Exhibit 10(g)
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PROPERTY CATASTROPHE EXCESS
REINSURANCE CONTRACT
EFFECTIVE: JANUARY 1, 2002
issued to
Merchants Mutual Insurance Company
and
Merchants Insurance Company of New Hampshire, Inc.
both of Buffalo, New York
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TABLE OF CONTENTS
ARTICLE PAGE
I Classes of Business Reinsured ▇
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▇▇▇ ▇▇▇▇▇▇▇▇▇ (▇▇▇▇ ▇▇▇) 2
IV Exclusions 2
V Retention and Limit 7
VI Reinstatement 7
VII Definition of Ultimate Net Loss 8
VIII Loss Occurrence (NMA 2244c) 8
IX Loss Notice (BRMA 26B) 10
X Loss Settlements (BRMA 29E) 10
XI Salvage and Subrogation 10
XII Reinsurance Premium 10
XIII Offset (BRMA 36B) 11
XIV Access to Records (BRMA 1D) ▇▇
▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (▇▇▇▇ ▇▇▇) 12
XVI Errors and Omissions (BRMA 14C) 12
XVII Currency (BRMA 12A) ▇▇
▇▇▇▇▇ ▇▇▇▇▇ (▇▇▇▇ ▇▇▇) 12
XIX Federal Excise Tax (BRMA 17A) 12
XX Unauthorized Reinsurance (BRMA 55G) 13
XXI Insolvency 14
XXII Arbitration (BRMA 6N) 15
XXIII Service of Suit (BRMA 49C) 16
XXIV Agency Agreement ▇▇
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Schedule A
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PROPERTY CATASTROPHE EXCESS
REINSURANCE CONTRACT
EFFECTIVE: JANUARY 1, 2002
issued to
Merchants Mutual Insurance Company
and
Merchants Insurance Company of New Hampshire, Inc.
both of Buffalo, New York
(hereinafter referred to collectively as the "Company")
by
The Subscribing Reinsurer(s) Executing the
Interests and Liabilities Agreement(s)
Attached Hereto
(hereinafter referred to as the "Reinsurer")
ARTICLE I - CLASSES OF BUSINESS REINSURED
By this Contract the Reinsurer agrees to reinsure the excess liability which may
accrue to the Company under its policies, contracts and binders of insurance or
reinsurance, whether written or oral (hereinafter called "policies") in force at
the effective date hereof or issued or renewed on or after that date, and
classified by the Company as Property, including but not limited to Fire and
Allied Lines (including Extended Coverage and excluding Crop Hail), Section I of
Farmowners, Section I of Homeowners, Section I of Commercial Multiple-Peril
(Coverall and Non-Coverall), Inland Marine (including Section I of Boatowners),
Businessowners, Earthquake and Automobile Physical Damage (excluding collision,
but including water damage, Fleet Dealers' and Garagekeepers' Legal Liability),
subject to the terms, conditions and limitations set forth herein and in
Schedule A attached to and forming part of this Contract.
ARTICLE II - TERM
A. This Contract shall become effective on January 1, 2002, with respect to
losses arising out of loss occurrences commencing on or after that date, and
shall remain in force until December 31, 2002, both days inclusive.
B. If this Contract expires while a loss occurrence covered hereunder is in
progress, the Reinsurer's liability hereunder shall, subject to the other
terms and conditions of this Contract, be determined as if the entire loss
occurrence had occurred prior to the expiration
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of this Contract, provided that no part of such loss occurrence is claimed
against any renewal or replacement of this Contract.
ARTICLE III - TERRITORY (BRMA 51A)
The territorial limits of this Contract shall be identical with those of the
Company's policies.
ARTICLE IV - EXCLUSIONS
This Contract does not apply to and specifically excludes the following:
1. Reinsurance accepted by the Company other than:
a. Facultative reinsurance on a share basis of risks accepted
individually and not forming part of any agreement; or
b. Local agency reinsurance on a share basis accepted in the normal
course of business; or
c. Reinsurance accepted by the Company from its affiliate,
2. Nuclear incident per the following clauses which are attached to and
deemed to form a part of this Contract:
a. "Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance"
- USA (BRMA 35B);
b. "Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance"
- Canada (BRMA 35G).
3. Any extra or non-contractual damages (including loss in excess of policy
limits) or legal fees and expense attendant to the defense thereof,
including but not limited to compensatory, exemplary and punitive
damages or fines or statutory penalties which are awarded against the
Company as a result of an act, omission or course of conduct committed
by or on behalf of the Company.
4. Any loss or liability accruing to the Company directly or indirectly
from any insurance written by or through any pool or association,
including pools or associations in which membership by the Company is
required under any statutes or regulations; however, this exclusion
shall not apply to:
a. The Alabama Insurance Underwriting Association;
b. The Florida Windstorm Underwriting Association;
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c. The Louisiana Insurance Underwriting Association;
d. The Mississippi Windstorm Underwriting Association;
e. The New York Coastal Market Assistance Program (CMAP);
f. The North Carolina Insurance Underwriting Association;
g. The South Carolina Windstorm and Hail Underwriting Association;
h. The Texas Catastrophe Property Insurance Association;
i. All "Fair Plan" and "Rural Risk Plan" business;
j. The Devco Mutual Association.
However, this Contract shall not cover any increase in such liability
resulting from the inability of any other participant in any such pool
or plan to meet its liability.
5. All liability of the Company arising by contract, operation of law, or
otherwise, from its participation or membership, whether voluntary or
involuntary, in any insolvency fund. "Insolvency fund" includes any
guaranty fund, insolvency fund, plan, pool, association, fund or other
arrangement, however denominated, established or governed, which
provides for any assessment of or payment or assumption by the Company
of part or all of any claim, debt, charge, fee or other obligation of an
insurer, or its successors or assigns, which has been declared by any
competent authority to be insolvent, or which is otherwise deemed unable
to meet any claim, debt, charge, fee or other obligation in whole or in
part.
6. Any loss or damage which is occasioned by war, invasion, hostilities,
acts of foreign enemies, civil war, rebellion, insurrection, military or
usurped power, or martial law or confiscation by order of any government
or public authority; however, this exclusion shall not apply to any
policy which contains a standard war exclusion.
7. Risks written on a layered basis, whether primary or excess of loss, or
policies written with a deductible or franchise of more than $5,000;
however, this exclusion shall not apply to policies which provide a
percentage deductible or franchise in connection with windstorm.
8. Insurance against earthquake, except when written in conjunction with
fire and otherwise eligible perils.
9. Insurance on growing crops.
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10. Insurance against flood, surface water, waves, tidal water or tidal
wave, overflow of streams or other bodies of water or spray from any of
the foregoing, all whether driven by wind or not, except when written in
conjunction with fire or otherwise eligible perils.
11. Any loss in respect of overhead transmission and distribution lines and
their supporting structures other than those on or within 1,000 feet of
the insureds premises; however, this exclusion shall not apply to public
utilities extension and/or suppliers extension and/or contingent
business interruption coverage, provided that these are not part of a
transmitters' or distributors' policy.
12. Business classified as Fidelity.
13. Liability under coverage afforded for loss or damage resulting from
failure to account or pay for any goods or merchandise sold on credit,
delivered under deferred payment agreements, consigned for sale, or
delivered under any trust or floor plan agreements, except under
standard accounts receivables policies.
14. Any loss or damage caused by or resulting from explosion, rupture, or
bursting of steam boilers, steam pipes, steam turbines, steam engines,
or rotating parts of machinery caused by centrifugal force; if owned by,
leased by, or actually operated under the control of the insured. This
exclusion shall not apply to ensuing loss by fire not otherwise
excluded.
15. Mortgage impairment insurance and similar kinds of insurance, howsoever
styled, providing coverage to an insured with respect to its mortgagee
interest in property or its owner interest in foreclosed property.
16. Difference in Conditions insurance and similar kinds of insurance,
howsoever styled.
17. Any collection of fine arts with an insurable value of $5,000,000 or
more.
18. Mobile homes.
19. Inland Marine business with respect to the following:
a. All bridges and tunnels;
b. Cargo insurance when written as such with respect to ocean, lake or
inland waterways vessels;
c. Commercial Negative Film insurance and Cast insurance;
d. Drilling rigs;
e. Furriers' Customers policies;
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f. Garment Contractors' policies;
g. Insurance on livestock under so-called "Mortality policies";
h. Jewelers' Block policies and Furriers' Block policies;
i. Mining equipment while underground;
j. Motor Truck Cargo insurance written for common carriers operating
beyond a radius of 300 miles;
k. Radio and television broadcasting towers;
l. Registered Mail insurance when the limit of any one addressee on any
one day is more than $50,000.
20. Watercraft, other than watercraft insured under a standard Homeowners or
Boatowners policy.
21. Loss of, damage to, or failure of, or consequential loss resulting
therewith (including but not limited to earnings and extra expense) of
satellites, spacecraft, and launch vehicles, including cargo and freight
carried therein, in all phases of operation (including but not limited
to manufacturing, transit, pre-launch, launch, and in-orbit).
22. Coverage afforded by ISO Pollutant Clean Up and Removal Additional
Aggregate Limit of Insurance Endorsement CP 04 07 (Ed., 4/86) or as
subsequently amended or by any similar endorsement affording such
coverage.
23. Pollutant clean up or removal, including time element coverage
associated therewith, under any Commercial Property policy or any Inland
Marine policy written by the Company which does not contain ISO Changes
- Pollutants Endorsement CP 01 86 (Ed., 4/86) or as subsequently
amended; however, this exclusion does not apply to any risk located in a
jurisdiction which has not approved the Insurance Services Office
("ISO") exclusion or where other regulatory restraints prohibit the
Company from attaching such endorsement. If the Company elects to file
an endorsement independent of ISO, such endorsement will be deemed a
suitable substitute provided the Company has submitted the wording to
the Reinsurer and received the Reinsurer's prior approval.
24. Notwithstanding any provision to the contrary within this Contract or
any amendment thereto, it is agreed that this Contract excludes loss,
damage, cost or expense of whatsoever nature directly or indirectly
caused by, resulting from or in connection with any Act of Terrorism,
regardless of any other cause or event contributing concurrently or in
any other sequence to the loss.
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For the purpose of this exclusion, an Act of Terrorism means an act,
including but not limited to the use of force or violence and/or the
threat thereof, of any person or group(s) of persons, whether acting
alone or on behalf of or in connection with any organization(s) or
government(s), committed for political, religious, ideological or
similar purposes, including the intention to influence any government
and/or to put the public, or any section of the public, in fear.
This exclusion also excludes loss, damage, cost or expense of whatsoever
nature directly or indirectly caused by, resulting from or in connection
with any action taken in controlling, preventing, suppressing or in any
way relating to any Act of Terrorism, or to any anticipated or suspected
Act of Terrorism.
If the Reinsurer alleges that by reason of this exclusion, any loss,
damage, cost or expense is not covered by this Contract, the burden of
proving the contrary shall be upon the Company.
Notwithstanding the above, the Company may include in its ultimate net
loss, loss, damage, cost or expense arising from an Act of Terrorism
otherwise excluded hereunder if such loss, damage, cost or expense
arises from Homeowners and/or Dwelling Fire policies covered under this
Contract except for:
a. Losses that result from the hostile detonation of any explosive or
similar device, whether or not a weapon of war, and regardless of
whether such device operates through the utilization of conventional
explosives or atomic or nuclear fission, fusion or other like
reaction involving radioactive force or radioactive matter, and also
including any device, whether or not a weapon of war, which through
whatever means, disperses or releases radioactive matter;
b. Losses that result from a building being uninhabitable due to the
direct or indirect release of germs, disease or other contagions or
contaminants following the Act of Terrorism, including but not
limited to losses resulting from so-called "sick building syndrome"
in which building occupants experience acute health and comfort
effects that appear to be linked to time spent in a building,
whether or not a specific illness or cause can be identified;
c. This "write-back" provision is not intended to provide coverage for
loss, damage, cost or expense which is otherwise not covered under
this Contract or is excluded by any clause or exclusion of this
Contract, including but not limited the Nuclear Incident Exclusion
clauses which are attached to and form a part of this Contract, and
d. In no event shall loss, damage, cost or expense covered under this
"write back" provision and arising from non-contiguous states be
aggregated into a single loss occurrence.
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In the event any portion of this exclusion is found to be invalid or
unenforceable, the remainder shall remain in full force and effect.
ARTICLE V - RETENTION AND LIMIT
A. As respects each excess layer of reinsurance coverage provided by this
Contract, the Company shall retain and be liable for the first amount of
ultimate net loss, shown as "Company's Retention" for that excess layer in
Schedule A attached hereto, arising out of each loss occurrence. The
Reinsurer shall then be liable, as respects each excess layer, for 95.0% of
the amount by which such ultimate net loss exceeds the Company's applicable
retention, but the liability of the Reinsurer under each excess layer shall
not exceed 95.0% of the amount, shown as "Reinsurer's Per Occurrence Limit"
for that excess layer in Schedule A attached hereto, as respects any one
loss occurrence.
B. As respects each excess layer of reinsurance coverage provided by this
Contract, the Company shall retain, in addition to its initial retention
each loss occurrence, 5.0% of the excess ultimate net loss to which the
excess layer applies.
ARTICLE VI - REINSTATEMENT
A. In the event all or any portion of the reinsurance under any excess layer of
reinsurance coverage provided by this Contract is exhausted by loss, the
amount so exhausted shall be reinstated immediately from the time the loss
occurrence commences hereon. For each amount so reinstated the Company
agrees to pay additional premium equal to the product of the following:
1. The percentage of the occurrence limit for the excess layer reinstated
(based on the loss paid by the Reinsurer under that excess layer); times
2. The earned reinsurance premium for the excess layer reinstated for the
term of this Contract (exclusive of reinstatement premium).
B. Whenever the Company requests payment by the Reinsurer of any loss under any
excess layer hereunder, the Company shall submit a statement to the
Reinsurer of reinstatement premium due the Reinsurer for that excess layer.
If the earned reinsurance premium for any excess layer for the term of this
Contract has not been finally determined as of the date of any such
statement, the calculation of reinstatement premium due for that excess
layer shall be based on the annual deposit premium for that excess layer and
shall be readjusted when the earned reinsurance premium for that excess
layer for the term of this Contract has been finally determined. Any
reinstatement premium shown to be due the Reinsurer for any excess layer as
reflected by any such statement (less prior payments, if any, for that
excess layer) shall be payable by the Company concurrently with payment by
the Reinsurer of the requested loss for that excess layer. Any return
reinstatement premium shown to be due the
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Company shall be remitted by the Reinsurer as promptly as possible after
receipt and verification of the Company's statement.
C. Notwithstanding anything stated herein, the liability of the Reinsurer under
any excess layer of reinsurance coverage provided by this Contract shall not
exceed either of the following:
1. 95.0% of the amount, shown as "Reinsurer's Per Occurrence Limit" for
that excess layer in Schedule A attached hereto, as respects loss or
losses arising out of any one loss occurrence; or
2. 95.0% of the amount, shown as "Reinsurer's Annual Limit" for that excess
layer in Schedule A attached hereto, in all during the term of this
Contract.
ARTICLE VII - DEFINITION OF ULTIMATE NET LOSS
"Ultimate net loss" as used herein shall be understood to mean the sum actually
paid by the Company in settlement of losses for which it is liable, after making
proper deductions for all other reinsurance or insurance which inures to the
benefit of the Reinsurer under this Contract, whether collectible or not, and
all salvages and all recoveries, and shall include all expenses incurred by the
Company in settlement or defense of claims including the salaries and expenses
of salaried adjusters but excluding the office expenses of the Company and the
salaries and expenses of its other employees; provided, however, that in the
event of the insolvency of the Company, "ultimate net loss" shall mean the
amount of loss and expense which the Company has incurred or 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 provisions of
Article XX of this Contract.
ARTICLE VIII - LOSS OCCURRENCE (NMA 2244C)
A. The term "loss 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 "loss 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 "loss 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.
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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 epicentre of which need not necessarily be
within the territorial confines referred to in the introductory portion
of this paragraph) and fire following directly occasioned by the
earthquake, only those individual fire losses which commence during the
period of 168 consecutive hours may be included in the Company's "loss
occurrence."
4. As regards "freeze," only individual losses directly occasioned by
collapse, breakage of glass and water damage (caused by bursting frozen
pipes and tanks) may be included in the Company's "loss occurrence."
B. For all those "loss occurrences," other than those referred to in
subparagraph 2 of paragraph A above, 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 any
"loss occurrence" referred to in subparagraph 1 of paragraph A 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. As respects those "loss occurrences" referred to in subparagraph 2 of
paragraph A above, if the disaster, accident or loss occasioned by the event
is of greater duration than 72 consecutive hours, then the Company may
divide that disaster, accident or loss into two or more "loss occurrences,"
provided no two periods overlap and no individual loss is included in more
than one such period and provided that no period commences 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.
D. No individual losses occasioned by an event that would be covered by 72
hours clauses may be included in any "loss occurrence" claimed under the 168
hours provision.
E. Losses directly or indirectly occasioned by:
1. Loss of, alteration of, or damage to; or
2. A reduction in the functionality, availability or operation of;
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a computer system, hardware, program, software, data, information
repository, microchip, integrated circuit, or similar device in computer
equipment or non-computer equipment, whether the property of the
policyholder of the Company or not, do not in and of themselves constitute
an event unless arising out of one or more of the following perils:
fire, lightning, explosion, aircraft or vehicle impact, falling objects,
windstorm, hail, tornado, cyclone, hurricane, earthquake, volcano,
tsunami, flood, freeze or weight of snow.
ARTICLE IX - LOSS NOTICE (BRMA 26B)
The Company shall advise the Reinsurer promptly of all losses which, in the
opinion of the Company, may result in a claim hereunder and of all subsequent
developments thereto which, in the opinion of the Company, may materially affect
the position of the Reinsurer.
ARTICLE X - LOSS SETTLEMENTS (BRMA 29E)
All loss settlements made by the Company, under policies subject hereto, whether
under policy terms and conditions or by way of compromise, shall be binding upon
the Reinsurer, and, upon receipt of satisfactory proof of loss, the Reinsurer
agrees to pay or allow, as the case may be, its share of each such settlement in
accordance with this Contract.
ARTICLE XI - SALVAGE AND SUBROGATION
The Reinsurer shall be credited with salvage (i.e., reimbursement obtained or
recovery made by the Company, less the actual cost, excluding salaries of
officials and employees of the Company and sums paid to attorneys as retainer,
of obtaining such reimbursement or making such recovery) on account of claims
and settlements involving reinsurance hereunder. Salvage thereon shall always be
used to reimburse the excess carriers in the reverse order of their priority
according to their participation before being used in any way to reimburse the
Company for its primary loss. The Company hereby agrees to enforce its rights to
salvage or subrogation relating to any loss, a part of which loss was sustained
by the Reinsurer, and to prosecute all claims arising out of such rights.
ARTICLE XII - REINSURANCE PREMIUM
A. As premium for each excess layer of reinsurance coverage provided by this
Contract, the Company shall pay the Reinsurer the greater of the following:
1. The amount, shown as "Annual Minimum Premium" for that excess layer in
Schedule A attached hereto; or
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2. The percentage, shown as "Premium Rate" for that excess layer in
Schedule A attached hereto, of the Company's net earned premium for the
term of this Contract.
B. The Company shall pay the Reinsurer an annual deposit premium for each
excess layer of the amount, shown as "Annual Deposit Premium" for that
excess layer in Schedule A attached hereto, in four equal installments of
the amount, shown as "Quarterly Deposit Premium" for that excess layer in
Schedule A attached hereto, on January 1, April 1, July 1 and October 1 of
2002.
C. As promptly as possible after the expiration of this Contract, the Company
shall provide a report to the Reinsurer setting forth the premium due
hereunder for each excess layer, computed in accordance with paragraph A,
and any additional premium due the Reinsurer or return premium due the
Company for each such excess layer shall be remitted promptly.
D. "Net earned premium" as used herein is defined as gross earned premium of
the Company for the classes of business reinsured hereunder, less the earned
portion of premiums ceded by the Company for reinsurance which inures to the
benefit of this Contract. For purposes of calculating net earned premium,
the following percentages of the Company's total basic policy premium shall
be considered subject premium:
1. 100% as respects Fire, Allied Lines (excluding Crop Hail), Inland
Marine, Earthquake and Automobile Physical Damage (excluding Collision);
2. 85.0% as respects Farmowners and Homeowners;
3. 15.0% as respects Commercial Multiple Peril (Coverall);
4. 35.0% as respects Commercial Multiple Peril (Non-Coverall);
5. 40.0% as respects Businessowners.
ARTICLE XIII - OFFSET (BRMA 36B)
The Company and the Reinsurer may offset any balance or amount due from one
party to the other under this Contract or any other contract heretofore or
hereafter entered into between the Company and the Reinsurer, whether acting as
assuming reinsurer or ceding company. However, in the event of the insolvency of
any party hereto, offset shall only be allowed in accordance with applicable
law.
ARTICLE XIV - ACCESS TO RECORDS (BRMA 1D)
The Reinsurer or its designated representatives shall have access at any
reasonable time to all records of the Company which pertain in any way to this
reinsurance.
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ARTICLE XV - NET RETAINED LINES (BRMA 32B)
A. This Contract applies only to that portion of any policy which the Company
retains net for its own account, and in calculating the amount of any loss
hereunder and also in computing the amount or amounts in excess of which
this Contract attaches, only loss or losses in respect of that portion of
any policy which the Company retains net for its own account shall be
included.
B. The amount of the Reinsurer's liability hereunder in respect of any loss or
losses shall not be increased by reason of the inability of the Company to
collect from any other reinsurer(s), whether specific or general, any
amounts which may have become due from such reinsurer(s), whether such
inability arises from the insolvency of such other reinsurer(s) or
otherwise.
ARTICLE XVI - ERRORS AND OMISSIONS (BRMA 14C)
Any inadvertent delay, omission or error shall not be held to relieve either
party hereto from any liability which would attach to it hereunder if such
delay, omission or error had not been made, provided such omission or error is
rectified upon discovery.
ARTICLE XVII - CURRENCY (BRMA 12A)
A. Whenever the word "Dollars" or the "$" sign appears in this Contract, they
shall be construed to mean United States Dollars and all transactions under
this Contract shall be in United States Dollars.
B. Amounts paid or received by the Company in any other currency shall be
converted to United States Dollars at the rate of exchange at the date such
transaction is entered on the books of the Company.
ARTICLE XVIII - TAXES (BRMA 50B)
In consideration of the terms under which this Contract is issued, the Company
will not claim a deduction in respect of the premium hereon when making tax
returns, other than income or profits tax returns, to any state or territory of
the United States of America or the District of Columbia.
ARTICLE XIX - FEDERAL EXCISE TAX (BRMA 17A)
(Applicable to those reinsurers, excepting Underwriters at Lloyd's London and
other reinsurers exempt from Federal Excise Tax, who are domiciled outside the
United States of America.)
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A. The Reinsurer has agreed to allow for the purpose of paying the Federal
Excise Tax the applicable percentage of the premium payable hereon as
imposed under Section 4371 of the Internal Revenue Code to the extent such
premium is subject to the Federal Excise Tax.
B. In the event of any return of premium becoming due hereunder the Reinsurer
will deduct the applicable percentage from the return premium payable hereon
and the Company or its agent should take steps to recover the tax from the
United States Government.
ARTICLE XX - UNAUTHORIZED REINSURANCE (BRMA 55G)
(Applies only to a Reinsurer who does not qualify for full credit with any
insurance regulatory authority having jurisdiction over the Company's reserves.)
A. As regards policies or bonds issued by the Company coming within the scope
of this Contract, the Company agrees that when it shall file with the
insurance regulatory authority or set up on its books reserves for losses
covered hereunder which it shall be required by law to set up, it will
forward to the Reinsurer a statement showing the proportion of such reserves
which is applicable to the Reinsurer. The Reinsurer hereby agrees that it
will apply for and secure delivery to the Company of a clean, irrevocable
and unconditional Letter of Credit, issued by a bank, and containing
provisions acceptable to the insurance regulatory authorities having
jurisdiction over the Company's reserves in an amount equal to the
Reinsurer's proportion of reserves in respect of known outstanding losses
that have been reported to the Reinsurer and allocated loss adjustment
expense relating thereto, and losses and allocated loss adjustment expense
paid by the Company but not recovered from the Reinsurer, as shown in the
statement prepared by the Company (hereinafter referred to as "Reinsurer's
Obligations"). Under no circumstances shall any amount relating to reserves
in respect of incurred but not reported losses be included in the amount of
the Letter of Credit.
B. The Letter of Credit shall be issued for a period of not less than one year,
and shall be automatically extended for one year from its date of expiration
or any future expiration date unless 30 days prior to any expiration date
the issuing bank shall notify the Company by certified or registered mail
that the issuing bank elects not to consider the Letter of Credit extended
for any additional period.
C. The Reinsurer and Company agree that the Letters of Credit provided by the
Reinsurer pursuant to the provisions of this Contract may be drawn upon at
any time, notwithstanding any other provision of this Contract, and be
utilized by the Company or any successor, by operation of law, of the
Company including, without limitation, any liquidator, rehabilitator,
receiver or conservator of the Company for the following purposes, unless
otherwise provided for in a separate Trust Agreement:
1. To reimburse the Company for the Reinsurer's Obligations, the payment of
which is due under the terms of this Contract and which has not been
otherwise paid;
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2. To make refund of any sum which is in excess of the actual amount
required to pay the Reinsurer's Obligations under this Contract;
3. To fund an account with the Company for the Reinsurer's Obligations.
Such cash deposit shall be held in an interest bearing account separate
from the Company's other assets, and interest thereon not in excess of
the prime rate shall accrue to the benefit of the Reinsurer.
In the event the amount drawn by the Company on any Letter of Credit is in
excess of the actual amount required for (1) or (3), the Company shall
promptly return to the Reinsurer the excess amount so drawn. All of the
foregoing shall be applied without diminution because of insolvency on the
part of the Company or the Reinsurer.
D. The issuing bank shall have no responsibility whatsoever in connection with
the propriety of withdrawals made by the Company or the disposition of funds
withdrawn, except to ensure that withdrawals are made only upon the order of
properly authorized representatives of the Company.
E. At annual intervals, or more frequently as agreed but never more frequently
than quarterly, the Company shall prepare a specific statement of the
Reinsurer's Obligations, for the sole purpose of amending the Letter of
Credit, in the following manner:
1. If the statement shows that the Reinsurer's Obligations exceed the
balance of credit as of the statement date, the Reinsurer shall, within
30 days after receipt of notice of such excess, secure delivery to the
Company of an amendment to the Letter of Credit increasing the amount of
credit by the amount of such difference.
2. If, however, the statement shows that the Reinsurer's Obligations are
less than the balance of credit as of the statement date, the Company
shall, within 30 days after receipt of written request from the
Reinsurer, release such excess credit by agreeing to secure an amendment
to the Letter of Credit reducing the amount of credit available by the
amount of such excess credit.
ARTICLE XXI - INSOLVENCY
A. In the event of the insolvency of one or both of the reinsured companies,
this reinsurance shall be payable directly to the company or to its
liquidator, receiver, conservator or statutory successor on the basis of the
liability of the company without diminution because of the insolvency of the
company or because the liquidator, receiver, conservator or statutory
successor of the company has failed to pay all or a portion of any claim. It
is agreed, however, that the liquidator, receiver, conservator or statutory
successor of the company shall give written notice to the Reinsurer of the
pendency of a claim against the company indicating the policy or bond
reinsured which claim would involve a possible liability on the part of the
Reinsurer within a reasonable time after such claim is filed in the
conservation or liquidation proceeding or in the receivership, and that
during the pendency of such claim,
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the Reinsurer may investigate such claim and interpose, at its own expense,
in the proceeding where such claim is to be adjudicated, any defense or
defenses that it may deem available to the company or its liquidator,
receiver, conservator or statutory successor. The expense thus incurred by
the Reinsurer shall be chargeable, subject to the approval of the Court,
against the company as part of the expense of conservation or liquidation to
the extent of a pro rata share of the benefit which may accrue to the
company solely as a result of the defense undertaken by the Reinsurer.
B. Where two or more reinsurers are involved in the same claim and a majority
in interest elect to interpose defense to such claim, the expense shall be
apportioned in accordance with the terms of this Contract as though such
expense had been incurred by the company.
C. It is further understood and agreed that, in the event of the insolvency of
one or both of the reinsured companies, the reinsurance under this Contract
shall be payable directly by the Reinsurer to the company or to its
liquidator, receiver or statutory successor, except as provided by Section
4118(a) of the New York Insurance Law or except (1) where this Contract
specifically provides another payee of such reinsurance in the event of the
insolvency of the company or (2) where the Reinsurer with the consent of the
direct insured or insureds has assumed such policy obligations of the
company as direct obligations of the Reinsurer to the payees under such
policies and in substitution for the obligations of the company to such
payees.
ARTICLE XXII - ARBITRATION (BRMA 6N)
A. As a condition precedent to any right of action hereunder, any dispute
arising out of the interpretation, performance or breach of this Contract,
including the formation or validity thereof, shall be submitted for decision
to a panel of three arbitrators. Notice requesting arbitration will be in
writing and sent certified or registered mail, return receipt requested.
B. One arbitrator shall be chosen by each party and the two arbitrators shall,
before instituting the hearing, choose an impartial third arbitrator who
shall preside at the hearing. If either party fails to appoint its
arbitrator within 30 days after being requested to do so by the other party,
the latter, after 30 days notice by certified or registered mail of its
intention to do so, may appoint the second arbitrator.
C. If the two arbitrators are unable to agree upon the third arbitrator within
30 days of their appointment, the third arbitrator shall be selected from a
list of six individuals (three named by each arbitrator) by a judge of the
federal district court having jurisdiction over the geographical area in
which the arbitration is to take place, or if the federal court declines to
act, the state court having general jurisdiction in such area.
D. All arbitrators shall be disinterested active or former executive officers
of insurance or reinsurance companies or Underwriters at Lloyd's, London.
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E. Within 30 days after notice of appointment of all arbitrators, the panel
shall meet and determine timely periods for briefs, discovery procedures and
schedules for hearings.
F. The panel shall be relieved of all judicial formality and shall not be bound
by the strict rules of procedure and evidence. Unless the panel agrees
otherwise, arbitration shall take place in Buffalo, New York, but the venue
may be changed when deemed by the panel to be in the best interest of the
arbitration proceeding. Insofar as the arbitration panel looks to
substantive law, it shall consider the law of the State of New York. The
decision of any two arbitrators when rendered in writing shall be final and
binding. The panel is empowered to grant interim relief as it may deem
appropriate.
G. The panel shall interpret this Contract as an honorable engagement rather
than as merely a legal obligation and shall make its decision considering
the custom and practice of the applicable insurance and reinsurance business
as promptly as possible following the termination of the hearings. Judgment
upon the award may be entered in any court having jurisdiction thereof.
H. Each party shall bear the expense of its own arbitrator and shall jointly
and equally bear with the other party the cost of the third arbitrator. The
remaining costs of the arbitration shall be allocated by the panel. The
panel may, at its discretion, award such further costs and expenses as it
considers appropriate, including but not limited to attorneys fees, to the
extent permitted by law.
I. If more than one reinsurer is involved in arbitration where there are common
questions of law or fact and a possibility of conflicting awards or
inconsistent results, all such reinsurers shall constitute and act as one
party for purposes of this Article and communications shall be made by the
Company to each of the reinsurers constituting the one party; provided,
however, that nothing therein shall impair the rights of such reinsurers to
assert several, rather than joint defenses or claims, nor be construed as
changing the liability of the reinsurers under the terms of this Contract
from several to joint.
ARTICLE XXIII - SERVICE OF SUIT (BRMA 49C)
(Applicable if the Reinsurer is not domiciled in the United States of America,
and/or is not authorized in any State, Territory or District of the United
States where authorization is required by insurance regulatory authorities)
A. It is agreed that in the event the Reinsurer fails to pay any amount claimed
to be due hereunder, the Reinsurer, at the request of the Company, will
submit to the jurisdiction of any court of competent jurisdiction within the
United States. Nothing in this Article constitutes or should be understood
to constitute a waiver of the Reinsurer's rights to commence an action in
any court of competent jurisdiction in the United States, to remove an
action to a United States District Court, or to seek a transfer of a case to
another court as permitted by the laws of the United States or of any state
in the United States.
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B. Further, pursuant to any statute of any state, territory or district of the
United States which makes provision therefor, the Reinsurer hereby
designates the party named in its Interests and Liabilities Agreement, or if
no party is named therein, the Superintendent, Commissioner or Director of
Insurance or other officer specified for that purpose in the statute, or his
successor or successors in office, as its true and lawful attorney upon whom
may be served any lawful process in any action, suit or proceeding
instituted by or on behalf of the Company or any beneficiary hereunder
arising out of this Contract.
ARTICLE XXIV - AGENCY AGREEMENT
If more than one reinsured company is named as a party to this Contract, the
first named company shall be deemed the agent of the other reinsured companies
for purposes of sending or receiving notices required by the terms and
conditions of this Contract, and for purposes of remitting or receiving any
monies due any party.
ARTICLE XXV - INTERMEDIARY (BRMA 23A)
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Inc. is hereby recognized as the Intermediary negotiating this
Contract for all business hereunder. All communications (including but not
limited to notices, statements, premium, return premium, commissions, taxes,
losses, loss adjustment expense, salvages and loss settlements) relating thereto
shall be transmitted to the Company or the Reinsurer through ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Inc., ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇. Payments by the
Company to the Intermediary shall be deemed to constitute payment to the
Reinsurer. Payments by the Reinsurer to the Intermediary shall be deemed to
constitute payment to the Company only to the extent that such payments are
actually received by the Company.
In Witness Whereof, the Company by its duly authorized representative has
executed this Contract as of the date undermentioned at:
Buffalo, New York,this day of in the year .
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Merchants Mutual Insurance Company (for and on behalf of the "Company")
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SCHEDULE A
PROPERTY CATASTROPHE EXCESS
REINSURANCE CONTRACT
EFFECTIVE: JANUARY 1, 2002
issued to
Merchants Mutual Insurance Company
and
Merchants Insurance Company of New Hampshire, Inc.
both of Buffalo, New York
FIRST SECOND THIRD
EXCESS EXCESS EXCESS
Company's Retention $ 5,000,000 $10,000,000 $20,000,000
Reinsurer's Per Occurrence Limit $ 5,000,000 $10,000,000 46,750,000
(95.0% of)
Reinsurer's Annual $10,000,000 $20,000,000 $93,500,000
Limit (95.0% of)
Annual Minimum Premium $ 501,600 $ 646,000 $ 1,332,000
Premium Rate 1.503% 1.936% 3.992%
Annual Deposit Premium $ 627,000 $ 807,500 $ 1,665,000
Quarterly Deposit Premium $ 156,750 $ 201,875 $ 416,250
The figures listed above for each excess layer shall apply to each Subscribing
Reinsurer in the percentage share for that excess layer as expressed in its
Interests and Liabilities Agreement attached hereto.
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U.S.A.
NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL DAMAGE - REINSURANCE
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.
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.
12/12/57
N.M.A. 1119
BRMA 35B
NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL DAMAGE - REINSURANCE
CANADA
1. This Agreement does not cover any loss or liability accruing to the
Reinsured, 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 Agreement does not cover any loss or liability accruing to the Reinsured,
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:
(a) nuclear reactor power plants including all auxiliary property on the
site, or
(b) any other nuclear reactor installation, including laboratories
handling radioactive materials in connection with reactor
installations, and critical facilities as such, or
(c) installations for fabricating complete fuel elements or for
processing substantial quantities of prescribed substances, and for
reprocessing, salvaging, chemically separating, storing or disposing
of spent nuclear fuel or waste materials, or
(d) installations other than those listed in (c) above using substantial
quantities of radioactive isotopes or other products of nuclear
fission.
3. Without in any way restricting the operation of paragraphs 1 and 2 of this
clause, this Agreement does not cover any loss or liability by radioactive
contamination accruing to the Reinsured, 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 the Reinsured does not have knowledge of such nuclear reactor
power plant or nuclear installation, or
(b) where the said insurance contains a provision excluding coverage for
damage to property caused by or resulting from radioactive
contamination, however caused.
4. Without in any way restricting the operation of paragraphs 1, 2 and 3 of this
clause, this Agreement does not cover any loss or liability by radioactive
contamination accruing to the Reinsured, directly or indirectly, and whether as
Insurer or Reinsurer, when such radioactive contamination is a named hazard
specifically insured against.
5. This clause shall not extend to risks using radioactive isotopes in any form
where the nuclear exposure is not considered by the Reinsured to be the primary
hazard.
6. The term "prescribed substances" shall have the meaning given to it by the
Atomic Energy Control Act R.S.C. 1985(c), A-16 or by any law amendatory thereof.
7. Reinsured to be sole judge of what constitutes:
(a) substantial quantities, and
(b) the extent of installation, plant or site.
8. Without in any way restricting the operation of paragraphs 1, 2, 3 and 4 of
this clause, this Agreement does not cover any loss or liability accruing to the
Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, caused:
(1) by any nuclear incident, as defined in the Nuclear Liability Act or
any other nuclear liability act, law or statute, or any law
amendatory thereof or nuclear explosion, except for ensuing loss or
damage which results directly from fire, lightning or explosion of
natural, coal or manufactured gas;
(2) by contamination by radioactive material.
NOTE: Without in any way restricting the operation of paragraphs 1, 2, 3
and 4 of this clause, paragraph 8 of this clause shall only apply to
all original contracts of the Reinsured, whether new, renewal or
replacement, which become effective on or after December 31, 1992.
N.M.A. 1980 (2/19/93)
