Opinion ID: 2709069
Heading Depth: 3
Heading Rank: 1

Heading: The RSA was ambiguous.

Text: 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 multiyear 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 30day 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.