Exhibit 10.6
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CLAIMS ADMINISTRATION AGREEMENT
by and among
INSPIRE CLAIMS MANAGEMENT, INC., debtor and debtor-in-possession,
INSPIRE INSURANCE SOLUTIONS, INC., debtor and debtor-in-possession,
And
ARROWHEAD CLAIMS MANAGEMENT, INC.
Dated as of May 14, 2002
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CLAIMS ADMINISTRATION AGREEMENT
THIS CLAIMS ADMINISTRATION AGREEMENT, dated as of May 14, 2002 (the
"Signing Date"), is by and among INSpire Claims Management, Inc., a Delaware
corporation and debtor and debtor-in-possession ("INSpire Claims"), INSpire
Insurance Solutions, Inc., a Texas corporation and debtor and
debtor-in-possession ("INSpire Insurance"), and Arrowhead Claims Management,
Inc. a California corporation ("Customer"). INSpire Claims, INSpire Insurance
and Customer are sometimes collectively referred to as the "Parties," and
individually referred to as a "Party." This Claims Administration Agreement,
together with the Schedules referenced herein and attached hereto, are
collectively referred to as this "Agreement."
RECITALS
A. INSpire Claims provides certain claims administration services to
Customer pursuant to a Claims Administration Services Agreement, dated as of
December 1, 1998, by and between INSpire Claims and Arrowhead General Insurance
Agency, Inc., a Minnesota corporation ("AGIA"), which was subsequently assigned
to Customer (the "Claims Administration Agreement").
B. INSpire Claims, INSpire Insurance and Customer subsequently entered
into a Claims Management System and Support Services Agreement and First
Amendment to Claims Administration Agreement, dated as of January 11, 2002 (the
"Claims Management Agreement"), by which, among other things, the personal
automobile claims servicing business was removed from the terms and conditions
of the Claims Administration Agreement and INSpire Insurance agreed to provide
certain services to Customer.
C. INSpire Insurance, INSpire Claims and Customer now desire to
terminate the Claims Administration Agreement and the Claims Management
Agreement and to concurrently enter into various new agreements, including this
Agreement, which will collectively establish a new business relationship between
the Parties.
D. On February 15, 2002, INSpire Claims and INSpire Insurance
voluntarily filed petitions for relief under Chapter 11 of the United States
Bankruptcy Code (the "Bankruptcy Code") with the United States Bankruptcy Court
for the Northern District of Texas, Fort Worth Division (the "Bankruptcy
Court"), which are jointly being administered under Case No. 02-41228-DML (the
"Bankruptcy Case").
E. INSpire Insurance, INSpire Claims and Customer further desire that
this Agreement, as well as the other agreements referenced in it, shall only be
effective and binding on them if (1) all of such agreements are approved by a
final order of the Bankruptcy Court acceptable in form and substance to
Customer, and (2) INSpire's rejection of the Claims Administration Agreement and
the Claims Management Agreement is approved by a final order of the Bankruptcy
Court acceptable in form and substance to Customer.
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STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the promises and the mutual agreements,
covenants, representations and warranties set forth in this Agreement and for
other good, valid and binding consideration, the receipt and sufficiency of
which are hereby acknowledged, the Parties, intending to be legally bound,
hereby agree as follows:
ARTICLE I
SERVICES;TERM; FEES
Section 1.1 Services. Effective on the later of the Signing Date or the
date when this Agreement is approved by final order of the Bankruptcy Court as
provided for herein (the "Effective Date") and during the Term (as defined
below), INSpire Claims will provide the services set forth on Schedule 1.1 (the
"Services"), to Customer upon the terms and conditions set forth in this
Agreement. In addition to the Services, INSpire Claims will provide to Customer
such other claims administration services as Customer may reasonably request in
writing from time to time during the Term and with respect to which the Parties
will have agreed regarding the scope, nature and pricing of such services and
the time period during which such services will be provided (the "Additional
Services"). During the Term of this Agreement, Customer may assume certain of
the Services from INSpire Claims upon terms and conditions which are
mutually-agreeable to the Parties and, with respect to such transferred
services, the Parties have agreed that INSpire Claims' costs associated with
such services (the "Transferred Services") shall be borne by Customer and then
offset against the Services Fee as set forth in Section 1.3(a). Such transfer
shall be executed only through a signed addendum to this Agreement.
Section 1.2 Term. The term during which INSpire Claims will provide the
Services to Customer will commence on the Effective Date and will expire on
December 31, 2008 (the "Expiration Date") unless extended or terminated pursuant
to the terms of this Agreement (the "Term"). The Expiration Date will be
extended automatically for a period of one year unless either Party gives
written notice of non-extension to the other Party at least six months prior to
the then current Expiration Date.
Section 1.3 Services Fee, Quarterly Minimums and Related Expenses.
(a) Services Fee. During the Term, Customer will pay to
INSpire Claims for the performance of the Services a fee which will be payable
monthly and calculated by multiplying (i) the amount of Earned Premium
recognized by Customer that is subject to the Services in the immediately
preceding month, by (ii) 7.15% (the "Services Fee"). For the purposes of this
Agreement, "Earned Premium" will mean the aggregate amount of personal property
premiums, for the products and carriers in the authorized states included in
Schedule 1.1, recognized as earned by Customer during a particular time period.
The Services Fee will be due and payable in arrears on the last day of the month
following the close of the calendar month in which the Services were performed.
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(b) Quarterly Minimums. During each calendar quarter of the
Term, the Services Fee payable each month will not be less than an amount equal
to Eighty Percent (80%) of the average monthly Services Fee paid in the
immediately prior calendar quarter (the "Quarterly Minimum").
(c) Unanticipated and Increased Service Level Changes. Each
Party agrees to negotiate in good faith for an adjustment to the Services Fee in
the event of any statutory, regulatory or judicial changes that require
additional activities not then provided for pursuant to this Agreement.
(d) Taxes. Customer will pay all tariffs and taxes, however
designated or levied, now existing or imposed in the future that are applicable
to the Services or the Services Fee. Such tariffs and taxes include state and
local privilege and excise taxes, sales, use and personal property taxes and any
other tariff or tax based on Services performed, equipment used, and the
communication or storage of data. Notwithstanding the foregoing, Customer will
not be responsible for, and INSpire will pay (i) any franchise or income taxes
based upon the income of INSpire Claims, (ii) any personal property or similar
taxes based upon the personal or real property owned or leased by INSpire Claims
and used in the performance of the Services, and (iii) Texas state sales taxes
payable as a result of the Services Fee due to INSpire Claims under this
Agreement; provided, however, that (1) the maximum annual Texas state sales tax
base (the amount on which Texas state sales taxes are calculated) payable by
INSpire on the Services Fee will not exceed the product of $5,000,000 of Earned
Income multiplied by the then effective Services Fee, and (2) Customer will pay
the excess of such maximum amount.
(e) Loss Adjustment Expenses. Unless expressly provided for in
this Agreement, INSpire Claims will be entitled to no other compensation. To
this end, INSpire Claims will pay with its own funds, and not with the funds of
Customer or insurers or reinsurers represented by Customer, all allocated and
unallocated loss adjustment expenses necessary to perform Services, including
its overhead, personnel and administrative expenses, the costs of records
retrieval, medical reviews, investigators, appraisers, experts and all other
vendors and subcontractors. Unless expressly provided for in this Agreement,
Customer and the insurers and reinsurers represented by Customer will have no
obligation to reimburse INSpire Claims for any internal or external expenses or
loss adjustment expenses incurred by INSpire Claims in the performance of
Services, except in the event of extraordinary loss adjustment expenses incurred
as the direct result of a catastrophic event, in which instance INSpire will be
entitled to be reimbursed for those extraordinary loss adjustment expenses on
the condition that the expenses are deemed reasonable and appropriate by the
insurer and are reimbursable to INSpire by the insurer. Under no circumstances
will Customer have any obligation to pay any amount to INSpire in addition to
the Services Fee set forth in Section 1.3(a).
(f) Service Level Penalty Payment. During the Term, INSpire
Claims will pay to Customer the penalty payments set forth in Schedule 1.3(f)
attached to this Agreement for the failure of INSpire Claims to achieve the
Service Levels (as defined below) during the specified time period (the "Service
Level Penalties"). Service Level Penalties shall not in the aggregate exceed 15%
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of the Services Fee payable in any month. Payment of such Service Level
Penalties shall not in any way limit, restrict or relieve any Party of liability
for any breach of this Agreement. INSpire Claims will pay the Service Level
Penalties to Customer within thirty days of the close of the time period during
which the penalty payments were calculated or, alternatively, Customer may, upon
thirty (30) days notice to INSpire Claims, offset the Service Level Penalties
owed by INSpire Claims against the Services Fee payable by Customer to INSpire
Claims. In the event that INSpire Claims believes that Service Level Penalties
have been improperly offset by Customer, INSpire Claims shall have full recourse
to all remedies provided for in Article VII of this Agreement.
(g) Penalty Identification. Penalties will be identified via
system reports, where available, or via audit by Customer. Audits shall be
conducted quarterly or monthly, at Customer's option, upon ten (10) days written
notice to INSpire Claims and will consist of a review of a sample size of
transactions constituting at least 10% of the universe of applicable
transactions for the specified audit period. Audit results will be considered by
Customer and INSpire Claims to be applicable to 100% of the universe of
applicable transactions for that specified audit period for the purposes of
calculating Penalties only if Service Levels are not met in more than 95% of the
files audited.
(h) Acts Beyond Control. If an event described in Section 8.14
of this Agreement [Force Majeure clause] impacts INSpire Claims' ability to meet
a Service Level, then INSpire Claims will not be penalized for failing to meet
that Service Level to the extent that such event has affected INSpire Claims'
ability to meet its obligations.
(i) Interest on Past Due Payments. Any sum due INSpire Claims
pursuant to this Agreement that is not paid on the date on which payment is due
shall bear interest from that date until the date such sum is paid at the lesser
of 1.5 percent per month or the maximum rate of interest allowed by applicable
law. Customer will also pay INSpire Claims for any reasonable expenses,
including attorney's fees, incurred by INSpire Claims in the collection of any
amounts due and payable under this Agreement.
(j) Electronic Funds Transfer. INSpire Claims will provide
Customer bank routing information. All payments are to be via Electronic Funds
Transfer (EFT), unless otherwise agreed to in writing by the parties, to the
account specified in writing by INSpire Claims.
(k) Payment of Undisputed Amounts. In the event that there
is an amount in dispute, Customer is still obligated to pay all undisputed
amounts on all invoices.
Section 1.4 Policy Processing and Administration Agreement; Sublease of
Premises; Software License Agreement; Professional Services Agreement; Asset
Purchase Agreement; Comprehensive Preferred Escrow Agreement; and Policy
Processing and Administration Agreement.
(a) Sublease of Premises. Concurrent with the execution of
this Agreement, and as a condition to it, AGIA and INSpire Insurance will enter
into a separate Sublease by which INSpire Insurance shall sublease office
premises located at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, to AGIA.
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(b) Software License Agreement. Concurrent with the execution
of this Agreement, and as a condition to it, AGIA and INSpire Insurance will
enter into separate Software License Agreement by which INSpire Insurance will
license certain software systems to AGIA.
(c) Professional Services Agreement. Concurrent with the
execution of this Agreement, and as a condition to it, AGIA, Customer, and
INSpire Insurance will enter into separate Professional Services Agreement by
which INSpire Insurance will provide certain professional services to AGIA.
(d) Asset Purchase Agreement. Concurrent with the execution of
this Agreement, and as a condition to it, AGIA and INSpire Insurance will enter
into a separate Asset Purchase Agreement by which INSpire Insurance will sell
certain assets to AGIA and AGIA will purchase such assets from INSpire
Insurance.
(e) Comprehensive Preferred Escrow Agreement. Concurrent with
the execution of this Agreement, and as a condition to it, AGIA, Customer and
INSpire Insurance will enter into separate Comprehensive Preferred Escrow
Agreement by which INSpire Insurance will maintain in escrow a copy of the
object code and source code for the latest version of INSpire Insurance's
software incorporated in the System in use by Customer.
(f) Policy Processing and Administration Agreement. Concurrent
with the execution of this Agreement, and as a condition to it, AGIA and INSpire
Insurance will enter into a separate Policy Processing and Administration
Agreement by which INSpire Insurance will provide certain policy processing and
administration services to AGIA.
ARTICLE II
PERFORMANCE OF SERVICES
Section 2.1 Service Levels. Each Party agrees to the service levels set
forth on Schedule 2.1, which service levels will be reviewed annually and
revised as mutually agreed upon by the Parties (the "Service Levels"). INSpire
Claims will provide Services under this Agreement in accordance with the Service
Levels.
Section 2.2 Evaluation and Review Process. Within 30 days after the end
of each calendar month during the Term, INSpire Claims will provide Customer
with a monthly service report that shows the performance of INSpire Claims as
measured against the Service Levels.
Section 2.3 Audit: Access to Records, Systems and Facilities.
(a) Annual Audit. Within 90 days after the completion of each
calendar year during the Term, INSpire Claims and Customer will cause a mutually
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agreed-upon, nationally-recognized accounting firm or other professional entity
(i) to test the procedures and controls used by INSpire Claims in the
performance of the Services, and (ii) to opine as to whether such procedures and
controls are sufficient to meet the Service Levels. INSpire Claims and Customer
agree to split the costs and expenses of the third party auditor equally between
the Parties.
(b) Access to Records and Facilities. INSpire Claims will
provide Customer and its reinsurers, carriers, prospective carriers and the
entity performing the annual audit described above reasonable access to its
facilities and all books, records and accounts necessary to verify compliance
with this Agreement. Such access will be made available upon prior written
notice during normal business hours for the Term of this Agreement and during
the periods in which INSpire Claims is required to maintain such records.
INSpire Claims will provide the appropriate state insurance department
reasonable access to its facilities and all necessary books, records and
accounts in a form usable by such department. Customer remains responsible for
ensuring that all persons given access comply with the confidentiality
provisions of Article III.
(c) Access to Systems. INSpire Claims will provide Customer
reasonable access to the computer systems used by INSpire Claims to perform the
Services. Such access will be made available upon prior written notice during
normal business hours during the Term. Customer will be responsible for the
payment or reimbursement of any fees or expenses associated with compliance by
INSpire Claims with this subsection.
Section 2.4 Ownership of Property
(a) Customer's Property. Customer will own all right, title
and interest in and to the content of the policy, claim, accounting and agent
files and computer images and storage discs created or developed in connection
with or as a result of the performance of the Services.
(b) INSpire Claims' Property. Subject to the foregoing,
INSpire Claims will own all right, title and interest in and to any and all
tools, techniques, processes, procedures, inventions, software, patents, know
how, trade secrets and other copyrights that it already has or that are first
discovered, created or developed by INSpire Claims in connection with, as a
result of or incident to the performance of the Services.
Section 2.5 Customer's Performance Obligations and Acknowledgements.
The performance of the Services by INSpire Claims requires the support and
cooperation of Customer. As such, Customer agrees and acknowledges as follows:
(a) Provide Information and Material. Customer will provide,
in a timely manner and in a format reasonably acceptable to INSpire Claims, the
data and materials necessary for INSpire Claims to perform the Services,
including policy jackets, Customer's banking institution account information,
corporate and subsidiary logos (if applicable), style and specifications of
printed documents such as insurance policies.
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(b) Acknowledgment of Responsibility. Customer acknowledges
that INSpire Claims assumes no risk or responsibility for Customer's policy
processing and administration functions under this Agreement.
(c) Access to Third Party Software. Customer will provide
INSpire Claims access to all software necessary for INSpire Claims to perform
the Services.
Section 2.6 Maintenance of Documents and Files. During the Term,
INSpire Claims will maintain (a) records of amounts billed and payments made on
behalf of Customer, and (b) copies of all claims, policies, notifications, loss
reports, inspections, independent adjuster reviews, claims documentation,
records and correspondence relating to all Customers claims and policies.
INSpire Claims will not destroy these records and documents without the written
permission of Customer for a period of five years from the loss or termination
date of the applicable policy, or the period specified by the applicable state
or federal statute regulating preservation of records, whichever is longer.
INSpire Claims may, at its discretion, use magnetic, optical, and other types of
technology to store such data. INSpire Claims agrees to provide to Customer
reasonable supporting documentation regarding any disputed invoice or claim
amount within 15 days after Customer provides written notification of the
dispute to INSpire Claims.
Section 2.7 Ultimate Discretion. INSpire Claims acknowledges and agrees
that Customer, being at risk and having ultimate responsibility for the claims
to be administered by INSpire Claims, will at all times have ultimate discretion
with respect to all matters pertaining to claims arising under its policies.
Section 2.8 Mail Received. On and after the Effective Date, INSpire
Claims may receive and open all mail addressed to Customer and deal with the
contents thereof in its discretion to the extent that such mail and the contents
thereof relate to the Services. INSpire Claims agrees to deliver or to cause to
be delivered to Customer all mail received by INSpire Claims which is addressed
to Customer and does not relate to the Services.
Section 2.9 Insurance. During the Term, INSpire Claims will maintain
errors and omissions insurance under a current and paid up policy, effective as
of the Effective Date, issued by an insurer reasonably acceptable to Customer,
which insurance will have a policy limit of no less than $5,000,000 and a
deductible no greater than $250,000. If INSpire Claims fails to maintain
coverage or incurs a lapse in coverage, Customer may purchase tail coverage (at
INSpire Claims' expense) in the amount set forth herein. INSpire Claims will
provide a copy of said insurance policy to Customer and annually provide to
Customer a certificate of insurance issued by INSpire Claims' insurer. Customer
will be named as an additional insured under INSpire Claims' errors and
omissions insurance policy.
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ARTICLE III
CONFIDENTIALITY
Section 3.1 Definitions. For purposes of this Article the following
definitions will apply:
(a) "Arrowhead Group" means Arrowhead Management Company,
AGIA, and Customer and their respective affiliates, parent entities,
subsidiaries, agents, directors, officers, employees, accountants, attorneys and
advisors.
(b) "INSpire Group" means INSpire Claims and INSpire Insurance
and their respective affiliates, parent entities, subsidiaries, agents,
directors, officers, employees, accountants, attorneys and advisors.
(c) "Confidential Information" means any information, oral or
written, whether prepared by the Disclosing Party, its Representatives or
otherwise, which is furnished to the Receiving Party or on behalf of the
Disclosing Party after the date of this Agreement relating to the Services. Such
information includes, but is not limited to, financial information, trade
secrets, processes, inventory, formulas, prices, markets, employee lists,
salaries, reports, computer files, maps, drawings, specifications, title
reports, customer information and lists, vendor sources, development and
marketing, plans, statistical data, forecasts, marketing strategies, or other
commercial, technical, strategic or human resources information. The term
"Confidential Information" does not include: (i) information which is or becomes
generally available to the public other than as a result of any unauthorized
disclosure or any wrongful acts of the Receiving Party; (ii) information which
is independently developed by the Receiving Party without the use of
Confidential Information from the Disclosing Party; (iii) information which is
rightfully received from a third party whose disclosure would not violate any
confidentiality obligation or breach of any agreement; or (iv) information which
is approved for release by the Disclosing Party in writing signed by the
Disclosing Party specifying the information to be released.
(d) "Disclosing Party" means Arrowhead Group or INSpire Group,
as the case may be, with respect to any Confidential Information provided by
such party to the other party.
(e) "Receiving Party" means Arrowhead Group or INSpire Group,
as the case may be, with respect to any Confidential Information received by
such party from the other party.
(f) "Representative" means any employee, agent, attorney,
accountant, financial advisor or other person acting on behalf of a party in
connection with this Agreement.
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Section 3.2 Nondisclosure. The Parties hereby agree as follows:
(a) Use of Information. All Confidential Information will be
used solely for the purpose of performing the Services. In no event will
Confidential Information be used by any party or person receiving Confidential
Information for business or competitive purposes.
(b) Confidentiality. All Confidential Information will be kept
strictly confidential by the Receiving Party and the Receiving Party will
restrict disclosure of Confidential Information to only those employees, agents
and advisors of the Receiving Party who have a need to know such information for
the purpose of performing the Services.
(c) Disclosure to Representatives. Representatives of the
Receiving Party shall be informed by the Receiving Party of the confidential
nature of such information and the covenant of confidentiality by the Receiving
Party hereunder, and they shall be directed by the Receiving Party to treat such
information confidentially. Before any disclosure o dissemination of any
Confidential Information subject to this Agreement is made to any person, other
than an officer or director of the Receiving Party or its counsel or independent
accountant, the Receiving Party shall provide the person to whom such disclosure
is made with a copy of this Agreement.
Section 3.3 No Solicitation. Each Party agrees that without the other
Party's prior written consent, neither such Party nor any of its affiliates will
solicit for employment, employ or otherwise contract for or solicit the services
of any person who is now employed by the other Party, for a period of one year
from the Effective Date, provided that this paragraph shall not apply to general
commercially published solicitations for employment by a Party or responses
thereto by employees of the other Party or to the hiring of employees as
contemplated by the definitive agreements pursuant to which this Agreement was
executed.
Section 3.4 Required Disclosure. In the event the Receiving Party or
its Representatives are requested or required in a judicial, administrative or
governmental proceeding to disclose any Confidential Information, the Receiving
Party shall cooperate with the Disclosing Party and provide it with prompt
notice of any such request so that the Disclosing Party may seek an appropriate
protective order and/or waive the Receiving Party's compliance with the
provisions of this Agreement. If, in the absence of a protective order or the
receipt of a waiver hereunder, the Receiving Party or its Representatives are
nonetheless, in the opinion of the Receiving Party's attorneys, legally required
to disclose Confidential Information to any tribunal or else stand liable for
contempt or suffer other penalty, the Receiving Party may disclose such
information to such tribunal without liability hereunder, provided that the
Receiving Party complies with the notice provisions of this paragraph.
Section 3.5 Return of Confidential Information. Upon the expiration or
termination of this Agreement, the Receiving Party shall promptly, and in any
event upon request by the Disclosing Party, deliver to the Disclosing Party all
Confidential Information, including all written and electronically stored
copies. Neither the Disclosing Party nor its Representatives will retain any
copies, extracts or other reproductions, in whole or in part, of such
Confidential Information. At the Disclosing Party's request, all documents,
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memoranda, notes and other such writings prepared by the Receiving Party or its
Representatives based on the information in the Confidential Information, or
which quote from or summarize any Confidential Information, will be destroyed as
soon as reasonably practicable, and such destruction shall be certified in
writing to the Disclosing Party by an authorized officer of the Receiving Party
supervising the destruction.
Section 3.6 Remedies for Breach. The Parties acknowledge that a breach
of the covenant of confidentiality contained in this Agreement may result in
irreparable and continuing damage to the Disclosing Party for which there will
be no adequate remedy at law. In the event of any breach of this Agreement, the
Receiving Party agrees that the Disclosing Party shall be entitled to seek and
obtain specific performance of this Agreement by the Receiving Party, including,
upon making the requisite showing that it is entitled thereto, provisional
injunctive relief restraining the Receiving Party from committing such breach,
in addition to such other and further relief, including monetary damages, as
provided by law.
ARTICLE IV
TRADE SECRET AND PROPRIETARY RIGHTS
Section 4.1 No Rights to Software. Notwithstanding any use by INSpire
Claims of any proprietary computer software programs in the performance of the
Services, neither this Agreement nor the performance of any Services hereunder
will be construed as a grant of a license or any other interest in or to INSpire
Claims' computer software programs. Further, this Agreement grants to Customer
no right to possess or reproduce, or any other interest in, any of the computer
software programs used in the performance of all or any part of the Services or
their specifications in any tangible or intangible medium. Customer may not
mortgage, hypothecate, sell, assign, pledge, lease, transfer, license or
sublicense any computer software programs used in the performance of all or any
part of the Services, nor allow any person or entity to transmit, copy or
reproduce any such computer software programs. In the event Customer comes into
possession of the computer software programs used in the performance of all or
any part of the Services, Customer will immediately notify INSpire Claims and
return such computer software programs and all copies of any kind thereof to
INSpire Claims.
Section 4.2 Nondisclosure. Other than Customer's employees who need
access to computer software programs for the performance of their duties,
Customer covenants and agrees not to disclose or otherwise make available to any
person any computer software programs used in the performance of all or any part
of the Services. Customer agrees to take all reasonable steps necessary to
obligate each of its employees who is given access to such computer software
programs to a level of care sufficient to protect the computer software programs
from unauthorized disclosure.
Section 4.3 Survival. THE OBLIGATION OF THE PARTIES UNDER THIS ARTICLE
AND ARTICLE III WILL CONTINUE AFTER THIS AGREEMENT EXPIRES OR IS TERMINATED.
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ARTICLE V
TERMINATION
Section 5.1 Termination of Agreement. This Agreement may be terminated
prior to the Expiration Date only as follows:
(a) by the non-breaching Party upon a breach by the other
Party of its duties or obligations under this Agreement; provided, however, that
(i) such breach remains substantially uncured within 30 days after written
notice specifying such breach is received by the breaching Party, or (ii) with
respect to a breach that cannot be reasonably cured within a 30-day period,
should the defaulting party fail to proceed within 30 days after written notice
specifying the breach to commence curing the default and thereafter fail to
proceed with all reasonable diligence to cure substantially the default;
(b) by a Party in the event (i) the other Party makes a
general assignment for the benefit of creditors, (ii) the other Party files a
voluntary petition in bankruptcy or petitions for reorganization or similar
arrangement under the bankruptcy laws, excepting the Bankruptcy Case, (iii) a
petition in bankruptcy is filed against the other Party by a third party and
such petition is not dismissed within ninety days of its filing date, (iv) a
receiver or trustee is appointed for all or any part of the property and assets
of the other Party, or (v) the Bankruptcy Case is converted to a case under
Chapter 7 of the Bankruptcy Code;
(c) by Customer, upon commission by INSpire Claims of fraud,
criminal conduct or willful violation of an insurance statute or regulation, if
said conduct by INSpire Claims has a material adverse effect on Customer's
ability to engage in business. This paragraph does not apply to conduct by
INSpire Claims' employees who are not acting at the direction of INSpire Claims;
or
(d) by INSpire Claims if Customer's Written Premium falls
below $20,000,000 on an annual basis.
Section 5.2 Procedure Upon Expiration or Termination. Upon expiration
or termination of this Agreement:
(a) Customer may (i) assume control of such open claim files
as Customer may elect, in which case INSpire Claims will take all reasonable
steps necessary to effect the orderly transfer of such claims files so that
Customer's liability for claims or allocated loss adjustment expenses is not
incurred, or (ii) require INSpire Claims to continue to administer to a
conclusion such open claim files as Customer may elect, in which case Customer
will pay INSpire Claims a reasonable fee on a time and materials basis
reasonably established by INSpire Claims;
(b) INSpire Claims will promptly return to Customer any
policies, forms or other supplies imprinted with Customer's name, regardless of
who incurred the cost for same as well as all files and documents regarding
Customer's policies and claims;
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(c) INSpire Claims will provide promptly to Customer, without
charge, a tape backup of all data files. Further, for a reasonable fee on a time
and materials basis, INSpire Claims will provide to Customer the personnel
necessary to assist with the records layout and file structures of the data
files such that these records and data files can be transferred to a new data
base designated by Customer. In the event that termination is as a result of a
breach by INSpire Claims, Customer shall have the right to maintain and process
claims arising on its policies on INSpire Claims' then current software systems
for a period of six months so that Customer can effect an orderly transfer of
its business to a new processing system; provided that Customer shall pay all
third party maintenance, license and other fees in order to do so;
(d) Such expiration or termination will not in any way limit,
restrict or relieve any Party of liability for any breach of this Agreement; and
(e) The automatic stay under the Bankruptcy Code will not in
any way limit or restrict Customer from exercising its rights or remedies upon
expiration or termination of this Agreement.
ARTICLE VI
REMEDIES AND LIMITATION OF LIABILITY
Section 6.1 Indemnification of the Parties.
(a) Each Party (the "Indemnitor") will indemnify, defend, and
hold harmless the other Party (the "Indemnitee") from and against any
arbitration award, claim, cost, damage, demand, expense, fine, liability,
lawsuit, obligation, payment or penalty of any kind or nature whatsoever,
including any reasonable attorneys' fees and expenses (a "Claim") incurred by
the Indemnitee that arises out of or directly relates to the Indemnitor's
performance or breach of this Agreement. Upon an Indemnitee's request, the
Indemnitor will indemnify the Indemnitee's directors, employees, officers,
agents, attorneys, representatives and shareholders to the same extent as such
Indemnitee. No such person, however, will be a third party beneficiary of the
indemnification provision set forth in this Agreement. To the extent that a
Indemnitee requests the Indemnitor to indemnify such party's representatives,
the Indemnitee will cause its representatives to comply with the indemnification
provisions and abide by the indemnification limitations set forth in this
Agreement.
(b) Customer hereby fully and irrevocably waives, releases and
discharges all existing and potential claims, awards, costs, demands, expenses,
liabilities, fines, balances, payments, demands for payment or rights that
Customer may have against INSpire Claims and INSpire Insurance, which in any way
relate to or arise from the services rendered by INSpire Claims and INSpire
Insurance under the Claims Administration Agreement and the Claims Management
Agreement, except for claims for indemnification arising from INSpire Claims'
negligent handling of claims under Customer's policies prior to the Effective
Date of this Agreement. INSpire Claims and INSpire Insurance hereby fully and
irrevocably waive, release and discharge all existing and potential claims,
awards, costs, demands, expenses, liabilities, fines, balances, payments,
demands for payment or rights INSpire Claims and INSpire Insurance may have
13
against Customer, which in any way relate to or arise from the services rendered
by INSpire Claims and INSpire Insurance under the Claims Administration
Agreement and the Claims Management Agreement, except for (i) claims for
indemnification arising from Customer's negligent handling of claims under its
own policies on or after the Effective Date of this Agreement, and (ii) any
amounts owed to INSpire pursuant to the Claims Administration Agreement and the
Claims Management Agreement for services rendered by INSpire from April 1, 2002
until the Effective Date. INSpire Claims will indemnify, defend and hold
Customer harmless from liability for negligent claims handling prior to the
Effective Date, unless the claims were handled in compliance with the direction
of Customer or the insurer. Customer will indemnify, defend and hold INSpire
Claims harmless for Customer's negligent claims handling, unless the claims were
handled in compliance with the direction of the insurer.
Section 6.2 Limitations of Liability. INSpire Claims and INSpire
Insurance will not be liable for any damages or indemnification under this
Agreement arising out of any handling of any claims under Customer's policies
where bad faith is alleged (the "Bad Faith Claims") (a) except to the extent
such Bad Faith Claim arises out of or is directly related to INSpire Claims' and
INSpire Insurance negligence, gross negligence or willful misconduct in the
performance of the Services; provided, however, that INSpire Claims and INSpire
Insurance will have no liability hereunder in connection with any action, or any
failure to take an action, taken at the direction of Customer, (b) until the
amount of the aggregate of all Bad Faith Claims for damages and indemnification
for which INSpire Claims and INSpire Insurance would otherwise be responsible
exceeds $50,000 in any particular calendar year (the "Deductible") and then
INSpire Claims and INSpire Insurance will only be responsible for the amount in
excess of the Deductible, and (c) to the extent that the aggregate amount of
such Bad Faith Claims exceed $5,000,000 in the aggregate.
Section 6.3 Limitation Acknowledgement. Each Party expressly
acknowledges that the limitations set forth in this Article VI represent the
express agreement of the Parties with respect to the allocation of risks between
the Parties, including the level of risk to be associated with the performance
of the Services as related to the amount of the payments to be made to INSpire
Claims for such Services, and each party fully understands and irrevocably
accepts such limitations.
Section 6.4 Notice of Claim. Any award of damages or indemnification
pursuant to this Agreement is conditioned upon the Indemnitor having received
full and prompt notice in writing of the Claim and the Indemnitee allowing the
Indemnitor to fully direct the defense or settlement of such Claim; provided,
however, that the failure to receive prompt notice relieves the Indemnitor of
its obligations under this Article only if the Indemnitor is materially
prejudiced by the failure to receive such notice. The Indemnitor will not be
responsible for any settlement or compromise made without its consent.
14
ARTICLE VII
ARBITRATION AND EQUITABLE REMEDIES
Section 7.1 Settlement Meeting. The Parties will attempt in good faith
to resolve promptly through negotiations any dispute under this Agreement. If
any such dispute should arise, the Parties, will meet at least once to attempt
to resolve the matter (the "Settlement Meeting"). Any Party may request the
other Parties to attend a Settlement Meeting at a mutually agreed time and place
within ten days after delivery of a notice of a dispute. The occurrence of a
Settlement Meeting with respect to a dispute will be a condition precedent to
seeking any arbitration or judicial remedy, provided that if a Party refuses to
attend a Settlement Meeting the other Parties may proceed to seek such remedy.
Section 7.2 Arbitration Proceedings. If the Parties have not resolved a
monetary dispute at the Settlement Meeting any Party may submit the matter to
arbitration. A panel of three arbitrators will conduct the arbitration
proceedings in accordance with the provisions of the Federal Arbitration Act (99
U.S.C. Section 1 et seq.) and the Commercial Arbitration Rules of the American
Arbitration Association (the "Arbitration Rules"). The decision of a majority of
the panel will be the decision of the arbitrators.
(a) Arbitration Notice. To submit a monetary dispute to
arbitration, a Party will furnish the other Parties and the American Arbitration
Association with a notice (the "Arbitration Notice") containing (i) the name and
address of such Party, (ii) the nature of the monetary dispute in reasonable
detail, (iii) the Party's intent to commence arbitration proceedings under this
Agreement, and (iv) the other information required under the Federal Arbitration
Act and the Arbitration Rules.
(b) Selection of Arbitrators. Within ten days after delivery
of the Arbitration Notice, each Party will select one arbitrator from the list
of the American Arbitration Association's National Panel of Commercial
Arbitrators. Within ten days after the selection of the last of those two
arbitrators, those two arbitrators will select the third arbitrator from such
list. If the first two arbitrators cannot select a third arbitrator within such
ten-day period, the American Arbitration Association will select such third
arbitrator from the list. Each arbitrator will be an individual not subject to
disqualification under Rule No. 19 of the Arbitration Rules with experience in
settling complex litigation involving the insurance industry.
(c) Arbitration Final. The arbitration of the matters in
controversy and the determination of any amount of damages or indemnification
will be final and binding upon the Parties to the maximum extent permitted by
law, provided that any Party may seek any equitable remedy available under Law
as provided in this Agreement. This agreement to arbitrate is irrevocable.
Section 7.3 Place of Arbitration. Any arbitration proceedings will be
conducted at such neutral location outside of the States of California and Texas
as the Parties may agree. If a neutral location cannot be agreed to by the
parties, then the arbitration proceedings will be held in Albuquerque, New
15
Mexico. The arbitrators will hold the arbitration proceedings within 60 days
after the selection of the third arbitrator.
Section 7.4 Discovery. During the period beginning with the selection
of the third arbitrator and ending upon the conclusion of the arbitration
proceedings, the arbitrators will have the authority to permit the Parties to
conduct such discovery as the arbitrators consider appropriate.
Section 7.5 Equitable Remedies. Notwithstanding anything else in this
Agreement to the contrary, after the Settlement Meeting a Party will be entitled
to seek any equitable remedies available under law. Any such equitable remedies
will be in addition to any damages or indemnification rights that such Party may
assert in an arbitration proceeding.
Section 7.6 Judgments. Any arbitration award under this Agreement will
be final and binding. Any court having jurisdiction may enter judgment on such
arbitration award upon application of a Party.
Section 7.7 Expenses. If any Party commences arbitration proceedings or
court proceedings seeking equitable relief with respect to this Agreement, the
prevailing Party in such arbitration proceedings or case may receive as part of
any award or judgment reimbursement of such Party's reasonable attorneys' fees
and expenses to the extent that the arbitrators or court considers appropriate.
Section 7.8 Cost of the Arbitration. The arbitrators will assess the
costs of the arbitration proceedings, including their fees, to the Parties in
such proportions as the arbitrators consider reasonable under the circumstances.
Section 7.9 Exclusivity of Remedies. To the extent permitted by law,
the arbitration and judicial remedies set forth in this Article will be the
exclusive remedies available to the Parties with respect to any dispute under
this Agreement or claim for damages or indemnification under this Agreement.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Amendment. No amendment of this Agreement will be effective
unless in writing signed by the Parties.
Section 8.2 Counterparts. This Agreement may be executed in any number
of counterparts, each of which will be deemed to be an original agreement, but
all of which will constitute one and the same agreement.
Section 8.3 Entire Agreement. This Agreement constitutes the entire
agreement and understanding between the Parties and supersedes all prior
agreements and understandings, both written and oral, with respect to the
subject matter of this Agreement.
16
Section 8.4 Expenses. Each Party will bear its own expenses with
respect to the negotiation and preparation of this Agreement.
Section 8.5 No Assignment. No Party may assign its benefits or delegate
its duties under this Agreement without the prior consent of the other Party.
Any attempted assignment or delegation without such prior consent will be void.
Notwithstanding the foregoing, each Party may assign its rights under this
Agreement to a purchaser of all the assets or equity of such Party without the
other Party's consent, and any such purchaser and any subsequent purchasers of
all of the assets or equity of such Party may similarly assign such rights.
Section 8.6 No Third Party Beneficiaries. This Agreement is solely for
the benefit of the Parties and no other Person will have any right, interest, or
claim under this Agreement.
Section 8.7 Notices. All claims, consents, designations, notices,
waivers, and other communications in connection with this Agreement will be in
writing. Such claims, consents, designations, notices, waivers, and other
communications will be considered received (a) on the day of actual transmittal
when transmitted by facsimile with written confirmation of such transmittal, (b)
on the next business day following actual transmittal when transmitted by a
nationally recognized overnight courier, or (c) on the third business day
following actual transmittal when transmitted by certified mail, postage
prepaid, return receipt requested; in each case when transmitted to a Party at
its address set forth below (or to such other address to which such Party has
notified the other, Parties in accordance with this Section to send such claims,
consents, designations, notices, waivers, and other communications):
INSpire Claims and INSpire: Attn: Chief Executive Officer
INSpire Claims Management, Inc./
INSpire Insurance Solutions, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Phone: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇
Jenkens & ▇▇▇▇▇▇▇▇▇, P.C.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Phone: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
17
Customer: Attn: Chief Executive Officer
Arrowhead Claims Management, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Section 8.8 Public Announcements. The Parties will agree on the terms
of any press releases or other public announcements related to this Agreement,
and will consult with each other before issuing any press releases or other
public announcements related to this Agreement; provided, however, that any
Party may make a public disclosure if in the opinion of such Party's counsel it
is required by law or the rules of any applicable stock exchange or dealer
quotation system to make such disclosure. The Parties agree, to the extent
practicable, to consult with each other regarding any such public announcement
in advance thereof. The Parties may, however, include the other Party on any
general customer lists or in presentations that include a list of current
customers.
Section 8.9 Representation by Legal Counsel. Each Party is a
sophisticated entity that was advised by experienced legal counsel and other
advisors in the negotiation and preparation of this Agreement.
Section 8.10 Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction will not invalidate the
remaining provisions of this Agreement or affect the validity or enforceability
of such provision in any other jurisdiction. In addition, any such prohibited or
unenforceable provision will be given effect to the extent possible in the
jurisdiction where such provision is prohibited or unenforceable.
Section 8.11 Successors. This Agreement will be binding upon and will
inure to the benefit of each Party and its heirs, legal representatives,
permitted assigns, and successors, provided that this Section will not permit
the assignment or other transfer of this Agreement, whether by operation of law
or otherwise, if such assignment of other transfer is not otherwise permitted
under this Agreement.
Section 8.12 Time of the Essence. Time is of the essence in the
performance of this Agreement and all dates and periods specified in this
Agreement.
Section 8.13 Waiver. No provision of this Agreement will be considered
waived unless such waiver is in writing and signed by the Party that benefits
from the enforcement of such provision. No waiver of any provision in this
Agreement, however, will be deemed a waiver of a subsequent breach of such
provision or a waiver of a similar provision. In addition, a waiver of any
breach or a failure to enforce any term or condition of this Agreement will not
in any way affect, limit, or waive a Party's rights under this Agreement at any
time to enforce strict compliance thereafter with every term and condition of
this Agreement.
18
Section 8.14 Force Majeure. The Parties will not be liable or deemed to
be in default for any delay or failure in performance under this Agreement or
interruption of Services resulting, directly or indirectly, from acts of God,
civil or military authority, labor disputes, shortages of suitable materials,
labor or transportation or any similar cause beyond the reasonable control of
the Parties.
Section 8.15 Attorneys' Fees. In the event of any action, arbitration,
claim, proceeding or suit between Customer and INSpire Claims seeking
enforcement of any of the terms and conditions of this Agreement, the prevailing
party in such action, arbitration, claim, proceeding or suit will be awarded its
reasonable costs and expenses, including its court costs and reasonable
attorneys' fees.
Section 8.16 Relationship of the Parties. The Parties are independent
contractors of one another, and there should be no instance in which they should
be construed as partners or joint venturers.
Section 8.17 Drafting. Neither this Agreement nor any provision
contained in this Agreement will be interpreted in favor of or against either
Party because such Party or its legal counsel drafted this Agreement or such
provision. No prior draft of this Agreement or any provision contained in this
Agreement will be used when interpreting this Agreement or its provisions.
Section 8.18 Headings. Article and section headings are used in this
Agreement only as a matter of convenience and will not have any effect upon the
construction or interpretation of this Agreement.
Section 8.19 Condition of Bankruptcy Court Approval. This Agreement is
expressly conditioned upon INSpire Claims and INSpire Insurance obtaining a
final order from the Bankruptcy Court in the Bankruptcy Case approving (i) this
Agreement, as well as the Policy Processing and Administration Agreement, the
Sublease, the Asset Purchase Agreement, the Software License Agreement, the
Professional Services Agreement and the Comprehensive Preferred Escrow Agreement
concurrently entered into between members of the INSpire Group and the Arrowhead
Group, all without amendment or modification, unless such amendment or
modification is approved in writing by all of the Parties, within forty-five
(45) days after the date this Agreement is entered into; and (ii) the
termination of the Claims Administration Agreement and the Claims Management
Agreement. The final order of the Bankruptcy Court shall be in a form and
substance acceptable to Customer. This Agreement shall be implemented by the
Parties on a date mutually agreed to by the Parties, but no later than five days
after the Effective Date. If the final order from the Bankruptcy Court is not
obtained within the time specified, this Agreement and all of its terms and
provisions are and shall be null and void and of no force or effect whatsoever.
Section 8.20 Termination of Claims Administration Agreement and the
Claims Management Agreement. INSpire Insurance, INSpire Claims and Customer do
hereby agree to terminate, and do terminate, the Claims Administration Agreement
and the Claims Management Agreement as of the Effective Date.
[SIGNATURE PAGE TO FOLLOW]
19
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed and delivered by a duly authorized officer as of the Signing Date.
INSPIRE INSURANCE SOLUTIONS, INC.,
a Texas corporation, debtor and debtor-in-possession
By:
---------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, President & CEO
INSPIRE CLAIMS MANAGEMENT, INC.,
a Delaware corporation, debtor and debtor-in-possession
By:
----------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, President & CEO
ARROWHEAD CLAIMS MANAGEMENT, INC.,
a California corporation
By:
----------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, President & CEO
20
Schedule 1.1 - Services
During the Term, and in accordance with the guidance and direction
provided by Customer, INSpire Claims will provide all the Claims Administration
Services and general management services specified in paragraph 1 of this
Schedule for the policies written by or through Customer for the authorized
Personal Property products, carriers and states identified in paragraph 2 of
this Schedule 1.1.
1. Services--Claims Administration
(a) INSpire Claims agrees to investigate, evaluate, and handle each
claim reported according to applicable state law, the terms and conditions of
the policy and any written standards provided by Customer. INSpire Claims will
not have any authority to alter or discharge any policy or waive any policy
provision or condition. INSpire Claims' services will include, generally, the
prompt and diligent management, processing, investigating, adjusting, and
reasonable settlement of claims, the extension or denial of coverage, the
assessment and appraisal of personal injuries and physical damage, retention of
experts when necessary, and the pursuit and collection of subrogation and
salvage recoveries. Such services may also include like services identified by
Customer (and accepted by INSpire) as services provided by Customer to carriers
as of the Signing Date.
(b) Loss reporting will be by toll free access provided to insureds and
agents.
(c) Coverage will be verified on all cases.
(d) INSpire Claims will administer the appraisal/assessment process and
will use in this endeavor a combination of staff and vendor, adjusters, and
appraisers.
(e) INSpire Claims will perform all reasonable and necessary
administrative and clerical work in connection with claim or loss reports.
(f) INSpire Claims will establish and maintain a claim filed for each
reported claim or loss with a copy of the policy for each reported claim. The
claim file will have a daily activity log that will be reviewable at any and all
reasonable times by Customer subject to the provisions of the Agreement.
(g) Upon receipt by INSpire Claims of a demand for arbitration of an
uninsured motorist claim which cannot be resolved by negotiation, or upon
receipt by INSpire Claims of notice that litigation has been filed concerning a
claim, INSpire Claims will promptly deliver to Customer the original claim file,
notes and photographs, which material will be returned to INSpire Claims at the
conclusion of the arbitration or litigation. All expenses incurred after
referral, including attorneys' fees, will be the responsibility of Customer.
21
(h) INSpire Claims will record and report each claim promptly to
Customer with a recommended reserve. INSpire Claims will, within two (2)
business days after the occurrence of the event when said two (2) business days
is reasonable, report to and consult with Customer's designated representative
with respect to any of the following:
(i) Any loss or claim resulting in legal action being
instituted against INSpire Claims or Customer;
(ii) Any loss or claim causing a complaint to be filed with
any regulatory authority;
(iii) Any inquiry from any regulatory authority, including but
not limited to any insurance department, with respect to any claim or
claims, even if no complaint causes such inquiry;
(iv) Any claim INSpire Claims deems appropriate to deny policy
coverage or involves a Coverage dispute unless otherwise directed by
Customer;
(v) Any claim which is likely to result in payment(s) in
excess of the lesser of (A) fifty thousand dollars ($50,000), (B) an
amount established by the appropriate Department of Insurance, (C)
above the policy limits, or (D) an amount that Customer is required to
report to one of its carriers. Customer is responsible for informing
INSpire Claims in writing as to the carriers and amounts required to be
reported. In the event of such claim, INSpire Claims will forward a
copy of the claim filed to Customer at its request;
(vi) Any claim open for more than six months, or involves an
allegation of extra contractual obligations;
(vii) Any claim involving a fatality, amputation, spinal cord
or brain damage, loss eyesight, extensive ▇▇▇▇▇, poisoning, or multiple
fractures; or
(viii) Any claim involving a minor.
(i) Within five business days after the end of each calendar month,
INSpire Claims will provide monthly, year-to-date and inception-to-date reports
on all claims activity, including new claims, claims closed without payment, and
changes to outstanding reserves as of the date reported, all reported by
accident year, calendar year and policy year. The claim reports will include:
(i) Information and statistical data (A) required by Insurance
Services Office ("ISO"), and (B) necessary for Customer to prepare any
reports required by the National Association of Insurance
Commissioners, or (C) other reports reasonably requested by Customer.
When appropriate, filings will be made directly with the above
entities;
22
(ii) Loss runs with paid claims and outstanding reserves
remaining at the end of each monthly report period, categorized as
indemnity, medical payment, or loss adjustment expense, plus any other
information required by the annual statement instructions or state
regulatory agencies;
(iii) Check Registers;
(iv) Large loss listing for claims exceeding amounts to be
mutually agreed upon by Parties, including cumulative paid and
outstanding reserves as of month end; and
(v) Aggregate loss runs (on a paid and incurred basis) by
policy.
(j) INSpire Claims will prepare checks and vouchers, compromises,
releases, agreements and any other documents reasonably necessary to finalize
and close claims on forms approved by Customer. INSpire Claims will issue
payments of claims and allocate loss adjustment expenses only on checks of, and
as authorized by, Customer.
(i) For purposes of settling claims and paying claim related
expenses, Customer has agreed to establish, maintain and fund a
separate bank account from which INSpire Claims may draw against as
hereinafter set forth (the "Claim Account").
(ii) Customer agrees to deposit additional funds into the
Claim Account on a weekly basis if necessary to maintain it at a level
sufficient to allow INSpire Claims to carry out its obligations under
this Agreement. INSpire Claims will regularly provide information and
estimates to Customer to enable Customer to maintain the Claim Account
at an appropriate level. Customer will provide to INSpire Claims such
information as is necessary for INSpire Claims to draw checks on the
Claim Account.
(iii) INSpire Claims hereby covenants that any check it
prepares will be signed and issued only in accordance with the
procedures adopted by Customer. Any check prepared by INSpire and drawn
on the Claim Account will be signed by two authorized individuals.
(iv) INSpire Claims will maintain a daily register of checks
drawn on the Claim Account for each loss payment (the "Claim
Register"). INSpire Claims will provide Customer access to this
information. The Claim Register will include, for each claim and/or
claimant, the claim number, policy number, loss date, the name of the
payee, the date and check number of the disbursement, and the amount
and type or purpose of the payment (i.e. indemnity, loss adjustment
expense, etc.). INSpire Claims will forward a copy of the Claim
Register to Customer on a monthly basis.
(v) INSpire Claims will promptly deposit any monies collected
through salvage and subrogation to the Claim Account, and maintain a
register of all such collections and deposits (the "Salvage and
Subrogation Register"). The Salvage and Subrogation Register will
23
include, but will not be limited to, the following information: date of
deposit, date of receipt of funds, the claim number, the payer, and the
amount and purpose of such payment.
(vi) INSpire Claims will provide access to the information
necessary for Customer to reconcile the Claim Register and the Salvage
and Subrogation Register to the Claim Account on a monthly basis.
(k) Service Standards and claims documentation will be to standards set
by Customer and agreed to by INSpire Claims. At a minimum, INSpire Claims will
be in compliance with all state regulations dealing with the adjusting and
handling of claims. INSpire Claims' own procedures and Customer's reasonable
written directives. INSpire Claims will periodically review the development of
the claims handling procedures with Customer to identify problems and recommend
corrective action.
(l) INSpire Claims will diligently pursue and prosecute Customer's
salvage and subrogation rights relating to any losses. INSpire Claims will use
reasonable efforts to collect and deposit funds arising from the enforcement of
such rights into the Claim Account. INSpire Claims will report monthly on
salvage/subrogation receipts.
(m) INSpire Claims will (i) investigate suspected fraud as appropriate,
(ii) provide monthly reports of the effectiveness of its anti-fraud program to
Customer, and (iii) prepare the reports required by any state insurance
commission.
24
2. The Personal Property Products, Carriers and States Authorized for Services
State Plan # Product Carrier
-------------------------------------------------------------------------
AL 21 Mobile Home Clarendon National
-------------------------------------------------------------------------
AZ 21 Mobile Home Clarendon National
-------------------------------------------------------------------------
CA 14 Motorcycle Clarendon National
-------------------------------------------------------------------------
CA 15-16 DIC Clarendon National
-------------------------------------------------------------------------
CA 17-20, 22 HO3 Clarendon National
-------------------------------------------------------------------------
CA 21 Mobile Home Clarendon National
-------------------------------------------------------------------------
CA 27-29, 35,36 DP3 Clarendon National
-------------------------------------------------------------------------
CA 31 HO4 Clarendon National
-------------------------------------------------------------------------
CA 32 HO6 Clarendon National
-------------------------------------------------------------------------
CA 17-20, 22 HO3 Clarendon National
-------------------------------------------------------------------------
CT 18-20 HO3 Clarendon National
-------------------------------------------------------------------------
CT 31 HO4 Clarendon National
-------------------------------------------------------------------------
CT 32 HO6 Clarendon National
-------------------------------------------------------------------------
CT 33, 34 Pref HO4/6 Clarendon National
-------------------------------------------------------------------------
▇▇ ▇▇-▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ National
-------------------------------------------------------------------------
DE 21 Mobile Home Clarendon National
-------------------------------------------------------------------------
FL 21 Mobile Home LION
-------------------------------------------------------------------------
GA 18-20 HO3 Clarendon National
-------------------------------------------------------------------------
LA 18-20 HO3 Clarendon National
-------------------------------------------------------------------------
LA 21 Mobile Home Clarendon National
-------------------------------------------------------------------------
LA 24 DP1 Clarendon National
-------------------------------------------------------------------------
MD 18-20 HO3 Clarendon National
-------------------------------------------------------------------------
MD 21 Mobile Home Clarendon National
-------------------------------------------------------------------------
ME 18-20 HO3 Clarendon National
-------------------------------------------------------------------------
MS 18-20 HO3 Clarendon National
-------------------------------------------------------------------------
MS 21 Mobile Home Clarendon National
-------------------------------------------------------------------------
NH 18-20 HO3 Clarendon National
-------------------------------------------------------------------------
NJ 18-20 HO3 Clarendon National
-------------------------------------------------------------------------
NM 21 Mobile Home Clarendon National
-------------------------------------------------------------------------
NY 18-20, 22 HO3 Clarendon National
-------------------------------------------------------------------------
NY 31,33 HO4 Clarendon National
-------------------------------------------------------------------------
NY 32,34 HO6 Clarendon National
-------------------------------------------------------------------------
OR 21 Mobile Home Clarendon National
-------------------------------------------------------------------------
PA 14 Motorcycle Clarendon National
-------------------------------------------------------------------------
PA 21 Mobile Home Clarendon National
-------------------------------------------------------------------------
RI 18-20 HO3 Clarendon National
-------------------------------------------------------------------------
SC 18-20 HO3 Clarendon National
-------------------------------------------------------------------------
SC 21 Mobile Home Clarendon National
-------------------------------------------------------------------------
VA 18-20, 22 HO3 Clarendon National
-------------------------------------------------------------------------
VA 31,33 HO4 Clarendon National
-------------------------------------------------------------------------
VA 32,34 HO6 Clarendon National
-------------------------------------------------------------------------
CA 18-20 HO3 Srius America
-------------------------------------------------------------------------
CA 50 BOP ▇▇▇▇▇▇
-------------------------------------------------------------------------
CA 55 Umbrella RLI
-------------------------------------------------------------------------
25
Schedule 1.3(f) - Penalty Provisions and Payments for INSpire Claim's failure to
meet Service Levels
The following penalties will apply should INSpire Claims fail to meet the
individual Service Levels set forth in Schedule 2.1 to the Claims Administration
Agreement. Each Penalty numbered below will constitute the penalty to INSpire
for failing to meet the same numbered Service Level on Schedule 2.1:
1. $5 per occurrence.
2. $5 per occurrence.
3. $10 for each incomplete Suspense item beyond 10 calendar days.
4. $500 per day.
5. $500 per day.
6. $1,000 per week.
7. $10 per occurrence.
8. $5 per occurrence.
9. $20 per occurrence.
10. $5 per occurrence.
11. $20 per occurrence.
12. $5 per occurrence.
13. 5% reduction of the Claims Administration Fee for the following month.
14. $10 per occurrence.
15. $5 per occurrence.
16. $5 per occurrence.
17. 5% reduction of the Claims Administration Fee for the following month.
18. $5 per occurrence.
19. $5 per occurrence.
26
20. $5 per day of late delivery.
21. $5 per occurrence.
22. $1 per day of late delivery.
23. $5 per day of late delivery.
24. No Penalty. This is a good faith commitment.
25. $1 per day of late delivery.
26. $200 per day.
27
Schedule 2.1 - Service Levels for the Claims Administration of Personal Property
Policies
1. All claims reported will be assigned to an adjuster within one business
day of receipt of first notice of loss by INSpire.
2. Adjusters will contact, or document an attempt to contact the claimant
and insured in the claim file within one business day after assignment. In the
event a contact is not made within one business day, a further attempt will be
made by the adjuster to contact the claimant and insured every day thereafter
until contact is made and such attempt will be documented in the claim file. In
addition, a letter will be sent to the claimant after three business days if no
contact is made.
3. All suspense/diary lists will remain current, meaning suspensed or
diaried items will be worked on the suspense or diary date.
4. The First Notice of Loss Unit will answer 85% of the calls within 60
seconds or less.
5. The First Notice of Loss Unit will answer 95% of the calls within 120
seconds.
6. The First Notice of Loss Unit will have an average weekly call
abandonment rate of less than 5%.
7. Ten-day (calendar days) initial supervisory file reviews will be
completed and documented in every claims file.
8. Thirty-day (calendar days) case reviews will be completed and
documented in every claims file.
9. Initial reserves, as agreed upon between INSpire and customer, will be
set up on all new claims reported within two business days of First Notice of
Loss.
10. All reserves will subsequently be adjusted within three business days
of the adjuster gaining information that supports a reserve change. This will
include all claims where a reserve is no longer warranted.
11. Local or Independent Field Adjusters will be assigned within three
business days of First Notice of Loss on all claims where the damage has been
assessed to be $3,000 or greater. Independent Adjusters will be retained on all
such claims over $3,000 when a local adjuster is unable to investigate the
claim. INSpire will follow-up with all Independent Adjusters within two business
days following their appointment and again within six business days if no status
report is received by that time. All contacts with Field Adjusters will be
documented in the claim file.
12. Subrogation will be properly addressed on all claims and will be
evident by documentation contained in the claims file within five business days
of assignment to an adjuster. Subrogation referral sheets are required to be in
all claims files if subrogation potential is found. All subrogation referrals
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will be sent to a subrogation specialist within two business days of subrogation
potential being identified.
13. Ten assignments to independent contractors, adjusters and staff
adjusters will be reinspected each month. The results of all reinspections will
be reported to customer within thirty (30) days after the close of each calendar
month.
14. Reservation of Rights letters will be completed and sent, one copy via
certified mail and another copy via regular mail, with a copy placed in the
claim file, on the following types of claims 100% of the time:
a. All claims where the initial notice of loss reflects that the policy
may not have been in force at the time of loss;
b. All claims where the loss may be excluded due to the conduct of the
Insured (intentional act, unlawful act, etc.);
c. All claims where coverage is in question;
d. Delayed reporting of the loss by the Insured after the Insured has
become aware of the loss resulting in the expansion of the scope of the loss;
e. Non-co-operation of the Insured that jeopardizes the settlement
investigation; and
f. Failure to comply with policy conditions.
15. All non-weather related losses within the first thirty (30) days of the
policy period, all fire losses, all theft losses, all multiple claims will be
sent to the special investigations unit (SIU) within three business days of
First Notice of Loss 100% of the time.
16. All large losses that exceed $25,000 are to be provided to Customer
within two business days after establishment of the reserve 100% of the time.
17. During the last week of each calendar month, INSpire will perform a
Dangling Reserve Study, the scope of which will be mutually agreed upon between
the Parties, and the results of which will be provided to Customer within ten
(10) days after the end of each calendar month.
18. Police reports and affidavits of theft are required on 100% of theft
claims and are to be present in the claims file, unless a supervisor authorizes
payment, in which case documentation for the exception must be present in file.
19. All claims checks will be issued and mailed to the appropriate party
within two business days of a payment being determined.
20. INSpire will provide high level, non-binding cost and time estimates of
system modifications within ten (10) working days of an inquiry by Customer in
order for Customer to determine the cost/benefit and feasibility of changes.
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21. Risk Reports, the scope of which will be mutually agreed to by the
Parties, will be completed, placed in the claims file and forwarded to INSpire's
Policy Processing and Administration department on the following types of
losses:
a. Theft losses (two or more or questionable within three years);
b. Fire losses ($5,000 or more damage);
c. Dog bite losses;
d. Habitual claims (more than two claims in last three years);
e. Poor risk conditions (both dwelling and premises); and
f. Red Flag claims (those that are highly suspicious, deliberate
actions, failure to cooperate by insured, etc.)
22. All inquiries from regulatory bodies will be answered within the
time set by the regulatory body.
23. All Coverage questions will be resolved (i.e. a determination will
be made) within fifteen (15) business days of the report of loss.
24. All telephone calls requiring a call back will be returned within one
business day.
25. All written correspondence requiring a response will be answered
promptly and no later than fifteen (15) calendar days of receipt.
26. Claims Call Center Services - These services will be provided by
INSpire from 8:00 a.m. to 5:30 p.m., Monday through Friday, for California
personal property insureds and claimants and from 6:00 a.m. to 5:30 p.m., Monday
through Friday, for insureds and claimants located outside of California,
utilizing toll-free 1-800 inbound telephone service. Times stated are Pacific
Standard Times. An after-hour answering service will be provided for after-hour
calls Monday through Friday, Saturdays, Sundays and Holidays.
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