the same policy just days before the termination but after the incentive payments had vested, in an apparent attempt to create a justification for their action.”
In the suit, Mr. Belisle says he conceived of CATCo in 2010 and established the firm with Qatar Insurance Co. under an agreement where 45% of all profits belonged to him and 55% to QIC. The ILS firm was successful and was sold to Markel in 2015 for $205 million, court documents say. Mr. Belisle stayed on as CEO at a base salary of $1 million plus incentive payments tied to performance and whether he remained with the firm beyond various agreed dates.
Mr. Belisle was granted $50 million in incentive payments related to staying with Markel, of which he allocated $12.5 million to other Markel CATCo employees, court documents say. He was entitled to a further performance incentives up to $77.5 million, of which he allocated $17.1 million to other staff and $7 million to Ms. Fredricks. The final vesting date was Dec. 31, 2018, court documents say.
Ms. Fredricks was hired by Markel CATCo in May 2016 as a senior actuary and quickly impressed managers at the firm, court documents say. By the end of the year, Mr. Belisle had identified her as his likely successor as CEO and she was appointed CEO-Bermuda in November 2017, according to the suit.
Her retention bonus was to be paid in installments and was contingent on her staying with the company until 2021, the suit says.
Meanwhile, Markel CATCo suffered losses as result of hurricanes Harvey, Irma and Maria and California wildfires in 2017. “These natural disasters required Markel CATCo, and others, to modify their loss reserves in late 2017 and throughout 2018,” court papers say.
U.S. and Bermuda authorities started inquiries following loss reserves additions in late 2017. After Markel disclosed the inquires, its stock slumped and it was later hit with a shareholder class action lawsuit.
Markel brought in New York law firm Skadden, Arps, Slate, Meagher & Flom LLP to conduct an internal review. As part of the review, cellphones and laptops of various Markel employees were searched, the suit alleges.
Markel and Skadden, “without disclosing that they would be imaging personal communications and communication modes, e.g., WhatsApp, and without suggesting that the employees had a choice, demanded that all employees, including plaintiff, surrender their personal phones and other business and personal electronic devices, to be imaged and/or searched immediately,” court papers say.
In late December, Markel proposed an amended employment agreement to Mr. Belisle whereby he would potentially forfeit his incentive payment based on the finding of the inquiry, court papers say. Mr. Belisle rejected the proposal.
In January, lawyers at Skadden accused Mr. Belisle “of engaging in an undisclosed personal relationship with Ms. Fredricks” and said the relationship was in violation of Markel’s code of conduct, although “no such prohibitions existed in the agreements or in the code as it existed on Dec. 31, 2018, which was the last code provided to and signed by plaintiff and Ms. Fredricks,” court papers say.
According to the suit, in January Markel inserted a clause into the code of conduct barring relationships between supervisors and employees.
Further, Mr. Belisle asserts in the suit, Ms. Fredricks’ promotions “were all in process before any personal relationship began,” and her incentive payments were granted by Mr. Belisle “from his own incentive payment,” as was customary with key members of his team.
On Jan. 18, Markel elected five new members to the Markel CATCo board, of which Mr. Belisle and Ms. Fredricks were also members, terminated the executives’ employment and told them their incentives would not be paid, court papers say.
Mr. Belisle and Ms. Fredricks allege, among other things, breach of their employment agreements, defamation and invasion of privacy. They seek contractual, compensatory and punitive damages.
Markel Corp. announced late Thursday that it is “fully cooperating” with inquiries by authorities in the United States and Bermuda concerning loss reserves at its Bermuda-based retrocessional reinsurance unit Markel CATCo Investment Management Ltd.