EXHIBIT 10(cl)
Managing General Agency Agreement
Number HFS-03-001
Table of Contents
Article 1 Appointment
Article 2 Authority of the Managing General Agent
Article 3 Compensation
Article 4 Accounting and Records
Article 5 Reports and Remittances
Article 6 Expenses
Article 7 Premium Escrow Accounts
Article 8 Control of Expirations
Article 9 Independent Contractor Relationship
Article 10 Advertising
Article 11 Agents Licensing
Article 12 Agency Sale or Transfer
Article 13 Hold Harmless
Article 14 Arbitration
Article 15 Termination
Article 16 Claims Handling
Article 17 Rate Filings and Underwriting Guidelines
Article 18 Reinsurance
Article 19 Miscellaneous
MANAGING GENERAL AGENCY AGREEMENT
HFS-03-001
This Agreement is made and entered into by and between OLD AMERICAN COUNTY
MUTUAL FIRE INSURANCE COMPANY, a Texas Corporation (Company) and AMERICAN
HALLMARK GENERAL AGENCY, INC. a Texas Corporation with administrative
offices in Dallas, Texas, (Managing General Agent).
THE COMPANY AND THE MANAGING GENERAL AGENT AGREE AS FOLLOWS:
ARTICLE 1 - APPOINTMENT
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1.1 The Company appoints the Managing General Agent to act as its Managing
General Agent as that term is defined in Article 21.07-3 of the Texas
Insurance Code and the Texas Administrative Code. This appointment is
continuous in nature and shall remain in effect until terminated in
accordance with Article 15 or natural expiry at September 30, 2006,
whichever comes first.
1.2 The Managing General Agent acknowledges and agrees that the Company's
appointment of the Managing General Agent does not restrict in any manner
the Company's right to appoint agents writing any lines of insurance the
Company writes through any other agent, sub-agent or managing general agent
either direct to the Company or through other agents.
ARTICLE 2 - AUTHORITY
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2.1 The Managing General Agent has the authority and duty to act on behalf
of the Company in all respects, insofar as necessary for the Managing
General Agent to perform the function of a Managing General Agent for the
Company. The Company may, from time-to-time, place reasonable written
restrictions upon the Managing General Agent. The Managing General Agent's
authority includes, but is not limited to, production, appointment and
supervision of agents for the Company, underwriting, accounting and claims
handling. All acts of the Managing General Agent, insofar as the Company's
business is concerned, are subject to the ultimate authority of the Company.
2.2 The Managing General Agent has the authority to develop a unique rate
plan and underwriting guidelines that the Company shall file with the Texas
Department of Insurance. The Managing General Agent shall certify that each
and every filing is in accordance with the laws of the State and that its
rate increases in any calendar year do not exceed 10%.
2.3 The original source of all business produced under this Agreement shall
be property/ casualty, general lines, or limited lines agents in the State
of Texas (Agent(s)).
2.4 The Managing General Agent has the authority to accept, on forms
approved by the Company, applications, binders, and/or Policies written by
or through Agents, for classes or lines of insurance as described in the
attached Schedule of Business and in the Quota Share Reinsurance Agreement
Number HFS-03-001 between the Company and Subscribing Reinsurers (the
Reinsurer) effective October 1, 2003, (Reinsurance Agreement), a copy of
said Agreement is attached hereto and fully incorporated herein.
2.5 The Managing General Agent acknowledges and agrees that the term(s) of
any Policy shall not exceed twelve (12) months. "Policy" is defined as any
policy, endorsement, binder, certificate, proposal for insurance or any
other document that binds the Company to insurance coverage.
2.6 The Managing General Agent has the authority to cancel Policies, at its
discretion, subject to the requirements imposed by law and in compliance
with the applicable provisions contained in this Agreement and the Policies.
2.7 The Managing General Agent has the authority to receive and receipt for
premiums and to retain commissions out of such collected premiums subject to
the terms and conditions of this Agreement.
2.8 The Managing General Agent or its designated claims handler shall have
the authority to set loss reserves and adjust and pay claims on behalf of
the Company.
2.9 The Company shall retain the authority to restrict the premium volume.
2.10 The Managing General Agent may not authorize policy issuance on behalf
of the Company to any broker, agent, managing general agent or any other
entity without the prior written consent of the Company.
2.11 Any and all agreements with Agent(s) shall be made directly between the
Managing General Agent and such Agent(s). It is understood that the Agent
shall have no claim or cause of action against the Company and said Agent(s)
shall look solely to the Managing General Agent for any and all expenses,
costs, causes of action and damages, including, but not limited to, extra
contractual obligations, arising in any manner from actions or inactions by
the Agent(s) or the Managing General Agent.
2.12 The Managing General Agent shall bear sole responsibility to oversee
the proper licensing of any Agents(s). Should any fines be levied against
the Company as the result of the Managing General Agent accepting business
from an unlicensed Agent, the Managing General Agent shall hold the Company
harmless and reimburse the Company for any and all expenses so incurred
including, but not limited to, legal fees, fines and travel expenses.
ARTICLE 3 - COMPENSATION
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3.1 The Managing General Agent's compensation shall be the commission
allowed under the Reinsurance Agreement less fronting fees and premium
taxes. As used in this Article, the term "Net Written Premium" is defined as
the total of all premium amounts on policies written by the Managing General
Agent between the Company and the Managing General Agent less return premium
and cancellations.
3.2 On the net written premium and policy fees for each underwriting year,
fronting fees shall be charged at a rate of one and three-quarters percent
(1.75%). Minimum fronting fees shall be the lesser of $2,500,000 for the
term of the contract with a minimum of $650,000 in year 1 and $850,000 in
year two, or two percent (2.00%) of net written premium and policy fees for
all three years.
3.3 The tax provision of one and three-quarters percent (1.75%) of net
written premium and net policy fees charged includes premium tax and the
Texas Overhead Assessment. The Company retains the right to adjust the
premium tax of 1.75% to any new effective rate determined by the Texas
Department of Insurance or other such agency. The Company will be liable
for remitting state premium taxes based on net written premium and net
policy fees charged.
3.4 Should service fees be charged on any policy covered by this Agreement,
and such fees are deemed taxable for premium tax purposes, then such service
fees are to be added to the net written premium and net policy fees charged
to determine the amount subject to Fronting Fees.
3.5 In the event there is no Agent to receive the designated commission on
a Policy, the Managing General Agent may retain the commission.
3.6 The commission may, from time to time, be amended upon mutual agreement
of the Company and the Managing General Agent without otherwise affecting
the terms and conditions of this Agreement.
3.7 The Company agrees to pass through to the Managing General Agent any
Contingent or Profit Commission allowed by the Reinsurer(s) referenced in
Article 9 of the Reinsurance Agreement.
ARTICLE 4 - ACCOUNTING AND RECORDS
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4.1 The Managing General Agent shall provide and maintain all necessary
books, records, policies, claim files, dailies and correspondence with
policyholders to determine the amount of liability of the Company and the
amount of premiums there from.
4.2 The Managing General Agent shall prepare separate, itemized, monthly
statements for each Agent on the business placed by the Agent through the
Managing General Agent, and furnish the Agent with an IRS Form 1099 each
year when required.
4.3 All records shall be kept in such manner and form as is generally
recognized as acceptable in the insurance industry or as may be required by
the Company. Such records shall be maintained for at least five (5) years
or for any longer applicable retention period required by the Texas
Department of Insurance. All records must be located in Texas, unless
approved by the Texas Department of Insurance under Article 1.28 of the
Texas Insurance Code.
4.4 All records applicable to the Company's business shall be opened for
inspection and/or audit at all reasonable times by the Company, its
reinsurers, insurance department personnel or other governmental
authorities.
4.5 Upon request and pursuant to regulatory requirements, the Managing
General Agent shall forward as reasonably required to the Company or the
Company's Designated Accountant and/or Statistical Agent, exact, as written,
copies of all applications, binders, policies, daily reports, monthly
reporting forms and endorsements issued by or through licensed Agent(s),
including all other evidence of insurance written, modified or terminated.
4.6 The Managing General Agent shall be solely responsible for and shall
keep accurate records of all policies assigned to the Managing General Agent
and shall account to the Company, upon the Company's reasonable request, for
all outstanding and unused policy supplies. In the event canceled or
terminated policies or binders are unavailable, the Managing General Agent
shall forward, or cause to be forwarded, properly executed Lost Policy
Receipts.
4.7 At renewal of any Policy issued by the Managing General Agent, the
Managing General Agent shall be responsible to the insured for the renewal
or non-renewal of the Policy and shall timely communicate any renewal quote
or notice of non-renewal to the insured to preclude the extension of
coverage beyond the expiration date of the current in-force policy.
4.8 The Company shall conduct or cause to be conducted four (4)
examinations of the Managing General Agent. This examination will take
place at the Managing General Agent's business offices or premises where
necessary records are maintained, and the Managing General Agent will bear
the total cost of $500 per audit plus out of pocket expenses actually and
reasonably incurred by the Company to conduct each examination. Such
examination must remain on file with the Company for three (3) years, be
available to the Commissioner of Insurance for review, and contain, at a
minimum, the following information:
a. claims control procedures;
b. timeliness of claims payments;
c. timeliness of premium reporting and collection;
d. compliance with underwriting guidelines; and
e. reconciliation of policy inventory.
If within any thirty (30) day period, the Company's aggregate premium volume
increases by thirty percent (30%) or more, the Company shall conduct, within
ninety (90) days of said period, an examination of the Managing General
Agent if the Managing General Agent:
a. writes greater than twenty percent (20%) of the Company's
aggregate premium volume; and
b. has experienced an increase of twenty percent (20%) or
more of premium volume during the thirty (30) day period.
Any such examination shall contain the information required pursuant to
Article 4.8.
ARTICLE 5 - MANAGING GENERAL AGENT'S REPORTS AND REMITTANCES
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5.1 The Managing General Agent shall submit a report to the Company, within
thirty (30) days after the close of business each calendar month,
summarizing the business transacted under this Agreement during the prior
month. Such report shall include the following items:
▇. ▇▇▇▇▇ premiums written less returns and cancellations;
b. Agent's commissions;
c. losses paid less recoveries and salvage;
d. loss adjustment expenses paid;
e. outstanding loss reserves;
f. outstanding loss expense reserves;
g. losses incurred but not reported;
h. unearned premium reserve; and
i. earned premium.
5.2 The Managing General Agent shall remit all amounts due directly to the
Company within forty-five (45) days after the close of the calendar month
for which the account is rendered.
5.3 In addition to the return of premium, the Managing General Agent shall
refund commissions on policy cancellations, reductions in premiums or any
other return premiums at the same rate at which such commissions were
originally retained.
5.4 The Company may, at its sole option, reasonably alter the frequency
and/or content of the Managing General Agent's report; provided, however,
such report is made no less frequently than monthly.
5.5 The omission of any item(s) from a monthly statement shall not affect
the responsibility of either party to account for and pay all amounts due
the other party, nor shall it prejudice the rights of either party to
collect all such amounts due from the other party.
5.6 The Managing General Agent shall annually furnish to the Company the
following summary information in such form as to enable the Company to
record such information in its annual statement:
a. summaries, with data segregated by major classes, of net premium
written, gross loss paid, net salvage, subrogation and adjusting
expenses paid during the year; and
b. details of in-force and unearned premium running twelve (12) months
or less from the policy inception date.
5.7 The Managing General Agent agrees to furnish the Company with any
additional reports necessary to provide the Company's monthly, quarterly
and/or annual statements to regulatory authorities including, but not
limited to, TICO or ISO statistical reporting.
5.8 The Managing General Agent shall annually furnish the Company current
financial statements of the Managing General Agent. These financial
statements shall include, but not be limited to, Profit and Loss, Balance
Sheet and Cash Flow Statements.
ARTICLE 6 - EXPENSES
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6.1 The Managing General Agent is responsible for and shall promptly pay
all expenses attributable to the producing and servicing of business under
this Agreement, except as specified in Article 6.2. This responsibility
shall not be altered whether the expense is billed to the Managing General
Agent or the Company. These expenses include but are not limited to:
a. salaries and all other benefits of all employees of the
Managing General Agent;
b. transportation, lodging, and meals of employees of the Managing
General Agent;
c. postage and other delivery charges;
d. advertising;
e. printing of all policies, forms and endorsements;
f. EDP hardware, software, and programming;
g. license and appointment fees for agents, brokers, and
solicitors;
h. adjustment expenses arising from claims on insurance written
under this Agreement, except for expenses incurred at the
direction of the Company;
i. provision of office space, equipment and other facilities
necessary for the operation of Managing General Agent; and
j. legal, audit and other expenses relating to any rate filing,
regulation, or rules affecting the business of the Managing
General Agent pursuant to this Agreement.
6.2 The Company is responsible for and shall promptly pay all expenses
attributable to the actions of the Company as a result of business produced
under this Agreement. This responsibility shall not be altered whether the
expense is billed to the Company or the Managing General Agent. These
expenses include but are not limited to:
a. salaries and all other benefits of all employees of the Company;
b. transportation, lodging, and meals of employees of the Company;
c. State or Guaranty Fund Assessments;
d. losses and loss adjustment expenses incurred at the direction of
the Company;
e. cost of reinsurance; and
f. legal and auditing expense incurred at the direction of the
Company (other than as provided for in Article 4.8).
ARTICLE 7 - PREMIUM ESCROW ACCOUNTS
-----------------------------------
7.1 The Managing General Agent shall accept in a fiduciary capacity all
premiums collected and other funds relating to the business written under
this Agreement. The privilege of retaining commissions shall not be
construed as changing the fiduciary capacity.
7.2 The Managing General Agent assumes responsibility for, and shall
promptly pay, the net earned premium currently due the Company, whether
collected or not, on Policies issued by the Managing General Agent or, the
Company on behalf of the Managing General Agent, subject to any deductions
provided herein.
7.3 The Managing General Agent shall establish and maintain a Premium
Escrow Account entitled "▇▇▇▇/Old American Premium Escrow Account". Escrow
Accounts shall be in a bank, which is a member of the Federal Reserve System
and is mutually agreeable to the Managing General Agent and the Company.
All premiums collected by the Managing General Agent on business produced
under this Agreement shall be deposited promptly into said account.
7.4 The Managing General Agent shall not commingle any premium or escrow
funds with its personal accounts or other agency funds or funds held by the
Managing General Agent in any other capacity.
7.5 The Managing General Agent and an officer of the Company shall maintain
signature authority on said Premium Escrow Account.
7.6 The Managing General Agent shall act as trustee for the Company on the
Premium Escrow Account.
7.7 Interest income and the cost of maintaining Escrow Accounts shall
belong to the Managing General Agent.
7.8 Escrow Accounts may consist of:
a. checking, savings, or money market accounts;
b. certificates of deposit; or
c. United States Treasury bills, notes or bonds.
7.9 The Managing General Agent may use any and all premium and other funds
collected by the Managing General Agent for and on behalf of the Company
under this Agreement solely for the payment of:
a. premium balances due minus deductions allowed in accordance with
this Agreement;
b. the return of unearned premiums arising due to cancellation or
endorsement;
c. the Managing General Agent's and Agent(s) commission;
d. losses and loss adjustment expenses; or
e. such other items as mutually agreed upon in writing by the
Managing General Agent and the Company.
7.10 The Company shall not be liable for any loss which occurs by reason of
the default or failure of the bank in which an account is carried and such
loss shall not affect the Managing General Agent's obligations under this
Agreement.
ARTICLE 8 - CONTROL OF EXPIRATIONS
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8.1 The Managing General Agent's records and the use and control of
expirations of the business produced by the Agents appointed by the Managing
General Agent or by the Company at the Managing General Agent's request
shall remain the property of the Managing General Agent and be left in the
Managing General Agent's undisputed possession, provided the Managing
General Agent is not in default and accounts for and pays over all premium
and other sums for which the Managing General Agent may be liable to the
Company.
8.2 Ownership of the records, use and control of expirations and the
goodwill relating thereto shall be vested in the Managing General Agent;
provided, however, in the event the Managing General Agent is in default
hereunder, and does not remedy such default within a reasonable time and
does not account for and pay all premiums or other sums for which it may be
liable to the company within a reasonable time following the due date, such
records, use and control of expirations and the good will relating thereto
shall become the property of Company.
8.3 The Managing General Agent assigns to the Company as security for, but
not in payment of, the obligations of the Managing General Agent under this
Agreement all sums due or to become due to the Managing General Agent from
any insured(s) for whom the Managing General Agent or Agent(s) provided a
Policy on behalf of the Company. In the event of default, the Company shall
have full authority to demand and collect such sums and the Managing General
Agent or Agent(s) shall not be entitled to any commissions and/or policy
fees on any premium so collected by the Company. The Company may also
assign any rights it acquires to the Reinsurer.
8.4 The Managing General Agent pledges and/or grants to the Company, so as
to further secure payment of any and all sums due the Company under this
Agreement, any and all of the Managing General Agent's records of
expirations of Policies, including but not limited to, the ownership and
exclusive use of said expirations. In the event of default, the Company
shall have the rights of the holder of a security interest granted by law,
including but not limited to the rights of foreclosure to effectuate such
security interest, and the Managing General Agent hereby agrees to peaceably
surrender possession of such records to the Company upon demand.
ARTICLE 9 - INDEPENDENT CONTRACTOR RELATIONSHIP
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9.1 Nothing contained in this Agreement shall be construed to create the
relationship of employer and employee, or joint venture or partnership,
between the Company and the Managing General Agent, or between the Company
and any employees, representatives or Agents of the Managing General Agent.
ARTICLE 10 - ADVERTISING
------------------------
10.1 Any advertising is the responsibility of, and shall be in the name of
the Managing General Agent. The Managing General Agent is prohibited from
using the Company's name or logo without prior written consent of the
Company.
10.2 In the event an advertisement containing the Company's name or logo is
used by the Managing General Agent or Agent(s), the Managing General Agent
shall send a copy of the advertisement to the Company and maintain a copy
and full details concerning where, when, and how it was used, and comply
with all legal requirements regarding content, review and approval of
advertising and maintenance of records.
ARTICLE 11 - AGENTS LICENSING
-----------------------------
11.1 The Managing General Agent shall maintain current license(s) or
certificate(s) of authority as required by law for the conduct of business
pursuant to this Agreement.
11.2 The Managing General Agent shall assure that all Agents maintain
appropriate license(s), certificate(s) of authority and appointments as
required by law for conduct of business under this Agreement.
11.3 The Managing General Agent shall maintain in force an Agency Agreement,
in a form satisfactory to the Company, with all Agents.
11.4 Any termination by the Managing General Agent of an Agent shall comply
with the Texas Insurance Code and any other applicable law or regulation.
ARTICLE 12 - AGENCY SALE OR TRANSFER
------------------------------------
12.1 In the event a controlling interest (10% or more of outstanding
shares) of the Managing General Agent is to be sold or transferred or the
Managing General Agent is to merge or be consolidated with another firm (not
affiliated with current ownership), the Managing General Agent shall give
thirty (30) days advance written notice to the Company.
12.2 The Managing General Agent shall also give notice to the Company if
there is a change in any principal officer and/or director of the Managing
General Agent within 30 days. Under any of these circumstances, the Company
may, at its election:
a. consent to the assignment of this Agreement to the successor;
b. enter into a new Managing General Agency Agreement with the
successor; or terminate this Agreement pursuant to Article 15.
The Company shall notify the Managing General Agent of its decision within
thirty (30) days of the receipt of the notice.
ARTICLE 13 - HOLD HARMLESS
--------------------------
13.1 The Managing General Agent shall indemnify and hold the Company
harmless from any and all claims, demands, causes of action, damages,
judgments and expenses (including, but not limited to, attorney's fees and
costs of court) which may be made against the Company and which arise,
either directly or indirectly, out of any action or inaction of the Managing
General Agent or the Managing General Agent's employees or representatives
in connection with any rights or obligations of the Managing General Agent
incurred in connection with this Agreement or with asserting rights
hereunder including, but not limited to, any action or inaction of the
Managing General Agent concerning the termination of Agent(s) pursuant to
the Texas Insurance Code or any other applicable law or regulation.
13.2 The Company shall indemnify and hold the Managing General Agent
harmless from any and all claims, demands, causes of action, damages,
judgments and expenses (including, but not limited to, attorney's fees and
costs of court) which may be made against the Managing General Agent and
which arise, either directly or indirectly, out of any action or inaction of
the Company including, but not limited to, any such acts of negligence by
the Company in connection with any rights or obligations of the Company
incurred in connection with this Agreement or with asserting rights
hereunder.
13.3 The Reinsurer is hereby named as a third party beneficiary to all
promises, duties and obligations of indemnification made by the Managing
General Agent to the Company to the extent of all damages, fines, penalties
and/or loss incurred by the Reinsurer as a direct result of indemnifying and
holding the Company harmless for the actions and/or inactions of the
Managing General Agent. Upon indemnification by the Reinsurer, the Company
shall assign its rights of recourse against the Managing General Agent to
the Reinsurer, provided always that any benefit or right of recourse
extended to the Reinsurer shall be subordinate to that of the Company.
ARTICLE 14 - ARBITRATION
------------------------
14.1 Unless both parties mutually agree to waive arbitration with respect to
a particular dispute, the parties to this Agreement hereby agree that
binding arbitration shall be the sole remedy for any and all dispute(s)
arising between them with reference to any transactions, terms or conditions
under this Agreement including its formation and validity. Arbitration
proceedings brought hereunder shall be referred for final determination to
the majority decision of a Panel of three disinterested arbitrators. Notice
of demand for arbitration shall be made in writing and shall be served via
certified or registered mail, return receipt requested, on the Respondent to
the Arbitration at the Respondent's current address. The notice requesting
arbitration shall identify the Agreement(s) involved in the dispute, the
issues to be resolved in the view of the Petitioner, and the arbitrator
selected by the Petitioner. The term "days" as used herein shall mean
calendar days.
14.2 The Respondent shall appoint an arbitrator within 30 days of receiving
a request by the Petitioner in writing and served via certified or
registered mail, return receipt requested, to do so. At the same time as
the appointment, the Respondent shall identify in writing any issues which
in its view must be resolved in the arbitration proceeding and which were
not identified by the Petitioner. If the Respondent fails to appoint its
arbitrator within 30 days of being requested to do so, in writing, by the
Petitioner, the Petitioner shall have the right to appoint the second
arbitrator. Within 30 days after their appointment, the two arbitrators so
chosen shall select a third arbitrator to act as umpire. If the two
arbitrators do not agree as to the selection of a third arbitrator within 60
days after their appointment, the third arbitrator shall be selected from a
list of six individuals (three named by each arbitrator) by a judge of the
federal district court or state court in Dallas County, Texas.
14.3 Each arbitrator shall be a disinterested, active or retired official or
officer of an insurance or reinsurance company, not under the control or
management of either party to this Agreement, and shall have experience in
the class and type of business subject to this dispute.
14.4 Within 30 days after notice of appointment of all arbitrators, the
Petitioner and the Respondent shall each submit a statement of position to
the Panel.
14.5 Within 60 days after notice of appointment of all arbitrators, each
party shall provide the other with its relevant books, records, and/or other
papers not protected from disclosure by either the work-product or attorney
client privilege. Other than the exchange of relevant documents, both
parties shall refrain from engaging in any type of discovery including, but
not limited to, depositions and interrogatories.
14.6 Within 30 days following the exchange of documents, the Petitioner and
the Respondent shall submit hearing briefs to the Panel.
14.7 Unless some other location is mutually agreeable to the parties,
arbitration proceedings shall take place within Dallas County, Texas.
Arbitration shall commence as soon as practicable but in no event longer
than 120 days after selection of the third arbitrator with notice thereof to
the parties. The specific time and site of arbitration shall be promptly
agreed to by the parties, or if no Consent is reached, then determined by
the Panel.
14.8 The Panel shall be relieved from applying the strict rules of evidence
and/or procedure and shall make its decision based on the custom and
practice of the insurance and reinsurance business with a view toward
effecting this Agreement in a reasonable manner. Should either party fail
to appear at the arbitration and/or fail to furnish the Panel with any
subpoenaed papers or information, the Panel is empowered to proceed ex
parte. The Panel shall make its award within 60 days following the close of
the hearing. The majority decision of the Panel shall be final and binding
upon the parties and shall be reduced to a written award, which may include
factual findings, and shall be signed by any two of the three arbitrators,
dated and delivered overnight to the parties. The Panel may award pre-
judgment and post-judgment interest, but in no case shall the authority of
the Panel extend to awarding punitive or exemplary damages. Judgment may be
entered upon the award by any court having jurisdiction.
14.9 Each party shall bear the expense of its own arbitrator, but shall
equally share with the other the expense of the third arbitrator. In the
event that the two arbitrators are chosen by one party, as above provided,
the expense of the two arbitrators, the third arbitrator and the arbitration
shall be equally divided between the Petitioner and the Respondent. Unless
mutually agreed other wise, a court reporter transcript shall be taken of
the hearing with costs to be divided equally between the parties. The Panel
shall allocate the remaining costs of arbitration.
14.10 The Arbitration proceeding brought hereunder, any or all provisions
contained herein, and arbitration awards entered pursuant to this Article
are specifically governed by, subject to and enforceable under the Federal
Arbitration Act (Title 9, United States Code, Sections 1-14, as amended.)
14.11 Each party agrees that time is of the essence with respect to all
terms and conditions referenced in this Article. All deadlines contained in
this Article may be extended by mutual consent of the parties, and if the
Panel has been selected, the Panel's Consent must also be obtained.
14.12 Each party agrees that any arbitration award entered pursuant to
and governed by this Article shall not have any precedential or collateral
estoppel effect on future arbitrations, proceedings, or controversies, if
any, between the parties. Any claim of res judicata or claim preclusion
shall itself be subject to arbitration.
14.13 This Article shall survive the termination of this Agreement.
ARTICLE 15 - TERMINATION
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15.1 This Agreement shall automatically terminate simultaneous with and upon
the cancellation or termination of the reinsurance agreement referred to in
Articles 2.4 and 17, except as provided in Article 15.7.
15.2 The right to solicit and place new business, or renewal, or any
modification of existing business, shall be suspended as provided in Article
15.5 in the event of default by the Managing General Agent.
The term "default" means any material breach or material failure to comply
with the terms and conditions of this Agreement and includes, but is not
limited to, the following:
a. failure to remit balances due as required by this Agreement;
b. failure to adjust all claims arising from all business written
under this Agreement;
c. failure to maintain Agent's license(s) or certificate(s) as
required by any public authority; and failure to comply with
any and all provisions of the Texas Insurance Code and/or Texas
Administrative Code.
15.3 In the event that the Company determines that the Managing General
Agent is in default, the Company may, at its sole discretion, suspend the
authority of the Managing General Agent. Such suspension shall be effective
immediately. The Managing General Agent shall have thirty (30) days to cure
the default.
15.4 In the event of cancellation of this Agreement due to fraud or breach
of conditions, any indebtedness of the Managing General Agent to the Company
and all premiums in the possession of the Managing General Agent, or for the
collection of which the Managing General Agent is responsible, shall,
notwithstanding any provisions to the contrary, become immediately due the
Company.
15.5 The failure of the Company or Managing General Agent to declare
promptly a default or breach of any of the terms and conditions of this
Agreement shall not be construed as a waiver of any of said terms and
conditions, nor estop either party from thereafter demanding a full and
complete compliance herewith.
15.6 After the effective date of this Agreement, if new laws are enacted
that would eliminate the advantages of issuing policies through the
Company, then this Agreement can be terminated at any time by the Managing
General Agent issuing the Company a written notice at least ninety (90) days
prior to the termination date. Soley for termination under this provision,
minimum fronting fees shall not apply for the year the Agreement terminates
and any subsequent years.
15.7 In the event the Company restricts volume under Article 2.9 for reasons
other than default under 15.2, at the request of a reinsurer, or is
required to by the Texas Department of Insurance or other governing body,
then the Managing General Agent may terminate this Agreement by issuing the
Company a written notice at least ninety (90) days prior to the termination
date. Soley for termination under this provision, minimum fronting fees
shall not apply for the year the Agreement terminates and any subsequent
years.
15.8 Notwithstanding the termination of this Agreement, the provisions of
this Agreement shall continue to apply to all unfinished business to the end
that all obligations and liabilities incurred by each party as a result of
this Agreement shall be fully performed and discharged. In the event this
Agreement is terminated, all fronting fees previously collected will be
considered fully earned.
ARTICLE 16 - CLAIMS HANDLING
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16.1 The Managing General Agent, or its appointed claims handler, shall have
the authority to settle all claims arising from business placed with the
Company under this Agreement in accordance with established Company
procedures. At the sole option of the Company, the Company may assume any
or all of this responsibility.
16.2 The Managing General Agent, or its appointed claims handler, shall
carry a minimum E&O policy that includes claims practices of $5,000,000 and
the Company shall be a named insured of the policy.
16.3 The authority of the Managing General Agent to settle claims shall not
exceed $30,000 per claim without notification to and consent of the Company.
The Company retains authority over disputes concerning claims settlement and
setting of loss reserves.
16.4 The Managing General Agent warrants that HCS shall promptly report to
the Company and the Reinsurers any and all claims involving:
a. Fatalities;
b. Bodily injuries involving:
1. Brain stem, quadriplegic, paraplegic or severe paralysis;
2. Serious ▇▇▇▇▇;
3. Amputations of major limbs;
4 Serious impairment of vision.
c. Any bodily injury loss reserve of $20,000 or greater;
d. Potential coverage disputes, bad faith situations or demands
which may give rise to a payment for excess of Policy limits
or extra contractual obligations;
e. violations of the Texas Deceptive Trade Practices Act or
Article 21.21 of the Texas Insurance Code; or
f. Any claims that do not fall within the above categories, but
have a potential of significant liability to the Reinsurer.
16.5 The Managing General Agent may appoint (subject to the approval of the
Company, which shall not be unreasonably withheld) appropriate claims
adjustment firms to handle certain investigations and settlements relating
to claims.
16.6 Payment of losses shall be made on checks or drafts in the name of the
Company. Any expense not directly connected with the settlement of losses
or recovery by way of salvage or subrogation shall be incurred solely by the
Managing General Agent except as from time to time specifically authorized
by the Company.
16.7 The Managing General Agent shall be responsible for the safekeeping of
all checks and/or drafts of the Company used for settling claims and shall
perform the following:
a. the Managing General Agent shall immediately return all voided
checks and/or drafts to the Company;
b. the Managing General Agent shall immediately notify the Company
of any irregularities, theft, disappearance or destruction of
checks and/or drafts; and
c. the Managing General Agent shall see to it that all checks
and/or drafts are sequentially numbered and issued in order, with
all voided checks and/or drafts properly marked and accounted for.
ARTICLE 17 - REINSURANCE
------------------------
17.1 The Managing General Agent may not bind reinsurance or retrocessions on
behalf of the Company, may not commit the Company to participate in
insurance or reinsurance syndicates and may not collect a premium from a
reinsurer or commit the Company to a claims settlement with a reinsurer
without the prior written approval of the Company. If the Company gives such
prior approval, the Managing General Agent must promptly forward a report to
the Company.
17.2 The Managing General Agent is prohibited from ceding reinsurance on
behalf of the Company.
17.3 All business coming within the scope of this Agreement shall be
reinsured under the attached Reinsurance Agreement. Because of the nature
of the Reinsurance Agreement, the Reinsurer shall have the right to act on
all such matters coming within the scope of this Agreement as though the
Reinsurer were the Company, but by doing so or not doing so, shall not
invalidate the right of the Company to act hereunder.
17.4 Any violation of the terms and/or conditions of the Reinsurance
Agreement resulting in any diminution of the Reinsurer's liability to the
Company shall be the sole responsibility of the Managing General Agent and
the Managing General Agent shall indemnify and hold the Company harmless
from any such liability.
ARTICLE 18 - MISCELLANEOUS
--------------------------
18.1 Any obligations and undertakings of each of the parties to this
Agreement shall be performable in Dallas County, Texas. The Managing
General Agent agrees to pay to the Company all sums of money which may
become payable to Company under this Agreement.
18.2 Complaints by Insureds - All Texas Department of Insurance (TDI)
complaints are to be handled by the Managing General Agent as follows:
a. the Managing General Agent is to notify the Company immediately of
any TDI complaints received and forward a copy of the complaint to
the Company;
b. the Company will promptly notify the Managing General Agent of any
complaints it receives on the business written pursuant to this
Agreement;
c. the Managing General Agent is to promptly research the
circumstances of each complaint and provide the Company with a
written reasonable explanation of the Managing General Agent's
position and intention; and
d. the Managing General Agent is to maintain complete records of each
complaint and all supporting documentation.
18.3 As regards non-TDI complaints, the Managing General Agent is to
maintain a log and complete records of each complaint and all supporting
documentation in a form approved by the Company.
18.4 The underwriting guidelines of the Company, as may be promulgated from
time to time by the Managing General Agent, are incorporated herein by
reference.
18.5 The Managing General Agent is prohibited from offsetting balances due
under this Agreement with any offset due under any other contract.
18.6 As regards the subject matter of this Agreement, this Agreement
supersedes all previous Managing General Agency Agreements, if any, whether
written and oral, between the Company and the Managing General Agent.
18.7 The Managing General Agent shall satisfy the financial responsibility
requirement under Insurance Code, Article 21.07-3.
18.8 No amendments to or modifications of this Agreement shall be valid
unless made in writing and executed by the Company and the Managing General
Agent in the form of an Amendment to this Agreement.
18.9 The Managing General Agent shall cause Hallmark Financial Services to
execute a guaranty of the Managing General Agent's obligations under this
Agreement.
18.10 The Managing General Agent shall not directly or indirectly assign
its rights and obligations under this Agreement in whole or in part to any
non-affiliated party without the prior written approval of the Company.
18.11 Wherever from the context it appears appropriate, each term stated
in either the singular or plural shall include the singular and plural and
any term stated in either the masculine, the feminine or the neuter gender
shall include the masculine, the feminine and the neuter gender. All
captions and section headings are intended to be for purposes of reference
only and do not affect the substance of the articles to which they refer.
18.12 Each party hereto agrees to perform any further acts and execute
and deliver any further documents, which may be reasonably necessary to
carry out the provisions of this Agreement.
18.13 In the event that any of the provisions, or portions thereof, of
this Agreement are held to be illegal, invalid or unenforceable by any court
of competent jurisdiction, the validity and enforceability of the remaining
provisions, or portions thereof, shall not be affected by the illegal,
invalid or unenforceable provisions or by its severance here from.
18.14 Any and all notices required or permitted to be given under this
Agreement shall be in writing and will be deemed given when deposited in the
United States Postal Service, Certified Mail, Return Receipt Requested, to
the parties' address as provided below.
This Agreement shall be effective the 1st day of September 2003 and shall
terminate October 31, 2006.
The Company: The Managing General Agent:
OLD AMERICAN COUNTY MUTUAL AMERICAN HALLMARK GENERAL
FIRE INSURANCE COMPANY AGENCY, INC.
By: By:
-------------------------- -----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Name:
-------------------------- -----------------------------
Title: President Title:
-------------------------- -----------------------------
Date: July 3, 2003 Date:
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SCHEDULE OF BUSINESS
The Company, the Reinsurer and the Managing General Agent agree that the
Managing General Agent has the authority to accept, on forms approved by the
Company, any Policy, endorsement, binder, certificate, or proposal for
insurance. The Managing General Agent's authority is limited by this
Schedule of Business.
Overall:
Projected premium volume $40,000,000
Territory Texas only
Maximum policy term Twelve months
Lines of business and maximum limits of liability
Coverage Maximum Limits
Bodily Injury Liability $ 25,026 each person
$ 50,026 each accident
Property Damage Liability $ 25,026 each accident
Uninsured/Underinsured Motorists
Bodily Injury $ 25,026 each person
$ 50,026 each accident
Property Damage $ 25,026 each accident
Personal Injury Protection $ 2,526 each person
Medical payments $ 526 each person
Physical Damage $ 50,000 each automobile
This Agreement does not apply to and specifically excludes the following:
a. Any business not produced by AMERICAN HALLMARK GENERAL AGENCY, INC.
or
b. Any business not classified as private passenger automobile
liability or physical damage, or
c. Exclusions specified within the Quota Share Reinsurance Agreement
Number HFS-03-001.
The Company: The Managing General Agent:
OLD AMERICAN COUNTY MUTUAL AMERICAN HALLMARK GENERAL
FIRE INSURANCE COMPANY AGENCY, INC.
By: By:
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇ Name:
-------------------------- -----------------------------
Title: Vice President Title:
-------------------------- -----------------------------
Date: Date:
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