Exhibit 10.12
UNDERWRITING MANAGEMENT AGREEMENT
This Agreement is entered into effective as of December 12, 2003, by
and between PLATTE RIVER INSURANCE COMPANY (hereinafter called the "Company"),
and DARWIN PROFESSIONAL UNDERWRITERS INC. (hereinafter called the "Manager").
WHEREAS, the Manager intends to develop, produce and market the
insurance business specified in Appendix I, Insurance Business (hereinafter
called the "Business") and desires to underwrite, administer and market the
Business on behalf of the Company; and
WHEREAS, the Company wishes that the Manager underwrite, administer
and market the Business;
NOW, THEREFORE, in consideration of the promises herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, it is agreed that:
SECTION 1 - APPOINTMENT AND AUTHORITY
1.0 The Company hereby appoints the Manager as its exclusive agent for
writing the Business, except the Company may write the Business with
an agent other than Darwin, without violating the exclusivity
provision of this Section 1.0, in the event Company requests that the
Manager act as agent for a given account or program and the Manager
declines Company's request. Notwithstanding the foregoing, (i) in the
event that Alleghany Corporation or any of its subsidiaries acquires
an insurer which is engaged in one or more lines of Business but is
not licensed in one or more jurisdictions in which the Company is
licensed, the Company may as an accommodation issue policies with
respect to such lines of Business at the request of that insurer for a
period of no more than six months following such acquisition without
violating the exclusivity provisions of this Section 1.0 and (ii) the
Company may issue surety products, policies to and in connection with
the Company's property and casualty accounts and programs in place at
June 1, 2003 and coverages incidental to or in conjunction with
commercial package policies, without violating the exclusivity
provisions of this Section 1.0.
1.1 In conducting the Business, the Manager is responsible for and is
authorized to:
a. Solicit and evaluate applications;
b. Subject to Appendix II, Underwriting Guidelines (the
"Underwriting Guidelines"), determine the underwriting
acceptability of risks and rate, quote, negotiate, bind,
manuscript, issue, adjust, renew and deliver policies, assumed
facultative and treaty reinsurance agreements, endorsements,
certificates and binders with respect to the Business
(hereinafter called the "Contracts");
c. ▇▇▇▇, collect and remit to the Company all premiums for the
Contracts and keep the necessary records to support each
transaction in accordance with the guidelines specified in
Appendix III, Accounting and Records (the "Accounting and Records
Guidelines");
d. Retain, out of premiums collected, expense reimbursement subject
to the terms specified in Appendix IV, Payments;
e. In accordance with the laws of the applicable jurisdiction,
effect cancellation, nonrenewal or rescission of Contracts on any
risk bound by the Manager for nonpayment of premium or other
causes as the Manager may deem to be in the interests of the
Company or as directed by the Company. No provision of this
Agreement shall be deemed to restrict the Company's rights to
cancel or not renew any policy of insurance subject to the
applicable laws and regulations concerning the cancellation and
nonrenewal of insurance policies;
f. Report claims to the Company and administer, settle and maintain
records of claims in accordance with the claims guidelines
provided in Appendix V, Claims (the "Claims Guidelines"); and
g. Accept proposals of insurance and assumed reinsurance from
agents, brokers or solicitors (hereinafter called "Subproducers")
and determine the amount of compensation payable to such
Subproducers. The Manager agrees that any compensation payable to
a Subproducer will be its sole responsibility and the Company
shall have no liability for any such compensation unless
otherwise agreed to in writing by the Company and the Manager
and, further, that no Subproducer shall be appointed or
considered as agent of the Company without the Company's prior
written consent thereto. The Manager shall be solely responsible
for confirming that all Subproducers approved by the Company
possess all licenses and appointments required under applicable
law.
SECTION 2 - LIMITATIONS OF AUTHORITY
2.0 The Manager shall not accept proposals or bind the Company for
insurance (i) on risks not included in the types of insurance
specified in Appendix I, Insurance Business, (ii) on risks deemed
unacceptable, as specified in the Underwriting Guidelines, and (iii)
as the Company may direct in writing from time to time. The Manager
shall have no authority to bind the Company to any ceding reinsurance
agreements.
2.1 Except for use of either party's name in correspondence in the
ordinary course of business, neither party shall use the other party's
name, logo or marks in any advertisement, sales or promotional
materials without providing notice thereof to the other party before
or within 10 days of such use. Neither party shall continue
2
such use upon receipt of an objection thereto by the other party, such
objection not to be unreasonably made.
2.2 The Manager shall not institute legal proceedings on behalf of the
Company except (i) for collection of premium, (ii) as may be specified
in the Claims Guidelines or (iii) as otherwise agreed by the Company
and the Manager.
2.3 With respect to the insurance functions performed for the Company by
the Manager, it is specifically recognized that the relationship
between the Manager and the Company shall be that of an authorized
agent acting on behalf of a principal. In all other respects, however,
the Manager shall conduct its business as an independent contractor.
2.4 The Manager shall not authorize any other person or entity to exercise
any of the Manager's underwriting authority specified herein without
the prior written consent of the Company.
SECTION 3 - OWNERSHIP AND CONTROL OF PROPRIETARY INFORMATION
3.0 As used herein, "Proprietary Information" means all intellectual
property rights, copyrights, trademarks, trade names, trade secrets
and all underwriting and marketing materials originated or
substantially developed by the Manager or the Company relating to the
Business including, but not limited to, underwriting manuals,
applications, Contract forms, advertisements, brochures, newsletters,
loss prevention materials and marketing logos. The Company and the
Manager both acknowledge that Proprietary Information developed or
acquired by the other party prior to or subsequent to the inception
date of this Agreement is owned by the other party and shall continue
to be owned by the other party in the event of the termination of this
Agreement, regardless of the reason for the termination.
SECTION 4 - OTHER DUTIES AND RESPONSIBILITIES
4.0 It is the responsibility of the Manager and the Company to comply with
all laws and regulations applicable to the Business, including but not
limited to:
a. Obtaining and maintaining appropriate licenses;
b. Maintaining accurate records of all transactions affecting the
Business;
c. Complying with any and all cancellation, nonrenewal and
countersignature requirements imposed by law; and
d. Complying with the requirements of any other applicable insurance
laws.
The Manager and the Company shall comply with the specific
requirements applicable to each, and shall assist each other whenever
possible in complying with this Section 4.0.
3
4.1 The Company shall pay all premium related taxes, with the exception of
surplus lines taxes which shall be the responsibility of the Manager
or another licensed surplus lines broker or agent producing Business
to the Manager, unless otherwise agreed upon in writing by the Company
and the Manager.
4.2 The Manager shall observe all regulatory restrictions upon the
licensing and soliciting of insurance in each jurisdiction.
4.3 The Manager shall become a licensed agent of the Company and the
Company shall assist the Manager in obtaining licenses when required
by applicable law. The Manager shall secure a proper countersignature
for each Contract when required by law.
4.4 Except as otherwise provided herein, the Manager shall be responsible
for its own expenses which shall include, but not be limited to, all
employee compensation, all business license fees, overhead expenses,
in-house claim services expenses, commissions to Subproducers and
compensation to associates or entities sponsoring or endorsing any
Business. The Company's approval is necessary prior to the Manager
obtaining any sponsorship or endorsement of the Business from any
third party.
4.5 The Manager will maintain a competent and sufficient staff to perform
the underwriting functions. The Manager also will maintain a competent
and sufficient staff or will retain competent and sufficient third
parties, including without limitation monitoring counsel, to perform
investigation and adjustment of claims, Contract issuance, billing and
generation of reports for the Business and any other non-underwriting
activity as the Manager determines is necessary and appropriate.
SECTION 5 - FUNDS HELD BY THE MANAGER ON BEHALF OF THE COMPANY
5.0 All funds collected or received by the Manager for or on behalf of the
Company shall be held in a fiduciary capacity by the Manager in an
account in a financial institution which is a member of the Federal
Reserve System. This account shall be used for all payments on behalf
of the Company. Provided the Manager has, in accordance with the terms
of this Agreement, accounted for and paid to the Company all premiums
and other monies legally due and owing to the Company, any investment
income produced from the fiduciary funds held on behalf of the Company
by the Manager shall vest and become the property of the Manager, and
the Company waives any right of ownership to such investment income.
SECTION 6 - EXPENSE REIMBURSEMENT AND INCENTIVE COMPENSATION PAYMENTS
6.0 The Manager shall be entitled to an expense reimbursement payment and
an incentive compensation payment in respect of Business written
pursuant to this Agreement in the amounts specified in Appendix IV,
Payments. The Manager
4
shall report transactions to the Company in the manner specified in
Appendix III, Accounting and Records, and shall deduct from its
remittance of premiums to the Company an amount in respect of the
expense reimbursement payment provided for in Article IV.
SECTION 7 - ACCOUNTING
7.0 The Manager shall account for and forward all money due to the Company
with respect to the Business transacted on behalf of the Company in
accordance with Appendix III, Accounting and Records.
SECTION 8 - RECORDS AND AUDITING
8.0 The Manager will maintain separate records of business written by the
Manager for the Company. The Company has the right, upon reasonable
written notice and during normal business hours of the Manager, to
copy, inspect and audit all the records, files and documents related
to the Business as the Company, at its sole discretion, deems
necessary. The Manager agrees to cooperate with the Company in
conducting such inspections and audits. The insurance commissioner of
the State of Nebraska (the "Commissioner") shall have access to all
books, bank accounts and records of the Manager in a form usable by
the Commissioner. The Manager shall retain records pursuant to the
requirements of the insurance laws of the State of Nebraska.
8.1 The Manager will submit to the Company on a daily basis notification
of policies bound during the previous business day and such other
information as is agreed between the parties.
8.2 The Manager will assist the Company in responding to any regulatory
requirements, audits or other inquiries.
8.3 Use, ownership and control of expirations shall remain with the
Manager following the termination of this Agreement.
SECTION 9 - INDEMNIFICATION
9.0 The Company agrees to indemnify and hold the Manager harmless from and
against all claims, actions, causes of action, liability or loss which
arise from any negligent or willful acts, errors or omissions by the
Company, or its directors, officers or employees, in the performance
or breach of duties under this Agreement. Loss will include, but not
be limited to, all damages, costs, expenses, reasonable attorneys'
fees and other legal fees, penalties, fines, direct or consequential
damages, assessments, verdicts (including punitive damages to the
extent permissible by law) and any other expense or expenditure
incurred by the Manager.
9.1 The Manager agrees to indemnify and hold the Company harmless from and
against all claims, actions, causes of action, liability or loss which
arise from any
5
negligent or willful acts, errors or omissions by the Manager, or its
directors, officers or employees, in the performance or breach of
duties under this Agreement. Loss will include, but not be limited to,
all damages, costs, expenses, reasonable attorneys' fees and other
legal fees, penalties, fines, direct or consequential damages,
assessments, verdicts (including punitive damages to the extent
permissible by law) and any other expense or expenditure incurred by
the Company.
SECTION 10 - TERMINATION
10.0 a. This Agreement shall commence as of June 1, 2003, and continue,
except as otherwise provided herein, through May 31, 2007 (the
"Expiration Date"), and shall thereafter continue in effect as
provided in Section 10.0(b), unless terminated by either party in
accordance with Section 10.1 of this Agreement.
b. Subject to the provisions of Section 10.1 herein below, at each
twelve (12) month anniversary following the Expiration Date of
this Agreement, this Agreement shall be deemed automatically
extended for an additional twelve (12) month period and the
Expiration Date specified in Section 10.0(a) shall be deemed to
be so amended, without further notice.
10.1 Notwithstanding Section 10.0:
a. Either party may terminate this Agreement for any reason
whatsoever effective upon the Expiration Date by providing not
less than sixty (60) days prior written notice to the other party
evidencing said party's intent to terminate this Agreement at
such Expiration Date.
b. This Agreement may be terminated at any time upon the mutual
written agreement of the Company and the Manager.
c. This Agreement may be terminated by the Company at any time by
written notice in the event the Manager files for bankruptcy,
becomes insolvent or assigns all or part of its assets for the
benefit of creditors.
d. This Agreement may also be terminated by the Company or by the
Manager at any time by written notice if the other party
materially breaches the terms of this Agreement, which breach is
not cured within 30 days after notice thereof has been delivered
to the breaching party. The Company may suspend the Manager's
underwriting and claim authority during the pendency of any
dispute regarding the cause for termination.
e. The Company may terminate this Agreement at any time by written
notice upon (i) a consolidation or merger of the Manager
resulting in Alleghany Corporation's failure to own, directly or
indirectly, at least 51 % of the outstanding equity interests in
the Manager, (ii) a sale by Alleghany Corporation or its
affiliates of equity interests in the Manager resulting in
6
Alleghany Corporation's failure to own, directly or indirectly,
at least 51% of the outstanding equity interests in the Manager,
or (iii) a sale of all or substantially all of the assets of the
Manager to a person other than Alleghany Corporation or any of
its affiliates. The Manager may terminate this Agreement at any
time by written notice upon (i) a consolidation or merger of the
Company resulting in Alleghany Corporation's failure to own,
directly or indirectly, at least 51 % of the outstanding equity
interests in the Company, (ii) a sale by Alleghany Corporation or
its affiliates of equity interests in the Company resulting in
Alleghany Corporation's failure to own, directly or indirectly,
at least 51% of the outstanding equity interests in the Company
or (iii) a sale of all or substantially all of the assets of the
Company and its subsidiaries to a person other than Alleghany
Corporation or any of its affiliates.
10.2 The Manager's appointment and authority for the Business written under
this Agreement is subject to the following:
a. That the Company is able to obtain and maintain in force at all
times reinsurance satisfactory to the Company for the Business.
The Manager shall assist the Company to obtain reinsurance with
respect to the Business, consistent with the Underwriting
Guidelines; and
b. If the Company's reinsurance is terminated or no longer in full
force and effect for all or any part of the Business, the Company
may, upon written notice to the Manager, reduce the Manager's
authority for the Business or any part of the Business affected
so that the Company's net retention levels, as described in the
Underwriting Guidelines, are not exceeded.
10.3 In the event of termination of this Agreement, the Company, in its
sole discretion, may continue in-force Contracts until their stated
expiration dates, subject to the following provisions:
a. Notwithstanding anything contained herein, the Company reserves
all of its rights to cancel and/or non-renew Contracts for
nonpayment of premium, and Contracts issued in violation of the
Underwriting Guidelines then applicable; and
b. The Manager shall continue to be the agent of the Company, but
only with respect to the servicing of Contracts in-force on or
before the date of termination of this Agreement and the
administration of claims made on Contracts issued under this
Agreement. The Company may suspend or terminate Manager's
authority under this Section 10.3(b) in the event this Agreement
is terminated because of breach by Manager of the material terms
of this Agreement.
7
SECTION 11 - GENERAL PROVISIONS
11.0 Neither party will delegate or assign its rights, duties or
obligations under this Agreement without the prior written consent of
the other party.
11.1 This Agreement shall be governed exclusively by the internal laws of
the State of Nebraska without giving effect to the conflicts of laws
provisions thereof.
11.2 Except upon the prior written consent of Company, Manager shall not
represent any other insurer not affiliated with Alleghany Corporation
with respect to the insurance business specified in Appendix I.
11.3 If any portion of this Agreement is in contravention of any statute,
governmental regulation or directive, such portion shall be
interpreted to conform to such statute, governmental regulation or
directive without further action by the Manager or by the Company.
11.4 In the event that any provision of this Agreement is struck down as
invalid or unenforceable, the remainder of the Agreement shall remain
binding and in effect.
11.5 The failure of either party to enforce any provision of this Agreement
shall not constitute a waiver by either party of any such provision.
11.6 If any dispute or disagreement shall arise in connection with any
interpretation of this Agreement, its performance or nonperformance,
or the figures or calculations used, the parties shall make every
effort to meet informally and settle their dispute in good faith.
11.7 The Company and the Manager each represent that they are authorized to
enter into this Agreement, in compliance with applicable law.
11.8 The provisions of this Agreement together with the Appendices and any
Addendum or Addenda attached hereto, constitute the entire Agreement.
This Agreement may not be altered or modified, except in writing,
signed by both parties.
11.9 The parties acknowledge that the following Appendices are attached
hereto and incorporated herein by reference as of the inception date
of this Agreement:
Appendix I Insurance Business
Appendix II Underwriting Guidelines
Appendix III Accounting and Records
Appendix IV Payments
Appendix V Claims
11.10 This Agreement may be executed in counterparts, each of which when
construed together shall constitute the whole.
8
SECTION 12 - NOTICES
12.0 All written notices under this Agreement shall be mailed by certified
or registered mail, return receipt requested, or sent by facsimile, as
follows:
a. To the Company: PLATTE RIVER INSURANCE COMPANY
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
b. To the Manager: DARWIN PROFESSIONAL UNDERWRITERS INC.
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed in
duplicate by their respective duly authorized officers,
PLATTE RIVER INSURANCE COMPANY DARWIN PROFESSIONAL UNDERWRITERS INC.
Dated as of December 12, 2003 Dated as of December 12, 2003
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
--------------------------------- ------------------------------------
Its: VP, CFO, & Treasurer Its: SVP, CFO
-------------------------------- -----------------------------------
9
