Exhibit 10.8
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TRADITIONAL PRIVATE PASSENGER AUTOMOBILE
QUOTA SHARE REINSURANCE CONTRACT
issued to
THE DIRECT GENERAL GROUP
NASHVILLE, TENNESSEE, including
DIRECT INSURANCE COMPANY
DIRECT GENERAL INSURANCE COMPANY
DIRECT GENERAL INSURANCE COMPANY OF LOUISIANA
and
DIRECT GENERAL INSURANCE COMPANY OF MISSISSIPPI
and/or any other companies that are now or may hereafter become members of
THE DIRECT GENERAL GROUP
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TRADITIONAL PRIVATE PASSENGER AUTOMOBILE
QUOTA SHARE REINSURANCE CONTRACT
TABLE OF CONTENTS
ARTICLE PAGE
------- ----
1 Business Reinsured............................................................................ 2
2 Cover......................................................................................... 2
3 Loss Limit.................................................................................... 4
4 Loss Corridor................................................................................. 4
5 Commencement and Termination.................................................................. 4
6 Exclusions.................................................................................... 6
7 Reinsurance Premium........................................................................... 8
8 Premium Cap................................................................................... 8
9 Provisional Ceding Commission................................................................. 8
10 Adjustment of Ceding Commission............................................................... 9
11 Accounts and Remittances...................................................................... 10
12 Definitions................................................................................... 12
13 Original Conditions........................................................................... 14
14 Special Provisions............................................................................ 14
15 No Third Party Rights......................................................................... 14
16 Loss and Loss Adjustment Expense.............................................................. 14
17 Special Commutation........................................................................... 15
18 Offset........................................................................................ 16
19 Currency...................................................................................... 16
20 Loss Reserve Funding......................................................................... 16
21 Taxes........................................................................................ 19
22 Federal Excise Tax........................................................................... 19
23 Inspection................................................................................... 19
24 Delay, Omission or Error..................................................................... 19
25 Insolvency................................................................................... 20
26 Arbitration.................................................................................. 20
27 Service of Suit.............................................................................. 21
28 Entire Contract.............................................................................. 22
29 Severability................................................................................. 22
30 Intermediary................................................................................. 23
31 Mode of Execution............................................................................ 23
Company Signature............................................................................ 23
ATTACHMENTS
Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance
-U.S.A....................................................................................... 25
Nuclear Incident Exclusion Clause - Liability - Reinsurance - U.S.A.......................... 27
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TRADITIONAL PRIVATE PASSENGER AUTOMOBILE
QUOTA SHARE REINSURANCE CONTRACT
(the "Contract")
issued to
THE DIRECT GENERAL GROUP
NASHVILLE, TENNESSEE, including
DIRECT INSURANCE COMPANY
DIRECT GENERAL INSURANCE COMPANY
DIRECT GENERAL INSURANCE COMPANY OF LOUISIANA
and
DIRECT GENERAL INSURANCE COMPANY OF MISSISSIPPI
and/or any other companies that are now or may hereafter become members of
THE DIRECT GENERAL GROUP
(collectively the "Company")
by
THE SUBSCRIBING REINSURER(S) IDENTIFIED IN THE
INTERESTS AND LIABILITIES AGREEMENT(S)
ATTACHED TO AND FORMING PART OF THIS CONTRACT
(the "Reinsurer")
ARTICLE 1
BUSINESS REINSURED
This Contract is to share with the Reinsurer the interests and liabilities of
the Company's Loss on its Net Retained Liability under all policies,
endorsements, and/or other evidences of liability for Private Passenger
Automobile Physical Damage and Liability business written or renewed by the
Company or on its behalf by State National Specialty Insurance Company, Fort
Worth, Texas, in the States of Arkansas, Florida, Georgia, Kentucky, Louisiana,
Mississippi, North Carolina, South Carolina, and Tennessee during the Contract
Year (hereinafter referred to as "Policy(ies)"), subject to the terms and
conditions herein contained.
ARTICLE 2
COVER
A. Subject to the limits hereof, the Company will cede, and the Reinsurer
will accept as reinsurance, the percentage share set forth below (the
"Quota Share Percentage") of the
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Company's Loss arising from its Net Retained Liability for all business
reinsured hereunder:
1. As respects Direct General Insurance Company, 60%;
2. As respects Direct Insurance Company, 25%;
3. As respects Direct General Insurance Company of Mississippi,
45%;
4. As respects Direct General Insurance Company of Louisiana,
20%.
The Company shall have the option to adjust the Quota Share Percentage
as respects each individually named reinsured company hereunder,
effective on the first day of any calendar quarter, by giving the
Reinsurer notice on or before the first day of such calendar quarter.
The Company shall have the option to adjust the Quota Share Percentage,
as respects each individually named reinsured company, to any
percentage from 15% through 70%, however, the total cession shall not
be less than 27.5%, nor shall it exceed 57.5%, for all reinsured
companies combined, as respects Policies with new or renewal Policy
periods effective during any one Contract Year.
B. In the event the Company's Loss Ratio exceeds the attachment point of
the Loss Corridor, as respects Policies issued or renewed during any
one Contract Year, the Reinsurer may elect to require the Company to
recalculate the Quota Share Percentage(s) for such Policies based upon
the following parameters, as applicable:
1. The Loss Ratio will be calculated as though the cession were
made evenly throughout the Contract Year;
2. The ceded premium from the State of Florida shall not exceed
55% of the overall cession;
3. The ceded premium from new business shall not exceed 60% of
the overall cession, and the ceded premium from renewal
business shall not be less than 40% of the overall cession.
C. Notwithstanding the above, Loss subject to this Contract and classified
by the Company as "Property Loss" will be limited to $2,000,000 per
Loss Occurrence.
D. The Company is permitted to carry an Excess Cessions reinsurance
contract, as well as Excess Catastrophe reinsurance, both of which
inure to the benefit of this Contract,
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ARTICLE 3
LOSS LIMIT
A. For purposes of determining the liability of the Reinsurer, the limits
of liability of the Company for Loss with respect to any one Policy
shall be deemed not to exceed the greater of the minimum statutory
limits in the applicable state in which the Company is licensed, or the
following:
1. Automobile Bodily Injury Liability, $ 10,000 per
person/$20,000 per occurrence;
2. Property Damage Liability, $5,000 per occurrence;
3. Uninsured/Underinsured Motorists Bodily Injury Liability,
$10,000 per person/$20,000 per occurrence;
4. Uninsured/Underinsured Motorists Property Damage Liability,
$5,000 per occurrence;
5. Personal Injury Protection, Statutory Coverages;
6. Medical Payments, $ 10,000 per person.
B. Further, the Company's Automobile Physical Damage limits shall not
exceed $75,000 each vehicle, or so deemed.
ARTICLE 4
LOSS CORRIDOR
As respects Policies with effective or renewal dates during each Contract Year,
the Company shall retain, under this Contract, 100% of Losses Incurred above a
Loss Ratio of 81.5%, The Company will remain liable for such Losses Incurred
unless Losses Incurred exceeds a Loss Ratio of 87.5%, at which point the
Reinsurer's liability will resume (based on its pro rata share) for any Losses
Incurred in excess of an 87.5% Loss Ratio. Said additional retention is called
the "Loss Corridor." The Loss Corridor is not subject to any effect from a
deficit carryforward from prior Contract Years.
ARTICLE 5
COMMENCEMENT AND TERMINATION
A. This Contract shall become effective at 12:01 a.m., Central Standard
Time, January 1, 2003, and shall remain in full force and effect until
terminated as provided in the following paragraph.
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B. 1. This Contract may be terminated by either party at 12:01 a.m.,
Central Standard Time, on January 1, 2004, or any January 1
thereafter by giving to the other party not less than 90 days'
notice by certified or registered mail, return receipt
requested.
2. Either party to this Contract shall also have the right to
terminate this Contract immediately by giving written notice
to the other party by certified or registered mail in the
event the other party:
a. Has its financial condition impaired by a reduction
of consolidated statutory policyholders surplus to a
level below $40,000,000. Such determination is made
based upon the consolidated statutory policyholders
surplus at the end of each calendar quarter.
b. Becomes insolvent, files a petition in bankruptcy,
goes into liquidation, enters voluntary supervision,
enters rehabilitation or has a receiver appointed.
The party shall immediately notify the other party of
any regulatory involvement.
3. The Reinsurer shall also have the right to terminate this
Contract immediately by giving written notice to the Company
by certified or registered mail in the event either of the
following occurs:
a. The Company's risk-based capital ratio is reduced
below 250% on a consolidated basis, or any of the
individual reinsured companies' risk-based capital
ratio is reduced below 200%, such calculations to be
provided to the Reinsurer by the Company at the end
of each calendar quarter.
b. The Company files for rate changes which effect
greater than a 3.5% weighted average rate reduction
as respects premiums ceded under the current Contract
Year without obtaining the Reinsurer's approval in
advance at the quarterly actuarial meeting.
4. It is understood and agreed that should the Company enter any
arrangement either by way of shareholding or management or
otherwise, under which effective legal or presumptive control
of 50% or more is assumed by any individual or organization
other than that which pertained at the time this Contract
became effective, the Company shall forthwith notify the
Reinsurer.
Acting upon such actual notice, or upon constructive notice
thereof by any other means, the Company shall have the right
to terminate this Contract by giving the Reinsurer not less
than 90 days' notice from the closing date of the arrangement,
by registered letter stating therein the date of termination.
In the event this Contract is terminated in accordance with the
provisions of paragraph B of this Article, the Reinsurer will remain
liable for 12 months run-off, plus six months of odd time, for all
Policies in force on the date of termination, unless the Company elects
to
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terminate coverage on a cut-off basis with return of unearned premium,
such election to be made by the Company in writing within 30 days of
the date of termination.
C. The Reinsurer shall also have the right to terminate this Contract by
giving the Company written notice by certified or registered mail in
the event the Company is more than 30 days delinquent with its monthly
reports and remittances due under this Contract. Following receipt of
such notice, the Company shall have 15 working days to bring its
account current. If the Company fails to bring its account current
within 15 working days, this Contract shall be terminated effective on
the date through which the most recent monthly report and remittance
provided subject premium, and the Reinsurer shall have no liability
hereunder for Losses occurring after the effective date of termination.
ARTICLE 6
EXCLUSIONS
A. This Contract shall not apply to and specifically excludes the
following perils, risks and classes of business:
1. As regards interests which at time of Loss or damage are on
shore, no liability shall attach hereto in respect of any Loss
or damage which is occasioned by war, invasion, hostilities,
acts of foreign enemies, civil war, rebellion, insurrection,
military or usurped power, or marital law or confiscation by
order of any government or public authority. This War
Exclusion Clause shall not, however, apply to interests which
at time of loss or damage are within the territorial limits of
the United States of America (comprising the fifty States of
the Union, the District of Columbia, and including bridges
between the U.S.A. and Mexico provided they are under United
States ownership), Canada, St. Pierre and Miquelon, provided
such interests are insured under Policies, endorsements or
binders containing a standard war or hostilities or warlike
operations exclusion clause.
2. Business excluded by the following attached Nuclear Incident
Exclusion Clauses:
a. Nuclear Incident Exclusion Clause - Physical Damage -
Reinsurance - U.S.A.
b. Nuclear Incident Exclusion Clause - Liability -
Reinsurance - U.S.A.
3. Pools, Associations, Syndicates and Guaranty Funds, except
Losses from Assigned Risk Plans or similar plans are not
excluded. It is further agreed that business ceded to the
North Carolina Reinsurance Facility is excluded hereunder.
4. Reinsurance except for Agency and Intra Group Company
Reinsurance, and Private Passenger Automobile business assumed
under "fronting" facilities with State National Specialty
Insurance Company.
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5. Mortgage Impairment Insurance or other similar covers, however
styled.
6. All liability of the Company 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 guaranty fund, insolvency fund,
plan, pool, association, fund or other arrangement, however
denominated, established or governed, which provides for any
assessment of or payment or assumption by the Company 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 meet any claim, debt, charge,
fee or other obligation in whole or in part.
7. Products Liability, Professional Malpractice Liability,
Directors' & Officers' Liability, Securities and Exchange
Commission Liability, Workers' Compensation and Employers'
Liability.
8. Loss arising out of the ownership, maintenance or use of any
vehicle, the principal use of which is:
a. As a public or livery conveyance;
b. Emergency vehicles;
c. Drive yourself motor vehicles available for leasing
periods of less than six months;
d. Automobiles used in speed contests and races;
e. Motorcycles.
9. Commercial Automobile Physical Damage and Liability business.
10. Accidental Death, Towing and Rental Reimbursement, and Life
Insurance when written as such.
11. Coverages written in conjunction with Motor Club memberships,
Accident Hospital Indemnity, Vehicle Protection Plans or
Travel Protection Plans.
12. Losses arising from seepage and pollution, provided, however,
that this exclusion will not apply, if and when a court
invalidates the Company's pollution liability exclusion
notwithstanding that such liability was intended to be
excluded from coverage.
13. Extra contractual obligations and excess Policy limits awards.
14. Automobile Dealers Open Lot Coverage, Garage and Garagekeepers
Legal Liability and Vendors Single Interest Coverages.
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B. In the event the Company becomes bound on an excluded risk without its
knowledge, either as a result of an existing insured extending its
operations or through an inadvertent error by an agent, the exclusions
hereunder, other than exclusions 1, 2, 4, 6, 12 and 14, shall be
suspended with respect to such insured risk until 30 days after an
underwriting supervisor of the Company acquires knowledge thereof and
until the Company can legally cancel or terminate its coverage of such
risk.
C. Business which is beyond the terms, conditions or limitations of this
Contract may be submitted to the Reinsurer for special acceptance
hereunder and such business, if accepted by the Reinsurer, shall be
subject to all of the terms, conditions and limitations of this
Contract except as modified by the special acceptance.
ARTICLE 7
REINSURANCE PREMIUM
Company shall cede to the Reinsurer its Quota Share Percentage of the Gross Net
Written Premium.
ARTICLE 8
PREMIUM CAP
A. As respects the Contract Year beginning January 1, 2003, the Company's
Gross Net Written Premium for Policies subject to this Contract shall
not exceed a Premium Cap of $400,000,000.
B. If the Premium Cap is exceeded, or is projected by the Company to be
exceeded, during the Contract Year, the Reinsurer shall have the right
to waive the Premium Cap, or by giving notice within 30 days of the
date upon which notice is given to the Reinsurer that the Premium Cap
is exceeded or projected to be exceeded, invoke its rights to reduce
the Quota Share Percentage under this Contract, as respects the
business for which the Premium Cap is exceeded, to the proportion that
the Quota Share Percentage of the Premium Cap bears to the total Gross
Net Written Premium under this Contract, Failure to invoke such option
within 30 days will constitute waiver of the Premium Cap.
ARTICLE 9
PROVISIONAL CEDING COMMISSION
A. The Reinsurer shall allow the Company a provisional ceding commission
of 22.7% of the ceded Gross Net Written Premium remitted to the
Reinsurer as per subparagraph 2 of
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paragraph A of the Accounts and Remittances Article. Return commission
shall be allowed on return premiums at the same rate.
B. It is expressly agreed that the ceding commission includes provision
for all acquisition costs, administrative fees, and for all other
expenses (other than the flat 6.0% charge and up to an additional 2.5%
charge for outside legal expense relating to Loss Adjustment Expense)
of whatever nature.
ARTICLE 10
ADJUSTMENT OF CEDING COMMISSION
A. As respects Policies written or renewed during each Contract Year, the
provisional commission allowed the Company shall be adjusted
periodically in accordance with the provisions set forth herein. The
adjusted commission rate shall be calculated as follows:
1. If the Adjusted Loss Ratio is 81.5% or greater, the commission
rate for the Contract Year shall be 14.2%;
2. If the Adjusted Loss Ratio is less than 81.5%, but not less
than 65.0%, the adjusted commission rate for the Contract Year
shall be 14.2%, plus 100% of the difference in percentage
points between 81.5% and the actual Adjusted Loss Ratio;
3. If the Adjusted Loss Ratio is 65% or less, the adjusted
commission rate for the Contract Year shall be 30.7%.
B. The first adjustment of the provisional ceding commission will take
place 12 months after the close of the Contract Year. The Company will
provide the Reinsurer with a detailed report showing its adjustment
calculation and indicating any amounts due. In the event funds are due
the Reinsurer, the Company will remit said funds with the report. In
the event funds are due the Company, the Reinsurer will remit said
funds to the Company when the Company agrees to commute the Contract
Year and accept a final commission adjustment calculation and
remittance.
C. Adjustments will continue to be made each January 1st thereafter until
all Losses and Loss Adjustment Expense for the Contract Year have been
closed, at which time a final adjustment will be made.
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ARTICLE 11
ACCOUNTS AND REMITTANCES
A. Within 30 days following the end of each month, the Company shall
render a net account to the Reinsurer, segregated by Contract Year.
Such account shall contain the following information, summarized by
line of business:
1. Ceded Gross Net Earned Premium during the month; less,
2. The provisional ceding commission rate (applied to ceded Gross
Net Earned Premium remitted), and the allowance for Loss
Adjustment Expense, as provided for in this Contract; less,
3. Ceded Loss and outside legal expense paid on Losses under
Policies written or renewed during the Contract Year (net of
the Company's Cumulative Retention under the Loss Corridor for
the Contract Year, if any); plus,
4. The Reinsurer's share of subrogation, salvage, or other
recoveries on Losses under Policies written or renewed during
Contract Year.
Any balances (as calculated in subparagraphs 1 through 4) due to the
Reinsurer shall be paid by the Company within 30 days following the end
of the month. Any balances due to the Company shall be paid by the
Reinsurer as soon as is reasonably practicable after receiving the
monthly report, but not to exceed 30 days following receipt of the
monthly report.
B. The Company's "Cumulative Retention under the Loss Corridor" for the
Contract Year shall mean at any time the amount, if any, by which the
inception-to-date accumulated paid Losses Incurred exceed 81.5% of
inception-to-date ceded Gross Net Earned Premium from Policies with
effective or renewal dates during the Contract Year, subject to a
maximum of 6% of the inception-to-date accumulated ceded Gross Net
Earned Premium from such Policies.
C. Notwithstanding the above, in the event that the Reinsurer has its
"Best's" rating lowered below "A-", the Company may withhold from
payment amounts due the Reinsurer hereunder, provided it establishes a
Security Fund (the "Fund") for the payment and/or settlement of amounts
due to and from the Reinsurer under this Contract. The Company shall be
permitted to withdraw from the fund any such payable amounts.
In that event, in lieu of the provisions of paragraph A above, the
Company shall remit to the Reinsurer only the Reinsurer's Margin,
calculated as 4.3% of the reinsurance premium due, and the remaining
reinsurance premium, net of ceding commission, shall be deposited in
the Fund.
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Thereafter, in lieu of the provisions of paragraph A above, the
Company's monthly report shall contain the following information:
1. Ceded Gross Net Earned Premium during the month; less
2. The provisional ceding commission rate (applied to Gross Net
Earned Premium remitted) as provided for in this Contract;
less,
3. The Reinsurer's Margin of 4.3% of (1) above; less
4. Ceded Loss and Loss Adjustment Expense paid on Losses ascribed
to the Contract Year (net of the Company's cumulative
retention under the Loss Corridor for the Contract Year, if
any); plus,
5. The Reinsurer's share of subrogation, salvage, or other
recoveries on Losses ascribed to the Contract Year.
If the net balance is positive, the Company shall deposit that amount
in the Fund. The Company shall hold any amounts due the Reinsurer until
such time that the Reinsurer's liability for Losses ascribed to the
Contract Year has been commuted, or all Losses have been closed or
settled for the Contract Year.
If said balance is negative, the Company shall withdraw such amount
from the Fund. To the extent the Fund balance is less than the amount
due, the Reinsurer shall remit the amount due promptly upon receipt and
verification of the Company's report.
In the event the "Best's" rating of the Reinsurer is raised to a level
of "A-" or better, the provisions of paragraph A above shall apply to
this Contract, in lieu of the provisions of this paragraph, and the
Company shall immediately pay to the Reinsurer the current balance of
the Fund and the Fund shall be terminated and all securities therein
released to the Company.
D. Each monthly account will also bear a notation advising of the Gross
Net Written Premium, outstanding Loss and Loss Adjustment Expense
reserve, summarized by line of business, and the unearned premium
reserve at the end of the period, summarized by line of business,
segregated by Contract Year, Should Loss and Loss Adjustment Expense
attributable to an ISO catastrophe(s) be involved, the account should
bear a notation showing the ISO number(s) and the paid and outstanding
amounts applicable.
E. Within 60 days following the end of each annual accounting period, the
Company shall furnish to the Reinsurer any other information which the
Reinsurer may require for its Annual Convention Statement which may be
reasonably available to the Company.
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ARTICLE 12
DEFINITIONS
A. "Loss" shall mean amounts paid or payable by Company for indemnity
under the Policies reinsured under this Contract.
B. "Net Retained Liability" shall mean the Company's gross liability for
Loss and Loss Adjustment Expense under the Policies, after application
of any reinsurance which inures to the benefit of this Contract.
C. "Private Passenger Automobile Physical Damage and Liability Business"
shall mean that business classified as private passenger automobile
insurance, including liability, physical damage, uninsured/underinsured
motorists and personal injury protection.
D. "Gross Net Written Premium" shall mean the gross written premium income
on subject business, without any reduction due to bad debts, less
returns and cancellations and less written premium income paid for
reinsurances, recoveries under which would inure to the benefit of this
Contract, subject to the provisions of paragraph B of the Special
Provisions Article. Gross Net Written Premium income shall not include
premium finance income, billing fees and Policy fees collected by the
Company in connection with business covered hereunder, regardless of
whether these fees are taxed as premium by the jurisdiction in
question.
E. "Gross Net Earned Premium" shall mean the earned portion of the ceded
Gross Net Written Premium.
F. "Loss Ratio" shall mean: (a) the Losses Incurred arising from Policies
with effective or renewal dates during the Contract Year; divided by,
(b) the Gross Net Earned Premium from Policies with effective or
renewal dates during the Contract Year.
G. "Adjusted Loss Ratio" shall mean the Loss Ratio after application of
the Loss Corridor and IBNR.
H. "Losses Incurred" shall mean paid ceded Loss and Loss Adjustment
Expense, plus ceded outstanding reserves under this Contract.
I, "IBNR" shall mean the amount added to Losses Incurred for purposes of
determining the Adjusted Loss Ratio for the adjustment of the ceding
commission for each Contract Year. As respects each Contract Year, the
IBNR factor for the first computation of adjusted commission for said
Contract Year will be 6% of ceded Automobile Liability Gross Net Earned
Premium (excluding property damage) under this Contract. For the second
computation, the IBNR factor will be reduced to 3% of said premium.
IBNR will be eliminated for subsequent computations of adjusted
commission for said Contract Year.
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J. "Contract Year" shall mean the 12-month period beginning 12:01 a.m.,
Central Standard Time, January 1, 2003, and each subsequent 12-month
period that this Contract remains in force shall be a separate Contract
Year. In the event of termination, the final Contract Year shall be
from the beginning of the current Contract Year through the date of
termination.
K. The term "Loss Occurrence" shall mean the sum of all individual losses
directly occasioned by any one disaster, accident or loss or series of
disasters, accidents or losses arising out of one event which occurs
within the area of one state of the United States or province of Canada
and states or provinces contiguous thereto and to one another. However,
the duration and extent of any one "Loss Occurrence" shall be limited
to all individual losses sustained by the Company occurring during any
period of 168 consecutive hours arising out of and directly occasioned
by the same event, except that the term "Loss Occurrence" shall be
further defined as follows:
1. As regards windstorms, 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
insured's premises by strikers, provided such occupation
commenced during the aforementioned 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 fire following
directly occasioned by the earthquake, only those individual
fire losses which commence during the period of 168
consecutive hours may be included in the Company's "Loss
Occurrence."
4. As regards "freeze," only individual losses directly
occasioned by collapse, breakage of glass and water damage
(caused by bursting of frozen pipes and tanks) may be included
in the Company's "Loss Occurrence."
For all "Loss 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 "Loss Occurrences" referred to in subparagraphs 1 and 2 above
where only one such period of 72
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consecutive hours shall apply with respect to one event, regardless of
the duration of the event.
No individual losses occasioned by an event that would be covered by 72
hours clauses may be included in any "Loss Occurrence" claimed under
the 168 hours provision.
ARTICLE 13
ORIGINAL CONDITIONS
All insurances falling under this Contract shall be subject to the same terms,
rates, conditions and waivers, and to the same modifications, alterations and
cancellations as the respective Policies of the Company (except that in the
event of the insolvency of the Company the provisions of the Insolvency Article
of this Contract shall apply).
ARTICLE 14
SPECIAL PROVISIONS
A. The Company shall provide the Reinsurer with quarterly Loss Ratio
estimates.
B. Deductions for inuring reinsurance purchases shall not exceed the
lesser of the actual cost of the inuring insurance or 2% of Gross Net
Written Premium (prior to deduction for inuring reinsurance purchases).
C. The Company shall not cede business written in any state not set forth
in the Business Reinsured Article.
ARTICLE 15
NO THIRD PARTY RIGHTS
Nothing herein 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 Contract.
ARTICLE 16
LOSS AND LOSS ADJUSTMENT EXPENSE
A. Subject to the terms and conditions of this Contract, any Loss
settlement made by the Company within the terms and conditions of the
Policy shall be unconditionally binding upon the Reinsurer in
proportion to its participation, and the Reinsurer shall benefit
proportionally in all salvages and recoveries.
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B. As an allowance for Loss Adjustment Expense (including Declaratory
Judgment Expenses), the Reinsurer shall be liable for an amount equal
to 6% of the ceded Gross Net Earned Premium hereunder. The Reinsurer
shall also reimburse the Company for a pro rata share of any outside
legal expenses incurred, but the Reinsurer's liability for such
expenses under this Contract shall not exceed 2.5% of ceded Gross Net
Earned Premium hereunder for Policies issued or renewed during each
Contract Year. Further, the Reinsurer's liability for Loss Adjustment
Expense and outside legal expenses incurred shall not exceed 8.5% of
ceded Gross Net Earned Premium hereunder for Policies issued or renewed
during each Contract Year.
C. "Declaratory Judgment Expenses" shall mean all expenses incurred by the
Company in connection with declaratory judgment actions brought to
determine the Company's defense and/or indemnification obligations that
are allocable to specific Policies and claims subject to this Contract.
Declaratory Judgment Expenses shall be deemed to have been incurred by
the Company on the date of the original Loss (if any) giving rise to
the declaratory judgment action.
ARTICLE 17
SPECIAL COMMUTATION
A. If the Company experiences a 33 l/3% or greater decrease in its
Consolidated Statutory Policyholders' Surplus from the amount reported
in its Statutory Annual Statement as of December 31, 2002 (the
"Triggering Event"), the Reinsurer shall have the sole option to
commute this Contract and to commute all outstanding liabilities (the
"Special Commutation") at any time by giving the Company 15 days' prior
written notice.
B. Where applicable, the Company shall notify the Reinsurer no later than
five business days from the date of the Triggering Event. When the
Reinsurer is on notice of the Triggering Event, the Reinsurer shall
notify the Company within a reasonable time thereafter whether or not
it will exercise its right of Special Commutation. Failure by the
Company to so notify the Reinsurer or failure by the Reinsurer to
invoke Special Commutation after the Triggering Event shall not limit
the right of the Reinsurer to invoke Special Commutation in the future;
such Special Commutation, however, would take effect on the date of
Reinsurer invocation, and not be retroactive back to the date of the
Triggering Event.
C. Upon the Reinsurer's Notice of Special Commutation, this Contract shall
be automatically commuted in its entirety as of the date of the
Triggering Event ("Commutation Effective Date"). In consideration for
the full release and settlement by the Company of all current and
future liabilities of the Company hereunder, the Reinsurer shall remit
to the Company an amount ("the Settlement Amount") equal to the ceded
unearned premium reserve as of the Commutation Effective Date plus, at
the Reinsurer's option, either (A) the sum of the Company's ceded
reserves for the Reinsurer's proportional share of Loss and Loss
Adjustment Expense (including Loss and Loss Adjustment Expense incurred
but not
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reported) under this Contract as reflected in the latest report
received by the Reinsurer, prior to date of notice of Special
Commutation or (B) the amount the Company and the Reinsurer agree is
the present value of the Reinsurer's proportional share of such Losses.
D. In the event the parties cannot agree on the Settlement Amount, then
within 10 business days of the Reinsurer's notice of its election of
Special Commutation, the parties shall mutually appoint an independent
nationally recognized actuary (F.S.A./F.C.A.S. or A.S.A./A.C.A.S.) (the
"Independent Actuary") who shall investigate and determine the
Settlement Amount. If the Reinsurer and the Company cannot reach an
agreement on the individual to be selected as the Independent Actuary
within 10 business days after the Reinsurer's notice to elect Special
Commutation, then the Reinsurer and the Company shall each furnish the
name of an acceptable actuary and the Independent Actuary shall be
selected by drawing lots. The determination of the Commutation
Settlement by the Independent Actuary shall be made within 20 business
days of its appointment and such determination shall be final and
binding between the parties. The costs of the Independent Actuary shall
be shared on an equal basis by the Reinsurer and the Company.
ARTICLE 18
OFFSET
The Company and the Reinsurer shall have the right to offset any balance or
balances (whether on account of premiums or Losses) due from one party to the
other under the terms of this Contract or any other contract heretofore or
hereafter entered into between the Company and the Reinsurer which is classified
by the Company as part of the Company's Private Passenger Automobile program.
However, in the event of the insolvency of any party hereto, offsets shall be
allowed in accordance with the statutes and/or regulations of the state having
jurisdiction over the insolvency.
ARTICLE 19
CURRENCY
The currency to be used for all purposes of this Contract shall be United States
of America currency.
ARTICLE 20
LOSS RESERVE FUNDING
A. This Article applies only to a reinsurer who does not qualify for full
credit with any insurance regulatory authority having jurisdiction over
the Company's reserves.
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B. The Company agrees, in respect of its Policies or bonds falling within
the scope of this Contract, that when it files with its insurance
regulatory authority, or sets up on its books liabilities as required
by law, it will forward to the Reinsurer a statement showing the
proportion of such liabilities applicable to the Reinsurer. The
"Reinsurer's Obligations" shall be defined as follows:
1. Unearned premium (if applicable);
2. Known outstanding Losses that have been reported to the
Reinsurer and Loss Adjustment Expense relating thereto;
3. Losses and Loss Adjustment Expense paid by the Company but not
recovered from the Reinsurer;
4. Losses incurred but not reported and Loss Adjustment Expense
relating thereto, where the Company has submitted the
calculation for said amount to the Reinsurer and the
Reinsurer's agreement is not unreasonably withheld.
C. The Reinsurer's Obligations shall be funded by funds withheld, cash
advances, trust agreement or a Letter of Credit (LOC). The Reinsurer
shall have the option of determining the method of funding provided it
is acceptable to the insurance regulatory authorities having
jurisdiction over the Company's reserves.
D. When funding by an LOC, the Reinsurer agrees to apply for and secure
timely delivery to the Company of a clean, irrevocable and
unconditional LOC issued by a bank and containing provisions acceptable
to the insurance regulatory authorities having jurisdiction over the
Company's reserves in an amount equal to the Reinsurer's Obligations.
Such LOC shall be issued for a period of not less than one year, and
shall be automatically extended for one year from its date of
expiration or any future expiration date unless 30 days (or such other
time period as may be required by insurance regulatory authorities),
prior to any expiration date the issuing bank shall notify the Company
by certified or registered mail that the issuing bank elects not to
consider the LOC extended for any additional period.
E. The Reinsurer and Company agree that any funding provided by the
Reinsurer pursuant to the provisions of this Contract may be drawn upon
at any time, notwithstanding any other provision of this Contract, and
be utilized by the Company or any successor, by operation of law, of
the Company including, without limitation, any liquidator,
rehabilitator, receiver or conservator of the Company, for the
following purposes, unless otherwise provided for in a separate trust
agreement:
1. To reimburse the Company for the Reinsurer's Obligations, the
payment of which is due under the terms of this Contract and
that has not been otherwise paid;
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2. To make refund of any sum that is in excess of the actual
amount required to pay the Reinsurer's Obligations under this
Contract (or in excess of 102% of Reinsurer's Obligations, if
funding is provided by a trust agreement);
3. To fund an account with the Company for the Reinsurer's
Obligations. Such cash deposit shall be held in an interest
bearing account separate from the Company's other assets, and
interest thereon not in excess of the prime rate shall accrue
to the benefit of the Reinsurer. Any taxes payable on accrued
interest shall be paid out of the assets in the account that
are in excess of the Reinsurer's Obligations (or in excess of
102% of Reinsurer's Obligations, if funding is provided by a
trust agreement). If the assets are inadequate to pay taxes,
any taxes due shall be paid by the Reinsurer;
4. To pay the Reinsurer's share of any other amounts the Company
claims are due under this Contract.
F. If the amount drawn by the Company is in excess of the actual amount
required for 1. or 3., or in the case of 4., the actual amount
determined to be due, the Company shall promptly return to the
Reinsurer the excess amount so drawn. All of the foregoing shall be
applied without diminution because of insolvency on the part of the
Company or the Reinsurer.
G. The issuing bank shall have no responsibility whatsoever in connection
with the propriety of withdrawals made by the Company or the
disposition of funds withdrawn, except to ensure that withdrawals are
made only upon the order of properly authorized representatives of the
Company.
H. Fifty days prior to the end of each calendar quarter, the Company shall
prepare a specific statement of the Reinsurer's Obligations for the
sole purpose of amending the LOC or other method of funding, in the
following manner:
1. If the statement shows that the Reinsurer's Obligations exceed
the balance of the LOC as of the statement date, the Reinsurer
shall, within 30 days after receipt of the statement, secure
delivery to the Company of an amendment to the LOC increasing
the amount of credit by the amount of such difference. Should
another method of funding be used, the Reinsurer shall, within
the time period outlined above, increase such funding by the
amount of such difference.
2. If, however, the statement shows that the Reinsurer's
Obligations are less than the balance of the LOC (or less than
102% of Reinsurer's Obligations if funding is provided by a
trust agreement), as of the statement date, the Company shall,
within 30 days after receipt of written request from the
Reinsurer, release such excess credit by agreeing to secure an
amendment to the LOC reducing the amount of credit available
by the amount of such excess credit. Should another method of
funding be used, the Company shall, within the time period
outlined above, decrease such funding by the amount of such
excess.
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ARTICLE 21
TAXES
In consideration of the terms under which this Contract is issued, the Company
undertakes not to claim any deduction of the premium hereon when making tax
returns, other than income or profits tax returns, to any state or territory of
the United States of America or to the District of Columbia.
ARTICLE 22
FEDERAL EXCISE TAX
(This Article applies only to those reinsurers, domiciled outside the United
States of America, who are not exempt from the Federal Excise Tax.)
A. The Reinsurer has agreed to allow for the purpose of paying the Federal
Excise Tax the percentage specified by United States law of the premium
payable hereon to the extent such premium is subject to Federal Excise
Tax.
B. In the event of any return of premium becoming due hereunder, the
Reinsurer shall deduct the percentage specified by United States law
from the amount of the return and the Company or its agent should take
steps to recover the Tax from the United States Government.
ARTICLE 23
INSPECTION
The Company shall place at the disposal of the Reinsurer at all reasonable
times, and the Reinsurer shall have the right to inspect, through its authorized
representatives, all books, records and papers of the Company in connection with
any reinsurance hereunder or claims in connection herewith.
ARTICLE 24
DELAY, OMISSION OR ERROR
Any inadvertent delay, omission or error shall not be held to relieve either
party hereto from any liability which would attach to it hereunder if such
delay, omission or error had not been made, providing such delay, omission or
error is rectified upon discovery.
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ARTICLE 25
INSOLVENCY
A. In the event of the Insolvency of the Company, reinsurance under this
Contract shall be payable by the Reinsurer on the basis of the
liability of the Company under Policy or Policies reinsured without
diminution because of the insolvency of the Company, to the Company or
to its liquidator, receiver, or statutory successor except as provided
by Section 4118(a) of the New York Insurance Law or except when the
Contract specifically provides another payee of such reinsurance in the
event of the insolvency of the Company or when the Reinsurer with the
consent of the direct insured or insureds has assumed such Policy
obligations of the Company as direct obligations of the Reinsurer to
the payees under such Policies and in substitution for the obligations
of the Company to such payees.
B. It is agreed, however, that the liquidator or receiver or statutory
successor of the insolvent Company shall give written notice to the
Reinsurer of the pendency of a claim against the insolvent Company on
the Policy or Policies reinsured within a reasonable time after such
claim is filed in the insolvency proceeding and that during the
pendency of such claim, the Reinsurer may investigate such claim and
interpose, at its own expense, in the proceeding when such claim is to
be adjudicated, any defense or defenses which it may deem available to
the Company or its liquidator or receiver or statutory successor. The
expense thus incurred by the Reinsurer shall be chargeable, subject to
court approval, against the insolvent Company as part of the expense of
liquidation to the extent of a proportionate share of the benefit which
may accrue to the Company solely as a result of the defense undertaken
by the Reinsurer.
C. When two or more reinsurers are involved in the same claim and a
majority in interest elect to interpose defense to such claim, the
expense shall be apportioned in accordance with the terms of this
Contract as though such expense had been incurred by the insolvent
Company.
D. In the event of the insolvency of any company or companies included in
the designation of "Company," this clause will apply only to the
insolvent company or companies.
ARTICLE 26
ARBITRATION
A. As a condition precedent to any right of action hereunder, any
irreconcilable dispute between the parties to this Contract will be
submitted for decision to a board of arbitration composed of two
arbitrators and an umpire meeting at a site in Nashville, Tennessee.
B. Arbitration shall be 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.
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C. The members of the board of arbitration shall be active or retired
disinterested officials of insurance or reinsurance companies, or
Underwriters at Lloyd's, London, not under the control or management of
either party to this Contract. Each party shall appoint its arbitrator
and the two arbitrators shall choose an umpire before instituting the
hearing. If the respondent fails to appoint its arbitrator within four
weeks after being requested to do so by the claimant, the latter shall
also appoint the second arbitrator. If the two arbitrators fail to
agree upon the appointment of an umpire within four weeks after their
nominations, each of them shall name three, of whom the other shall
decline two, and the decision shall be made by drawing lots.
D. The claimant shall submit its initial brief within 45 days from
appointment of the umpire. The respondent shall submit its brief within
45 days thereafter and the claimant may submit a reply brief within 30
days after filing of the respondent's brief.
E. The board shall make its decision with regard to the custom and usage
of the insurance and reinsurance business. The board shall issue its
decision in writing based upon a hearing in which evidence may be
introduced without following strict rules of evidence but in which
cross-examination and rebuttal shall be allowed. The board shall make
its decision within 60 days following the termination of the hearings
unless the parties consent to an extension. The majority decision of
the board shall be final and binding upon all parties to the
proceeding. Judgment may be entered upon the award of the board in any
court having jurisdiction.
F. Each party shall bear the expense of its own arbitrator and shall
jointly and equally bear with the other party the expense of the umpire
and of the arbitration.
ARTICLE 27
SERVICE OF SUIT
A. This Article applies only to those reinsurers not domiciled in the
United States of America, and/or not authorized in any state, territory
and/or district of the United States of America where authorization is
required by insurance regulatory authorities.
B. In the event of the failure of a Reinsurer to pay any amount claimed to
be due under this Contract, the Reinsurer, at the request of the
Company, shall submit to the jurisdiction of any court of competent
jurisdiction within the United States of America and shall comply with
all requirements necessary to give such court jurisdiction; and all
matters arising hereunder shall be determined in accordance with the
law and practice of such court. Nothing in this clause constitutes or
should be understood to constitute a waiver of the Reinsurer's rights
to commence an action in any court of competent jurisdiction in the
United States of America, 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 of America or of any state
in the United States of America.
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C. Service of process in such suit may be made upon Messrs. Mendes and
Mount, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ (hereinafter,
"agent for service of process"), and in any suit instituted against the
Reinsurer upon this Contract, the Reinsurer shall 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 the Reinsurer in any such suit and/or upon the
request of the Company to give a written undertaking to the Company
that the agent for service of process shall enter a general appearance
on behalf of the Reinsurer in the event such a suit shall be
instituted.
Further, pursuant to any statute of any state, territory or district of
the United States of America that makes provision therefor, the
Reinsurer hereby designates the Superintendent, Commissioner or
Director of Insurance or other officer specified for that purpose in
the statute, or his successor or successors in office, as its true and
lawful attorney upon whom may be served any lawful process in any
action, suit or proceeding instituted by or on behalf of the Company or
any beneficiary hereunder arising out of this Contract and hereby
designates the agent for service of process as the firm to whom the
said officer is authorized to mail such process or a true copy thereof.
ARTICLE 28
ENTIRE CONTRACT
This Contract embodies the entire agreement and understanding between the
Company and the Reinsurer relating to the subject matter hereof during the term
of this Contract. Unless otherwise specifically provided herein, this Contract
may be amended, modified or waived only by an instrument in writing signed by
the Company and each subscribing reinsurer that is affected by such amendment,
modification or waiver.
ARTICLE 29
SEVERABILITY
If any law or regulation of the Federal, state or local government of the United
States of America or the rulings of officials having supervision over insurance
companies should render the undertaking of this Contract illegal within the
jurisdiction of such authority, the Company may upon written notice to the
Reinsurer suspend, abrogate or amend this Contract insofar as it relates to such
jurisdiction, to the extent necessary to comply with such law, regulation or
ruling. Such suspension, abrogation or amendment of a portion of this Contract
will in no way affect any other portion thereof.
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ARTICLE 30
INTERMEDIARY
▇▇▇ ▇▇▇▇▇▇▇▇▇ & Company, Inc., is hereby recognized as the Intermediary
negotiating this Contract for all business hereunder. All communications
(including notices, statements, premiums, return premiums, commissions, taxes,
Losses, Loss Adjustment Expense, salvages, and loss settlements) relating
thereto shall be transmitted to the Company or the Reinsurer through ▇▇▇
▇▇▇▇▇▇▇▇▇ & Company, Inc., ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, Payments by the Company to the Intermediary shall be deemed payment to
the Reinsurer, Payments by the Reinsurer to the Intermediary shall be deemed
payment to the Company only to the extent that such payments are actually
received by the Company.
ARTICLE 31
MODE OF EXECUTION
A. This Contract may be executed by:
1. An original written ink signature of paper documents.
2. An exchange of facsimile copies showing the original written
ink signature of paper documents.
3. Electronic signature technology employing computer software
and a digital signature or digitizer pen pad to capture a
person's handwritten signature in such a manner that the
signature is unique to the person signing, is under the sole
control of the person signing, is capable of verification to
authenticate the signature and is linked to the document
signed in such a manner that if the data is changed, such
signature is invalidated.
B. The use of any one or a combination of these methods of execution shall
constitute a legally binding and valid signing of this Contract. This
Contract may be executed in one or more counterparts, each of which,
when duly executed, shall be deemed an original.
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IN WITNESS WHEREOF, THE COMPANY HAS CAUSED THIS CONTRACT TO BE EXECUTED BY ITS
DULY AUTHORIZED REPRESENTATIVE(S) THIS 10TH DAY OF JULY, 2003.
THE DIRECT GENERAL GROUP
DIRECT INSURANCE COMPANY
DIRECT GENERAL INSURANCE COMPANY
DIRECT GENERAL INSURANCE COMPANY OF LOUISIANA
AND
DIRECT GENERAL INSURANCE COMPANY OF MISSISSIPPI
AND/OR ANY OTHER COMPANIES THAT ARE NOW OR MAY HEREAFTER BECOME MEMBERS OF
THE DIRECT GENERAL GROUP
/s/ J. ▇▇▇▇ ▇▇▇▇▇▇, VICE PRESIDENT-FINANCE & TREASURER
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NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL DAMAGE -
REINSURANCE - U.S.A.
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.
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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.
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.
12/12/57
NMA 1119
NOTES: Wherever used herein the terms:
"Reassured" shall be understood to mean "Company",
"Reinsured", "Reassured" or whatever other
term is used in the attached reinsurance
document to designate the reinsured company
or companies.
"Agreement" shall be understood to mean "Agreement",
"Contract", "Policy" or whatever other term
is used to designate the attached
reinsurance document.
"Reinsurers" shall be understood to mean "Reinsurers",
"Underwriters" or whatever other term is
used in the attached reinsurance document to
designate the reinsurer or reinsurers.
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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 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 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
Reassured on New York risks, until 90 days following approval
of the
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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
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first aid,
to expenses incurred with respect to
bodily injury, sickness, disease or death
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.
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▇▇. 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 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 under the first two paragraphs of
the definition of nuclear facility; "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,
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
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(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.
NOTES: Wherever used herein the terms:
"Reassured" shall be understood to mean "Company",
"Reinsured", "Reassured" or whatever other
term is used in the attached reinsurance
document to designate the reinsured company
or companies.
"Agreement" shall be understood to mean "Agreement",
"Contract", "Policy" or whatever other term
is used to designate the attached
reinsurance document.
"Reinsurers" shall be understood to mean "Reinsurers",
"Underwriters" or whatever other term is
used in the attached reinsurance document to
designate the reinsurer or reinsurers.
21/9/67
NMA 1590 (amended).
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INTERESTS AND LIABILITIES AGREEMENT
(the "Agreement")
of the
DORINCO REINSURANCE COMPANY
(the "Subscribing Reinsurer")
as respects the
TRADITIONAL PRIVATE PASSENGER AUTOMOBILE
QUOTA SHARE REINSURANCE CONTRACT
(the "Contract")
issued to and executed by
THE DIRECT GENERAL GROUP
NASHVILLE, TENNESSEE, INCLUDING
DIRECT INSURANCE COMPANY
DIRECT GENERAL INSURANCE COMPANY
DIRECT GENERAL INSURANCE COMPANY OF LOUISIANA
AND
DIRECT GENERAL INSURANCE COMPANY OF MISSISSIPPI
AND/OR ANY OTHER COMPANIES THAT ARE NOW OR MAY HEREAFTER BECOME MEMBERS OF
THE DIRECT GENERAL GROUP
(collectively, the "Company")
The Subscribing Reinsurer agrees that its share in the interests and liabilities
of the "Reinsurer" as set forth in the Contract attached hereto shall be for
25.00%.
The share of the Subscribing Reinsurer in the interests and liabilities of the
Reinsurer in respect of said Contract shall be separate and apart from the
shares of such other subscribing reinsurers, if any, in respect of said
Contract. The interests and liabilities of the Subscribing Reinsurer shall not
be joint with those of such other subscribing reinsurers, and in no event shall
the Subscribing Reinsurer participate in the interests and liabilities of such
other subscribing reinsurers.
This Agreement shall be effective for the period commencing at 12:01 a.m.,
Central Standard Time, January 1,2003, subject to the termination provisions of
the Commencement and Termination Article of the Contract.
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IN WITNESS WHEREOF, the Subscribing Reinsurer has caused this Agreement to be
executed by its duly authorized representative as follows:
on this 14TH day of JULY, in the year of 2003.
DORINCO REINSURANCE COMPANY
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
------------------------
VICE PRESIDENT
OUR REF: TA 33587 - 2003
Market Reference Number:
THE DIRECT GENERAL GROUP
DIRECT INSURANCE COMPANY
DIRECT GENERAL INSURANCE COMPANY
DIRECT GENERAL INSURANCE COMPANY OF LOUISIANA
AND
DIRECT GENERAL INSURANCE COMPANY OF MISSISSIPPI
AND/OR ANY OTHER COMPANIES THAT ARE NOW OR MAY HEREAFTER BECOME MEMBERS OF
THE DIRECT GENERAL GROUP
TRADITIONAL PRIVATE PASSENGER AUTOMOBILE
QUOTA SHARE REINSURANCE CONTRACT
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INTERESTS AND LIABILITIES AGREEMENT
(the "Agreement")
of the
SCOR REINSURANCE COMPANY
(the "Subscribing Reinsurer")
as respects the
TRADITIONAL PRIVATE PASSENGER AUTOMOBILE
QUOTA SHARE REINSURANCE CONTRACT
(the "Contract")
issued to and executed by
THE DIRECT GENERAL GROUP
NASHVILLE, TENNESSEE, INCLUDING
DIRECT INSURANCE COMPANY
DIRECT GENERAL INSURANCE COMPANY
DIRECT GENERAL INSURANCE COMPANY OF LOUISIANA
AND
DIRECT GENERAL INSURANCE COMPANY OF MISSISSIPPI
AND/OR ANY OTHER COMPANIES THAT ARE NOW OR MAY HEREAFTER BECOME MEMBERS OF
THE DIRECT GENERAL GROUP
(collectively, the "Company")
The Subscribing Reinsurer agrees that its share in the interests and liabilities
of the "Reinsurer" as set forth in the Contract attached hereto shall be for
20.00%.
The share of the Subscribing Reinsurer in the interests and liabilities of the
Reinsurer in respect of said Contract shall be separate and apart from the
shares of such other subscribing reinsurers, if any, in respect of said
Contract. The interests and liabilities of the Subscribing Reinsurer shall not
be joint with those of such other subscribing reinsurers, and in no event shall
the Subscribing Reinsurer participate in the interests and liabilities of such
other subscribing reinsurers.
This Agreement shall be effective for the period commencing at 12:01 a.m.,
Central Standard Time, January 1, 2003, subject to the termination provisions of
the Commencement and Termination Article of the Contract.
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IN WITNESS WHEREOF, the Subscribing Reinsurer has caused this Agreement to be
executed by its duly authorized representative as follows:
on this 15TH day of JULY, in the year of 2003.
SCOR REINSURANCE COMPANY
/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
----------------------
ASSISTANT SECRETARY
Market Reference Number:
THE DIRECT GENERAL GROUP
DIRECT INSURANCE COMPANY
DIRECT GENERAL INSURANCE COMPANY
DIRECT GENERAL INSURANCE COMPANY OF LOUISIANA
AND
DIRECT GENERAL INSURANCE COMPANY OF MISSISSIPPI
AND/OR ANY OTHER COMPANIES THAT ARE NOW OR MAY HEREAFTER BECOME MEMBERS OF
THE DIRECT GENERAL GROUP
TRADITIONAL PRIVATE PASSENGER AUTOMOBILE
QUOTA SHARE REINSURANCE CONTRACT
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8958-00-0016-00
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