EXHIBIT 10.22
CLAIMS SERVICE AND MANAGEMENT AGREEMENT
This Claims Service and Management Agreement ("Agreement") is made and
entered into as of October 1, 2001 by and between United States Fire Insurance
Company, ("Manager") and International Insurance Company ("Company").
WHEREAS, the Company and the Manager are each indirect subsidiaries of
Fairfax Financial Holdings Limited ("Fairfax"); and
WHEREAS, the Company is engaged in the business of insurance and has
underwritten or assumed certain policies of insurance; and
WHEREAS, the Company wishes to retain Manager to provide claims
services for certain identified types of claims, and Manager is willing to
provide such services on the terms and conditions set forth below; and,
WHEREAS, Manager possesses the personnel and facilities for the
processing, adjustment and settlement of claims;
NOW THEREFORE, in consideration of the mutual covenants contained
herein and other valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
1. Definitions: As used herein, the following terms shall have the meaning
set forth below:
1.1 "Claims Handling Services" shall mean all claims and
administrative services provided by Manager under this
Agreement.
1.2 "Claims" shall mean any demand by any Person against the
Company for coverage under policies underwritten or assumed by
the Company that are referred by the Company in its sole
discretion to Manager for servicing, including, but not
necessarily limited to, certain workers compensation claims.
1.3 "Operating Account" means the account designated by Manager
for the payment by Company of Service Fees.
1.4 "Records" means any and all documents, correspondence, and
other information including electronic data related to Claims,
or information of any kind, without limitation, relating to
Claims Handling Services.
1.5 "Transition Plan" means an orderly comprehensive plan to
transfer Company's pending workers compensation Claims to
Manager.
1.6 "Service Fees" means the amount payable by Company to Manager
for Claims Handling Services.
1.7 "Person" means an individual, corporation, partnership,
association, proprietorship, trust or any other entity or
organization, any federal, state or local government or
quasi-governmental body or political subdivision or any agency
or instrumentality thereof.
1.8 "Delegated Authority" means full policy limits gross
settlement and reserve authority, without consideration of any
reinsurance, and separately full authority for related
expenses.
1.9 "Expenses" means all necessary amounts incurred in the
handling of the Claims including legal fees and declaratory
judgment fees, court costs, claim related travel expenses,
expert fees, court reporter and transcript fees, witness fees
and witness travel expense, and such other reasonable fees and
expenses necessary to properly handle the Claims.
1.10 "Loss" means amounts reserved or paid for satisfaction of
judgments, or settlement of Claims under the Company's
policies, and may include expense in those instances where the
policy provides that expense is within limits.
2. AUTHORITY AND SERVICES
2.1 The Company hereby appoints Manager as a claims manager and
grants Manager authority to manage and service those Claims
referred by Company to Manager. It is understood and agreed
Manager shall have authority to investigate, compromise,
manage and supervise the denial of Claims, as well as the
settlement and payment of Claims within Manager's Delegated
Authority. Manager shall have the authority to retain counsel,
experts, and other third party providers on
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behalf of Company reasonably necessary for the handling of
Claims, and is further authorized to manage said providers on
behalf of Company.
2.2 Manager shall be responsible to:
2.2.1 Accept and review all Claim reports submitted by the
Company;
2.2.2 Investigate all Claims, secure all necessary
Claims-related services, and adjust, settle, resist
or otherwise handle all such Claims within the
Delegated Authority granted by the Company, in
accordance with sound case management practices and
industry standards and in compliance with applicable
regulatory requirements;
2.2.3 Investigate all Claims, secure all necessary
Claims-related services, and adjust, settle, resist
or otherwise handle all such Claims in excess of the
Delegated Authority with the prior written approval
of the Company, in accordance with sound case
management practices and industry standards and in
compliance with applicable regulatory requirements;
2.2.4 Establish files for all Claims, organized by
Account/Claim Type, which files shall contain all
documentation received by Manager relevant and
material to the Claim, relating to the investigation,
evaluation, negotiation, settlement and litigation of
such Claims. The files shall be available for review
and copying at all reasonable times by Company or its
designated agent or any regulatory or taxing
authority.
2.2.5 Recommend the amount of Loss reserves to be
established for each Claim. Manager shall maintain
reserve analysis information for all Claims.
2.2.6 Provide staff and materials to handle all Claims in a
professional and orderly manner in accordance with
sound case management practices and industry
standards, and in compliance with applicable
regulatory requirements. Manager shall have the sole
discretion, subject only to the requirements of this
paragraph 2.2.6, in its selection and utilization of
staff, facilities and materials in connection with
the handling of Claims by Manager.
2.2.7 Retain stored files following closure in compliance
with Company's record retention policy and at
Company's expense
2.2.8 Exercise control of litigated cases including
requiring detailed legal bills, and in accordance
with Manager's litigation management guidelines,
industry standards and in compliance with regulatory
requirements.
2.2.9 Promptly notify Company of all extra-contractual
matters.
2.2.10 Document the file with, where appropriate, releases
on Claims settled or disposed of by Manager.
2.2.11 Notify the Company as soon as practical, but not
later than the issuance of the monthly Fairfax report
which Manager will prepare as a matter of course, of
any individual Claims Loss or Expense payment in
excess of $250,000.
2.2.12 Assume full and complete responsibility for preparing
reinsurance reports associated with all Claims, and
provide said reports to Company for distribution as
required.
2.2.13 Assume full and complete responsibility for the
recovery of deductibles in the context of settlements
and provide for payment to the Company or any sums
collected. Manager will advise Company of deductibles
not resolved in the settlement process.
2.3 The appointment of the Manager by the Company to this
Agreement is not exclusive.
2.4 Manager is designated the "Authorized Representative" for
Company for all Claims.
2.5 The services provided by Manager hereunder are not of a legal
nature, and the Manager shall in no event give, or be required
to give, any legal opinion or provide any legal representation
to the Company nor may any communication prepared by the
Manager be relied upon by the Company as a legal opinion or
interpretation. The Manager is not and shall not be considered
as engaged in the practice of law.
2.6 Notwithstanding the authority delegated to Manager under this
section, the Company has the right to take over the handling
and control of any specific Claim at any time for any reason
or no reason. In the event Company elects to take over the
handling of any specific Claim, Company shall bear the costs
associated with transferring the administration of the Claim,
unless the transfer was occasioned by deficient claims
handling, under which circumstances Manager shall bear said
costs.
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3. COMPANY'S OBLIGATIONS
3.1 To remit service fees in accordance with Section 4 of this
Agreement.
3.2 To fund all Loss and Expense payments that are the
responsibility of Company under this Agreement.
3.3 Company retains full responsibility for filing and/or
completing any reports for any insurance rating bureaus, and
required statutory financial reports, or any other similar
reports or statistics required of Company. Manager shall
supply Company with the necessary information and in the
appropriate medium and format as reasonably determined by the
Company.
3.4 Company shall designate one or more Company employees to
provide Manager with information concerning the Company
necessary to service the Claims, and provide to Manager Loss
or Expense authority in excess of the Delegated Authority.
3.5 Company shall respond promptly to Manager for requests for
authority in excess of Manager's Delegated Authority. All
authority granted in excess of Manager's Delegated Authority
shall be confirmed in writing, which writing may include
facsimile transmission and/or electronic mail.
3.6 Company shall forward to Manager notices of new Claims.
3.7 Company shall cooperate with Manager to develop an orderly
plan of transition for existing Claims.
3.8 Company agrees to provide Manager with any and all
documentation necessary to evidence Manager's authority
pursuant to this Agreement. 3.9 Company may, in its sole
discretion, provide Manager with limited access to portions of
the Company's, or Company's authorized representative's,
claims management system.
4. SERVICE FEES
4.1 Company shall pay the Manager fees for the Claims Handling
Services. Service fees shall be equal to Manager's actual cost
to provide services hereunder and shall be payable monthly in
arrears into the Manager's Operating Account on the last day
of each calendar month.
4.2 Expenses incurred by Manager and payable under this Agreement
shall be allocated in accordance with the provisions of New
York Insurance Department Regulation 30.
5. AUDIT RIGHTS
5.1 Company shall have the right, upon reasonable notice to
Manager, to conduct audits of all Records.
5.2 Company shall have the right, upon reasonable notice to
Manager, to audit Manager's draft and check security
procedures.
5.3 Company shall have the right, upon reasonable notice to
Manager, to inspect and audit the statements it receives from
Manager.
5.4 Manager shall make its books and records relating to the
services provided hereunder available to Company for
reasonable inspection and to cooperate with Company in audits
conducted under this section.
5.5 Company shall have the right, upon reasonable notice, to audit
actuarial data items.
6. Termination
6.1 Either party may terminate this Agreement, with or without
cause, by providing not less than sixty (60) days written
notice to the other party.
6.2 This agreement may be terminated by either party by written
notice served on the other party, which notice when served
shall take effect immediately if:
6.2.1 The other party shall at any time be in material
breach of any of its obligations hereunder and, in
the case of a material breach capable of remedy,
fails to remedy the same within 30 days after
receiving written notice from the aggrieved party
requiring it do so: or
6.2.2 The other party shall at any time become insolvent,
suspend payment of its debts, enter into any
arrangement with its creditors, convene a meeting of
its creditors or cease or threaten to cease to carry
on its business or enter into liquidation (voluntary
or involuntary) or have a receiver appointed over any
of its assets.
6.3 Upon termination of this Agreement for any reason, each party
will deliver or cause to be delivered to the other party, or
such other person as the other party may direct, Records
associated with the business of the other party.
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6.4 Company acknowledges that in the event it elects to terminate
this Agreement, Manager will not recapture or otherwise
utilize the resources and expenses allocated to Claims
Handling Services pursuant to this Agreement. Except in the
case of termination by Company due to a finally determined
material breach by Manager, Company agrees to pay or otherwise
reimburse Manager for all reasonable termination and severance
expenses for Manager's personnel and related overhead expenses
associated with such termination of this Agreement on an
actual cost basis.
7. Indemnification
7.1 Manager shall defend, indemnify and hold Company and its
directors, officers, employees or agents harmless from and
against all extra contractual liability and related expense,
including attorney's fees, arising out of any real or alleged
acts or omissions which constitute gross negligence or willful
misconduct of Manager or its agents which occur following the
receipt by Manager of a Claim.
7.2 Company shall defend, indemnify and hold Manager and its
directors, officers, employees or agents harmless from and
against all liability and related expense, including
attorney's fees, arising out of the instructions or acts of
Company or its employees or agents, or where Manager has given
Company prior written notice of its intended course of action
and Company has approved said course of action or has not
otherwise disapproved it within five (5) business days of
receipt of said written notice from Manager. If Manager
materially deviates from an approved course of action, Company
shall have no liability under this paragraph. Without limiting
the generality of the foregoing, Manager will not be liable to
Company for any action taken or omitted by Manager in good
faith and believed by Manager to be authorized or within the
rights or powers conferred upon it by this Agreement.
7.3 Paragraphs 8.l and 8.2 shall survive termination of this
Agreement.
8. ARBITRATION
8.1 Any dispute or difference arising with reference to this
Agreement, and the rights and obligations of Manager and
Company hereunder shall be referred to a Board of Arbitration
("Board") of two (2) arbitrators and an umpire.
8.2 The members of said Board shall be United States citizens and
shall be active or retired disinterested officers of insurance
or reinsurance companies.
8.3 One arbitrator shall be chosen by the party initiating the
arbitration within 30 days of initiating the arbitration. The
other party shall respond within 30 days of receipt of the
identity of the initiating party's designation, and shall
designate its arbitrator. The umpire shall thereafter be
chosen by the two arbitrators within 30 days. If the
arbitrators are unable to agree on an umpire, an umpire
meeting the qualifications set forth above shall be chosen by
the American Arbitration Association.
8.4 Each party shall submit its position to the Board within 30
days from the date of appointment of the umpire, which time
period may be extended by agreement of the parties, or in the
absence of such agreement, the unanimous written consent of
the Board.
8.5 The arbitration shall take place in New York, New York, unless
otherwise agreed in writing by the parties. The Board shall
make its decision considering the custom and usage of the
insurance and reinsurance business and any other relevant
considerations including regulations and legal precedents. The
Board is released from all judicial formalities and may
abstain from the strict rules of law. The written decision of
the majority of the Board shall be rendered within 60 days
following the termination of the Board's hearings, unless the
parties consent to an extension. Such majority decision of the
Board shall be final and binding upon the parties both as to
law and fact, and may not be appealed to any court of any
jurisdiction. Judgment may be entered upon the final decision
of the Board in any court of proper jurisdiction.
8.6 Each party shall bear the fees and expenses of the arbitrator
selected by or on its behalf, and the parties shall bear the
fees and expenses of the umpire as determined by the Board.
9. CONFLICTS OF INTEREST
9.1 If Manager reasonably considers that the interests of Company
in relation to a particular transaction are materially
different from the interests of other Fairfax subsidiaries
serviced by Manager and involved in the same transaction,
Manager shall notify Company of the perceived
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conflict and Company shall be entitled to withdraw the
authority to act on its behalf in relation to that transaction
whereupon Manager shall have no further obligation to consider
Company's interest in relation to that transaction.
9.2 To the extent that, in respect of services provided pursuant
to the Agreement, any potential or perceived conflicts of
interest arise by virtue of the retention by either party of
legal or other counsel or representation which are also
retained either at the date of this Agreement or subsequently
by the other party and/or Fairfax, each party hereby waives
such potential or perceived conflict and acknowledges the
common interest of Manager, the Company and Fairfax.
10. MISCELLANEOUS
10.1 The opening statements to this Agreement are not mere recitals
and are incorporated by reference as material terms to this
Agreement.
10.2 Manager and Company agree that the Claims files are the
property of Company.
10.3 No assignment of this Agreement, or any rights or interest
arising hereunder shall be valid unless in writing and
mutually agreed upon by the parties.
10.4 Company recognizes that a Claim may involve other indirect
subsidiaries of Fairfax. Company further recognizes that some
Claims may involve policies which are lost. Allocation of Loss
and expense incurred with respect to such claims shall be in
compliance with the applicable policy provisions, sound claims
practices, and in accordance with the provisions of with the
provisions of New York Insurance Department Regulation 30.
10.5 Manager at all times hereunder, is acting as an independent
contractor. Personnel supplied by Manager shall be employees
of Manager and will not be for any purpose be employees of
Company.
10.6 Manager shall hold in confidence any confidential information
obtained by it relating to the business of Company or its
affiliated corporations or the policyholders of Company and to
the same degree as it protects its own confidential
information. Disclosures made by a party in the course of
performing its obligations under this Agreement are not
intended, and should not be construed, as a waiver of any
privilege or confidentiality over such information and any
such privileges and confidentialities are expressly reserved.
Manager recognizes its obligations under the law with respect
to the use and disclosure of any non public personal
information it may receive and agrees to abide by the
Company's privacy policy and the laws and regulations
governing such information including, but not limited to, the
Xxxxx-Xxxxx-Xxxxxx Act.
10.7 This Agreement shall constitute the final, complete and entire
agreement between the parties as respects Claims Handling
Services. This Agreement may not be modified or amended except
by written instrument executed by each party.
10.8 This Agreement shall be governed and construed in accordance
with the laws of the State of Illinois without giving effect
to the principles of conflicts of laws.
10.9 Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under
applicable law. If any provision of this Agreement or any
portion of any provision of this Agreement is declared null
and void, invalid, prohibited by or unenforceable under
applicable law by any Court or tribunal having jurisdiction,
then such provision or such portion of a provision shall be
fully severable and ineffective only to the minimum extent of
such prohibition or invalidity, without invalidating the
remainder of the Agreement or provision of this Agreement,
shall be considered separate and apart from the remainder of
this Agreement which shall remain in full force and effect,
and said provision which was found to be prohibited or invalid
shall remain in full force and effect in all other
jurisdictions.
10.10 This Agreement is subject to the non-disapproval or approval
of the New York Insurance Department and the Illinois
Insurance Department, and such terms and conditions hereof as
may be required by such Insurance Departments to be altered or
amended shall be deemed acceptable to the parties hereto, to
the extent same shall not change the substance and intent of
this Agreement.
10.11 The Commissioner of Insurance of the state of domicile of the
Company or that of its affiliated companies, or his
representatives shall, at all reasonable times, be permitted
access to all relevant books and records of the Company.
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10.12 This Agreement may be executed in multiple counterparts, each
of which shall be deemed an original, and all of which shall
constitute one and the same instrument. The Section headings
are for convenience and of reference only and shall not be
construed as part of this Agreement.
11. REPRESENTATIONS AND NOTICES
11.1 The signatories to this Agreement represent and warrant that
they are authorized to execute this Agreement on behalf of
their respective companies, that they have legal authority to
bind their respective companies, and all corporate formalities
necessary to said authorization have been completed.
11.2 Any written notices or communications to be given under or
pursuant to this Agreement may be given either by personal
service, first class post, or facsimile to the address of the
other party set out below or such other address as such party
may have notified as being its address for service for purpose
of this Agreement.
Company: International Insurance Company
000 X. Xxxxxxxxxx Xx. Xxxxx 0000
Xxxxxxxxxx, XX 00000
Attention: President
Fax: 000-000-0000
Manager: Xxxx & Xxxxxxx
000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attention: President
Fax: TBD
The parties have executed this Agreement as of the effective date set
forth above.
International Insurance Company United States Fire Insurance Company
By: /s/ By: /s/
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Its; Senior Vice President Its: Senior Vice President
--------------------------------- -----------------------------------
By: /s/ XXXXXXX X. XXXXXXXX
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Its: Vice President and Secretary
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