                        NONPRECEDENTIAL DISPOSITION
                         To be cited only in accordance with
                                 Fed. R. App. P. 32.1



                United States Court of Appeals
                                For the Seventh Circuit
                                Chicago, Illinois 60604

                                Argued October 2, 2013
                              Decided December 19, 2013

                                        Before

                        FRANK H. EASTERBROOK, Circuit Judge

                        DANIEL A. MANION, Circuit Judge

                        ILANA DIAMOND ROVNER, Circuit Judge

No. 13-1846

HOMEOWNERS CHOICE, INC.,                     Appeal from the United States District
    Plaintiff-Appellee,                      Court for the Northern District of Illinois,
                                             Eastern Division.
      v.
                                             No. 10 CV 7700
AON BENFIELD, INC.,
     Defendant-Appellant.                    Harry D. Leinenweber, Judge.




                                      ORDER

        Aon Benfield, Inc., is an insurance broker that contracted with Homeowners
Choice, Inc., to obtain reinsurance for Homeowners. In this contract, which the parties
call a revenue-sharing agreement (“RSA”), Aon agreed to rebate to Homeowners a
portion of Aon’s commission. After Homeowners decided not to renew the RSA, Aon
notified Homeowners that pursuant to the terms of the RSA, it was no longer obligated
to pay Homeowners the rebate. Homeowners sued Aon. The district court concluded
No. 13-1846                                                                         Page 2

that the RSA was ambiguous, and held a bench trial during which it heard extrinsic
evidence. Following trial, the district court held that under the RSA’s terms, Aon was
required to pay Homeowners $744,402.06. Aon appeals.

                                   I. BACKGROUND

       Homeowners is a Florida-based insurance company that provides property and
casualty insurance to Floridians. Homeowners regularly purchases reinsurance to
insure itself from any large judgments it might incur.1 Aon is an Illinois corporation that
serves as a reinsurance intermediary (or broker) and capital advisor to insurance
companies and other commercial entities. Aon was responsible for placing and
servicing reinsurance policies for the property and casualty insurance policies written
by Homeowners. When Aon placed a reinsurance policy, it earned a brokerage
commission.

      Generally, to place reinsurance for a particular insurance company, a broker
must be the “broker of record” for the underlying insurer. Homeowners signed a
Broker Authorization Contract (the “Contract”) designating Aon as its broker of record
beginning July 1, 2007. The Contract provided that Aon’s broker of record status would
continue until Aon resigned, was terminated, or was replaced by a successor broker of
record. It also provided that, even if Homeowners terminated Aon as broker of record,
Aon would still continue to service the reinsurance contracts that it had placed (unless
Homeowners opted otherwise), and in any event would still receive the brokerage
(commission) from those placements. The Contract contained no provision for revenue
sharing.

       In 2008, Aon and Homeowners began negotiating an RSA under which Aon
would share part of its commission from the reinsurer with Homeowners. This
exchange was essentially a rebate in the form of an “Annual Fee” to Homeowners in
return for giving Aon exclusive status as Homeowners’ reinsurance broker.2 In


       1
       “In essence, reinsurance is insurance for insurance companies.” Cont’l Cas. Co. v.
Am. Nat’l Ins. Co., 417 F.3d 727, 729 n.1 (7th Cir. 2005) (citation omitted).
       2
       In an attempt to secure Homeowners’ business for multiple years, Aon
proposed a multi-year RSA, which Homeowners rejected twice because Homeowners
was not interested in any agreement that bound it for longer than one year.
Homeowners’ executives first rejected a multi-year agreement at a conference in the fall
No. 13-1846                                                                      Page 3

February 2009, Homeowners and Aon discussed a proposed RSA for the period from
June 1, 2009 through May 31, 2010 (“the 2009 reinsurance placements”). Meanwhile,
Homeowners also entertained proposals from other reinsurance brokers. At this time,
Aon was aware of the potential competitors and the fact that Homeowners was
experiencing significant growth that could generate substantial commissions.

       On February 24, 2009, the parties met at the Tampa Airport through their
representatives: Frank McCahill, then-CEO of Homeowners, Paresh Patel, then-
Chairman of the Board for Homeowners, Jeff Jones, the individual broker from Aon
assigned to the Homeowners account, and Rob Brendahl, a senior Aon executive. The
meeting convened to discuss a brokerage arrangement for the 2009 reinsurance
placements. The parties reached an oral agreement at this meeting.

       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 reached a one-year arrangement and confirmed that the agreement included
a one-year RSA. Jones informed McCahill that Aon would formalize this agreement in
writing because its staff were experts in drafting RSAs.

       It is undisputed that Aon’s counsel drafted the RSA and that McCahill signed
and returned the RSA without alteration on April 29, 2009. The provisions of the RSA
material to this case are:

      1.      In consideration for Client appointing Aon 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 Benfield
              agrees to share with Client Aon Benfield’s received and earned brokerage
              revenue derived from the Subject Business, excluding any brokerage paid
              to corresponding brokers including those affiliated with Aon Benfield or
              sub-brokers (“Net Brokerage Revenue”) by paying Client an annual fee
              (“Annual Fee”) for the Agreement Year to be calculated as set out in
              Schedule A.




of 2008 and again after Aon submitted a proposed multi-year agreement to
Homeowners’ executives on November 8, 2008.
No. 13-1846                                                                           Page 4

       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 shall an Annual Fee
              be payable subsequent to any decision by Client to terminate or replace
              Aon Benfield as its reinsurance intermediary-broker for any portion of the
              Subject Business. In addition, in the event Aon Benfield is terminated as
              Client’s reinsurance intermediary-broker for any Subject Business prior to
              the end of the Agreement Year, Client shall promptly reimburse Aon
              Benfield for all Annual Fees previously paid by Aon Benfield under this
              Agreement. Client agrees to reimburse Aon Benfield for any and all costs
              and expenses associated with collecting any reimbursement.

See App. A (underline added).

       Aon remained the reinsurance broker of record for Homeowners for the entire
period of the 2009 reinsurance placements (June 1, 2009 through May 31, 2010). On
March 10, 2010, McCahill sent Jones an e-mail stating that Homeowners had chosen
another reinsurance broker for the post-May 31, 2010 reinsurance placements and that
Homeowners would then be using the new broker. On March 11, 2010, McCahill issued
a Broker of Record letter, informing the insurance community that Homeowners had
selected TigerRisk Partners as its broker of record for the term of June 1, 2010 through
May 31, 2011. On March 14, 2010, Jones responded to this email to express Aon’s regrets
at Homeowners’ decision, but did not say that Homeowners had forfeited the rebate
earned under the RSA. On May 14, 2010, Homeowners notified Aon that it was owed
$659,943.00 under the RSA. By letter dated July 23, 2010, Aon responded that under
Paragraph 2 of the RSA it owed Homeowners nothing because Homeowners replaced
Aon Benfield as broker prior to the expiration of the RSA.

         Homeowners subsequently brought this action in the district court. The parties
filed cross-motions for summary judgment. The district court determined that
Paragraph 2 of the RSA was ambiguous and denied the motions for summary
judgment. In March 2012, the district court held a two-day bench trial. Following the
trial, the district court ordered post-trial briefing. The district judge concluded that
Homeowners and Aon had entered into a one-year RSA. Pursuant to that RSA,
Homeowners was entitled to a rebate from the reinsurance policies placed and serviced
by Aon on Homeowners’ behalf from June 1, 2009 through May 31, 2010. The district
court entered judgment for Homeowners in the amount of $744,402.06. Homeowners
Choice, Inc. v. Aon Benfield, Inc., 1:10-cv-07700, 2013 U.S. Dist. LEXIS 45938, at *26 (N.D.
Ill. Mar. 29, 2013). Aon appeals.
No. 13-1846                                                                            Page 5

                                        II. ANALYSIS

       On appeal, Aon argues that the RSA is unambiguous and that under the
unambiguous language of the RSA, Homeowners forfeited its right to receive a rebate.
Relatedly, Aon argues that the district court erred at trial in applying the doctrine of
contra proferentem, “the rule that if language supplied by one party is reasonably
susceptible to two interpretations … the one that is less favorable to the party that
supplied the language is preferred.”3 Aon argues that the application of contra
proferentem here was error because that doctrine only applies to ambiguous contracts
and Aon’s position is that the RSA was unambiguous.

        “Whether a contract is ambiguous is a question of law that we must review de
novo.” WH Smith Hotel Servs., Inc., v. Wendy’s Int’l, Inc., 25 F.3d 422, 427 (7th Cir. 1994)
(citing A. W. Wendell & Sons v. Qazi, 626 N.E.2d 280, 292 (Ill. App. Ct. 1993)). “In Illinois,
‘[a]n instrument is ambiguous only if the language used is reasonably or fairly
susceptible to having more than one meaning, but it is not ambiguous if a court can
discover its meaning simply through knowledge of those facts which give it meaning as
gleaned from the general language of the contract.’” Bourke v. Dun & Bradstreet Corp.,
159 F.3d 1032, 1036 (7th Cir. 1998). “Ambiguous contractual language is generally
construed against the drafter of the language … .” Duldulao v. St. Mary of Nazareth
Hospital Center, 505 N.E.2d 314, 319 (Ill. 1987) (citations omitted).

       A. The RSA was ambiguous.

        The parties’ positions on whether the RSA is ambiguous rest on a single dispute:
Aon argues that “Subject Business” refers to all of Homeowners’ reinsurance contracts,
including those formed after the Agreement Year. If we accept Aon’s interpretation of
“Subject Business,” then Homeowners forfeited the rebate because the first sentence of
Paragraph 2 of the RSA provides that no fee would be payable to Homeowners after it
made “any decision” to “terminate or replace” Aon as its broker of record. On the other
hand, Homeowners argues that “Subject Business” is limited to the defined “Agreement
Year.” If we accept Homeowners’ interpretation of “Subject Business,” then
Homeowners is entitled to the rebate under the RSA because Homeowners did not
terminate or replace Aon as its broker of record for the Agreement Year, but rather for
the following year.



       3
           E. Allan Farnsworth, Farnsworth on Contracts § 7.11 (3d. ed. 2004).
No. 13-1846                                                                            Page 6

       In this case, we agree with the district court that the first sentence of Paragraph 2
of the RSA is ambiguous. The phrase “Subject Business” could reasonably be read to
mean: (1) only reinsurance agreements placed during the Agreement Year; or (2) all
reinsurance agreements, including future reinsurance agreements; or (3) all reinsurance
placed and serviced by Aon. If we were to read the language as Aon suggests,
Homeowners would not be entitled to a rebate without renewing the RSA for an
additional year. But the RSA clearly states that it was a one-year agreement. This
conflict further demonstrates that the language is ambiguous. Aon’s interpretation of
the RSA is also problematic because it creates an impossibility. The arrangement of text
in the RSA here leaves one wondering what consideration Homeowners would have
received for executing the RSA if it was forfeited upon completion of a one-year
engagement. Under Aon’s interpretation, there would have been none; Homeowners
would not be entitled to a rebate in consideration of the current one-year contract
without renewing the RSA for an additional year beyond the one-year term. But that
interpretation of the RSA is not reasonable, so extrinsic evidence is required to shed
light on the parties’ intent.

       Aon nonetheless argues that the RSA is unambiguous, relying on the Eighth
Circuit’s decision in Olympus Ins. Co. v. Aon Benfield, Inc., 711 F.3d 894 (8th Cir. 2013). In
Olympus, an insurance company sued Aon after it refused to pay a rebate purportedly
due under a multi-year RSA. Like the RSA in this case, the multi-year RSA in Olympus
stated that an “Annual Fee” or rebate was not “payable” once Homeowners made a
decision to “terminate or replace Benfield as its reinsurance intermediary-broker for any
portion of the Subject Business.” Id. at 896. However, the Olympus case is
distinguishable from this case because the multi-year RSA in Olympus and the RSA here
are materially different.

        In Olympus, “the unambiguous language of the contract relieved Benfield of any
obligation to pay Olympus the Annual Fee ….” Id. at 897 (emphasis added). The multi-
year RSA in Olympus was not ambiguous because, unlike here, it defined the terms
“Initial Term” and “One-Year Renewal Term,” included language referring to “the
initial annual period”and “additional subsequent Agreement Years,” and included a 30-
day window for either party to notify the other if it intends not to renew the agreement.
Id. at 896. Consequently, the Olympus court’s interpretation of “decision” in the context
of a “clear and unambiguous” multi-year RSA has no impact on this case because here
the RSA is ambiguous. Id. at 899.
No. 13-1846                                                                           Page 7

       B. The district court properly entered judgment for Homeowners.

        In light of our conclusion that the RSA is ambiguous, Aon’s second argument
necessarily fails. On appeal, Aon does not argue that, if the RSA is ambiguous, the
district court committed reversible error in concluding that the extrinsic evidence
introduced at trial supports Homeowners’ interpretation of the RSA. See Curia v. Nelson,
587 F.3d 824, 832 (7th Cir. 2009) (“… ambiguity can only be clarified by reference to
extrinsic evidence of the parties’ intent.”). Rather, Aon argues that the district court
erred in applying the doctrine of contra proferentem. But Aon’s sole basis for challenging
the application of contra proferentem in this case is its claim that the RSA was
unambiguous4 and Aon concedes that contra proferentem applies to ambiguous
contracts5—it just disagrees that the RSA at issue here is ambiguous. However, we have
already concluded that the RSA is ambiguous. Accordingly, the district court did not err
in applying contra proferentem to construe the RSA against Aon.

                                   III. CONCLUSION

       The RSA is ambiguous and so the district court properly considered extrinsic
evidence, including timely e-mails, and denied the parties’ cross-motions for summary
judgment. The district did not err in applying the doctrine of contra proferentem to
construe the RSA against Aon. For these reasons, Homeowners was entitled to the
rebate it earned during the period of the 2009 reinsurance placements. Consequently,
we AFFIRM the judgment of the district court.




       4
       See Farnsworth at § 7.12a (“[C]ontra proferentem [is] applicable only if the
language is ambiguous.”).
       5
       See Br. at 44 (“The district court’s reliance on contra proferentem … appl[lies] only
to ambiguous contracts.”).
No. 13-1846                                                                       Page 8

                                   APPENDIX “A”

                                    AGREEMENT

Based on the desire of the parties to establish a long-term mutually beneficial
relationship, this Agreement “(Agreement”) is entered into this 31st day of March, 2009,
between Aon Benfield, Inc., with offices at 200 East Randolph Street, Chicago, IL 60601
(doing business a “Aon Benfield”) and Homeowners Choice, Inc., including its
affiliates, with offices at 2340 Drew Street, Suite 200, Clearwater, FL 33765 (“Client”),
under the following terms and conditions:

      1.      In consideration for Client appointing Aon 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 Benfield
              agrees to share with Client Aon Benfield’s received and earned brokerage
              revenue derived from the Subject Business, excluding any brokerage paid
              to corresponding brokers including those affiliated with Aon Benfield or
              sub-brokers (“Net Brokerage Revenue”) by paying Client 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 shall an Annual Fee
              be payable subsequent to any decision by Client to terminate or replace
              Aon Benfield as its reinsurance intermediary-broker for any portion of the
              Subject Business. In addition, in the event Aon Benfield is terminated as
              Client’s reinsurance intermediary-broker for any Subject Business prior to
              the end of the Agreement Year, Client shall promptly reimburse Aon
              Benfield for all Annual Fees previously paid by Aon Benfield under this
              Agreement. Client agrees to reimburse Aon Benfield for any and all costs
              and expenses associated with collecting any reimbursement.

      3.      Unless otherwise specified in Schedule A, within 60 days after receipt by
              Aon Benfield of the last premium payment for the Subject Business for the
              Agreement Year or within 90 days after the expiration of the reinsurance
              contract(s) that constitute the Subject Business, whichever is earlier, Aon
              Benfield shall provide Client with a report detailing the Net Brokerage
No. 13-1846                                                                       Page 9

              Revenue for the Agreement Year and including payment of the Annual
              Fee. In the event that Aon Benfield must pay return brokerage to Client’s
              reinsurers, Net Brokerage Revenue will be recalculated and Client will
              return to Aon Benfield as soon as reasonably possible any amount due as
              a result of the recalculation.

      4.      This Agreement shall be governed by the laws of Illinois without regard to
              principles of conflicts of laws, and the parties agree that any disputes
              arising from this Agreement shall be resolved in the Illinois courts.
