California businesses and residents may be interested in a case in which a United States insurance company, HCI Group, won a breach of contract lawsuit involving a revenue sharing contract (RSC).

The agreement, signed in 2009, was with Aon Benfield (AON), a reinsurance intermediary company. HCI Group had contracted with AON in order to help it gain reinsurance coverage.

In 2009, both companies signed an RSC, which stipulated that AON would receive a share when placing reinsurance coverage for the HCI Group. AON received compensation from reinsurers against significant losses that had been caused by extreme weather and other disasters. AON also received fees from other reinsurers. However, AON failed to pay after the HCI Group decided to terminate the contract the next year.

AON claimed that the RSC stated that the payment that the companies would have shared would not be rendered once HCI decided to end its relationship with them. Therefore, HCI gave up its portion of the revenue when it decided not to continue its relationship with AON. However, HCI Group stated that the contract was effective for only one year, and the alleged relinquishment provision was unclear and unenforceable. Ultimately, HCI received $744,402 in the spring in damages from a Chicago court.

A certain amount of business success depends upon the strength of its contracts. Unfortunately, some contracts in California may be too vague for the parties to understand and may be poorly carried out. An experienced business and commercial law attorney may be able to help his clients negotiate contracts that may be stronger and less ambiguous than those drawn up without any legal aid.

Source: IBR Reinsurance, "HCI group wins breach of contract dispute with Aon Benfield", June 14, 2013