No. 3525-0087
PROPERTY PER RISK REINSURANCE AGREEMENT
---------------------------------------
between
SELECTIVE INSURANCE COMPANY OF AMERICA
SELECTIVE WAY INSURANCE COMPANY
SELECTIVE INSURANCE COMPANY OF THE SOUTHEAST
SELECTIVE INSURANCE COMPANY OF SOUTH CAROLINA
EXCHANGE INSURANCE COMPANY
and
The Participants Subscribing to the Respective Interests and Liabilities
Contracts to which this Agreement as attached (hereinafter referred to as the
"Reinsurer")
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No. 3525-0087
TABLE OF CONTENTS
-----------------
ARTICLE PAGE
------- ----
I RETENTION OF COMPANY AND LIABILITY
OF REINSURER 1
II EXHIBITS COVERED 2
III LINES OF BUSINESS COVERED 2
IV SEVERABILITY 2
V EXCLUSIONS 3
VI TERRITORY 4
VII ULTIMATE NET LOSS 4
VIII DECLARATORY JUDGMENT EXPENSES 5
IX EXTRA CONTRACTUAL OBLIGATIONS 6
X EXCESS JUDGMENTS CLAUSE 7
XI CLAIMS 7
XII SUBROGATION AND SALVAGE 8
XIII SELF-INSURED OBLIGATIONS 8
XIV ERRORS AND OMISSIONS 9
XV RESERVES AND TAXES 9
XVI ACCESS TO RECORDS 10
XVII INSOLVENCY CLAUSE 10
XVIII ARBITRATION 11
XIX OFFSET AND SECURITY CLAUSE 12
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No. 3525-0087
TABLE OF CONTENTS
-----------------
(continued)
XX COMMENCEMENT AND TERMINATION 13
XXI EXTENDED TERMINATION 14
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No. 3525-0087
PROPERTY PER RISK REINSURANCE AGREEMENT
---------------------------------------
THIS REINSURANCE AGREEMENT made and entered into by and between the
SELECTIVE INSURANCE COMPANY OF AMERICA, SELECTIVE WAY INSURANCE COMPANY, both
of Branchville, New Jersey, SELECTIVE INSURANCE COMPANY OF THE SOUTHEAST,
SELECTIVE INSURANCE COMPANY OF SOUTH CAROLINA, both of Charlotte, North
Carolina, EXCHANGE INSURANCE COMPANY, of Buffalo, New York (hereinafter
collectively referred to as the "Company") and the participants subscribing
to the respective Interests and Liabilities Contracts to which this Agreement
is attached (hereinafter referred to as the "Reinsurer").
WITNESSETH:
The Reinsurer hereby reinsures the Company to the extent and on the
terms and conditions and subject to the exceptions, exclusions and
limitations hereinafter set forth and nothing hereinafter shall in any manner
create any obligations or establish any rights against the Reinsurer in favor
of any third parties or any persons not parties to this Agreement.
ARTICLE I
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RETENTION OF COMPANY AND LIABILITY OF REINSURER
-----------------------------------------------
The retention of the Company and the liability of the Reinsurer and all
other benefits accruing to the Company, as provided in this Agreement or any
amendments thereof, shall apply to the parties comprising the Company as a
group and not separately to each of the parties. Any payments by the
Reinsurer to any of the parties comprising the Company shall discharge the
Reinsurer's liability under this Agreement.
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ARTICLE II
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EXHIBITS COVERED
----------------
The Company will reinsure with the Reinsurer and the Reinsurer will
accept reinsurance from the Company as set forth in Exhibits A, B and C which
are attached hereto and made a part of this Agreement, such Exhibits being
entitled for purposes of identification as follows:
Exhibit A -First Excess of Loss Cover
Exhibit B -Second Excess of Loss Cover
Exhibit C -Third Excess of Loss Cover
ARTICLE III
-----------
LINES OF BUSINESS COVERED
-------------------------
(a) All business classified by the Reinsured as Property including but
not limited to Fire, Allied Lines, Earthquake, Inland Marine, Property
Sections of Homeowners, Farmowners, Businessowners, and Commercial Multi-
Peril Policies, Legal Liability Coverage when written on a Property or Inland
Marine form, Automobile Physical Damage, and Fidelity when included in a
multi-peril policy.
(b) In addition to the terms and conditions contained herein, it is
specifically understood and agreed that the business subject to recoveries
under this Agreement and the Exhibits attached shall be limited to business
which is written in accordance with the Company's SBU Guidelines. Any change
in Company underwriting philosophy which significantly impacts the Company's
SBU Guidelines shall be discussed with the lead Reinsurer.
ARTICLE IV
----------
SEVERABILITY
------------
If any provision of this Agreement shall be rendered illegal or
unenforceable by the laws, regulations or public policy of any state, such
provision shall be considered void in
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such state, but this shall not affect the validity or enforceability of any
other provisions of this Contract or the enforceability of such provision in
any other jurisdiction.
ARTICLE V
---------
EXCLUSIONS
----------
(a) This Agreement does not cover risks specifically listed below
unless individually submitted by the Company to the Reinsurer for inclusion
hereunder, and, if specially accepted by the Reinsurer, such business shall
then be covered under the terms of this Agreement, except as such terms shall
be modified by such acceptance:
1. All Lines of Business not specifically covered hereunder.
2. Financial Guarantees, Financial Insurance (including residual
value or similar types of coverage) and Insolvency.
3. Reinsurance assumed by the Company under obligatory
reinsurance agreements and excess of loss reinsurance
agreements, other than inter-company reinsurance between the
companies comprising the "Company" under this Agreement, but
this will not exclude reinsurance written by the Company over
Self-Insured retentions.
4. Pools, Associations and Syndicates business as per the
attached Pools, Associations and Syndicates Clause
5. Policies issued with a deductible greater than $l00,000;
provided this exclusion shall not apply to policies which
customarily provide a percentage deductible on the perils of
Earthquake, Windstorm or to policies in respect of the
Company's so-called "Board of Education Enhancements" program.
6. The following Automobile Physical Damage kinds of risks and
perils:
(i) Collision or upset.
(ii) Wrongful conversion, embezzlement or secretion.
(iii)Manufacturers' stock at factories.
7. Flood, surface water, waves, tidal water or tidal waves,
overflow of streams or other bodies of water or spray from any
of the foregoing written as a stand-alone policy.
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No. 3525-0087
8. Earthquake, landslide and other earth movement, when written
as a stand-alone policy.
9. War risk, bombardment, invasion, insurrection, rebellion,
revolution, military or usurped power, or confiscation by
order of any government or public authority, as excluded under
a standard policy containing a standard war exclusion clause.
10. Loss or liability excluded by the provisions of Nuclear
Incident Exclusion Clauses - Physical Damage - Reinsurance -
No. 2 and Reinsurance - No. 4 attached hereto. The word
"Reassured" used therein means "Company".
11. Insolvency Funds Exclusion Clause attached.
12. Mortgage impairment insurances when written and classified as
such, however this exclusion shall not apply to standard
mortgage errors and omissions policies.
ARTICLE VI
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TERRITORY
---------
This Agreement applies only to policies on a worldwide basis.
ARTICLE VII
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ULTIMATE NET LOSS
-----------------
(a) The term "Ultimate Net Loss" as used in this Agreement means the
sum actually paid by the Company in settlement of losses for which it is held
liable, including Declaratory Judgment Expenses in accordance with the
provisions of Article VIII, Extra Contractual Obligations in accordance with
the provisions of Article IX, and all expenses incurred by the Company in
settlement or defense of claims, including taxed court costs, pre-judgment
and post-judgment interest, and loss expenses incurred in the investigation,
adjustment, litigation, defense and settlement of claims made against the
Company under the policies reinsured hereunder.
(b) Recoveries, salvages and claims upon other reinsurance which inures
to the benefit of the Reinsurer under this Agreement, whether collectible or
not, shall be deducted in arriving at the "ultimate net loss."
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No. 3525-0087
(c) All office expenses of the Company and all salaries and expenses of
its officials and employees are excluded under this Agreement.
(d) In the event of the insolvency of the Company, "ultimate net loss"
means the amount of loss which the Company has incurred or for which it is
liable, and payment by the Reinsurer shall be made to the liquidator,
receiver or statutory successor of the Company in accordance with the
provisions of Article XVII of this Agreement.
(e) In calculating the amount of any loss hereunder and also in
computing the amount or amounts in excess of which this Agreement attaches,
only loss or losses in respect of that portion of any insurance or
reinsurance agreement which the company retains net for its own account shall
be included.
(f) The amount of the Reinsurers' liability hereunder in respect to any
loss or losses shall not be increased by reason of the inability of the
Company to collect from any other reinsurers whether specific or general any
amounts which may have become due from them whether such inability arises
from the insolvency of such other reinsurers or otherwise.
ARTICLE VIII
------------
DECLARATORY JUDGMENT EXPENSES
-----------------------------
The term "Declaratory Judgment Expenses" shall mean legal expenses paid
by the Company for the investigation, analysis, evaluation, and/or resolution
of litigation of coverage issues between the Company and any other party to
determine the Company's obligation to defend, indemnify and/or pay on behalf
of its insured(s) under policies reinsured hereunder arising from a specific
claim or claims.
The date on which Declaratory Judgment Expenses are incurred by the
Company shall be deemed, in all circumstances, to be the same dates as the
specific claim or claims under the policy reinsured hereunder.
Recoveries from any form of insurance and/or reinsurance that
protect the Company against claims the subject matter of this clause will
inure to the benefit of the
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No. 3525-0087
Reinsurer and shall be deducted from the total amount of Declaratory Judgment
Expenses for purposes of determining the amount recoverable hereunder.
ARTICLE IX
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EXTRA CONTRACTUAL OBLIGATIONS
-----------------------------
(a) The Agreement shall protect the Company within the limits hereof,
where ultimate net loss includes 90% of any Extra Contractual Obligations.
(b) "Extra Contractual Obligations" are defined as those liabilities
not covered under any other provision of this agreement, which arise from the
handling of any claim on business covered hereunder (including awards to a
third party claimant in excess of the Company's policy limit)such liabilities
arising because of, but not limited to the following: failure by the company
to settle within the policy limit, or by reason of alleged or actual
negligence, fraud or bad faith in rejecting an offer of settlement or in the
preparation of the defense or in the trial of any action against its insured
or in the preparation or prosecution of an appeal consequent upon such
action.
(c) The date on which an Extra Contractual Obligation is incurred by
the Company shall be deemed, in all circumstances, to be the date of the
original occurrence.
(d) This article shall not apply where the loss has been incurred due
to the fraud of a member of the Board of Directors or a corporate officer of
the Company 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 covered hereunder.
(e) Recoverables from any form of insurance or reinsurance which
protects the Company against claims which are subject matter of this clause
will inure to the benefit of the reinsurer and shall be deducted in arriving
at the amount of the Company's ultimate net loss.
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ARTICLE X
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EXCESS JUDGMENTS CLAUSE
(a) In the event a claimant is awarded an amount in excess of the
Company's policy limit as a result of the Company's alleged or actual
tortious conduct in the handling of the investigation, defense or settlement
of the claim made against the Company's insured and an action is brought by
the insured or assignee and a judgment rendered against the Company for an
amount in excess of the Company's policy limit, 90% of that portion of the
award made to the claimant which is in excess of the Company's policy limit
shall be added to the amount of the Company's policy limit and the sum
thereof shall be considered one loss, subject to the provision in (b) below
and other provisions, exclusions and limitations set forth in this Agreement.
(b) Recoveries from any form of insurance or reinsurance which protect
the Company against claims the subject matter of this clause will inure to
the benefit of the Reinsurer and shall be deducted to arrive at the amount of
the Company's ultimate net loss.
ARTICLE XI
----------
CLAIMS
------
(a) The Company shall advise the Reinsurer promptly of all claims and
any subsequent developments pertaining thereto which in its opinion may
develop into losses involving reinsurance hereunder.
(b) The Company has the obligation to investigate and, to the extent
that may be required by the policies reinsured hereunder, defend any claim
affecting this reinsurance and to pursue such claim to final determination.
(c) It is understood that when so requested the Company will afford the
Reinsurer an opportunity to be associated with the Company at the expense of
the Reinsurer in the defense or control of any claim or suit or proceeding
involving this
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No. 3525-0087
reinsurance; and the Company and the Reinsurer shall cooperate
in every respect in the defense of such suit or claim or proceeding.
ARTICLE XII
-----------
SUBROGATION AND SALVAGE
-----------------------
(a) The Reinsurer shall be subrogated, as respects any loss for which
the Reinsurer shall actually pay or become liable, but only to the extent of
the amount of payment by or the amount of liability to the Reinsurer, to all
the rights of the Company against any person or other entity who may be
legally responsible in damages for said loss.
(b) Any recoveries, salvages or reimbursements applying to risks
covered under this Agreement shall always be used to reimburse the excess
carriers (from the last to the first, beginning with the carrier of the last
excess), according to their participation, before being used in any way to
reimburse the Company for its primary loss.
(c) In the event there are any recoveries, salvages or reimbursements
recovered subsequent to a loss settlement, it is agreed that if the expenses
incurred in obtaining salvage or other recoveries are less than the amount
recovered, such expenses shall be borne by each party in the proportion that
each party benefits from the recoveries. If the expense incurred in
obtaining salvage or other recoveries is greater than the amount recovered,
the salvage or other recoveries shall first be applied to the reimbursement
of the expense of recovery and the remaining expense shall be borne by the
Company and the Reinsurer in proportion to the liability of each party for
the loss before such recovery had been obtained. Expenses hereunder shall
exclude all office expenses of the Company and all salaries and expenses of
its officials and employees.
ARTICLE XIII
------------
SELF-INSURED OBLIGATIONS
------------------------
(a) As respects all business the subject matter hereof, where the
coverage has been agreed upon between the Company and the Reinsurer, this
Agreement shall cover all obligations of the Company assumed by it as a self-
insurer (or self-insured obligations in
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excess of any valid and collectible insurance available to the Company) to
the same extent as if all types of insurance covered by this Agreement were
afforded under the broadest forms of agreements issued by the Company.
(b) An insurance or reinsurance wherein the Company hereby reinsured
and/or its affiliated and/or subsidiary Companies are named as the Insured or
Reinsured party, either alone or jointly with some other party, shall be
deemed to be an insurance or reinsurance coming within the scope of this
Agreement, notwithstanding that no legal liability may arise in respect
thereof by reason of the fact that the Company hereby reinsured and/or its
affiliated and/or subsidiary Companies are named as the Insured or Reinsured
party or one of the Insured or Reinsured parties.
ARTICLE XIV
-----------
ERRORS AND OMISSIONS
--------------------
Any inadvertent delay, error or omission on the part of the Company
shall not invalidate the reinsurance under this Agreement, provided such
errors or omissions are corrected promptly after discovery thereof, but the
liability of the Reinsurer under this Agreement or any exhibits or
endorsements attached hereto shall in no event exceed the limits specified
therein.
ARTICLE XV
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RESERVES AND TAXES
------------------
(a) The Reinsurer shall maintain legal reserves with respect to
unearned premiums and all claims hereunder in accordance with the Exhibits as
attached hereto.
(b) The Company will be liable for all taxes on premiums reported to
the Reinsurer hereunder and will reimburse the Reinsurer for such taxes where
the Reinsurer is required to pay the same.
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ARTICLE XVI
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ACCESS TO RECORDS
-----------------
The Company shall place at the disposal of the Reinsurer and the
Reinsurer shall have the right to inspect, through its authorized
representatives, at all reasonable times during the currency of this
Agreement and thereafter, the books, records and papers of the Company
pertaining to the reinsurance provided hereunder and all claims made in
connection therewith.
ARTICLE XVII
------------
INSOLVENCY CLAUSE
-----------------
The reinsurance provided by this Agreement shall be payable by the
Reinsurer directly to the Company or to its liquidator, receiver or statutory
successor on the basis of the liability of the Company under the contract or
contracts reinsured. Subject to the right of setoff and the verification of
coverage, the Reinsurer shall pay its share of the loss without diminution
because of the insolvency of the Company. In the event of the insolvency of
the Company, the liquidator, receiver or statutory successor of the Company
shall give written notice of the pendency of each claim against the Company
on a policy or bond reinsured within a reasonable time after such claim is
filed in the insolvency proceeding. During the pendency of such claim, the
Reinsurer may, at its own expense, investigate such claim and interpose in
the proceeding where such claim is to be adjudicated any defense or defenses
which it may deem available to the Company, its liquidator or receiver or
statutory successor. Subject to court approval, any expense thus incurred by
the Reinsurer shall be chargeable against the Company as part of the expense
of liquidation to the extent of such proportionate share of the benefit as
shall accrue to the Company solely as a result of the defense undertaken by
the Reinsurer. The reinsurance shall be payable as set forth above except
where this Agreement specifically provides for the payment of reinsurance
proceeds to another party in the event of the insolvency of the Company.
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ARTICLE XVIII
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ARBITRATION
-----------
(a) As a condition precedent to any right of action hereunder, any
dispute arising out of this Agreement shall be submitted to the decision of a
board of arbitration composed of two arbitrators and an umpire, meeting in
Branchville, New Jersey unless otherwise agreed.
(b) The members of the board of arbitration shall be active or retired
disinterested officials of insurance or reinsurance companies. Each party
shall appoint its arbitrator and the two arbitrators shall choose an umpire
before instituting the hearing. If the respondent fails to appoint its
arbitrator within four weeks after being requested to do so by the claimant,
the latter shall also appoint the second arbitrator. If the two arbitrators
fail to agree upon the appointment of an umpire within four weeks after their
nominations, each of them shall name three, of whom the other shall decline
two and the decision shall be made by drawing lots.
(c) The claimant shall submit its initial brief within 20 days from
appointment of the umpire. The respondent shall submit its brief within 20
days after receipt of the claimant's brief and the claimant may submit a
reply brief within l0 days after receipt of the respondent's brief.
(d) The board shall make its decision with regard to the custom and
usage of the insurance and reinsurance business. The board shall issue its
decision in writing based upon a hearing in which evidence may be introduced
without following strict rules of evidence but in which cross examination and
rebuttal shall be allowed. The board shall make its decision within 60 days
following the termination of the hearings unless the parties consent to an
extension. The majority decision of the board shall be final and binding
upon all parties to the proceeding. Judgment may be entered upon the award
of the board in any court having jurisdiction thereof.
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No. 3525-0087
(e) 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
clause and communications shall be made by the Company to each of the
reinsurers constituting the one party, provided, however, that nothing
therein 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 under the terms of this Agreement from several to joint.
(f) Each party shall bear the expense of its own arbitrator and shall
jointly and equally bear with the other party the expense of the umpire and
all other costs.
ARTICLE XIX
-----------
OFFSET AND SECURITY CLAUSE
--------------------------
(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 hereinafter 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 to withhold for the purpose of
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No. 3525-0087
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.
(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. In the event of the
insolvency of either party to this agreement, then offsets shall only be
allowed to the extent permitted by the applicable law of the insolvency
party's "state of domicile."
ARTICLE XX
----------
COMMENCEMENT AND TERMINATION
----------------------------
(a) This Agreement and the Exhibits attached hereto shall take effect
as of 12:01 A.M., July 1, 1996 and shall, except as otherwise stipulated
herein or in any Exhibit hereto or any Endorsement hereof, continue in full
force and effect until terminated as hereinafter provided. In the event of
termination of this agreement, the Reinsurer shall return the unearned
premium and shall not be liable for losses occurring after the anniversary
date. However, the Reinsured shall have the option to continue coverage
hereon for business in force at the existing rate applied to the unearned
subject premium income portfolio at the date of termination; not to exceed 12
months plus odd time.
(b) This Agreement or any of the Exhibits may be cancelled at any time
by mutual agreement or as of any January 1, April 1, July 1 or October 1 by
either party giving 90 days notice to the other stating when thereafter
cancellation shall be effective.
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No. 3525-0087
(c) Every notice of termination shall be given by registered or
certified letter addressed to the intended recipient at such recipient's
address as hereinabove set forth. In determining whether the requisite
number of days' notice has been given in any case, the date of termination
shall be counted but the date of mailing shall not.
(d) Notwithstanding the termination of this Agreement or any Exhibit as
attached hereto, the provisions of this Agreement shall continue to apply to
all unfinished business hereunder to the end that all obligations and
liabilities incurred by each party hereunder prior to such termination shall
be fully performed and discharged.
ARTICLE XXI
-----------
EXTENDED TERMINATION
--------------------
If this Agreement should terminate while an occurrence giving rise to a
claim hereunder is in progress, subject to the other conditions of this
Agreement, the Reinsurer shall be liable for its proportion of the entire
loss or damage caused by such occurrence.
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EXHIBIT A
EXHIBIT A
---------
FIRST EXCESS OF LOSS COVER
--------------------------
Section 1
---------
COVER
-----
The Reinsurer agrees to reimburse the Company, on an excess of loss
basis, for the amounts of ultimate net loss which the Company may pay as a
result of losses occurring on and after 12:01 A.M., July 1, 1996 under the
Company's policies in force as of 12:01A.M., July 1, 1996 and new and renewal
policies becoming effective on and after said date, covering business
classified by the Company as set forth in the Article entitled Lines of
Business Covered of the Agreement, except as excluded in the Article entitled
Exclusions of the Agreement, subject to the limitations set forth in Section
2 hereof.
Section 2
---------
LIMITS OF COVER
---------------
(a) The Reinsurer shall not be liable for any loss until the Company's
ultimate net loss on each risk in each occurrence involving one or more of
the perils covered under this Agreement exceeds $400,000 and then the
Reinsurer shall be liable for the amount of the Company's ultimate net loss
in excess of $400,000; but the Reinsurer's liability shall not exceed
$2,100,000 on each risk in each occurrence; provided, the aggregate of
reinsurance losses shall not exceed $6,300,000 in any one occurrence.
(b) The Company shall be the sole judge of what constitutes one risk.
The definition of risk shall include Commercial Automobile Physical Damage at
the location of the risk. When the Company provides an insured with a
separate sublimit for Flood and/or Earthquake on an occurrence or annual
limit basis, it is its intention to reserve the option to judge a loss or
losses caused by one occurrence and falling to the sublimit as being one risk
each insured.
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No. 3525-0087
EXHIBIT A
Section 3
---------
DEFINITIONS
-----------
(a) The term "Company's net premiums earned" used herein means the
Company's net premiums written (i.e., gross premiums less return premiums and
less premiums for reinsurance ceded which inures to the benefit of this
cover) during the period for which computation is being made, plus the net
unearned premiums at the beginning of the period, less the net unearned
premiums at the end of the period; said unearned premiums to be computed on
the monthly pro rata basis.
(b) The term "policies" means each of the Company's binders, policies,
contracts, cessions and certificates providing insurance on the perils and
classes of business covered hereunder.
(c) The term "Loss Occurrence" shall mean the sum of all individual
losses directly occasioned by any one disaster, accident or loss or series of
disasters, accidents or losses arising out of one event which, with respect
to Continental U.S. losses and/or Canadian losses, occurs within the area of
one state of the United States or province of Canada and states or provinces
contiguous thereto and to one another. However, the duration and extent of
any one "Loss Occurrence" shall be limited to all individual losses sustained
by the Company occurring during any period of 168 consecutive hours arising
out of an directly occasioned by the same event except that the term "Loss
Occurrence" shall be further defined as follows:
1. As regards windstorm, hail, tornado, hurricane, cyclone, including
ensuing collapse and water damage, all individual losses sustained
by the Company occurring during any period of 72 consecutive hours
arising out of and directly occasioned by the same event. However,
the event need not be limited to one state or province or states
or provinces contiguous thereto.
2. As regards riot, riot attending a strike, civil commotion,
vandalism and malicious mischief, all individual losses sustained
by the Company occurring during any period of 72 consecutive hours
within the area of one
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No. 3525-0087
EXHIBIT A
municipality or county and the municipalities or counties
contiguous thereto arising out of an directly occasioned by the
same event. The maximum duration of 72 consecutive hours may be
extended in respect of individual losses which occur beyond such
72 consecutive hours during the continued occupation of an
assured's premises by strikers, provided such occupation commenced
during the aforesaid period.
3. As regards earthquake (the epicenter of which need not necessarily
be within the territorial confines referred to in the opening
paragraph of this subsection (c)) and fire following directly
occasioned by the earthquake, only those individual fire losses
which commence during the period of 168 consecutive hours may be
included in the Company's "Loss Occurrence."
4. As regards "Freeze," only individual losses directly occasioned by
collapse, breakage of glass and water damage (caused by bursting
of frozen pipes and tanks) may be included in the Company's "Loss
Occurrence."
For all those "Loss Occurrences" the Company may choose the date and
time when any such period of consecutive hours commences provided that
it is not earlier than the date and time of the occurrence of the first
recorded individual loss sustained by the company arising out of that
disaster, accident or loss and provided that only one such period of
168 consecutive hours shall apply with respect to one event, except for
any "Loss Occurrence" referred to in sub-paragraphs 1. and 2. above
where only one such period of 72 consecutive hours shall apply with
respect to one event, regardless of the duration of the event.
No individual losses occasioned by an event that would be covered by 72
hours clause may be included in any "Loss Occurrence" claimed under the
168 hours provision.
Section 4
---------
REINSURANCE PREMIUM
-------------------
(a) As premium for the reinsurance provided hereunder during each
contract year, the Company shall pay the Reinsurer 2.44% of its net earned
premium for the contract year, subject to an annual minimum premium of
$3,440,000.
(b) The Company shall pay the Reinsurer an annual deposit premium of
$4,300,000 in four equal installments of $1,075,000 on January 1, April 1,
July 1 and October 1 of each year this Agreement remains in effect.
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No. 3525-0087
EXHIBIT A
(c) "Net earned premium" as used herein is defined as gross earned
premium of the Company for the classes of business reinsured hereunder, less
the earned portion of premiums ceded by the Company for reinsurance which
inures to the benefit of this Contract. For purposes of calculating net
earned premium, 85% of the Company's individual premiums on Homeowners and
Farmowners policies other than as respects Personal Article Floaters (PAF)
and 65% of the Company's indivisible premiums on Businessowners policies
shall be considered applicable to the perils and classes of business covered
hereunder shall be considered subject premium.
Section 5
---------
REINSTATEMENT
-------------
In the event of the whole or any portion of the liability under this
Agreement being exhausted by loss, the amount so exhausted shall be
automatically reinstated from the time of occurrence of the loss at no
additional premium.
Section 6
---------
REPORTS AND REMITTANCES
-----------------------
(a) The Company will provide the Reinsurer with all necessary data
respecting premiums and losses, including reserves thereon, as at dates and
on forms mutually acceptable to the Company and the Reinsurer.
(b) Payment by the Reinsurer of its proportion of losses and loss
expenses paid or to be paid by the Company will be made by the Reinsurer to
the Company within 15 days after proof of amount paid or to be paid by the
Company is received by the Reinsurer. The Company may, however, give the
Reinsurer written notice of its intention to pay any loss on a certain date
and may require the receipt of payment of the Reinsurer's share of the loss
by such date, provided the Reinsurer in any event shall have a period of 48
hours after receipt of said written notice to mail or otherwise dispatch the
payment.
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No. 3525-0087
EXHIBIT A
This Exhibit A is attached to and forms part of Reinsurance Agreement
No.3525-0087 issued to SELECTIVE INSURANCE COMPANY OF AMERICA, SELECTIVE WAY
INSURANCE COMPANY, SELECTIVE INSURANCE COMPANY OF THE SOUTHEAST, SELECTIVE
INSURANCE COMPANY OF SOUTH CAROLINA, and EXCHANGE INSURANCE COMPANY.
-5-
PAGE
No. 3525-0087
EXHIBIT B
EXHIBIT B
---------
SECOND EXCESS OF LOSS COVER
---------------------------
Section 1
---------
COVER
-----
The Reinsurer agrees to reimburse the Company, on an excess of loss basis,
for the amounts of ultimate net loss which the Company may pay as a result
of losses occurring on and after 12:01 A.M., July 1, 1996 under the
Company's policies in force as of 12:01A.M., July 1, 1996 and new and
renewal policies becoming effective on and after said date, covering
business classified by the Company as set forth in the Article entitled
Lines of Business Covered of the Agreement, except as excluded in the
Article entitled Exclusions of the Agreement, subject to the limitations set
forth in Section 2 hereof.
Section 2
---------
LIMITS OF COVER
---------------
(a) The Reinsurer shall not be liable for any loss until the Company's
ultimate net loss on each risk in each occurrence involving one or more of
the perils covered under this Agreement exceeds $2,500,000 and then the
Reinsurer shall be liable for the amount of the Company's ultimate net loss
in excess of $2,500,000; but the Reinsurer's liability shall not exceed
$2,500,000 on each risk in each occurrence; provided, the aggregate of
reinsurance losses shall not exceed $7,500,000 in any one occurrence.
(b) The Company shall be the sole judge of what constitutes one
risk. When the Company provides an insured with a separate sublimit for
Flood and/or Earthquake on an occurrence or annual limit basis, it is its
intention to reserve the option to judge a loss or losses caused by one
occurrence and falling to the sublimit as being one risk each insured.
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No. 3525-0087
EXHIBIT B
Section 3
---------
DEFINITIONS
-----------
(a) The term "Company's net premiums earned" used herein means the
Company's net premiums written (i.e., gross premiums less return premiums
and less premiums for reinsurance ceded which inures to the benefit of this
cover) during the period for which computation is being made, plus the net
unearned premiums at the beginning of the period, less the net unearned
premiums at the end of the period; said unearned premiums to be computed on
the monthly pro rata basis.
(b) The term "policies" means each of the Company's binders, policies,
contracts, cessions and certificates providing insurance on the perils and
classes of business covered hereunder.
(c) The term "Loss Occurrence" shall mean the sum of all individual
losses directly occasioned by any one disaster, accident or loss or series
of disasters, accidents or losses arising out of one event which, with
respect to Continental U.S. losses and/or Canadian losses, occurs within
the area of one state of the United States or province of Canada and states
or provinces contiguous thereto and to one another. However, the duration
and extent of any one "Loss Occurrence" shall be limited to all individual
losses sustained by the Company occurring during any period of 168
consecutive hours arising out of an directly occasioned by the same event
except that the term "Loss Occurrence" shall be further defined as follows:
1. As regards windstorm, hail, tornado, hurricane, cyclone, including
ensuing collapse and water damage, all individual losses sustained
by the Company occurring during any period of 72 consecutive hours
arising out of and directly occasioned by the same event. However,
the event need not be limited to one state or province or states
or provinces contiguous thereto.
2. As regards riot, riot attending a strike, civil commotion,
vandalism and malicious mischief, all individual losses sustained
by the Company occurring during any period of 72 consecutive hours
within the area of one
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No. 3525-0087
EXHIBIT B
municipality or county and the municipalities or counties
contiguous thereto arising out of an directly occasioned by the
same event. The maximum duration of 72 consecutive hours may be
extended in respect of individual losses which occur beyond such
72 consecutive hours during the continued occupation of an
assured's premises by strikers, provided such occupation commenced
during the aforesaid period.
3. As regards earthquake (the epicenter of which need not necessarily
be within the territorial confines referred to in the opening
paragraph of this subsection (c)) and fire following directly
occasioned by the earthquake, only those individual fire losses
which commence during the period of 168 consecutive hours may be
included in the Company's "Loss Occurrence."
4. As regards "Freeze," only individual losses directly occasioned by
collapse, breakage of glass and water damage (caused by bursting
of frozen pipes and tanks) may be included in the Company's "Loss
Occurrence."
For all those "Loss Occurrences" the Company may choose the date and
time when any such period of consecutive hours commences provided that
it is not earlier than the date and time of the occurrence of the first
recorded individual loss sustained by the company arising out of that
disaster, accident or loss and provided that only one such period of 168
consecutive hours shall apply with respect to one event, except for any
"Loss Occurrence" referred to in sub-paragraphs 1. and 2. above where
only one such period of 72 consecutive hours shall apply with respect to
one event, regardless of the duration of the event.
No individual losses occasioned by an event that would be covered by 72
hours clause may be included in any "Loss Occurrence" claimed under the
168 hours provision.
Section 4
---------
REINSURANCE PREMIUM
-------------------
(a) As premium for the reinsurance provided hereunder during each
contract year, the Company shall pay the Reinsurer .33% of its net earned
premium for the contract year, subject to an annual minimum premium of
$470,400.
(b) The Company shall pay the Reinsurer an annual deposit premium of
$588,000 in four equal installments of $147,000 on January 1, April 1, July 1
and October 1 of each year this Agreement remains in effect.
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No. 3525-0087
EXHIBIT B
(c) "Net earned premium" as used herein is defined as gross earned
premium of the Company for the classes of business reinsured hereunder, less
the earned portion of premiums ceded by the Company for reinsurance which
inures to the benefit of this Contract. For purposes of calculating net
earned premium, 85% of the Company's individual premiums on Homeowners and
Farmowners policies other than as respects Personal Article Floaters (PAF)
and 65% of the Company's indivisible premiums on Businessowners policies
shall be considered applicable to the perils and classes of business covered
hereunder shall be considered subject premium.
Section 5
---------
REINSTATEMENT
-------------
In the event of the whole or any portion of the liability under this
Agreement being exhausted by loss, the amount so exhausted shall be
automatically reinstated from the time of occurrence of the loss at no
additional premium.
Section 6
---------
REPORTS AND REMITTANCES
-----------------------
(a) The Company will provide the Reinsurer with all necessary data
respecting premiums and losses, including reserves thereon, as at dates and
on forms mutually acceptable to the Company and the Reinsurer.
(b) Payment by the Reinsurer of its proportion of losses and loss
expenses paid or to be paid by the Company will be made by the Reinsurer to
the Company within 15 days after proof of amount paid or to be paid by the
Company is received by the Reinsurer. The Company may, however, give the
Reinsurer written notice of its intention to pay any loss on a certain date
and may require the receipt of payment of the Reinsurer's share of the loss
by such date, provided the Reinsurer in any event shall have a period of 48
hours after receipt of said written notice to mail or otherwise dispatch the
payment.
-4-
PAGE
No. 3525-0087
EXHIBIT B
This Exhibit B is attached to and forms part of Reinsurance Agreement
No.3525-0087 issued to SELECTIVE INSURANCE COMPANY OF AMERICA, SELECTIVE WAY
INSURANCE COMPANY, SELECTIVE INSURANCE COMPANY OF THE SOUTHEAST, SELECTIVE
INSURANCE COMPANY OF SOUTH CAROLINA, and EXCHANGE INSURANCE COMPANY.
-5-
PAGE
No. 3525-0087
EXHIBIT C
---------
THIRD EXCESS OF LOSS COVER
--------------------------
Section 1
---------
COVER
-----
The Reinsurer agrees to reimburse the Company, on an excess of loss
basis, for the amounts of ultimate net loss which the Company may pay as a
result of losses occurring on and after 12:01 A.M., July 1, 1996 under the
Company's policies in force as of 12:01A.M., July 1, 1996 and new and renewal
policies becoming effective on and after said date, covering business
classified by the Company as set forth in the Article entitled Lines of
Business Covered of the Agreement, except as excluded in the Article entitled
Exclusions of the Agreement, subject to the limitations set forth in Section
2 hereof.
Section 2
---------
LIMITS OF COVER
---------------
(a) The Reinsurer shall not be liable for any loss until the Company's
ultimate net loss on each risk in each occurrence involving one or more of
the perils covered under this Agreement exceeds $5,000,000 and then the
Reinsurer shall be liable for the amount of the Company's ultimate net loss
in excess of $5,000,000; but the Reinsurer's liability shall not exceed
$5,000,000 on each risk in each occurrence; provided, the aggregate of
reinsurance losses shall not exceed $15,000,000 in any one occurrence.
(b) The Company shall be the sole judge of what constitutes one risk.
When the Company provides an insured with a separate sublimit for Flood
and/or Earthquake on an occurrence or annual limit basis, it is its intention
to reserve the option to judge a loss or losses caused by one occurrence and
falling to the sublimit as being one risk each insured.
-1-
PAGE
No. 3525-0087
Section 3
---------
DEFINITIONS
-----------
(a) The term "Company's net premiums earned" used herein means the
Company's net premiums written (i.e., gross premiums less return premiums
and less premiums for reinsurance ceded which inures to the benefit of this
cover) during the period for which computation is being made, plus the net
unearned premiums at the beginning of the period, less the net unearned
premiums at the end of the period; said unearned premiums to be computed on
the monthly pro rata basis.
(b) The term "policies" means each of the Company's binders, policies,
contracts, cessions and certificates providing insurance on the perils and
classes of business covered hereunder.
(c) The term "Loss Occurrence" shall mean the sum of all individual
losses directly occasioned by any one disaster, accident or loss or series of
disasters, accidents or losses arising out of one event which, with respect
to Continental U.S. losses and/or Canadian losses, occurs within the area of
one state of the United States or province of Canada and states or provinces
contiguous thereto and to one another. However, the duration and extent of
any one "Loss Occurrence" shall be limited to all individual losses sustained
by the Company occurring during any period of 168 consecutive hours arising
out of an directly occasioned by the same event except that the term "Loss
Occurrence" shall be further defined as follows:
1. As regards windstorm, hail, tornado, hurricane, cyclone, including
ensuing collapse and water damage, all individual losses sustained
by the Company occurring during any period of 72 consecutive hours
arising out of and directly occasioned by the same event. However,
the event need not be limited to one state or province or states or
provinces contiguous thereto.
2. As regards riot, riot attending a strike, civil commotion,
vandalism and malicious mischief, all individual losses sustained
by the Company occurring during any period of 72 consecutive hours
within the area of one municipality or county and the
municipalities or counties contiguous
-2-
PAGE
No. 3525-0087
thereto arising out of an directly occasioned by the same event.
The maximum duration of 72 consecutive hours may be extended in
respect of individual losses which occur beyond such 72 consecutive
hours during the continued occupation of an assured's premises by
strikers, provided such occupation commenced during the aforesaid
period.
3. As regards earthquake (the epicenter of which need not necessarily
be within the territorial confines referred to in the opening
paragraph of this subsection (c)) and fire following directly
occasioned by the earthquake, only those individual fire losses
which commence during the period of 168 consecutive hours may be
included in the Company's "Loss Occurrence."
4. As regards "Freeze," only individual losses directly occasioned by
collapse, breakage of glass and water damage (caused by bursting of
frozen pipes and tanks) may be included in the Company's "Loss
Occurrence."
For all those "Loss Occurrences" the Company may choose the date and
time when any such period of consecutive hours commences provided that
it is not earlier than the date and time of the occurrence of the first
recorded individual loss sustained by the company arising out of that
disaster, accident or loss and provided that only one such period of 168
consecutive hours shall apply with respect to one event, except for any
"Loss Occurrence" referred to in sub-paragraphs 1. and 2. above where
only one such period of 72 consecutive hours shall apply with respect to
one event, regardless of the duration of the event.
No individual losses occasioned by an event that would be covered by 72
hours clause may be included in any "Loss Occurrence" claimed under the
168 hours provision.
Section 4
---------
REINSURANCE PREMIUM
-------------------
(a) As premium for the reinsurance provided hereunder during each
contract year, the Company shall pay the Reinsurer .24% of its net earned
premium for the contract year, subject to an annual minimum premium of
$340,800.
(b) The Company shall pay the Reinsurer an annual deposit premium of
$426,000 in four equal installments of $106,500 on January 1, April 1, July 1
and October1 of each year this Agreement remains in effect.
(c) "Net earned premium" as used herein is defined as gross earned
premium of the Company for the classes of business reinsured hereunder, less
the earned portion of
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PAGE
No. 3525-0087
premiums ceded by the Company for reinsurance which inures to the benefit of
this Contract. For purposes of calculating net earned premium, 85% of the
Company's individual premiums on Homeowners and Farmowners policies other
than as respects Personal Article Floaters (PAF) and 65% of the Company's
indivisible premiums on Businessowners policies shall be considered
applicable to the perils and classes of business covered hereunder shall be
considered subject premium.
Section 5
---------
REINSTATEMENT
-------------
Each claim hereon reduces the amount of indemnity from the time of
occurrence of the loss by the sum paid, but any amount so exhausted is hereby
reinstated from the time of occurrence of the loss. The first full amount so
reinstated shall be at no additional charge. The Company agrees to pay, as
the 2nd full limit reinstated an additional premium calculated at pro rata of
the annual earned premium hereon for the calendar year during which the loss
occurred, being pro rata as to the fraction of the face value of this
Agreement (i.e., the fraction of $5,000,000) so reinstated and 100% as to the
calendar year unexpired at the time of the occurrence of the loss.
Nevertheless, the Reinsurer's liability hereunder shall never exceed
$5,000,000 in respect of any one occurrence and, subject to the limit in
respect of any one occurrence, shall be further limited to $15,000,000 in any
one calendar year by reason of any and all claims arising hereunder.
Section 6
---------
REPORTS AND REMITTANCES
-----------------------
(a) The Company will provide the Reinsurer with all necessary data
respecting premiums and losses, including reserves thereon, as at dates and
on forms mutually acceptable to the Company and the Reinsurer.
(b) Payment by the Reinsurer of its proportion of losses and loss
expenses paid or to be paid by the Company will be made by the Reinsurer to
the Company within 15 days after proof of amount paid or to be paid by the
Company is received by the Reinsurer. The
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PAGE
No. 3525-0087
Company may, however, give the Reinsurer written notice of its intention to
pay any loss on a certain date and may require the receipt of payment of the
Reinsurer's share of the loss by such date, provided the Reinsurer in any
event shall have a period of 48 hours after receipt of said written notice to
mail or otherwise dispatch the payment.
This Exhibit C is attached to and forms part of Reinsurance Agreement
No.3525-0087 issued to SELECTIVE INSURANCE COMPANY OF AMERICA, SELECTIVE WAY
INSURANCE COMPANY, SELECTIVE INSURANCE COMPANY OF THE SOUTHEAST, SELECTIVE
INSURANCE COMPANY OF SOUTH CAROLINA, and EXCHANGE INSURANCE COMPANY.
-5-
PAGE
No. 3525-0087
INSOLVENCY FUNDS EXCLUSION CLAUSE
---------------------------------
Liability of the Company arising from its participation or membership,
whether voluntary or involuntary, in any insolvency fund, including any
guarantee fund, association, pool, plan or other facility which provides for
the assessment of, payment by, or assumption by the Company of a part or the
whole of any claim, debt, charge, fee or other obligations of an insurer, or
its successors or assigns, which has been declared insolvent by any authority
having jurisdiction.
