ERIE INSURANCE COMPANY and
ERIE INSURANCE COMPANY OF NEW YORK
Erie, Pennsylvania
AGGREGATE EXCESS OF LOSS REINSURANCE
This REINSURANCE CONTRACT is made between ERIE INSURANCE EXCHANGE, by and
through its Attorney-in-Fact, ERIE INDEMNITY COMPANY, of Erie, Pennsylvania
(hereafter called the "REINSURER"), and ERIE INSURANCE COMPANY and its wholly
owned subsidiary ERIE INSURANCE COMPANY OF NEW YORK, both of Erie, Pennsylvania
(herein referred to collectively (or individually as the context requires) as
the "COMPANY").
In consideration of the agreements and mutual promises contained herein, the
parties hereby agree that this Reinsurance Contract covers 95% of the Ultimate
Net Loss, as herein provided and specified, which may accrue to the COMPANY
under all policies, contracts, and binders of insurance and reinsurance as
respects coverages classified by the COMPANY as Property and Casualty as a
result of any loss or losses thereunder occurring during the term of this
Reinsurance Contract, subject to the following terms and conditions:
ARTICLE 1 - Term
This Reinsurance Contract shall cover the period commencing on the first day of
January, 1997, and ending on the thirty-first day of December, 1997, both days
inclusive.
ARTICLE 2 - Retention and Limit
No claim shall be made hereunder unless the COMPANY'S total Ultimate Net Losses,
as herein defined, occurring during the term of this Contract exceed an amount
equal to 72.5% of the COMPANY'S Net Premiums, as herein defined, earned during
the term of this Reinsurance Contract. The REINSURER shall then be liable for
95% of the amount of such excess up to but not exceeding an amount equal to 95%
of 15% of the COMPANY'S net premium earned during the term of this Reinsurance
Contract.
It is understood and agreed that losses equal to 5% of the Ultimate Net Loss in
excess of the retentions hereunder, shall be retained net by the COMPANY for its
own account.
ARTICLE 3 - Definition of Ultimate Net Loss
The term "Ultimate Net Loss" shall mean the liabilities incurred by the COMPANY
under insurance or reinsurance agreements, contracts, policies, certificates,
binders, endorsements or agreements of
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insurance or reinsurance and shall include those liabilities of the COMPANY
incurred under that certain Reinsurance Pooling Agreement between Erie Insurance
Exchange, Erie Insurance Company and Erie Insurance Company of New York
effective January 1, 1995 ("Reinsurance Pooling Agreement") as it currently
exists or may hereafter be amended, except that "Ultimate Net Loss" as used
herein shall not include unallocated loss adjustment expenses incurred by the
Company.
Nothing in this Article shall be construed to mean that losses are not
recoverable hereunder until the COMPANY'S Ultimate Net Loss has been
ascertained.
ARTICLE 4 - Definition of Net Premiums
The term "Net Premiums" shall mean direct premiums, less return premiums,
received by the COMPANY under insurance or reinsurance agreements, contracts,
policies, certificates, binders, endorsements, or agreements of insurance or
reinsurance, and shall include the COMPANY'S respective share of the premiums
received under the Reinsurance Pooling Agreement as it currently exists or may
hereafter be amended, less premiums for all reinsurances inuring to the benefit
of this Reinsurance Contract without deduction of dividends declared, paid, or
credited to policyholders.
ARTICLE 5 - Underwriting Warranty
It is warranted by the COMPANY that it will not knowingly retain net liability
in excess of the following respective amounts:
Property coverages: $10,000,000 as respects any one risk.
Casualty coverages: $5,000,000 as respects any one policy other than Workers'
Compensation policies.
It is understood that the COMPANY shall be the sole judge of what constitutes
any one risk as respects property coverages and any one policy as respects
casualty coverages.
ARTICLE 6 - Net Retained Liability
This Reinsurance Contract shall apply only to that portion of any insurance or
reinsurance which the COMPANY retains net for its own account, and in
calculating the amount of any loss hereunder, and also in computing the amount
in excess of which this Reinsurance Contract attaches, only loss or losses in
respect to that portion of any insurance or reinsurance which the COMPANY
retains net for its own account shall be included. It is, however, understood
and agreed that the amount of the REINSURER'S liability hereunder in respect to
any loss or losses shall not be increased by reason of the inability of the
COMPANY to collect from any other reinsurers, whether specific or general, any
amounts which may have become due from them, whether such inability arises from
the
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insolvency of such other reinsurers or otherwise.
ARTICLE 7 - Quota Share Reinsurance
Unless otherwise specially agreed, it is understood that, in the event the
COMPANY cedes reinsurance on a quota share or portfolio basis, the provisions of
this Reinsurance Contract shall apply as if such reinsurance had not been
effected.
ARTICLE 8 - Notice of Loss
In the event of a claim arising hereunder, notice shall be given to Erie
Insurance Exchange, 000 Xxxx Xxxxxxxxx Xxxxx, Xxxx, Xxxxxxxxxxxx, 00000-0000, to
the attention of the Managing Director of Reinsurance as soon as practicable.
ARTICLE 9 - Loss Settlements
All loss settlements made by the COMPANY, providing the same are within the
terms of this Reinsurance Contract, shall be unconditionally binding upon the
REINSURER, and amounts falling to the share of the REINSURER shall be payable by
it upon reasonable evidence of the amount due or to be due being given by the
COMPANY.
Should the COMPANY'S Ultimate Net Losses occurring during the term of this
Reinsurance Contract exceed, at any time, an amount equal to 72.5% of the Net
Premiums earned through that period of time, it is understood and agreed that,
at the option of the COMPANY, 95% of such excess and 95% of all such additional
Ultimate Net Losses occurring thereafter will be paid by the REINSURER, subject
to a limit of 95% of 15% of the Net Premiums earned as respects any losses
occurring during the term of this Reinsurance Contract. Any such payment shall
be subject to adjustment in accordance with the provisions of Article 3 after
the REINSURER'S ultimate liability hereunder has been determined.
ARTICLE 10 - Governing Law; Jurisdiction
Subject to "Article 15 - Arbitration", if the REINSURER fails to pay any amount
claimed to be due hereunder, the REINSURER, at the request of the COMPANY, will
submit to the jurisdiction of a court of competent jurisdiction within the
United States. Nothing in this clause constitutes or should be understood to
constitute a waiver of the REINSURER'S rights to commence an action in any court
of competent jurisdiction in the United States, to remove an action to a United
States District Court, or to seek a transfer of a case to another court as
permitted by the laws of the United States or of any state in the United States.
It is further agreed that service of process in such suit may be made upon the
REINSURER, and that
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the reinsurer will abide by the final decision of such court or of any appellate
court in the event of an appeal.
Further, pursuant to any statute of any state, territory, or district of the
United States which makes provision therefor, the REINSURER hereby designates
the Superintendent, Commissioner, or Director of Insurance, or other officer
specified for that purpose in the statute, or his successor or successors in
office, as its true and lawful attorney upon whom may be served any lawful
process in any action, suit, or proceeding instituted by or on behalf of the
COMPANY or any beneficiary hereunder arising out of this Reinsurance Contract,
and hereby authorizes the said officer to mail such process, or a true copy
thereof, to the COMPANY.
ARTICLE 11 - Insolvency
In the event of insolvency of the COMPANY, the reinsurance under this
Reinsurance Contract shall be payable by the REINSURER to the COMPANY or to its
liquidator, receiver, or statutory successor, on the basis of the liability of
the COMPANY under the policy or policies reinsured without diminution because of
the insolvency of the COMPANY.
It is further agreed that the liquidator, or receiver, or statutory successor of
the COMPANY, shall give written notice to the REINSURER of the pendency of any
claim against the COMPANY on the 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 their own expense, in the proceeding where such claim is to be adjudicated,
any defense or defenses which they may deem available to the COMPANY or to its
liquidator, or receiver, or statutory successor. The expense thus incurred by
the REINSURER shall be chargeable, subject to court approval, against the
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.
ARTICLE 12 - Premium
The premium for this reinsurance shall be 1.01% of the subject Net Premiums
earned by the COMPANY during the period this Reinsurance Contract remains in
force, and shall be subject to a minimum premium of $800,000.
The COMPANY shall pay to the REINSURER a deposit premium of $900,000 which shall
be payable in equal installments of $450,000 each on the first days of January
and July during the period this Reinsurance Contract remains in force. Final
adjustment of the premium hereunder shall be made as soon as may be reasonably
practicable after expiration of this Reinsurance Contract.
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ARTICLE 13 - Premium and Loss Payments
Premiums shall be payable directly to the REINSURER and losses shall be paid
directly to the COMPANY in United States currency.
ARTICLE 14 - Access to Records
The REINSURER, by its duly appointed representative, shall have the right, at
any reasonable time, to examine all papers in the possession of the COMPANY
referring business effected hereunder.
ARTICLE 15 - Arbitration
Except as provided in "Article 16 - Loss Commutation", should an irreconcilable
difference of opinion arise between the COMPANY and the REINSURER as to the
interpretation or payment under this Reinsurance Contract, it is hereby mutually
agreed that, as a condition precedent to any right of action hereunder, such
difference, upon the written request of either party, shall be submitted to
arbitration, one arbitrator to be chosen by the COMPANY, one by the REINSURER,
and an umpire to be chosen by the two arbitrators before they enter upon
arbitration.
In the event that either party should fail to choose an arbitrator within sixty
days following a written request by the other party to enter upon arbitration,
the requesting party may choose two arbitrators who shall in turn choose an
umpire before entering upon arbitration. If the arbitrators have not chosen an
umpire at the end of ten days following the last day of the selection of the two
arbitrators, each of the arbitrators shall name three, of whom the other
declines two, and the decision shall be made of the remaining two by drawing
lots. The arbitrators and the umpire shall be active or retired disinterested
officers of insurance or reinsurance companies or Underwriters at Lloyd's,
London, not under the control of either party to this Reinsurance Contract. Each
party shall present its case to the arbitrators within sixty days following the
date of their appointment.
The decision, in writing, of the arbitrators shall be final and binding upon
both parties as to questions of fact, but failing to agree, they shall call in
the umpire and the decision of the majority shall be final and binding as to
questions of fact upon both parties. Judgment upon the award rendered may be
entered in any court having jurisdiction. Each party shall bear the expense of
its own arbitrator and shall jointly and equally bear with the other the expense
of the umpire and of the arbitration. In the event that the two arbitrators are
chosen by one party, as above provided, the expense of the arbitrators, the
umpire, and the arbitration shall be equally divided between the two parties.
Any such arbitration shall take place at Erie, Pennsylvania, unless some other
location is mutually agreed upon by the two parties in interest.
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ARTICLE 16 - Loss Commutation
Sixty months after expiration of this Reinsurance Contract, the COMPANY and the
REINSURER agree to commute any unpaid net losses recoverable hereunder occurring
during the term of this Reinsurance Contract.
The COMPANY shall submit a statement of valuation of the net losses recoverable
showing the elements considered reasonable to establish the net losses to be
commuted. The COMPANY and the REINSURER shall agree upon the capitalized value
of such losses and the REINSURER shall pay to the COMPANY the amount so
determined. Payment by the REINSURER of the capitalized value of such losses
shall constitute a complete and final release of the REINSURER'S liability in
respect of such losses.
If the COMPANY and the REINSURER fail to agree on the capitalized value of such
losses within sixty days of receipt of the statement of valuation, then any
difference shall be settled by a panel of three Actuaries or Appraisers, one to
be chosen by each party and the third by the two so chosen. If either party
refuses or neglects to appoint an Actuary or Appraiser within sixty days after
the request in writing that the difference be settled by a panel of three
Actuaries or Appraisers, the other party may appoint two Actuaries or
Appraisers. If the two Actuaries or Appraisers fail to agree on the selection of
a third Actuary or Appraiser within thirty days of their appointment, then each
of them shall name two, one of whom the other shall decline and the
determination of the Actuary or Appraiser shall be made by drawing lots. All the
Actuaries or Appraisers shall be regularly engaged in the valuation of claims
subject to the provisions of this Article 16 - Commutation. None of the
Actuaries or Appraisers shall be under the control of either party to this
Reinsurance Contract nor shall they have any interest in the net losses being
commuted other than that which is required to fulfill their obligations
hereunder.
Each party shall submit its case to its Actuary or Appraiser within thirty days
of the appointment of the third Actuary or Appraiser. The decision in writing of
any two Actuaries or Appraisers, when filed with the COMPANY and the REINSURER,
shall be final and binding on both parties. The expense of the Actuaries or
Appraisers and of the Commutation shall be equally divided between the COMPANY
and the REINSURER. Said Commutation shall take place in Erie, Pennsylvania,
unless some other place is mutually agreed upon by the COMPANY and the
REINSURER.
The term "capitalized value" as used herein shall mean the estimated value of
all future payments hereunder, excluding any provision for incurred but not
reported losses, reduced to present value at an agreed upon rate of interest to
be determined at the time of commutation or the prime rate, whichever is less.
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ARTICLE 17 - Extended Expiration
Should this Reinsurance Contract terminate while a loss occurrence covered
hereunder is in progress, it is understood and agreed that, subject to the other
conditions of this Reinsurance Contract, the REINSURER shall be responsible for
their proportion of the entire loss or damage caused by such occurrence.
ARTICLE 18 - Singular Contains the Plural
In interpretation of this Reinsurance Contract, the singular includes the plural
and the plural includes the singular, should the context so require to give full
force and effect to the intent of the parties and the provisions hereunder.
ARTICLE 19 - Notice of Default; Cure
In the event of a default of any of the terms of this Reinsurance Contract,
notice of the default shall be given and the party against which a default is
alleged shall have fifteen days in which to cure such default, prior to any
action being taken hereunder.
ARTICLE 20 - Notices
Notice to REINSURER shall be given at the following address or at any address
specified in writing by REINSURER:
Erie Insurance Exchange
000 Xxxx Xxxxxxxxx Xxxxx
Xxxx, XX 00000
Notice to COMPANY shall be given at the following addresses or at any addresses
specified in writing by COMPANY:
Erie Insurance Company Erie Insurance Company of New York
100 Erie Insurance Place 0 Xxxx Xxxxxx
Xxxx, XX 00000 Xxxxxxxxxxx, XX 00000
Notice is effective when given in writing, upon personal delivery, or sent
postage pre-paid by regular mail, Federal Express or similar service, telex or
telecopier to the address specified herein.
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ARTICLE 21 - Amendments
This Reinsurance Contract may be altered or amended in any of its terms and
conditions by the written mutual consent of the parties, and such amendment
shall be considered as part of this Reinsurance Contract.
ARTICLE 22 - Binding Effect
The provisions of this Reinsurance Contract shall be binding on both parties and
their respective heirs, legal representatives, successors and assigns, binding
any receivers, trustees or other fiduciaries appointed in any federal state
insolvency proceeding or federal bankruptcy case.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives.
In Erie, Pennsylvania, this 26th day of February, 1997.
ERIE INSURANCE COMPANY
ATTEST:
/s/ Xxxx Xxxxx /s/ X. X. Xxxxx
---------------------------- -------------------------
ERIE INSURANCE COMPANY
OF NEW YORK
ATTEST:
/s/ Xxxx Xxxxx /s/ J. R. Xxx Xxxxxx
---------------------------- -------------------------
ERIE INSURANCE EXCHANGE, by
ERIE INDEMNITY COMPANY,
Attorney-in-Fact
ATTEST:
/s/ J.R. Xxx Xxxxxx /s/ Xxxxxxx X. Xxxxxxx
---------------------------- -------------------------
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