Olympus Ins. Co. v. Aon Benfield, Inc.

Decision Date01 April 2013
Docket NumberNo. 12–1974.,12–1974.
Citation711 F.3d 894
PartiesOLYMPUS INSURANCE COMPANY, Plaintiff–Appellant v. AON BENFIELD, INC.; Benfield, Inc., Defendants–Appellees.
CourtU.S. Court of Appeals — Eighth Circuit

OPINION TEXT STARTS HERE

Terence J. Devine, Albany, NY, William Lawrence Davidson and Thomas D. Jensen, Minneapolis, MN, for appellant.

Timothy E. Branson and David Youngert Trevor, Minneapolis, MN, for appellee.

Before MURPHY, BENTON, and SHEPHERD, Circuit Judges.

SHEPHERD, Circuit Judge.

Olympus Insurance Company (Olympus) appeals the district court's 1 dismissal of its complaint for failure to state a claim. SeeFed.R.Civ.P. 12(b)(6). Olympus argues that the district court erred in determining that its contract with Benfield, Incorporated (Benfield) clearly and unambiguously provided that Benfield did not owe Olympus an annual fee after Benfield was notified of Olympus's decision to replace Benfield with another reinsurance broker. Having conducted a de novo review of the district court's order, we affirm the dismissal of Olympus's complaint.

I.

Olympus sells homeowners insurance policies in the State of Florida. To manage the risk associated with these homeowners policies, Olympus sought to reinsure any portion of a policy above $750,000 and aggregate catastrophe loss above $6 million. Because reinsurance policies are spread among multiple reinsurers, Olympus engaged the services of Benfield as its reinsurance broker. Benfield was responsible for placing and servicing reinsurance policies for the homeowners insurance policies written by Olympus. After Benfield successfully placed a reinsurance policy, it earned a brokerage commission, which was typically 10% of the premium Olympus paid to the reinsurer. Also, as is common in the industry, Olympus and Benfield entered into a brokerage sharing agreement, under which Benfield agreed to share part of its commission in the form of an “Annual Fee” with Olympus in return for exclusive status as Olympus's reinsurance broker and the establishment of a long-term brokerage relationship.

In 2008, Olympus and Benfield entered into a one-page brokerage sharing agreement. As relevant, the contract provided in the first paragraph:

In consideration for Client appointing Benfield as its exclusive reinsurance intermediary-broker for the placement and servicing of all of Client's reinsurance contracts (the “Subject Business”) for the initial annual period beginning on June 1, 2008 and ending on May 31, 2009 (the “Initial Term”) (each June 1 to May 31 may also be referred to as an “Agreement Year”), and for additional subsequent Agreement Years (each such year a “One–Year Renewal Term”) unless either party notifies the other party of its intent not to renew this Agreement at least 30 days prior to the end of the Initial Term or any subsequent One–Year Renewal Term, Benfield agrees to share with Client Benfield's received and earned brokerage revenue derived from the Subject Business excluding any brokerage paid to corresponding brokers, including any brokers affiliated with Benfield or sub-brokers (“Net Brokerage Revenue”) by paying Client an annual fee (“Annual Fee”) for each Agreement Year equal to 70% of all Net Brokerage Revenue less the Service Fee set forth in Paragraph 2 of this Agreement.

(Appellant's Addendum at 18.) Also relevant to this case is the third paragraph of the contract, which provided:

No Annual Fee shall be payable subsequent to any decision by Client to terminate or replace Benfield as its reinsurance intermediary-broker for any portion of the Subject Business. In addition,in the event Benfield is terminated as Client's reinsurance intermediary-broker for any Subject Business prior to the end of the Initial Term, Client shall promptly pay Benfield any outstanding amount of the Service Fee for the current Agreement Year and shall reimburse Benfield for Annual Fees previously paid by Benfield under this Agreement. Client agrees to reimburse Benfield for any and all costs and expenses associated with collecting any reimbursement.

(Appellant's Addendum at 18.)

In February 2009, Olympus decided to replace Benfield as its reinsurance broker with Guy Carpenter & Company (Guy Carpenter). On March 25, 2009, Guy Carpenter informed Benfield by letter that it would replace Benfield as Olympus's reinsurance broker effective June 1, 2009. The parties agree that this letter served as proper notice of termination. In October 2009, Olympus demanded payment of the Annual Fee due for the Initial Period. Benfield refused to make the payment, arguing that its replacement by Guy Carpenter constituted a decision to “terminate or replace” as contemplated by the third paragraph of the agreement, and thus that Benfield was not obligated to pay the Annual Fee.

Olympus brought the instant action in state court under theories of breach of contract, quasi-contract, unjust enrichment, and quantum meruit and requested relief of $611,854, the amount Olympus contends it is owed in Annual Fees. After removal to federal court on the basis of diversity, Benfield moved for dismissal of the complaint, arguing the unambiguous terms of the contract provide that Benfield does not owe Olympus the Annual Fee and the existence of a contract forecloses Olympus's claims of quasi-contract, unjust enrichment, and quantum meruit.

After a hearing, the district court entered an order granting Benfield's motion to dismiss. Applying Minnesota law, the district court concluded the unambiguous language of the contract relieved Benfield of any obligation to pay Olympus the Annual Fee because the forfeiture provision of the third paragraph was activated when Benfield was informed of Olympus's decision not to renew the brokerage agreement. The court also determined that the remaining claims—quasi-contract, unjust enrichment, and quantum meruit—could not succeed because Olympus and Benfield were parties to an express contract.

Olympus appeals the dismissal of its complaint. We have jurisdiction under 28 U.S.C. § 1291.

II.

In this appeal, Olympus raises four claims of error: (1) the district court improperly limited the definition of “Subject Business” to only those words preceding the parenthetical term and excluding the modification clauses following the parenthetical term; (2) the district court incorrectly construed a non-renewal to have the same meaning as a “replacement” or a “termination” under the contract; (3) the district court's interpretation of the contract—that Benfield is only obligated to pay the annual fee if Olympus renews the broker agreement for an additional term—creates a condition subsequent that is not contained in the contract; and (4) because the contract is ambiguous, theories of equity—specifically unjust enrichment and quantum meruit—are available to Olympus.

Our review of the district court's grant of a motion to dismiss under Rule 12(b)(6) is de novo. Cox v. Mortg. Elec. Registration Sys., Inc., 685 F.3d 663, 668 (8th Cir.2012). This agreement contains a choice-of-law clause dictating that Minnesotalaw will govern the contract. The parties agree that Minnesota law applies to the contract. We review de novo the district court's application and interpretation of Minnesota law. Id.

When interpreting a contract, the court's primary goal “is to ascertain and enforce the intent of the parties.” Valspar Refinish, Inc. v. Gaylord's, Inc., 764 N.W.2d 359, 364 (Minn.2009). If the contract is memorialized in a written instrument, the written contract serves as the best evidence of the parties' intent, and the court determines that intent “from the plain language of the instrument itself.” Travertine Corp. v. Lexington–Silverwood, 683 N.W.2d 267, 271 (Minn.2004). We give contract language its plain and ordinary meaning, reading it in the context of the instrument as a whole...

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