Exhibit 10-19
AGREEMENT OF REINSURANCE
NO. 8759
between
PENN-AMERICA INSURANCE COMPANY
PENN-STAR INSURANCE COMPANY
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▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(herein collectively referred to as the "Company")
and
GENERAL REINSURANCE CORPORATION
a Delaware corporation
having its principal offices at
Financial Centre
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ P.O. Box 10350
Stamford, Connecticut 06904-2350
(herein referred to as the "Reinsurer")
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In consideration of the promises set forth in this Agreement, the parties agree
as follows:
Article I - SCOPE OF AGREEMENT
As a condition precedent to the Reinsurer's obligations under this Agreement,
the Company shall cede to the Reinsurer the business described in this
Agreement, and the Reinsurer shall accept such business as reinsurance from the
Company.
This Agreement is comprised of General Articles I through XII and the Exhibit(s)
listed below and each Exhibit which may be made a part of this Agreement. The
terms of the General Articles and of the Exhibit(s) shall determine the rights
and obligations of the parties. The terms of the General Articles shall apply to
each Exhibit unless specifically amended therein. In the event of termination of
all the Exhibits made a part of this Agreement, the General Articles shall
automatically terminate when the liability of the Reinsurer under said Exhibits
ceases.
EXHIBIT A - EXCESS OF LOSS REINSURANCE
of
Other Liability Business
EXHIBIT B - EXCESS OF LOSS REINSURANCE
of
Automobile Liability Business
EXHIBIT C - EXCESS OF LOSS REINSURANCE
of
Property Business
Article II - PARTIES TO THE AGREEMENT
This Agreement is solely between the Company and the Reinsurer. When more than
one Company is named as a party to this Agreement, the first Company named shall
be the agent of the other companies as to all matters pertaining to this
Agreement. Performance of the obligations of each party under this Agreement
shall be rendered solely to the other party. However, if the Company becomes
insolvent, the liability of the Reinsurer shall be modified to the extent set
forth in the article entitled INSOLVENCY OF THE COMPANY. In no instance shall
any insured of the Company or any claimant against an insured of the Company
have any rights under this Agreement.
Article III - MANAGEMENT OF CLAIMS AND LOSSES
The Company shall investigate and settle or defend all claims and losses. When
requested by the Reinsurer, the Company shall permit the Reinsurer, at the
expense of the Reinsurer, to be associated with the Company in the defense or
control of any claim, loss, or legal proceeding which involves or is likely to
involve the Reinsurer. All payments of claims or losses by the Company within
the terms and limits of its policies which are within the limits set forth in
the applicable Exhibit shall be binding on the Reinsurer, subject to the terms
of this Agreement.
Article IV - RECOVERIES
The Company shall pay to or credit the Reinsurer with the Reinsurer's portion of
any recovery obtained from salvage, subrogation, or other insurance. Adjustment
Expenses for recoveries shall be deducted from the amount recovered.
The Reinsurer shall be subrogated to the rights of the Company to the extent of
its loss payments to the Company. The Company agrees to enforce its rights of
salvage, subrogation, and its rights against insurers or to assign these rights
to the Reinsurer.
If the reinsurance under an Exhibit is on a share basis, the recoveries shall be
apportioned between the parties in the same ratio as the amounts of their
liabilities bear to the loss. If the reinsurance under an Exhibit is on an
excess basis, recoveries shall be distributed to the parties in an order inverse
to that in which their liabilities accrued.
Article V - PREMIUM REPORTS AND REMITTANCES
All reinsurance premium reports required by the Exhibit(s) attached hereto may
be sent to:
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Client Accounting Unit
General Reinsurance Corporation
Financial Centre
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▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
All reinsurance premiums and any other amounts due the Reinsurer may be remitted
to the following lockbox address:
General Reinsurance Corporation
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Article VI - ERRORS AND OMISSIONS
The Reinsurer shall not be relieved of liability because of an error or
accidental omission of the Company in reporting any claim or loss or any
business reinsured under this Agreement, provided that the error or omission is
rectified promptly after discovery. The Reinsurer shall be obligated only for
the return of the premium paid for business reported but not reinsured under
this Agreement.
Article VII - SPECIAL ACCEPTANCES
Business not within the terms of this Agreement may be submitted to the
Reinsurer for special acceptance and, if accepted by the Reinsurer, shall be
subject to all of the terms of this Agreement except as modified by the special
acceptance.
Article VIII - RESERVES AND TAXES
The Reinsurer shall maintain the required reserves as to the Reinsurer's portion
of unearned premium, claims, losses, and adjustment expense.
The Company shall be liable for all premium taxes on premium ceded to the
Reinsurer under this Agreement. If the Reinsurer is obligated to pay any premium
taxes on this premium, the Company shall reimburse the Reinsurer; however, the
Company shall not be required to pay taxes twice on the same premium.
Article IX - OFFSET
The Company or the Reinsurer may offset any balance, whether on account of
premium, commission, claims or losses, Adjustment Expense, salvage, or
otherwise, due from one party to the other under this Agreement or under any
other agreement heretofore or hereafter entered into between the Company and the
Reinsurer.
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Article X - INSPECTION OF RECORDS
The Company shall allow the Reinsurer to inspect, at reasonable times, the
records of the Company relevant to the business reinsured under this Agreement,
including Company files concerning claims, losses, or legal proceedings which
involve or are likely to involve the Reinsurer.
Article XI - ARBITRATION
Any unresolved difference of opinion between the Reinsurer and the Company shall
be submitted to arbitration by three arbitrators. One arbitrator shall be chosen
by the Reinsurer, and one shall be chosen by the Company. The third arbitrator
shall be chosen by the other two arbitrators within ten (10) days after they
have been appointed. If the two arbitrators cannot agree upon a third
arbitrator, each arbitrator shall nominate three persons of whom the other shall
reject two. The third arbitrator shall then be chosen by drawing lots. If either
party fails to choose an arbitrator within thirty (30) days after receiving the
written request of the other party to do so, the latter shall choose both
arbitrators, who shall choose the third arbitrator. The arbitrators shall be
impartial and shall be active or retired persons whose principal occupation is
or was as an officer of property and casualty insurance or reinsurance
companies.
The party requesting arbitration (the "Petitioner") shall submit its brief to
the arbitrators within thirty (30) days after notice of the selection of the
third arbitrator. Upon receipt of the Petitioner's brief, the other party (the
"Respondent") shall have thirty (30) days to file a reply brief. On receipt of
the Respondent's brief, the Petitioner shall have twenty (20) days to file a
rebuttal brief. Respondent shall have twenty (20) days from the receipt of
Petitioner's rebuttal brief to file its rebuttal brief. The arbitrators may
extend the time for filing of briefs at the request of either party.
The arbitrators are relieved from judicial formalities and, in addition to
considering the rules of law and the customs and practices of the insurance and
reinsurance business, shall make their award with a view to effecting the intent
of this Agreement. The decision of the majority shall be final and binding upon
the parties. The costs of arbitration, including the fees of the arbitrators,
shall be shared equally unless the arbitrators decide otherwise. The arbitration
shall be held at the times and places agreed upon by the arbitrators.
Article XII - INSOLVENCY OF THE COMPANY
In the event of the insolvency of the Company, the reinsurance proceeds will be
paid to the Company or the liquidator on the basis of the amount of the claim
allowed in the insolvency proceeding without diminution by reason of the
inability of the Company to pay all or part of the claim.
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The Reinsurer shall be given written notice of the pendency of each claim
against the Company on the policy(ies) reinsured hereunder within a reasonable
time after such claim is filed in the insolvency proceedings. The Reinsurer
shall have the right to investigate each such claim and to interpose, at its own
expense, in the proceeding where such claim is to be adjudicated, any defenses
which it may deem available to the Company or its liquidator. The expense thus
incurred by the Reinsurer shall be chargeable, subject to court approval,
against the insolvent Company as part of the expense of liquidation to the
extent of a proportionate share of the benefit which may accrue to the Company
solely as a result of the defense undertaken by the Reinsurer.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in duplicate,
this day of , 200___,
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PENN-AMERICA INSURANCE COMPANY
PENN-STAR INSURANCE COMPANY
Attest:
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and this day of , 200___.
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GENERAL REINSURANCE CORPORATION
Vice President
Attest:
-----------------------------------
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EXHIBIT A
Attached to and made a part of
Agreement of Reinsurance No. 8759
EXCESS OF LOSS REINSURANCE
of
Other Liability Business
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Section 1 - BUSINESS SUBJECT TO THIS EXHIBIT
This Exhibit shall apply to Other Liability Business written by the Company,
which is defined as insurance classified as other liability (including
employers' liability stop gap coverage but excluding hired and non-owned
automobile liability) and section II under commercial multiple peril (including
employers' liability stop gap coverage and businessowners) and described in the
manuals of the Insurance Services Office, as respects insureds domiciled in the
United States of America, its territories and possessions, or in Canada.
Section 2 - COMMENCEMENT
This Exhibit shall apply to new and renewal policies of the Company becoming
effective at and after 12:01 A.M., January 1, 2000, with respect to claims or
losses resulting from occurrences insured under coverages of such policies
written on an occurrence basis and with respect to claims received and recorded
by the Company or the insured under coverages of such policies written on a
claims made basis.
This Exhibit shall continue in force until terminated in accordance with the
provisions of the section entitled TERMINATION.
Section 3 - LIABILITY OF THE REINSURER
The Reinsurer shall pay to the Company, with respect to Other Liability business
of the Company, the amount of Net Loss each Occurrence in excess of the Company
Retention but not exceeding the Limit of Liability of the Reinsurer as set forth
in the Schedule of Reinsurance.
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SCHEDULE OF REINSURANCE
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Company Limit of Liability
Class of Business Retention of the Reinsurer
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First Second
Excess Cover Excess Cover
Other Liability Business $500,000 $500,000 $2,000,000
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Section 4 - COMBINATION COVER
If an Occurrence takes place which involves the Other Liability business
reinsured hereunder and/or the Automobile Liability business reinsured under
Exhibit B to this Agreement and/or one Property Risk reinsured under Exhibit C
to this Agreement in combination, the Reinsurer shall pay to the Company the
amount of Net Loss in excess of a Combination Company Retention equal to the
highest Company Retention for the business involved with respect to such
Occurrence, but not exceeding a Limit of Liability of the Reinsurer equal to the
difference between the Combination Company Retention and the sum of the Company
Retentions for the business involved. The Limit of Liability of the Reinsurer
specified in this Section shall be in addition to the Limits of Liability of the
Reinsurer set forth in the sections entitled LIABILITY OF THE REINSURER of this
Exhibit and said Exhibits B and C.
Section 5 - OTHER REINSURANCE
The obligations of the Company to reinsure business falling within the scope of
this Exhibit and of the Reinsurer to accept such reinsurance are mandatory and
no other reinsurance (either facultative or treaty) is permitted, except as
provided for below.
The Company may purchase facultative excess of loss reinsurance or facultative
share reinsurance within the liability of the Reinsurer, if, in the underwriting
judgment of the Company, the Reinsurer will be benefited thereby. In no event,
however, shall the amount required with respect to the Company Retention be
reduced.
Section 6 - COMPANY POLICY AMOUNTS
For the purpose of determining the Company Retention and the Limits of Liability
of the Reinsurer, the limits of liability of the Company with respect to any one
policy shall be deemed not to exceed:
(a) Other Liability Combined Single Limit $1,000,000 each occurrence
(Including Employers' Liability Stop
Gap Coverage)
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(b) Section II Liability under Commercial $1,000,000 each occurrence
Multiple Peril (Including Employers'
Liability Stop Gap Coverage and
Businessowners)
Section 7 - DEFINITIONS
(a) Company Retention
This term shall mean the amount the Company shall retain for its
own account; however, this requirement shall be satisfied if
this amount is retained by the Company or its affiliated
companies under common management or common ownership.
(b) Net Loss
This term shall mean all payments by the Company within the
terms and limits of its policies in settlement of claims or
losses, payment of benefits, or satisfaction of judgments or
awards, including Adjustment Expense, after deduction of
subrogation and other recoveries and after deduction of amounts
due from all other reinsurance, whether collectible or not. If
the Company becomes insolvent, this definition shall be modified
to the extent set forth in the article entitled INSOLVENCY OF
THE COMPANY.
Notwithstanding the provisions of the article entitled
MANAGEMENT OF CLAIMS AND LOSSES, this term shall also include
100% of Losses in Excess of Policy Limits and 80% of Extra
Contractual Obligations.
(c) Adjustment Expense
This term shall mean expenditures by the Company within the
terms of its policies in the direct defense of claims and as
allocated to an individual claim or loss (other than for office
expenses and for the salaries and expenses of employees of the
Company or of any subsidiary or related or wholly owned company
of the Company) made in connection with the disposition of a
claim, loss, or legal proceeding including investigation,
negotiation, and legal expenses, court costs; Prejudgment
Interest or Delayed Damages; and interest on any judgment or
award.
(d) Prejudgment Interest or Delayed Damages
This term shall mean interest or damages added to a settlement,
verdict, award, or judgment based on the amount of time prior to
the settlement, verdict, award, or judgment whether or not made
part of the settlement, verdict, award, or judgment.
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(e) Losses in Excess of Policy Limits and Extra Contractual
Obligations
(1) The term "Loss in Excess of Policy Limits" shall mean a
payment made to a third party claimant in excess of the
policy limit which the Company is legally obligated to pay
resulting from an action taken by the insured or assignee
arising from a third party claimant being awarded an
amount in excess of the Company's policy limit as a result
of the Company's failure to settle within the policy limit
or of the Company's alleged or actual negligence or bad
faith in rejecting an offer of settlement or in the
preparation of the defense or in the trial of any action
against its insured or in the preparation or prosecution
of an appeal consequent upon such action.
(2) The term "Extra Contractual Obligation" shall mean a loss
which the Company is legally obligated to pay, which is
not covered under any other provision of this Exhibit and
which arises from the Company's handling of any claim on
the policies reinsured hereunder which have limits of
liability greater than the Company Retention.
The date on which a Loss in Excess of Policy Limits or an Extra
Contractual Obligation is incurred by the Company shall be
deemed, in all circumstances, to be the date of the original
Occurrence.
There shall be no coverage hereunder where the Loss in Excess of
the Policy Limit or the Extra Contractual Obligation has been
incurred due to the fraud or criminal conduct of a member of the
Board of Directors, a corporate officer of the Company, or any
other employee of the Company, acting individually or
collectively or in collusion with any individual or corporation
or any other organization or party involved in the
investigation, defense or settlement of any claim covered
hereunder.
Any insurance or reinsurance, whether collectible or not, which
indemnifies or protects the Company against claims which are the
subject matter of this definition and any contribution,
subrogation, or recovery shall inure to the benefit of the
Reinsurer and shall be deducted to arrive at the amount of the
Company's Net Loss.
(f) Occurrence
This term shall mean each accident or occurrence or series of
accidents or occurrences arising out of one event, whether
involving one or several of the Company's policies. All bodily
injury, personal injury, advertising injury or property damage
arising out of continuous or repeated exposure to substantially
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the same general conditions shall be considered as arising out
of one occurrence. The date of Occurrence shall be deemed to be
the following:
(1) As respects a loss involving one or more policies written
on an occurrence basis, the date on which bodily injury,
personal injury, advertising injury or property damage
occurs.
(2) As respects a loss involving one or more policies written
on a claims-made basis, the date when notice of claim is
received and recorded by the Company or the insured,
whichever comes first, and any related claims reported
subsequent to such date shall be included in such loss.
However, if notice of claim is received and recorded by
the Company or the insured during an Extended Reporting
Period, the date of Occurrence shall be deemed to be the
last day of the policy period.
(3) As respects a loss involving one or more policies written
on an occurrence basis and one or more policies written on
a claims-made basis, the date on which bodily injury,
personal injury, advertising injury or property damage
occurs, and any related claims reported subsequent to such
date shall be included in such loss whether they are
covered under occurrence or claims-made policies.
(g) Subject Premium
This term shall mean the Company's premium for the business
reinsured under this Exhibit, after deduction of the premium
paid for reinsurance which inures to the benefit of this
Exhibit.
For purposes of this Exhibit, subject premium for businessowners
shall be deemed to be 40% of the total policy premium.
Section 8 - EXCLUSIONS
This Exhibit does not apply to:
(a) Reinsurance assumed by the Company, excepting reinsurance of
primary business assumed from affiliated companies and excepting
reinsurance of business written by another insurance company at
the request of the Company and 100% reinsured by the Company;
(b) 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, but
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not excluding loss or damage which would be covered under a
standard form of policy containing a standard war exclusion
clause;
(c) Any loss or liability accruing to the Company directly or
indirectly from any insurance written by or through any pool,
association, or syndicate, including pools, associations, or
syndicates in which membership by the Company is required under
any statute or regulation;
(d) Any 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, howsoever denominated,
established, or governed, which provides for any assessment of,
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;
(e) Nuclear Incident as provided in the Nuclear Incident Exclusion
Clause - Liability - Reinsurance, which is attached to and made
a part of this Exhibit;
(f) Policies written on a co-indemnity basis not controlled by the
Company;
(g) Fidelity, surety, aviation, ocean marine, system performance,
boiler and machinery, political risk, kidnap, ▇▇▇▇▇▇ and
extortion, credit, retroactive liability, financial guarantee
and insolvency business, or strike insurance;
(h) Policies written to apply in excess of a deductible or self
insured amount of more than $25,000 or policies written to apply
specifically in excess over underlying insurance;
(i) Pollution liability or environmental impairment liability with
respect to new and renewal policies written on and after January
1, 1986, but this exclusion does not preclude liability for
loss, damage, costs, or expenses which are covered under
Insurance Services Office wordings promulgated on or after
January 1, 1986. However, if the insured elects to purchase any
"buy back" or additional coverage options, such options shall
not be covered under this Exhibit even if such options are
provided by or covered under such Insurance Services Office
wordings;
(j) "Self-insurance" or "self-insured obligations", howsoever
styled, of the Company, its affiliates or subsidiaries, or any
insurance wherein the Company, its affiliates or subsidiaries,
are named as the insured party, either alone or jointly with
some other party, notwithstanding that no legal liability may
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arise in respect thereof by reason of the fact that the Company,
its affiliates or subsidiaries, may not be obligated by law to
pay a claim to itself, its affiliates or subsidiaries;
(k) Policies written on a claims made basis where the retroactive
date of such policies precedes the effective date of the
original insured's first claims made policy;
(l) Liability arising out of the manufacturing, mining,
transportation, distribution, use, removal, encapsulation, or
exposure to asbestos, asbestos products, asbestos fibers, or
asbestos dust;
(m) Policies covering liability of any original insured whose annual
gross sales, receipts, or revenues exceed $250,000,000;
(n) Automobile liability insurance, including non owned and hired
automobile liability when written as part of a general liability
policy;
(o) Liability other than automobile insurance relating to risks
involving:
(1) Wrecking of buildings or structures, except when six
stories or less in height;
(2) Amusement parks, amusement devices (other than coin
operated devices), fairs, exhibitions, carnivals,
circuses, and zoos (other than petting zoos), except when
written within the guidelines of the Company's Special
Events Program;
(3) Sports or other entertainment events with an expected
capacity, at any one time, of 25,000 or more people;
(4) Arenas, grandstands, stadiums, theatres, halls and any
other indoor venues with an expected capacity, at any one
time, of 25,000 or more people;
(5) Blasting operations;
(6) Motion picture production;
(7) All mining or quarrying operations;
(8) Subway construction or tunnelling, other than sewer
construction;
(9) Navigation, towing, construction, repair, conversion,
cleaning, work on, stevedoring, demolition, wrecking,
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uprighting, or salvage of any commercial vessel, barge,
dry dock, oil rig, and any other commercial vessel;
(10) Offshore or subaqueous operations;
(11) Railroads, including street railways, except sidetrack
agreements;
(12) Aircraft, helicopters, airports, or flight operations;
(13) Governmental subdivisions, bodies, authorities, or
agencies over 10,000 in population, except OL&T related
exposures;
(14) Storage, production, marketing, handling, refinement,
distribution, or transmission of natural or artificial
fuels, except with respect to:
(i) Wholesale distribution of gasoline, kerosene, or
fuel oils;
(ii) Storage of gasoline, kerosene, or fuel oils with a
combined total capacity of less than 75,000 gallons
at any one location; and,
(iii) Retail sales of gasoline or diesel fuel or fuel
oil;
(15) Manufacture, transportation, marketing, handling, storage,
or use of explosives (Note: An explosive substance is
defined as any substance manufactured for the express
purpose of exploding as differentiated from other
commodities used industrially which are fortuitously
explosive such as gasoline, celluloid, fuel gases, and
dyestuffs), caps, primers, or detonators and other similar
materials, fireworks, ammunition, or ammonium nitrate;
(16) Gas, electric, and water utility companies;
(17) Shoring, underpinning, or moving of buildings or
structures;
(18) Manufacture, marketing, blending, mixing, repackaging or
relabeling of agricultural and industrial chemicals;
(19) Steeple or chimney shaft work (other than residential
chimney sweep operations) and tower construction;
(20) Construction or maintenance of cofferdams;
(21) Malpractice or professional liability and/or errors and
omissions insurance including liability of any insurer or
reinsurer for alleged misconduct in the handling of claims
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or in any of its dealings with policyholders, except for
beauticians, barbers, morticians, opticians, optometrists,
hearing aid specialists clergymen counseling, animal
grooming, exercise studios, day care centers and those
classes mutually agreed upon in writing;
(22) Directors and officers, public officials, Security
Exchange Commission, and ERISA liability;
(23) Broadcasters, telecasters, and publishers liability;
(24) Liquor law liability other than the following: host
liquor, and liquor law liability when written in
conjunction with the Company's Restaurant Pak program,
Special Events program, Bar and Tavern program, or Package
Store and Grocery Store program;
(25) Products recall, products integrity, or products
impairment insurance;
(26) Products and completed operations as respects:
(i) The manufacture, sale, handling, or distribution of
aircraft, aerospacecraft, satellites, and missiles
and parts for or components of, aircraft,
aerospacecraft, satellites, and missiles;
(ii) The manufacture, blending, mixing, repackaging,
relabeling, or importing of ethical and non-ethical
drugs, and cosmetics;
(iii) The manufacture, or wholesale distribution of
tobacco based products;
(iv) The manufacture of all motorized vehicles, mobile
equipment, heavy equipment or machinery, home power
tools, and oil drilling equipment;
(v) The manufacture, blending, mixing, repackaging, or
relabeling of farm animal feed.
(27) Oil or gas pipelines, ▇▇▇▇▇, or drilling operations;
(28) Ship building, ship repair yards, dry docks, and marinas;
(p) Homeowners Section II and comprehensive personal liability;
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(q) Liability insurance afforded for watercraft; however, this
exclusion shall not apply to coverage afforded by ISO Commercial
General Liability Coverage Form CG 00 01 (Ed. 11/85) or as
subsequently amended.
If the Company provides insurance for an insured with respect to any premises,
operations, products, or completed operations listed in exclusion (o) items (1),
(2), (5), (7), (14), (15), (17), (19), (26)(ii) and (26)(v), and (q) above and
if such premises, operations, products, or completed operations constitute only
a minor and incidental part of the total premises, operations, products, or
completed operations of the insured, such exclusion(s) shall not apply.
If the Company is bound, without the knowledge of and contrary to the
instructions of the Company's supervisory underwriting personnel, on any
business falling within the scope of exclusions (o) items (1), (2), (5), (7),
(14), (15), (17), (19), (26)(ii) and (26)(v), and (q), these exclusions be
suspended with respect to such business until 30 days after an underwriting
supervisor of the Company acquires knowledge of such business.
Section 9 - REINSURANCE PREMIUM AND COMMISSION
As a condition precedent to the Reinsurer's obligations hereunder, the Company
shall pay to the Reinsurer:
(a) For the First Excess Cover, 5.417% of the Company's Subject
Premium written.
(b) For the Second Excess Cover, 2.500% of the Company's Subject
Premium written.
The reinsurance premiums in (a) and (b) above are subject to a fixed commission
of 40%.
Section 10 - CONTINGENT COMMISSION
In addition to the fixed commission set forth in the section entitled
REINSURANCE PREMIUM AND COMMISSION, the Reinsurer shall pay to the Company a
contingent commis-
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sion of 60% of the amount by which the Reinsurer's Income exceeds the
Reinsurer's Outgo for each Contingent Period.
With respect to the contingent commission and the calculation thereof, the
following definitions and reporting provisions shall apply:
(a) Contingent Period
The initial Contingent Period shall be from May 1, 1996, through
December 31, 2000 (the period from May 1, 1996 through December
31, 1999 under Exhibit A of prior Agreement No. 8206 between the
Company and the Reinsurer and the period from January 1, 2000
through December 31, 2000 under this Exhibit), and thereafter
each Contingent Period shall consist of 36 months to begin
concurrently with the expiration of the previous Contingent
Period; however,
(1) Should the date of termination of this Exhibit coincide
with the completion of a Contingent Period, such
Contingent Period and the period from the date of
termination until expiration or termination of the
reinsurance, if any, then in effect shall be combined and
shall constitute a single Contingent Period.
(2) Should Company terminate this Exhibit after the completion
of the initial Contingent Period or Reinsurer terminate
this Exhibit at any time and the date of termination not
coincide with the completion of a Contingent Period, the
following periods shall be combined and shall constitute a
single Contingent Period:
(i) The last Contingent Period completed prior
to the date of termination, and
(ii) The period from the last completed
Contingent Period until the date of
termination, and
(iii) The period from the date of termination
until expiration or termination of the
reinsurance, if any, then in effect.
(3) Should the Company terminate this Exhibit during the
initial Contingent Period, the provisions of sub-paragraph
(g) of this Section shall apply.
(b) Reinsurer's Income
This term shall mean:
(1) The First Excess reinsurance premium written, net of
fixed commission, during the Contingent Period;
A - 16
(2) Plus the First Excess reinsurance premium unearned,
net or fixed commission, at the end of the preceding
Contingent Period (or as respects the initial
Contingent Period, as of May 1, 1996) calculated on a
monthly pro rata basis;
(3) Less the First Excess reinsurance premium unearned,
net of fixed commission, at the end of the Contingent
Period calculated on a monthly pro rata basis.
(c) Reinsurer's Outgo
This term shall mean:
(1) The sum of the Reinsurer's payments and reserves for
claims, losses and adjustment expense (including
reserves for claims and losses incurred but not
reported, as set forth in sub-paragraph (d) below)
less the Reinsurer's portion of salvage recovered,
resulting from Occurrences taking place during the
Contingent Period and allocated to the First Excess
Cover;
(2) Plus 20% of the Reinsurer's Income as an allowance
for the Reinsurer's management expenses.
(d) Reserves for Claims and Losses Incurred but Not Reported
The reserves for claims and losses incurred but not reported
(IBNR) shall be determined separately for each twelve month
period within each Contingent Period. IBNR will be determined by
multiplying the Reinsurer's Income for each twelve month period
by the appropriate factor based on the maturity of the twelve
month period from its commencement date.
Maturity (In Months) ▇▇▇▇ ▇▇▇▇▇▇
▇▇ 80%
24 60%
36 40%
48 20%
60 and subsequent 0%
(e) Statements of Contingent Commission (Interim Statements)
As respects the initial Contingent Period, as soon as
practicable after December 31, 1998 and December 31, 1999, the
Reinsurer shall render to the Company an interim statement of
contingent commission for the period from the commencement of
the Contingent Period until such December 31st. The amount
thereof shall be balanced against the amount previously paid the
A - 17
Company for the Contingent Period and the difference due either
party shall be remitted promptly.
As respects each subsequent Contingent Period, as soon as
practicable after each anniversary of the commencement of a
Contingent Period, the Reinsurer shall render to the Company an
interim statement of contingent commission for the period from
the commencement of the Contingent Period until such
anniversary. The amount thereof shall be balanced against the
amount previously paid the Company for the Contingent Period and
the difference due either party shall be remitted promptly.
(f) Statements of Contingent Commission (Entire Contingent Period)
As soon as practicable after the end of a Contingent Period, the
Reinsurer shall render to the Company a statement of contingent
commission for the entire Contingent Period. The amount thereof
shall be balanced against the amount previously allowed the
Company for the Contingent Period and the amount due either
party shall be remitted promptly. Annually thereafter, revised
statements shall be rendered to the Company reflecting changes
in the original statement until all claims and losses resulting
from Occurrences taking place during the Contingent Period are
fully discharged, and the amount due either party because of
such changes shall be remitted promptly.
(g) Termination
If this Exhibit is terminated by the Company at any time during
the period from January 1, 2000 through December 31, 2000, the
contingent commission percentage shall be 66 2/3% of 60%.
If this Exhibit is still in force at the end of the initial
Contingent Period, the contingent commission percentage for the
entire Contingent Period shall be 100% of 60%.
If this Exhibit is terminated by the Company after the end of
the initial Contingent Period or by the Reinsurer at any time,
the contingent commission percentage for any Contingent Period,
or fractional part thereof, shall be 100% of 60%.
Section 11 - REPORTS AND REMITTANCES
(a) Reinsurance Premium
Within 45 days after the close of each calendar quarter, the
Company shall render to the Reinsurer a report of the
A - 18
reinsurance premium for the quarter with respect to the
Company's Subject Premium written during the quarter,
summarizing the reinsurance premium by line of insurance; and
the amount due the Reinsurer shall be remitted within 45 days
after the close of the quarter.
Within 45 days after the close of each calendar quarter, the
Company shall also render to the Reinsurer a report of the
reinsurance premium unearned by line of insurance and the
contribution for the quarter to the reinsurance premium in force
by line of insurance, by term and by month and year of
expiration.
(b) Claims and Losses
The Company shall report promptly to the Reinsurer each claim or
loss for which the Company's estimated amount of Net Loss is 50%
or more of the amount of the Company Retention and shall also
report all cases of serious injury which, regardless of
considerations of liability or coverage, might involve this
reinsurance, including but not limited to the following:
(1) Cord injury - paraplegia, quadriplegia;
(2) Amputations - requiring a prosthesis;
(3) Brain damage affecting mentality or central nervous system
- such as permanent disorientation, behavior disorder,
personality change, seizures, motor deficit, inability to
speak (aphasia), hemiplegia or unconsciousness (comatose);
(4) Blindness;
(5) ▇▇▇▇▇ - involving over 10% of body with third degree or
30% of body with second degree;
(6) Multiple fractures - involving more than one member or
non-union;
(7) Fracture of both heel bones (fractured bilateral os
calcis);
(8) Nerve damage causing paralysis and loss of sensation in
arm and hand (brachial plexus nerve damage);
(9) Massive internal injuries affecting body organs;
(10) Injury to nerves at base of spinal canal (Cauda Equina) or
any other back injury resulting in incontinence of bowel
and/or bladder;
A - 19
(11) Fatalities;
(12) Any other serious injury which, in the judgment of the
Company, might involve the Reinsurer.
The Company shall advise the Reinsurer of the estimated amount
of Net Loss in connection with each such claim or loss and of
any subsequent changes in such estimates.
Promptly upon receipt of a definitive statement of Net Loss from
the Company, but within no more than 25 days, the Reinsurer
shall pay to the Company the Reinsurer's portion of Net Loss.
The Company shall report to the Reinsurer any subsequent changes
in the amount of Net Loss, and the amount due either party shall
be remitted promptly, but within no more than 25 days.
(c) General
In addition to the reports required in (a) and (b) above, the
Company shall furnish such other information as may be required
by the Reinsurer for the completion of the Reinsurer's quarterly
and annual statements and internal records.
All reports shall be rendered on forms or in format acceptable
to the Company and the Reinsurer.
Section 12 - TERMINATION
Either party may terminate this Exhibit by sending to the other, by registered
mail to its principal office, notice stating the time and date when, not less
than 90 days after the date of mailing of such notice, termination shall be
effective. As respects coverages written on an occurrence basis, the Reinsurer
shall not be liable for claims and losses resulting from occurrences taking
place at and after the effective time and date of termination. As respects
coverages written on a claims-made basis, the Reinsurer shall not be liable for
claims received and recorded by the Company or the insured at and after the
effective time and date of termination, unless such claim is received and
recorded by the Company or the insured during an extended reporting period in
force at the time and date of termination.
The Reinsurer shall return to the Company the reinsurance premium unearned
calculated on the monthly pro rata basis as of the effective time and date of
termination, less the commission previously allowed thereon.
A - 20
EXHIBIT B
Attached to and made a part of
Agreement of Reinsurance No. 8759
EXCESS OF LOSS REINSURANCE
of
Automobile Liability Business
---------------------------------------------------------------------------
B - 21
Section 1 - BUSINESS SUBJECT TO THIS EXHIBIT
This Exhibit shall apply to Liability Business written by the Company, which is
defined as insurance classified as commercial automobile liability, including
non owned and hired automobile liability when written as part of a general
liability policy, commercial automobile uninsured/ underinsured motorists,
commercial automobile personal injury protection, and garage liability (not to
include garage keepers legal liability) and described in the manuals of the
Insurance Services Office, as respects insureds domiciled in the United States
of America, its territories and possessions, or in Canada.
Section 2 - COMMENCEMENT
This Exhibit shall apply to claims or losses resulting from Occurrences insured
under new and renewal policies of the Company becoming effective at and after
12:01 A.M., January 1, 2000, and shall continue in force until terminated in
accordance with the provisions of the section entitled TERMINATION.
Section 3 - LIABILITY OF THE REINSURER
The Reinsurer shall pay to the Company, with respect to Automobile Liability
business of the Company, the amount of Net Loss each Occurrence in excess of the
Company Retention but not exceeding the Limits of Liability of the Reinsurer as
set forth in the Schedule of Reinsurance.
SCHEDULE OF REINSURANCE
---------------------------------------------------------------------------------------------------------
Class of Business Company Retention Limits of Liability of the Reinsurer
---------------------------------------------------------------------------------------------------------
First Second
Excess Cover Excess Cover
Automobile Liability Business $250,000 $750,000 $2,000,000
---------------------------------------------------------------------------------------------------------
B - 22
Section 4 - COMBINATION COVER
If an Occurrence takes place which involves the Automobile Liability business
reinsured hereunder and/or any Other Liability business reinsured under Exhibit
A to this Agreement and/or one Property Risk reinsured under Exhibit C to this
Agreement in combination, the provisions of the section entitled COMBINATION
COVER of said Exhibit A shall apply.
Section 5 - OTHER REINSURANCE
The obligations of the Company to reinsure business falling within the scope of
this Exhibit and of the Reinsurer to accept such reinsurance are mandatory and
no other reinsurance (either facultative or treaty) is permitted, except as
provided for below.
The Company may purchase facultative excess of loss reinsurance or facultative
share reinsurance within the liability of the Reinsurer, if, in the underwriting
judgment of the Company, the Reinsurer will be benefited thereby. In no event,
however, shall the amount required with respect to the Company Retention be
reduced.
Section 6 - COMPANY POLICY AMOUNTS
For the purpose of determining the Company Retention and the Limits of Liability
of the Reinsurer, the limits of liability of the Company with respect to any one
policy shall be deemed not to exceed:
(a) Commercial Automobile Bodily $1,000,000 each person*
Injury Liability $1,000,000 each occurrence*
(b) Commercial Automobile Property $ 250,000* each occurrence
Damage
(c) Commercial Automobile Liability $1,000,000 each occurrence*
Combined Single Limit
(d) Commercial Uninsured and Underinsured $1,000,000 each person*
Motorists Coverages $1,000,000 each occurrence*
(e) Personal Injury Protection Coverage Statutory Limits
(f) Garage Liability $1,000,000 each occurrence
*As respects policies written in Texas by another insurance carrier at
the request of the Company and 100% reinsured by the Company, these
amounts shall be increased by $51.
B - 23
Section 7 - DEFINITIONS
(a) Company Retention
This term shall mean the amount the Company shall retain for its
own account; however, this requirement shall be satisfied if
this amount is retained by the Company or its affiliated
companies under common management or common ownership.
(b) Net Loss
This term shall mean all payments by the Company within the
terms and limits of its policies in settlement of claims or
losses, payment of benefits, or satisfaction of judgments or
awards, including Adjustment Expense, after deduction of
subrogation and other recoveries and after deduction of amounts
due from all other reinsurance, whether collectible or not. If
the Company becomes insolvent, this definition shall be modified
to the extent set forth in the article entitled INSOLVENCY OF
THE COMPANY.
Notwithstanding the provisions of the article entitled
MANAGEMENT OF CLAIMS AND LOSSES, this term shall also include
100% of Losses in Excess of Policy Limits and 80% of Extra
Contractual Obligations.
(c) Adjustment Expense
This term shall mean expenditures by the Company within the
terms of its policies in the direct defense of claims and as
allocated to an individual claim or loss (other than for office
expenses and for the salaries and expenses of employees of the
Company or of any subsidiary or related or wholly owned company
of the Company) made in connection with the disposition of a
claim, loss, or legal proceeding including investigation,
negotiation, and legal expenses, court costs; Prejudgment
Interest or Delayed Damages; and interest on any judgment or
award.
(d) Prejudgment Interest or Delayed Damages
This term shall mean interest or damages added to a settlement,
verdict, award, or judgment based on the amount of time prior to
the settlement, verdict, award, or judgment whether or not made
part of the settlement, verdict, award, or judgment.
(e) Losses in Excess of Policy Limits and Extra Contractual
Obligations
(1) The term "Loss in Excess of Policy Limits" shall mean a
payment made to a third party claimant in excess of the
policy limit which the Company is legally obligated to pay
resulting from an action taken by the insured or assignee
arising from a third party claimant being awarded an
amount in excess of the Company's policy limit as a result
of the Company's failure to settle within the policy limit
or of the Company's alleged or actual negligence or bad
B - 24
faith in rejecting an offer of settlement or in the
preparation of the defense or in the trial of any action
against its insured or in the preparation or prosecution
of an appeal consequent upon such action.
(2) The term "Extra Contractual Obligation" shall mean a loss
which the Company is legally obligated to pay, which is
not covered under any other provision of this Exhibit and
which arises from the Company's handling of any claim on
the policies reinsured hereunder which have limits of
liability greater than the Company Retention.
The date on which a Loss in Excess of Policy Limits or an Extra
Contractual Obligation is incurred by the Company shall be
deemed, in all circumstances, to be the date of the original
Occurrence.
There shall be no coverage hereunder where the Loss in Excess of
the Policy Limit or the Extra Contractual Obligation has been
incurred due to the fraud or criminal conduct of a member of the
Board of Directors, a corporate officer of the Company, or any
other employee of the Company, acting individually or
collectively or in collusion with any individual or corporation
or any other organization or party involved in the
investigation, defense or settlement of any claim covered
hereunder.
Any insurance or reinsurance, whether collectible or not, which
indemnifies or protects the Company against claims which are the
subject matter of this definition and any contribution,
subrogation, or recovery shall inure to the benefit of the
Reinsurer and shall be deducted to arrive at the amount of the
Company's Net Loss.
(f) Occurrence
This term shall mean each accident or occurrence or series of
accidents or occurrences arising out of one event, whether
involving one or several of the Company's policies. All bodily
injury or property damage arising out of continuous or repeated
exposure to substantially the same general conditions shall be
considered as arising out of one Occurrence.
(g) Subject Written Premium
This term shall mean the Company's written premium for the
business reinsured under this Exhibit after deduction of the
premium paid for reinsurance which inures to the benefit of this
Exhibit.
B - 25
Section 8 - EXCLUSIONS
This Exhibit does not apply to:
(a) Reinsurance assumed by the Company, excepting reinsurance of
primary business assumed from affiliated companies and excepting
reinsurance of business written by another insurance company at
the request of the Company and 100% reinsured by the Company;
(b) 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, but
not excluding loss or damage which would be covered under a
standard form of policy containing a standard war exclusion
clause;
(c) Any loss or liability accruing to the Company directly or
indirectly from any insurance written by or through any pool,
association, or syndicate, including pools, associations, or
syndicates in which membership by the Company is required under
any statute or regulation;
(d) Any 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, howsoever denominated,
established, or governed, which provides for any assessment of,
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;
(e) Nuclear Incident as provided in the Nuclear Incident Exclusion
Clause - Liability - Reinsurance, which is attached to and made
a part of this Exhibit;
(f) Policies written on a co-indemnity basis not controlled by the
Company;
(g) Fidelity, surety, aviation, ocean marine, system performance,
boiler and machinery, political risk, kidnap, ▇▇▇▇▇▇ and
extortion, credit, retroactive liability, financial guarantee
and insolvency business, or strike insurance;
(h) Policies written to apply in excess of a deductible or self
insured amount of more than $25,000 or policies written to apply
specifically in excess over underlying insurance;
(i) Pollution liability or environmental impairment liability with
respect to new and renewal policies written on and after January
1, 1986, but this exclusion does not preclude liability for
loss, damage, costs, or expenses which are covered under
B - 26
Insurance Services Office wordings promulgated on or after
January 1, 1986. However, if the insured elects to purchase any
"buy back" or additional coverage options, such options shall
not be covered under this Exhibit even if such options are
provided by or covered under such Insurance Services Office
wordings;
(j) "Self-insurance" or "self-insured obligations", howsoever
styled, of the Company, its affiliates or subsidiaries, or any
insurance wherein the Company, its affiliates or subsidiaries,
are named as the insured party, either alone or jointly with
some other party, notwithstanding that no legal liability may
arise in respect thereof by reason of the fact that the Company,
its affiliates or subsidiaries, may not be obligated by law to
pay a claim to itself, its affiliates or subsidiaries;
(k) Liability arising out of the manufacturing, mining,
transportation, distribution, use, removal, encapsulation, or
exposure to asbestos, asbestos products, asbestos fibers, or
asbestos dust;
(l) Policies covering liability of any original insured whose annual
gross sales, receipts, or revenues exceed $250,000,000;
(m) Garagekeepers legal liability and general liability, other than
non owned and hired automobile liability when written as part of
a general liability policy;
(n) Automobile liability insurance relating to the ownership,
maintenance, or use of:
(1) Automobiles used in organized speed contests;
(2) Emergency vehicles, including police and fire department
vehicles;
(3) Automobiles leased or rented to others without drivers;
however, this exclusion shall not apply to substitute
automobiles maintained by new car dealers;
(4) Commercial automobiles customarily operated beyond a 500
mile radius as defined in the manuals of the Insurance
Services Office, except for accounts with up to five
vehicles hauling their own goods;
(5) Commercial automobiles over 45,000 lbs. gross vehicle
weight or gross combination weight as defined in the
manuals of the Insurance Services Office, except for
accounts with up to five vehicles hauling their own goods;
B - 27
(6) Public automobiles as defined in the manuals of the
Insurance Services Office;
(7) Vehicles used for transporting corrosives, explosives,
flammable gases, flammable liquids, flammable solids,
hazardous waste, non-flammable gases, oxidizers, poisons
or radioactive materials.
If the Company provides insurance for an insured with respect to the ownership,
maintenance, or use of the vehicles listed in exclusions (n)(1) through (n)(6)
and if such ownership, maintenance, or use constitutes only a minor and
incidental part of the ownership, maintenance, or use of all vehicles of the
insured, such exclusion(s) shall not apply.
If the Company is bound, without the knowledge of and contrary to the
instructions of the Company's supervisory underwriting personnel, on any
business falling within the scope of exclusions (n) items (1), (2), (3), (4),
(5), and (6), these exclusions be suspended with respect to such business until
30 days after an underwriting supervisor of the Company acquires knowledge of
such business.
Section 9 - REINSURANCE PREMIUM AND COMMISSION
As a condition precedent to the Reinsurer's obligations hereunder, the Company
shall pay to the Reinsurer:
(a) For the First Excess Cover:
(1) For the commercial automobile liability business
(other than courier) reinsured hereunder, 12.00% of
the Company's Subject Written Premium;
(2) For the garage liability business reinsured
hereunder, 19.59% of the Company's Subject Written
Premium;
(3) For the courier business reinsured hereunder, 32.33%
of the Company's Subject Written Premium.
The reinsurance premiums set forth in above are provisional and
shall be adjusted at the rates set forth in Appendix A attached
hereto.
(b) For the Second Excess Cover, 1.67% of the Company's Subject
Written Premium.
The reinsurance premiums in (a) and (b) above are subject to a fixed commission
of 40%.
B - 28
Section 10 - REPORTS AND REMITTANCES
(a) Reinsurance Premium
Within 45 days after the close of each calendar quarter, the
Company shall render to the Reinsurer a report of the
provisional reinsurance premium set forth in sub-paragraph (a)
of the section entitled REINSURANCE PREMIUM AND COMMISSION for
the quarter and the reinsurance premium set forth in
sub-paragraph (b) of said Section for the quarter with respect
to business of the Company written during the quarter,
summarizing the reinsurance premium by line of insurance; and
the amount due the Reinsurer shall be remitted within 45 days
after the close of the quarter.
Within 45 days after the close of each calendar quarter, the
Company shall also render to the Reinsurer a report of the
reinsurance premium unearned by line of insurance and the
contribution for the quarter to the reinsurance premium in force
by line of insurance, by term and by month and year of
expiration.
Within 45 days after the close of each calendar year, the
Company shall render to the Reinsurer a report of the Company's
Subject Written Premium during the year. The Company shall
calculate the actual reinsurance premium thereon in accordance
with the provisions of sub-paragraph (a) of the section entitled
REINSURANCE PREMIUM AND COMMISSION and shall balance such amount
against the provisional reinsurance premium previously paid. Any
difference due the Reinsurer shall be remitted with such report.
Any difference due the Company shall be remitted promptly, but
within no more than 25 days after receipt of such report.
(b) Claims and Losses
The Company shall report promptly to the Reinsurer each claim or
loss for which the Company's estimated amount of Net Loss is 50%
or more of the amount of the Company Retention and shall also
report all cases of serious injury which, regardless of
considerations of liability or coverage, might involve this
reinsurance, including but not limited to the following:
(1) Cord injury - paraplegia, quadriplegia;
(2) Amputations - requiring a prosthesis;
(3) Brain damage affecting mentality or central nervous
system - such as permanent disorientation, behavior
disorder, personality change, seizures, motor
deficit, inability to speak (aphasia), hemiplegia or
unconsciousness (comatose);
(4) Blindness;
B - 29
(5) ▇▇▇▇▇ - involving over 10% of body with third degree
or 30% of body with second degree;
(6) Multiple fractures - involving more than one member
or non-union;
(7) Fracture of both heel bones (fractured bilateral os
calcis);
(8) Nerve damage causing paralysis and loss of sensation
in arm and hand (brachial plexus nerve damage);
(9) Massive internal injuries affecting body organs;
(10) Injury to nerves at base of spinal canal (Cauda
Equina) or any other back injury resulting in
incontinence of bowel and/or bladder;
(11) Fatalities;
(12) Any other serious injury which, in the judgment of
the Company, might involve the Reinsurer.
The Company shall advise the Reinsurer of the estimated amount
of Net Loss in connection with each such claim or loss and of
any subsequent changes in such estimates.
Promptly upon receipt of a definitive statement of Net Loss from
the Company, but within no more than 25 days, the Reinsurer
shall pay to the Company the Reinsurer's portion of Net Loss.
The Company shall report to the Reinsurer any subsequent changes
in the amount of Net Loss, and the amount due either party shall
be remitted promptly, but within no more than 25 days.
(c) General
In addition to the reports required in (a) and (b) above, the
Company shall furnish such other information as may be required
by the Reinsurer for the completion of the Reinsurer's quarterly
and annual statements and internal records.
All reports shall be rendered on forms or in format acceptable
to the Company and the Reinsurer.
B - 30
Section 11 - TERMINATION
Either party may terminate this Exhibit by sending to the other, by registered
mail to its principal office, notice stating the time and date when, not less
than 90 days after the date of mailing of such notice, termination shall be
effective. The Reinsurer shall not be liable for claims and losses resulting
from Occurrences taking place at and after the effective time and date of
termination.
The Reinsurer shall return to the Company the reinsurance premium unearned
calculated on the monthly pro rata basis as of the effective time and date of
termination, less the commission previously allowed thereon.
B - 31
EXHIBIT C
Attached to and made a part of
Agreement of Reinsurance No. 8759
EXCESS OF LOSS REINSURANCE
of
Property Business
---------------------------------------------------------------------------
Section 1 - BUSINESS SUBJECT TO THIS EXHIBIT
This Exhibit shall apply to Property Business written by the Company, which is
defined as insurance which is classified in the NAIC form of annual statement as
fire, allied lines, inland marine, commercial multiple peril (property
coverages) or automobile physical damage (dealers open lot or garage keepers
legal liability each with a maximum policy limit of $500,000), except those
lines specifically excluded in the section entitled EXCLUSIONS, on risks
wherever located in the United States of America, its territories and
possessions, or in Canada.
Section 2 - COMMENCEMENT
This Exhibit shall apply to losses resulting from Occurrences insured under new
and renewal policies of the Company becoming effective at and after 12:01 A.M.,
January 1, 2000, and shall continue in force until terminated in accordance with
the provisions of the section entitled TERMINATION.
Section 3 - LIABILITY OF THE REINSURER
The Reinsurer shall pay to the Company, with respect to each Risk of the
Company, the amount of Net Loss sustained by the Company in excess of the
Company Retention but not exceeding the Limits of Liability of the Reinsurer as
set forth in the Schedule of Reinsurance.
The Limit of Liability of the Reinsurer under the First Excess Cover shall not
exceed a total payment of Net Loss of $600,000 on all Risks involved in one
Occurrence; the Limit of Liability of the Reinsurer under the Second Excess
Cover shall not exceed a total payment of Net Loss of $1,500,000 on all Risks
involved in one Occurrence; and the Limit of Liability of the Reinsurer under
the Third Excess Cover shall not exceed a total payment of Net Loss of
$2,000,000 on all Risks involved in one Occurrence.
C - 32
SCHEDULE OF REINSURANCE
-------------------------------------------------------------------------------------------------
Company
Class of Business Retention Limit of Liability of the Reinsurer
-------------------------------------------------------------------------------------------------
First Second Third
Excess Cover Excess Cover Excess Cover
Property Business $300,000 $200,000 $500,000 $1,000,000
-------------------------------------------------------------------------------------------------
All insurance written under one or more policies of the Company against the same
peril on the same Risk shall be combined, and the Company Retention and the
Limit of Liability of the Reinsurer shall be determined on the basis of the sum
of all insurance against the same peril and on the same Risk which is in force
at the time of a claim or loss.
Section 4 - COMBINATION COVER
If an Occurrence takes place which involves one Property Risk reinsured under
this Exhibit and the Other Liability business reinsured under Exhibit A or the
Automobile Liability business reinsured under Exhibit B in combination, the
provisions of the section entitled COMBINATION COVER of said Exhibit A shall
apply.
Section 5 - OTHER REINSURANCE
The obligations of the Company to reinsure business falling within the scope of
this Exhibit and of the Reinsurer to accept such reinsurance are mandatory and
no other reinsurance (either facultative or treaty) is permitted, except as
provided for below.
When the amount of insurance written by the Company on an individual Risk
exceeds $2,000,000, permission is granted the Company to purchase facultative
excess of loss or share reinsurance for the excess amount on such Risk. If the
Company purchases facultative excess of loss reinsurance, it shall apply the
Supplemental Rates set forth in Appendix A attached hereto. If the Company does
not purchase either facultative excess of loss or share reinsurance for the
excess amount on such Risk, the Net Loss for the purpose of computing the
Company Retention and the Limit of Liability of the Reinsurer shall be reduced
as if facultative share reinsurance had been in force at the time of the loss
for the excess amount on such Risk.
The Company may also purchase facultative excess of loss reinsurance or
facultative share reinsurance within the liability of the Reinsurer, if, in the
underwriting judgment of the Company, the Reinsurer will be benefited thereby.
In no event, however, shall the amount required with respect to the Company
Retention be reduced.
C - 33
Recoveries from catastrophe reinsurance shall be deemed not to reduce the amount
required with respect to the Company Retention.
Section 6 - DEFINITIONS
(a) Company Retention
This term shall mean the amount the Company shall retain for its
own account; however, this requirement shall be satisfied if
this amount is retained by the Company or its affiliated
companies under common management or common ownership.
(b) Net Loss
This term shall mean all payments by the Company within the
terms and limits of its policies in settlement of claims or
losses, including Adjustment Expense, after deduction of salvage
and other recoveries and after deduction of amounts due from all
other reinsurance, except catastrophe reinsurance, whether
collectible or not. If the Company becomes insolvent, this
definition shall be modified to the extent set forth in the
article entitled INSOLVENCY OF THE COMPANY.
Notwithstanding the provisions of the article entitled
MANAGEMENT OF CLAIMS AND LOSSES, this term shall also include
80% of Extra Contractual Obligations.
(c) Adjustment Expense
This term shall mean expenditures by the Company within the
terms of its policies in the direct defense of claims and as
allocated to an individual claim or loss (other than for office
expenses and for the salaries and expenses of employees of the
Company or of any subsidiary or related or wholly owned company
of the Company) made in connection with the disposition of a
claim, loss, or legal proceeding including investigation,
negotiation, and legal expenses; court costs; Prejudgment
Interest or Delayed Damages; and interest on any judgment or
award.
(d) Prejudgment Interest or Delayed Damages
This term shall mean interest or damages added to a settlement,
verdict, award, or judgment based on the amount of time prior to
the settlement, verdict, award, or judgment whether or not made
part of the settlement, verdict, award, or judgment.
C - 34
(e) Extra Contractual Obligations
This term shall mean a loss which the Company is legally
obligated to pay, which is not covered under any other provision
of this Exhibit and which arises from the Company's handling of
any claim on the policies reinsured hereunder which have amounts
of insurance greater than the Company Retention.
The date on which an extra contractual obligation is incurred by
the Company shall be deemed, in all circumstances, to be the
date of the original Occurrence.
There shall be no coverage hereunder where the extra contractual
obligation has been incurred due to the fraud or criminal
conduct of a member of the Board of Directors, a corporate
officer of the Company, or any other employee of the Company,
acting individually or collectively or in collusion with any
individual or corporation or any other organization or party
involved in the investigation, defense or settlement of any
claim covered hereunder.
Any insurance or reinsurance, whether collectible or not, which
indemnifies or protects the Company against claims which are the
subject matter of this definition and any contribution,
subrogation, or recovery shall inure to the benefit of the
Reinsurer and shall be deducted to arrive at the amount of the
Company's Net Loss.
(f) Risk
The Company shall establish what constitutes one Risk, provided:
(1) a Building and its contents, including time element
coverages, shall never be considered more than one Risk;
(2) when two or more Buildings and their contents are situated
at the same general location, the Company shall identify
on its records at the time of acceptance by the Company
those individual Buildings and their contents that are
considered to constitute each Risk; if such identification
is not made, each Building and its contents shall be
considered to be a separate Risk.
C - 35
(g) Building
This term shall mean each structure that is considered by the
local fire insurance rating organization to be a separate
building for rate making purposes. With reference to structures
not rated specifically by the local fire insurance rating
organization, the term Building shall mean each separately
roofed structure enclosed within exterior walls.
(h) Occurrence
This term shall mean each occurrence or series of occurrences
arising out of one event.
(i) Subject Written Premium
This term shall mean the Company's written premium for the
business reinsured under this Exhibit, after deduction of the
premium paid for reinsurance which inures to the benefit of this
Exhibit.
For purposes of this Exhibit, Subject Written Premium for
businessowners shall be deemed to be 60% of the total policy
premium.
Section 7 - EXCLUSIONS
This Exhibit does not apply to:
(a) Reinsurance assumed by the Company, excepting reinsurance of
primary business assumed from affiliated companies;
(b) 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, but
not excluding loss or damage which would be covered under a
standard form of policy containing a standard war exclusion
clause;
(c) Any loss or liability accruing to the Company directly or
indirectly from any insurance written by or through any pool,
association, or syndicate, including pools, associations, or
syndicates in which membership by the Company is required under
any statute or regulation;
(d) Any 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, howsoever denominated,
C - 36
established, or governed, which provides for any assessment of,
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;
(e) Nuclear Incident as provided in the Nuclear Incident Exclusion
Clause - Physical Damage - Reinsurance, which are attached to
and made a part of this Exhibit;
(f) Policies written on a co-indemnity basis not controlled by the
Company;
(g) Fidelity, surety, aviation, ocean marine, system performance,
boiler and machinery, political risk, kidnap, ▇▇▇▇▇▇ and
extortion, credit, retroactive liability, financial guarantee
and insolvency business, or strike insurance;
(h) Policies written to apply in excess of a deductible or self
insured amount of more than $25,000 or policies written to apply
specifically in excess over underlying insurance;
(i) Loss, damage costs, or expenses arising out of: the release,
discharge, dispersal, or escape of pollutants; the extraction,
removal, clean up, containment, monitoring, or detoxification of
pollutants; or, the removal, restoration, or replacement of
polluted land or water. However, this exclusion does not
preclude liability for loss, damage, costs, or expenses which
are covered under Insurance Services Office wordings promulgated
on or after April 1, 1986. Nevertheless, if the insured elects
to purchase any "buy-back" or additional coverage options, such
options shall not be covered under this Exhibit even if such
options are provided by or covered under such Insurance Services
Office wordings;
(j) "Self-insurance" or "self-insured obligations", howsoever
styled, of the Company, its affiliates or subsidiaries, or any
insurance wherein the Company, its affiliates or subsidiaries,
are named as the insured party, either alone or jointly with
some other party, notwithstanding that no legal liability may
arise in respect thereof by reason of the fact that the Company,
its affiliates or subsidiaries, may not be obligated by law to
pay a claim to itself, its affiliates or subsidiaries;
(k) The following kinds of insurance and risks classified by the
Company as property business:
(1) The perils of 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, when written as such;
C - 37
(2) The peril of earthquake, when written as such;
(3) Difference in conditions insurance or similar kinds of
insurance, howsoever styled;
(4) Insurance on growing or standing crops, or timber;
(5) Mortgage impairment insurance and similar kinds of
insurance, howsoever styled;
(6) Risks having a total insurable value of more than
$50,000,000;
(7) Any collection of fine arts with an insurable value of
$5,000,000 or more;
(8) All bridges, tunnels, and dams;
(9) Mobile homes, when written on a personal lines policy;
(10) All offshore property risks;
(11) Railroad property;
(12) Inland marine business with respect to the following:
(i) Cargo insurance with respect to ocean, lake, or
inland waterway vessels;
(ii) Motor-truck cargo insurance written for common
carriers operating beyond a radius of 2,000
miles;
(iii) Commercial negative film insurance and cast
and/or non-appearance insurance;
(iv) Drilling and/or production rigs and all
machinery and equipment used in the exploration
of natural fuels;
(v) Furriers' customers and garment contractors
policies;
(vi) Insurance on livestock birds, or other animals
under so-called "mortality policies";
C - 38
(vii) Jewelers' block policies and furriers' block
policies;
(viii) Mining equipment while underground;
(ix) Radio and television broadcasting towers,
exceeding 500 feet in height;
(x) Registered mail and armored car insurance;
(xi) Watercraft, other than watercraft insured under
personal property floaters, yacht, or outboard
policies.
Section 8 - REINSURANCE PREMIUM AND COMMISSION
As a condition precedent to the Reinsurer's obligations hereunder, the Company
shall pay to the Reinsurer a reinsurance premium equal to the product of the
Company's Subject Written Premium, and the applicable reinsurance rate as set
forth in Appendix A attached hereto.
The reinsurance premiums above shall be subject to a fixed commission allowance
of 40%.
Section 9 - REPORTS AND REMITTANCES
(a) Reinsurance Premium
Within 45 days after the close of each calendar quarter, the
Company shall render to the Reinsurer a report of the
reinsurance premium for the quarter with respect to business of
the Company written during the quarter, summarizing the
reinsurance premium by line of insurance; and the amount due the
Reinsurer shall be remitted within 45 days after the close of
the quarter.
Within 45 days after the close of each calendar quarter, the
Company shall also render to the Reinsurer a report of the
reinsurance premium unearned by line of insurance and the
contribution for the quarter to the reinsurance premium in force
by line of insurance, by term and by month and year of
expiration.
(b) Claims and Losses
The Company shall report promptly to the Reinsurer each claim or
loss which, in the Company's opinion, may involve the
reinsurance afforded by this Exhibit. The Company shall advise
the Reinsurer of the estimated amount of Net Loss in connection
with each such claim or loss and of any subsequent changes in
such estimates.
C - 39
Promptly upon receipt of a definitive statement of Net Loss from
the Company, but within no more than 25 days, the Reinsurer
shall pay to the
C - 40
Company the Reinsurer's portion of Net Loss. The Company shall
report to the Reinsurer any subsequent changes in the amount of
Net Loss, and the amount due either party shall be remitted
promptly, but within no more than 25 days.
(c) P.C.S. Catastrophe Bulletins
The Company shall furnish to the Reinsurer, upon request, the
following information with respect to each catastrophe set forth
in the Catastrophe Bulletins published by the Property Claim
Services:
(1) The preliminary estimates of the amount recoverable from
the Reinsurer;
(2) The Reinsurer's portion of claims, losses, and Adjustment
Expense paid less salvage recovered during each calendar
quarter;
(3) The Reinsurer's portion of reserves for claims, losses,
and Adjustment Expense at the end of each calendar
quarter.
(d) General
In addition to the reports required by (a), (b), and (c) above,
the Company shall furnish such other information as may be
required by the Reinsurer for the completion of the Reinsurer's
quarterly and annual statements and internal records.
All reports shall be rendered on forms or in format acceptable
to the Company and the Reinsurer.
Section 10 - TERMINATION
Either party may terminate this Exhibit by sending to the other, by registered
mail to its principal office, notice stating the time and date when, not less
than 90 days after the date of mailing of such notice, termination shall be
effective. The Reinsurer shall not be liable for any claims or losses resulting
from Occurrences taking place at and after the effective time and date of
termination.
The Reinsurer shall return to the Company the reinsurance premium unearned
calculated on the monthly pro rata basis as of the effective time and date of
termination, less the commission previously allowed thereon.
C - 41
APPENDIX A
Attached to and made a part of
Exhibit B of Agreement No. 8759
FIRST EXCESS REINSURANCE RATES
Commercial Auto (Other than Courier)
Policy Limit Gross Reinsurance Rates
$ 300,000 CSL 6.31%
$ 500,000 CSL 16.67%
$1,000,000 CSL 25.72%
$100,000/$ 300,000 1.47%
$250,000/$ 500,000 10.74%
$500,000/$1,000,000 22.89%
Garage
Policy Limit Gross Reinsurance Rates
$ 300,000 CSL 7.61%
$ 500,000 CSL 18.82%
$1,000,000 CSL 27.75%
Courier
Policy Limit Gross Reinsurance Rates
$1,000,000 CSL 32.33%
42
APPENDIX A
Attached to and made a part of
Exhibit C of Agreement No. 8759
REINSURANCE RATES
Gross Reinsurance Rates
Amount of Insurance First Excess Second Excess Third Excess
$ 0 - $ 300,000 - 0 - - 0 - - 0 -
$ 300,001 - $ 400,000 4.13% - 0 - - 0 -
$ 400,001 - $ 500,000 12.35% - 0 - - 0 -
$ 500,001 - $1,000,000 21.30% 8.10% - 0 -
$1,000,001 - $2,000,000 22.50% 19.94% 11.52%
Supplemental Rates
$2,000,001 - $3,000,000 19.20% 20.72% 25.77%
$3,000,001 - $5,000,000 14.97% 17.63% 30.40%
43
ENDORSEMENT NO. 1
Attached to and made a part of
AGREEMENT OF REINSURANCE
NO. 8759
between
PENN-AMERICA INSURANCE COMPANY
PENN-STAR INSURANCE COMPANY
and
GENERAL REINSURANCE CORPORATION
IT IS MUTUALLY AGREED that, retroactive to the inception date of this Agreement,
Section 11 is hereby added to Exhibit C of this Agreement as follows:
"Section 11 - MORTGAGEE REINSURANCE ENDORSEMENTS
To induce a mortgagee named in a policy of the Company to accept such policy,
the Company and the Reinsurer may agree to name such mortgagee as a third party
beneficiary in a Mortgagee Reinsurance Endorsement made a part of this Exhibit.
For each such Mortgagee Reinsurance Endorsement so issued, the Company shall
indemnify the Reinsurer for any and all liability, loss, cost, or expense the
Reinsurer may sustain or incur in excess of its obligations under this Exhibit
by reason of the issuance of such Mortgagee Reinsurance Endorsement.
If the Reinsurer becomes liable to a mortgagee under any Mortgagee Reinsurance
Endorsement, the Reinsurer shall, to the extent of its liability:
(a) Benefit pro-rata in reductions of the Company's loss by salvage,
subrogation, compromise, or otherwise.
(b) Be automatically subrogated to all of the mortgagee's rights
against the Company under the policy.
(c) Be completely discharged from its obligation to make any payment
to the Company under this Exhibit and be entitled to set off
against any amount due from the Reinsurer to the Company under
this or any other agreement for any amounts for which the
Reinsurer would not be liable except for the existence of such
Mortgagee Reinsurance Endorsement.
The Reinsurer shall have the right to cancel any Mortgagee Reinsurance
Endorsement by notice to the mortgagee."
44
IN WITNESS WHEREOF, the parties hereto have caused this Endorsement to be
executed
in duplicate,
this day of , 200___,
------------- ------------------------------------
PENN-AMERICA INSURANCE COMPANY
PENN-STAR INSURANCE COMPANY
Attest:
-----------------------------------
and this day of , 200___.
--------- ------------------------------------
GENERAL REINSURANCE CORPORATION
Vice President
Attest:
-----------------------------------
45