EXHIBIT 10(b)
POLICY AND CLAIMS
PROCESSING SERVICES AGREEMENT
This Processing Services Agreement, effective as of September 1, 2003
("Effective Date"), is by and among CGI Information Systems & Management
Consultants, Inc. ("CGI"), with a principal place of business at ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Phoenix Indemnity Insurance Company
("Phoenix"), with a principal place of business at ▇▇▇▇▇ ▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, collectively referred to as the "Parties" and
individually referred to as a "Party." Phoenix is referred to as the
"Client." This Processing Services Agreement, together with the Schedules
and Statements of Work referenced herein and attached hereto, are
collectively referred to as the "Agreement".
This Agreement supercedes any and all other prior agreements between the
Parties hereto relating to services provided by CGI or its predecessor in
interest, to or on behalf of Phoenix Indemnity Insurance Company including
but not limited to that certain letter of understanding between CGI and
Hallmark Financial Services dated February 17, 2003.
Chapter 1 ARTICLE 1.
Chapter 2 SERVICES; TERM; FEES
1.1 Services. CGI agrees to provide the services set forth on Schedule 1
("Initial Services") to the Client according to the terms and conditions
set forth in this Agreement. In addition to the Initial Services, CGI
will provide to the Client such other services as the Client may
reasonably request in writing from lime to time during the Term and with
respect to which the Parties agree regarding the scope, nature and
pricing of such services and the time period during which such services
will be provided ("Additional Services"). The Initial Services and the
Additional Services are sometimes referred to collectively as the
"Services."
1.2 Additional Services. Additional Services shall be performed under this
Agreement by either executing an additional Schedule or a Statement of
Work ("SOW").
a) Additional Schedules. An additional Schedule is to be used if and when
the Client and CGI agree on additional, on-going business services
that CGI will perform for the client. The services, service levels,
the fee for the services, and any special conditions will be
documented in the Schedule. Each Schedule will reference this
Agreement and will be numbered sequentially.
b) Statements of Work. From time to time, the Client may elect to have
CGI perform work that is not within the scope of the services defined
in any Schedule. Such work will be documented and agreed to by the
Parties using an SOW. Service requests shall be in writing, and upon
mutual agreement between the parties, shall be attached to and
incorporated into this Agreement as a separate SOW specifying the
start date and duration of the service request, the services to be
performed and any deliverables to be furnished by CGI. Each SOW shall
reference this Agreement and will be numbered sequentially.
1.3 Service Levels. CGI agrees to make a commercially reasonable effort to
achieve the service levels documented in Schedule 1 for the Initial
Services and any service levels documented in additional Schedules for
Additional Services.
1.4 Term. The term during which CGI will provide the Initial Services to
Client will commence upon the Effective Date and will expire on November
30, 2003 ("Expiration Date"), unless extended or terminated pursuant to
the terms of this Agreement. If services defined in any SOW extends
beyond the Expiration Date, this Agreement will extend, for only those
services, until such time as the services or service request is
completed.
1.5 Service Fees and Payments.
a) Service Fees. During the Term, Client will pay to CGI for the
performance of the Initial Services the fees set forth in Schedule 1 and
the fees for Additional Services established in either a Schedule or SOW
("Service Fees").
b) Payment. CGI will invoice Client within 15 days after the end of the
month for services rendered during the prior month. Client will remit all
payments due to CGI for services rendered within 15 days of receipt of
such invoice.
c) Interest on Past Due Payments. Any undisputed sum due CGI pursuant to
this Agreement that is not paid within 15 days of when payment is due
shall bear interest from that date until the date such sum is paid at the
lesser of 1.5 percent per month or the maximum rate of interest allowed
by applicable law. Client will also pay CGI for any reasonable expenses,
including attorney's fees, incurred by CGI in the collection of any
amounts due and payable under this Agreement.
d) Payment Disputes. Any disagreement between the parties with respect to
payments and amounts due and owing shall be notified to the other party
and the parties shall initially meet to resolve any such dispute. If the
parties are unable to resolve the dispute within five (5) business days
of the initial meeting, either party may submit such claim to arbitration
pursuant to the disputes clause specified in Section 9. In the event that
there is an amount in dispute, Client remains obligated to pay all
undisputed amounts.
e) Electronic Funds Transfer. CGI will provide Client bank routing
information. All payments are to be via Electronic Funds Transfer (BET),
unless otherwise agreed to in writing by the parties, to the account
specified in writing by CGI.
1.6 Unanticipated and Increased Service Level Changes. Each Party agrees to
negotiate in good faith for an adjustment to the Services Fees in the
event of any statutory, regulatory or judicial changes that require
either additional activities not then provided for pursuant to this
Agreement or reduce or lessen the activities then provided.
1.7 Taxes. Client shall be responsible for any tariffs and taxes, however
designated or levied, now existing or imposed in the future that are
applicable to the Services. Such tariffs and taxes include state and
local privilege and excise taxes, sales taxes, and any other tariff or
tax based on Services performed.
1.8 Travel. If approved by Client in writing, CGT personnel will undertake
reasonable travel necessary for the performance of the Services. CGI
personnel will make travel arrangements and incur reasonable travel
expenses necessary for performance of the Services pursuant to the terms
of CGI's then current Travel and Expense Policy. Expenses will be billed
to the Client at cost. Travel fees will be invoiced monthly as
appropriate.
ARTICLE 2
REPRESENTATION AND WARRANTIES OF CLIENT
Client represents and warrants that the statements contained in this Article
are correct and complete as of the Effective Date.
2.1 Corporate Status; Qualification. Client is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Arizona. There is no pending or, to the Client's knowledge,
threatened proceeding for the dissolution, liquidation, insolvency or
rehabilitation of Client. Client is duly qualified and in good standing
as a foreign entity under the laws of each jurisdiction where
qualification is required, except where the lack of such qualification
would not have a material adverse effect.
2.2 Corporate Power and Authority. Client has the corporate power and
authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated
hereby. Client has taken all corporate action necessary to authorize its
execution and delivery of this Agreement, the performance of its
obligations hereunder and the consummation of the transactions
contemplated hereby.
2.3 Enforceability. This Agreement has been duly executed and delivered by
Client and constitutes a legal, valid and binding obligation of Client
enforceable against it in accordance with the terms of this Agreement,
except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and general equitable principles regardless
of whether such enforceability is considered in a proceeding at law or in
equity.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF CGI
CGI represents and warrants that the statements contained in this Article
are correct and complete as of the Effective Date.
3.1 Corporate Status; Qualification. CGI is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware. There is no pending or, to CGI's knowledge, threatened
proceeding for the dissolution, liquidation, insolvency or rehabilitation
of CGI. CGI is duly qualified and in good standing as a foreign entity
under the laws of each jurisdiction where qualification is required,
except where the lack of such qualification would not have a material
adverse effect.
3.2 Corporate Power and Authority. CGI has the corporate power and
authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated
hereby. CGI has taken all corporate action necessary to authorize its
execution and delivery of this Agreement, the performance of its
obligations hereunder and the consummation of the transactions
contemplated hereby.
3.3 Enforceability. This Agreement has been duly executed and delivered by
CGI and constitutes a legal, valid and binding obligation of CGI
enforceable against it in accordance with the terms of this Agreement,
except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and general equitable principles regardless
of whether such enforceability is considered in a proceeding at law or
in equity.
ARTICLE 4
PERFORMANCE OF SERVICES
4.1 Designated Representative. Each Party will appoint an individual (a
"Designated Representative") who will (a) oversee and manage the
performance of its obligations under this Agreement, (Ii) serve as such
Party's primary managerial point of contact with the other Party and (c)
be authorized to act for it and on its behalf with respect to all
matters relating to this Agreement.
4.2 Access to Records and Facilities. CGL will provide Client reasonable
access to its facilities and all books, records and accounts, in a
format readable by the Client and necessary to verify compliance with
this Agreement. Such access will be made available upon prior written
notice during normal business hours for the Term of this Agreement and
during the periods in which CGI is required to maintain such records.
CGI will provide the appropriate state insurance department reasonable
access to its facilities and all necessary books, records and accounts
in a form usable by such department. Client remains responsible for
ensuring that all persons given access comply with the confidentiality
provisions of Article V.
4.3 Ownership of Property.
a) Client's Property. Client will own all right, title, and interest in
and to the content of the data, output, files, and computer images
created or developed in connection with, as a result of or incident to
the performance of the Services. Unless otherwise explicitly stated,
nothing herein shall be deemed a transfer of any fights in Client
property to CGI.
b) CGI'S Property. Subject to the immediately foregoing paragraph, CGI
will own all right, title and interest in and to any and all
intellectual property, including, but not limited to, any and all
tools, techniques, processes, procedures, inventions, software,
patents, know how, trade secrets and copyrights, that it owned prior
to the Effective Date, independent of this Agreement, and that are
first discovered, created or developed by CGI in connection with, as a
result of or incident to the performance of the Services. Unless
otherwise explicitly stated, nothing herein shall be deemed a transfer
of any rights in CGI property to Client.
4.4 Client Responsibilities. Client acknowledges that GUI's performance of
the Services requires the support and cooperation of Client. As such,
Client agrees to cooperate with CGI, and will perform the duties in a
timely manner. Client will provide any information, data and/or
documentation (collectively, "Data") that CGI reasonably requests from
Client that is necessary for CGI to properly perform its obligations
hereunder. Such Data shall be provided by Client in the form and by the
dates mutually agreed upon, and shall be kept confidential by CGI in
accordance with this Agreement. To reduce the possibility of delays,
errors or inaccuracies, CGI agrees to promptly assess such Data received
from Client with respect to the accuracy and usability thereof and to
notify Client within a commercially reasonable timeframe not to exceed 10
business days or other mutually agreed upon timeframe of any resultant
impact on CGI performance of the Services. Thereafter, CGI shall not be
liable for any Client caused delays, errors or inaccuracies, the
potential for which proper notification was given to Client. CGI shall be
entitled to appropriate adjustments (pricing, scheduling, etc.) resulting
from such delays, errors or inaccuracies. In the event that Client fails
to perform its duties in a timely manner and such delays require
modifications related to CGI's performance of the Services, then any
costs associated therewith shall be the responsibility of Client and CGI
shall be entitled to appropriate adjustments resulting from such failure
by Client.
4.5 Maintenance of Documents and Files. During the Term, CGI will maintain
appropriate documents and files as required. CGI will not destroy these
documents and files without the written permission of Client for a
period of at least ten years from the loss or termination date of the
applicable policy, or the period specified by the applicable state or
federal statute regulating preservation of records, whichever is longer.
CGI may, at its discretion, use magnetic, optical, and other types of
technology to store such data.
4.6 Commercially Reasonable Efforts. Each Party will use its commercially
reasonable efforts to satisfy its respective obligations hereunder.
4.7 Insurance. During the Term, CGI will maintain errors and omissions
insurance under a current and paid up policy, effective as of the
Effective Date, issued by an insurer reasonably acceptable to Client,
which insurance will have a policy limit of no less than $5,000,000 and
a deductible no greater than $500,000. If CGI fails to maintain coverage
or incurs a lapse in coverage, Client may purchase tail coverage (at
CGI's expense) in the amount set forth herein. CGI will provide a copy
of said insurance policy to Client and annually provide to Client a
certificate of insurance issued by CGI's carrier. Client will be named
as an additional insured to CGI's errors and omissions policy.
ARTICLE 5
CONFIDENTIALITY
5.1 Definitions. For purposes of this Article the following definitions
will apply:
a) "Affiliate" means a company that has a 50% or more ownership interest
in another company or a company in which another company has 50% or
more ownership interest.
b) "Client" means Client and its directors, officers, and
Representatives, but in no circumstances includes a third party
competitor of CGI.
c) "CGI" means CGI, its Affiliates, any parent corporation or
subsidiaries, directors, officers, and Representatives.
d) "Confidential Information" means any information of the Disclosing
Party, oral or written, whether prepared by the Disclosing Party, its
Representatives or otherwise, which is furnished to the Receiving
Party in relation to this Agreement. Such information includes, but is
not limited to, financial information, trade secrets, processes,
inventory, formulas, prices, markets, employee lists, salaries,
reports, computer files, maps, drawings, specifications, title
reports, Client information and lists, vendor sources, development and
marketing plans, statistical data, forecasts, marketing strategies, or
other commercial, technical, strategic or human resources information,
and know how obtained from the foregoing. The term "Confidential
Information" does not include: (a) information which is or becomes
generally available to the public other than as a result of any
unauthorized disclosure or any wrongful acts of the Receiving Party;
(b) information which is independently developed by the Receiving
Party without the use of Confidential Information from the Disclosing
Party; (c) information which is rightfully received from a third party
whose disclosure would not violate any confidentiality obligation or
breach of any agreement; or (d) information which is approved for
release by the Disclosing Party in writing signed by the Disclosing
Party specifying the information to be released.
e) "Disclosing Party" means Client or CGI, as the case may be, with
respect to any Confidential Information provided by such party to the
other party.
f) "Receiving Party" means Client or CGI, as the case may be, with respect
to any Confidential Information received by such party from the other
party.
g) "Representative" means any employee, agent, attorney, accountant,
financial advisor or other person acting on behalf of a party under a
contractual relationship in connection with this Agreement.
5.2 Nondisclosure. The Parties hereby agree as follows:
a) Use of Information. All Confidential Information will be used solely
for the purpose of performing of the Services. In no event will
Confidential Information be used by any party or person receiving
Confidential Information for business or competitive purposes.
b) Confidentiality. All Confidential Information will be kept strictly
confidential by the Receiving Party and the Receiving Party will
restrict disclosure of Confidential Information to only those employees
agents and advisors of the Receiving Party who have a need to know such
information for the purpose of performing the Services.
c) Disclosure to Representatives. Representatives of the Receiving Party
shall be informed by the Receiving Party of the confidential nature of
such information and the covenant of confidentiality by the Receiving
Party hereunder, and they shall be directed by the Receiving Party
to treat such information confidentially. Before any disclosure or
dissemination of any Confidential Information subject to this Agreement
is made to any person, other than an officer, director, or employee of
the Receiving Party or its counsel or independent accountant, the
person to whom such disclosure is made shall execute a confidentiality
and non-disclosure agreement in favor of, and in form acceptable to,
the Disclosing Party.
5.3 No Solicitation. Each Party acknowledges that the other Party
makes a substantial investment in the training and development of its
employees and each Party therefore agrees, during the term of this
agreement and for a period of twelve (12) months thereafter, not to hire,
either directly or indirectly, whether though solicitation or otherwise,
any employee of the other Party without the other Party's prior express
written consent. Unless each Party provides express written consent, if a
Party hires such an employee within 90 days of that employee's separation
from the former employer, the acquiring Party agrees to compensate the
other Party in an amount equal to twelve (12) months of that employee's
annual compensation.
5.4 Required Disclosure. In the event the Receiving Party or its
Representatives are requested or required in a judicial, administrative
or governmental proceeding to disclose any Confidential Information, the
Receiving Party shall cooperate with the Disclosing Party and provide it
with prompt notice of any such request so that the Disclosing Party
may seek an appropriate protective order and/or waive the Receiving
Party's compliance with the provisions of this Agreement. If, in the
absence of a protective order or the receipt of a waiver hereunder, the
Receiving Party or its Representatives are nonetheless, in the opinion
of the Receiving Party's attorneys, legally required to disclose
Confidential Information to any tribunal or else stand liable for
contempt or suffer other penalty, the Receiving Party may disclose such
information to such tribunal without liability hereunder, provided that
the Receiving Party complies with the notice provisions of this paragraph.
5.5 Return of Confidential Information. Upon the expiration or termination
of this Agreement, the Receiving Party shall promptly, and in any event
upon request by the Disclosing Party, deliver to the Disclosing Party all
Confidential Information, including all written and electronically stored
copies in a form and by the dates mutually agreed upon. Neither the
Disclosing Party nor its Representatives will retain any copies, extracts
or other reproductions, in whole or in part, of such Confidential
Information except where such Confidential Information is stored by CGI
as part of its process of copying data for disaster recovery purposes. At
the Disclosing Party's request, all documents, memoranda, notes and other
writings prepared by the Receiving Party or its Representatives based on
the information in the Confidential Information, or which quote from or
summarize any Confidential Information, will be destroyed as soon as
reasonably practicable, and such destruction shall be certified in
writing to the Disclosing Party by an authorized officer of the Receiving
Party supervising such destruction.
5.6 Remedies for Breach. The Parties acknowledge that a breach of the
covenant of confidentiality contained in this Article 5 will result in
irreparable and continuing damage to the Disclosing Party for which there
will be no adequate remedy at law. hi the event of any breach of the
covenant of confidentiality, the Receiving Party agrees that the
Disclosing Party shall be entitled to seek and obtain specific
performance of the covenants set forth in section 5.2 and 5.5 of this
Agreement by the Receiving Party, including, upon making the requisite
showing that it is entitled thereto, provisional injunctive relief
restraining the Receiving Party from committing such breach, in addition
to such other and further relict including monetary damages, as provided
by law.
5.7 Survival. THE OBLTOATIONS UNDER THIS ARTTCLE 5 WILL CONTINUE AFTER THIS
AGREEMENT EXPIRES ORTS TERMINATED.
ARTICLE 6
TRADE SECRET AND PROPRIETARY RIGHTS
6.1 No Rights proprietary secrets, in to Software. Notwithstanding CGI's
use of its computer software programs, or other trade the performance
of the Services, neither this Agreement nor the performance of any
Services hereunder will be construed as a grant of a license or any
other interest in or to CGI's computer software programs or other trade
secrets. Further, this Agreement grants to Client no right to possess
or reproduce, or any other interest in, any of the computer software
programs or other trade secrets used in the performance of all or
any part of the Services or their specifications in any tangible or
intangible medium. Client may not mortgage, hypothecate, sell, assign,
pledge, lease, transfer, license, sublicense, provide access to,
decompile, or reverse engineer any computer software programs or other
trade secrets used in the performance of all or any part of the Services,
nor allow any person or entity to transmit, copy, reproduce, use,
decompile, or reverse engineer any such computer software programs or
other trade secrets. In the event Client comes into possession of the
computer software programs or other trade secrets used in the performance
of all or any part of the Services, Client will immediately notify CGI
and return such computer software programs or other trade secrets and all
copies of any kind thereof to CGI, unless such possession is authorized
in writing by CGI as part of providing the Services.
6.2 Nondisclosure. The Parties acknowledge that the duties related to
protection of trade secrets are often more stringent than those for
protection of other forms of proprietary information. Other than Client's
employees that need access to computer software programs or other trade
secrets for the performance of their duties, Client covenants and agrees
not to disclose or otherwise make available to any person any computer
software programs or trade secrets used in the performance of all or any
part of the Services. Client agrees to take all reasonable steps
necessary to obligate each of its employees who is given access to such
computer software programs or other trade secrets to a level of care
sufficient to protect the computer software programs or other trade
secrets from unauthorized disclosure, and to comply with all applicable
laws and regulations pertaining to protection of trade secrets.
6.3 Survival. THE OBLICIATTON OF CLIENT UNDER THIS ARTICLE WILL CONTINUE
AFTER THIS AGREEMENT EXPIRES ORTS TERMINATED.
ARTICLE 7
TERMTNATION & EXPIRATION
7.1 Termination of Agreement. This Agreement may be terminated prior to the
Expiration Date only as follows:
a) by written notice from the non-breaching Party upon a material breach
by the other Party of its duties or obligations under this Agreement;
provided, however, that (i) such breach remains substantially uncured
for thirty (30) days after written notice specifying such breach is
received by the breaching Party or (ii) with respect to a breach that
cannot be reasonably cured within a thirty (30) day period, should
the defaulting party fail to proceed within thirty (30) days after
written notice specifying the breach to commence curing the breach and
thereafter fails to proceed with all reasonable diligence to cure
substantially the breach;
b) by a Party in the event (I) the other Party makes a general assignment
for the benefit of creditors, (ii) the other Party files a voluntary
petition in bankruptcy or petitions for reorganization or similar
arrangement under the bankruptcy laws, (iii) a petition in bankruptcy
is filed against the other Party by a third party and such petition
is not dismissed within ninety (90) days of its filing date, or (iv) a
receiver or trustee is appointed for all or any part of the property
and assets of the other Party; or
c) by Client, upon commission by CGI of fraud, criminal conduct or willful
violation of an insurance statute or regulation, if said conduct
by CGI has a material adverse effect on Client's ability to engage in
business. This paragraph does not apply to conduct by CGI employees who
are not acting at the direction of CGI.
7.2 Procedure upon Expiration or Termination. Upon expiration or
termination of this Agreement and in lieu of any other arrangement to
continue system processing services: CGI will transfer all Client data
to the Client via a copy of the most recent backup tape. CGI will provide
data in another format for a reasonable and customary fee if requested.
a) Client shall pay CGI all undisputed amounts due and owing to CGI
through the date of termination or expiration in accordance with the
Payment terms of this Agreement.
b) Such expiration or termination will not in any way limit, restrict or
relieve any Party of liability for any breach of this Agreement.
c) The Parties recognize that upon termination of this Agreement,
Client may require a continuation of certain services necessary for
winding down, running off and/or the smooth transition of business.
Such services shall be provided by CGI at a price and level of service
to be mutually agreed upon.
d) The parties agree that subrogation and salvage files will transfer
to Client effective October 13, 2003. Client will pay CGI 25% of the
subrogation and 15% of the salvage for October 1-12, 2003. For the
balance of October, Client will pay a pro-rated amount of the separate
subrogation and salvage fees based on the average of the fees for the
months of July, August and September 2003. The November fees for
subrogation and salvage will be equal to the average of the fees for
the months of July, August and September 2003. Any new claim received
by CGI after October 13, 2003, involving salvage will be transferred
to Client for handling of the entire claim.
e) Any adjusting expense customarily incurred, regardless of type,
initiated, incurred or generated prior to the termination of this
Agreement shall be the sole responsibility of CGI. Customary
adjustment expenses include but are not limited to police reports,
official reports from local, state and federal agencies, motor
vehicle reports, appraisals and independent adjuster fees. Claim
adjustment expenses that are not customarily incurred by CGT include
all legal expenses (to include but not limited to attorney fees,
examinations under oath, court reporter fees), engineers,
reconstruction experts, other experts, and those expenses incurred by
CGI's special investigation unit in the investigation of possible
fraud. Conversely, any adjusting expense, regardless of type,
initiated, incurred or generated after the termination of this
Agreement, shall be the sole responsibility of Client.
f) Neither Party will make any disparaging comments, whether oral or
written, about the other Party or the relationship between the Parties.
ARTICLE 8 - REMEDIES AND LIMITATION OF
LIABILITY
8.1 Indemnification of the Parties. Each Party (the "Indemnitor") will
indemnify, defend, and hold harmless any other Party (the "Indemnitee")
from and against any arbitration award, claim, cost, damage demand,
expense, fine, liability, lawsuit, obligation, payment or penalty of any
kind or nature whatsoever, including any reasonable attorney's fees and
expenses (a "Claim") incurred by the Indemnitee that arises out of or
directly relates to the Indemnitor's performance or breach of this
Agreement or any Schedule or Statement of Work attached from time to
time hereto and made a part hereof, unless the performance or breach was
at the written direction of the other party. Upon Indemnitee's request,
the Indemnitor will indemnify the Indemnitee's directors, employees,
officers, agents, attorneys, representatives and shareholders to the
same extent as such Indemnitee. No such person, however, will be a third
party beneficiary of the indemnification provision set forth in this
Agreement. To the extent that an Indemnitee requests the Indemnitor to
indemnify such Party's directors, employees, officers, agents,
attorneys, representatives and shareholders, the Indemnitee will cause
such persons or entities to comply with the indemnification provisions
and abide by the indemnification limitations set forth in this
Agreement.
8.2 Limitations of Liability.
(a) The parties hereby agree that except to the extent otherwise
covered by Professional or General Liability insurance policies
issued to or on behalf of CGI, CGI will only be liable for direct
damages, as defined herein, sustained by Client as a result of CGI's
breach of this Agreement whether such breach is the result of
negligence, gross negligence or willful misconduct in the performance
of the services provided in the Agreement and/or any Schedule or
Statement of Work attached from time to time hereto and made a part
hereof, provided however, that CGI will not be deemed to have been
grossly negligent in connection with any action or any failure to
take an action, taken at the direction of Client. For the purposes of
this Agreement, direct damages are defined as those damages which
usually, naturally and necessarily flow from a wrongful act or breach
and are of a nature that the mere allegation of breach gives
sufficient notice to the breaching party that they will result from
that party's breach of this Agreement. Direct damages will include,
by way of example only: additional operational expenses, remedial
expenses, mitigation expenses, and cover damages.
(b) In no event, except when covered by liability insurance, shall a
party be liable for any consequential, indirect, punitive, exemplary,
incidental, multiple or special damages with respect to any breach of
this agreement; provided, however, that this subsection will not
limit the amount of a Claim for indemnification (as opposed to a
Claim for damages) which is based on an amount paid by an Indemnitee
to a third party that contains consequential, incidental, punitive,
or special damages as a component of such amount paid by the
Indemnitee to the third party.
(c) Notwithstanding subsections (a) and (b) above, CGI's total
liability for damages shall not exceed the greater of either the
amounts which were paid to CGI during the eighteen (18) month period
prior to the event which is subject to the claim or, if 18 monthly
payments have not yet been received by CGI, the total amount of those
previously received payments plus those anticipated to be made into
the future until a total of 18 monthly payments would have been
received.
8.3 Limitation Acknowledgment. Each Party expressly acknowledges that the
limitations set forth in this Article represent the express agreement
of the Parties with respect to the allocation of risks between the
Parties, including the level of risk to be associated with the
performance of the Services as related to the amount of payment to be
made to CGI for such Services, and each Party fully understand and
irrevocably accepts such limitations.
8.4 Notice of Claim. Any award of damages or indemnification pursuant to
this Agreement is conditioned upon the Indemnitor having received full
written notice within 3 business days of receipt of the Claim by
Indemnitee and the Indemnitee allowing the Indemnitor to fully direct
the defense or settlement of such Claim; provided, however, that the
failure to receive notice as required in this section relieves the
Indemnitor of its obligations under this Article only if the Indemnitor
is materially prejudiced by the failure to receive such notice. The
Indemnitor will not be responsible for any settlement or compromise
made without its consent and such consent shall not be unreasonably
withheld or delayed.
8.5 Survival. THE OBLICIATIONS UNDER THIS ARTICLE 8 SURVIVE THE EXILPRATION
OR TERMINATION OF THIS ACIREEMENT.
ARTICLE 9
ARBITRATION AND EQUITABLE REMEDIES
9.1 Settlement Meeting. The Parties will attempt in good faith to resolve
promptly through negotiations any dispute under this Agreement. If any
such dispute should arise, the Parties will meet at least once to
attempt to resolve the matter (the "Settlement Meeting"). Any Party may
request the other Parties to attend a Settlement Meeting at a mutually
agreed time and place within ten days after delivery of a notice of a
dispute. The occurrence of a Settlement Meeting with respect to a
dispute will be a condition precedent to seeking any arbitration or
judicial remedy, provided that if a Party refuses to attend a Settlement
Meeting or does not avail itself to a Settlement Meeting within twenty
days after delivery of a notice of dispute the other Party may proceed
to seek such remedy.
9.2 Arbitration Proceedings. If the Parties have not resolved a monetary
dispute at the Settlement Meeting any Party may submit the matter to
arbitration. A panel of three arbitrators will conduct the arbitration
proceedings in accordance with the provisions of the Federal Arbitration
Act (99 U.S.C. Section 1 et seq.) and the Commercial Arbitration Rules
of the American Arbitration Association (AAA) (the "Arbitration Rules").
The decision of a majority of the panel will be the decision of the
arbitrators.
9.3 Arbitration Notice. To submit a monetary dispute to arbitration, a Party
shall furnish the other Parties and the AAA with a notice (the
"Arbitration Notice") containing (i) the name and address of such Party,
(ii) the nature of the monetary dispute in reasonable detail, (iii) the
Party's intent to commence arbitration proceedings under this Agreement,
and (iv) the other information required under the Federal Arbitration
Act and the Arbitration Rules.
9.4 Selection of Arbitrators. Within ten days after delivery of the
Arbitration Notice, each Party shall select one arbitrator from the list
of the American Arbitration Association's National Panel of Commercial
Arbitrators. Within ten days after the selection of the two arbitrators,
those two arbitrators will select the third arbitrator from such list
and two alternates, and each party shall have one veto, to use at its
sole discretion, to disqualify a selected third arbitrator, in which
case, the two arbitrators will select from the remaining alternate
arbitrators. If the first two arbitrators cannot select a third
arbitrator and two alternate arbitrators within such ten day period, the
AAA will select such third arbitrator from the list and neither party
shall have veto power over such AAA selected third arbitrator. Each
arbitrator will be an individual not subject to disqualification under
Rule No. 19 of the Arbitration Rules with experience in settling complex
litigation involving the insurance industry.
9.5 Arbitration Final. The arbitration of the matters in controversy and
the determination of any amount of damages or indemnification shall be
final and binding upon the Parties to the maximum extent permitted by
law, provided that any Party may seek any equitable remedy available
under law as provided in this Agreement. This agreement to arbitrate is
irrevocable.
9.6 Place of Arbitration. Any arbitration proceedings will be conducted at
such location as the Parties may agree. If the parties cannot agree on
a mutually acceptable location, the location of the arbitration shall
in Fort Worth, Texas. The arbitrators will hold the arbitration
proceedings within sixty (60) days after the selection of the third
arbitrator.
9.7 Discovery. During the period beginning with the selection of the third
arbitrator and ending upon the conclusion of the arbitration
proceedings, the arbitrators will have the authority to permit the
Parties to conduct such discovery as the arbitrators consider
appropriate.
9.8 Equitable Remedies. Notwithstanding anything else in this Agreement to
the contrary, after the Settlement Meeting a Party will be entitled to
seek any equitable remedies available under law. Any such equitable
remedies will be in addition to any damages or indemnification fights
that such Party may assert in an arbitration proceeding.
9.9 Judgments. Any arbitration award under this Agreement will be final and
binding. Any court having jurisdiction may enter judgment on such
arbitration award upon application of a Party.
9.10 Expenses. If any Party commences arbitration proceedings or court
proceedings seeking equitable relief with respect to this Agreement,
the prevailing Party in such arbitration proceedings or case may
receive as part of any award or judgment reimbursement of such Party's
reasonable attorneys' fees and expenses to the extent that the
arbitrators or court considers appropriate.
9.11 Cost of the Arbitration. The arbitrators will assess the costs of
the arbitration proceedings, including their fees, to the Parties in
such proportions as the arbitrators consider reasonable under the
circumstances.
9.12 Exclusivity of Remedies. To the extent permitted by law, the
arbitration and judicial remedies set forth in this Article will be the
exclusive remedies available to the Parties with respect to any dispute
under this Agreement or claim for damages or indemnification under this
Agreement.
ARTICLE 10
MISCELLANEOUS
10.1 Amendment. No amendment of this Agreement will be effective unless
in writing, signed by the Parties.
10.2 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed to be an original agreement,
but all of which will constitute one and the same agreement.
10.3 Entire Agreement. This Agreement constitutes the entire agreement
and understanding between the Parties and supersedes all prior agreements
and understandings, both written and oral, with respect to the subject
matter of this Agreement.
10.4 Expenses. Each Party will bear its own expenses with respect to the
negotiation and preparation of this Agreement.
10.5 Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Texas, without regard to the
conflicts of laws, principles or provisions thereof; Each Party submits
to the exclusive jurisdiction and venue of the State of Texas.
10.6 No Assignment. Neither Party may assign its benefits or delegate its
duties under this Agreement without the prior consent of the other
Party; provided, however, that Client may assign its rights and delegate
its duties under this Agreement to an affiliated entity without CGI's
consent, but with prior notice to CGI. Any attempted assignment or
delegation in violation of the foregoing sentence will be void.
Notwithstanding the foregoing, each Party may assign its rights under
this Agreement to any third party which acquires (through purchase,
merger, reorganization or other combination) all or substantially all of
the assets or equity of such Party without the other Party's consent,
but with notice to the other Party.
10.7 No Third Party Beneficiaries. This Agreement is solely for the
benefit of the Parties and no other Person will have any right, interest,
or claim under this Agreement.
10.8 Public Announcements. The Parties will agree on the terms of any
press releases or other public announcements related to this Agreement,
and will consult with each other before issuing any press releases or
other public announcements related to this Agreement; provided, however,
that any Party may make a public disclosure if in the opinion of such
Party's counsel it is required by law or the rules of any applicable
stock exchange or dealer quotation system to make such disclosure. The
Parties agree, to the extent practicable, to consult with each other
regarding any such public announcement in advance thereof. The Parties
may, however, include the other Party and the Party's logos on any serial
list of clients and are not prohibited from discussing the general
existence of the relationship.
10.9 Representation by Legal Counsel. Each Party is a sophisticated
entity that was advised by experienced legal counsel and other advisors
in the negotiation and preparation of this Agreement.
10.10 Severability. Any provision of this Agreement that is prohibited
or unenforceable in any jurisdiction will not invalidate the remaining
provisions of this Agreement or affect the validity or enforceability
of such provision in any other jurisdiction. In addition, any such
prohibited or unenforceable provision will be given effect to the extent
possible in the jurisdiction where such provision is prohibited or
unenforceable.
10.11 Successors. This Agreement will be binding upon and will inure to
the benefit of each Party and its heir, legal representatives, permitted
assigns, and successors. provided that this Section will not permit the
assignment or other transfer of this Agreement, whether by operation of
law or otherwise, if such assignment of other transfer is not otherwise
permitted under this Agreement.
10.12 Time of the Essence. Time is of the essence in the performance of
this Agreement and all dates and periods specified in this Agreement.
10.13 Waiver. No provision of this Agreement will be considered waived
unless such waiver is in writing and signed by the Party that benefits
from the enforcement of such provision. No waiver of any provision in
this Agreement, however, will be deemed a waiver of a subsequent breach
of such provision or a waiver of a similar provision. In addition, a
waiver of any breach or a failure to enforce any term or condition of
this Agreement will not in any way affect, limit, or waive a Party's
rights under this Agreement at any time to enforce strict compliance
thereafter with every term and condition of this Agreement.
10.14 Force Majeure. The Parties will not be liable or deemed to be in
default for any delay or failure in performance under this Agreement or
interruption of Services resulting, directly or indirectly, from acts of
God, acts of terrorism, civil or military authority, labor disputes,
shortages of suitable materials, labor or transportation or any similar
cause beyond the reasonable control of the Parties.
10.15 Attorney's Fees. In the event of any action, arbitration, claim,
proceeding or suit between Client and CGI seeking enforcement of any of
the terms and conditions of this Agreement, the prevailing party in such
action, arbitration, claim, proceeding or suit will be awarded its
reasonable costs and expenses, including its court costs and reasonable
attorneys' fees.
10.16 Relationship of the Parties. The Parties are independent
contractors of one another, and there should be no instance in which
they should be construed as partners or joint ventures.
10.17 Drafting. Neither this Agreement nor any provision contained in
this Agreement will be interpreted in favor of or against either Party
because such Party or its legal counsel drafted this Agreement or such
provision. No prior draft of this Agreement or any provision contained
in this Agreement will be used when interpreting this Agreement or its
provisions.
10.18 Headings. Article and section headings are used in this Agreement
only as a matter of convenience and will not have any effect upon the
construction or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their duly authorized representatives as of the day
and year first written above.
CGI Information Systems & Management Consultants, Inc.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------
Authorized Signature
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name
SVP 10/22/03
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Title Date
Phoenix Indemnity Insurance Company
/s/ Brookland ▇▇▇▇▇
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Authorized Signature
Brookland ▇▇▇▇▇
---------------------
Name
President 10/1/03
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Title Date
POLICY AND CLAIMS
PROCESSING SERVICES AGREEMENT - SCHEDULE 1
This Schedule is an attachment to the Policy and Claims Processing Services
Agreement, dated September 1, 2003, between Client and CGI. CGI will perform
the following services for the Client subject to the provisions to which the
Parties have agreed. This Schedule is effective as of September 1,
2003, 12:01 a.m.
SECTION lA
SERVICES
The following is a list of policy administration services that CGI will
perform on behalf of the Client.
1. Issue Client's policies, process renewals, cancellations, and
reinstatements. CGI will use such non-renewal or cancellation notices
as may be required by policy wording or regulatory authority. Client
will advise CGI of appropriate wording.
2. Process invoices for additional premiums and renewal bills.
3. Process refunds for return premiums.
4. Provide timely, accurate and appropriate responses to inquiries from
producers, insureds, premium finance and mortgage companies and other
relevant third parties (e.g. mortgagees).
5. Provide data processing support for policy processing, including
imaging of source documents, data entry, editing, electronic workflow,
rating, coding, reporting, accounting, and maintenance of policy
records.
6. Insure that personnel assigned to support Client are appropriately
licensed and trained and are provided with the necessary space,
furniture, fixtures, electrical power, computer connections,
telephones, and other required assets to support the services.
7. Mail all necessary policy documents to relevant parties.
8. Support Client billing through direct ▇▇▇▇.
9. Provide accounting services for premiums by receiving and distributing
premiums, maintaining trust accounts, agency accounts and paying
producer commissions, in accordance with Client's obligations
including, but not limited to:
a. Premium Bank Account. Promptly upon receipt thereof, CGI will deposit
all premiums and other funds collected for business written by or on
behalf of Client into a deposit-only bank account to be established
and controlled by Client. CGI will be deemed to have a fiduciary
responsibility to Client with regard to such funds of Client.
b. Operating Account. Client will establish and fund a separate bank
account which CGI may draw upon to pay return premium due
policyholders and commissions due Producers (hereinafter called the
"Operating Account"), CGI will reconcile all disbursements from the
Operating Account each month by type and amount of disbursement (e.g.,
return premium, commissions due to or from Producers) and furnish a
copy to Client.
c. Monthly Reports. All month-end management reports in printed format
will be provided to Client within 3 business days after the end of
each month. Further, a cash journal will be provided to Client within
3 business days after the end of each month and all bank
reconciliations will be provided to Client within 20 business days
after the end of each month with no material reconciling items carried
over from the prior month. All accounting end of the month electronic
system downloads will be transferred to Client within 2 business days
after the end of each month.
d. Required Reports. Reports with the information and statistical data
required by Insurance Services Office and necessary for Client to
prepare any reports required by the National Association of Insurance
Commissioners will be provided to Client as necessary or required to
prepare such reports.
12. Calculate and pay commissions to the Producer on Client's behalf,
or invoice and receive the return of commission from the Producer on
return premium transactions and prepare and mail a Federal 1099 tax
statement for each Producer paid a commission during a tax year.
13. Provide timely, accurate and appropriate responses to non-
underwriting questions from policyholders, insured and producers
concerning policy and/or endorsement issuance or billing.
14. Maintain written operational procedures, as they exist as of the
Effective Date, to handle all business related to the policies.
15. Provide all agreed upon additional reports or perform
modifications as requested in writing by Client on a time and
materials basis utilizing the appropriate mix of service personnel
required to perform the modifications or produce new reports. Rates
for such personnel are listed in Section lB.
16. Maintain a disaster recovery plan to be implemented in the event
of an occurrence of a catastrophic event.
The following is a list of claims administration services that CGI will
perform on behalf of the client.
1. 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 Client using appropriately trained and
licensed personnel. Client grants CGI the authority to provide the
foregoing claims administration services; provided, however that CGI
will not have any authority to alter or discharge any policy or waive
any policy provision or condition.
2. Establish a claims operation center that will function as a control
unit.
3. Verify coverage on all cases.
4 Administer the appraisal/assessment process using a combination of
staff, independent appraisers and direct repair facilities reasonably
acceptable to Client. All expenses for these appraisals/assessments
will be incurred by CGI.
5. Perform all reasonable and necessary administrative and clerical work
in connection with claim or loss reports.
6. Establish and maintain a claim file for each reported claim or loss.
The claim file will have a daily activity log, which will be available
for review at any and all reasonable times by Client subject to the
provisions of the Agreement.
7. Record and report each claim promptly to Client with a recommended
reserve; and consult with, and seek consent from Client with respect to
any of the following:
a. Any loss or claim resulting in legal action being instituted against
Client's insured, CGI or Client;
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 in which CGI deems appropriate to rescind policy coverage
for material misrepresentation;
e. Any claim involving an allegation of extra contractual obligations, or
bad faith claim handling;
f. Any claim involving a fatality, major amputation, spinal cord or brain
damage, loss of eyesight, extensive bums, poisoning, or multiple
fractures;
g. Any claim that Client desires to be kept advised of during the life of
the claim; or
h. Any claim where there has been a demand for policy limits and CGI does
not evaluate the value of the claim to include settlement at that
amount;
i. Any claim involving asbestos, pollution, toxic waste and lead or paint
poisoning;
j. Potential subrogation in excess of $40,000;
k. Any claim which is very likely to result in the commencement of
litigation within 30 days;
l. Any claim involving pharmaceuticals, communicable diseases, rape,
child molestation or multiple claim food poisoning.
m. Any claim involving denials of coverage not related to material
misrepresentation
8. Provide monthly and year-to-date reports on all claims activity
including new claims reported, claims pending, claims closed and reserve
changes. The reports will include:
a. Information and statistical data (1) required by Insurance Services
Office, (2) necessary for Client to prepare any reports required by
National Association of Insurance Commissioners, or (3) other reports
reasonably requested by Client.
b. Loss runs with paid claims and outstanding reserves remaining at the
end of each monthly report period, categorized as indemnity, medical
payment, loss adjustment expense separated by other expense and legal
expense (to the extent that Client properly inputs the necessary
data), plus any other information required by the Annual Statement
instructions or state regulatory agencies;
c. Check registers;
d. Reports needed by Client for the filing of reinsurance claims or
quarterly reinsurance updates.
9. Perform a periodic review at mutually agreed upon intervals of
outstanding claim reserves, and recommend changes outstanding claim
reserves.
10. Prepare checks and vouchers, compromises, releases, agreements and any
other documents reasonably necessary to finalize and close claims. CGI
will issue payments of claims and allocate loss adjustment expenses
only within the guidelines as authorized by Client. For purposes of
settling claims and paying claim-related expenses, Client has agreed to
establish, maintain and fund a separate bank account from which CGI may
draw against as hereinafter set forth (the "Claim Account"). Client
agrees to deposit additional funds into the Claim Account on a weekly
basis if necessary to maintain it at a level sufficient to allow CGI to
carry out its obligations under this Agreement. CGI will regularly
provide information and estimates to Client to enable Client to
maintain the Claim Account at an appropriate level. Client will provide
to CGI such information as is necessary for CGI to draw checks on the
Claim Account. CGI hereby guarantees that any check it prepares will be
signed and issued only in accordance with the procedures set forth
below:
Check Amount # Type Authorized
Signatures Signatory
0.01-$1,999.99 1 1 Facsimile CGI
$2,000.00-$9,999.99 2 1 Facs,l Orig CGI
$10,000.00-$19.999.99 2 2 Original CGI
$20,000.00+ 2 2 Original 1 CGI, 1 Client
Facsimile signatures can be replaced with original signatures.
Original signatures may not be replaced with facsimile signatures.
Exceptions will be submitted to CGI in writing by Client.
CGI will 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 will include, but will not be limited
to, the following information: date of deposit, date of receipt of
funds, the claim number, the payer, and the amount and purpose of such
payment. (The "Claim Register" will include, but will not be limited
to, the following information: claim number; date of check; payee;
amount; and check number.) CGI will reconcile the Claim Register and
the Salvage and Subrogation Register to the Claim Account on a monthly
basis.
11. Maintain service standards and claims documentation in accordance with
standards set by Client and agreed to by CGI. CGI will be in compliance
with all state regulations dealing with the adjusting and handling of
claims. CGI will periodically review the development of the claims
handling procedure with Client to identify problems and recommend
corrective action.
12. Pursue and prosecute diligently Client's salvage and subrogation
rights relating to any losses. CGI will use reasonable efforts to
collect and deposit funds arising from the enforcement of such rights
into the Claim Account. CGI will report monthly on salvage/subrogation
receipts.
13. Provide on a case by case basis with prior client approval Special
Investigative Services in accordance with guidelines agreed to by Client
on a time and expense basis.
14. Provide Client claim information to prepare reports (A) required by the
Internal Revenue Service, and (B) other reports reasonably requested by
Client.
15. Maintain a disaster recovery plan to be implemented in the event of a
catastrophic event.
16. Upon (A) receipt by CGI of a demand for arbitration or notice that
litigation has been filed concerning a claim or feature or (B) a
determination by Client that it is necessary to commence litigation of a
claim feature, or salvage or subrogation claim CGI will promptly provide
the Designated Representative with written notice of Client's option to
assume all further responsibility for the administration of the disputed
claim or feature; and, in the event Client elects within ten (10) days
to assume such responsibility for the disputed claim or feature, CGI
will promptly transfer to Client such disputed claim or feature;
and will promptly deliver to Client the original claim file, notes,
photographs and any Special investigation Unit files, which material
will be returned to CGI at the conclusion of the arbitration or
litigation. Notwithstanding Client's election with respect to the Party
responsible for the administration of any disputed claim or feature,
Client will be responsible for all expenses regarding such arbitration
or litigation, including attorneys' fees, incurred after receipt by CGI
of a demand for arbitration or after receipt by CGI of notice that
litigation has been filed concerning a claim or feature.
SECTION lB
SERVICE FEES
CGI will perform the services listed above for the following fee:
1. Policy Administration Services. Policy Administration fees shall be equal
to 7.15% of the Written Premium recognized by the Client for each month,
subject to a monthly minimum of $lQ0,000.O0.
2. Claims Administration Services. Claims Administration fees shall be equal
to 7.75% of the Earned Premium recognized by the Client for each month.
Subject to Section 7.2(d) of the Processing Services Agreement to which
this Schedule 1 is a part, CGI will be entitled to retain 25% of all
subrogation recoveries and 15% of all salvage recoveries. Special
Investigative Unit Services will be provided as approved by Client for
the fee of $60 per hour, plus actual expenses.
3. When requested and authorized by Client, processing system modifications
will be charged to Client, on a time and materials basis utilizing the
appropriate mix of service personnel required to perform the
modifications. Hourly rates for such services are $125 per hour.
4. Travel. Client will reimburse CGL for all reasonable travel requested by
Client in connection with the work performed under this Service Schedule.
IN WITNESS WHEREOF, the parties hereto have caused this Schedule to the
Processing Services Agreement to be executed in duplicate by their duly
authorized representatives.
CGI Information Systems & Management Consultants, Inc.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------
Authorized Signature
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------
Name
SVP 10/22/03
---------------------
Title Date
Phoenix Indemnity Insurance Company
/s/ Brookland ▇▇▇▇▇
---------------------
Authorized Signature
Brookland ▇▇▇▇▇
---------------------
Name
President 10/1/03
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Title Date
