EXHIBIT 10.28
MANAGING GENERAL AGENCY AGREEMENT
Between
AMERICAN PHYSICIANS INSURANCE AGENCY, INC.
(hereinafter called "AGENT")
and
FLORIDA PHYSICIANS INSURANCE COMPANY, INC.
(hereinafter called "COMPANY")
Effective Date: March 27, 1997
Section 1. AGENCY APPOINTMENT
a. COMPANY hereby appoints AGENT as its exclusive agent to perform the
duties set forth herein and vests in AGENT full authority to
accomplish, effect and execute such duties upon the terms and
conditions set forth below. The authority of AGENT shall be limited to
the territory and the kinds of insurance specified in Addendum A.
b. Term. The term of this Agreement shall be as follows:
1) The initial term of this Agreement shall be for a period of
eight (8) years beginning on the 27th day of March, 1997,
unless terminated earlier as provided by Section 6 of this
Agreement.
2) This Agreement shall automatically renew for successive terms
of five (5) years, unless either party to this Agreement
provides written notice to the other party at least 18 months
before the expiration of the initial term or any renewal term
that the party does not desire to continue this Agreement.
Section 2. AGENT'S RELATIONSHIP TO COMPANY
a. This Agreement is not a contract of employment and nothing herein
contained shall be construed to create the relationship of employer and
employee between COMPANY and AGENT. AGENT is an independent contractor
and shall be free to exercise judgment and discretion with regard to
the conduct of business as agent for COMPANY.
b. COMPANY shall place all business solicited or covered under
this Agreement through AGENT.
c. COMPANY recognizes AGENT or affiliated companies have existing
business relationships, as described in Addendum C, with
American Physicians Insurance Exchange, Western Indemnity, and
Prime Medical Services, Inc. and AGENT may continue such relationships
and business at the option of AGENT, except that AGENT agrees that it
will cease all new business production with and through Western
Indemnity effective as of April 1, 1997.
d. The business written by COMPANY pursuant to this Agreement will be
reinsured under a separate reinsurance agreement ("Reinsurance
Agreement") by AMERICAN PHYSICIANS INSURANCE EXCHANGE (hereinafter
called "REINSURER").
Section 3. AUTHORITY AND DUTIES OF AGENT
a. Solicitation and Servicing. Subject to requirements imposed
by law and the terms of this Agreement, AGENT has authority:
1) to receive, underwrite, determine premium, and promptly
process proposals or applications for such insurance
policies as are specified in Addendum A;
2) AGENT has authority to bind COMPANY for such insurance
policies and endorsements as are specified in addendum A;
3) to issue policies on behalf of COMPANY;
4) to have supervisory responsibility for local agency and
field operations of COMPANY in Texas including the
appointment and direction of local recording agents
within Texas;
5) to handle the adjustment of losses including authority to
effect claims settlements in connection with policies issued
by COMPANY in Texas pursuant to this Agreement as permitted by
law and which claims settlement authority in no event shall
exceed 1.0% of the COMPANY'S policyholder surplus as of
December 31 of the last completed calendar year, or $30,000,
whichever is greater (To the extent not subject to reinsurance
with American Physicians Insurance Exchange, COMPANY retains
final authority over disputes involving claim settlements or
loss reserves as regards COMPANY and AGENT);
6) to provide periodic reports to COMPANY relating to
insurance business issued on behalf of COMPANY and any
reports to reinsurers for business of COMPANY that has
been reinsured as described in this Agreement;
7) to obtain premium financing on behalf of insureds, AGENT
may arrange for installment payments.
b. Legal Compliance. AGENT shall comply in all respects with all
applicable laws.
c. Premiums and Accounting.
2
1) The billing and collection of premiums shall be performed for
COMPANY by AGENT. If AGENT receives any premiums for insurance
issued under this Agreement, AGENT shall promptly report to
COMPANY the premiums received and remit monthly to the COMPANY
and its REINSURER the net premiums due according to the terms
of the Reinsurance Agreement between COMPANY and REINSURER and
this Agreement. Remittance shall be within 30 days after the
close of each month.
2) All premiums, including return premiums, received by AGENT are
the property of COMPANY and shall be held by AGENT as trustee
for the COMPANY and REINSURER until delivered to COMPANY or
the REINSURER as applicable. The trust relationship and
COMPANY's ownership of unpaid premiums which have not been
collected by AGENT shall not be held to be modified, affected
or waived by the keeping of an account on COMPANY's books as a
creditor and debtor account, the payment of balances at stated
periods, the retention of commissions by AGENT, or the duty to
pay commissions to subproducers when and as appropriate. AGENT
will maintain premium monies in a separate bank account and
will not mingle such monies with its own funds.
3) The AGENT shall not be required to return, as commission or
return commission, monies greater than the total commission
paid or otherwise payable to the AGENT.
d. Maintenance of Records.
1) AGENT shall keep complete records and accounts of all
transactions pertaining to insurance written under this
Agreement. Such records shall be kept current and shall be
readily identifiable. During the term of this Agreement and
for such time thereafter as COMPANY shall deem necessary for
the protection of its and COMPANY's property and/or interests,
COMPANY shall have the right and AGENT shall permit and
authorize COMPANY, through any person(s) designated by COMPANY
at such times and as often as COMPANY may reasonably request:
i) to visit, inspect, examine, audit and verify, at
any of its offices or elsewhere, any of the
properties, accounts, books, records or work papers
belonging to or in the possession of AGENT or
belonging to or in the possession of any other
person pertaining to matters which COMPANY shall
deem relevant to the subject matter of this
contract or to the financial condition of AGENT.
ii) to make copies thereof and extracts therefrom.
iii) to discuss the affairs, finances and accounts of
AGENT with AGENT's directors, officers or employees
3
or any person(s) in any way connected with AGENT, its
affairs, finances or accounts, including, but not
limited to AGENT's independent accountants, bankers,
broker, sub-agents or other insurance companies.
2) All records relating to business issued pursuant to this
Agreement shall be jointly held by AGENT for COMPANY and
AGENT. Policy files and claim files shall be considered
COMPANY records that will be held by AGENT for COMPANY. AGENT
shall have a right to make copies thereof and extracts
therefrom. AGENT will maintain procedures to ensure all
records are reasonably produced, maintained and protected.
3) AGENT shall maintain records for at least five years or until
the completion of a financial examination by the insurance
department of the state in which the COMPANY is domiciled,
whichever is longer.
e. Reporting and Servicing of Business.
1) AGENT shall promptly process all applications for insurance
and submit monthly written reports to COMPANY and REINSURER
concerning the insurance written under this Agreement in
accordance with the rules and regulations promulgated from
time to time by COMPANY or its REINSURER.
2) AGENT shall immediately notify COMPANY and REINSURER of all
claims, suits and losses of which it has notice. AGENT shall
cooperate fully with COMPANY to facilitate the investigation,
adjustment, and settlement and payment of any claim and assist
COMPANY in the collection of any deductibles due from the
insured.
3) AGENT shall provide all usual and customary services of an
insurance agent in connection with all insurance policies
placed by AGENT with COMPANY.
f. Advertising. AGENT shall not insert any advertisement
-----------
referring to COMPANY or issue or cause to have issued any letter,
circular, pamphlet or other publication or statement referring to
COMPANY, without the prior written consent of COMPANY. Such consent
shall not be construed as any agreement by COMPANY to bear any part of
the expense of advertisement. In the event COMPANY shall be subjected
to loss or expense arising out of any unauthorized advertisement,
publication or statement of AGENT, AGENT shall indemnify the COMPANY
for all resulting damages and costs whether direct or consequential.
g. Ownership of Printed Matter. It is expressly understood that
any policies, forms and other supplies furnished to AGENT by
COMPANY shall remain the property of COMPANY and shall be
returned to COMPANY promptly upon demand. It is expressly
4
understood that any policies, forms and other supplies furnished to
COMPANY by AGENT shall remain the property of AGENT and shall be
returned to AGENT promptly on demand.
h. Expenses. AGENT shall pay all expenses in respect to the
--------
performance of AGENT's duties under this Agreement, including but not
limited to rentals, transportation facilities, clerical expense,
solicitor's fees, commission's to local recording agents, postage,
advertising, or personal local license fees. Unless otherwise specified
in writing in advance by COMPANY, AGENT shall not charge or commit
COMPANY to any expense, agreement, payment, debt, or obligation other
than the insurance expressly described herein which AGENT is authorized
to write.
i. AGENT may not bind reinsurance or retrocession on behalf of
the COMPANY, may not commit the COMPANY to participation in
insurance or reinsurance syndicates, and may not collect
payment from a reinsurer or commit the COMPANY to a claim
settlement with a reinsurer without the prior written approval
of the COMPANY. AGENT has written approval to perform all
acts necessary to effect settlements on reinsurance ceded with
American Physicians Insurance Exchange. AGENT shall promptly
report all transactions with American Physicians Insurance
Exchange.
Section 4. COMPENSATION
As full compensation for services rendered under this Agreement, AGENT agrees to
accept and COMPANY agrees that agent is entitled to keep as part of premiums
received the amounts specified in Addendum B.
Section 5. SUSPENSION OF AGENT'S AUTHORITY
If AGENT is delinquent either in accounting for or payment of any funds due to
COMPANY, or is otherwise in default under this Agreement, COMPANY may, by
written notice to AGENT, suspend or otherwise limit AGENT's authority to manage
any new or renewal business or change any existing policy during the suspension.
COMPANY, at its option, may suspend or otherwise limit such authority in whole
or in part or may condition the exercise of such authority on any appropriate
condition, including, but not limited to, the payment of premiums in advance of
the effective date.
For the purposes of this Section, AGENT is not delinquent because of routine
differences in the accounting records of the AGENT and the COMPANY which are
minor in amount and do not involve funds willfully withheld by the AGENT.
Upon the occurrence of any of the events described in Section 6(a), AGENT'S
authority under this Agreement, including such authority and duties described in
Section 3 to, among other things, manage any new or renewal business or change
any existing policy, shall
5
automatically be suspended and shall be terminated upon termination
of this Agreement.
Section 6. TERMINATION
a. Termination. The term of this Agreement shall expire and this
Agreement shall terminate in accordance with subsection b. of
this section upon the occurrence of any of the following
events:
1) Upon the effective date of the suspension, revocation or
termination of either party's license by appropriate authority
and after exhausting any appeals to which either party is
entitled.
2) The insolvency of either party, the inability to pay debts as
they mature, the making of an assignment for the benefit of
creditors, the dissolution of either party, the appointment of
a receiver or liquidator for either party or for a substantial
part of either partys' property, or the institution of
bankruptcy, reorganization, arrangement, insolvency or similar
proceedings by or against either party under the laws of any
jurisdiction.
3) Misappropriation of funds or property of COMPANY or funds
received for it by AGENT; the failure of AGENT to remit to
COMPANY the funds due promptly upon demand; the commission by
AGENT of any fraud against COMPANY or any conduct injurious to
COMPANY's standing or good name.
4) Misappropriation of funds or property of AGENT or funds
received for it by COMPANY; the failure of COMPANY to remit to
AGENT the funds due promptly upon demand; the commission by
COMPANY of any fraud against AGENT or any conduct injurious to
AGENT's standing or good name.
5) At the date and time that American Physicians Insurance
Exchange fails to fund or to maintain sufficient security
after 60 day notice and failure of American Physicians
Insurance Exchange to cure such default as required by Article
XV, Part C of the Reinsurance Agreement, effective March 27,
1997, between Florida Physicians Insurance Company, Inc. and
American Physicians Insurance Exchange.
6) Eighteen months after the date and time that Florida
PHysicians Insurance Company, Inc. is no longer a
shareholder of APS Insurance Services, Inc.
7) Either party may terminate this Agreement at any time if
the Stock Purchase and Stock Option Agreement between
American Physicians Service Group, Inc., and Florida
Physicians Insurance Company, Inc. is not closed in
accordance with its terms.
6
b. Continuing Duties. Upon termination of this Agreement for
-----------------
default, AGENT shall be obligated to proper servicing of all in-force
policies of insurance written hereunder until all such policies shall
have expired. COMPANY shall not cancel or terminate such policies in
effect on the termination date of this Agreement prior to the
expiration or regular renewal date of the policy, whichever date shall
first occur. Such services shall consist of, but shall not necessarily
be limited to, cancelling, issuing amendatory endorsements, and
collecting and returning premiums, and consultations as required by the
COMPANY.
Section 7. OWNERSHIP OF BUSINESS
a. All information and knowledge of AGENT regarding the insurance
business including its accounts, customers, prospective
customers, plans regarding future insurance business, and
otherwise relating to the COMPANY's insurance business, which
could be used by a competitor or other third person to solicit
the said insurance business in competition with the AGENT for
which in any manner could affect the goodwill of the AGENT,
shall be treated by COMPANY in the strictest confidence and
shall not be divulged by COMPANY to any person, or used in any
manner which might reasonably result in it being divulged to
any person, other than employees of the COMPANY as reasonably
and necessarily required in the ordinary course of business.
This covenant shall continue to be binding on COMPANY
indefinitely in accordance with its terms notwithstanding
termination or suspension of AGENT's authority under this
Agreement.
b. All data, customer lists, records and written material prepared or
compiled by AGENT shall be the sole and exclusive property of the
AGENT, and none of such data, customer lists, records, or written
materials, or copies thereof, shall be retained by COMPANY upon
termination of this Agreement.
Section 8. HOLD HARMLESS
a. COMPANY agrees to indemnify, defend and hold AGENT harmless from and
against any and all claims, suits, actions, liability, loss of expense
caused by or resulting from any violation by COMPANY of this Agreement.
b. AGENT agrees to indemnify, defend and hold COMPANY harmless from and
against any and all claims, suits, actions, liability, loss or expense
caused by or arising out of any violation by the AGENT of this
Agreement.
Section 9. GENERAL PROVISIONS
a. Assignment. Neither party shall assign, delegate, transfer,
encumber or otherwise dispose of this Agreement, any interest
therein, or any rights or obligations hereunder without the
prior written consent of the other party and any purported
7
assignment, transfer, encumbrance or other disposition without such
consent shall be void. Except that, the merger, consolidation or other
corporate reorganization of COMPANY, or the assignment, or other
transfer of this Agreement to a subsidiary or affiliate of the COMPANY,
shall not be deemed a violation of this subsection a.
b. No Waiver. The failure of COMPANY or AGENT to insist on strict
compliance with this Agreement, or to exercise any right or remedy
hereunder, shall not constitute a waiver of any rights contained herein
nor estop the parties from thereafter demanding full and complete
compliance therewith nor prevent the parties from exercising such
remedy in the future.
c. Notices. Any notice required or permitted to be given under
this Agreement shall be in writing and shall be deemed duly
given if delivered personally, by registered or certified mail
or by telefax to the party for whom it is intended at the
following address or such other address as the recipient may
designate from time to time.
d. Full Agreement. This Agreement supersedes and makes null and void any
and all previous agency agreements, whether written or oral, between
COMPANY and AGENT with respect to the type of business to be serviced
hereunder and constitutes the full agreement between the parties. No
amendment to this Agreement shall be valid unless in writing and signed
by the parties.
e. Severability. If any provision of this Agreement should be
------------
invalid under or in conflict with the laws of any state, this Agreement
shall be deemed amended to comply with the minimum requirements of such
laws without affecting the remaining provisions of this Agreement;
provided, however, if either party believes that the voiding of any
provision hereof materially affects the whole Agreement, such party by
written notice, may terminate this Agreement forthwith.
f. Choice of Law. This Agreement shall be interpreted under and
pursuant to the laws of the State of Texas.
g. Third Parties. The provisions of this Agreement are for the
sole benefit of the parties and shall not be enforceable for
the benefit of any one who is not a party to this Agreement,
except as expressly provided herein.
h. Notices. AGENT must notify the COMPANY in writing within 30
days if there is a change in:
1) ownership of 10% of more of the outstanding stock of the
AGENT;
2) any principal office of the AGENT; or
3) any director of the AGENT.
8
i. AGENT may not offset balances due under any contract with any
offset due under any other contract.
IN WITNESS WHEREOF, the parties intending to be bound have caused this Agreement
to be effective this 27th day of March, 1997.
For AGENT: AMERICAN PHYSICIANS INSURANCE
AGENCY, INC.
By:________________________________
Title:_____________________________
For COMPANY: FLORIDA PHYSICIANS INSURANCE COMPANY, INC
By:________________________________
Title:_____________________________
For REINSURER: AMERICAN PHYSICIANS INSURANCE EXCHANGE
By:________________________________
Title:_____________________________
9
ADDENDUM A
TO MANAGING GENERAL AGENCY AGREEMENT
Between
AMERICAN PHYSICIANS INSURANCE AGENCY, INC.
("AGENT")
and
FLORIDA PHYSICIANS INSURANCE COMPANY, INC.
("COMPANY")
Dated March 27, 1997
The parties agree that:
1. The AGENT is authorized to be the exclusive managing agent for
COMPANY for the following kind(s) of business:
All standard Medical Malpractice Professional Liability
insurance for Texas health care providers described in
Addendum A-1 and such other policies authorized in writing by
the COMPANY from time to time in Texas.
2. The AGENT is authorized only for the following territory to
the extent the AGENT is properly licensed:
STATE OF TEXAS
ADDENDUM A - 1
TO MANAGING GENERAL AGENCY AGREEMENT
Between
AMERICAN PHYSICIANS INSURANCE AGENCY, INC.
("AGENT")
and
FLORIDA PHYSICIANS INSURANCE COMPANY, INC.
("COMPANY")
Dated March 27, 1997
Specialties
Medical Doctors (M.D.)
Osteopaths (D.O.)
Chiropractors (D.C.)
Podiatrists (D.P.M.)
Certified Nursing Assistant
Dental Hygienist
Dietitian/Nutritionist
Heart/Lung Perfusionist
Medical Laboratory Technician
Nurse Anesthetist
Nurse Midwife
Nurse Practitioner
(Including Obstetrical N.P., Pediatric/Family N.P.
Psychiatric N.P.
Surgical N.P.)
Nurse - Critical Care
Nurse - Emergency Room
Nurse - LPN, LVN, Aide,
1st year RN Nurse - General Duty Nurse - Obstetrical Nurse - Scrub Nurse
OR Technician (Hospital) Optician Optometrist Paramedic Pharmacist Physical
Therapist Physicians Assistant Psychotherapist Respiratory Therapist Surgeons
Assistant Other - Allied Health
Care N.O.C.
ADDENDUM B
TO MANAGING GENERAL AGENCY AGREEMENT
Between
AMERICAN PHYSICIANS INSURANCE AGENCY, INC., as AGENT
and
FLORIDA PHYSICIANS INSURANCE COMPANY, INC.
("COMPANY")
Dated: March 27, 1997
1. The parties agree that, for business described in Addendum A and A-1,
AGENT shall be entitled to a commission of 13.5% of written premium.
2. AGENT shall also be entitled to receive as additional compensation any
commissions paid by AGENT to local recording agent, solicitor or other
soliciting agent.
3. Commissions on any other business shall be determined on a
case-by-case basis.
ADDENDUM C
TO MANAGING GENERAL AGENCY AGREEMENT
Between
AMERICAN PHYSICIANS INSURANCE AGENCY, INC.
("AGENT")
and
FLORIDA PHYSICIANS INSURANCE COMPANY, INC.
("COMPANY")
Dated March 27, 1997
Western Indemnity Policies:
Coastal Healthcare
STAT Physicians
Southwest Medical
OB/GYN Associates
Prime Medical Services, Inc.:
National Urology Program, including Texas
