PAGE
EXHIBIT 17.a
INTERESTS AND LIABILITIES AGREEMENT
(hereinafter referred to as the "Agreement")
to the
NEW JERSEY HOMEOWNERS QUOTA SHARE TREATY
(hereinafter referred to as the "Contract")
between
SELECTIVE INSURANCE COMPANY OF AMERICA
SELECTIVE WAY INSURANCE COMPANY
SELECTIVE INSURANCE COMPANY OF THE SOUTHEAST
SELECTIVE INSURANCE COMPANY OF SOUTH CAROLINA
EXCHANGE INSURANCE COMPANY
and/or any insurance affiliates which are now owned
or hereafter may be acquired by
The Selective Insurance Group
(hereinafter either individually or collectively
referred to as the "Company")
and
(hereinafter referred to as the "Subscribing Reinsurer")
It is mutually agreed by and between the Company on the one part and the
Subscribing Reinsurer on the other part, that the Subscribing Reinsurer's
share in the interest and liabilities of the Reinsurers as set forth in
the Contract attached hereto and forming a part of this Agreement shall be
for % of the 85% Quota Share.
The share of the Subscribing Reinsurer in the interests and liabilities
of the Reinsurers in respect of the said Contract shall be separate and
apart from the shares of the other reinsurers in the said Contract, and
the interests and liabilities of the Subscribing Reinsurer shall not be
joint with those of the other reinsurers and in no event shall the
Subscribing Reinsurer participate in the interests and liabilities of the
other reinsurers.
This Agreement and the Contract attached hereto shall take effect from
12:01 a.m., Eastern Standard
Effective: January 1, 1997
3645-24
DOC: January 13, 1997
PAGE
Time, January 1, 1998, unless cancelled in accordance with the
terms and conditions of Article 3, Term and Cancellation.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed, in duplicate, by their duly authorized representatives this 10th
day of February, 1997.
SELECTIVE INSURANCE COMPANY OF AMERICA
SELECTIVE WAY INSURANCE COMPANY
SELECTIVE INSURANCE COMPANY OF THE SOUTHEAST
SELECTIVE INSURANCE COMPANY OF SOUTH CAROLINA
EXCHANGE INSURANCE COMPANY
and/or any insurance affiliates which are now owned
or hereafter may be acquired by
The Selective Insurance Group
------------------------------------------------------------------------
and on this day of , 199__.
Effective: January 1, 1997
3645-24
DOC: January 13, 1997
PAGE
NEW JERSEY HOMEOWNERS QUOTA SHARE TREATY
TABLE OF CONTENTS
-----------------
Article Page
------- ----
Preamble............................................... 1
1 Business Covered....................................... 1
2 Exclusions............................................. 2
3 Term and Cancellation.................................. 2
4 Territory.............................................. 3
5 Contract Detail........................................ 3
6 Definition of Loss Occurrence.......................... 4
7 Extra Contractual Obligations.......................... 5
8 Excess of Original Policy Limits....................... 5
9 Indemnification and Errors and Omissions............... 6
10 Reinsurance Follows Original Policies.................. 6
11 Notice of Loss......................................... 7
12 Losses................................................. 7
13 Loss Expenses.......................................... 7
14 Premium and Commissions................................ 8
15 Currency............................................... 10
16 Accounts, Reports and Payments......................... 10
17 Loss and Unearned Premium Reserves..................... 11
18 Sunset and Commutation................................. 12
19 Federal Excise Tax..................................... 13
20 Service of Suit (U.S.A.)............................... 14
21 Insolvency............................................. 14
22 Access to Company's Records............................ 15
23 Arbitration............................................ 16
24 Intermediary........................................... 16
Effective: January 1, 1997
3645-24
DOC: January 13, 1997
PAGE
NEW JERSEY HOMEOWNERS QUOTA SHARE TREATY
(hereinafter referred to as the "Contract")
In consideration of the mutual covenants hereinafter contained and subject
to all the terms and conditions hereinafter set forth
VARIOUS INSURANCE AND/OR REINSURANCE COMPANIES AND/OR
UNDERWRITING MEMBERS OF LLOYD'S
(hereinafter collectively referred to as the "Reinsurers")
one of whom is
THE "SUBSCRIBING REINSURER" WHOSE NAME
APPEARS ON THE INTERESTS AND LIABILITIES AGREEMENT
ATTACHING TO AND FORMING A PART OF THIS CONTRACT
do hereby indemnify, as herein provided and specified, the
SELECTIVE INSURANCE COMPANY OF AMERICA
SELECTIVE WAY INSURANCE COMPANY
SELECTIVE INSURANCE COMPANY OF THE SOUTHEAST
SELECTIVE INSURANCE COMPANY OF SOUTH CAROLINA
EXCHANGE INSURANCE COMPANY
and/or any insurance affiliates which are now owned or hereafter may be
acquired by
The Selective Insurance Group
(hereinafter either individually or collectively referred to as the
"Company")
ARTICLE 1
---------
BUSINESS COVERED
----------------
This Contract applies to risks located in the State of New Jersey with
respect to all sections of coverage written and classified by the Company
as Homeowners, Condominium, Tenants and Mobile Homeowners insurances.
Effective: January 1, 1997 1 of 17
3645-24
DOC: January 13, 1997
PAGE
ARTICLE 2
---------
EXCLUSIONS
----------
A. As per original policy terms and conditions.
B. This Contract 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.
ARTICLE 3
---------
TERM AND CANCELLATION
---------------------
This Contract shall apply to all cessions commencing on and after
12:01 a.m., Eastern Standard Time, January 1, 1996, and shall remain in
force until 12:01 a.m., Eastern Standard Time, January 1, 1998.
Notwithstanding the above, the portfolio of unearned premiums and unexpired
liability as of 12:01 a.m., Eastern Standard Time, January 1, 1997, shall
be assumed by the Reinsurers under this Contract and nothing herein
contained shall alter or affect the continuity granted, insofar as this
portfolio assumption is concerned, by the said preceding Contract. In
consideration of the foregoing, the Company shall pay to the Reinsurers
hereunder the unearned premiums calculated on the monthly pro rata basis as
of January 1, 1997, less provisional commission allowed the Company by the
Reinsurers and in consequence thereof, the Reinsurers hereunder shall be
liable for all losses under the said preceding Contract occurring subsequent
to 12:01 a.m., Eastern Standard Time, January 1, 1997.
In the event of non-renewal of this Contract, the liability of the
Reinsurers shall remain in force to the natural expiration or cancellation
or next anniversary date whichever comes first. However, at the option of
the Company this Contract may be cancelled on a cut-off basis. In the event
of the Company exercising this cut-off option, the Reinsurers shall incur no
liability for losses occurring subsequent to the date of termination, but
shall remain liable for all losses outstanding as of the date of termina-
tion. In the event of the Company withdrawing the cessions as provided for
herein, it shall debit the Reinsurers with a sum equal to the pro rata
unearned premiums on unexpired cessions at the respective date, less the
rate of commission allowed by the Reinsurers on such cessions, provided
such option is exercised prior to the termination of this Contract.
Effective: January 1, 1997 2 of 17
3645-24
DOC: January 13, 1997
PAGE
If any law or regulation of the federal, state or local government of any
jurisdiction in which the Company is doing business should render illegal
the arrangements made in this Contract, the Contract can be terminated
immediately, insofar as it applies to such jurisdiction, by the Company
giving notice to the Reinsurers to such effect.
This Contract may be altered or amended in any of its terms and conditions
by mutual consent of the parties, either by endorsement hereof or by an
instrument in writing attached hereto and formally signed.
ARTICLE 4
---------
TERRITORY
---------
This Contract covers risks located in New Jersey and/or as provided in the
original policies.
ARTICLE 5
---------
CONTRACT DETAIL
---------------
The Company shall cede under this Contract and the Reinsurers shall accept
by way of reinsurance eighty five percent (85%) quota share of all business
covered hereunder.
The liability of the Reinsurers for any interest shall attach simultaneously
with the liability of the Company.
The maximum cession hereunder is $850,000 (being 85% of $1,000,000) per
policy as respects Coverage A, Section I, except with respect to Section II,
for which the Company agrees to a maximum cession of $425,000 (being 85% of
$500,000) per policy.
In no event, however, shall the Reinsurers' liability exceed $95,000,000 in
any one Loss Occurrence, as defined in Article 6, Definition of Loss
Occurrence.
The Company shall maintain net for its own account on each and every risk
the remaining 15% subject to Excess of Loss Reinsurances.
With respect to Extra Contractual Obligations, as defined in Article 7,
Extra Contractual Obligations, the Reinsurers shall be liable to pay up to
100% of the Extra Contractual loss recoverable hereunder, but the
contractual loss plus the Extra Contractual Obligation shall not exceed
Coverage A, Section I Treaty Limits. Furthermore, the Extra Contractual
loss recoverable hereunder shall be the Reinsurers' pro rata share equal to
the percentage ceded hereunder.
Effective: January 1, 1997 3 of 17
3645-24
DOC: January 13, 1997
PAGE
ARTICLE 6
---------
DEFINITION OF LOSS OCCURRENCE
-----------------------------
The term "Loss Occurrence" shall mean the sum of all individual losses
directly occasioned by any one disaster, accident or loss or series of
disasters, accidents or losses arising out of one event which occurs within
the state of New Jersey. However, the duration and extent of any one "Loss
Occurrence" shall be limited to all individual losses sustained by the
Company 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:
A. As regards windstorm, hail, tornado, hurricane, cyclone, including
ensuing collapse and water damage, all individual losses sustained by
the Company occurring during any period of 72 consecutive hours 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.
B. As regards riot, riot attending a strike, civil commotion, vandalism
and malicious mischief, all individual losses sustained by the Company
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 insured's premises by
strikers, provided such occupation commenced during the aforesaid
period.
C. 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 Company's
"Loss Occurrence".
D. 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 Company's "Loss
Occurrence".
Except for those "Loss Occurrences" referred to in paragraphs A. and B.
above, the Company 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 Company arising out of that 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 paragraphs A.
and B. above, if the disaster, accident or loss occasioned by the event is
of greater duration than 72 consecutive hours, then the Company 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
Effective: January 1, 1997 4 of 17
3645-24
DOC: January 13, 1997
PAGE
and provided that no period commences earlier than the date and time of the
occurrence of the first recorded individual loss sustained by the Company
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.
ARTICLE 7
---------
EXTRA CONTRACTUAL OBLIGATIONS
-----------------------------
This Contract shall protect the Company for any Extra Contractual Obliga-
tions within the limitations of Article 5, Contract Detail. "Extra
Contractual Obligations" are defined as those liabilities not covered under
any other provision of this Contract and which arise from the handling of
any claim on business covered hereunder, such liabilities arising because
of, but not limited to, the following: failure by the Company to settle
within the policy limit, or by reason of alleged or actual negligence, fraud
or bad faith in rejecting an offer of settlement or in the preparation of
the defense or in the trial of any action against its insured or reinsured
or in the preparation or prosecution of an appeal consequent upon such
action.
The date on which any Extra Contractual Obligation is incurred by the
Company 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 Company acting individually or collectively or in collusion with any
individuals or corporation or any other organization or party involved in
the presentation, defense or settlement of any claim covered hereunder.
ARTICLE 8
---------
EXCESS OF ORIGINAL POLICY LIMITS
--------------------------------
This Contract shall protect the Company, within the limitations of
Article 5, Contract Detail, 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, 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 reinsured 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 fraud by a member of the Board of Directors or a Corporate Officer of the
Company acting individually or
Effective: January 1, 1997 5 of 17
3645-24
DOC: January 13, 1997
PAGE
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 Company would have been contractually liable to pay had it not
been for the limit of the original policy.
ARTICLE 9
---------
INDEMNIFICATION AND ERRORS AND OMISSIONS
----------------------------------------
Any recitals in this Contract of the terms and provisions of any original
insurance or reinsurance are merely descriptive. The Reinsurers are
reinsuring, to the amount herein provided, the obligations of the Company
under any original insurance or reinsurance. The Company shall be the sole
judge as to:
A. what shall constitute a claim or loss covered under any original
insurance or reinsurance written by the Company;
B. the Company's liability thereunder;
C. the amount or amounts which shall be proper for the Company to pay
thereunder.
The Reinsurers shall be bound by the judgment of the Company as to the
obligation(s) and liability(ies) of the Company under any original insurance
or reinsurance, subject to the terms and conditions of this Contract.
Any inadvertent error, omission or delay in complying with the terms and
conditions of this Contract shall not be held to relieve either party hereto
from any liability which would attach to it hereunder if such error,
omission or delay had not been made, provided such error, omission or delay
is rectified immediately upon discovery.
ARTICLE 10
----------
REINSURANCE FOLLOWS ORIGINAL POLICIES
-------------------------------------
All reinsurances for which the Reinsurers shall be liable by subscribing to
this Contract shall be subject in all respects to the same rates, terms,
conditions, interpretations, waivers, the exact proportion of premiums paid
to the Company and to the same modifications, alterations and cancellations
as the respective insurances of the Company to which such reinsurances
relate, the true intent of this Contract being that the Reinsurers shall, in
every case to which this Contract applies and in the proportion specified
herein, follow the fortunes of the Company.
Effective: January 1, 1997 6 of 17
3645-24
DOC: January 13, 1997
PAGE
ARTICLE 11
----------
NOTICE OF LOSS
--------------
In the event of loss which may cause a claim to the Reinsurers in the
estimated amount of $500,000 or more, notice of such loss shall be advised
to the Reinsurers as soon as possible.
ARTICLE 12
----------
LOSSES
------
A. The Company alone and at its full discretion shall adjust, settle or
compromise all claims and losses. All such adjustments, settlements
and compromises, including ex gratia payments, shall be binding on the
Reinsurers in proportion to their participation. The Company shall
likewise at its sole discretion commence, continue, defend, compromise,
settle or withdraw from actions, suits or proceedings and generally do
all such matters and things relating to any claim or loss as in its
judgement may be beneficial or expedient; and all loss payments made
shall be shared by the Reinsurers proportionately. The Reinsurers
shall, on the other hand, benefit proportionately from all reductions
of losses by salvage, compromise or otherwise.
B. In respect of all business covered hereunder in the event of a loss
being intimated or reported to the Company or its agent before the
Company's net retention has been established, the Company,
nevertheless, shall be entitled to claim on the Reinsurers in
conformity with the limits which the Company usually retains net and
cedes hereunder upon such risk or risks in the same or similar
localities as established by its books and/or practices. However,
upon request of the Reinsurers, the Company will produce evidence of
its practice applicable to any such case forming the subject of inquiry
or investigation.
C. Losses due by the Reinsurers to the Company in an amount not exceeding
$500,000 on any one loss shall be carried to account; but when the
amount due from the Reinsurers as a result of any one loss and its
expenses equals or exceeds $500,000 any one loss or Loss Occurrence, as
defined in Article 6, Definition of Loss Occurrence, it will, at the
option and upon demand of the Company, be paid by special remittance
immediately upon receipt of a special loss account which shall be
prepared by the Company and shall contain all relevant details in
connection with the loss.
ARTICLE 13
----------
LOSS EXPENSES
-------------
A. The Reinsurers shall be liable for their proportionate share of all
expenses incurred by the Company in connection with the investigation
and settlement or contesting the validity of specific claims or losses
or alleged losses (except as hereinafter provided). In addition, the
Effective: January 1, 1997 7 of 17
3645-24
DOC: January 13, 1997
PAGE
Reinsurers shall be liable for their proportional share of legal
expenses and costs incurred in connection with coverage questions and
legal actions connected hereto.
B. When the Company uses its own field employees or officials instead of
outside adjusters to settle losses, the Company shall be permitted to
include a pro rata share of the salaries and expenses of the said field
employees according to the time occupied in adjusting such losses and
also the expenses of said officials incurred in connection with the
losses, but no salaries of such officials or any normal overhead
charge, such as rent, postage, lighting, cleaning, heating, etc., shall
be included.
C. Unallocated loss expenses, being operating expense classifications not
attributable to specific losses, are excluded hereunder. These are
defined as administrative expenses of personnel assigned to claims
sections and the expenses of non-claim departments involved in the
administrative claim work (other than the Company's Legal Department as
specified above.)
ARTICLE 14
----------
PREMIUM AND COMMISSIONS
-----------------------
A. With respect to all business, the Reinsurers shall be paid premiums at
the gross rates applicable, less a provisional commission of 37%.
B. The provisional commission of 37% shall be adjusted after the expira-
tion of this Contract on an earned/incurred basis as follows:
Loss and Allocated Loss Adjustment Expense Ratio Commission
------------------------------------------------ ----------
60% or Higher 30.00%
59% 31.00%
58% 32.00%
57% 33.00%
56% 34.00%
55% 35.00%
54% 36.00%
53% (Provisional) 37.00%
52% 38.00%
51% 39.00%
50% 40.00%
49% 41.00%
48% 42.00%
47% 43.00%
46% 44.00%
45% 45.00%
44% 46.00%
43% 47.00%
Effective: January 1, 1997 8 of 17
3645-24
DOC: January 13, 1997
PAGE
42% 48.00%
41% 49.00%
40% or Lower 50.00%
"Premiums earned" for the purposes of the commission adjustment shall mean
the total premiums written during the twelve month calendar period, plus the
reserve for unearned premiums at the beginning of the twelve month calendar
period, minus the reserve for unearned premiums at the end of the twelve
month calendar period.
"Losses incurred" shall mean the net loss and allocated loss adjustment
expenses recovered during the twelve month calendar period on losses
occurring during that period, plus the outstanding loss reserve, including
losses incurred but not reported, at the end of that twelve month calendar
period on losses occurring during that twelve month calendar period. Extra
Contractual Obligations losses, as defined in Article 7, Extra Contractual
Obligations, and losses in excess of original policy limits, as defined in
Article 8, Excess of Original Policy Limits, are to be included in the
losses incurred definition subject to the Contract Limit, if applicable.
The Company shall retain 50% of the Loss and Allocated Loss Adjustment
Expense Ratio between 65% and 75% for the term of this Contract.
C. The calculation of adjusted commission shall be prepared and submitted
by the Company 84 months after January 1, 1998 and in accordance with
Article 18, Sunset and Commutation.
D. The commission allowances which the Reinsurers, in accordance with the
preceding stipulations, will pay to the Company, include provisions for
all taxes, assessments and expenses falling on the business transacted
under this Contract; and in the event of the Reinsurers being compelled
to make returns to the Insurance Departments or other departments of
any state, District of Columbia, province, county or city, or any
board, bureau or association, and consequently being obliged to pay
taxes or assessments direct to such department, board, bureau or
association on the premium received from the Company under this
Contract, such taxes or assessment shall be refunded by the Company to
the Reinsurers. This Section shall have no application to federal or
dominion government taxes or to any federal, dominion, state, District
of Columbia, province or municipal excess profits or income taxes.
E. If any amount of reserves for losses and loss expense that had been
used in any calculation of adjusted commission are indicated by
subsequent developments to have been underestimated or overestimated,
such calculation shall be revised at the request of either party. The
Company shall refund to the Reinsurers, or the Reinsurers shall pay to
the Company, such amount as will give effect to the revisions.
Effective: January 1, 1997 9 of 17
3645-24
DOC: January 13, 1997
PAGE
ARTICLE 15
----------
CURRENCY
--------
Wherever the word "Dollars" or the sign "$" appear in this Contract, they
shall be construed to mean United States Dollars, excepting in those cases
where the policies are issued by the Company in Canadian Dollars in which
cases they shall mean Canadian Dollars.
For purposes of this Contract, where the Company received premiums or pays
losses in currencies other than United States or Canadian currency, such
premiums and losses shall be converted into United States Dollars at the
actual rates of exchange at which these premiums and losses are entered in
the Company's books.
ARTICLE 16
----------
ACCOUNTS, REPORTS AND PAYMENTS
------------------------------
A. The Company shall furnish to the Reinsurers monthly accounts of
business ceded hereunder within 45 days after the close of each month,
showing premiums due the Reinsurers, adjustments to premium reserves,
if any, and commissions, Federal Excise Tax, if any, and paid losses
due from the Reinsurers, supported by statistical details as set forth
herein. The balance shown to be due by each account shall be payable
by the debtor party within 45 days after the close of the month
accounted for.
B. The statistical details referred to in the preceding paragraph shall
be comprised of:
1. Premiums less return premiums summarized by major classes.
2. Paid loss and paid loss adjustment expense summarized by major
classes and segregated into years of occurrence.
3. Outstanding losses summarized by major classes and segregated into
years of occurrence.
4. Total unearned premiums each month and at the end of each year
summarized by major classes.
C. In addition, the Company shall forward with its current account,
particulars of every loss and its expenses paid therein which are in
excess of $500,000 any one loss or Loss Occurrence, as defined in
Article 6, Definition of Loss Occurrence, to the Contract and also
shall forward details of the aggregate settlement made in respect of
any event which is recognized by the Reinsurers to be a catastrophe.
It is agreed, however, that when the amount due from the Reinsurers
as a result of any one loss exceeds their proportion of $500,000,
they will at the option and upon demand of the
Effective: January 1, 1997 10 of 17
3645-24
DOC: January 13, 1997
PAGE
Company make payment by special remittance immediately upon receipt
of a special loss account which shall be prepared by the Company and
shall contain all relevant details in connection with the loss.
ARTICLE 17
----------
LOSS AND UNEARNED PREMIUM RESERVES
----------------------------------
(This Article applies to those Reinsurers who do not qualify for credit by
any state or any other governmental authority having jurisdiction over the
Company's loss and unearned premium reserves.)
A: Where a Letter of Credit Trust Agreement is used, the following clause
shall apply:
It is agreed that when the Company files with the Insurance Department
or establishes reserves for claims covered hereunder and unearned
premium, as required by law, the Company shall forward to the Reinsurers
a statement showing the proportion of such loss and unearned premium
reserves which is applicable to the Reinsurers. The Reinsurers hereby
agree to apply for and secure delivery to the Company of a clean,
irrevocable and unconditional Letter of Credit, with a minimum term of
one year, that is issued or confirmed, and presentable and payable in
the United States by any bank or trust company, and is in a format
acceptable to the governmental authority having jurisdiction over the
Company's reserves in an amount equal to the Reinsurers' proportion of
said loss and unearned premium reserves.
The Company and the Reinsurers agree that such Letter of Credit shall
be subject to the terms of a separate Letter of Credit Trust Agreement,
and that said trust agreement shall be in a form acceptable to the
governmental authority having jurisdiction over the Company's loss and
unearned premium reserves.
The designated bank shall have no responsibility whatsoever in connec-
tion with the propriety of withdrawals made by the Company or the
disposition of funds withdrawn, except to see that withdrawals are made
only upon the order of properly authorized representatives of the
Company.
B: Where a Letter of Credit Trust Agreement is not used, the following
clause shall apply:
It is agreed that when the Company files with the Insurance Department
or establishes reserves for claims covered hereunder and unearned
premium, as required by law, the Company shall forward to the Reinsurers
a statement showing the proportion of such loss and unearned premium
reserves which is applicable to the Reinsurers. The Reinsurers hereby
agree to apply for and secure delivery to the Company of a clean,
irrevocable and unconditional Letter of Credit, with a minimum term of
one year, that is issued or confirmed, and presentable and payable in
the United States by any bank or trust company, and is in a format
acceptable to the governmental authority having jurisdiction over the
Effective: January 1, 1997 11 of 17
3645-24
DOC: January 13, 1997
PAGE
Company's reserves in an amount equal to the Reinsurers' proportion of
said loss and unearned premium reserves.
The Company and the Reinsurers agree that the Letter of Credit provided
by the Reinsurers under this provision may be drawn upon at any time,
notwithstanding any other provisions in this Contract, and be utilized
by the Company or any successor by operation of law of the Company,
including, without limitation, any liquidator, rehabilitator, receiver
or conservator of such Company for the following purposes:
1. to reimburse the Company for the Reinsurers' share of surrenders
and benefits or losses paid by the Company under the terms and
provisions of the policies reinsured under this Contract;
2. to reimburse the Company for the Reinsurers' share of premium
returned to the owners of policies reinsured under this Contract
on account of cancellation of such policies;
3. to fund an account with the Company in an amount at least equal to
the deduction, for reinsurance ceded, from the Company's liabilities
for policies ceded under this Contract. Such amount shall include,
but not be limited to, amounts for policy reserves, reserves for
claims and losses incurred (including losses incurred but not
reported), loss adjustment expenses, and unearned premiums;
4. to pay any other amounts the Company claims are due under this
Contract;
5. to return any amounts drawn down on Letters of Credit in excess of
the actual amounts required for 1., 2. and 3. above, or in case of
4. above, any amounts which are subsequently determined not to be
due.
All of the foregoing should be applied without diminution because of
insolvency on the part of the Company or the Reinsurers.
The designated bank shall have no responsibility whatsoever in connec-
tion with the propriety of withdrawals made by the Company or the
disposition of funds withdrawn, except to see that withdrawals are made
only upon the order of properly authorized representatives of the
Company.
ARTICLE 18
----------
SUNSET AND COMMUTATION
----------------------
A. Not later than 84 months after the close of the Contract year, the
Company shall advise the Reinsurers of all claims reported for said
Contract year not finally settled which are likely to result in a claim
under this Contract. The Company and the Reinsurers or their respective
representatives shall, by mutual agreement, determine and capitalize
such claims. Payment by the Reinsurers of their proportion of the
amount or amounts so mutually agreed, shall
Effective: January 1, 1997 12 of 17
3645-24
DOC: January 13, 1997
PAGE
constitute a complete and final release of the Reinsurers of
liability in respect of such claim (or claims).
B. If agreement cannot be reached, the Company and the Reinsurers shall
mutually appoint an Actuary or Appraiser to investigate, determine
and capitalize such claims. If both parties then agree, the Reinsurers
shall pay their proportion of the amount so determined to be the
capitalized value of such claims.
C. If the parties fail to agree, then any difference shall be settled by a
panel of three Actuaries, one to be chosen by each party and the third
by the two so chosen. If either party refuses or neglects to appoint an
Actuary within thirty days, the other party may appoint two Actuaries.
If the two Actuaries fail to agree on the selection of a third Actuary
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 the Actuaries shall be Fellows of the Casualty
Actuarial Society or of the American Academy of Actuaries. None of the
Actuaries shall be under the control of either party to this Contract.
Each party shall submit its case to its Actuary within thirty days of
the appointment of the third Actuary. The decision in writing of any
two Actuaries, when filed with the parties hereto, shall be final and
binding on both parties. The expense of the Actuaries and of the
Commutation shall be equally divided between the two parties. Said
Commutation shall take place in Branchville, New Jersey, unless some
other place is mutually agreed upon by the Company and the Reinsurers.
ARTICLE 19
----------
FEDERAL EXCISE TAX
------------------
(This Article applies only to those Reinsurers, domiciled outside the United
States of America who are not exempt from the Federal Excise Tax.)
The Reinsurers have 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 Reinsurers
will deduct the percentage specified by United States law from the amount of
the return and the Company or its agent should take steps to recover the Tax
from the United States Government.
Effective: January 1, 1997 13 of 17
3645-24
DOC: January 13, 1997
PAGE
ARTICLE 20
----------
SERVICE OF SUIT (U.S.A.)
------------------------
(This Article applies only to those Reinsurers not domiciled in the United
States of America, and/or not authorized in any state, territory and/or
district of the United States where authorization is required by insurance
regulatory authorities.)
It is agreed that in the event of the failure of the Reinsurers to pay any
amount claimed to be due under this Contract, the Reinsurers, at the request
of the Company, will submit to the jurisdiction of any court of competent
jurisdiction within the United States of America 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. Nothing in this Article constitutes or should be
understood to constitute a waiver of the Reinsurers' 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.
Service of process in such suit may be made upon Mendes and Mount, 000
Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000-0000 (hereinafter, "agent for
service of process") and in any suit instituted against any Reinsurer(s)
upon this Contract, the Reinsurer(s) 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 Reinsurers in any such suit and/or upon the request of the
Company to give a written undertaking to the Company that the agent for
service of process will enter a general appearance on behalf of the
Reinsurers in the event such a suit shall be instituted.
Further, pursuant to any statute of any state, territory or district of the
United States of America which makes provision therefor, the Reinsurers
hereby designate 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 Company or any beneficiary hereunder arising out of this
Contract and hereby designate the agent for service of process as the firm
to whom the said officer is authorized to mail such process or a true copy
thereof.
ARTICLE 21
----------
INSOLVENCY
----------
In the event of the insolvency of the 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 without
diminution because of the insolvency of the Company or because
Effective: January 1, 1997 14 of 17
3645-24
DOC: January 13, 1997
PAGE
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 Reinsurers 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 Reinsurers
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 Reinsurers may investigate such claim and interpose, at
their own expense, in the proceeding where such claim is to be adjudicated
any defense or defenses that they may deem available to the Company or its
liquidator, receiver, conservator or statutory successor. The expense thus
incurred by the Reinsurers 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
Reinsurers.
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 Contract as
though such expense had been incurred by the Company.
As to all reinsurance made, ceded, renewed or otherwise becoming effective
under this Contract, the reinsurance shall be payable as set forth above by
the Reinsurers to the Company or to its liquidator, receiver, conservator or
statutory successor, except as provided by Sections 4118(a)(1)(A) and
1114(c) of the New York Insurance Law or except (1) where the Contract
specifically provides another payee in the event of the insolvency of the
Company, and (2) where the Reinsurers, with the consent of the direct
insured or insureds, have assumed such policy obligations of the Company as
direct obligations of the Reinsurers to the payees under such policies and
in substitution for the obligations of the Company to such payees. Then,
and in that event only, the Company, with the prior approval of the
certificate of assumption on New York risks by the Superintendent of
Insurance of the State of New York, is entirely released from its obligation
and the Reinsurers pay any loss directly to payees under such policy.
ARTICLE 22
----------
ACCESS TO COMPANY'S RECORDS
---------------------------
The Reinsurers or their duly designated representatives shall have access to
the books, documents and records of the Company at all reasonable times for
the purpose of obtaining information concerning this Contract or the subject
matter thereof.
Effective: January 1, 1997 15 of 17
3645-24
DOC: January 13, 1997
PAGE
ARTICLE 23
----------
ARBITRATION
-----------
As a precedent to any right of action hereunder, if any dispute shall arise
between the parties to this Contract with reference to the interpretation of
this Contract or their rights with respect to any transaction involved,
whether such dispute arises before or after termination of this Contract,
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 disinterested officers of
insurance or reinsurance companies or Underwriters at Lloyd's, London not
under the control of either party to this Contract.
The arbitrators shall interpret this Contract as an honorable engagement and
not as merely a legal obligation. They are relieved of all judicial
formalities and may abstain from following the strict rules of law. They
shall make their award with a view to effecting the general purpose of this
Contract in a reasonable manner rather than in accordance with a literal
interpretation of the language. Each party shall submit its case to its
arbitrator within thirty days of the appointment of the third arbitrator.
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 the city in
which the Company's Head Office is located unless some other place is
mutually agreed upon by the parties to this Contract.
ARTICLE 24
----------
INTERMEDIARY
------------
Xxx Xxxxxxxxx & Company, Inc. is hereby recognized as the intermediary
negotiating this Contract for all business hereunder. All communications
(including but not limited to notices, statements, premiums, return
premiums, commissions, taxes, losses, loss adjustment expenses, salvages,
and loss settlements) relating thereto shall be transmitted to the Company
or the Reinsurers through Xxx Xxxxxxxxx & Company, Inc., Xxx Xxxxx Xxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000. Payments by the Company to the
intermediary shall be deemed to constitute payment to the Reinsurers.
Payments by the Reinsurers to the intermediary shall be deemed to
Effective: January 1, 1997 16 of 17
3645-24
DOC: January 13, 1997
PAGE
constitute payment to the Company only to the extent that such payments
are actually received by the Company.
Effective: January 1, 1997 17 of 17
3645-24
DOC: January 13, 1997
PAGE
TERMINATION ADDENDUM
to the
NEW JERSEY HOMEOWNERS QUOTA SHARE TREATY
(hereinafter referred to as the "Contract")
between
SELECTIVE INSURANCE COMPANY OF AMERICA
SELECTIVE WAY INSURANCE COMPANY
SELECTIVE INSURANCE COMPANY OF THE SOUTHEAST
SELECTIVE INSURANCE COMPANY OF SOUTH CAROLINA
EXCHANGE INSURANCE COMPANY
and/or any insurance affiliates which are now owned or hereafter may be
acquired by
The Selective Insurance Group
(hereinafter either individually or collectively referred to as the
"Company")
and
(hereinafter referred to as the "Subscribing Reinsurer")
It is hereby mutually agreed, that effective 12:01 a.m., Eastern Standard
Time, January 1, 1997, the Contract (effective 1/1/96) is terminated in
accordance with the terms of Article 3, Term and Cancellation, of the
Contract.
All other terms and conditions shall remain unchanged.
Termination Addendum 1 of 3
Effective: January 1, 1997
3645-24
PAGE
IN WITNESS WHEREOF, the parties hereto have caused this Termination
Addendum to be executed, in duplicate, by their duly authorized
representatives this day of , 199__.
SELECTIVE INSURANCE COMPANY OF AMERICA
SELECTIVE WAY INSURANCE COMPANY
SELECTIVE INSURANCE COMPANY OF THE SOUTHEAST
SELECTIVE INSURANCE COMPANY OF SOUTH CAROLINA
EXCHANGE INSURANCE COMPANY
and/or any insurance affiliates which are now owned or hereafter may be
acquired by
The Selective Insurance Group
Termination Addendum 2 of 3
Effective: January 1 1997
3645-24
PAGE
and on this day of , 199__.
Termination Addendum 3 of 3
Effective: January 1, 1997
3645-24
PAGE
SUMMARY OF CHANGES
to the
SELECTIVE INSURANCE COMPANY
NEW JERSEY HOMEOWNERS QUOTA SHARE TREATY
This Contract effective January 1, 1997 differs from the previous Contract
effective January 1, 1996 in the following manner:
1. Throughout the Contract, all dates have been amended to reflect the
current 12 month period of the Contract.
2. Interests and Liabilities Agreement; A new third paragraph has been
introduced to reflect the commencement and expiration of the Contract.
3. Article 3, Term and Cancellation; The first paragraph has been amended
to reflect the current 12 month period of the Contract and the third
paragraph has been amended to reflect the language of the placement
slip.
4. Article 8, Excess of Original Policy Limits; The first paragraph has
been amended to delete the phrase "within Coverage A, Section I Treaty
limits hereof" and replace it with "within the limitations of
Article 5, Contract Detail".
5. Article 14, Premium and Commissions; Section B has been amended to
reflect the language of the placement slip including amending the
sliding scale commission adjustment calculations, deleting all
references to deficit and credit carryforward calculations, and
replacing the phrase "Contract year" with "the twelve month calendar
period". Expiring Sections C and D have been deleted in accordance
with the placement slip.
Effective: January 1, 1997
3645-24
