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EXHIBIT 10.5
SPECIFIC EXCESS
REINSURANCE CONTRACT
Effective: January 1, 1997
issued to
Medical Inter-Insurance Exchange of New Jersey
Lawrenceville, New Jersey
(hereinafter referred to as the "Company")
by
American Re-Insurance Company
Subscribing to its respective Interests and Liabilities Agreements hereto
(hereinafter referred to as the "Reinsurer")
ARTICLE I: CLASSES OF BUSINESS REINSURED
A. By this Contract, the Reinsurer agrees to reinsure the liability which may
accrue to the Company under all of its original policies, contracts,
binders and certificates of insurance or reinsurance classified by the
Company as:
Medical and Dental Practitioners Liability (including Corporate and
Professional Premises Liability Coverage, where applicable);
Hospital and Other Healthcare Institution Professional Liability;
Commercial General Liability, Employers' Liability, Automobile
Liability and all other Non-Professional (including Excess/
Umbrella) Liability unless excluded under Article III; all either
written in respect of Health Care Institutions or in conjunction
with Professional Liability coverages written for such institutions.
(hereinafter called "policies"), unless otherwise excluded under ARTICLE III:
EXCLUSIONS, issued or renewed on or after the effective date, subject to the
terms, conditions and limitations hereinafter set forth.
B. It is understood that this Contract applies to losses first occurring
under occurrence policies and/or claims made thereon under claims made
policies issued or renewed on or after the effective date hereof.
Permanent Protection Plan policies underwritten by the Company shall in
all cases be
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deemed to be Loss Occurrence policies covering on a losses occurring
during basis. The Reinsurer shall be subject to all of the conditions of
the Permanent Protection Plan policies including policy limits and
aggregate limit formulas under the extended reporting coverage therein.
ARTICLE II: COMMENCEMENT AND TERMINATION
A. This Contract shall become effective on January 1, 1997, and shall
continue in force thereafter until terminated.
B. Either party may terminate this Contract on any December 31 by giving the
other party not less than 90 days prior written notice.
C. Unless otherwise mutually agreed, reinsurance hereunder on business in
force on the effective date of termination shall remain in full force and
effect until expiration, cancellation or next premium anniversary of such
business, whichever first occurs, but in no event beyond 12 months
following the effective date of termination, plus any extension of
coverage for extended reporting as per the original policies of the
Company.
Reinsurer shall remain liable in respect of policies issued or renewed
during the Term in force on the basis of underlying coverage. Reinsurer
shall receive its share of premiums for such respective policies and there
shall not be any return of unearned premium in respect thereto.
ARTICLE III: EXCLUSIONS
This Contract does not apply to and specifically excludes the following:
1. Reinsurance assumed, except reinsurance from American Medical
Mutual, Inc. Risk Retention Group and Lawrenceville Property and
Casualty Insurance Company and Lawrenceville Re Ltd., where the
underwriting is through New Jersey State Medical Underwriters, Inc.
2. Claims emanating from policies issued by the Company with effective
dates after the termination date of this Contract.
3. Directors and Officers Liability when written as such.
4. Financial Guaranty and Insolvency Business.
5. All liability of the Company arising by contract, operation of law,
or otherwise, from its participation or membership, whether
voluntary or involuntary, in any insolvency fund. "Insolvency fund"
includes any guaranty fund, insolvency fund, plan, pool,
association, fund or other arrangement, however denominated,
established or governed, which provides for any assessment of or
payment or assumption by the Company of part or all of any claim,
debt, charge, fee or other
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obligation or an insurer, or its successors or assigns, which has
been declared by any competent authority to be insolvent, or which
is otherwise deemed unable to meet any claim, debt, charge, fee or
other obligation in whole or in part.
6. Nuclear risks as defined in the "Nuclear Incident Exclusion Clause -
Liability - Reinsurance USA and Canada" except for incident arising
from nuclear medicine, attached to and forming part of this
Contract.
7. Any business derived from participation in any Pool, Association or
Syndicate.
ARTICLE IV: RETENTIONS AND LIMITS
A. Coverage A (Each Insured Coverage): The Company shall retain and be liable
for the first $X amount as per the table below of the Paid portion of
Ultimate Net Loss as respects any one original policy, each claim. The
Reinsurer shall then be liable for the amount by which such Paid portion
of Ultimate Net Loss exceeds the Company's Retention, but the liability of
the Reinsurer shall not exceed $13,000,000 Ultimate Net Loss plus pro rata
Loss Adjustment Expenses as respects any one original policy, each claim.
Notwithstanding the above, the Company shall also retain, in each contract
year, the first $13,000,000 of the Paid portion of Ultimate Net Loss plus
pro rata Loss Adjustment Expenses in the aggregate otherwise recoverable
under Coverage A.
States Class of Business Retention $X =
------ ----------------- --------------
Other than PA Medical & Dental Practitioner Prof. Lab. $2,000,000
Other than PA Hospital & All Other Health Care Institutions
Professional Liability $3,000,000
PA All Professional Liability (Physicians, Surgeons
& Institutions) $2,200,000
All States General Liability, Employers'
Liability, Automobile Liability and all
Non Professional Liability Coverage
written in respect of Health Care
Institutions or in conjunction with
Professional Liability (health care)
coverages. $3,000,000
In no event shall the Reinsurer be liable, in each contract year, for more
than $39,000,000 in respect of the sum of the Paid portion of Ultimate Net
Loss and Pro rata Loss Adjustment Expense, Loss in Excess of Policy
Limits, and Extra Contractual Obligations, in the aggregate for Coverage
A.
B. Coverage B (Each Insured Coverage): For purposes of Coverage B only, the
Company shall retain and be liable for the Paid portion of Ultimate Net
Loss equal to the sum of the Retention
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and Limit under Coverage A as respects any original policy, each claim.
The Reinsurer shall then be liable for 90% of the amount by which the Paid
portion of Ultimate Net Loss exceeds the sum of the Retention and Limit
under Coverage A, but the liability of the Reinsurer shall not exceed 90%
of $10,000,000 plus pro rata Loss Adjustment Expenses as respects any
original policy, each claim.
In no event shall the Reinsurer be liable, in each contract year, for more
than $27,000,000 (being 90% of $30,000,000) in respect of the sum of the
Paid portion of Ultimate Net Loss and Pro rata Loss Adjustment Expense,
Loss in Excess of Policy Limits, and Extra Contractual Obligations, in the
Aggregate for Coverage B.
C. Coverage C (Each Insured Coverage): For purposes of Coverage C only, the
Company shall retain and be liable for the Paid portion of Ultimate Net
Loss equal to the sum of the Retention and Limit under Coverage A and
$10,000,000 paid indemnity plus pro rata expenses in respect of Coverage B
as respects any original policy, each claim. The Reinsurer shall then be
liable for 90% of the amount by which such Paid portion of Ultimate Net
Loss exceeds the sum of the Retention and Limit under Coverage A and
$10,000,000 paid indemnity plus pro rata expenses in respect of Coverage
B, but the liability of the Reinsurer shall not exceed 90% of $10,000,000
plus pro rata Loss Adjustment Expenses as respects any original policy,
each claim.
In no event shall the Reinsurer be liable, in each contract year, for more
than $27,000,000 (being 90% of $30,000,000) in respect of the sum of the
Paid portion of Ultimate Net Loss and Pro rata Loss Adjustment Expense,
Loss in Excess of Policy Limits, and Extra Contractual Obligations, in the
Aggregate for Coverage C.
D. Coverage D (Each Insured Coverage): For purposes of Coverage D only, the
Company shall retain and be liable for the Paid portion of Ultimate Net
Loss equal to the sum of the Retention and Limit under Coverage A and
$10,000,000 paid indemnity plus pro rata expenses in respect of Coverage B
and $10,000,000 paid indemnity plus pro rata expenses in respect of
Coverage C as respects any original policy, each claim. The Reinsurer
shall then be liable for 90% of the amount by which such Paid portion of
Ultimate Net Loss exceeds the sum of the Retention and Limit under
Coverage A and $10,000,000 paid indemnity plus pro rata expenses in
respect of Coverage B and $10,000,000 paid indemnity plus pro rata
expenses in respect of Coverage C, but the liability of the Reinsurer
shall not exceed 90% of $5,000,000 plus pro rata Loss Adjustment Expenses
as respects any original policy, each claim.
In no event shall the Reinsurer be liable, in each contract year, for more
than $13,500,000 (being 90% of $15,000,000) in respect of the sum of the
Paid portion of Ultimate Net Loss and Pro rata Loss Adjustment Expense,
Loss in Excess of Original Policy Limits, and Extra Contractual
Obligations, in the Aggregate, for Coverage D.
E. Under no circumstances shall the Reinsurer be liable in respect of the
Company's policies that provide aggregate loss coverage medical stop loss
and/or captivation coverage to its clients.
F. In order for the Company to be able to recover a claim under Coverages A,
B, C and D above, the Company must report the respective claim recoverable
for each contract year within ten years from January 1 of such contract
year.
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G. Under no circumstance shall Coverage B Limit be available or used by the
Company in respect of Coverage A Ultimate Net Loss coverage.
H. Under no circumstance shall Coverage C Limit be available or used by the
Company in respect of Coverages A and B Ultimate Net Loss coverage.
I. Under no circumstance shall Coverage D Limit be available or used by the
Company in respect of Coverages A, B and C Ultimate Net Loss coverage.
ARTICLE V: DEFINITIONS
A. "Paid portion of Ultimate Net Loss" as used herein is defined as the sum
or sums (including Loss in Excess of Policy Limits, Extra Contractual
Obligations, as hereinafter defined) paid by the Company in settlement of
claims including any and all vicarious liability arising from Business
Reinsured and in satisfaction of judgments rendered on account of such
claims, after deduction of all salvage, all recoveries, including the
Pennsylvania catastrophe fund, if applicable, and all claims on inuring
insurance or reinsurance, whether collectible or not. Ultimate Net Loss
shall not include any Loss Adjustment Expense or outstanding loss
reserves. Nothing herein shall be construed to mean that losses under this
Contract are not recoverable until the Company's Paid portion of Ultimate
Net Loss has been ascertained. The Paid portion of Ultimate Net Loss shall
be calculated on a per claim, per policy per insured basis. If the Company
issues multiple policies to an insured, the policies will be deemed to be
one original policy for purposes of coverage under this Reinsurance
Contract.
B. "Outstanding portion of Ultimate Net Losses" as used herein is defined as
the sum of outstanding loss reserve including losses outstanding in
respect of covered Excess of Policy Limits and covered Extra Contractual
Obligations and incurred but not reported amounts less any outstanding
recoveries, salvage and inuring reinsurance claims.
C. "Loss in Excess of Policy Limits" and "Extra Contractual Obligations" as
used herein shall be defined as follows:
1. "Loss in Excess of Policy Limits" shall mean 90% subject to the
limitations below of any amount paid or payable by the Company in
excess of its policy limits, but otherwise within the terms of its
policy, as a result of a settlement by the Company or an action
against it by its insured or its insured's assignee to recover
damages the insured is legally obligated to pay to a third party
claimant because of the Company's alleged or actual negligence,
breach of contract or bad faith in rejecting a settlement within
policy limits, or in discharging its duty to defend or prepare the
defense in the trial of an action against its insured, or in
discharging its duty to prepare or prosecute an appeal consequent
upon such an action. A Loss in Excess of Policy Limits shall be
deemed to have occurred on the same date as the loss covered or
alleged to be covered under the policy.
The Company shall only include the amount of 90% of Loss in Excess
of Policy Limits
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within Ultimate Net Loss to reach the Coverage Section Limit in
accordance with the following table:
For Subject Policies with Limits "Greater Than and Up To"
For G.L.
▇▇▇▇. Liable.
Auto Liable.
For all states other For all states other For Pennsylvania & All Other
than PA than PA for Health Care Inst. Non-Professn'l
Coverage Section for Pays. & Surge. Health Care Inst. Pays. & Surgeons Liability
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Coverage A Limit $2M to $15M $3M to $16M $2.2M to $15.2M $3M to $16M
Coverage B Limit 15M to 25M 16M to 26M 15.2M to 25.2M 16M to 26M
Coverage C Limit 25M to 35M 26M to 36M 25.2M to 35.2M 26M to 36M
Coverage D Limit 35M to 40M 36M to 41M 35.2M to 40.2M 36M to 41 M
2. "Extra Contractual Obligations" shall mean 90% of any punitive,
exemplary, compensatory, multiplied or consequential damages, other
than Loss in Excess of Policy Limits paid or payable by the Company
as a result of an action against it by its insured, its insured's
assignee or a third party claimant, which action alleges negligence,
breach of contract or bad faith on the part of the Company in
handling a claim under a policy subject to this Contract. An Extra
Contractual Obligation shall be deemed to have occurred on the same
date as the loss covered or alleged to be covered under the policy.
The Company shall only include the amount of 90% of Extra
Contractual Obligations within Ultimate Net Loss to reach the
Coverage Section Limit in accordance with the following table:
For Subject Policies with Limits "Greater Than and Up To"
For G.L.
Empl. Liabil.
Auto Liabil.
For all states other For all states other For Pennsylvania & All Other
than PA than PA for Health Care Inst. Non-Professn'l
Coverage Section for Phys. & Surg. Health Care Inst. Phys. & Surgeons Liability
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Coverage A Limit $2M to $15M $3M to $16M $2.2M to $15.2M $3M to $16M
Coverage B Limit 15M to 25M 16M to 26M 15.2M to 25.2M 16M to 26M
Coverage C Limit 25M to 35M 26M to 36M 25.2M to 35.2M 26M to 36M
Coverage D Limit 35M to 40M 36M to 41M 35.2M to 40.2M 36M to 41 M
Notwithstanding anything stated herein, this Contract shall not
apply to any Loss in Excess of Policy Limits or any Extra
Contractual Obligation incurred by the Company as a result of any
fraudulent and/or criminal act by any officer or director of the
Company acting individually or
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collectively or in collusion with any individual or corporation or
any other organization or party involved in the presentation,
defense or settlement of any claim covered hereunder.
D. "Loss Occurrence" means a loss occurrence or medical incident, or
otherwise the series of accidents, acts, errors or omissions
including continuous or repeated exposure to substantially the same
general harmful conditions giving rise to coverage, all as defined
and provided within the underlying policies underwritten by the
Company.
E. "Claims Made" as used herein shall mean the earlier of (1) or (2)
below:
1. When the insured first gives notice to the Company that a
claim has been made against the insured; or
2. When the insured first gives notice to the Company of a
specific medical incident involving a particular person which
may result in a claim against the original insured.
Notwithstanding the above, and in all cases, the Claims Made date
shall be as defined and provided within the underlying policies
underwritten by the Company.
F. "Losses Incurred" as used herein shall mean the sum of the Paid
portion of Ultimate Net Loss paid by the Reinsurer and the
Outstanding portion of Ultimate Net Loss due from the Reinsurer and
the related Paid and Outstanding Pro rata Loss Adjustment Expenses
under policies issued or renewed during the contract year under
consideration.
G. 1. "Loss Adjustment Expense" as used herein shall mean expenses
allocable to the investigation defense and/or settlement of
specific claims, including litigation expenses and
postjudgment interest and legal expenses and costs incurred in
connection with coverage questions and legal actions connected
thereto, but not including office expenses or salaries of the
Company's regular employees.
2. "Pro rata Loss Adjustment Expenses" as used herein shall mean
the result obtained by multiplying the covered indemnity
percentage, as calculated below by the Company's "Loss
Adjustment Expense" for a given claim. The percentage shall be
determined by dividing the amount of Ultimate Net Loss
indemnity for a coverage section by the Company's total
Ultimate Net Loss for a given claim.
H. "Gross Excess Limits Premium" as used herein shall mean the net
written increased limits premium of the Company for the Classes of
Business Reinsured for the respective layer of coverage limit
hereon. Such premiums shall represent the incremental gross premium
of the Company pertaining to the respective coverage layer hereon
for which Gross Excess Limits Premium is being calculated. Such net
written premium shall be comprised of claims made premium for
underlying policies written on such basis and occurrence premium as
respects underlying policies written on a loss occurrence basis
(i.e. Permanent Protection Plan policies). It is understood that net
written increased limits premium is less cancellation and return
premium but is gross of any deductions for original acquisition
costs (i.e. brokerage).
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I. The first contract year shall be from January 1, 1997 through
December 31, 1997, both days inclusive, and each subsequent 12-month
period shall be a separate contract year.
ARTICLE VI: CLAIMS AND LOSS ADJUSTMENT EXPENSES
A. Within 60 days after the end of each calendar quarter, the Company
shall provide the Reinsurer with a claims bordereau outlining any
claim on which the Company has placed a reserve value of $1,000,000
or more.
B. The Company shall include with each claim bordereau, the following
information as respects new claims, pending claims and closed claims
during the quarter:
1. Claim number or reference number;
2. Name of Insured;
3. Name of Claimant;
4. Subject policy limit;
5. Claims Made date;
6. Loss Occurrence date;
7. Indemnity (paid and outstanding);
8. Expenses (paid and outstanding);
9. Indemnity recovery; if any;
10. Expense recovery; if any;
11. Status.
12. Claim manager report which includes narrative loss description
of each claim.
C. The Reinsurer shall have the right, at its own expense, to be
associated in the defense of any claim, suit or proceeding involving
this reinsurance.
D. The Company shall, at its full discretion, adjust and settle all
claims and losses. All such adjustments and settlements shall be
binding on the Reinsurer and the Reinsurer agrees to pay all amounts
for which it may be liable immediately after receipt of reasonable
evidence of the amount paid by the Company.
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ARTICLE VII: SALVAGE AND SUBROGATION
The Reinsurer shall be credited with salvage (i.e., reimbursement obtained or
recovery made by the Company, less the actual cost, excluding salaries of
officials and employees of the Company and sums paid to attorneys as retainer,
of obtaining such reimbursement or making such recovery) on account of claims
and settlements involving reinsurance hereunder. Salvage thereon shall always be
used to reimburse the excess carriers in the reverse order of their priority
according to their participation before being used in any way to reimburse the
Company for its primary loss. The Company hereby agrees to enforce its rights to
salvage or subrogation relating to any loss, a part of which loss was sustained
by the Reinsurer, and to prosecute all claims arising out of such rights.
ARTICLE VIII: COVERAGE A PREMIUM AND CEDING COMMISSIONS
A. Deposit Premium: As respects each contract year, the Company shall pay the
Reinsurer an annual Deposit Premium equal to the greater of 50% of Gross
Excess Limits Premium or $3,500,000. The $3,500,000 shall be paid in four
equal installments of $875,000 on March 31, June 30, September 30 and
December 31 of each contract year. The Company shall pay additional
Deposit Premium due, if any, during the contract year upon finalizing
Gross Excess Limits Premium for each respective calendar quarter.
B. Minimum Premium: As respects each contract year, the Company shall pay the
Reinsurer Actual Premium as per D. below, but not less than the Minimum
Premium which is equal to 16.67% of Gross Excess Limits Premium in respect
of policies with limits attaching in respect of Coverage A or $1,500,000,
whichever is greater.
C. Maximum Premium: As respects each contract year, the Company shall pay the
Reinsurer Actual Premium as per D. below, but not greater than the Maximum
Premium which is equal to 63% of Gross Excess Limits Premium in respect
of policies with limits attaching in respect of Coverage A or $4,500,000,
whichever is greater.
D. Actual Premium: As respects each contract year, the Company shall
calculate Actual Premium which shall equal the sum of the Minimum Premium
(in B. above) plus 100% of Losses Incurred (net of the $13,000,000
Ultimate Net Loss plus pro rata Loss Adjustment Expense deductible)
subject to the Minimum Premium (in B. above) and the Maximum Premium (in
C. above).
The Company shall calculate and report any decrease in Actual Premium for
each contract year within 60 days after the end of 36 months from the
beginning of each contract year, and within 60 days after the end of each
12-month period thereafter until all Ultimate Net Losses and pro rata Loss
Adjustment Expenses subject hereto have been settled. The Company shall
calculate and report any increase in Actual Premium for each agreement
period within 60 days after the end of 12 months from the beginning of
each contract year, and within 60 days after the end of each 12-month
period thereafter until all Ultimate Net Losses and pro rata Loss
Adjustment Expenses subject hereto have been settled.
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The Reinsurer shall pay the Company any reported decrease in Actual
Premium less amounts previously paid in respect of Deposit Premium and
prior net Actual Premium payments upon 15 days of receipt of the Company's
report or 75 days in arrears of the respective year end reporting date,
whichever is later.
The Company shall pay the Reinsurer any reported increase in Actual
Premium less amounts previously paid in respect of Deposit Premium and
prior net Actual Premium payments upon the reporting of such Actual
Premium development to Reinsurer.
E. Ceding Commissions - Reinsurer shall allow a Ceding Commission equal to
18% of Ultimate Coverage A Minimum Premium as defined in Section B. above.
Such Ceding Commission shall be payable as Deposit Premiums are paid to
Reinsurer. The 18% rate shall, therefore, be applied to 42.86% of Coverage
A Deposit Premiums (which approximate $3,500,000) paid by the Company. A
final adjustment for Ceding Commission shall be made and paid when
ultimate Gross Excess Limits Premium is determined by the Company.
ARTICLE IX: COVERAGE B PREMIUM AND CEDING COMMISSION
A. Minimum Premium: As respects each contract year, the Company shall pay the
Reinsurer an annual Minimum Premium equal to 90% of Gross Excess Limits
Premium for policies with limits attaching hereunder in respect of
Coverage B. Minimum Premium above shall be payable by the Company to the
Reinsurer quarterly within 45 days in arrears from the end of each quarter
paying all amounts due in respect of premiums collected by the Company for
the respective quarter.
B. Reinstatement Premium: As respects each contract year, and in the event of
the whole or any portion of the second Coverage B indemnity limit being
exhausted by loss, the amount so exhausted shall be automatically
reinstated from the time of the loss and the Company shall pay to the
Reinsurer an Additional Premium calculated by applying to the annual
Minimum Premium to Reinsurer for the respective contract year, the
percentage that the amount of indemnity so reinstated bears to the total
amount of indemnity coverage afforded under Coverage B, subject to a
minimum of 100% as to time, to be paid simultaneously with the payment of
loss by the Reinsurer. Notwithstanding the above, the first 90% of
$10,000,000 indemnity Limit shall be reinstated by the Reinsurer free of
charge.
Nevertheless, the Reinsurer's liability in any one claim shall never
exceed 90% of $10,000,000 Ultimate Net Loss plus pro rata Loss Adjustment
Expenses in respect of Coverage B.
C. Maximum Premium: As respects each contract year, the Maximum Premium shall
equal the product of the Minimum Premium multiplied by 2 (two).
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D. Ceding Commission: The Reinsurer's shall pay to the Company 25.75% of all
Coverage B Minimum Premium and Reinstatement Premium payable hereon by the
Company at the time the Company pays such premiums.
ARTICLE X: COVERAGE C PREMIUM AND CEDING COMMISSION
A. Minimum Premium: As respects each contract year, the Company shall pay the
Reinsurer an annual Minimum Premium equal to 90% of Gross Excess Limits
Premium for policies with limits attaching hereunder in respect of
Coverage C. Minimum Premium above shall be payable by the Company to
Reinsurer quarterly within 45 days in arrears from the end of each quarter
paying all amounts due in respect of premiums collected by the Company for
the respective quarter.
B. Reinstatement Premium: As respects each contract year, and in the event of
the whole or any portion of the second Coverage C indemnity limit being
exhausted by loss, the amount so exhausted shall be automatically
reinstated from the time of the loss and the Company shall pay to the
Reinsurer an Additional Premium calculated by applying to the annual
Minimum Premium to Reinsurer for the respective contract year, the
percentage that the amount of indemnity so reinstated bears to the total
amount of indemnity coverage afforded under Coverage C, subject to a
minimum of 100% as to time, to be paid simultaneously with the payment of
loss by the Reinsurer. Notwithstanding the above, the first 90% of
$10,000,000 indemnity Limit shall be reinstated by the Company free of
charge.
Nevertheless, the Reinsurer's liability in any one claim shall never
exceed 90% of $10,000,000 Ultimate Net Loss plus pro rata Loss Adjustment
Expenses in respect of Coverage C.
C. Maximum Premium: As respects each contract year, the Maximum Premium shall
equal the product of the Minimum Premium multiplied by 2 (two).
D. Ceding Commission: The Reinsurer shall pay to the Company 25.75% of all
Coverage C Minimum Premium and Reinstatement Premium payable hereon by the
Company at the time the Company pays such premiums.
ARTICLE XI: COVERAGE D PREMIUM AND CEDING COMMISSION
A. Minimum Premium: As respects each contract year, the Company shall pay the
Reinsurer an annual Minimum Premium equal to 90% of Gross Excess Limits
Premium for policies with limits attaching hereunder in respect of
Coverage D. Minimum Premium above shall be payable by the Company to
Reinsurer quarterly within 45 days in arrears from the end of each quarter
paying all amounts due in respect of premiums collected by the Company for
the respective quarter.
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B. Reinstatement Premium: As respects each contract year, and in the event of
the whole or any portion of the second Coverage D indemnity limit being
exhausted by loss, the amount so exhausted shall be automatically
reinstated from the time of the loss and the Company shall pay to the
Reinsurer an Additional Premium calculated by applying to the annual
Minimum Premium to Reinsurer for the respective contract year, the
percentage that the amount of indemnity so reinstated bears to the total
amount of indemnity coverage afforded under Coverage C, subject to a
minimum of 100% as to time, to be paid simultaneously with the payment of
loss by the Reinsurer. Notwithstanding the above, the first 90% of
$5,000,000 indemnity Limit shall be reinstated by the Company free of
charge.
Nevertheless, the Reinsurer's liability in any one claim shall never
exceed 90% of $5,000,000 Ultimate Net Loss plus pro rata Loss Adjustment
Expenses in respect of Coverage D.
C. Maximum Premium: As respects each contract year, the Maximum Premium shall
equal the product of the Minimum Premium multiplied by 2 (two).
D. Ceding Commission: The Reinsurer shall pay to the Company 25.75% of all
Coverage D Minimum Premium and Reinstatement Premium payable hereon by the
Company at the time the Company pays such premiums.
ARTICLE XII: OFFSET AND SECURITY
A. Each party hereto has the right, which may be exercised at any time, to
offset any amounts, whether on account of premiums or losses or otherwise,
due from such party to another party under this Agreement or any other
reinsurance agreement heretofore or hereafter entered into between them,
against any amounts, whether on account of premiums or losses or otherwise
due from the latter party to the former party. The party asserting the
right of offset may exercise this right, whether as assuming or ceding
insurer or in both roles in the relevant agreement or agreements.
B. Each party hereby assigns and pledges to the other party (or to each other
party, if more than one) all of its rights under this Agreement to receive
premium or loss payments at any time from such other party ("Collateral"),
to secure its premium or loss obligations to such other party at any time
under this Agreement and any other reinsurance agreement heretofore or
hereafter entered into by and between them ("Secured Obligations"). If at
any time a party is in default under any Secured Obligation or shall be
subject to any liquidation, rehabilitation, reorganization or conservation
proceeding, each other party shall be entitled in its discretion, to apply
or withhold for the purpose of applying in due course, any Collateral
assigned and pledged to it by the former party and otherwise to realize
upon such Collateral as security for such Secured Obligations.
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C. The security interest described herein, and the term "Collateral", shall
apply to all payments and other proceeds in respect of the rights assigned
and pledged. A party's security interest in Collateral shall be deemed
evidenced only by the counterpart of this Agreement delivered to such
party.
D. Each right under this Article is a separate and independent right,
exercisable, without notice or demand, alone or together with other
rights, in the sole election of the party entitled thereto, and no waiver,
delay or failure to exercise, in respect of any right, shall constitute a
waiver of any other right. The provisions of this Article shall survive
any cancellation or other termination of this Agreement.
ARTICLE XIII: ACCESS TO RECORDS
A. The Company shall place at the disposal of the Reinsurer at all reasonable
time, and the Reinsurer shall have the right to inspect, through
authorized representatives, all books, records, policies, endorsements and
papers of the Company in connection with any reinsurance hereunder, or
claims in connection herewith.
B. The Reinsurer agrees that it will not disclose any confidential
information obtained by it hereunder to parties not subject to this
Contract except under the following circumstances and then only when
necessary:
1. When disclosure of such information is required in the normal course
of the Reinsurer's business; or
2. With the prior written consent of the Company; or
3. When the Reinsurer is required by a subpoena or court order to
disclose such information. The Reinsurer shall promptly notify the
Company of any attempt by a third party to obtain from it any such
confidential information.
C. The Reinsurer will provide the Company or its designated representative
with such information as the Reinsurer and Company may agree is necessary
to the Company's handling of the business reinsured herein.
D. The obligation contained in this Article shall survive termination of this
Contract.
ARTICLE XIV: LIABILITY OF THE REINSURER
A. The liability of the Reinsurer shall follow that of the Company in every
case and be subject in all respects to all the general and specific
stipulations, clauses, waivers and modifications of the Company's policies
and any endorsements thereon. However, in no event shall this be construed
in any way to provide coverage outside the terms and conditions set forth
in this Contract.
14
B. Nothing herein shall in any manner create any obligation or establish any
rights against the Reinsurer in favor of any third party or any persons
not parties to this Contract.
ARTICLE XV: NET RETAINED LIABILITY
A. This Contract applies only to that portion of any insurance or reinsurance
which the Company retains net for its own account (prior to deduction of
any underlying reinsurance), and in calculating the amount of any loss
hereunder and also in computing the amount or amounts in excess of which
this Contract attaches only loss or losses in respect of that portion of
any policy which the Company retains net for its own account shall be
included.
B. The amount of the Reinsurer's liability hereunder in respect of any loss
or losses shall not be increased by reason of the inability of the Company
to collect from any other reinsurer(s), whether specific or general, any
amounts which may have become due from such reinsurer(s), whether such
inability arises from the insolvency of such other reinsurer(s) or
otherwise.
ARTICLE XVI: DELAYS, ERRORS OR OMISSIONS
Inadvertent delays, errors or omissions made in connections with this Contract
or any transaction hereunder shall not relieve either party from any liability
which would have attached had such delay, error or omission not occurred,
provided always that such error or omission will be rectified as soon as
possible after discovery. In no event shall late notification of any claim,
except as provided in the sunset clause under ARTICLE IV, Section F, by the
Company constitute a ground upon which the Reinsurer has been prejudice by such
late notice. As used in this Article, the term "prejudice" shall mean that a
different outcome in the handling of any claim would have resulted but for the
untimely notice to the Reinsurer.
ARTICLE XVII: CURRENCY
Whenever the word "Dollars" or the "$" appears in this Contract, they shall be
construed to mean United States Dollars and all transactions under this Contract
shall be in United States Dollars.
ARTICLE XVIII: FEDERAL EXCISE TAX
If the Reinsurer is subject to the Federal Excise Tax, the Reinsurer agrees to
allow, for the purpose of paying the Tax, up to I % of the premium payable
hereon to the extent such premium is subject to the Tax. In the event of any
return premium becoming due hereunder, the Reinsurer will deduct from the amount
of the return premium the same percentage as it allowed, and the Company or its
agents should take steps to recover the Tax from the U.S.Government.
15
ARTICLE XIX: UNAUTHORIZED REINSURERS
A. If the Reinsurer is unauthorized in any state of the United States of
America or the District of Columbia, the Reinsurer agrees to fund its
share of the Company's Outstanding portion of Ultimate Net Loss and Pro
rata Loss Adjustment Expense reserves and Coverage A return premium
accrued by the Company, as determined by the Company, respectively by:
1. Clean, irrevocable and unconditional letters of credit issued and
confirmed, if confirmation is required by the insurance regulatory
authorities involved, by a bank or banks meeting the NAIC Securities
Valuation Office credit standards for issuers of letters of credit
and acceptable to said insurance regulatory authorities; and/or
2. Trust accounts in conformity with New York Regulation 114 for the
benefit of the Company and as may be required by any other insurance
regulatory authority; and/or
3. Cash advances;
if, without such funding, a penalty would accrue to the Company on any
financial statement it is required to file with the insurance regulatory
authorities involved. The Reinsurer, at its sole option, may fund in other
than cash if its method and form of funding are acceptable to the
insurance regulatory authorities involved and the Company.
B. With regard to funding in whole or in part by letters of credit, it is
agreed that each letter of credit will be in a form acceptable to
insurance regulatory authorities involved, will be issued for a term of at
least one year and will include an "evergreen clause" which automatically
extends the term for at least one additional year at each expiration date
unless written notice of non-renewal is given to the Company not less than
30 days prior to said expiration date. The Company and the Reinsurer
further agree, notwithstanding anything to the contrary in this Contract,
that said letters of credit may be drawn upon by the Company or its
successors in interest at any time, without diminution because of the
insolvency of the Company or the Reinsurer, but only for one or more of
the following purposes:
1. To reimburse itself for the Reinsurer's share of the Paid portion of
Ultimate Net Loss and/or Pro rata Loss Adjustment Expenses paid
under the terms of policies reinsured hereunder, unless paid in cash
by the Reinsurer;
2. To reimburse itself for the Reinsurer's share of any Coverage A
return premium due and other amounts claimed to be due hereunder,
unless paid in cash by the Reinsurer.
3. To fund a cash account in an amount equal to the Reinsurer's share
of any Outstanding portion of Ultimate Net Loss and Pro rata Loss
Adjustment
16
Expense reserves and Coverage A return premium funded by means of a
letter of credit which (a) is under non-renewal notice, if said
letter of credit has not been renewed or replaced by the Reinsurer
10 days prior to its expiration date, or (b) the Reinsurer has
failed to increase to the amount requested by the Company, it being
understood that nothing in this Contract in any way shall restrict
or limit the rights of the Company under the terms of the letter of
credit;
4. To refund to the Reinsurer any sum in excess of the actual amount
required to fund the Reinsurer's share of the Company's Outstanding
portion of Ultimate Net Loss and Pro rata Loss Adjustment Expense
reserves and Coverage A return premium, if so requested by the
Reinsurer.
In the event the amount drawn by the Company on any letter of credit is in
excess of the actual amount required for B(l) or B(2), or in the case of
B(3), the actual amount determined to be due, the Company shall promptly
return to the Reinsurer the excess amount so drawn.
ARTICLE XX: INSOLVENCY
A. In the event of the Insolvency of the Company, this reinsurance shall be
payable directly to the Company or to its liquidator, receiver,
conservator or statutory successor immediately upon demand, with
reasonable provision for verification, on the basis of the liability of
the Company without diminution because of the Insolvency of the Company or
because the liquidator, receiver, conservator or statutory successor of
the Company has failed to pay all or a portion of any claim. It is agreed,
however, that the liquidator, receiver, conservator or statutory successor
of the Company shall give written notice to the Reinsurer of the pendency
of a claim against the Company indicating the policy or bond reinsured
which claim would involve a possible liability on the part of the
Reinsurer within a reasonable time after such claim is filed in the
conservation or liquidation proceeding or in the receivership, and that
during the pendency of such claim, the Reinsurer may investigate such
claim and interpose, at its own expense, in the proceeding where such
claim is to adjudicated, any defense or defenses that it may deem
available to the Company or its liquidator, receiver, conservator, or
statutory successor. Accidental failure to give such notice shall not
excuse the obligation unless the Reinsurer is substantially prejudiced by
the failure to give such notice. The expense thus incurred by the
Reinsurer shall be chargeable, subject to the approval of the Court,
against the Company as part of the expense of conservation or liquidation
to the extent of a pro rata share of the benefit which may accrue to the
Company solely as a result of the defense undertaken by the Reinsurer.
B. Where two or more reinsurers are involved in the same claim and a majority
in interest elect to interpose defense to such claim, the expense shall be
apportioned in accordance with the terms of this Contract as though such
expense had been incurred by the Company.
17
C. It is further understood and agreed that, in the event of the Insolvency
of the Company, the reinsurance under this Contract shall be payable
directly by the Reinsurer to the Company or to its liquidator, receiver or
statutory successor.
ARTICLE XXI: ARBITRATION
A. As a condition precedent to any right of action hereunder, in the event of
any dispute or difference of opinion hereafter arising with respect to
this Contract, it is hereby mutually agreed that such dispute or
difference of opinion shall be submitted to Arbitration. One Arbiter shall
be chosen by the Company, the other by the Reinsurer, and an Umpire shall
be chosen by the two Arbiters before they enter upon Arbitration, all of
whom shall be active or retired disinterested executive officers of
insurance or reinsurance companies. In the event that either party should
fail to choose an Arbiter within 30 days following a written request by
the other party to do so, the requesting party may choose two Arbiters who
shall in turn choose an Umpire before entering upon Arbitration. If the
two Arbiters fail to agree upon the selection of an Umpire within 30 days
following their appointment, each Arbiter shall nominate three candidates
within 10 days thereafter, two of whom the other shall decline, and the
decision shall be made by drawing lots. Nothing herein shall prevent
either party from commencing a proceeding in the United States District
Court having jurisdiction over the dispute for the purposes of having said
court select an Umpire pursuant to the Federal Arbitration Act 9 USC 1 er
seq.
B. Each party shall present its case to the Arbiters within 30 days following
the date of appointment of the Umpire. The Arbiters shall consider this
Contract as an honorable engagement rather than merely as a legal
obligation and they are relieved of all judicial formalities and may
abstain from following the strict rules of law. The decision of the
Arbiters shall be final and binding on both parties; but failing to agree,
they shall call in the Umpire and the decision of the majority shall be
final and binding upon both parties. Judgment upon the final written
decision of the Arbiters may be entered in any court of competent
jurisdiction.
C. If more than one reinsurer is involved in the same dispute, all such
reinsurers shall constitute and act as one party for purposes of this
Article and communications shall be made by the Company to each of the
reinsurers constituting one party, provided, however, that nothing herein
shall impair the rights of such reinsurers to assert several, rather than
joint, defenses or claims, nor be construed as changing the liability of
the reinsurers participating under the terms of this Contract from several
to joint.
D. Each party shall bear the expense of its own Arbiter, and shall jointly
and equally bear with the other the expense of the Umpire and of the
Arbitration. In the event that the two Arbiters are chosen by one party,
as above provided, the expense of the Arbiters, the Umpire and the
Arbitration shall be equally divided between the two parties.
E. Any Arbitration proceedings shall take place at a location in
Lawrenceville, New Jersey. All proceedings pursuant hereto shall be
governed by the law of the State of New Jersey.
18
INTERESTS AND LIABILITIES AGREEMENT
to the
SPECIFIC EXCESS REINSURANCE CONTRACT
Effective: January 1, 1997
between
Medical Inter-Insurance Exchange of New Jersey
Lawrenceville, New Jersey
(hereinafter referred to as the "Company")
and
American Re-Insurance Company
(hereinafter referred to as the "Reinsurer")
It is hereby mutually agreed that the Reinsurer shall have a 9.00% share in the
interests and liabilities as set forth in the document attached hereto entitled
"SPECIFIC EXCESS REINSURANCE CONTRACT" Effective: January 1, 1997, issued to
Medical Inter-Insurance Exchange of New Jersey". The share of the Reinsurer
shall be separate and apart from the shares of the other reinsurers and shall
not be joint with those of the other reinsurers and the Reinsurer shall in no
event participate in the interest and liabilities of the other reinsurers.
IN WITNESS WHEREOF, the parties hereto, by their respective duly authorized
officers, have executed this Agreement, in triplicate, as of the dates
undermentioned.
In Lawrenceville, New Jersey, this 25th day of September, 1997,
For and on Behalf of Medical Inter-Insurance Exchange of New Jersey
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------------------------------------
In Princeton, New Jersey, this ____ day of _______________, 19___, For and on
Behalf of American Re-Insurance Company
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------------------------------
19
ADDENDUM NO. 1
TO THE
INTERESTS AND LIABILITIES AGREEMENT
TO THE
1997 SPECIFIC EXCESS REINSURANCE CONTRACT
ENTERED INTO BY AND BETWEEN
MEDICAL INTER-INSURANCE EXCHANGE OF NEW JERSEY
LAWRENCEVILLE, NEW JERSEY
(HEREINAFTER REFERRED TO AS "COMPANY")
AND
AMERICAN RE-INSURANCE COMPANY
(HEREINAFTER REFERRED TO AS "SUBSCRIBING REINSURER")
Effective July 1, 1997, Endorsement No. 1 is attached hereto and forms a part of
the 1997 Specific Excess Reinsurance Contract.
Nothing herein contained shall alter, vary or extend any provision or condition
of the Agreement other than as above stated.
IN WITNESS WHEREOF, the parties hereto have caused this Endorsement to be
executed in triplicate this 24th day of April, 1998.
MEDICAL INTER-INSURANCE EXCHANGE OF NEW JERSEY
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------------
Title: President & CEO
-------------------------------------
AMERICAN RE-INSURANCE COMPANY
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------
Title: Vice President
-------------------------------------
20
ENDORSEMENT NO. 1
TO THE
1997 SPECIFIC EXCESS REINSURANCE CONTRACT
ISSUED TO
MEDICAL INTER-INSURANCE EXCHANGE OF NEW JERSEY
LAWRENCEVILLE, NEW JERSEY
(HEREINAFTER REFERRED TO AS "COMPANY")
BY
AMERICAN RE-INSURANCE COMPANY
PRINCETON, NEW JERSEY
(HEREINAFTER REFERRED TO AS "REINSURER")
Effective July 1, 1997, the Reinsurer hereby agrees to amend the 1997 Specific
Excess Reinsurance Contract provided to the Company as follows:
1) Article 1: Classes of Business Reinsured, page 1 - Section A - Addition of
the following paragraph to be inserted preceding the final paragraph of
Section A:
"Property Coverage, including Fire, Allied Lines and Extended Coverages,
Inland Marine and Commercial Multi-Peril, all either written in respect of
Health Care Institutions or when written in conjunction with Professional
Liability coverages for Health Care Institutions."
2) Article III: Exclusions, page 3 - Addition of Exclusions 8., 9. and 10. as
follows:
"8. Earthquake coverages, when written as such.
9. North American War Exclusion Clause, attached to and forming part of
this Contract.
10. Seepage and Pollution Liability."
3) Article IV: Retentions and Limits, page 3, Section A. - Deletion of the
first paragraph of Section A. and insertion of the following revised
paragraph:
2
21
"A. Coverage A (Each Insured): Coverage A shall apply to all Classes of
Business Reinsured except Property Coverage. The Company shall
retain and be liable for the first $X amount as per the table below
of the Paid portion of Ultimate Net Loss as respects any one
original policy, each claim. The Reinsurer shall then be liable for
the amount by which such Paid portion of Ultimate Net Loss exceeds
the Company's Retention, but the liability of the Reinsurer shall
not exceed $13,000,000 Ultimate Net Loss plus pro rata Loss
Adjustment Expenses as respects any one original policy, each
claim."
4) Article IV: Retentions and Limits, page 3, Section B. - Deletion of the
first paragraph of Section B. and insertion of the following revised
paragraph:
"B. Coverage B (Each Insured): Coverage B shall apply to all Classes of
Business Reinsured except Property Coverage. For purposes of
Coverage B only, the Company shall retain and be liable for the Paid
portion of Ultimate Net Loss equal to the sum of the Retention and
Limit under Coverage A as respects any original policy, each claim.
The Reinsurer shall then be liable for 90% of the amount by which
the Paid portion of Ultimate Net Loss exceeds the sum of the
Retention and Limit under Coverage A, but the liability of the
Reinsurer shall not exceed 90% of $10,000,000 plus pro rata Loss
Adjustment Expenses as respects any original policy, each claim."
5) Article IV: Retentions and Limits, page 4, Section C. - Deletion of the
first paragraph of Section C. and insertion of the following revised
paragraph:
"C. Coverage C (Each Insured): Coverage C shall apply to all Classes of
Business Reinsured except Property Coverage. For purposes of
Coverage C only, the Company shall retain and be liable for the Paid
portion of Ultimate Net Loss equal to the sum of the Retention and
Limit under Coverage A and $10,000,000 paid indemnity plus pro rata
expenses in respect of Coverage B as respects any original policy,
each claim. The Reinsurer shall then be liable for 90% of the amount
by which such Paid portion of Ultimate Net Loss exceeds the sum of
the Retention and Limit under Coverage A and $10,000,000 paid
indemnity plus pro rata expenses in respect of Coverage B, but the
liability of the Reinsurer shall not exceed 90% of $10,000,000 plus
pro rata Loss Adjustment Expenses as respects any original policy,
each claim."
3
22
6) Article IV: Retentions and Limits, page 4, Section D. - Deletion of the
first paragraph of Section D. and insertion of the. following revised
paragraph:
"D. Coverage D (Each Insured): Coverage D shall apply to all Classes of
Business Reinsured except Property Coverage. For purposes of
Coverage D only, the Company shall retain and be liable for the Paid
portion of Ultimate Net Loss equal to the sum of the Retention and
Limit under Coverage A and $10,000,000 paid indemnity plus pro rata
expenses in respect of Coverage B and $10,000,000 paid indemnity
plus pro rata expenses in respect of Coverage C as respects any
original policy, each claim. The Reinsurer shall then be liable for
90% of the amount by which such Paid portion of Ultimate Net Loss
exceeds the sum of the Retention and Limit under Coverage A and
$10,000,000 paid indemnity plus pro rata expenses in respect of
Coverage B and $10,000,000 paid indemnity plus pro rata expenses in
respect, of Coverage C, but the liability of the Reinsurer shall not
exceed 90% of $5,000,000 plus pro rata Loss Adjustment Expenses as
respects any original policy, each claim."
7) Article IV: Retentions and Limits, pages 4-5, Sections E., F., G., H. and
I. to be relettered as follows:
Section E to become Section F
Section F to become Section G
Section G to become Section H
Section H to become Section I
Section I to become Section J
8) Article IV: Retentions and Limits, page 4 - Addition of Section E as
follows:
"E. Coverage E (Each Insured Coverage): Coverage E shall apply to the
Property Coverage Class of Business Reinsured only. For purposes of
Coverage E only, the Company shall retain and be liable for the
first $500,000 of the Paid portion of Ultimate Net Loss as respects
each and every loss, each original policy. Reinsurer shall then be
liable for 100% of the amount by which such Paid portion of Ultimate
Net Loss exceeds the Company's Retention, but the liability of the
Reinsurer shall not exceed $14,500,000 Ultimate Net Loss plus Pro
Rata Loss Adjustment Expense as respects each and every loss, each
original policy.
In no event shall Reinsurer be liable, in each contract year, for
more than $43,500,000 in respect of the sum of the Paid portion of
Ultimate Net Loss plus Pro Rata Loss Adjustment Expense, Loss in
Excess of Original Policy Limits, and Extra Contractual Obligations,
in the Aggregate, for Coverage E."
4
23
9) Article V: Definitions, page 8 - Addition of Definition J. as follows:
"J. "Gross Written Premium" as used herein shall mean the written
premium of the Company, including additional premiums and premium
adjustments less any return premiums in respect of policies written
during the term of this Contract."
10) Article VI: Claims and Loss Adjustment Expenses, page 8 - Section A -
Addition of the following paragraph as follows:
"Within 60 days after the end of each calendar quarter, the Company shall
provide the Reinsurer with a claims bordereau, as respects to Coverage E,
outlining any claim on which the Company has a paid or outstanding loss
value equal to or greater than $300,000 Ultimate Net Loss. The Company may
request, where necessary, an individual cash call for any claim payments
equal to or greater than $500,000 from Reinsurer for Coverage E only."
11) Renumbering of current Article XII and all subsequent Articles, i.e.:
Article XII to become Article XIII
Article XIII to become Article XIV
Article XIV to become Article XV
and continuing through the final Article of the Contract
and insertion of new Article XII as follows:
"ARTICLE XII: COVERAGE E PREMIUM AND CEDING COMMISSION
A. Initial Premium: As respects each contract year, the Company shall
pay the Reinsurer an Initial Premium equal to X% of each Policy's
Gross Written, Premium as per the Coded Excess Schedule, attaching
hereto and forming part of the 1997 Specific Excess Reinsurance
Contract, for policies with limits attaching hereunder in respect of
Coverage E. Initial Premium shall be payable by the Company to the
Reinsurer quarterly within 60 days in arrears from the end of each
quarter paying all amounts due in respect of premiums collected by
the Company for the respective quarter.
B. Reinstatement Premium: As respects each contract year, and in the
event of the whole or any portion of the second Coverage E indemnity
limit being exhausted by loss, the amount so exhausted shall be
automatically reinstated from the time of the loss and the Company
shall pay to the Reinsurer an Additional Premium calculated by
applying the aggregate Gross Written Premium to the Reinsurer for
Coverage E for the respective contract year to the percentage that
the amount of indemnity so reinstated bears to the total amount of
indemnity coverage afforded under Coverage E, to be paid
simultaneously with the payment of loss
5
24
by the Reinsurer. Notwithstanding the above, the first 100% of
$14,500,000 indemnity limit shall be reinstated by the Reinsurer
free of charge.
C. Ceding Commission: The Reinsurer shall pay to the Company 25.75% of
all Coverage E Initial Premium and Reinstatement Premium payable
hereon by the Company at the time the Company pays such premiums.
The Company shall provide the Reinsurer with a bordereau outlining the
Gross Written Premium and the Coded Excess Schedule Premium for each
policy written under Coverage E within 60 days after the end of each
calendar quarter. The bordereau shall include detailed information by
state, policy limit, construction type, including addresses, and probable
maximum losses."
All other terms and conditions remain unchanged.
6
25
EXHIBIT I
MEDICAL INTER-INSURANCE EXCHANGE
CODED EXCESS RATING GRID
PROPERTY PER RISK TREATY
============================================================================================
Location Amount Subject ($M) % of Gross Written Premium
--------------------------------------------------------------------------------------------
$4.5M xs $0.5M $5M xs $5M $5M xs $10M $10M xs $15M
============================================================================================
Over 0.5 - 0.6 2.83
--------------------------------------------------------------------------------------------
0.6 - 0.7 5.53
--------------------------------------------------------------------------------------------
0.7 - 0.8 7.82
--------------------------------------------------------------------------------------------
0.8 - 0.9 9.70
--------------------------------------------------------------------------------------------
0.9 - 1.0 11.59
--------------------------------------------------------------------------------------------
1.0 - 1.2 14.56
--------------------------------------------------------------------------------------------
1.2 - 1.4 17.25
--------------------------------------------------------------------------------------------
1.4 - 1.6 19.14
--------------------------------------------------------------------------------------------
1.6 - 1.8 22.10
--------------------------------------------------------------------------------------------
1.8 - 2.0 24.39
--------------------------------------------------------------------------------------------
2.0 - 2.5 27.63
--------------------------------------------------------------------------------------------
2.5 - 3.0 31.54
--------------------------------------------------------------------------------------------
3.0 - 4.0 35.44
--------------------------------------------------------------------------------------------
4.0 - 5.0 38.68
--------------------------------------------------------------------------------------------
5.0 - 7.0 39.35 4.04
--------------------------------------------------------------------------------------------
7.0 - 10.0 40.30 7.41
--------------------------------------------------------------------------------------------
10.0 - 15.0 41.78 7.41 4.04
--------------------------------------------------------------------------------------------
15.0 - 20.0 40.84 7.41 5.39 2.70
--------------------------------------------------------------------------------------------
20.0 - 25.0 40.43 7.68 6.06 4.99
--------------------------------------------------------------------------------------------
25.0 - 30.0 40.43 8.09 5.66 5.39
--------------------------------------------------------------------------------------------
30.0 - 40.0 39.49 7.68 5.39 5.39
--------------------------------------------------------------------------------------------
40.0 - 50.0 38.54 7.28 5.26 5.26
============================================================================================
26
ADDENDUM NO. 2
TO THE
INTERESTS AND LIABILITIES AGREEMENT
TO THE
1997 SPECIFIC EXCESS REINSURANCE CONTRACT
ENTERED INTO BY AND BETWEEN
MEDICAL INTER-INSURANCE EXCHANGE OF NEW JERSEY
LAWRENCEVILLE, NEW JERSEY
(HEREINAFTER REFERRED TO AS "COMPANY")
AND
AMERICAN RE-INSURANCE COMPANY
(HEREINAFTER REFERRED TO AS "SUBSCRIBING REINSURER")
Effective January 1, 1998, Endorsement No. 2 is attached hereto and forms a part
of the 1997 Specific Excess Reinsurance Contract.
Effective January 1, 1998, American Re's share in the interests and liabilities
of the captioned Reinsurance Contract shall be amended from 9.00% to 9.78%.
Nothing herein contained shall alter, vary or extend any provision or condition
of the Agreement other than as above stated.
IN WITNESS WHEREOF, the parties hereto have caused this Endorsement to be
executed in triplicate this 24th day of April, 1998.
MEDICAL INTER-INSURANCE EXCHANGE OF NEW JERSEY
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------------
Title: President & CEO
-------------------------------------
AMERICAN RE-INSURANCE COMPANY
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------
Title: Vice President
-------------------------------------
27
ENDORSEMENT NO. 2
TO THE
1997 SPECIFIC EXCESS REINSURANCE CONTRACT
(HEREINAFTER REFERRED TO AS "REINSURANCE CONTRACT")
ISSUED TO
MEDICAL INTER-INSURANCE EXCHANGE OF NEW JERSEY
LAWRENCEVILLE, NEW JERSEY
(HEREINAFTER REFERRED TO AS THE "COMPANY")
BY
AMERICAN RE-INSURANCE COMPANY
PRINCETON, NEW JERSEY
(HEREINAFTER REFERRED TO AS THE "REINSURER")
I. Effective January 1, 1998, the Reinsurer hereby agrees to amend the 1997
Specific Excess Reinsurance Contract provided to the Company as follows:
1) Article IV: Retentions and Limits, page 4 - Deletion of Section D. and
insertion of the following revised Section D:
"Coverage D (Each Insured Coverage): Coverage D shall apply to all Classes
of Business Reinsured except Property Coverage. For purposes of Coverage D
only, the Company shall retain and be liable for the Paid portion of
Ultimate Net Loss equal to the sum of the Retention and Limit under
Coverage A and $10,000,000 paid indemnity plus pro rata expenses in
respect of Coverage B and $10,000,000 paid indemnity plus pro rata
expenses in respect of Coverage C at respects any original policy, each
claim. The Reinsurer shall then be liable for 90% of the amount by which
such Paid portion of Ultimate Net Loss exceeds the sum of the Retention
and Limit under Coverage A and $10,000,00 paid indemnity plus pro rata
expenses in respect of Coverage B and $10,000,000 paid indemnity plus pro
rata expenses in respect of Coverage C, but the liability of the Reinsurer
shall not exceed 90% of $15,000,000 plus pro rata Loss Adjustment Expenses
as respects any original policy, each claim.
In no event shall the Reinsurer be liable, in each contract year, for more
than $40,500,000 (being 90% of $45,000,000) in respect of the sum of the
Paid portion of Ultimate Net Loss and Pro rata Loss Adjustment Expense,
Loss in Excess of Original Policy Limits, and Extra Contractual
Obligations, in the Aggregate, for Coverage D."
2
28
2) Article V: Definitions, page 6 - Sections 1 and 2., Subject Policy Limits
Tables - Deletion of Coverage D Limits and insertion of the following
revised limits:
For G.L.
Empl. Liabil.
Auto Liabil.
For all states For all states For Pennsylvania & All Other
other than PA other than PA for Health Care Inst. Non-Professn'l
Coverage Section for Phys. & Surg. Health Care Inst. Phys. & Surgeons Liability
----------------- ----------------- ----------------- ---------------- --------------
"Coverage D Limit 35M to 50M 36M to 51M 35.3 M to 50.3M 36Mto 51M"
3) Article XI: Coverage D Premium Ceding Commissions, pages 11-12 - Deletion
of Section B and insertion of the following revised Section B:
"B. Reinstatement Premium: As respects each contract year, and in the
event of the whole or any portion of the second Coverage D indemnity
limit being exhausted by loss, the amount so exhausted shall be
automatically reinstated from the time of the loss and the Company
shall pay to the Reinsurer an Additional Premium calculated by
applying to the annual Minimum Premium to the Reinsurer for the
respective contract year the percentage that the amount of indemnity
so reinstated bears to the total amount of indemnity coverage
afforded under Coverage C, subject to a minimum of 100% as to time,
to be paid simultaneously with the payment of loss by the Reinsurer.
Notwithstanding the above, the first 90% of $15,000,000 indemnity
limit shall be reinstated by the Reinsurer free of charge.
Nevertheless, the Reinsurer's liability in any one claim shall never
exceed 90% of $15,000,000 Ultimate Net Loss plus pro rata Loss
Adjustment Expenses in respect of Coverage D."
All other terms and conditions remain unchanged.
3
29
ADDENDUM NO. 3
TO THE
INTERESTS AND LIABILITIES AGREEMENT
TO THE
1997 SPECIFIC EXCESS REINSURANCE CONTRACT
ENTERED INTO BY AND BETWEEN
MEDICAL INTER-INSURANCE EXCHANGE OF NEW JERSEY
LAWRENCEVILLE, NEW JERSEY
(HEREINAFTER REFERRED TO AS "COMPANY")
AND
AMERICAN RE-INSURANCE COMPANY
(HEREINAFTER REFERRED TO AS "SUBSCRIBING REINSURER")
Effective January 1, 1997, Endorsement No. 3 is attached hereto and forms a part
of the 1997 Specific Excess Reinsurance Contract.
Nothing herein contained shall alter, vary or extend any provision or condition
of the Agreement other than as above stated.
IN WITNESS WHEREOF, the parties hereto have caused this Endorsement to be
executed in triplicate this 24th day of April, 1998.
MEDICAL INTER-INSURANCE EXCHANGE OF NEW JERSEY
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------------
Title: President & CEO
-------------------------------------
AMERICAN RE-INSURANCE COMPANY
BY: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------
Title: Vice President
-------------------------------------
30
ENDORSEMENT NO. 3
TO THE
1997 SPECIFIC EXCESS REINSURANCE CONTRACT'
ISSUED TO
MEDICAL INTER-INSURANCE EXCHANGE OF NEW JERSEY
LAWRENCEVILLE, NEW JERSEY
(HEREINAFTER REFERRED TO AS "COMPANY")
BY
AMERICAN RE-INSURANCE COMPANY
PRINCETON, NEW JERSEY
(HEREINAFTER REFERRED TO AS "REINSURER")
Effective January 1, 1997, ie Reinsurer hereby agrees to amend the 1997 Specific
Excess Reinsurance Contract provided to the Company as follows:
1) Article IV: Retention and Limits, page 3 - Section A - Delete the
Pennsylvania retention in the table and replace with the following revised
retention:
PA All Professional Liability $2,300,000
(Physicians, Surgeons & Institutions)"
2) Article V: Definitions, page 6 - Sections I and 2 - Delete Coverage A, B,
C and D Limits in the table for the column "For Pennsylvania Health Care
Inst. Phys. & Surgeons" only and replace with the following revised
limits:.
For Pennsylvania
Health Care Inst.
Coverage Section Phys & Surgeons
---------------- --------------------
Coverage A Limit "$ 2.3M to $ 15.3M
Coverage B Limit 15.3M to 25.3M
Coverage C Limit 25.3M to 35.3M
Coverage D Limit 35.3M to 40.3M"
All other terms and conditions remain unchanged.
31
ADDENDUM NO. 4
TO THE
INTERESTS AND LIABILITIES AGREEMENT
TO THE
1997 SPECIFIC EXCESS REINSURANCE CONTRACT
ENTERED INTO BY AND BETWEEN
MEDICAL INTER-INSURANCE EXCHANGE, OF NEW JERSEY
LAWRENCEVILLE, NEW JERSEY
(HEREINAFTER REFERRED TO AS "COMPANY")
AND
AMERICAN RE-INSURANCE COMPANY
(HEREINAFTER REFERRED TO AS "SUBSCRIBING REINSURER")
Effective December 31, 1997, Endorsement No. 4 is attached hereto and forms a
part of the 1997 Specific Excess Reinsurance Contract.
Nothing herein contained shall alter, vary or extend any provision or condition
of the Agreement other than as above stated.
IN WITNESS WHEREOF, the parties hereto have caused this Endorsement to be
executed in triplicate this 24th of April, 1998.
MEDICAL INTER-INSURANCE EXCHANGE OF NEW JERSEY
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------------
Title: President and CEO
-------------------------------------
AMERICAN RE-INSURANCE COMPANY
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------
Title: Vice President
-------------------------------------
32
ENDORSEMENT NO. 4
TO THE
1997 SPECIFIC EXCESS REINSURANCE CONTRACT
ISSUED TO
MEDICAL INTER-INSURANCE EXCHANGE OF NEW JERSEY
LAWRENCEVILLE, NEW JERSEY
(HEREINAFTER REFERRED TO AS "COMPANY")
BY
AMERICAN RE-INSURANCE COMPANY
PRINCETON, NEW JERSEY
(HEREINAFTER REFERRED TO AS "REINSURER")
Effective December 31, 1997, the Reinsurer hereby agrees to amend the 1997
Specific Excess Reinsurance Contract provided to the Company as follows:
ARTICLE III EXCLUSIONS, Exclusion 1. - Addition of the following paragraph:
"In addition, this exclusion shall also not apply to assumed
reinsurance underwritten by the Company for captives or other insurance
facilities of hospitals and all other health care institutions where
the underwriting is through the New Jersey State Medical Underwriters,
Inc."
All other terms and conditions remain unchanged.
