EXHIBIT 10 (c)
CLAIMS ADMINISTRATION AGREEMENT
(hereinafter called the "Agreement")
between
MILLERS GENERAL AGENCY, INC.
(hereinafter called the "Administrator")
and
CLARENDON NATIONAL INSURANCE COMPANY
(hereinafter called the Company")
made as of the 15th day of August, 2001
RECITALS
A. The Company entered into a general agency agreement ("Agency
Agreement") with the Administrator as General Agent ("General Agent") for
the issuance and administration of insurance policies in certain states
("Policies", or individually, "Policy").
B. The Administrator is experienced in the administration or
insurance claims and is duly qualified to administer and adjust claims
arising under the Policies
C. The Company would like the Administrator to administer and
adjust such claims, and the Administrator is willing to do so on behalf of
the Company in accordance with the terms of this Agreement.
IN CONSIDERATION OF THE MUTUAL PROMISES EXCHANGED). the parties
agree as follows:
ARTICLE I
AUTHORITY AND SERVICES OF ADMINISTRATOR
1.1 Authority. The Administrator shall administer and adjust all
claims arising under the Policies (including claims under Policies written
for the Company's participation in mandatory underwriting facilities,
including but not limited to, joint underwriting associations or assigned
risk pools) in accordance with the terms and conditions of the Policies and
as authorized by the Company pursuant to this Agreement. All claims services
to be provided by the Administrator under this Agreement shall conform
to the written standards or guidelines of the Administrator ("Claim
Standards"). The Administrator shall be solely responsible for assuring
that the Claim Standards comply with all governmental statutes, rules, or
regulations of any applicable jurisdiction. Upon signing this Agreement,
the Administrator shall provide to the Company a copy of its then in effect
Claims Standards, and Administrator shall provide to the Company any
updates, modifications, or amendments thereof no less than annually
throughout the terms of this Agreement. The Administrator shall perform
its obligations in conformity with any reasonable standards, instructions,
practices or procedures which the Company may. from time to time, provide to
the Administrator, which standards, instructions, practices and procedures
shall, when provided to the Administrator, become part of the Claim
Standards. The Claims Standards shall also include the applicable
limitations and exclusions set forth in the Company's reinsurance agreements
("Reinsurance Agreements"), a current schedule of which is attached hereto,
covering business produced under the Agency Agreement and the Policies. The
Company agrees to, where applicable, provide the relevant sections of the
Reinsurance Agreements to the Administrator, either directly or through a
reinsurance intermediary or other representative. Once the Administrator
receives copies of the Reinsurance Agreements, the limitations and
exclusions set forth in the Reinsurance Agreements will become part of the
Claims Standards, and the Administrator will be bound by such imitations and
exclusions. Notwithstanding the foregoing, the Company has and will retain
the final authority over decisions and policies regarding claims
administration, including without limitation, the payment or non-payment
of claims.
1.2 Services. The Administrator shall perform the following services
in compliance with applicable law and the Claims Standards, subject to
periodic review and audit thereof by the Company throughout the term of this
Agreement:
(a) Record, examine and promptly report each claim to the Company
on a monthly basis, as well as any reserve established therefor by the
Administrator.
(b) Maintain a claim file for each reported claim containing,
among other things a copy of the declarations page of the relevant Policy
(which shall clearly identify the Policy and the insured) and an activity
log.
(c) Perform reasonable and necessary administrative and clerical
work in connection with reported claims, including without limitation, the
following:
(i) Investigate all reported claims to the extent the
Administrator deems necessary.
(ii) Determine and evaluate any coverage issues in connection
with the claims and refer same to the Company or counsel with
recommendations.
(iii) Determine proper workers' compensation benefits due,
if any, on compensable claims.
(iv) Establish appropriate reserves for all claims, subject
however, to the right of the Company to adjust the amounts of such reserves
based upon the Claims Standards.
(v) Deny coverage with respect to those claims which the
Administrator determines should be denied based upon factors established by
the Claims Standards, in writing, as a basis for denying coverage.
(vi) Adjust, settle and bring to a conclusion those claims
which the Administrator determines the Company is legally obligated to pay
in accordance with applicable law, the terms of the Policies, and the Claims
Standards.
(vii) Adjust claims only through adjusters who are currently
licensed as public adjusters, independent adjusters, or company employee
adjusters and appointed by the Administrator provided, however, that the
Administrator shall not subcontract any of its obligations hereunder (other
than hiring local adjusters to investigate specific claims) without first
obtaining the Company's written consent and approval of the terms of the
proposed subcontract. The Administrator shall promptly furnish the Company
with such information as the Company may request in order to evaluate the
prospective subcontractor. Any subcontractor must be currently licensed as
a public or independent adjuster.
(viii) Prepare necessary information for any salvage,
subrogation or contribution action which in the Administrator's judgment may
inure to the benefit of the Company.
(ix) Appoint independent counsel from a list approved by the
Company and, at the Company's direction, coordinate a proper defense with
such counsel.
(x) Prepare checks, vouchers, compromise agreements,
releases and other documents necessary or desirable to close out claims.
(xi) Continuously review outstanding claim reserves and
recommend to the Company any changes to such reserves deemed necessary by
the Administrator; and provide the Company with written monthly reports
showing all outstanding claims then being administered by the Administrator,
the activity being performed with regard to the claims, and any changes to
outstanding reserves as of the date of the report, all as more specifically
provided in Section 1.3 of this Agreement.
(xii) Record and report promptly to the Company each loss
and Legal Loss Adjustment Expense (as defined herein) paid, utilizing
mutually agreed upon claim disbursement, checking and coding procedures.
(d) Periodically review the claims handling procedure with the
Company to identify any problems and to arrive at mutually agreeable
corrective action.
(e) Where applicable and required, prepare and forward the
Company's federal and state 1099 filings and prepare and distribute 1099
Forms to all applicable payees.
(f) Report suspected fraud as required by any applicable statute
or regulation in the state(s) where the Policies are issued.
(g) Pursue the Company's salvage, subrogation and contribution
rights relating to any losses sustained under the Policies, and promptly
report to the Company and account for any salvage, subrogation and
contribution collections. If a Policy contains deductible or similar
provisions (such as a self-insured retention provision) requiring the holder
of the Policy (''Policyholder") to reimburse the Company for the payment
of loss and/or loss adjustment expenses (collectively, "deductible
reimbursement" the Administrator shall be responsible for billing and
collecting the deductible reimbursement from the Policyholder or
drawing upon any security deposited by the Policyholder to satisfy the
Policyholder's obligation to pay the deductible reimbursement. Within ten
(I0) days after a payment giving rise to a deductible reimbursement is made,
the Administrator shall send an invoice to the Policyholder for the amount
of the deductible reimbursement. If the deductible reimbursement is
not collected within thirty (30) days after the invoice is sent, the
Administrator shall send a second invoice to the Policyholder and, if such
second invoice is not paid, shall, in its capacity as General Agent and in
accordance with Section 1.5 (j) of the Agency Agreement, and to the extent
lawful, cancel the Policy for non-payment of the deductible reimbursement.
(h) Promptly notify and consult with the Company with respect to
the following:
(i) Any loss or claim resulting in a lawsuit being
instituted against the Administrator or the Company.
(ii) Any serious complaint (in the judgment of the
Administrator) being filed with, or any inquiry regarding such complaint
from, any insurance department or other regulatory authority relating to any
loss or claim which might result in regulatory action being taken against
the Company or the Administrator. In such case (1) the Administrator shall
immediately forward to the Company a copy of any written communication
received from the regulatory authority, and (2) if a response affecting the
Company or the Administrator is required, the Administrator shall, within
five (5) business days after the receipt of the complaint or receipt of thc
inquiry, draft a response and submit it to the Company for approval before
submitting it to the regulatory authority. The Administrator may respond
directly to other complaints or inquiries arising in the normal course of
business.
(iii) Any loss or claim in respect of which the
Administrator makes a recommendation or determination to deny coverage for
reasons not established by the Claims Standards, as well as any coverage
dispute.
(iv) Any claim which the Administrator anticipates will
result in a loss payment (1) in excess of $10,000, or (2) in an amount
established by an insurance department having jurisdiction.
(v) Any claim (1) which is open for more than six (6)
months, or (2) which involves extra-contractual allegations, or (3) which
involves a minor, or (4) which involves permanent disability or disability
for a period of nine (9) months or more, or (5) which involves loss of life
or limb, amputation, spinal cord or brain injury, loss of eyesight or
hearing, poisoning, extensive ▇▇▇▇▇, or multiple fractures.
(vi) Any suspected or alleged fraud, or any allegation of
"bad faith" in claims handling against the Administrator or the Company.
(vii) In any of the foregoing cases, the Administrator shall
forward a copy of the complete claim file to the Company at the Company's
request.
(i) Maintain in good standing all licenses, permits and
authorizations necessary or appropriate for the Administrator (and any
adjuster, investigator or appraiser employed by the Administrator) to
perform services under this Agreement in compliance with all applicable
laws, rules and regulations; and the Administrator shall use only public
independent adjusters, investigators or appraisers who are duly licensed
in the states where their services are performed.
(j) Neither the Administrator nor anyone appointed by it shall
have any right or authority (I) to alter, modify, or terminate any Policy,
except in its capacity as General Agent and in accordance with the
provisions of the General Agency Agreement or of subparagraph (g) of this
Section 1.2, (2) to waive any Policy provision, or (3) to commit the Company
to any claim settlement with any of the Company's reinsurers, without the
prior written consent of the Company.
(k) The Administrator is responsible for ensuring that Policies
are administered according to customary and usual customer service and
policy administration standards. The Administrator shall promptly respond to
inquiries, correspondence and communications, whether written, telephonic or
electronic. The Administrator shall ensure that it has sufficient staffing
or independent contractors to perform all its functions and obligations
hereunder, and to assist in servicing the business and Policies, as required
by this Agreement.
1.3 Claims Reports and Files.
(a) The Administrator, at its sole cost, shall provide claims
reports ("Claims Reports") to
the Company, whether on hard copy, disks or tapes or electronically, within
seven (7) days after the end of each calendar month unless otherwise set
forth herein. The Claims Reports shall include the following:
(i) Information and statistical data (1) required by the
Insurance Services Office ("ISO"), (2) necessary for the Company to prepare
any reports required by the National Association of Insurance Commissioners
or the National Council of Compensation insurers (including unit statistical
reports and data calls relating to any workers' compensation Policies), and
(3) necessary for any other purpose the Company may reasonably request same,
including without limitation: (A) to monitor and evaluate the business
written under the Agency Agreement; (B) to comply with any reporting
requirements under any applicable reinsurance agreements; and (C) to comply
with any current or future state or rating agency reporting requirements.
All information required by the Company to evaluate the business, to comply
with reinsurance reporting requirements or to comply with state or rating
agency reporting requirements shall be deemed to have been reasonably
requested. The Administrator shall furnish all such reports to the Company
at least fifteen (15) days prior to applicable filing deadlines,
notwithstanding any contrary time provisions in this Agreement.
(ii) Loss runs showing paid claims on a monthly, year-to-
date, and inception-to-date basis, the date when each claim was first
reported to the Administrator and outstanding reserves remaining at the end
of each month, by state, and categorized as indemnity, medical payment, or
loss adjustment expense, and any other information required for the
Company's annual financial statement or by state regulatory agencies.
Loss adjustment expenses shall be further categorized as allocated loss
adjustment expenses ("ALAE") or unallocated loss adjustment expenses
("ULAE") based on the revised NAIC definitions of ALAE and ULAE to be used
for reporting purposes effective January 1, 1998. ALAE are comprised of
defense, litigation and medical cost containment expenses, whether internal
or external. ALAF include (but are not limited to) the following expenses:
(i) surveillance; (ii) fixed amounts for medical cost containment; (iii)
litigation management; (iv) loss adjustment expenses for participation in
voluntary and involuntary market pools if reported by accident year;
(v) fees or salaries for appraisers private investigators, hearing
representatives, reinspectors and fraud investigators, if working in defense
of a claim, and fee or salaries for rehabilitation nurses, if such cost is
not included in losses; (vi) attorney fees incurred by reason of a duty to
defend, even when other coverage does not exist; and (vii) the cost of
engaging experts. ULAE are comprised of those loss adjustment expenses
other than ALAE as defined above. ULAE include (but are not limited to) the
following expenses: (i) fees of adjusters and settling agents; (ii) loss
adjustment expenses for participation in voluntary and involuntary market
pools if reported by calendar year: (iii) attorney fees incurred in the
determination of coverage, including litigation between the insurer and the
policyholder; and (iv) fees or salaries for appraisers, private
investigators, hearing representatives, reinspectors and fraud
investigators, if working in the capacity of an adjuster.
(iii) The number (count) of open claims, new claims, claims
closed with payment and claims closed without payment, each count being
shown:
monthly and year-to-date
and
by line of business and by state.
(iv) Claims Register (as later defined}
(v) Check Register (as later defined), including outstanding
check register.
(vi) Reserve transaction journal setting forth all reserve
changes per claim per line for the applicable reporting period.
(vii) Large loss listing (as determined by the Company),
including cumulative paid and outstanding reserves monthly.
(viii) Aggregate loss runs (on a paid and incurred basis) by
Policy.
(b) The Administrator shall deliver to the Company copies of the
Administrator's computer data base ("Computer Data") maintained in support
of its Claims Reports. The Computer Data shall be delivered to the Company
in a format (i) acceptable to the Company and any entity which requires the
data from the Company, (ii) readable on the Company's and such entity's
computer system, and (iii) which complies with the file layout
specifications set forth or the attached Schedule 1 or any subsequent file
layout specifications provided to the Administrator by the Company. The
Computer Data shall consist of all information contained in the Claims
Reports including, with respect to each claim, the claim number, the Policy
number, the name of the insured, the effective date and expiration date of
the Policy, the type of loss by coverage, the date when the claim was first
reported to the Administrator, the accident date, the reserve, any paid
loss, any paid loss adjustment expenses, and any salvage, subrogation or
contribution recovery. The Administrator shall also prepare completed
reports for the ISO including the data and detail required by the ISO,
and in the format required by the ISO, and shall (i) submit such reports
directly to the ISO with a copy to the Company, or (ii) submit such reports
to the Company for transmission to the ISO. In addition, the Administrator
shall use its reasonable best efforts, if not prohibited by law, to provide
the Company, at the Administrator's expense, with a limited license to use
the software system used by the Administrator in its administration arid
run-of of claims under this Agreement, including all computer programs and
updated source and object codes ("Software"). The Administrator shall
deliver the Software, as well as all necessary manuals, to the Company at
the same time as it delivers the Computer Data to the Company.
(c) The Administrator shall own the book of business which is the
subject of this Agreement. including without limitation, the Policy renewals
and expirations, the policyholder list, the Iist of Agents, all financial
information relating to the Policies (including rating, underwriting and
loss information), and any and all goodwill and trade secrets relating
thereto (the "Book of Business''). The Company acknowledges the
Administrator's ownership of the Book of Business and agrees to preserve
and protect such assets on behalf of the Administrator. The Company shall
further preserve and protect all Data and confidential information
pertaining to the Book of Business (the "Confidential Information").
Clarendon will hold and will cause its respective employees and employees
of its affiliate companies, to hold in strict confidence the Confidential
Information (except to the extent that such information can be shown to have
been (i) previously known to Clarendon (or its respective affiliates) prior
to its disclosure, (ii) in the public domain through no fault of Clarendon
or (iii) later lawfully acquired by Clarendon (or its respective affiliates)
from other sources), and will not release or disclose such information to
any other person, except in connection with this Agreement to its respective
auditors, actuaries, attorneys, financial advisors and other consultants or
advisors. Clarendon and its respective representatives may provide such
Confidential Information in response to judicial or administrative processes
or applicable governmental laws, rules, regulations. orders or ordinances,
but only that portion of the Confidential Information which, on the advice
of counsel, is legally required to be furnished, and provided that Clarendon
notifies the Administrator of its obligation to provide such information and
fully cooperates with the Administrator to protect the confidentiality of
such Confidential Information under applicable law. The Company further
agrees that, in no event, shall it, directly or indirectly, deliver, discuss
or make available any Confidential Information to anyone who is known by the
Company to be involved directly or indirectly with the operations,
performance, strategies or management of any other person or entity that is
a competitor of the Administrator.
(d) The Company acknowledges and agrees that its use of the
Computer Data and Software shall be limited to the administration and run-
off of claims under this Agreement, and the furnishing of the Computer Data
and Software to the Company by the Administrator shall not be construed as
conferring upon the Company any right to sell, lease, transferor dispose of
all or any portion of the Computer Data or Software (except that same may be
used by the Company's designee, if any, for the purpose of administering and
running-off the claims). The Company further agrees that (i) it will not
copy any part of the Computer Data or Software, except as may be required to
administer and run-off the claims, and (ii) promptly upon completion of the
administration and run-off of the claims, it will return the Computer Data
and Software to the Administrator. The Company's designee shall execute an
agreement setting forth the requirements stated in this section 1.3(d).
(e) Subject to the provisions of Section 5.4 (a), closed files
shall be retained and preserved by the Administrator for a period of six (6)
years from the date of the last file activity or until her expiration of the
applicable statute of imitations period, whichever is later ("Retention
Period"). At the end of the Retention Period the Administrator shall make
written request of the Company for instructions as to the disposition of
each closed file. As authorized by the Company, in writing, the
Administrator shall (i) destroy the closed file or (ii) return the closed
file to the Company, at the Company's expense. Notwithstanding the forgoing,
the Administrator shall retain a tile, and the Retention Period shall be
deemed extended. until there is a final, binding determination of the claim
by settlement, judgment, or otherwise; and the Administrator shall identify
and segregate from all other files any file involving a minor and shall
return such file to the Company at the end of the Retention Period
(f) All claims files and records regarding the administration of
claims under this Agreement. including the financial records relating to the
Claims Account (as later defined) and the payment of claims and Legal Loss
Adjustment Expenses (as later defined), may be audited, examined and copied
by the Company's representatives or by any state insurance department or
other regulatory authority having jurisdiction, at any times during normal
business hours. the Company reserves the right at any time, in its sole
discretion, to assume control over a particular claim and to require the
Administrator to forward a copy of the claim file to the Company.
(g) The Administrator shall maintain the confidentiality of all
data supplied to or developed by it relating to the claims administered
under this Agreement, and shall not disclose such data without the prior
written consent of the Company, or as otherwise authorized by the provisions
of this Agreement. The Administrator shall not use the name, service ▇▇▇▇,
logo, or authorized signatures of the Company, or any of its affiliates, in
any advertising or promotional material without the prior written consent of
the Company.
(h) Claims files are and shall remain the property of the
Company.
1.4 Claims Account.
(a) For purposes of paying claims and claims related expenses,
the Company shall establish, fund and maintain a separate bank account
("Claims Account') which the Administrator may draw against as provided in
this Agreement.
(b) The Company shall fund the Claims Account with amounts
necessary to pay all claims and "Legal Loss Adjustment Expenses", which
term, as used in this Agreement, means legal costs and expenses incurred by
the Administrator and allocated by it to the investigation, adjustment and
settlement or defense of claims for benefits under the Policies, including
without imitation, attorneys' fees and disbursements, pre and post judgment
interest, court reporter services and transcripts, deposition charges and
transcripts, fees for service of process, court costs, appeal bonds,
printing costs related to trials and appeals, fees of witnesses amid
experts, medical examination and review, laboratory costs, vehicle and
property damage appraisals, surveillance, photography, and similar costs
reasonably incurred and related to the investigation and defense of claims
or the protection and prosecution of subrogation rights of the Company.
Legal Loss Adjustment Expenses shall also include additional compensation
paid to the Administrator to the extent recoverable under the Reinsurance
Agreements, a schedule of which will be provided to Clarendon upon request.
Legal Loss Adjustment Expenses shall exclude all Administrators' Expenses
(as later defined). The Administrator shall, on a regular basis, provide the
Company with information and estimates to enable the Company to maintain the
Claims Account at an appropriate level. In no event shall the Claims Account
be funded in an amount greater than three (3) months estimated claims
payments and Legal Loss Adjustment Expenses.
(c) Checks drawn on the Claims Account by the Administrator, or
its agents or employees, shall be signed and issued only in accordance with
procedures agreed upon in advance by the Company and the Administrator. In
any ease, checks drawn on the Claims Account must be signed by two (2)
authorized officers or employees of the Administrator, whose names and
positions shall be promptly reported to the Company. To issue any check or
checks aggregating in excess of $50,000 for any one claim, thc Administrator
shall first send a fax request to the Company for authority to do so and
shall not issue such check or checks until it receives specific
authorization therefor by fax from the Company.
(d) The Administrator shall maintain a daily register of chocks
drawn on the Claims Account for each claims payment and Legal Loss
Adjustment Expense paid ("Check Register"). The Administrator shall maintain
a daily register of each paid and outstanding claim ("Claims Register")
which register shall include, for each claim or claimant the claim number,
Policy number, loss date, name (of payee, date and check number of the
disbursement, and the amount and purpose of the payment. A copy of the Check
Register anti Claims Register shall be forwarded to the Company monthly.
(e) Any monies collected by the Administrator for salvage,
subrogation, contribution, or deductible reimbursement, shall be deposited
in the Claims Account immediately upon receipt, and a register or other
record of such collections and deposits shall be maintained by the
Administrator. The register or other record shall contain, among other
things, the date and amount of the deposit, the date of receipt of the
funds, the claim number and the payer and the purpose of payment and a copy
shall be sent to the Company monthly. Such register or record, and the
Claims Register, shall he reconciled with the Claims Account or a monthly
basis. The costs of collection for salvage, subrogation or contribution
shall be limited to necessary payment made to independent third panics and
shall not include any of the Administrator's expenses referred to in Section
1.5.
1.5 Adrninistrator's Expenses. The Administrator shall have sole
responsibility for its own expenses ("Administrator's Expenses"), including
without limitation, (a) costs of personnel employed by the Administrator
(including subcontractors and agents) to perform services under this
Agreement. such costs to include salaries, payroll taxes, overtime,
employee benefits, fees and temporary help, (b) rent, utilities, telephone,
furniture, fixtures, equipment, software, postage, advertising, license
fees, occupational taxes, and (c) miscellaneous administrative expenses,
compliance work expenses and processing costs, licensing costs and other
overhead expenses of the Administrator. Notwithstanding any thing to the
contrary, the Administrator's Expenses shall exclude any loss adjustment
expenses paid to Clarendon from its reinsurers pursuant to the Reinsurance
Agreements
1.6 Special Investigation Units. The Company has established a fraud
detection program known as a Special Investigation Unit ("SIU") and conducts
its own SIU investigations in accordance with Company policy and state law
governing SIUs. The Administrator shall promptly report to the Company's SIU
suspected fraudulent claims in order to insure compliance with state and
federal anti-fraud statutes and regulations, to avoid underwriting
undesirable risks, to facilitate arid maintain working relationships with
law enforcement agencies, the National Insurance Crime Bureau and the
appropriate divisions within the applicable insurance department, and to
enable the Company to maintain a database of information related to
insurance fraud.
1.7 lndependent Contractor.
(a) The Administrator is an independent contractor of the
Company, and nothing contained in this Agreement shall be deemed to create
the relationship of employer and employee, partners, or joint venturers
between the Company and the Administrator.
(b) The Administrator shall not act as an Insurer, nor shall it
be ultimately responsible for payment or satisfaction of claims against any
Policyholder nor for Legal Loss Adjustment Expenses.
(c) line Administrator shall not give, or be required to give,
any legal opinion, or provide any legal representation, to any Policyholder
or to the Company, and any legal opinions or representation shall be
provided only by duly licensed outside counsel employed for the purpose by
the Administrator.
(d) For purposes of interpreting the provisions of this
Agreement, the Administrator shall be deemed to be the Company's agent, and
it shall perform all of its obligations under this Agreement to the full
extent required of an agent under the law.
1.8 Subcontracting. The Administrator may not enter into a
subcontract or subcontracts with another person, entity or entities
("Subcontractors", or individually "Subcontractor") pursuant to which such
Subcontractor or Subcontractors shall perform any of the services or produce
any of the reports to be performed or produced pursuant to this Agreement,
unless the identity of any such Subcontractor and the form and content of
any subcontract therewith is approved in advance in writing by the Company.
No such subcontract shall relieve the Administrator of responsibility for
the fulfillment of any of its obligations hereunder.
ARTICLE 2
COMPENSATION OF ADMINISTRATOR
2.1 Compensation. For all services to be rendered by the Administrator
during the term of this Agreement, the Company shall pay the Administrator a
fee equal to eight percent (8%) of earned premium. Payment of fees shall be
made in monthly installments. Earned premium shall be determined using
statutory accounting practices, as permitted and prescribed by applicable
insurance regulatory bodies.
2.2 Unearned Fees. The Administrator shall have a continuing
obligation to refund to the Company, within thirty (30) days of demand, any
fees paid to the Administrator which have not yet been earned ("unearned
Fees"). Fees paid to the Administrator shall be deemed earned fees with the
exception of fees paid to the Administrator for third party liability claims
administered under the Policies which fees will be deemed unearned until
such fees are deemed earned fees pursuant to section 2.3 herein.
2.3 Determination of Earned Fees. For third party liability claims
administered under the Policies sixty-five percent (65%) of the fees for
such claims will be deemed earned in the month following the month in which
the premium for these coverages is earned, twenty-five percent (25%) of the
fees for such claims will be deemed earned one (1) year thereafter, and the
remaining ten percent (10%) of the fees for such claims will be deemed
earned two (2) years thereafter. Until earned, these fees shall he deemed
to be and included as part of Unearned Fees. The Administrator shall have a
continuing obligation to refund to the Company, within thirty (30) days of
demand, fees for third party liability claims paid, but not yet earned
pursuant to this section 2.3, as well as all Unearned Fees pursuant to
section 2.2.
2.4 Loss Adjustment Expenses. Unless otherwise specifically provided
in this Agreement, the Administrator shall be solely responsible for issuing
payments for all loss adjustment expenses incurred by or payable to
independent third parties in the administration of claims under this
Agreement.
ARTICLE 3
DUTIES OF COMPANY
3.1 Cooperation. The Company shall cooperate with the Administrator to
the extent reasonably necessary to enable the Administrator to adequately
perform claims services under this Agreement, including without limitation,
responding promptly to the Administrator's requests for relevant
information, meeting as needed with the Administrator or persons designated
by the Administrator. making decisions on claim matters as required by this
Agreement, and remitting funds to the Claims Account as required.
3.2 Loss Coverage. The Company shall provide timely and complete loss
coverage In accordance with the terms of the Policies. When the Company
makes a determination as to coverage under any Policy, any liability, loss,
cost or expense relating to such coverage shall be borne solely by the
Company and the Company agrees to hold the Administrator harmless with
respect to same. When the Administrator denies coverage and such denial is
not based on the Claims Standards or the Company's explicit written and
Iawful instructions, the Administrator shall be liable for any liability,
loss, cost or expense relating to such coverage and agrees to hold the
Company harmless with respect to same.
3.3 Administrators Taxes. The Company shall have no responsibility for
any income taxes (or interest or penalties thereon) imposed upon the
Administrator.
3.4 Administrator's Name. The Company may not use the name, logo
or service ▇▇▇▇ of the Administrator or any of its affiliates in any
advertising or promotional material without the prior written consent of
the Administrator.
ARTICLE 4
INDEMNITIES
4.1 Administrator's Indemnity. The Administrator agrees to indemnify
the Company, its subsidiaries, successors and assigns, and the shareholders,
directors, officers, agents and employees of any of them (collectively
"Company Indemnitees"), against and in respect of any and all claims,
demands, actions, proceedings, liability, losses, damages (except
consequential damages), judgments, costs and expenses, including without
limitation, attorneys' fees, disbursements and court costs, and any loss in
excess of Policy limits, as well as extra-contractual obligations, including
but not limited to punitive. exemplary or compensatory damages, suffered
made or instituted against or incurred by the Company Indemnitees, or any of
them, and which arise, directly or indirectly, out of or result from; (i)
bad faith or gross negligence of the Administrator, or its employees or
representatives in discharging its obligations to the Company or to the
Policyholders, and/or (ii) any failure by the Administrator, or its
employees, representatives, independent adjusters or approved subcontractors
to perform its obligations under or relating to this Agreement; provided
however that the actions of the Administrator described in subsections (i)
or (ii) were not taken pursuant to the written instructions of the Company.
4.2 Company's Indemnity. The Company agrees to indemnity the
Administrator, its subsidiaries, successors and assigns, and the
shareholders, directors, officers and employees of any of them (collectively
"Administrator Indemnitees"), against and in respect of any and all claims,
demands, actions, proceedings, liability, losses, damages (except
consequential damages), judgments, costs and expenses, including without
limitation, attorneys' fees, disbursements and court costs, and any loss in
excess of Policy limits, as well as extra-contractual obligations, including
but not limited to punitive, exemplary, or compensatory damages, suffered,
made or instituted against or incurred by the Administrator Indemnitees, or
any of them, and which arise, directly or indirectly, out of or result from;
(1) bad faith or gross negligence of the Company, or its employees or
representatives in discharging its obligations to the Administrator or to
the Policyholders, and/or (ii) any failure by the Company, or its employees
or representatives, to perform its obligations under or relating to this
Agreement.
4.3 Survival of Indemnities. The indemnities set forth in this Article
shall survive any termination of this Agreement.
4.4 Insurance. Throughout the term of this Agreement, the
Administrator shall maintain errors and omissions Insurance with a policy
limit of at least $1,000,000 and a deductible no greater than $500,000,
under a current paid up policy issued by an insurer reasonably acceptable
to the Company. A copy of the policy shall be furnished to the Company on
demand. As a condition precedent to the Company's entering into this
Agreement, The Millers Insurance Company shall execute and deliver to the
Company a guarantee of payment of the errors and omissions deductible
shortfall ("E&O Shortfall") for the initial limit of $450,000 excess
$50,000. The E&O Shortfall shall thereafter be determined annually and shall
equal the actual deductible under the errors and omissions policy minus
$50,000, excess $50,000. The guarantee shall be in the form attached as
Schedule 3
ARTICLE 5
TERM AND TERMINATION
5. Term. The term of this Agreement shall commence as of the date of
this Agreement and shall continue until all claims arising under the
Policies have been closed, unless sooner terminated as provided in this
Article.
5.2 Voluntary Termination. This Agreement may be terminated at any
time by either party, without cause, by giving the other party not less than
one hundred eighty (180) days prior notice of such termination.
5.3 Termination for Cause. This Agreement shall terminate:
(a) at the election of the Company, upon notice to the
Administrator, if the Administrator becomes insolvent, if it makes an
assignment for the benefit of its creditors, if a petition for relief under
the Bankruptcy Code is filed by or against it, or if a trustee, receiver or
other custodian of its assets is appointed;
(b) at the election of the Company, upon thirty (30) days notice
to the Administrator, in the event of a Change of Control (as defined in
Section 7.3), unless (i) the Administrator has provided the notice referred
to in Section 7.3 and (ii) the Company agrees in writing to such Change of
Control;
(c) at the election of the Company, upon notice to the
Administrator, if any public authority cancels, declines to renew, or
suspends, any license or certificate of authority of the Administrator which
is necessary to the legal performance of its obligations under this
Agreement;
(d) at the election of the Company, upon notice to the
Administrator, in the event of any material change in the Company's
obligations under the Policies, or in its business prospects, caused by (i)
a change in law or insurance regulations or (ii) any suspension, prohibition
or cease and desist order or decree issued by any public authority having
jurisdiction;
(e) at the election of the Company, upon notice to the
Administrator, in the event of the cancellation of, or an adverse change in
the terms, conditions or coverage of the Company's reinsurance agreements
with respect to the Policies;
(f) upon the filing by or against the Company of a petition for
relief under the Bankruptcy Code, or the issuance of an order of liquidation
or rehabilitation or similar action against the Company by any public
authority having jurisdiction;
(g) at the election of the Company, upon notice to the
Administrator, if the Administrator commits any of the following acts or
omissions: fraud, gross negligence, or willful misconduct (which includes
but is not limited to willful violation of the Company's lawful instructions
or willful violation of any applicable law, rule or regulation governing or
relating to the Administrator's performance of services tinder this
Agreement or the General Agency Agreement);
(h) at the election of the Company, upon ten (10) days notice, if
the Administrator breaches any provision of this Agreement or of the General
Agency Agreement and fails to cure such breach within thirty (30) days after
notice of the breach is given to the Administrator by the Company. For
purposes of this Subsection, routine differences in accounting methods of
the Administrator and the Company which involve minor amounts of money and
do not involve recoveries collected and knowingly withheld by the
Administrator, shall not constitute a failure to account and remit funds to
the Company provided all items not in dispute are paid in accordance with
the procedures set forth in this Agreement;
(i) at the election of the Company. upon thirty (30) clays notice
to the Administrator, if the Genera] Agents' affiliates, The Millers
Insurance Company and Millers Casualty Insurance Company, or either of them,
breach a material covenant of that certain Stop Loss Reinsurance Agreement
between them and the Company dated as of May 1, 2001; or
(m) at the election of the Company, upon notice to the
Administrator, if any of the following entities becomes insolvent, makes an
assignment for the benefit of its creditors, files or has filed by or
against it a petition for relief under the Bankruptcy Code, or has a
trustee, receiver or other custodian of its assets appointed: Millers
American Group, Inc., Trilogy Holdings, Inc., The Millers Insurance Company,
Phoenix Indemnity Insurance Company, Millers (General Agency, Inc. or
Millers Casualty Insurance Company.
5.4 Procedures Upon Termination. Upon termination of this Agreement
the Company shall have either of the following options:
(a) To assume control of such claim files (whether open or
closed) as the Company may elect, in which case the Administrator shall
promptly transfer such claim files to a location specified by the Company.
The Administrator shall cooperate fully with the Company to effect a
prompt and orderly transfer of the claim files to the Company or its
representatives for the purpose, among others, of preventing an increase
in the Company's liability for claims and loss adjustment expenses.
(b) To require the Administrator to continue to administer to a
conclusion all open claims. The Claims Account, in such case, shall continue
to he maintained by the Company.
5.5 Adjustment of Pre-Payment Upon Termination; Indemnity.
(a) Upon termination of this Agreement the Company shall pay the
Administrator for services rendered on a pro rata basis. The Administrator
shall return to the Company any Unearned Fees within thirty (30) days after
demand. The final determination of payments owed in accordance with this
Subsection shall be made by auditors or accountants selected by the Company.
(b) If this Agreement terminates for any reason other than a
voluntary termination by the Company under Section 5.2, and if the Company
takes back open claim files from the Administrator or assigns the
administration of such files to a third party, the Administrator agrees to
indemnify the Company Indemnities against and in respect of all costs and
expenses related to the administration of claims -
5.6 Suspension of Administrator's Authority. The Company may suspend
the Administrator authority to administer and adjust claims during the
pendency of any dispute regarding termination of Agreement.
5.7 No Consequential Damages. Neither the Administrator nor any of its
employees or representatives shall have or assert any claim against the
Company, its subsidiaries, successors or assigns, or the shareholders,
directors, officers, agents or employees of any of them, for loss of
business, loss of profits, or damage to goodwill or reputation, as a result
of the termination of this Agreement in accordance with this Article.
ARTICLE 6
NOTICES
Any notice or other communication hereunder shall be in writing and
shall be deemed fully made or given (a) when hand delivered, (b) on the
business day after it is delivered to a recognized overnight courier service
for overnight delivery to a party at the address of such party stated below
(or to such other address as such party may have fixed by notice), or (c)
three (3) business days after it is mailed to a party, postage prepaid, by
registered or certified mail, return receipt requested, addressed to such
party at its address stated below (or to such changed address as such party
may have fixed by notice):
To the Administrator:
Millers General Agency, Inc.
c/o Millers American Group
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇. ▇▇▇▇▇▇
To the Company::
Clarendon National Insurance Company
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: President
ARTICLE 7
MISCELLANEOUS
7.1 Assignment . The Administrator shall not assign or otherwise
transfer this Agreement or any rights hereunder without the prior written
consent of the Company.
7.2 Trust Funds.
(a) In any action or proceeding brought by the Company to recover
funds due the Company or the Policyholders under this Agreement
(collectively "trust funds"), the Administrator shall be obligated to
account on its own records for such trust funds and to pay the Company all
sums for which it cannot account. The Company shall be entitled to bring any
action or proceeding available at law or equity to recover trust funds and
to assert claims therein, including without limitation, claims for an
accounting, for breach of contract and for conversion. In any such action or
proceeding it shall be conclusively presumed that the Administrator is a
fiduciary of the Company with respect to trust funds and is liable to the
Company for trust funds which have not been timely paid to the Company or to
the Claims Account as required by this Agreement; and the Administrator
waives (i) any right it may have to assert any non-compulsory counterclaim,
non-compulsory cross-claim, or set-off in the action or proceeding, and (ii)
the right to trial by jury and any claim that the forum or situs is
inconvenient. The Administrator shall retain the right to bring any separate
proceeding it deems appropriate to recover any claims it may have as a
creditor of the Company, or otherwise, but the pendency of such proceeding
shall not delay, binder or defeat the Company's right to promptly recover
any trust funds then due or to levy upon any judgment therefor.
(b) As a condition precedent to the Company's entering into this
Agreement, the ultimate parent company of the Administrator shall execute
and deliver to the Company a guarantee of payment of the trust funds. The
guarantee shall be in the form attached as Schedule 2.
7.3 Change of Control. The Administrator shall notify the Company in
writing at least thirty (30) days prior to any of the following occurrences,
each of which shall be deemed a "change of control":
(a) A sale, transfer, or the issuance to a new shareholder or
member, of ten (10%) percent or more of the voting stock or membership
interests of the Administrator other than to an affiliate of the
Administrator; or
(b) A sale or transfer of a substantial portion of the material
assets of the Administrator, or any merger or consolidation of the
Administrator with another entity or entities; or
(c) A change in any director or principal officer of the
Administrator: or
(d) An assignment or transfer of this Agreement or any rights
hereunder by the Administrator.
7.4 Governing Law; Consent to Jurisdiction. This Agreement shall be
governed in all respects, including validity, interpretation and effect, by
the laws of the State of New York applicable to contracts to be performed in
the State of New York. The parties agree that any action or proceeding,
however characterized, relating to this Agreement may he maintained in the
courts of the State of New York sitting in the Borough of Manhattan, City of
New York or the federal court for the Southern District of New York, and the
parties hereby irrevocably submit to the non-exclusive jurisdiction of any
such court for the purposes of any such action or proceeding and irrevocably
agree to be bound by any judgment rendered by any such court with respect to
any such action or proceeding. The parties hereby waive any objection they
may now or hereafter have to the venue of any such action or proceeding in
any such court and any claim, that such action or proceeding has been
brought in an inconvenient forum.
7.5 Waiver of Jury Trial. TO THE FULLEST EXTENT PERMITTED BY LAW, EACH
CF THE PARTIES HERETO HEREBY WAIVES THEIR RESPECTIVE RIGHTS TO A JURY TRIAL
OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT
OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THE
TRANSACTIONS CONTEMPLATED HEREIN. The scope of this wavier is intended to be
all-encompassing of any and all disputes that may be filed in any court and
that relate to the subject matter of this Agreement, including, without
limitation, contract claims, tort claims, breach of duty claims, and all
other common law and statutory claims. This waiver shall apply to any
subsequent amendments, renewals, supplements or modifications to this
Agreement.
7.6 No Third Party Benefits. This Agreement is for the sole and
exclusive benefit of the parties and their successors and permitted assigns,
and no third party is intended to or shall have any rights hereunder.
7.7 No Waiver. The failure of either party to insist upon strict
compliance with any provision of this Agreement, or to exercise any right or
remedy under this Agreement, shall not constitute a waiver by such party of
the provision or prevent such party from exercising such right or remedy in
the future.
7.8 Entire Agreement. This Agreement and the Schedules attached, sets
forth the entire understanding of the parties with regard to its subject
matter, and supersedes and merges all prior discussions, agreements,
promises, representations, warranties and arrangements between them with
regard to such subject matter. Neither party shall be bound by any
agreement, representation or warranty regarding such subject matter other
than as expressly set forth in this Agreement or in a subsequent writing
signed by the party to be bound thereby. This Agreement may not be modified
or supplemented, nor may any provision be waived, except by a writing signed
by the party to be bound thereby.
7.9 Severability. If any provision of this Agreement is held to be
invalid or unenforceable, such impediment shall attach only to such
provision and shall not render invalid or unenforceable any other provision
of this Agreement.
7.10 Headings. The headings used in this Agreement or in any Schedules
are inserted for convenience only and shall not affect the meaning or
interpretation of the Agreement.
7.11 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall be deemed one and the same instrument.
7.12 Schedules. The Schedules referred to in this Agreement are an
integral part of and shall be deemed incorporated in, the Agreement.
7.13 Further Assurances. The parties shall execute and deliver such
other documents or instruments and take such other action as may be
reasonably required to more effectively implement the provisions and intent
of this Agreement.
7.14 Benefit of Parties. This Agreement shall bind and benefit the
successors and permitted assigns of the parties.
7.15 Survival. All of the terms, covenants, agreements obligations,
conditions, representations and warranties set forth in this Agreement and
in any document or other writing delivered pursuant hereto, shall survive
the termination of this Agreement and shall continue in full force and
effect so long as any liability or obligation under this Agreement is
outstanding or unpaid.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the day and year first
above written.
Attest: MILLERS GENERAL AGENCY, INC
By: /s/
Title:
Attest: CLARENDON NATIONAL INSURANCE COMPANY
By: /s/
Title
SCHEDULE 1
Claim Master Fields Listing
Claimant Master Fields Listing
Payment Master Fields Listing
Start Month Reserves Fields Listing
End Month Reserves Fields Listing
Outstanding Checks Fields Listing
SCHEDULE 2
GUARANTEE OF PAYMENT OF TRUST FUNDS
SCHEDULE 3
GUARANTEE OF PAYMENT OF THE E&O SHORTFALL