MULTI-LINE EXCESS OF LOSS REINSURANCE AGREEMENT
between
DONEGAL MUTUAL INSURANCE COMPANY
(Marietta, PA)
SOUTHERN INSURANCE COMPANY OF VIRGINIA
(Glen Allen, VA)
SOUTHERN HERITAGE INSURANCE COMPANY
(Duluth, Georgia)
ATLANTIC STATES INSURANCE COMPANY
(Marietta, PA)
PIONEER INSURANCE COMPANY
(Greenville, NY)
PIONEER INSURANCE COMPANY
(Greenville, OH)
DELAWARE ATLANTIC INSURANCE COMPANY
(Wilmington, DE)
(hereinafter collectively called the "Reinsured")
and
The Reinsurers subscribing to the respective Interests and Liabilities
Contract to which this Agreement is attached (hereinafter called the
"Reinsurer")
ARTICLE 1 BUSINESS COVERED
This Agreement, subject to the terms and conditions herein contained, is to
indemnify the Reinsured in respect of the net excess liability as herein
provided and specified which may accrue to the Reinsured as a result of any loss
or losses which may occur or claims which may be made during the term of this
Agreement arising out of any and all binders, policies, and contracts of
insurance (hereinafter referred to as "policy" or "policies") heretofore or
hereafter issued or entered into by or on behalf of the Reinsured and classified
by the Reinsured as Property and Casualty, to include Property, Multi-Peril
Policies, General Liability, Workers' Compensation and Automobile.
ARTICLE 2 TERRITORY
This Agreement shall cover wherever the Reinsured's policies cover.
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ARTICLE 3 EXCLUSIONS
This Agreement shall not cover business classified by the Reinsured as:
1. Pools, Associations, or Syndicates, including State Insurance Guaranty
Associations. However, such operations which the Reinsured is obliged
to cover by reason of membership in the National Workers' Compensation
Reinsurance Pool or any state Workers' Compensation Assigned Risk Pool
or Plan or participation in any Automobile Assigned Risk Pool, Plan or
Facility are not to be excluded. Furthermore, this exclusion shall not
apply to any Inter-Company Pooling.
2. Insurance on Growing and/or Standing Crops.
3. Reinsurance of any kind assumed by the Reinsured, except local agency
reinsurance accepted in the normal course of business.
4. War, as defined in the original policy.
5. Bridges, tunnels and art collections valued at over $1,000,000.
6. Loss or liability excluded by the provisions of:
a. Nuclear Incident Exclusion Clause - Physical Damage -
Reinsurance
b. Nuclear Incident Exclusion Clause - Liability - Reinsurance
c. Nuclear Incident Exclusion Clause - Physical Damage and
Liability (Boiler and Machinery Policies) - Reinsurance
as per clauses attached hereto.
7. Boiler and Machinery with the exception of that business covered under
a standard multiple peril policy.
8. Stevedoring.
9. United States Longshoremen and Harbor Workers Act Exposure.
10. Xxxxx Act Exposure.
11. Workers' Compensation on all mining operations.
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12. Workers' Compensation on operations employing the process of nuclear
fission or fusion or handling of radioactive material.
13. Long haul trucking.
14. Vehicles used as a public or livery conveyance for passengers except
courtesy cars and civic, charitable or welfare organization buses.
15. Medical Malpractice.
16. Professional liability, except Druggists, Morticians, Beauty Shops,
Pastoral, Opticians, Condominium Directors and Officers Liability and
Employee Benefits Liability.
17. Aviation and Ocean Marine.
18. Fidelity, Surety, Credit, Title, Insolvency and Financial Guaranty with
the exception of that business covered under a standard multiple peril
policy.
19. Insolvency Funds, as per clause attached.
20. Manufacturing of pharmaceuticals and/or chemicals.
21. Railroad Operations.
22. Racing or speed contests.
23. Earthquake and flood when written as such.
24. Difference in conditions insurance.
25. Asbestos manufacturing.
26. Transportation of liquified petroleum gas and/or explosives.
27. Commercial ambulance service.
28. Manufacture of firearms.
Other than as respects risks excluded in 1-6, 11, 12, 15, 17-28 above, the
exclusions listed in this Article shall not be considered applicable when the
excluded Class constitutes an incidental part of the insured's regular business
operations.
In the event the Reinsured is bound on any risk excluded above without the
knowledge of and/or contrary to the instructions of the Reinsured's supervisory
underwriting personnel, the reinsurance provided under this Agreement shall
apply until terminated or first anniversary whichever should first occur.
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ARTICLE 4 TERM AND CANCELLATION
A. This Agreement shall become effective on January 1, 2002 at 12:01 A.M.,
Standard Time. It is unlimited as to its duration and may be terminated
as of any January 1st at 12:01 A.M., Standard Time by either party upon
giving to the other party hereto no less than ninety (90) days' notice
of cancellation in writing by mail. In the event either party
terminates in accordance with the above, the Reinsurer shall continue
to participate in all reinsurances coming within the terms of this
Agreement granted or renewed by the Reinsured within the said ninety
(90) days.
In the event of termination the Reinsurer shall (1) remain liable for
losses occurring or claims made prior to such termination date and (2)
at the option of the Reinsured, shall remain liable at the same terms
and conditions with respect to policies in force at the date of
termination until the expiration, cancellation or next anniversary of
such acceptance, whichever first occurs, but not for any more than
twelve months following the date of termination plus odd time, if any,
not to exceed eighteen months in all.
B. This Agreement shall apply as follows:
(1) As respects all policies written on a claims-made basis,
claims made during the term of this Agreement. The date of
loss, for purposes of this Agreement, shall be understood to
mean the date that the claim was made against the Reinsured or
the date as otherwise provided under the original claims-made
policy.
In the event the Reinsured provides an Extended Reporting
Period which becomes effective during the term of this
Agreement the Reinsurer shall continue to be liable for claims
received by the Reinsured or original insured under the
reporting provisions of the original claims-made policy during
such Extended Reporting Period, provided always that the loss
which results in any such claim takes place prior to the
effective date of the Extended Reporting Period. For purposes
hereof, the date of loss for claims received during the
Extended Reporting Period shall be the expiration, anniversary
or cancellation date of the policy to which the Extended
Reporting Period was attached.
(2) As respects all other business covered hereunder, losses
arising during the term of this Agreement.
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C. In the event of a loss involving one or more policies the following shall
apply:
(1) Where one or more occurrence policies are involved in the same
loss, the date of the loss shall determine the recovery
hereon.
(2) Where one or more claims-made policies are involved in the
same loss, the date of the first claim reported during the
treaty period, including those reported under an Extended
Reporting Period which became effective during the treaty
period, shall determine the recovery hereon. Any further
claims reported during and subsequent to the annual treaty
period relating to the same loss will go toward the retention
in the treaty year in which the first claim was made.
(3) Where one or more claims-made policies and one or more
occurrence policies are involved in the same loss, the date of
loss under the occurrence policy shall determine the recovery
hereon. Any further claims reported during and subsequent to
the annual treaty period relating to the same loss will go
toward the retention in the treaty year in which the first
claim was made.
ARTICLE 5 DEFINITION OF LOSS OCCURRENCE
As respects Casualty:
The term "loss occurrence", as used herein, shall mean any one occurrence or
series of occurrences arising out of one event. Occupational Disease under
Workers' Compensation policies shall be deemed to be an occurrence within the
meaning of this Agreement and each case of an employee contracting any disease
for which the Company may be held liable shall be considered as constituting a
separate or distinct occurrence. The date of such occurrence shall be deemed to
be the following:
(1) If the case is compensable under the Workers' Compensation Law, the
date of the beginning of the disability for which compensation is
payable.
(2) If the case is not compensable under the Workers' Compensation Law, the
date that disability due to said disease actually began.
(3) If the claim is made after employment has ceased, the date of cessation
of such employment.
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As respects Property:
The term "Loss Occurrence" as used herein shall mean the sum of all individual
losses occasioned by any one disaster, accident or loss or series of disasters,
accidents or losses arising out of one event which occurs within the area of one
state of the United States or province of Canada and states or provinces
contiguous thereto and to one another. However, the duration and extent of any
one "Loss Occurrence" shall be limited to all individual losses sustained by the
Reinsured occurring during any period of 168 consecutive hours arising out of
and directly occasioned by the same event except that the term "Loss Occurrence"
shall be further defined as follows:
i) As regards windstorm, hail, tornado, hurricane, cyclone, including
ensuing collapse and water damage, all individual losses sustained by
the Reinsured occurring during any period of 72 consecutive hours and
arising out of and directly occasioned by the same event. However, the
event need not be limited to one state or province or states or
provinces contiguous thereto.
ii) As regards riot, riot attending a strike, civil commotion, vandalism
and malicious mischief, all individual losses sustained by the
Reinsured occurring during any period of 72 consecutive hours within
the area of one municipality or county and the municipalities or
counties contiguous thereto arising out of and directly occasioned by
the same event. The maximum duration of 72 consecutive hours may be
extended in respect of individual losses which occur beyond such 72
consecutive hours during the continued occupation of an assured's
premises by strikers, provided such occupation commenced during the
aforesaid period.
iii) As regards earthquake (the epicenter of which need not necessarily be
within the territorial confines referred to in the opening paragraph of
this article) and fire following directly occasioned by the earthquake,
only those individual fire losses which commence during the period of
168 consecutive hours may be included in the Reinsured's "Loss
Occurrence".
iv) As regards "Freeze", only individual losses directly occasioned by
collapse, breakage of glass and water damage (caused by bursting of
frozen pipes and tanks) may be included in the Reinsured's "Loss
Occurrence".
Except for those "Loss Occurrences" referred to in (i) and (ii) the Reinsured
may choose the date and time when any such period of consecutive hours commences
provided that it is not earlier than the date and time of the occurrence of the
first recorded individual loss sustained by the Reinsured arising out of that
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disaster, accident or loss and provided that only one such period of 168
consecutive hours shall apply with respect to one event.
However, as respects those "Loss Occurrences" referred to in (i) and (ii), if
the disaster, accident or loss occasioned by the event is of greater duration
than 72 consecutive hours, then the Reinsured may divide that disaster, accident
or loss into two or more "Loss Occurrences" provided no two periods overlap and
no individual loss is included in more than one such period and provided that no
period commences earlier than the date and time of the occurrence of the first
recorded individual loss sustained by the Reinsured arising out of that
disaster, accident or loss.
No individual losses occasioned by an event that would be covered by 72 hours
clauses may be included in any "Loss Occurrence" claimed under the 168 hours
provision.
Losses directly or indirectly occasioned by:
i) loss of, alteration of, or damage to
or
ii) a reduction in the functionality, availability or operation of
a computer system, hardware, program, software, data, information repository,
microchip, integrated circuit or similar device in computer equipment or
non-computer equipment, whether the property of the policyholder of the
Reinsured or not, do not in and of themselves constitute an event unless arising
out of one or more of the following perils:
fire, lightning, explosion, aircraft or vehicle impact, falling
objects, windstorm, hail, tornado, cyclone, hurricane, earthquake,
volcano, tsunami, flood, freeze or weight of snow.
ARTICLE 6 NET RETAINED LINES
This Agreement applies only to that portion of any insurance or reinsurance
covered by this Agreement which the Reinsured 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 the Reinsured
retains net for its own account shall be included, it being understood and
agreed that the amount of the Reinsurer's liability hereunder in respect of any
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loss or losses shall not be increased by reason of the inability of the
Reinsured 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 insolvency of such other reinsurers or otherwise.
It is understood and agreed that any inter-company pooling shall be disregarded
for purposes of determining the Net Retained Lines hereunder.
ARTICLE 7 ULTIMATE NET LOSS
The term "Ultimate Net Loss" shall be understood to mean the actual loss or
losses paid or to be paid by the Reinsured under its policies, including 90% of
any losses in Excess of Original Policy Limits, as defined in Article 8, and 90%
of any Extra Contractual Obligations, as defined in Article 9, 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 the Reinsured
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 (including a pro
rata share of salaries and expenses of the Reinsured's field employees while
adjusting such claims or losses and expenses of the Reinsured's officials
incurred in connection with claims or losses, but no salaries of the Reinsured's
officials or any normal overhead charges such as rent, postal, lighting,
cleaning, heating, etc., shall be included) less proper deductions for all
recoveries (including amounts recoverable under other reinsurance except
reinsurance, if any, inuring to the benefit of the Reinsured) and salvages
actually made by the Reinsured; provided always that nothing in this Article
shall be construed to mean that losses under this Agreement are not recoverable
until the Reinsured'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 EXCESS OF ORIGINAL POLICY LIMITS
This Agreement shall protect the Reinsured, within the limits hereof, in
connection with ultimate net loss in excess of the limit of its original policy,
such loss in excess of the limit having been incurred because of failure by it
to settle within the policy limit or by reason of alleged or actual negligence,
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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 Reassured or in
the preparation or prosecution of an appeal consequent upon such action.
However, this Article shall not apply where the loss has been incurred due to
the fraud of a member of the Board of Directors or a corporate officer of the
Reinsured 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 purposes of this Article, the word "loss" shall mean any amounts for
which the Reinsured would have been contractually liable to pay had it not been
for the limit of the original policy.
Furthermore, if any provision of this Article shall be rendered illegal or
unenforceable by the laws, regulations or public policy of any state, such
provision shall be considered void in such state, but this shall not affect the
validity or enforceability of any other provision of this Agreement or the
enforceability of such provision in any other jurisdiction.
ARTICLE 9 EXTRA CONTRACTUAL OBLIGATIONS CLAUSE
This Agreement shall protect the Reinsured within the limits hereof, where the
ultimate net loss includes any Extra Contractual Obligations. "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 the Reinsured 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 Reassured or in the preparation or prosecution of
an appeal consequent upon such action.
The date on which an Extra Contractual Obligation is incurred by the Reinsured
shall be deemed, in all circumstances, to be the date of the original accident,
casualty, disaster or loss occurrence.
However, this Article shall not apply where the loss has been incurred due to
the fraud of a member of the Board of Directors or a corporate officer of the
Reinsured acting individually or collectively or in collusion with any
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individual or corporation or any other organization or party involved in the
presentation, defense or settlement of any claim covered hereunder.
Furthermore, if any provision of this Article shall be rendered illegal or
unenforceable by the laws, regulations or public policy of any state, such
provision shall be considered void in such state, but this shall not affect the
validity or enforceability of any other provision of this Agreement or the
enforceability of such provision in any other jurisdiction.
ARTICLE 10 LIMITS AND RETENTIONS
(A) As respects business classified by the Reinsured as Property:
No claim shall be made upon the Reinsurer unless and until the Reinsured shall
have first sustained an ultimate net loss in excess of $300,000 each risk each
loss and then the Reinsurer shall be liable for the ultimate net loss sustained
by the Reinsured in excess of $300,000 in respect of each risk each loss. The
limit of liability of the Reinsurer in respect of each risk each loss shall be
$700,000 and $2,800,000 in respect of each occurrence.
The Reinsured shall be the sole judge as to what constitutes any one risk.
(B) As respects business classified by the Reinsured as Casualty:
No claim shall be made upon the Reinsurer unless and until the Reinsured shall
have first sustained an ultimate net loss in excess of $300,000 each and every
loss occurrence and then the Reinsurer shall be liable for the ultimate net loss
sustained by the Reinsured in excess of $300,000 in respect of each such loss
occurrence. The limit of liability of the Reinsurer in respect of any one such
loss occurrence shall be $700,000.
Notwithstanding the foregoing paragraphs, where the original policy or policies
of the Reinsured provide for aggregate limits of liability, this Agreement shall
cover excess of $300,000 ultimate net loss in the aggregate for such aggregate
liability any one original policy year, but such sums recoverable hereunder
shall not exceed $700,000 ultimate net loss in the aggregate any one policy
year.
"Policy year" shall mean "each separate original policy period of not exceeding
twelve months commencing at the inception, anniversary or renewal date as and
from January 1, 2002."
"Aggregate" shall mean "ultimate net loss incurred in the aggregate during any
one policy year".
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(C) In respect of a combination loss involving both (A) and (B) above, the
limit of the Reinsurer shall be $1,700,000 ultimate net loss and the
amount retained by the Reinsured shall be $300,000 each loss
occurrence.
It is agreed, however, that not more than one property risk shall be included in
any such combination accident or occurrence.
Recoveries from a loss or losses caused by Terrorism (as defined in this
Agreement) shall be limited to $2, 100,000 during each 12 month period (January
1 through December 31) this Agreement remains in effect.
ARTICLE 11 DEFINITION OF TERRORISM
An act of terrorism includes any act or preparation in respect of action, or
threat of action designed to influence the government de jure or de factor of
any nation or any political division thereof, or in pursuit of political,
religious, ideological, or similar purposes to intimidate the public or a
section of the public of any nation by any person or group(s) of persons whether
acting alone or on behalf of or in connection with any organization(s) or
government(s) de jure or de factor, and which:
i) involves violence against one or more persons; or
ii) involves damage to property; or
iii) endangers life other than that of the person committing the action; or
iv) creates a risk to health or safety of the public or a section of the
public; or
v) is designed to interfere with or to disrupt an electronic system.
An act of terrorism also includes loss, damage, cost or expense directly or
indirectly caused by, contributed to by resulting from, or arising out of or in
connection with any action in controlling, preventing, suppressing, retaliating
against, or responding to any act of terrorism.
ARTICLE 12 RATE AND PREMIUM
The Reinsured shall pay to the Reinsurer during each annual period of this
Agreement premium calculated by applying a rate of 3.50% to the gross net earned
premium income of the Reinsured during such period in respect of business the
subject matter of this Agreement.
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The term "gross net earned premium income" as used herein shall be understood to
mean gross premiums earned by the Reinsured less premiums paid for reinsurances
which inure to this Agreement. It is understood that 50% of Automobile Physical
Damage premiums, other than collision, shall be deducted for theft during the
period for which computation is being made.
The Reinsured shall pay to the Reinsurer an annual deposit premium of
$7,150,000. Said deposits shall be payable in quarterly installments of
$1,787,500 at each January 1, April 1, July 1 and October 1.
As soon as practicable after each January 1, 2003, the Reinsured shall submit a
statement showing the actual premium due for the term calculated in accordance
with the first paragraph of this Article, and the debtor party shall remit to
the other the amount due, if any, by which the actual premium differs from the
deposit premium, subject to the annual minimum premium of $5,720,000.
ARTICLE 13 CURRENCY
All premiums and losses paid under this Agreement shall be made in United States
currency.
ARTICLE 14 NOTICE OF LOSS AND LOSS SETTLEMENTS
In the event of a loss occurrence which either results in or appears to be of
serious enough nature as probably to result in a loss involving this Agreement,
the Reinsured shall give notice as soon as reasonably practicable to the
Reinsurer and the Reinsured shall keep the Reinsurer advised of all subsequent
developments in connection therewith.
The Reinsurer agrees to abide by the loss settlements of the Reinsured, such
settlements to be considered as satisfactory proof of loss, and amounts falling
to the share of the Reinsurer shall be immediately payable to the Reinsured by
them upon reasonable evidence of the amount paid or to be paid by the Reinsured.
ARTICLE 15 ACCESS TO RECORDS
The Reinsurer, by its duly appointed representatives, shall have the right at
any reasonable time, to examine all papers in the possession of the Reinsured
referring to business effected hereunder.
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ARTICLE 16 STATISTICS
The Reinsured shall furnish the Reinsurer such quarterly and annual statistics
as may be necessary to comply with statutory requirements and in such form as
may be mutually agreed upon.
ARTICLE 17 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 18 TAXES
In consideration of the terms under which this Agreement is issued, the
Reinsured undertakes not to claim any deduction in respect of the premium hereon
when making tax returns other than Income or Profits Tax returns to any State or
Territory or the District of Columbia.
ARTICLE 19 FEDERAL EXCISE TAX
(Applies only to those Reinsurers, excepting Underwriters at Lloyd's, London and
other Reinsurers exempt from the Federal Excise Tax, who are domiciled outside
the United States of America.)
The Reinsurer has agreed to allow for the purpose of paying the Federal Excise
Tax the percentage specified by United States law of the premium payable hereon
to the extent such premium is subject to Federal Excise Tax.
In the event of any return of premium becoming due hereunder the Reinsurer will
deduct the percentage specified by United States law from the amount of the
return and the Reinsured or its agent should take steps to recover the Tax from
the U.S. Government.
ARTICLE 20 LOSS RESERVES
(This Clause is applicable to any Reinsurer who does not qualify for credit by
states having jurisdiction over the Reinsured.)
At annual intervals (or more frequently as determined by the Reinsured, but not
more frequently than quarterly) the Reinsured will submit to the Reinsurer a
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statement showing the proportion of losses, as defined below, applicable to the
Reinsurer.
The Reinsurer will apply for, and secure delivery thereof to the Reinsured, a
clean, irrevocable and unconditional Letter of Credit in an amount equal to the
Reinsurer's share of said losses. The Letter of Credit shall be issued by a
United States bank which is a member of the Federal Reserve System and which is
acceptable to the Insurance Departments of such states.
If, as of a statement date, the Reinsurer's share of losses under this Agreement
shall exceed the then available balance of the Letter of Credit, the Reinsurer
shall, within thirty (30) days after receiving such statement, secure delivery
to the Reinsured of an amendment to the clean, irrevocable and unconditional
Letter of Credit increasing the balance of the Letter of Credit available by the
amount of such difference.
If the Reinsurer's share of losses under this Agreement shall be less than the
then available balance of the Letter of Credit, the Reinsured shall, within
thirty (30) days after receipt of written request of Reinsurer, release such
excess amount by agreeing to consent to an amendment to the Letter of Credit
reducing the balance of the Letter of Credit available by the amount of such
excess.
The Reinsured undertakes to use and apply any amounts which it may draw upon the
Letter of Credit, without diminution because of the insolvency of the Reinsured
or Reinsurer, notwithstanding any other provision in this contract, only for one
or more of the following purposes:
(1) To pay or reimburse itself for the Reinsurer's share of losses
paid by the Reinsured for which the Reinsurer is obligated to
reimburse the Reinsured, if not otherwise paid by the
Reinsurer.
(2) To obtain a cash deposit of the Reinsurer's share under this
contract of losses, if the clean, irrevocable and
unconditional Letter of Credit is not renewed at least thirty
(30) days before the expiration thereof, and the Reinsurer
shall continue thereafter to have a share in such losses.
(3) To pay any other amounts the Reinsured claims are due under
this reinsurance contract.
The Reinsured will immediately return to the Reinsurer any amounts drawn down on
the Letter of Credit that are subsequently determined not to be due.
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The term "losses" as used in this Article shall include:
losses and allocated loss adjustment expenses paid by the Reinsured but
not recovered (in proportion) from the Reinsurer,
reserves for losses reported and outstanding, losses incurred but not
reported, and allocated loss adjustment expenses.
ARTICLE 21 INSOLVENCY
In the event of the insolvency of the Reinsured, this reinsurance shall be
payable directly to the Reinsured, or to its liquidator, receiver, conservator
or statutory successor on the basis of the liability of the Reinsured without
diminution because of the insolvency of the Reinsured or because the liquidator,
receiver, conservator or statutory successor of the Reinsured has failed to pay
all or a portion of any claim. It is agreed, however, that the liquidator,
receiver, conservator or statutory successor of the Reinsured shall give written
notice to the Reinsurer of the pendency of a claim against the Reinsured
indicating the policy or bond reinsured which claim would involve a possible
liability on the part of the Reinsurer within a reasonable time after such claim
is filed in the conservation or liquidation proceeding or in the receivership,
and that during the pendency of such claim, the Reinsurer may investigate such
claim and interpose, at its own expense, in the proceeding where such claim is
to be adjudicated any defense or defenses that they may deem available to the
Reinsured or its liquidator, receiver, conservator or statutory successor. The
expense thus incurred by the Reinsurer shall be chargeable subject to the
approval of the court, against the Reinsured as part of the expense of
conservation or liquidation to the extent of a pro rata share of the benefit
which may accrue to the Reinsured solely as a result of the defense undertaken
by the Reinsurer.
Where two or more Reinsurers are involved in the same claim and a majority in
interest elect to interpose defense to such claim, the expense shall be
apportioned in accordance with the terms of the reinsurance agreement as though
such expense had been incurred by the Reinsured.
The reinsurance shall be payable by the Reinsurer to the Reinsured or to its
liquidator, receiver, conservator or statutory successor, except as provided by
subsection a of Section 4118 of the New York Insurance Law or except (a) where
the Agreement specifically provides another payee of such reinsurance in the
event of the insolvency of the Reinsured, or (b) where the Reinsurer with the
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consent of the direct insured or insureds has assumed such policy obligations of
the Reinsured as direct obligations of the Reinsurer to the payees under such
policies and in substitution for the obligations of the Reinsured to such
payees.
However, in the event of insolvency of any one of the Reinsureds, each party
agrees to honor the terms set forth herein as if this Agreement were a separate
agreement between the Reinsurer and each individually named Reinsured. Balances
payable or recoverable by any Reinsurer or each individually named Reinsurer or
individually named Reinsured shall not serve to offset any balances payable or
recoverable to or from any other Reinsured party to this Agreement. Reports and
remittances made to the Reinsurer in accordance with Articles 11 and 14 are to
be in sufficient detail to identify both the Reinsurer's loss obligations due
each Reinsured and each Reinsured's premium remittance under the report. In the
event that the policies of two or more individually named Reinsureds are
involved in the same casualty loss occurrence, the retention shall be $300,000
as respects the Ultimate Net Loss for all Reinsureds added together, and the
loss recoverable for each individually named Reinsured shall be in the same
proportion that the individually named Reinsured's loss bears to the total
Ultimate Net Loss. However, regardless of the number of individually named
Reinsureds involved in one loss occurrence, in no event will the Reinsurer be
liable for more than $700,000 each risk each loss and $2,800,000 in respect of
each occurrence as respects property, $700,000 each and every loss occurrence as
respects casualty and $1,700,000 each loss occurrence as respects a combined
property and casualty loss.
ARTICLE 22 ARBITRATION
As a precedent to any right of action hereunder, if any dispute shall arise
between the Reinsured and the Reinsurer 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 active
or retired executive officers of insurance or reinsurance companies not under
the control of either party to this Agreement.
16
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 the Reinsured and the Reinsurer.
ARTICLE 23 SERVICE OF SUIT
(Applies only to those Reinsurers who are domiciled outside the United States
and/or unauthorized in any state, territory, or district of the United States
having jurisdiction over the Reinsured.)
In the event of the failure of the Reinsurer hereon to pay any amount claimed to
be due hereunder the Reinsurer hereon, at the request of the Reinsured, will
submit to the jurisdiction of any court of competent jurisdiction within the
United States and will comply with all requirements necessary to give such court
jurisdiction and all matters arising hereunder shall be determined in accordance
with the law and practice of such court.
Service of process in such suit may be made upon Messrs. Mendes and Mount, 000
Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000-0000, and that any suit instituted
against any one of them under this Agreement, the Reinsurer will abide by the
final decision of such court or of any Appellate Court in the event of an
appeal.
The above-named are authorized and directed to accept service of process on
behalf of the Reinsurer in any such suit and/or upon the request of the
Reinsured to give a written undertaking to the Reinsured that they will enter a
general appearance upon the Reinsurer's behalf in the event such suit shall be
instituted. Further, pursuant to any statute of any state, territory or district
of the United States which makes provision therefor, the Reinsurer hereon hereby
17
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 their 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 Reinsured or any beneficiary hereunder arising out of this Agreement and
hereby designate the above-named as the person to whom the said officer is
authorized to mail such process or a true copy thereof.
ARTICLE 24 WRITTEN AGREEMENT
There are no other agreements between the Reinsurer and the Reinsured regarding
the reinsurance provided by this Agreement, including but not limited to
agreements which directly or indirectly guarantee a profit under this Agreement
for either party.
ARTICLE 25 INTERMEDIARY
Xxxx X. Xxxxx Co., Inc., is hereby recognized as the intermediary through whom
all communications relating hereto (including but not limited to notices,
statements, premiums, return premiums, commissions, taxes, losses, loss
adjustment expenses, salvage and loss settlement) shall be transmitted to both
parties. It is understood, as regards remittances due either party hereunder,
that payment by the Reinsured to Xxxx X. Xxxxx Co., Inc. shall constitute
payment to the Reinsurer, but payment by the Reinsurer to Xxxx X. Xxxxx Co.,
Inc., shall only constitute payment to the Reinsured to the extent such payments
are actually received by the Reinsured.
18
NUCLEAR INCIDENT EXCLUSION CLAUSE -
PHYSICAL DAMAGE - REINSURANCE
1. This Reinsurance does not cover any loss or liability accruing to the
Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, from any
Pool of Insurers or Reinsurers formed for the purpose of covering Atomic or
Nuclear Energy risks.
2. Without in any way restricting the operation of paragraph (1) of this
Clause, this Reinsurance does not cover any loss or liability accruing to the
Reinsured, directly or indirectly and whether as Insurer or Reinsurer, from any
insurance against Physical Damage (including business interruption or
consequential loss arising out of such Physical Damage) to:
I. Nuclear reactor power plants including all auxiliary
property on the site, or
II. Any other nuclear reactor installation, including
laboratories handling radioactive materials in
connection with reactor installations, and "critical
facilities" as such, or
III. Installations for fabricating complete fuel elements
or for processing substantial quantities of "special
nuclear material", and for reprocessing, salvaging,
chemically separating, storing or disposing of
"spent" nuclear fuel or waste materials, or
IV. Installations other than those listed in paragraph
(2) III above using substantial quantities of
radioactive isotopes or other products of nuclear
fission.
3. Without in any way restricting the operations of paragraphs (1) and
(2) hereof, this Reinsurance does not cover any loss or liability by radioactive
contamination accruing to the Reinsured, directly or indirectly, and whether as
Insurer or Reinsurer, from any insurance on property which is on the same site
as a nuclear reactor power plant or other nuclear installation and which
normally would be insured therewith except that this paragraph (3) shall not
operate
(a) where Reinsured does not have knowledge of such nuclear
reactor power plant or nuclear installation, or
19
(b) where said insurance contains a provision excluding coverage
for damage to property caused by or resulting from radioactive
contamination, however caused. However on and after 1st
January 1960 this sub-paragraph (b) shall only apply provided
the said radioactive contamination exclusion provision has
been approved by the Governmental Authority having
jurisdiction thereof.
4. Without in any way restricting the operations of paragraphs (1), (2)
and (3) hereof, this Reinsurance does not cover any loss or liability by
radioactive contamination accruing to the Reinsured, directly or indirectly, and
whether as Insurer or Reinsurer, when such radioactive contamination is a named
hazard specifically insured against.
5. It is understood and agreed that this Clause shall not extend to
risks using radioactive isotopes in any form where the nuclear exposure is not
considered by the Reinsured to be the primary hazard.
6. The term "special nuclear material" shall have the meaning given it
in the Atomic Energy Act of 1954, or by any law amendatory thereof.
7. Reinsured to be sole judge of what constitutes:
(a) substantial quantities, and
(b) the extent of installation, plant or site.
NOTE: Without in any way restricting the operation of paragraph (1) hereof, it
is understood and agreed that
(a) all policies issued by the Reinsured on or before 31st
December 1957 shall be free from the application of the other
provisions of this Clause until expiry date or 31st December
1960 whichever first occurs whereupon all the provisions of
this Clause shall apply.
(b) with respect to any risk located in Canada policies issued by
the Reinsured on or before 31st December 1958 shall be free
from the application of the other provisions of this Clause
until expiry date or 31st December 1960 whichever first occurs
whereupon all the provisions of this Clause shall apply.
20
NUCLEAR INCIDENT EXCLUSION CLAUSE - LIABILITY -
REINSURANCE, U.S.A.
(1) This reinsurance does not cover any loss or liability accruing to
the Reinsured as a member of, or subscriber to, any association of insurers or
reinsurers formed for the purpose of covering nuclear energy risks or as a
direct or indirect reinsurer of any such member, subscriber or association.
(2) Without in any way restricting the operation of paragraph (1) of
this Clause it is understood and agreed that for all purposes of this
reinsurance all the original policies of the Reinsured (new, renewal and
replacement) of the classes specified in Clause II of this paragraph (2) from
the time specified in Clause III in this paragraph (2) shall be deemed to
include the following provision (specified as the Limited Exclusion Provision):
Limited Exclusion Provision.*
I. It is agreed that the policy does not apply under any
liability coverage, to [injury, sickness, disease, death or
destruction, bodily injury or property damage] with respect to
which an insured under the policy is also an insured under a
nuclear energy liability policy issued by Nuclear Energy
Liability Insurance Association, Mutual Atomic Energy
Liability Underwriters or Nuclear Insurance Association of
Canada, or would be an insured under any such policy but for
its termination upon exhaustion of its limit of liability.
II. Family Automobile Policies (liability only), Special
Automobile Policies (private passenger automobiles, liability
only), Farmers Comprehensive Personal Liability Policies
(liability only), Comprehensive Personal Liability Policies
(liability only) or policies of a similar nature; and the
liability portion of combination forms related to the four
classes of policies stated above, such as the Comprehensive
Dwelling Policy and the applicable types of Homeowners
Policies.
III. The inception dates and thereafter of all original policies as
described in II above, whether new, renewal or replacement,
being policies which either
(a) become effective on or after 1st May, 1960, or
21
(b) become effective before that date and contain the Limited
Exclusion Provision set out above;
provided this paragraph (2) shall not be applicable to Family
Automobile Policies, Special Automobile Policies, or policies
or combination policies of a similar nature, issued by the
Reinsured on New York risks, until 90 days following approval
of the Limited Exclusion Provision by the Governmental
Authority having jurisdiction thereof.
(3) Except for those classes of policies specified in Clause II of
paragraph (2) and without in any way restricting the operation of paragraph (1)
of this Clause, it is understood and agreed that for all purposes of this
reinsurance the original liability policies of the Reinsured (new, renewal and
replacement) affording the following coverages:
Owners, Landlords and Tenants Liability, Contractual
Liability, Elevator Liability, Owners or Contractors
(including railroad) Protective Liability, Manufacturers and
Contractors Liability, Product Liability, Professional and
Malpractice Liability, Storekeepers Liability, Garage
Liability, Automobile Liability (including Massachusetts Motor
Vehicle or Garage Liability)
shall be deemed to include, with respect to such coverages, from the time
specified in Clause V of this paragraph (3), the following provision (specified
as the Broad Exclusion Provision):
Broad Exclusion Provision.*
It is agreed that the policy does not apply:
I. Under any Liability Coverage, to [injury, sickness, disease,
death or destruction, bodily injury or property damage]
(a) with respect to which an insured under the policy is
also an insured under a nuclear energy liability
policy issued by Nuclear Energy Liability Insurance
Association, Mutual Atomic Energy Liability
Underwriters or Nuclear Insurance Association of
Canada, or would be an insured under any such policy
but for its termination upon exhaustion of its limit
of liability; or
(b) resulting from the hazardous properties of nuclear
material and with respect to which (1) any person or
organization is required to maintain financial
22
protection pursuant to the Atomic Energy Act of 1954,
or any law amendatory thereof, or (2) the insured is,
or had this policy not been issued would be, entitled
to Indemnity from the United States of America, or
any agency thereof, under any agreement entered into
by the United States of America, of any agency
thereof, with any person or organization.
II. Under any Medical Payments Coverage, or under any
Supplementary payments Provision relating to [immediate
medical or surgical relief, first aid,] to expenses incurred
with respect to [bodily injury, sickness, disease, death or
bodily injury] resulting from the hazardous properties of
nuclear material and arising out of the operation of a nuclear
facility by any person or organization.
III. Under any Liability Coverage, to [injury, sickness, disease,
death or destruction, bodily injury or property damage]
resulting from the hazardous properties of nuclear material,
if
(a) the nuclear material (1) is at any nuclear facility
owned by, or operated by or on behalf of, an insured
or (2) has been discharged or dispersed therefrom;
(b) the nuclear material is contained in spent fuel or
waste at any time possessed, handled, used, processed
stored, transported or disposed of by or on behalf of
an insured; or
(c) the [injury, sickness, disease, death or destruction
bodily injury or property damage] arises out of the
furnishing by an insured of services, materials,
parts or equipment in connection with the planning,
construction, maintenance, operation or use of any
nuclear facility, but if such facility is located
within the United States of America, its territories,
or possessions or Canada, this exclusion (c) applies
only to [injury to or destruction of property at such
nuclear facility] property damage to such nuclear
facility and any property thereat.
IV. As used in this endorsement:
"hazardous properties" include radioactive, toxic or explosive
properties; "nuclear material" means source material, special
23
nuclear material or byproduct material; "source material",
"special nuclear material", and "byproduct material" have the
meanings given them in the Atomic Energy Act of 1954 or in any
law amendatory thereof; "spent fuel" means any fuel element or
fuel component, solid or liquid, which has been used or
exposed to radiation in a nuclear reactor; "waste" means any
waste material (1) containing byproduct material other than
the tailings or wastes produced by the extraction or
concentration of uranium or thorium from any ore processed
primarily for its source material content and (2) resulting
from the operation by any person or organization of any
nuclear facility included within the definition of nuclear
facility under paragraph (a) or (b) thereof; "nuclear
facility" means
(a) any nuclear reactor,
(b) any equipment or device designed or used for (1)
separating the isotopes of uranium or plutonium, (2)
processing or utilizing spent fuel, or (3) handling,
processing or packaging waste,
(c) any equipment or device used for the processing,
fabricating or alloying of special nuclear material
if at any time the total amount of such material in
the custody of the insured at the premises where such
equipment or device is located consist of or contains
more than 25 grams of plutonium or uranium 233 or any
combination thereof, or more than 250 grams of
uranium 235,
(d) any structure, basin, excavation, premises or place
prepared or used for the storage or disposal of
waste,
and includes the site on which any of the foregoing is
located, all operations conducted on such site and all
premises used for such operations; "nuclear reactor" means any
apparatus designed or used to sustain nuclear fission in a
self-supporting chain reaction or to contain a xxxxxxxx xxxx
of fissionable material; [With respect to injury to or
destruction of property, the word "injury" or "destruction"]
"property damage" includes all forms of radioactive
contamination of property. [includes all forms of radioactive
contamination of property.]
V. The inception dates and thereafter of all original policies
affording coverages specified in this paragraph (3), whether
new, renewal or replacement, being policies which become
24
effective on or after 1st May, 1960, provided this paragraph
(3) shall not be applicable to
(i) Garage and Automobile Policies issued by the Reinsured on
New York risks, or
(ii) statutory liability insurance required under Chapter 90,
General Laws of Massachusetts,
until 90 days following approval of the Broad Exclusion
Provision by the Governmental Authority having jurisdiction
thereof.
(4) Without in any way restricting the operation of paragraph (1) of
this Clause, it is understood and agreed that paragraphs (2) and (3) above are
not applicable to original liability policies of the Reinsured in Canada and
that with respect to such policies this Clause shall be deemed to include the
Nuclear Energy Liability Exclusion Provisions adopted by the Canadian
Underwriters' Association or the Independent Insurance Conference of Canada.
*NOTE. The words printed in brackets in the Limited Exclusion Provision
and in the Broad Exclusion Provision shall apply only in relation to original
liability policies which include a Limited Exclusion Provision or a Broad
Exclusion Provision containing those words.
25
NUCLEAR INCIDENT EXCLUSION CLAUSE
PHYSICAL DAMAGE AND LIABILITY
(BOILER AND MACHINERY POLICIES) REINSURANCE, U.S.A.
1. This reinsurance does not cover any loss or liability accruing to
the Reinsured as a member of, or subscriber to, any association of insurers or
reinsurers formed for the purpose of covering nuclear energy risks or as a
direct or indirect reinsurer of any such member, subscriber or association.
2. Without in any way restricting the operation of paragraph (1) of
this Clause it is understood and agreed that for all purposes of this
reinsurance all original Boiler and Machinery Insurance or Reinsurance contracts
of the Reinsured shall be deemed to include the following provisions of this
paragraph;
This Policy does not apply to "loss", whether it be direct or indirect,
proximate or remote
(a) from an Accident caused directly or indirectly by nuclear
reaction, nuclear radiation or radioactive contamination, all
whether controlled or uncontrolled; or
(b) from nuclear reaction, nuclear radiation or radioactive
contamination, all whether controlled or uncontrolled, caused
directly or indirectly by, contributed to or aggravated by an
Accident.
3. However, it is agreed that loss arising out of the use of
Radioactive Isotopes in any form is not hereby excluded from
reinsurance protection.
4. Without in any way restricting the operation of paragraph (1)
hereof, it is understood and agreed that
(a) all policies issued by the Reinsured effective on or before
30th April, 1958, shall be free from the application of the
other provisions of this Clause until expiry date or 30th
April, 1961, whichever first occurs, whereupon all the
provisions of this Clause shall apply.
(b) with respect to any risk located in Canada policies issued by
the Reinsured effective on or before 30th June, 1958, shall be
free from the application of the other provisions of this
Clause until expiry date of 30th June, 1961, whichever first
occurs, whereupon all the provisions of this Clause shall
apply.
26
INSOLVENCY FUNDS EXCLUSION CLAUSE
This Agreement excludes all liability of the Company 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.
NOTES: Wherever used herein the terms:
-----
"Company" shall be understood to mean
"Company", "Reinsured", "Reassured"
or whatever other term is used in
the attached reinsurance contract to
designate the reinsured company or
companies.
"Agreement" shall be understood to mean
"Agreement", "Contract", "Policy" or
whatever other term is used to
designate the attached reinsurance
document.
"Reinsurers" shall be understood to mean
"Reinsurers", "Underwriters" or
whatever other term is used in the
attached reinsurance contract to
designate the reinsurer or
reinsurers.
27
I N D E X
CLAUSE ARTICLE
BUSINESS COVERED 1
TERRITORY 2
EXCLUSIONS 3
TERM AND CANCELLATION 4
DEFINITION OF LOSS OCCURRENCE 5
NET RETAINED LINES 6
ULTIMATE NET LOSS 7
EXCESS OF ORIGINAL POLICY LIMITS 8
EXTRA CONTRACTUAL OBLIGATIONS CLAUSE 9
LIMITS AND RETENTIONS 10
DEFINITION OF TERRORISM 11
RATE AND PREMIUM 12
CURRENCY 13
NOTICE OF LOSS AND LOSS SETTLEMENTS 14
ACCESS TO RECORDS 15
STATISTICS 16
ERRORS AND OMISSIONS 17
TAXES 18
FEDERAL EXCISE TAX 19
LOSS RESERVES 20
INSOLVENCY 21
ARBITRATION 22
SERVICE OF SUIT 23
WRITTEN AGREEMENT 24
INTERMEDIARY 25
