No. 3154-0028
PROPERTY AND CASUALTY CLASH EXCESS OF LOSS
REINSURANCE AGREEMENT
PENN-PATRIOT INSURANCE COMPANY
between
PENN-AMERICA INSURANCE COMPANY
PENN-STAR INSURANCE COMPANY
and
AMERICAN RE-INSURANCE COMPANY
TABLE OF CONTENTS
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ARTICLE PAGE
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I EXHIBITS COVERED 1
II TERRITORY 1
III ULTIMATE NET LOSS 2
IV EXTRA CONTRACTUAL
OBLIGATIONS 2
V EXCESS JUDGMENTS 3
VI DECLARATORY JUDGMENT EXPENSE 4
VII EXCLUSIONS 4
VIII DEFINITIONS 16
IX CLAIMS 20
X WARRANTY 21
XI SUBROGATION AND SALVAGE 22
XII TAXES 23
XIII ACCESS TO RECORDS 23
XIV INSOLVENCY 23
XV OFFSET AND SECURITY 23
XVI ERRORS AND OMISSIONS 24
XVII FEDERAL EXCESS RECOVERY 24
XVIII COMMENCEMENT AND
TERMINATION 25
No. 3154-0028
PROPERTY AND CASUALTY CLASH EXCESS OF LOSS
REINSURANCE AGREEMENT
THIS AGREEMENT made and entered into by and between PENN-AMERICA INSURANCE
COMPANY, PENN-STAR INSURANCE COMPANY, both of Hatboro, Pennsylvania and
PENN-PATRIOT INSURANCE COMPANY of Richmond, Virginia (hereinafter referred to as
the "Company") and AMERICAN RE-INSURANCE COMPANY, a Delaware Corporation with
Administrative Offices in Princeton, New Jersey (hereinafter referred to as the
"Reinsurer").
WITNESSETH:
The Reinsurer hereby reinsures the Company to the extent and on the terms and
conditions and subject to the exceptions, exclusions and limitations hereinafter
set forth and nothing hereinafter shall in any manner create any obligations or
establish any rights against the Reinsurer in favor of any third parties or any
persons not parties to this Agreement. Performance of the obligations of each
party under this Agreement shall be rendered solely to the other party.
ARTICLE I
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EXHIBITS COVERED
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The Company will reinsure with the Reinsurer and the Reinsurer will accept
reinsurance from the Company as set forth in Exhibits A and B which are attached
hereto and made a part of this Agreement, such Exhibits being entitled for
purposes of identification as:
EXHIBIT A - FIRST PROPERTY AND CASUALTY CLASH EXCESS OF LOSS
EXHIBIT B - SECOND PROPERTY AND CASUALTY CLASH EXCESS OF LOSS
ARTICLE II
TERRITORY
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A. As respects Property business of the Company, this Agreement shall
cover policies issued for risks located within the United States of
America, its territories and possessions, and Canada.
B. As respects Casualty business of the Company, this Agreement shall
follow the original policies of the Company.
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ARTICLE III
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ULTIMATE NET LOSS
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A. The term "Ultimate Net Loss" shall mean the sum or sums paid by the
Company for which it is liable, under policies reinsured hereunder,
including any Loss Adjustment Expenses, as hereinafter defined.
Ultimate Net Loss shall also include 90% of any Extra Contractual
Obligations, as provided in ARTICLE IV, EXTRA CONTRACTUAL OBLIGATIONS;
90% of any Excess Judgment, as provided in ARTICLE V, EXCESS JUDGMENTS
and the amount of Declaratory Judgment Expenses, as provided in
ARTICLE VI, DECLARATORY JUDGMENT EXPENSE. All sums hereunder shall be
subject to proper deductions for all salvages, recoveries and all
other reinsurances or insurances that inure to the benefit of the
Reinsurer under this Agreement, whether collectible or not. The
Reinsurer's liability hereunder shall not increase by reason of the
inability of the Company to collect from any other reinsurer or
insurer, for any reason, any amount that may be due from such
reinsurer or insurer.
B. Except as specifically provided for or excluded under this Article,
the term "Loss Adjustment Expenses" shall mean all expenses which have
been paid by the Company in the investigation, adjustment, settlement
or defense of specific claims covered under original policies of the
Company reinsured hereunder, (also including prejudgment and
post-judgment interests and salaries and expenses of salaried
adjusters associated therewith), but not including office,
administrative or overhead expenses of the Company or salaries and
expenses of its officials and employees.
C. In the event of the insolvency of the Company, "Ultimate Net Loss"
shall be as otherwise defined herein except it shall include the sum
or sums which the Company has incurred for which it is liable instead
of the sum or sums paid by the Company for which it is liable, and
payment by the Reinsurer shall be made to the liquidator, receiver or
statutory successor of the Company in accordance with the INSOLVENCY
Article.
ARTICLE IV
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EXTRA CONTRACTUAL OBLIGATIONS
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A. As reinsured under this Agreement, the Company shall be protected for
any Extra Contractual Obligation awarded by a court of competent
jurisdiction against the Company. (Such Extra Contractual Obligation
shall be added to the amount of the award or settlement within the
Company's policy limit and the sum thereof shall be considered one
loss subject to the exclusions and limitations set forth in this
Agreement.)
B. "Extra Contractual Obligation" shall be defined as those liabilities
not covered under any other provision of this Agreement, and any legal
costs and expenses
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incurred in connection therewith, which arise from the Company's
handling of any claim on business covered hereunder including the
Company's umbrella policies, and including but not limited to, the
failure by the Company to settle within the policy limit, or by reason
of alleged or actual negligence, fraud, or bad faith, in rejecting an
offer of settlement, in the preparation of the defense, in the trial
of any action against its insured or in the preparation or prosecution
of an appeal consequent upon such action.
C. For the purpose of the application of this Agreement, an Extra
Contractual Obligation shall be deemed to have arisen on the same date
as the original loss that gave rise to the Extra Contractual
Obligation.
D. This Article shall not apply where the Extra Contractual Obligation
has been incurred due to the fraud or criminal act of a member of the
Board of Directors, an officer, an agent, or an employee of the
Company or any other person or organization involved in the
presentation, defense or settlement of any claim covered hereunder,
whether acting individually or collectively or in collusion with any
person or organization.
E. Recoveries from any form of insurance or reinsurance, whether
separately purchased from another insurance carrier or self insurance
issued by the Company to itself, which protects the Company against
claims which are the subject matter of this Article, will inure to the
benefit of the Reinsurer and shall be first deducted to arrive at the
amount of any Extra Contractual Obligation covered hereunder, whether
collectible or not.
F. If any provision of this Article shall be rendered illegal or
unenforceable by the laws, regulations or public policy of any state,
such provision shall be considered void in such state, but this shall
not affect the validity or enforceability of any other provision of
this Agreement or the enforceability of such provision in any other
jurisdiction.
ARTICLE V
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EXCESS JUDGMENTS
----------------
A. As reinsured under this Agreement, the Company shall be protected for
any Excess Judgment awarded by a court of competent jurisdiction
against the Company. (Such Excess Judgment shall be added to the
amount of the award or settlement within the Company's policy limit
and the sum thereof shall be considered one loss subject to the
exclusions and limitations set forth in this Agreement.)
B. "Excess Judgment" shall mean any amount in excess of the Company's
original policy limits including the Company's umbrella policies, but
otherwise within the coverage terms of the policy, that is paid by the
Company, together with any legal costs and expenses incurred in
connection therewith, resulting from the failure by the Company to
settle within the policy limit, or by reason of alleged or actual
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negligence, fraud, or bad faith, in discharging its duty to defend, in
preparing the defense in an action against its insured or in
discharging its duty to prepare or prosecute an appeal consequent upon
such action.
C. This Article shall not apply where the Excess Judgment has been
incurred due to the fraud or criminal act of a member of the Board of
Directors, an officer, an agent or an employee of the Company, or any
other person or organization involved in the presentation, defense or
settlement of any claim covered hereunder, whether acting individually
or collectively or in collusion with any person or organization.
D. Recoveries from any form of insurance or reinsurance, whether
separately purchased from another insurance carrier or self insurance
issued by the Company to itself, which protects the Company against
claims which are the subject matter of this Article, will inure to the
benefit of the Reinsurer and shall be first deducted to arrive at the
amount of any Excess Judgment hereunder, whether collectible or not.
E. If any provision of this Article shall be rendered illegal or
unenforceable by the laws, regulations or public policy of any state,
such provision shall be considered void in such state, but this shall
not affect the validity or enforceability of any other provision of
this Agreement or the enforceability of such provision in any other
jurisdiction.
ARTICLE VI
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DECLARATORY JUDGMENT EXPENSES
-----------------------------
A. This Agreement shall protect the Company for Declaratory Judgment
Expenses which are paid by the Company, as otherwise provided under
this Agreement.
B. "Declaratory Judgment Expenses" as used in this Agreement shall mean
legal expenses paid by the Company in the investigation, analysis,
evaluation, resolution or litigation of coverage issues between the
Company and its insured(s), under policies reinsured hereunder, for a
specific loss or losses tendered under such policies, which loss or
losses are not excluded under this Agreement.
ARTICLE VII
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EXCLUSIONS
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A. The reinsurance provided under this Agreement is subject to the
exclusions set forth below and shall not cover the excluded coverages,
risks or exposures unless individually submitted by the Company to the
Reinsurer for inclusion hereunder, and if specially accepted in
writing by the Reinsurer, such business shall then be covered under
the terms of this Agreement, except to the extent the terms of this
Agreement are modified by the special acceptance.
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B. The reinsurance provided under this Agreement shall not apply to the
following:
1. Business derived from any Pool, Association (including Joint
Underwriting Associations), Syndicate, Exchange, Plan, Fund or
other facility directly as a member, subscriber or participant,
or indirectly by way of reinsurance or assessments. This
exclusion shall not apply to automobile assigned risks or
workers' compensation assigned risks which may be currently or
subsequently covered hereunder, except such assigned risks
arising from property or umbrella coverages.
2. Liability of the Company arising from its participation or
membership, whether voluntary or involuntary, in any insolvency
fund, including any guarantee fund, association, pool, plan or
other facility which provides for the assessment of, payment by,
or assumption by the Company of a part or the whole of any claim,
debt, charge, fee or other obligations of an insurer, or its
successors or assigns, which has been declared insolvent by any
authority having jurisdiction.
3. Except as respects Workers' Compensation business hereunder,
liability excluded by the provisions of the following Nuclear
clauses attached hereto. The word "Reassured" used therein means
"Company."
USA:
- Liability - Reinsurance No. 1B
- Physical Damage - Reinsurance No. 2
- Physical Damage and Liability
(Boiler and Machinery) - Reinsurance No. 3.
Canada:
- Liability - Reinsurance Canada Pre 1985 - Physical Damage
- Reinsurance Canada Pre 1985 - Liability - Reinsurance
Canada Post 1985 - Physical Damage -
Reinsurance Canada Post 1985
- Physical Damage and Liability Canada -Reinsurance
(Boiler and Machinery)
As respects Workers Compensation business hereunder,
operations employing the process of nuclear fission or fusion
or handling of radioactive material, which operations include
but are not limited to:
1. the use of nuclear reactors such as atomic piles, particle
accelerators or generators, or
2. the use, handling or transportation of radioactive
materials, or
3. the use, handling or transportation of any weapon of war or
explosive device employing nuclear fission or fusion
The preceding exclusions a., b., and c. do not apply to:
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a. the exclusive use of particle accelerators incidental to
ordinary industrial or educational research pursuits, or
b. the exclusive use, handling or transportation of radio
isotopes for medical or industrial use;
c. radium or radium compounds.
4. Coverage provided by the Company to insurance, or reinsurance
companies, captives, brokers or risk retention groups (each
hereinafter referred to as "insured" for purposes of this
exclusion) which provide insurance against liability of the
insured for any damages resulting from alleged or actual tortious
conduct by the insured in the handling of claims brought against
any policyholders of the insured or in the handling of any other
business matters with or on behalf of any policyholders.
5. The following coverages:
a. Financial Guarantees;
b. Credit and Fidelity Coverage;
c. Surety Bonds;
d. Warranty Coverage;
e. Political Risk Coverage;
f. Currency Exchange Coverage;
g. Forgery Coverage; or
h. Kidnap, Extortion or ▇▇▇▇▇▇ Coverage.
6. Aggregate Excess of Loss or Stop Loss Coverages.
7. Retroactive Coverage, except in connection with unknown
incidents, covered under a claims made coverage.
8. Coverage provided on a co-indemnity basis with another insurer,
reinsurer or other entity including an insured under the
Company's policy; however, this exclusion does not apply to the
standard co-insurance provisions of a policy and facultative
reinsurance inuring to the benefit of this Agreement.
9. Coverage underwritten or accepted by any third party except the
binding authority granted by the Company to its duly authorized
agents.
10. Coverage written specifically to insure or reinsure punitive
damages.
11. Entertainment business, including but not limited to, Commercial
Negative Film Coverage, Cast Coverage and Completion Bond
Coverage.
12. The Company's liability and any related expenses, beyond
circumscribed policy provisions, including but not limited to,
punitive, exemplary, consequential or compensatory damages,
resulting from a claim of an insured or an insured's assignee
against the Company its agents or
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employees, except as provided for in the Extra Contractual
Obligations and Excess Judgments Articles.
13. All reinsurance assumed by the Company, except intra-Company
pooling arrangements.
14. All loss, cost or expense arising out of, resulting as a
consequence of or related to War. "War", as utilized herein,
shall mean war whether or not declared, civil war, martial law,
insurrection, revolution, invasion, bombardment or any use of
military force, usurped power or confiscation, nationalization or
damage of property by any government, military or other
authority.
To the extent there is no Insurance Service Office, Inc. current
standard coverage form for a type of coverage reinsured under
this agreement, "War" as utilized herein shall mean war whether
or not declared, civil war, martial law, insurrection,
revolution, invasion, bombardment or any use of military force,
usurped power or confiscation, nationalization or damage of
property by any government, military or other authority.
15. All loss, cost or expense directly or indirectly arising out of,
resulting as a consequence of or related to Pollution whether or
not there is another cause of loss which may have contributed
concurrently or in any sequence to a loss.
"Pollution" means any solid, liquid, gaseous or thermal irritant
or contaminant, including smoke, vapor, soot, fumes, acids,
alkalis, chemicals and waste. Waste includes materials to be
recycled, reconditioned or reclaimed.
This exclusion shall not apply to the extent that such
liabilities would be covered under the current standard
unendorsed coverage forms issued by Insurance Services Office,
Inc. for each type of coverage reinsured under this Agreement.
16. Space or space-related risks such as, but not limited to,
satellites, spacecraft, launch sites and launch vehicles
including cargo and freight carried therein, in all phases of
operation.
17. a. Any coverage written specifically to apply to Internet
exposures; or
b. Any loss, cost or expense arising out of or related to the
Internet, except if covered under any coverage not written or
endorsed specifically to apply to Internet exposures.
Notwithstanding the above referenced exception, the reinsurance
provided under this agreement shall not apply to the following
persons, entities or
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exposures, except for in force policies with effective dates
prior to 9/1/01 and covered under this Agreement:
(1) Internet Service Providers, meaning any
person or entity providing access to the
Internet, content over the Internet or
connection to the Internet; or
(2) Application Service Providers, meaning any
person or entity that provides software and
associated services to a subscriber base
across an area network; or
(3) Internet Backbone Providers, meaning any
person or entity that routes or provides
channels for packets that transport data
from point to point on the Internet; or
(4) Any person or entity that derives ninety
percent or more of gross revenue or conducts
or executes ninety percent or more of
business transactions on or through the
Internet; or
(5) Any person or entity that provides
electronic mail services; or
(6) Any person or entity that develops,
supplies, and/or installs encryption
software for use on the Internet.
"Internet" as utilized in this exclusion shall mean, the
international computer network of interoperable packet switched
data networks, also known as the worldwide web or worldwide
network of computers.
18. All Workers' Compensation business, except for Employers'
Liability Stop Gap coverage.
19. All automobile Liability business when written as such.
20. All loss, cost or expense arising out of or related to, either
directly or indirectly, any "Terrorist Activity," as defined
DEFINITIONS Article, and any action taken to hinder, defend
against or respond to any such activity. This exclusion applies
regardless of any other cause or event that in any way
contributes concurrently or in any sequence to the loss, cost or
expense.
C. The reinsurance provided under this Agreement for Liability business,
other than Workers Compensation, and Automobile Liability business,
shall not apply to the following:
1. Professional Liability or Errors and Omissions Coverage other
than for the following:
a. "Beau-T-Pak";
b. Barbers;
c. Opticians;
d. Veterinarians that treat household pets;
e. Morticians;
f. Clergy;
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g. Employee Benefits Liability (E&O Coverage);
h. Druggists;
i. "Day Care Pak";
j. "Adult Day Care;
k. "Health Club Pak";
l. "Instructor Pak";
m. In-Home Day Care;
n. "Pet Pak";
o. "Wellness Pak"; or
p. Massage Program.
2. Directors' and Officers' Liability Coverage, except for
Condominiums and Homeowners Associations.
3. The following coverages:
a. Product recall;
b. Product tampering;
c. Product integrity impairment; or
d. Product guarantee.
4. Coverage provided under or for liability arising from any federal
law, including but not limited to; USL&H, ▇▇▇▇▇ Act, Defense Base
Act, Federal Employers' Liability Act, Outer Continental Shelf
Lands Act, the Federal Coal Mine Health and Safety Act of 1969,
the Non-appropriated Fund Instrumentality's Act, any other
federal law awarding damages for violation of those laws or
regulations issued there under and any amendments to any of the
aforementioned laws or regulations.
5. Securities Act Liability Coverage (S.E.C. Liability).
6. Commercial Umbrella or Excess Liability Coverage, however Extra
Contractual Obligations or Excess Judgments liabilities arising
from such coverage shall be reinsured as provided within this
Agreement.
7. Personal Umbrella Liability Coverage.
8. Environmental Impairment Liability Coverage.
9. Products Liability Coverage written without an annual aggregate
limit.
10. Employer's liability and/or common law liability of employer's to
their employees when coverage is provided under Worker's
Compensation Coverage.
11. Protection and Indemnity Liability Coverage.
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12. Primary coverage written on a deductible basis or excess of a
self-insured retention when such deductible or retained amounts
are greater than $50,000.
13. Uninsured or Underinsured Motorists Coverage.
14. Advertising or Personal Injury Liability Coverage for any person
or entity whose business is advertising, broadcasting, publishing
or telecasting.
15. Aircraft and airports as respects coverage for all liability
arising out of the ownership, maintenance or use of aircraft
and/or flight or ground operations.
16. Blanket or all-risk type coverage, commonly known as
Organizational Liability, Organization Liability, Operational
Liability, Integrated Risk, Enterprise Risk or under similar
names, written in, or endorsed to, a policy covering all types of
losses incurred by, or claims against, an entity; provided,
however, that this exclusion shall not include any named-peril
grant of coverage which contemplates specifically enumerated
types of claims or losses.
17. Liability, including any related expenses directly or indirectly
arising out of, resulting as a consequence of, or related to
employment-related practices, including, but not limited to
liability related to harassment, wrongful termination or
discrimination, whether under coverage written as such or
otherwise.
18. Liability including any related expenses, arising out of the
Employee Retirement Income Security Act of 1974 and amendments
thereto.
19. Liability including any related expenses, directly or indirectly
arising out of, resulting as a consequence of or related to
Sexual Misconduct, whether or not there is another cause of loss
which may have contributed concurrently or in any sequence to a
loss for the Company's Day Care Pak, In Home Day Care Pak or
Adult Day Care policies, except for in force policies with
effective dates prior to 9/1/01, and for Day Care Pak, In Home
Day Care Pak or Adult Day Care policies of the Company where the
insured purchases the Company's buy-back coverage or when the
Company attaches the Penn-America S2092 (03/04) abuse and
molestation exclusion.
"Sexual Misconduct" as utilized herein shall include, sexual
molestation, sexual harassment, sexual abuse, any verbal or
nonverbal communication, behavior, or conduct with sexual
connotations or the infliction of physical, emotional or
psychological injury whether for purpose of sexual gratification,
discrimination, intimidation, coercion or other sexual purpose,
regardless of whether such action or resulting injury is alleged
to be intentionally or negligently caused.
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20. All loss, cost or expense directly or indirectly, arising out of,
resulting as a consequence of, or related to the manufacture,
distribution, testing, remediation, removal, storage, disposal,
sale, use of or exposure to the following, whether or not there
is another cause of loss which may have contributed concurrently
or in any sequence to a loss:
a. Asbestos or materials or products containing asbestos;
b. 2.4,5 Trichloroacetic acid ("2,4,5-1") or 2.3,7,8 -
TCDD;
c. Diethylstilbestrol ("DES") in any dosage or form Any
intrauterine device ("IUD");
d. Any product containing silicone, which is in any form
injected or implanted into the body;
e. Phen-fen;
f. Dioxin;
g. Polychlorinated biphenyls;
h. Lead or materials or products containing lead;
i. Latex gloves;
j. Polybutylene piping (acrylonitrile-butadine-styrene);
or
k. Bio-engineered products, including any food products or
therapeutic or diagnostic pharmaceutical products which
are developed using some form of bioengineering.
21. All loss, cost or expense directly arising out of, resulting as a
consequence of, or related to Electromagnetic Radiation related
to the manufacture or generation of:
a. Electric power and/or power lines;
b. Cellular phones;
c. Radio and TV broadcasting and/or towers except for
insured's with total sales less than $500,000;
d. Computers;
e. Electric blankets;
f. Military radar or weapons;
g. Police or weather radar;
h. Satellite stations;
i. Magnetic resonance imaging equipment;
j. X-ray equipment, except sales that are 10% or less of
insured's total sales; or
k. Microwave ovens;
"Electromagnetic Radiation" as used herein, shall include
magnetic energy waves, fields or forces generated, produced,
distributed, transmitted or maintained by charges, currents,
frequencies, forces of energy or electricity."
22. Products Liability or Completed Operations Liability related to:
a. Drugs, except for liability arising from the retail
sale or wholesale distribution of drugs by insureds not
engaged in their manufacture;
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b. Chemicals, except for liability arising from the retail
sale or wholesale distribution of household chemicals
by insureds not engaged in their manufacture;
c. Insecticides and pesticides, except sales that are 20%
or less of insured's total sales;
d. Aircraft or aircraft parts;
e. Animal feed, other than custom-blended grains without
chemical or pharmacological additives, except sales
that are 20% or less of insured's total sales;
f. Cosmetics manufacturing, except for the manufacture of
soaps or shampoos where the insured's receipts are less
than 10% of total sales or skin and hair care products
prepared at beauty salons or similar establishments,
g. Tobacco and tobacco products, but this exclusion shall
not apply to liability arising from the retail sale or
wholesale distribution of tobacco products by insureds
not engaged in their manufacture;
h. Automobiles, trucks, motorcycles and all-terrain
vehicles or component parts critical to the operation
of the foregoing, but this exclusion shall not apply to
the liability arising from the retail sale or wholesale
distribution of component parts critical or
non-critical to the operation of the foregoing not
engaged in their manufacture;
i. Fiberglass, but this exclusion shall not apply to
liability arising from the retail sale or wholesale
distribution of fiberglass products by insureds not
engaged in their manufacture;
j. Firearms, except sales that are 20% or less of
insured's total sales; k. Medical equipment; l.
Elevator or hoist manufacturing, installation,
inspection, service or repair;
m. Security and alarm system manufacturing, installation,
inspection, service or repair, except for coverage as
provided for in the Company's guidelines as of 9/01/01;
or
n. Fire suppression system manufacturing, installation,
inspection, service or repair, except for coverage as
provided for in the Company's guidelines as of 9/01/01.
23. Wrecking or demolition of buildings, structures, watercraft or
aircraft, except for buildings six stories or less.
24. Railroad, subway and street railway construction, operation or
maintenance, excepting sidetrack agreements.
25. Bridge, tunnel, dam or reservoir design, construction, operation
or maintenance.
26. Mining, except insureds with receipts from quarry operations of
less than 5% of total sales.
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27. Onshore or offshore gas or oil drilling operations, pipelines, or
▇▇▇▇▇.
28. Mill or grain elevator operation.
29. Manufacture, assembly, packing, handling, processing,
transportation, sale, storage or detonation of fireworks, fuses,
nitroglycerine, ammonium nitrate, magnesium, celluloid,
pyroxylin, ammunition, explosives or any product in which an
explosive substance is an ingredient, or component part.
The term "explosive substance," as used herein, is any substance
manufactured for the express purpose of exploding as
differentiated from those commodities, other than those
commodities specified in this exclusion, which are only
fortuitously explosive, such as gasoline, fuel oil, or dyestuffs.
30. Manufacture, production, refining, storage, sale, distribution or
transportation of natural or artificial fuel, gas, butane,
methane, propane, other liquefied petroleum gases, gasoline or
gases or air under pressure, except this exclusion does not apply
to gasoline at hardware stores, convenience stores and automobile
service stations storing gasoline on premises for retail sale,
fuel oil dealers, and LPG sales that are 20% or less of the
insured's total sales.
31. Stevedoring.
32. Ski lodges, lifts, cable cars and tows.
33. Shipbuilding, ship repair, ship breaking, dry dock, and quays or
wharf operations, except boat slips or docks that are incidental
to restaurants, condominiums, or similar operations or risks.
34. Watercraft over 50 feet in length.
35. Amusement parks, amusement devices (other than coin operated
devices), fairs, exhibitions, carnivals, circuses and zoos (other
than petting zoos), except when written within the guidelines of
the of the Company's Special Events Program.
36. Sports or other entertainment events with an expected capacity,
at any one time, of 25,000 or more people.
37. Arenas, grandstands, stadiums, theatres, halls and any other
indoor venue with an expected capacity, at any one time, of
25,000 or more.
38. Electric and gas utilities and the municipalities, authorities
and all boards, commissions, or entities responsible for
administering or controlling these utilities.
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39. Governmental agencies, entities, or political subdivisions of a
state or municipalities with a population of 50,000 or more,
except for insureds required to name the local municipality as a
named insured for special events.
40. Insurance companies, agents, brokers, or risk retention groups,
inspection services, claims services and rating bureaus, unless
coverage for errors and omissions is excluded under the policy
reinsured.
41. School boards or school districts.
42. Nursing homes and nursing home care, except for adult day care
centers or the Family Home Care Program when written within the
Company guidelines as of 9/01/01.
43. Banks and other financial institutions unless the Company's
coverage contains a financial institution endorsement agreed to
by the Reinsurer.
44. Contractors engaged in the construction, erection or exterior
maintenance of structures in excess of six stories, except for
window washers or power washing operations.
45. Crop-dusting.
46. Insureds in the business of Scaffold manufacture, installation,
repair, removal or rental.
47. Inverse condemnation liability.
48. All loss, cost or expense arising out of, resulting as a
consequence of or related to poultry products, operations or
exposures, including but not limited to; poultry houses, poultry
processing operations, live birds, processed birds, egg laying
operations, egg processing operations or eggs.
49. All loss, cost or expense, directly or indirectly arising out of
or related to the liability of Contractors for Residential
Construction in Arizona, California, Colorado, Nevada, Oregon,
New York, Texas and Washington.
"Contractors" shall mean all developers, general contractors and
subcontractors who sub out more than 50% of their work.
"Residential Construction" shall mean all development, design,
building or other construction, improvements, site selection,
surface or subsurface site preparation, or any work, products or
component parts thereof, or services provided in relation to any
of the foregoing, involving property intended in
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whole or in part for residential habitation, or any common or
public areas or facilities related thereto.
Notwithstanding the foregoing, "Residential Construction"
shall not include repair work, remodeling or any other
contracting work which is begun after the date of initial
occupancy provided such work is unrelated to or not completing
work begun prior to the date of initial occupancy.
D. In the event the Company is inadvertently bound on any exclusion enumerated
under paragraph C, the reinsurance provided under this Agreement shall
apply until discovery by the Company of the existence of the inadvertent
binding and for 30 days thereafter, and shall then cease unless, within the
30-day period, the Company has received from the Reinsurer written notice
of its approval of such binding.
E. The reinsurance provided under this Agreement for Property business shall
not apply to the following:
1. Difference in Conditions Coverage.
2. Ocean Marine Coverage.
3. Mortgage impairment insurance and similar kinds of insurance,
however styled.
4. Mining including mining equipment.
5. Aviation business.
6. The following coverages:
a. Product recall;
b. Product tampering;
c. Product integrity impairment; or
d. Product guarantee.
7. Excess Coverage, meaning coverage written to apply specifically
in excess over underlying insurance.
8. Boiler and Machinery Coverage.
9. Livestock Mortality or Fertility Coverage.
10. Furriers' and Jewelers Block Coverage.
11. Contingency business interruption risks of any kind.
12. Transmission and distribution lines other than those within 500
feet of an insured's premises. It is understood and agreed that
public utilities
-15-
extension and/or suppliers extension and/or contingent business
interruption coverage are not subject to this exclusion provided
that these are not part of a transmitter's or distributor's
policies.
13. All onshore or offshore: a. gas and oil drilling risks; b.
petrochemical risks; c. pipeline risks; or d. well risks.
14. Flood, surface water, waves, tidal water or tidal waves, overflow
of streams or other bodies of water or spray from any of the
foregoing, all whether driven by wind or not; provided, however,
this exclusion shall not apply to losses covered under automobile
physical damage policies or Inland Marine Policies.
15. Earthquake, landslide and other earth movement provided, however,
this exclusion shall not apply to automobile physical damage
coverage or Inland Marine Policies.
16. Railroad property, rolling stock, tracks or roadbeds.
17. Fine arts collections exceeding $5,000,000 in total value.
18. Mobile homes, except mobile home parks written on a commercial
lines basis with less than 25% of the mobile homes being owned by
the insured.
19. Risks having total insurable value of more than $50,000,000.
20. Growing, standing or drying crops and timber.
21. Watercraft except watercraft insured under personal property
floaters.
22. Bridges, dams and tunnels.
23. All loss, cost or expense arising out of, resulting as a
consequence of or related to poultry products, operations or
exposures, including but not limited to; poultry houses, poultry
processing operations, live birds, processed birds, egg laying
operations, egg processing operations or eggs.
ARTICLE VIII
------------
DEFINITIONS
-----------
A. The following Definitions apply as respects all Property business:
-16-
I. Property Occurrence:
--------------------
A. The term "Occurrence" shall mean the sum of all individual losses
directly occasioned by any one disaster, accident or loss or series of
disasters, accidents or losses arising out of one event which occurs
within the area of one state of the United States or province of
Canada and states or provinces contiguous thereto and to one another.
However, the duration and extent of any one "Occurrence" shall be
limited to all individual losses sustained by the Company occurring
during any period of 168 consecutive hours arising out of and directly
occasioned by the same event except that the term "Occurrence" shall
be further defined as follows:
1. As regards windstorm, hail, tornado, hurricane, cyclone,
including ensuing collapse and water damage, all individual
losses sustained by the Company occurring during any period of 72
consecutive hours arising out of and directly occasioned by the
same event. However, the event need not be limited to one state
or province or states or provinces contiguous thereto.
2. As regards riot, riot attending a strike, civil commotion,
vandalism and malicious mischief, all individual losses sustained
by the Company occurring during any period of 72 consecutive
hours within the area of one municipality or county and the
municipalities or counties contiguous thereto arising out of and
directly occasioned by the same event. The maximum duration of 72
consecutive hours may be extended in respect of individual losses
which occur beyond such 72 consecutive hours during the continued
occupation of an assured's premises by strikers, provided such
occupation commenced during the aforesaid period.
3. As regards earthquake (the epicenter of which need not
necessarily be within the territorial confines referred to in the
opening paragraph of this Article) and volcanic eruption, all of
the Company's individual losses (including losses from other
perils covered hereunder which directly arise from earthquake and
volcanic eruption) which occur during a period of 168 consecutive
hours shall be considered one "Occurrence". The term "earthquake"
means one or more seismic disturbances emanating from the same or
adjacent geological faults. The term "volcanic eruption" means
all activity arising from a single volcano.
4. As regards flood, being the overflowing of a natural body of
water caused by torrential rain and the resulting inundation of
the adjacent land, all individual losses sustained by the Company
which occur during a period of 168 hours in a territory forming
one river basin shall be considered one "Occurrence." The term
"river basin" shall mean the land drained by a river, including
all the tributaries of such
-17-
river, which flows directly into an ocean, sound, bay gulf, or
into one of the Great Lakes.
5. As regards "Freeze," only individual losses directly caused by
falling trees or limbs, collapse, breakage of glass, power outage
(off premises), automobile physical damage (comprehensive only)
and water damage (caused by ice damming or by bursting of frozen
pipes and tanks) may be included in the Company's "Occurrence".
B. For all "Occurrences" the Company may choose the date and time when
any such period of consecutive hours commences provided that it is not
earlier than the date and time of the occurrence of the first recorded
individual loss sustained by the Company arising out of that disaster,
accident or loss and provided that only one such period of 168
consecutive hours shall apply with respect to one event, except for
those "Occurrences" referred to in subparagraphs 1. and 2. above where
only one such period of 72 consecutive hours shall apply with respect
to one event, regardless of the duration of the event.
C. No individual losses occasioned by an event that would be covered by
72 hours clauses may be included in any "Occurrence" claimed under the
168 hours provisions.
II. Property Definition of Risk
---------------------------
A. The Company shall be the sole judge of what constitutes one risk
provided:
1. One risk shall be defined from the standpoint of the peril of
fire, however, except as otherwise provided hereunder, a building
and its contents shall never be considered as constituting more
than one risk, nor shall time element coverages be considered a
separate risk apart from the building and its contents, and
2. One risk, with respect to the peril of wind, including but not
limited to: tornado, cyclone, hurricane, windstorm and hail,
shall mean all insured locations listed on an individual policy
that are within a legal property boundary which is owned,
occupied or operated by the insured as one continuous property
site, including a site that contains roadways, streams or
rights-of-way intersecting the site.
3. The term "building" shall mean each separately roofed structure
enclosed within exterior walls.
4. As respects Dealer Open Lot risks, all insured property at any
one location shall be considered one risk.
-18-
III. Casualty Occurrence:
-------------------
A. The term "occurrence" as used herein means each accident or occurrence
or series of accidents or occurrences, arising out of one event,
provided that, as respects:
1. Products Liability (bodily injury and property damage), the term
"occurrence" shall mean the sum of all damages arising from the
consumption, use or exposure to the insured's product(s)
occurring during each original policy period, in respect to each
insured, each policy, emanating from or traceable to the same
causative agency.
2. Third Party Bodily Injury or Property Damage Liability, other
than Automobile and Products, arising or emanating from or
traceable to a continuous or repeated exposure to the same
causative agency, the term "occurrence" shall mean the sum of all
damages sustained by each insured, each policy, during each
original policy period.
B. The term "each original policy period" as used herein means each
annual period the original policy (i.e., the policy reinsured
hereunder) is in effect. Policies in effect for a period greater than
one year shall be deemed to have separate annual policy periods.
C. If the date of loss, accident or occurrence cannot be specifically
determined, the date of loss, accident or occurrence shall be the
inception date of the original policy; such policy period shall be
deemed not to exceed 12 calendar months.
IV. Terrorist Activity
------------------
A. "Terrorist Activity" shall mean any deliberate, unlawful act that:
1. is declared by any authorized governmental official to be or
to involve terrorism, terrorist activity or acts of
terrorism; or
2. includes, involves, or is associated with the use or
threatened use of force, violence or harm against any
person, tangible or intangible property, the environment, or
any natural resources, where the act or threatened act is
intended, in whole or in part, to
(a) promote, further or express opposition to any
political, ideological, philosophical, racial, ethnic,
social or religious cause or objective; or
(b) influence, disrupt or interfere with any government
related operations, activities or policies; or
(c) intimidate, coerce or frighten the general public or
any segment of the general public; or
(d) disrupt or interfere with a national economy or any
segment of a national economy; or
3. includes, involves, or is associated with, in whole or in
part, any of the following activities, or the threat
thereof:
-19-
(a) hijacking or sabotage of any form of transportation or
conveyance, including but not limited to spacecraft,
satellite, aircraft, train, vessel, or motor vehicle;
(b) hostage taking or kidnapping;
(c) the use or threatened use of, or release or threatened
release of any nuclear, biological, chemical or
radioactive agent, material, device or weapon;
(d) the use of any bomb, incendiary device, explosive or
firearm;
(e) the interference with or disruption of basic public or
commercial services and systems, including but not
limited to the following services or systems:
electricity, natural gas, power, postal,
communications, telecommunications, information, public
transportation, water, fuel, sewer or waste disposal;
(f) the injuring or assassination of any elected or
appointed government official or any government
employee;
(g) the seizure, blockage, interference with, disruption
of, or damage to any government buildings,
institutions, functions, events, tangible or intangible
property or other assets; or
(h) the seizure, blockage, interference with, disruption
of, or damage to tunnels, roads, streets, highways, or
other places of public transportation or conveyance.
B. Any of the activities listed in section A(3) above shall be considered
Terrorist Activity except where the Company can demonstrate to the
Reinsurer that the foregoing activities or threats thereof were
motivated solely by personal objectives of the perpetrator that are
unrelated, in whole or in part, to any intention to
1. promote, further or express opposition to any political,
ideological, philosophical, racial, ethnic, social or religious
cause or objective; or
2. influence, disrupt or interfere with any government related
operations, activities or policies; or
3. intimidate, coerce or frighten the general public or any segment
of the general public; or
4. disrupt or interfere with a national economy or any segment of a
national economy.
ARTICLE IX
----------
CLAIMS
------
A. As a condition precedent to the Reinsurer's liability under this
Agreement, the Company shall give timely written notice to the
Reinsurer of all claims which may develop into losses involving
reinsurance hereunder.
-20-
B. In addition, the following categories of claims shall be reported to
the Reinsurer immediately, regardless of any questions of liability of
the insured or coverage under the policy:
1. Fatality;
2. Partial or Total Paralysis;
3. Severe brain injury or brain damage prognosis;
4. Severe ▇▇▇▇▇;
5. Amputation of one or more limbs;
6. Loss of sight or hearing to a substantial degree;
7. Any injury where there is, or appears probable, an alleged loss
of earnings for one year or more; and,
8. Any claim with a loss reserve that exceeds 50% of the Company's
net retention, provided that such claim might involve the
Reinsurer.
C. The Company has the obligation to investigate and defend any claim
affecting this reinsurance, to advise the Reinsurer promptly of
subsequent developments pertaining thereto and to pursue such claim to
final determination.
D. It is understood that when so requested the Company will afford the
Reinsurer an opportunity to be associated with the Company at the
expense of the Reinsurer in the defense or control of any claim or
suit proceeding involving this reinsurance; and the Company and the
Reinsurer shall cooperate in every respect in the defense of such suit
or claim or proceeding.
ARTICLE X
----------
WARRANTY
--------
Casualty
--------
A. The maximum limits of liability for any one policy of the Company
shall be deemed not to exceed the following:
1. General Liability - $1,000,000 each occurrence and $2,000,000
general aggregate. a) As respects Products and Completed
Operations - $1,000,000 in the aggregate.
2. Massage Program - $2,000,000 each occurrence and $3,000,000
general aggregate.
-21-
3. Professional Liability - $1,000,000 each occurrence and
$1,000,000 in the annual aggregate.
4. Umbrella Liability - The Company will purchase or so deemed
umbrella facultative reinsurance covering Extra Contractual
Obligations and Excess Judgments liability as defined within this
Agreement for an amount equal to and in addition to the umbrella
policy limit, subject to an annual aggregate limit of $5,000,000.
Facultative reinsurance coverage for any umbrella extra
contractual obligations or excess judgments liability shall inure
to the benefit of this Agreement.
Property
A. It shall be deemed that the Company will purchase facultative
reinsurance on all risks in excess of $2,000,000.
B. It shall be deemed that the Company will purchase catastrophe
reinsurance for $29,000,000 in excess of $1,000,000 for any one
occurrence.
ARTICLE XI
----------
SUBROGATION AND SALVAGE
-----------------------
A. The Reinsurer shall be subrogated, as respects any loss for which the
Reinsurer shall actually pay or become liable, but only to the extent
of the amount of payment by or the amount of liability to the
Reinsurer, to all the rights of the Company against any person or
other entity who may be legally responsible in damages for said loss.
The Company hereby agrees to enforce such rights, but in case the
Company shall refuse or neglect to do so the Reinsurer is hereby
authorized and empowered to bring any appropriate action in the name
of the Company or its policyholders, or otherwise to enforce such
rights.
B. Any recoveries, salvages or reimbursements applying to risks covered
under this Agreement shall always be used to reimburse the excess
carriers (from the last to the first, beginning with the carrier of
the last excess), according to their participation, before being used
in any way to reimburse the Company for its primary loss.
C. All salvages, recoveries or reimbursements, after deduction of
expenses applicable thereto, recovered or received subsequent to a
loss settlement under this Agreement shall be applied as if recovered
or received prior to the aforesaid settlement and all necessary
adjustments shall be made by the parties hereto, provided always, that
nothing in this clause shall be construed to mean that losses under
this Agreement are not recoverable until the Company's ultimate net
loss has been ascertained. Expenses hereunder shall exclude all office
expenses of the Company and all
-22-
salaries and expenses of its officials and employees except those of
salaried adjusters.
ARTICLE XII
-----------
TAXES
The Company will be liable for all taxes on premiums reported to the
Reinsurer hereunder and will reimburse the Reinsurer for such taxes
where the Reinsurer is required to pay the same.
ARTICLE XIII
------------
ACCESS TO RECORDS
The Company shall place at the disposal of the Reinsurer and the
Reinsurer shall have the right to inspect, through its authorized
representatives, at all reasonable times during the currency of this
Agreement and thereafter, the books, records and papers of the Company
pertaining to the reinsurance provided hereunder and all claims made
in connection therewith.
ARTICLE XIV
INSOLVENCY
The reinsurance provided by this Agreement shall be payable by the
Reinsurer directly to the Company or to its liquidator, receiver or
statutory successor on the basis of the liability of the Company under
the contract or contracts reinsured. Subject to the right of offset
and the verification of coverage, the Reinsurer shall pay its share of
the loss without diminution because of the insolvency of the Company.
In the event of the insolvency of the Company, the liquidator,
receiver or statutory successor of the Company shall give written
notice of the pendency of each claim against the Company on a policy
or bond reinsured within a reasonable time after such claim is filed
in the insolvency proceeding. During the pendency of such claim, the
Reinsurer may, at its own expense, investigate such claim and
interpose in the proceeding where such claim is to be adjudicated any
defense or defenses which it may deem available to the Company, its
liquidator or receiver or statutory successor. Subject to court
approval, any expense thus incurred by the Reinsurer shall be
chargeable against the Company as part of the expense of liquidation
to the extent of such proportionate share of the benefit as shall
accrue to the Company solely as a result of the defense undertaken by
the Reinsurer. The reinsurance shall be payable as set forth above
except where this Agreement specifically provides for the payment of
reinsurance proceeds to another party in the event of the insolvency
of the Company.
ARTICLE XV
OFFSET AND SECURITY
-23-
A. Each party hereto has the right, which may be exercised at any time,
to offset any amounts, whether on account of premiums or losses or
otherwise, due from such party to another party under this Agreement
or any other reinsurance agreement heretofore or hereafter entered
into between them, against any amounts, whether on account of premiums
or losses or otherwise due from the latter party to the former party.
The party asserting the right of offset may exercise this right,
whether as assuming or ceding insurer or in both roles in the relevant
agreement or agreements.
B. Each party hereby assigns and pledges to the other party (or to each
other party, if more than one) all of its rights under this Agreement
to receive premium or loss payments at any time from such other party
("Collateral"), to secure its premium or loss obligations to such
other party at any time under this Agreement and any other reinsurance
agreement heretofore or hereinafter entered into by and between them
("Secured Obligations"). If at any time a party is in default under
any Secured Obligation or shall be subject to any liquidation,
rehabilitation, reorganization or conservation proceeding, each other
party shall be entitled in its discretion, to apply, or to withhold
for the purpose of applying in due course, any Collateral assigned and
pledged to it by the former party and otherwise to realize upon such
Collateral as security for such Secured Obligations.
C. The security interest described herein, and the term "Collateral,"
shall apply to all payments and other proceeds in respect of the
rights assigned and pledged. A party's security interest in Collateral
shall be deemed evidenced only by the counterpart of this Agreement
delivered to such party.
D. Each right under this Article is a separate and independent right,
exercisable, without notice or demand, alone or together with other
rights, in the sole election of the party entitled thereto, and no
waiver, delay, or failure to exercise, in respect of any right, shall
constitute a waiver of any other right. The provisions of this Article
shall survive any cancellation or other termination of this Agreement.
ARTICLE XVI
-----------
ERRORS AND OMISSIONS
The Reinsurer shall not be relieved of liability because of an error
or accidental omission by the Company in reporting any claim or loss
or any business reinsured under this Agreement, provided that the
error or omission is rectified promptly after discovery. The Reinsurer
shall be obligated only for the return of the premium paid for
business reported but not reinsured under this Agreement.
ARTICLE XVII
-------------
FEDERAL EXCESS RECOVERY
As respects the Insured Losses of the Insurer for each Program Year,
it is hereby agreed that to the extent the Insurer's total reinsurance
recoverables for Insured Losses, whether
-24-
collected or not, combined with the financial assistance available to
the Insurer under the Act exceeds the aggregate amount of Insured
Losses paid by the Insurer, less any other recoveries or
reimbursements, such excess amounts (the "Excess Recovery") shall be
allocated to the Company. The allocation to the Company shall be
deemed to be an amount equal to the proportion that the Company's
Insured Losses bear to the Insurer's total Insured Losses for each
Program Year. The Company shall then reimburse the Reinsurer for its
share of the Excess Recovery allocated to the Company. The Reinsurer's
share of the Excess Recovery shall be deemed to be an amount equal to
the proportion that the Reinsurer's payment of Insured Losses under
this Agreement bears to the Company's total collected reinsurance
recoverables for Insured Losses. The Company also agrees to provide
the Reinsurer with all necessary data respecting the transactions
covered under this Clause.
"Act" as utilized herein shall mean the Terrorism Risk Insurance Act
of 2002 and any subsequent amendment thereof or any regulations
promulgated there under. "Insurer", "Insured Losses", and "Program
Year" as utilized herein shall follow the definitions as provided in
the Act."
ARTICLE XVIII
-------------
COMMENCEMENT AND TERMINATION
----------------------------
A. This Agreement shall take effect as of 12:01 a.m., Eastern Standard
Time, January 1, 2004, and shall, except as otherwise stipulated
herein or in any Exhibit hereto or any Endorsement hereof, continue in
full force and effect until terminated as hereinafter provided.
B. This Agreement may be canceled at any December 31, unless otherwise
mutually agreed by either party, giving 90 days notice in writing
prior to such date, stating to the other its desire to effect such
cancellation.
C. In the event of cancellation, the Reinsurer shall remain liable for
losses occurring prior to such cancellation date, but all liability
shall terminate hereunder as to losses occurring subsequent to the
cancellation date.
D. Should this Agreement terminate while a covered loss occurrence is in
progress, the entire loss arising out of such loss occurrence shall be
subject to this Agreement.
E. Every notice of termination shall be given by certified letter
addressed to the intended recipient at such recipient's address as
hereinabove set forth. In determining whether the requisite number of
days' notice has been given in any case, the date of termination shall
be counted but the date of mailing shall not.
F. Notwithstanding the termination of this Agreement as hereinabove
provided, the provisions of this Agreement shall continue to apply to
all unfinished business hereunder to the end that all obligations and
liabilities incurred by each party hereunder prior to such termination
shall be fully performed and discharged.
-25-
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed in duplicate in Hatboro, Pennsylvania, this day of , 2004;
ACCEPTED:
PENN-AMERICA INSURANCE COMPANY
PENN-STAR INSURANCE COMPANY
PENN-PATRIOT INSURANCE COMPANY
-----------------------
and in Princeton, New Jersey, this day of 2004.
AMERICAN RE-INSURANCE COMPANY
-----------------------
Vice President
DATED: June 4, 2004
RG/rg
-26-
EXHIBIT A
FIRST PROPERTY AND CASUALTY
CLASH EXCESS OF LOSS
Section 1
A. BUSINESS COVERED
The Reinsurer agrees to reimburse the Company, on an excess of loss
basis, for the amounts of ultimate net loss which the Company may pay
as a result of losses occurring on and after January 1, 2004, as
respects the Company's in-force, new and renewal policies becoming
effective on and after said date, covering the Classes of Insurance
set forth below, except as excluded under the EXCLUSIONS Article of
this Agreement, subject to the limitations set forth herein.
CLASSES OF INSURANCE
Property
----------
Fire
Commercial Multi Peril Section I
Businessowners Section I
Allied Lines
Inland Marine
Casualty
----------
General Liability
Commercial Multi Peril Section II
Businessowners Section II
Employer's Liability Stop Gap coverage
Non-owned and Hired Automobile Liability when
written as part of Commercial Multi Peril Section II
or General Liability policies, including
Professional Liability
B. The term "policies" as used herein means each of the Company' s
binders, policies and contracts providing insurance and reinsurance on
the Classes of Insurance covered hereunder.
Section 2
LIMITS OF COVER
---------------
A. As respects one or more than one of the classes under Property Classes
of Insurance as stated in Section 1, the Reinsurer shall not be liable
for any loss until the Company's ultimate net loss for each risk in
each occurrence exceeds $2,000,000 and then the Reinsurer shall be
liable for the amount of the Company' s ultimate net
-1-
loss for each risk in each occurrence in excess of $2,000,000 but the
Reinsurer's liability shall not exceed 100% of $3,000,000 for each
risk in any one occurrence or $3,000,000 as respects all risks in any
one loss occurrence.
B. As respects one or more than one of the classes under Casualty Classes
of Insurance as stated in Section 1, the Reinsurer shall not be liable
for any loss until the Company's ultimate net loss in each occurrence
exceeds $3,000,000 and then the Reinsurer shall be liable for the
amount of the Company' s ultimate net loss in each occurrence in
excess of $3,000,000 but the Reinsurer's liability shall not exceed
100% of $2,000,000 in any one occurrence.
C. In the event of a combination loss occurrence involving a Property
Class of Insurance and a Casualty Class of Insurance as stated in
Section 1, the Reinsurer's liability shall not exceed $3,000,000 in
the aggregate in any one occurrence, further subject to Casualty
Classes of Insurance sub-limit of $2,000,000 in any one occurrence.
Section 3
---------
REINSURANCE PREMIUM
The annual minimum and deposit premium for the reinsurance provided
under this Exhibit shall be $210,000.
Section 4
---------
REPORTS AND REMITTANCES
A. The minimum and deposit premium shall be fully earned as of the
inception date of this Agreement and shall be paid in advance by the
Company to the Reinsurer in equal installments on 1/1, and 7/1, during
the term of this Agreement.
B. Payment by the Reinsurer of its portion of loss and loss expenses paid
by the Company will be made by the Reinsurer to the Company within 5
days after proof of payment by the Company is received by the
Reinsurer.
Section 5
---------
REINSTATEMENT
Each claim hereon reduces the amount of indemnity from the time of
occurrence of the loss by the sum paid, but any amount so exhausted is
hereby reinstated from the time of occurrence of the loss, and for
each amount so reinstated the Company agrees to pay an additional
premium calculated at the annual earned premium hereon for the
Agreement Year during which the loss occurred, being pro rata as to
the fraction of the face value of this Agreement (i.e., the fraction
of $3,000,000 as respects Property Classes and $2,000,000 as respects
Casualty Classes) so reinstated and 100% as to the time of the
-2-
Agreement Year. Nevertheless, the Reinsurer's liability hereunder, as
respects Property Classes shall never exceed $3,000,000 in respect of
any risk in any one occurrence and the Reinsurer's liability
hereunder, as respects Casualty Classes, shall never exceed $2,000,000
in respect of any one occurrence, and shall be further limited to
$6,000,000 as respects Property Classes or $4,000,000 as respects
Casualty Classes, in any one Agreement Year by reason of any and all
claims arising hereunder. However, the Reinsurer's liability shall
never exceed $6,000,000 for both Property and Casualty Classes of
Insurance in any one Agreement Year.
This Exhibit A is attached to and forms part of Reinsurance Agreement
No. 3154-0028 issued to PENN-AMERICA INSURANCE COMPANY, PENN-STAR
INSURANCE COMPANY and PENN-PATRIOT INSURANCE COMPANY
DATED: June 4, ▇▇▇▇
▇▇/▇▇
-▇-
▇▇. ▇▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇ ▇
EXHIBIT B
---------
SECOND PROPERTY AND CASUALTY
CLASH EXCESS OF LOSS
-------------------
Section 1
---------
A. BUSINESS COVERED
The Reinsurer agrees to reimburse the Company, on an excess of loss
basis, for the amounts of ultimate net loss which the Company may pay
as a result of losses occurring on and after January 1, 2004, as
respects the Company's in-force, new and renewal policies becoming
effective on and after said date, covering the Classes of Insurance
set forth below, except as excluded under the EXCLUSIONS Article of
this Agreement, subject to the limitations set forth herein.
CLASSES OF INSURANCE
Property
---------
Fire
Commercial Multi Peril Section I
Businessowners Section I
Allied Lines
Inland Marine
Casualty
---------
General Liability
Commercial Multi Peril Section II
Businessowners Section II
Employer's Liability Stop Gap coverage
Non-owned and Hired Automobile Liability when
written as part of Commercial Multi Peril Section II
or General Liability policies, including
Professional Liability
B. The term "policies" as used herein means each of the Company' s
binders, policies and contracts providing insurance and reinsurance on
the Classes of Insurance covered hereunder.
Section 2
---------
LIMITS OF COVER
A. As respects one or more than one of the classes under Property Classes
of Insurance as stated in Section 1, the Reinsurer shall not be liable
for any loss until the Company's ultimate net loss for each risk in
each occurrence exceeds $5,000,000 and then the Reinsurer shall be
liable for the amount of the Company' s ultimate net loss for each
risk in each occurrence in excess of $5,000,000
-1-
but the Reinsurer's liability shall not exceed 100% of $5,000,000 for
each risk in any one occurrence or $5,000,000 as respects all risks in
any one loss occurrence.
B. As respects one or more than one of the classes under Casualty Classes
of Insurance as stated in Section 1, the Reinsurer shall not be liable
for any loss until the Company's ultimate net loss in each occurrence
exceeds $5,000,000 and then the Reinsurer shall be liable for the
amount of the Company' s ultimate net loss in each occurrence in
excess of $5,000,000 but the Reinsurer's liability shall not exceed
100% of $5,000,000 in any one occurrence.
C. In the event of a combination loss occurrence involving a Property
Class of Insurance and a Casualty Class of Insurance as stated in
Section 1, the Reinsurer's liability shall not exceed $5,000,000 in
the aggregate in any one occurrence.
D. Reinsurance recoveries under Exhibit A of this Agreement shall inure
to the sole benefit of the Company in determining the Company's
Ultimate Net Loss under this Exhibit.
Section 3
---------
REINSURANCE PREMIUM
The annual minimum and deposit premium for the reinsurance provided
under this Exhibit shall be $275,000.
Section 4
---------
REPORTS AND REMITTANCES
A. The minimum and deposit premium shall be fully earned as of the
inception date of this Agreement and shall be paid in advance by the
Company to the Reinsurer in equal installments on 1/1, and 7/1, during
the term of this Agreement.
B. Payment by the Reinsurer of its portion of loss and loss expenses paid
by the Company will be made by the Reinsurer to the Company within 5
days after proof of payment by the Company is received by the
Reinsurer.
Section 5
---------
REINSTATEMENT
Each claim hereon reduces the amount of indemnity from the time of
occurrence of the loss by the sum paid, but any amount so exhausted is
hereby reinstated from the time of occurrence of the loss, and for
each amount so reinstated the Company agrees to pay an additional
premium calculated at the annual earned premium hereon for the
-2-
Agreement Year during which the loss occurred, being pro rata as to
the fraction of the face value of this Agreement (i.e., the fraction
of $5,000,000) so reinstated and 100% as to the time of the Agreement
Year. Nevertheless, the Reinsurer's liability hereunder shall never
exceed $5,000,000 in respect of any risk in one occurrence and,
subject to the limit in respect of any one occurrence, shall be
further limited to $10,000,000 in any one Agreement Year by reason of
any and all claims arising hereunder. However, the Reinsurer's
liability shall never exceed $10,000,000 for both Property and
Casualty Classes of Insurance in any one Agreement Year.
This Exhibit B is attached to and forms part of Reinsurance Agreement
No. 3154-0028 issued to PENN-AMERICA INSURANCE COMPANY, PENN-STAR
INSURANCE COMPANY and PENN-PATRIOT INSURANCE COMPANY
DATED: June 4, 2004
RG/rg
-3-
No. 3154-0028
NUCLEAR INCIDENT EXCLUSION CLAUSE--
PHYSICAL DAMAGE--REINSURANCE--NO. 2
(1) This Reinsurance does not cover any loss or liability accruing to the
Reassured, directly or indirectly and whether as Insurer or Reinsurer,
from any Pool of Insurers or Reinsurers formed for the purpose of
covering Atomic or Nuclear Energy risks.
(2) Without in any way restricting the operation of paragraph (1) of this
Clause, this Reinsurance does not cover any loss or liability accruing
to the Reassured, directly or indirectly and whether as Insurer or
Reinsurer, from any insurance against Physical Damage (including
business interruption or consequential loss arising out of such
Physical Damage) to:
I. Nuclear reactor power plants including all auxiliary property on
the site, or
II. Any other nuclear reactor installation, including laboratories
handling radioactive materials in connection with reactor
installations, and "critical facilities" as such, or
III.Installations for fabricating complete fuel elements or for
processing substantial quantities of "special nuclear material,"
and for reprocessing, salvaging, chemically separating, storing
or disposing of "spent" nuclear fuel or waste materials, or
IV. Installations other than those listed in paragraph (2) III above
using substantial quantities of radioactive isotopes or other
products of nuclear fission.
(3) Without in any way restricting the operations of paragraphs (1) and
(2) hereof, this Reinsurance does not cover any loss or liability by
radioactive contamination accruing to the Reassured, directly or
indirectly, and whether as Insurer or Reinsurer, from any insurance on
property which is on the same site as a nuclear reactor power plant or
other nuclear installation and which normally would be insured
therewith except that this paragraph (3) shall not operate:
(a) where Reassured does not have knowledge of such nuclear
reactor power plant or nuclear installation, or
(b) where said insurance contains a provision excluding coverage
for damage to property caused by or resulting from
radioactive contamination, however caused. However on and
after 1st January 1960 this sub-paragraph (b) shall only
apply provided the said radioactive contamination exclusion
provision has been approved by the Governmental Authority
having jurisdiction thereof.
(4) Without in any way restricting the operations of paragraphs (1), (2)
and (3) hereof, this Reinsurance does not cover any loss or liability
by radioactive contamination accruing to the Reassured, directly or
indirectly, and whether as Insurer or Reinsurer, when such radioactive
contamination is a named hazard specifically insured against.
(5) It is understood and agreed that this Clause shall not extend to risks
using radioactive isotopes in any form where the nuclear exposure is
not considered by the Reassured to be the primary hazard.
(6) The term "special nuclear material" shall have the meaning given it in
the Atomic Energy Act of 1954 or by any law amendatory thereof.
(7) Reassured to be sole judge of what constitutes:
(a) substantial quantities, and
(b) the extent of installation, plant or site.
-1-
Note.--Without in any way restricting the operation of paragraph (1)
hereof, it is understood and agreed that:
(a) all policies issued by the Reassured on or before 31st
December 1957 shall be free from the application of the
other provisions of this Clause until expiry date or 31st
December 1960 whichever first occurs whereupon all the
provisions of this Clause shall apply,
(b) With respect to any risk located in Canada policies issued
by the Reassured on or before 31st December 1958 shall be
free from the application of the other provisions of this
Clause until expiry date or 31st December 1960 whichever
first occurs whereupon all the provisions of this Clause
shall apply.
-2-
NUCLEAR INCIDENT EXCLUSION CLAUSE - LIABILITY - REINSURANCE - No. 1B
(1) This reinsurance does not cover any loss or liability accruing to the
Reassured as a member of, or subscriber to, any association of
insurers or reinsurer formed for the purpose of covering nuclear
energy risks or as a direct or indirect reinsurer of any such member,
subscriber or association.
(2) Without in any way restricting the operation of paragraph (1) of this
Clause it is understood and agreed that for all purposes of this
reinsurance all the original policies of the Reassured (new, renewal
and replacement) of the classes specified in Clause II of this
paragraph (2) from the time specified in Clause III in this paragraph
(2) shall be deemed to include the following provision (specified as
the Limited Exclusion Provision):
Limited Exclusion Provision.*
I. It is agreed that the policy does not apply under any liability
coverage, to { injury, sickness, disease, death or destruction bodily
injury or property damage with respect to which an insured under the
policy is also an insured under a nuclear energy liability policy
issued by Nuclear Energy Liability Insurance Association, Mutual
Atomic Energy Liability Underwriters or Nuclear Insurance Association
of Canada, or would be an insured under any such policy for its
termination upon exhaustion of its limit of liability.
II. Family Automobile Policies (liability only), Special Automobile
Policies (private passenger automobiles, liability only), Farmers
Comprehensive Personal Liability Policies (liability only),
Comprehensive Personal Liability Policies (liability only) or policies
of similar nature; and the liability portion of combination forms
related to the four classes of policies stated above, such as the
Comprehensive Dwelling Policy and the applicable types of Homeowners
Policies.
III.The inception dates and thereafter of all original policies as
described in II above, whether new, renewal or replacement, being
policies which either
(a) become effective on or after 1st May, 1960, or
(b) become effective before that date and contain the Limited
Exclusion Provision set out above;
provided this paragraph (2) shall not be applicable to Family
Automobile Policies, Special Automobile Policies, or policies or
combination policies of a similar nature, issued by the Reassured on
New York risks, until 90 days following approval of the Limited
Exclusion Provision by the Governmental Authority having jurisdiction
thereof.
(3) Except for those classes of policies specified in Clause II of
paragraph (2) and without in any way restricting the operation of
paragraph (1) of this Clause, it is understood and agreed that for all
purposes of this reinsurance the original liability policies of the
Reassured (new, renewal and replacement) affording the following
coverages:
Owners, Landlords and Tenants Liability, Contractual Liability,
Elevator Liability, Owners or Contractors (including railroad)
Protective Liability, Manufacturers and Contractors Liability, Product
Liability, Professional and Malpractice Liability, Storekeepers
Liability, Garage Liability, Automobile Liability (including
Massachusetts Motor Vehicle or Garage Liability) shall be deemed to
include, with respect to such coverages, from the time specified in
Clause V of this paragraph (3), the following provision (specified as
the Broad Exclusion Provision):
Broad Exclusion Provision.*
It is agreed that the policy does not apply:
I. Under any Liability Coverage, to { Injury, sickness, disease, death or
destruction Bodily injury or property damage
(a) with respect to which an insured under the policy is also an
insured under a nuclear energy liability policy issued by Nuclear
Energy Liability Insurance Association, Mutual Atomic Energy
Liability Underwriters or Nuclear Insurance Association of
Canada, or would be an insured under any such policy but for its
termination upon exhaustion of its limit of liability; or
-1-
(b) resulting from the hazardous properties of nuclear material and
with respect to which (1) any person or organization is required
to maintain financial protection pursuant to the Atomic Energy
Act of 1954, or any law amendatory thereof, or (2) the insured
is, or had this policy not been issued would be, entitled to
indemnity from the United States of America, or any agency
thereof, under any agreement entered into by the United States of
America, or any agency thereof, with any person or organization.
II. Under any Medical Payments Coverage, or under any Supplementary
Payments Provision relating to {{ immediate medical or surgical
relief, to expenses incurred with respect first aid, to bodily injury,
sickness, disease or death resulting from the hazardous properties of
bodily injury nuclear material and arising out of the operation of
nuclear facility by any person or organization.
III. Under any Liability Coverage, to { Injury, sickness, disease, death or
destruction Bodily injury or property damage resulting from the
hazardous properties of nuclear material, if
(a) the nuclear material (1) is at any nuclear facility owned by, or
operated by or on behalf of, an insured or (2) has been
discharged or dispersed therefrom;
(b) the nuclear material is contained in spent fuel or waste at any
time possessed, handled, used, processed, stored, transported or
disposed of by or on behalf of an insured; or
(c) the { injury, sickness, disease, death or destruction bodily
injury or property damage arises out of the furnishing by an
insured of services, materials, parts or equipment in connection
with the planning, construction, maintenance, operation or use of
any nuclear facility, but if such facility is located within the
United States of America, its territories, or possessions or
Canada, this exclusion (c) applies only to { injury to or
destruction of property at such nuclear facility. property damage
to such nuclear facility and any property thereat.
IV. As used in this endorsement:
"hazardous properties" include radioactive, toxic or explosive
properties; "nuclear materials" means source material, special nuclear
material or byproduct material; "source material," "special nuclear
material," "byproduct material" have the meanings given them in the
Atomic Energy Act of 1954 or in any law amendatory thereof; "spent
fuel" means any fuel element or fuel component, solid or liquid, which
has been used or exposed to radiation in a nuclear reactor; "waste"
means any waste material (1) containing byproduct material other than
the tailings or wastes produced by the extraction or concentration of
uranium or thorium from any ore processed primarily for its source
material content and (2) resulting from the operation by any person or
organization of any nuclear facility included within the definition of
nuclear facility under paragraph (a) or (b) thereof; "nuclear
facility" means
(a) any nuclear reactor,
(b) any equipment or device designed or used for (1) separating
the isotopes of uranium or plutonium, (2) processing or
utilizing spent fuel, or (3) handling, processing or
packaging waste,
(c) any equipment or device used for the processing, fabricating
or alloying of special nuclear material if at any time the
total amount of such material in the custody of the insured
at the premises where such equipment or device is located
consists of or contains more than 25 grams of plutonium or
uranium 233 or any combination thereof, or more than 250
grams of uranium 235,
(d) any structure, basin, excavation, premises or place prepared
or used for the storage or disposal of waste,
-2-
and includes the site on which any of the foregoing is located, all
operations conducted on such site and all premises used for such
operations; "nuclear reactor" means any apparatus designed or used to
sustain nuclear fission in a self-supporting chain reaction or to
contain a ▇▇▇▇▇▇▇▇ ▇▇▇▇ of fissionable material; With respect to
injury to or destruction of property, the word "injury" or
"destruction" includes all forms of radioactive contamination of
property. "Property damage" includes all forms of radioactive
contamination of property.
V. The inception dates and thereafter of all original policies affording
coverages specified in this paragraph (3), whether new, renewal or
replacement, being policies which become effective on or after 1st
May, 1960, provided this paragraph (3) shall not be applicable to
(i) Garage and Automobile Policies issued by the Reassured on New
York risks, or
(ii)statutory liability insurance required under Chapter 90, General
Laws of Massachusetts, until 90 days following approval of the
Broad Exclusion Provision by the Governmental Authority having
jurisdiction thereof.
(4) Without in any way restricting the operation of paragraph (1) of this
Clause, it is understood and agreed that paragraphs (2) and (3) above are
not applicable to original liability policies of the Reassured in Canada
and that with respect to such policies this Clause shall be deemed to
include the Nuclear Energy Liability Exclusion Provisions adopted by the
Canadian Underwriters' Association or the Independent Insurance Conference
of Canada.
--------------------------------------------------------------------------------
* NOTE: The words printed in italics in the Limited Exclusion Provision and
in the Broad Exclusion Provision shall apply only in relation to original
liability policies which include a Limited Exclusion Provision or a Broad
Exclusion Provision containing those words.
-3-
NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL DAMAGE AND LIABILITY
(BOILER AND MACHINERY POLICIES) - REINSURANCE - No. 3
(1) This reinsurance does not cover any loss or liability accruing to the
Reassured as a member of, or subscriber to, any association of
insurers or reinsurers formed for the purpose of covering nuclear
energy risks or as a direct or indirect reinsurer of any such member,
subscriber or association.
(2) Without in any way restricting the operation of paragraph (1) of this
Clause it is understood and agreed that for all purposes of this
reinsurance all original Boiler and Machinery Insurance contracts of
the Reassured (new, renewal and replacement) shall be deemed to
include the following provisions of this paragraph.
This Policy does not apply to "loss," whether it be direct or
indirect, proximate or remote
(a) from an Accident caused directly or indirectly by nuclear
reaction, nuclear radiation or radioactive contamination,
all whether controlled or uncontrolled; or
(b) from nuclear reaction, nuclear radiation or radioactive
contamination, all whether controlled or uncontrolled,
caused directly or indirectly by, contributed to or
aggravated by an Accident.
(3) However, it is agreed that loss arising out of the use of Radioactive
Isotopes in any form is not hereby excluded from reinsurance
protection.
(4) Without in any way restricting the operation of paragraph (1) hereof,
it is understood and agreed that
(a) all policies issued by the Reassured to become effective on
or before 30th April, 1958, shall be free from the
application of the other provisions of this Clause until
expiry date or 30th April, 1961, whichever first occurs,
whereupon all the provisions of this Clause shall apply,
(b) with respect to any risk located in Canada policies issued
by the Reassured to become effective on or before 31st
December, 1958, shall be free from the application of the
other provisions of this Clause until expiry date or 31st
December, 1960, whichever first occurs, whereupon all the
provisions of this Clause shall apply.
