EXHIBIT 10.5
AGENCY AGREEMENT
THIS AGENCY AGREEMENT ("Agreement") is entered into and effective as of
June 1, 1995, by and between CLARENDON NATIONAL INSURANCE COMPANY, a New Jersey
insurance corporation, with its administrative offices located at 1177 Avenue of
the Americas, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, (hereinafter, the
"Company") and STIRLING ▇▇▇▇▇ INSURANCE SERVICES INC., a Florida corporation
with its offices located at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇ (hereinafter, the "Agency").
WHEREAS, the Company is authorized to issue workers' compensation insurance
policies and related liability lines, including non-occupational coverages, in
the States set forth on Schedule A and the Company also undertakes to use its
best efforts to obtain authorization for 24 Hour coverage products;
WHEREAS, the Agency is duly licensed as a managing general agent in the
States set forth on Schedule A where required by law; and
WHEREAS, the Company wishes to appoint the Agency to produce, administer,
and manage a program of workers' compensation insurance (including related
coverage B, employers liability) in the States set forth on Schedule A
(hereinafter, the "Policies") (which authority may include the issuance of other
state endorsements for risks with multi-state operations subject to the
Company's and the Agency's authorizations in those states). The authorized
coverages and limits of liability of such Policies are set forth on Schedule B
attached hereto (which Schedule B shall be amended effective as of the date the
Company elects to offer an additional or a different policy).
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the parties agree that this Agreement shall be effective
as of the date set forth above (the "Effective Date") as follows:
ARTICLE I. - GENERAL PRINCIPLES
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A. The Company, relying upon the expertise of the Agency, grants
authority to the Agency hereunder to manage the Policies. The parties understand
that, the Company, being at risk and having ultimate responsibility and
authority for the Policies managed by the Agency, at all times shall have the
ultimate responsibility and discretion with respect to all matters pertaining to
such Policies.
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B. It is the intent of the Company and the Agency to produce an operating
profit for the Company. The Agency shall perform its duties under this
Agreement in an ethical, legal and professional manner.
ARTICLE II. - UNDERWRITING AUTHORITY
------------------------------------
A. The Agency, as an independent contractor of the Company, subject to
any requirements imposed upon the Agency and the Company by any governmental
entity, the terms of this Agreement, and the underwriting rules and regulations
of the Company, is authorized and is delegated responsibility to:
1. Solicit applications for Policies through duly licensed agents in
the States set forth on Schedule A. The Company shall forward to the Agency a
copy of the Company's Underwriting Rules, Regulations, and Guidelines
("Underwriting Rules") for use by the Agency in processing such applications and
submitting to the Company those which might be accepted by the Company on a
facultative basis or as may be otherwise specified in such Underwriting Rules.
The Company may amend its Underwriting Rules at any time by providing the Agency
written notice thereof, and the Agency shall thereafter process the Policies
pursuant to such amended guidelines and procedures. The Underwriting Rules
include the basis of rates to be charged, the lines of insurance which may be
written, maximum limits of liability, applicable exclusions, territorial
limitations, cancellation provisions, the maximum policy period, and control of
policy issuance.
2. Issue Policies on behalf of the Company to qualifying risks
accepted under the Underwriting Rules and issue all related, required statutory
and regulatory notifications, if any. The parties hereto acknowledge that the
Agency has been furnished copies of the Company's rates, policy forms and
endorsements.
3. Maintain control procedures related to binder, policy and
notification issuance to facilitate audit of such activities by the Company
and/or the Insurance Commissioner, or equivalent authority, of the States on
Schedule A.
4. Provide a risk management information system that will track,
account, and report to the Company premium, commissions, losses, loss reserves,
allocated and unallocated claim costs, claim incidence detail, indemnity and
medical payments. During the term of this Agreement, the Agency shall use
underwriting and risk management information on behalf of the Company.
5. Assure that the Company complies with any required reports or
data calls related to the Policies.
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6. Assure that in the event any Policy is issued with a deductible
endorsement and the Underwriting Rules require collateralization, that the
policyholder collateralize all unpaid deductible obligations actuarially valued
to their ultimate cost with collateral acceptable to the Company. In the event
any Policy is retrospectively rated all projected retrospective premium due the
Company shall be similarly collateralized.
7. Assure that every applicable policyholder is subject to annual
post policy period payroll audit.
8. Collect and receipt for premium, and, as compensation for its
program management services and producing agents' commission, retain the
percentage of net written premium specified in Article IV.
9. Cancel coverage only when authorized by the Company and pursuant
to Policy terms. The Agency shall cancel any Policy in the event a policyholder
fails to (i) pay premium when due, or (ii) maintain agreed collateral for
deductible obligations or retrospectively rated premium as provided in
subparagraph II.A.6 or (iii) for any other reason permitted under the Policy and
by law.
B. The Agency, without the prior written approval of the Company:
1. Shall not bind reinsurance or retrocession on behalf of the
Company;
2. Shall not commit the Company to participate in reinsurance of
reinsurance syndicates; and
3. Shall not collect a payment from a reinsurer or commit the
Company to a claim settlement with a reinsurer without the prior written
approval of the Company.
If the Company grants such prior written approval for any of the items
specified in II.B.1, II.B.2, or II.B.3 above, the Agency shall promptly forward
to the Company a report of any such action taken.
C. Any and all agreements between any agent, insurance broker, agent or
other entity approved by the Company (hereinafter called the "Agent") shall be
made directly between the Agency and such Agent.
D. The Agency is responsible to oversee the placement of business through
and the proper licensing of any Agent. If, as a result of acceptance of a
placement by the Agency from an Agent that the Agency knew or should have known
was unlicensed, the Agency shall indemnify and hold the Company
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harmless from all claims, costs, fines and expenses arising and paid by the
Company due solely to the fact that the Agent was unlicensed that is not
recoverable from reinsurers.
E. The Agency shall receive and may accept proposals for Policies up to a
specified maximum "Net Written Premium" (which term shall mean gross written
premium less returns for cancellations) for each Policy as stated on Schedule B
for the first Calendar Year of this Agreement and as amended for each subsequent
Calendar Year thereafter. The first Calendar Year shall mean the time period
from the Effective Date through December 31, 1995. Each subsequent Calendar
Year shall commence January 1st of such year and end on December 31st of such
year.
F. The Company hereby grants to the Agency authority to utilize only
insurance contract wording, endorsement wordings and rates that are approved in
writing by the Company.
G. The Company hereby grants to the Agency authority to operate only
within written guidelines approved in writing by the Company; and any Policy
issued by the Agency which does not fall within such guidelines shall, at the
Company's written request, be promptly terminated subject to the regulations of
the state. The Agency shall indemnify the Company for all claims that the
Company is required to pay not recoverable from reinsurers solely because the
Agency did not terminate the Policy.
H. The Agency shall arrange underwriting inspections on all Policies
written. The inspection shall be for the Agency's benefit, rather than the
insured's benefit, and shall be used by the Agency in underwriting risks
pursuant to the Underwriting Rules. Each inspection shall produce a written
report for the Agency's benefit. Compensation for such services shall be
deducted by the Agency from Net Written Premium and paid to the inspection
company.
ARTICLE III. - CLAIM AUTHORITY
------------------------------
A. The Agency, as an independent contractor of the Company, subject to
any requirements imposed upon the Agency and the Company by any governmental
entity, the terms of this Agreement, and the Underwriting Rules, is authorized
and is delegated responsibility to perform or contractually arrange for the
adjustment of all claims arising under the Policies issued by the Agency on
behalf of the Company hereunder. The Company reserves the right to disapprove
any contract adjusters appointed by the Agency. All such services shall be
performed by duly licensed and qualified casualty adjusters. The Agency shall
maintain claim files in hard copy or shall otherwise make such files
electronically available to the Company. The Agency shall also effect a
comprehensive program
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of health care cost management related to medical services provided
policyholders, if the Policies so require.
The Agency, directly or through its adjusters, may settle claims and set
loss reserves, and the Company retains final authority over such matters. The
Agency shall immediately report to the Company any claim arising under any
Policy produced under this Agreement, and may represent the Company in the
investigation, control and settlement of any such claim.
The Agency may charge the Company for adjusting indemnity, medical and
information claims based upon a fee schedule agreed between the Agency and the
Company, plus reasonable and customary rates for allocated loss adjustment
expenses, plus a percentage to be agreed initially and amended from time to time
of the difference between medical, hospital and similar services as originally
billed by a provider and the total charge ultimately paid to the provider. The
parties recognize that this adjusting service may be bid or contracted out to
third parties for medical claims.
B. In the course of its duties under this Agreement, the Agency shall:
1. Record and report each claim promptly to the Company with a
recommended reserve;
2. Maintain a claim file with a copy of the Policy for each reported
claim. The claim file will have a daily activity log and shall be available for
inspection, review and/ or copying by the Company or its duly authorized
representatives;
3. Perform reasonable and necessary administrative and clerical work
in connection with reported claims;
4. Prepare checks and vouchers, compromises, releases, agreements
and any other documents reasonably necessary to finalize and close claims;
5. Perform a continuous review of outstanding claim reserves,
recommend changes to outstanding claim reserves, and provide the Company with
monthly reports showing changes to outstanding reserves as of the date reported;
6. Record and report promptly to the Company each loss and allocated
loss adjustment expense paid utilizing the Company claim disbursement, checking
and coding procedures;
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7. Periodically review the development of the claims handling
procedure with the Company or its duly authorized representative to identify
problems and recommend corrective action;
8. Diligently pursue and prosecute the Company's salvage and
subrogation rights relating to any losses sustained under this Agreement. The
Agency shall use all reasonable efforts to collect and deposit funds arising
from the enforcement of such rights into the Company's Claim Bank Account (as
hereinafter defined). The Agency will report and account to the Company all
salvage and subrogation collections under this Agreement.
C. The Company grants to the Agency authority to settle and pay upon
prior notice to the Company any claim up to Fifty Thousand Dollars ($50,000) per
claim.
D. The Agency shall notify and consult with the Company with respect to
any of the following:
1. Any loss or claim resulting in legal action being instituted
against the Agency and/or the Company;
2. Any loss or claim causing a complaint to be filed with any
regulatory authority;
3. Any inquiry from any regulatory authority, including but not
limited to any insurance department, with respect to any claim or claims, even
if no complaint causes such inquiry;
4. Any claim the Agency deems appropriate to deny policy coverage;
or
5. Any claim which might ultimately result in the payment(s) in
excess of Fifty Thousand Dollars ($50,000) due to any claim or claims arising
out of a single occurrence or injury.
The Agency shall notify the Company within thirty (30) days of
determination of (i) any claim which involves a coverage dispute, (ii) any claim
which involves a demand in excess of policy limits, or (iii) any allegation of
bad faith, violations of the applicable State Insurance Code.
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ARTICLE IV. - THE AGENCY'S COMPENSATION
---------------------------------------
A. The Company hereby allows the Agency, as compensation for its
services hereunder, a commission fee, equal to the commission set forth on
Schedule B attached hereto and incorporated herein, describing the Policy and
the compensation as a percentage of Net Written Premium for such Policy.
B. The Agency shall prepare separate, itemized monthly statements for
each Agent on the business placed by the Agent through the Agency, and furnish
the Agent with an IRS Form 1099 each year required.
C. The Agency shall maintain an errors and omissions insurance policy
issued by an insurer acceptable to the Company with policy limits of no less
than One Million Dollars ($1,000,000), and a deductible no greater than Fifty
Thousand Dollars ($50,000).
ARTICLE V. - RECORDS, REPORTS, REMITTANCES AND PROCEDURES
---------------------------------------------------------
A. The Agency shall maintain complete and orderly underwriting and claims
files, records and accounts of all transactions involving the Company in
accordance with generally accepted insurance and accounting practices.
B. The Company or its authorized representatives shall have the right
(but not the obligation) at all reasonable times to inspect the Agency's books
and records, wherever located, which pertain to the business of the Company
which is the subject of this Agreement and shall have the right to copy or make
abstracts from such books and records.
C. The Agency shall promptly deposit all funds collected on behalf of the
Company in a Premium Trust Account. Such amount shall be maintained in a bank(s)
with membership in the Federal Reserve system and insured by the Federal Deposit
Insurance Corporation.
D. At the end of each month, the Company shall produce an accounting
detailing all premiums collected and deposited into the Premium Trust Account.
The Agency shall pay to the Company all Net Written Premium collected and
deposited in the Premium Trust Account less the Agency's and Agent's commissions
as set out in this Agreement, claim fees and expenses, inspection fees and
expenses, and deductions, expenses, and costs payable by the Company as per this
Agreement, or as agreed by the Company and the Agency and listed on the
accounting. The Agency may pay such commission and listed deductions directly
from the Premium Trust Account without further authorization.
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E. The Agency shall not be required to return as commission or return
commission monies greater than the total commission paid or otherwise payable to
the Agency.
F. The Agency shall not offset balances due under this Agreement with
any other balance due under any other contract or agreement. The Agency shall
not use or convert money that is deposited or should have been deposited to the
Premium Trust Account, except as provided in this Agreement.
G. The Agency shall maintain and submit a monthly Bordereaux report for
all business written under this Agreement for Policies, binders or endorsements
issued or canceled by the Agency (the "Bordereaux"). The Agency shall maintain
and furnish to the Company such other reports as may be reasonably requested by
the Company.
The Bordereaux for each line of business shall include the following
information: policy number, name of insured, effective date of coverage, policy
period, annual premium, payment terms, minimum deposit premium, premium
collected, credits against the premium collected for sums due third parties, and
the balance due the Company. Sums deducted from premium collected to pay third
parties shall be utilized solely to pay expenses approved in writing by the
Company, which expenses may include administration fees, safety and loss control
services, premium audit services, commissions due the Agency or Agents. Third
party fees shall be specifically identified on the monthly Bordereaux and shall
be paid on a collected premium basis.
The Agency shall remit all funds due the Company on or before fifteen
(15) days after the end of each month for business reported to the Company for
the prior month pursuant to the Bordereaux. The Company may direct the Agency
in writing to remit sums due the Company directly to the Company's reinsurers.
All sums due the Company shall be paid by wire transfer or as otherwise directed
in writing by the Company. The Agency shall reconcile all funds collected to
the monthly Bordereaux reports.
H. Notwithstanding anything to the contrary contained in this Agreement,
the Agency shall account and pay to the Company any net income loss due to
uncollected premium, except it is agreed that, if any additional premium is
charged and billed by the Company, and such additional premium cannot be
collected by the Agency, the Agency shall not be responsible for such additional
premium provided:
1. The Agency notifies the Company that such premium is uncollected
within sixty (60) days of the initial billing date for such additional premium;
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2. The Agency shall make a good faith effort to collect such
premium;
3. The Agency shall forward to the Company copies of all
correspondence relating to its collection effort; and
4. No Commission shall be paid to the Agency on premiums collected
by the Company.
The net income loss will not be payable if the Company has not
incurred "net retained loss" in respect of the Policy for which premium is
uncollectible following reasonable collection efforts by the Agency or the
Company. A "net retained loss" means that the Policy for which collection is
sought has an excess of actual paid claims chargeable to the Company (and not to
reinsurers) over premiums. Should a net retained loss have been incurred by the
Company, the net income loss payable by the Agency shall be the lower of: (i)
the uncollected premium; or (ii) the net retained loss of the Company.
I. The transfer of funds to the Company, or the acceptance of any funds
from the Agency, shall not constitute acceptance of the accuracy of any report
submitted by the Agency to the Company.
J. For purposes of settling claims and paying claim-related expenses, the
Company shall establish, maintain and fund a separate bank account from which
the Agency may draw against as hereinafter set forth (the "Claim Bank Account").
On a daily and monthly basis, the Agency will prepare and send to the
Company a register of checks drawn on the Claim Bank Account for each loss
payment (the "Claim Register"). The Claim Register shall include, but shall not
be limited to, the claim number, the name of payee, the date and check number of
the disbursement, and the purpose and amount of the disbursement.
All claim payments shall be signed by two signatories. Any claim
payment up to Fifty Thousand Dollars ($50,000) shall be signed by two authorized
representatives of the Agency. Any claim payment in excess of Fifty Thousand
Dollars ($50,000) shall be signed by an authorized representative of the Company
and an officer of the Agency. The Agency shall notify the Company in writing of
the identity of the authorized signatories of claim checks.
The Agency shall promptly deposit any monies collected through salvage
and subrogation to the Claim Bank Account, and maintain a register of all such
collections and deposits (the "Salvage and Subrogation Register"). The Salvage
and Subrogation Register shall include, but shall not be limited to, the
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following information: date of deposit, date of receipt of funds, the claim
number, the payor, and the amount and purpose of such payment.
The Agency shall reconcile the Claim Register and Salvage and
Subrogation Register to the Claim Bank Account on a monthly basis.
K. Within twenty (20) days after the close of each calendar month, and in
addition to reports due the Company under this Article V, the Agency shall
render to the Company reports of transactions for said month in formats
acceptable to the Company. The reports shall include, but shall not necessarily
be limited to, information and statistical data necessary for the Company to
prepare any report required by the NAIC or NCCI, or any other reports reasonably
requested by the Company. The Agency's reports shall include an accounting of
all premiums written and earned, all commissions and fees, all claims and
allocated claims expenses reserved, paid, incurred and outstanding, and
collected and collectible salvage and subrogation.
L. Within ninety (90) days after the end of each fiscal year, the Agency
shall furnish the Company with true copies of its audited, certified balance
sheet and related statement of operation for such fiscal year.
M. The Agency shall establish and maintain written operational procedures
to handle all business related to the Policies.
ARTICLE VI. - ACCESS TO BOOKS AND RECORDS
-----------------------------------------
A. The Company shall have access during normal business hours to the
books and records of the Agency for any purpose relating to any business placed
with the Company by the Agency.
B. The books, records, underwriting and rating facilities of the Agency
relating to any business it places with the Company shall be maintained
separately and apart from those relating to any other insurance company the
Agency may represent and shall include underwriting files.
C. The books and records referenced in VI, VI.A and VI.B above shall be
maintained by the Agency for at least five years from the expiration date of the
last Policy issued or until completion of a financial examination by the
insurance department of the state in which the Company is domiciled, whichever
is longer or as may otherwise be provided by law.
D. The Company may conduct a semi-annual examination of all books and
records maintained by the Agency which relate to business placed pursuant to
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this Agreement. Such examinations shall incept six months after the effective
date of this Agreement and continue every six months thereafter until six months
after the termination of this Agreement.
E. If the Company's aggregate premium volume increases by 30% or more in
any 30-day period after the second semi-annual examination (as provided supra),
the Company may conduct an additional examination of the books and records of
the Agency which are related to coverage placed under this Agreement.
F. The examinations of the books and records of the Agency must
adequately provide the Company and any Commissioner of Insurance, or equivalent
authority, with the information specified below, will be made available by the
Company and the Agency upon request by the Commissioner, and will remain on file
with the Company for at least three years:
1. The existence and adherence to claim handling procedures.
2. The timeliness of claim payments.
3. The timeliness of premium reporting and collection.
4. Compliance with underwriting guidelines furnished by the Company
to the Agency.
5. Reconciliation of policy inventory or policy issuance records.
G. The Agency shall provide the Company copies of its computer software
and updated copies of its computer data base maintained in support of its claim
reports ("Computer Data"). The transfer of Computer Data shall be in a format
acceptable to the Company and readable on the Company's computer system. Such
Computer Data shall include all information contained in the claim reports, and
shall include with respect to each claim, the claim number, policy number, name
of insured, effective date and expiration date of the policy, the date the claim
was first reported to the Agency, reserves, paid losses, paid loss adjustment
expense, and any salvage or subrogation recoveries.
The Agency shall establish and maintain written operating procedures
to handle all claims, related adjustment costs, and salvage and subrogation.
The Agency's reports shall account for all paid and incurred (including
outstanding reserves separately) losses, loss adjustment expense, salvage and
subrogation recoveries.
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H. Articles V and VI, VI.A shall survive termination of this Agreement
until such time as all obligations of the Agency and the Company have been
discharged.
ARTICLE VII. - EXPENSES
-----------------------
A. THE AGENCY'S EXPENSES:
The Agency shall accept and pay all expenses incurred by the Agency in
connection with the underwriting, production, marketing and servicing of the
Policies, including but not limited to the following:
1. Printing of proposals, policy jackets, contracts of insurance,
cancellation notices, premium notices, records, and reports, and all other
documents required to fulfill the obligations of the Agency under this
Agreement.
2. Advertising and public relations expenses, except as otherwise
agreed to be paid by the Company. The Company's prior written approval shall be
required with respect to any advertising or public relations material which
contains the Company's name or logo.
3. The Agency's general office expenses, including rent, salaries,
utilities, data processing performed by the Agency, transportation, furniture,
fixtures, equipment, supplies, telephone, postage, and other general overhead
expenses.
B. COMPANY'S EXPENSES:
The Company shall absorb and pay directly all charges and expenses directly
attributable to its operations and all expenses, costs and claims provided in
this Agreement and/or under the Policies. In addition to those charges otherwise
provided in this Agreement, the Company shall reimburse the Agency for premium
audit expenses, underwriting inspections, and other costs required to fulfill
the obligations of the Company under this Agreement or as agreed from time-to-
time by the Company. Premium audit expenses shall be accounted for on a per-
Policy basis.
ARTICLE VIII. - GENERAL PROVISIONS
----------------------------------
A. Nothing herein shall create the relationship of employer and employee
between the Company and the Agency, it being understood and agreed that the
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Agency is an independent contractor of the Company for the purposes set forth
herein with all rights, powers and duties as such.
B. The Agency shall not assign, sell or otherwise transfer all or any
part of this Agreement in whole or in part either directly or indirectly without
the prior written consent of the Company.
C. This Agreement may not be changed, nor may any provision hereof be
waived, unless such modification is in writing, signed by both parties hereto,
and specifies the effective date thereof.
D. Should the Agency receive an inquiry or complaint from any regulatory
authority concerning a violation of insurance law or regulation, or any
complaint disputing coverage under any Policy issued hereunder, or any process
or other litigation document or any threat of litigation with respect to any
Policy or any other matter contemplated within this Agreement, prompt notice and
a true copy thereof shall be given to the Company. If a response affecting the
Company is required, the Agency shall, within five (5) business days of the
inquiry, draft a response and submit the draft to the Company for prior approval
before submission to the regulatory authority.
E. The Company and the Agency shall maintain all licenses and regulatory
approvals necessary to conduct business covered under this Agreement.
F. Notwithstanding the authority granted to the Agency by the Company,
the Company may require the Agency to terminate coverage provided by any Policy
so long as such termination does not violate any statute or regulation. If the
Company exercises this right, the Company shall instruct the Agency to send
appropriate non-renewal or cancellation notice as required by contract wording
or regulatory authority to terminate coverage.
G. The Agency is required and agrees to be in compliance with, and the
Agency shall ensure that all Agents are properly licensed pursuant to, all
applicable laws and regulations which affect the Policies.
H. The Agency shall obtain the express prior written approval of the
Company before issuing any advertisement, circular, pamphlet or other
publication which refers to the Company. The Agency shall have the right to
advertise the Policies.
I. The failure of the Company or the Agency to insist on strict
compliance with this Agreement, or to exercise any right or remedy hereunder,
shall not constitute a waiver of any rights contained herein or stop the parties
from
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thereafter demanding full and complete compliance therewith, nor prevent the
parties from exercising any right or remedy in the future.
J. Any notice required or permitted to be given under this Agreement
shall be in writing and shall be deemed duly given if delivered personally, by
Federal Express or other recognized courier service, or by registered or
certified mail, return receipt requested, to the party for whom it is intended
at the following address or such other address as the party may designate from
time to time.
For the Agency:
Stirling ▇▇▇▇▇ Insurance Services Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, President
(▇▇▇) ▇▇▇-▇▇▇▇
For the Company:
Clarendon National Insurance Company
1177 Avenue of the Americas, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
Notices shall be deemed given when delivered, or three (3) days after
delivery to the courier or mailing, as above provided.
K. If any provision of this Agreement should be found to be invalid or
unenforceable, the remaining provisions of this Agreement shall remain in full
force and effect.
L. This Agreement shall be interpreted under and pursuant to the laws of
the State of New York.
M. This Agreement shall bind and benefit the successors and permitted
assigns of the parties.
N. The Agency shall indemnify and hold the Company harmless by the Agency
for all losses, costs, charges and expenses (collectively called "Expenses")
paid or incurred by the Company by reason of or in connection with the breach or
non-performance of any covenant or obligation to be observed or performed by the
Agency under this Agreement; provided, however, that in the case of a breach or
non-performance by the Agency, the Company shall have given the Agency notice
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of the breach or non-performance and the Agency shall not have cured same within
ten (10) days after the date of the notice, or if same is of such a nature that
it cannot reasonably be cured within such time, if the Agency has not within
such time commenced to cure same and does not diligently continue to and
actually cure same. Any expenses incurred by the Company after the giving of
such notice shall be promptly reimbursed by the Agency. Without limiting the
generality of the foregoing, the Agency's covenants and obligations as referred
to herein shall include but not be limited to:
1. the obligation to deposit, report and remit premiums to the
Company;
2. the obligation to remit return premiums to the insureds when due;
3. the obligation to process all policies, endorsements and notices
of cancellation and/or non-renewal pursuant to the Company's underwriting
guidelines;
4. the obligation to observe and comply with underwriting guidelines
and sub-agent appointment procedures;
5. the obligation to observe and comply with all statutes,
regulations, rules and rates; and
6. the obligation to comply with the requirements of Article V
hereunder.
The term "Expenses" as used herein shall include but shall not be limited
to the following expenses: legal, accounting, data processing, file retrieval,
software, clerical help, professional services, and travel. The Agency shall
reimburse or pay the Company for all Expenses immediately upon receipt of a
written statement setting forth such Expenses, provided the Agency shall be
given written notice and the right to cure for ten (10) days prior to the
imposition of any charge. An interest charge of the lesser of (i) 18% per annum,
or (ii) the highest rate of interest permitted by applicable law, shall accrue
with respect to any Expenses remaining unpaid for thirty (30) days after
presentation of such statement and shall continue until payment in full of the
balance due.
O. In the event that any obligation to grant or extend insurance coverage
is imposed on the Company by a Court or Insurance Commission or Department as a
result of any breach by the Agency of its obligations under Policies, then and
in that event, the Agency shall (i) pay any fine or penalty imposed upon the
Company
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by such Court or Insurance Commission or Department, and (ii) reimburse the
Company for all Expenses in accordance with paragraph VIII.O of this Article.
P. This Agreement may be executed in two (2) or more counterparts, each
of which shall be deemed an original but all of which together shall constitute
one and the same agreement.
Q. This Agreement supersedes any previous agreements whether oral or in
writing between the Agency and the Company.
R. The Agency must notify the Company, in writing, within thirty (30)
days if there is a change in:
1. Ownership of ten percent (10%) or more of the outstanding stock
of the Agency;
2. Any principal officer of the Agency; or
3. Any director of the Agency.
S. The Agency shall submit to an examination of its financial condition
and its compliance with the laws of Florida as and if required under the Florida
Insurance Code, or any other state law applicable to the Agency.
ARTICLE IX. - INDEMNITY AGREEMENT
---------------------------------
A. The Agency shall indemnify the Company and its subsidiaries,
successors, reinsurers and assignees, as well as their shareholders, directors,
officers and agents against and in respect of any and all claims, demands,
actions, proceedings, liability, losses, damages, costs or expenses, including
without limitation, attorney's fees, disbursements and court costs, made or
instituted against or incurred by the Company or such other indemnitees and
which arise, either directly or indirectly, out of any action or inaction of the
Agency or its employees or representatives, in connection with any obligations
of the Agency arising out of this Agreement, including but not limited to any
action or inaction of the Agency concerning the Agent(s), pursuant to all
applicable laws.
B. The Company shall indemnify and hold the Agency harmless against and
in respect of any and all claims, demands, causes of action, liability, losses,
damages, judgments, costs and expenses, including but not limited to attorney's
fees, disbursements and court costs which may be made or instituted against or
incurred by the Agency and which arise, either directly or indirectly, out of
any
16
action or inaction of the Company in connection with any obligations of the
Company arising out of this Agreement or the Policies.
ARTICLE X. - ARBITRATION
------------------------
A. Any controversy or claim arising out of or relating to this Agreement
or the breach or enforcement thereof shall be submitted to the decision of a
board of arbitration ("Board") composed of two arbitrators and an umpire, who,
unless the parties otherwise agree, shall meet in New York City, New York. The
laws of the State of New York shall govern the interpretation and application of
this Agreement and the enforcement of the arbitration award.
B. The members of the Board shall be active or retired disinterested
officials of insurance or insurance management companies or Underwriters at
Lloyd's, London, other than the parties of their affiliates. Each party shall
appoint its arbitrator, and the two arbitrators shall choose an umpire before
instituting the hearing. The arbitration shall be instituted by the claimant
serving a notice upon the respondent setting forth the nature of the dispute and
the name, address and current (or last, if retired) employment position of the
arbitrator appointed by the claimant. The respondent shall appoint its
arbitrator within twenty (20) days after service of claimant's notice and shall,
within such time, similarly notify claimant of the name, address and current (or
last, if retired) employment position of the respondent's arbitrator. If the
respondent fails to appoint its arbitrator within such twenty (20) day period,
the claimant shall also appoint the second arbitrator within ten (10) days after
the expiration of the twenty (20) days for respondent to appoint its arbitrator.
If the two arbitrators fail to agree upon the appointment of an umpire at the
end of twenty (20) days following the last date of the appointment of the
arbitrators, then the umpire shall be appointed by the American Arbitration
Association (or its successor).
C. The claimant shall submit its initial statement within twenty (20)
days from appointment of the umpire. The respondent shall submit its responsive
statement within twenty (20) days after receipt of the claims statement, and the
claimant may submit a reply statement within ten (10) days after receipt of the
responsive statement. No other statement shall be submitted by either party.
Copies of all statements shall be sent to the parties, the arbitrators and the
umpire.
D. The Board shall consider this Agreement an honorable engagement rather
than merely a legal obligation and shall make its decision with regard to the
custom and usage of the insurance and reinsurance business and in accordance
with the Commercial Arbitration Rules of the American Arbitration Association
(or its successor). The Board shall issue its decision in writing upon evidence
introduced at a hearing or by other means of submitting evidence in which strict
17
rules of evidence need not be followed, but in which cross examination and
rebuttal shall be allowed if requested. Any hearing shall commence within
thirty (30) days of claimant's reply statement, or of respondent's statement if
claimant does not submit a reply statement. The Board shall make its decision
within forty-five (45) days following the termination of the hearings unless the
parties consent to an extension. The majority decision of the Board shall be
final and binding upon all parties to the proceeding. Judgment may be entered
confirming the award of the Board in any court having jurisdiction thereof.
E. Each party shall bear the expense of its own arbitrator and shall
jointly and equally bear the expense of the umpire. The remaining costs of the
arbitration proceedings shall be allocated by the Board.
F. In the event of subsequent actions or proceedings to confirm the award
or to enforce the judgment thereon or any other rights flowing therefrom, the
prevailing party shall be entitled to recover its reasonable attorney's fees.
G. Any suit, action, or other proceeding by or against either party to
this Agreement, including any proceeding to compel arbitration, to confirm the
arbitration award, or to enforce any remedy available to either party may be
brought in the Supreme Court of the State of New York, County of New York, or in
the United States District Court for the Southern District of New York, and each
of the parties hereto submits and consents to the non-exclusive jurisdiction of
each such court for the purpose of any such suit, action or proceeding. The
parties consent that process in any action or proceeding may be served by
registered or certified mail, which service shall be sufficient to confer in
personam jurisdiction over the party served.
ARTICLE XI. - SUSPENSION
------------------------
If the Agency is delinquent in accounting for a payment of any sums
due the Company, or has breached the terms of this Agreement, or has violated
the authority granted in this Agreement, the Company may by written notice to
the Agency, suspend the Agency's authority to submit or underwrite any new or
renewal business under this Agreement.
ARTICLE XII. - TERM OF AGREEMENT
--------------------------------
This Agreement shall have an initial term of thirty-six (36) months
commencing upon the Effective Date of this Agreement and shall be extended
automatically for additional twenty-four (24) month terms thereafter if not
terminated within six (6) months of the termination date of any term.
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Notwithstanding the foregoing, this Agreement may be terminated without cause,
at any time, by either party mailing to the other party a six (6) month notice
of termination of this Agreement.
ARTICLE XIII. - TERMINATION
---------------------------
A. This Agreement shall terminate with cause:
1. Immediately at the election of and upon written notice from the
Company, if any public authority cancels or declines to renew any of the
licenses of the Agency, or automatically and immediately if any public authority
cancels or declines to renew the Company's licenses in any jurisdiction in which
it is licensed to do business.
2. Automatically and immediately in the event of a transfer, sale or
pledge of the majority of the stock or upon consolidation with a successor in
interest or a substantial portion of the assets of the Agency, unless this
Agreement is assigned with the express written consent of the Company.
3. Automatically and immediately upon the insolvency or bankruptcy
of the Agency or an assignment by the Agency for the benefit of creditors.
4. Automatically and immediately upon the insolvency or bankruptcy
of the Company.
5. Immediately at the election of and upon written notice from the
Company of the commission of any of the following acts by the Agency: fraud or
gross negligence or willful misconduct (which includes, but is not limited to,
willful violation of instructions, or willful violation of any covenant of this
Agreement or any statutory provision or Insurance Department regulation).
6. At the election of the Company upon the Agency's violation of any
provision of this Agreement, other than as set forth in XIII.A.1, XIII.A.2,
XIII.A.3, XIII.A.4 and XIII.A.5 above, provided however, that the Agency will be
allowed ten (10) days to cure such violation. For purposes of this Subsection
XIII.A.6, routine differences in the accounting methods of the Agency and the
Company which are minor in amount and do not involve premiums collected and
willfully withheld by the Agency shall not constitute failure to account for and
pay over premiums, provided all items not in dispute are paid in accordance with
the collection and remittance procedures set forth in this Agreement.
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7. At the election of the Company in the event of any material
change in the Company's obligations or business prospects under the Policies
caused by a change in law or insurance regulations in the States set forth on
Schedule A, or by a change in the terms and/or coverages of the Company's
reinsurance agreement(s) with its reinsurers for business produced hereunder.
8. At the election of the Agency if claims are unpaid or the Company
is not, in the Agency's opinion, complying with the terms of the Policies, and
the Company does not cure such problems to the Agency's satisfaction within ten
(10) days of written notice.
9. At the election of the Agency, if the Company breaches or fails
to comply with any term of this Agreement, and such breach or failure is not
cured within ten (10) days of written notice from the Agency to the Company.
B. In the event of proper termination of this Agreement:
1. The obligations of the Agency and the Company under this
Agreement shall be discharged promptly.
2. No party shall have a claim upon the other for loss of
prospective profit or damage to the business arising therefrom.
3. The Agency's records shall remain the property of the Agency and
left in the Agency's possession, including the right to renew all business with
an insurer, as long as the Agency is in compliance with all of its obligations
to the Company.
4. The Company may, in its sole discretion, require the Agency to
run-off the in-force business to normal expiration in accordance with the
provisions of this Agreement. The Agency shall bear all expenses of the run-off
operations but shall be paid its fees for the run-off period that would have
been due had this Agreement continued in force.
5. The Agency shall upon demand return to the Company any Policies,
forms or other supplies imprinted with the Company's name regardless of who
incurred the cost for same, or any Policies, forms or other supplies furnished
to the Agency by the Company.
ARTICLE XIV. - COMPUTER DATA
----------------------------
A. In the event this Agreement terminates and/or the Agency refuses or is
unable to administer and run-off business produced under this Agreement, then
20
in that event the Agency shall immediately provide the Company with a tape back-
up of all programs and data libraries, including updated source code and data
files, used in the production and administration of business hereunder (the
"Data"). The Company agrees that it shall utilize the Data solely for the
purpose of administering and running off the business produced hereunder.
B. The Agency hereby grants, at no cost to the Company, a limited license
to the Company to use the Agency's software ("Software") in connection with the
administration and run-off of the business produced hereunder. The Agency shall
deliver the Software, together with the source and object code for the Software,
as well as all necessary manuals, immediately upon delivery of the Data to the
Company as provided in the preceding paragraph. The Company grants the Agency,
at no cost during the term of this Agreement and subsequent to the term of this
Agreement in connection with the administration and run-off of the business
produced, the limited license to use the Company's software programs for the
purposes of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers as of the day and year first above written.
For and on behalf of the Agency: STIRLING ▇▇▇▇▇ INSURANCE SERVICES INC.
Attest: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇.
(Notary Public -
State of Florida) By: /s/
-------------------------- ------------------------------------
Its Authorized Officer
My Comm. Exp. 7/09/96
Bonded By Service Ins.
▇▇. ▇▇▇▇▇▇▇▇
[_] Personally Known [_] Other I.D.
For and on behalf of the Company: CLARENDON NATIONAL INSURANCE COMPANY
Attest: /s/ By: /s/
-------------------------- ------------------------------------
Its Authorized Officer
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SCHEDULE A
----------
List of States
Florida
22
SCHEDULE B
----------
COVERAGE LIMITS OF LIABILITY
-------- -------------------
Workers' Compensation/Employer's Liability Statutory
Commission Structure:
Policy Issuance.................................................... 4%
Loss Control....................................................... 2%
Claims............................................................. 6%
Brokering Agent.................................................... 5%
Producing Agent.................................................... 7%
Rent a Captive Fee................................................. 3%
----
Total.................................................................. 27%
Net Written Premium Limit.......................Per Underwriting Guidelines
23