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WORKERS' COMPENSATION FIRST EXCESS OF LOSS
REINSURANCE CONTRACT
EFFECTIVE: JULY 1, 1998
issued to
American Compensation Insurance Company
Minneapolis, Minnesota
and any and all insurance companies which are now or hereafter
come under the same ownership or management as
American Compensation Insurance Company
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Reinsurance Services
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TABLE OF CONTENTS
ARTICLE PAGE
I Classes of Business Reinsured 1
II Commencement and ▇▇▇▇▇▇▇▇▇▇▇ ▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ (▇▇▇▇ ▇▇▇) 2
IV Exclusions 2
V Retention and Limit 4
VI Definitions 5
VII Claims 6
VIII Subrogation 7
IX Reinsurance Premium 7
X Reports and Remittances 8
XI Offset 8
XII Late Payments 8
XIII Access to Records (BRMA 1D) 9
XIV Liability of the Reinsurer 10
XV Net Retained Lines (BRMA 32B) 10
XVI Errors and Omissions 10
XVII Currency (BRMA 12A) ▇▇
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XIX Federal Excise Tax (BRMA 17A) 11
XX Unauthorized Reinsurers 11
XXI Insolvency 12
XXII Arbitration (BRMA 6J) 13
XXIII Service of Suit (BRMA 49C) 14
XXIV Governing Law 15
XXV Other Provisions 15
XXVI Agency Agreement 15
XXVII Intermediary (BRMA 23A) 16
Attachments:
Nuclear Incident Exclusion Clause - Liability - Reinsurance (USA)
Nuclear Incident Exclusion Clause - Liability - Reinsurance (Canada)
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WORKERS' COMPENSATION FIRST EXCESS OF LOSS
REINSURANCE CONTRACT
EFFECTIVE: JULY 1, 1998
issued to
American Compensation Insurance Company
Minneapolis, Minnesota
and any and all insurance companies which are now or hereafter
come under the same ownership or management as
American Compensation Insurance Company
(HEREINAFTER REFERRED TO COLLECTIVELY AS THE "Company")
by
The Subscribing Reinsurer(s) Executing the
Interests and Liabilities Agreement(s)
Attached Hereto
(HEREINAFTER REFERRED TO AS THE "Reinsurer")
ARTICLE I - CLASSES OF BUSINESS REINSURED
By this Contract the Reinsurer agrees to reinsure the excess liability which
may accrue to the Company under its policies, contracts and binders of
insurance or reinsurance (hereinafter called "policies") in force at the
effective date hereof or issued or renewed on or after that date,
and classified by the Company as Workers' Compensation and/or Employers
Liability business, subject to the terms, conditions and limitations
hereinafter set forth.
ARTICLE II - COMMENCEMENT AND TERMINATION
A. This Contract shall become effective on July 1, 1998, with respect
to losses arising out of occurrences commencing on or after that date,
and shall continue in force thereafter until terminated.
B. Either party may terminate this Contract on December 31, 2000 or any
December 31 thereafter by giving the other party not less than 90 days
prior notice by certified mail.
C. The Company may terminate a Subscribing Reinsurer's share under this
Contract by giving the Subscribing Reinsurer not less than 10 days notice
by certified mail in the event a Subscribing Reinsurer loses at least
50.0% of its statutory surplus existing at inception, or is deemed impaired
or insolvent by applicable regulatory or judicial authorities.
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D. Unless the Company elects that the Reinsurer have no liability for losses
arising out of occurrences commencing after the effective date of
termination, and so notifies the Reinsurer prior or as promptly as possible
after the effective date of termination, 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
plus odd time (not exceeding 15 months in all) following the effective date
of termination.
E. In an occurrence covered hereunder is in progress at the end of any
contract year, the Reinsurer's liability hereunder shall, subject to the
other terms and conditions of this Contract, be determined as if the
entire occurrence had occurred prior to the end of that contract year,
provided that no part of such occurrence is claimed against any other
contract year or any renewal or replacement of this Contract.
ARTICLE III - TERRITORY (BRMA 51A)
The territorial limits of this Contract shall be identical with those of the
Company's policies.
ARTICLE IV - EXCLUSIONS
A. This Contract shall not apply to:
1. Reinsurance assumed by the Company, except inter-company reinsurance
or reinsurance assumed by the Company from other issuing companies
because of regulatory and/or practical reasons while in all other
aspects acting as the insurance carrier.
2. "Self-insurance" or "self-insured obligations," howsoever styled, of
the Company, its affiliates or subsidiaries, or any insurance wherein
the Company, its affiliates or subsidiaries, are named as the insured
party, either alone or jointly with some other party, notwithstanding
that no legal liability may arise in respect thereof by reason of the
fact that the Company, its affiliates or subsidiaries, may not be
obligated by law to pay a claim to itself, its affiliates or
subsidiaries.
3. Any loss or liability accruing to the Company directly or indirectly
from any insurance written by or through any pool or association
including pools or associations in which membership by the Company is
required under any statutes or regulations; however, this exclusion
shall not apply to the Company's involuntary participation in assigned
risk plans in so far as the class of business is one written by the
Company.
4. Any liability of the Company arising from its participation or
membership in any insolvency fund.
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5. Nuclear risks as defined in the "Nuclear Incident Exclusion Clause -
Liability - Reinsurance (U.S.A.)" and the "Nuclear Incident Exclusion
Clause - Liability - Reinsurance (Canada)" attached to and forming
part of this Contract.
6. As regards interests which at time of loss or damage are on shore,
no liability shall attach hereto in respect of any loss or damage which
is occasioned by war, invasion, hostilities, acts of foreign enemies,
civil war, rebellion, insurrection, military or usurped power, or
martial law or confiscation by order of any government or public
authority. This War Exclusion Clause shall not, however, apply to
interests which at time of loss or damage are within the territorial
limits of the United States of America (comprising the Fifty States of
the Union, the District of Columbia, and including bridges between the
United States of America and Mexico provided they are under United
States ownership), Canada, St. Pierre and Miquelon, provided such
interests are insured under policies containing a standard war or
hostilities or warlike operations exclusion clause.
7. Insurance with respect to operations involving:
a. Aircraft flight operations or operations in which the flying
hazard is a major part of the insured's operation;
b. Manufacturing, packing, handling, shipping, or storage of
substances intended for use as an explosive, ammunitions, fuses,
arms, magnesium, propellant charges, detonating devices, fireworks,
nitroglycerine, celluloid or pyroxylin; however, this exclusion
shall not apply to the incidental packing, handling or storage of
same in connection with the sale of such substances. Firearm
manufacturing shall not be excluded;
c. Gas companies, dealers or distributors, except those in the
gasoline service station business; oil or gas operators, lease
operators or contractors; oil or gas pipeline construction or
operations; oil rig and ▇▇▇▇▇▇▇ work; onshore or offshore gas or
oil drilling operations. Gasoline hauling shall not be excluded
if the insured's primary operation is retail gasoline distribution
and the tankers are used to distribute to the risk's own locations
only;
d. Production, refining, handling, shipping or storage of "flammable
liquids" or "flammable gasses" as defined by the National Fire
Protection Association; however, this exclusion shall not apply
to the incidental handling or storage of same in connection with
the sale of such substances;
e. Railroad operation or construction of railroads;
f. Maritime or federal employments; steamship lines, agencies, or
stevedoring, navigation or operation of vessels; operation of
drydocks, marine wrecking; and including all United States
▇▇▇▇▇▇▇▇▇ and Harbor Workers' exposures except as incidental and
necessary to the primary operation;
g. Sewer and subway construction, shaft sinking or tunnelling;
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h. Wrecking or demolition;
i. Underground mining, strip mining, or quarrying;
j. Off-shore or subaqueous work;
k. Caisson of ▇▇▇▇▇▇ dam work; dam, dike, lock or revetment
construction;
l. Nuclear Regulatory Commission projects or operations conducted
under license from the Nuclear Regulatory Commission;
m. Asbestos removal;
n. Firefighters and police officers.
B. If the Company provides insurance for an insured with respect to any
operations listed in subparagraph 5 of paragraph A above, and if such
operations constitute only a minor and incidental part of the total
operations of the insured, such exclusion(s) shall not apply. "Minor
and incidental" as used herein is defined as 10.0% or less of the
total premium for the account.
C. If the Company is bound, without the knowledge of and contrary to the
instructions of the Company's supervisory underwriting personnel, on
any business falling within the scope of one or more of the exclusions
set forth in this Article, these exclusions, except subparagraphs 1,
2, 3 and 4 of paragraph A, shall be suspended with respect to such
business until 30 days after an underwriting supervisor of the Company
acquires knowledge of such business.
ARTICLE V - RETENTION AND LIMIT
The Company shall retain and be liable for the first $25,000 of ultimate net
loss (whether involving any one or any combination of the classes of
business covered hereunder, regardless of the number of policies under which
such loss is payable or the number of different interests insured) arising
out of each occurrence. The Reinsurer shall then be liable for the amount by
which such ultimate net loss exceeds the Company's retention, but the
liability of the Reinsurer shall not exceed $275,000 as respects any one
occurrence. However, as respects an occurrence where a claim is filed by any
insured involved in the occurrence in accordance with Minnesota Workers'
Compensation Law, the liability of the Reinsurer shall not exceed the
following:
1. As respects occurrences commencing during the 1998 contract year,
$255,000;
2. As respects occurrences commencing during the 1999 contract year,
$265,000;
3. As respects occurrences commencing during the 2000 contract year
and each subsequent contract year, $275,000;
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ARTICLE VI - DEFINITIONS
A. "Ultimate net loss" as used herein is defined as the sums or sums
(including loss in excess of policy limits, extra contractual obligations
and any loss adjustment expense, as hereinafter defined) which shall
constitute one loss, paid or payable by the Company in settlement of
claims and in satisfaction of judgments rendered on account of such
claims, after deduction of all salvage, all recoveries and all claims on
inuring insurance or reinsurance, whether collectible or not. Nothing
herein shall be construed to mean that losses under this Contract are not
recoverable until the Company's ultimate net loss has been ascertained.
B. "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 95.0% of any amount
of loss, together with any legal costs and expenses incurred in
connection therewith, paid or payable by the Company in excess of its
policy limits, but otherwise within the coverage terms of its policy,
as a result of 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 alleged fraud or alleged or
actual negligence or bad faith of the Company or the Company's
parent, R.T.W., Inc., Bloomington, Minnesota, 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.
2. "Extra contractual obligations" shall mean 95.0% of any punitive,
exemplary, compensatory or consequential damages, other than loss in
excess of policy limits, together with any legal costs and expenses
incurred in connection therewith, paid of 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, fraud or
bad faith on the part of the Company or R.T.W., Inc., Bloomington,
Minnesota, 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.
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
directed against the Company by any officer or director of the Company or
R.T.W., Inc., Bloomington, Minnesota, acting individually or 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 under a policy subject to this Contract.
C. "Loss adjustment expense" as used herein shall mean expenses
assignable to the investigation, appraisal, adjustment, settlement,
litigation, defense and/or appeal of specific claims, regardless of how
such expenses are classified for statutory reporting purposes. Loss
adjustment expense shall include, but not be limited to, interest on
judgments and declaratory judgment expenses or other legal expenses and
costs incurred in connection with
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coverage questions and legal actions connected thereto. Loss adjustment
expense shall not include office expenses, salaries of the Company's regular
employees or payments made by the Company to R.T.W., Inc., Bloomington,
Minnesota.
D. "Occurrence" as used herein shall mean each accident or occurrence or
series of accidents or occurrences arising out of one event regardless of
the number of employees or employers involved, except as modified below.
As respects an occupational or other disease or cumulative injury under
Workers' Compensation or Employers Liability policies for which the
employer is liable:
1. Which arises from a specific sudden and accidental event limited
in time and place, such occupational or other disease suffered by one
or more employees of one or more employers shall be deemed to be an
occurrence within the meaning of this contract, and the date of
occurrence shall be deemed to be the date of the sudden and
accidental event.
2. Which does not arise from a specific sudden and accidental event
limited in time and place, such occupational disease as defined by
the Workers' Compensation Laws of the states in which the Company
writes Workers' Compensation business shall mean an occupational
disease of one specific type suffered by one or more employees of one
employer. The date of occurrence shall be deemed to be the date on
which the occupational disease suffered by an employee is first
reported by the Company to the Reinsurer and any case of occupational
disease of the same specific type suffered by any other employee of
the same employer shall be deemed to have arisen out of the same
occurrence.
E. "Contract year" as used herein shall mean the periods from July 1, 1998
to December 31, 1998, both days inclusive, January 1, 1999 to December
31, 1999, both days inclusive, January 1, 2000 to December 31, 2000, both
days inclusive, and each respective period beginning January 1 and ending
December 31 thereafter that this Contract continues in force. However, if
this Contract is terminated, the period from the beginning of the then
current contract year through the effective date of termination shall be
considered a contract year, and the "runoff" period (if any) shall be
considered a separate contract year and referred to as the "runoff
contract year."
ARTICLE VII - CLAIMS
A. The Company shall notify the Reinsurer of claims in a monthly
bordereau report as provided in paragraph B below. The Reinsurer shall
have the right to participate, at its own expense, in the defense of any
claim or suit or proceeding involving this reinsurance.
B. On the last day of each calendar month, the Company shall provide a
bordereau report to the Reinsurer setting forth all losses for which the
paid plus outstanding ultimate net loss is greater than $12,500. Such
report shall specifically identify all claims involving loss in excess of
policy limits, extra contractual obligations, Employers Liability
business,
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occupational disease and/or cumulative injury. The Company shall also
provide a summary of the Reinsurer's share of all losses and loss
adjustment expense paid during the calendar month.
C. All claim settlements made by the Company, provided they are within
the terms of this Contract, shall be binding upon the Reinsurer, and the
Reinsurer agrees to pay all amounts for which it may be liable within 15
days of receipt of the Company's monthly bordereau report.
ARTICLE VIII - SUBROGATION
The Reinsurer shall be credited with recoveries from subrogation (i.e.,
reimbursement obtained or recovery made by the Company or by R.T.W., Inc.,
Bloomington, Minnesota, on behalf of the Company, less the actual cost,
excluding salaries of officials and employees of the Company or R.T.W., Inc.,
Bloomington, Minnesota, of obtaining such reimbursement or making such
recovery) on account of claims and settlements involving reinsurance
hereunder. Recoveries therefrom 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 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.
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ARTICLE X - REPORTS AND REMITTANCES
Annually, if requested by the Reinsurer in writing, the Company shall furnish
the Reinsurer with such information as the Reinsurer may require to complete
its Annual Convention Statement.
ARTICLE XI - OFFSET
The Company and the Reinsurer shall have the right to offset any balance or
amounts due from one party to the other under the terms of this Contract
only. The party asserting the right of offset may exercise such right any time
whether the balances due are on account of premiums or losses or otherwise.
ARTICLE XII - LATE PAYMENTS
A. The provisions of this Article shall not be implemented unless
specifically invoked, in writing, by one of the parties to this Contract.
B. In the event any premium, loss or other payment due either party is not
received by the intermediary named in Article XXVI (hereinafter referred to
as the "Intermediary") by the payment due date, the party to whom payment
is due may, by notifying the Intermediary in writing, require the debtor
party to pay, and the debtor party agrees to pay, an interest
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penalty on the amount past due calculated for each such payment on the last
business day of each month as follows:
1. The number of full days which have expired since the due date or the
last monthly calculation, whichever the lesser; times
2. 1/365th of the 6-month United States Treasury ▇▇▇▇ rate, as quoted in
THE WALL STREET JOURNAL on the first business day of the month for which
the calculation is made; times
3. The amount past due, including accrued interest.
It is agreed that interest shall accumulate until payment of the original
amount due plus interest penalties have been received by the Intermediary.
C. As respects any routine payment, adjustment or return due either party,
the due date, for purposes of this Article, shall be as provided for in the
applicable section of this Contract. In the event a due date is not
specifically stated for a given payment, it shall be deemed due 30 days
after the date of transmittal by the Intermediary of the initial billing
for each such payment. For purposes of interest calculations only,
amounts due hereunder shall be deemed paid upon receipt by the
Intermediary.
D. Nothing herein shall be construed as limiting or prohibiting a
Subscribing Reinsurer from contesting the validity of any claim, or from
participating in the defense or control of any claim or suit, or
prohibiting either party from contesting the validity of any payment or
from initiating any arbitration or other proceeding in accordance with
the provisions of this Contract. If the debtor party prevails in an
arbitration or other proceeding, then any interest penalties due
hereunder on the amount in dispute shall be null and void. If the debtor
party loses in such proceeding, then the interest penalty on the amount
determined to be due hereunder shall be calculated in accordance with the
provisions set forth above unless otherwise determined by such
proceedings. If a debtor party advances payment of any amount it is
contesting, and proves to be correct in its contestation, either in whole
or in part, the other party shall reimburse the debtor party for any such
excess payment made plus interest on the excess amount calculated in
accordance with this Article.
E. Interest penalties arising out of the application of this Article that
are $100 or less from any party shall be waived unless there is a pattern of
late payments consisting of three or more items over the course of any
12-month period.
ARTICLE XIII - ACCESS TO RECORDS (BRMA 1D)
The Reinsurer or its designated representatives shall have access at any
reasonable time to all records of the Company which pertain in any way to
this reinsurance.
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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.
B. Nothing herein shall in any manner create any obligations 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 LINES (BRMA 32B)
A. This Contract applies only to that portion of any policy which the
Company retains net for its own account, 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 - ERRORS AND OMISSIONS
The Company and the Reinsurer shall not be prejudiced in any way by any
delays, errors or omissions through mistake, accident or failure to cede any
reinsurance under the terms of this Contract or by erroneous cancellation,
either partial or total, of any cession, or by omitting to report or by
erroneously reporting any claim or loss settlement or any other transaction
hereunder, provided that such delays, errors or omissions are sought to be
rectified after discovery. Delays, errors or omissions made in connection
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.
ARTICLE XVII - CURRENCY (BRMA 12A)
A. Whenever the word "Dollars" or the "$" sign 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.
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B. Amounts paid or received by the Company in any other currency shall be
converted to United States Dollars at the rate of exchange at the date
such transaction is entered on the books of the Company.
ARTICLE XVIII - TAXES (BRMA 50B)
In consideration of the terms under which this Contract is issued, the
Company will not claim a deduction in respect of the premium hereon when
making tax returns, other than income or profits tax returns, to any state or
territory of the United States of America or the District of Columbia.
ARTICLE XIX - FEDERAL EXCISE TAX (BRMA 17A)
(Applicable to those reinsurers, excepting Underwriters at Lloyd's London and
other reinsurers exempt from Federal Excise Tax, who are domiciled outside
the United States of America.)
A. The Reinsurer has agreed to allow for the purpose of paying the Federal
Excise Tax the applicable percentage of the premium payable hereon (as
imposed under Section 4371 of the Internal Revenue Code) to the extent such
premium is subject to the Federal Excise Tax.
B. In the event of any return of premium becoming due hereunder the Reinsurer
will deduct the applicable percentage from the return premium payable
hereon and the Company or its agent should take steps to recover the tax
from the United States Government.
ARTICLE XX - 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 ceded outstanding loss and loss adjustment
expense reserves (including incurred but not reported loss reserves) 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. Escrow accounts for the benefit of the Company; 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.
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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 losses and/or loss
adjustment expense 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 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 ceded outstanding loss and loss adjustment expense reserves
(including incurred but not reported loss reserves) funded by means
of a letter of credit which 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;
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 ceded
outstanding loss and loss adjustment expense reserves (including
incurred but not reported loss reserves), 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(1) or B(3), or in the case
of B(2), the actual amount determined to be due, the Company shall
promptly return to the Reinsurer the excess amount so drawn.
ARTICLE XXI - INSOLVENCY
A. In the event of the insolvency of one or more of the reinsured
companies, this reinsurance shall be payable directly to the company or
to its liquidator, receiver, conservator or statutory successor, 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
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proceeding where such claim is to be adjudicated, any defense or defenses
that may deem available to the company or its liquidator, receiver,
conservator or statutory successor. 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.
C. It is further understood and agreed that, in the event of the insolvency
of one or more of the reinsured companies, the reinsurance under this
Contract shall be payable directly by the Reinsurer to the company or to
its liquidator, receiver or statutory successor, except as provided by
Section 4118(a) of the New York Insurance Law or except (1) where this
Contract specifically provides another payee of such reinsurance in the
event of the insolvency of the company or (2) where the Reinsurer with
the consent of the direct insured or insureds has assumed such policy
obligations of the company as direct obligations of the Reinsurer to the
payees under such policies and in substitution for the obligations of
the company to such payees.
D. Prior to the implementation of a novation, any certificate of assumption
on New York risks must be approved in advance by the Superintendent of
Insurance for New York.
ARTICLE XXII - ARBITRATION (BRMA 6J)
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 or Lloyd's
London Underwriters. 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.
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.
▇. ▇. ▇▇▇▇▇▇ CO.
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Judgment upon the final 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, not 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 mutually
agreed upon by the parties to this Contract, but notwithstanding the
location of the arbitration, all proceedings pursuant hereto shall be
governed by the law of the state in which the Company has its principal
office.
ARTICLE XXIII -- SERVICE OF SUIT (BRMA 49C)
(Applicable if the Reinsurer is not domiciled in the United States of
America, and/or is not authorized in any State, Territory or District of the
United States where authorization is required by insurance regulatory
authorities)
A. It is agreed that in the event the Reinsurer fails to pay any amount
claimed to be due hereunder, the Reinsurer, at the request of the
Company, will submit to the jurisdiction of a court of competent
jurisdiction within the United States. Nothing in this Article
constitutes or should be understood to constitute a waiver of the
Reinsurer's rights to commence an action in any court of competent
jurisdiction in the United States, to remove an action to a United States
District Court, or to seek a transfer of a case to another court as
permitted by the laws of the United States or of any state in the United
States.
B. Further, pursuant to any statute of any state, territory or district of
the United States which makes provision therefor, to the Reinsurer hereby
designates the party named in its Interests and Liabilities Agreement,
or if no party is named therein, the Superintendent, Commissioner or
Director of Insurance or other officer specified for that purpose in the
statute, or his successor or successors in office, at its true and
lawful attorney upon whom may be served any lawful process in any
action, suit or proceeding instituted by or on behalf of the Company or
any beneficiary hereunder arising out of this Contract.
▇. ▇. ▇▇▇▇▇▇ CO.
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ARTICLE XXIV -- GOVERNING LAW
This Contract shall be governed as to performance, administration and
interpretation by the laws of the State of Minnesota, exclusive of its rules
with respect to conflicts of law, except as to state rules with respect to
credit for reinsurance in which case the rules of all applicable states
shall apply.
ARTICLE XXV -- OTHER PROVISIONS
A. Waiver. The failure of the Company or the Reinsurer to insist on strict
compliance with this Contract, or to exercise any right or remedy
hereunder, shall not constitute a waiver of any rights herein nor stop
the parties from thereafter demanding full and complete compliance nor
prevent the parties from exercising such a remedy in the future.
B. Conflict with Law and Severability. If any provision of this Contract
should be invalid under applicable laws, the latter shall control but
only to the extent of the conflict without affecting the remaining
provisions of this Contract.
C. Headings. The headings preceding the text of the Articles and paragraphs
of this Contract are intended and inserted solely for convenience of
reference and shall not affect the meaning, interpretation, construction
or effect of this Contract.
D. Assignment. This Contract shall be binding upon and inure to the benefit
of the Company and the Reinsurer and their respective successors and
assigns provided, however, that this Contract may not be assigned by the
Reinsurer without the prior written consent of the Company which consent
may be withheld by the Company in its sole discretion.
E. Entire Agreement. This Contract constitutes the full and complete
agreement between the parties with respect to the reinsurance
arrangement between them. This Contract may be amended by mutual consent
of the parties hereto expressed in an addendum or endorsement, and such
addendum or endorsement, when executed by the parties hereto, shall be
deemed to be an integral part of this Contract and binding on the
parties hereto.
F. Third Party Beneficiary. Except as provided under Article XXI --
Insolvency, in no event shall anyone other than the Reinsurer or the
Company have any rights under this Contract.
ARTICLE XXVI -- AGENCY AGREEMENT
If more than one reinsured company is named as a party to this Contract, the
first named company shall be deemed the agent of the other reinsured
companies for purposes of sending or receiving notices required by the terms
and conditions of this Contract, and for purposes of remitting or receiving
any monies due any party.
▇. ▇. ▇▇▇▇▇▇ CO.
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ARTICLE XXVII -- INTERMEDIARY (BRMA 23A)
▇. ▇. ▇▇▇▇▇▇ Co. is hereby recognized as the Intermediary negotiating this
Contract for all business hereunder. All communications (including but not
limited to notices, statements, premium, return premium, commissions, taxes,
losses, loss adjustment expense, salvages and loss settlements) relating
thereto shall be transmitted to the Company or the Reinsurer through ▇. ▇.
▇▇▇▇▇▇ Co., Reinsurance Services, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇. Payments by the Company to the Intermediary shall be deemed
to constitute payment to the Reinsurer. Payments by the Reinsurer to the
Intermediary shall be deemed to constitute payment to the Company only to the
extent that such payments are actually received by the Company.
IN WITNESS WHEREOF, the Company by its duly authorized representative has
executed this Contract as of the date undermentioned at:
Minneapolis, Minnesota, this 16th day of March 1999.
/s/ ▇▇▇ ▇. ▇▇▇▇
-------------------------------------------------------------
American Compensation Insurance Company (for and on behalf of
the Company)
▇. ▇. ▇▇▇▇▇▇ CO.
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INTERESTS AND LIABILITIES AGREEMENT
of
First Excess and Reinsurance Corporation
Overland Park, Kansas
through
CORE Managers, Inc.
Stamford Connecticut
(HEREIN REFERRED TO AS THE "SUBSCRIBING REINSURER")
with respect to the
WORKERS' COMPENSATION FIRST EXCESS OF LOSS
REINSURANCE CONTRACT
EFFECTIVE: JULY 1, 1998
issued to and duly executed by
American Compensation Insurance Company
Minneapolis, Minnesota
and any and all insurance companies which are now or hereafter
come under the same ownership or management as
American Compensation Insurance Company
The SUBSCRIBING REINSURER hereby accepts a 100% share in the interests and
liabilities of the "Reinsurer" as set forth in the attached Contract captioned
above.
This Agreement shall become effective on July 1, 1998, and shall continue in
force until terminated in accordance with the provisions of the attached
Contract.
The SUBSCRIBING REINSURER'S share in the attached Contract shall be separate
and apart from the shares of the other reinsurers, and shall not be joint
with the shares of the other reinsurers, it being understood that the
SUBSCRIBING REINSURER shall in no event participate in the interests and
liabilities of the other reinsurers.
IN WITNESS WHEREOF, the SUBSCRIBING REINSURER by its duly authorized
representative has executed this Agreement as of the date undermentioned at:
Stamford, Connecticut this 15th day of March 1999.
/s/ ▇▇▇▇▇ ▇. Zaffinel
--------------------------------------------------------------
CORE Managers Inc. (as Reinsurance Manager for and on behalf
of First Excess and Reinsurance Corporation)
▇.▇. ▇▇▇▇▇▇ CO.
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NUCLEAR INCIDENT EXCLUSION CLAUSE -- LIABILITY - REINSURANCE
CANADA
1. This Agreement does not cover any loss or liability accruing to the
Reinsured as a member of, or subscriber to, any association of insurers
formed for the purpose of covering nuclear energy risks or as a direct or
indirect reinsurer of any such member, subscriber, or association.
2. Without in any way restricting the operation of paragraph 1 of this clause
it is agreed that for all purposes of this Agreement all the original
liability contracts of the Reinsured, whether new, renewal or replacement, of
the following classes, namely,
Personal Liability,
Farmers Liability,
Storekeepers Liability,
which become effective on or after 31st December 1984, shall be deemed to
include, from their inception dates and thereafter, the following provision:
LIMITED EXCLUSION PROVISION
This Policy does not apply to bodily injury or property damage with
respect to which the Insured is also insured under a contract of nuclear
energy liability insurance (whether the Insured is named in such
contract or not and whether or not it is legally enforceable by the
Insured) issued by the Nuclear Insurance Association of Canada or any
other group or pool of insurers or would be an Insured under any such
policy but for its termination upon exhaustion of its limit of liability.
With respect to property, loss of use of such property shall be deemed
to be property damage.
3. Without in any way restricting the operation of paragraph 1 of this
clause it is agreed that for all purposes of this Agreement all the original
liability contracts of the Reinsured, whether new, renewal or replacement, of
any class whatsoever (other than Personal Liability, Farmers Liability,
Storekeepers Liability or Automobile Liability contracts), which become
effective on or after 31st December 1984, shall be deemed to include, from
their inception dates and thereafter, the following provision:
BROAD EXCLUSION PROVISION
It is agreed that this Policy does not apply:
(a) to liability imposed by or arising under the Nuclear Liability Act;
or
(b) to bodily injury or property damage with respect to which an
Insured under this Policy is also insured under a contract of
nuclear energy liability insurance (whether the Insured is named in
such contract or not and whether or not it is legally enforceable
by the Insured) issued by the Nuclear Insurance Association of
Canada or any other insurer or group or pool of insurers or would
be an Insured under any such policy but for its termination upon
exhaustion of its limit of liability; or
(c) to bodily injury or property damage resulting directly or indirectly
from the nuclear energy hazard arising from:
(1) the ownership, maintenance, operation or use of a nuclear
facility by or on behalf of an Insured;
(2) the furnishing by an Insured of services, materials, parts or
equipment in connection with the planning, construction,
maintenance, operation or use of any nuclear facility; and
(3) The possession, consumption, use, handling, disposal or
transportation of fissionable substances or of other radioactive
material (except radioactive isotopes, away from a nuclear
facility, which have reached the final stage of fabrication so
as to be useable for any scientific, medical, agricultural,
commercial or industrial purpose) used, distributed, handled or
sold by an Insured.
As used in this Policy:
(I) The term "nuclear energy hazard" means the radioactive,
toxic, explosive or other hazardous properties of radioactive
material;
(II) The term "radioactive material" means uranium, thorium,
plutonium, neptunium, their respective derivatives and
compounds, radioactive isotopes of other elements and any other
substances that the Atomic Energy Control Board may, by
regulation, designate as being prescribed substances
capable of releasing atomic energy, or as being requisite for
the production, use or application of atomic energy;
(III) The term "nuclear facility" means:
(a) any apparatus designed or used to sustain nuclear fission
in a self-supporting chain reaction or to contain a
▇▇▇▇▇▇▇▇ ▇▇▇▇ of plutonium, thorium and uranium or any one
or more of them;
(b) any equipment or device designed or used for (i)
separating the isotopes of plutonium, thorium and uranium
or any one or more of them, (ii) processing or utilizing
spent fuel, or (iii) handling, processing or packaging
waste;
(c) any equipment or device used for the processing,
fabricating or alloying of plutonium, thorium or uranium
enriched in the isotope uranium 233 or in the isotope
uranium 235, or any one or more of them if at any time the
total amount of such material in the custody of the Insured
at the premises where such equipment or device is located
consists of or contains more than 25 grams of plutonium or
uranium 233 or any combination thereof, or more than 250
grams of uranium 235;
(d) any structure, basin, excavation, premises or place
prepared or used for the storage or disposal of waste
radioactive material;
and includes the site on which any of the foregoing is
located, together with all operations conducted thereon and all
premises used for such operations.
(IV) The term "fissionable substance" means any prescribed
substance that is, or from which can be obtained, a substance
capable of releasing atomic energy by nuclear fission.
(V) With respect to property, loss of use of such property shall
be deemed to be property damage.
U.S.A.
NUCLEAR INCIDENT EXCLUSION CLAUSE - LIABILITY - REINSURANCE
(APPROVED BY LLOYD'S UNDERWRITERS' FIRE AND NON-MARINE ASSOCIATION)
(1) This reinsurance does not cover any loss or liability accruing to
the Reassured as a member of, or subscriber to, any association of insurers
or reinsurers formed for the purpose of covering nuclear energy risks or as
a direct or indirect reinsurer of any such member, subscriber or association.
(2) Without in any way restricting the operation of paragraph (1) of
this Clause it is understood and agreed that for all purposes of this
reinsurance all the original policies of the Reassured (new, renewal and
replacement) of the classes specified in Clause II of this paragraph (2) from
the time specified in Clause III in this paragraph (2) shall be deemed to
include the following provision (specified as the Limited Exclusion
Provision):
LIMITED EXCLUSION PROVISION.*
I. It is agreed that the policy does not apply under any liability
coverage,
to (INJURY, SICKNESS, DISEASE, DEATH OR DESTRUCTION
(bodily injury or property damage
with respect to which an insured under the policy is also an
insured under a nuclear energy liability policy issued by
Nuclear Energy Liability Insurance Association, Mutual
Atomic Energy Liability Underwriters or Nuclear Insurance
Association of Canada, or would be an insured under any such
policy but for its termination upon exhaustion of its limit of
liability.
II. Family Automobile Policies (liability only), Special Automobile
Policies (private passenger automobiles, liability only), Farmers
Comprehensive Personal Liability Policies (liability only),
Comprehensive Personal Liability Policies (liability only) or
policies of a similar nature; and the liability portion of
combination forms related to the four classes of policies stated
above, such as the Comprehensive Dwelling Policy and the applicable
types of Homeowners Policies.
III. The inception dates and thereafter of all original policies as
described in II above, whether new, renewal or replacement,
being policies which either
(a) become effective on or after 1st May, 1960 or
(b) become effective before that date and contain the Limited
Exclusion Provision set out above;
provided this paragraph (2) shall not be applicable to Family
Automobile Policies, Special Automobile Policies or policies or
combination policies of a similar nature, issued by the Reassured
on New York risks, until 90 days following approval of the
limited Exclusion Provision by the Governmental Authority having
jurisdiction thereof.
(3) Except for those classes of policies specified in Clause II of
paragraph (2) and without in any way restricting the operation of paragraph (1)
of this Clause, it is understood and agreed that for all purposes of this
reinsurance the original liability policies of the Reassured (new, renewal
and replacement) affording the following coverages:
Owners, Landlords and Tenants Liability, Contractual Liability,
Elevator Liability, Owners or Contractors (including railroad)
Protective Liability, Manufacturers and Contractors Liability,
Product Liability, Professional and Malpractice Liability,
Storekeepers Liability, Garage Liability, Automobile Liability
(including Massachusetts Motor Vehicle or Garage Liability)
shall be deemed to include, with respect to such coverages, from the time
specified in Clause V of this paragraph (3), the following provision
(specified as the Broad Exclusion Provision):
BROAD EXCLUSION PROVISION.*
It is agreed that the policy does not apply:
I. Under any Liability Coverage to (INJURY, SICKNESS, DISEASE, DEATH OR
DESTRUCTION
(bodily injury or property damage
(a) with respect to which an insured under the policy is also an
insured under a nuclear energy liability policy issued by Nuclear
Energy Liability Insurance Association, Mutual Atomic Energy
Liability Underwriter or Nuclear Insurance Association of Canada,
or would be an insured under any such policy but for its termination
upon exhaustion of its limit of liability; or
(b) resulting from the hazardous properties of nuclear material and
with respect to which (1) any person or organization is required to
maintain financial protection pursuant to the Atomic Energy Act of
1954, or any law amendatory thereof, or (2) the insured is, or had
this policy not been issued would be, entitled to indemnity from
the United States of America, or any agency thereof, under any
agreement entered into by the United States of America, or any
agency thereof, with any person or organization.
II. Under any Medical Payments Coverage, or under any Supplementary Payments
Provision relating to (IMMEDIATE MEDICAL OR SURGICAL RELIEF
(first aid,
to expenses incurred with respect
to (BODILY INJURY, SICKNESS, DISEASE OR DEATH
(bodily injury
resulting from the hazardous properties of nuclear material and
arising out of the operation of a nuclear facility
by any person or organization.
III. Under any Liability Coverage to (INJURY, SICKNESS, DISEASE, DEATH OR
DESTRUCTION
(bodily injury or property damage
resulting from the hazardous properties of nuclear material, if
(a) the nuclear material (1) is at any nuclear facility owned by, or
operated by or on behalf of, an insured or (2) has been discharged
or dispersed therefrom;
(b) the nuclear material is contained in spent fuel or waste at any
time possessed, handled, used, processed, stored, transported or
disposed of by or on behalf of an insured; or
(c) the (INJURY, SICKNESS, DISEASE, DEATH OR DESTRUCTION
(bodily injury or property damage
arises out of the furnishing by an insured of services,
materials, parts or equipment in connection with the
planning, construction, maintenance, operation or use of any
nuclear facility, but if such facility is located within the United
States of America, its territories, or possessions or Canada, this
exclusion (c) applies
only to (INJURY TO OR DESTRUCTION OF PROPERTY AT SUCH NUCLEAR
FACILITY
(property damage to such nuclear facility and any
property thereat.
IV. As used in this endorsement:
"hazardous properties" include radioactive, toxic or explosive
properties; "nuclear material" means source material, special nuclear
material or byproduct material; "source material", "special nuclear
material", and "byproduct material" have the meanings given them in the
Atomic Energy Act of 1954 or in any law amendatory thereof; "spent fuel"
means any fuel element or fuel component, solid or liquid, which has
been used or exposed to radiation in a nuclear reactor; "waste" means
any waste material (1) containing byproduct material and (2) resulting
from the operation by any person or organization of any nuclear facility
included within the definition of nuclear facility under paragraph (a)
or (b) thereof; "nuclear facility" means
(a) any nuclear reactor,
(b) any equipment or device designed or used for (1) separating the
isotopes of uranium or plutonium, (2) processing or utilizing spent
fuel, or (3) handling processing or packaging waste,
(c) any equipment or device used for the processing, fabricating or
alloying of special nuclear material if at any time the total
amount of such material in the custody of the insured at the
premises where such equipment or device is located consists of or
contains more than 25 grams of plutonium or uranium 233 or any
combination thereof, or more than 250 grams of uranium 235,
(d) any structure, basin, excavation, premises or place prepared or
used for the storage or disposal of waste, and includes the site on
which any of the foregoing is located, all operations conducted on such
site and all premises used for such operations; "nuclear reactor" means
any apparatus designed or used to sustain nuclear fission in a
self-supporting chain reaction or to contain a ▇▇▇▇▇▇▇▇ ▇▇▇▇ of
fissionable material;
( WITH RESPECT TO INJURY TO OR DESTRUCTION OF PROPERTY, THE WORD "INJURY"
OR "DESTRUCTION"
( "property damage" includes all forms of radioactive contamination of
property.
( INCLUDES ALL FORMS OF RADIOACTIVE CONTAMINATION OF PROPERTY.
V. The inception dates and thereafter of all original policies
affording coverages specified in this paragraph (3), whether
new, renewal or replacement, being policies which become
effective on or after 1st May, 1960, provided this paragraph
(3) shall not be applicable to
(i) Garage and Automobile Policies issued by the
Reassured on New York risks, or
(ii) statutory liability insurance required under
Chapter 90, General Laws of Massachusetts, until 90 days
following approval of the Broad Exclusion Provision by the
Governmental Authority having jurisdiction thereof.
(4) Without in any way restricting the operation of paragraph (1) of
this Clause, it is understood and agreed that paragraphs (2) and (3) above are
not applicable to original liability policies of the Reassured in Canada and
that with respect to such policies this Clause shall be deemed to include
the Nuclear Energy Liability Exclusion Provisions adopted by the Canadian
Underwriters' Association of the Independent Insurance Conference of Canada.
* NOTE: THE WORDS PRINTED IN ITALICS IN THE LIMITED EXCLUSION PROVISION AND
IN THE BROAD EXCLUSION PROVISION SHALL APPLY ONLY IN RELATION TO ORIGINAL
LIABILITY POLICIES WHICH INCLUDE A LIMITED EXCLUSION PROVISION OR A BROAD
EXCLUSION PROVISION CONTAINING THOSE WORDS.
