Exhibit 2.4
CROP HAIL INSURANCE
QUOTA SHARE CONTRACT
(hereinafter referred to as "Contract")
Effective: January 1, 1998
issued to
Continental Casualty Company
(hereinafter referred to as the "Company")
by
IGF Insurance Company
and its Affiliated Companies
(hereinafter collectively referred to as "Reinsurer")
ARTICLE 1 - TERM
This Contract shall apply to losses occurring on and after 12:01 a.m. Central
Standard Time, January 1, 1998 as respects new and renewal policies on business
covered by this Contract, becoming effective on and after said date and shall
continue in full force and effect until terminated as provided below.
This Contract shall terminate automatically upon the exercise of a Put Right or
Call Right as defined under the Strategic Alliance Agreement (hereinafter "SAA")
between Continental Casualty Company and IGF Holdings, Inc. and its Affiliated
Companies, to which this Contract is attached, with termination becoming
effective at the end of the Crop Year in which such Put Right or Call Right is
exercised, and no policies written after the effective time of termination shall
be covered hereunder.
ARTICLE 2 - BUSINESS COVERED
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The Company agrees to cede and the Reinsurer agrees to accept a 100% quota share
of the liabilities of the Company under all policies of Crop Hail insurance,
meaning all policies, binders, certificates, endorsements, contracts, coverage
written by Producers Lloyds Insurance Company and Pallisers Insurance Company
and reinsured by the Company, or other evidences of liability, written or
renewed by or on behalf of the Company during the term of this Contract and
classified by the Company as crop hail, including allied coverages as described
under the Company's policies (hereinafter "policies" as used in this Contract).
ARTICLE 3 - TERRITORY
This Contract applies to the territory of the Company's business covered
hereunder.
ARTICLE 4- ORIGINAL CONDITIONS
All amounts ceded hereunder shall be subject to the same gross rating and to the
same clauses, conditions, exclusions and modifications of the policies reinsured
hereunder, subject to the limits, terms and conditions of this Contract.
Except as specifically and expressly provided for in the Insolvency Article, the
provisions of this Contract are intended solely for the benefit of the parties
to and executing this Contract, and nothing in this Contract shall in any manner
create, or be construed to create, any obligations to or establish any rights
against any party to this Contract in favor of any third parties or other
persons not parties to and executing this Contract.
ARTICLE 5 - LOSSES
The Company alone and at its full discretion shall adjust, settle or compromise
all claims and losses. All such adjustments, settlements and compromises,
including ex-gratia payments, and loss expenses shall be binding on the
Reinsurer in proportion to its' participation. The Company shall likewise at its
sole discretion commence, continue, defend, compromise, settle or withdraw from
actions, suits or proceedings and generally do all such matters and things
relating to any claim or loss as in its judgment may be beneficial or expedient;
and all loss payments made shall be shared by the Reinsurer proportionately. The
Reinsurer shall, on the other hand, benefit proportionately from all reductions
of losses by salvage, compromise or otherwise.
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In the event the Company's paid losses and loss expenses exceed the Net Earned
Premium Income less ceding commission, the Reinsurer agrees to advance the
amount by which the losses exceed the Net Earned Premium Income less ceding
commission within 30 days of receipt of a written report substantiating such a
request.
ARTICLE 6 - EXCESS OF ORIGINAL POLICY LIMITS
This Contract shall protect the Company as provided in Article 2 - Business
Covered in connection with loss in excess of the limit of the original policy.
However, this Article shall not apply where the loss has been incurred due to
fraud by a member of the Board of Directors or a corporate officer of the
Company acting individually or collectively or in collusion with any individual
or corporation or any other organization or party involved in the presentation,
defense or settlement of any claim covered hereunder.
For the purpose of this Article, the word "loss" shall mean any amounts for
which the Company would have been contractually liable to pay had it not been
for the limit of the original policy.
ARTICLE 7 - EXTRA CONTRACTUAL OBLIGATIONS
This Contract shall protect the Company as provided in Article 2 - Business
Covered where the loss includes any extra contractual obligations.
The term "Extra Contractual Obligations" is defined as those liabilities not
covered under any other provision of this Contract 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 the Company to settle
within the policy limit, or by reason of alleged or actual negligence, fraud or
bad faith in rejecting an offer of settlement or in preparation of the defense
or in trial of any action against its insured, or reinsured as provided for in
Article 2, or in the preparation or prosecution of an appeal consequent upon
such action.
The date on which any Extra Contractual Obligation loss is incurred by the
Company shall be deemed, in all circumstances, to be the date of the original
occurrence, or the date the original claim is first made, whichever is
applicable.
However, this Article shall not apply where the loss has been incurred due to
fraud by a member of the Board of Directors or a corporate officer of the
Company acting individually
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or collectively or in collusion with any individual or corporation or any other
organization or party involved in the presentation, defense or settlement of any
loss covered hereunder.
ARTICLE 8 - CURRENCY
Where the word "dollars" and/or the sign "$" appear in this Contract, they shall
mean United States dollars.
For purposes of this Contract, where the Company receives premiums or pays
losses in currencies other than United States currency, such premiums or losses
shall be converted in to United States dollars at the actual rates of exchange
at which these premiums or losses are entered in the Company's books.
ARTICLE 9 - ACCOUNTS, REPORTS AND PAYMENTS
As soon as possible after the end of the season, but no later than December 15th
of each Agreement Year, with Agreement Year meaning any January 1st through
December 31st for which coverage applies under this Contract, the Company shall
provide the Reinsurer with a complete account, to include but not be limited to
the following:
Net Earned Premium income accounted for during the Agreement Year, meaning
gross earned premium income on business accounted for during that Agreement Year
less any returned premium and earned income paid for reinsurances, recoveries
under which inure to the benefit of this Contract; less
The ceding commission as provided for in this Contract: less;
Losses and loss adjustment expense paid during the Agreement Year, with loss
adjustment expense for external adjusters including part time loss adjusters
capped at 4%, except for the reinsurance agreement with Producers Lloyds
Insurance Company wherein the loss adjustment expense shall be capped at 4.5%
and as incurred under the reinsurance agreement with Pallisers Insurance
Company, of gross written premium accounted for during the Agreement Year; plus
Subrogation, salvage, or other recoveries on losses occurring during the term
of the Agreement Year being accounted for.
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Within 15 days of receipt of the Company's report, the Reinsurer shall remit any
balance due to the Company as respects such report.
As soon as possible after the conclusion of each calendar quarter and Agreement
Year the Company will provide any other information the Reinsurer may require
for its Convention Statement which may be reasonably available to the Company.
ARTICLE 10 - CEDING COMMISSION
The Reinsurer will allow the Company a ceding commission under the reinsurance
agreement with Producers Lloyds Insurance Company of 27.5% provisional and
increasing to 31.5% at a loss ratio of 48%, plus intermediary fees and under the
reinsurance agreement with Palliser Insurance Company (of 26% provisional and
increasing to 29% at 54% loss ratio, plus intermediary fees.
Return commission shall be allowed on return premiums at the same rate.
ARTICLE 11 - OFFSET
The Company or the Reinsurer shall have the right to offset any balance or
amounts due from one party to the other under the terms of this Contract. The
party asserting the right of offset may exercise such right at any time whether
the balances due are on account of premiums or losses.
ARTICLE 12 - ACCESS TO RECORDS
Upon reasonable notice, the Reinsurer, or its designated representative, shall
have access at any reasonable time to inspect and audit the books and records of
the Company which pertain in any way to this reinsurance and it may make copies
of any records pertaining thereto. This right of inspection, audit and
information shall survive termination of this Contract and shall run to the
natural expiry of all liabilities under the policies reinsured.
ARTICLE 13 - TAXES
In consideration of the terms under which this Contract is issued, the Company
undertakes not to claim any deduction of the premium hereon when making tax
returns, other than
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Income or Profits Tax returns, to any state or territory of the United States of
America or to the District of Columbia.
ARTICLE 14 - ERRORS AND OMISSIONS
Any inadvertent error, omission or delay in complying with the terms and
conditions of this Contract shall not be held to relieve either party hereto
from any liability which would attach to it hereunder if such error, omission or
delay had not been made, provided such error, omission or delay is rectified
immediately upon discovery.
ARTICLE 15 - AMENDMENTS
This Contract may be altered or amended in any of its terms and conditions by
mutual consent of the Company and the Reinsurer by an Endorsement hereto. Such
Endorsement will then constitute a part of this Contract.
ARTICLE 16 - LOSS FUNDING
This Article is only applicable to those Reinsurers who cannot qualify for
credit by the State, meaning the state, province or Federal authority having
jurisdiction over the Company's loss reserves.
As regards policies issue by the Company coming within the scope of this
Contract, the Company agrees that when it shall file with the insurance
department or set up on its books reserves for losses covered hereunder which it
shall be required to set up by law it will forward to the Reinsurer a statement
showing the proportion of such loss reserves which is applicable to them.
The Reinsurer hereby agrees that it will apply for and secure delivery to the
Company a clean irrevocable and unconditional Letter of Credit issued by a bank
chosen by the Reinsurer and acceptable to the appropriate insurance authorities,
in an amount equal to the Reinsurer's proportion of the loss reserves in respect
of known outstanding losses that have been reported to the Reinsurer and
allocated loss expenses relating thereto as shown in the statement prepared by
the Company. Under no circumstances shall any amount relating to reserves in
respect of losses or loss expenses Incurred But Not Reported be included in the
amount of the Letter of Credit.
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The Letter of Credit shall be "Evergreen" and shall be issued for a period of
not less than one year, and shall be automatically extended for one year from
its date of expiration or any future expiration date unless thirty (30) days
prior to any expiration date, the bank shall notify the Company by certified or
registered mail that it elects not to consider the Letter of Credit extended for
any additional period.
The Company, or its successors in interest, undertakes to use and apply any
amounts which it may draw upon such Credit pursuant to the terms of the Contract
under which the Letter of Credit is held, and for the following purposes only:
To pay the Reinsurer's share or to reimburse the Company for the
Reinsurer's share of any liability for loss reinsured by this Contract, the
payment of which has been agreed by the Reinsurer and which has not otherwise
been paid.
To make refund of any sum which is in excess of the actual amount required
to pay the Reinsurer's share of any liability reinsured by this Contract.
In the event of expiration of the Letter of Credit as provided for above,
to establish deposit of the Reinsurer's share of known and reported outstanding
losses and allocated loss expenses relating thereto under this Contract. Such
cash deposit shall be held in an interest bearing account separate from the
Company's other assets, and interest thereon shall accrue to the benefit of the
Reinsurer. It is understood and agreed that this procedure will be implemented
only in exceptional circumstances and that, if it is implemented, the Company
will ensure that a rate of interest is obtained for the Reinsurer on such a
deposit account that is at least equal to the rate which would have been paid by
Citibank N.A. in New York, and further that the Company will account to the
Reinsurer on an annual basis for all interest accruing on the cash deposit
account for the benefit of the Reinsurer.
The bank chosen for the issuance of the Letter of Credit shall have no
responsibility whatsoever in connection with the propriety of withdrawals made
by the Company or the disposition of funds withdrawn, except to ensure that
withdrawals are made only upon the order of properly authorized representatives
of the Company.
At annual intervals, or more frequently as agreed but never more frequently than
semiannually, the Company shall prepare a specific statement, for the sole
purpose of amending the Letter of Credit, of the Reinsurer's share of known and
reported outstanding losses and allocated loss expenses relating thereto. If the
statement shows that the Reinsurer's share of such losses and allocated loss
expenses exceeds the balance of credit as of the statement date, the Reinsurer
shall, within thirty (30) days after receipt of notice
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of such excess, secure delivery to the Company of an amendment of the Letter of
Credit increasing the amount of credit by the amount of such difference. If,
however, the statement shows that the Reinsurer's share of known and reported
outstanding losses plus allocated loss expenses relating thereto is less than
the balance of credit as of the statement date, the Company shall, within thirty
(30) days after receipt of written request from the Reinsurer, release such
excess credit by agreeing to secure an amendment to the Letter of Credit
reducing the amount of credit available by the amount of such excess credit.
ARTICLE 17 - INSOLVENCY
This reinsurance shall be payable by the Reinsurer on the basis of the liability
of the Company under Policy or Policies reinsured without diminution, because of
the insolvency of the Company, to the Company or its liquidator, receiver, or
statutory successor.
In the event of insolvency of the Company, the liquidator or receiver or
statutory successor of the Company shall give written notice to the Reinsurer of
the pendency of a claim filed against the Company on the Policy or Policies
reinsured 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 which it may deem available to the
Company or its liquidator or receiver or statutory successor. The expenses 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 benefits which may accrue to the Company solely as a
result of the defense so undertaken by the Reinsurer.
Should the Company go into liquidation or should a receiver be appointed, the
Reinsurer shall be entitled to deduct from any sums which may be or may become
due to the Company under this reinsurance Contract, any sums which are due to
the Reinsurer by the Company under this Contract and which are payable at a
fixed or stated date, as well as any other sums due to the Reinsurer which are
permitted to be offset under applicable law.
It is further understood and agreed that, in the event of the insolvency of the
Company, the reinsurance under this Contract shall be payable directly by the
Reinsurer to the Company or to its liquidator, receiver or statutory successor,
except a) where this Contract specifically provides another payee of such
reinsurance in the event of the insolvency of the Company and b) where the
Reinsurer with the consent of the direct insured or insureds has assumed
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such policy obligations of the Company as direct obligations of the Reinsurer to
the payees under such policies and in substitution for the obligations of the
Company to such payees.
In no event shall anyone other than the parties to this Contract or, in the
event of the Company's insolvency, its liquidator, receiver, or statutory
successor, have any rights under this Contract.
ARTICLE 18 - ARBITRATION
As a condition precedent to any right of action hereunder, any dispute arising
out of the interpretation, performance or breach of this Contract, including the
formation or validity thereof, shall be submitted for decision to a panel of
three arbitrators. Notice requesting arbitration will be in writing and sent
certified mail, return receipt requested.
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 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 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, 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, Underwriters at Lloyd's London not under the
control of either party to this Contract, or a qualified arbitrator supplied by
the AAA.
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.
The panel shall be relieved of all judicial formality and shall not be bound by
the strict rules of procedure and evidence. Arbitration shall take place in
Chicago, Illinois. Insofar as the arbitration panel looks to substantive law, it
shall consider the law of the State of Illinois. 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.
The panel shall make its decision considering the custom and practice of the
applicable insurance and reinsurance business as promptly as possible following
the termination of the hearings. Judgment upon the award may be entered in any
court having jurisdiction thereof.
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Each party shall bear the expense of its own arbitrator and shall jointly and
equally bear with the other party the cost of the third arbitrator. The
remaining costs of the arbitration shall be allocated by the panel. The panel
may, at its discretion, award such further costs and expenses as it considers
appropriate, including but not limited to attorneys fees, to the extent
permitted by law. The panel is prohibited from awarding punitive, exemplary or
treble damages, of whatever nature, in connection with any arbitration
proceeding concerning this Contract.
ARTICLE 19 - CHOICE OF LAW
This Contract, including all matters relating to formation, validity and
performance thereof, shall be interpreted in accordance with the law of the
State of Illinois.
ARTICLE 20 - INTER-COMPANY POOLING
It is understood and agreed that the Company has entered into the CNA
Reinsurance Pooling Agreement whereby it assumes 100% (one hundred percent) of
the liability of the other participants in the CNA Reinsurance Pooling
Agreement. This present Contract protects such assumed liability and attaches
prior to redistribution, if any, within the participating companies. Such
redistribution shall be disregarded for all purposes of this present Contract.
For all purposes of this present Contract, other member companies of the CNA
Reinsurance Pooling Agreement are: National Fire Insurance Company of Hartford,
American Casualty Company of Reading Pennsylvania, Transportation Insurance
Company, Transcontinental Insurance Company, Valley Forge Insurance Company, CNA
Casualty of California, CNA Lloyd's of Texas and Columbia Casualty Company.
It is also understood and agreed that the Company shall include the insurance
companies of the Continental Corporation which are affiliated with, controlled
by or under common management of CNA.
ARTICLE 21 - ENTIRE CONTRACT
This Contract and that certain Strategic Alliance Agreement, the Ancillary
Agreements, Crop Hail Insurance Services and Indemnity Agreement, MPCI Insurance
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Services and Indemnity, Multiple Peril Crop Insurance Quota Share Agreement
effective July 1, 1997, Multiple Peril Crop Insurance Quota Share Reinsurance
Contract effective July 1, 1997, and the Crop Hail Quota Share Agreement -
effective January 1, 1998, between the parties, represent the entire agreement
and understanding among the parties. No other oral or written agreements or
contracts relating to the risks reinsured hereunder currently exist and/or are
contemplated between the parties.
ARTICLE 22 - SEVERABILITY
If any law or regulation of any Federal, State, or Local Government of the
United States of America or the provinces of Canada or the ruling officials of
any supervision over insurance companies, should render illegal this Contract,
or any portion thereof, as to risks or properties located in the jurisdiction of
such authority, either the Company or the Reinsurer may upon written notice to
the other suspend, abrogate, or amend this Contract insofar as it relates to
risks or properties located within such jurisdiction to such extent as may be
necessary to comply with such law, regulations or ruling.
Such illegality, suspension, abrogation, or amendment of a portion of this
Contract shall in no way affect any other portion thereof.
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IN WITNESS WHEREOF the parties acknowledge that no intermediary is involved in
or brought about this transaction, and the parties hereto, by their authorized
representatives, have executed this Contract:
on this day of 1998
CONTINENTAL CASUALTY COMPANY
By: ________________________________________________
Attested by: _________________________________________
and on this day of 1998
IGF INSURANCE COMPANY
and its AFFILIATED COMPANIES
By: ________________________________________________
Attested by:__________________________________________
CROP HAIL INSURANCE
QUOTA SHARE CONTRACT
(referred to as the "Contract")
Effective: January 1, 1998
issued to
Continental Casualty Company
(referred to as the "Company")
by
IGF Insurance Company
and its Affiliated Companies
(referred to as the "Reinsurer")
