HCI Group, Inc. Wins Court Case Against Aon Benfield in RSA Dispute
13 Junio 2013 - 6:00AM
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.
CONTACT: Company Contact:
Jay Madhu, Vice President of Investor Relations
HCI Group, Inc.
Tel (813) 405-3660
jmadhu@hcigroup.com
Investor Relations Contact:
Matt Glover or Michael Koehler
Liolios Group, Inc.
Tel (949) 574-3860
hci@liolios.com
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