EXHIBIT 10.14
LOSS PORTFOLIO TRANSFER
REINSURANCE CONTRACT
EFFECTIVE: 01/01/04
Issued to
Evergreen National Indemnity Company
Columbus, Ohio
(hereinafter referred to as the "Company")
By
Century Surety 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 all Property and Casualty
lines of business except for surety, 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 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.
1
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:
$3,511,058 representing case reserves as shown in Exhibit A known as of
the effective date, net of treaty reinsurance;
$2,049,689 representing incurred but not reported reserves ("IBNR")
reserve agreed to by the parties.
2
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 XX - XXX XXXXXXXX XXXXX (XXXX 00X)
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
3
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 XXXX - XXXXX (XXXX 00X)
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 company, 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.
4
B. It is further understood and agreed that, in the event of the
insolvency of the reinsured 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 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.
5
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.
6
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 1st day of January in the year 2004.
/s/ Roswell X. Xxxxx
-----------------------------------------------------
Evergreen National Indemnity Company
Columbus, Ohio, this 1st day of January in the year 2004.
/s/ Xxxxxxxxxxx X. Xxxx
-----------------------------------------------------
Century Surety Company
7
