HOMEOWNERS CHOICE, INC. v. AON BENFIELD,INC.
Filing
81
MEMORANDUM Opinion and Order, Signed by the Honorable Harry D. Leinenweber on 3/29/2013:Case TerminatedMailed notice(wp, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
HOMEOWNERS CHOICE, INC.,
Plaintiff,
Case No. 10 C 7700
v.
Hon. Harry D. Leinenweber
AON BENFIELD, INC.,
Defendant.
MEMORANDUM OPINION AND ORDER
Before the Court for decision are the trial record and posttrial briefing of Plaintiff Homeowners Choice, Inc. and Defendant
Aon Benfield.
For the reasons stated herein, the Court finds in favor of
Plaintiff
Homeowners
Choice
Inc.
and
awards
the
sum
of
$744,402.06. The Court enters the following Findings of Fact and
Conclusions of Law pursuant to FED. R. CIV. P. RULE 52(a)(1).
I.
FACTUAL BACKGROUND
This case stems from a dispute over a reinsurance contract.
Reinsurance
is
a
transaction
where
a
reinsurer
agrees
to
indemnify or reimburse an insurance company (the reinsured)
against all or part of a loss the insurance company sustains
under
the
policies
reimbursement,
the
it
has
insurance
issued.
company
In
pays
exchange
the
for
the
reinsurer
a
premium.
In order to facilitate a reinsurance transaction,
generally an insurance company must appoint a reinsurance broker
as its “broker of the record.” After being appointed, the broker
of the record obtains reinsurance policies and services those
policies
on
the
insurance
company’s
behalf.
Reinsurance
companies earn commissions on the policies they secure for an
insurance company.
A.
Plaintiff
publicly
traded
The Parties
Homeowners
Florida
Choice,
Inc.
corporation.
(“Homeowners”)
It
has
a
is
number
a
of
subsidiary companies - one of which is Homeowners Choice Property
and
Casualty
Insurance
Company
(“Homeowners
Insurance”).
Homeowners Insurance is engaged in the business of selling
property
and
casualty
insurance
to
Florida
homeowners.
Homeowners Insurance reinsures its insurance portfolio through
the purchase of reinsurance.
At all relevant times of this
dispute, Frank McCahill (“McCahill”) was the President and Chief
Executive Officer of Homeowners and Perish Patel (“Patel”) was
the Chairman of the Board of Directors.
Defendant Aon Benfield, (hereinafter, “Aon” or “Benfield”)
is an Illinois corporation that provides, among other things,
insurance
risk
management
services
and
brokers
reinsurance.
Homeowners first appointed Aon as its “broker of the record” in
2007.
Homeowners renewed its agreement with Aon in 2008 and
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again in 2009.
This case concerns the Broker Authorization
Contract the parties entered into in 2009.
B.
Negotiations Leading to the 2009
Brokers Authorization Contract
In approximately October 2008, the parties began to engage
in negotiations regarding the renewal of their 2008 Brokers
Authorization Contract for the 2009-2010 fiscal year.
This was
not an uncommon period of time for negotiations to occur, as it
is typical for casualty and property insurance companies in
Florida to secure their reinsurance contracts between May and
July, before Florida’s hurricane season.
insurance
companies
to
request
It is also common for
proposals
from
a
number
of
reinsurance brokers months before they select which reinsurance
company
to
reinsurance
name
as
its
brokers
broker
submit
of
record.
provide
insurance
The
proposals
companies
an
explanation of the services the broker can offer and what the
premium will be for such services.
At the time Homeowners and Aon began negotiations for the
2009 Contract, Homeowners was experiencing significant growth.
Aon
recognized
substantial
record.
this
amount
and
of
recognized
commissions
as
its
ability
Homeowners’
to
earn
broker
a
of
Thus, Aon sought to secure its role as Homeowners’
broker of record as soon as
possible, and for as long as
possible.
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In the early stages of negotiations, Homeowners proposed to
renew its agreement with Aon if Aon agreed to enter into a
Revenue-Sharing Agreement (“RSA”) with Homeowners.
proposed
RSA,
Aon
would
pay
Homeowners
a
Under the
portion
of
the
commissions it earned from placing Homeowners’ reinsurance.
Aon agreed to consider the possibility of incorporating a
RSA into the 2009 Brokers Authorization Contract and on November
8,
2008
sent
agreement”).
continue
as
Homeowners
The
draft
Homeowners’
a
draft
agreement
broker
of
agreement
provided
record
(“the
that
and
draft
Aon
would
would
allow
Homeowners to share a portion of the revenue Aon earned from the
placement of reinsurance policies.
The draft agreement proposed
to extend the brokerage relationship to either a three-year or a
five-year term.
After McCahill received the draft agreement and learned the
agreement
was
for
multiple
years,
he
rejected
the
offer.
McCahill informed Aon he was not interested in any agreement that
bound Homeowners for a period of longer than one year.
After this, negotiations between the parties continued.
During this time, however, Homeowners was receiving proposals
from other reinsurance brokers. Notably, in early February 2009,
Aon learned that one of its competitors, Willis Insurance, made
a presentation to Homeowners regarding the reinsurance services
it could offer for the 2009-2010 fiscal year.
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After learning
this,
Aon
immediately
began
to
coordinate
a
meeting
with
Homeowners to make a similar presentation.
On February 24, 2009, McCahill and Patel met with a number
of Aon representatives at a restaurant in the Tampa Airport in
Florida.
The purpose of the meeting was to discuss Aon resuming
its role as Homeowners’ broker of record and discuss a RSA that
was amenable to both Homeowners and Aon.
Those present at the
meeting from Aon included, Jeff Jones (“Jones”), the reinsurance
broker
Homeowners
Fleischhacker
had
been
working
(“Fleischhacker”),
with
Jones’
since
2007,
supervisor,
Bill
and
Rob
proposed
an
Bredahl (“Bredahl”), one of Aon’s top executives.
During
the
meeting,
Bredahl
initially
arrangement similar to that described in the draft agreement
which
involved
a
multi-year
agreement
between
the
parties.
McCahill and Patel again rejected this proposal and explained
Homeowners was only interested in entering a one-year agreement.
At this point, Bredahl countered with a one-year reinsurance
agreement that allegedly included a one-year RSA.
The agreement
was to begin June 1, 2009 and end May 31, 2010.
McCahill and
Patel orally accepted this offer on behalf of Homeowners.
The day after the meeting, McCahill and Jones exchanged
emails to confirm the terms of the oral agreement the parties
reached in Tampa. Both emails stated that the parties had agreed
on a one-year arrangement and confirmed that the agreement
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included a one-year RSA.
Jones informed McCahill that Aon would
formalize this agreement in writing.
C.
The 2009 Brokers Authorization Contract
On or about April 29, 2009, Aon sent McCahill a Brokers
Authorization Contract (“the 2009 Contract”) which purported to
memorialize
the
February 2009.
agreement
the
parties
reached
in
Tampa
in
Shortly after receiving the agreement, McCahill
signed it and returned a signed copy to Aon.
In relevant part, the 2009 Contract provides:
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
[Homeowners] 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 [Homeowners] 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
[Homeowners] 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
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shall an Annual Fee be payable subsequent to
any decision by Client [Homeowners] 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
[Homeowners’]
reinsurance
intermediary broker for any Subject Business
prior to the end of the Agreement Year,
Client [Homeowners] shall promptly reimburse
[Aon] for all Annual Fees previously paid by
[Aon]
under
this
Agreement.
Client
[Homeowners] agrees to reimburse [Aon] for
any and all costs and expenses associated
with collecting any reimbursement. . . .
Pl.’s Ex. 1 at 1 (emphasis added).
Pursuant to the 2009 Contract, Aon resumed its role as
Homeowners’ broker of record for the 2009 fiscal year.
It is
undisputed that Aon remained Homeowners’ broker of record until
May 31, 2010, the date the 2009 Contract expired.
Homeowners’
interpretation
of
paragraph
two
was
that
Homeowners would receive an annual fee so long as it did not
replace or terminate Aon before the 2009 Contract expired.
Aon
contends that the same paragraph required Homeowners to renew the
2009 Contract with Aon before it was entitled to its annual fee.
D.
Negotiations for Renewing the 2009 Contract
In the fall of 2009, (while Aon remained Homeowners’ broker
of record pursuant to the 2009 Contract), Homeowners requested
proposals from several reinsurance brokers, including Aon.
In
requesting these proposals, Homeowners specifically asked brokers
to include some type of RSA in their presentation.
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Homeowners
received
proposals
from
Aon
and
TigerRisk,
one
of
Aon’s
competitors.
Homeowners received Aon’s proposal around January 8, 2010.
In
this
297-page
proposal,
“Compensation Structure.”
Aon
included
a
section
titled,
This section included a discussion of
a proposed RSA for 2010-2011. The final paragraph referenced the
2009 Contract Aon had with Homeowners.
In relevant part, it
read, “[a]s with the expiring Agreement, please note that the
provisions are intended to only include brokerage earned by Aon
Benfield . . . are [sic] payable to Company [Homeowners] at the
end of each treaty year, in the event that Aon Benfield remains
as broker for the subsequent contract year.”
Pl.’s Ex. 17 at
119.
Homeowners
noticed
this
language
in
the
proposal,
but
thought it was of little significance since the document was only
a proposal for 2010, and not a binding document that could not
impact the 2009 Contract the parties executed nearly nine months
prior.
Thus, Homeowners never communicated any concerns to Aon
with respect to this provision affecting its entitlement to the
annual fee in the 2009 Contract.
Over the next months, Aon’s representatives communicated
with Homeowners several times to try and secure the renewal as
its broker of record for the 2010.
During these communications,
Homeowners contends Aon never mentioned anything with respect to
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a forfeiture of the annual fee under the RSA in the 2009 Contract
if it chose another reinsurance broker for 2010.
Ultimately, on or about March 10, 2010, Homeowners informed
Aon that it had chosen TigerRisk as its reinsurance broker for
2010.
McCahill emailed Jones to notify him that after May 31,
2010 (the date the 2009 Contract expired), Homeowners would be
using TigerRisk as its broker of record. Jones responded to this
email, but failed to mention anything regarding the fact that
Homeowners would forfeit its right to the fees owed under the RSA
in the 2009 Contract as result of its decision.
On May 14, 2010, Homeowners notified Aon that it was owed
$659,943 under the RSA pursuant to the 2009 Contract.
Aon
responded that under paragraph 2 of the 2009 Contract, it owed
Homeowners nothing since Homeowners chose not to renew Aon as its
broker of record for 2010.
E.
Procedural History
On December 3, 2010, Homeowners filed the instant suit in
this Court claiming Aon was liable for breach of contract and
unjust enrichment.
filed Cross
ECF No. 1.
Motions
for
On January 31, 2012, the parties
Summary
Judgment.
In
its
Motion,
Homeowners argued that it was entitled to the annual fee under
the RSA because Aon remained Homeowners’ broker of record until
May 31, 2010, the Contract’s expiration date.
In Aon’s Motion,
it argued that it was entitled to judgment as a matter of law
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because paragraph 2 of the 2009 Contract provided that Homeowners
would not receive any payments under the RSA if it terminated or
replaced Aon as its broker of record in 2010.
This Court granted Aon’s Motion for Summary Judgment on
Homeowners’ unjust enrichment claim.
ECF No. 56.
With respect
to the breach of contract claim, the Court denied both summary
judgment motions, determining that the RSA provision in the 2009
Contract was ambiguous.
In finding this ambiguous, the Court
held that an issue of material fact remained with respect to
meaning of the term “Subject Business” in paragraph 2 of the 2009
Contract.
On March 12, 2012, the Court began a two-day bench trial.
Both Homeowners and Aon presented testimony with respect to their
interpretation
Business.”
of
the
2009
Contract
and
the
term
“Subject
After the trial concluded, the Court directed the
parties to submit post-trial briefs.
II.
DISCUSSION
Pursuant to Federal Rule 52, the Court enters the following
written Findings of Fact and Conclusions of Law based upon
consideration of all the admissible evidence as well as this
Court’s own assessment of the credibility of the trial witnesses.
To the extent that any Findings of Fact, as stated, may be
considered Conclusions of Law, they shall be deemed Conclusions
of Law.
Similarly, to the extent that matters expressed as
- 10 -
Conclusions of Law may be considered Findings of Fact, they shall
also be deemed Findings of Fact.
A.
1.
Findings of Fact
The Parties’ Prior Transactions
First, it is undisputed that Homeowners appointed Aon as its
broker of the record in 2007 pursuant to a one-year agreement.
Then, in 2008, Homeowners renewed the 2007 agreement for a oneyear term.
Finally, in February 2009, the parties agreed to
renewing their 2008 agreement for yet another one-year term.
2.
Next,
it
is
The Drafter of the 2009 Contract
clear
that
Aon’s
general
counsel,
Daniel
Eldredge, was the individual who drafted the 2009 Contract.
It
is equally clear that neither McCahill nor Patel made a single
change to the written 2009 Contract prior to signing it.
3.
Homeowners’ Intent
After considering the evidence adduced at trial, it is
evident that Homeowners sought to enter into a one-year agreement
with Aon for the 2009-2010 fiscal year.
The Court also finds
Homeowners intended the 2009 Contract to include a one-year RSA.
These findings are supported by Homeowners rejection of Aon’s
November 2008 draft agreement and its rejection of Bredhal’s
initial offer at the February 2009 meeting in Tampa, Florida.
See Ct. Tr. 3/12/13 McCahill Direct at 36 (stating that “[o]n
numerous
occasions,
I
discussed
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with
the
personnel
at
Aon
Benfield that a multiyear risk sharing agreement was totally
unacceptable, and on many occasions I advised them to cease and
desist even bringing the topic up.”); see also Ct. Tr. 3/13/13
Jones Direct at 211 (explaining “Rob Bredhal said:
We can take
the three-year deal that we offered you before, and we can make
that a one-year deal.”).
This finding is further supported by the emails exchanged
between McCahill and Jones immediately after the February 2009
meeting.
Notably, on February 25, 2009, McCahill emailed Jones
stating:
“Jeff:
Good meeting.
A few follow-ups:
a “one-year” commission sharing arrangement.”
We agreed to
Pl.’s Ex. 6.
Thus, the Court finds Homeowners intended the 2009 Contract
to include a one-year RSA that was payable to Homeowners at the
end of the Contract term regardless of who it chose as its broker
of record in 2010.
4.
Aon’s Intent
With respect to Aon’s intent, the Court finds the evidence
adduced to be a mixed bag.
It is undeniable that Aon presented
testimony that it intended the RSA in the 2009 Contract to be
contingent upon Homeowners naming Aon as its broker of record in
2010.
See Ct. Tr. Jones Direct 3/13/13 at 213 (stating “Rob
Bredahl expressed . . . that [sic] revenue sharing agreement
would allow there to be a stickiness factor between Homeowners
Choice and Aon Benfield.
So it would allow the relationship to
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continue.
It would provide an incentive for the relationship to
continue.”); see also Ct. Tr. 3/13/13 Jones Direct at 221-222
(explaining that Aon told Homeowners it needed to consider the
difference in premium payments as well as their forfeiture of the
RSA when it determined whether to renew Aon in 2010).
This intention is also illustrated by the proposal Aon sent
to Homeowners in January 2010.
In relevant part, it read, “[a]s
with the expiring Agreement, please note that the provisions are
intended
to
only
include
brokerage
earned
by
Aon
Benfield . . . are [sic] payable to Company [Homeowners] at the
end of each treaty year, in the event that Aon Benfield remains
as broker for the subsequent contract year.”
Pl.’s Ex. 17 at
119.
However,
this
evidence
is
contradicted
by
the
email
communications Jones had with McCahill the day after the oral
agreement was reached in Tampa in February 2009.
That email was
in response to McCahill’s email which sought to confirm, among
other things, that Aon and Homeowners had agreed on “a one-year
commission sharing arrangement” in Tampa.
response
to
McCahill,
under
the
Pl. Ex. 6.
heading,
“Revenue
In his
Sharing
Agreement (RSA),” Jones wrote, “[a]s we discussed, Aon Benfield
has offered and HCI [Homeowners] has accepted to continue our
relationship through at least, its June 1, 2009 reinsurance
renewal.
Our relationship during this timeframe (i.e., the June
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1, 2009 reinsurance renewal) will include a RSA, which we [sic]
formalize in the near future, calculated as follows . . .”
Ex. 5.
Aon’s
Pl.
This email fails to mention anything with respect to
intention
that
the
fees
earned
under
the
RSA
were
contingent on Homeowners renewing Aon as its broker of record in
2010.
Indeed, this language is similar to that in the 2009
Contract, which also fails to express Aon’s intentions to make
the annual fee contingent upon renewal.
In relevant part, the
Contract states:
[N]or shall an Annual Fee be payable
subsequent to any decision by Client
[Homeowners] 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
[Homeowners’]
reinsurance
intermediary broker for any Subject Business
prior to the end of the Agreement Year,
Client [Homeowners] shall promptly reimburse
[Aon] for all Annual Fees previously paid by
[Aon] under this Agreement. . . .
Pl.’s Ex. 1 at 1 (emphasis added).
Paragraph one of the 2009 Contract purports to define
“Subject Business” and “Agreement Year.”
The first line of
paragraph one reads,
[i]n consideration for Client [Homeowners]
appointing Aon Benfield as reinsurance
intermediary-broker for the placement and
servicing of all reinsurance purchased by
the
Client [Homeowners]
(“the
Subject
Business”) for the annual period beginning
on June 1, 2009 and ending on May 31, 2010
(an “Agreement Year”), Aon Benfield agrees
to share with Client [Homeowners] Aon
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Benfield’s received
revenue
derived
Business . . .
and earned
from
the
brokerage
Subject
Id.
In its post-trial brief, Aon argues these paragraphs reflect
Aon’s clear intent to have the RSA be contingent upon Homeowners’
renewal of the 2009 Contract.
However, the paragraphs are void
of any language that states unambiguously the RSA was contingent
on renewing Aon as a reinsurance broker in 2010.
Instead, the 2009 Contract expressly defines the Agreement
Year as the time period of June 1, 2009 to May 31, 2010.
As
previously mentioned, it is undisputed Aon remained Homeowners’
broker of record during that time.
Thus, the Court finds that while Aon’s subjective intent at
the time the 2009 Contract was executed may have been for the RSA
to include a contingency of renewal, this was not an objective
intent communicated to Homeowners at the time the contract was
executed.
It was not until nine months after the 2009 Contract
was executed when Aon sent its 2010 proposal to Homeowners that
Aon made its objective intent apparent.
See Pl.’s Ex. at 119.
This evidence is afforded less weight than the negotiations the
parties engaged in February 2009 meeting, and around the time
Homeowners signed the 2009 Contract in April.
See generally,
Newkirk v. Vill. of Steger, 536 F.3d 771, 774 (7th Cir. 2008)
(stating that Illinois law follows an objective view of intent
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and a party’s outward manifestations of their intent governs);
see also, Elda Arnhold & Byzantio, L.L.C. v. Ocean Atl. Woodland
Corp., 284 F.3d 693, 701 (7th Cir. 2002) (stating that the most
relevant extrinsic evidence of intent is evidence of the parties’
negotiations at the time the contract was executed).
Thus, the
Court finds Aon’s objective intent ambiguous with respect to the
renewal contingency in the RSA.
5.
The Interpretation of “Subject Business”
After reviewing the evidence, the Court finds that the term
“Subject
Business”
means
all
reinsurance
the
purchased
by
Homeowners for the time period beginning on June 1, 2009 and
ending on May 31, 2010. While Aon argues that “Subject Business”
should mean all reinsurance purchased by Homeowners, including
those after May 31, 2010, the Court disagrees.
The objective
evidence surrounding Homeowners’ intent to enter into a “one-year
commission sharing arrangement” was clear in the February 25,
2009 email McCahill sent to Jones.
Pl.’s Ex. 6.
The best
evidence Aon presented regarding its intent for its proposed
definition was the proposal Aon sent Homeowners nine months after
the 2009 Contract was executed.
The Court finds this evidence
less persuasive than the email communications that were exchanged
one day after the parties met in February and two months before
the 2009 Contract was executed, and therefore finds that the
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parties objectively intended “Subject Business” to include only
the reinsurance purchased from June 1, 2009 to May 31, 2010.
6.
The Interpretation of Paragraph 2
In light of the Court’s conclusion that “Subject Business”
means all reinsurance contracts Homeowners purchased between
June 1, 2009 and May 31, 2010, the Court finds the forfeiture
clause in paragraph two would have applied only if Homeowners had
terminated or replaced Aon as its broker of record prior to May
31, 2010.
See Pl. Ex. 1.
It is undisputed that Aon remained
Homeowners’ broker of record until May 31, 2010.
As such,
Homeowners did not terminate or replace Aon for any portion of
the Subject Business.
B.
Neither
party
Conclusions of Law
disputes
that
interpretation of the 2009 Contract.
Illinois
law
governs
the
To prevail on a breach of
contract claim under Illinois law, Homeowners must establish:
(1) the existence of a valid and enforceable contract; (2)
substantial performance of the contract by Homeowners; (3) a
breach by Aon; and (4) resultant damages.
TAS Distributing Co.
v. Cummins Engine Co., 491 F.3d 625, 631 (7th Cir. 2007).
Homeowners has the burden of establishing the existence of a
contract.
Bowers v. Jones, 978 F.2d 1004, 1013 (7th Cir. 1992).
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Here, the Court finds Homeowners has met its burden in
proving the existence of the 2009 Contract.
See Pl.’s Ex. 1.
Moreover, since Aon remained Homeowners’ broker of record until
May 31, 2010, when the 2009 Contract expired, the Court finds
Homeowners has substantially performed under the 2009 Contract.
Assuming Homeowners proves Aon breached the 2009 Contract, it is
clear that Homeowners has sustained damages. Therefore, the only
element of Homeowners’ prima facie case that requires discussion
is whether Aon breached the contract.
In the Court’s summary judgment ruling, it found the term
“Subject Business” ambiguous.
See ECF No. 56 at 7-8.
In
Illinois, construing an ambiguous contract is a question of fact.
See Curia v. Nelson, 587 F.3d 824, 829 (7th Cir. 2011).
When the
Court determines that a contract or portion thereof is ambiguous,
the Court is permitted to consider extrinsic evidence of the
parties’ intent. Id. Indeed, Seventh Circuit instructs that the
Court’s goal in construing an ambiguous contract is “to give
effect to the intentions of the parties at the time they entered
into the contract.”
Tranzact Technologies, Ltd. v. Evergreen
Partners, Ltd., 366 F.3d 542, 546 (7th Cir. 2004).
After examining all the evidence adduced at trial, and
making the aforementioned Findings of Fact, the Court holds that
Homeowners has met its burden in establishing Aon breached the
2009 Contract.
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This is conclusion is also supported by the doctrine of
contra proferentem, which states that ambiguous provisions of a
contract are construed against the drafter.
See Id. n.2 citing
Ancraft Prods. Co. v. Universal Oil Prods. Co., 427 N.E.2d 585,
588 (Ill. App. Ct. 1981).
Aon argues the doctrine of contra
proferentem is inapplicable since Homeowners and Aon are two
sophisticated
transaction.
parties
that
participated
in
an
arms-length
The Court disagrees.
While the Seventh Circuit has stated that “the argument for
contra proferentum is pretty feeble when the policyholder is a
sophisticated commercial enterprise rather than an individual
consumer,”
in
the
same
breath
it
noted
that
some
states,
including Illinois, do not limit contra proferentum to insurance
policies sold to commercially unsophisticated parties.
Farmers
Auto. Ins. Ass’n v. St. Paul Mercury Ins. Co., 482 F.3d 976, 977
(7th Cir. 2007).
In fact, the Illinois Supreme Court has held
that “any insured, whether large and sophisticated or not, must
enter into a contract with the insurer which is written according
to the insurer’s pleasure by the insurer.” Outboard Marine Corp.
v. Liberty Mutual Ins. Co., 607 N.E.2d 1204, 1219 (Ill. 1992).
Because of this, and because of the fact that there is generally
little negotiation over the language in insurance contracts, the
Illinois courts apply the doctrine of contra proferentum even
with sophisticated parties.
Id.
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In this case, it is undisputed that Aon and Homeowners
engaged in oral negotiations regarding the terms of the 2009
Contract.
Indeed, such negotiations provided a substantial
amount of evidence with respect to the intention of the parties
at the time the 2009 Contract was executed.
However, the
evidence revealed Aon was the only party responsible for drafting
the 2009 Contract.
Patel testified that Bredahl told him that
Aon would draft the Contract since Aon had lawyers who had
expertise in drafting RSA’s.
Ct. Tr. 3/13/13 Patel Direct at
141.
why
Moreover,
when
asked
he
failed
to
have
one
of
Homeowners’ lawyers examine the 2009 Contract before he signed
it, McCahill testified that in April 2009 Homeowners did not have
any lawyers who were experts with insurance contracts.
See Ct.
Tr. 3/13/13 McCahill Redirect at 117 (stating at the time he
signed the 2009 Contract, Homeowners had only one lawyer that was
an SEC attorney.).
In light of these facts, the Court finds the
doctrine contra proferentum appropriate. If Aon intended to make
the annual fee in the RSA contingent upon Homeowners’ renewing
Aon as its broker of record, Aon should have expressed this
explicitly in the 2009 Contract. This is particularly true given
Aon’s alleged expertise in drafting RSA’s.
The Court notes that even if it agreed with Aon and found
contra preferentum inapplicable, the end result would be the
same. This is because in Illinois, a party asserting a condition
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precedent to a contract or a contract provision “bears the burden
of establishing that the parties intended to create a condition
at the time the contract was made.”
MCM Partners, Inc. v.
Andrews-Bartlett & Assocs., Inc., 161 F.3d 443, 447 (7th Cir.
1998) citing Wasserman v. Autohaus on Edens, 559 N.E.2d 911, 916
(Ill. App. Ct. 1990).
Aon failed to adduce any evidence to indicate that at the
time of contracting, Homeowners intended to create a contingency
with respect to the RSA.
Instead, the primary evidence Aon
relies upon are paragraphs 1, 2, and 3 of the 2009 Contract.
See
Def.’s Post-Trial Memo. at 4-9.
Setting aside for a moment the Court’s finding that Subject
Business includes only reinsurance purchased from June 1, 2009 to
May 31, 2010, it is undisputed that the Court previously held
“Subject Business” to be an ambiguous term.
This ambiguity is
yet another reason that supports the Court’s determination that
the RSA in the 2009 Contract did not contain a contingency.
In Illinois, the courts do not construe a contract to have
a condition precedent unless there is “language in the instrument
[that] is unambiguous” or “the intent to create such a condition
is apparent from the face of the agreement.”
AAR Int’l, Inc. v.
Vacances Heliades S.A., 202 F.Supp.2d 788, 800 (N.D. Ill. 2002)
citing Catholic Charities v. Thorpe, 741 N.E.2d 651, 653-54 (Ill.
2000).
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Here, there is neither unambiguous language nor a clear
intent by both parties to create a condition or contingency to
the annual fee under the RSA.
Accordingly, the Court refuses to
find the 2009 Contract required Homeowners to renew Aon as its
broker of record before receiving its annual fee under the RSA.
Therefore, because the Court concludes that the annual fee
under the RSA in the 2009 Contract was not contingent upon
Homeowners’ renewing Aon as its broker of record in 2010, the
Court finds Aon has breached the 2009 Contract by failing to pay
Homeowners its annual fee.
Based on this Conclusion, Homeowners
has proved its breach of contract claim and is entitled to
damages.
IV.
CONCLUSION
For the reasons stated herein, the Court finds in favor of
Plaintiff
Homeowners
Choice,
Inc.
on
Count
I,
and
awards
Homeowners the sum of $744,402.06.
IT IS SO ORDERED.
Harry D. Leinenweber, Judge
United States District Court
Date: 3/29/2013
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