No. 3154-0026
PROPERTY AND CASUALTY
EXCESS OF LOSS REINSURANCE AGREEMENT
between
PENN-AMERICA INSURANCE COMPANY
PENN-STAR INSURANCE COMPANY
PENN-PATRIOT INSURANCE COMPANY
and
AMERICAN RE-INSURANCE COMPANY
No. 3154-0026
TABLE OF CONTENTS
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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 DECLARATORY JUDGMENT EXPENSE 4
VII EXCLUSIONS 4
VIII DEFINITIONS 18
XIX CLAIMS 22
X SUBROGATION AND SALVAGE 23
XI TAXES 23
XII ACCESS TO RECORDS 24
XIII INSOLVENCY 24
XIV OFFSET AND SECURITY 24
XV ERRORS AND OMISSIONS 25
XVI FEDERAL EXCESS RECOVERY 25
XVII COMMENCEMENT AND
TERMINATION 26
No. 3154-0026
PROPERTY AND CASUALTY
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 and
PENN-PATRIOT INSURANCE COMPANY of Richmond, Virginia (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
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EXHIBITS COVERED
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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 EXCESS OF LOSS
EXHIBIT B - CASUALTY EXCESS OF LOSS
ARTICLE II
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TERRITORY
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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
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ULTIMATE NET LOSS
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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;
90% of any Excess Judgment, as provided in ARTICLE V, EXCESS JUDGMENTS;
and the amount of Declaratory Judgment Expenses, as provided in ARTICLE
VI, DECLARATORY JUDGMENT EXPENSE. 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
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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
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No. 3154-0026
incurred in connection therewith, which arise from the Company's
handling of any claim on business covered hereunder, 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
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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
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discharging its duty to defend, in preparing the defense in an action
against its 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.
E. 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
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DECLARATORY JUDGMENT EXPENSE
----------------------------
A. This Agreement shall protect the Company for Declaratory Judgment
Expense that are paid by the Company, as otherwise provided under this
Agreement.
B. "Declaratory Judgment Expense" as used in this Agreement shall mean
legal expenses paid by the Company in the investigation, analysis,
evaluation, resolution or litigation of coverage issues between the
Company and its insured(s), under policies reinsured hereunder, for a
specific loss or losses tendered under such policies, which loss or
losses are not excluded under this Agreement.
ARTICLE VII
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EXCLUSIONS
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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
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No. 3154-0026
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
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:
a. the use of nuclear reactors such as atomic piles, particle
accelerators or generators, or
b. the use, handling or transportation of radioactive
materials, or
c. the use, handling or transportation of any weapon of war or
explosive device employing nuclear fission or fusion
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No. 3154-0026
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
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,
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No. 3154-0026
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.
However, this Agreement shall exclude from recovery any Extra
Contractual Obligations or Excess Judgments loss covered under
the Company's umbrella reinsurance agreement.
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.
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
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No. 3154-0026
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
(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.
19. All automobile Liability business when written as such.
20. As respects Property business, all loss, cost or expense
arising out of or related to, either directly or indirectly,
any "Terrorist Activity," as defined DEFINITIONS Article, and
any action taken to hinder, defend against or respond to any
such activity. This exclusion applies regardless of any other
cause or event that in any way contributes concurrently or in
any sequence to the loss, cost or expense and for the
following:
a) Any one risk at any one location where the risk Total
Insured Value (hereinafter TIV), inclusive of all
coverages is greater than $50,000,000; or
b) The aggregate TIV for all risks insured by the
company at any one location, inclusive of all
coverages is greater than $50,000,000,; or
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No. 3154-0026
c) Locations written on a subscription basis where the
100% TIV, inclusive of all coverages is greater than
$50,000,000; and
d) Any of the following risks (i.e., owners of, not
tenants in): 1. Airlines or Airports
2. Apartments, Condos, or Co-Operatives (i.e.,
Urban Only and greater than 25 stories)
3. Bridges (i.e., greater than 300 feet in
length)
4. Casinos of Las Vegas and Atlantic City only
5. Chemical Manufacturing or Distributing
Companies except for liability arising from
the retail sale or wholesale distribution of
household chemicals by insureds not engaged
in their manufacture
6. Convention or Exhibition Centers (i.e.,
Urban only) with an expected capacity, at
any one time, of 25,000 or more
7. Dams (i.e., greater than 300 feet in length)
8. Defense or Aerospace Industries
9. Department Stores that are part of malls
over 1,000,000 sq. feet
10. Financial Institutions (i.e., Building. and
Time Element coverages or multiple locations
(i.e., Office Schedules of greater than
10,000 sq. feet per location))
11. Government buildings (i.e., Federal or
State) and National Landmarks
12. High Tech Manufacturing Companies and
Telecommunication Companies with Total
Insured Values greater than $5,000,000.
13. Hospitals (i.e., Urban only)
14. Hotels (i.e., Urban only and greater than 25
stories)
15. Internet Companies and Major Media Companies
with Total Insured Values greater than
$5,000,000.
16. Office Buildings (i.e., Urban only and
greater than 25 stories)
17. Oil and Gas Manufacturing or Distributing
Companies
18. Public School Districts (i.e., Urban only)
19. Port or Transit Authorities
20. Railroads
21. Shopping Malls over 1,000,000 sq. feet
22. Arenas, grandstands, stadiums, theatres,
halls and any other indoor venue with an
expected capacity, at any one time, of
25,000 or more.
23. Tunnels (i.e., greater than 300 feet in
length)
24. Universities (i.e., Urban only)
25. Utilities electric, gas, water & sewer
C. 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";
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No. 3154-0026
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";
o. "Wellness Pak"; or
p. Massage Program.
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.
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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 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 or when the
Company attaches the Penn-America S2092 (03/04) abuse
or molestation exclusion.
"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
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No. 3154-0026
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; 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
except for insured's with total sales less
than $500,000;
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."
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No. 3154-0026
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;
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 20% 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 six
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.
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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.
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, except boat slips or
docks that are incidental to restaurants,
condominiums, or similar operations or risks.
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.
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No. 3154-0026
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, except for insureds
required to name the local municipality as a named
insured for special events.
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 or the Family Home Care Program 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.
44. Contractors engaged in the construction, erection or
exterior maintenance of structures in excess of six
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. All loss, cost or expense, directly or indirectly
arising out of or related to the liability of
Contractors for Residential Construction in Arizona,
California, Colorado, Nevada, Oregon, New York, Texas
and Washington.
"Contractors" shall mean all developers, general
contractors and subcontractors who sub out more than
50% of their work.
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No. 3154-0026
"Residential Construction" shall mean all development, design,
building or other construction, improvements, site selection,
surface or subsurface site preparation, or any work, products
or component parts thereof, or services provided in relation
to any of the foregoing, involving property intended in whole
or in part for residential habitation, or any common or public
areas or facilities related thereto.
Notwithstanding the foregoing, "Residential Construction"
shall not include repair work, remodeling or any other
contracting work which is begun after the date of initial
occupancy provided such work is unrelated to or not completing
work begun prior to the date of initial occupancy.
D. In the event the Company is inadvertently bound on any exclusion
enumerated under paragraph C, 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.
E. 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.
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.
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No. 3154-0026
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 covered
under automobile physical damage policies or Inland Marine
Policies.
15. Earthquake, landslide and other earth movement provided,
however, this exclusion shall not apply to automobile physical
damage coverage or Inland Marine Policies.
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.
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.
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No. 3154-0026
ARTICLE VIII
------------
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
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No. 3154-0026
considered 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 shall never be
considered as constituting more than one
risk, nor shall time element
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No. 3154-0026
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 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.
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No. 3154-0026
IV. Terrorist Activity
------------------
A. "Terrorist Activity" shall mean any deliberate,
unlawful act that:
1. is declared by any authorized governmental
official to be or to involve terrorism,
terrorist activity or acts of terrorism; or
2. includes, involves, or is associated with
the use or threatened use of force, violence
or harm against any person, tangible or
intangible property, the environment, or any
natural resources, where the act or
threatened act is intended, in whole or in
part, to
(a) promote, further or express
opposition to any political,
ideological, philosophical, racial,
ethnic, social or religious cause
or objective; or
(b) influence, disrupt or interfere
with any government related
operations, activities or policies;
or
(c) intimidate, coerce or frighten the
general public or any segment of
the general public; or
(d) disrupt or interfere with a
national economy or any segment of
a national economy; or
3. includes, involves, or is associated with,
in whole or in part, any of the following
activities, or the threat thereof:
(a) hijacking or sabotage of any form
of transportation or conveyance,
including but not limited to
spacecraft, satellite, aircraft,
train, vessel, or motor vehicle;
(b) hostage taking or kidnapping;
(c) the use or threatened use of, or
release or threatened release of
any nuclear, biological, chemical
or radioactive agent, material,
device or weapon;
(d) the use of any bomb, incendiary
device, explosive or firearm;
(e) the interference with or disruption
of basic public or commercial
services and systems, including but
not limited to the following
services or systems: electricity,
natural gas, power, postal,
communications, telecommunications,
information, public transportation,
water, fuel, sewer or waste
disposal;
(f) the injuring or assassination of
any elected or appointed government
official or any government
employee;
(g) the seizure, blockage, interference
with, disruption of, or damage to
any government buildings,
institutions, functions, events,
tangible or intangible property or
other assets; or
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No. 3154-0026
(h) the seizure, blockage, interference
with, disruption of, or damage to
tunnels, roads, streets, highways,
or other places of public
transportation or conveyance.
B. Any of the activities listed in section A(3) above shall be considered
Terrorist Activity except where the Company can demonstrate to the
Reinsurer that the foregoing activities or threats thereof were
motivated solely by personal objectives of the perpetrator that are
unrelated, in whole or in part, to any intention to
1. promote, further or express opposition to any political,
ideological, philosophical, racial, ethnic, social or
religious cause or objective; or
2. influence, disrupt or interfere with any government related
operations, activities or policies; or
3. intimidate, coerce or frighten the general public or any
segment of the general public; or
4. disrupt or interfere with a national economy or any segment of
a national economy.
ARTICLE IX
----------
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;
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.
-22-
No. 3154-0026
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 X
---------
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
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 XI
----------
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.
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No. 3154-0026
ARTICLE XII
-----------
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 XIII
------------
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.
ARTICLE XIV
-----------
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.
-24-
No. 3154-0026
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 XV
----------
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.
ARTICLE XVI
-----------
FEDERAL EXCESS RECOVERY
-----------------------
As respects the Insured Losses of the Insurer for each Program Year, it is
hereby agreed that to the extent the Insurer's total reinsurance recoverables
for Insured Losses, whether collected or not, combined with the financial
assistance available to the Insurer under the Act exceeds the aggregate amount
of Insured Losses paid by the Insurer, less any other recoveries or
reimbursements, such excess amounts (the "Excess Recovery") shall be allocated
to the Company. The allocation to the Company shall be deemed to be an amount
equal to the proportion that the Company's Insured Losses bear to the Insurer's
total Insured Losses for each Program Year. The Company shall then reimburse the
Reinsurer for its share of the Excess Recovery allocated to the Company. The
Reinsurer's share of the Excess Recovery shall be deemed to be an amount equal
to the
-25-
No. 3154-0026
proportion that the Reinsurer's payment of Insured Losses under this
Agreement bears to the Company's total collected reinsurance recoverables for
Insured Losses. The Company also agrees to provide the Reinsurer with all
necessary data respecting the transactions covered under this Clause.
"Act" as utilized herein shall mean the Terrorism Risk Insurance Act of 2002 and
any subsequent amendment thereof or any regulations promulgated there under.
"Insurer", "Insured Losses", and "Program Year" as utilized herein shall follow
the definitions as provided in the Act."
ARTICLE XVII
------------
COMMENCEMENT AND TERMINATION
----------------------------
A. This Agreement shall take effect as of 12:01 a.m., Eastern Standard
Time, January 1, 2004, 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.
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
-26-
No. 3154-0026
hereunder to the end that all obligations and liabilities incurred by
each party hereunder prior to such termination shall be fully performed
and discharged.
-27-
No. 3154-0026
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be executed
in duplicate in Hatboro, Pennsylvania, this day of ,2004;
ACCEPTED:
PENN-AMERICA INSURANCE COMPANY
PENN-STAR INSURANCE COMPANY
PENN-PATRIOT INSURANCE COMPANY
______________________________
and in Princeton, New Jersey, this day of 2004.
AMERICAN RE-INSURANCE COMPANY
_______________________
Vice President
DATED: June 4, 2004
RG/rg
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No. 3154-0026
EXHIBIT A
EXHIBIT A
---------
PROPERTY 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 January 1, 2004, as
respects the Company's 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
--------
Fire
Commercial Multi Peril Section I
Businessowners Section I
Allied Lines
Inland Marine
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 $500,000 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 $500,000 but the Reinsurer's liability shall not exceed 100%
of $1,500,000 for each and every risk or exceed $4,500,000 in any one
occurrence.
B. As respects Terrorist Activity as defined within the DEFINITIONS
Article, involving 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 $500,000 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 $500,000 but the Reinsurer's liability shall not
-1-
No. 3154-0026
EXHIBIT A
exceed 100% of $1,500,000 for each and every risk or exceed $3,000,000
in any one occurrence, subject further to an annual aggregate limit of
$3,000,000.
C. In the event of a combination loss involving a property risk and a
casualty occurrence loss 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 7.25% of the Company's net written premium for
the new and renewal Property business covered as of January 1, 2004.
B. "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.
Section 4
---------
COMMISSION
----------
The Reinsurer shall make a commission allowance of 37.50% 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. 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.
This Exhibit A is attached to and forms part of Reinsurance Agreement No.
3154-0026 issued to PENN-AMERICA INSURANCE COMPANY, PENN-STAR INSURANCE COMPANY
and PENN-PATRIOT INSURANCE COMPANY
DATED: June 4, 2004
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No. 3154-0026
EXHIBIT B
---------
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 January 1, 2004, as
respects the Company's 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
Casualty
--------
General Liability
Commercial Multi Peril Section II
Businessowners Section II
Employer's Liability Stop Gap coverage
Non-owned and Hired Automobile Liability when
written as part of Commercial Multi Peril Section
II or General Liability policies including
Professional Liability
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 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.
B. As respects Terrorist Activity as defined within the DEFINITIONS
Article, involving 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
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No. 3154-0026
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,
subject further to an annual aggregate limit of $2,500,000.
C. In the event of a combination loss involving a property risk from
Exhibit A and a casualty occurrence, 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 11.061% of the Company's net written premium
for the new and renewal Casualty business covered as of January 1,
2004.
B. "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.
Section 4
---------
COMMISSION
----------
The Reinsurer shall make a commission allowance of 37.50% 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. 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.
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No. 3154-0026
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. Massage Program - $2,000,000 each occurrence and $3,000,000
general aggregate.
3. Professional Liability - $1,000,000 each occurrence and
$1,000,000 in the annual aggregate.
This Exhibit B is attached to and forms part of Reinsurance Agreement No.
3154-0026 issued to PENN-AMERICA INSURANCE COMPANY, PENN-STAR INSURANCE COMPANY
and PENN-PATRIOT INSURANCE COMPANY
DATED: June 4, 2004
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No. 3154-0026
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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No. 3154-0026
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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No. 3154-0026
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,
{ Injury, sickness, disease, death or
destruction to 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
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No. 3154-0026
(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 to first aid, to
{ bodily injury, sickness, disease or death
resulting from the hazardous properties of bodily
injury to 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
to { 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,
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No. 3154-0026
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.
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No. 3154-0026
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.
