EXHIBIT 10.17
CLAIMS ADMINISTRATION SERVICES AGREEMENT
This CLAIMS ADMINISTRATION SERVICES AGREEMENT (this "Agreement"), dated as of
September 30, 2003, is entered into by and among Xxxxxx Employers Insurance
Company, an Illinois insurance company ("KEIC"), Eagle Pacific Insurance
Company, a Washington insurance company ("EPIC"), and Pacific Eagle Insurance
Company, a California insurance company ("PEIC"; and together with EPIC,
"EAGLE").
W I T N E S S E T H:
WHEREAS, Insurance Holdings, Inc., a Delaware corporation ("NEWCO"), has
entered into a Purchase Agreement, dated as of July 14, 2003, with Xxxxxx
Employers Group, Inc., a Washington corporation, Lumbermens Mutual Casualty
Company, an Illinois mutual insurance company ("Lumbermens"), EPIC, and PEIC
providing for, among other things, the sale of certain assets of Eagle, and the
acquisition of KEIC by NEWCO (as amended, the "Purchase Agreement"); and
WHEREAS, the Purchase Agreement provides for, among other things, the
execution as of the date hereof (the "Closing Date") of a claims administration
services agreement between KEIC and EAGLE; and
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements set forth herein, the parties hereto agree as follows:
1. DEFINITIONS
A. "90% Target" shall mean an amount equal to 90% of the Estimated
Expenses Amount.
B. "Allocated Loss Adjustment Expense (or ALAE)" shall mean all costs
and expenses that are chargeable to the investigation, handling,
adjustment, settlement or defense of any Claim for benefits or
damages under a Policy and includes but is not limited to:
applicable rehabilitation coordinators' charges; fees for service of
process; fees and costs of attorneys; fees for audit of legal bills;
costs of undercover operatives or detective services; costs of
appraisals; costs of employing experts for preparation of maps,
photographs, diagrams, or chemical or physical analysis; the costs
of other third-party professional advice, opinion or testimony
concerning Claims; costs of legal transcripts of testimony; costs of
copies of public records; costs of depositions and court reporters
or recorded statements; costs of bonds, appeals, pre and
post-judgment interest; cost of hospital and medical xxxx audits;
the cost of any utilization review, peer review, third-party case
management, preferred provider fees and other third party managed
care and medical cost containment expenses; autopsy reports and
other similar third-party charges, fee or costs reasonably
chargeable to the investigation, negotiation, settlement defense or
Subrogation of Claims; and all other similar
costs, fees and expenses for services related to the investigation,
handling, adjustment, settlement or defense of any Claim or the
protection and collection of subrogation rights. ALAE shall not
include the salaries or wages of KEIC's employees or any costs,
charges, or expenses incurred by KEIC solely in the provision of
Claims Services; provided, however, fees for Managed Care Services,
if any, shall be part of ALAE.
C. "Claim" shall mean each and every demand, suit, occurrence or loss,
actual or alleged, arising out of or in connection with a Policy, or
any deductible under such Policy, and arising out of a single
occurrence, including Reported Claims and New Claims (as defined
herein).
D. "Claimant" shall mean a person or entity that has made a Claim
against a party that is an insured under a Policy or is entitled to
Claim Services under a Policy.
E. "Claim Loss" shall mean any paid loss or other payment that may
arise under or relate to any Policy, including Allocated Loss
Adjustment Expense.
F. "Claims Files" shall have the meaning specified in Section 6.A.
G. "Claims Services" shall have the meaning specified in Section 4 and
Exhibit A to this Agreement, and includes Managed Care Services and
Loss Control Services.
H. "Conclusion" of a Claim or "Concluded Claim" shall mean the time at
which (i) such Claim has been fully paid or (ii) a commercially
reasonable determination is made by KEIC that EAGLE has no further
liability for such Claim. A Claim which has had a Conclusion of a
Claim shall be deemed to be concluded unless and until there is a
Reopening of such Claim.
I. "Covered Losses" shall mean losses or other payments resulting from
Reported Claims and New Claims.
J. "EAGLE's Confidential Information" shall mean any and all data and
information, which relates to EAGLE's, or their respective
policyholders, claimants or businesses, that is held, acquired or
accessed by KEIC in connection with this Agreement. Unless otherwise
required by applicable laws EAGLE's Confidential Information shall
not include (i) information generally known or publicly available
through no act of KEIC, (ii) information furnished to KEIC after the
Closing Date by a third party independent of KEIC's obligations
under this Agreement, as a matter of right and without restriction,
or (iii) all information that KEIC acquired pursuant to the Purchase
Agreement, which information may be used without restriction.
K. "Law(s)" shall mean any applicable code, statute, law, directive,
rule, bulletin, and/or regulation.
L. "Loss Adjustment Expense or LAE" shall mean ALAE and ULAE.
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M. "Managed Care Services" shall mean the services specified in Exhibit
A to this Agreement.
N. "KEIC Confidential Information" shall mean any all data and
information, which relates to KEIC, or its Vendors, affiliates or
business that is disclosed to EAGLE in connection with this
Agreement, including, but not limited to, pricing and cost
information, standards, practices and procedures (including Best
Practices), and other proprietary information of KEIC. Unless
otherwise required by applicable Laws, KEIC Confidential Information
shall not include (i) information generally known or publicly
available through no act of EAGLE, or (ii) information furnished to
EAGLE after the Closing Date by a third party independent of EAGLE's
obligations under this Agreement, as a matter of right and without
restriction.
O. "New Claims" means those Claims reported after the Closing Date.
P. "New Claims Fees" shall have the meaning specified in Section 9.B.
Q. "Policy or Policies" shall mean all of the policies or contracts
issued by the EAGLE in all of the lines of business set forth on
Exhibit A other than such policies or contracts that prior to the
date hereof have been handled on the Xxxxxx Companies' Friendly
Online Claims User System (FOCUS) claim handling system.
R. "Pension Claims" shall mean those Claims for workers' compensation
benefits where a determination has been made that the claimant will
no longer, for the indefinite future, be able to work.
S. "Proprietary Systems" shall mean the technology systems currently
known as COMPASS and EAGLETRAK software systems and any other
systems that is used by KEIC to maintain, process and generate data
and reports concerning claims, and as such systems may be amended,
changed or substituted with systems performing similar functions and
being of similar capacity.
T. "Publicly Available Information" shall mean any information that
KEIC or EAGLE have a reasonable basis to believe is lawfully made
available to the general public from:
A. Federal, state or local government records;
B. Widely distributed media; or
C. Disclosures to the general public that are required to be made
by federal, state, or local law.
U. "Recoveries" shall mean any and all credits, Subrogation, salvage,
adjustments, reimbursements, overpayments, voided or returned checks
or other recoveries,
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including second injury funds, contributions or indemnification
rights which shall be credited to a Policy.
V. "Reopening" of a Claim shall mean the reopening of a Claim with
respect to which previously there had been a determination that such
Claim had been concluded as defined in "Conclusion" because of (i)
the receipt of additional ALAE, (ii) the aggravation of an injury
giving rise to the original Claim, and (iii) a similar subsequent
development.
W. "Reported Claims" shall mean those Claims reported on or before the
Closing Date.
X. "Reported Claims Fee" shall have the meaning specified in Section
9.A.
Y. "Service Fees" shall mean the Reported Claims Fee, the New Claims
Fee, the Managed Care Service Fees all as set forth on Exhibit B.
Z. "Subrogation" shall mean, when KEIC (on behalf of EAGLE) or EAGLE
issues a payment to the insured or another party, pursuant to the
Policy, or assumes an obligation which rightfully belongs to a third
party, the right of KEIC (on behalf of EAGLE) or EAGLE,
respectively, to look to the responsible third party for repayment
of all or a portion of such payment on behalf of EAGLE.
AA. "Unallocated Loss Adjustment Expense or ULAE" shall mean all
expenses involved in handling or paying losses not related to a
particular Claim that is not Allocated Loss Adjustment Expense.
BB. "Vendors" shall have the meaning specified in Section 7.
Other capitalized terms used and not defined herein shall have the respective
meanings ascribed to such terms in the Purchase Agreement.
2. TERM OF AGREEMENT
This Agreement shall commence on the Closing Date and continue unless
terminated in accordance with Section 3 of this Agreement.
3. TERMINATION
A. This Agreement may be terminated prior to expiration as follows:
1. Either party may provide written notice to the other party of
the occurrence of a material breach or breaches of a provision
of or obligation under this Agreement. Such notice shall set
forth full details of the alleged material breach or breaches
and suggest a commercially reasonable proposal designed to
compensate monetarily the party alleging the breach or
otherwise cure the alleged breach or breaches. Within five (5)
business days after receipt of such notice, the party
receiving the notice shall supply
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full details of all relevant circumstances surrounding the
alleged material breach or breaches and in a commercially
reasonably manner, address specifically the proposal of the
party alleging the breach or breaches as to monetary
compensation or other cure, and at its option put forward a
commercially reasonable counter-proposal for monetary
compensation or other cure. Within thirty (30) business days
thereafter, representatives of the parties shall consult with
each other by telephone or in person at times and places to be
agreed upon to negotiate a resolution of the alleged material
breach or breaches. If successful, the parties shall reduce
the resolution of the matter to writing. In the event the
parties are not successful, this Agreement may be terminated
by the party alleging the breach upon providing a further
prior written notice to the other party of termination no less
than thirty (30) business days thereafter stating attempts to
resolve or cure the alleged material breach or breaches were
unsuccessful.
2. Upon the institution of voluntary or involuntary conservation,
rehabilitation or liquidation proceedings, or other
receivership proceedings, or the institution of proceedings
under the U.S. Bankruptcy Code or otherwise, by or against
EPIC or PEIC or their corporate parent, KEIC may, following a
written notice to EPIC and PEIC, terminate this Agreement
effective on a date at least sixty (60) days after the written
notice is received by EPIC and PEIC.
3. Upon the institution of voluntary or involuntary conservation,
rehabilitation or liquidation proceedings, or other
receivership proceedings, or the institution of proceedings
under the U.S. Bankruptcy Code or otherwise, by or against
KEIC, EAGLE may, following a written notice to KEIC, terminate
this Agreement effective on a date at least sixty (60) days
after the written notice is received by KEIC.
B. Upon termination of this Agreement, KEIC shall, at EAGLE's cost and
expense, assist EAGLE in the transition of Claim Services to EAGLE
or EAGLE's designated subsequent provider of Claims Services. After
KEIC ceases to provide Claims Services or at any other time upon
request of EAGLE, KEIC shall forward, at EAGLE's cost and expense,
to EAGLE, copies of any Claims Files and other documents,
information (including Confidential Information) or other property
owned by EAGLE, whether maintained as hard copies, imaged or
electronically stored on CD-ROM, or as archived data files on fixed
or moveable media.
C. SURVIVAL
Sections 3.B, 3.C, 4.B, 4.C, 5, 6, 8, 11, 13 and 14 of this
Agreement shall survive the expiration or termination of this
Agreement and expiration or termination shall have no effect upon
the rights and obligations of the parties arising out of any
transactions occurring prior to the date of expiration or
termination.
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4. CLAIM SERVICES
A. Agreement to Provide Claims Services. Subject to the terms and
conditions set forth in this Agreement and in accordance with
Exhibit A, each of EPIC and PEIC hereby engages KEIC to provide
Claims Services for the Claims until Conclusion of a Claim,
including any Reopening of a Claim, and KEIC hereby agrees to
provide such Claims Services.
B. Standard of Care. In the exercise of KEIC's performance of Claims
Services under this Agreement, KEIC shall discharge its duties with
the care, skill, prudence, and diligence reasonably expected of a
person acting in a similar capacity; provided, however, that KEIC
shall not be liable for any mistake of judgment made in good faith,
unless said mistake of judgment departs from the aforementioned
standard of care. For the purposes of determining KEIC's compliance
with the standard of care, KEIC shall be deemed in compliance if
KEIC achieves the Best Practices substantially in the form set forth
in Schedule 1. If at any time EAGLE believes that, when viewed in
the aggregate, KEIC is not in general compliance with the standard
of care, EAGLE may so notify KEIC and, if KEIC has not achieved such
general compliance within ninety (90) days after such notice, EAGLE
may terminate this Agreement for material breach of this Agreement
in accordance with Section 3.A.1 of this Agreement.
C. Assumption of Control. Notwithstanding anything to the contrary in
this Agreement, EAGLE has the right, at any time and at its sole
option, to assume control over the administration and handling of a
particular Claim; provided that EAGLE may not use the provision of
this Section 4.C. to frustrate the termination provisions of this
Agreement. In the event EAGLE assumes control over the
administration or handling of a particular Claim, KEIC shall have no
further responsibility for such Claim.
D. Integrated Program. The Claims Services, Managed Care Services
provided herein are part of an integrated program. EAGLE agrees that
as long as KEIC is to provide Claim Services under this Agreement,
EAGLE shall also retain KEIC to provide Managed Care Services, with
respect to Claims for which KEIC is providing Claims Services, in
accordance with the terms of this Agreement.
E. Staffing.
1. To the extent reasonable in view of the availability of staff
and the volume of Claims generated, KEIC will maintain staff
primarily focused on each line of insurance of business
served; provided that, if at any location there is not
sufficient claim volume to keep staff at such location fully
dedicated to such line of business, then KEIC may utilize such
staff to service other customer claims. KEIC has separately
provided to EAGLE a list of the senior supervisors and senior
claims examiners, or their equivalent, dedicated to such lines
of business. KEIC shall exercise commercially reasonable
efforts to maintain staff of comparable skill and expertise to
its
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staff that exists at the Closing Date. Claims Services
staffing will be reviewed semi-annually by KEIC and EAGLE to
discuss, among other things, any unsatisfactory performance of
specific employees. EAGLE will provide KEIC with thirty (30)
days notice that the performance of such employee is
unsatisfactory, and, if upon the expiration of a sixty (60)
day period following the date which the notice was received by
KEIC the performance of such employee has not improved and has
not become satisfactory to EAGLE, KEIC will be required to
transfer such employee from EAGLE Claims Services at KEIC's
expense. Final authority and control over the hiring of
additional or replacement staff resides with KEIC.
2. KEIC agrees that it will, and will cause its affiliates to,
give EAGLE advance notice of any significant reduction in
force or office consolidation proposed to be made with respect
to those offices servicing the Claims, in order that EAGLE or
its affiliate(s) or assignees will have a reasonable
opportunity, if so inclined, to make employment offers to such
individuals.
5. LOSS FUND AND DISBURSEMENT ACCOUNTS
(a) KEIC shall establish or maintain a separate bank account
(or accounts as required by law) at a federally chartered bank
mutually acceptable to KEIC and EAGLE (the "Disbursement
Account") for the payment of Claims and Allocated Loss
Adjustment Expenses on behalf of EAGLE. The Disbursement
Account shall be set up as a zero balance account drawing
monies to fund all Loss and Allocated Loss Adjustment Expense
payments from a corresponding operating account established by
and in the name of EAGLE (the "Loss Fund Account") at each
bank where KEIC establishes a Disbursement Account. KEIC is
authorized to issue drafts in the name of EAGLE on the
Disbursement Account in accordance with the terms of this
Agreement.
(b) In the event there are insufficient funds in the Loss Fund
Account to cover drafts issued by KEIC from the Disbursement
Account, for whatever reason, KEIC may immediately suspend its
performance under this Agreement until the Loss Fund Account
is replenished to cover all outstanding drafts and those
reasonably anticipated to be issued within the next two (2)
business days. Any costs and liabilities, including but not
limited to regulatory fines and penalties and banking charges
incurred due to the failure of EAGLE to timely fund the Loss
Fund Account shall be borne and paid by the EAGLE.
(c) KEIC shall prepare a monthly reconciliation report for the
Disbursement Account showing all disbursements by EAGLE from
the Disbursement Account for the month. Such report will be
made available to EAGLE within fifteen (15) days following the
end of each month. The reconciliation report shall include:
(i) disbursement register, including the
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time period at the register, policy number, claim number, date
of loss, payment date, payment account and payment basis
(indemnity, medical, or ALAE) and (ii) any Recoveries. Any
Recoveries received by KEIC that are not properly netted
against obligations shall be deposited in a separate account
established by EAGLE at Xxxxxx Bank, N.A or such other bank as
identified by EAGLE.
6. CLAIMS FILES
A. Maintenance of Claims Files. KEIC shall maintain and keep true and
complete copies of all material records relating to Claims and the
Claims Services provided hereunder in connection therewith, all
transactions and correspondence with insureds, Claimants, agents,
brokers, attorneys, adjusters, investigators, EAGLE and any other
person or entity regarding Claims administered pursuant to this
Agreement, whether maintained in either physical or electronic form,
all reserving and financial information, and any other information
maintained or collected by KEIC relating to claims (the "Claims
Files").
B. Ownership. EAGLE shall own all of its Claims Files (physical or
other) and all data contained therein and all other files, data,
information, documents, and information relating to Claims in their
physical form, and also electronic versions of the foregoing. All
Claims Files created by KEIC or its Vendors or changes,
modifications, and additions made to such Claims Files by KEIC or
its Vendors solely in providing the Claim Services hereunder shall
be owned by EAGLE as work for hire. If for any reason such Claims
Files are not owned by EAGLE, KEIC hereby assigns all right, title
and interest therein to EAGLE.
C. Security. KEIC shall maintain commercially reasonable security
procedures and policies (including all required by Law) designed to
protect Claims Files against unauthorized use, access or disclosure.
KEIC shall limit access to such Claims Files to those employees of
EAGLE, Insureds or their brokers or reinsurer as designated to KEIC
by EAGLE from time to time, and to those employees of KEIC and
Vendors who are required to have such access to perform the Claims
Services hereunder.
D. Access. EAGLE shall at all reasonable times, with reasonable advance
notice to KEIC, be entitled to access and make copies of its Claims
Files, including Claims Files at the site where KEIC's Disaster
Recovery Plan (as hereinafter defined) stores back up copies of all
such Claims Files.
E. Site of Claims Files. KEIC shall maintain (i) all physical Claims
Files in each office where such file is managed and (ii) all
electronic Claims Files in a secure database for which KEIC has
responsibility.
F. Back up, Disaster and System Recovery. KEIC shall on no less
frequently than weekly back up its systems for storage at its
off-site disaster recovery storage site. KEIC has provided to EAGLE
a copy of its current back up, disaster and system
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recovery procedures and plan (the "Disaster Recovery Plan"). KEIC
shall use commercially reasonable efforts to comply with the
Disaster Recovery Plan. In addition, if KEIC makes any changes to
its Disaster Recovery Plan, it shall notify EAGLE in writing within
five (5) days after such change occurs.
G. Privacy. KEIC shall comply with all applicable privacy Laws that
govern information contained within the Claims Files.
H. Record Storage Retention. KEIC shall maintain Claims Files in
accordance with written policy and procedures and in compliance with
Law in all material respects. After Conclusion of a Claim, files
will be stored for three (3) years by KEIC at the cost of KEIC and
thereafter in accordance with the written directions provided to
KEIC from EAGLE as to the disposition of such Claims Files at the
cost of EAGLE.
I. Right to Audit. EAGLE or its designee(s) shall have the right to
perform on-site audits of the books and records pertaining to the
Claims at reasonable intervals and duration, upon reasonable notice
and during customary business hours during the term of this
Agreement. EAGLE agrees that such audits shall be undertaken to
minimize the disruption to KEIC's operations. The right to audit
shall be unlimited; provided, however, that the cost incurred by
KEIC for the audits (other than audits requested by clients and the
state financial examination in excess of two (2) per year per
location) shall be borne by EAGLE; further provided, however, that
if such third audit is a corrective action-based audit, following a
prior audit, EAGLE shall not be responsible for the costs incurred
by KEIC. KEIC agrees to make Claims Files and all other relevant
information available to EAGLE, its designee(s), its clients, its
investors and lenders and any regulatory authority at the relevant
KEIC's facility.
J. Insurance. KEIC is required to maintain in full force and effect
during the term of this Agreement, and thereafter as long as KEIC
has any obligations hereunder, a policy or policies of the types of
insurance set forth below (with aggregate limits of at least the
amounts set forth below), covering KEIC and its subsidiaries and
each of their employees, directors, officers and agents which are
issued by Underwriters at Lloyd's of London or an insurer rated no
less than "B+" by A. M. Best Company. KEIC shall use its
commercially reasonable efforts to obtain such coverage from an
insurer rated "A-" or higher by A.M. Best Company.
Type Amount
---- ------
Errors and Omissions $3,000,000/3,000,000 each
claim/aggregate
Commercial General Liability $1,000,000 combined single limit
(includes personal injury, advertising per occurrence
liability, premises operations,
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Type Amount
---- ------
completed operations and blanket
contractual)
Fidelity $3,000,000/3,000,000 each
claim/aggregate
Automobile Liability
(includes owned, hired and non-owned $1,000,000 combined single limit
automobiles) per occurrence
Workers Compensation
Required by Law statutory amount
Employers Liability $1,000,000
Umbrella Coverage $10,000,000 per
occurrence/aggregate
Such insurance shall be maintained by KEIC at its sole cost and
expense and shall be primary and noncontributing coverage over any
valid and collectible insurance available to EAGLE. Such coverage
shall be continuously maintained throughout the term of this
Agreement, and if a "claims made" policy or policies, shall provide
for retroactive coverage sufficient to cover all of the Claim
Services for five (5) years after this Agreement is terminated. KEIC
shall require its insurer to provide a certificate of insurance to
EAGLE at Closing and upon any policy renewal thereafter, which
certificate provides that such insurer will notify EAGLE in writing
within ten (10) days of lapse, material changes, or receipt of a
notice terminating coverage. KEIC further agrees to notify EAGLE of
any claim brought under such policy which arises out of or is
connected with the Claim Services provided hereunder. EAGLE and its
affiliates for the benefit of itself and its entities and their
respective directors, officers, employees, representatives and
agents shall be named as additional insureds with respect to KEIC's
commercial general liability, automobile liability and umbrella
liability insurance. If KEIC elects to self-insure any of the
insurance required herein, then the self-insured shall be considered
an insurance carrier for the purposes of this provision. Each
self-insured retention(s) and/or deductible(s) shall be treated as
though they were recoverable under the required insurance.
7. VENDORS
In providing Claims Services, KEIC may use subcontractors, service
providers, counsel, claims investigators, appraisers, structured settlement
brokers or surveillance firms (each a "Vendor"). Notwithstanding any other
provision of this Agreement to the contrary, EAGLE shall have the right (subject
to its responsibility for the incremental costs and expenses of KEIC
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resulting from no longer being able to use such Vendor) in its sole discretion
to instruct KEIC in writing to discontinue the use of any Vendor engaged to
assist with Claims. In the event that EAGLE exercises its right under the
immediately preceding sentence, KEIC shall abide by such decision as soon as
reasonably practicable. EAGLE may instruct KEIC in writing to use Vendors for
any specific Claim or Claims; provided, that in such event EAGLE shall be
responsible for the selection of such Vendor and any incremental costs and
expenses incurred by KEIC in engaging and maintaining such replacement vendor.
Notwithstanding the preceding sentences of this Section 7, KEIC shall provide
Managed Care Services through its own personnel and the Vendors, including
independent medical examiners of KEIC's choosing for medical loss containment
services or provision of independent medical examination. KEIC shall remain
liable to EAGLE for the performance of KEIC's obligations under this Agreement
that are subcontracted to any agents or subcontractors, other than with respect
to services that are provided to EAGLE by Vendors retained by KEIC on EAGLE's
behalf.
8. CONFIDENTIALITY, NONDISCLOSURE AND PRIVACY
A. EAGLE's Confidential Information
1. KEIC shall use commercially reasonable efforts to maintain the
confidentiality of all EAGLE's Confidential Information
supplied to, or obtained or used by KEIC in the performance of
Claim Services. KEIC shall not disclose such confidential
information without the prior written consent of EAGLE.
2. Notwithstanding any other provision hereof, KEIC will not use
or disclose any of EAGLE's Confidential Information it
receives from or on behalf of EAGLE or has access to for
purposes other than those: (a) necessary to carry out the
services required to be provided under this Agreement; and (b)
permitted or required under the Xxxxx-Xxxxx-Xxxxxx Act or any
other applicable Federal or state law or regulation, or (c)
related to the tax treatment and tax structure of the
transactions contemplated under this Agreement, including all
materials of any kind (including opinions or other tax
analyses); provided that the authorization in the foregoing
clause (c) is not intended to permit disclosure of any other
information including, without limitation, (w) any portion of
any materials to the extent not related to the tax treatment
or tax structure of the transactions contemplated under this
Agreement, (x) the identities of participants or potential
participants in the transactions contemplated under this
Agreement, (y) the existence or status of any negotiations,
(iv) any pricing or financial information (except to the
extent such pricing or financial information is related to the
tax treatment or tax structure of the transactions
contemplated under this Agreement), or (z) any other term or
detail not relevant to the tax treatment or the tax structure
of the transactions contemplated under this Agreement. Without
limiting the foregoing, KEIC shall be prohibited from selling
EAGLE's Confidential Information.
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3. To the extent that KEIC receives or has access to confidential
information of EAGLE's policyholders or claimants, KEIC will
implement and maintain reasonably appropriate measures
designed to meet the following objectives: (i) to ensure the
security and confidentiality of such information; (ii) to
protect against any anticipated threats or hazards to the
security or integrity of such information; and (iii) to
protect against the unauthorized access or use of such
information. These measures shall include, but not be limited
to, the maintenance of appropriate safeguards to restrict the
access to EAGLE's Confidential Information to those employees,
agents, or service providers of KEIC who need that information
to carry out the purposes for which the information was
disclosed. For information disclosed to KEIC in electronic
form, KEIC agrees that it will maintain "firewalls" or similar
barriers and password-protected access to EAGLE's Confidential
Information.
B. KEIC Confidential Information
1. EAGLE shall maintain the confidentiality of all KEIC
Confidential Information supplied to, or obtained or used by
EAGLE in connection with the receipt of services under this
Agreement. EAGLE shall not disclose KEIC Confidential
Information without the prior written consent of KEIC.
2. Notwithstanding any other provision hereof, EAGLE will not use
or disclose any Confidential Information they receive from or
on behalf of KEIC or have access to for purposes other than
those permitted or required under the Xxxxx-Xxxxx-Xxxxxx Act
or any other applicable Federal or state law or regulation.
Without limiting the foregoing, EAGLE shall be prohibited from
selling the Confidential Information they receive from or on
behalf of KEIC.
3. To the extent EAGLE receives or has access to KEIC
Confidential Information, EAGLE will implement and maintain
appropriate measures designed to meet the following
objectives: (i) to ensure the security and confidentiality of
such information; (ii) to protect against any anticipated
threats or hazards to the security or integrity of such
information; and (iii) to protect against the unauthorized
access or use of such information. These measures shall
include, but not be limited to, the maintenance of appropriate
safeguards to restrict the access to the KEIC Confidential
Information to those employees, agents, or service providers
of EAGLE who need that information to carry out the purposes
for which the information was disclosed. For information
disclosed to EAGLE in electronic form, EAGLE agrees that it
will maintain "firewalls" or similar barriers and
password-protected access to KEIC Confidential Information.
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9. FEES AND COMPENSATION
A. Reported Claims Fee. In connection with the Reported Claims, EAGLE
shall pay KEIC, over time and from time to time, the fees and
expenses set forth in the attached Exhibit B plus any additional
sales, services, value added or similar taxes where applicable, if
any, to the extent that any such taxes are newly imposed after the
date of this Agreement or for which there is a rate increase after
the date of this Agreement (the "Reported Claims Fee"). Such fees
and expenses shall be paid by EPIC and PEIC, severally, and not
jointly, monthly in arrears thirty (30) days after the end of each
month. KEIC shall provide EPIC and PEIC monthly invoices in a
mutually acceptable format no later than the tenth (10) day
following each month.
B. New Claims Fees. In connection with New Claims, EAGLE shall pay KEIC
upon the opening of each New Claim the fees and expenses set forth
in the attached Exhibit B plus any additional sales, services, value
added or similar taxes where applicable, if any, to the extent that
any such taxes are newly imposed after the date of this Agreement or
for which there is a rate increase after the date of this Agreement
(the "New Claims Fee"). Such fees and expenses shall be paid by EPIC
and PEIC, severally, and not jointly, monthly in arrears thirty (30)
days after the end of each month. KEIC shall provide EPIC and PEIC
monthly invoices in a mutually acceptable format no later than the
tenth (10) day following each month.
C. Managed Care Services Fees. For Managed Care Services provided on
Reported Claims or New Claims, EAGLE shall each severally and not
jointly pay KEIC the fees and expenses set forth in the attached
Exhibit B.
D. Late Charges. Late payment charges of one (1) percent per month
(twelve (12) percent per annum) or the maximum allowed by law,
whichever is less, shall be charged against any New Claim or Managed
Care Service fee or expense by the 15th day after payment is
required from EAGLE. In addition, KEIC shall also have the option to
suspend services including the making of payments on behalf of
EAGLE, or to exercise any other rights contained in this Agreement
including those contained in Xxxxxxx 0, Xxxxxxxxxxx. During any
period of suspension of services, the terms of this Agreement shall
remain in effect, except that those sections requiring KEIC to
provide services are suspended until such time as KEIC agrees to
resume performance.
10. INDEMNIFICATION
A. Indemnification by EAGLE. EAGLE shall, jointly and severally,
indemnify, defend and hold KEIC (and any of its parent companies,
subsidiaries and affiliates, and each of its and their present and
former officers, directors, agents, employees, successors and
assigns) (each such person or entity, a "KEIC Indemnified Party")
harmless from any and all claims, suits, losses, judgments, damages,
costs, administrative fines, penalties or expenses, including
reasonable
13
attorneys' fees (collectively, "Losses") incurred by one or more
KEIC Indemnified Parties because of (i) any negligent act or
omission or crime or civil wrong committed by EAGLE or its employees
or agents (other than KEIC); or (ii) KEIC's or its agents' or
employees' negligent acts or omissions or a crime or a civil wrong,
in each case to the extent caused or committed by KEIC or its agents
or employees at such EAGLE's direction in connection with Claims
Services performed or executed under this Agreement. EAGLE, jointly
and severally, shall also indemnify, defend and hold each of the
KEIC Indemnified Parties harmless from any and all Losses seeking to
hold any such KEIC Indemnified Party responsible or liable under any
policies of insurance or contracts of reinsurance written by EAGLE,
except to the extent that such Loss relates to the negligence or
criminal or civil wrongful act or omissions of KEIC (other than
negligent acts or omissions or criminal or civil wrongs committed by
KEIC or its agents or employees at EAGLE's direction).
B. Indemnification by KEIC. KEIC shall indemnify, defend and hold EAGLE
(and any of its parent companies, subsidiaries and affiliates, and
each of its and their present and former officers, directors,
agents, employees, successors and assigns) (each such person or
entity, an "EAGLE Indemnified Party") harmless from and against any
and all Losses incurred by any such EAGLE Indemnified Party because
of any negligent act or omission or a crime or civil wrong
(including any violations of unfair claims practices statutes or
regulations) committed by KEIC or any of its employees or agents;
provided, however, that KEIC need not provide such indemnity for any
Losses which result from KEIC's or its agents' or employees'
negligent acts or omissions or a crime or a civil wrong, in each
case to the extent caused or committed by KEIC or its agents or
employees at EAGLE's direction.
C. Indemnification Procedures. If any claim is instituted or asserted
by any third party against any person who is entitled to
indemnification pursuant to this Agreement, such indemnified party,
after receipt by it of written notice of the commencement or
assertion of such claim, shall promptly cause a written notice of
such claim to be made to the party required to furnish such
indemnity; provided, that failure to give such notice shall not
relieve the indemnifying party of its indemnification obligations
hereunder, unless and to the extent such failure to provide notice
shall have materially and substantially prejudiced the rights of the
indemnifying party. Failure to give such notice shall not result in
any liability of the indemnified party to the indemnifying party.
Following any such notification, the indemnifying party and
indemnified party shall have the same respective rights and
obligations (subject to all of the same terms and conditions set
forth in Section 11.5 of the Purchase Agreement) with respect to the
defense of such claim as are set forth in Section 11.5 of the
Purchase Agreement.
11. NOTICES
Except as otherwise set forth herein, any notice required under this
Agreement must be in writing and either sent by first class mail, facsimile,
certified mail, return receipt requested,
14
nationally recognized courier service that maintains delivery records, or
personally delivered. Notice shall be effective five (5) days after the date of
mailing or upon receipt, whichever is earlier. Unless changed, the addresses of
the respective parties are:
Notices shall be sent to:
FOR KEIC: FOR EAGLE:
Xxxxxx Employers Insurance Company Eagle c/o Lumbermens Mutual Casualty
Company
c/o SeaBright Insurance Company
0000 0xx Xxxxxx 0 Xxxxxx Xxxxx
Xxxxx 0000 Xxxx Xxxxx, XX 00000
Xxxxxxx, Xxxxxxxxxx 00000
Attention: President Attention: General Counsel
Fax: 000-000-0000 Fax: 000-000-0000
or any other person or address of which notice has been provided in accordance
with this Section 11.
12. GENERAL PROVISIONS
A. Entire Agreement. This Agreement, including the Exhibits and
Schedules hereto, sets forth the entire agreement and understanding
between the parties and merges and supersedes all prior discussions,
agreements (including any existing intercompany agreements between
the parties) and understandings of every kind and nature among them
as to the subject matter hereof, and no party shall be bound by any
condition, definition, warranty or representation other than as
expressly provided for in this Agreement or as may be on a date on
or subsequent to the date hereof duly set forth in writing signed by
each party which is to be bound thereby. Unless otherwise expressly
defined, terms defined in this Agreement shall have the same
meanings when used in any Exhibit or Schedule and terms defined in
any Exhibit or Schedule shall have the same meanings when used in
this Agreement or in any other Exhibit or Schedule. This Agreement
(including the Exhibits and Schedules hereto) shall not be changed,
modified or amended except by a writing signed by each party to be
charged and this Agreement may not be discharged except by
performance in accordance with its terms or by a writing signed by
each party to be charged.
B. Governing Law. This agreement and its validity, construction and
performance shall be governed in all respects by the laws of the
State of Illinois, without giving effect to principles of conflicts
of law.
C. Benefit of Parties; Assignment. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their
respective successors (statutory, legal or otherwise) and permitted
assigns. This Agreement may not be assigned
15
by either party without the prior written consent of the other
party. Nothing herein contained shall confer or is intended to
confer on any third party or entity which is not a party to this
Agreement any rights under this Agreement.
D. Severability of Contract Provision. If any provisions of this
Agreement shall be invalid under the laws of the United States or
any state in which the Agreement is being interpreted, such
provisions will not invalidate the whole Agreement, but the
Agreement shall be construed as if not containing the particular
provision or provisions held to be invalid.
E. Remedies Not Exclusive. No remedy set forth in this Agreement is
exclusive of any other remedy but shall be in addition to every
other remedy given under this Agreement or existing now or hereafter
at law or equity.
F. Independent Contractors. The parties shall not be deemed partners,
joint ventures or governed by any legal relationship other than as
independent contractors.
G. Headings. Headings are for convenience only and are of no effect in
construing this Agreement.
H. Third Parties. This Agreement is not intended and shall not be
deemed to give any right or remedy to any third party whatsoever
(other than the KEIC Indemnified Parties and the EAGLE Indemnified
Parties) unless said right or remedy is specifically granted to such
third party by the terms hereof.
I. Force Majeure. If by reason of acts of God, winds, fires, epidemics,
landslides, floods, droughts, famines, acts of public enemies, acts
or orders of any kind of any governmental authority, insurrection,
military action, war, whether or not declared, acts of terrorism,
sabotage, riots, civil disturbances, explosions or partial or entire
failure of utilities, any party to this Agreement is unable in whole
or in part to carry out its duties and obligations (other than any
monetary obligation or requirement to pay money), upon delivery of a
notice of such force majeure event to the other parties to this
Agreement, such party shall not be deemed to be in default during
the continuance of such inability, notwithstanding any provision in
this Agreement to the contrary. Such party shall, however, use its
reasonable efforts to remedy with all reasonable dispatch the cause
or causes preventing such party from carrying out its duties and
obligations hereunder. The other parties to this Agreement may
terminate this Agreement immediately upon notice if, notwithstanding
the force majeure event, the party asserting force majeure has not
resumed carrying out its duties and obligations in full within
twenty (20) business days from the occurrence of the force majeure
event.
J. Nonwaiver of Contract Provisions. The failure of any of the parties
to insist, in any one or more instances, upon a strict performance
of any of the provisions of this Agreement or to exercise any option
herein contained, shall not be construed as a waiver or
relinquishment for the future of such provision, but the same shall
continue and remain in full force and effect.
16
K. Time of Performance. Subject to Section 12.I. above, KEIC recognizes
that failure to timely meet the provision of services set forth
under this Agreement may provide a basis for termination of this
Agreement by EAGLE as a material breach under Section 3.A.1 of this
Agreement. EAGLE acknowledge that KEIC's performance of its duties
and obligations under this Agreement is dependent upon the
cooperation of EAGLE. To the extent that the failure of EAGLE to
furnish KEIC with the resources, information and responses required
under this Agreement prevents KEIC from fulfilling its obligations
under this Agreement, KEIC shall not be considered in breach,
material or otherwise, of this Agreement.
L. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of
which together shall constitute one and the same instrument.
M. DISCLAIMER OF WARRANTIES. EXCEPT FOR THOSE REPRESENTATIONS AND
WARRANTIES EXPRESSLY SET FORTH IN THIS AGREEMENT, KEIC MAKES NO
OTHER REPRESENTATIONS OR WARRANTIES, EITHER EXPRESS OR IMPLIED.
N. DISCLAIMER OF DAMAGES. IN NO EVENT, WHETHER BASED ON CONTRACT,
INDEMNITY, WARRANTY, TORT (INCLUDING WILLFUL AND WANTON MISCONDUCT,
RECKLESSNESS OR NEGLIGENCE), STRICT LIABILITY OR OTHERWISE, SHALL
EITHER PARTY, ITS AFFILIATES OR ANY OF THEIR RESPECTIVE OFFICERS,
DIRECTORS, MANAGERS, MEMBERS, PARTNERS, STOCKHOLDERS, EMPLOYEES,
AGENTS OR SUBCONTRACTORS, BE LIABLE FOR ANY CONSEQUENTIAL DAMAGES,
LOST PROFITS OR PUNITIVE DAMAGES (OTHER THAN ANY SUCH DAMAGES
RECOVERED AGAINST THE OTHER PARTY OR ITS AFFILIATES BY A THIRD
PARTY). THE FOREGOING DISCLAIMER SHALL APPLY IRRESPECTIVE OF WHETHER
THE POSSIBILITY OF SUCH LOST PROFITS OR DAMAGES HAD BEEN DISCLOSED
IN ADVANCE OR COULD HAVE REASONABLY BEEN FORESEEN. THE FOREGOING
REPRESENTS AN EXPRESS ALLOCATION OF RISK BETWEEN THE PARTIES.
O. No Business Judgment; No Professional Services. In performing its
obligations hereunder, KEIC shall not be required to make, nor shall
the KEIC be responsible for, any management decision or any exercise
of business judgment with respect to the business of EAGLE,
including, but not limited to, decisions relating to investments,
accounting practices or legal matters. Notwithstanding anything to
the contrary in this Agreement, in no event shall KEIC be required
to provide any legal services, actuarial services or any other
services for which any type of professional license or certificate
is required.
P. Compliance with Laws. KEIC shall comply with all material respects
with applicable federal, state and local Laws. KEIC and its
employees are and shall
17
remain duly licensed to perform its obligations in each jurisdiction
in which it renders Claim Services.
13. DISPUTES
A. Fee Disputes. In the event EAGLE has a good faith dispute as to any
fees due and payable to KEIC, EAGLE shall, on or prior to the date
payment is due and payable, provide KEIC with written notice of the
nature of the good faith dispute setting forth the specific facts
and documents forming the basis for the dispute. The parties shall
use reasonable best efforts to resolve the dispute within fifteen
(15) days following receipt of EAGLE's notice. If the dispute cannot
be resolved within such time period, the senior management for each
party will attempt to resolve the dispute within the succeeding
thirty (30) days. If such dispute cannot be resolved, all of the
parties' rights and remedies under this Agreement are applicable.
14. INTELLECTUAL PROPERTY RIGHTS
A. General. The parties agree nothing in this Agreement shall be
construed to give either party any right, title, or interest in any
of the other party's proprietary processes (including, but not
limited to, work flows, policy and procedure manuals, and standard
operating procedures manuals), software or data system; provided,
however, that EAGLE shall own, in each case as work for hire any
changes, additions or modifications to any of EAGLE's property,
Claims Files or to EAGLE's Confidential Information not acquired by
Buyer or KEIC pursuant to the Purchase Agreement that are made by
KEIC (or its affiliates or service providers) in performing the
Claims Services. In the event that any such changes, additions,
modifications or work is not work for hire, then KEIC hereby assigns
(or shall cause its affiliates or their service providers to assign,
as the case may be), all right, title and interest, including
copyright, to EAGLE.
B. Use of Name. The parties agree not to use each other's name in any
promotional materials or meetings with third parties, except to the
extent necessary to identify EAGLE as one of KEIC's customers or to
identify KEIC as EAGLE's vendor.
15. PROVISION OF DATA AND REPORTS: ACCESS TO SYSTEMS AND DATA
A. Data and Reports. KEIC will provide to EAGLE all data and reports
related to Claims in the same form, format and frequency as EAGLE
provides for its own purposes. Such data and reports shall include
the data and those reports which are generated using or maintained
in the Proprietary Systems, as well as any other KEIC-utilized claim
technology. To the extent that KEIC is unable to provide such data
or reports due to the unavailability of either source systems or
changes in technology, KEIC will work with EAGLE to identify and
implement alternative mechanisms for supporting EAGLE's claim data
needs. In the event either party's technical platform environments
may necessitate changes in the data transfer mechanisms or report
productions, the parties shall work together to
18
establish appropriate data transfer mechanisms so that EAGLE's
access to the data and reports continues, with each party to bear
their respective costs of changes in their own systems.
(i) Access. KEIC shall arrange for each of EPIC and PEIC and their
designees to have access to the Claims Files and continuing
electronic access to the Proprietary Systems in order to
enable EAGLE to monitor and extract information about the
Claims.
B. To the maximum extent permitted by the licenses and agreements to
which it is a party, KEIC shall also permit EAGLE and its affiliates
to utilize the Proprietary Systems to access the Claims Files as
necessary for EAGLE and its affiliates to perform their
responsibilities under the Purchase Agreement and any other
agreements executed in connection therewith.
* * * * *
19
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first above written by persons authorized to act in this regard.
Eagle Pacific Insurance Company, Inc. Xxxxxx Employers Insurance Company
BY: /s/ Xxxxxxx X. Xxxxxx BY: /s/ Xxxx X. Xxxxxx
-------------------------------- --------------------------------
DATE: September 30, 2003 DATE: September 30, 2003
---------------------------- -----------------------------
Pacific Eagle Insurance Company, Inc.
BY: /s/ Xxxxxxx X. Xxxxxx
--------------------------------
DATE: September 30, 2003
------------------------------
20
CLAIMS ADMINISTRATION SERVICES AGREEMENT
EXHIBITS
A. Management of Claims
B. Fee Schedule
SCHEDULES
1 Best Practices
21
EXHIBIT A
MANAGEMENT OF CLAIMS
1. LINES OF BUSINESS
The lines of insurance covered by the Claims Administration Services Agreement
of which this Exhibit A forms a part (the "Agreement") are United States
Longshoremen and Harbor Workers Compensation Act, Xxxxx Act, Federal Employers
Liability Act and Workers Compensation.
CLAIM SERVICES AND MANAGED CARE SERVICES
KEIC will provide all services necessary for the handling of Claims (the "Claims
Services"), including the services set forth below and specifically including
Managed Care Services and will comply with the Claims Servicing Procedures in
Schedule 1. Each Claim will be handled to Conclusion.
A. CLAIMS ADMINISTRATION -- GENERAL
KEIC shall:
(i) Assist EAGLE in providing written claim reporting instruction
to each of EAGLE's insured's reporting facility(ies) according
to the accepted loss reporting procedure.
(ii) Acknowledge to EAGLE's insured source of receipt of each claim
notice, identifying each with a unique claim number.
(iii) File state required claim reports and notices as agreed to
from time to time by the parties in writing prior thereto;
provided that to the extent any such report must be signed by
an authorized representative of EAGLE, EAGLE will first
provide such signature.
(iv) Provide EAGLE with limited access to its Intranet website that
will notify EAGLE and KEIC of new and modified account
management instructions. If mutually agreeable, KEIC will
implement the instructions and supply them on its Intranet
website.
(v) Examine all reported Claims (including incidents which have
been reported but for which no adjustment has been made or no
loss reported).
22
(vi) Maintain a master claim file for each reported Claim which
shall be reviewable at any and all reasonable times by EAGLE
or its designee.
(vii) Confirm a coverage on every Claim before accepting coverage.
(viii) Provide EAGLE, upon request, a clear synopsis of the Claim to
include identification of insured, issues of coverage and
recommendations, outline of the facts of the loss, evaluation
of legal liability, determination of the settlement range, and
opportunities for Recoveries.
(ix) Establish and continue to adjust, pursuant to EAGLE's
standards, reserves for all Claims; provided, however, that
KEIC shall not establish an initial reserve for loss and LAE,
or change any existing reserve therefor, in an amount greater
than that set forth below, without the consent of EAGLE:
All: $250,000
(x) Subject to the limitations contained herein, deny those Claims
as to which KEIC believes there is no basis for payment.
Investigate, evaluate, adjust and settle to conclusion those
Claims EAGLE is legally obligated to pay or which EAGLE
advises KEIC it desires to pay, including the necessary
preparation for and handling of any Recoveries which may inure
to the benefit of the EAGLE.
(xi) Perform all reasonably necessary administrative and clerical
work in connection with Claims or Claim Services, including
but not limited to data entry.
(xii) Provide all forms reasonably necessary for the administration
of Claims and Claims Services.
(xiii) Perform all reasonably necessary services to collect
Recoveries and properly credit Recoveries to the appropriate
Claim File.
(xiv) Report all State Insurance Department complaints or inquiries
immediately to EPIC or PEIC, as applicable. KEIC shall take
the lead with the input of the applicable company in
responding to all State Insurance Department complaints or
inquiries. KEIC shall maintain a log, by State, of all
complaints, which log complies with all applicable Laws, and a
copy of which shall be made available to the applicable
company.
B. CLAIMS INVESTIGATION/PREPARATION
(i) KEIC will provide investigation and documentation of
information for the purpose of determining coverage, liability
and the extent of damages or
23
benefits for each Claim. KEIC will issue reservation of rights
letters, but EAGLE must approve all coverage declinations.
(ii) KEIC will use outside experts as necessary in the examination
and evaluation of a Claim, including any defense. Fees for
such experts will be charged as Allocated Loss Adjustment
Expense (ALAE).
(iii) KEIC will investigate and evaluate Recoveries opportunities.
KEIC will pursue Recoveries and supervise efforts to collect
Subrogation amounts when it reasonably believes Subrogation
amounts are recoverable and the expected amount of recovery
does not exceed the expected costs of pursuing the
Subrogation. EAGLE may direct that some cases may warrant
Subrogation.
(iv) All applicable claims will be automatically indexed by KEIC
with any relevant fraud database including the AISG Index
Bureau. EAGLE will license and supply to KEIC access to such
fraud bureaus. Each Claim will be periodically re-indexed
until the Claim File is closed. If fraud is detected, Claims
may be referred to the KEIC Special Investigations Unit. This
referral is done at the discretion of KEIC. EAGLE may direct
SIU investigations to initiated on a claim.
(v) Upon catastrophe loss event, KEIC will provide a CAT response
team within 24 hours. During the initial month following the
event, KEIC will provide weekly reports identifying the number
of claims, projected losses, coverage that is effected, and
other agreed information. Unless agreed otherwise, reporting
thereafter will be monthly.
C. LOSS ADJUSTMENT & SETTLEMENT
(i) KEIC will issue checks (incorporating the appropriate EAGLE
company's name) from the Disbursement Account funded by EAGLE
for such purpose under Section 5 of the Agreement for Covered
Losses and ALAE in amounts consistent with the investigation
and evaluation of liability and damages. For Covered Losses
exceeding those shown in "Settlement Authority" below, KEIC
will consult with, and receive the approval of, EAGLE before
settlement or payment.
D. LITIGATION MANAGEMENT
(i) KEIC will maintain a list of independent attorneys acceptable
to KEIC. EAGLE shall have the right as specified in Section 7
of the Agreement approved by EAGLE. As the need arises, KEIC
will arrange for such attorneys to be retained on EAGLE's
behalf.
(ii) KEIC will direct attorney activity and assist with discovery
as well as pre-trial preparation of each case, including
continued negotiations and settlement where warranted.
24
(iii) KEIC will coordinate and facilitate the exchange of
information between EAGLE and attorneys.
(iv) KEIC should notify EAGLE sixty (60) days prior to the start of
any trial whether or not the Claims is below the required
reporting level. In the event sixty (60) days notice is not
reasonably possible, KEIC will notify EAGLE as soon as
possible after KEIC learns of the start date of the trial. The
pre-trial report will be forwarded at least thirty (30) days
before the scheduled trial date.
(v) KEIC will have defense counsel comply with EAGLE's litigation
reporting, billing and xxxx review guidelines.
E. REPORTING REQUIREMENTS
KEIC shall provide reports to EAGLE, in the formats substantially similar to
those currently provided to EAGLE or as otherwise agreed with EAGLE, for:
(i) All losses (both indemnity and ALAE) initially reserved at
$250,000 or more on which a subsequent reserve changes by
$100,000 or more (the "Large Loss Report").
(ii) All coverage disputes or declination of coverage.
(iii) All allegations of bad faith or extra-contractual damages.
(iv) All Claims where the incurred reserve is equal to or greater
than 50% of policy limits.
(v) All Claims involving serious injury exposure without regard to
legal liability or policy limit
- Deaths
- Quadriplegia
- Paraplegia
- Xxxxx over 25% of a body
- Coma
- Closed head injuries
- Amputation.
- All bloodborne pathogen Claims (e.g. HIV, Hepatitis)
25
- Rape or attempted rape
- Loss of vision equal to 80% or usual loss that precludes
return to regular job or work.
(vi) All declaratory judgment actions.
(vii) All refunds, including ALAE, greater than $50,000 should be
reported to EAGLE after KEIC receives notice thereof.
(viii) Mass tort and class actions as requested by EAGLE.
(ix) All accidents occurring outside the U.S. or U.S. territorial
waters.
(x) All Employer Liability Claims.
(xi) All Claims where SIU has been consulted and KEIC believes a
fraud has been committed.
(xii) All Claims where a structured settlement is contemplated.
(xiii) RSD Claims.
(xiv) Pension Claims.
F. SETTLEMENT AUTHORITY
KEIC has authority to settle any one claimant (loss and ALAE combined) without
prior approval of EAGLE as set forth next to the lines of insurance below:
All other lines -- up to $250,000.
For any one loss in excess of the foregoing amounts, KEIC shall secure the prior
approval of EAGLE by e-mail. EAGLE shall respond promptly to any request for
authority to settle under this provision and in all events within five (5)
business days.
G. [Intentionally Omitted]
H. MEDICAL XXXX REVIEW FOR WORKERS COMPENSATION CLAIMS
(i) KEIC will audit each worker's compensation medical xxxx for
the purpose of verifying the accuracy and appropriateness of
charges.
(ii) KEIC will review workers' compensation medical bills using an
automated xxxx review system in all states where an automated
xxxx review system is currently in operation.
26
(iii) KEIC shall reduce medical charges to the extent of any
duplicative or excess charges and provide an explanation for
any reduction and a toll free number to providers.
(iv) KEIC will maintain data by provider taxpayer identification
and patient social security number and services rendered by
treatment and diagnostic code.
(v) KEIC shall produce quarterly, or at times otherwise agreed to
by the parties in writing, reports on the total amount of
duplicative and excess charges identified by KEIC.
(vi) Medical Xxxx Review shall be charged as ALAE on the individual
claim file, except where contrary to Applicable Law.
I. PREFERRED PROVIDER NETWORK FOR WORKERS COMPENSATION CLAIMS
(i) Claim service for workers compensation includes access to a
network of medical providers. The Managed Care Fees set forth
in Exhibit B to EAGLE for access to the Preferred Provider
Network shall be charged as medical loss.
(ii) EAGLE shall be provided with on-line and hard copy network
directories for referral purposes upon request. EAGLE may
request that providers not listed in the directory be invited
to become a participating provider. KEIC, at its discretion,
may enter into a contractual arrangement with such provider(s)
to include them in the Preferred Provider Network.
(iii) KEIC will provide information designed to inform and educate
its employees on the availability and use of the network. The
program will cover the referral process, claims submission and
payment procedures, dispute resolution, network provider
recruitment.
(iv) KEIC will provide EAGLE with its standard utilization reports
and review them with EAGLE. Reports are produced quarterly or
at other times agreed to by the parties in writing. KEIC will
work with EAGLE to ensure maximum utilization of network
providers.
(v) KEIC shall offer EAGLE with Internet access and a toll-free
800 number and/or electronic, internet access as a referral
service to locate providers within a particular geographic
area.
(vi) It is specifically understood and agreed that KEIC makes no
warranty or assurance concerning the quality of medical care.
It is further understood and agreed that all medical
practitioners participating in the KEIC Preferred Provider
Network are independent contractors for all purposes including
liability for any acts or omissions in the treatment of any
27
claimant. KEIC does not interfere with or participate in the
provider-patient relationship and all health care decisions
are between the patient and provider. The selection of a
provider is the decision of the patient and not based on the
credentialing or recommendation of KEIC.
J. FIELD CASE MANAGEMENT
(i) "Field Case Managers" shall mean nurses or vocational
rehabilitation consultants who operate locally (on-site) to
coordinate and facilitate services to Claimant. Field Case
Management shall be provided at KEIC's discretion or according
to pre-determined criteria established by the EAGLE. Field
Case Managers shall coordinate and manage health care services
provided to the Claimant in a timely, cost effective manner,
minimizing the recovery period without jeopardizing medical
stability. Field Case Managers shall maintain contact with
treating provider(s), Claimants and EAGLE. Field Case
Management may include medical, vocational and/or serious
injury/catastrophic care management services.
(ii) Field Case Management provided at KEIC's discretion, shall
include coordinating health care services to Claimant,
monitoring Claimant's recovery, providing health education to
EAGLE, and following up with providers regarding services,
length of disability and physical abilities of the Claimant.
Field Case Managers may travel to the Claimant's home,
provider's office, or work site. Field Case Management may
include vocational Field Case Management if deemed appropriate
by KEIC to assist Claimant in identifying job-related goals
through rehabilitation plans which may include testing for job
goals, aptitudes, and transferable skills as well as
estimating job placement and earning potential. In addition,
if appropriate, KEIC shall provide job search training,
placement services and shall conduct labor market surveys to
help Claimant identify career opportunities.
(iii) KEIC shall provide serious injury/catastrophic Field Case
Management where deemed appropriate by KEIC within twenty-four
(24) hours of a serious injury/catastrophic claim referral. A
Field Case Manager shall contact all parties involved and may
conduct an on-site evaluation. The Field Case Manager shall
assess case requirements, assist in the coordination of
referrals and discharge plans, and educate Claimant on
injury/illness and health care services.
(iv) The parties agree neither EAGLE nor KEIC is responsible for
the provision or omission of health care by any provider to
claimant. Furthermore, the parties agree KEIC's provision of
Field Case Management services does not in any manner
interfere with the relationship between the medical providers
and a Claimant and all health care decisions are between the
medical providers and Claimant.
28
K. PRESCRIPTION DRUG PROGRAM FOR WORKERS COMPENSATION CLAIMS
(i) Claim service for workers compensation includes access to a
prescription drug program. This program consists of drug
vendors which will accept fees reduced below the pharmacy's
usual charge. Charges for use of the prescription drug program
are charged as medical loss to the individual claim files.
(ii) KEIC shall provide information designed to inform and educate
Claimants on the availability and use of the prescription drug
program and shall issue to each workers' compensation Claimant
an identification card to be used at the time retail
prescription drug purchases are made.
L. PRE-ADMISSION CERTIFICATION AND UTILIZATION REVIEW
(i) "Physician Consultant" shall mean a physician who assesses the
medical necessity and appropriateness of medical services
provided to Claimants in accordance with state and federal
treatment guidelines, when appropriate, Commission/URAC
standards, and generally accepted, externally acquired, and/or
internally developed criteria in conjunction with supporting
clinical documentation and findings.
(ii) "Utilization Management" shall mean determination of the
appropriateness of payment for health care services,
procedures and facilities rendering treatment. Utilization
Management consists of pre-certification, concurrent, and
retrospective reviews which may include a length of service
and causality review.
(iii) KEIC shall provide Utilization Management, and Physician
Consultant services to claimants. Retrospective reviews may be
recommended by KEIC in situations of conflicting medical
information, questionable billing or at the request of the
Claimant, provider or claims adjuster.
(iv) KEIC shall obtain any necessary medical information from the
provider in order to perform the Utilization management
services. A nurse may render certification determinations and
a physician consultant shall render all clinical
non-certification determinations.
(v) KEIC shall notify the provider of certification determinations
via telephone and/or in writing if required by law. Claimant
may also be notified in writing if required by law.
(vi) Cases shall be referred to a KEIC physician consultant when
the medical information obtained from the provider does not
meet the appropriate criteria. The physician consultant may
contact the treating provider to discuss the treatment plan
and/or request additional information if needed.
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(vii) The treating provider or treating facility shall be notified
of a non-certification determination within one (1) business
day following the determination by the physician consultant.
KEIC shall send written notification of non-certification to
the treating provider and/or treating facility, and to the
Claimant when required.
M. OTHER MEDICAL COST CONTAINMENT SERVICES
For additional fees agreed to by the parties in writing, KEIC shall use
other medical care review and medical cost containment programs, including
services provided by KEIC affiliate companies, as agreed to by the parties
in writing. Fees shall be charged as medical loss or Allocated Loss
Adjustment Expense as required by law or regulation.
N. THE EAGLES CLAIM STATUS MEETING
KEIC will participate with EAGLE in quarterly claim status meetings to
discuss status and relevant issues concerning: individual Claims, such
Claims to be agreed prior to meeting; issues of changes in statutory or
regulatory environments which may affect EAGLE or KEIC; and specific
litigation issues. These meetings to be held telephonically or at such
location as is agreed to by the parties.
O. 1099 PREPARATION SERVICES
KEIC will produce, from its claims system, in a format suitable for
electronic transmission, the information necessary for the preparation of
Internal Revenue Service ("IRS") Form 1099 for transactions requiring the
submission of such forms to the IRS, and such information shall be
transmitted to the IRS or provided to a third party 1099 service provider
(1099 Pro, Inc., or a comparable provider) for transmission to the IRS.
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