PROGRAM MANAGEMENT AGREEMENT between Tower Insurance Company of New York and CastlePoint Management Corp. Amended and Restated
Exhibit 10.24
between
Tower Insurance Company of New York
and
CastlePoint Management Corp.
Amended and Restated
This Agreement, entered into as of January 1, 2007 (the “Agreement”) by and between TOWER
INSURANCE COMPANY OF NEW YORK, a property and casualty insurance company domiciled in New York (the
“Company”), and CASTLEPOINT MANAGEMENT CORP., a Delaware corporation (“Manager”), each having
offices located at 000 Xxxxxxxx, Xxx Xxxx, X.X. 00000.
PREAMBLE
WHEREAS, Company and Manager entered into a Program Management Agreement dated April 4, 2006,
but now find it advisable to amend and restate such agreement; and
WHEREAS, Company desires to appoint Manager as its manager for performing underwriting and
claims services with respect to the Traditional Program Business and Specialty Program Business and
Insurance Risk Sharing Business as set forth in this Agreement; and
WHEREAS, Manager desires to perform such responsibilities;
NOW, THEREFORE, Company and Manager, in consideration of the mutual promises herein contained
and for other good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, agree as follows:
1. Appointment.
Company does hereby nominate, constitute, and appoint Manager as its manager for: (i) the
soliciting, underwriting, quoting, binding, issuing, and servicing of Company’s insurance policies
classified as Traditional Program Business and Specialty Program Business and Insurance Risk
Sharing Business as set forth in the schedule attached hereto as Exhibit A, as may be amended from
time to time (such insurance and any policies, contracts, binders, endorsements, certificates,
agreements, or evidence of insurance, individually and collectively, will be referred to as
“Policy” or “Policies” hereunder).
2. Authority. Manager is authorized to:
2.1 Issue, or direct Company to issue, Policies subject to: (i) the scope and limits granted
in Exhibit A attached hereto; (ii) the terms and conditions (including exclusions) of
Page 1 of 16
Exhibit 10.24
forms of Policies prescribed by Company; (iii) applicable state insurance laws, rules, and
regulations; (iv) the underwriting guidelines approved by Company; (v) Company’s ultimate right to
veto the solicitation, underwriting, quoting, binding, and issuing of any Policy by Manager; (vi)
Company’s ultimate right to cancel any Policy subject to applicable governmental regulatory
requirements for cancellation and non-renewal; (vii) Company’s ultimate right to veto the
appointment by Manager of any agent, broker or producer, and the ultimate power of Company to
cancel any such agency pursuant to Section 2.4; (viii) Company’s right to approve all advertising
with respect to the Policies in which Company’s name is used.
2.2 Collect, account, receipt for, and remit premiums on Policies that Manager writes on
behalf of Company in accordance with Section 2.1 and, as full compensation, to retain commissions
out of premiums so collected in amounts as specified in Exhibit A attached hereto. Manager agrees
to pay all costs and expenses of collection from insureds where premiums to be received by Manager
pursuant to this Agreement are not paid in full by the insured. Manager agrees that all premiums,
including return premiums received by Manager, are Company’s property and will be paid over to the
Company immediately following collection.
2.3 Secure or obtain agents and producers to produce business. Company appointments will
follow upon Manager providing evidence that the agents and producers are lawfully licensed to
transact the type of insurance they are expected to write, are not serving on Company’s or
Manager’s board of directors and complete Company’s appointment process. The agents and producers
must meet the applicable compliance regulations for licensure.
2.4 Terminate agents and producers.
2.5 Investigate and settle claims as provided in Section 10 below and establish reserves for
such claims.
2.6 Appoint properly licensed small third party insurers or their affiliates as Program
Underwriting Agents using Company policies on the condition that such small insurers participate as
a reinsurer on the Specialty Program Business and Insurance Risk Sharing Business they underwrite.
“Program Underwriting Agent” means an insurance intermediary that aggregates business from retail
and general agents and manages business on behalf of insurance companies, including functions such
as risk selection and underwriting, premium collection, policy form design and client service.
3. Performance.
3.1 Manager hereby accepts the foregoing appointment and agrees faithfully to perform the
duties thereof in a professional manner as an agent of Company and to obey promptly such reasonable
instructions as it may receive from time to time from Company in accordance with this Agreement.
3.2 If Manager commits a material breach of this Agreement, Company may, as one remedy but not
as an exclusive remedy, require its own employees or designated representatives to carry out
Manager’s duties hereunder. Manager shall reimburse Company for Company’s reasonable expenses,
including salaries, incurred for having Company’s employees or representatives perform such duties
or, at Company’s option, Manager shall pay such employees
Page 2 of 16
Exhibit 10.24
or representatives directly. Such reimbursement or direct payments shall be made by Manager within
five (5) days after Manager’s receipt of invoices of such expenses.
4. Expenses.
No expenses or fees shall be paid pursuant to this Agreement. All expenses incurred by either
party shall be apportioned, allocated or paid at actual cost in accordance with the Traditional
Program Business Quota Share Reinsurance Agreement and the Specialty Program Business and Insurance
Risk Sharing Business Quota Share Reinsurance Agreement between the Company and CastlePoint
Reinsurance Company (CPRe) or the Traditional Program Business Pool Management Agreement and the
Specialty Program Business Pool Management Agreement between the Company and CastlePoint Insurance
Company (CPIC), as that term is defined in those agreements, as the case may be. Manager may,
however, seek reimbursement for any expenses it incurs in performing its functions hereunder from
either CPRe or CPIC as the case may be, the allocation of which shall comply with Regulation 30 of
the New York Insurance Laws (11 NYCRR 105-109).
5. Territory.
Manager’s authority to solicit, quote, underwrite, bind, issue, or service Policies extends
only to insureds or prospective insureds located in the states specified in Exhibit A attached
hereto, subject to: (i) the applicable licensing authority of Company, (ii) Company having made and
received approval of all necessary regulatory filings and (iii) Manager obtaining licenses wherever
required for activities conducted by Manager pursuant to this Agreement.
6. Representations and Warranties of Manager. On the effective date hereof, during the
term of this Agreement, and for any period described in Section 14.5, Manager hereby represents and
warrants to Company as follows:
6.1 Laws and Licenses. Manager has complied and will comply with all applicable laws,
rules, and regulations. Manager shall provide current copies of Manager’s licenses, which will be
maintained in Company’s records. Company will appoint Manager in all applicable states. Manager
will obtain and maintain at its own expense all licenses required for it to perform this Agreement.
6.2 No Breach. This Agreement is a valid and binding obligation of Manager. The
execution and delivery of this Agreement and the consummation of the transactions contemplated
herein will not breach or conflict with Manager’s by-laws or certificate of incorporation, nor with
any agreement, covenant, or understanding (oral or written) to which Manager is bound, and will not
adversely affect the application for issuance or the validity of any license of Manager.
6.3 Status. Manager is a duly organized and validly existing corporation in the State
of Delaware.
6.4 Authorization. The execution, delivery, and performance of this Agreement by
Manager have been duly and properly authorized by it.
Page 3 of 16
Exhibit 10.24
7. Representations and Warranties of Company. On the effective date hereof, during the
term of this Agreement, and for any period described in Section 14.5, each Company hereby
represents and warrants to Manager as follows:
7.1 Laws and Licenses. Company has complied and will comply with all applicable laws,
rules and regulations and shall, whenever necessary, obtain and maintain at its own expense all
licenses required for it to perform this Agreement.
7.2 No Breach. This Agreement is a valid and binding obligation of Company. The
execution and delivery of this Agreement and the consummation of the transactions contemplated
herein will not breach or conflict with Company’s by-laws or articles of incorporation, nor with
any agreement, covenant, or understanding (oral or written) to which Company is bound, and will not
adversely affect the application for issuance or the validity of any license of Company.
7.3 Status. Company is a duly organized and validly existing corporation in the State
of New York.
7.4 Authorization. The execution, delivery, and performance of this Agreement by
Company have been duly and properly authorized by it.
8. Duties and Responsibilities. Subject to Company’s supervision and instructions, Manager
agrees to perform the following duties and services in addition to those otherwise enumerated in
this Agreement:
8.1 Solicit, underwrite, quote, bind, issue, secure proper countersignature when required by
applicable laws, and service Policies on behalf of Company.
8.2 Cancel Policies issued or underwritten by Manager in accordance with the terms of the
Policies and applicable state regulations.
8.3 Issue Policies only on forms approved by Company and filed with and approved by regulatory
authorities wherever such filing and approval is required.
8.4 Underwrite and issue Policies in accordance with the premium rates and underwriting
criteria and guidelines as approved by Company.
8.5 Investigate and settle claims as provided in Section 10 below and establish reserves for
such claims.
8.6 Maintain at Manager’s expense data processing systems and equipment, an office or offices
and a staff of employees sufficient in number and qualifications to perform the duties set forth in
this Agreement.
8.7 Pay to Company any fines imposed by regulatory authorities, taxation authorities, and
their agents for data collection and advisory organizations, due to late filing or poor quality of
data provided by Manager.
Page 4 of 16
Exhibit 10.24
8.8 Pay to Company any fines imposed by regulatory authorities upon Company due to the use of
unapproved forms or rates by Manager or due to other market conduct violations caused by Manager’s
willful misconduct.
8.9 Maintain separately for Company and each other insurer with which Manager does business,
complete and current records and accounts, including underwriting files, which Manager shall retain
in accordance with Section 12 and any applicable laws.
8.10 Refund within sixty (60) days of the end of each calendar month, return commissions on
Policy cancellations or premium reduction, in each case at the same rate at which such commissions
were originally retained.
8.11 Collect, account, receipt for and promptly remit premiums on Policies that Manager writes
on behalf of Company in accordance with Section 2.1.
8.12 Hold all monies, including premiums, return premiums, and monies received by Manager, in
a fiduciary capacity for Company. Except as otherwise authorized by this Agreement, Manager shall
maintain such monies in a separate and segregated bank account in a bank that is a member of the
Federal Reserve System and is insured by the Federal Deposit Insurance Corporation. This account
shall not be used for any purpose other than payments to or on behalf of Company. Any investment
income produced from this bank account shall vest and become the property of Manager.
8.13 Comply with all regulatory requirements including, but not limited to, the cancellation,
non-renewal, or conditional renewal of policies.
8.14 Return upon demand after termination of this Agreement, all unused Policies, forms, and
other property furnished to Manager by Company. Such items remain the property of Company. Manager
shall fully cooperate with and assist Company in recovering such items from third parties, if any.
8.15 Exercise Manager’s authority through authorized employees of Manager or its affiliates.
8.16 Not represent other companies except as permitted by Company.
8.17 Exercise exclusive and independent control of Manager’s time and conduct.
9. Limitations of Authority.
Notwithstanding the foregoing, all underwriting services provided to Company by Manager shall
be based upon the written criteria, standards and guidelines of Company which shall retain the
final authority over underwriting decisions including, but not limited to, acceptance, rejection,
cancellation and termination of risks.
Page 5 of 16
Exhibit 10.24
10. Claims.
10.1 Manager shall or shall arrange to investigate, negotiate, and settle all Policy claims or
losses on behalf of Company; however, Manager shall obtain the prior approval of Company before
handling and settling any Policy claim or loss which is in excess of Fifty Thousand Dollars
($50,000) gross incurred loss. Manager shall determine coverage for claims; however, Manager shall
obtain the prior written approval of Company for the handling of litigation in which the Company is
named as a defendant or claims in which Manager seeks declaratory relief on behalf of Company. All
claims or losses shall be reported in monthly statements pursuant to Section 11 below. In
addition, Manager shall immediately notify Company in writing of any claim or loss as Company
requests upon receiving notice or knowledge of: (i) any Policy claim or loss in excess of Two
Hundred Fifty Thousand Dollars ($250,000) gross incurred loss; or (ii) any loss regardless of
incurred dollar amount involving the following: fatalities; brain stem/brain damage injuries;
spinal cord injuries; heart attacks; severe, non-accumulative hearing loss; severe,
non-accumulative vision loss; amputation of major body part; paraplegia; quadriplegia; serious
xxxxx (i.e. second or third degree and/or xxxxx over 50% of the body); non-union, compound,
comminuted, serious fractures; injury to the spine or pervasive nerve damage; class action suits;
allegations of criminal conduct by an insured or allegations of criminal conduct by an insured or
allegations of criminal conduct on the insured’s premises; bad faith claims or suits; demands in
excess of policy limits; actual or alleged violations of the Deceptive Trade Practices Act; actual
or alleged violations of the applicable State Insurance Codes; actual or alleged violation of law
by Manager; or litigation naming Company as a defendant. In determining gross incurred loss,
Manager shall consider the facts and circumstance of the claim or loss, Manager’s analysis of the
insured’s liability for the claim or loss, Manager’s analysis of damages resulting from the claim
or loss and Manager’s analysis of the applicability of coverage for the claim or loss. These
individually reported claims or losses should be updated semi-annually and more frequently upon the
occurrence of any material change in any claim or loss or any information previously reported to
Company. Company shall be immediately notified if Manager is closing a file on a reported claim or
loss and of the reason for this file closure. Failure to promptly notify Company of claims under
this Section 10.1 shall be considered a material breach of this Agreement and subject to all the
remedies provided herewith.
10.2 Whenever Manager shall deem it prudent to engage legal counsel or loss adjusters to
protect Company’s interest regarding claims or losses, such services shall be provided only by
qualified attorneys-at-law and/or licensed loss adjusters selected by Manager, who have substantial
experience in the handling of claims litigation of the type involved. Upon execution of this
Agreement, Manager shall submit to Company for approval a list of the attorneys and loss adjusters
it intends to use. Such list shall be considered approved unless Company objects to any of such
firms or individuals within fourteen (14) days after receipt of such list. Any provision hereof to
the contrary notwithstanding, it is agreed that, with respect to any claim or loss of any amount,
Manager shall promptly furnish Company, or its designee, any additional claim or loss information
requested by Company with respect to a claim or loss pertaining to any Policy covered by this
Agreement, and it is further agreed with respect to any claim or loss of any amount as follows:
Page 6 of 16
Exhibit 10.24
a. Company may assign an attorney of its own choice to assume the defense
of any claim or loss reported to Company and, in the event an attorney
has already been employed by Manager, the service of such attorney
which has already been employed by Manager shall be terminated by
Manager forthwith and Manager shall waive any conflict of interest
that may have been created by such attorney’s employment by Manager.
b. In the event that Company is named as a defendant in any lawsuit,
Manager shall, as soon as it has notice or knowledge of such lawsuit,
immediately give written notice thereof to Company accompanied by a
copy of the complaint and any court papers related to such lawsuit.
10.3 All claims services provided to Company by Manager shall be based upon the written
criteria, standards and guidelines of Company which shall retain the final authority over claims
decisions including, but not limited to, payment and non-payment of claims.
11. Accounting and Reporting Procedures. Manager shall:
11.1 Within thirty (30) days after the end of each month, remit to Company all premiums
collected on Policies issued under the terms of this Agreement, less the commission due to Manager
in accordance with Exhibit A attached hereto. Manager may not offset balances due to Company
hereunder against balances due Manager under any other contract with Company;
11.2 On behalf of Company supply accounting, underwriting, and claim bordereaux with copies to
Company, pursuant to their terms and conditions;
11.3 With regard to business placed by Manager with Company hereunder, furnish to Company, in
electronic format, within thirty (30) days after the end of each month a report of written,
earned, and unearned premiums; losses and loss adjustment expenses paid and outstanding; loss and
loss adjustment expenses incurred; commissions earned by Manager;
11.4 Provide detail and summary reports, in an electronic or printed medium, as are required
to meet all reporting requirements of state regulatory or taxation authorities, their managers for
data collection, and advisory organizations including but not limited to:
a. Within thirty (30) days of the close of the calendar quarter: direct premiums
(written and earned); in force premiums; policy counts (written and in force); direct losses
and loss adjustment expenses including subrogation (paid and reserved); number of claims
open, closed with payment, and closed without payment; as prescribed by state regulatory
authorities.
b. Within thirty (30) days of the close of the calendar quarter: direct written
premium, losses, and loss adjustment expense including subrogation (paid and reserved)
transaction data as prescribed by advisory organizations providing loss cost and policy
forms.
c. Thirty (30) days prior to the prescribed deadline: the reports of direct premiums
(written and earned), losses, and loss adjustment expenses including salvage
Page 7 of 16
Exhibit 10.24
and subrogation (paid and reserved) as required by state regulatory data collection agents,
including but not limited to financial calls, unit statistical data, summary statistical
data, and detailed claim information for National Council on Compensation Insurance (NCCI),
Insurance Services Office (ISO), and National Association of Independent Insurers (NAII),
and various state-specific reporting requirements as necessary.
11.5 By the first business day of February of each year, Manager shall provide Company with
any information Company may require in order to complete its statutory financial statements for the
prior year.
12. Books and Records.
Manager shall keep such books and records as may be (i) reasonably requested by Company; or
(ii) required by law, rulings, or orders of the insurance departments of the states having
jurisdiction over: (a) Manager or Manager’s business or (b) any Policies. Manager shall make such
books and records available for examination, audit, and copying by the insurance departments of
such states and by Company, or by their authorized representatives. Company shall have the right
to examine and review at any reasonable time all books, records, files, and papers, including, but
not by way of limitation, claim files and underwriting files maintained and kept by Manager which
relate to this Agreement and the Policies. Manager shall institute and maintain retention and
disposal systems for claim files and underwriting files in accordance with procedures and
requirements as prescribed by law. All books and records of Manager shall be maintained at the
principal place of business of Manager and shall be complete, accurate, and up-to-date, and shall
reflect all monies paid or received by Agent and all transactions of Manager pursuant to this
Agreement. Anything to the contrary notwithstanding, all of the books, records, files, and papers
maintained and kept by Manager relating to underwriting and claims matters involving this Agreement
or the Policies, shall be and remain the sole and exclusive property of Company except that upon
termination of this Agreement, all right, title, and interest in and to all Policy renewals or
expirations and all records with respect to renewals and expirations shall automatically and
irrevocably transfer to and vest in Manager provided Manager has accounted for and has made
payments of all amounts due Company and continues to do so.
13. Indemnification.
13.1 Manager shall indemnify and hold harmless Company from and against all losses, damages,
costs, expenses, claims, fines, penalties, or liabilities of any description suffered by Company
with respect to Manager or any Policies issued or underwritten by Manager, including, without
limitation, any attorney’s fees, in connection with or arising out of: (i) any violations by
Manager of laws, rules, or regulations to which it is subject; (ii) any material breach of any
warranty or representation of Manager made in this Agreement or any other material breach of this
Agreement by Manager; or (iii) any willful misconduct, gross negligence, or misrepresentation, of
Manager or of it officers, directors, employees, agents, sub-producers, or independent contractors.
13.2 Company shall indemnify and hold harmless Manager from and against all losses, damages,
costs, expenses, claims, fines, penalties, or liabilities of any description suffered by Manager
with respect to Company or any Policies issued or underwritten by Company,
Page 8 of 16
Exhibit 10.24
including, without limitation, any attorney’s fees, in connection with or arising out of: (i) any
violations by Company of laws, rules, or regulations to which it is subject; (ii) any breach of any
warranty or representation of Company made in this Agreement or any other breach of this Agreement
by Company; or (iii) any alleged or actual misconduct, negligence, misrepresentation, or other acts
or failures to act of Company or of it officers, directors, employees, agents, sub-producers, or
independent contractors.
14. Termination of Agreement.
14.1 This Agreement shall continue until terminated in accordance with Sections 14.2 through
14.5 below.
14.2 This Agreement may be terminated immediately by either party upon giving written notice
to the other party via electronic, certified or registered mail in the event of:
a. The misappropriation by either party of any funds or property belonging to the other
party;
b. The fraud, gross negligence, or willful misconduct of the other party;
c. The license or certificate of authority of the other party in their state of
domicile is canceled, non-renewed or suspended by any public authority;
d. An assignment by the other party for the benefit of creditors; the dissolution or
liquidation of the other party; the appointment of a conservator, receiver, or liquidator
for a substantial part of the other party’s property; the institution of bankruptcy,
insolvency, or similar proceedings by or against the other party;
e. Material breach by the other party of any provision of this Agreement;
f. If any law or regulation of the federal, state, or local government of any
jurisdiction in which the other party is doing business shall render illegal or invalid any
transaction contemplated by this Agreement, or any term of this Agreement, this Agreement
may be terminated insofar as it applies to such jurisdiction by either party giving notice
to the other party to such effect or by either party giving notice to the other party to
such effect;
g. Change in ownership of ten percent (10%) or more of the outstanding voting stock of
the other party, sale or transfer of the other party’s assets, merger of the other party,
or change or resignation of any principal officer or director of the other party;
h. The licenses required of the other party for it to perform under this Agreement
expire, are terminated, or are not valid pursuant to the law of the State in which the other
party is transacting business on behalf of either party.
14.3 This Agreement may be terminated at any time by mutual written agreement, or upon sixty
(60) days prior written notice by either Company or Manager.
Page 9 of 16
Exhibit 10.24
14.4 If at any time either party sends notice of termination to the other party as provided in
Section 14.2 above or the Agreement is otherwise terminated as provided herein, the Manager shall
not solicit, underwrite, quote, bind, or issue any Policies or renew any existing Policies for
which the inception date or renewal date falls after the effective date of termination of this
Agreement, nor shall Manager cancel and rewrite any existing Policies.
14.5 Unless otherwise indicated by this Agreement or either party otherwise notifies the other
party in writing, Manager’s duties and responsibilities under this Agreement shall survive
termination of this Agreement until such time as all Policies issued, underwritten, or serviced by
Manager pursuant to this Agreement have expired and all known losses under such Policies have been
paid or settled, have run off or otherwise have been disposed of in the judgment of Company, all
incurred but not reported loss reserves have been reduced to zero, and any amounts owed to Company
by others has been paid. The only compensation Manager shall receive for its performance of its
duties hereunder (both during and after the term of this Agreement) is set forth in Section 4.
14.6 Upon termination of the Agreement, Manager shall, unless notified in writing to the
contrary by Company:
a. Continue to represent Company for the purpose of servicing Policies placed by
Manager with Company which are in force on, or renewed at Company’s election, or as required
by law, after the date of termination of this Agreement, and Manager shall continue to
receive its normal compensation for such services.
b. Issue and countersign appropriate endorsements on Policies in force, provided that
without prior written approval of Company, such endorsement shall not increase nor extend
Company’s liability nor extend the term of any Policy.
c. Collect and receipt for premiums and retain commissions out of premiums collected as
full compensation.
14.7 Any notice issued pursuant to this Section shall be effective on the day after it is
received by Manager.
15. Suspension of Manager’s Authority.
15.1 In lieu of terminating this Agreement, Company may give written notice to Manager that
Company is immediately suspending Manager’s authority in its entirety or in any particular state to
bind new or renewal business, change any existing Policy and/or settle any claim during the
pendency of any of the following events:
a. Manager is delinquent in payment of any monies due Company;
b. Any dispute exists between Manager and Company regarding the existence of any of the
events listed in Section 14.2;
15.2 Such suspension shall remain in effect until such delinquency is cured or dispute is
resolved and Manager receives written notification from Company to that effect. If such
Page 10 of 16
Exhibit 10.24
delinquency is not cured within fifteen (15) days from the date of receipt of written
notification by Manager of such delinquency, Company may exercise its right to terminate this
Agreement under Section 14.2.
15.3 Unless otherwise notified in writing to the contrary by Company, Manager’s obligation
under this Agreement shall continue during the suspension of Manager’s authority under this
Agreement.
15.4 Any notice of suspension issued pursuant to this Section shall be effective immediately.
16. Ownership of Expirations.
The use and control of expirations will remain the property of Manager; and Company will not,
without consent of Manager, (a) refer or communicate to any other agent or broker, Company’s
records of insureds, expiration dates and other material information relating to specific risks
except for loss or claims information specifically requested by the insured or the insured’s
authorized representative nor (b) use such material information relating to specific risks for
purposes of solicitation.
17. Mediation; Arbitration and Injunctive Relief.
17.1 If any dispute arises between Company and Manager with reference to the interpretation,
performance, or breach of this Agreement (whether the dispute arises before or after termination of
this Agreement) such dispute, if not resolved by the parties, must be submitted to non-binding
mediation. If such dispute is not resolved by non-binding mediation within sixty (60) days it will
then be submitted for decision to a panel of three arbitrators. Notice requesting arbitration will
be in writing and sent certified or registered mail, return receipt requested.
17.2 One arbitrator shall be chosen by each party and the two arbitrators shall, before
instituting the hearing, choose an impartial third arbitrator who shall preside at the hearing. If
either party fails for any reason to appoint its arbitrator within thirty (30) days after being
requested to do so by the other party, the latter, after ten (10) days notice by certified or
registered mail of its intention to do so, may appoint the second arbitrator. If the two
arbitrators are unable to agree upon the third arbitrator within thirty (30) days of their
appointment, the third arbitrator shall be selected from a list of six individuals (three named by
each arbitrator) by a judge of the United States District Court having jurisdiction over the
geographical area in which the arbitration is to take place, or if that court declines to act, the
state court having general jurisdiction in such area.
17.3 All arbitrators shall be active or retired disinterested officials of insurance or
reinsurance companies not under the control or management of either party to this Agreement and
will not have personal or financial interests in the result of the arbitration.
17.4 Within thirty (30) days after notice of appointment of all arbitrators, the panel shall
meet and determine timely periods for briefs, discovery procedures, and schedules for hearings.
Page 11 of 16
Exhibit 10.24
17.5 The panel shall be relieved of all judicial formality and shall not be bound by the
strict rules of procedure and evidence. Unless the panel agrees otherwise, arbitration shall take
place in New York, New York. Insofar as the arbitration panel looks to substantive law, it shall
consider the law of the State of New York. The decision of any two arbitrators when rendered in
writing shall be final and binding. The panel is empowered to grant interim relief as it may deem
appropriate.
17.6 The panel shall interpret this Agreement as an honorable engagement rather than merely a
legal obligation and shall make its decision considering the custom and practice of the applicable
insurance and reinsurance businesses within sixty (60) days following the termination of the
hearing unless the parties consent to an extension. Judgment upon the award may be entered in any
court having jurisdiction thereof.
17.7 Punitive damages will not be awarded. The arbitrators may, however, at their discretion
award such other costs and expenses as they deem appropriate, including but not limited to
attorneys’ fees, the cost of arbitration, and arbitrators’ fees, to the extent permitted by law.
17.8 It is understood and agreed that in the event of any breach or threatened breach, Company
may apply to a court of competent jurisdiction for, and shall be entitled to, injunctive relief
from such court, without the requirement of posting a bond or proof of damages, designed to cure
existing breaches and to prevent a future occurrence or threatened future occurrence of like
breaches on the part of Manager. It is further understood and agreed that the remedies and
recourses herein provided shall be in addition to, and not in lieu of, any other remedy or recourse
which is available to Company either at law or in equity in the absence of this paragraph including
without limitation the right to damages.
18. Miscellaneous.
18.1 This Agreement may be revised by mutual agreement of Manager and Company and such
revision shall be evidenced by a written agreement duly executed by authorized representatives of
Manager and Company, which specifies the effective date thereof.
18.2 Manager shall not have authority to represent Company on any exclusive basis with respect
to any policy form, line, or class or subclass of business, unless otherwise authorized in writing
by Company.
18.3 Manager shall not commit Company to any expenses or obligations not specifically provided
for herein without the prior written permission of Company.
18.4 Company shall have the right to oversee and supervise the operation of this Agreement,
including but not limited to the right at all reasonable times to have access to and to copy at
Company’s expense Manager’s books and records as they relate to this Agreement, which rights shall
survive the termination or expiration of this Agreement. The director or commissioner of insurance
of any state where Manager issues Policies on behalf of Company shall have at all reasonable times
the right of access to all books, records, and bank account of Manager in a form usable by such
official.
Page 12 of 16
Exhibit 10.24
18.5 During the term of this Agreement, Manager shall obtain and maintain in full force and
effect, at its expense, fidelity insurance with a minimum policy limit of $1,000,000, errors and
omissions insurance with a minimum policy limit of $2,000,000, directors and officers insurance
with a minimum policy limit of $2,000,000, and general liability insurance with a minimum policy
limit of $1,000,000 and on such terms as are reasonably acceptable to Company. Manager shall
furnish Company with copies of the certificates of insurance for such insurance, and shall not
cancel or amend any such insurance without Company’s prior written consent.
18.6 Manager shall provide to Company, copies of its quarterly financial reports and annual
audited financial reports.
18.7 If Manager fails in any respect to fulfill its duties and responsibilities under this
Agreement, then the expense incurred by Company in order to fulfill Manager’s duties and
responsibilities under this Agreement will be fully reimbursed by Manager.
18.8 This Agreement may not be directly or indirectly assigned by either party in whole or in
part, nor may Manager appoint a sub managing general Manager.
18.9 Any provision of this Agreement which conflicts with applicable law or regulation will be
amended to the minimum extent necessary to effectuate compliance with such law or regulation.
18.10 Manager is an independent contractor, not an employee of Company, and nothing in this
Agreement shall be construed to create an employer/employee relationship between Company and
Manager.
18.11 This Agreement shall be construed in accordance with the laws of the State of New York.
18.12 Neither Company nor Manager shall disclose material details of this Agreement and the
Policies without the prior consent of the other party. However, this restriction will not apply to
disclosures made by Company or Manager to its agents, producers, shareholders, policyholders,
auditors, accountants, arbitrators, legal counsel, or other third parties as required in the
ordinary course of business, nor to disclosures required by arbitration panels, governmental
agencies, regulatory authorities, or courts of law.
18.13 Failure of either party to enforce compliance with any term or condition of this
Agreement shall not constitute a waiver of such term or condition. No waiver of any breach or
default hereunder shall be valid unless in writing and signed by the party giving such waiver, and
no such waiver shall be deemed a waiver of any subsequent breach or default of the same or similar
nature.
18.14 Manager acknowledges and agrees that it will benefit from this Agreement and that a
breach by it of the covenants contained herein would cause Company irreparable damages that could
not adequately be compensated for only by monetary compensation. Manager shall notify Company in
writing via electronic, certified or registered mail, within five (5) days if there is a change in
ownership of ten percent (10%) or more of the outstanding voting stock of
Page 13 of 16
Exhibit 10.24
Manager, sale or transfer of all Manager’s assets, merger of Manager, or change of any
principal officer or director of Manager including, but not limited to, resignation.
18.15 Any notice or other communications required or permitted hereunder shall be sufficiently
given if sent by electronic, certified or registered mail, postage prepaid, if to Company,
addressed to Tower Insurance Company of New York, 000 Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx,
00000, Attention: Xxxxxxx Xxxxxxxxxxx, General Counsel, and if to Company addressed to CastlePoint
Management Corp., 000 Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx, XX 00000, Attention: General Counsel or such
other address as notified by either party to the other.
18.16 Notwithstanding any other provisions of this Agreement, the business and affairs of
Company shall be managed by its board of directors, and, to the extent delegated by the board, by
its appropriately authorized officers. The board of directors and officers of Manager shall not
have any management prerogatives with respect to the business affairs and operations of the
Company.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date first
written above, subject to the satisfaction of New York Insurance Law § 1505, including any
conditions such regulators may impose on the terms of this Agreement subsequent to the date hereof.
CASTLEPOINT MANAGEMENT CORP.
By: /s/ Xxxx Xxxxxx
Title: SVP & CFO
Title: SVP & CFO
TOWER INSURANCE COMPANY OF NEW YORK
By: /s/ Xxxxxxx Xxxxxxxxx
Title: SVP & CFO
Title: SVP & CFO
Page 14 of 16
Exhibit 10.24
EXHIBIT A
SCHEDULE OF AUTHORITY
Manager is only authorized to accept or bind business, as defined in Section A below, subject to
the amounts and stipulations indicated below. Amounts in excess of the authorized limits or
classifications must be referred to Company for review and approval prior to binding.
A. AUTHORIZED BUSINESS. Any Specialty Program Business and Insurance Risk Sharing
Business, or Traditional Program Business, as defined below:
1. “Specialty Program Business” as used herein shall mean all Program Business other than
Traditional Program Business or Traditional Program Business that Tower and CPIC agree shall be
deemed Specialty Program Business. “Program Business” used herein means narrowly defined classes
of business that are underwritten on an individual policy basis by Program Underwriting Agents on
behalf of insurance companies. Traditional Program Business shall mean blocks of Program Business
in excess of $5 million in gross written premium that Tower has historically underwritten,
consisting of non-auto related personal lines and the following commercial lines of business:
retail stores and wholesale trades, commercial and residential real estate, restaurants, grocery
stores, office and service industries, and artisan contractors. “Program Underwriting Agent” shall
mean an insurance intermediary that aggregates business from retail and general agents and manages
business on behalf of insurance companies, including functions such as risk selection and
underwriting, premium collection, policy form design and client service.
2. “Insurance Risk Sharing Business” means various risk sharing arrangements such as (i)
pooling or sharing of premiums and losses between CPIC or Tower on the one hand and other insurance
companies on the other hand based upon their respective percentage allocations or (ii) appointing
other third party insurance companies as Program Underwriting Agents with such third party
insurance companies assuming through reinsurance a portion of the business they produce as Program
Underwriting Agents.
Manager must obtain specific written consent from Company to write any type of insurance risk
sharing business.
3. “Traditional Program Business” shall mean blocks of Program Business in excess of $5
million in gross written premium that Tower has historically underwritten, consisting of non-auto
related personal lines and the following commercial lines of business: retail stores and wholesale
trades, commercial and residential real estate, restaurants, grocery stores, office and service
industries, and artisan contractors.
Page 15 of 16
Exhibit 10.24
X. XXXXX NET WRITTEN PREMIUM LIMIT. A maximum of $50,000,000 unless Manager obtains
the prior written consent of Company. Gross Net Written Premium shall mean gross written premium
of Company less returned premium for cancellations and reductions.
C. POLICY LIMITS AND COVERAGE CLASSIFICATIONS.
Small Market Business, Middle Market Business and Large Lines Real Estate General Liability
Business.
| Coverage | Limit | |
Commercial Property (including Equipment Breakdown) |
$30 Million | |
Commercial General Liability
|
$1 Million per Occurrence / $2 Million Aggregate |
The above coverages are provided on ISO forms and on certain independent manuscript forms to be
agreed.
No other classes of insurance may be written on Company’s insurance policies.
D. TERRITORIAL LIMITATIONS. Manager shall not issue any policy in any jurisdiction
other than the authorized states defined as those states in which Company is licensed and has filed
and approved rates and policies. Company at its own discretion may limit or revoke Manager’s
authority as regards any particular state.
Page 16 of 16
