WASHINGTON (dpa-AFX) - HCI Group Inc. (HCI), formerly Homeowners Choice Inc., said it has won a breach of contract dispute with reinsurance intermediary giant Aon Benfield (AON) in which HCI claimed monies were owed under a 2009 revenue sharing agreement. Such agreements are commonly called 'RSAs.'
HCI, which primarily provides insurance to Florida homeowners, had engaged Aon to assist it in securing reinsurance coverage. Reinsurance is insurance for insurance companies. With Aon's assistance, HCI sought and obtained indemnification from reinsurers against large, extraordinary losses caused by hurricanes and other catastrophes. Aon received fees from the reinsurers when the coverage was placed.
In 2009, Aon agreed to share with HCI revenues Aon would receive when placing HCI's reinsurance coverage. Later, it refused to pay after HCI elected to use another intermediary for the following year. According to Aon, the RSA contained a clause that said no shared revenue would be payable any time after HCI decided to terminate or replace Aon and that HCI therefore forfeited its a share of the revenue when it did not renew its relationship with Aon.
HCI sued in federal court in Chicago, Illinois contending the RSA, which was authored by Aon and contained no renewal provisions, was never intended to be more than a one-year deal and the purported forfeiture provision was ambiguous and thus not enforceable. The federal trial judge agreed with HCI and on March 23, 2013 awarded HCI $744,402.06 in damages and interest.
'While we are pleased with the decision, we are disappointed that a simple handshake deal deteriorated to parsing contract language and arguing over legal technicalities,' said HCI Group, Inc. Chief Executive Officer Paresh Patel.
Although the case centered on a one year RSA, an Aon representative testified that even if the RSA had been a three year contract, HCI would have owed back three years of shared revenue if it did not renew with Aon at the end of three years. HCI said it argued this interpretation would lead to absurd results.
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