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

- 2 -

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.

- 3 -

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.

- 4 -

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

- 5 -

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
- 6 -

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.
- 7 -

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

- 8 -

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

- 9 -

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
- 11 -

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

- 12 -

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

- 13 -

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
- 14 -

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

- 15 -

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

- 16 -

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).

- 17 -

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.

- 18 -

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.
- 19 -

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

- 20 -

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).
- 21 -

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

- 22 -