TAMPA, Fla., Jan. 13, 2014 (GLOBE NEWSWIRE) -- A U.S. appeals court has affirmed a trial court decision in favor of Florida based insurer HCI Group, Inc. (NYSE:HCI), formerly known as Homeowners Choice, Inc., over insurance intermediary giant Aon Benfield (NYSE:AON) in a dispute related to a 2009 revenue sharing agreement. Such agreements are commonly called RSAs.
HCI had engaged Aon to assist it in securing reinsurance coverage for its Florida homeowners' insurance business in 2009. Reinsurance is essentially insurance for insurance companies. With Aon's assistance, HCI 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.
Aon agreed to an RSA with HCI, where revenues Aon would receive when placing HCI's reinsurance coverage would be shared with HCI. 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 share of the revenue when it did not renew its agreement with Aon.
HCI sued Aon 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 asserted forfeiture provision was ambiguous and thus not enforceable. After a two day trial, which included testimony from top HCI executives and an individual Aon broker (Aon executives involved in negotiating the RSA were purportedly out of the country and unavailable to testify), the trial judge agreed with HCI and on March 23, 2013 entered judgment for HCI. The judge's opinion can be found at www.hcigroup.com/aon/opinion.
Aon appealed to the U.S. Court of Appeals, Seventh Circuit, in Chicago contending the RSA language was not ambiguous. Oral arguments were heard on October 2, 2013, and on December 19, 2013, the court issued its decision in favor of HCI. The court found the RSA language was ambiguous and the interpretation sought by Aon to be "problematic because it leads to an impossibility" as well as unreasonable. The opinion can be found at www.hcigroup.com/aon/appeal.
"This industry survives on trust," said Paresh Patel, HCI Group's chairman and chief executive officer. "We trusted Aon to pay us. And they did pay us... after a trial, an appeal, and tens of thousands of dollars in legal fees. It's interesting that multiple Aon executives flew in to meet with us and get our business yet none were available to settle our dispute. A simple handshake deal devolved to negotiating with lawyers and parsing confusing contract language. Ultimately, we were vindicated by the facts."
About HCI Group, Inc.
HCI Group, Inc. owns subsidiaries engaged in diverse, yet complementary business activities, including homeowners' insurance, reinsurance, real estate and information technology services. 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.
The company's common shares trade on the New York Stock Exchange under the ticker symbol "HCI" and are included in the Russell 2000 Index and S&P SmallCap 600 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, visit www.hcigroup.com
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