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EXHIBIT 10.6
CLAIMS LIFE CYCLE
SERVICES AGREEMENT
CLARENDON
This Claims Life Cycle Services Agreement ("Agreement") is effective
as of the 15th day of August, 1996 ("Effective Date"), by and between Millers
Integrated Claims Resources, Inc. d/b/a MiliRisk, a Texas corporation with
principal offices at ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ("MiliRisk"), and
Blanch Wholesale Insurance Services, Inc. and Blanch Insurance Services, Inc.,
both Texas corporations having their principal place of business at ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ("Customer").
Whereas, Customer has entered into a General Agency Agreement (the
"GAA") with Clarendon National Insurance Company ("Clarendon") to administer
certain insurance policies previously issued by Allstate Insurance company
("Allstate");
Whereas, Customer is desirous of MiliRisk providing Claims Life Cycle
Services for which Customer is responsible under the GAA, as set forth in this
Agreement; and
Whereas, MiliRisk wishes to provide such Services for Customer; and
Whereas, the parties hereto wish to reduce their Agreement to writing;
Now, therefore, for and in consideration of the premises set forth
below and other good and valuable consideration, the receipt and sufficiency of
which is expressly acknowledged, Customer and MiliRisk hereby agree as follows:
ARTICLE 1. SERVICES
The "Services" to be performed by MiliRisk are set forth in Exhibit I
to this Agreement.
ARTICLE 2. TERM
2.1 The term of this Agreement shall commence on the Effective
Date and shall have a "Minimum Term" of 36 full calendar
months unless terminated earlier pursuant to the provisions of
this Agreement. The Agreement shall automatically be renewed
and extended after the conclusion of the Minimum Term for an
additional renewal term or terms of 36 months unless
terminated pursuant to the provisions of Article 8.
2.2 The "Implementation Period" shall begin on the Effective Date
of this Agreement and shall end on the date MiliRisk notifies
Customer that MiliRisk is capable of receiving all future
claims on behalf of Customer. During the Implementation
Period, MiliRisk shall prepare an analysis of the lines of
business for inclusion within the terms of this Agreement.
Customer shall assist MiliRisk during such "Implementation
Period" with the gathering of appropriate data, information,
background, and other facts as needed by MiliRisk to enable
MiliRisk to perform the Services enumerated in Exhibit I of
this Agreement.
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2.3 Notwithstanding the foregoing provisions relating to the
Minimum Term, and any subsequent renewal terms, should
Customer attempt to terminate or repudiate this Agreement
prior to the end of the Minimum Term without cause provided
for under Sections 8.2 or 8.3, Customer shall pay a
termination fee to MiliRisk within thirty (30) days after the
date it attempts to terminate or repudiate this Agreement. A
termination fee totaling $500,000 shall be due MiliRisk, if
Customer's attempt to terminate or repudiate this Agreement
occurs within the first 3 months of the Minimum Term. If the
attempt to terminate or repudiate this Agreement occurs after
the first 3 months, but before the end of the 6th month, a
termination fee is due MiliRisk in the amount of $400,000. If
the attempt to terminate or repudiate this Agreement occurs
after the 6th month, but before the end of the 12th month, a
termination fee is due MiliRisk in the amount of $300,000. If
the attempt to terminate or repudiate this Agreement occurs
after the 12th month, but before the end of the 24th month, a
termination fee is due MiliRisk in the amount of $250,000. If
the attempt to terminate or repudiate this Agreement occurs
after the 24th month, but before the end of the 36th month, a
termination fee is due MiliRisk in the amount of $200,000. If
the attempt to terminate or repudiate this Agreement occurs
after the 36th month, MiliRisk shall not be entitled to a
termination fee. The termination fees referenced in this
section are in addition to and not in lieu of other
compensation due to MiliRisk under this Agreement.
ARTICLE 3. DUTIES OF MILIRISK
3.1 During the Implementation Period, MiliRisk shall design,
construct, and implement software systems to provide claims
administration, management information, and other related
services all of which are as described in Exhibit I. In
addition, the Implementation Period will be used to assemble
the staff, arrange for furniture and fixtures, and prepare for
the start of business. All procedures required to conduct
business as well as the requisite staff training will occur
during this period.
3.2 MiliRisk shall dedicate the necessary human, equipment and
computer resources to provide and, during the term of this
Agreement, will provide, Customer with the Services enumerated
in Exhibit I of this Agreement for the Lines of Business and
States specified in Exhibit I.
3.3 MiliRisk shall investigate, evaluate, and handle each claim
reported within the established authority for claims as set
forth in Exhibit I attached hereto and made part of the
Agreement.
3.4 MiliRisk will designate an employee to act as liaison with
Customer to facilitate the provision of the Services.
3.5 MiliRisk shall maintain the confidentiality of data or
information which is the property of Customer and/or
Clarendon, and which is directly accessible to MiliRisk in the
implementation and performance of the Services.
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3.6 MiliRisk shall maintain complete, accurate and orderly claims
books, files, records and accounts of all transactions in
accordance with generally accepted insurance and accounting
practices.
3.7 MiliRisk shall maintain permanent copies of all claims and
correspondence related to the claims. MiliRisk shall not
destroy these permanent copies without the written permission
of the Customer for a period of at least five (5) years from
the date of the last file activity, or the period specified by
the applicable state statute regulating preservation of
records, whichever is longer. At the end of such five year
period, upon MiliRisk's written request for instructions, the
Customer shall authorize MiliRisk to either (a) destroy the
closed files or (b) return such files to Clarendon at
Clarendon's expense. Notwithstanding the foregoing, any claim
file involving a minor shall be separately identified and
returned to Clarendon at the end of such five year period.
Claim files shall be the property of both the Customer and
Clarendon. Upon an order of liquidation of Clarendon, the
files shall become the sole property of Clarendon or
Clarendon's estate. MiliRisk may, at its discretion, use
magnetic, optical, and other types of technology to store such
data.
3.8 All claims still open upon termination or cancellation of this
Agreement will require that one of the following to occur:
a. All open claims will be handled on a pre-agreed
annual fee per claim; or
b. All open claims will be handled on a time and expense
basis at then current prevailing rates; or
c. All claims will be returned to Customer, with any
holdover reverting to a time and expense basis at
then current prevailing rates.
MiliRisk will make this determination in its discretion unless
Clarendon has elected to runoff the business itself pursuant
to the GAA.
3.9 MiliRisk acknowledges and agrees that Clarendon, being at risk
and having ultimate responsibility for the claims to be
administered by MiliRisk, shall at all times have ultimate
discretion with respect to all matters pertaining to the
claims.
3.10 MiliRisk will not assume the responsibility for direct
notification to any excess or quota share insurance carrier of
claims; however, reports will be provided as required.
ARTICLE 4. DUTIES OF CUSTOMER
4.1 Customer agrees that all claims occurring during the term of
this Agreement will be reported to MiliRisk, unless otherwise
notified by the Customer and approved by MiliRisk. Customer
will provide all information relevant to claims subject to the
GAA to MiliRisk in order for MiliRisk to fulfill its duties
and obligations as set out in Exhibit I.
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4.2 Customer shall appoint a Project Manager with sufficient
authority within Customer's organization to facilitate
Customer's role as MiliRisk performs the Services enumerated
in Exhibit I of this Agreement.
ARTICLE 5. AUDIT PROVISIONS
5.1 MiliRisk shall maintain records of amounts billable to and
payments made on behalf of Customer. In addition, MiliRisk
shall maintain records of the data utilized to perform the
Services defined in Exhibit I of the Agreement; until five
years following the date of last file activity, or the period
specified by the applicable state statute, whichever is the
later unless such records are earlier returned to Customer.
MiliRisk agrees to provide reasonable supporting documentation
concerning any disputed invoice amount to Customer within 15
days after Customer provides written notification of the
dispute to MiliRisk. Customer and an auditor selected by
Customer shall have access to all such records upon mutually
agreed upon prior notice for the purposes of audit and
verification during normal business hours during the full term
of this Agreement and during the respective periods in which
MiliRisk is required to maintain such records. MiliRisk shall
provide access to its books, records and bank accounts to the
insurance department of the State of Florida in a form usable
by the department.
ARTICLE 6. PRICE AND PAYMENT
6.1 Customer agrees to pay Service Fees and Rates as specified in
Exhibit II hereto.
6.2 Except for Services Fees and Rates which are based upon a
percentage of incurred losses, the Services Fees and Rates in
Exhibit II hereto may be increased effective as of each
anniversary of the Effective Date during the existence of this
Agreement by the percentage change in the United States
Consumer Price Index for all Urban Users (CPI-U) published by
the United States Bureau of Labor Statistics, for the
immediately preceding calendar year. In the event a vendor
supplying any service or product to MiliRisk required for
MiliRisk to provide the Services to Customer increases its
rates charged to MiliRisk, MiliRisk may increase the
contracted rates set forth herein to include such increased
costs.
6.3 The Service Fees and Rates may increase if changes in the
Services mutually agreed to in writing substantially alter the
servicing personnel, equipment, or result in the servicing
being done on a different system.
6.4 When Customer requests MiliRisk personnel to travel to any
location for the purpose of performing work under this
Agreement, the Customer will, in addition to the charges
specified for Services, pay MiliRisk for all reasonable
travel, living and out-of-pocket expenses.
6.5 Customer agrees to pay all tariffs and taxes that are now or
may become applicable to the Services rendered hereunder, any
equipment used by MiliRisk solely for Customer communication
line, its use, lease, operation, control, transportation or
value pursuant to this Agreement, or as measured by payments
made by Customer
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to MiliRisk under this Agreement, or as required to be
collected by MiliRisk or paid by MiliRisk to tax authorities
based on this Agreement. This provision includes but is not
limited to sales, use, and personal property taxes, or any
other form of tax based on Services performed, equipment used,
and the communicating or storage of data, but does not include
taxes based upon the net income of MiliRisk.
6.6 Service Fees and Rates for Services will be due and payable 15
days after the close of a calendar month beginning the
effective date of the first policy issued.
6.7 Customer agrees that MiliRisk will have the right to
renegotiate the Service Fees in the event of statutory,
regulatory, or judicial changes that require additional
activities not contemplated at the inception of this
Agreement.
ARTICLE 7. LICENSE, TRADE SECRET AND PROPRIETARY RIGHTS
7.1 Although MiliRisk from time to time may use its own
proprietary computer software products in the performance of
the Services enumerated in Exhibit I of this Agreement, this
Agreement does not grant a license to Customer for the use of
any software products.
7.2 This Agreement grants to Customer no right to possess or
reproduce, or any other interest in, the computer software
programs performing all or any part of the Services or their
specifications in any tangible or intangible medium. Customer
may not mortgage, hypothecate, sell, assign, pledge, lease,
transfer, license or sublicense the computer software programs
performing all or any part of the Services, nor allow any
person, firm, or corporation to transmit, copy or reproduce
the computer software programs performing all or any part of
the Services or their specifications in whole or in part. In
the event Customer shall come into possession of the computer
software programs performing all or any part of the Services,
Customer shall immediately notify MiliRisk and return the
computer software programs performing the Services and all
copies of any kind thereof to MiliRisk upon MiliRisk's
request.
7.3 Customer promises and agrees not to disclose or otherwise make
computer software programs performing all or any part of the
Services available to any person other than employees of
Customer required to have such knowledge for normal use of
them. Customer agrees to obligate each such employee to a
level of care sufficient to protect the computer software
programs performing all or any part of the Services from
unauthorized disclosure. THE OBLIGATION OF CUSTOMER UNDER THIS
ARTICLE SHALL CONTINUE AFTER THIS AGREEMENT IS TERMINATED.
7.4 MiliRisk warrants and represents that it owns, or is licensed
with respect to, all software it will employ in the
performance of this Agreement. In the event this Agreement is
terminated, MiliRisk will grant a license, upon terms and
conditions set forth in a licensing agreement, to Customer
and/or Clarendon to use the software which MiliRisk employs in
the performance of this Agreement to the extent MiliRisk is
not otherwise prohibited from doing so by contract or by
operation of
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law. MiliRisk shall use its best efforts to deliver the
software, as well as all necessary manuals, to the Customer
immediately upon delivery of data to the Customer.
ARTICLE 8. TERMINATION
8.1 Either party may terminate this Agreement without cause at the
expiration of the Minimum Term set forth in Section 2.1,
provided the other party receives at least six (6) months
prior written notice of termination. Termination without cause
during any renewal term would also require six months notice.
8.2 Either party may terminate this Agreement upon breach by the
other party of any one or more of the terms and conditions of
this Agreement or the related Exhibits, provided that the
party in breach is notified in writing by the other party of
the breach and the breach is not cured or a satisfactory
resolution agreed upon in writing within thirty (30) days of
such written notification, or if such breach is non-monetary
and is of such a nature that it cannot reasonably be cured
within such time commenced to cure same and does not
diligently continue to and actually cure same within a
reasonable period thereafter. The terms and conditions of
MiliRisk referred to in this Section 8.2 shall include, but
shall not be limited to:
a. the obligation to observe and comply with applicable
laws, regulations, rules and rates affecting the
transaction of business hereunder; and
b. the obligation to provide any other Services under
this Agreement.
8.3 In the event either party makes a general assignment for the
benefit of creditors or files a voluntary petition in
bankruptcy or petitions for reorganization or arrangement
under the bankruptcy laws, or if a petition in bankruptcy is
filed against either party and remains undismissed for a
period of thirty (30) days, or if a receiver or trustee is
appointed for all or any part of the property and assets of
either party, the other party may terminate the Agreement
immediately.
8.4 This Agreement shall terminate automatically if the GAA is
terminated for any reason other than because of breach by the
Customer. The termination fee described in Section 2.3 still
applies to this situation.
8.5 Rights Upon Termination. Upon expiration or termination of
this Agreement:
a. The obligations of the Customer and MiliRisk to the
date of termination shall be discharged promptly;
b. MiliRisk shall promptly return to ale Customer any
forms or other supplies imprinted with the Customer's
or Clarendon's name, regardless of who incurred the
cost for same.
c. MiliRisk shall, at its sole expense, run off the
in-force business to normal expiration in accordance
with the provisions of this Agreement. The
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Customer, however, may elect to run off the in-force
business itself or through its designee, in which
case it may do so, and if this Agreement is
terminated because of a breach by MiliRisk, MiliRisk
shall nevertheless be liable for all expenses of the
run-off operation; however, if the termination is for
a reason other than as provided in Section 8.2, the
Customer, rather than MiliRisk, shall bear the
expenses of the run off if it elects to run off the
business itself or through its designee. The term
"run off" as used herein shall mean servicing claims
submitted under policies, providing reports as
required by this Agreement, and such other activities
as required of MiliRisk under this Agreement.
d. If MiliRisk is unable, or refuses to run off the
in-force policies, or if the Customer elects to run
off such policies itself or through its designee,
MiliRisk shall promptly provide the Customer, without
charge, with a tape back-up of all data files (the
"Data").
e. In any proceeding brought by the Customer or
Clarendon to recover premiums or return premiums or
other funds due hereunder to Clarendon or insureds
under the policies (hereinafter called "trust
funds"), MiliRisk shall be obligated to account on
its own records for such trust funds and to pay all
sums for which it cannot account. In any such
proceeding it shall be conclusively presumed that
MiliRisk is liable for trust funds which have not
been timely paid, and MiliRisk waives (i) any right
it may have to assert any counterclaim, crossclaim,
or set-off of any kind in the proceeding, and (ii)
any claim or defense based on or relating to its use
of the Customer's or Clarendon's reporting procedures
as provided for in this Agreement, or any
modification thereof. MiliRisk shall retain the right
to bring any separate proceeding it deems appropriate
to recover on any claims it may have, as a creditor
or otherwise, but the pendency of any such proceeding
shall not delay, hinder or defeat the Customer's or
Clarendon's right to promptly recover any trust funds
then due or to levy upon any judgment therefore.
ARTICLE 9. LIMITATION OF LIABILITY AND REMEDIES
9.1 If data is processed in error due to an error or defects in
the Services provided by MiliRisk, then upon MiliRisk
receiving notice of such error or defect, MiliRisk shall
reprocess such data without charge to Customer.
9.2 MiliRisk shall indemnify, protect, defend and hold Customer,
its officers, directors, shareholders and employees harmless
from and against any and all losses, damages, liabilities,
fines, settlements, penalties and judgements (including
reasonable costs and attorney's fees) (herein "Damages")
arising out of or resulting from the negligent, wilful or
intentional acts of MiliRisk performed in connection with this
Agreement or arising from a breach of this Agreement by
MiliRisk . Customer shall indemnify, protect, defend and hold
MiliRisk, its officers, directors, shareholders and employees
harmless from and against any and all Damages arising out of
or resulting from the negligent, willful or intentional acts
of Customer performed in connection with this Agreement or
arising from a breach of this Agreement by
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Customer. This indemnity shall survive the earlier expiration
or termination of this Agreement.
9.3 MiliRisk's liability to Customer for Damages arising from
errors and defects in performing the Services (whether the
damage is based in tort or contract, law or equity) is limited
to an amount not to exceed the usual and customary charges
paid to MiliRisk under this Agreement in any one month of this
Agreement plus costs and attorney's fees as provided in
Section 10.11. Except as provided in Section 2.3, for any
breach of this Agreement which does not result in or
constitute a termination or repudiation of this Agreement,
Customer's liability to Mil Risk for Damages is limited to an
amount not to exceed the usual and customary charges paid to
MiliRisk under this Agreement in any one month of this
Agreement plus costs and attorney's fees as provided in
Section 10.11.
9.4 Customer's remedies and MiliRisk's liability for breaches of
this Agreement and errors or defects in the delivery of
Services are limited to the remedies and liabilities set forth
in Sections 8.2, 9.1, 9.2 and 9.3 of this Agreement.
MiliRisk's remedies and Customer's liability for breaches of
this Agreement are limited to the remedies and liabilities set
forth in Sections 2.3, 8.2, 9.2 and 9.3 of this Agreement.
ARTICLE 10. GENERAL
10.1 The parties shall not be liable or deemed to be in default for
any delay or failure in performance under this Agreement or
interruption of Service resulting, directly or indirectly,
from acts of God, civil or military authority, labor disputes,
shortages of suitable parts, materials, labor or
transportation or any similar cause beyond the reasonable
control of the parties.
10.2 Customer and MiliRisk agree that, while this Agreement is in
effect, neither will directly or indirectly induce any
employee of the other to terminate his or her employment; nor
will either, without prior written consent of the other, offer
employment to any employee of the other, or to former
employees during the six (6) month period immediately
following such employee's termination. Notwithstanding the
foregoing, Customer shall not be bound by this provision if
MiliRisk withdraws from or eliminates its policy life cycle
service business entirely.
10.3 All notices which are required to be given or submitted
pursuant to this Agreement shall be in writing and shall be
either delivered in person or sent by certified mail, return
receipt requested, to the address set forth herein or to such
other address as the parties may from time to time designate
in writing for such purposes. Notices shall be deemed to have
been given at the time when personally delivered or, if mailed
in a certified post-paid envelope, upon the fifth day after
the date such notice shall be postmarked. All notices to
MiliRisk shall be addressed to the attention of the Chief
Financial Officer.
10.4 The parties covenant and promise not to disclose the terms and
conditions of this Agreement to any third party (except
Clarendon) unless expressly agreed to by the parties.
Notwithstanding the foregoing, the parties agree that
disclosure may be
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made to any auditors, regulators, carriers, or reinsurers on a
need to know basis only without prior consent.
10.5 This Agreement and any Exhibits made a part hereof: (a)
constitute the entire Agreement between the parties and
supersede and merge any and all prior discussions,
representations, negotiations, correspondence, writings and
other Agreements and together state the entire understanding
and Agreement between MiliRisk and Customer with respect to
the Services described; (b) may be amended or modified only in
a written instrument agreed to and signed by MiliRisk and
Customer; and, (c) shall be deemed to have been entered into
and executed in the State of Texas and shall be construed,
performed and enforced in all respects in accordance with the
laws of that state. For purposes of venue, this Agreement is
performable in Tarrant County, Texas.
10.6 Neither party hereto shall be deemed to have waived any rights
or remedies accruing to it hereunder unless such waiver is in
writing and signed by such party. No delay or omission by
either party hereto in exercising any right shall operate as a
waiver of said right on any future occasion. All rights and
remedies hereunder shall be cumulative and may be exercised
singularly or concurrently.
10.7 The descriptive headings of this Agreement are intended for
reference only and shall not affect the construction or
interpretation of this Agreement.
10.8 Wherever the singular of any term is used herein it shall be
deemed to include the plural wherever the plural thereof may
be applicable.
10.9 The parties shall not assign this Agreement or any of its
rights hereunder without the prior written consent of the
other party which consent shall not be unreasonably withheld
unless the proposed assignment is to a competitor of the other
party.
10.10 If any provision of this Agreement or any Exhibit hereto or
the application thereof to any party or circumstances shall,
to any extent, now or hereafter be or become invalid or
unenforceable, the remainder of this Agreement shall not be
affected thereby and every other provision of this Agreement
shall be valid and enforceable, to the fullest extent
permitted by law.
10.11 In the event of any action between Customer and MiliRisk
seeking enforcement of any of the terms and conditions of this
Agreement, the prevailing party to such action shall be
awarded its reasonable costs and expenses, including its court
costs and reasonable attorney's fees.
10.12 The parties hereto are independent contractors of one another,
and they should not, in any instance be construed as partners
or joint venturers.
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MILIRISK AND CUSTOMER CERTIFY BY THEIR UNDERSIGNED AUTHORIZED AGENTS THAT THEY
HAVE READ THIS AGREEMENT, INCLUDING ALL EXHIBITS HERETO, AND AGREE TO BE BOUND
BY THEIR TERMS AND CONDITIONS.
EXECUTED to be effective the 28th day of August, 1996.
Millers Integrated Claims Resources, Inc. Blanch Wholesale Insurance Services,
Inc.
BY: /s/ F. ▇▇▇▇▇▇ ▇▇▇▇▇▇,III BY: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------- ------------------------------
Name: F. ▇▇▇▇▇▇ ▇▇▇▇▇▇,III Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------- ----------------------------
Title: President & CEO Title: President
------------------------- ---------------------------
Blanch Insurance Services, Inc.
BY: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------
Title: President
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EXHIBIT I
TO THE
CLAIMS LIFE CYCLE SERVICES AGREEMENT
BY AND BETWEEN
MILIRISK
AND
BLANCH WHOLESALE INSURANCE SERVICES, INC.
BLANCH INSURANCE SERVICES, INC.
A. SERVICES
During the term of this Agreement MiliRisk shall provide the Claims Life Cycle
Services defined below for the Lines of Business (Section B of this Exhibit I)
for the States specified (Section C of this Exhibit I) written by or through
Customer on behalf of Clarendon. MiliRisk will, in accordance with guidance and
direction provided by the Customer, and in accordance with the GAA, provide all
Claims Life Cycle Services and general management of these Services described
here in for subject claims as follows:
1. Customer grants MiliRisk the authority to investigate, evaluate, and
handle each claim reported according to applicable state law, the
terms and conditions of the policy and any written standards provided
by Clarendon. MiliRisk shall not have any authority to alter or
discharge any policy or waive any policy provision or condition.
2. MiliRisk will set up a claims operation center that will function as a
control unit.
3. Loss reporting will be by toll free access provided to insureds and
agents.
4. Coverage will be verified on all cases.
5. MiliRisk will administer the appraisal/assessment process and will use
in this endeavor a combination of staff and vendor, adjusters, and
appraisers.
6. MiliRisk will perform all reasonable and necessary administrative and
clerical work in connection with claim or loss reports.
7. MiliRisk will establish and maintain a claim file for each reported
claim or loss with a copy of the policy for each reported claim. The
claim file will have a daily activity log which shall be reviewable at
any and all reasonable times by the Customer subject to the provisions
of Article 5 of the Agreement.
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8. MiliRisk will provide the Customer with litigation management and will
have control of choice of counsel. MiliRisk will not abandon files to
the control and handling by defense counsel. MiliRisk will work with
counsel to determine the best course of action within a reasonable
budget and will continue to do best efforts adjusting/investigation
activities within the scope of authority granted by the Customer.
9. MiliRisk will record and report each claim promptly to the Customer
and Clarendon with a recommended reserve. MiliRisk shall consult with
Customer and Clarendon with respect to any of the following:
(a) Any loss or claim resulting in legal action being instituted
against the MiliRisk, the Customer or Clarendon;
(b) Any loss or claim causing a complaint to be filed with any
regulatory authority;
(c) 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;
(d) Any claim MiliRisk deems appropriate to deny policy coverage
or involves a coverage dispute;
(e) Any claim which might ultimately result in the payment(s) in
excess of the lesser of (i) Twenty-five thousand ($25,000)
dollars or (ii) an amount established by the Florida
Department of Insurance. In the event of such claim, MiliRisk
shall forward a copy of the claim file to Clarendon at its
request;
(f) Any claim open for more than six months, or involves an
allegation of extra contractual obligations;
(g) Any claim involving a fatality, amputation, spinal cord or
brain damage, loss of eyesight, extensive ▇▇▇▇▇, poisoning, or
multiple fractures; or
(h) Any claim involving a minor.
10. Within seven business days after the end of each calendar month,
MiliRisk will provide monthly, year-to-date and inception-to-date
reports on all claims activity, including new claims, claims closed
without payment, and changes to outstanding reserves as of the date
reported, all reported by Accident Year. The claim reports will
include:
(a) Information and statistical data (i) required by Insurance
Services Office ("ISO"), and (ii) necessary for Clarendon to
prepare any reports required by the National Association of
Insurance Commissioners, or (iii) other reports reasonably
requested by Clarendon. MiliRisk shall also provide whatever
reports are necessary for and requested by Clarendon to
monitor and evaluate the business subject to this Agreement.
All information required by Clarendon to monitor and evaluate
business written under this Agreement and to comply with state
reporting requirements now
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or hereafter imposed on Clarendon, shall be deemed to be
reasonably requested hereunder;
(b) Loss Runs with paid claims and outstanding reserves remaining
at the end of each monthly report period, categorized as
indemnity, medical payment, or loss adjustment expense, plus
any other information required by the Annual Statement
instructions or state regulatory agencies;
(c) Check Registers;
(d) Reserve Transaction Journal:
(e) Large Loss Listing, including cumulative paid and outstanding
reserves as of month end; and
(f) Aggregate Loss Runs (on a paid and incurred basis) by policy.
If Clarendon requires the foregoing data for purposes of preparing reports for
its reinsurers, MiliRisk will report the foregoing information on a policy or
underwriting year basis at Clarendon's request within a mutually agreed upon
time.
MiliRisk shall provide Clarendon 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 Clarendon and readable on Clarendon'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, the accident date, reserves,
paid losses, paid loss adjustment expense, and any salvage or subrogation
recoveries.
11. MiliRisk will perform a periodic review at mutually agreed upon
intervals of outstanding claim reserves, and recommend changes to
outstanding claim reserves.
12. MiliRisk will prepare checks and vouchers, compromises, releases,
agreements and any other documents reasonably necessary to finalize
and close claims. MiliRisk will issue payments of claims and allocate
loss adjustment expenses only on check of, and as authorized by, the
Customer and/or Clarendon.
For purposes of settling claims and paying claim related expenses,
Clarendon has agreed with Customer to establish, maintain and fund a
separate bank account from which MiliRisk may draw against as
hereinafter set forth (the "Claim Account"). MiliRisk shall not retain
more than three months estimated claims payments and allocated loss
adjustment expenses in the Claim Account.
Clarendon has agreed with Customer to deposit additional funds into
the Claims Account on a weekly basis if necessary to maintain it at a
level sufficient to allow MiliRisk to carry out its obligations under
this Agreement. MiliRisk shall regularly provide information and
estimates to Clarendon to enable Clarendon to maintain the Claims
Account at an
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appropriate level. Clarendon shall provide to MiliRisk such
information as is necessary for MiliRisk to draw checks on the Claims
Account.
MiliRisk will record and report promptly to the Customer and Clarendon
each loss and allocated loss adjustment expense paid utilizing
Clarendon's claim disbursement, checking and coding procedures.
MiliRisk hereby guarantees that any check it prepares will be signed
and issued only in accordance with the procedures adopted by
Clarendon. Any check prepared by MiliRisk on the Claims Account must
be signed by two authorized individuals. The authority to sign such
checks shall be limited according to the dollar amount of the check:
(a) For any check $5,000 or less, the two signatories shall be any
two employees or officers of MiliRisk or the Customer.
(b) For any check greater than $5,000 but not greater than
$20,000, the signatories shall include at least one officer of
MiliRisk or the Customer.
(c) For any check greater than $20,000, the signatories shall
include one designated employee of Clarendon. Any check for
such amount shall be forwarded to Clarendon, along with all
claim information in MiliRisk's possession, for review by
Clarendon. MiliRisk shall comply with all Clarendon's
reasonable requests related to the adjustment and settlement
of such claims.
MiliRisk shall notify the Customer and Clarendon in writing of the identity of
the authorized signatories of claims checks. Likewise, Customer and Clarendon
will notify MiliRisk of persons authorized to sign on their behalf.
MiliRisk shall maintain a daily register of checks drawn on the Claim Account
for each loss payment (the "Claim Register"). The Claim Register shall include,
for each claim and/or claimant, the claim number, policy number, loss date, the
name of payee, the date and check number of the disbursement, and the amount
and type or purpose of the payment (i.e., indemnity, loss adjustment expense,
etc.). MiliRisk shall forward a copy of the Claim Register to Clarendon on a
monthly basis.
MiliRisk shall promptly deposit any monies collected through salvage and
subrogation to the Claim 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
following information: date of deposit, date of receipt of funds, the claim
number, the payor, and the amount and purpose of such payment.
MiliRisk shall reconcile the Claim Register and the Salvage and Subrogation
Register to the Claim Account on a monthly basis.
13. Service standards and claims documentation will be to standards set by
the Customer and agreed to by MiliRisk. At a minimum, MiliRisk will
be in compliance with all State regulations dealing with the adjusting
and handling of claims. MiliRisk will periodically
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review the development of the claims handling procedure with the
Customer and Clarendon to identify problems and recommend corrective
action.
14. MiliRisk will diligently pursue and prosecute Clarendon's salvage and
subrogation rights relating to any losses. MiliRisk will use all
reasonable efforts to collect and deposit funds arising from the
enforcement of such rights into the Claim Account. MiliRisk will
report monthly on salvage/subrogation receipts.
15. MiliRisk will provide Customer with a maximum of four (4) copies each
of the standard monthly Risk Management Information Reports (RMIS)
which are detail claims register, a loss run, check register, reserve
transaction journal, and a large loss listing. MiliRisk will also
provide Customer with data described in Exhibit III.
16. MiliRisk will produce 1099's per IRS regulations for vendors whose
services are not included within the basic fee for Claims Life Cycle
Services.
B. AUTHORIZED LINES OF BUSINESS:
Homeowners (HO3, HO6, HO4, and HO2) and Dwelling Fire (DF1)
C. AUTHORIZED STATES:
Florida
D. LOCATION OF PROVISION OF SERVICES:
MiliRisk shall provide the Services defined above at the MiliRisk
service center in Fort Worth, Texas and/or at a site or sites in
Florida to be named later at its discretion. ;
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EXHIBIT II
SERVICE FEES & RATES
CONSULTANTS
Senior Consultants 175.00 per hour
Consultants 125.00 per hour
PROGRAMMERS
Lead Programmer Analyst 150.00 per hour
Senior Programmer Analyst 125.00 per hour
Programmer Analyst 100.00 per hour
Project Leaders 175.00 per hour
CLAIMS LIFE CYCLE SERVICES
Fees will be based upon 15.5% of incurred losses exclusive of
IBNR and LAE.
IMPLEMENTATION PERIOD
Design, construction, and implementation of software systems
to support contract. Advance waived.
SPECIAL FEES
Claim system modifications will be charged to the Customer on
a time and materials basis utilizing the appropriate mix of
service personnel required to perform the modification.
Additional reports or modifications to agreed upon reports
will also be charged to the Customer on a time and materials
basis utilizing the appropriate mix of service personnel
required to perform the modifications or produce new reports.
Hourly rates for such personnel are listed above.
LEGAL EXPENSES ARE EXCLUDED FROM ALL FEES AND WILL BE PASSED THROUGH TO
CUSTOMER.
INCURRED LOSSES FOR THE BILLING MONTH WILL BE THE BASIS OF FEES FOR THAT MONTH.
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EXHIBIT III
The following information will be delivered in mutually acceptable electronic
media following the end of the month processing:
CLAIM FILE DATA ELEMENTS:
Claim Number
Claimant Number
Claimant Name
Date of Loss
Date Reported
Status (open/closed)
Date Closed
Date Reopen
Accident State
Policy Number
Coverage Code
Outstanding Loss Reserve (as of month end)
Outstanding Expense Reserve (as of month end)
CLAIM TRANSACTION FILE DATA ELEMENTS:
Claim Number
Claimant Number
Date Entered
Transaction
Transaction Effective Date
Amount