Exhibit 10.22
MANAGEMENT SERVICES AGREEMENT
This Management Services Agreement ("Agreement") is effective the
1st day of January, 2003, by and between SAVERS PROPERTY AND CASUALTY INSURANCE
COMPANY (hereinafter referred to as the "Company"), a Missouri corporation with
its principal offices in Overland Park, Kansas, and MEADOWBROOK, INC., a
Michigan corporation, with its principal office in Southfield, Michigan
(hereinafter referred to as "Manager").
RECITALS:
A. MEADOWBROOK INSURANCE GROUP, INC., (hereinafter referred to as "MIG"),
owns several insurance-related subsidiary companies as part of the
insurance holding company system pursuant to the insurance laws and
regulations in the various jurisdictions where such subsidiaries are
licensed;
B. This Agreement shall be subject to and interpreted in accordance with the
laws, rules and insurance regulations in the jurisdictions wherein the
subsidiaries are licensed;
Therefore, in consideration of the mutual agreements described in this
Agreement, the Company and the Manager agree as follows:
AGREEMENT:
ARTICLE 1 - APPOINTMENT OF MANAGER
The Company and the Manager agree the Manager will perform services for the
Company as described in this Agreement and in the manner provided in this
Agreement. All underwriting, claims, loss control and investment services
provided to the Company by the Manager are to be based upon the written
criteria, standards and guidelines of the Company. The Company shall have the
ultimate and final authority over decisions and policies, including but not
limited to the acceptance, rejection or canceling of risks, the payment or
non-payment of claims and the purchase of securities.
Notwithstanding any other provision of this Agreement, it is understood the
business affairs of the Company shall ultimately be controlled and managed by
its Board of Directors and its officers, in accordance with relevant law. Also,
to the extent required under law, the Board of Directors shall present to the
Company's Shareholders issues for vote. The Manager shall not have any
management prerogatives with respect to the business affairs and operations of
the Company.
ARTICLE 2 - DUTIES
2.01 MANAGEMENT SERVICES
A. ACCOUNTING SERVICES, FINANCIAL STATEMENTS AND TAX RETURNS
The Manager will perform services appropriate to the Company's
operations and provide all accounting services required for purposes
of accounting for the results of its business operations. The
Manager will prepare all of the Company's financial statements
required for filing with regulatory authorities, including statutory
financial statements as required under the applicable insurance code
or by an applicable insurance bureau. The Manager will perform these
services in a manner and at a time which complies with the
requirements of the insurance bureau, of taxing authorities, and as
otherwise reasonably required by the Company. Accounting services
shall include the maintenance of proper premium accounts, including
provision for unearned premiums, loss provision and
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experience statistics as required for management and for filing with
any regulatory authority. The Manager will prepare the Company's
financial statements on a quarterly and annual basis. Prior to their
due dates, the Manager will prepare and deliver to the Company all
tax returns to be filed with any taxing authority of the Company.
Also, the Manager shall provide actuarial services to the Company;
however, the Company's annual actuarial review shall be conducted by
a third-party.
B. ACCOUNTS RECEIVABLE
The Manager will collect all funds due the Company. Manager shall
use due diligence and utilize all reasonable efforts for the
collection of amounts due the Company, but shall be responsible to
the Company only for premiums which are actually collected. The
Manager shall regularly account to the Company on monies received by
the Manager on behalf of the Company. Due diligence in the
collection of accounts receivable shall mean regular contact of
persons owing money to the Company with the demand for payment and
maintenance of records adequate to legally enforce any debts owed.
Due diligence shall include any legal enforcement of the debts owed.
C. DEPOSITS OF MONIES RECEIVED
The Manager shall deposit daily into accounts of the Company
maintained for that purpose all monies received by the Manager for
the Company. When a Manager is the agent for the risk, all premium
will be deposited, in accordance with the terms of any relevant
Agency Agreement. All premiums collected by the Manager shall be
held in trust segregated by the Company and held in a fiduciary
capacity.
D. ACCOUNTS PAYABLE
The Manager will make payments of the accounts payable of the
Company which are incurred by the Company in the ordinary course of
business; and which represent expenses of the Company in areas for
which the Manager is responsible under this Agreement.
For that purpose, the Manager may be designated as the signatory on
certain depository and checking accounts of the Company. The Manager
shall provide regular accounting to the Company of the payments
which the Manager has paid.
E. REPORTS AND RECORDS
At least annually, and more often as may reasonably be requested by
the Company, the Manager will provide information on the Company's
overall financial conditions, results of business operations and
future capital requirements. The Manager will maintain the coverage
documents or policies offered through the Company and any
amendments, and will be responsible for developing and furnishing
all necessary forms for the coverage of policyholders of the
Company. These forms shall include applications, claims reports,
premium collection or invoice forms, loss control, coverage
documents, rating forms, and related reports or explanatory forms
required for operations of the Company. The printing of such forms
and policies shall be the responsibility of the Company. All reports
and records as described above will be provided as mutually agreed
with the Manager and the Company.
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F. ADVICE AND OTHER SERVICES
The Manager will have no responsibility as to other matters
pertaining to the Company and its business operations. The Manager
will perform such other related services as may be reasonably
necessary for the proper conduct of the Company's business
operations and which are within the scope of this Agreement.
G. UNDERWRITING
The Company shall retain the ultimate right and responsibility to
refuse any risk and/or cancel any policy. The Manager shall perform
such underwriting services as the Company shall from time to time
request. Underwriting services shall include the review of
applications for policies of insurance, making decisions on
coverage, follow up with applicants for additional information, and
working with reinsurers of the Company as requested. Certain
underwriting services to be performed by the Manager may be
delegated to a third-party upon approval of such third parties and
the terms of the delegation by the Company. The Manager will comply
with all written guidelines set forth by the Company with respect to
underwriting, the acceptance or rejection of certain classes of
business, the scope of coverage and the provisions of the coverage
document or related to the issuance of policies.
H. REINSURANCE
The Manager shall seek to arrange for appropriate reinsurance,
including the preparation of all necessary documents with respect to
such reinsurance. The Manager shall act as the liaison with the
reinsurers with respect to both the acceptance of applications, the
payment and remittance of premiums, the reporting of claims and
collection of reinsurance payments due the Company. Also, the
Manager shall negotiate the terms, conditions and premiums for such
reinsurance.
I. INVESTMENTS
The Company shall have custody of, responsibility for and control
all investments of the Company. The Manager will comply with the
Investment Policy Guidelines set forth by the Company with respect
to investments and the acceptance or rejection of certain
investments. However, the Company shall have the ultimate and final
authority over decisions regarding the purchase and sale of
securities.
J. EXPENSES ARISING IN MANAGEMENT SERVICES
During the term of this Agreement, the Company will incur expenses
for various types of services. Joint expenses incurred by the
Company, and the other insurance companies within the MIG Holding
System, will be allocated to the Company as follows:
Expense Cost Allocation Method
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1. Information Services Premium Volume
2. Claim Administration Costs Claim Cost/Reported
3. Actuarial Services Premium Volume
4. Audit Premium Volume
5. Legal Time Study
6. Tax Advice/Preparation Time Study
7. Equipment Lease/Costs Premium Volume
8. Printing/Marketing Materials Premium Volume
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9. Leases Time Study
10. Other Administrative Costs Time Study
The Manager will periodically renew the allocation method to assure
the expenses are fairly apportioned to the Company and consistent
with relevant state insurance regulations.
2.02 CLAIMS
A. CLAIMS ADMINISTRATION
The Company shall have ultimate responsibility for claims
adjustments and payments. The Manager will receive all claims and
notice of claims from policyholders of the Company. The Manager will
review, process, investigate, adjust, settle or resist all claims
received in accordance with the Company's direction, the terms of
Company coverage documents, and any written guidelines or decision
of the Company regarding coverage, handling or payment of claims.
The Manager will establish loss reserves for each claim as deemed
necessary in accordance with the Company's direction. The Manager
will make subrogation investigations and consult with the Company or
its representatives for the proper adjusting of subrogation matters.
The Manager will engage attorneys as necessary, to represent
policyholders in any suit covered by the Company's policy.
B. CLAIMS EXPENSES
The Company will pay allocated loss expenses, which include
reasonable expense items, such as attorney's fees, incidental legal
fees, experts' fees, witnesses' travel expense, extraordinary travel
expense incurred by the Manager at the request of the Company, court
reporter's fees, transcript fees, and the cost of obtaining public
records and witness fees. The Company will pay expenses associated
with the investigation, negotiation, settlement or defense of any
claim hereunder or as required for the collection of subrogation
payments from third parties on behalf of the Company. All claims
expenses other than allocated loss adjustment expenses shall be
considered unallocated loss adjustment expenses and shall be paid by
the Manager.
C. CLAIMS REPORTS
The Manager will establish claim files for each reported claim which
will be subject to review by the Company or its representatives at
any reasonable time without prior notice. Reports for the Company
will be furnished, in formats and frequencies approved by the
Company, to show claims fund activity and payments, losses paid,
pending and reserved, by participant coverage, type, cause function,
size, and so on. The Manager will assist as needed with all
litigation and defense activities related to claims pursuant to the
Company program within guidelines established by the Company. These
activities shall include recommendation of attorneys on a case or
retainer basis for approval by the Company, preparation of all claim
documentation, retention of witnesses and performance of other steps
as necessary to properly defend against claims against insureds of
the Company.
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2.03 LOSS PREVENTION
The Manager will arrange for and coordinate loss prevention services as
agreed with the Company, including furnishing assistance and professional
consultation to participating insureds, in developing loss prevention
systems, making inventories and surveys regarding exposures and risks
covered under the Company program, analyzing claim causes and trends,
including frequency and severity, developing and conducting training
programs, and other information for loss prevention. The type of services
which will be provided to individual insureds to help them to develop loss
prevention systems will include review and analysis of past claims,
management controls and development of recommendations to improve risk
management.
ARTICLE 3 - COMPENSATION
3.01 FEES
In consideration of the services provided by the Manager, the Company
shall pay the Manager a fee based upon the costs and expenses incurred
with regard to the individual programs administered by the Manager for the
Company; such fee shall be no greater than the actual costs the Company
would expend in providing the service for itself.
3.02 TIME OF PAYMENT
The amount agreed upon as described in paragraph 3.01 will be payable
monthly.
ARTICLE 4 -THIRD PARTIES
The Manager and the Company agree the Manager may engage, employ and delegate
certain functions under this Agreement to third parties, agents or subsidiaries
of the Manager. In addition, the Manager shall have the authority to terminate
such retention. The Company shall have the authority to approve or terminate a
third-party and agency, as well as, approve all commission rates. To the extent
the Manager has delegated such function to a third party, the fee for such
service shall be paid by the Manager.
ARTICLE 5 - TERM AND TERMINATION
5.01 TERM
The Term of this Agreement will be from January 1, 2003 through December
31, 2006 ("Original Term"). The Term will automatically be extended for
three (3) year periods thereafter, unless either party provides written
notice ninety (90) days prior to the end of the Term or any extended term,
as applicable, that it does not wish to extend the Term. If the services
of Manager are unsatisfactory, the Company shall provide written
notification to the Manager of such dissatisfaction. The Manager shall
have 180 days to cure such problems or, if such problem cannot be cured
within such time, take reasonable steps within 180 days to cure such
problem. If the problem has not been cured, the Agreement can be
terminated ninety (90) days after expiration of the 180 days or after the
Manager was unable to cure the problem.
5.02 TERMINATION
This Agreement can be terminated by either party upon ninety (90) days
written notice to the other. Also, this Agreement may be terminated
immediately in the event of the insolvency, receivership, bankruptcy or
liquidation of either party or if either party has made an assignment for
the benefit of creditors.
ARTICLE 6 - OWNERSHIP OF RECORDS
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The Manager will maintain all appropriate records, files, ledgers, and reports
so as to accurately reflect at all times the financial transactions of the
Company. Upon reasonable notice, the Manager shall make all such records
available for inspection by the Company. All records of any kind relating to the
Company shall be the property of the Company and shall be in the Company's
custody and control or will be available for inspection.
ARTICLE 7 - GENERAL REQUIREMENTS OF THE MANAGER
7.01 MANAGER'S GENERAL DUTIES
The Manager is responsible to perform the duties assumed under this
Agreement in accordance with standard procedures for the performance of
such duties, which exist, in the insurance industry.
7.02 DEALING WITH THIRD PARTIES
The Manager is authorized and may act for, bind, make commitments, and
represent the Company to any third-party, in the ordinary course of
business and in fulfillment of its obligations under this Agreement.
ARTICLE 8 - MISCELLANEOUS
8.01 NOTICES
All notice requirements and other communications indicated shall be deemed
given when personally delivered or on the third succeeding business day
after being mailed by registered or certified mail, return receipt
requested, to the appropriate party at its address below or at such other
address as shall be specified by notice given hereunder.
THE COMPANY:
SAVERS PROPERTY AND
CASUALTY INSURANCE COMPANY
00000 Xxxx, Xxxxx 000
Xxxxxxxx Xxxx, XX 00000-0000
Attn: President
THE MANAGER: MEADOWBROOK, INC.
00000 Xxxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000-0000
Attn: President
8.02 ASSIGNMENT
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors.
8.03 AMENDMENT
This Agreement may not be amended, altered or modified except in writing
signed by the party against whom enforcement or any waiver, change,
discharge, alteration or modification is sought.
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8.04 INVALIDITY
The invalidity of any provision of this Agreement shall not affect the
validity of the remainder of any such provision or the remaining
provisions of this Agreement.
8.05 INTERPRETATION
The article, section and paragraph headings included in this Agreement
have been used solely for convenience and shall not be used in conjunction
with the interpretation of this Agreement. References to articles,
sections and paragraphs shall refer to such provisions in this Agreement
unless otherwise stated.
8.06 WAIVER
The failure of either party at any time to require performance by the
other party of any provision of this Agreement shall not be deemed a
continuing waiver of that provision or a waiver of any other provision of
this Agreement, and shall in no way affect the full right to require such
performance from the other party at any time thereafter.
8.07 SEVERABILITY
This Agreement and the transaction contemplated herein constitute one
transaction and shall not be divisible in any manner. A breach of any
portion of this Agreement shall be deemed a breach of the whole Agreement.
8.08 COUNTERPARTS
If photocopies or duplicates of the original of this Agreement are signed
by the parties then each such originally signed document shall be deemed
to be an original of this Agreement.
8.09 CONFLICT OF INTEREST
The Manager shall not engage in conduct or activities that constitute
actual business competition with the Company.
8.10 INDEMNIFICATION
Both the Company and the Manager shall hold harmless, indemnify and defend
the other party against any expenses, damages, liability, action, cost or
other claims, including attorney fees arising out of the other party's
material breach of any duty or obligation hereunder.
8.11 ERRORS AND OMISSIONS INSURANCE COVERAGE
The Manager shall maintain an errors and omissions insurance policy in an
amount not less than $2,000,000 per claim and an employee dishonesty bond
of not less than $500,000 per claim.
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SAVERS PROPERTY AND
CASUALTY INSURANCE COMPANY
DATE: February 3, 2003 /s/ Xxxx X. Xxxx
-------------------------- --------------------------------------
BY: Xxxx X. Xxxx
---------------------------------
ITS: President
---------------------------------
MEADOWBROOK, INC.
DATE: February 3, 2003 /s/ Xxxxxx X. Xxxxxx
-------------------------- --------------------------------------
BY: Xxxxxx X. Xxxxxx
---------------------------------
ITS: President
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