REINSURANCE AGREEMENT
(hereafter referred to as the "Agreement")
among
PROVIDENT AMERICAN LIFE & HEALTH
INSURANCE COMPANY
(hereafter referred to as the "Company")
and
PROVIDENT INDEMNITY LIFE
INSURANCE COMPANY
(hereafter referred to as the "Reinsurer")
and
PROVIDENT INDEMNITY LIFE
INSURANCE COMPANY
(hereafter referred to as the "Administrator")
Effective Date: 11:59 P.M., Local Standard Time, December 31, 1998
Term: Continuous
Type: COINSURANCE
REINSURANCE AGREEMENT
(hereafter referred to as the "Agreement")
among
PROVIDENT AMERICAN LIFE & HEALTH
INSURANCE COMPANY
(hereafter referred to as the "Company")
and
PROVIDENT INDEMNITY LIFE
INSURANCE COMPANY
(hereafter referred to as the "Reinsurer")
and
PROVIDENT INDEMNITY LIFE
INSURANCE COMPANY
(hereafter referred to as the "Administrator")
PREAMBLE
In consideration of the mutual covenants hereinafter contained the parties
hereto agree as follows:
ARTICLE I - DEFINITIONS
"Administrator" means Provident Indemnity Life Insurance Company, a Pennsylvania
corporation.
"Claim" means a claim made to the Company or the Administrator by a
policyholder, insured, certificate holder or dependent thereof who is entitled
to coverage under a Policy for which medical treatment facilities or services
contractually covered by such Policy, and not excluded by such Policy, were
rendered or provided to such policyholder, insured, certificate holder or
dependent thereof. A Claim is incurred on the date it is regarded as being
incurred in the administration of the insured's Claim relating to the same
medical treatment, facilities or services.
"Coinsurance Basis" means reinsurance on a basis whereby the Company cedes to
the Reinsurer reserves underlying the Policies and assets, valued at book value
in accordance with SAPand which satisfy the reserve requirements necessary or
required by applicable law or regulation with respect to the Reinsurer's
proportionate share of liability hereunder, and such reserves and assets are
held by the Reinsurer. :
"Company" means Provident American Life & Health Insurance Company, a
Pennsylvania corporation.
"Contested Claim" has the meaning assigned to such term in Article XI hereof.
"Effective Date" means 11:59 P.M., Local St. Standard Time, December 31 1998.
"Extra Contractual Obligations" means all reasonable costs, expenses, damages,
liabilities or obligations of any kind or nature (including without limitation
attorneys fees, consequential and incidental damages, and punitive and exemplary
damages) which are incurred by the Company and arise out of, result from or
relate to any act or omission, whether or not in bad faith, intentional,
willful, negligent, reckless, careless or otherwise, of the Company or the
Administrator in connection with a Policy, and which are not contractually
covered by the terms and conditions of such Policy.
"Treaty" means the reinsurance agreements set forth in this Agreement.
"Liability" means (1) a Claim that has been actually paid by the Company on an
underlying Policy and (2) all Losses. A Liability is incurred on the date that
the Loss is actually paid by the Company
"Liability Adjustment Expenses" means all reasonable payments to other than
employees of fees and expenses associated with investigation, litigation
(including without limitation reasonable attorney's fees) and settlement of
Claims, as distinguished from the amount of a claimant's recovery from the
Company under such claimant's Policy.
"Local Standard Time" means the time at the Location of the Company's home of
office.
"Loss(es)" means the liability of the Company under all life insurance policies
and annuities.
"Person" means an individual, firm, corporation or entity.
"Policy" means the plans of insurance policies, riders, and binders listed on
Schedule A attached hereto and incorporated herein by reference which were
issued by the Company and by the Administrator prior to the Effective Date and
are in force on the Effective Date.
"Premium" means premium required by a Policy to be paid and which is actually
collected and received by the Company or the Administrator, on behalf of the
Company, less premium returned to a Person after actual collection and receipt
by the Company or the Administrator due to rescission or cancellation of a
Policy or reductions or terminations in coverage or benefits under a Policy.
Premium shall exclude fees collected on behalf of associations and other third
parties by the Company or the Administrator
"Reinsurer" means Provident Indemnity Life Insurance Company, a Pennsylvania
corporation.
"Services" means all of the usual and customary servicing and administrative
functions and duties associated with the policies, including but not limited to,
premium payments; claims administration, customer services for insureds, owners,
beneficiaries, agents and other interested Persons; file and record maintenance
and administration including system maintenance and administration; billing and
collection of premium; maintenance of policy financial data in such form to
allow the Company and Reinsurer to meet any and all reporting requirements it
may have; and payment of agents' commissions related to Policies, it being
understood that provision of funds for the payment of claims and commissions, to
the extent, if any, that Premiums are insufficient for that purpose, are the
sole responsibility of the Reinsurer.
"Suspension Notice" has the meaning assigned to such term in Article XXIII
hereof.
"Transferred Reserve" means assets acceptable to the Reinsurer (if other than
cash assets valued at a book value or current market value in the case of
marketable securities in accordance with SAP) comprised of claims due and
unpaid, claims incurred but not reported, unearned premium reserve and advance
premiums, policy reserves, dividend accumulations and other contract deposit
funds, statutory life and annuity reserves, less due and uncollected and
deferred premiums, net of loading, and policy loans.
ARTICLE II - LIABILITY; ALLOWANCES
The Company agrees to cede to the Reinsurer, and the Reinsurer agrees to
reinsure from the Company, 100% of the Liabilities incurred after the Effective
Date on the underlying Policies. The Reinsurer agrees to indemnify the Company
for such Liabilities to the extent provided by this Article II. The Company and
the Reinsurer acknowledge and agree that the reinsurance provided to the Company
by the Reinsurer hereunder is on an original terms basis on the underlying
Policies reinsured hereby.
In connection with the reinsurance hereunder, on the Effective Date. the Company
shall pay the Transferred Reserve to the Reinsurer.
ARTICLE III - COMMENCEMENT AND TERMINATION: RECAPTURE
This Agreement, and the rights, obligations and duties hereunder of the parties
hereto shall become effective on the Effective Date provided the transfer of
assets set forth in Article IV has occurred. The Reinsurer shall continue to
provide reinsurance only for Liabilities incurred by the Company under Policies
so long as such Policies continue to be in force and this Agreement continues to
be in effect as to such Policies. The Reinsurer shall have no liability
hereunder for Liabilities paid by the Company under Policies prior to the
Effective Date.
This Agreement is unlimited in duration with respect to the Policies. This
Agreement shall automatically terminate when no Policies are in force.
ARTICLE IV - POLICY REDUCTIONS AND TERMINATIONS
The Reinsurer's liability hereunder shall not be increased by reason of the
inability of the Company to collect from any other reinsurers any amounts which
may become due from such reinsurers which amounts arise, relate to or result
from reinsurance of risk by such reinsurers under Policies or any other policy
issued by the Company.
Reductions and terminations of coverage and benefits under Policies shall reduce
or terminate the Reinsurer's liability hereunder in a corresponding amount as of
the same date.
ARTICLE V - PREMIUM
The Administrator, on behalf of the Company shall pay to the Reinsurer an amount
equal to 100% of Premium relating to coverage after the Effective Date, and pay
to the Company Premium collected for coverage prior to the Effective Date. The
Company shall immediately deliver to the Administrator any Premium received by
the Company for payment to the Reinsurer.
ARTICLE VI - REPORTS AND REMITTANCES; POWER OF ATTORNEY
The Premiums collected by the Administrator with respect to the Policies shall
be deposited in a bank account or accounts under the control of Administrator,
and identified as the Company's Premiums account(s). The Company authorizes the
deposit of checks drawn to its order in this account, as well as the use of this
account for the payment of the following:
1. To pay return Premiums to policyholders (provided that such Premiums
were received by the Administrator on behalf of the Company hereunder);
2. To pay Liabilities or fund a bank account identified as the Company's
account for the payment of Liabilities and Liability Adjustment
Expenses with respect to Policies;
3. To pay commissions with respect to Premiums on Policies;
4. To pay the Company estimated Premium taxes with respect to the
Policies;
5. To pay association fees collected from policyholders to the respective
associations based on specified fee schedules and to pay the residual
amounts of the association fees to the Company.
6. To pay the net balance due from Premiums each month to the Reinsurer.
Any expenses associated with this account shall be borne by, and interest earned
thereon credited to, the Administrator.
Within thirty (30) days after the end of each calendar month the Administrator
shall deliver in writing to the Company and the Reinsurer a report delineating
all of the foregoing, and shall also include in such report (i) reserves,
calculated in accordance with SAP, on the Policies in force as of the end of the
preceding calendar quarter (reported on a quarterly basis only), and (ii) such
other information as the Reinsurer may reasonably Request.
Together with the delivery of each such report by the Administrator to the
Reinsurer, the Administrator shall remit all amounts due and payable by the
Company to the Reinsurer, if any, as indicated by such report. Within ten (10)
business days after the Reinsurer's receipt of the report, the Reinsurer shall
pay the Administrator all amounts due and payable to the Company by the
Reinsurer, if any as indicated by such report. All payments owed by the
Reinsurer to the Company and made to the Administrator shall be deemed to be
made to the Company. All payments owed by the Company to the Reinsurer and made
by the administrator shall be deemed to be made by the Company. If the
Administrator decides to deliver such report via electronic media, the
Administrator shall consult with the Reinsurer to determine the appropriate
reporting format. Should the Administrator subsequently desire to make changes
in the data, format or the code structure, the Administrator shall communicate
such changes to the Company and Reinsurer prior to the use of such changes in
reports to the Reinsurer.
Upon receipt of a report, the Reinsurer may, in its discretion and upon
reasonable information and belief, contest the information contained in report.
If the Reinsurer so contests, the Reinsurer shall deliver to the Administrator
and the Company written notice thereof stating the reasons upon which the
Reinsurer disputes the report, and the parties shall use their best efforts to
resolve the dispute within twenty (20) days thereafter. If the parties fail to
resolve such dispute within such period, the dispute shall be resolved by
arbitrations as provided herein. During the time such dispute is pending, the
Reinsurer shall have the right to suspend all payment obligations relating to
the disputed portion(s) of such report until resolution of such dispute. If such
dispute is resolved by arbitration in favor of the Administrator, the Reinsurer
shall be liable for interest (as provided below) on the amount owed by the
Reinsurer to the Company as of the date such amount became past due.
The Company hereby irrevocably constitutes and appoints the Administrator, or
its delegate, as its attorney-in-fact with full power of substitution, and with
full power and authority to act in its name, place, and stead to execute, swear
to, acknowledge, deliver, and file all instruments and documents as may be
required or necessary, in the reasonable discretion of the Administrator or its
delegate, to perform the Services and all administrative obligations of the
Administrator hereunder relating to the Policies. This power of attorney shall
be deemed coupled with an interest, shall be irrevocable, and shall survive the
insolvency of the Company.
Interest at a rate equal to .5833% per month (7% per annum) shall be charged on
all amounts due and owing which have not been paid when due by and to the
Company or the Reinsurer, as applicable.
ARTICLE VII - EXTRA CONTRACTUAL OBLIGATIONS
The Reinsurer shall have no liability for Extra Contractual Obligations, unless
the Reinsurer was an active party or directed, consented to, or ratified the
act, omission or course of conduct which ultimately resulted in assessment of
Extra Contractual Obligations against the Company, in which case the Reinsurer
shall share pro rata in such Extra Contractual Obligations in proportion to the
Reinsurer's liability for a Liability hereunder.
ARTICLE VIII - REINSURER'S RIGHT OF NOTICE OF UNUSUAL PRACTICES
The parties acknowledge and agree that the Reinsurer has placed its utmost good
faith and confidence in the Administrator, and the parties assume that except as
otherwise notified by the Administrator, the underwriting, claims and other
insurance practices employed by the Administrator with respect to the
reinsurance under this Agreement are consistent with the customary and usual
practices of the insurance industry as a whole. Where the Administrator does
engage in exceptional or uncustomary practices, the Company and the
Administrator agrees to notify the Reinsurer of such practices. The parties
agree that the Administrator's failure to so notify the Reinsurer will result in
the Reinsurer having no liability hereunder with respect to Liabilities relating
to such exceptional or uncustomary practices.
ARTICLE IX ADMINISTRATION OF THE POLICIES
As of the Effective Date, the Administrator agrees to perform the Services with
the utmost good faith for as long as the Reinsurer is required to provide
reinsurance hereunder. The Administrator agrees to indemnify and hold harmless
the Company from and against any losses, damages, liabilities, costs, or
expenses incurred by the Company as result of the Administrator's material
breach of this Article IX. If the Reinsurer reasonably believes that the
Administrator has failed to perform the Services, the Reinsurer shall notify the
Administrator in writing of such failure and the Administrator shall have ten
(10) business days to cure such failure to the reasonable satisfaction of the
Reinsurer. If the Administrator fails or refuses to cure such failure within
such period, or has become financially impaired, the Reinsurer may request the
Administrator to secure another Person to perform the Services, in which case
the Company shall engage another Person selected by the Administrator and
reasonably satisfactory to the Company and the Reinsurer to perform the
Services. Such other Person shall have in good standing all governmental
regulatory and other licenses, permits and authorizations necessary or required
by law to perform the Services.
In the event the Administrator is removed from performing the Services pursuant
to this Article, the Company and the Administrator shall deliver to the
replacement Person providing the Services all reports, records, documents,
instruments and other information necessary or required to perform
satisfactorily the Services. All costs associated with the transfer of the
Services to another Person shall be borne by the Administrator.
ARTICLE X - REPRESENTATIONS WARRANTIES AND COVENANTS
The Company and the Administrator represent and warrant to the Reinsurer that:
1. There are no governmental or regulatory consents, approvals or other
authorizations necessary or required by law, regulation, order, decree,
judgment or otherwise to be obtained to consummate the transactions
contemplated by this Agreement; and
2. If required by applicable law, rule or regulation, each Policy has been
filed with the appropriate governmental or regulatory agency or
authority and approval of such filed Policy has been obtained by the
Company or the Administrator, as applicable, from such agency or
authority.
The Company and the Administrator covenant and agree:
1. To request promptly any such consents, approvals or other
authorizations, if necessary or required, relating to this Agreement
and the transactions contemplated hereby, and to pursue diligently such
request. The and the Administrator Jointly and severally agree to
indemnify and hold harmless the Reinsurer from and against any and all
losses, damages, costs, expenses or liabilities suffered or incurred by
the Reinsurer arising out of a breach of this Agreement by the Company;
and
2. To perform all of their respective duties and obligations hereunder
with the utmost good faith.
ARTICLE XI - LIABILITY SETTLEMENTS
The Reinsurer shall accept the decision of the Administrator with respect to a
Claim and the incurrence of a Liability, except as otherwise provided herein.
The Administrator agrees to deliver written notice to the Reinsurer of each
Claim which would, if paid, cause the Reinsurer's liability hereunder to be
$25,000 or more prior to such Claim actually being paid. The Administrator
agrees to deliver to the Reinsurer all documents, reports and other information
in the possession of or known by the Administrator relating to such, Claim to
permit the Reinsurer to evaluate the Claim and advise the Administrator in
writing with respect to payment of the Claim. If the Reinsurer fails to advise
the Administrator in writing within ten (10) days after the Administrator's
delivery to the Reinsurer of the documents, reports and other information
relating to such Claim, the Administrator shall pay the Claim and the Reinsurer
shall be estopped from denying reinsurance liability hereunder for such
Liability.
The Administrator may, in its discretion, deliver written notice to the
Reinsurer of each Claim as to which the Administrator is uncertain, or has
reasonable cause to believe, that such Claim is or may not be properly payable.
In addition, the Administrator shall deliver immediately such a notice to the
Reinsurer and the Company as to each Claim denied in whole or in part by the
administrator if a notice of litigation or threatened litigation is filed with
the Company or the Administrator relating to such denied Claim (each Claim as to
which such a notice is delivered is referred to herein as a "Contested Claim").
The Company and the Administrator agree to deliver immediately to the Reinsurer
all documents, reports and other information relating to such Contested Claim to
permit the Reinsurer to evaluate the Contested Claim and advise the Company and
the Administrator in writing with respect to payment of the Contested Claim. In
the event the Company or the Administrator complies with the Reinsurer's advice
with respect to a Contested Claim, and Extra Contractual Obligations later arise
with respect to such Contested Claim, the Reinsurer shall share in the Extra
Contractual Obligations in proportion to the Reinsurer's liability for a
Liability hereunder, but if the Company or the Administrator fails to give such
notice or to comply with such advice, the Reinsurer shall not share in any of
the Extra Contractual Obligations. In no event shall the Reinsurer be liable for
any Extra Contractual Obligations based upon acts, omissions, facts,
circumstances or events which occurred prior to the Effective Date. The
Administrator agrees to deliver written notice to the Reinsurer of each Policy
that the Administrator reasonably believes should be rescinded and Premium
reimbursed to the policyholder prior to the Administrator, on behalf of the
Company, actually rescinding such Policy. The Reinsurer, shall review facts
surrounding the Policy and the reasons for the reasonable belief of the
Administrator that the Policy should be rescinded and the Reinsurer will advise
the Administrator in writing with respect to the rescission of the Policy within
fifteen (15) business days after the Administrator delivers its written notice
to the Reinsurer regarding the Policy. In the event the Reinsurer advises the
Administrator to rescind the Policy and Extra Contractual Obligations later
arise due to such advice from the Reinsurer, the Reinsurer shall share in the
Extra Contractual Obligations in proportion to the Reinsurer's liability for a
loss hereunder, but if the Administrator fails to comply with such advice, the
Reinsurer shall not share in any of the Extra Contractual Obligations.
The parties agree that the Company's and the Administrator's intentional or
grossly negligent acts or omissions with respect to this Article XI shall
relieve the Reinsurer of any liability hereunder with respect to any such Claim,
Liability or Policy.
ARTICLE XII - COINSURANCE; RESERVES
The reinsurance hereunder shall be on a Coinsurance Basis. The parties agree
that the SAP reserves relating to the Policies, including the advance premiums,
and unearned premiums which shall be reviewed and the amounts therefor shall be
calculated as November 30, 1998 and determined by an actuary designated by the
Company, which actuary shall be a Fellow of the Society of Actuaries ("FSA").
Upon the FSA's completion of such calculation, the FSA shall deliver to an
actuary designated by the Reinsurer (the Reinsurer's Actuary" ") such
calculation for review and approval by the Reinsurer's Actuary on behalf of the
Reinsurer. If the Reinsurer's Actuary does not approve the calculation, the
Reinsurer's Actuary and the FSA shall use their good faith best efforts to reach
an agreement as to such calculation. Thereafter, the FSA and the Reinsurer's
Actuary continue to disagree with respect to such calculation, the parties agree
that the calculation shall be determined by the independent actuarial firm of
Xxxxxxxxxxx, Xxxxxxxx & Xxxxxxxxx or Xxxxxx & Associates, which firm shall be
selected by the Company. The determination of the calculation by such firm shall
be final, binding, conclusive and nonappealable upon the Company and the
Reinsurer. The parties agree that all fees of the FSA shall be borne by the
Company, all fees of the Reinsurer's Actuary shall be borne by the Reinsurer,
and all fees of the independent actuarial firm shall be borne by each of the
Company and the Reinsurer in the proportion of the difference that each of their
respective representatives' calculations bears to the calculation of the
independent actuarial firm. By way of example, if the FSA determines the SAP
reserves to be $2 million, the Reinsurer's Actuary determines the SAP reserves
to be $3 million, and the independent actuarial firm determines the SAP reserves
to be $2.5 million, each of the Company and the Reinsurer shall be liable for
50% of the fees of the independent actuarial firm.
If any due premiums allowed as an offset in computing the Transferred Reserves
are not received by the Administrator on behalf of the Company within forty-five
(45) days after the Effective Date, the Company shall pay the amount net of
offsetting reductions to unearned premium reserves thereof to the Reinsurer upon
demand by the Reinsurer.
ARTICLE XIII - ERRORS AND OMISSIONS
Any inadvertent or clerical delay, error or omission made by any party hereto in
connection with this Agreement shall not relieve either party from any liability
of such party hereunder had such inadvertent or clerical delay, error or
omission not occurred. The parties agree to cure all inadvertent and clerical
delays, errors and omissions immediately upon discovery thereof.
ARTICLE XIV INSOLVENCY
In the event of insolvency of the Company, all payments of the Reinsurer for
Liabilities shall be payable directly to the Administrator for the account of
the Company, or to the Company's liquidator, receiver, conservator or statutory
successor without diminution because of the insolvency of the Company, except
where this Agreement specifically provides for another payee of such Liabilities
in the event of the insolvency of the Company.
The Company or its liquidator, receiver, conservator or statutory successor
shall give written notice to the Reinsurer of the pendency of a Claim indicating
the Policy under which such Claim is pending, within a reasonable time after
such Claim is filed in the insolvency proceeding. 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. The expense thus incurred by the Reinsurer
shall be chargeable, subject to the approval of the insolvency court, against
the Company as part of the administrative expenses of the estate to the extent
of a pro rata share of the benefit which may accrue to the Company solely as a
result of the defense undertaken by the Reinsurer.
ARTICLE XV - TREASURY REGULATION SECTION 1.848-2(g) (8) JOINT ELECTION
The Company and the Reinsurer hereby agree to the following pursuant to Section
1.848-2(g)(8) of the Income Tax Regulations issued December 1992, under Section
848 of the Internal Revenue Code of 1986, as amended. This election shall be
effective for the taxable year ended December 31, 1998 and for all subsequent
taxable years for which this Agreement remains in effect unless such election is
terminated by mutual written agreement of the parties hereto with the consent,
if required, of the Commissioner of the Internal Revenue Service.
As used in this Article XV, the term "party"' will refer to either the Company
or the Reinsurer as appropriate.
The terms used in this Article XV are defined by reference to Treasury
Regulation Section 1.848-2 in effect as of December 29, 1992. The term "net
consideration" will refer to either net consideration as defined in Treasury
Regulation Section 1.848-2(f) or "gross premium and other consideration" as
defined in Treasury Regulation Section 1.848-2(b) as appropriate.
Both parties agree to identify this Agreement as one for which the joint
election under Treasury Regulation Section 1.848-2(g)(8) has been made in a
schedule attached to their respective federal income tax returns for the taxable
period ended December 31, 1998.
The party with the positive net consideration for this Agreement for each
taxable year will capitalize specified policy acquisition expenses with respect
to this Agreement without regard to the general deductions limitation of Section
848(c)(1).
Both parties agree to exchange information pertaining to the amount of net
consideration under this Agreement each year to ensure consistency or as
otherwise required by the Internal Revenue Service.
The Company will submit a schedule to the Reinsurer by July 1st of each year of
its calculation of the net consideration for the preceding calendar year. This
schedule of calculations will be accompanied by a statement signed by an officer
of the Company stating that the Company will report such net consideration in
its tax return for the preceding calendar year.
The Reinsurer may contest such calculation by providing an alternative
calculation to the Company in writing within forty-five (45) days of the
Reinsurer receipt of the Company's calculation. If the Reinsurer does not so
notify the Company, the Reinsurer will report the net consideration as
determined by the Company in the Reinsurer's tax return for the previous year.
If the Reinsurer disputes the Company's calculation of the net consideration,
the parties will act in good faith to reach an agreement as to the correct
amount within forty-five (45) days of the date the Reinsurer submits its
alternative calculation. If the Company and the Reinsurer reach agreement on an
amount of net consideration, each party shall report such amount in their
respective tax returns for the previous calendar year. If the parties fail to
reach agreement on an amount of net consideration, the dispute shall be resolved
by arbitration as provided herein.
ARTICLE XVI - CONDITIONS
The Company and the Administrator acknowledge and agree that each of their
agreement not to terminate, recapture the business under, or otherwise modify,
amend or alter the terms of the Initial Treaty is a material inducement to the
Reinsurer agreeing to enter into this Agreement, and that absent the Company's
and the Administrator's acknowledgement and agreement, the Reinsurer would not
have entered into this Agreement. Accordingly, as a condition to this Agreement
remaining in full force and effect, the Initial Treaty shall be in full force
and effect and in operation in accordance with its original terms and conditions
as of the date of its execution. The Company and the Administrator further agree
and acknowledge that neither shall terminate, recapture the business under, or
otherwise modify, amend or alter any of the terms of the Initial Treaty, without
the prior written consent of the Reinsurer.
ARTICLE XVII - TAXES
The Company shall not claim a deduction in respect of the Premium ceded
chereunder when making tax returns, other than income or profits tax returns, to
any state or territory of the United States of America or the District of
Columbia.
Within fifteen (15) days after the Company files with all governmental
authorities its premium tax returns for the preceding calendar year, the Company
shall provide a copy of same to the Administrator and the Reinsurer. Within
fifteen (15) days thereafter, the Administrator and the Reinsurer shall compute
the excess or the deficiency of premium taxes actually paid to the Company for
such preceding calendar year based upon the estimated payment made by the
Administrator to the Company each month pursuant to Article VI hereof. If there
exists an excess, the Company agrees to pay such excess amount to the
Administrator for the benefit of the Reinsurer, within fifteen (15) days after
receipt of written notice from the Administrator of such excess amount. If there
exists a deficiency, the Reinsurer agrees to pay such deficiency to the
Administrator, on behalf of the Company, within fifteen (15) days after receipt
of written notice from the Administrator of such deficiency amount. The
Administrator shall pay either party the actual funds due and received within
fifteen (15) days thereafter.
ARTICLE XVIII - ACCESS TO RECORDS
The Company and the Administrator shall make available to the Reinsurer and the
Reinsurer shall have the right to inspect at the Reinsurer's expense), through
its authorized representatives, at all reasonable times, the books, records and
papers of the Company and the Administrator pertaining to the reinsurance
provided hereunder and all Claims made and Liabilities paid in
connection/herewith.
ARTICLE XIX - ARBITRATION
Any dispute arising out of this Agreement, whether arising before or after
termination, which is not resolved by the parties shall be submitted to
arbitration for decision by a board of arbitrators composed of two arbiters and
an umpire, meeting in Xxxxxxxxxx County, Pennsylvania unless otherwise agreed.
Arbitration shall be commenced by one party delivering to the other party(ies)
written notice of arbitration, which notice shall set forth the nature of the
dispute and the relief sought. Within thirty (30) days after receipt of such
notice, each party to the dispute shall appoint an arbiter, and within thirty
(30) days thereafter, such arbiters shall appoint the umpire. If any party fails
to select an arbiter within the period prescribed, the other party(ies) shall
select the arbiter(s). If the arbiters so selected fail to agree upon the
appointment of an umpire within such thirty (30) day period, each arbiter shall
propose three names, of whom the other shall decline two and the decision shall
be made by drawing lots. The members of the board of arbitrators shall be active
or retired, disinterested of officers of life, accident and health insurance or
reinsurance companies.
The arbitration hearing shall be commenced within thinly (30) days after the
selection of the umpire. During the pendency of the arbitration, the parties may
provide the board of arbitrators, as well as the other party(ies), briefs and
memorandum of law supporting their respective position in the dispute. The board
of arbitrators shall consider all such briefs and memoranda as well as testimony
at the arbitration.
The board of arbitrators shall follow the Commercial Arbitration Rules and shall
make its decision with due regard to applicable law and to custom and practice
in the insurance and reinsurance industry. The board of arbitrators 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 sixty (60)
days following the termination of the hearing. The majority decision of the
board shall be final, binding, nonappealable and conclusive upon all parties to
the proceeding. The board's decision may be entered as a judgment in any court
having jurisdiction thereof.
Each party shall bear the expenses of its own arbiter and the party against
which the decision of the arbitration board is rendered shall bear the expense
of the umpire unless the arbitration board, in its discretion, otherwise
allocates expenses. Any remaining costs of the arbitration proceedings shall be
allocated by the arbitration board.
This Article XIX shall survive any termination of this Agreement.
ARTICLE XX GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the laws of
the State of Pennsylvania without regard to applicable principles of conflicts
of law.
ARTICLE XXI - SUBROGATION
The Reinsurer shall be credited with its proportionate share of subrogation
(i.e., reimbursement obtained or recovery made by the Company or the
Administrator, less the actual cost, excluding salaries of officials and
employees of the Company and sums paid to attorneys as retainer, of obtaining
such reimbursement or making such recovery) on account of Liabilities. The
Company, through the Administrator, hereby agrees to enforce its rights to
subrogation relating to any expenses if requested to do so by the Reinsurer (at
the expense of the Reinsurer), and to prosecute all claims arising out of such
rights.
ARTICLE XXII - ENTIRE AGREEMENT
This Agreement constitutes the entire agreement and understanding among the
parties hereto with respect to the subject matter hereof. There are no
agreements or understandings among the parties with respect to the subject
matter hereof other than as expressed in this Agreement.
ARTICLE XXIII - POLICY CHANGES: RATE INCREASES
If any change is made in a Policy by the Company that affects reinsurance
hereunder, the Administrator shall immediately deliver written notice thereof to
the Reinsurer. Except for Policy changes required by state or federal law or
regulation any proposed change shall not be effective until approved in writing
by the Reinsurer.
From and after the Effective Date, each of the Administrator and the Company,
shall, or shall cause its duly appointed actuary or representative to, timely
file with all applicable regulatory authorities a request for rate increases
with respect to the Policies reinsured under this agreement. Such rate increase
filings shall be made (i) within fifteen (15) days after the date on which such
rate increase filings are requested in writing by the Reinsurer to the
Administrator, and (ii) in the amounts requested by the Reinsurer up to amounts
permitted by applicable law based upon all relevant factors, including without
limitation, loss experience for the Policies. The costs of calculating the rate
increase amount, if calculated by an outside actuary or other qualified outside
representative of he Administrator, shall be borne by the Reinsurer in
proportion to its share of liability hereunder.
The Administrator, on behalf of the Company, agrees to deliver to the Reinsurer
within forty-five (45) days after the end of each calendar quarter a written
report showing:
1. The loss experience on the Policies reinsured under this Agreement for
the preceding quarter; and
2. The dates on which increase filings were actually made for Policies
reinsured under this Agreement for the preceding quarter if any; and
3. The amounts of the rate increases which were filed and the amounts
which were approved for Policies reinsured under this Agreement; and
4. Whether approval of the rate increase filings have been obtained, and
5. Any other information reasonably requested by the Reinsurer relating to
the Policies reinsured under this Agreement.
It is acknowledged and agreed that the making of timely rate increase filings as
requested by the Reinsurer under this Agreement is a material inducement to the
Reinsurer agreeing to enter into this Agreement and that absent the assurance
that such filings will be made and the Reinsurer's reliance on such assurance,
the Reinsurer would not have entered into this Agreement. Accordingly, the
parties hereto agree that the failure or refusal by the Administrator or the
Company to comply strictly with the material requirements of this Article XXIII
shall constitute a material breach of this Agreement by the Company, and the
Reinsurer may, in its discretion, suspend performance of its obligations under
this Agreement (without incurring an any liability, including without
limitation, interest or other penalties on amounts due from the Reinsurer
hereunder) by delivering to the Company and the Administrator written notice of
the Reinsurer's intent to suspend performance of its obligations under this
Agreement (the "Suspension Notice"). If the Administrator or the Company has not
cured, or diligently pursued the cure of, the material breach this Article XXIII
within ten (10) business days after the date of the Suspension Notice, then the
Reinsurer may, in its discretion, immediately terminate this Agreement, in which
case the Reinsurer shall have no further liability or obligations whatsoever
under this Agreement from and after the date of such termination. Upon a cure of
the material breach by the Administrator or the Company, the Reinsurer shall
perform its obligations with respect to such material breach relating back to
the date of such suspension of the Reinsurer's obligations with no interruption
of reinsurance coverage.
ARTICLE XXIV - OFFSET
The Company or the Reinsurer shall have, and may exercise at any time and from
time to time, the right to offset any balance or balances, whether on account of
Premiums or Liabilities or otherwise, due from one party with respect to this
Agreement.
ARTICLE XXV - WAIVER; AMENDMENT
Except as provided herein, any waiver by any party hereto of a breach by the
other party of any provision of this Agreement shall not operate or be construed
led as a continuing waiver or a waiver of any subsequent breach by such party.
Except as otherwise provided herein, no waiver shall be valid unless in writing
and signed by the party exercising such waiver. Any modification or amendment of
this Agreement shall be in writing and signed by the parties hereto.
ARTICLE XXVI - ASSIGNMENT BINDING EFFECT
Except as otherwise provided herein, the right, duties and obligations hereunder
of the parties hereto may not be assigned or delegated by any party hereto to
any other Person without the prior written consent of the parties hereto,
provided, however that the Reinsurer may retrocede any portion of its liability
hereunder. This Agreement shall be binding upon and inure to the benefit of the
parties' respective successors and permitted assigns.
ARTICLE XXVII - SEVERABILITY
The invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of the remainder of this Agreement, and
any such invalid or unenforceable provision shall be severable from the
remainder of this Agreement.
ARTICLE XXVIII - NOTICES
Any notice or other communication which is required or permitted to be delivered
to any party hereunder shall be in writing and deemed delivered if sent by
government-sponsored mail; an internationally-recognized overnight carrier with
confirmation receipt of delivery; certified mail, return receipt requested; or
facsimile with confirmation receipt of successful and complete transmission
addressed as follows:
If to the Reinsurer: Provident Indemnity Life
Insurance Company
0000 XxXxxx Xxxx
Xxxxxxxxxx, XX 00000
Facsimile: 000-000-0000
Attn: Xxxxxxx X. Xxxxx
If to the Company: Provident American Life & Health
Insurance Company
0000 XxXxxx Xxxx
Xxxxxxxxxx, XX 00000
Facsimile: 000-000-0000
Attn: Xxxxxxx X. Xxxxx
If to the Administrator: Provident Indemnity Life
Insurance Company
0000 XxXxxx Xxxx
Xxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attn: Xxxxxxx X. Xxxxx
ARTICLE XXIX - EXECUTION
The parties, by and through each of their respective authorized representatives,
have executed this Agreement as of the date below written
PROVIDENT AMERICAN LIFE & HEALTH
INSURANCE COMPANY
Taxpayer I.D.# 00-0000000
Date:
By:
Xxxxxxx X. Xxxxx
Title: Chief Operating Officer
PROVIDENT INDEMNITY LIFE INSURANCE COMPANY
Norristown, Pennsylvania
Taxpayer I.D. # 00-0000000
Date:
By:
Xxxxxxx X. Xxxxx
Title: President
SCHEDULE A
POLICY
The term "Policy" means all products of insurance presently written by Company,
including, but not limited to, the HealthQuest, HealthEdge, Optimum, Personal
Privilege, Solution Plus, HealthQuest Plus, and AdvantEdge policies.
