CONTRACTUAL LIABILITY INSURANCE POLICY
FOR EXTENDED SERVICE CONTRACTS
AMERICAN MODERN HOME INSURANCE COMPANY
CINCINNATI, OHIO
A. INSURING AGREEMENT
In consideration of the payment of the premium and subject to all of the
terms and conditions of this policy, American Modern Home Insurance Company
(the "Company") agrees to reimburse the Insured or any Additional Insured
for all costs reasonably incurred in fulfilling its legally binding
obligations under each Extended Service Contract validly issued by the
Insured or any Additional Insured during the Policy Term, in accordance
with the terms and conditions of such Extended Service Contract. The
reimbursements of those costs shall be made directly to the Insured or any
Additional Insured, and in the event such costs are incurred by another
party's performance of repair or replacement services pursuant to such
obligations, the reimbursement may be made, on behalf of the Insured or any
Additional Insured, directly to such other party. The Company shall not
have any duty to defend the Insured or any Additional Insured in any
lawsuit or other judicial or administrative proceeding involving the
Insured or any Additional Insured.
B. DEFINITIONS
(1) INSURED: The person(s) or organization named as the Insured in the
Declaration.
(2) ADDITIONAL INSURED: Any person(s) or organization added to this policy
as an additional insured at the request of the Insured upon written
approval of the Company signed by a duly authorized representative of
the Company.
(3) EXTENDED SERVICE CONTRACT: A contract described in the attached
Schedule and issued by the Insured or any Additional Insured while
this policy is in force on a form approved in writing by the Company,
and for which the proper premium is timely paid.
(4) Contractual OBLIGATION: The Insured's or any Additional Insured's
obligation to properly repair or replace covered parts or to reimburse
the reasonable cost of proper repair or replacement of covered parts
under an Extended Service Contract. No other obligations or
liabilities which may arise from an Extended Service Contract are
insured by this policy. See C. EXCLUSIONS. The amount of a Contractual
Obligation shall not exceed the reasonable cost to properly repair or
replace a covered part nor shall it exceed the liability provided
under an Extended Service Contract.
(5) CONTRACT HOLDER: The original purchaser of an Extended Service
Contract or someone who has qualified as a transferee under the terms
of the Extended Service Contract.
(6) CONTRACT HOLDER CLAIM: A claim by a Contract Holder which constitutes
a Contractual Obligation.
(7) LOSS: Expenses actually incurred by the Insured or any Additional
Insured or on behalf of the Insured or any Additional Insured in the
performance of Contractual Obligation.
(8) SERVICE CENTER: A person or organization authorized by or on behalf of
the Insured or any Additional Insured to perform services or repairs
under an Extended Service Contract.
(9) INSURED'S CLAIM: A claim by the Insured or any Additional Insured for
benefits under this policy based on a Contractual Obligation.
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C. EXCLUSIONS
This policy does not insure for any obligation or liability other than a
Contractual Obligation, and does not apply to:
(1) liability for any and all consequential damages, including but not
limited to punitive or extra-contractual damages and/or bodily injury,
arising from performance by the Insured or any Additional Insured, the
Insured's or any Additional Insured's agents or employees or any
Service Center under an Extended Service Contract;
(2) any and all obligations and liabilities which may arise by virtue of
performance under an Extended Service Contract by the Insured or any
Additional Insured or anyone else;
(3) breach of any and all implied warranties of merchantability;
(4) breach of any and all implied warranties of fitness;
(5) any and all liabilities for negligence;
(6) any and all liabilities for defective products, including strict
liability;
(7) any and all obligations and liabilities which may arise by virtue of
the sale by Insured or any Additional Insured of the item which is the
subject of an Extended Service Contract, or any part or component of
such item. Among the kinds of obligations and liabilities excluded by
this Exclusion are:
(a) any and all implied warranties of merchantability;
(b) any and all implied warranties of fitness;
(c) any and all liabilities for negligence;
(d) any and all liabilities for defective products, including strict
liability;
(8) any and all liabilities or obligations extending to anyone other than
the Contract Holder;
(9) any arid all obligations, liabilities or claims of the Insured or any
Additional Insured arising from any fraudulent, dishonest or criminal
act of the Insured or any Additional Insured or his agents or
employees;
(10) any duty to defend the Insured or any Additional Insured in any
lawsuit or other judicial or administrative proceeding involving the
Insured or any Additional Insured;
(11) labor and/or parts performed by or on behalf of the Insured or any
Additional Insured arising out of work or any portion thereof, or out
of materials, parts or equipment, as a result of recall by the
manufacturer or dealer:
(12) seizure or destruction of property by order of governmental authority;
(13) any Extended Service Contract not sold or bound as set forth in
Section D. CONDITIONS:
(14) for bodily injury, sickness, disease or death of any person.
D. CONDITIONS
(1) SALE OF EXTENDED SERVICE CONTRACT: Within 30 days after the date on
which an Extended Service Contract was issued. The Insured or any
Additional Insured shall report the sale of the Extended Service
Contract, on the forms provided by the Company, and forward to the
Company or its authorized agent the proper premium. Issuance of an
Extended Service Contract on behalf of an insurer other than Company
will void coverage under this policy.
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(2) PREMIUM DETERMINATION: The premium for liability under each Extended
Service Contract shall be computed in accordance with the schedule
rates attached hereto and made a part hereof and with Company's rules,
rating plans and minimum premium requirements. These rates shall
remain in effect until modified by the Company, and, after thirty (30)
days, prior written notice of the change shall have been given to the
Insured or any Additional Insured.
(3) LIMIT OF LIABILITY: The Company's limit of liability with respect to
any one Contractual Obligation shall not exceed One Hundred Twenty
Percent (120%) of the Insured's or any Additional Insured's wholesale
invoice cost of the merchandise.
(4) NOTICE OF INSURED'S CLAIM: When a Contract Holder makes a Contract
Holder Claim, prior to undertaking any performance under an Extended
Service Contract the Insured or any Additional Insured shall notify
the Company or its authorized agent of the Contract Holder Claim,
supplying particulars of the claim.
(5) PRIOR AUTHORIZATION: The Insured or any Additional Insured shall not
undertake any performance under an Extended Service Contract without
first receiving authorization to perform from the Company or its
authorized agent, and after giving proper notice of the Insured's or
any Additional Insured's claim.
(6) PROOF OF LOSS: As soon as practicable (but, in any event, not later
than 30 days after the Loss), the Insured or any Additional Insured
shall give to the Company written proof of Loss, under oath if
required, including full particulars of the nature and the extent of
the Loss and other details entering into the determination of the
amount payable. The Insured or any Additional Insured shall submit to
examination under oath by any person named by the Company and
subscribe to same, as often as may reasonably be required. Proof of
Loss shall be on forms furnished by the Company unless the Company
shall have failed to furnish such forms within 15 days after receiving
notice of claim.
(7) INSPECTION AND AUDIT: The Insured or any Additional Insured shall keep
complete records and accounts of all transactions pertaining to
Extended Service Contracts. The Company shall be permitted but not
obligated to inspect at any reasonable time the Insured's or any
Additional Insured's premises, books and records as they pertain to
coverage under this policy. This right shall exist so long as Extended
Service Contracts are outstanding. Neither the Company's right to make
inspections nor the making thereof nor any report thereon shall
constitute an undertaking. on behalf of or for the benefit of the
Insured or any Additional Insured or others, to determine or warrant
that such property or operations are safe or healthful, or are in
compliance with any law, rule or regulation.
(8) ACTION AGAINST THE COMPANY: No action shall lie against the Company
unless, as a condition precedent thereto, there shall have been full
compliance by the Insured or any Additional Insured with all of the
terms of this policy and until the amount of the Insured's or any
Additional Insured's Loss shall have been finally determined either by
judgment against the Insured or any Additional Insured after trial or
by written agreement of the Insured or any Additional Insured, the
Contract Holder, and the Company. Any person or organization or the
legal representative thereof who has secured such judgment or written
agreement shall thereafter be entitled to recover under this policy to
the extent of the insurance afforded by this policy. No person or
organization shall have any right under this policy to join the
Company as a party to any action against the Insured or any Additional
Insured to determine the Insured's or any Additional Insured's
liability, nor shall the Company be impleaded by the Insured or any
Additional Insured or his legal representative. Bankruptcy or
insolvency of the Insured or any Additional Insured or of the
Insured's or any Additional Insured's estate shall not relieve the
Company of any of its obligations under this policy.
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E. GENERAL PROVISIONS
(1) INSURED'S OR ANY ADDITIONAL INSURED'S REPRESENTAONS IN THE
DECLARATIONS: By acceptance of this policy. the Insured or any
Additional Insured agrees that the statements in the Declarations are
his agreements and representations, that this policy is issued in
reliance upon the truth of such representations and that this policy
embodies all agreements existing between himself and the Company or
any of its agents relating to this insurance.
(2) CANCELLATION: Prospective Cancellation: The Insured or any Additional
Insured may cancel this policy by surrendering the policy to the
Company or any of its authorized agents or by mailing to the Company
written notice stating when thereafter the cancellation shall be
effective. The Company may cancel this policy by mailing to the
Insured or any Additional Insured at the address shown in this policy
written notice stating when not less than thirty (30) days thereafter
such cancellation shall be effective. If cancellation by the Company
is for non-payment of premium. ten (10) days written notice shall be
given. All liability of the Company under this policy shall terminate
upon the effective date of cancellation, except with respect to those
Extended Service Contracts reported with premium paid to Company prior
to the effective date of cancellation.
Retrospective Cancellation: The Company may not cancel this policy
with respect to Extended Service Contracts which are in effect on the
date of cancellation. The Insured or any Additional Insured may cancel
this policy with respect to all Extended Service Contracts which are
in effect on the date of cancellation by surrendering the policy to
the Company or any of its authorized agents or by mailing to the
Company written notice stating when thereafter the cancellation shall
be effective. Any retrospective cancellation by the Insured or any
Additional Insured shall be with respect to all Extended Service
Contracts in effect on the date of cancellation. The mailing of notice
as aforesaid shall be sufficient proof of notice. Delivery of written
notice by the Insured or any Additional Insured or by the Company
shall be equivalent to mailing.
If the Insured or any Additional Insured cancels the policy with
respect to Extended Service Contracts in effect on the date of
cancellation (retrospective cancellation), earned premiums shall be
computed with respect to such Extended Service Contracts in accordance
with customary short rate table and procedure. Premium adjustments may
be made either at the time cancellation is effected or as soon as
practicable after cancellation becomes effective, but payment or
tender of unearned premiums is not a condition of cancellation.
(3) SUBROGATION: In the event of any payment by the Company under this
policy, the Company shall be subrogated to all of the Insured's or any
Additional Insured's rights of recovery therefor against any person or
organization. and the Insured or any Additional Insured shall execute
and deliver instruments and papers and do whatever is necessary to
secure such rights. The Insured or any Additional Insured shall do
nothing to prejudice such rights.
(4) ASSIGNMENT: Assignment of interest under this policy shall not bind
the Company unless its consent is endorsed hereon. No liability of the
Company shall exist under this policy unless the assignment is
accepted and the policy is endorsed.
(5) CHANGES IN THE POLICY: No waiver or change of the terms of this policy
shall be made except by endorsement issued to form part of this policy
and signed by a duly authorized representative of the Company. Notice
to any agent or knowledge possessed by any agent or by any person
shall not effect a waiver or change in any part of this policy or stop
the Company from asserting any right under the terms of this policy.
(6) TERRITORY: This policy applies only to Losses which occur while the
item covered by an Extended Service Contract is within the United
States of America, its territories or possessions.
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(7) RECOVERIES: All amounts recovered by the Insured or any Additional
Insured for which he has received benefits under this policy shall
belong to, and be paid to the Company by the Insured or any Additional
Insured up to the total amount of benefits paid by the Company.
(8) OTHER INSURANCE: If the Insured or any Additional Insured has other
insurance against a Contractual Obligation covered by this policy, the
Company shall not be liable under this policy for a greater proportion
of such Contractual Obligation than the applicable limit of liability
of this policy bears to the total applicable limit of liability of all
valid and collectible insurance against such Contractual Obligation.
(9) RENEWAL: This policy shall be automatically renewed for successive one
(1) year terms.
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IN WITNESS WHEREOF, American Modem Home Insurance Company has caused this policy
to be signed by its President and Secretary and countersigned by a duly
authorized agent of the Company.
President
Secretary
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CHANGE ENDORSEMENT
INSURED, ANY ADDITIONAL INSURED AND COMPANY ▇▇▇▇▇▇ AGREE TO THE FOLLOWING
CHANGES:
C. EXCLUSIONS is supplemented by the addition of the following:
(15) Any Extended Service Contracts which have not been approved by Company
or the service contract administrator, provided, however, such service
contract administrator shall be approved by Company.
D. CONDITIONS - Subsection (1) is deleted and replaced with the following:
(1) SALE OF EXTENDED SERVICE CONTRACT: If the Insured is a Manufactured
Home Dealer, within (30) days after the date on which an Extended Service
Contract was issued, Insured or any Additional Insured shall report the
sale of the Extended Service Contract, on the forms provided by the
Company, and forward to Company or its authorized agent the proper premium.
The application for any such service contracts forwarded to Company by
Insured or Additional Insured must state the correct and exact price
charged to a Contract Holder for such Extended Service Contract. Issuance
of an Extended Service Contract on behalf of an insurer other than Company
will void coverage under this policy. If Insured is an appliance Dealer the
former Subsection (1) applies.
D. CONDITIONS - Subsection (3) is deleted and replaced with the following:
(3) LIMIT OF LIABILITY: The Company's limit of liability with respect to
any one contractual obligation shall not exceed one hundred percent (120%)
of the Insured's or any Additional Insured's wholesale invoice cost of the
item subject to the Extended Service Contract.
E. GENERAL PROVISIONS - Subsection (2) is deleted and replaced with the
following:
(2) CANCELLATION: Insured or any Additional Insured may cancel this policy
by surrendering the policy to Company or its authorized agent or by mailing
to Company written notice stating when thereafter the cancellation shall be
effective. Company may cancel this policy by mailing written notice of
cancellation to the insured or any additional insured at the address shown
on this policy at least (30) days prior to the effective date of
cancellation. If cancellation by Company is for non-payment of premium,
fraud, or misrepresentation in any way relating to this policy, ten (10)
days written notice of cancellation shall be provided. All liability of
Company under this policy shall terminate upon the effective date of
cancellation. except with respect to those extended service contracts
reported with premium paid to Company prior to the effective date of
cancellation.
ADMINISTRATION/AGENCY AGREEMENT
This Agreement is entered into the 19th day of May, 1998, by and between
American Modern Home Insurance Company, American Family Home Insurance Company,
American Southern Home Insurance Company, American Western Home Insurance
Company and American Modern Home Service Company (hereinafter collectively
referred to as "Company") with principle place of business at Amelia, Ohio, and
Mechanical Breakdown Administrators, Inc. (hereinafter referred to as "MBA")
with principal place of business at Scottsdale, Arizona.
WHEREAS, Company desires to write in various service contract, warranty and
mechanical breakdown insurance programs as are more fully set forth in Exhibit A
hereto;
WHEREAS, MBA has the ability to serve as administrator and/or agent for Company
with respect to such programs;
NOW THEREFORE, in consideration of the mutual promises herein, Company and MBA
agree as follows:
1. Authority/Appointment: Subject to the terms and conditions of this
Agreement, Company hereby appoints MBA as an agent and program
administrator for the programs set forth in Exhibit A hereto. This
Agreement shall not be construed as creating an employer/employee
relationship between Company and MBA and MBA agrees that it is an
independent contractor. Only such authority as specified in this
Agreement is granted to MBA and all such programs written hereunder
are restricted to the United States unless otherwise set forth in
Exhibit A hereto. MBA shall not use the name of Company in any type of
advertisement without the prior approval of Company and this Agreement
shall in no way be construed as granting MBA an exclusive
administration or agency relationship with respective products listed
in Exhibit A. Company will issue to MBA, from time to time, written
underwriting guidelines which shall contain basic operating procedures
required by Company. MBA shall abide by such underwriting guide or
other underwriting instructions, manuals, rates, or other
specifications which apply to MBA and provided by Company, from time
to time, by written notice. Any such modification or supplementation
of such underwriting guide (including, without limitation, withdraw of
MBA's authority with respect to any particular line(s) of business)
may be effected unilaterally by Company without the consent of MBA and
will constitute a modification of this Agreement. However, Company can
only unilaterally eliminate authority for a line of business if
directed by a regulatory authority. Company may allow MBA a reasonable
amount of time in which to effect such unilateral modifications or
supplementation to such underwriting guide. Company may establish
production standards for MBA including to, but not limited to,
production quotas and prescribed loss ratios.
2. Administrative functions: MBA agrees to perform administrative
functions including, but not limited to, product development,
developing program procedures, marketing, processing applications,
collecting premium, issuing policies consistent with Company's
rates/rules/forms filings, implementing Company's underwriting and
program guidelines, issuing cancellation and non-renewal notices
consistent with applicable law and policy/contract language, paying
commissions consistent with applicable law, adjusting and paying
claims consistent with this Agreement and applicable law, maintaining
claim data, data processing, performing necessary subrogation and
salvage functions, assisting in the development of management
procedures and assisting Company in the development of program
management capabilities.
3. Reports: MBA agrees to report on all facets, of such business subject
to this Agreement, in a manner and timing as specified herein or as
agreed to by Company and MBA.
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4. Subproducers: MBA shall have the power and authority to appoint
subproducers, local agents, brokers, retailers and dealers
(hereinafter collectively referred to as "sub producers") shall
arrange for licensing of such sub producers if necessary and shall be
responsible for their conduct and operations. MBA, where appropriate,
shall report promptly to Company all appointments, renewals and
changes of sub producers and Company shall have the right to either
decline or approve such appointment or continued appointment of any
such subproducer. ▇▇▇ agrees to furnish all such information as
Company may from time to time request in connection with such business
produced by the subproducers. In the event MBA arranges for the
service contracts or warranties to be marketed through retailers or
dealers, MBA shall ensure compliance of such marketing or the sale by
such retailers or dealers with applicable laws and regulations
relating to the business subject to this Agreement. In states where
retailers or dealers are required to be the obligor under service
contracts marketed hereunder, MBA shall be responsible for issuing
contractual liability policies to such retailers or dealers. MBA shall
provide reports of all such policies issued and shall follow authority
guidelines set forth in Paragraph 1. of this Agreement. MBA shall also
sign all such retailers or dealers to appropriate dealer Agreements
and such dealer Agreement to be used shall be attached hereto as
Exhibit B.
5. Premiums/Fees: MBA shall be obligated to collect and shall be liable
to pay to Company and does hereby guarantee payment to Company of the
premium/contract fee and/or Administration fee on each risk, policy,
endorsement, warranty, certificate or service contract solicited
and/or written by or through MBA, including those risks, policies,
endorsements, warranties, certificates or service contracts solicited
by or through subproducers, dealers or retailers acting by or through
MBA, whether or not the premium or fee on each such risk, policy,
endorsement, warranty, certificate or service contract has been
collected by either MBA or the subproducer, dealer or retailer as the
case may be. MBA agrees to place all such premium and fees collected
in a segregated trust account and acknowledges and agrees that MBA is
a fiduciary as trustee with respect to such funds.
6. Accounting: Commencing with the effective date of this Agreement, MBA
shall within twenty days of the end of each month provide a complete
and accurate account of transactions between MBA and Company during
each such calendar month. Payment of all applicable premiums and fees
due Company shall accompany such account of transactions. MBA shall
have the authority to deposit into Company accounts all checks payable
to Company or its affiliates. MBA acknowledges and agrees that it is a
fiduciary with respect to all funds due Company.
7. Claims Authority:
A. MBA shall have the authority to adjust, pay and settle all claims up
to the lesser of 6,000 dollars ($6,000) or the maximum amount of
coverage provided under each such policy, warranty or service contract
subject to this Agreement. Company reserves the right to participate
in the adjustment and settlement of any claim and to further direct
that any such claim be paid.
B. MBA shall promptly report to Company all claims in a form and time
period as to be agreed by Company and MBA. MBA shall fully cooperate
in the investigation and adjustment of any claims or suits and agrees
to provide Company with all information relative to such claims at any
time.
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C. In the event of any litigation, arbitration or other dispute
resolution process which arises as a result of MBA's adjustment of any
claim, Company shall pay all costs in connection with such proceeding
unless such proceeding is a result of any error, omission,
misrepresentation, bad faith, fraud, or violation of any deceptive
trade practice or deceptive claims practice act by MBA. Company's
Agreement to provide any defense under this paragraph shall not in any
way waive MBA's indemnification obligations contained in this
Agreement.
▇. ▇▇▇ acknowledges that it has all adjuster licenses' necessary for
adjusting claims pursuant to this Agreement.
8. Claims Imprest Account: MBA shall create and operate a Claims Imprest
Account to be funded by Company from premium/contract fees collected by MBA
and received by Company. MBA shall use such funds to pay claims consistent
with this Agreement. MBA shall serve as a fiduciary to such funds and shall
not pay any fees or expenses out of such Claims Imprest Account. MBA shall
make no transfer of any such funds except for the payment of claims.
Company shall ensure that any such account balance shall be no less than an
amount equal to two (2) months paid claims based on the most recent monthly
average claim payment amount. All funds in such Claims Imprest Account
shall be property of Company and Company shall be entitled to any interest
earned thereon. Such funds contained in Claims Imprest Account shall not be
subject to any levy or attachment by any creditors of MBA.
9. Compensation: MBA's compensation for the administration of programs subject
to this Agreement and the placement of policies or service contracts
subject hereto shall be at a rate as specified in Exhibit A hereto. There
shall be no contingent or bonus commission due MBA unless specifically
agreed to by Company in writing.
In the event of cancellation of warranties, service contracts, polices or
the reduction of warranty, service contract fees or policy premium, MBA
shall be liable for payment of the entire service contract retail price or
policy premium for any such service contract or policy, as computed by the
unearned warranty, service contract or premium formula specified by Company
or the warranty, policy or service contract sold. MBA shall have the
responsibility for refunding the entire unearned amount, including dealer
or subproducer compensation or markup if applicable, to the particular
warranty, service contract or policy holder, and Company shall credit MBA
with Company's portion on the next monthly account of the parties after
such refund. MBA hereby guarantees that such return/refund shall be made
and agrees to hold harmless and indemnify Company for any failure by MBA,
its subproducers or dealers to refund the unearned warranty, service
contract or policy amount, including dealer/subproducer compensation. Any
cancellation fee contained in any warranty, service contract or policy
shall be property of Company.
10. Employees/Expenses: All employees, subproducers and agents of MBA shall be
MBA's employees, agents and subproducers and shall not be deemed employees
of Company for any reason what so ever. All expenses of MBA, including but
not limited to, rentals, transportation, facilities, postage, advertising,
local licensing fees, costs of equipment, utilities, supplies not furnished
by Company and inspections or audits of contract/policy holders, shall be
borne by MBA and shall not under any circumstance be considered expenses of
Company in the absence of Company's written Agreement. MBA shall be
responsible for tracking all fees or compensation due subproducers,
retailers or dealers and shall hold Company harmless for any claim for such
fees or compensation against Company.
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11. Records/Audits: MBA shall keep in a manner and form prescribed or approved
by Company, true and accurate records and books of account of all
transactions under this Agreement with Company. MBA shall hold and preserve
the property of Company (which shall include but not limited to any
records, contracts, contract forms, policies, policy forms, brochures,
applications, manuals, underwriting guides and all other property of
Company) which shall at any time come into MBA's possession or under its
control. MBA shall surrender such property to Company upon demand. MBA
shall, as often as required, submit to a representative of Company, all
such books and records for examination and copying as said Representative
shall desire to make, and MBA shall cooperate and assist in such
examination or audit. Company may request corrective action be made
promptly and MBA shall confirm completion thereof in writing. Company's
right to inspect and copy records relating to Company and/or business
written by MBA under this Agreement shall survive termination of this
Agreement and shall continue until all matters affecting Company are
settled. MBA shall make such reports of all transactions under this and all
previous Agreements as may be required by Company. MBA agrees to conduct
daily and monthly backups of its computer system and place a yearly backup
in a safety deposit for protection in the event of any disaster or
emergency damaging MBA's systems and records.
12. Administration Runoff Account: MBA shall under the direction of Company
establish an account in Company's and MBA's name for the purpose of
providing Company with appropriate funds in the event that Company must
obtain an alternative third party administrator with respect to business
written hereunder due to MBA being unable to perform its duties pursuant to
this Agreement. Such accounts shall not be an asset of MBA and shall not be
attached by MBA creditors. MBA agrees to fund such trust account with
eighteen dollars ($18.00) per service contract, extended warranty,
certificate or insurance policy sold by MBA under this Agreement. Such
funding shall occur immediately upon the premium or fee being received by
MBA for such service contract, extended warranty, certificate or insurance
policy. MBA shall have no authority to withdraw funds from such account.
The trust account shall continue to be funded until the amount held in
trust contains eighteen dollars ($18.00) for each contract, extended
warranty, certificate or insurance policy in force. Thereupon, Company
shall conduct a quarterly review of such trust account to ensure that the
amount held in the account is equal to eighteen dollars ($18.00) per in
force service contract, extended warranty, certificate or insurance policy.
If the amount held in the account is deficient, then funding by MBA shall
resume pursuant to this paragraph. In the event the amount held in such
trust account is in excess of that required by this paragraph, the amount
of such excess shall be a credit on the next monthly account of
transactions between MBA and Company and Company may transfer such excess
to its other accounts. The trust account shall be established in a
federally insured bank and shall be invested in any of the following
instruments: Demand Accounts, Time Accounts or Certificates of Deposit. All
interest earned on such accounts in each calendar year shall be paid to MBA
within forty-five days after the end of such calendar year. In the event
this Agreement is terminated pursuant to Paragraph 14.B., MBA shall not
service business written pursuant to this Agreement after termination and
the trust account shall remain property of Company. However, any amounts in
the trust account in excess of those required to meet the minimum dollar
amount per contract, warranty, certificate or policy issued hereunder shall
be paid to MBA. Company may offset any amounts due MBA under this paragraph
against any amounts MBA owes Company under this Agreement. if termination
of this Agreement is pursuant to Paragraph 14.A. or Paragraph 14.C., MBA
shall continue to service business written hereunder after termination and
Company shall pay MBA from the account on a quarterly basis as each in
force service contract, extended warranty, certificate or insurance policy
is earned out. For purposes of this payment only, such in force business
shall be considered as being earned pro-rata. In the event MBA is servicing
business after termination and the projected loss ratio for in force
business equals or exceeds a ninety percent (90%) loss ratio or MBA is in
violation of any of its responsibilities under this Agreement which apply
to servicing business after termination, Company reserves the right to
require MBA to cease servicing such business and move such servicing to
another administrator. In such event all payments of the trust account to
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MBA hereunder shall cease. For purposes of this paragraph loss ratio shall
be defined as the percentage resulting from losses and loss adjustment
expense being divided by the gross amount of money to Company from MBA from
business produced hereunder.
13. Indemnification and Right of Offset: MBA shall at all times indemnify and
save harmless Company from and against all manner of actions, suits,
liabilities, costs or expenses by reason of any act or failure to act on
part of MBA, its employees, subproducers or agents. Company shall at all
times have the right to receive and apply any amount of money held by it on
account of all obligations and liabilities of MBA to Company, whether
arising from this Agreement or otherwise, and for all liabilities, damages,
costs or expenses which Company may sustain or be liable by reason of any
act or failure to act on the part of MBA, its employees, subproducers, or
agents.
14. Termination:
A. Either party may terminate this Agreement by providing the other with
not less than three hundred and sixty five (365) days written notice
prior to the effective date of termination.
B. Company may terminate this Agreement:
a. Immediately upon written notice in the event that MBA has failed
to promptly comply with any of its material duties and material
obligations under this Agreement or;
b. Immediately upon MBA committing any fraudulent or illegal act,
gross, willful or negligent misconduct or threat of insolvency.
C. MBA may terminate this Agreement upon providing written notice of any
fraudulent or illegal act, gross, willful or negligent misconduct or
threat of insolvency.
D. Upon termination of this Agreement, MBA shall cease writing all such
business on behalf of Company and any right to use the name of Company
or any of its products shall immediately cease. MBA shall immediately
cause to be delivered to Company all property of Company, including
but not limited to applications, unused claims drafts, service
contracts, warranties, policies, pricing guides, manuals, forms and
brochures. If MBA fails to deliver such items, MBA shall bear any
expense which Company may incur in obtaining such items and MBA shall
be liable in damages for losses resulting in whole or in part from
MBA's failure to immediately deliver such property to Company. In the
event that unused drafts, warranties, applications, contracts or
policies cannot be accounted for by MBA, MBA hereby agrees to protect
and forever defend Company against and to hold harmless and indemnify
Company on account of all persons and claims whatsoever on said
applications, drafts, warranties, policies or contracts. Expiration
and renewals rights for all such policies written shall be the
property of MBA unless MBA is in default under any obligation under
this Agreement, then such renewal rights and such polices shall be
property of Company.
15. Miscellaneous:
A. This Agreement shall not be assigned without prior written consent of
Company and it may not be modified verbally, or be modified with any
subsequent practice or course of dealing by the parties, nor in any
other manner other than by writing signed by the parties hereto. No
forbearance or neglect on the part of Company to enforce any of the
provisions of this Agreement shall be construed as a waiver of any of
Company's rights or privileges hereunder unless in each instance a
written memorandum specifically expressing such waiver be made and
subscribed by the President or a Vice President of Company. No waiver
of such rights arising from any default or failure of performance of
MBA's obligations shall modify this Agreement, or extend to affect
5
rights of Company arising from the subsequent default or failure of
performance. Where used herein, the pronoun referenced to MBA shall
include the masculine and the feminine, and the singular and the
plural. The obligations of MBA, express and implied shall be joint and
several. The parties agree that if this Agreement is terminated the
promises, duties and obligations contained herein shall outlive this
Agreement and shall remain in effect to the extent required until all
transactions and obligations between the parties hereto are settled.
B. More than one corporation may be a party to this Agreement as an
Underwriter. In such event, any reference herein contained to
"Company" shall be collective in this application and, where the
context requires, the word "Company1' and/or the pronoun "it" or "its"
when referring to Company shall include the plural as well as the
singular. MBA may be appointed as a general agent or administrator for
one or more of such corporations. In the event of appointment of MBA
as an administrator or agent by less than all of the corporations who
are parties to this Agreement, the rights and obligations of Company
and MBA as set forth in this Agreement shall be deemed to be
applicable to and undertaken by only that corporation or corporations
that has in fact appointed MBA as its general agent or administrator.
MBA warrants that it is in compliance so long as this Agreement is in
effect with all applicable laws and/or regulations governing the
conduct of business subject to this Agreement. MBA shall be
responsible for tracking all unused applications, extended service
contracts, warranties or policies, and also shall be responsible for
contractual liability issuance and countersigning in states where
retailers or dealers are required to be the obligor under service
contracts written.
16. Severability: This Agreement is issued under, is subject to and shall
be interpreted in accordance with the laws of the state of Ohio by any
court of competent jurisdiction in Clermont County, Ohio. if any
provisions are contrary to any applicable controlling federal, state
or local law or regulation it shall be severed from the Agreement and
shall not affect the validity of this Agreement. This Agreement
supercedes all previous Agreements, either expressed or implied
between the parties hereto.
6
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as the date first written above.
Witness: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
MECHANICAL BREAKDOWN ADMINISTRATORS
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: CEO
Witness:
AMERICAN MODERN HOME INSURANCE COMPANY
AMERICAN FAMILY HOME INSURANCE COMPANY
AMERICAN SOUTHERN HOME INSURANCE COMPANY
AMERICAN WESTERN HOME INSURANCE COMPANY
AMERICAN MODERN HOME SERVICES COMPANY
By:
Title: SVP
7
EXHIBIT A
This Exhibit A is effective May 19, 1998, and forms a part of the Agreement
dated May 19, 1998, by and between American Modern Home Insurance Company,
American Family Home Insurance Company, American Southern Home Insurance
Company, American Western Home Insurance Company and American Modern Home
Service Company (hereinafter collectively referred to as ("Company") and
Mechanical Breakdown Administrators, Inc. (hereinafter referred to as 'MBA").
It is hereby agreed by Company and MBA that MBA shall serve as Administrator
and/or Agent for the following types of business:
Compensation
-----------------------
Commission Admin.Fee
---------- ---------
RV and Travel Trailer Service Contracts 0% *
TX Auto MBI 49% 0%
*The difference between the dealer net cost and the gross amount due Company for
such business.
This Exhibit A supercedes any previous Exhibit A to the above mentioned
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Exhibit A as the date
first listed above:
Witness: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
MECHANICAL BREAKDOWN ADMINISTRATORS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: CEO
Witness:
AMERICAN MODERN HOME INSURANCE COMPANY
AMERICAN FAMILY HOME INSURANCE COMPANY
AMERICAN SOUTHERN HOME INSURANCE COMPANY
AMERICAN WESTERN HOME INSURANCE COMPANY
AMERICAN MODERN HOME SERVICES COMPANY
By:
Title: SVP
CONTINGENT COMMISSION ADDENDUM
This addendum is effective May 19, 1998 and forms a part of the
Administration/Agency Agreement between American Modern Home Insurance Company,
American Family Home Insurance Company, American Southern Home Insurance
Company, American Western Home Insurance Company and American Modern Home
Service Company (hereinafter collectively referred to as "Company") and
Mechanical Breakdown Administrators, Inc. (hereinafter referred to as "MBA").
MBA may qualify for contingent commissions as calculated in accordance with this
Contingent Commission Addendum and predicated on the experience of Expired
Service Contracts from Subject Business written under the above-mentioned
Agreement. The Contingent Commission calculation for such Expired Service
Contracts shall occur in the next subsequent calendar quarter after the service
contract expiry. Definitions and the formula for the calculation are as follows:
A. Expired Service Contracts - Shall mean all service contracts from
Subject Business written under this Agreement which have come to their
natural expiry or have been cancelled and the cost of such contract
due Company (both premium and fees) has been fully earned.
B. Subject Business - Shall mean that business written pursuant to the
above-mentioned Agreement and classified by Company as Recreational
Vehicle and Travel Trailer service contract business.
C. Interest - Shall mean all interest generated by Expired Service
Contracts from Subject Business in the calendar quarter subject to
calculation. This interest shall be generated at a rate equal to that
of a ninety (90) day U.S. Treasury Bill.
D. The Contingent Commission shall be calculated in the following manner:
There shall be deducted from premium and fees received by Company from
Expired Service Contracts for Subject Business plus Interest, the sum
of:
1. Company's retention equal to twenty percent (20%) of premiums and
fees due and received by Company for Expired Service Contracts;
plus
2. The net amount of any front commission paid or credited to MBA
for Expired Service Contracts; plus
3. The total of losses paid, loss expense paid and outstanding
losses for Expired Service Contracts at the end calendar quarter
subject to this calculation, less salvage recovered, subrogation
recovered and outstanding losses for Extended Service Contracts
at the beginning of the calendar quarter subject to this
calculation; plus
4. Any carryover from a negative calculation in the calendar quarter
immediately proceeding the quarter subject to this calculation.
In the event the above calculation results in a positive amount,
fifty-five percent (55%) of such an amount shall be contingent
commission and shall be payable to MBA within 120 days of the end of
the quarter subject to calculation, except as set forth in Paragraph
D. if such calculation results in a negative amount, such amount shall
be carried forward to the calculation for the next calendar quarter.
Notwithstanding anything to the contrary, it is agreed and understood
that any negative amount calculated under this Addendum shall offset
any positive amount calculated under any other contingent commission
addendum to the Administration/Agency Agreement and any negative
amount calculated under such other Addendum shall offset any positive
amount calculated under this Addendum.
E. In the event that projected losses for Subject Business under this
Agreement show a loss ratio equal to or greater than ninety percent
(90%) for unexpired service contracts or for service contracts
expiring in the calendar quarter immediately subsequent to the
calendar quarter subject to this calculation, based on loss
projections and earning methodology establish by Company, no
contingent commission payments pursuant to this Contingent Commission
Addendum shall be paid for the calendar quarter subject to calculation
hereunder and there shall be no carry forward of such commission to
the next accounting period.
In the event the above-mentioned Agreement is terminated, all terms and
conditions of this Addendum shall apply and contingent commission shall continue
to be calculated, except that after notice of termination, the payment of
contingent commission, if any, shall be suspended until such time as all
liability of Company, including losses and loss expenses paid and outstanding
arising out of business issued pursuant to the above-mentioned Agreement shall
have been terminated and until MBA shall have certified in writing that all
known claims against Company have been duly reported to Company. Thereupon, the
final contingent commission shall be calculated for the entire period. If this
results in a positive amount, Company shall pay fifty-five percent (55%) of such
amount upon the mailing to MBA of a final accounting statement, and in
consideration thereof, MBA agrees to hold harmless and indemnify Company against
all losses, demands and claims, including those for unearned premium return,
arising from policies or contracts placed pursuant to the above-mentioned
Agreement.
Witness:
AMERICAN MODERN HOME INSURANCE COMPANY
AMERICAN FAMILY HOME INSURANCE COMPANY
AMERICAN MODERN HOME SERVICES COMPANY
AMERICAN SOUTHERN HOME INSURANCE COMPANY
AMERICAN WESTERN HOME INSURANCE COMPANY
By:
Title: SVP
Witness: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
MECHANICAL BREAKDOWN ADMINISTRATORS
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: CEO