North Carolina residents might be interested to learn that a breach of contract dispute between a U.S-based insurer and a reinsurance intermediary has been decided in favor of the insurer. According to a 2009 revenue sharing agreement between the insurer and the intermediary, the intermediary would assist the insurer in securing reinsurance coverage. With the help of the intermediary, the insurer received indemnification from the reinsurers against excessive losses as a result of catastrophes. The intermediary then received fees from the reinsurers.
Under the terms of the agreement, the reinsurer would receive compensation when the insurer’s reinsurance coverage was placed. The insurer subsequently used another intermediary, causing the original intermediary to refuse to pay. The intermediary alleged that the agreement provided that shared revenue was no longer payable if the insurer terminated or replaced the intermediary.
According to the intermediary, the insurer’s non-renewal of its business relationship with the intermediary constituted a forfeiture of any shared revenues. The insurer contended that the agreement was limited to a one year term and further claimed that the subject provision regarding forfeiture was vague and unenforceable. A Chicago court ruled in favor of the insurer on March 23 and awarded damages and interest to the insurer in the amount of $744,402.
Business litigation involves complex and constantly-evolving areas of the law. Contract disputes are common in North Carolina and are governed by the laws of the state. When the parties to a contract cannot reach an agreement regarding the fulfillment of the terms of the contract, the court system may be called upon to intercede. Failure to perform under a contract may result in litigation by the party harmed by such a breach. The injured party may bring a claim to enforce the terms of the agreement and may seek damages related to the breach.
Source: Insurance Business Review, “HCI Group wins breach of contract dispute with Aon Benfield“, June 14, 2013