Exhibit 10.12
LOSS PORTFOLIO TRANSFER
REINSURANCE CONTRACT
EFFECTIVE: 01/01/04
Issued to
Century Surety Company
Columbus, Ohio
(hereinafter referred to as the "Company")
By
Evergreen National Indemnity Company
Columbus, Ohio
(hereinafter referred to as the "Reinsurer")
ARTICLE I - BUSINESS REINSURED
By this Contract the Reinsurer agrees to reinsure the Ultimate Net Loss which
has accrued to the Company on losses occurring on or before the effective date
of this Contract under its policies, contracts and binders of insurance or
reinsurance (hereinafter called "policies") issued or renewed prior to the
effective date hereof and classified by the Company as Contract Surety Bonds and
Landfill Bonds, subject to the terms, conditions and limitations hereinafter set
forth.
ARTICLE II - TERM
This Contract shall become effective on January 1, 2004, and remain in force
until all outstanding loss and assignable loss adjustment expense covered under
this Contract has been settled or commuted in accordance with the provisions of
this Contract.
ARTICLE III - DEFINITIONS
A. "Ultimate net loss" as used herein is defined as the sum or sums
(including assignable loss adjustment expense, as hereinafter defined),
and unrecoverable reinsurance for outstanding losses, including incurred
but not reported losses paid by the Company in settlement of claims and in
satisfaction of judgments rendered on account of such claims, after
deduction of all salvage, all recoveries and all claims on inuring
insurance or reinsurance; provided, however, that in the event of the
insolvency of the Company, payment by the Reinsurer shall be made in
accordance with the provisions of Article XIV. Nothing herein shall be
construed to mean that losses under this Contract are not recoverable
until the Company's ultimate net loss has been ascertained.
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B. "Assignable loss adjustment expense" as used herein shall mean expenses
assignable to the investigation, appraisal, adjustment, settlement,
litigation, defense and /or appeal of specific claims, regardless of how
such expenses are classified for statutory reporting purposes. Assignable
loss adjustment expense shall include, but not be limited to, interest on
judgments, expenses of outside adjusters, and declaratory judgment
expenses or other legal expenses and costs incurred in connection with
coverage questions and legal actions connected thereto, but shall not
include office expenses or salaries of the Company's regular employees. If
the Company elects or is forced to hire a claims handling company to
manage its claims, then the cost of such shall be excluded from assignable
loss adjustment expense.
ARTICLE IV - LOSS NOTICES, SETTLEMENTS AND PAYMENTS
A. Losses shall be reported as hereinafter provided, except that the Company
shall promptly notify the Reinsurer of any unusual circumstances affecting
the Reinsurer's liability hereunder.
B. All loss settlements made by the Company, provided they are within the
terms of this Contract shall be binding upon the Reinsurer. The Reinsurer
agrees to pay all amounts for which it may be liable as provided in
Article VII.
ARTICLE V - SALVAGE AND SUBROGATION
The Reinsurer shall be credited with salvage (i.e., reimbursement obtained or
recovery made by the Company, less the actual cost, excluding salaries of
officials and employees of the Company and sums paid to attorneys as retainer,
of obtaining such reimbursement or making such recovery) on account of claims
and settlements involving reinsurance hereunder. Salvage thereon shall always be
used to reimburse the excess carriers in the reverse order of their priority
according to their participation before being used in any way to reimburse the
Company for its primary loss. The Company hereby agrees to enforce its rights to
salvage or subrogation relating to any loss, a part of which loss was sustained
by the Reinsurer, and to prosecute all claims arising out of such right.
ARTICLE VI - REINSURANCE CONSIDERATION
As consideration for the reinsurance provided hereunder the Company shall
deliver to the Reinsurer in cash or in securities acceptable to the Reinsurer an
amount equal to the sum of the following:
$457,394 representing case reserves as shown in Exhibit A known as of the
effective date, net of treaty reinsurance;
$999,546 representing incurred but not reported reserves ("IBNR") reserve
agreed to by the parties.
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ARTICLE VII - REPORTS AND REMITTANCES
A. Within 45 days after the end of each calendar quarter during the term of
this Contract, the Company shall report to the Reinsurer the following:
1. Summary of paid losses and assignable loss adjustment expense paid
during the quarter;
2. Summary of case outstanding losses and assignable loss adjustment
expense as of the end of the quarter, including a report of the
carried incurred by not reported amounts;
3. Any other information needed by the Reinsurer to evaluate this
Contract which is reasonably available to the Company.
The loss information shall be segregated by line of business and accident
(report) year.
B. The Reinsurer shall pay losses within 30 days after receipt of the
Company's quarterly report or within 75 days after the end of each
calendar quarter, whichever is later.
ARTICLE VIII - NON-PAYMENT OF PREMIUM
The Reinsurer may terminate this Contract with 30 days prior written notice, and
shall have no liability hereunder, in the event the Company fails to pay any
reinsurance consideration for any reason, including insolvency, within ten
business days of the date such consideration is due. The Company may avoid
termination by paying any and all amounts that are delinquent on or before the
effective date of termination.
ARTICLE IX - OFFSET
The Company and 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 any time whether the
balances due are on account of premiums or losses or otherwise. However, in the
event of the insolvency of any party hereto, offset shall only be allowed in
accordance with applicable law.
ARTICLE X - ACCESS TO RECORDS (BRMA 1D)
The Reinsurer or its designated representatives shall have access at any
reasonable to all records of the Company which pertain in any way to this
reinsurance.
ARTICLE ▇▇ - ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (▇▇▇▇ ▇▇▇)
A. This Contract applies only to that portion of any policy which the Company
retains net for its own account, and in calculating the amount of any loss
hereunder and also
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in computing the amount or amounts in excess of which this Contract
attaches, only loss or losses in respect of that portion of that portion
of any policy which the Company retains net for its own account shall be
included.
B. The amount of the Reinsurer's liability hereunder in respect of any loss
or losses shall not be increased by reason of the inability of the Company
to collect from any other reinsurer(s), whether such inability arises from
the insolvency of such other reinsurers(s) or otherwise.
ARTICLE XII - ERRORS AND OMISSIONS (BRMA 14F)
Inadvertent delays, errors or omissions made in connection with this Contract or
any transaction hereunder shall not relieve either party from any liability
which would have attached had such delay, error or omission not occurred,
provided always that such error or omission is rectified as soon as possible
after discovery.
ARTICLE ▇▇▇▇ - ▇▇▇▇▇ (▇▇▇▇ ▇▇▇)
In consideration of the terms under which this Contract is issued, the Company
will not claim a deduction in respect of the premium hereunder when making tax
returns, other than income or profits tax returns, to any state or territory of
the United States of America or the District of Columbia.
ARTICLE XIV - INSOLVENCY
A. In the event of the insolvency of the reinsured companies, this
reinsurance shall be payable directly to the company or to its liquidator,
receiver, conservator or statutory successor on the basis of the liability
of the company with diminution because of the insolvency of the company or
because the liquidator, receiver, conservator or statutory successor of
the company 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 company shall give written notice to the Reinsurer of the pendency
of a claim against the company 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 it may deem
available to the company 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 company 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 company solely as a
result of the defense undertaken by the Reinsurer.
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B. It is further understood and agreed that, in the event of the insolvency
of one or more of the reinsured companies, the reinsurance under this
Contract shall be payable directly by the Reinsurer to the company or to
its liquidator, receiver or statutory successor, except as provided by
Section 4118(a) of the New York Insurance Law or except (1) where this
Contract specifically provides another payee of such reinsurance in the
event of the insolvency of the company or (2) where the Reinsurer with the
consent of the direct insured or insureds has assumed 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.
ARTICLE XV - ARBITRATION
A. As a condition precedent to any right of action, hereunder, in the event
of any dispute or difference of opinion hereafter arising with respect to
this Contract, it is hereby mutually agreed that such dispute or
difference of opinion shall be submitted to arbitration. One Arbiter shall
be chosen by the Company, the other by the Reinsurer, and an Umpire shall
be chosen by the two Arbiters before they enter upon arbitration, all of
whom shall be active or retired disinterest executive officers of
insurance or reinsurance companies. In the event that either party should
fail to choose an Arbiter within 30 days following a written request by
the other party to do so, the requesting party may choose two Arbiters who
shall in turn choose an Umpire before entering upon arbitration. If the
two Arbiters fail to agree upon the selection of an Umpire within 30 days
following their appointment, each Arbiter shall nominate three candidates
within 10 days thereafter, two of whom the other shall decline, and the
decision shall be made by drawing lots.
B. Each party shall present its case to the Arbiters within 30 days following
the date of appointment of the Umpire. The Arbiters shall consider this
Contract as an honorable engagement rather than merely as a legal
obligation and they are relieved of all judicial formalities and may
abstain from following the strict rules of law. The decision of the
Arbiters shall be final and binding on both parties; but failing to agree,
they shall call in the Umpire and the decision of the majority shall be
final and binding upon both parties. Judgment upon the final decision of
the Arbiters may be entered in any court of competent jurisdiction.
C. Each party shall bear the expense of its own Arbiter, and shall jointly
and equally bear with the other the expense of the Umpire of the
arbitration. In the event that the two Arbiters are chosen by one party,
as above provided, the expense of the Arbiters, the Umpire and the
arbitration shall be equally divided between the two parties.
D. Any arbitration proceedings shall take place at a location mutually agreed
upon by the parties to this Contract, but notwithstanding the location of
the arbitration, all proceedings pursuant hereto shall be governed by the
law of the State of Ohio.
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ARTICLE XVI - SERVICE OF SUIT (BRMA 49D)
(Applicable if the Reinsurer is not domiciled in the United States of America,
and/or is not authorized in any State, Territory or District of the United
States where authorization is required by insurance regulatory authorities)
A. It is agreed that in the event the Reinsurer fails to pay any amount
claimed to be due hereunder, the Reinsurer, at the request of the Company,
will submit to the jurisdiction of a court of competent jurisdiction
within the United States. Nothing in this Article constitutes or should be
understood to constitute a waiver of the Reinsurer's rights to commence an
action in any court of competent jurisdiction in the United States, to
remove an action to a United States District Court, or to seek a transfer
of a case to another court as permitted by the laws of the United States
or of any state in the United States.
B. Further, pursuant to any statute of any state, territory or district of
the United States which makes provision therefore, the Reinsurer hereby
designates the Superintendent, Commissioner or Director of Insurance or
other officer specified for the purpose in the statute, or his successor
or successors in office, as its true and lawful attorney upon who may be
served any lawful process in any action, suit or proceeding instituted by
or on behalf of the Company or any beneficiary hereunder arising out of
this Contract.
ARTICLE XVII - GOVERNING LAW
The Contract shall be governed by and construed in accordance with the laws of
the State of Ohio.
ARTICLE XVIII - AGENCY AGREEMENT
If more than one reinsured company is named as a party to this Contact, Century
Surety Company shall be deemed the agent of the other reinsured companies for
the purposes of sending or receiving notices required by the terms and
conditions of this Contract, and for purposes of remitting or receiving any
monies due any party.
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IN WITNESS WHEREOF, the parties hereto by their respective duly authorized
representatives have executed this Contract as of the dates undermentioned at:
Columbus, Ohio, this ________ day of ________________________ in the year _____.
_____________________________________________________
Century Surety Company
Columbus, Ohio, this ________ day of ________________________ in the year _____.
_____________________________________________________
Evergreen National Indemnity Company
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