Exhibit 10.31
▇▇▇▇▇▇▇ AMERICA, INC.
The Pinnacle, Suite 375
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
TITLE: EXCESS OF LOSS REINSURANCE CONTRACT
BETWEEN: DARWIN NATIONAL ASSURANCE COMPANY, DARWIN SELECT
INSURANCE COMPANY, CAPITOL INDEMNITY CORPORATION, CAPITOL
SPECIALTY INSURANCE CORPORATION, PLATTE RIVER INSURANCE
COMPANY AND/OR ANY OTHER ASSOCIATED, AFFILIATED OR
SUBSIDIARY COMPANIES OF ALLEGHANY INSURANCE HOLDING LLC,
BUT ONLY IN RESPECT OF BUSINESS UNDERWRITTEN BY DARWIN
PROFESSIONAL UNDERWRITERS, INC.
AND
THE REINSURERS SIGNATORY HERETO
COMMENCING: APRIL 1, 2005
U.S. CLASSIFICATION: U.S. REINSURANCE
Page 1 of 34
CONTENTS
PREAMBLE IDENTITY OF PARTIES
---------- -------------------
ARTICLE 1 BUSINESS REINSURED.............................................. 4
ARTICLE 2 EXCLUSIONS...................................................... 4
ARTICLE 3 COVER, LIMIT AND RETENTION...................................... 5
ARTICLE 4 WARRANTY........................................................ 6
ARTICLE 5 TERRITORIAL SCOPE............................................... 7
ARTICLE 6 PERIOD.......................................................... 7
ARTICLE 7 SPECIAL TERMINATION............................................. 7
ARTICLE 8 ULTIMATE NET LOSS............................................... 9
ARTICLE 9 LOSS RATIO CAP.................................................. 10
ARTICLE 10 EXCESS OF ORIGINAL POLICY LIMITS................................ 10
ARTICLE 11 EXTRA-CONTRACTUAL OBLIGATIONS................................... 10
ARTICLE 12 NET RETAINED LINES.............................................. 11
ARTICLE 13 PREMIUM......................................................... 12
ARTICLE 14 NOTICE OF LOSS AND LOSS SETTLEMENTS............................. 13
ARTICLE 15 UNEARNED PREMIUM AND OUTSTANDING LOSS RESERVES_................. 14
ARTICLE 16 INTEREST PENALTY................................................ 16
ARTICLE 17 COMMUTATION..................................................... 17
ARTICLE 18 CURRENCY........................................................ 18
ARTICLE 19 TAX, PROVISIONS................................................. 18
ARTICLE 20 INSOLVENCY OF THE REASSURED..................................... 19
ARTICLE 21 OFFSET.......................................................... 20
ARTICLE 22 DELAYS, ERRORS AND OMISSIONS.................................... 20
Page 2 of 34
ARTICLE 23 AMENDMENTS AND ALTERATIONS...................................... 20
ARTICLE 24 ACCESS TO RECORDS AND CLAIMS REVIEW............................. 20
ARTICLE 25 ARBITRATION..................................................... 21
ARTICLE 26 SERVICE OF SUIT................................................. 22
ARTICLE 27 CONFIDENTIALITY................................................. 23
ARTICLE 28 REGULATORY COMPLIANCE........................................... 23
ARTICLE 29 INTERMEDIARY.................................................... 23
ARTICLE 30 GOVERNING LAW................................................... 24
ARTICLE 31 PARTICIPATION................................................... 24
ARTICLE 32 SEVERAL LIABILITY NOTICE........................................ 24
ATTACHMENTS:
1. NUCLEAR INCIDENT EXCLUSION CLAUSES - LIABILITY - REINSURANCE -
U.S.A./CANADA
2. NUCLEAR ENERGY RISKS EXCLUSION CLAUSE - REINSURANCE - 1994 - (WORLDWIDE
excluding U.S.A. and CANADA)
3. APPENDIX A LOSS BORDEREAU FORMAT
Page 3 of 34
EXCESS OF LOSS REINSURANCE CONTRACT
PREAMBLE
This Contract is made and entered into between Darwin National Assurance
Company, Darwin Select Insurance Company, Capitol Indemnity Corporation, Capitol
Specialty Insurance Corporation, Platte River Insurance Company and/or any other
associated, affiliated or subsidiary companies of Alleghany Insurance Holding
LLC, but only in respect of business underwritten by Darwin Professional
Underwriters Inc. of ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (NAIC
Group Code 10472) (hereinafter referred to as "the Reassured") and the
Reinsurers signatory hereto (hereinafter referred to as "the Reinsurers"), on
the following terms and conditions:
ARTICLE 1
BUSINESS REINSURED
This Contract applies to policies of insurance classified by the Reassured as
Healthcare Facility Primary Professional Liability, Healthcare Facility Primary
General Liability, including Employee Benefits and other ancillary liability
coverages, Physician and Surgeon Primary Professional Liability, Physician Group
Primary Professional Liability, Physician Group Primary General Liability, and
other ancillary liability coverages, Follow Form Excess Liability and Umbrella
Liability as original.
For the purposes of this Contract, the terms "policy", "policies" or "original
policies" as used herein shall be understood to mean all binders, policies,
contracts, endorsements or other evidence of insurance issued in the name of the
Reassured.
Where the Reassured issues a group policy to multiple insureds providing
separate and distinct limits to each insured, then for the purposes of recovery
hereunder each separate and distinct limit shall be deemed to be a separate
policy.
Where the Reassured issues more than one policy to the same original insured
covering the same class of business, (such as on a layered basis), then the
combination of such policies shall be considered a program for the purposes
hereof, as reasonably determined by the Reassured.
ARTICLE 2
EXCLUSIONS
This Contract does not apply to and absolutely excludes the Following:
1. Nuclear Incidents, in accordance with the Nuclear Incident Exclusion
Clauses - Liability - Reinsurance - U.S.A./Canada - as attached.
Page 4 of 34
2. Nuclear Energy Risks, in accordance with the Nuclear Energy Risks Exclusion
Clause (Reinsurance) (1994) (Worldwide excluding U.S.A. and Canada) - as
attached
3. All liability of the Reassured arising by contract, operation of law, or
otherwise, from its participation or membership, whether voluntary or
involuntary, in any Insolvency Fund. "Insolvency Fund" includes any
guarantee fund, insolvency tend, plan, pool, association, fund or other
arrangement, howsoever denominated, established or governed, which provides
for any assessment of or payment or assumption by the Reassured of part or
all of any claim, debt, charge, fee or other obligation of an insurer, or
its successors or assigns, which has been declared by any competent
authority to be insolvent, or which is otherwise deemed unable to niece any
claim, debt, charge, fee or other obligation in whole or in part.
4. Liability assumed by the Reassured as a Member or Reinsurer of any Pool,
Association or Syndicate.
5. Financial Guarantee and Insolvency Insurance.
6. Surety business.
7. Reinsurance Assumed Business, other than reinsurance of a captive insurance
company, policies "fronted" by another carrier and individually
underwritten by Darwin Professional Underwriters, Inc. and Inter-Company
Pooling Arrangements.
ARTICLE 3
COVER, LIMIT AND RETENTION
Section A:
In respect of business classified by the Reassured as Healthcare Facility
Primary Professional Liability, Healthcare Facility Primary General Liability,
including Employee Benefits and other ancillary liability coverages, Follow Form
Excess Liability and Umbrella Liability, the Reinsurers shall be liable under
this Contract for the Reassured's Ultimate Net Loss in excess of $500,000 each
and every loss, each Insured, each policy/program, subject to a limit of
liability to the Reinsurers of up to $1,500,000 Ultimate Net Loss each and every
loss, well insured, each policy/program.
Section B:
In respect of business classified by the Reassured as Physician and Surgeon
Primary Professional Liability, Physician Group Primary Professional Liability,
Physician Group Primary General Liability, other ancillary liability coverages
and Follow Form Excess Liability, the Reinsurers shall be liable under this
Contract for the Reassured's Ultimate Net Loss in excess of $250,000 each and
every loss, each Insured, each policy/program, subject to a limit of liability
to the Reinsurers of up to $1,750,000 Ultimate Net Loss each and every loss,
each insured, each policy/program.
Page 5 of 34
Section C:
hr the event of business covered under Sections A or B being involved in the
same loss occurrence, the Reinsurers shall be liable under this Contract for the
Reassured's Ultimate Net Loss in excess of $500,000 each and every loss
occurrence subject to a limit of liability to the Reinsurers of up to $2,000,000
Ultimate Net Loss each and every loss occurrence.
In the event of business covered under Sections A and B being involved in the
same loss occurrence, the Reinsurers shall be liable under this Contract for the
Reassured's Ultimate Net Loss in excess of $750,000 each and every loss
occurrence subject to a limit of liability to the Reinsurers of up to $2,000,000
Ultimate Net Loss each and every loss occurrence.
Recoveries under Sections A and B inure to the benefit of Section C.
It is understood and agreed that for the purposes of Section C, the maximum
contribution to the Ultimate Net Loss is $500,000 per policy/program for Section
A and $250,000 per policy/program for Section B.
Sections A, B and C
The Reassured shall retain the aforementioned retention(s) net and unreinsured,
except for internal reinsurance and/or Catastrophe Excess of Loss Reinsurance.
Reinsurers hereon agree to bear their proportional share of all loss adjustment
and defense cost expenses, as per the original policy. Original policies may
provide for costs inclusive or costs in addition coverage. Where coverage is
issued on a cost inclusive basis, costs shall be included within the Ultimate
Net Loss hereon. Where coverage is issued on a cost in addition basis, pro rata
costs shall be payable in addition to the limits hereon, Sections A and/or B
and/or C combined.
It is understood and agreed that the limits hereon apply separately to each
original coverage and/or section thereof as applicable, issued by the Reassured,
unless written on a combined, shared limit basis, as per the original policies.
The meaning of "each and every loss", "claim", "claim made" and "losses
occurring" shall follow the definitions in the policies covered hereunder, as
finally determined by the Reassured. The Reassured shall also be the determinant
of what constitutes "loss occurrence", "each Insured", "each coverage", "each
section" and "each policy".
ARTICLE 4
WARRANTY
It is understood and agreed the maximum original policy limit subject to (his
Contract shall be $1,000,000 per claim or so deemed.
Page 6 of 34
ARTICLE 5
TERRITORIAL SCOPE
This Contract shall cover wherever the original policies cover.
ARTICLE 6
PERIOD
This Contract covers all claims made or losses occurring, as original, on
original policies written or renewed with effective dates during the period
April 1st, 2005 12:01 a.m. Standard Time to April 1st, 2006 12:01 a.m. Standard
Time at the place and location of risks insured.
The maximum original policy period shall be twelve (12) months plus odd time not
to exceed eighteen (18) months in all, plus extended reporting period coverage
or endorsements, as original. For the purposes of this Contract, any extension,
discovery period or extended reporting endorsement attaching to a policy covered
hereunder shall be considered as part of the period of the said policy, subject
to the provision that a separate limit of liability will not apply in respect
thereof unless required by statute.
Upon expiry of this Contract, policies in force at the effective time and date
of expiration hereof shall continue to be covered hereunder until their
individual natural expiration or termination dates, whichever sooner, including
extensions, discovery periods, DDR, or other similar extended reporting
endorsements attaching to such policies. The Reassured may however, subject to
agreement by Reinsurers hereon, terminate the liability of the Reinsurers for
claims made or losses occurring, as original, after the effective tinge and date
of expiration hereof and, in such event, the unearned premium at that date
applicable to in force policies, including extensions, discovery periods, DDR,
or other similar extended reporting endorsements attached thereto, shall be
deducted from the Subject Gross Net Written Premium Income for the purpose of
the premium rating hereunder.
ARTICLE 7
SPECIAL TERMINATION
A. Either party may terminate this Contract upon thirty (30) days notice in
the event that the other party's surplus has been reduced by 30% or more of
the amount of surplus at March 31st, 2005.
B. The Reassured may terminate the Reinsurer's participation hereon at any
time by giving thirty (30) days' prior written notice to the Reinsurer in
the event that:
1. A State Insurance Department or other legal authority has ordered the
subscribing Reinsurer to cease writing business; or
Page 7 of 34
2. The subscribing Reinsurer has become insolvent or has been placed into
liquidation or receivership or proceedings have been instituted
against the subscribing Reinsurer for the appointment of a receiver,
liquidator, rehabilitator, conservator or trustee in bankruptcy, or
other agents known by whatever name, to take possession of its assets
or control of its operation; or
3. The subscribing Reinsurer has reinsured its entire liability under
this Contract without the Reassured's prior written consent. However,
the Reinsurer shall be at liberty to effect catastrophe excess and/or
aggregate stop loss excess reinsurance; or
4. The subscribing Reinsurer has ceased assuming new and renewal treaty
reinsurance business; or
5. The subscribing Reinsurer experiences a downgrading in their financial
strength rating from Standard and Poor's Group below BBB or a
downgrading in rating from A.M. Best Company below A-.
In the event of such termination, the liability of the Reinsurer shall be
terminated as follows:
Policies in force at the effective time and date of termination of this Contract
shall continue to be covered hereunder until their individual expiration dates,
including extensions, discovery periods or other such similar reporting
endorsements or provisions attached thereto. For rating purposes, the applicable
Subject Gross Net Written Premium Income shall be calculated on policies issued
or renewed from the inception date of this Contract to the effective time and
date of termination of this Contract.
The Reassured may however terminate the liability of the Reinsurer for claims
made or losses occurring, as original, after the effective time and date of
termination of this Contract and, in such event, the unearned premium at the
termination date applicable to in force policies, including extensions,
discovery periods or other similar extended reporting endorsements or provisions
attached thereto, shall be deducted from the Subject Gross Net Written Premium
Income for the purpose of the premium rating hereunder.
The Reassured shall have the right at the time of termination of this Contract
or at any time following the termination of the Reinsurer, provided the
developed rate at that time is strictly below the Maximum hereon, to commute
losses at their discretionary reserves (which they may deem to be zero for the
purposes hereof). The Reassured will then give Reinsurers a full and final
release of all future liabilities under this Contract. It is understood and
agreed that unearned premium at the termination date applicable to in force
policies, including extensions, discovery periods or other similar extended
reporting endorsements or provisions attached thereto, shall be deducted from
the Subject Gross Net Written Premium Income for the purpose of the premium
rating hereunder.
Page 8 of 34
ARTICLE 8
ULTIMATE NET LOSS
The term "Ultimate Net Loss" as used in this Contract shall mean the sum
actually paid or payable by the Reassured in settlement of any losses under its
original policies and/or 90% of any additional liability incurred by the
Reassured as a result of an award in excess of policy limits, and/or 90% of any
liability incurred by the Reassured from any extra-contractual obligation, both
as more fully defined in EXCESS OF ORIGINAL POLICY LIMITS and EXTRA-CONTRACTUAL
OBLIGATIONS. In the event that the Reassured's original policies and/or specific
coverage parts of their original policies are issued on a cost inclusive basis,
such loss adjustment expenses shall be included within the Reassured's Ultimate
Net loss for the purposes of recovery hereunder.
Where the Reassured's original policies and/or specific coverage parts of their
original policies provide for loss adjustment expenses in addition to limit, all
loss adjustment expenses paid by the Reassured shall be apportioned in
proportion to the respective interests in the loss of the parties hereto as such
interests finally appear, provided that in the event a verdict or judgment is
reduced by an appeal or a settlement, subsequent to the entry of the judgment,
resulting in an ultimate saving on such verdict or judgment, or a judgment is
reversed outright, the expense incurred in securing such final reduction or
reversal shall be pro rata between the Reinsurers and the Reassured in the
proportion that each benefits from such reduction or reversal; and the expenses
incurred up to the time and date of the original verdict or judgment shall be
pro-rated in proportion to each party's interest in such verdict or judgment.
In the event of external legal or external adjustment expenses, including
outside monitoring counsel expenses, rescission expenses and declaratory
judgment expenses, which are incurred by the Reassured in connection with a
claim or potential claim hereunder and which are not the subject of the
Reassured's original policy, then Reinsurers shall also be liable for their
proportion of such expenses in addition to their share of the loss recoverable
hereunder.
For the purposes of this Contract loss adjustment expenses shall include all
expenses of litigation, including post judgment interest, but shall exclude the
salaries of regular employees and all office expenses of the Reassured.
All salvages and recoveries shall first be deducted from such loss to arrive at
the amount of the Reassured's Ultimate Net Loss for the purposes of this
Contract, All salvages, recoveries or payments recovered or received subsequent
to a loss settlement under this Contract shall be applied as if recovered or
received prior to the aforesaid settlement and all necessary adjustments shall
be made by the parties hereto. However, nothing in the foregoing shall be
construed as meaning that losses are not recoverable hereunder until the
Reassured's Ultimate Net Loss has been ascertained.
Page 9 of 34
ARTICLE 9
LOSS RATIO CAP
Notwithstanding any other provision of this Contract, the maximum recoverable
hereon shall not exceed 300% of the final adjusted reinsurance premium.
ARTICLE 10
EXCESS OF ORIGINAL POLICY LIMITS
Sections A and B, as applicable
As provided in ULTIMATE NET LOSS, this Contract shall protect the Reassured
within the limits of this Contract in respect of 90% of any additional liability
incurred by the Reassured as the result of an award in excess of the original
policy limit as more fully defined below. The Reinsurers agree that the said 90%
of the additional liability so incurred, plus the Reassured's contractual loss,
shall be considered as one combined loss for the purpose of the Reassured's
retention and of the recovery under this Contract subject always, however, to
the amount recoverable hereunder not exceeding the limit of recovery under this
Contact as provided in COVER, LIMIT, AND RETENTION, Sections A and B, as
applicable.
Awards in excess of the original policy limit are defined as contractual losses
which the Reassured may be legally liable to pay, but in excess of the original
policy limit, such losses in excess of the original policy limit having been
incurred because of, but not limited to, the following: failure by the Reassured
to settle within the original policy limit or by reason of alleged or actual
negligence, fraud or bad faith in rejecting an offer of settlement or in the
preparation of the defense or in the trial of any action against an insured or
in the preparation or prosecution of an appeal consequent upon such action,
The date on which any liability in excess of original policy limits is incurred
by the Reassured shall be deemed, in all circumstances, to be the date the
original claim was made or occurred.
However, this Article shall not apply where such awards in excess of original
policy limit have been incurred due to the fraud of a member of the Board of
Directors or a corporate officer of the Reassured acting individually or
collectively or in collusion with any individual or corporation or any other
organization or party involved in the presentation, defense or settlement of any
claim.
ARTICLE 11
EXTRA-CONTRACTUAL OBLIGATIONS
Sections A and B, as applicable
Page 10 of 34
As provided in ULTIMATE NET LOSS, this Contract shall protect the Reassured
within the limits of this Contract in respect of 90% of any additional liability
incurred by the Reassured as the result of any extra-contractual obligation, as
more fully defined below. The Reinsurers agree that the said 90% of the
additional liability so incurred, plus the Reassured's contractual loss, shall
be considered as one combined loss for the purposes of the Reassured's retention
and of the recovery under this Contract subject always, however, to the amount
recoverable hereunder not exceeding the limit of recovery under this Contract as
provided in COVER, LIMIT, AND RETENTION, Sections A and B, as applicable.
"Extra-contractual obligations" are defined as those liabilities not covered
under any otter provision of this Contract and which arise from the handling of
any claim on business covered hereunder, such liabilities arising because of,
but not limited to, the following: failure by the Reassured to settle within the
policy limit, or by reason of alleged or actual negligence, fraud or had faith
in rejecting an offer of settlement or in the preparation of the defense or in
the trial of any action against an insured or in the preparation or prosecution
of an appeal consequent upon such action.
The date on which any extra-contractual obligation is incurred by the Reassured
shall be deemed, in all circumstances, to be the date the original claim was
made or occurred.
However, this Article shall not apply where such extra-contractual obligations
have been incurred due to the fraud of a member of the Board of Directors or a
corporate officer of the Reassured acting individually or collectively or in
collusion with any individual or corporation or any other organization or party
involved in the presentation, defense or settlement of any claim.
ARTICLE 12
NET RETAINED LINES
This Contract applies only to that portion of any insurance covered by this
Contract which the Reassured retains net for its own account and in calculating
the amount of any loss hereunder and also in computing the amount in excess of
which this Contract attaches, only loss or losses in respect of that portion of
any insurance which the Reassured retains net for its own account shall be
included.
It is understood and agreed that the amount of the Reinsurers' liability
hereunder in respect of any loss or losses shall not be increased by reason of
the inability of the Reassured to collect from any other reinsurers, whether
specific or general, any amounts which may have become due from them, whether
such inability arises front the insolvency of such other reinsurers or
otherwise.
Page 11 of 34
ARTICLE 13
PREMIUM
In consideration of the liabilities undertaken by the Reinsurers in accordance
with the terms of this Contract, the Reassured shall pay to the Reinsurers their
share of the following premium:
A. Deposit Premium of $10,000,000 payable in four (4) equal installments of
$2,500,000 in arrears due on June 30, 2005, September 30, 2005, December
31, 2005, and March 31, 2006.
B. Within 60 days of expiry of this Contract, the Reassured shall render a
statement of its Subject Gross Net Written Premium Income (as defined
below) and the Reassured shall pay, or be paid by Reinsurers, the
difference between the Deposit Premium and a premium determined by applying
a provisional rate of 24.0% to the said Subject Gross Net Written Premium
Income.
C. Twelve (12) months after the expiry of this Contract and annually
thereafter until all losses are finally settled or commuted, the premium
hereunder shall be adjusted at a rate equivalent to 107.5% of the Case
Incurred Loss Cost plus a minimum rate of 10.5% applied to the Subject
Gross Net Written Premium Income. In no event, however, shall the premium
developed exceed a maximum rate equal to 40.0% of the Subject Gross Net
Written Premium Income (hereinafter "experience adjustment").
D. Notwithstanding the foregoing, it is agreed that the first downward
experience adjustment of premium shall not he made until thirty-six (36)
months after the expiry of this Contract.
E. In the event that Reinsurers are placed in a negative cash position
(Premiums paid by the Reassured less paid losses) prior to April 1, 2008,
the Reassured shall produce an experience adjustment account as set out in
C above and shall settle funds due within sixty (60) days of such account.
F. For the purposes of this Contract, the Reassured's Subject Gross Net
Written Premium Income shall be defined as the written premium charged by
the Reassured in respect of the first $1,000,000 of original per claim
policy or program limits (or so deemed) for business covered hereunder,
less cancellations, return premiums, and premiums paid for inuring
reinsurance.
G. For the purpose of this Contract, Case Incurred Loss Cost means the paid
and outstanding indemnity, defense and allocated loss adjustment expenses
recovered or recoverable hereunder on losses applicable to this Contract.
Page 12 of 34
ARTICLE 14
NOTICE OF LOSS AND LOSS SETTLEMENTS
A paid and outstanding loss bordereaux for all claims with incurred amounts
(indemnity, defense and expense combined), established by the Reassured of
$250,000 or more for Section A and $125,000 or more for Section B to be rendered
by the Reassured within forty-five (45) days of the end of each calendar
quarter, being within forty-five (45) days of June 30th, 2005 and quarterly
thereafter.
Notwithstanding the foregoing in the event that the Reassured's original policy
attaches at $10,000,000 or lower, the Reassured will report on the loss
bordereaux, irrespective of reserves, the following:
A. Any claim which involves the following circumstances or injuries;
i. Unanticipated neurological, sensory and/or systemic deficits such as
brain damage, permanent paralysis, partial or complete loss of sight
or hearing;
ii. Birth related injuries where mother or infant suffer permanent damage;
iii. Anesthesia related injuries resulting in permanent damage;
iv. Injuries which limit activities of daily living such as amputation or
loss of sight;
v. Unanticipated death, i.e. not foreseen as an expected natural
consequence of the medical situation;
vi. Cardiac/respiratory arrest requiring cardiopulmonary resuscitation;
vii. Radiology claims;
viii. Formal accreditation / standards review.
B. Any class action alleging damages in respect of policies attaching
hereunder.
C. Any claim by a governmental or regulatory body which seeks direct monetary
relief or Sanction.
It is understood and agreed, both by the Reassured and Reinsurers, that all paid
and outstanding losses shall be advised to Reinsurers solely by quarterly
bordereaux and that no individual loss reports arc to be provided unless
specifically requested by Reinsurers.
The bordereaux shall comprise numerical details of the paid and outstanding
amounts of each loss together with other data to identify the claim, all as
shown on the example bordereaux format(s) attached hereto as Appendix A to this
Contract and which have been mutually agreed by the Reassured and Reinsurers. It
is clearly understood and
Page 13 of 34
agreed that such bordereaux shall not provide any other details of the claim and
that there shall be no requirement to provide assessment of potential liability
or other evaluations of each claim.
Reinsurers agree to abide by all loss settlements of the Reassured which at its
sole discretion shall adjust, settle or compromise all losses and all such
adjustments, settlements or compromises shall be binding upon Reinsurers subject
to the terms, conditions and limitations of the original policies and this
Contract.
Reinsurers agree to settle their share of such loss payments within forty-five
(45) days of receipt of the quarterly bordereaux; the bordereaux being the sole
billing documentation necessary to effect settlements from Reinsurers.
Requests for individual loss reports by Reinsurers hereon shall not delay their
payment of a claim once billing of the claim has been presented by the Reassured
to Reinsurers. In addition, responses to requests for individual loss reports
shall not be delayed or withheld by the Reassured.
Notwithstanding such quarterly bordereaux settlements, the Reassured may request
an immediate cash loss settlement from Reinsurers in the event that the amount
due from Reinsurers in respect of an individual claim is $500,000 or more. Such
cash loss ▇▇▇▇▇▇▇▇ shall be made solely utilizing the same format as the
quarterly bordereaux collections.
ARTICLE 15
UNEARNED PREMIUM AND OUTSTANDING LOSS RESERVES
This Article applies only to those Reinsurers signatory hereto who do not
qualify for credit under the regulations of the State insurance authorities or
departments which have jurisdiction over the Reassured's reserves.
The Reassured agrees that when, for its Annual Convention Statement purposes, it
files with the authorities or departments mentioned above or sets up in its
books statutory reserves for known outstanding losses and allocated loss
expenses reinsured by this Contract, for unearned premium in respect of business
coming within the scope of this Contract, or for incurred but not reported
losses (IBNR), hereinafter "The Stated Reserves", it shall forward to the
Reinsurers a clear statement of the Reinsurers' proportion of The Stated
Reserves detailing separately the amounts involved for known outstanding losses
and allocated loss expenses, unearned premium and IBNR, and also how those
amounts are calculated. Reserves for IBNR shall not exceed the actual amount of
IBNR carried on the books of the Reassured for statutory reporting purposes.
The Reinsurers, promptly upon receipt of the Reassured's statement, shall apply
for, and secure delivery to the Reassured of, clean irrevocable and
unconditional Letters of Credit or such equivalent funding acceptable to the
Reassured, for the benefit of the Reassured in amounts equal to their proportion
of The Stated Reserves.
Page 14 of 34
In the event that the Provisional Premium adjustment and/or experience
adjustment calculation hereon results in a reduced level of collateral funding
hereunder, the Reassured agrees to return such excess collateral to Reinsurers
within ninety (90) days of the date the adjustment is made.
All Letters of Credit procured pursuant to this Contract shall be issued by a
Bank which is a Member of the Federal Reserve and acceptable to the authorities
or departments mentioned in the first paragraph of this Article current at the
date of the Reassured's statement. Such Letter of Credit shall be in full
conformity with the requirements of such authorities or departments.
Further, all such Letters of Credit shall be "Evergreen" in that they shall be
issued for an initial period of not less than one year and shall be
automatically extended for one year from their original expiration dates and
subsequently from their extended expiration dates unless and until, at least
thirty days before any expiration date, the issuing bank gives notice to the
Reassured by registered mail that the issuing bank elects not to extend the life
of the Letter of Credit in question beyond its forthcoming expiration date.
In consideration of the contract of the Reinsurers to furnish such Letters of
Credit to the Reassured to enable it to obtain credit for the reinsurance
provided under this Contract, the Reassured hereby undertakes to hold such
Letters of Credit and the proceeds of any drawings made upon thorn in trust for
the Reinsurers and to use and apply the proceeds of any such drawings for the
following purposes only:
a. To pay the Reinsurers' share or to reimburse the Reassured for that share
of any liability for loss or allocated loss expense reinsured by this
Contract or for unearned premium in respect of business coming within the
scope of this Contract;
b. To refund to the Reinsurers any balance by which the amount of the Letter
of Credit exceeds the Reinsurers' proportion of any liability for loss or
allocated loss expense reinsured by this Contract, incurred but not
reported losses (IBNR) or for unearned premium in respect of business
coming within the scope of this Contract.
c. In the event that one or more of the Reinsurers participating in the Letter
of Credit gives timely notice of cancellation or non-renewal of their
participation in the Letter of Credit and provided that the obligations
secured by the Letter of Credit remain unliquidated and undischarged at the
time of receipt by the Reassured of such notice, the Reassured shall create
a cash deposit account, separate from its own assets, in an amount equal to
the participation of the canceling or non-renewing Reinsurer(s) in the
Letter of Credit. That cash deposit account tray then be used as in
subparagraphs a. and b. above. It is understood and agreed that this
procedure may only be implemented before the expiry of the notice period in
respect of cancellation or non-renewal and that if it is implemented, the
Reassured will ensure that a rate of interest is obtained for the
Reinsurers on such a deposit account that is at least equal to the rate
which would be paid by Citibank N.A. in
Page 15 of 34
New York, and further that the Reassured will account to the Reinsurers on
an annual basis for all interest accruing on the cash deposit account for
the benefit of the Reinsurers.
The issuing bank shall have no responsibility whatsoever in connection with the
propriety of drawings made by the Reassured on the Letters of Credit issued
under this Contract or in connection with the disposition of any funds so
withdrawn, except to ensure that drawings are made only upon the order of
properly authorized representatives of the Reassured.
All Letters of Credit procured for the Reassured under this Contract shall be
adjusted at annual intervals, or more frequently as agreed (but never more
frequently than quarterly), to reflect the current balance of the Reinsurers'
proportion of the Reassured's known outstanding loss and allocated loss expense
reserves and unearned premium reserves, and the Reassured shall produce a
statement for this purpose detailed in the same way as the original statement on
the basis of which such Letters of Credit were first issued. If the statement
shows that the Reinsurers' proportion of such losses and allocated expenses,
IBNR or unearned premium reserves exceeds the current amount of the Letters of
Credit, the Reinsurers shall, within thirty days after receipt of the statement,
secure the amendment of the Letters of Credit increasing their amount to the
amount of the current balance of these items. If, however, the statement shows
that the Reinsurers' proportion of the current balance of those items is less
than the amount of the Letters of Credit the Reassured shall, within thirty days
of receipt of a written request from the Reinsurers to do so, facilitate the
release of the excessive security by authorizing the amendment of the Letters of
Credit so as to reduce their amount to the current balance required.
All expenses incurred in the establishment or maintenance of such Letters of
Credit shall be paid by the Reinsurers.
ARTICLE 16
INTEREST PENALTY
The provisions of this Article shall not be implemented unless specifically
invoked, in writing, by the Reassured or Reinsurer. The interest amounts
provided for in this Article will apply to the Reinsurer or to the Reassured in
the following circumstances:
1. Loss payment owed by the Reinsurer to the Reassured shall have a due
date to the Reassured of forty-five (45) calendar days following the
date of the Reinsurer's receipt of the billing, but no later than
ninety (90) days from the Reassured's date of the billing.
2. Payment of any premium installments shall be due to the Reinsurer
within thirty (30) calendar days of the date specified in this
Contract. Any
Page 16 of 34
premium adjustments will be due by the debtor party within sixty (60)
calendar days of the date specified in this Contract.
3. Payment of return premiums, commissions, profit sharing, or any other
amounts not provided in paragraphs l or 2 above, shall he due by the
debtor party within sixty (60) calendar days of the due date specified
in this Contract. If no due date is specified, the due date shall be
sixty (60) days following the date of the debtor party's receipt of
the billing, but no later than ninety (90) days from the creditor
party's date of the billing.
4. Failure by the Reinsurer or Reassured to comply with their respective
payment obligations within the time periods as herein provided will
result in a compound interest penalty payable at a rate equal to the
ninety (90) day Treasury ▇▇▇▇ rate as published is the Money Rate
Section or any successor section of the Wall Street Journal on the
first business day following the date a remittance becomes due, plus
2% per annum, to be compounded and adjusted quarterly. Any interest
which occurs pursuant to this Article shall be calculated by the pasty
to which it is owed. The accumulation of the number of days that any
payment is past due will stop on the date the Intermediary, where
applicable, receives payment.
5. The validity of any claim or payment may be contested under the
provisions of this Contract. If the debtor party prevails in such
action, there shall be no interest penalty due. Otherwise, any
interest will be calculated and due as outlined above.
6. If a Reinsurer advances payment of any claim it is contesting, and
prevails such action, the Reassured shall return such payment plus pay
interest on same, calculated as per the provisions of this Article.
7. Any interest which occurs pursuant to this Article may be waived by
the party to which it is owed. Further, any interest which is
calculated pursuant to this Article that is $100 or less shall be
waived. Waiver of such interest, however, shall not affect the waiving
party's right to similar interest for any other failure by the other
party to make payment when due under this Article.
8. Nothing in this Article shall diminish any legal remedies which either
party may have against the other.
ARTICLE 17
COMMUTATION
The Reassured shall have the right one year after the expiry of this Contract,
but within six (6) years Following the expiry of the contract, provided the
developed rate at that time is strictly below the Maximum hereon, to commute
losses at their discretionary reserves
Page 17 of 34
(which they may deem to be zero For the purposes hereof). The Reassured will
then give Reinsurers a full and final release of all future liabilities under
this Contract.
Notwithstanding the foregoing, the Reassured shall have the right six (6) years
after the expiry of the Contract, or at anytime thereafter, provided the
developed rate at that time is strictly below the Maximum hereon, to continue
losses at reserves to be mutually agreed by the Reassured and Reinsurers. The
Reassured will then give Reinsurers a full and final release of all future
liabilities under this Contract.
ARTICLE 18
CURRENCY
The currency to be used for all purposes of this Contract shall be United States
Dollars. All amounts paid or received by the Reassured in any other currency
shall be converted into United States Dollars at the rates of exchange at which
such transactions are converted in the books of the Reassured.
ARTICLE 19
TAX PROVISIONS
The Reassured shall be liable for all taxes (except Federal Excise Tax) levied
on it with respect to premiums payable to the Reinsurers hereunder. Federal
Excise Tax applies only to those Reinsurers, excepting Underwriters at Lloyd's,
London and other Reinsurers exempt from the Federal Excise Tax, who are
domiciled outside the United States of America.
To the extent that such premium is subject to Federal Excise Tax, the Reinsurers
hereby agree to allow as a deduction from the premium, for the purpose of paying
Federal Excise Tax, all applicable percentages of the premium payable hereon.
In the event of any return premium becoming due hereunder the Reinsurers will
deduct all applicable Percentages from the amount of the return, and the
Reassured or its agents shall take steps to recover the tax from the Government
of the United States of America
In consideration of the terms under which this Contract is issued, the Reassured
undertakes not to claim any deduction in respect of premium payable hereon when
making tax returns, other than Income or Profits tax returns, to any fiscal
authority of the United States of America or any State or Territory thereof.
Page 18 of 34
ARTICLE 20
INSOLVENCY OF THE REASSURED
Amounts due to the Reassured under this Contract shall be payable by the
Reinsurers on the basis of the liability of the Reassured under the original
policies reinsured hereunder without diminution because of the insolvency of any
one or all of the Reassured Companies.
In the event of the insolvency of the Reassured and the appointment of a
Liquidator, Receiver, Conservator or Statutory Successor, the Liquidator or
Receiver or Conservator or Statutory Successor of the Reassured shall give
written notice to the Reinsurers of the pendency of any claim against the
insolvent Reassured on the original policies reinsured hereunder within a
reasonable time after such claim is filed in the insolvency proceedings. During
the pendency of such claim the Reinsurers may investigate such claim and
intervene, at their own expense, in the proceedings where such claim is to be
adjudicated and interpose any defense or defenses which they may deem available
to the Reassured or its Liquidator or Receiver or Conservator or Statutory
Successor. The expense thus incurred by the Reinsurers shall he chargeable,
subject to court approval, against the insolvent Reassured as part of the
expense of liquidation to the extent of a proportionate share of the benefit
which may accrue to the Reassured solely as a result of the defense so
undertaken by the Reinsurers.
When two or more Reinsurers are involved in the same claim and a majority in
interest elect to investigate the claim and/or to interpose defense to such
claim, the expense shall be apportioned in accordance with the terms of the
above paragraph as though such expense had been incurred by the Reassured.
Should the Reassured go into liquidation or should a receiver be appointed, the
Reinsurers shall be entitled to deduct from any sums which may be or may become
due to the Reassured under this Contract any sums which are due to the
Reinsurers from the Reassured under this Contract and which are payable at a
fixed or stated date, as well as any other sums due to the Reinsurers which are
permitted to be offset under applicable law.
In the event of the insolvency of the Reassured, the amounts due to the
Reassured under this Contract shall be payable by the Reinsurers directly to the
Reassured or to its Liquidator, Receiver or Conservator or Statutory Successor.
It is the mutual intent of the parties that, in the event of the insolvency of
the Reassured, this Article shall he read to conform with the state or
regulatory requirements of the jurisdiction in which the liquidation or
receivership is conducted In the event that any provision of this Article is in
conflict with such state or regulatory requirements, then such provision shall
be reformed to be in compliance with such state or regulatory requirements.
Page 19 of 34
ARTICLE 21
OFFSET
Each party hereto shall lave, and may exercise in the event of insolvency of the
Other or the non-payment by the other of obligations when due hereunder, the
right to offset any balance or balances whether on account of premiums,
commissions, claims or losses, adjustment expenses, salvage or any amount due
from that party to the other party hereto under this Contract only against any
balance or balances due or to become due to the offsetting party from the other
party under this Contract only. The terms of this Article shall apply separately
to this Contract and to each successive renewal of this Contract.
ARTICLE 22
DELAYS, ERRORS AND OMISSIONS
No inadvertent delay, error or omission shall be held to relieve either party
hereto of any liability which would have attached to them under this Contract if
such delay, error or omission had not been made, provided that rectification is
made immediately upon discovery.
ARTICLE 23
AMENDMENTS AND ALTERATIONS
The terms herein contained comprise the whole Contract between the Reassured and
the Reinsurers and may only be changed in writing, signed by or on behalf of
both parties.
ARTICLE 24
ACCESS TO RECORDS AND CLAIMS REVIEW
All documents and records in the possession of the Reassured concerning this
Contract shall be made available upon reasonable notice at the request of the
Reinsurers for inspection at the Reassured's offices by the Reinsurers or their
nominated representatives for the purposes of obtaining information concerning
this Contract or the subject matter hereof.
Specifically, the Reinsurers shall be entitled to nominate a representative to
assess the Reassured's claims and claims procedures.
For the avoidance of doubt, it is hereby expressly agreed that the rights given
to the Reinsurers by this Article shall continue in effect notwithstanding the
expiration of this Contract and shall be exercised at the Reinsurers' own
expense.
Page 20 of 34
ARTICLE 25
ARBITRATION
As a condition precedent to any right of action hereunder, all disputes or
differences arising out of or connected with this Contract (whether or not
arising before or after expiration) its interpretation or implementation, shall
be referred to arbitration in Farmington, Connecticut, U.S.A., the city in which
the Reassured's principal office is located.
Arbitration shall he initiated by the delivery of a written notice of demand for
arbitration by one party to the other within a reasonable time after the dispute
has arisen stating the nature of the dispute and the remedy sought. Those
Reinsurers involved in the dispute or other matter in controversy shall be
considered as one party for the purpose of allocating the cost of the
arbitration.
Each party shall appoint an individual as arbitrator and the two so appointed
shall then appoint a third arbitrator. If either party refuses or neglects to
appoint an arbitrator within sixty (60) days, the other party may appoint the
second arbitrator. If the two arbitrators do not agree on a third arbitrator
within sixty (60) days of their appointment, within ten (10) days thereafter the
two arbitrators will request the American Arbitration Association ("AAA") to
appoint a third arbitrator with the qualifications set forth below in this
Article without regard to the AAA's Commercial Arbitration Rules. If the AAA
fails to appoint a third arbitrator within thirty (30) days after its receipt of
the two arbitrators' request, either party may apply to a court of competent
jurisdiction to appoint a third arbitrator with the qualifications set forth
below in this Article. The third arbitrator will immediately notify each party
of his selection. In the event of the resignation or death of any member of the
arbitrator panel, a replacement will be appointed in the same manner as the
resigning or deceased member was appointed.
Each arbitrator shall be an active or retired officer of an insurance or
reinsurance, company or Underwriter at Lloyd's London; no arbitrator shall have
a personal or financial interest in the result of the arbitration, and shall not
be a present or former officer, attorney, or consultant of the Reassured or the
Reinsurer or either's affiliates.
The arbitrators shall interpret this Contract as an honorable engagement and not
as merely a legal obligation; they are relieved of all judicial formalities and
may abstain from following the strict rules of law, and shall make any award
with a view to effecting the general purpose of this Contract in a reasonable
manner with due regard to the custom and usage of the insurance and reinsurance
business.
The arbitrators shall have full discretion to make such orders as they think fit
in connection with all procedural matters in the Arbitration, including but not
limited to the conduct of the reference by written or oral submissions, the
production of documents, the examination of witnesses, and the imposition of
time limits for the taking of necessary procedural steps. The arbitrators shall
also have full discretion to make such orders as
Page 21 of 34
they think fit with regard to the payment of the costs of the Arbitration
including attorneys' costs and fees.
If more than one Reinsurer is involved in the same dispute, all such Reinsurers
shall constitute and act as one party for purposes of this Article and
communications shall be made by the Reassured to each of the Reinsurers
constituting the one party, provided that nothing herein shall impair the rights
of such Reinsurers to assert several, rather than joint, defenses or claims, nor
be construed as changing the liability of the Reinsurers udder the terms of this
Contract from several to joint.
Any Award or order of the arbitrators or a majority thereof shall be binding on
the parties and there shall be no right of appeal there from.
Except as provided above, arbitration shall be based, insofar as applicable,
upon the procedures of the American Arbitration Association.
ARTICLE 26
SERVICE OF SUIT
This Article applies only to those Reinsurers signatory hereto who are domiciled
outside the United States of America or, should the Reassured be authorized to
do business in the State of New York, those Reinsurers who are unauthorized in
New York as respects suits instituted in New York.
It is agreed that in the event of the failure of the Reinsurers hereon to pay
any amount claimed to be due hereunder, the Reinsurers hereon, at the request of
the Reassured, will submit to the jurisdiction of a Court of competent
jurisdiction within the United States. Nothing in this Clause constitutes or
should be understood to constitute a waiver of Reinsurers' rights to commence an
action in any Court of competent jurisdiction in the United States, to remove an
action to a United States District Court, or to seek a transfer of a case to
another Court as permitted by the laws of the United States or of any State in
the United States.
It is further agreed that service of process in such suit may be made upon
Mendes & Mount, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, and that in any
suit instituted against any one of them upon this contract, Reinsurers will
abide by the final decision of such Court or of any Appellate Court in the event
of an appeal.
The above-named are authorized and directed to accept service of process on
behalf of Reinsurers in any such suit and/or upon the request of the Reassured
to give a written undertaking to the Reassured that they will enter a general
appearance upon Reinsurers' behalf in the event such a suit shall be instituted.
Further, pursuant to any statute of any state, territory or district of the
United States which makes provision therefor, Reinsurers hereon hereby designate
the Superintendent,
Page 22 of 34
Commissioner or Director of Insurance or other officer specified for that
purpose in the statute, or his successor or successors in office, as their true
and lawful attorney upon whom may be served any lawful process in any action,
suit or proceeding instituted by or on behalf of the Reassured or any
beneficiary hereunder arising out of this contract of reinsurance, and hereby
designate the above-named as the person to whom the said officer is authorized
to mail such process or a true copy thereof.
NMA 1998
ARTICLE 27
CONFIDENTIALITY
The confidential nature of this Contract is acknowledged by all parties.
Moreover, the Reinsurers will only disclose to third parties, such as
regulators, auditors, rating agencies, shareholders, reinsurers and the like,
such details of this Contract as are necessary to comply with their obligations
to such third parties as part of their normal business practice.
It is a condition binding on Reinsurers hereon that they may not disclose any
details of this Contract at any time to any other third party without the
agreement of the Reassured.
ARTICLE 28
REGULATORY COMPLIANCE
If any provision of this Contract shall be rendered illegal or unenforceable by
the laws, regulations or public policy of any State in the United States, such
provision shall be considered void in such State, but this shall not affect the
validity or enforceability of any other provision of this Contract, or the
validity or enforceability of such provision in any other jurisdiction.
ARTICLE 29
INTERMEDIARY
▇▇▇▇▇▇▇ America Incorporated is hereby recognized as the Intermediary
negotiating this Contract for all business hereunder. All communications
including notices, premiums, return premiums, commissions, taxes, losses, loss
adjustment expenses, salvages and loss settlements relating thereto shall he
transmitted to the Reinsurer or the Reassured through ▇▇▇▇▇▇▇ America
Incorporated at The Pinnacle, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇.▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇. Payments by the Reassured to the Intermediary will be deemed to
constitute payment to the Reinsurer. Payments by the Reinsurer to the
Intermediary
Page 23 of 34
will be deemed only to constitute payment to the Reassured to the extent that
such payments arc actually received by the Reassured.
ARTICLE 30
GOVERNING LAW
This Contract shall be governed by and construed in accordance with the laws of
the State of Connecticut.
ARTICLE 31
PARTICIPATION
This Contract obligates each of their Reinsurers for their proportion of the
interests and liabilities set forth under this Contract, such proportions being
shown in the attached Schedules.
ARTICLE 32
SEVERAL LIABILITY NOTICE
The subscribing Reinsurers' obligations under contracts of reinsurance to which
they subscribe are several and not joint and are limited solely to the extent of
their individual subscriptions. The subscribing Reinsurers are not responsible
for the subscription of any co-subscribing Reinsurer who for any reason does not
satisfy all or part of its obligations.
IN WITNESS WHEREOF the parties hereto have, by their duly authorized
representative, executed this Contract as follows:
For and on behalf of the Reassured:
Signed by /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------
And for the Reinsurers by means of and in accordance with the attached
Schedules, which shall be considered to form an integral part of this Contract.
Page 24 of 34
NUCLEAR INCIDENT EXCLUSION CLAUSE - LIABILITY - REINSURANCE (U.S.A.)
(1) This reinsurance does not cover any loss or liability accruing to the
Reassured as a member of, or subscriber to, any association of insurers or
reinsurers formed for the purpose of covering nuclear energy risks or as a
direct or indirect reinsurer of any such member, subscriber or association.
(2) Without in any way restricting the operation of paragraph (1) of this
Clause it is understood and agreed that for all purposes of this
reinsurance all the original policies of the Reassured (new, renewal and
replacement) of the classes specified in Clause II of this paragraph (2)
from the tithe specified in Clause III in this paragraph (2) shall be
deemed to include the following provision (specified as the Limited
Exclusion Provision).
LIMITED EXCLUSION PROVISION:
I. It is agreed that the policy does not apply under any liability
coverage, to: injury, sickness, disease, death or destruction
bodily injury or property damage
with respect to which an insured under the policy is also an insured
under a nuclear energy liability policy issued by Nuclear Energy
Liability Insurance Association, Mutual Atomic Energy Liability
Underwriters or Nuclear Insurance Association of Canada, or would be
an insured under any such policy but for its termination upon
exhaustion of its limit of liability.
II. Family Automobile Policies (liability only), Special Automobile
Policies (private passenger automobiles, liability only), Farmers
Comprehensive Personal Liability Policies (liability only),
Comprehensive Personal Liability Policies (liability only) or policies
of a similar nature; and the liability portion of combination forms
related to the four classes of policies stated above, such as the
Comprehensive Dwelling Policy and the applicable types of Homeowners
Policies.
III. The inception dates and thereafter of all original policies as
described in II above, whether new, renewal or replacement, being
policies which either
(a) become effective on or after 1st May, 1960, or
(b) become effective before that date and contain the Limited
Exclusion Provision set out above;
provided this paragraph (2) shall not be applicable to Family
Automobile Policies, Special Automobile Policies, or policies or
combination policies of a similar nature, issued by the Reassure on
New York risks, until 90
Page 25 of 34
days following approval of the Limited Exclusion Provision by the
Governmental Authority having jurisdiction thereof.
(3) Except for those classes of policies specified in Clause II of paragraph
(2) and without in any way restricting the operation of paragraph (1) of
this Clause, it is understood and agreed that for all purposes of this
reinsurance the original liability policies of the Reassured (new, renewal
and replacement) affording the following coverages:
Owners, Landlords and Tenants Liability, Contractual Liability,
Elevator Liability, Owners or Contractors (including railroad)
Protective Liability, Manufacturers and Contractors Liability, Product
Liability, Professional and Malpractice Liability, Storekeepers
Liability, Garage Liability, Automobile Liability (including
Massachusetts Motor Vehicle or Garage Liability)
shall be deemed to include, with respect to such coverages, from the time
specified in Clause V of this paragraph (3), the following provision
(specified as the Broad Exclusion Provision):
BROAD EXCLUSION PROVISION.*
It is agreed that the policy does not apply:
I. Under any Liability Coverage, to injury, sickness, disease, death or
destruction bodily injury or property damage
(a) with respect to which an insured under the policy is also an insured
under a nuclear energy liability policy issued by Nuclear Energy
Liability Insurance Association, Mutual Atomic Energy Liability
Underwriters or Nuclear Insurance Association of Canada, or would be
an insured under any such policy but for its termination upon
exhaustion of its limit of liability;
or
(b) resulting from, the hazardous properties of nuclear material and with
respect to which (1) any person or organization is required to
maintain financial protection pursuant to the Atomic Energy Act of
1954, or any law amendatory thereof, or (2) the insured is, or had
this policy not been issued would be, entitled to indemnity from the
United States of America, or any agency thereof, under any agreement
entered into by the United States of America, or any agency thereof,
with any person or organization.
II. Under any Medical Payments Coverage, or under any Supplementary Payments
Provision relating to immediate medical or surgical relief first aid,
to expenses incurred with respect to bodily injury, sickness, disease or
death
Page 26 of 34
bodily injury resulting from the hazardous properties of nuclear material
and arising out of the operation of a nuclear facility by any person or
organization.
III. Under any Liability Coverage, to injury, sickness, disease, death or
destruction bodily injury or property damage resulting from the hazardous
properties of nuclear material, if
(a) the nuclear material (1) is at any nuclear facility owned by, or
operated by or on behalf of, an insured or (2) has been discharged or
dispersed therefrom;
(b) the nuclear material is contained in spent fuel or waste at any time
possessed, handled, used, processed, stored, transported or disposed
of by or on behalf of an insured; or
(c) the injury, sickness, disease, death or destruction bodily injury or
property damage arises out of the furnishing by an insured of
services, materials, parts or equipment in connection with the
planning, construction, maintenance, operation or use of any nuclear
facility, but if such facility is located within the United States of
America, its territories, or possessions or Canada, this exclusion (c)
applies only to injury to or destruction of property at such nuclear
facility, property damage to such nuclear facility and any property
thereat.
IV. As used in this endorsement:
"HAZARDOUS PROPERTIES" include, radioactive, toxic or explosive properties;
"NUCLEAR MATERIAL" means source material, special nuclear material or
byproduct material; "SOURCE MATERIAL", "SPECIAL NUCLEAR MATERIAL", and
"BYPRODUCT MATERIAL" have the meanings given them in the Atomic Energy Act
of 1954 or in any law amendatory thereof; "SPENT FUEL" means any fuel
element or fuel component, solid or liquid, which has been used or exposed
to radiation in a nuclear reactor; "WASTE" means any waste material (1)
containing by product material and (2) resulting from the operation by any
person or organization of any nuclear facility included within the
definition of nuclear facility under paragraph (a) or (b) thereof; "NUCLEAR
FACILITY" means
(a) any nuclear reactor,
(b) any equipment or device designed or used for (1) separating the
isotopes of uranium or plutonium, (2) processing or utilizing spent
fuel, or (3) handling, processing or packaging waste,
(c) any equipment or device used for the processing, fabricating or
alloying of special nuclear material if at any tinge the total amount
Page 27 of 34
of such material in the custody of the insured at the premises where
such equipment or device is located consists of or contains more than
25 grams of plutonium or uranium 233 or airy combination thereof, or
more than 250 grains of uranium 235,
(d) any structure, basin, excavation, premises or place prepared or used
for the storage or disposal of waste,
and includes the site on which any of the foregoing is located, all operations
conducted on such site and all premises used for such operations; "NUCLEAR
REACTOR" means any apparatus designed or used to sustain nuclear fission in a
self-supporting chain reaction or to contain a ▇▇▇▇▇▇▇▇ ▇▇▇▇ of fissionable
material;
With respect to injury to or destruction of property, the word "injury" or
"destruction",
"property damage" includes all forms of radioactive contamination of
property,
includes all farms of radioactive contamination of property.
V. The inception dates and thereafter of all original policies affording
coverages; specified in this paragraph (3), whether new, renewal or
replacement, being policies which become effective on or after 1st May,
1960, provided this paragraph (3) shall not be applicable to
(i) Garage and Automobile Policies issued by the Reassured on New
York risks.
or
(ii) statutory liability insurance required under Chapter 90, General
Laws of Massachusetts,
until 90 days following approval of the Broad Exclusion Provision by the
Governmental Authority having jurisdiction thereof.
(4) Without in any way restricting the operation of paragraph (l) of this
Clause, it is understood and agreed that paragraphs (2) and (3) above are
not applicable to original liability policies of the Reassured in Canada
and that with respect to such policies this Clause shall be deemed to
include the Nuclear Energy Liability Exclusion Provisions adopted by the
Canadian Underwriters' Association or the Independent Insurance Conference
of Canada.
*NOTE. The words printed in italics in the Limited Exclusion Provision and in
the Broad Exclusion Provision shall apply only in relation to original
liability policies which include a Limited Exclusion Provision or a Broad
Exclusion Provision containing those words.
Page 28 of 34
NUCLEAR INCIDENT EXCLUSION CLAUSE - LIABILITY - REINSURANCE - CANADA
1. This Agreement does not cover any loss or liability accruing to the
Reinsured as a member of, or subscriber to, any association of insurers or
reinsurers formed for the purpose of covering nuclear energy risks or as a
direct or indirect reinsurers' of any such member, subscriber or
association.
2. Without in any way restricting the operation of paragraph I of this clause
it is agreed that for all purposes of this Agreement all the original
liability contracts of the Reinsured, whether new, renewal or replacement,
of the following classes, namely,
Personal Liability.
Farmers' Liability.
Storekeepers' Liability.
which become effective on or alter 31st December 1992, shall be deemed to
include, from their inception dates and thereafter, the following
provision:
Limited Exclusion Provision.
This Policy does not apply to bodily injury or property damage with respect
to which the Insured is also insured under a contract of nuclear energy
liability insurance (whether the Insured is unnamed in such contract and
whether or not it is legally enforceable by the Insured) issued by the
Nuclear Insurance Association of Canada or any other group or pool of
insurers or would be an Insured under any such policy but for its
termination upon exhaustion of its limits of liability.
With respect to property, loss of such property shall be deemed to be
property damage.
3. Without in any way restricting the operation of paragraph I of this clause
it is agreed that for all purposes of this Agreement all the original
liability contracts of the Reinsured, whether new, renewal or replacement,
of any class whatsoever (other than Personal Liability, Farmers' Liability,
Storekeepers' Liability or Automobile Liability contracts), which become
effective on or after 31st December 1992, shall be deemed to include from
their inception dates and thereafter, the following provision:
Broad Exclusion Provision.
It is agreed that this Policy does not apply:
(a) to liability imposed by or arising from any nuclear liability act, law
or statute or any law amendatory thereof; nor
Page 29 of 34
(b) to bodily injury or property damage with respect to which an Insured
under this policy is also insured under a contract of nuclear energy
liability insurance (whether the Insured is unnamed in such contract
and whether or not it is legally enforceable by the Insured) issued by
the Nuclear Insurance Association of Canada or any other insurer or
group or pool of insurers or would be an Insured under any such policy
but for its termination upon exhaustion of its limit or liability; nor
(c) to bodily injury or property damage resulting directly or indirectly
from the nuclear energy hazard arising from:
(i) the ownership, maintenance, operation or use of a nuclear
facility by or on behalf of an Insured;
(ii) the furnishing by an Insured of services, materials, parts or
equipment in connection with the planning, construction,
maintenance, operation or use of any nuclear facility; and
(iii) the possession, consumption, use, handling, disposal or
transportation of fissionable substances, or of other radioactive
material (except radioactive isotopes, away from a nuclear
facility, which have reached the final stage of fabrication so as
to be usable for any scientific, medical, agricultural,
commercial or industrial purpose) used, distributed, handled or
sold by an Insured.
As used in this policy:
1. The term "nuclear energy hazard" means the radioactive, toxic, explosive,
or other hazardous properties of radioactive material;
2. The term "radioactive material" means uranium, thorium, plutonium,
neptunium, their respective derivatives and compounds, radioactive isotopes
of other elements and any other substances which may be designated by or
pursuant to any law, act or statute, or law amendatory thereof as being
prescribed substances capable of releasing atomic energy, or as being
requisite for the production, use of application of atomic energy;
3. The term "nuclear facility" means:
(a) any apparatus designed or used to sustain nuclear fission in
self-supporting chain reaction or to contain a ▇▇▇▇▇▇▇▇ ▇▇▇▇ of
plutonium, thorium or uranium or any one or more of them;
(b) any equipment or device designed or used for (i) separating the
isotopes of plutonium, thorium and uranium or any one or more of
them,, (ii) processing or utilizing spent fuel, or (iii) handling,
processing or packaging waste;
Page 30 of 34
(c) any equipment or device used fir the processing, fabricating or
alloying of plutonium, thorium or uranium enriched in the isotope
uranium 233 or in the isotope uranium 235, or any one or more of them
if at any time the total amount oh such material in the custody of the
Insured at the premises where such equipment or device is located
consists of or contains more than 25 grams of plutonium or uranium 233
or any combination thereof; or more than 250 grams of uranium 235;
(d) any structure, basin, excavation, premises or place prepared or used
for the storage or disposal of waste radioactive material;
and includes the site on which any of the foregoing is located, together
with all operations conducted thereon and all premises used for such
operations.
4. The term "fissionable substance" means any prescribed substance that is, or
from which can be obtained, a substance capable of releasing atomic energy
by nuclear fission.
5. With respect to property, loss of use of such property shall be deemed to
be property damage.
NMA 1979a (01/04190) Form approved by Lloyd's Underwriters' Non-Marine
Association Limited
Page 31 of 34
NUCLEAR ENERGY RISKS EXCLUSION CLAUSE (REINSURANCE) (1994)
(WORLDWIDE EXCLUDING U.S.A. & CANADA)
This agreement shall exclude Nuclear Energy Risks whether such risks are written
directly and/or by way of reinsurance and/or via Pools and/or Associations.
For all purposes of this agreement Nuclear Energy Risks shall mean all first
party and/or third party insurances or reinsurances (other than Workers'
Compensation and Employers' Liability) in respect of:-
(I) All Property on the site of a nuclear power station.
Nuclear Reactors, reactor buildings and plant and equipment therein on any
site other than a nuclear power station.
(II) All Property, on any site (including but not limited to the sites referred
to in (I) above) used or having been used for:
a) The generation of nuclear energy; or
b) The Production, Use or Storage of Nuclear Material.
(III) Any other Property eligible for insurance by the relevant local Nuclear
Insurance Pool and/or Association but only to the extent of the
requirements of that local Pool and/or Association.
(IV) The supply of goods and services to any of the sites, described in (I) to
(III) above, unless such insurances or reinsurances shall exclude the
perils of irradiation and contamination by Nuclear Material.
Except as undernoted, Nuclear Energy Risks shall not include: -
(i) Any insurance or reinsurance in respect of the construction or erection or
installation or replacement or repair or maintenance or decommissioning of
Property as described in (I) to (III) above (including contractors' plant
and equipment);
(ii) Any Machinery Breakdown or other Engineering insurance or reinsurance not
coming within the scope of (I) above;
Provided always that such insurance or reinsurance shall exclude the perils of
irradiation and contamination by Nuclear Material.
However, the above exemption shall not extend to: -
(1) The provision of any insurance or reinsurance whatsoever in respect of:
(a) Nuclear Material;
Page 32 of 34
(b) Any Property in the High Radioactivity Zone or Area of any Nuclear
Installation as from the introduction of Nuclear Material or - for
reactor installations - as from fuel loading or first criticality
where so agreed with the relevant local Nuclear Insurance Pool and/or
Association.
(2) The provision of any insurance or reinsurance for the undernoted perils: -
- Fire, lightning, explosion;
- Earthquake;
- Aircraft and other aerial devices or articles dropped therefrom;
- Irradiation and radioactive contamination;
- Any other peril insured by the relevant local Nuclear Insurance Pool
and/or Association;
in respect of any other Property not specified in (1) above which directly
involves the Production, Use or Storage of Nuclear Material as from the
introduction of Nuclear Material into such Property.
Definitions
"Nuclear Material" means:-
(i) Nuclear fuel, other than natural uranium and depleted uranium, capable of
producing energy by a self-sustaining chain process of nuclear fission
outside a Nuclear Reactor, either alone or in combination with some other
material; and
(ii) Radioactive Products or Waste.
"Radioactive Products or Waste" means any radioactive material produced in, or
any material made radioactive by exposure to the radiation incidental to the
production or utilization of nuclear fuel, but does not include radioisotopes
which have reached the final stage of fabrication so as to be usable for any
scientific, medical, agricultural, commercial or industrial purposes.
"Nuclear Installation" means:-
(i) Any Nuclear Reactor;
(ii) Any factory using nuclear fuel for the production of Nuclear Material, or
any factory for the processing of Nuclear Material, including any factory
for the reprocessing of irradiated nuclear fuel; and
(iii) Any facility where Nuclear Material is stored, other than storage
incidental to the carriage of such material.
"Nuclear Reactor" means any structure containing nuclear fuel in such an
arrangement that a self-sustaining chain process of nuclear fission can occur
therein without an additional source of neutrons.
Page 33 of 34
"Production, Use or Storage of Nuclear Material" means the production,
manufacture, enrichment, conditioning, processing, reprocessing, use, storage,
handling and disposal of Nuclear Material.
"Property" shall mean all land, buildings, structures, plant, equipment,
vehicles, contents (including but not limited to liquids and gases) and all
materials of whatever description whether fixed or not.
"High Radioactivity Zone or Area" means:-
(i) For nuclear power stations and Nuclear Reactors, the vessel or structure
which immediately contains the core (including its supports and shrouding)
and all the contents thereof, the fuel elements, the control rods and the
irradiated fuel store; and
(ii) For non-reactor Nuclear Installations, any area where the level of
radioactivity requires the provision of a biological shield.
Page 34 of 34