INTEREST AND LIABILITIES CONTRACT
TO
RETROCESSIONAL REINSURANCE CONTRACT
BETWEEN
PIONEER INSURANCE COMPANY
AND
DONEGAL MUTUAL INSURANCE COMPANY
It is hereby agreed by and between Pioneer American Insurance Company (Pioneer)
and Donegal Mutual Insurance Company (Donegal) that Donegal will assume and
retrocede a 100% share and Pioneer will assume a 100% share of the retrocession
of the Interests and Liabilities as set forth in the attached Retrocessional
Reinsurance Agreement effective July 1, 1996 until terminated.
This Contract made and executed in duplicate this 21st day of May, 1996
PIONEER INSURANCE COMPANY
/s/ XXXXX X. XXXXXXX
-----------------------------------
XXXXX X. XXXXXXX, SECRETARY
DONEGAL MUTUAL INSURANCE COMPANY
/s/ XXXXX X. XXXXXXX
-----------------------------------
XXXXX X. XXXXXXX, SECRETARY
REINSURANCE AND RETROCESSION AGREEMENT
between
PIONEER INSURANCE COMPANY
and
DONEGAL MUTUAL INSURANCE COMPANY
Article 1 BUSINESS COVERED
This Agreement, subject to the terms and conditions herein contained, is for
Donegal Mutual Insurance Company (Donegal) to indemnify Pioneer Insurance
Company (Pioneer) in respect of the net liability as herein provided and
specified which may accrue to Pioneer as a result of any loss or losses which
may occur during the term of this Agreement under any and all binders, policies,
and contracts of insurance or reinsurance (hereinafter referred to as "policy"
or "policies") heretofore or hereafter issued or.entered into by or on behalf of
the Pioneer and for Donegal to retrocede the net liability back to Pioneer and
Pioneer to assume the net liability back from Donegal as part of the
retrocession.
Article 2 Territory
This Agreement shall cover wherever the Pioneer's policies cover.
Article 3 Exclusions
This Agreement shall not cover:
A. Business classified by the Reinsured as:
(1)
Overhead transmission and distribution lines and their supporting structures
other than those on or within 150 meters (or 500 feet) of the insured premises.
It is understood and agreed that public utilities extension and/or suppliers
extension and/or contingent business interruption coverage are not subject to
this exclusion provided that these are not part of a transmitter's or
distributor's policy.
(2)
Pools, Associations, or Syndicates, including State Insurance Guaranty
Associations. However, such operations which Pioneer is obliged to cover by
reason of membership or participation in any Automobile Assigned Risk Pool, Plan
or Facility, any FAIR Plan, or any Coastal Pool are not to be excluded.
Furthermore, this exclusion shall not apply to any Inter-Company Pooling.
(3) Insurance on Growing and/or Standing Crops.
(4)
Reinsurance of any kind assumed by the Reinsured, except local agency
reinsurance accepted in the normal course of business.
(5)
Bridges, tunnels and art collections valued at over $150,000,000.
(6) Aviation.
(7) Insolvency Funds, as per clause attached.
(8) Flood, when written as such.
B. Extra Contractual Obligations and Loss in Excess of Original Policy
Limits -- "Extra Contractual Obligations" are defined as those liabilities not
covered under any other provision of this Agreement and which arise from the
handling of any claim on business covered hereunder, such liabilities arising
because of, but not limited to, the following: failure by Pioneer to settle
within the policy limit, or by reason of alleged or actual negligence, fraud or
bad faith in rejecting an offer of settlement or in the preparation of the
defense or in the trial of any action against its Insured or Reinsured or in the
preparation or prosecution of an appeal consequent upon such action.
The term "Loss in Excess of Original Policy Limits" shall mean a net loss
of Pioneer which is in excess of the limit of its original policy, such loss in
excess of the limit having been incurred because of the following: failure by
Pioneer to settle within the policy limit or by reason of alleged or actual
negligence, fraud or bad faith in rejecting an offer or settlement or in the
preparation of the defense or in the trial of any action against its Insured or
Reinsured or in the preparation or prosecution of an appeal consequent upon such
action.
C. Fidelity, Surety, Credit, Title, Insolvency and Financial Guaranty.
D. Loss or Liability excluded by the provisions of the Nuclear Incident
Exclusion Clause - Physical Damage - Reinsurance, as per clause attached hereto.
E. War, as defined in the original policy.
F. Ocean Marine
Article 4 Term
This Agreement shall become effective on July 1, 1996 at 12:01 A.M. Standard
Time. It is unlimited as to its duration and may be terminated by either party
upon giving ninety (90) days notice of cancellation in writing. In the event
either party terminates in accordance with the above, it is understood that all
transactions coming within the terms of this Agreement will continue in effect
within the said ninety (90) days.
Article 5 DEFINITION OF LOSS OCCURRENCE
The term "Loss Occurrence" shall mean any one occurrence or series of
occurrences arising out of one event.
Article 6 NET RETAINED LINES
This Agreement applies only to that portion of any insurance or reinsurance
covered by this Agreement which Pioneer 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 Agreement attaches, only loss or losses in respect of that
portion of any insurance or reinsurance which Pioneer retains net for its own
account shall be included. It being understood and agreed that the amount of
Donegal's liability hereunder in respect of any loss or losses shall not be
increased by reason of the inability of the Pioneer to collect from any other
reinsurer, whether specific or general any amounts which may have become due
from them whether such inability arises from the insolvency of such other
reinsurer or otherwise.
Article 7 ULTIMATE NET LOSS INCURRED
The term "Ultimates Net Loss Incurred" shall be understood to mean the actual
loss or losses incurred or to be incurred by Pioneer under its policies, such
loss or losses to include expenses of litigation, if any, interest accrued where
such interest is part of the judgment and all other loss expenses of Pioneer
including legal expenses and costs incurred in connection with coverage and
validity questions and legal actions connected thereto which are allocable only
to a specific claim or action on policies covered hereunder less proper
deductions for all recoveries (including amounts recoverable under other
reinsurance) and salvages actually made by the Pioneer; provided always that
nothing in this Article shall be construed to mean that losses under this
Agreement are not recoverable until Pioneer's ultimate net loss has been
ascertained.
All salvages, recoveries and payments recovered or received subsequent to a
loss settlement under this Agreement shall be applied as if recovered or
received prior to the said settlement and all necessary adjustments shall be
made by the parties hereto.
Article 8 CEDING AND RETROCEDING NET LOSS
(a) As of the effective date and time of this agreement Pioneer will cede and
Donegal will accept 100% of Pioneer's Net Liability for losses. Thereafter
Pioneer will cede and Donegal will accept 100% of Pioneer's Net Losses Incurred,
including allocated loss adjusting expense incurred. (b) As of the effective
date and time of this agreement Donegal will retrocede and Pioneer will accept
100% of the net liability for losses Donegal assumed from Pioneer and,
thereafter, Donegal will retrocede 100% of the Net Incurred Losses it assumed
from Pioneer including allocated loss adjusting expenses incurred.
Article 9 RATE AND PREMIUM
Pioneer shall pay to Donegal and Donegal will retrocede to Pioneer during the
term of this Agreement Net Earned Premium Income of Pioneer during such term in
respect of business the subject matter of this Agreement.
The term "Net Earned Premium Income" as used herein shall be understood to mean
gross premiums earned by Pioneer less premiums for reinsurance which inure to
the benefit of this Agreement.
All premiums and losses paid under this Agreement shall be made in United States
currency.
Article 10 ACCESS TO RECORDS
Pioneer and Donegal, by their duly appointed representatives, shall have the
right at any reasonable time, to examine all papers in the possession of the
other referring to business effected hereunder.
Article 11 ERRORS AND OMISSIONS
Any inadvertent delay, omission or error shall not be held to relieve either
party hereto from any liability which would attach to it hereunder if such
delay, omission or error had not been made. Such delay, omission or error shall
be rectified immediately upon discovery.
Article 12
As a precedent to any right of action hereunder, if any dispute shall arise
between Pioneer and Donegal with reference to the interpretation of this
Agreement or their rights with respect to any transaction involved, whether such
dispute arises before or after termination of this Agreement, such dispute upon
the written request of either party, shall be submitted to three
arbitrators, one to be chosen by each party, and the third by the two so
chosen. If either party refuses or neglects to appoint an arbitrator within
thirty days after the receipt of written notice from the other party requesting
it to do so, the requesting party may appoint two arbitrators. If the two
arbitrators fail to agree in the selection of a third arbitrator within thirty
days of their appointment, each of them shall name two, of whom the other shall
decline one and the decision shall be made by drawing lots. All arbitrators
shall be disinterested active or retired executive officers of insurance or
reinsurance companies or Underwriters at Lloyd's, London not under the control
of either party to this Agreement.
The Arbitrators shall interpret the Agreement and make their decision with
regard to the custom and usage of the insurance and reinsurance business. They
shall issue their 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. They shall make their award with a
view to effecting the general purpose of this Agreement in a reasonable manner
rather than in accordance with a literal interpretation of the language.
The decision in writing of any two arbitrators, when filed with the parties
hereto, shall be final and binding on both parties. Judgment may be entered upon
the final decision of the arbitrators in any court having jurisdiction. Each
party shall bear the expense of its own arbitrator and shall jointly and equally
bear with the other party the expense of the third arbitrator and of the
arbitration. Said arbitration shall take place in Marietta, Pennsylvania unless
some other place is mutually agreed upon by Pioneer and Donegal.
Article 13 INSOLVENCY FUNDS EXCLUSION CLAUSE
This Agreement excludes all liability of Pioneer arising, by contract,
operation of law, or otherwise, from its participation or membership, whether
voluntary or involuntary, in any insolvency fund. "Insolvency fund" includes any
guaranty fund, insolvency fund, plan, pool, association, fund or other
arrangement, howsoever denominated, established or governed; which provides for
any assessment of or payment or assumption by the Company of part or all of any
claim, debt, charge, fee, or other obligation of an insurer, or its successors
or assigns, which has been declared by any competent authority to be insolvent,
or which is otherwise deemed unable to meet any claim, debt, charge, fee or
other obligation in whole or in part.
