Exhibit 10-20
No. 3154-0006
PROPERTY AND CASUALTY
EXCESS OF LOSS REINSURANCE AGREEMENT
between
PENN-AMERICA INSURANCE COMPANY
PENN-STAR INSURANCE COMPANY
and
AMERICAN RE-INSURANCE COMPANY
TABLE OF CONTENTS
ARTICLE PAGE
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I EXHIBITS COVERED 1
II TERRITORY 1
III ULTIMATE NET LOSS 2
IV EXTRA CONTRACTUAL
OBLIGATIONS 2
V EXCESS JUDGMENTS 3
VI EXCLUSIONS 4
VII DEFINITIONS 17
VIII CLAIMS 20
IX SUBROGATION AND SALVAGE 21
X TAXES 22
XI ACCESS TO RECORDS 22
XII INSOLVENCY 22
XIII OFFSET AND SECURITY 23
XIV ERRORS AND OMISSIONS 23
XV COMMENCEMENT AND
TERMINATION 24
No. 3154-0006
EXCESS OF LOSS REINSURANCE AGREEMENT
THIS AGREEMENT made and entered into by and between PENN-AMERICA INSURANCE
COMPANY, PENN-STAR INSURANCE COMPANY, both of Hatboro, Pennsylvania (hereinafter
referred to as the "Company") and AMERICAN RE-INSURANCE COMPANY, a Delaware
Corporation with Administrative Offices in Princeton, New Jersey (hereinafter
referred to as the "Reinsurer").
WITNESSETH:
The Reinsurer hereby reinsures the Company to the extent and on the terms and
conditions and subject to the exceptions, exclusions and limitations hereinafter
set forth and nothing hereinafter shall in any manner create any obligations or
establish any rights against the Reinsurer in favor of any third parties or any
persons not parties to this Agreement. Performance of the obligations of each
party under this Agreement shall be rendered solely to the other party.
ARTICLE I
EXHIBITS COVERED
The Company will reinsure with the Reinsurer and the Reinsurer will accept
reinsurance from the Company as set forth in Exhibits A and B which are attached
hereto and made a part of this Agreement, such Exhibits being entitled for
purposes of identification as:
EXHIBIT A - PROPERTY AND CASUALTY EXCESS OF LOSS
EXHIBIT B - COMMERCIAL AUTOMOBILE LIABILITY AND GARAGE
LIABILITY EXCESS OF LOSS
ARTICLE II
TERRITORY
A. As respects Property business of the Company, this Agreement shall
cover policies issued for risks located within the United States of
America, its territories and possessions, and Canada.
B. As respects Casualty business of the Company, this Agreement shall
follow the original policies of the Company.
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ARTICLE III
ULTIMATE NET LOSS
A. The term "Ultimate Net Loss" shall mean the sum or sums paid by the
Company for which it is liable, under policies reinsured hereunder,
including any Loss Adjustment Expenses, as hereinafter defined.
Ultimate Net Loss shall also include 90% of any Extra Contractual
Obligations, as provided in ARTICLE IV, EXTRA CONTRACTUAL OBLIGATIONS;
and 90% of any Excess Judgment, as provided in ARTICLE V, EXCESS
JUDGMENTS. All sums hereunder shall be subject to proper deductions for
all salvages, recoveries and all other reinsurances or insurances that
inure to the benefit of the Reinsurer under this Agreement, whether
collectible or not. The Reinsurer's liability hereunder shall not
increase by reason of the inability of the Company to collect from any
other reinsurer or insurer, for any reason, any amount that may be due
from such reinsurer or insurer.
B. Except as specifically provided for or excluded under this Article, the
term "Loss Adjustment Expenses" shall mean all expenses which have been
paid by the Company in the investigation, adjustment, settlement or
defense of specific claims covered under original policies of the
Company reinsured hereunder, (also including prejudgment and
post-judgment interests and salaries and expenses of salaried adjusters
associated therewith), but not including office, administrative or
overhead expenses of the Company or salaries and expenses of its
officials and employees.
C. In the event of the insolvency of the Company, "Ultimate Net Loss"
shall be as otherwise defined herein except it shall include the sum or
sums which the Company has incurred for which it is liable instead of
the sum or sums paid by the Company for which it is liable, and payment
by the Reinsurer shall be made to the liquidator, receiver or statutory
successor of the Company in accordance with the INSOLVENCY Article.
ARTICLE IV
EXTRA CONTRACTUAL OBLIGATIONS
A. As reinsured under this Agreement, the Company shall be protected for
any Extra Contractual Obligation awarded by a court of competent
jurisdiction against the Company. (Such Extra Contractual Obligation
shall be added to the amount of the award or settlement within the
Company's policy limit and the sum thereof shall be considered one loss
subject to the exclusions and limitations set forth in this Agreement.)
B. "Extra Contractual Obligation" shall be defined as those liabilities
not covered under any other provision of this Agreement, and any legal
costs and expenses incurred in connection therewith, which arise from
the Company's handling of any claim on business covered hereunder,
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including but not limited to, the failure by the Company to settle
within the policy limit, or by reason of alleged or actual negligence,
fraud, or bad faith, in rejecting an offer of settlement, in the
preparation of the defense, in the trial of any action against its
insured or in the preparation or prosecution of an appeal consequent
upon such action.
C. For the purpose of the application of this Agreement, an Extra
Contractual Obligation shall be deemed to have arisen on the same date
as the original loss that gave rise to the Extra Contractual
Obligation.
D. This Article shall not apply where the Extra Contractual Obligation has
been incurred due to the fraud or criminal act of a member of the Board
of Directors, an officer, an agent, or an employee of the Company or
any other person or organization involved in the presentation, defense
or settlement of any claim covered hereunder, whether acting
individually or collectively or in collusion with any person or
organization.
E. Recoveries from any form of insurance or reinsurance, whether
separately purchased from another insurance carrier or self insurance
issued by the Company to itself, which protects the Company against
claims which are the subject matter of this Article, will inure to the
benefit of the Reinsurer and shall be first deducted to arrive at the
amount of any Extra Contractual Obligation covered hereunder, whether
collectible or not.
F. If any provision of this Article shall be rendered illegal or
unenforceable by the laws, regulations or public policy of any state,
such provision shall be considered void in such state, but this shall
not affect the validity or enforceability of any other provision of
this Agreement or the enforceability of such provision in any other
jurisdiction.
ARTICLE V
EXCESS JUDGMENTS
A. As reinsured under this Agreement, the Company shall be protected for
any Excess Judgment awarded by a court of competent jurisdiction
against the Company. (Such Excess Judgment shall be added to the amount
of the award or settlement within the Company's policy limit and the
sum thereof shall be considered one loss subject to the exclusions and
limitations set forth in this Agreement.)
B. "Excess Judgment" shall mean any amount in excess of the Company's
original policy limits, but otherwise within the coverage terms of the
policy, that is paid by the Company, together with any legal costs and
expenses incurred in connection therewith, resulting from the failure
by the Company to settle within the policy limit, or by reason of
alleged or actual negligence, fraud, or bad faith, in discharging its
duty to defend, in preparing the defense in an action against its
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insured or in discharging its duty to prepare or prosecute an appeal
consequent upon such action.
C. This Article shall not apply where the Excess Judgment has been
incurred due to the fraud or criminal act of a member of the Board of
Directors, an officer, an agent or an employee of the Company, or any
other person or organization involved in the presentation, defense or
settlement of any claim covered hereunder, whether acting individually
or collectively or in collusion with any person or organization.
D. Recoveries from any form of insurance or reinsurance, whether
separately purchased from another insurance carrier or self insurance
issued by the Company to itself, which protects the Company against
claims which are the subject matter of this Article, will inure to the
benefit of the Reinsurer and shall be first deducted to arrive at the
amount of any Excess Judgment hereunder, whether collectible or not.
D. If any provision of this Article shall be rendered illegal or
unenforceable by the laws, regulations or public policy of any state,
such provision shall be considered void in such state, but this shall
not affect the validity or enforceability of any other provision of
this Agreement or the enforceability of such provision in any other
jurisdiction.
ARTICLE VI
EXCLUSIONS
A. The reinsurance provided under this Agreement is subject to the
exclusions set forth below and shall not cover the excluded coverages,
risks or exposures unless individually submitted by the Company to the
Reinsurer for inclusion hereunder, and if specially accepted in writing
by the Reinsurer, such business shall then be covered under the terms
of this Agreement, except to the extent the terms of this Agreement are
modified by the special acceptance.
B. The reinsurance provided under this Agreement shall not apply to the
following:
1. Business derived from any Pool, Association (including Joint
Underwriting Associations), Syndicate, Exchange, Plan, Fund or
other facility directly as a member, subscriber or
participant, or indirectly by way of reinsurance or
assessments. This exclusion shall not apply to automobile
assigned risks or workers' compensation assigned risks which
may be currently or subsequently covered hereunder, except
such assigned risks arising from property or umbrella
coverages.
2. Liability of the Company arising from its participation or
membership, whether voluntary or involuntary, in any
insolvency fund, including any guarantee fund, association,
pool, plan or other facility which provides for the assessment
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of, payment by, or assumption by the Company of a part or the
whole of any claim, debt, charge, fee or other obligations of
an insurer, or its successors or assigns, which has been
declared insolvent by any authority having jurisdiction.
3. Except as respects Workers' Compensation business hereunder,
liability excluded by the provisions of the following Nuclear
clauses attached hereto. The word "Reassured" used therein
means "Company."
USA:
- Liability - Reinsurance No. 1B
- Physical Damage - Reinsurance No. 2
- Physical Damage and Liability
(Boiler and Machinery) - Reinsurance No. 3.
Canada:
- Liability - Reinsurance Canada Pre 1985
- Physical Damage - Reinsurance Canada Pre 1985
- Liability - Reinsurance Canada Post 1985
- Physical Damage - Reinsurance Canada Post 1985
- Physical Damage and Liability Canada -Reinsurance
(Boiler and Machinery)
As respects Workers Compensation business hereunder,
operations employing the process of nuclear fission or fusion
or handling of radioactive material, which operations include
but are not limited to:
1. the use of nuclear reactors such as atomic piles,
particle accelerators or generators, or
2. the use, handling or transportation of radioactive
materials, or
3. the use, handling or transportation of any weapon of
war or explosive device employing nuclear fission or
fusion
The preceding exclusions a., b., and c. do not apply to:
a. the exclusive use of particle accelerators incidental
to ordinary industrial or educational research
pursuits, or
b. the exclusive use, handling or transportation of
radio isotopes for medical or industrial use;
c. radium or radium compounds.
4. Coverage provided by the Company to insurance, or reinsurance
companies, captives, brokers or risk retention groups (each
hereinafter referred to as "insured" for purposes of this
exclusion) which provide insurance against liability of the
insured for any damages resulting from alleged or actual
tortious conduct by the insured in the handling of claims
brought against any policyholders of the insured or in the
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handling of any other business matters with or on behalf of
any policyholders.
5. The following coverages:
a. Financial Guarantees;
b. Credit and Fidelity Coverage;
c. Surety Bonds;
d. Warranty Coverage;
e. Political Risk Coverage;
f. Currency Exchange Coverage;
g. Forgery Coverage; or
h. Kidnap, Extortion or ▇▇▇▇▇▇ Coverage.
6. Aggregate Excess of Loss or Stop Loss Coverages.
7. Retroactive Coverage, except in connection with unknown
incidents, covered under a claims made coverage.
8. Coverage provided on a co-indemnity basis with another
insurer, reinsurer or other entity including an insured under
the Company's policy; however, this exclusion does not apply
to the standard co-insurance provisions of a policy and
facultative reinsurance inuring to the benefit of this
Agreement.
9. Coverage underwritten or accepted by any third party except
the binding authority granted by the Company to its duly
authorized agents.
10. Coverage written specifically to insure or reinsure punitive
damages.
11. Entertainment business, including but not limited to,
Commercial Negative Film Coverage, Cast Coverage and
Completion Bond Coverage.
12. The Company's liability and any related expenses, beyond
circumscribed policy provisions, including but not limited to,
punitive, exemplary, consequential or compensatory damages,
resulting from a claim of an insured or an insured's assignee
against the Company its agents or employees, except as
provided for in the Extra Contractual Obligations and Excess
Judgments Articles.
13. All reinsurance assumed by the Company, except intra-Company
pooling arrangements.
14. All loss, cost or expense arising out of, resulting as a
consequence of or related to War. "War", as utilized herein,
shall mean war whether or not declared, civil war, martial
law, insurrection, revolution, invasion, bombardment or any
use of military force, usurped power or confiscation,
nationalization or damage of property by any government,
military or other authority.
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To the extent there is no Insurance Service Office, Inc.
current standard coverage form for a type of coverage
reinsured under this agreement, "War" as utilized herein shall
mean war whether or not declared, civil war, martial law,
insurrection, revolution, invasion, bombardment or any use of
military force, usurped power or confiscation, nationalization
or damage of property by any government, military or other
authority.
15. All loss, cost or expense directly or indirectly arising out
of, resulting as a consequence of or related to Pollution
whether or not there is another cause of loss which may have
contributed concurrently or in any sequence to a loss.
"Pollution" means any solid, liquid, gaseous or thermal
irritant or contaminant, including smoke, vapor, soot, fumes,
acids, alkalis, chemicals and waste. Waste includes materials
to be recycled, reconditioned or reclaimed.
This exclusion shall not apply to the extent that such
liabilities would be covered under the current standard
unendorsed coverage forms issued by Insurance Services Office,
Inc. for each type of coverage reinsured under this Agreement.
16. Space or space-related risks such as, but not limited to,
satellites, spacecraft, launch sites and launch vehicles
including cargo and freight carried therein, in all phases of
operation.
17. a. Any coverage written specifically to apply to
Internet exposures; or
b. Any loss, cost or expense arising out of or related
to the Internet, except if covered under any coverage
not written or endorsed specifically to apply to
Internet exposures. Notwithstanding the above
referenced exception, the reinsurance provided under
this agreement shall not apply to the following
persons, entities or exposures, except for in force
policies with effective dates prior to 9/1/01 and
covered under this Agreement:
(1) Internet Service Providers, meaning any
person or entity providing access to the
Internet, content over the Internet or
connection to the Internet; or
(2) Application Service Providers, meaning any
person or entity that provides software and
associated services to a subscriber base
across an area network; or
(3) Internet Backbone Providers, meaning any
person or entity that routes or provides
channels for packets that transport data
from point to point on the Internet; or
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(4) Any person or entity that derives ninety
percent or more of gross revenue or conducts
or executes ninety percent or more of
business transactions on or through the
Internet; or
(5) Any person or entity that provides
electronic mail services; or
(6) Any person or entity that develops,
supplies, and/or installs encryption
software for use on the Internet.
"Internet" as utilized in this exclusion shall mean, the
international computer network of interoperable packet
switched data networks, also known as the worldwide web or
worldwide network of computers.
18. All Workers' Compensation business, except for Employers'
Liability Stop Gap coverage.
C. The reinsurance provided under this Agreement for Automobile Liability
business shall not apply to the following:
1. Primary coverage written on a deductible basis or excess of a
self-insured retention when such deductible or retained
amounts are greater than $25,000.
2. Commercial Umbrella or Excess Liability Coverage.
3. Personal Umbrella Liability Coverage.
4. Motorcycles, motorized scooters, motorized bicycles, racing
vehicles, all-terrain vehicles, and other off the road
motorized vehicles, except for in force policies with
effective dates prior to 9/1/01 and covered under Exhibit B of
this Agreement..
5. Operation or use of police, fire and emergency vehicles,
including ambulances.
6. Vehicles normally used for hauling goods for others which
operate regularly beyond a radius of 200 miles of an insured's
garaged location, except for in force policies with effective
dates prior to 9/1/01 and covered under Exhibit B of this
Agreement.
7. Vehicles while engaged in bobtail or deadheading operations,
except for in force policies with effective dates prior to
9/1/01 and covered under Exhibit B of this Agreement.
8. Vehicles leased or rented to others, except for in force
policies with effective dates prior to 9/1/01 and covered
under Exhibit B of this Agreement.
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9. Vehicles engaged in the transportation and distribution of
fireworks, fuses, nitroglycerine, explosives, magnesium,
ammunition, ammonium nitrate, natural or artificial fuel, gas,
butane, propane, liquefied petroleum gases or gasoline.
10. Vehicles which may be classified as "public vehicles" except
vehicles used as school or church buses. "Public vehicles"
shall be defined as contract buses, taxicabs, and livery
vehicles.
11. Commercial vehicles over 45,000 pounds gross vehicle weight
used for purposes of hauling sand and gravel, refuse, logs,
timber or cement, except for in force policies with effective
dates prior to 9/1/01 and covered under Exhibit B of this
Agreement.
12. Trucks utilized for logging and lumbering operations, except
for in force policies with effective dates prior to 9/1/01 and
covered under Exhibit B of this Agreement.
13. Retail vehicles operating under time constraints, including
but not limited to messenger or delivery services, except for
in force policies with effective dates prior to 9/1/01 and
covered under Exhibit B of this Agreement.
14. Sale of new and used vehicles, except for in force policies
with effective dates prior to 9/1/01 and covered under Exhibit
B of this Agreement.
D. The reinsurance provided under this Agreement for Liability business,
other than Workers Compensation, and Automobile Liability business,
shall not apply to the following:
1. Professional Liability or Errors and Omissions Coverage other
than for the following:
a. "Beau-T-Pak";
b. Barbers;
c. Opticians;
d. Veterinarians that treat household pets;
e. Morticians;
f. Clergy;
g. Employee Benefits Liability (E&O Coverage);
h. Druggists;
i. "Day Care Pak";
j. "Adult Day Care;
k. "Health Club Pak";
l. "Instructor Pak";
m. In-Home Day Care;
n. "Pet Pak"; or
o. "Wellness Pak".
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2. Directors' and Officers' Liability Coverage, except for
Condominiums and Homeowners Associations.
3. The following coverages:
a. Product recall;
b. Product tampering;
c. Product integrity impairment; or
d. Product guarantee.
4. Coverage provided under or for liability arising from any
federal law, including but not limited to; USL&H, ▇▇▇▇▇ Act,
Defense Base Act, Federal Employers' Liability Act, Outer
Continental Shelf Lands Act, the Federal Coal Mine Health and
Safety Act of 1969, the Non-appropriated Fund
Instrumentality's Act, any other federal law awarding damages
for violation of those laws or regulations issued there under
and any amendments to any of the aforementioned laws or
regulations.
5. Securities Act Liability Coverage (S.E.C. Liability).
6. Commercial Umbrella or Excess Liability Coverage.
7. Personal Umbrella Liability Coverage.
8. Environmental Impairment Liability Coverage.
9. Products Liability Coverage written without an annual
aggregate limit.
10. Employer's liability and/or common law liability of employer's
to their employees when coverage is provided under Worker's
Compensation Coverage.
11. Protection and Indemnity Liability Coverage.
12. Primary coverage written on a deductible basis or excess of a
self-insured retention when such deductible or retained
amounts are greater than $50,000.
13. Uninsured or Underinsured Motorists Coverage.
14. Advertising or Personal Injury Liability Coverage for any
person or entity whose business is advertising, broadcasting,
publishing or telecasting.
15. Aircraft and airports as respects coverage for all liability
arising out of the ownership, maintenance or use of aircraft
and/or flight or ground operations.
16. Blanket or all-risk type coverage, commonly known as
Organizational Liability, Organization Liability, Operational
Liability, Integrated Risk, Enterprise Risk or under similar
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names, written in, or endorsed to, a policy covering all types
of losses incurred by, or claims against, an entity; provided,
however, that this exclusion shall not include any named-peril
grant of coverage which contemplates specifically enumerated
types of claims or losses.
17. Liability, including any related expenses directly or
indirectly arising out of, resulting as a consequence of, or
related to employment-related practices, including, but not
limited to liability related to harassment, wrongful
termination or discrimination, whether under coverage written
as such or otherwise.
18. Liability including any related expenses, arising out of the
Employee Retirement Income Security Act of 1974 and amendments
thereto.
19. Liability including any related expenses, directly or
indirectly arising out of, resulting as a consequence of or
related to Sexual Misconduct, whether or not there is another
cause of loss which may have contributed concurrently or in
any sequence to a loss for the Company's Day Care Pak, In Home
Day Care Pak or Adult Day Care policies, except for in force
policies with effective dates prior to 9/1/01, and for Day
Care Pak, In Home Day Care Pak or Adult Day Care policies of
the Company where the insured purchases the Company's buy-back
coverage.
"Sexual Misconduct" as utilized herein shall include, sexual
molestation, sexual harassment, sexual abuse, any verbal or
nonverbal communication, behavior, or conduct with sexual
connotations or the infliction of physical, emotional or
psychological injury whether for purpose of sexual
gratification, discrimination, intimidation, coercion or other
sexual purpose, regardless of whether such action or resulting
injury is alleged to be intentionally or negligently caused.
20. All loss, cost or expense directly or indirectly, arising out
of, resulting as a consequence of, or related to the
manufacture, distribution, testing, remediation, removal,
storage, disposal, sale, use of or exposure to the following,
whether or not there is another cause of loss which may have
contributed concurrently or in any sequence to a loss:
a. Asbestos or materials or products containing asbestos;
b. 2.4,5 Trichloroacetic acid ("2,4,5-1") or 2.3,7,8 -
TCDD;
c. Diethylstilbestrol ("DES") in any dosage or form Any
intrauterine device ("IUD");
d. Any product containing silicone, which is in any form
injected or implanted into the body;
e. Phen-fen;
f. Dioxin;
g. Polychlorinated biphenyls;
h. Lead or materials or products containing lead;
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i. Latex gloves;
j. Polybutylene piping (acrylonitrile-butadine-styrene); or
k. Bio-engineered products, including any food products or
therapeutic or diagnostic pharmaceutical products which
are developed using some form of bioengineering.
21. All loss, cost or expense directly arising out of, resulting
as a consequence of, or related to Electromagnetic Radiation
related to the manufacture or generation of:
a. Electric power and/or power lines;
b. Cellular phones;
c. Radio and TV broadcasting and/or towers;
d. Computers;
e. Electric blankets;
f. Military radar or weapons;
g. Police or weather radar;
h. Satellite stations;
i. Magnetic resonance imaging equipment;
j. X-ray equipment, except sales that are 10% or less of
insured's total sales; or
k. Microwave ovens;
"Electromagnetic Radiation" as used herein, shall include
magnetic energy waves, fields or forces generated, produced,
distributed, transmitted or maintained by charges, currents,
frequencies, forces of energy or electricity."
22. Products Liability or Completed Operations Liability related
to:
a. Drugs, except for liability arising from the retail
sale or wholesale distribution of drugs by insureds
not engaged in their manufacture;
b. Chemicals, except for liability arising from the
retail sale or wholesale distribution of household
chemicals by insureds not engaged in their
manufacture;
c. Insecticides and pesticides, except sales that are
20% or less of insured's total sales;
d. Aircraft or aircraft parts;
e. Animal feed, other than custom-blended grains without
chemical or pharmacological additives, except sales
that are 20% or less of insured's total sales;
f. Cosmetics manufacturing, except for the manufacture
of soaps or shampoos where the insured's receipts are
less than 10% of total sales or skin and hair care
products prepared at beauty salons or similar
establishments,;
g. Tobacco and tobacco products, but this exclusion
shall not apply to liability arising from the retail
sale or wholesale distribution of tobacco products by
insureds not engaged in their manufacture;
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h. Automobiles, trucks, motorcycles and all-terrain
vehicles or component parts critical to the operation
of the foregoing, but this exclusion shall not apply
to the liability arising from the retail sale or
wholesale distribution of component parts critical or
non-critical to the operation of the foregoing not
engaged in their manufacture;
i. Fiberglass, but this exclusion shall not apply to
liability arising from the retail sale or wholesale
distribution of fiberglass products by insureds not
engaged in their manufacture;
j. Firearms, except sales that are 10% or less of
insured's total sales;
k. Medical equipment;
l. Elevator or hoist manufacturing, installation,
inspection, service or repair;
m. Security and alarm system manufacturing,
installation, inspection, service or repair, except
for coverage as provided for in the Company's
guidelines as of 9/01/01; or
n. Fire suppression system manufacturing, installation,
inspection, service or repair, except for coverage as
provided for in the Company's guidelines as of
9/01/01.
23. Wrecking or demolition of buildings, structures, watercraft or
aircraft, except for buildings three stories or less.
24. Railroad, subway and street railway construction, operation or
maintenance, excepting sidetrack agreements.
25. Bridge, tunnel, dam or reservoir design, construction,
operation or maintenance.
26. Mining, except insureds with receipts from quarry operations
of less than 5% of total sales.
27. Onshore or offshore gas or oil drilling operations, pipelines,
or ▇▇▇▇▇.
28. Mill or grain elevator operation.
29. Manufacture, assembly, packing, handling, processing,
transportation, sale, storage or detonation of fireworks,
fuses, nitroglycerine, ammonium nitrate, magnesium, celluloid,
pyroxylin, ammunition, explosives or any product in which an
explosive substance is an ingredient, or component part.
The term "explosive substance," as used herein, is any
substance manufactured for the express purpose of exploding as
differentiated from those commodities, other than those
commodities specified in this exclusion, which are only
fortuitously explosive, such as gasoline, fuel oil, or
dyestuffs.
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30. Manufacture, production, refining, storage, sale, distribution
or transportation of natural or artificial fuel, gas, butane,
methane, propane, other liquefied petroleum gases, gasoline or
gases or air under pressure, except this exclusion does not
apply to gasoline at hardware stores, convenience stores and
automobile service stations storing gasoline on premises for
retail sale, fuel oil dealers, and LPG sales that are 20% or
less of the insured's total sales.
31. Stevedoring.
32. Ski lodges, lifts, cable cars and tows.
33. Shipbuilding, ship repair, ship breaking, dry dock, and quays
or wharf operations.
34. Watercraft over 50 feet in length.
35. Amusement parks, amusement devices (other than coin operated
devices), fairs, exhibitions, carnivals, circuses and zoos
(other than petting zoos), except when written within the
guidelines of the of the Company's Special Events Program.
36. Sports or other entertainment events with an expected
capacity, at any one time, of 25,000 or more people.
37. Arenas, grandstands, stadiums, theatres, halls and any other
indoor venue with an expected capacity, at any one time, of
25,000 or more.
38. Electric and gas utilities and the municipalities, authorities
and all boards, commissions, or entities responsible for
administering or controlling these utilities.
39. Governmental agencies, entities, or political subdivisions of
a state or municipalities with a population of 50,000 or more.
40. Insurance companies, agents, brokers, or risk retention
groups, inspection services, claims services and rating
bureaus, unless coverage for errors and omissions is excluded
under the policy reinsured.
41. School boards or school districts.
42. Nursing homes and nursing home care, except for adult day care
centers when written within the Company guidelines as of
9/01/01.
43. Banks and other financial institutions unless the Company's
coverage contains a financial institution endorsement agreed
to by the Reinsurer.
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44. Contractors engaged in the construction, erection or exterior
maintenance of structures in excess of three stories, except
for window washers or power washing operations.
45. Crop-dusting.
46. Insureds in the business of Scaffold manufacture,
installation, repair, removal or rental.
47. Inverse condemnation liability.
48. All loss, cost or expense arising out of, resulting as a
consequence of or related to poultry products, operations or
exposures, including but not limited to; poultry houses,
poultry processing operations, live birds, processed birds,
egg laying operations, egg processing operations or eggs.
49. Contractors, except as provided for by the Company's Penn
Amerigram dated November 7, 2001, and attached to this
Agreement as APPENDIX B.
E. In the event the Company is inadvertently bound on any exclusion
enumerated under paragraph D, the reinsurance provided under this
Agreement shall apply until discovery by the Company of the existence
of the inadvertent binding and for 30 days thereafter, and shall then
cease unless, within the 30-day period, the Company has received from
the Reinsurer written notice of its approval of such binding.
F. The reinsurance provided under this Agreement for Property business
shall not apply to the following:
1. Difference in Conditions Coverage.
2. Ocean Marine Coverage.
3. Mortgage impairment insurance and similar kinds of insurance,
however styled.
4. Mining including mining equipment.
5. Aviation business.
6. The following coverages:
a. Product recall;
b. Product tampering;
c. Product integrity impairment; or
d. Product guarantee.
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7. Excess Coverage, meaning coverage written to apply
specifically in excess over underlying insurance.
8. Boiler and Machinery Coverage.
9. Livestock Mortality or Fertility Coverage.
10. Furriers' and Jewelers Block Coverage.
11. Contingency business interruption risks of any kind.
12. Transmission and distribution lines other than those within
500 feet of an insured's premises. It is understood and agreed
that public utilities extension and/or suppliers extension
and/or contingent business interruption coverage are not
subject to this exclusion provided that these are not part of
a transmitter's or distributor's policies.
13. All onshore or offshore:
a. gas and oil drilling risks;
b. petrochemical risks;
c. pipeline risks; or
d. well risks.
14. Flood, surface water, waves, tidal water or tidal waves,
overflow of streams or other bodies of water or spray from any
of the foregoing, all whether driven by wind or not; provided,
however, this exclusion shall not apply to losses under
automobile physical damage coverage.
15. Earthquake, landslide and other earth movement provided,
however, this exclusion shall not apply to automobile physical
damage coverage.
16. Railroad property, rolling stock, tracks or roadbeds.
17. Fine arts collections exceeding $5,000,000 in total value.
18. Mobile homes, except mobile home parks written on a commercial
lines basis with less than 25% of the mobile homes being owned
by the insured.
19. Risks having total insurable value of more than $50,000,000.
20. Growing, standing or drying crops and timber.
21. Watercraft except watercraft insured under personal property
floaters.
22. Bridges, dams and tunnels.
-16-
23. All loss, cost or expense arising out of, resulting as a
consequence of or related to poultry products, operations or
exposures, including but not limited to; poultry houses,
poultry processing operations, live birds, processed birds,
egg laying operations, egg processing operations or eggs.
ARTICLE VII
DEFINITIONS
A. The following Definitions apply as respects all Property business:
I. Property Occurrence:
A. The term "Occurrence" shall mean the sum of all individual
losses directly occasioned by any one disaster, accident or
loss or series of disasters, accidents or losses arising out
of one event which occurs within the area of one state of the
United States or province of Canada and states or provinces
contiguous thereto and to one another. However, the duration
and extent of any one "Occurrence" shall be limited to all
individual losses sustained by the Company occurring during
any period of 168 consecutive hours arising out of and
directly occasioned by the same event except that the term
"Occurrence" shall be further defined as follows:
1. As regards windstorm, hail, tornado, hurricane,
cyclone, including ensuing collapse and water damage,
all individual losses sustained by the Company
occurring during any period of 72 consecutive hours
arising out of and directly occasioned by the same
event. However, the event need not be limited to one
state or province or states or provinces contiguous
thereto.
2. As regards riot, riot attending a strike, civil
commotion, vandalism and malicious mischief, all
individual losses sustained by the Company occurring
during any period of 72 consecutive hours within the
area of one municipality or county and the
municipalities or counties contiguous thereto arising
out of and directly occasioned by the same event. The
maximum duration of 72 consecutive hours may be
extended in respect of individual losses which occur
beyond such 72 consecutive hours during the continued
occupation of an assured's premises by strikers,
provided such occupation commenced during the
aforesaid period.
3. As regards earthquake (the epicenter of which need
not necessarily be within the territorial confines
referred to in the opening paragraph of this Article)
and volcanic eruption, all of the Company's
individual losses (including losses from other perils
covered hereunder which directly arise from
earthquake and volcanic eruption) which occur during
a period of 168 consecutive hours shall be considered
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one "Occurrence". The term "earthquake" means one or
more seismic disturbances emanating from the same or
adjacent geological faults. The term "volcanic
eruption" means all activity arising from a single
volcano.
4. As regards flood, being the overflowing of a natural
body of water caused by torrential rain and the
resulting inundation of the adjacent land, all
individual losses sustained by the Company which
occur during a period of 168 hours in a territory
forming one river basin shall be considered one
"Occurrence." The term "river basin" shall mean the
land drained by a river, including all the
tributaries of such river, which flows directly into
an ocean, sound, bay gulf, or into one of the Great
Lakes.
5. As regards "Freeze," only individual losses directly
caused by falling trees or limbs, collapse, breakage
of glass, power outage (off premises), automobile
physical damage (comprehensive only) and water damage
(caused by ice damming or by bursting of frozen pipes
and tanks) may be included in the Company's
"Occurrence".
B. For all "Occurrences" the Company may choose the date and time
when any such period of consecutive hours commences provided
that it is not earlier than the date and time of the
occurrence of the first recorded individual loss sustained by
the Company arising out of that disaster, accident or loss and
provided that only one such period of 168 consecutive hours
shall apply with respect to one event, except for those
"Occurrences" referred to in subparagraphs 1. and 2. above
where only one such period of 72 consecutive hours shall apply
with respect to one event, regardless of the duration of the
event.
C. No individual losses occasioned by an event that would be
covered by 72 hours clauses may be included in any
"Occurrence" claimed under the 168 hours provisions.
II. Property Definition of Risk
A. The Company shall be the sole judge of what constitutes one
risk provided:
1. One risk shall be defined from the standpoint of the
peril of fire, however, except as otherwise provided
hereunder, a building and its contents for a single
insured shall never be considered as constituting
more than one risk, nor shall time element coverages
be considered a separate risk apart from the building
and its contents, and
2. One risk, with respect to the peril of wind,
including but not limited to: tornado, cyclone,
hurricane, windstorm and hail, shall mean all insured
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locations listed on an individual policy that are
within a legal property boundary which is owned,
occupied or operated by the insured as one continuous
property site, including a site that contains
roadways, streams or rights-of-way intersecting the
site.
3. The term "building" shall mean each separately roofed
structure enclosed within exterior walls.
4. As respects Dealer Open Lot risks, all insured
property at any one location shall be considered one
risk.
III. Casualty Occurrence:
A. The term "occurrence" as used herein means each accident or
occurrence or series of accidents or occurrences, arising out
of one event, provided that, as respects:
1. Products Liability (bodily injury and property
damage), the term "occurrence" shall mean the sum of
all damages arising from the consumption, use or
exposure to the insured's product(s) occurring during
each original policy period, in respect to each
insured, each policy, emanating from or traceable to
the same causative agency.
2. Third Party Bodily Injury or Property Damage
Liability, other than Automobile and Products,
arising or emanating from or traceable to a
continuous or repeated exposure to the same causative
agency, the term "occurrence" shall mean the sum of
all damages sustained by each insured, each policy,
during each original policy period.
B. The term "each original policy period" as used herein means
each annual period the original policy (i.e., the policy
reinsured hereunder) is in effect. Policies in effect for a
period greater than one year shall be deemed to have separate
annual policy periods.
C. If the date of loss, accident or occurrence cannot be
specifically determined, the date of loss, accident or
occurrence shall be the inception date of the original policy;
such policy period shall be deemed not to exceed 12 calendar
months.
D. As respects Occupational Disease under Workers' Compensation
each case of an employee contracting an Occupational disease
for which the Company is held liable shall be considered an
occurrence within the meaning of this Agreement and, subject
to the provisions of Paragraph 2 below, the date of the
occurrence shall be deemed to be the following:
1. If the case is compensable under the Workers'
Compensation Law or any Occupational Disease
Compensation Act, the date of the beginning of the
disability for which compensation is payable;
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2. If the case is not compensable under the Workers'
Compensation Law or any Occupational Disease
Compensation Act, the date that disability due to
said disease actually began;
3. Where claim is made after employment has ceased, then
the date of cessation of employment shall be deemed
to be the date of disability, unless otherwise
determined by a Workers' Compensation Board or
similar authority.
4. In the event an occupational disease is contracted by
two or more employees of the same insured and the
Company sustains within a policy year several losses
resulting from such occupational disease contracted
by the employees, the aggregate of all such losses
within each original policy period shall be
considered as constituting one occurrence and the
inception date of original policy in which losses
occur shall be deemed to be the date of the
occurrence.
a) The term "each original policy period" as
used herein means each annual period the
original policy (i.e., the policy reinsured
hereunder) is in effect. Policies in effect
for a period greater than one year shall be
deemed to have separate annual policy
periods.
b) If the date of loss, accident or occurrence
cannot be specifically determined, the date
of loss, accident or occurrence shall be the
inception date of the original policy; such
policy period shall be deemed not to exceed
12 calendar months.
ARTICLE VIII
CLAIMS
A. As a condition precedent to the Reinsurer's liability under this
Agreement, the Company shall give timely written notice to the
Reinsurer of all claims which may develop into losses involving
reinsurance hereunder.
B. In addition, the following categories of claims shall be reported to
the Reinsurer immediately, regardless of any questions of liability of
the insured or coverage under the policy:
1. Fatality;
2. Partial or Total Paralysis;
3. Severe brain injury or brain damage prognosis;
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4. Severe ▇▇▇▇▇;
5. Amputation of one or more limbs;
6. Loss of sight or hearing to a substantial degree;
7. Any injury where there is, or appears probable, an alleged
loss of earnings for one year or more; and,
8. Any claim with a loss reserve that exceeds 50% of the
Company's net retention, provided that such claim might
involve the Reinsurer.
C. The Company has the obligation to investigate and defend any claim
affecting this reinsurance, to advise the Reinsurer promptly of
subsequent developments pertaining thereto and to pursue such claim to
final determination.
D. It is understood that when so requested the Company will afford the
Reinsurer an opportunity to be associated with the Company at the
expense of the Reinsurer in the defense or control of any claim or suit
proceeding involving this reinsurance; and the Company and the
Reinsurer shall cooperate in every respect in the defense of such suit
or claim or proceeding.
ARTICLE IX
SUBROGATION AND SALVAGE
A. The Reinsurer shall be subrogated, as respects any loss for which the
Reinsurer shall actually pay or become liable, but only to the extent
of the amount of payment by or the amount of liability to the
Reinsurer, to all the rights of the Company against any person or other
entity who may be legally responsible in damages for said loss. The
Company hereby agrees to enforce such rights, but in case the Company
shall refuse or neglect to do so the Reinsurer is hereby authorized and
empowered to bring any appropriate action in the name of the Company or
its policyholders, or otherwise to enforce such rights.
B. Any recoveries, salvages or reimbursements applying to risks covered
under this Agreement shall always be used to reimburse the excess
carriers (from the last to the first, beginning with the carrier of the
last excess), according to their participation, before being used in
any way to reimburse the Company for its primary loss.
C. All salvages, recoveries or reimbursements, after deduction of expenses
applicable thereto, recovered or received subsequent to a loss
settlement under this Agreement shall be applied as if recovered or
received prior to the aforesaid settlement and all necessary
adjustments shall be made by the parties hereto, provided always, that
nothing in this clause shall be construed to mean that losses under
-21-
this Agreement are not recoverable until the Company's ultimate net
loss has been ascertained. Expenses hereunder shall exclude all office
expenses of the Company and all salaries and expenses of its officials
and employees except those of salaried adjusters.
ARTICLE X
TAXES
The Company will be liable for all taxes on premiums reported to the Reinsurer
hereunder and will reimburse the Reinsurer for such taxes where the Reinsurer is
required to pay the same.
ARTICLE XI
ACCESS TO RECORDS
The Company shall place at the disposal of the Reinsurer and the Reinsurer shall
have the right to inspect, through its authorized representatives, at all
reasonable times during the currency of this Agreement and thereafter, the
books, records and papers of the Company pertaining to the reinsurance provided
hereunder and all claims made in connection therewith.
ARTICLE XII
INSOLVENCY
The reinsurance provided by this Agreement shall be payable by the Reinsurer
directly to the Company or to its liquidator, receiver or statutory successor on
the basis of the liability of the Company under the contract or contracts
reinsured. Subject to the right of offset and the verification of coverage, the
Reinsurer shall pay its share of the loss without diminution because of the
insolvency of the Company. In the event of the insolvency of the Company, the
liquidator, receiver or statutory successor of the Company shall give written
notice of the pendency of each claim against the Company on a policy or bond
reinsured within a reasonable time after such claim is filed in the insolvency
proceeding. During the pendency of such claim, the Reinsurer may, at its own
expense, investigate such claim and interpose in the proceeding where such claim
is to be adjudicated any defense or defenses which it may deem available to the
Company, its liquidator or receiver or statutory successor. Subject to court
approval, any expense thus incurred by the Reinsurer shall be chargeable against
the Company as part of the expense of liquidation to the extent of such
proportionate share of the benefit as shall accrue to the Company solely as a
result of the defense undertaken by the Reinsurer. The reinsurance shall be
payable as set forth above except where this Agreement specifically provides for
the payment of reinsurance proceeds to another party in the event of the
insolvency of the Company.
-22-
ARTICLE XIII
OFFSET AND SECURITY
A. Each party hereto has the right, which may be exercised at any time, to
offset any amounts, whether on account of premiums or losses or
otherwise, due from such party to another party under this Agreement or
any other reinsurance agreement heretofore or hereafter entered into
between them, against any amounts, whether on account of premiums or
losses or otherwise due from the latter party to the former party. The
party asserting the right of offset may exercise this right, whether as
assuming or ceding insurer or in both roles in the relevant agreement
or agreements.
B. Each party hereby assigns and pledges to the other party (or to each
other party, if more than one) all of its rights under this Agreement
to receive premium or loss payments at any time from such other party
("Collateral"), to secure its premium or loss obligations to such other
party at any time under this Agreement and any other reinsurance
agreement heretofore or hereinafter entered into by and between them
("Secured Obligations"). If at any time a party is in default under any
Secured Obligation or shall be subject to any liquidation,
rehabilitation, reorganization or conservation proceeding, each other
party shall be entitled in its discretion, to apply, or to withhold for
the purpose of applying in due course, any Collateral assigned and
pledged to it by the former party and otherwise to realize upon such
Collateral as security for such Secured Obligations.
C. The security interest described herein, and the term "Collateral,"
shall apply to all payments and other proceeds in respect of the rights
assigned and pledged. A party's security interest in Collateral shall
be deemed evidenced only by the counterpart of this Agreement delivered
to such party.
D. Each right under this Article is a separate and independent right,
exercisable, without notice or demand, alone or together with other
rights, in the sole election of the party entitled thereto, and no
waiver, delay, or failure to exercise, in respect of any right, shall
constitute a waiver of any other right. The provisions of this Article
shall survive any cancellation or other termination of this Agreement.
ARTICLE XIV
ERRORS AND OMISSIONS
The Reinsurer shall not be relieved of liability because of an error or
accidental omission by the Company in reporting any claim or loss or any
business reinsured under this Agreement, provided that the error or omission is
rectified promptly after discovery. The Reinsurer shall be obligated only for
the return of the premium paid for business reported but not reinsured under
this Agreement.
-23-
ARTICLE XV
COMMENCEMENT AND TERMINATION
A. This Agreement shall take effect as of 12:01 a.m., Standard Time,
September 1, 2001, and shall, except as otherwise stipulated herein or
in any Exhibit hereto or any Endorsement hereof, continue in full force
and effect until terminated as hereinafter provided.
B. This Agreement may be canceled at any December 31, unless otherwise
mutually agreed by either party, giving 90 days notice in writing prior
to such date, stating to the other its desire to effect such
cancellation. However, this Agreement shall not be cancelled prior to
January 1, 2003.
C. In the event of cancellation, the Company shall have the option to
terminate this Agreement on a cut-off or run-off basis as follows:
1. In the event the Company elects to cancel cut-off, the
Reinsurer shall remain liable for losses occurring prior to
such cancellation date, but all liability shall terminate
hereunder as to losses occurring subsequent to the
cancellation date.
2. In the event the Company elects to cancel run-off, the
Reinsurer shall remain liable for losses occurring prior to
such cancellation date, and any risk covered hereunder and in
effect as of said cancellation date shall remain in full force
until policy cancellation or natural expiration for a period
of time not to exceed twelve months.
D. Should this Agreement terminate while a covered loss occurrence is in
progress, the entire loss arising out of such loss occurrence shall be
subject to this Agreement.
E. Every notice of termination shall be given by certified letter
addressed to the intended recipient at such recipient's address as
hereinabove set forth. In determining whether the requisite number of
days' notice has been given in any case, the date of termination shall
be counted but the date of mailing shall not.
F. Notwithstanding the termination of this Agreement as hereinabove
provided, the provisions of this Agreement shall continue to apply to
all unfinished business hereunder to the end that all obligations and
liabilities incurred by each party hereunder prior to such termination
shall be fully performed and discharged.
-24-
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be executed
in duplicate in Hatboro, Pennsylvania, this _________ day of ________________ ,
2002;
ACCEPTED:
PENN-AMERICA INSURANCE COMPANY
PENN-STAR INSURANCE COMPANY
-----------------------
and in Princeton, New Jersey, this __________ day of ______________________
2002.
AMERICAN RE-INSURANCE COMPANY
-----------------------
Vice President
DATED: February 28, 2002
RG/rg
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No. 3154-0006
EXHIBIT A
EXHIBIT A
PROPERTY AND CASUALTY EXCESS OF LOSS
Section 1
A. BUSINESS COVERED
The Reinsurer agrees to reimburse the Company, on an excess of loss
basis, for the amounts of ultimate net loss which the Company may pay
as a result of losses occurring on and after September 1, 2001, as
respects the Company's in-force policies, and new and renewal policies
becoming effective on and after said date, covering the Classes of
Insurance set forth below, except as excluded under the EXCLUSIONS
Article of this Agreement, subject to the limitations set forth herein.
CLASSES OF INSURANCE
Property Casualty
Fire General Liability
Commercial Multi Peril Section I Commercial Multi Peril Section II
Businessowners Section I Businessowners Section II
Allied Lines Employer's Liability Stop Gap coverage
Inland Marine
Automobile Physical Damage, Non-owned and Hired Automobile Liability when
including Dealer's Open Lot written as part of Commercial Multi Peril
Section II or General Liability policies.
B. The term "policies" as used herein means each of the Company' s
binders, policies and contracts providing insurance and reinsurance on
the Classes of Insurance covered hereunder.
Section 2
LIMITS OF COVER
A. As respects one or more than one of the classes under Property Classes
of Insurance as stated in Section 1, the Reinsurer shall not be liable
for any loss until the Company's ultimate net loss for each and every
risk exceeds $300,000 and then the Reinsurer shall be liable for the
amount of the Company' s ultimate net loss for each and every risk in
excess of $300,000 but the Reinsurer's liability shall not exceed 100%
of $1,700,000 for each and every risk or exceed $3,000,000 in any one
occurrence.
-1-
B. As respects one or more than one of the classes under Casualty Classes
of Insurance as stated in Section 1, the Reinsurer shall not be liable
for any loss until the Company's ultimate net loss in each occurrence
exceeds $500,000 and then the Reinsurer shall be liable for the amount
of the Company' s ultimate net loss in each occurrence in excess of
$500,000 but the Reinsurer's liability shall not exceed 100% of
$2,500,000 in any one occurrence.
C. In the event of a combination loss involving a property risk and a
casualty occurrence (excluding any Commercial Auto Liability or Garage
Liability losses from Exhibit B), the Company's retention shall be the
greater retention of the Line of Business applicable but not to exceed
to $500,000.
Section 3
REINSURANCE PREMIUM
A. The premium for the reinsurance provided under this Exhibit shall be
computed at the rate of 9.10% of the Company's net written premium for
the in-force Property business covered as of September 1, 2001.
B. For the period September 1, 2001 through February 28, 2002, the premium
for the reinsurance provided under this Exhibit shall be computed at
the rate of 11.375% of the Company's net written premium for the new
and renewal Property business effective during this period and covered
hereunder.
C. For the period March 1, 2002 through December 31, 2002, the premium for
the reinsurance provided under this Exhibit shall be computed at the
rate of 13.65% of the Company's net written premium for the new and
renewal Property business effective during this period and covered
hereunder.
D. The premium for the reinsurance provided under this Exhibit shall be
computed at the rate of 7.917% of the Company's net written premium for
the in-force Casualty business covered as of September 1, 2001.
E. For the period September 1, 2001 through February 28, 2002, the premium
for the reinsurance provided under this Exhibit shall be computed at
the rate of 7.917% of the Company's net written premium for the new and
renewal Casualty business effective during this period and covered
hereunder.
E. For the period March 1, 2002 through December 31, 2002, the premium for
the reinsurance provided under this Exhibit shall be computed at the
rate of 11.875% of the Company's net written premium for the new and
renewal Casualty business effective during this period and covered
hereunder.
G. "Net written premium" shall mean the total of the Company's gross
premium written during the agreement year for the lines of business
covered hereunder, less expense constants on admitted policies, and
-2-
less return premiums and premiums paid for reinsurance, if any, inuring
to the benefit of the Agreement.
H. The subject written premium for the in-force business at the inception
of this Agreement shall be the Unearned Premium Reserve.
Section 4
COMMISSION
The Reinsurer shall make a commission allowance of 40.0% to the Company on the
premiums ceded to this Agreement.
Section 5
REPORTS AND REMITTANCES
A. The Company will provide the Reinsurer with all necessary data
respecting premiums and forward it to the Reinsurer within 45 days
after the close of each quarter, on forms mutually acceptable.
B. Any balance due the Reinsurer, shall be remitted by the Company with
the Account Current. The Reinsurer shall remit any balance due the
Company promptly upon the Reinsurer's receipt of the Account Current.
C. The incoming unearned premium reserve shall be paid by the Company
within 45 days of the Agreement's inception (i.e., September 1, 2001).
D. Payment by the Reinsurer of its portion of loss and loss expenses paid
by the Company will be made by the Reinsurer to the Company within 5
days after proof of payment by the Company is received by the
Reinsurer.
Section 6
WARRANTY
The maximum limits of liability for any one policy of the Company shall be
deemed not to exceed the following:
1. General Liability - $1,000,000 each occurrence and $2,000,000 general
aggregate. a) As respects Products and Completed Operations -
$1,000,000 in the aggregate.
2. Liquor Liability Coverage - $1,000,000 each occurrence (i.e., new and
renewal Restaurant policies, excluding Bars and Taverns, for the A, B,
and C states as per attached Appendix A, having liquor receipts of 40%
or less of total sales, effective on or after the effective date of
this Agreement).
-3-
3. Commercial Auto Liability - $1,000,000 each person/each occurrence;
4. Commercial Auto Property Damage - $250,000 each occurrence;
5. Commercial Auto Liability (CSL) - $1,000,000 each occurrence;
6. Commercial Uninsured and Underinsured Motorists Coverage - $1,000,000
each person/each occurrence;
7. Personal Injury Protection Coverage- Statutory Limits; and Garage
Liability - $1,000,000 each occurrence.
This Exhibit A is attached to and forms part of Reinsurance Agreement No.
3154-TBD issued to PENN-AMERICA INSURANCE COMPANY, PENN-STAR INSURANCE COMPANY
DATED: February 28, ▇▇▇▇
▇▇/▇▇
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▇▇. ▇▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇ ▇
EXHIBIT B
COMMERCIAL AUTOMOBILE AND GARAGE LIABILITY
EXCESS OF LOSS
Section 1
A. BUSINESS COVERED
The Reinsurer agrees to reimburse the Company, on an excess of loss
basis, for the amounts of ultimate net loss which the Company may pay
as a result of losses occurring on and after September 1, 2001, as
respects the Company's in-force policies until the natural expiration
thereof, covering Commercial Automobile Liability including Garage
Liability, Class of Insurance, except as excluded under the EXCLUSIONS
Article of this Agreement, subject to the limitations set forth herein.
Section 2
LIMITS OF COVER
A. First Layer
As respects the Class of Insurance as stated in Section 1, the Reinsurer
shall not be liable for any loss until the Company's ultimate net loss in
each occurrence exceeds $250,000 and then the Reinsurer shall be liable
for the amount of the Company' s ultimate net loss in each occurrence in
excess of $250,000 but the Reinsurer's liability shall not exceed 100% of
$750,000 in any one occurrence.
B. In the event of a combination loss involving a property risk and a
casualty occurrence (i.e., any Commercial Auto Liability or Garage
Liability losses covered hereunder), the Company's retention shall be the
greater retention of the Line of Business applicable but not to exceed to
$300,000.
C. Second Layer
As respects the Class of Insurance as stated in Section 1, the Reinsurer
shall not be liable for any loss until the Company's ultimate net loss in
each occurrence exceeds $1,000,000 and then the Reinsurer shall be liable
for the amount of the Company' s ultimate net loss in each occurrence in
excess of $2,000,000 but the Reinsurer's liability shall not exceed 100%
of $2,000,000 in any one occurrence.
Section 3
REINSURANCE PREMIUM
A. First Layer
The reinsurance provided under this Exhibit shall be computed at the
following rates as required by law:
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Commercial Auto (Other than Courier)
Policy Limit Gross Reinsurance Rates
------------ -----------------------
$300,000 CSL 6.31%
$500,000 CSL 16.67%
$1,000,000 CSL 25.72%
$100,000/$300,000 1.47%
$250,000/$500,000 10.74%
$500,000/$1,000,000 22.89%
Garage
Policy Limit Gross Reinsurance Rates
------------ -----------------------
$300,000 CSL 7.61%
$500,000 CSL 18.82%
$1,000,000 CSL 27.75%
Courier
Policy Limit Gross Reinsurance Rates
------------ -----------------------
$1,000,000 CSL 32.33%
B Second Layer
The reinsurance provided under this Exhibit shall be computed at a rate
of 1.67% of the Company's net written premium for the in-force business
effective during period and covered hereunder.
C. "Net written premium" shall mean the total of the Company's gross
premium written during the agreement year for the lines of business
covered hereunder, less expense constants on admitted policies, and
less return premiums and premiums paid for reinsurance, if any, inuring
to the benefit of the Agreement.
D. The subject net written premium for the in-force business at the
inception of this Agreement shall be the Unearned Premium Reserve.
Section 4
COMMISSION
The Reinsurer shall make a commission allowance of 40.0% to the Company on the
premiums ceded to this Agreement.
-2-
Section 5
REPORTS AND REMITTANCES
A. Reinsurance premium (i.e., General Re's return of the unearned premium)
shall be paid by the Company within 45 days of Agreement's inception
(i.e., September 1, 2001).
B. Renewal policies to be paid within 45 days after the close of each
quarter, with all necessary data respecting premiums shall be forwarded
to the Reinsurer on forms mutually acceptable.
C. Any balance due the Reinsurer, shall be remitted by the Company with
the Account Current. The Reinsurer shall remit any balance due the
Company promptly upon the Reinsurer's receipt of the Account Current.
D. Payment by the Reinsurer of its portion of loss and loss expenses paid
by the Company will be made by the Reinsurer to the Company within 5
days after proof of payment by the Company is received by the
Reinsurer.
Section 6
WARRANTY
The maximum limits of liability for any one policy of the Company shall be
deemed not to exceed the following:
1. Commercial Auto Liability - $1,000,000 each person/each occurrence;
2. Commercial Auto Property Damage - $250,000 each occurrence;
3. Commercial Auto Liability (CSL) - $1,000,000 each occurrence;
4. Commercial Uninsured and Underinsured Motorists Coverage - $1,000,000
each person/each occurrence;
5. Personal Injury Protection Coverage- Statutory Limits; and Garage
Liability - $1,000,000 each occurrence.
This Exhibit B is attached to and forms part of Reinsurance Agreement No.
3154-TBD issued to PENN-AMERICA INSURANCE COMPANY, PENN-STAR INSURANCE COMPANY
DATED: February 28, ▇▇▇▇
▇▇/▇▇
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▇▇▇▇▇▇▇▇ A
Class A Class B Class C
------- ------- -------
Delaware Arkansas Arizona
Kansas California Georgia
Maryland Colorado Idaho
Nebraska Connecticut Indiana
Nevada Florida Iowa
South Carolina Illinois Maine
▇▇▇▇▇▇▇ Kentucky Michigan
Louisiana Mississippi
South Dakota Montana
Tennessee New Mexico
Utah North Dakota
Wisconsin Ohio
Oklahoma
Oregon
Washington
Wyoming
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NUCLEAR INCIDENT EXCLUSION CLAUSE--
PHYSICAL DAMAGE--REINSURANCE--NO. 2
(1) This Reinsurance does not cover any loss or liability accruing to the
Reassured, directly or indirectly and whether as Insurer or Reinsurer, from any
Pool of Insurers or Reinsurers formed for the purpose of covering Atomic or
Nuclear Energy risks.
(2) Without in any way restricting the operation of paragraph (1) of this
Clause, this Reinsurance does not cover any loss or liability accruing to the
Reassured, directly or indirectly and whether as Insurer or Reinsurer, from any
insurance against Physical Damage (including business interruption or
consequential loss arising out of such Physical Damage) to:
I. Nuclear reactor power plants including all auxiliary property
on the site, or
II. Any other nuclear reactor installation, including laboratories
handling radioactive materials in connection with reactor
installations, and "critical facilities" as such, or
III. Installations for fabricating complete fuel elements or for
processing substantial quantities of "special nuclear
material," and for reprocessing, salvaging, chemically
separating, storing or disposing of "spent" nuclear fuel or
waste materials, or
IV. Installations other than those listed in paragraph (2) III
above using substantial quantities of radioactive isotopes or
other products of nuclear fission.
(3) Without in any way restricting the operations of paragraphs (1) and (2)
hereof, this Reinsurance does not cover any loss or liability by radioactive
contamination accruing to the Reassured, directly or indirectly, and whether as
Insurer or Reinsurer, from any insurance on property which is on the same site
as a nuclear reactor power plant or other nuclear installation and which
normally would be insured therewith except that this paragraph (3) shall not
operate:
(a) where Reassured does not have knowledge of such nuclear reactor
power plant or nuclear installation, or
(b) where said insurance contains a provision excluding coverage for
damage to property caused by or resulting from radioactive
contamination, however caused. However on and after 1st January 1960
this sub-paragraph (b) shall only apply provided the said radioactive
contamination exclusion provision has been approved by the Governmental
Authority having jurisdiction thereof.
(4) Without in any way restricting the operations of paragraphs (1), (2)
and (3) hereof, this Reinsurance does not cover any loss or liability by
radioactive contamination accruing to the Reassured, directly or indirectly, and
whether as Insurer or Reinsurer, when such radioactive contamination is a named
hazard specifically insured against.
(5) It is understood and agreed that this Clause shall not extend to risks
using radioactive isotopes in any form where the nuclear exposure is not
considered by the Reassured to be the primary hazard.
(6) The term "special nuclear material" shall have the meaning given it in
the Atomic Energy Act of 1954 or by any law amendatory thereof.
(7) Reassured to be sole judge of what constitutes:
(a) substantial quantities, and
(b) the extent of installation, plant or site.
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Note.--Without in any way restricting the operation of paragraph (1)
hereof, it is understood and agreed that:
(a) all policies issued by the Reassured on or before 31st December
1957 shall be free from the application of the other provisions of this
Clause until expiry date or 31st December 1960 whichever first occurs
whereupon all the provisions of this Clause shall apply,
(b) With respect to any risk located in Canada policies issued by the
Reassured on or before 31st December 1958 shall be free from the
application of the other provisions of this Clause until expiry date or
31st December 1960 whichever first occurs whereupon all the provisions
of this Clause shall apply.
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NUCLEAR INCIDENT EXCLUSION CLAUSE - LIABILITY - REINSURANCE - No. 1B
(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
reinsurer 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 time 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 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 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 Reassured on
New York risks, until 90 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
-1-
(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, to expenses incurred with respect
first aid,
to bodily injury, sickness, disease or death resulting from the hazardous properties of
bodily injury
nuclear material and arising out of the operation of 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 materials" means source material, special nuclear
material or byproduct material; "source material," "special nuclear
material," "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 byproduct material other than
the tailings or wastes produced by the extraction or concentration of
uranium or thorium from any ore processed primarily for its source
material content 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 time the
total amount 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 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,
-2-
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"
includes all forms of radioactive contamination of property. "Property
damage" includes all forms 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 (1) 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.
-3-
NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL DAMAGE AND LIABILITY
(BOILER AND MACHINERY POLICIES) - REINSURANCE - No. 3
(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 original Boiler and Machinery Insurance contracts of the
Reassured (new, renewal and replacement) shall be deemed to include the
following provisions of this paragraph.
This Policy does not apply to "loss," whether it be direct or
indirect, proximate or remote
(a) from an Accident caused directly or indirectly by nuclear
reaction, nuclear radiation or radioactive contamination,
all whether controlled or uncontrolled; or
(b) from nuclear reaction, nuclear radiation or radioactive
contamination, all whether controlled or uncontrolled,
caused directly or indirectly by, contributed to or
aggravated by an Accident.
(3) However, it is agreed that loss arising out of the use of
Radioactive Isotopes in any form is not hereby excluded from reinsurance
protection.
(4) Without in any way restricting the operation of paragraph (1)
hereof, it is understood and agreed that
(a) all policies issued by the Reassured to become effective
on or before 30th April, 1958, shall be free from the
application of the other provisions of this Clause until
expiry date or 30th April, 1961, whichever first occurs,
whereupon all the provisions of this Clause shall apply,
(b) with respect to any risk located in Canada policies issued
by the Reassured to become effective on or before 31st
December, 1958, shall be free from the application of the
other provisions of this Clause until expiry date or 31st
December, 1960, whichever first occurs, whereupon all the
provisions of this Clause shall apply.
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