75% Florida Multiple Line
Quota Share Reinsurance Contract
Effective: July 1, 1998
issued to
Condor Insurance Company
Amwest Surety Insurance Company
and
Far West Insurance Company
All of Omaha, Nebraska
(hereinafter referred to collectively as the "Company")
by
The Subscribing Reinsurer(s) Executing the
Interests and Liabilities Agreement(s)
Attached Hereto
(hereinafter referred to as the "Reinsurer")
Article I - Classes of Business Reinsured
A. By this Contract the Company obligates itself to cede to the Reinsurer and
the Reinsurer obligates itself to accept quota share reinsurance of the
Company's net liability under policies, contracts and binders of insurance
or reinsurance (hereinafter called "policies") in force at the effective
date hereof, or issued or renewed on or after that date, and classified by
the Company as Homeowners Multiple Peril (Sections I and II), Mobile
homeowners Multiple Peril (Sections I and II) and Inland Marine business.
B. "Net liability" as used herein is defined as the Company's gross liability
remaining after cessions, if any, to other reinsurers.
C. The liability of the Reinsurer with respect to each cession hereunder
shall commence obligatorily and simultaneously with that of the Company,
subject to the terms, conditions and limitations hereinafter set forth.
Article II - Term
A. This Contract shall become effective at 12:01 a.m., Local Standard Time at
the location of the risk, July 1, 1998, with respect to losses arising out
of occurrences commencing on or after that time and date, and shall remain
in force until 12:01 a.m., Local Standard Time at the location of the
risk, July 1, 1999 (i.e., providing coverage on a "risks attaching/
underwriting year" basis during the term of this Contract).
B. Unless the Company elects to reassume the ceded unearned premium in force
on the effective date of expiration, and so notifies the Reinsurer prior
to or as promptly as possible after the effective date of expiration,
reinsurance hereunder on business in force on the effective date of
expiration shall remain in full force and effect until expiration,
cancellation or next premium anniversary of such business, whichever first
occurs, but in no event beyond 12 months plus odd time (not exceeding 15
months in all) following the effective date of expiration.
C. Notwithstanding the provisions of paragraph B above, in the event the
Company is prohibited or precluded by the appropriate regulatory
authorities, or by law, from arranging mid-term cancellation or
non-renewal of any policies subject to this Contract beyond their natural
expiry, the Reinsurer agrees to extend coverage hereunder with respect to
such policies until such policies may be terminated by the Company, but in
no event beyond 24 months after the effective date of expiration.
D. All premiums and losses from policies allocated to this Contract shall be
credited or charged, respectively, to this Contract, regardless of the
date said premiums earn or such losses occur. It is understood that a
policy will be allocated to this Contract if the term of this Contract is
in effect as of:
1. As respects all new policies, the effective date of such policies;
2. As respects renewals of one year or less term policies, the renewal
date of such policies;
3. As respects continuous or greater than one year term policies, the
premium anniversary date of such policies.
Notwithstanding the foregoing, it is understood that policies in force on
July 1, 1998, shall be allocated to this Contract. Policies shall remain
allocated to this Contract until the next renewal date or premium
anniversary date.
Article III - Territory
This Contract shall only apply to policies issued to insureds domiciled in the
State of Florida, but this limitation shall not apply to losses if the Company's
policies provide coverage outside the aforesaid territorial limits.
Article IV - Exclusions
This Contract does not apply to and specifically excludes the following:
1. All business not included in Article I.
2. All excess of loss reinsurance assumed by the Company.
3. Reinsurance assumed by the Company under obligatory reinsurance
agreements, except agency reinsurance where the policies involved
are to be reunderwritten in accordance with the underwriting
standards of the Company and reissued as Company policies at the
next anniversary or expiration date.
4. Financial guarantee and insolvency.
5. Flood and/or earthquake when written on a stand-alone basis.
6. Mortgage Impairment insurances and similar kinds of insurances,
however styled.
7. Workers' Compensation except as respects domestic employees.
8. Nuclear risks as defined in the "Nuclear Incident Exclusion Clause -
Physical Damage - Reinsurance" and the "Nuclear Incident Exclusion
Clause - Liability - Reinsurance" attached to and forming part of
this Contract.
9. Loss or damage caused by or resulting from 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
this exclusion shall not apply to loss or damage covered under a
standard policy with a standard War Exclusion Clause.
10. This Contract excludes loss and/or damage and/or costs and/or
expenses arising from asbestos presence and/or seepage and/or
pollution and/or contamination, other than contamination from smoke.
Nevertheless, this exclusion does not preclude payment of the cost
of removing debris of property damaged by a loss otherwise covered
hereunder, subject always to a limit of not more than $10,000 plus
25% of the Company's property loss under the applicable original
policy. However, this exclusion will not apply where there has been
a final court ruling that the Company's asbestos and/or seepage
and/or pollution and/or contamination exclusion is invalid or
unenforceable.
11. Liability as a member, subscriber or reinsurer of any Pool, Syndicate or
Association; and any combination of insurers or reinsurers formed for the
purpose of covering specific perils, specific classes of business or for
the purpose of insuring risks located in specific geographical areas.
However, this exclusion shall not apply to residual market mechanisms,
including but not limited to FAIR Plans, Joint Underwriting Associations,
or to Coastal Pools, Beach Plans or similar plans, however styled. It is
understood and agreed, however, that this reinsurance does not include any
increase in liability to the Company resulting from (a) the inability of
any other participant in a residual market mechanism, including but not
limited to a FAIR Plan, Joint Underwriting Association, Coastal Pool, Beach
Plan or similar plan, to meet its liability, or (b) any claim against such
a residual market mechanism, including but not limited to a FAIR Plan,
Joint Underwriting Association, Coastal Pool, Beach Plan or similar plan,
or any participant therein, including the Company, whether by way of
subrogation or otherwise, brought by or on behalf of any insolvency fund.
Article V - Retention and Limit
A. As respects business subject to this Contract, the Company shall retain
and be liable for 25.0% of its net liability. The Company shall cede to
the Reinsurer and the Reinsurer agrees to accept 75.0% of the Company's
net liability.
B. The Company shall purchase or be deemed to have purchased inuring
reinsurance to limit its loss to the following amounts:
1. Homeowners Multiple Peril (Section I, Coverage A), $500,000 each risk;
2. Homeowners Multiple Peril (Section II), $500,000 each risk.
C. The Company shall be the sole judge of what constitutes "one risk".
D. As respects the interim period, the Reinsurer's provisional limit of
liability for property losses arising out of any one loss occurrence shall
be $5,000,000 (exclusive of loss in excess of policy limits, extra
contractual obligations, loss adjustment expense or any assessments from
any FAIR plans, Joint Underwriting Associations, Coastal Pools, Beach Plans
or similar plans or any insolvency fund or guaranty fund). After expiration
of the interim period, the Reinsurer's provisional limit of liability for
property losses arising out of any one loss occurrence shall be 200% of the
actual gross ceded property premium hereunder (exclusive of loss in excess
of policy limits, extra contractual obligations, loss adjustment expense or
any assessments from any FAIR plans, Joint Underwriting Associations,
Coastal Pools, Beach Plans or similar plans or any insolvency fund or
guaranty fund).
However, it is understood that the Reinsurer's final limit of liability
for losses (including those losses occurring during the interim period),
not including any loss adjustment expense, incurred from any one loss
occurrence shall ultimately be calculated in accordance with paragraph A
above, subject to the maximum limits of liability specified in paragraph
F.
E. "Interim period" as used herein shall mean the period from the effective
date of this Contract through the date that the Company's gross ceded
property premium hereunder exceeds $2,500,000.
F. Notwithstanding the provisions of paragraph D above, in no event shall the
Reinsurer's liability for property losses arising out of any one loss
occurrence exceed 200% of the gross ceded property premium hereunder,
after deduction for inuring reinsurance, subject to a maximum of
$25,000,000 (exclusive of loss in excess of policy limits, extra
contractual obligations, loss adjustment expense or any assessments from
any FAIR plans, Joint Underwriting Associations, Coastal Pools, Beach
Plans or similar plans or any insolvency fund or guaranty fund).
G. Notwithstanding the provisions of paragraph A above, in no event shall the
Reinsurer's liability for losses from any assessments from any FAIR plans,
Joint Underwriting Associations or to Coastal Pools, Beach Plans or
similar plans or any insolvency fund or guaranty fund exceed $25,000,000
during the term of this Contract.
H. In the event the Company suffers losses arising out of the same loss
occurrence involving two or more separate policies allocated to this
Contract and to any prior or replacement contract, if any, the loss
occurrence limitation specified in paragraphs D and E above shall be
reduced to the percentage that the loss under policies allocated to this
Contract bears to the Company's total losses arising out of that loss
occurrence.
Article VI - Assessments
A. The provisions of Article V shall apply to a proportion of any assessments
made against the Company pursuant to those laws and regulations creating
obligatory funds (including insurance guaranty and insolvency funds to the
extent that such costs are transferable to the policyholder), pools, joint
underwriting associations, FAIR plans and similar plans, said proportion
to be the proportion of the Company's total premiums causing the
assessment which were or are subject to this Contract.
B. Upon expiration of this Contract, the provisions of this Article shall
continue to apply for as long as the Company is required to accept
assignments and/or assessments because of the business reinsured
hereunder.
Article VII - Loss in Excess of Policy Limits/ECO
A. In the event the Company pays or is held liable to pay an amount of loss in
excess of its policy limit, but otherwise within the terms of its policy
(hereinafter called "loss in excess of policy limits") or any punitive,
exemplary, compensatory or consequential damages, other than loss in excess
of policy limits (hereinafter called "extra contractual obligations")
because of alleged or actual bad faith or negligence on its part in
rejecting a settlement within policy limits, or in discharging its duty to
defend or prepare the defense in the trial of an action against its
policyholder, or in discharging its duty to prepare or prosecute an appeal
consequent upon such an action, or in otherwise handling a claim under a
policy subject to this Contract, the loss in excess of policy limits and/or
the extra contractual obligations shall be added to the Company's loss
(including loss adjustment expense), if any, under the policy involved, and
the sum thereof shall be subject to the provisions of Article V.
B. An extra contractual obligation shall be deemed to have occurred on the
same date as the loss covered or alleged to be covered under the policy.
C. Notwithstanding anything stated herein, this Contract shall not apply to
any loss in excess of policy limits or any extra contractual obligation
incurred by the Company as a result of any fraudulent and/or criminal act
by any officer or director of the Company acting individually or
collectively or in collusion with any individual or corporation or any
other organization or party involved in the presentation, defense or
settlement of any claim covered hereunder.
D. Recoveries from any form of insurance or reinsurance which protects the
Company against claims the subject matter of this Article shall inure to
the benefit of this Contract.
Article VIII - Claims and Loss Adjustment Expense
A. Losses shall be reported by the Company in summary form as hereinafter
provided, but the Company shall notify the Reinsurer immediately when a
specific case involves unusual circumstances or large loss possibilities.
The Reinsurer shall have the right to participate, at its own expense, in
the defense or control of any claim or suit or proceeding involving this
reinsurance.
B. All loss settlements made by the Company, whether under strict policy
conditions or by way of compromise, shall be binding upon the Reinsurer,
and the Reinsurer agrees to pay or allow, as the case may be, its
proportion of each such settlement in accordance with Article XIII.
C. In the event of a claim under a policy subject hereto, the Reinsurer shall
be liable for its proportionate share of loss adjustment expense incurred
by the Company in connection therewith, and shall be credited with its
proportionate share of any recoveries of such expense. Loss adjustment
expense shall include litigation expenses, both prejudgment and
postjudgment interest, and legal expenses incurred in direct connection
with legal actions, including but not limited to declaratory judgment
actions, regardless of how such expenses are classified for statutory
reporting purposes. "Declaratory judgment actions" are defined as those
actions brought to determine the Company's defense and/or indemnification
obligations that are allocable only to specific policies and claims covered
under this Contract. Any declaratory judgment expense shall be deemed to
have been fully incurred on the same date as the original loss (if any)
giving rise to the action. Loss adjustment expense shall not include office
expenses or salaries of the Company's regular employees.
Article IX - Salvage and Subrogation
The Reinsurer shall be credited with its proportionate share of salvage (i.e.,
reimbursement obtained or recovery made by the Company, less the actual cost,
excluding salaries of officials and employees of the Company, and sums paid to
attorneys as retainer, of obtaining such reimbursement or making such recovery)
on account of claims and settlements involving reinsurance hereunder. The
Company hereby agrees to enforce its rights to salvage or subrogation relating
to any loss, a part of which loss was sustained by the Reinsurer, and to
prosecute all claims arising out of such rights.
Article X - Florida Hurricane Catastrophe Fund
A. Any loss reimbursement the Company receives under the Florida Hurricane
Catastrophe Fund (FHCF) as a result of loss occurrences commencing during
the term of this Contract shall be deemed to be salvage received by the
Company in determining ultimate net loss under this Contract. If the
salvage amount is based on the Company's losses in more than one loss
occurrence and the FHCF does not designate the amount allocable to each
loss occurrence, the salvage amount shall be prorated in the proportion
that the Company's losses in each loss occurrence bear to the Company's
total losses arising out of all loss occurrences to which the salvage
applies. If, as a result of such salvage, the loss to the Reinsurer under
this Contract in any one loss occurrence is less than the amount previously
paid by the Reinsurer, the Company shall promptly remit the difference to
the Reinsurer.
B. Any return premium due the Company under this Contract as a result of a
salvage payment made to the Reinsurer in accordance with paragraph A shall
be payable by the Reinsurer concurrently with payment by the Company of
the salvage amount.
C. Any reimbursement premiums, equalization charge or emergency assessment
paid by the Company under the FHCF shall be deemed to be premiums paid for
inuring reinsurance.
Article XI - Original Conditions
A. All reinsurance under this Contract shall be subject to the same rates,
terms, conditions, waivers and interpretations and to the same
modifications and alterations as the respective policies of the Company.
However, in no event shall this be construed in any way to provide
coverage outside the terms and conditions set forth in this Contract. The
Reinsurer shall be credited with its exact proportion of the original
premiums received by the Company (net of rebates, policy fees or
equivalent charges, other service fees or brokerage fees), prior to
disbursement of any dividends, but after deduction of premiums, if any,
ceded by the Company for inuring reinsurance.
B. Nothing herein shall in any manner create any obligations or establish any
rights against the Reinsurer in favor of any third party or any persons
not parties to this Contract.
Article XII - Sliding Scale Commission
A. The Reinsurer shall allow the Company a 32.0% provisional commission on
all premiums ceded to the Reinsurer hereunder. The Company shall allow the
Reinsurer return commission on return premiums at the same rate. The
provisional commission allowed the Company shall be adjusted periodically
in accordance with the provisions set forth herein.
B. The adjusted commission rate shall be calculated as follows and be applied
to premiums earned for the term of this Contract:
1. If the ratio of losses incurred to premiums earned is 59.0% or
greater, the adjusted commission rate for the term of this Contract
shall be 26.0%
2. If the ratio of losses incurred to premiums earned is less than
59.0%, but not less than 50.0%, the adjusted commission rate for the
term of this Contract shall be 26.0%, plus 67.0% of the difference
in percentage points between 59.0% and the actual ratio of losses
incurred to premiums earned;
3. If the ratio of losses incurred to premiums earned is less than
50.0%, but not less than 40.0%, the adjusted commission rate for the
term of this Contract shall be 32.0% plus 60.0% of the difference in
percentage points between 50.0% and the actual ratio of losses
incurred to premiums earned;
4. If the ratio of losses incurred to premiums earned is 40.0% or less,
the adjusted commission rate for the term of this Contract shall be
38.0%.
C. Within 30 days after 12 months following the expiration of this Contract,
the Company shall calculate and report the adjusted commission on premiums
earned for the term of this Contract. If the adjusted commission on
premiums earned is less than commissions previously allowed by the
Reinsurer on premiums earned for the term of this Contract, the Company
shall remit the difference to the Reinsurer with its report. If the
adjusted commission on premiums earned is greater than commissions
previously allowed by the Reinsurer on premiums earned for the term of
this Contract, the Reinsurer shall remit the difference to the Company as
promptly as possible after receipt and verification of the Company's
report.
D. In the event the adjusted commission calculation for the term of this
Contract is based partly on ceded reserves for losses and/or loss
adjustment expense, the adjusted commission shall be recalculated within
30 days after the end of each subsequent 12-month period until all losses
under policies with effective or renewal dates during the term of this
Contract have been settled. Any balance shown to be due either party as a
result of any such recalculation shall be remitted promptly by the other
party.
E. "Losses incurred" as used herein shall mean ceded losses and loss
adjustment expense paid as of the effective date of calculation, plus the
ceded reserves for losses and loss adjustment expense outstanding as of
the same date, it being understood and agreed that all losses and related
loss adjustment expense under policies with effective or renewal dates
during the term of this Contract shall be charged to this Contract,
regardless of the date said losses actually occur, unless this Contract
expires on a "cutoff" basis, in which event the Reinsurer shall have no
liability for losses occurring after the effective date of expiration.
F. "Premiums earned" as used herein shall mean ceded net written premiums for
policies with effective or renewal dates during the term of this Contract,
less the unearned portion thereof as of the effective date of calculation,
it being understood and agreed that all premiums for policies with
effective or renewal dates during the term of this Contract shall be
credited to this Contract, unless this Contract expires on a "cutoff"
basis, in which event the unearned reinsurance premium (less previously
allowed ceding commission) as of the effective date of expiration shall be
returned by the Reinsurer to the Company.
G. It is expressly agreed that the ceding commission allowed the Company
includes provision for all dividends, commissions, taxes, assessments, and
all other expenses of whatever nature, except loss adjustment expense.
Article XIII - Reports and Remittances
A. As promptly as possible after the effective date of this Contract, the
Company shall remit the Reinsurer's share of the unearned premium (less
provisional commission thereon) applicable to subject business in force at
the effective date of this Contract.
B. Within 30 days after the end of each month, the Company shall report to
the Reinsurer:
1. Ceded net written premium for the month;
2. Ceded net collected premium for the month;
3. Provisional commission on (2) above;
4. Ceded losses and loss adjustment expense paid during the month;
5. Ceded unearned premiums and ceded outstanding loss reserves as of the
end of the month.
Within 45 days after the end of each month, the positive balance of (2)
less (3) less (4) shall be remitted by the Company. Any balance shown to
be due the Company shall be remitted by the Reinsurer within 45 days after
the end of the month of account.
B. Annually, the Company shall furnish the Reinsurer with such information as
the Reinsurer may require to complete its Annual Convention Statement.
Article XIV - Loss Occurrence (NMA 2244/BRMA 27A)
A. The term "loss occurrence" shall mean the sum of all individual losses
directly occasioned by any one disaster, accident or loss or series of
disasters, accidents or losses arising out of one event which occurs
within the area of one state of the United States or province of Canada
and states or provinces contiguous thereto and to one another. However,
the duration and extent of any one "loss occurrence" shall be limited to
all individual losses sustained by the Company occurring during any period
of 168 consecutive hours arising out of and directly occasioned by the
same event, except that the term "loss occurrence" shall be further
defined as follows:
1. As regards windstorm, hail, tornado, hurricane, cyclone, including
ensuing collapse and water damage, all individual losses sustained
by the Company occurring during any period of 72 consecutive hours
arising out of and directly occasioned by the same event. However,
the event need not be limited to one state or province or states or
provinces contiguous thereto.
2. As regards riot, riot attending a strike, civil commotion, vandalism
and malicious mischief, all individual losses sustained by the
Company occurring during any period of 72 consecutive hours within
the area of one municipality or county and the municipalities or
counties contiguous thereto arising out of and directly occasioned
by the same event. The maximum duration of 72 consecutive hours may
be extended in respect of individual losses which occur beyond such
72 consecutive hours during the continued occupation of an assured's
premises by strikers, provided such occupation commenced during the
aforesaid period.
3. As regards earthquake (the epicentre of which need not necessarily
be within the territorial confines referred to in paragraph A of
this Article) and fire following directly occasioned by the
earthquake, only those individual fire losses which commence during
the period of 168 consecutive hours may be included in the Company's
"loss occurrence."
4. As regards "freeze," only individual losses directly occasioned by
collapse, breakage of glass and water damage (caused by bursting
frozen pipes and tanks) may be included in the Company's "loss
occurrence."
B. Except for those "loss occurrences" referred to in subparagraphs 2 of
paragraph A above, the Company may choose the date and time when any such
period of consecutive hours commences, provided that it is not earlier
than the date and time of the occurrence of the first recorded individual
loss sustained by the Company arising out of that disaster, accident or
loss, and provided that only one such period of 168 consecutive hours
shall apply with respect to one event, except for any "loss occurrences"
referred to in subparagraph 1 of paragraph A above where only one such
period of 72 consecutive hours shall apply with respect to one event,
regardless of the duration of the event.
C. However, as respects those "loss occurrences" referred to in subparagraph
2 of paragraph A above, if the disaster, accident or loss occasioned by
the event is of greater duration than 72 consecutive hours, then the
Company may divide that disaster, accident or loss into two or more "loss
occurrences," provided that no two periods overlap and no individual loss
is included in more than one such period, and provided that no period
commences earlier than the date and time of the occurrence of the first
recorded individual loss sustained by the Company arising out of that
disaster, accident or loss.
D. No individual losses occasioned by an event that would be covered by 72
hours clauses may be included in any "loss occurrence" claimed under the
168 hours provision.
Article XV - Late Payments
A. The provisions of this Article shall not be implemented unless
specifically invoked, in writing, by one of the parties to this Contract.
B. In the event any premium, loss or other payment due either party is not
received by the intermediary named in Article XXV (hereinafter referred to
as the "Intermediary") by the payment due date, the party to whom payment
is due, may, by notifying the Intermediary in writing, require the debtor
party to pay, and the debtor party agrees to pay, an interest penalty on
the amount past due calculated for each such payment on the last business
day of each month as follows:
1. The number of full days which have expired since the due date or the
last monthly calculation, whichever the lesser, times
2. 1/365ths of the 6-month United States Treasury ▇▇▇▇ rate as quoted
in The Wall Street Journal on the first business day of the month
for which the calculation is made; times
3. The amount past due, including accrued interest.
It is agreed that interest shall accumulate until payment of the original
amount due plus interest penalties have been received by the Intermediary.
C. The establishment of the due date shall, for purposes of this Article, be
determined as follows:
1. As respects the payment of routine deposits and premiums due the
Reinsurer, the due date shall be as provided for in the applicable
section of this Contract. In the event a due date is not
specifically stated for a given payment, it shall be deemed due 30
days after the date of transmittal by the Intermediary of the
initial billing for each such payment.
2. Any claim or loss payment due the Company hereunder shall be deemed
due 5 business days after the proof of loss or demand for payment is
transmitted to the Reinsurer. If such loss or claim payment is not
received within the 5 days, interest will accrue on the payment or
amount overdue in accordance with paragraph B above, from the date
the proof of loss or demand for payment was transmitted to the
Reinsurer.
3. As respects any payment, adjustment or return due either party not
otherwise provided for in subparagraphs 1 and 2 of paragraph C
above, the due date shall be as provided for in the applicable
section of this Contract. In the event a due date is not
specifically stated for a given payment, it shall be deemed due 10
business days following transmittal of written notification that the
provisions of this Article have been invoked.
For purposes of interest calculations only, amounts due hereunder shall be
deemed paid upon receipt by the Intermediary.
D. Nothing herein shall be construed as limiting or prohibiting a Subscribing
Reinsurer from contesting the validity of any claim, or from participating
in the defense or control of any claim or suit, or prohibiting either party
from contesting the validity of any payment or from initiating any
arbitration or other proceeding in accordance with the provisions of this
Contract. If the debtor party prevails in an arbitration or other
proceeding, then any interest penalties due hereunder on the amount in
dispute shall be null and void. If the debtor party loses in such
proceeding, then the interest penalty on the amount determined to be due
hereunder shall be calculated in accordance with the provisions set forth
above unless otherwise determined by such proceedings. If a debtor party
advances payment of any amount it is contesting, and proves to be correct
in its contestation, either in whole or in part, the other party shall
reimburse the debtor party for any such excess payment made plus interest
on the excess amount calculated in accordance with this Article.
E. Interest penalties arising out of the application of this Article that are
$100 or less from any party shall be waived unless there is a pattern of
late payments consisting of three or more items over the course of any
12-month period.
Article XVI - Offset (BRMA 36C)
The Company and the Reinsurer shall have the right to offset any balance or
amounts due from one party to the other under the terms of this Contract. The
party asserting the right of offset may exercise such right any time whether the
balances due are on account of premiums or losses or otherwise.
Article XVII - Access to Records (BRMA 1D)
The Reinsurer or its designated representatives shall have access at any
reasonable time to all records of the Company which pertain in any way to this
reinsurance.
Article XVIII - Errors and Omissions (BRMA 14F)
Inadvertent delays, errors or omissions made in connection with this Contract or
any transaction hereunder shall not relieve either party from any liability
which would have attached had such delay, error or omission not occurred,
provided always that such error or omission is rectified as soon as possible
after discovery.
Article XIX - Taxes (BRMA 50B)
In consideration of the terms under which this Contract is issued, the Company
will not claim a deduction in respect of the premium hereon when making tax
returns, other than income or profits tax returns, to any state or territory of
the United States of America or the District of Columbia.
Article XX - Unearned Premium and Loss Reserves
A. If the Reinsurer is unauthorized in any state of the United States of
America or the District of Columbia or rated B+ or less by A.M. Best, the
Reinsurer agrees to fund its share of the Company's ceded unearned premium
and outstanding loss and loss adjustment expense reserves (including
incurred but not reported loss reserves) by:
1. Clean, irrevocable and unconditional letters of credit issued and
confirmed, if confirmation is required by the insurance regulatory
authorities involved, by a bank or banks meeting the NAIC Securities
Valuation Office credit standards for issuers of letters of credit
and acceptable to said insurance regulatory authorities; and/or
2. Escrow accounts for the benefit of the Company; and/or
3. Cash advances;
if, without such funding, a penalty would accrue to the Company on any
financial statement it is required to file with the insurance regulatory
authorities involved. The Reinsurer, at its sole option, may fund in other
than cash if its method and form of funding are acceptable to the
insurance regulatory authorities involved.
B. With regard to funding in whole or in part by letters of credit, it is
agreed that each letter of credit will be in a form acceptable to insurance
regulatory authorities involved, will be issued for a term of at least one
year and will include an "evergreen clause," which automatically extends
the term for at least one additional year at each expiration date unless
written notice of non-renewal is given to the Company not less than 30 days
prior to said expiration date. The Company and the Reinsurer further agree,
notwithstanding anything to the contrary in this Contract, that said
letters of credit may be drawn upon by the Company or its successors in
interest at any time, without diminution because of the insolvency of the
Company or the Reinsurer, but only for one or more of the following
purposes:
1. To reimburse itself for the Reinsurer's share of unearned premiums
returned to insureds on account of policy cancellations, unless paid
in cash by the Reinsurer;
2. To reimburse itself for the Reinsurer's share of losses and/or loss
adjustment expense paid under the terms of policies reinsured
hereunder, unless paid in cash by the Reinsurer;
3. To reimburse itself for the Reinsurer's share of any other amounts
claimed to be due hereunder, unless paid in cash by the Reinsurer;
4. To fund a cash account in an amount equal to the Reinsurer's share
of any ceded unearned premium and/or outstanding loss and loss
adjustment expense reserves (including incurred but not reported
loss reserves) funded by means of a letter of credit which is under
non-renewal notice, if said letter of credit has not been renewed or
replaced by the Reinsurer 10 days prior to its expiration date;
5. To refund to the Reinsurer any sum in excess of the actual amount
required to fund the Reinsurer's share of the Company's ceded
unearned premium and/or outstanding loss and loss adjustment expense
reserves (including incurred but not reported loss reserves), if so
requested by the Reinsurer.
In the event the amount drawn by the Company on any letter of credit is in
excess of the actual amount required for B(1), B(2) or B(4), or in the
case of B(3), the actual amount determined to be due, the Company shall
promptly return to the Reinsurer the excess amount so drawn.
Article XXI - Insolvency
A. In the event of the insolvency of one or more of the reinsured companies,
this reinsurance shall be payable directly to the company or to its
liquidator, receiver, conservator or statutory successor immediately upon
demand, with reasonable provision for verification, on the basis of the
liability of the company without diminution because of the insolvency of
the company or because the liquidator, receiver, conservator or statutory
successor of the company has failed to pay all or a portion of any claim.
It is agreed, however, that the liquidator, receiver, conservator or
statutory successor of the company shall give written notice to the
Reinsurer of the pendency of a claim against the company indicating the
policy or bond reinsured which claim would involve a possible liability on
the part of the Reinsurer within a reasonable time after such claim is
filed in the conservation or liquidation proceeding or in the receivership,
and that during the pendency of such claim, the Reinsurer may investigate
such claim and interpose, at its own expense, in the proceeding where such
claim is to be adjudicated, any defense or defenses that it may deem
available to the company or its liquidator, receiver, conservator or
statutory successor. The expense thus incurred by the Reinsurer shall be
chargeable, subject to the approval of the Court, against the company as
part of the expense of conservation or liquidation to the extent of a pro
rata share of the benefit which may accrue to the company solely as a
result of the defense undertaken by the Reinsurer.
B. Where two or more reinsurers are involved in the same claim and a majority
in interest elect to interpose defense to such claim, the expense shall be
apportioned in accordance with the terms of this Contract as though such
expense had been incurred by the company.
C. It is further understood and agreed that, in the event of the
insolvency of one or more of the reinsured companies, the
reinsurance under this Contract shall be payable directly by the
Reinsurer to the company or to its liquidator, receiver or
statutory successor, except as provided by Section 4118(a) of the
New York Insurance Law or except (1) where this Contract
specifically provides another payee of such reinsurance in the
event of the insolvency of the company or (2) where the Reinsurer
with the consent of the direct insured or insureds has assumed
such policy obligations of the company as direct obligations of
the Reinsurer to the payees under such policies and in
substitution for the obligations of the company to such payees.
Article XXII - Arbitration
A. As a condition precedent to any right of action hereunder, in the
event of any dispute or difference of opinion hereafter arising
with respect to this Contract, it is hereby mutually agreed that
such dispute or difference of opinion shall be submitted to
arbitration. One Arbiter shall be chosen by the Company, the
other by the Reinsurer, and an Umpire shall be chosen by the two
Arbiters before they enter upon arbitration, all of whom shall be
active or retired disinterested executive officers of insurance
or reinsurance companies or Lloyd's London Underwriters. In the
event that either party should fail to choose an Arbiter within
30 days following a written request by the other party to do so,
the requesting party may choose two Arbiters who shall in turn
choose an Umpire before entering upon arbitration. If the two
Arbiters fail to agree upon the selection of an Umpire within 30
days following their appointment, each Arbiter shall nominate
three candidates within 10 days thereafter, two of whom the other
shall decline, and the decision shall be made by drawing lots.
B. Each party shall present its case to the Arbiters within 30 days following
the date of appointment of the Umpire. The Arbiters shall consider this
Contract as an honorable engagement rather than merely as a legal
obligation and they are relieved of all judicial formalities and may
abstain from following the strict rules of law. The decision of the
Arbiters shall be final and binding on both parties; but failing to agree,
they shall call in the Umpire and the decision of the majority shall be
final and binding upon both parties. Judgment upon the final decision of
the Arbiters may be entered in any court of competent jurisdiction.
C. If more than one reinsurer is involved in the same dispute, all such
reinsurers shall constitute and act as one party for purposes of this
Article and communications shall be made by the Company to each of the
reinsurers constituting one party, provided, however, that nothing herein
shall impair the rights of such reinsurers to assert several, rather than
joint, defenses or claims, nor be construed as changing the liability of
the reinsurers participating under the terms of this Contract from several
to joint.
D. Each party shall bear the expense of its own Arbiter, and shall jointly
and equally bear with the other the expense of the Umpire and of the
arbitration. In the event that the two Arbiters are chosen by one party,
as above provided, the expense of the Arbiters, the Umpire and the
arbitration shall be equally divided between the two parties.
E. Any arbitration proceedings shall take place at Calabasas, California
unless otherwise mutually agreed upon by the parties to this Contract, but
notwithstanding the location of the arbitration, all proceedings pursuant
hereto shall be governed by the law of the state in which the Company has
its principal office.
Article XXIII - Service of Suit (BRMA 49C)
(Applicable if the Reinsurer is not domiciled in the United States of America,
and/or is not authorized in any State, Territory or District of the United
States where authorization is required by insurance regulatory authorities)
A. It is agreed that in the event the Reinsurer fails to pay any amount
claimed to be due hereunder, the Reinsurer, at the request of the Company,
will submit to the jurisdiction of a court of competent jurisdiction
within the United States. Nothing in this Article constitutes or should be
understood to constitute a waiver of the Reinsurer's rights to commence an
action in any court of competent jurisdiction in the United States, to
remove an action to a United States District Court, or to seek a transfer
of a case to another court as permitted by the laws of the United States
or of any state in the United States.
B. Further, pursuant to any statute of any state, territory or district of
the United States which makes provision therefor, the Reinsurer hereby
designates the party named in its Interests and Liabilities Agreement, or
if no party is named therein, the Superintendent, Commissioner or Director
of Insurance or other officer specified for that purpose in the statute,
or his successor or successors in office, as its true and lawful attorney
upon whom may be served any lawful process in any action, suit or
proceeding instituted by or on behalf of the Company or any beneficiary
hereunder arising out of this Contract.
Article XXIV - Agency Agreement
If more than one reinsured company is named as a party to this Contract, the
first named company shall be deemed the agent of the other reinsured companies
for purposes of sending or receiving notices required by the terms and
conditions of this Contract, and for purposes of remitting or receiving any
monies due any party.
Article XXV - Intermediary (BRMA 23A)
▇. ▇. ▇▇▇▇▇▇ Co. is hereby recognized as the Intermediary negotiating this
Contract for all business hereunder. All communications (including but not
limited to notices, statements, premium, return premium, commissions, taxes,
losses, loss adjustment expense, salvages and loss settlements) relating thereto
shall be transmitted to the Company or the Reinsurer through ▇. ▇. ▇▇▇▇▇▇ Co.,
Reinsurance Services, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
Payments by the Company to the Intermediary shall be deemed to constitute
payment to the Reinsurer. Payments by the Reinsurer to the Intermediary shall be
deemed to constitute payment to the Company only to the extent that such
payments are actually received by the Company.
In Witness Whereof, the Company by its duly authorized representative has
executed this Contract as of the date undermentioned at:
Calabasas, California, this _______ day of ________________________199___.
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Condor Insurance Company
Table of Contents
Article Page
I Classes of Business Reinsured 1
II Term 1
III Territory 2
IV Exclusions 3
V Retention and Limit 4
VI Assessments 5
VII Loss in Excess of Policy Limits/ECO 5
VIII Claims and Loss Adjustment Expense 6
IX Salvage and Subrogation 7
X Florida Hurricane Catastrophe Fund 7
XI Original Conditions 7
XII Sliding Scale Commission 8
XIII Reports and Remittances 9
XIV Loss Occurrence (NMA 2244/BRMA 27A) 10
XV Late Payments 11
XVI Offset (BRMA 36C) 13
XVII Access to Records (BRMA 1D) 13
XVIII Errors and Omissions (BRMA 14F) 13
XIX Taxes (BRMA 50B) 13
XX Unearned Premium and Loss Reserves 13
XXI Insolvency 15
XXII Arbitration 15
XXIII Service of Suit (BRMA 49C) 16
XXIV Agency Agreement ▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ (▇▇▇▇ ▇▇▇) 17