Olympus Insurance Co. v. Aon Benfield Inc. and Benfield Inc. (D. Minn. March 30, 2012)
On March 20, 2012 a federal judge in Minnesota dismissed a breach of contract action brought by Olympus Insurance Co. (“the insurer”) against its reinsurance brokers, Aon Benfield Inc. and Benfield Inc. (collectively “the reinsurance broker”), by which the insurer sought money allegedly owed to the insurer, finding that the reinsurance broker did not owe the insurer an annual fee. The insurer alleged that it hired the reinsurance broker to obtain reinsurance policies for the insurer and that the reinsurance broker had agreed to pay the insurer an annual fee based on a percentage of the commissions that the reinsurance broker received during the contract year from the insurer’s reinsurance providers.
The insurer alleged that in early 2009, Peter Chandler, the specific reinsurance broker who handled the insurer’s reinsurance business, left the employment of the reinsurance broker and went to work for Guy Carpenter & Co. LLC. Subsequently, the insurer appointed Guy Carpenter as its new reinsurance broker effective June 1, 2009. The insurer argued that it was owed the annual fee that was due at the end of the 2008-2009 fiscal year. The reinsurance broker responded that it did not owe the annual fee because the insurer terminated it as its reinsurance broker no later than March 25, 2009, and, under the forfeiture provision of the contract between the parties, no annual fee was thereafter due. The reinsurance brokers moved to dismiss and, on March 30, 2012, U.S. District Court Judge Patrick J. Schiltz granted their motion.
The judge ruled that no annual fee was due before March 25, 2009 because the insurer ended its relationship with the reinsurance broker prior to that date. According to the court, pursuant to the forfeiture provision, no annual fee was payable subsequent to such a decision. Because the annual fee was not payable before the insurer’s decision to terminate the reinsurance broker, and because the annual fee was not payable after that decision, the annual fee was not payable at all, the court concluded.
The court rejected the insurer’s contention that the term “Subject Business” contained in the contract was limited to a time period beginning on June 1, 2008 and ending on May 31, 2009. The court decided that to interpret the “Subject Business” of the contract as referring only to the placement and servicing of reinsurance contracts during the initial term was inconsistent with the unambiguous language of the contract. According to the court, the terms “terminate” and “replace” contained in the contract include non-renewal. Therefore, the insurer’s decision to terminate its relationship with the reinsurance broker, and to replace the reinsurance broker with Guy Carpenter, was clearly a decision by the insurer to terminate or replace the reinsurance broker as its reinsurance broker for any portion of the “Subject Business” of the contract.
Finally, the court held that the insurer, as a party to an express contract, could not recover on claims for quasi contract, unjust enrichment, and quantum meruit. In the opinion of the court, the insurer received exactly what it bargained for in the written contract: the placement and servicing of reinsurance contracts as well as the conditional entitlement to an annual fee. Both of these benefits were legally sufficient consideration in the eyes of the court regardless of whether the insurer subjectively believed these benefits to be adequate consideration.
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