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Homeowners Choice, Inc v. Aon Benfield

September 10, 2012


The opinion of the court was delivered by: Hon. Harry D. Leinenweber


Both the Plaintiff and the Defendant have moved for summary judgment in this matter. For the reasons stated herein, the Motions are denied.


Plaintiff Homeowners Choice, Inc. ("Homeowners Choice") is a Florida corporation with a subsidiary, Homeowners Choice Property and Casualty Insurance Company ("Homeowners Insurance"). In order to manage its downside risk on the policies it issues, Homeowners Insurance buys reinsurance; to procure those policies, it entered into an agreement with a reinsurance broker/intermediary, Defendant Aon Benfield ("Aon"). Generally, to place reinsurance for particular insurance company, a broker must be the "broker of record" for that insurer. In broad strokes, reinsurers generally agree to pay intermediaries a fee, but the fee is deducted from the reinsurance premium payments made by the insurance company, through the broker, to the reinsurer.

Many reinsurance contracts have one-year terms. Although intermediaries also "service" the reinsurance policies, most of a reinsurance intermediary's work on behalf of the insurance company for a particular reinsurance year is completed once the reinsurance coverage is placed. There is typically no separate payment for post-placement servicing.

Homeowners Insurance signed a Broker Authorization Contract (the "Contract") with Aon, designating Aon as its broker of record beginning July 1, 2007. The Contract provided that Aon's broker of record status would continue until Aon resigned, was terminated, or was replaced by a successor broker of record. It also provided that even if Homeowners Insurance terminated Aon's broker of record status, Aon would continue to service the reinsurance contracts that it had placed (unless Homeowners Insurance opted otherwise), and in any event would still receive the "brokerage" (essentially, commission) from those placements.

In 2008, Aon and Homeowners Choice discussed entering into a revenue-sharing agreement so that, under certain conditions, Aon would pay Homeowners Choice some of the commission money that it earned from Homeowners Insurance's reinsurance placements. On November 8, 2008, Aon sent Homeowners Choices an e-mail and draft agreement which would extend for three or five years. (The draft appears to be, to some degree, a standard draft contract that Aon maintains for multi-year agreements.)

Although the extent of negotiation is unclear, discussions continued into 2009. Through those discussions, the explicit references to a multi-year agreement were removed. (Homeowners Choice notes that the document template title at the bottom of the final agreement reads ". . . Homeowners Choice, Inc. 03-2009 1 yr Term.doc.") Aon admits that it typed up the parties' agreed changes to the contract language, but disclaims that it "drafted" the contract.

Homeowners Choice contends that on February 25, 2009, it "agreed to continue its relationship with [Aon] through the June 1, 2009 renewal and apply lower percentages for the revenue-sharing agreement, which this time, was tied only to a one-year term. . . ." The Court agrees with Aon, however, that this contention is inadequately supported. The parties entered into a revenue sharing agreement on March 31, 2009, and executed the written agreement on April 6 and April 29.

The Agreement provides, almost in its entirety:

Based on the desire of the parties to establish a long-term mutually beneficial relationship, this Agreement ("Agreement") is entered into on this 31st day of March 2009, between Aon . . . and Homeowners Choice, Inc., including its affiliates . . . ("Client"), under the following terms and conditions:

1. In consideration for Client appointing Aon Benfield as reinsurance intermediary-broker for the placement and servicing of all reinsurance purchased by the Client (the "Subject Business") for the annual period beginning on June 1, 2009 and ending on May 31, 2010 (an "Agreement Year"), [Aon] agrees to share with Client [Aon's] received and earned brokerage revenue derived from the Subject Business, excluding any brokerage paid to corresponding brokers including those affiliated with [Aon] or sub-brokers ("Net Brokerage Revenue") by paying Client an annual fee ("Annual Fee") for the Agreement Year to be calculated as set out in Schedule A.

2. No Annual Fee shall be due for any Net Brokerage Revenue derived from the Subject Business that is less than $1,000,000, nor shall an Annual Fee be payable subsequent to any decision by Client to terminate or replace [Aon] as its reinsurance intermediary-broker for any portion of the Subject Business. In addition, in the event [Aon] is terminated as Client's reinsurance intermediary-broker for any Subject Business prior to the end of the Agreement Year, Client shall promptly reimburse [Aon] for all Annual Fees previously paid by [Aon] under this Agreement. Client agrees to reimburse [Aon] for any and all costs and expenses associated with collecting any reimbursement.

3. Unless otherwise specified in Schedule A, within 60 days after receipt by [Aon] of the last premium payment for the Subject Business for the Agreement Year or within 90 days after the expiration of the reinsurance contract(s) that constitute the Subject Business, whichever is earlier, [Aon] shall provide Client with a report detailing the Net Brokerage Revenue for the Agreement Year and including payment of the Annual Fee. In the event that [Aon] must pay return brokerage to Client's reinsurers, Net Brokerage Revenue will be recalculated and Client will return to [Aon] as soon as reasonably possible any amount due as a result of the recalculation.

Schedule A set forth the percentage of Aon's Net Brokerage Revenue to which Homeowners Choice would be entitled (between 0-40%), depending on how much net revenue Aon received from Homeowners Insurance's reinsurance placements.

Homeowners Choice did not cancel any of its reinsurance during the Agreement Year. Although satisfied with Aon's service, Homeowners Insurance notified Aon in March 2010, that it would be using a different reinsurance broker for reinsurance placements starting on June 1, 2010. Aon remained the broker of record to service the ...

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