TAMPA, Fla., June 13, 2013 (GLOBE NEWSWIRE) -- Florida based insurer, HCI Group, Inc. (NYSE:HCI), formerly Homeowners Choice, Inc., has won a breach of contract dispute with reinsurance intermediary giant Aon Benfield (NYSE: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, one of the world's largest reinsurance intermediaries, 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. As is customary in the industry, 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. The judge's opinion can be found at http://hcigroup.com/aon . Aon has appealed. "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. "This industry survives on trust," he said. According to Patel, "Aon flew in executives to make the deal. But when a disagreement arose, the executives became unavailable—even at the trial. Instead of discussing the business deal, Aon sent lawyers."
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV