Aon ordered to pay $24 million for misrepresenting risks
A unit of Aon Corp., the world's largest insurance broker, was ordered to pay $24 million to United National Insurance Company for misrepresenting reinsurance risks.
Aon Ltd., a division of Chicago-based Aon, acted as United National's broker in the 1990s when it obtained reinsurance from Riunione Adriatica di Sicurta SpA, an Italian reinsurance company, to cover the potential liability of building contractors in California, according to court papers.
United National, based in Bala Cynwyd, Pennsylvania, sued Aon in 2004 in Philadelphia federal court, alleging that Aon made misrepresentations to RAS when it obtained the reinsurance, according to court papers. The verdict was delivered yesterday at the end of a nine-week trial.
"The jury concluded that Aon and Aon alone was responsible for misrepresenting to RAS the extent of the risk in the program they were reinsuring," Jerome C. Katz, a partner with Ropes & Gray who represents United National, said in an interview.
Aon plans to appeal, David Prosperi, a company spokesman, said in an e-mail.
After agreeing to reinsure the United National building contractors, RAS brought an arbitration against United National in 1999 and sought to rescind its participation in the program because of Aon's misrepresentations, according to court papers.
Following an arbitration hearing in 2002, United National paid about $17 million to RAS and lost a portion of its reinsurance protection, according to court papers.
RAS is now owned by Munich-based insurer Allianz SE.
The jury reward includes $17 million that United National expected to be reimbursed for its lost reinsurance as well as $7 million in legal fees, according to United National's lawyers.
United National is also entitled to prejudgment interest, and if the court agrees, the total judgment is likely to be at least $33 million, Katz said. He was assisted on the case by William K. Perry of Chadbourne & Parke.
The case is United National v. Aon, 004-cv-00539, U.S. District Court, Eastern District of Pennsylvania (Philadelphia).