EXHIBIT 10.24
COMMERCIAL AND PRIVATE PASSENGER AUTOMOBILE
QUOTA SHARE TREATY
(hereinafter referred to as the "Agreement")
between
FEDERATED NATIONAL INSURANCE COMPANY
(hereinafter referred to as the "Company")
and
TRANSATLANTIC REINSURANCE COMPANY
(hereinafter referred to as the "Reinsurer")
Table of Contents
PREAMBLE....................................................................1
ARTICLE 1 - BUSINESS REINSURED..............................................1
ARTICLE 2 - COVER...........................................................1
ARTICLE 3 - COMMENCEMENT AND TERMINATION....................................2
ARTICLE 4 - NON-TRADITIONAL QUOTA SHARE OPTION..............................3
ARTICLE 5 - SPECIAL TERMINATION.............................................3
ARTICLE 6 - TERRITORY.......................................................3
ARTICLE 7 - EXCLUSIONS......................................................4
ARTICLE 8 - REPORTS AND REMITTANCES.........................................5
ARTICLE 9 - CEDING COMMISSION...............................................6
ARTICLE 10 - DEFINITIONS....................................................6
ARTICLE 11 - ORIGINAL CONDITIONS............................................7
ARTICLE 12 - CURRENCY.......................................................8
ARTICLE 13 - TAXES......................................................... 8
ARTICLE 14 - LOSS AND LOSS EXPENSE......................................... 8
ARTICLE 15 - EXCESS OF POLICY LIMITS....................................... 8
ARTICLE 16 - EXTRA CONTRACTUAL OBLIGATIONS................................. 8
ARTICLE 17 - DELAY, OMISSION OR ERROR...................................... 8
ARTICLE 18 - INSPECTION.................................................... 8
ARTICLE 19 - OFFSET........................................................ 8
ARTICLE 20 - SALVAGE AND SUBROGATION....................................... 8
ARTICLE 21 - WARRANTY...................................................... 9
ARTICLE 22 - ARBITRATION................................................... 9
ARTICLE 23 - INSOLVENCY....................................................10
ARTICLE 24 - EXECUTION.....................................................10
COMMERCIAL AND PRIVATE PASSENGER AUTOMOBILE
QUOTA SHARE TREATY
(hereinafter referred to as the "Agreement")
between
FEDERATED NATIONAL INSURANCE COMPANY
(hereinafter referred to as the "Company")
and
TRANSATLANTIC REINSURANCE COMPANY
(hereinafter referred to as the "Reinsurer")
PREAMBLE
In consideration of the mutual covenants hereinafter contained the parties
hereto agree as follows:
ARTICLE 1 - BUSINESS REINSURED
This Agreement is to share with the Reinsurer the interests and liabilities of
the Company under all policies for Commercial and/or Non-Standard Private
Passenger Automobile Liability and Physical Damage Business written or renewed
by or on behalf of the Company during the term of this Agreement, subject to the
terms and conditions herein contained.
ARTICLE 2 - COVER
A. The Company will cede, and the Reinsurer will accept as reinsurance, a
40% share of all business reinsured (Sections A and B) hereunder
subject to the maximum Policy limits stated below:
B. SECTION A: For the basic limits program, the following maximum limits
will be offered:
Bodily Injury/Per Person $10,000
Bodily Injury/Per Occurrence $20,000
Property Damage Liability $10,000
Automobile Physical Damage (ACV)
Private Passenger $50,000
Commercial $40,000
Personal Injury Protection
Statutory Uninsured Motorist/Bodily Injury $10,000
Page 1 of 13
C. SECTION B: For the increased limits program, the following maximum
limits will be offered:
Bodily Injury/Per Person $100,000
Bodily Injury/Per Occurrence $300,000
Property Damage Liability $50,000
Uninsured Motorist
Bodily Injury/Per Person $100,000
Bodily Injury/Per Occurrence $300,000
Basic limits and increased limits will be reported separately.
D. The limit of liability of the Reinsurer as respects Excess of Policy
Limits or Extra Contractual Obligations shall be $500,000 inclusive of
contractual loss.
E. The maximum limit of liability of the Reinsurer in any one Agreement
Year as respects Excess of Policy Limits or Extra Contractual
Obligations only, shall be $1,500,000.
F. In the event of an act of terrorism this agreement will be subject to
an annual limit of $1,000,000 for all losses incurred by the act of
terrorism.
ARTICLE 3 - COMMENCEMENT AND TERMINATION
A. This Agreement shall become effective at 12:01 a.m., Eastern Standard
Time, December 31, 2002 and shall remain in full force and effect until
terminated as provided in the following paragraph.
B. Either the Company or the Reinsurer shall have the right to terminate
this Agreement at any June 30th or December 31st by giving the other
party 90 days prior notice in writing via either Certified or
Registered Mail, return receipt requested.
C. As respects policies ceded hereunder which are still in force at the
termination of this Agreement, The Reinsurer shall remain liable on
such policies for a further twelve (12) months plus odd time, not to
exceed eighteen (18) months in all or until the natural expiration,
renewal or cancellation of such policies, whichever occurs first. The
Company may at its option, however, elect to terminate the entire
liability of the Reinsurer for losses occurring subsequent to the time
and date of termination in which event the Reinsurer shall return the
appropriate unearned premium reserve to the Company less the commission
previously allowed thereon.
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D. Regardless of the method of termination the liability of the Reinsurer
will continue in the event that the Company is bound by statute or
regulation.
ARTICLE 4 - NON-TRADITIONAL QUOTA SHARE OPTION
The Reinsurer will have the option at July 15, 2002 to modify the terms of this
Agreement to a Non-Standard Quota Share treaty to include the following:
1. Change would be retroactive to December 31, 2001;
2. Reinsurer's margin- 4% (Combined Ratio = 96%);
3. Reinsurer will transfer funds to establish a Funds Withheld structure
with the Company retaining all funds except for Reinsurer's margin;
4. Ceding commission- 30% at a 66% ratio of losses incurred to premiums
earned with Company realizing 100% of the profits under a 66% ratio of
losses incurred to premiums earned;
5. Profit Commission to be calculated 24 months from inception with a 6.5%
IBNR factor applied;
6. The Company to assume 100% of incurred losses from a 66% ratio of
losses incurred to premiums earned to an 86% ratio of losses incurred
to premiums earned;
7. Establishment of a ratio of losses incurred to premiums earned cap of
110%.
ARTICLE 5 - SPECIAL TERMINATION
A. Either party to this Agreement shall have the right to cancel this
Agreement immediately by giving 10 days written notice to the other
party by registered mail in the event that one party:
1. Has its financial condition impaired by a reduction of surplus
as regards policyholders of 15% or more in any twelve month
period from the inception date of this Agreement;
2. Is declared insolvent or put in liquidation by any competent
regulatory authority or court of competent jurisdiction;
3. Loses its operating license, or has its operating license
suspended, in any jurisdiction;
4. Ceases writing new or renewal business;
5. Has any change in ownership, which is considered to be 10% or
more of its stock and/or a change in management;
6. Fails to remit premiums/losses in accordance with the terms of
this Agreement. The coverage afforded by this Agreement shall
cease as of the date of termination except in the case of
failure to remit premium, termination shall be effective as at
the date through which premium has been paid.
B. The Reinsurer shall have the right to cancel this Agreement 90 days
notice if A.M. Best rating is reduced to B or lower or its S&P rating
reduced to BB+ or lower.
C. Subject to the Special Termination items above, the party giving notice
shall have the option to return or request the return of the unearned
premium, if any, on the business in force at the date of cancellation,
less any commission allowed thereon, thereby terminating this agreement
on a cutoff basis.
D. Regardless of the method of termination the liability of the Reinsurer
will continue in the event that the Company is bound by statute or
regulation.
ARTICLE 6 - TERRITORY
.
This Agreement applies to losses arising out of Policies written in Florida,
occurring in the United States of America, its territories and possessions, and
Puerto Rico or as per original Policies.
Page 3 of 13
ARTICLE 7 - EXCLUSIONS
This Agreement does not apply to and specifically excludes the following:
1. Financial Guarantee and insolvency.
2. All excess of loss reinsurance assumed by the Company.
3. Reinsurance assumed by the Company under obligatory reinsurance
agreements.
4. Business written to apply in excess of a deductible of more than
$5,000, and business issued to apply specifically in excess over
underlying insurance.
5. Liability as a member, subscriber or reinsurer of any pool, syndicate
or association; and any combination of insurers or reinsurers formed
for the purpose of covering specific perils, specific classes of
business or for the purpose of insuring risks located in specific
geographical areas; but this exclusion shall not apply to Assigned Risk
Plans or FAIR Plans or to Coastal Pools, Beach Plans or similar plans,
however styled. It is understood and agreed, however, that this
reinsurance does not include any increase in liability to the Company
resulting from (a) the inability of any other participant in a FAIR
Plan, Coastal Pool, Beach Plan or similar plan to meets its liability,
or (b) any claim against such a FAIR Plan, Coastal Pool, Beach Plan or
similar plan, or any participant therein, including the Company,
whether by way of subrogation or otherwise, brought by or on behalf of
any insolvency fund.
6. All liability of the Company arising by contract, operation of law, or
otherwise from its participation or membership, whether voluntary or
involuntary, in any insolvency fund. "Insolvency fund" includes any
guaranty fund, insolvency fund, plan, pool, association, fund or other
arrangement, however denominated, established or governed, which
provides for any assessment of or payments or assumption by the Company
of part or all of any claim, debt, charge, fee or other obligation of
an insurer, or its successors assigns, which has been declared by any
competent authority to be insolvent, or which is otherwise deemed
unable to meet any claim, debt, charge fee or other obligation in whole
or in part.
7. Automobile Liability Insurance relating to the ownership, maintenance
or use of:
a. A Taxicab, public livery conveyance or bus;
b. An ambulance, fire department or law enforcement, private
emergency vehicle or other municipal equipment;
c. A racing or exhibition vehicle;
d. Rental and leasing of all motor vehicles;
e. Commercial automobiles, except service vehicles used by
Craftsmen and Artisans up to a maximum of one ton;
f. Risks engaged in the transportation or distribution of
munitions and explosives such as, but not limited to: liquid
hydrogen, nitrogen, chlorine, fireworks, fuses, dynamite,
nitroglycerine, ammonia nitrate, anhydrous ammonia, celluloid,
pryroxline, or their derivatives, LGP, butane, propane and
gasoline;
g. Recreational and high performance vehicles;
h. Policies sold to celebrity persons.
Page 4 of 13
8. Any automobile not classified as private passenger automobile.
9. Business written on a co-surety or co-indemnity basis not controlled by
the Company.
10. Business excluded by the following attached Nuclear Incident Exclusion
Clauses:
a. Nuclear Incident Exclusion Clause- Physical Damage-
Reinsurance- U.S.A.
b. Nuclear Incident Exclusion Clause- Liability- Reinsurance-
U.S.A.
11. Business excluded by the following attached Pollution and Seepage
Exclusion Clauses:
a. Pollution Exclusion Clause- Auto Liability- Reinsurance.
b. Pollution and Seepage Exclusion Clause.
12. Loss or damage resulting from any of the following lines of business;
Ocean Marine, Accident and Health, Workers' Compensation, Aircraft (all
perils), Fidelity, Surety, Glass, Boiler and Machinery, Credit, Title,
and /or Life.
If any business falling within the scope of one or more of the
exclusions is assigned to the Company under an Assigned Risk Plan, such
exclusion(s) shall not apply, it being understood and agreed that the
limits of liability extended by the Company as respects such policies
shall not exceed the minimum statutory limits of liability prescribed
in such Assigned Risk Plan.
ARTICLE 8 - REPORTS AND REMITTANCES
A. Within 45 days following the end of each month, the Company will render
a net account to the Reinsurer for the current Agreement Year. Prior
Agreement Years having activity during the month will be accounted for
separately in a similar manner. Basic Limits (Section A) and Increased
Limits (Section B) are to be reported separately. Such account will
contain the following:
1. Gross Net written premium accounted for during the month; less
returns and cancellations;
2. Collected Net written premiums accounted for during the month;
less returns and cancellations;
3. The ceding commission due as provided for in this Agreement;
4. Losses and loss expense paid on losses occurring during the
month;
5. Outstanding loss and loss adjustment expense reserves at the
end of the period;
6. Subrogation, salvage, or other recoveries on losses occurring
during the month;
Page 5 of 13
7. Unearned premium reserve at the end of the period.
B. Within 60 days following the end of the month the debtor party will
remit to the creditor party any balance due including;
1. Ceded Net Written Premium collected during the month, less;
2. Ceding commission due the Company during the month, less;
3. Paid losses and loss adjustment expense paid, net of salvage
and recoveries, provided such loss and loss adjustment expense
have not been deducted on behalf of the Company in any
previous monthly report.
C. Within 45 days following the end of each Agreement Year, the Company
shall furnish the following information to the Reinsurer for the
Agreement Year:
1. A summary of written premium ceded;
2. A summary of premiums earned;
3. A summary of loss and loss adjustment expense paid and
outstanding, segregated by the Agreement Year in which the
loss occurred;
4. Any other information, which the Reinsurer may require for its
Annual Convention Statement, which may be reasonably available
to the Company.
ARTICLE 9 - CEDING COMMISSION
A. The Reinsurer will allow the Company a provisional ceding commission of
30.0% of the Written premium for Agency Xxxx policies and Collected
premium on Direct Xxxx policies ceded hereunder. Return commission
shall be allowed on return premiums at the same rate.
B. The final ceding commission shall be determined by the loss experience
under this Agreement Year. There shall be provisional adjustments and a
final adjustment all in accordance with the other paragraphs of this
Article.
C. Within 45 days following 24 months from the inception of the Agreement
Year, the Company will calculate an adjusted ceding commission based on
premiums earned and losses incurred. The ceding commission paid to that
date shall be adjusted between the parties as appropriate. Adjustments
will continually be made annually until all losses have been paid,
closed or commuted, at which time the ceding commission shall become
final.
D. Premiums earned for the Agreement Year shall mean all written premium
ceded to this Agreement Year (less cancellations and returns) plus the
unearned premium reserve at the beginning of the Agreement Year and
less the unearned premium reserve at the end of the Agreement Year.
E. Losses incurred for the Agreement Year shall mean the loss and loss
expense paid by the reinsurer (less salvages and recoveries received)
on loss occurring during the Agreement Year, plus loss and loss expense
reserves outstanding on losses occurring during the Agreement Year and
an IBNR factor of 6.5% for the first adjustment period.
F. Should the ratio of losses incurred to premiums earned be 66.0% or
higher, then the adjusted ceding commission shall be 30.0%.
G. Should the ratio of losses incurred to premiums earned be less than
66.0%, but not less than 63.0%, the adjusted commission rate for the
Agreement Year will remain at 30.0%.
H. Should the ratio of losses incurred to premiums earned be less than
63.0%, but not less than 43.0%, the adjusted commission rate for the
Agreement Year under consideration shall be 30.0%, plus the difference
in percentage points between 63.0% and the actual ratio of losses
incurred to premiums earned to a maximum commission of 50.0%.
I. Notwithstanding the above, the Company shall retain 50% of incurred
losses otherwise recoverable from the Reinsurer under this Agreement
above a ratio of losses incurred to premiums earned to the Reinsurer of
70.0% up to a ratio of losses incurred to premiums earned to the
Reinsurer of 75.0%. In addition the Company shall retain 100% of
incurred losses otherwise recoverable from the Reinsurer under this
Agreement above a ratio of losses incurred to premiums earned to the
Reinsurer of 75.0% up to a ratio of losses incurred to premiums earned
to the Reinsurer of 80.0%.
J. Upon termination, any period of less than 12 months from inception
shall be considered as an Agreement Year for purposes of this Article;
any period of less than 12 months from anniversary will be considered
as part of the preceding Agreement Year.
K. Should this Agreement be terminated on a run-off basis wherein the
reinsurer is liable for losses occurring after the date of termination,
then such run-off period shall be considered as part of the last
Agreement Year.
L. Notwithstanding anything above, if the Reinsurer elects to modify this
Agreement at July 15, 2002, per Article 4- Non-Traditional Quota Share
Option, the commissions payable hereunder will be as outlined in
Article 4 and not as above.
ARTICLE 10 - DEFINITIONS
A. The term "Policy" as used in this Agreement shall mean any binder,
policy, or contract of insurance or reinsurance issued, accepted or
held covered provisionally or otherwise, by or on behalf of the
Company.
B. The term "Agreement Year" as used in this Agreement shall mean each 12
consecutive month period commencing with December 31, 1999. Any period
following termination of this Agreement in which the Reinsurer remains
liable for losses arising out of Policies in force at the date of
termination will be considered as part of the concluding Agreement
Year.
C. The term "Loss Occurrence" as used in this Agreement shall mean any one
disaster or casualty or accident or loss or series of disasters or
casualties or accidents or losses arising out of or caused by one
event.
Page 6 of 13
D. The term "Commercial and/or Non-Standard Private Passenger Automobile
Liability and/or Physical Damage Business" as used in this Agreement
shall mean all insurances and reinsurances written by the Company and
classified as Commercial and/or Non-Standard Private Passenger
Automobile Liability and/or Physical Damage including bodily injury and
property damage, personal injury protection, medical payments,
comprehensive, collision and uninsured motorists coverage.
E. Written Premium: Gross Written Premium on Policies written hereunder,
less cancellations and returned premium.
F. Collected Premium: Down payments plus installment received by the
Company on Policies written hereunder.
G. Recreational Vehicle: road buggies, dune buggies, caravans, motor
coaches and motor homes.
H. Celebrity Persons: actors (guild and/or association membership),
professional athletes (with league membership), Olympic athletes,
college athletes, radio personalities, news broadcasters, musicians,
authors/writers (of published works), and models.
I. An act of terrorism is defined as activities against persons,
organizations or property of any nature that involve the following or
preparation for the following:
a. Use or threat of force or violence;
b. Commission or threat of a dangerous act; or
c. Commission or threat of an act that interferes with or
disrupts an electronic, communication, information or
mechanical system; and
When one or both of the following applies:
a. The effect is to intimidate or coerce a government, or to
cause chaos among the civilian population or any segment
thereof, or to disrupt any segment of the economy; or
b. It is reasonable to believe the intent is to intimidate or
coerce a government, or to seek revenge or retaliate, or to
further political, ideological, religious, social or economic
objectives or to express (or express opposition to) a
philosophy or ideology.
ARTICLE 11 - ORIGINAL CONDITIONS
All insurances falling under this Agreement shall be subject to the same terms,
rates conditions and waivers, and to the same modifications, alterations and
cancellations as the respective Policies of the Company (except that in the
event of the Insolvency of the Company the provisions of the Insolvency Clause
shall apply) and the Reinsurer shall be credited with its exact proportion of
the original gross premiums received by the Company.
Nothing herein shall in any manner create any obligations or establish any
rights against the Reinsurer in favor of any third parties or any persons not
parties to this Agreement.
Page 7 of 13
ARTICLE 12- CURRENCY
The currency to be used for all purposes of this Agreement shall be United
States of America currency.
ARTICLE 13 - TAXES
The Company will be liable for taxes on premiums reported to the Reinsurer
hereunder.
ARTICLE 14 - LOSS AND LOSS EXPENSE
Any loss settlement made by the Company, whether under strict Policy conditions
or by way of compromise, shall be unconditionally binding upon the Reinsurer in
proportion to its participation, and the Reinsurer shall benefit proportionally
in all salvages and recoveries.
The Reinsurer shall bear its proportionate share of all expenses incurred by the
Company in the investigation, adjustment, appraisal or defense of all claims
under Policies reinsured hereunder (excluding, however, office expenses and
salaries of claims staff and officials of the Company) and shall receive its
proportionate share of any recoveries of such expenses. Notwithstanding the
above, expenses hereunder shall be limited to Actual Paid Loss Adjustment
Expense or 8.0% of earned premiums (which ever is less), inclusive of legal,
court and all other costs.
Payment of Loss Adjustment Expense to Superior Adjusting Inc. will be through
the monthly accounting statements at a rate of 7.5% of Earned Premium. An
adjustment to Actual Loss Adjustment Expense or 8% of Earned Premium (which ever
is less) will be made at the time of the Commission Adjustment
ARTICLE 15 - EXCESS OF POLICY LIMITS
In the event the loss includes an amount in excess of the Company's Policy
limit, 100% of such amount, in excess of the Company's Policy limit shall be
added to the amount of the Company's Policy limit, and the sum thereof shall be
covered hereunder, subject to the Reinsurer's limit of liability appearing in
the COVER ARTICLE of this Agreement.
However, this Article shall not apply where the loss has been incurred due to
the fraud of a member of the Board of Directors or of a corporate officer of the
Company acting individually or collectively or in collusion with any individual
or corporation or any other organization or party involved in the presentation,
defense or settlement of any claim covered hereunder.
For the purpose of this Article, the word "loss" shall mean any amounts for
which the Company would have been contractually liable to pay had it not been
for the limit of the original policy.
ARTICLE 16 - EXTRA CONTRACTUAL OBLIGATIONS
This Agreement shall protect the Company, subject to the reinsurer's limit of
liability appearing in the COVER ARTICLE of this Agreement, where the loss
includes any Extra Contractual Obligations for 100% of such Extra Contractual
Obligations. "Extra Contractual Obligations" are defined as those liabilities
not covered under any provision of this Agreement and which arise from handling
of any claim on business covered hereunder, such liabilities arising because of,
but not limited to, the following: failure by the Company to settle within the
Policy limit, or by reason of alleged or actual negligence, fraud or bad faith
in rejecting an offer of settlement or in the preparation of the defense or in
the trial of any action against its insured or in the preparation or prosecution
of an appeal consequent upon such action.
The date on which any Extra Contractual Obligation is incurred by the Company
shall be deemed, in all circumstances, to be the date of the original loss.
However, this Article shall not apply where the loss has been incurred due to
the fraud of a member of the Board of Directors or of a corporate officer of the
Company acting individually or collectively or in collusion with any individual
or corporation or any other organization or party involved in the presentation,
defense or settlement of any claim covered hereunder.
ARTICLE 17 - DELAY, OMISSION OR ERROR
Any inadvertent delay, omission or error shall not relieve either party hereto
from any liability that would attach to it hereunder if such delay, omission or
error had not been made, provided that such delay, omission or error is
rectified upon discovery.
ARTICLE 18 - INSPECTION
The Company shall place at the disposal of the Reinsurer at all reasonable
times, and the Reinsurer shall have the right to inspect, through its authorized
representatives, all books, records and papers of the Company in connection with
any reinsurance hereunder or claims in connection herewith.
ARTICLE 19 - OFFSET
The Company or the Reinsurer shall have, and may exercise at any time the right
to offset any balance or balances, whether on account of premiums, losses, or
otherwise, due from one party to the other under the terms of this Agreement.
ARTICLE 20 - SALVAGE AND SUBROGATION
The Reinsurer shall be credited with its proportionate share of salvage or
subrogation recoveries (i.e., reimbursement obtained or recovery made by the
Company, less the actual cost, excluding salaries of officials and employees of
the Company, of obtaining such reimbursement or making such recovery) on account
of claims and settlements involving reinsurance hereunder.
Page 8 of 13
ARTICLE 21- WARRANTY
A. It is hereby warranted that the Reinsurer must approve all changes to
the underwriting guidelines and rates.
B. It is hereby warranted that the maximum amount of Gross Written Premium
to be written under in any one underwriting year under this Agreement
is $12,000,000.
ARTICLE 22- ARBITRATION
As a condition precedent to any right of action hereunder, any irreconcilable
dispute between the parties to this Agreement will be submitted for decision to
a board of arbitration composed of two arbitrators and an umpire.
Arbitration shall be initiated by the delivery of a written notice of demand for
arbitration by one party to the other within a reasonable time after the dispute
has arisen.
The members of the board of arbitration shall be active or retired disinterested
officials of insurance or reinsurance companies, or underwriters at Lloyd's,
London, not under the control or management of either party to this agreement.
Each party shall appoint its arbitrator and the two arbitrators shall choose an
umpire before instituting the hearing. If the respondent fails to appoint its
arbitrator within four weeks after being requested to do so by the claimant, the
latter shall also appoint the second arbitrator. If the two arbitrators fail to
agree upon the appointment of an umpire within four weeks after their
nominations, each of them shall name three, of whom the other shall decline two,
and the decision shall be made by drawing lots.
The claimant shall submit its initial brief within 45 days from the appointment
of the umpire. The respondent shall submit its brief within 45 days thereafter
and the claimant may submit a reply brief within 30 days after filing of the
respondent's brief.
The board shall make its decision with regard to the custom and usage of the
insurance and reinsurance business. The board shall issue its decision in
writing based upon a hearing in which evidence may be introduced without
following strict rules of evidence but in which cross examination and rebuttal
shall be allowed. The board shall make its decision within 60 days following the
termination of the hearings unless the parties consent to an extension. The
majority decision of the board shall be final and binding upon all parties to
the proceeding. Judgment may be entered upon the award of the board in any court
having jurisdiction.
Each party shall bear the expense of its own arbitrator and shall jointly and
equally bear with the other party the expense of the umpire. The remaining costs
of the arbitration proceedings shall be allocated by the board.
Any arbitration proceeding shall be conducted in Plantation, Florida unless the
parties agree on a mutually agreeable site.
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ARTICLE 23- INSOLVENCY
In the event of the insolvency of the Company, reinsurance under this Agreement
shall be payable by the Reinsurer on the basis of the Company under Policy or
Policies reinsured without diminution because of the insolvency of the Company,
to the Company or to its liquidator, receiver, or statutory successor except as
provided by Section 4118(a) of the New York Insurance Law or except when the
Agreement specifically provides another payee of such reinsurance in the event
of the insolvency of the Company, or when the Reinsurer with the consent of the
direct insured or insureds has assumed such Policy obligations of the Company as
direct obligations of the Reinsurer to the payees under such Policies and in
substitution for the obligations of the Company to such payees.
It is agreed, however, that the liquidator, receiver or statutory successor of
the insolvent Company shall give written notice to the Reinsurer of the pendency
of a claim against the insolvent Company on the Policy or Policies reinsured
within a reasonable time after such claim is filed in the insolvency proceeding
and that during the pendency of such claim, the Reinsurer may investigate such
claim and interpose, at its own expense in the proceeding when such claim is to
be adjudicated, any defense or defenses which it may deem available to the
Company or its liquidator, receiver, or statutory successor. The expense thus
incurred by the Reinsurer shall be chargeable, subject to court approval,
against the insolvent Company as part of the expense of liquidation to the
extent of a proportionate share of the benefit which may accrue to the Company
solely as a result of the defense undertaken by the Reinsurer.
Where two or more reinsurers are involved in the same claim and a majority in
interest elects to interpose defense to such claim, the expense shall be
apportioned in accordance with the terms of this Agreement as though such
expense had been incurred by the insolvent Company.
Should the Company go into liquidation or should a receiver be appointed, the
Reinsurer shall be entitled to deduct from any sums which may be due or may
become due to the Company under this reinsurance Agreement any sums which are
due to the Reinsurer by the Company under this reinsurance Agreement and which
are payable at a fixed or stated date as well as any other sums due the
Reinsurer which are permitted to be offset under applicable law.
ARTICLE 24 - EXECUTION
This Agreement is executed by the Company and the Reinsurer by the signing, in
duplicate, of the Interests and Liabilities Contract attached to this Agreement.
Page 10 of 13
INTERESTS AND LIABILITIES CONTRACT
(hereinafter referred to as the "Contract")
between
FEDERATED NATIONAL INSURANCE COMPANY
Plantation, Florida
(hereinafter referred to as the "Company")
and
TRANSATLANTIC REINSURANCE COMPANY
(hereinafter referred to as the "Subscribing Reinsurer")
in respect of the
COMMERCIAL AND PRIVATE PASSENGER AUTOMOBILE
QUOTA SHARE REINSURANCE AGREEMENT
(hereinafter referred to as the "Agreement")
IT IS AGREED that, effective 12:01 a.m., Eastern Standard Time, December 31,
2002, the SUBSCRIBING REINSURER shall have a 100% share in the Interests and
Liabilities of the Reinsurer as set forth in the above Agreement to which this
Contract is attached. This Contract shall continue in force until terminated in
accordance with the provisions contained in the above Agreement.
The share of the SUBSCRIBING REINSURER in the Interests and Liabilities of the
Reinsurer under the above Agreement shall be several and not joint with the
shares of any other subscribing reinsurer, and in no event shall the SUBSCRIBING
REINSURER participate in the Interests and Liabilities of any other subscribing
reinsurer.
Page 11 of 13
IN WITNESS WHEREOF, the parties hereto by their respective duly authorized
representatives have executed this Contract, in duplicate, as of the dates
undermentioned.
Signed in Plantation, Florida, this day of , 2003.
FEDERATED NATIONAL INSURANCE COMPANY
BY: /s/ Xxxxxxx X. Xxxxxxxxxx
-----------------------------------
TITLE: President
--------------------------------------------
Signed in New York, New York, this 18 day of July , 2003.
TRANSATLANTIC REINSURANCE COMPANY
BY: /s/ Xxxxxxx X. Xxxxxxxxx
--------------------------------------------
TITLE: Vice President
-----------------------------------
300300302
Page 12 of 13
POLLUTION AND SEEPAGE EXCLUSION CLAUSE
This Contract excludes loss and/or damage and/or costs and/or expenses arising
from seepage and/or pollution and/or contamination, other than contamination
from smoke. Nevertheless, this exclusion does not preclude payment of the cost
of removing debris of property damaged by a loss otherwise covered hereunder,
subject always to a limit of 24% of the Company's property loss under the
applicable original policy.
Page 13 of 13
POLLUTION EXCLUSION CLAUSE - AUTO LIABILITY - REINSURANCE
A. This reinsurance excludes all loss and/or liability accruing to the Company
as a result of:
1. bodily injury or property damage arising out of the actual,
alleged or threatened discharge, dispersal, release or escape
of pollutants:
a) that are (or that are contained in any property that
is):
i. being transported or towed by, or handled for
movement into, onto or from the insured auto, or
otherwise in the course of transit;
ii. being stored, disposed of, treated or processed
in or upon the insured auto;
b) before the pollutants (or any property in which the
pollutants are contained) are moved from the place
where they are accepted by the insured for movement
into or onto the insured auto; or
c) after the pollutants (or any property in which the
pollutants are contained) are moved from the insured
auto to the place where they are finally delivered,
disposed of or abandoned by the insured;
2. any governmental direction or request that the insured test
for, monitor, clean up, remove, contain, treat, detoxify or
neutralize pollutants.
B. Paragraph A above does not apply to environmental restoration coverage
required by the Motor Carrier Act of 1980, or similar mandatory laws.
C. Subparagraph A(1)(a)(ii) above does not apply to fuels, lubricants, fluids,
exhaust gases or other similar pollutants that are needed for or result from the
normal electrical, hydraulic or mechanical functioning of the insured auto or
its parts, if:
1. the pollutants escape or are discharged, dispersed or released
directly from an auto part designed by its manufacturer to
hold, store, receive or dispose of such pollutants; and
2. the bodily injury or property damage does not arise out of the
operation of a cherry picker or similar device mounted on an
automobile or truck chassis and used to raise or lower
workers, air compressors, pumps and/or generators, including
spraying, welding, building cleaning, geophysical exploration,
lighting and well servicing equipment.
D. Paragraphs A(1)(b) and A(1)(c) above do not apply if:
1. the pollutants (or any property in which the pollutants are
contained) are upset, overturned or damaged as a result of the
maintenance or use of an insured auto; and
2. the discharge, dispersal, release or escape of the pollutants
is caused directly by such upset, overturn or damage.
E. "Pollutants" mean any solid, liquid, gaseous or thermal irritant or
contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and
waste. Waste includes material to be recycled, reconditioned or reclaimed.
NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL DAMAGE - REINSURANCE - U.S.A.
1) This Agreement does not cover any loss or liability accruing to the
Reinsured, directly or indirectly, and whether as Insurer or Reinsurer,
from any Pool of Insurers or Reinsurers formed for the purpose of
covering Atomic or Nuclear Energy risks.
2) Without in any way restricting the operation of paragraph (1) of this
Clause, this Agreement does not cover any loss or liability accruing to
the Reinsured, directly or indirectly and whether as Insurer or
Reinsurer, from any Insurance against Physical Damage (including business
interruption or consequential loss arising out of such Physical Damage)
to:
I. Nuclear reactor power plants including all auxiliary property
on the site, or
II. Any other nuclear reactor installation, including laboratories
handling radioactive materials in connection with reactor
installations, and "critical facilities" as such, or
III. Installations for fabricating complete fuel elements or for
processing substantial quantities of "special nuclear
material," and for reprocessing, salvaging, chemically
separating, storing or disposing of "spent" nuclear fuel or
waste materials, or
IV. Installations other than those listed in paragraph 2) III
above using substantial quantities of radioactive isotopes or
other products of nuclear fission.
3) Without in any way restricting the operations of paragraphs 1) and 2)
hereof, this Agreement does not cover any loss or liability by
radioactive contamination accruing to the Reinsured, directly or
indirectly, and whether as Insurer or Reinsurer, from any insurance on
property which is on the same site as a nuclear reactor power plant or
other nuclear installation and which normally would be insured therewith
except that this paragraph 3) shall not operate
a) where the Reinsured does not have knowledge of such
nuclear reactor power plant or nuclear installation,
or
b) where said insurance contains a provision excluding
coverage for damage to property caused by or
resulting from radioactive contamination, however
caused. However, on and after 1st, January 1960, this
sub-paragraph b) shall only apply provided the said
radioactive contamination exclusion provision has
been approved by the Government Authority having
jurisdiction thereof.
4) Without in any way restricting the operations of paragraphs 1), 2) and
3) hereof, this Agreement does not cover any loss or liability by
radioactive contamination accruing to the Reinsured, directly or
indirectly, and whether as Insurer or Reinsurer, when such radioactive
contamination is a named hazard specifically insured against.
5) It is understood and agreed that this Clause shall not extend to risks
using radioactive isotopes in any form where the nuclear exposure is
not considered by the Reinsured to be the primary hazard.
6) The term "special nuclear material" shall have the meaning given it in
the Atomic Energy Act of 1954, or by any law amendatory thereof.
7) Reinsured to be sole judge of what constitutes:
a) substantial quantities, and
b) the extent of installation, plant or site.
NUCLEAR INCIDENT EXCLUSION CLAUSE - LIABILITY - REINSURANCE U.S.A.
(Approved by Lloyd's Underwriters' Non-Marine Association)
(1) This reinsurance does not cover any loss or liability accruing to the
Reassured as a member of, or subscriber to, any association of insurers or
reinsurers formed for the purpose of covering nuclear energy risks or as a
direct or indirect reinsurer of any such member, subscriber or association.
(2) Without in any way restricting the operation of paragraph (1) of this
Clause it is understood and agreed that for all purposes of this reinsurance all
the original policies of the Reassured (new, renewal and replacement) of the
classes specified in Clause II of this paragraph (2) from the time specified in
Clause III in this paragraph (2) shall be deemed to include the following
provision (specified as the Limited Exclusion Provision):
LIMITED EXCLUSION PROVISION.*
I. It is agreed that the policy does not apply under any liability
coverage, to (injury, sickness, disease, death or destruction, (bodily
injury or property damage with respect to which an insured under the
policy is also an insured under a nuclear energy liability policy
issued by Nuclear Energy Liability Insurance Association, Mutual Atomic
Energy Liability Underwriters or Nuclear Insurance Association of
Canada, or would be an insured under any such policy but for its
termination upon exhaustion of its limit of liability.
II. Family Automobile Policies (liability only), Special Automobile
Policies (private passenger automobiles, liability only), Farmers
Comprehensive Personal Liability Policies (liability only),
Comprehensive Personal Liability Policies (liability only) or policies
of a similar nature; and the liability portion of combination forms
related to the four classes of policies stated above, such as the
Comprehensive Dwelling Policy and the applicable types of Homeowners
Policies.
III. The inception dates and thereafter of all original policies as
described in II above, whether new, renewal or replacement, being
policies which either
(a) become effective on or after 1st May, 1960, or
(b) become effective before that date and contain the
Limited Exclusion Provision set out above; provided
this paragraph (2) shall not be applicable to Family
Automobile Policies, Special Automobile Policies, or
policies or combination policies of a similar nature,
issued by the Reassured on New York risks, until 90
days following approval of the Limited Exclusion
Provision by the Governmental Authority having
jurisdiction thereof.
(3) Except for those classes of policies specified in Clause II of
paragraph (2) and without in any way restricting the operation of paragraph (1)
of this Clause, it is understood and agreed that for all purposes of this
reinsurance the original liability policies of the Reassured (new, renewal and
replacement) affording the following coverage's:
Owners, Landlords and Tenants Liability, Contractual Liability, Elevator
Liability, Owners or Contractors (including railroad)
Protective Liability, Manufacturers and Contractors Liability, Product
Liability, Professional and Malpractice Liability, Storekeepers Liability,
Garage Liability, Automobile Liability (including Massachusetts Motor
Vehicle or Garage Liability)
shall be deemed to include, with respect to such coverages, from the time
specified in Clause V of this paragraph (3), the following provision (specified
as the Broad Exclusion Provision):
BROAD EXCLUSION PROVISION.*
It is agreed that the policy does not apply:
I. Under any Liability Coverage, to (injury, sickness, disease, death or
destruction (bodily injury or property damage
(a) with respect to which an insured under the policy is also an insured
under a nuclear energy liability policy issued by Nuclear Energy Liability
Insurance Association, Mutual Atomic Energy Liability Underwriters or
Nuclear Insurance Association of Canada, or would be an insured under any
such policy but for its termination upon exhaustion of its limit of
liability; or
(b) resulting from the hazardous properties of nuclear material and with
respect to which (1) any person or organization is required to maintain
financial protection pursuant to the Atomic Energy Act of 1954, or any law
amendatory thereof, or (2) the insured is, or had this policy not been
issued would be, entitled to indemnity from the United States of America,
or any agency thereof, under any agreement entered into by the United
States of America, or any agency thereof, with any person or organization.
II. Under any Medical Payments Coverage, or under any Supplementary
Payments Provision relating to (immediate medical or surgical relief,
(first aid, to expenses incurred with respect to (bodily injury,
sickness, disease or death (bodily injury resulting from the hazardous
properties of nuclear material and arising out of the operation of a
nuclear facility by any person or organization.
III. Under any Liability Coverage to (injury, sickness, disease, death or
destruction (bodily injury or property damage resulting from the
hazardous properties of nuclear material, if
(a) the nuclear material (1) is at any nuclear facility owned by,
or operated by or on behalf of, an insured or (2) has been
discharged or dispersed therefrom;
(b) the nuclear material is contained in spent fuel or waste at
any time possessed, handled, used, processed, stored,
transported or disposed of by or on behalf of an insured; or
(c) the (injury, sickness, disease, death or destruction (bodily
injury or property damages arises out of the furnishing by an
insured of services, materials, parts or equipment in
connection with the planning, construction, maintenance,
operation or use of any nuclear facility, but if such facility
is located within the United States of America, its
territories, or possessions or Canada, this exclusion (c)
applies only to (injury to or destruction of property at such
nuclear facility (property damage to such nuclear facility and
any property threat.
IV. As used in this endorsement:
"HAZARDOUS PROPERTIES" include radioactive, toxic or explosive
properties; "NUCLEAR MATERIAL" means source material, special nuclear
material or byproduct material; "SOURCE MATERIAL," "SPECIAL NUCLEAR
MATERIAL," and "BYPRODUCT MATERIAL" have the meanings given them in the
Atomic Energy Act of 1954 or in any law amendatory thereof; "SPENT
FUEL" means any fuel element or fuel component, solid or liquid, which
has been used or exposed to radiation in a nuclear reactor; "WASTE"
means any waste material (1) containing byproduct material and
(2)resulting from the operation by any person or organization of any
nuclear facility included within the definition of nuclear facility
under paragraph (a) or (b) thereof; "NUCLEAR FACILITY" means
(a) any nuclear reactor,
(b) any equipment or device designed or used for (1) separating
the isotopes of uranium or plutonium, (2) processing or
utilizing spent fuel, or (3) handling, processing or packaging
waste,
(c) any equipment or device used for the processing, fabricating
or alloying of special nuclear material if at any time the
total amount of such material in the custody of the insured at
the premises where such equipment or device is located
consists of or contains more than 25 grams of plutonium or
uranium 233 or any combination thereof, or more than 250 grams
of uranium 235,
(d) any structure, basin, excavation, premises or place prepared
or used for the storage or disposal of waste, and includes the
site on which any of the foregoing is located, all operations
conducted on such site and all premises used for such
operations; "NUCLEAR REACTOR" means any apparatus designed or
used to sustain nuclear fission in a self-supporting chain
reaction or to contain a xxxxxxxx xxxx of fissionable
material; (With respect to injury to or destruction of
property, the word "injury" or "destruction" ("property
damage" includes all forms of radioactive contamination of
property (includes all forms of radioactive contamination of
property.
V. The inception dates and thereafter of all original policies affording
coverage's specified in this paragraph (3), whether new, renewal or
replacement, being policies which become effective on or after 1st May,
1960, provided this paragraph (3) shall not be applicable to
(i) Garage and Automobile Policies issued by the Reassured on New York
risks, or
(ii) statutory liability insurance required under Chapter 90, General
Laws of Massachusetts, until 90 days following approval of the Broad Exclusion
Provision by the Governmental Authority having jurisdiction thereof.
(4) Without in any way restricting the operation of paragraph (1) of this
Clause, it is understood and agreed that paragraphs (2) and (3) above are not
applicable to original liability policies of the Reassured in Canada and that
with respect to such policies this Clause shall be deemed to include the Nuclear
Energy Liability Exclusion Provisions adopted by the Canadian Underwriters'
Association of the Independent Insurance Conference of Canada.
*NOTE: The words printed in italics in the Limited Exclusion Provision and in
the Broad Exclusion Provision shall apply only in relation to original liability
policies which include a Limited Exclusion Provision or a Broad Exclusion
Provision containing those words.
