HCI Group, a US-based insurer, has won a breach of contract dispute related to a revenue sharing agreement (RSA) signed in 2009 with reinsurance intermediary Aon Benfield (AON).
Formerly known as Homeowners Choice, HCI had hired Aon Benfield to help it in securing reinsurance coverage.
HCI obtained indemnification from reinsurers against large, extraordinary losses caused by hurricanes and other catastrophes with the support of Aon Benfield, which in turn received fees from the reinsurers.
Both the companies have signed a RSA in 2009, under which Aon would receive share when placing HCI’s reinsurance coverage.
Later, Aon 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.
In its case, HCI opposed the RSA saying that it was never intended to be more than a one-year deal and the purported forfeiture provision was ambiguous and thus not enforceable.
HCI received $744,402 in damages and interest from a Chicago court on 23 March 2013.
HCI Group CEO Paresh Patel said, "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."