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."
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 argued this interpretation would lead to absurd results.
About HCI Group, Inc.
HCI Group, Inc., formerly Homeowners Choice, Inc., owns subsidiaries engaged in diverse business activities, including property and casualty insurance, information technology, real estate and reinsurance. The company's largest subsidiary, Homeowners Choice Property & Casualty Insurance Company, Inc., is a leading provider of property and casualty insurance in the state of Florida.
HCI's common shares trade on the New York Stock Exchange under the ticker symbol "HCI" and are included in the Russell 2000 Index. Its 8% Senior Notes trade on the New York Stock Exchange under the ticker symbol "HCJ." Its 7% Series A, cumulative redeemable preferred shares trade on the NASDAQ Capital Market under the ticker symbol "HCIIP." For more information about HCI Group, Inc., visit www.hcigroup.com.
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Source:HCI Group, Inc.