REINSURANCE AGREEMENT
EXHIBIT
10.138
NUMBER 19980929LMIC
Reinsurance Agreement (“Agreement”), dated this 29th day of September, 1998 by and between
Liberty Mutual Insurance Company, a Massachusetts mutual insurance company (the “Reinsurer” or
“LMIC”), and Colorado Casualty Insurance Company, a Colorado corporation (the “Company” or “CCIC”).
WITNESSETH
It is understood that the Company and the Reinsurer (hereinafter identified as the “parties”)
hereto wish to enter into a reinsurance arrangement through which the Company is to bear no
business, credit or insurance risk whatsoever (save the risk of the Reinsurer’s insolvency). The
Reinsurer shall hold the Company harmless and indemnify it for these risks. The sole consideration
provided by the Company, in exchange for the expense reimbursement set forth in Section 3 herein,
is to permit the Policies (as hereinafter defined) which are reinsured one hundred percent (100%)
under this Agreement to be issued in the name of the Company. All provisions of this Agreement
shall be interpreted so as to be in accord with this Preamble.
SECTION 1 — REINSURANCE OBLIGATION
1.1 The Company agrees to cede to the Reinsurer, and the Reinsurer agrees to accept as quota
share reinsurance of the Company, one hundred percent (100%) of the Company’s ultimate net
liability under all policies, contracts, binders, or agreements (hereinafter collectively called
the “Policies”) issued or assumed during the term of this Agreement (as further described in
Sections 1.3 and 1.4) by the Company through agents appointed by Company.
1.2 Business ceded hereunder shall include every original policy, rewrite, renewal or
extension (whether before or after the termination of this Agreement) required by statute or by
rule or regulation of any authority having competent jurisdiction, of any Policy of insurance
originally ceded hereunder by the Company to the Reinsurer.
1.3 It is understood that the classes of business reinsured under this Agreement are deemed to
include only those policies issued by CCIC or assumed by CCIC under other reinsurance agreements.
1.4 The Company has the right to place reinsurance (treaty or facultative) on the policies
covered under this Agreement. All such reinsurance placed on these policies by the Company shall
apply before this Agreement and inure to the benefit of the Reinsurer.
1.5 All reinsurance under this Agreement shall be subject to the same rates, terms, conditions
and waivers, and to the same modifications and alterations as the respective Policies of the
Company.
SECTION 2 — TERM AND RUN-OFF CANCELLATION
2.1 This Agreement shall take effect September 29,1998 as of 12:00:01 a.m., Mountain Standard
Time, provided that the closing of the purchase by LMIC of all of the capital stock of CCIC shall
have occurred prior to, or within twenty-four (24) hours after, the effectiveness of this
Agreement. This Agreement shall remain continuously in force until terminated in accordance with
Section 2.4.
2.2 When this Agreement terminates for any reason, reinsurance hereunder shall continue to
apply to the Policies in force at the time and date of termination until expiration or cancellation
of such Policies. It is understood that any Policies with effective dates prior to the termination
but issued after the termination date are covered under the Agreement. Additionally, the
reinsurance hereunder shall continue to apply as to Policies which must be issued or renewed by the
Company, as a matter of state law or regulation or because an agent has not been timely canceled,
until the expiration dates on said Policies.
2.3 Upon termination of this Agreement, the Reinsurer and the Company shall not be relieved of
or released from any obligation created by or under this Agreement in relation to payment,
expenses, reports, accounting or claims handling, relating to Policies under this Agreement
existing and in effect on the date of such termination. The parties hereto expressly covenant and
agree that they will cooperate with each other in the handling of all such run-off insurance
business until all Policies have expired either by cancellation or by terms of such Policies and
all outstanding losses and loss adjustment expenses have been settled. While by law and regulation
the Company recognize its primary obligations to its policyholders, the Reinsurer recognizes that
there shall be no added cost or involvement by the Company in servicing this run-off.
2.4 This Agreement may be canceled at any time in accordance with the following terms and
conditions, provided that unilateral cancellation by the Reinsurer of previously ceded risks is
only permitted for non-payment of reinsurance considerations by the Company:
(a) This Agreement may be canceled at any time by either party giving the other party and the
Colorado Commissioner of Insurance at least ninety (90) days’ advance written notice by certified
mail, return receipt requested, of such intent to cancel.
(b) This Agreement may be canceled by giving 60 days’ written notice to the other party and to
the Colorado Commissioner of Insurance by any party hereto should Reinsurer or Company be declared
insolvent or be ordered into liquidation, conservatorship or rehabilitation by a court of competent
jurisdiction.
SECTION 3 — EXPENSE REIMBURSEMENT
3.1 The amount of expense reimbursement granted to the Company per month shall be equal to the
amount of (i) any premium taxes due on Policies issued under this Agreement and (ii) agent
commissions paid and accrued on Policies issued under this Agreement.
3.2 On or before the forty-eighth (48th) day following the end of each calendar quarter,
Reinsurer shall pay to Company the expense reimbursement described in Section 3.1 for all Policies
issued during the preceding calendar quarter. The Company shall be responsible for and shall make
direct payments of Agents’ Commissions to Agents.
SECTION 4 — LOSS SETTLEMENTS
4.1 The Reinsurer shall assume one hundred percent (100%) of the risks covered by this
Agreement and shall be solely and directly liable for one hundred percent (100%) of all net losses,
judgments, settlements, and expenses (including, but not limited to, all legal fees and interest on
judgments) incurred in connection with the investigation, settlement or contesting of the validity
of claims or losses under the Policies reinsured under this Agreement. The Reinsurer has assumed,
and does hereby assume, sole responsibility, whether directly or through the Agents, for the
payment of the claims or losses under the Policies reinsured hereunder. In this connection, the
Reinsurer shall be reimbursed for one hundred percent (100%) of any net amounts received by the
Company as salvage or subrogation recovery.
4.2 The Reinsurer hereby empowers the Company, in the Company’s discretion and under its
supervision, to appoint the Agents to accept notice of and investigate any claim arising under any
of the Policies and to pay, adjust, settle, resist, or compromise any such claim. All such loss
settlements, whether under strict policy conditions or by way of compromise, shall be
unconditionally binding upon the Reinsurer. However, should the Company be ordered or instructed by
any regulatory agency of competent jurisdiction to take any action or refrain from taking any
action with regard to any claim, then the Reinsurer shall be bound by and shall follow the order or
instructions of such regulatory agency as though the Reinsurer were the object of such order or
instruction.
4.3 The Company shall notify the Reinsurer of any claim, suit, or action against the Company
under any of the Policies written pursuant to this Agreement within ten (10) days of actual
knowledge of said claim, suit, or action, and will promptly furnish to the Reinsurer or its
designated representative all summonses, citations, complaints, petitions, counterclaims, and other
pleadings and legal instruments served upon or delivered to the Company in connection therewith.
The Company hereby further empowers the Reinsurer to dispose of any salvage received as the result
of any loss settlement hereunder, to enforce (by the institution of suit for damages or otherwise)
any right of the Company against any person or organization for any loss under any of the Policies,
and to employ legal counsel when necessary. All sums received as a result of such authorized
actions by the Reinsurer shall be treated as current loss recoveries by the Company and the
Reinsurer. The Company further agrees to execute and deliver to the Reinsurer any and all legal
instruments necessary to implement the foregoing authorizations. Upon request, the Reinsurer shall
furnish to the Company any and all documents and correspondence relating to the subject matter
hereof. Drafts in payment of losses insured under the Company’s Policies shall be signed by the
Reinsurer or Company shall pay such drafts as drawn by the Reinsurer’s or Company’s Claims or Loss
Department or their appointed loss representatives. Notwithstanding Section 4.2 or any other
provision of this Agreement to the contrary, this Agreement shall not be construed or deemed to
create any direct right of action or privity of contract between the Company’s policyholders and
the Reinsurer.
4.4 All records pertaining to claims arising under the Policies issued by the Company in
connection with this Agreement shall be retained by Company.
SECTION 5 — PREMIUM COLLECTION
5.1 The Company shall have the sole responsibility for the collection of premiums from the
respective insureds on Policies written pursuant to this Agreement.
5.2 The Company shall be liable for collection of balances from insureds and/or Agents, and
the Reinsurer’s liability hereunder shall not be reduced by the failure to collect any balances.
SECTION 6 — ERRORS AND OMISSIONS
The Company shall not be prejudiced, in any way, by any error or omission with respect to its
performance under this Agreement, whether such error or omission is the result of clerical error,
accident, or oversight to cede to the Reinsurer any reinsurance properly attributed to the
Reinsurer’s share under the terms of this Agreement, erroneous cancellation, either partial or
total, of any cession hereunder, failure to report or erroneous reporting of any losses, or by any
other error or omission; provided, however, that the Company shall take such steps as are necessary
or appropriate to correct any such error or omission as soon as is practicable upon its actual
discovery by the Company.
SECTION 7 — INSPECTION OF RECORDS
The books and records pertaining to liability and losses under this Agreement maintained by
either party hereto shall at all times be subject to the inspection by an authorized representative
of the other party. This provision shall survive the termination of this Agreement.
SECTION 8 — OTHER DUTIES OF THE REINSURER AND COMPANY
8.1 In addition to the duties of the Company specifically expressed or implied herein, Company
shall be solely responsible for all of the administration of the insurance business subject to the
reinsurance under this Agreement and all of the costs of such administration, including, but not
limited to, costs of premium collection, costs of printing forms, underwriting, servicing,
settling, and payment of all claims and expenses.
8.2 The Reinsurer and the Company shall perform their obligations under this Agreement in
compliance with law and all regulations or directives duly promulgated by the Colorado Division of
Insurance and the laws of the other applicable jurisdictions, and the Reinsurer shall cooperate
with the Company to the extent necessary to enable the Company to comply with such laws,
regulations and directives.
8.3 The Company shall be responsible for the control of the Agents appointed by Company,
including the financial condition of such Agents.
8.4 The Company hereby guarantees payment to the Reinsurer of any premium or other amounts due
the Reinsurer for Polices reinsured under this Agreement. The Company or is designated
representatives shall be solely
responsible for notifying the Agents of this Agreement and of any termination hereof, and for the
consequences of any failure to provide such notification.
8.5 Consistent with the provisions of this Section, the Reinsurer hereby guarantees that the
Company shall receive the expense reimbursement provided by Section 3.1 hereof, irrespective of any
events, losses or developments occurring during the term of this Agreement. The Reinsurer’s
obligation with respect to payment of such expense reimbursement of the Company is not dependent
upon performance of the Agents, underwriting experience, loss experience or any other event
foreseen by the parties at the inception of this Agreement.
SECTION 9 — ASSESSMENTS OR ASSIGNMENTS
The Reinsurer hereby assumes liability for any and all assessments and assignments (whether
before or after the termination of this Agreement) imposed as a result of Policies reinsured
hereunder levied or made by a guaranty fund, insolvency fund, plan, pool, association, or other
arrangement created by statute or regulation.
SECTION 10 — INSOLVENCY
In the event of the insolvency of the Company (including any appointment of a receiver or
liquidator), this reinsurance shall be payable directly to the Company, or to its liquidator,
receiver, conservator or statutory successor on the basis of the liability of the Company without
diminution because of the insolvency of the Company or because the liquidator, receiver,
conservator or statutory successor of the Company has failed to pay all or a portion of any claim.
The liquidator, receiver, conservator or statutory successor of the Company shall give written
notice to the Reinsurer of the pendency of a claim against the Reinsurer or the Company indicating
the policy or bond reinsured and whether the claim could involve a possible liability on the part
of the Reinsurer within a reasonable time after such claim is filed in the conservation or
liquidation proceeding or in the receivership. During the pendency of such claim, the Reinsurer may
investigate such claim and interpose, at its own expense, in the proceeding where such claim is to
be adjudicated any defense or defenses that it may deem available to the Company or its liquidator,
receiver, conservator or statutory successor.
SECTION 11 — REGULATORY MATTERS
11.1 It is the parties’ understanding that the Colorado Commissioner of Insurance views
premiums which are over ninety (90) days due (aged by item and effective date) from the Agent to
the Company as non-admitted assets. In confirmation of the liabilities assumed by the Reinsurer
under this Agreement, the Reinsurer hereby assumes one hundred (100%) of all liability and
responsibility for all premiums in the course of collection.
11.2 The Reinsurer shall agree, at no cost to the Company, to take those actions (including,
but not limited to, modification in how funds are handled and how accounts are cleared and settled)
and agree to those arrangements necessary to ensure that the Company suffers no adverse impact
because of this Agreement and is in compliance with the laws of the State of Colorado and
regulations promulgated by any governmental entity thereof, including the Commissioner of
Insurance, insofar as this Agreement is concerned.
SECTION 12 — MISCELLANEOUS
Notices. Any notices or other communications required or permitted hereunder shall be
deemed to have been duly given only when received by the party to whom such notice or communication
is addressed at the following addresses (or at such other address for a party as shall be specified
by like notice)
To Company:
|
Xxxxx Xxxxx, President | |
| Colorado Casualty Insurance Company | ||
| 0000 Xxxxx Xxxxxxxx Xxxxxxxxx | ||
| Xxxxxxxxx, XX 00000-0000 | ||
To Reinsurer:
|
Xxxxxx X. Xxxxxxxx | |
| Vice President and Comptroller | ||
| Liberty Mutual Insurance Company | ||
| 000 Xxxxxxxx Xxxxxx | ||
| Xxxxxx, XX 00000-0000 |
Gender and Number. All words or terms used in this Agreement, regardless of the number
or gender in which they are used, shall be deemed to include any other number and any other gender
as the context may require.
Successors and Assigns. This Agreement shall be binding upon and shall inure to the
benefit of the respective successors and assigns of the parties hereto but shall not be assigned by
either of the parties without the prior written consent of the other.
Waiver. The failure of any party at any time or times to require performance of any
provisions hereof shall in no manner affect such party’s right at
a later date to enforce the same. No waiver by either party of a condition or a breach of any term,
covenant, representation or warranty contained in this Agreement, whether by conduct or otherwise,
in any one or more instances, shall be deemed to be construed as a further or continuing waiver of
such condition, breach or waiver of any condition or of the breach of any other term, covenant,
representation or warranty of this Agreement.
Attorneys’ Fees. If either party hereto becomes a party to litigation or any other
proceeding in connection with or related to this Agreement with the other party and prevails in
such litigation or proceeding, the other party will pay the cost and expenses relating to such
litigation or other proceeding including, without limitation, the attorneys’ fees and expenses of
investigation of the prevailing party.
Counterparts. This Agreement may be executed in any number of counterparts with the
same effect as if the signatures to each counterpart were upon the same instrument.
Entire Agreement. This Agreement sets forth the entire understanding of the Reinsurer
and the Company and supersedes all prior agreements, arrangements, and communications, whether oral
or written, between the Reinsurer and the Company with respect to the subject matter hereof; and
this Agreement shall not be modified or amended other than by written agreement of the Reinsurer
and the Company. Captions appearing in this Agreement are for convenience of reference only and
shall not be deemed to explain, limit or amplify the provisions hereof.
Governing Law. This Agreement shall be governed by, construed in accordance with, the
laws of the State of Colorado.
Venue and Jurisdiction. Company hereby irrevocably submits to the non-exclusive
jurisdiction of any county, state of federal court of general and competent jurisdiction located
within the counties of Xxxxxxx, Arapahoe or Denver, State of Colorado, with respect to any legal
action or proceeding arising out of or connected with this Agreement.
Alternative Dispute Resolution. At the option of either party, any and all disputes or
controversies, whether of law or fact, of any nature whatsoever, arising from or respecting this
Agreement shall be decided by arbitration conducted in accordance with the rules and regulations of
the American Arbitration Association. The arbitrators shall be selected as follows: Reinsurer and
Company shall each select one independent, qualified arbitrator and the two arbitrators so selected
(the “Party Arbitrators”) shall choose the third arbitrator; provided that if the Party Arbitrators
are unable to select a third arbitrator within fifteen (15) business days from the date the second
Party Arbitrator is selected, the Colorado Commissioner of Insurance shall select the third
arbitrator. Arbitration shall take place in the Denver, Colorado metropolitan area.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first set
forth above.
| LIBERTY MUTUAL INSURANCE COMPANY |
||||
| By: | /s/ | |||
| Its: Senior Vice President & CFO | ||||
| COLORADO CASUALTY INSURANCE COMPANY |
||||
| By: | /s/ | |||
| Its: President | ||||
