141
PROPERTY CATASTROPHE EXCESS OF LOSS
REINSURANCE CONTRACT
(hereinafter referred to as the "Contract")
between
20TH CENTURY INSURANCE COMPANY
and/or
21ST CENTURY CASUALTY COMPANY
(hereinafter referred to as the "Company")
and
The SUBSCRIBING REINSURERS executing the attached
Interests and Liabilities Contract
(hereinafter referred to as the "Reinsurer")
ARTICLE 1
---------
BUSINESS COVERED
----------------
This Contract applies to loss occurrences which take place
during the currency of this Contract under all policies,
certificates, binders and/or contracts of insurance or
reinsurance, oral or written, or other evidences of liability
(hereinafter called "policy" or "policies") which are issued or
may be issued for or by the Company and classified by the
Company as Homeowners (Section I only), Condominium Owners
(Section I only), Dwelling Fire, Inland Marine, and/or
Automobile Physical Damage.
ARTICLE 2
---------
TERM AND EXTENDED EXPIRATION
----------------------------
This Contract shall take effect from 12:01 a.m., Pacific
Daylight Savings Time, July 1, 1994, to 12:01 a.m., Pacific
Daylight Savings Time July 1, 1995, and shall apply to all loss
occurrences which take place during the currency of this
Contract.
If this Contract shall terminate while a loss occurrence
covered hereunder is in progress, it is agreed that, subject to
the other conditions of this Contract, the Reinsurer is
responsible for its proportion of the entire loss.
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ARTICLE 3
---------
TERRITORY
---------
This Contract shall apply to the State of California of the
United States of America.
ARTICLE 4
---------
TAXES
-----
In consideration of the terms under which this Contract is
issued, the Company undertakes not to claim any deduction in
respect of the premium hereon when making tax returns, other
than Income or Profits Tax returns, to any State or Territory or
the District of Columbia.
The Reinsurer (if not domiciled in the United States of America)
has agreed to allow for the purpose of paying the Federal Excise
Tax the percentage specified by United States law of the premium
payable hereon to the extent such premium is subject to Federal
Excise Tax (subject to the provisions of any applicable
international tax treaties). In the event of any return of
premium becoming due hereunder the Reinsurer will deduct the
percentage specified by United States law from the amount of the
return and the Company or its agent will take steps to recover
the Tax from the United States Government.
ARTICLE 5
---------
CURRENCY
--------
Wherever the word "Dollars" and/or the sign "$" appear in this
Contract, they shall be construed to mean United States Dollars.
Where the Company receives premiums or pays losses in currencies
other than United States Currency, such premiums and losses
shall be converted into United States Dollars at the actual
rates of exchange at which such premiums or losses are entered
on the Company's books.
ARTICLE 6
---------
EXCLUSIONS
----------
This Contract specifically excludes:
1. Flood and/or Earthquake when written alone.
2. Mortgage Impairment Business.
3. All reinsurance assumed other than facultative.
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4. War risk, bombardment, invasion, insurrection, rebellion,
revolution, military or usurped power, or confiscation by order
of any government or public authority, as excluded under a
standard policy continuing a standard War Exclusion Clause.
5. 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.
6. Third Party Bodily Injury or Death Liability, Third Party
Personal Injury Liability, Third Party Property Damage Liability
and Medical Payments insurance; however, nothing herein
contained shall be construed as excluding liability for damage
to property in an insureds care, custody or control for which
the insured may be liable.
7. Loss and/or damage and/or costs and/or expenses arising from
Seepage and/or Pollution and/or Contamination, other than
contamination from smoke damage. Nevertheless, this exclusion
does not preclude any payment of the cost of the removal of
debris of property damaged by a loss otherwise covered hereunder
but subject always to a limit of 25% of the Company's property
loss under the original policy.
8. Special Programs as declared by the Company.
9. Liability of the Company as excluded by the following clauses,
which are attached to and made a part of this Contract:
a. Nuclear Incident Exclusion Clauses - Physical Damage -
Reinsurance - U.S.A. and Canada; and Nuclear Energy Risk
Exclusion Clause (Reinsurance) - Worldwide Excluding U.S.A.
and Canada.
b. Pools, Associations and Syndicates Exclusion Clause.
10. Extra Contractual Obligations and/or Losses in Excess of Policy
Limits.
"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
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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.
"Loss in excess of the Policy limit" is defined as any loss
exceeding the limit of the Company's policy, having been
incurred because of 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. For the purposes of this
definition, 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 policy.
"Extra Contractual Obligations" and "Loss In Excess Of Policy
Limit" shall also include any exemplary or punitive damages
assessed against the Company 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 individual
or corporation or any other organization or party involved in
the presentation, defense or settlement of any claim covered
hereunder.
ARTICLE 7
---------
DEFINITION OF LOSS OCCURRENCE
-----------------------------
The term "Loss Occurrence" wherever appearing in this contract
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 area of one state of the United States or province of Canada
and states or provinces contiguous thereto and to one another.
However, the duration and extent of any one loss occurrence
shall be limited to all individual losses sustained by the
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:
1. 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.
2. 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
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individual losses which occur beyond such 72 consecutive hours
during the continued occupation of an insureds premises by
strikers, provided such occupation commenced during the
aforesaid period.
3. AS REGARDS EARTHQUAKE (THE EPICENTER OF WHICH NEED NOT
NECESSARILY BE WITHIN THE TERRITORIAL CONFINES REFERRED TO IN
THE FIRST 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.
4. AS REGARDS FREEZE Only individual losses directly occasioned by
collapse, breakage or glass, and water damage (caused by
bursting of frozen pipes and tanks) may be included in the
Company's loss occurrence.
For all those loss occurrences other than 2. 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, except
for any loss occurrence referred to in 1. above, where only one
such period of 72 consecutive hours shall apply with respect to
one event, regardless of the duration of the event.
As respects those loss occurrences referred to in 2. 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 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 hour clauses may be included in any loss
occurrence claimed under the 168 hour provisions.
ARTICLE 8
---------
ULTIMATE NET LOSS
-----------------
The term "ultimate net loss" wherever used in this Contract
shall mean:
1. the actual loss or losses paid by the Company, plus
2. expenses of litigation (if any), plus
3. all other loss expenses of the Company (excluding office
expenses and salaries of officials of the Company except in the
case of field claim adjusters or staff attorneys, and then only
when the time spent by any adjuster or staff attorney is
definitely allocated to a specific claim or specific
catastrophe), less
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4. salvages and/or recoveries (if any), less
5. recoveries from all other reinsurance's effected by the Company
relating to the business described in ARTICLE 1, whether
collected or not (except that the Company is permitted to carry
underlying Catastrophe reinsurance, recoveries under which shall
inure to the Company's sole benefit), all relating to any one
loss occurrence.
All salvages, recoveries or payments recovered or received
subsequent to a loss settlement under this contract shall be
applied as if recovered or received prior to the aforesaid
settlement, and all necessary adjustments shall be made by the
parties hereto.
Nothing in this Article, however, shall be construed as meaning
that losses are not recoverable from the Reinsurer until the
ultimate net loss to the company has been ascertained.
ARTICLE 9
---------
NET RETAINED LINES
------------------
This Contract applies only to that portion of any insurance or
reinsurance which the Company retains net for its own account.
In calculating the amount of any loss hereunder and also in
computing the amount or amounts in excess of which this contract
attaches, only loss or losses in respect of that portion of any
insurance or reinsurance which the Company retains net for its
own account shall be included.
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 reinsurers,
whether specific or general, any amounts which may have become
due from them, whether such inability arises from the insolvency
of such other reinsurers or otherwise.
ARTICLE 10
----------
CLAIMS
------
The Company shall give immediate notice to the Reinsurer of any
loss occurrence which they have reason to believe could involve
this Contract.
The Company shall keep the Reinsurer informed of all
developments likely to affect any payment by the Reinsurer under
this Contract.
The Company may commence, continue, defend, settle or withdraw
from actions, suits or prosecutions and generally do all such
things relating to any loss occurrence in which the Reinsurer is
interested as, in the Company's judgment, may be beneficial or
expedient to both parties.
All settlements made by the Company, provided same are within
the original terms of this Contract, shall be unconditionally
binding upon the Reinsurer. The share of the Reinsurer in any
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settlement shall be payable by the Reinsurer to the Company upon
reasonable evidence of the amount paid or to be paid being given
by the Company.
ARTICLE 11
----------
LOSS RESERVES
-------------
This Article applies only if the Reinsurer does not qualify for
credit by any state or any other governmental authority having
jurisdiction over the Company's loss reserves; if the Reinsurer
does not qualify, they shall be subject to the terms of the Loss
Reserves Clause attached to and forming a part of this Contract.
ARTICLE 12
----------
ACCESS TO RECORDS
-----------------
The duly accredited representative of the Reinsurer, at all
reasonable times during the currency of this Contract and to the
extent of the Reinsurer's interest thereafter, shall have access
at the offices of the Company to all records of the Company
which pertain in any way to this Contract or the subject matter
thereof, provided always that the Reinsurer shall have given to
the Company prior written notice of their desire to obtain
information.
ARTICLE 13
----------
ERRORS AND OMISSIONS
--------------------
Any inadvertent error, omission or delay in complying with the
terms and conditions of this Contract shall not be held to
relieve or increase the liability of either party hereto. Upon
discovery of such an incident, rectification shall be made as
soon as reasonably practicable, following which the position of
the parties shall be as though the incident had not occurred.
ARTICLE 14
----------
SERVICE OF SUIT (Applicable only to Reinsurers not domiciled in
---------------
the United States of America, and/or is not authorized in any
State, Territory and/or District of the United States where
authorization is required by insurance regulatory authorities.)
In the event of the failure of the Reinsurer 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.
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Service of process in such suit may be made upon Mendes & Mount,
Citicorp Plaza, 725 South Figueroa Street, 19th, floor, Los
Angeles, California 90017 (but only as respects suit brought in
the State of New York, service of process on the Reinsurer in
such suit may be made upon Messrs. Mendes & Mount, 750 Seventh
Avenue, New York, New York 10019-6829) and in any suit
instituted against the Reinsurer upon this Contract, the
Reinsurer will abide by the final decision of such Court or of
any Appellate Court in the event of an appeal.
The above named are authorized and directed to accept service of
process on behalf of the Reinsurer in any such suit and/or upon
the company's request to give a written undertaking to the
Company that they will enter a general appearance upon the
Reinsurer's behalf in the event such a suit shall be instituted.
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 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 designates
the above named as the firm to whom the said officer is
authorized to mail such process or a true copy thereof.
ARTICLE 15
----------
ARBITRATION
-----------
As a precedent to any right of action hereunder, any dispute
between the Company and the Reinsurer (hereinafter referred to
as the "parties") with reference to their rights and obligations
under this Contract, whether during or after the currency
hereof, shall be submitted to three arbitrators, one to be
chosen by each party, and the third by the two so chosen. All
correspondence between all participants in the arbitration shall
be sent by certified or registered mail, return receipt
requested; refusal to accept any such correspondence is equal to
an acknowledgment of receipt.
The party requesting arbitration (claimant) shall mail to the
other party (respondent) written notice to that effect and name
its arbitrator. If the respondent refuses or neglects to
appoint its arbitrator within thirty days after the receipt of
said written notice from the claimant, the claimant shall
appoint a second arbitrator. If the two arbitrators fail
otherwise to agree in the selection of the third arbitrator they
shall, within thirty days of their appointment, each name three,
of whom the other shall decline two and the decision shall be
made by drawing lots.
All arbitrators shall be active or retired executive officers of
insurance or reinsurance companies or Underwriters at Lloyd's,
London, none of whom have any personal interest in the outcome
of the dispute. The arbitrators shall interpret this Contract
as an honorable engagement and not only as a legal obligation.
They are relieved of all judicial formalities and may abstain
from following the strict rules of law. They shall make their
decision 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.
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Each party shall submit its case to the arbitrators within
thirty days of the selection of the third arbitrator. Thirty
additional days shall then be allowed for rejoinder and
surrejoinder before the arbitrators shall be required to hand
down their decision. The majority decision of the arbitrators,
when filed in writing with the parties, shall be final and
binding on both parties. The parties hereby consent to the
entry of judgment upon the final decision of the arbitrators in
any Court having jurisdiction.
The arbitrators are empowered to prolong the terms granted above
for the filing of papers and equally of the handing down of a
decision, but in any event they shall be bound to give their
decision within five months from the day of receipt by the
respondent of the written request for arbitration by the
claimant.
Each party shall bear the expense of the arbitrator appointed by
or for it, 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.
ARTICLE 16
----------
INSOLVENCY
----------
In the event of the insolvency of the Company and the
appointment of a conservator, liquidator, receiver or statutory
successor of the Company, this reinsurance shall be payable
directly to such conservator, liquidator, receiver or statutory
successor immediately upon demand, with reasonable provision for
verification, on the basis of claims allowed against the
insolvent company by any court of competent jurisdiction or by
any conservator, liquidator, receiver or statutory successor of
the Company having authority to allow such claims, without
diminution because of such insolvency or because such
conservator, liquidator, receiver or statutory successor has
failed to pay all or a portion of any claims. It is agreed,
however, that the conservator, liquidator, receiver 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 conservator,
liquidator, receiver 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.
Where two or more Reinsurers on this Contract 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 this 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 for above by the Reinsurer to the Company or to its
conservator, liquidator, receiver or statutory successor, except:
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1. as provided by Sections 4118 (a)(1)(A) and 1114(c) of the New
York Insurance Law, or
2. where the original contract of insurance or reinsurance
specifically provides another payee in the event of the
insolvency of the Company; and 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. 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 Reinsurer pays any
loss directly to payees under such policy.
ARTICLE 17
----------
INTERMEDIARY
------------
Guy Carpenter & 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 Reinsurer through Guy Carpenter & Company, Inc.
Payments by the Company to the Intermediary shall be deemed to
constitute payment to the Reinsurer. Payments by the Reinsurer
to the Intermediary shall be deemed to constitute payment to the
Company only to the extent that such payments are actually
received by the Company.
ARTICLE 18
----------
MODIFICATIONS
-------------
Any mutually agreed modifications to this Contract (whether by
Addendum or correspondence) shall be binding on both parties and
shall be deemed to form a part of this Contract.
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EXHIBIT A
---------
FIRST PROPERTY CATASTROPHE EXCESS OF LOSS
REINSURANCE CONTRACT
----------------------------------------------------
SECTION 1 - AMOUNT OF COVER
---------------------------
The Reinsurer shall not be liable for any loss hereunder until
the Company's ultimate net loss in each loss occurrence exceeds
$10,000,000 and then the Reinsurer shall be liable for the
amount of the Company's ultimate net loss in each loss
occurrence the excess of $10,000,000, but the Reinsurer's
liability shall not exceed $90,000,000 ultimate net loss in each
loss occurrence. For the purposes of the Contract, "Ultimate
Net Loss" shall be as defined in ARTICLE 8, "Loss Occurrence"
shall be as defined in ARTICLE 7, "Company's retention" shall be
as defined in Section 2 of this Exhibit, and the amount of
coverage provided shall be further subject to the limitations
stated in Section 4 of this Exhibit.
SECTION 2 - WARRANTED COMPANY RETENTION
---------------------------------------
It is warranted by the Company that they will retain 5% of the
limit of this Contract (being 5% or $4,500,000 part of
$90,000,000 each loss occurrence) net for their own account.
SECTION 3 - PREMIUM
-------------------
The Company shall pay the Reinsurer an annual premium of
$18,000,000, payable quarterly in advance of equal installments
of $4,500,000 each, on July 1, October 1, January 1 and April 1.
SECTION 4 - REINSTATEMENT
-------------------------
Each claim hereon reduces the amount of indemnity from the time
of occurrence of the loss by the sum paid, but any amount so
exhausted is hereby reinstated from the time of occurrence of
the loss, and for each amount so reinstated the Company agrees
to pay an additional premium (hereafter called the
"reinstatement premium").
The reinstatement premium shall be calculated on the ultimate
premium stated in Section 3 of this Exhibit. To such ultimate
premium shall be applied the ratio which the payment made by the
Reinsurer in respect of the loss occurrence bears to $90,000,000.
The reinstatement premium shall be deducted by the Reinsurer
from the amount of the loss payment.
Notwithstanding the foregoing, the liability of the Reinsurer
shall never be more than:
1. $90,000,000 in respect of any one loss occurrence, nor
2. $180,000,000 in all during the term of this Contract.
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EXHIBIT B
---------
SECOND PROPERTY CATASTROPHE EXCESS OF LOSS
REINSURANCE CONTRACT
-----------------------------------------------------
SECTION 1 - AMOUNT OF COVER
---------------------------
The Reinsurer shall not be liable for any loss hereunder until
the Company's ultimate net loss in each loss occurrence exceeds
$100,000,000 and then the Reinsurer shall be liable for the
amount of the Company's ultimate net loss in each loss
occurrence the excess of $100,000,000, but the Reinsurer's
liability shall not exceed $100,000,000 ultimate net loss in
each loss occurrence. For the purposes of the Contract,
"Ultimate Net Loss" shall be as defined in ARTICLE 8, "Loss
Occurrence" shall be as defined in ARTICLE 7, "Company's
retention" shall be as defined in Section 2 of this Exhibit and
the amount of coverage provided shall be further subject to the
limitations stated in Section 4 of this Exhibit.
SECTION 2 - WARRANTED COMPANY RETENTION
---------------------------------------
It is warranted by the Company that they will retain 5% of the
limit of this Contract (being 5% or $5,000,000 part of
$100,000,000 each loss occurrence) net for their own account.
SECTION 3 - PREMIUM
-------------------
The Company shall pay the Reinsurer an anual premium of
$12,000,000 payable quarterly in advance in installments of
$3,000,000 each, on July 1, October 1, January 1 and April 1.
SECTION 4 - REINSTATEMENT
-------------------------
Each claim hereon reduces the amount of indemnity from the time
of occurrence of the loss by the sum paid, but any amount so
exhausted is hereby reinstated from the time of occurrence of
the loss, and for each amount so reinstated the Company agrees
to pay an additional premium (hereafter called the
"reinstatement premium").
The reinstatement premium shall be calculated on the ultimate
premium stated in Section 3 of this Exhibit. To such ultimate
premium shall be applied the ratio which the payment made by the
Reinsurer in respect of the loss occurrence bears to
$100,000,000.
The reinstatement premium shall be deducted by the Reinsurer
from the amount of the loss payment.
Notwithstanding the foregoing, the liability of the Reinsurer
shall never be more than:
1. $100,000,000 in respect of any one loss occurrence, nor
2. $200,000,000 in all during the term of this Contract.
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Page 1 of 6
No. 3341-00-0002-00-95-03-00-00
San Francisco, January 4, 1995
20th Century Insurance Company
6301 Owensmouth
Woodland Hills, California 91367
Gentlemen:
We are in receipt of confirmation that the following reinsurance has
been effected for your account:
REASSURED 20th Century Insurance Company
21st Century Casualty Company
Woodland Hills, California
TREATY 60% QUOTA SHARE TREATY applying to all business
classified by the Reassured as Personal Excess Liability
Policy (P.E.L.P.).
LIMIT 60% Quota Share of a maximum of $1,000,000 CSL any one
risk (Maximum cession $600,000 CSL any one risk).
The Reassured shall be the sole judge of what constitutes
one risk.
TERRITORY This reinsurance shall apply wherever the Reassured's
policies apply.
RETENTION 40% Quota Share subject only to Contingency Reinsurance.
Recoveries under which shall inure to the Reassured's
sole benefit.
PERIOD Continuous and to apply to new, renewal and
reunderwritten policies incepting on and after
12:01 a.m., Pacific Standard Time January 1, 1995.
154
Page 2 of 6
3341-00-0002-00-95-03-00-00
CANCELLATION At 12:01 a.m., Pacific Standard Time of any January 1
following 90 days' notice. In the event of cancellation,
the Reassured shall have the option of terminating
Reinsurers' liability in force at cancellation date with
return by Reinsurers of the unearned premium portfolio,
or of continuing Reinsurers' liability until the first
anniversary date following cancellation.
Irrespective of the cancellation option chosen by the
Reassured, Reinsurers will remain liable for losses
occurring on risks in force at cancellation which for any
reason the Reassured is unable to cancel but in no event
shall Reinsurers liability continue for more than three
years from cancellation date.
PREMIUM AND
COMMISSION Gross original rates as allocated by the Reassured less
22.5% commission.
ACCOUNTS Quarterly within 45 days of close of quarter with
settlement within 60 days of close of quarter.
CASH LOSSES $100,000
WARRANTY Reassured shall use only their Policy.
EXCLUSIONS As per attached Exclusion List.
LOSS ADJUSTMENT
AND
LEGAL EXPENSES Pro rated and in proportion to each party's share of loss
and in addition to limit hereof, except where the limit
of the Reassured's policy includes defense costs as part
of the limit.
STATISTICAL
REPORTS Quarterly reports of unearned premiums and outstanding
losses.
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3341-00-0002-00-95-03-00-00
NON-ADMITTED
REINSURERS Agree to provide clean, irrevocable and unconditional
Letters of Credit as respects outstanding loss reserves,
IBNR, LAE and unearned premiums.
CLAUSES Extended Expiration Clause
Original Conditions Clause
Extra Contractual Obligations Clause (Combined
contractual and extra contractual loss not to exceed the
limit of this Reinsurance).
Excess of Policy Limits Clause
Access to Records Clause
Errors and Omissions Clause
Tax/Federal Excise Tax Statutory Amount
Service of Suit Clause
Arbitration Clause
Insolvency Clause
Guy Carpenter Intermediary Clause
156
Page 4 of 6
3341-00-0002-00-95-03-00-00
REINSURERS
----------
The Mercantile and General Reinsurance Company of America 15.0%
SCOR Reinsurance Company 15.0%
Underwriters Reinsurance Company 30.0%
-----
60.0%
=====
GUY CARPENTER & COMPANY, INC.
Timothy J. Brophy
Senior Vice President
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Page 5 of 6
3341-00-0002-00-95-03-00-00
20TH CENTURY INSURANCE COMPANY
PERSONAL EXCESS LIABILITY QUOTA SHARE TREATY
--------------------------------------------
EXCLUSION LIST
--------------
This Contract does not apply to and specifically excludes the following:
1. Perils and clauses which are excluded in the Reassureds Personal Excess
Liability Policy (P.E.L.P.).
2. Assumed Reinsurance except Agency Reinsurance.
3. Nuclear Incident Exclusion Clause.
4. War risks, bombardment, invasion, insurrection, rebellion, revolution,
military or usurped power, and confiscation by order of any government
or civil authority, as excluded under a standard policy containing a
standard war exclusion clause.
5. Accident and Health Insurance.
6. Losses arising out of seepage and pollution as per original exclusions.
However, this exclusion shall not apply when the Reassured includes its
seepage and pollution exclusion on a policy and the judicial entity
having legal jurisdiction invalidates the Reassured's exclusion, thereby
obligating the Reassured for liability for seepage and pollution when
such liability was intended to be excluded from coverage by the
Reassured's seepage and pollution exclusion.
7. 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.
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3341-00-0002-00-95-03-00-00
LOSSES AND LOSS ADJUSTMENT EXPENSES
-----------------------------------
As provided in ARTICLE 12, the Company shall settle all losses, and such
settlements shall be unconditionally binding upon the Reinsurer in proportion
to its participation.
In addition to the limit hereunder, as shown in ARTICLE 4, the Reinsurer
shall be liable for its pro rata share of all loss adjustment expenses, as
defined herein, incurred by the Company in connection with the settlement of,
resistance to and negotiations concerning claims and losses. Notwithstanding
the foregoing, if the Company's policy includes defense costs as part of the
policy limit, such defense costs shall be included with the loss (if any) in
making up the recovery from the Reinsurer, up to the limit of this Agreement.
The term "loss adjustment expenses" shall mean court costs, interest
upon awards and judgments, allocated expenses for investigation and
adjustment, and all allocated legal expenses paid by the Company which shall
include all legal expense and costs associated with any declaratory judgment
actions brought to determine the Company's defense and/or indemnification
obligations arising under policies ceded to this Agreement. The Reinsurer
shall not, however, be required to contribute to the salary charges of any
officials or permanent employees of the Company except in the case of field
claim adjusters or staff attorneys, and then only when the time spent by any
adjuster or staff attorney is definitely allocated to a specific claim or
loss.
The Reinsurer shall be credited with its proportionate share of salvage
or recovery made by the Company on account of claims and settlement involving
reinsurance hereunder. 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
rights. All salvages, recoveries or payments recovered or received
subsequent to a loss settlement under this Agreement shall be applied as if
recovered or received prior to the aforesaid settlement, and all necessary
adjustment shall be made by the parties hereto.
The amounts due from the Reinsurer shall be charged in the quarterly
accounts. If the amount due from the Reinsurer in respect of any one loss
exceeds its percentage of $100,000 the Reinsurer shall upon demand forthwith
remit the amount due. The Reinsurer reserves the right to reduce such amount
by the amount of any balances under this Agreement which may be due to the
Reinsurer in current account.
159
Reinsurer Reference RA 1121
PROPERTY CATASTROPHE EXCESS OF LOSS
REINSURANCE AGREEMENT
(hereinafter referred to as the "Agreement")
between
20th CENTURY INSURANCE COMPANY
and/or
21st CENTURY CASUALTY COMPANY,
Woodland Hills, California
(hereinafter referred to collectively as the "Company")
and
NATIONAL INDEMNITY COMPANY,
Omaha, Nebraska
(hereinafter referred to as the "Reinsurer")
Article I. Business Covered.
This Contract applies to loss occurrences which take place during
the currency of this Agreement under all policies, certificates,
binders and/or contracts of insurance or reinsurance (hereinafter
called "policy" or "policies") which are issued or may be issued by
or on behalf of the Company and classified by the Company as
Homeowners (Section I only), Condominium Owners (Section I only),
Dwelling Fire, Inland Marine, and/or Automobile Physical Damage.
Article II. Term.
This Agreement shall take effect from 12:01 a.m., Pacific Daylight
Savings Time, January 23, 1995 to 11:59 p.m., Pacific Standard
Time, May 15, 1995 (hereinafter, the "Period"), and shall apply to
Loss Occurrences which take place during the Period of this
Agreement.
If this Agreement shall terminate while a Loss Occurrence covered
hereunder is in progress, it is agreed that, subject to the other
terms and conditions of this Agreement, the Reinsurer is
responsible for its proportion of the entire loss. Conversely, if
this
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Agreement shall commence while a Loss Occurrence otherwise
covered hereunder is in progress, it is agreed that the Reinsurer
shall not be responsible for any Ultimate Net Loss arising from
such Loss Occurrence, regardless of when such Ultimate Net Loss is
incurred.
Article III. Premium.
The Company shall pay to the Reinsurer, by wire transfer, a Premium
of $7,747,500 prior to 5:00 p.m., Eastern Standard Time, January
20, 1995. The Premium shall be non-refundable and fully earned
upon inception of the coverage provided hereunder.
Article IV. Amount of Cover.
The Reinsurer shall not be liable for any loss hereunder until the
Company's Ultimate Net Loss in each Loss Occurrence exceeds the
indicated Retention, and then the Reinsurer shall be liable for the
amount of the Company's Ultimate Net Loss in each Loss Occurrence
excess of the Retention, but the Reinsurer's liability shall not
exceed the indicated Limit, as set forth below, in Ultimate Net
Loss in each Loss Occurrence.
PERIOD LIMIT RETENTION
01/23/95 - 02/15/95 $200,000,000 $250,000,000
02/16/95 - 02/28/95 $200,000,000 $200,000,000
03/01/95 - 03/15/95 $175,000,000 $200,000,000
03/16/95 - 03/31/95 $145,000,000 $200,000,000
04/01/95 - 04/15/95 $105,000,000 $200,000,000
04/16/95 - 04/30/95 $70,000,000 $200,000,000
05/01/95 - 05/15/95 $35,000,000 $200,000,000
The above limit of liability applies to Ultimate Net Loss as a
result of each Loss Occurrence excess of the Retention. In the
event of a Loss Occurrence in excess of the Retention, the
applicable limit of liability under this Agreement will be
determined based on the date of that first Loss Occurrence (first
Loss Occurrence being determined chronologically). If the first
Loss Occurrence results in losses ceded to this Agreement
161
equal to the applicable limit stated above for the date of the first Loss
Occurrence, then no further coverage will be provided hereunder for
any subsequent Loss Occurrence.
In the event that the first Loss Occurrence is less than the
applicable limit for the date of that first Loss Occurrence, then
the remaining limit available hereunder for the second Loss
Occurrence excess of the Retention will be determined by first
taking the applicable full limit for the first Loss Occurrence as
stated above less the Ultimate Net Loss finally ceded to the
Reinsurer from the first Loss Occurrence and dividing that
difference by the applicable limit stated above for the first Loss
Occurrence. The resulting fraction will then be multiplied by the
limit stated above applicable to the date of the second Loss
Occurrence. The resulting product is the limit available hereunder
excess of the Retention for the second Loss Occurrence.
If the second Loss Occurrence does not exhaust the remaining limit,
then the remaining limit for the third and subsequent chronological
Loss Occurrences during the Period of this cover excess of the
Retention shall be determined in the same manner. If the second
Loss Occurrence does exhaust the pro rata remaining limit as
determined above, there shall be no further coverage hereunder. No
loss payment for the second or subsequent Loss Occurrences shall be
made until the Reinsurer and Company mutually agree on the total
loss to be ceded hereunder for each of the chronologically prior
Loss Occurrences.
Article V. Territory.
This Agreement shall apply only to the State of California of the
United States of America.
Article VI. Exclusions.
This Agreement specifically excludes from the Limits and Retentions
hereunder:
1. Flood and/or Earthquake when written alone.
2. Mortgage Impairment Business.
3. All reinsurance assumed other than facultative.
4. War risk, bombardment, invasion, insurrection, rebellion,
revolution, military or usurped power, or confiscation by
order of any government or public authority, as excluded under
a standard policy containing a standard War Exclusion Clause.
5. All liability of the Company arising by contract, by operation
of law, or otherwise,
162
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.
6. Third Party Bodily Injury or Death Liability, Third Party
Personal Injury Liability, Third Party Property Damage
Liability and Medical Payments insurance; however, nothing
herein contained shall be construed as excluding liability for
damage to property in an insured's care, custody or control
for which the insured may be liable.
7. Loss and/or damage and/or costs and/or expenses arising from
Seepage and/or Pollution and/or Contamination, other than
contamination from smoke damage. Nevertheless, this exclusion
does not preclude any payment of the cost of the removal of
debris of property damaged by a loss otherwise covered
hereunder but subject always to a limit of 25% of the
Company's property loss under the original policy.
8. Special Programs as declared by the Company.
9. Liability of the Company as excluded by the following clauses,
which are attached hereto and made a part of this Agreement:
a. Nuclear Incident Exclusion Clauses - Physical Damage -
Reinsurance - U.S.A. and Canada; and Nuclear Energy Risk
Exclusion Clause (Reinsurance) - Worldwide Excluding
U.S.A. and Canada.
b. Pools, Associations and Syndicates in accordance with the
Pools, Associations and Syndicates Exclusions Clause.
10. Extra Contractual Obligations and/or Losses in Excess of
Policy Limits.
"Extra Contractual Obligations" are defined as those
liabilities not covered under any other provision of this
Agreement and which arise from the handling of any claim on
business covered hereunder, such liabilities arising because
of, but not limited to, the following: failure by the 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
163
against its insured or reinsured or in the preparation or
prosecution of an appeal consequent upon such action.
"Losses in Excess of Policy Limits" are defined as any losses
exceeding the limit of the Company's policy, having been
incurred because of 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. For the
purposes of this definition, 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 policy.
"Extra Contractual Obligations" and "Losses in Excess of
Policy Limits" shall also include any exemplary or punitive
damages assessed against the Company 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 individual or corporation or any other organization
or party involved in the presentation, defense or settlement
of any claim covered hereunder.
11. "Unallocated Loss Adjustment Expenses", which shall mean all
court costs, attorneys' fees, expenses and interest which are
not allocated to a specific Loss Occurrence for which
reimbursement is due the Company under this Agreement.
Unallocated Loss Adjustment Expenses shall include salaries of
officers and permanent employees of the Reinsured.
Article VII. Loss Occurrence.
The term "Loss Occurrence" wherever appearing in this Agreement
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 Territory as defined in Article V. of this Agreement. 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:
1. 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.
164
2. 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.
3. 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.
4. 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.
For all those "Loss Occurrences" 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, except for those "Loss Occurrences" referred
to in subparagraphs 1 and 2 above, where only one such period of 72
consecutive hours shall apply with respect to one event, regardless
of the duration of the event.
No individual losses occasioned by an event that would be covered
by a 72 hours clause may be included in any "Loss Occurrence"
claimed under the 168 hours provision.
Article VIII. Ultimate Net Loss.
The term "Ultimate Net Loss" wherever used in this Agreement shall
mean:
1. the actual loss or losses paid by the Company, plus
2. expenses of litigation (if any) not otherwise excluded
hereunder, plus
165
3. all other loss expenses of the Company (excluding office
expenses and salaries of officials of the Company except
in the case of field claim adjusters or staff attorneys,
and then only when the time spent by any adjuster or
staff attorney is definitely allocated to a specific
claim or specific catastrophe), less
4. salvages and/or recoveries (if any) as determined in
accordance with Article XI. of this Agreement,
Subrogation and Salvage, less
5. recoveries from all other reinsurances effected by the
Company relating to the business described in Article I,
whether collected or not (except that the Company is
permitted to carry underlying Catastrophe reinsurance,
recoveries under which shall inure to the Company's sole
benefit), all relating to any one Loss Occurrence.
All salvages, recoveries or payments recovered or received
subsequent to a loss settlement under this Agreement shall be
applied as if recovered or received prior to the aforesaid
settlement, and all necessary adjustments shall be made by the
parties hereto.
It is understood and agreed that the Company shall have the benefit
of underlying catastrophe excess of loss reinsurance, recoveries
under which shall inure to the sole benefit of the Company.
Nothing in this Article, however, shall be construed as meaning
that losses are not recoverable from the Reinsurer until the
Ultimate Net Loss to the Company has been ascertained.
Article IX. Net Retained Lines.
This Agreement applies only to that portion of any insurance or
reinsurance which the Company retains net for its own account. In
calculating the amount of any loss hereunder and also in computing
the amount or amounts in excess of which this Agreement attaches,
only loss or losses in respect of that portion of any insurance or
reinsurance which the Company retains net for its own account shall
be included.
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 reinsurers, whether specific
or general, any amounts which may have become due from them,
whether such inability arises from the insolvency of such other
reinsurers or otherwise.
166
Article X. Claims.
The Company shall give immediate notice to the Reinsurer of any
Loss Occurrence which they have reason to believe could involve
this Agreement.
The Company shall furthermore keep the Reinsurer informed of all
developments likely to affect any payment by the Reinsurer under
this Agreement.
The Company may commence, continue, defend, settle or withdraw from
actions, suits or prosecutions and generally do all such things
relating to any Loss Occurrence in which the Reinsurer is
interested as, in the Company's judgment, may be beneficial or
expedient to both parties. While the Reinsurer is not obligated to
do so, the Reinsurer shall nevertheless be afforded the right to
associate, solely in its discretion and at its own expense, in the
defense, resistance or settlement of any claims arising from a Loss
Occurrence which may possibly give rise to a claim hereunder.
All settlements made by the Company, provided same are within the
original terms of the policies reinsured hereunder and the terms of
this Agreement, shall be unconditionally binding upon the
Reinsurer. The share of the Reinsurer in any settlement shall be
payable by the Reinsurer to the Company upon receipt by the
Reinsurer of proof of loss satisfactory to the Reinsurer.
Article XI. Salvage and Subrogation.
(A) The Reinsurer shall be subrogated, as respects any Ultimate
Net Loss for which the Reinsurer shall actually pay or become
liable to pay, but only to the extent of the amounts of payment by,
or the amount of liability of, the Reinsurer, to all rights of the
Company against any person or other entity who may be legally
responsible in damages for said Ultimate Net Loss. The Company
hereby agrees to enforce such rights. In the event the Company
shall fail or neglect to do so, the Reinsurer is hereby authorized
and empowered to bring any appropriate action in the name of the
Company or insured under a reinsurance contract or insurance policy
reinsured hereunder to enforce such rights.
(B) In determining the amount of recoveries, salvages or
reimbursements, there shall first be deducted from any amount
recovered the expenses incurred in effecting the recovery
(excluding salaries and expenses of officers and employees of the
Company). Once such expense has been paid, any rights of
subrogation, recoveries, salvages or reimbursements applying to
Loss Occurrences reinsured under this Agreement shall always be
used to reimburse the reinsurers excess of Reinsurer (from the last
to the first, beginning with the reinsurer of the last excess)
according their participation, before being
167
used in any way to reimburse the Reinsurer. The Company shall
recover for the Retention from recoveries, salvages or reimbursements
only after the Reinsurer has been reimbursed in full for its Ultimate
Net Loss reimbursement payment.
(C) All salvages, recoveries or reimbursements, after deduction of
all expenses allowed under Paragraph B of this Article applicable
thereto, recovered or received subsequent to an Ultimate Net Loss
reimbursement by the Reinsurer under this Agreement shall be
applied as if recovered or received prior to the aforesaid
settlement and all necessary adjustments shall be made by the
parties hereto; provided that nothing in this Article shall be
construed to mean that Ultimate Net Losses under this Agreement are
not recoverable until all salvage, recovery and reimbursement has
been determined.
Article XII. Audit and Inspection.
The duly authorized representative of the Reinsurer, at all
reasonable times during the Period of this Agreement (and
thereafter to the extent of any interest expressed by the Reinsurer
in the business reinsured hereunder) shall have access at the
offices of the Company to all records of the Company which pertain
in any way to this Agreement or the subject matter thereof,
provided always that the Reinsurer shall have given to the Company
prior written notice of their desire to obtain information.
Article XIII. Errors and Omissions.
Any inadvertent error, omission or delay in complying with the
terms and conditions of this Agreement shall not be held to relieve
or increase the liability of either party hereto. Upon discovery
of such an incident, rectification shall be made as soon as
reasonably practicable, following which the position of the parties
shall be as though the incident had not occurred.
Article XIV. Insolvency.
The portion of any risk or obligation assumed by the Reinsurer,
when such portion is ascertained, shall be payable on demand of the
Company at the same time as the Company shall pay its net retained
portion of such risk or obligation, with reasonable provision of
verification before payment, and the reinsurance shall be payable
by the Reinsurer, on the basis of the liability of the Company
under the contract or contracts reinsured without diminution
because of the insolvency of the Company.
In the event of the insolvency of the Company and the appointment
of a conservator,
168
liquidator, receiver or statutory successor of the Company, this
reinsurance shall be payable directly to such conservator,
liquidator, receiver or statutory successor
immediately upon demand, with reasonable provision for
verification, on the basis of claims allowed against the insolvent
company by any court of competent jurisdiction or by any
conservator, liquidator, receiver or statutory successor of the
Company having authority to allow such claims, without diminution
because of such insolvency or because such conservator, liquidator,
receiver or statutory successor has failed to pay all or a portion
of any claim. It is agreed, however, that the conservator,
liquidator, receiver 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. It
is furthermore agreed 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 conservator, liquidator, receiver 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.
Where two or more Reinsurers on this Contract 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 this 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 Reinsurer to the Company or to its
conservator, liquidator, receiver or statutory successor, except:
1. as provided by Sections 4118(a)(1)(A) and 1114(c) of the
New York Insurance Law, or
2. where the original contract of insurance or reinsurance
specifically provides another payee in the event of the
insolvency of the Company; and 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. 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 Reinsurer pays any loss
169
directly to payees under such policy.
Article XV. Non-Waiver.
The failure of the Company or the Reinsurer to insist on strict
compliance with this Agreement, or to exercise any right or remedy
hereunder, shall not constitute a waiver of any rights contained
herein nor estop the parties from thereafter demanding full and
complete compliance nor prevent the parties from exercising such
remedy in the future.
Article XVI. Modifications.
Any mutually agreed modifications to this Agreement shall be
binding on both parties and shall be deemed to form a part of this
Agreement only when signed by an authorized representative of each
party.
Article XVII. Offset.
The Reinsured or the Reinsurer may offset any balance(s), including
but not limited to offsetting premium and claims payments, which
may become due and owing hereunder. This offset right shall apply
regardless of whether the balances arose on account of premium,
commission, claims, losses, loss adjustment expense, salvage or any
other amount(s) due from one party to the other under this
Agreement or under any other agreement heretofore or hereafter
entered into between the Company and the Reinsurer. This right of
offset shall apply regardless of whether either party was acting as
assuming reinsurer or ceding reinsured or was acting in any other
capacity related or not related to reinsurance.
Article XVIII. Currency.
Whenever the word "Dollars" and/or the sign "$" appears in this
Agreement, it shall be understood to mean United States Dollars.
Where the Company receives premiums or pays losses in currencies
other than United States Dollars, such premiums and losses shall be
converted into United States Dollars at the actual rates of
exchange at which such premiums or losses are entered on the
Company's books.
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Article XIX. Taxes.
In consideration of the terms under which this Agreement is issued,
the Company undertakes not to claim any deduction in respect of the
premium hereon when making tax returns, other than Income or
Profits Tax returns, to any State or Territory or the District of
Columbia.
Article XX. No Third Party Rights.
In no event shall anyone other than the Reinsurer of the Company
(or its statutory successor as set forth in Article XVI. hereof)
have any rights under this Agreement.
Article XXI. Arbitration.
This Article shall form a separate Agreement between the Company
and the Reinsurer from the main Property Catastrophe Excess of Loss
Reinsurance Agreement.
All matters in difference in relation to this reinsurance,
including its formation and validity and whether arising during or
after the period of this reinsurance, shall be submitted to binding
arbitration for resolution.
The dispute shall be submitted to three arbitrators, one to be
chosen by each party, and the third by the two so chosen. The
party requesting arbitration (petitioner) shall mail to the other
party (respondent) a written demand of arbitration naming its
arbitrator. The respondent shall appoint its arbitrator within
thirty days of receipt of the demand. If the respondent refuses or
neglects to appoint its arbitrator within that time, the claimant
shall appoint a second arbitrator. If the two arbitrators fail
otherwise to agree in the selection of the third arbitrator (the
umpire), they shall within thirty days of their appointment each
nominate three, of whom the other shall decline two and the
decision shall be made by drawing lots.
All members of the arbitration panel shall be active or retired
disinterested officers of insurance or reinsurance companies or
Underwriters at Lloyd's of London. The arbitration panel shall
interpret this reinsurance agreement as an honorable engagement and
not only as a legal obligation. They are relieved of all judicial
formalities and may abstain from following strict rules of law.
They shall make their decision with a view to effecting the general
purpose of this reinsurance agreement and the mutual intentions of
the parties thereto in a reasonable manner. Unless otherwise
mutually agreed or directed by the arbitration panel, the seat of
the arbitration shall be the city in which the Company's head
office is located.
171
The arbitration panel shall have authority to fix all procedural
rules for the holding of the arbitration including discretionary
power to make orders as to any matters which it may consider proper
in the circumstances of the case with regard to scheduling,
pleadings, discovery, inspection of documents, examination of
witnesses and any other matter whatsoever relating to the conduct
of the arbitration and may receive and act upon such evidence
whether oral or written strictly admissible or not as it shall in
its discretion deem fit. The panel shall render a written decision
within sixty days of the matter being referred to them for
deliberations.
Each party shall bear their own expenses and costs and the costs of
its arbitrator, and the parties shall share equally in the costs of
the umpire and the hearing. The arbitration panel may not award
exemplary, punitive, multiple or other damages of a similar nature.
The award of the arbitration panel shall be in writing and binding
upon the parties who covenant to carry out the same. If either of
the parties should fail to carry out any award, the other may apply
for its enforcement to any court of competent jurisdiction in any
territory in which the party in default is domiciled or has assets
or carries on business.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed in duplicate by their duly authorized
representatives.
This 14th day of March , 1995 by 20TH CENTURY INSURANCE COMPANY
---- ------------- ------- 21ST CENTURY CASUALTY COMPANY
by: Charles I. Petit
-----------------------------
Vice President
and this 8th day of March , 1995 by NATIONAL INDEMNITY COMPANY
---- -------------- -------
by: Brian G. Snoven
-----------------------------
Asst. Vice President
172
AMENDMENT NO. 2
---------------
This Amendment (this "Amendment") is entered into as of December
31, 1994 by and among 20th Century Industries, a California corporation
(the "Borrower"), Union Bank, individually and as Agent, The First
National Bank of Chicago, individually and as Documentary Agent, and the
other financial institutions signatory hereto.
RECITALS
--------
A. The Borrower, the Agent, the Documentary Agent and the Lenders
are party to that certain Credit Agreement dated as of June 30, 1994 (as
heretofore amended, the "Credit Agreement"). Unless otherwise specified
herein, each capitalized term used and not otherwise defined in this
Amendment shall have the meaning ascribed to it by the Credit Agreement.
B. The Borrower, the Agents and the Lenders wish to amend the
Credit Agreement on the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the mutual execution hereof and
other good and valuable consideration, the parties hereto agree as
follows:
1. Amendment of Credit Agreement. The Credit Agreement is
-----------------------------
hereby amended as follows:
(a) The definition of "Applicable ABR Margin" in Article
-------
I is amended in its entirety to read as follows:
"'Applicable ABR Margin' means (a) 0.5% during
---------------------
Period I, (b) 1.5% during Period II, (c) .75% during
Period III and (d) 0.25% during Period IV; provided,
--------
however, that for the period from and including January
1, 1995 to and including March 31, 1995 the Applicable
ABR Margin shall be 2.0%."
(b) The definition of "Applicable Eurodollar Margin" in
Article I is amended in its entirety to read as follows:
---------
"'Applicable Eurodollar Margin'" means (a) 2.5%
----------------------------
during Period II, (b) 1.75% during Period III and (c)
1.25% during Period IV; provided, however, that for the
-----------------
period from and including January 1, 1995 to and
including March 31, 1995 the Applicable Eurodollar Margin
shall be 3.25%. The Applicable Eurodollar Margin may
change during an Interest Period to the extent required
by this definition."
(c) Section 6.23.1 is amended in its entirety to read as
--------------
follows:
"6.23.1 Surplus as Regards Policyholders.
--------------------------------
Commencing June 30, 1994 (after giving effect to the
application of the proceeds of the Loans) and determined
as at the end of each calendar quarter (commencing as of
such date), at all times after the date hereof, maintain
173
an aggregate Surplus as Regards Policyholders of at least
(a) $200 million in the case of the calendar quarter
ending December 31, 1994, (b) $225 million in the case of
the calendar quarter ending March 31, 1995 and (c) $250
million in the case of all other calendar quarters."
(d) The reference in Section 6.23.2 to "4.50 to 1.00"
--------------
with respect to the period "6/30/94 - 6/30/95" is replaced with a
reference to "5.00 to 1.00".
(e) Section 6.23.3 is amended in its entirety to read as
--------------
follows:
"6.23.3 Coverage Ratio. As of the end of each
--------------
fiscal quarter of the Borrower ending on or after March
31, 1995, maintain a ratio (the "Coverage Ratio") of (a)
--------------
the sum of (i) the amount of cash and cash equivalents of
the Borrower, on a non-consolidated basis, as of the end
of such fiscal quarter plus (ii) consolidated Statutory
Net Income of the Insurance Subsidiaries for the most
recent four fiscal quarters (or lesser number of fiscal
quarters specified below) then ended to (b) the amount of
principal and interest on all Indebtedness of the
Borrower (other than repayments of principal on the Loans
pursuant to Sections 2.6 or 2.7(b)) and cash dividends on
------------ ------
the Preferred Stock paid during the four fiscal quarters
(or lesser number of fiscal quarters specified below)
then ended of not less than 1.50 to 1.00; provided,
--------
however, that for purposes of determining any of the
-------
foregoing amounts such amounts will be calculated for the
fiscal quarter ending on March 31, 1995, for the two most
recent fiscal quarters ending on June 30, 1995, for the
three most recent fiscal quarters ending on September 30,
1995, and, thereafter, on a four-quarter basis."
2. Representations and Warranties of the Borrower. The
----------------------------------------------
Borrower represents and warrants that:
(a) The execution, delivery and performance by the
Borrower of this Amendment has been duly authorized by all
necessary corporate action on the part of the Borrower and does not
(i) violate any law, rule or regulation, order, writ, judgment,
injunction, decree or award binding on the Borrower or any
Subsidiary or the Borrower's or any Subsidiary's articles or
certificate of incorporation or bylaws, (ii) violate the provisions
of or require the approval or consent of any party to any
indenture, instrument or agreement to which the Borrower or any
Subsidiary is a party or is subject or by which it, or its
property, is bound, or (iii) conflict with or constitute a default
thereunder or require the approval or consent of any Governmental
Authority.
(b) This Amendment is a legal, valid and binding
obligation of the Borrower enforceable against the Borrower in
accordance with its terms, except as the enforcement thereof may be
174
subject to (i) the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar law affecting creditors'
rights generally and (ii) general principles of equity (regardless
of whether such enforcement is sought in a proceeding in equity or
at law); and
(c) No Default or Unmatured Default has occurred and is
continuing.
(d) As of the date hereof, (i) each Insurance Subsidiary
is in compliance with all applicable California or California
Department of Insurance statutes, rules, regulations, orders and
directives (each a "Legal Requirement") relative to minimum levels
of Surplus as Regards Policyholders and (ii) to the best knowledge
of the Borrower, there exists no Legal Requirement that between the
date hereof and June 30, 1995 the aggregate Surplus as Regards
Policyholders of the Borrower's Consolidated Insurance Subsidiaries
exceed $200 million.
3. Effective Time. This Amendment shall become effective
--------------
upon its execution and delivery by the Borrower, the Agent, the
Documentary Agent and the Required Lenders (without respect to whether
it has been executed and delivered by all Lenders).
4. Reference to and Effect Upon the Credit Agreement.
-------------------------------------------------
(a) Except as specifically amended above, the Credit
Agreement and each other Loan Document shall remain in full force
and effect and are hereby in all respects ratified and confirmed.
(b) The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or
remedy of the Agents or any Lender under the Credit Agreement or
any Loan Document, nor constitute a waiver of any provision of the
Credit Agreement or any Loan Document.
(c) From and after the effectiveness hereof, each
reference in the Credit Agreement to "this Agreement", "hereunder",
"hereof", "herein" or words of similar import shall mean and be a
reference to the Credit Agreement as amended hereby.
5. Costs and Expenses. Without limiting its obligations
------------------
under Section 9.7 of the Credit Agreement, the Borrower affirms it has
agreed to reimburse the Agents for the reasonable fees and expenses of
Winston & Strawn incurred in connection with this Amendment.
6. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS
OF LAWS PROVISIONS) OF THE STATE OF NEW YORK BUT GIVING EFFECT TO
FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
7. Headings. Section headings in this Amendment are
--------
included herein for convenience of reference only and shall not
constitute a part of this Amendment for any other purposes.
175
8. Counterparts. This Amendment may be executed in any
------------
number of counterparts, each of which when so executed shall be deemed
an original but all such counterparts shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment
as of the date and year first above written.
UNION BANK, individually and THE FIRST NATIONAL BANK OF
as Agent CHICAGO, individually and as
Documentary Agent
By: Robert C Dawson By:
---------------------------- ----------------------------
Its: VP Its:
---------------------------- ----------------------------
By:____________________________
Its:___________________________
THE BANK OF NEW YORK BANK ONE, TEXAS, N.A.
By:____________________________ By:____________________________
Its:___________________________ Its:___________________________
FIRST UNION NATIONAL BANK OF SANWA BANK CALIFORNIA
NORTH CAROLINA
By:____________________________ By:____________________________
Its:___________________________ Its:___________________________
SHAWMUT BANK CONNECTICUT, N.A. 20TH CENTURY INDUSTRIES
By:____________________________ By:____________________________
Its:___________________________ Its:___________________________
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176
8. Counterparts. This Amendment may be executed in any
------------
number of counterparts, each of which when so executed shall be deemed
an original but all such counterparts shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment
as of the date and year first above written.
UNION BANK, individually and THE FIRST NATIONAL BANK OF
as Agent CHICAGO, individually and as
Documentary Agent
By:____________________________ By:____________________________
Its:___________________________ Its:___________________________
By:____________________________
Its:___________________________
THE BANK OF NEW YORK BANK ONE, TEXAS, N.A.
By: Timothy J. Starbaugh By:
---------------------------- ----------------------------
Its: Vice President Its:
---------------------------- ----------------------------
FIRST UNION NATIONAL BANK OF SANWA BANK CALIFORNIA
NORTH CAROLINA
By:____________________________ By:____________________________
Its:___________________________ Its:___________________________
SHAWMUT BANK CONNECTICUT, N.A. 20TH CENTURY INDUSTRIES
By:____________________________ By:____________________________
Its:___________________________ Its:___________________________
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177
8. Counterparts. This Amendment may be executed in any
------------
number of counterparts, each of which when so executed shall be deemed
an original but all such counterparts shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment
as of the date and year first above written.
UNION BANK, individually and THE FIRST NATIONAL BANK OF
as Agent CHICAGO, individually and as
Documentary Agent
By:____________________________ By:____________________________
Its:___________________________ Its:___________________________
By:____________________________
Its:___________________________
THE BANK OF NEW YORK BANK ONE, TEXAS, N.A.
By:____________________________ By:____________________________
Its:___________________________ Its:___________________________
FIRST UNION NATIONAL BANK OF SANWA BANK CALIFORNIA
NORTH CAROLINA
By:____________________________ By:____________________________
Its:___________________________ Its:___________________________
SHAWMUT BANK CONNECTICUT, N.A. 20TH CENTURY INDUSTRIES
By: Timothy B. Brown By:
---------------------------- ----------------------------
Its: Assistant Vice President Its:
---------------------------- ----------------------------
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178
8. Counterparts. This Amendment may be executed in any
------------
number of counterparts, each of which when so executed shall be deemed
an original but all such counterparts shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment
as of the date and year first above written.
UNION BANK, individually and THE FIRST NATIONAL BANK OF
as Agent CHICAGO, individually and as
Documentary Agent
By: By: Paul T. Schultz
---------------------------- ----------------------------
Its: Its: Vice President
---------------------------- ----------------------------
By:____________________________
Its:___________________________
THE BANK OF NEW YORK BANK ONE, TEXAS, N.A.
By:____________________________ By:____________________________
Its:___________________________ Its:___________________________
FIRST UNION NATIONAL BANK OF SANWA BANK CALIFORNIA
NORTH CAROLINA
By:____________________________ By:____________________________
Its:___________________________ Its:___________________________
SHAWMUT BANK CONNECTICUT, N.A. 20TH CENTURY INDUSTRIES
By:____________________________ By:____________________________
Its:___________________________ Its:___________________________
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179
8. Counterparts. This Amendment may be executed in any
------------
number of counterparts, each of which when so executed shall be deemed
an original but all such counterparts shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment
as of the date and year first above written.
UNION BANK, individually and THE FIRST NATIONAL BANK OF
as Agent CHICAGO, individually and as
Documentary Agent
By:____________________________ By:____________________________
Its:___________________________ Its:___________________________
By:____________________________
Its:___________________________
THE BANK OF NEW YORK BANK ONE, TEXAS, N.A.
By:____________________________ By:____________________________
Its:___________________________ Its:___________________________
FIRST UNION NATIONAL BANK OF SANWA BANK CALIFORNIA
NORTH CAROLINA
By: By: Richard H. Palmer
---------------------------- ----------------------------
Its: Its: Vice President
---------------------------- ----------------------------
SHAWMUT BANK CONNECTICUT, N.A. 20TH CENTURY INDUSTRIES
By:____________________________ By:____________________________
Its:___________________________ Its:___________________________
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180
8. Counterparts. This Amendment may be executed in any
------------
number of counterparts, each of which when so executed shall be deemed
an original but all such counterparts shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment
as of the date and year first above written.
UNION BANK, individually and THE FIRST NATIONAL BANK OF
as Agent CHICAGO, individually and as
Documentary Agent
By:____________________________ By:____________________________
Its:___________________________ Its:___________________________
By:____________________________
Its:___________________________
THE BANK OF NEW YORK BANK ONE, TEXAS, N.A.
By:____________________________ By:____________________________
Its:___________________________ Its:___________________________
FIRST UNION NATIONAL BANK OF SANWA BANK CALIFORNIA
NORTH CAROLINA
By:____________________________ By:____________________________
Its:___________________________ Its:___________________________
SHAWMUT BANK CONNECTICUT, N.A. 20TH CENTURY INDUSTRIES
By: By: Neil H. Ashley
---------------------------- ----------------------------
Its: Its: C E O
---------------------------- ----------------------------
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181
WAIVER
------
This Waiver ("Waiver") is dated as of March 15, 1995 by and among 20th
Century Industries, a California corporation (the "Borrower"), Union Bank,
individually and as Agent, The First National Bank of Chicago, individually and
as Documentary Agent, and the other financial institutions signatory hereto.
RECITALS
--------
A. The Borrower, the Agent, the Documentary Agent and the Lenders are
party to that certain Credit Agreement dated as of June 30, 1994 (as previously
amended, the "Credit Agreement"). Unless otherwise specified herein, each
capitalized term used in this Waiver shall have the meaning ascribed to it by
the Credit Agreement.
B. The Agents and the Lenders wish to waive certain provisions of the
Credit Agreement on the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the mutual execution hereof and other
good and valuable consideration, the parties hereto agrees as follows:
1. Waiver. The Lenders hereby waive any Default under
------
Section 6.10 of the Credit Agreement arising solely out of the payment of up to
------------
$4.5 million of dividends on the Preferred Stock during the month of March of
1995.
2. Representations and Warranties of the Borrower. As an
----------------------------------------------
inducement to the Lenders to grant the foregoing waiver, the Borrower represents
and warrants that:
(a) The execution, delivery and performance by the Borrower
of this Waiver has been duly authorized by all necessary corporate action on
the part of the Borrower and does not (i) violate any law, rule or
regulation, order, writ, judgment, injunction, decree or award binding on the
Borrower or any Subsidiary or the Borrower's or any Subsidiary's articles or
certificate of incorporation or bylaws, (ii) violate the provisions of or
require the approval or consent of any party to any indenture, instrument or
agreement to which the Borrower or any Subsidiary is a party or is subject or
by which it, or its property, is bound, (iii) conflict with or constitute a
default thereunder or (iv) require the approval or consent of any
Governmental Authority.
(b) This Waiver is a legal, valid and binding obligation of
the Borrower enforceable against the Borrower in accordance with its terms,
except as the enforcement thereof may be subject to (i) the effect of any
applicable bankruptcy,insolvency, reorganization, moratorium or similar law
affecting creditors' rights
182
generally and (ii) general principles of equity (regardless of whether such
enforcement is sought in a proceeding in equity or at law).
(c) No Default or Unmatured Default has occurred and is
continuing.
(d) The representations and warranties of the Borrower set
forth in Article V of the Credit Agreement are true and correct on and as of
---------
the date hereof except to the extent that such representations and warranties
specifically relate to an earlier date.
3. Effective Time. This Waiver shall become effective at such
--------------
time as this Waiver has been executed and delivered by the Borrower, the Agents
and the Required Lenders without respect to whether it has been executed by all
the Lenders.
4. Effect Upon the Credit Agreement. The execution, delivery and
--------------------------------
effectiveness of this Waiver shall not operate as a waiver of any right, power
or remedy of the Agents or any Lender under the Credit Agreement or any Loan
Document, nor constitute a waiver of any provision of the Credit Agreement or
any Loan Document, except as specifically set forth herein. Subject only to
waivers pursuant to the express terms of Section 1 above, the Lenders expressly
reserve any and all rights and remedies they may have under the Loan Documents
with respect to any and all existing or future Defaults and Unmatured Defaults.
5. Costs and Expenses. Without limiting its obligations under
------------------
Section 9.7 of the Credit Agreement, the Borrower affirms it has agreed to
-----------
reimburse the Agents for the reasonable fees and expenses of Winston & Strawn in
connection with this Waiver.
6. GOVERNING LAW. THIS WAIVER SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAWS
PROVISIONS) OF THE STATE OF NEW YORK BUT GIVING EFFECT TO FEDERAL LAWS
APPLICABLE TO NATIONAL BANKS.
7. Headings. Section headings in this Waiver are included herein
--------
for convenience of reference only and shall not constitute a part of this Waiver
for any other purposes.
8. Counterparts. This Waiver may be executed in any number of
------------
counterparts, each of which when so executed shall be deemed an original but all
such counterparts shall constitute one and the same instrument.
[signature page follows]
183
IN WITNESS WHEREOF, the parties have executed this Waiver as of the
date and year first above written.
UNION BANK, individually and THE FIRST NATIONAL BANK OF
as Agent CHICAGO, individually and as
Documentary Agent
By: By:
------------------------ --------------------------
Its: Its:
------------------------ --------------------------
By:
------------------------ --------------------------
Its:
------------------------ --------------------------
THE BANK OF NEW YORK BANK ONE, TEXAS, N.A.
By: By:
------------------------ --------------------------
Its: Its:
------------------------ --------------------------
FIRST UNION NATIONAL BANK OF SANWA BANK CALIFORNIA
NORTH CAROLINA
By: By:
------------------------ --------------------------
Its: Its:
------------------------ --------------------------
SHAWMUT BANK CONNECTICUT, N.A. 20TH CENTURY INDUSTRIES
By: By: William L. Mellick
------------------------ --------------------------
Its: Its: President & CEO
------------------------ --------------------------
C:\DOCS\GSM\1STCHGO\20TH\WAIVER.1
3-13-95/11:09am
184
AMENDMENT NO. 1 TO
INVESTMENT AND STRATEGIC ALLIANCE AGREEMENT
This Amendment No. 1 to Investment and Strategic Alliance Agreement ("Amendment
No. 1") is made and entered into this 23rd day of March, 1995 by and between
20th Century Industries, a corporation organized and existing under the laws of
the State of California (the "Company"), and American International Group, Inc.,
a corporation organized and existing under the laws of the State of Delaware
(the "Investor").
R E C I T A L S
- - - - - - - -
WHEREAS, the Company and the Investor entered into an Investment
and Strategic Alliance Agreement (the "Agreement") on October 17, 1994, pursuant
to which the Company issued to affiliates of the Investor (a) 200,000 shares of
Series A Convertible Preferred Stock, stated value $1,000 per share, having the
rights, preferences, privileges and restrictions set forth in the Certificate of
Determination of the Company (the "Series A Certificate of Determination")
governing the Series A Convertible Preferred Stock (the "Series A Preferred
Shares"), and (b) 16,000,000 Series A Warrants, each exercisable for one share
of Common Stock, no par value, of the Company ("Common Stock"), subject to
adjustment, having the terms set forth in a Warrant Certificate dated December
16, 1994 (the "Warrant Certificate") (the "Series A Warrants");
WHEREAS, on January 27, 1995, the California Department of
Insurance (the "DOI") and the Company entered into a Stipulation, and, on
January 28, 1995, the DOI issued an Order under California Insurance Code
Sections 1065.1 and 1065.2, pursuant to which the DOI has required that the
Company raise an additional $50 million of capital for contribution to the
Company's insurance subsidiaries (the "DOI Capital Requirement"), the first $30
million of which must be raised by March 31, 1995 and the remaining $20 million
of which must be raised by December 31, 1995; and
WHEREAS, the Company and the Investor have agreed upon a $20
million capital contribution to the Company by the Investor to fund a portion of
the DOI Capital Requirement, in exchange for which the Company will issue
additional Series A Preferred Shares to the Investor pursuant to Section 4.3 of
the Agreement, and, in connection therewith, the Company and the Investor desire
to amend Section 4.3 of the Agreement as set forth herein.
A G R E E M E N T
- - - - - - - - -
NOW, THEREFORE, for good and valuable consideration, the receipt
of which is hereby acknowledged, the parties hereto agree as follows:
Section 1. Issuance of Series A Preferred Shares. Concurrently
-------------------------------------
with the execution of this Amendment No. 1, the Investor is contributing $20
million to the Company pursuant to Section 4.3 of the Agreement to fund a
portion of the DOI Capital Requirement. The Company and the Investor agree
that, notwithstanding the formula set forth in Section 4.3 for determining the
number of Series A Preferred Shares to be issued to the Investor in respect of
such contribution, the Investor and the Company agree that, in consideration for
such contribution, the Company shall issue to the Investor 20,000
185
Series A Preferred Shares, having an aggregate liquidation value equal to the
amount contributed to the Company by the Investor.
Section 2. Amendment. In order to memorialize the agreement of
---------
the Company and the Investor to modify the formula for determining the number of
Series A Preferred Shares to be issued in respect of the Investor's $20 million
contribution to the Company, Section 4.3 of the Agreement is hereby amended to
read in its entirety as follows:
"Section 4.3 Investor Contribution and
Additional Shares; Adjustment to Series A Warrants
Exercise Price. If at any time (before or after the
Closing Date) there shall be any Excess Loss Amount as
defined above, the Investor shall, if requested in writing
by the Company after the Closing Date (and subject to the
Closing hereunder), contribute to the capital of the
Company at the request of the Company, in whole or in
part, an amount up to the lesser of (i) $70,000,000 or
(ii) the Excess Loss Amount (the "Investor Contribution").
In consideration for the first $20 million of the Investor
Contribution pursuant to this Section 4.3 (the "$20
Million Contribution"), the Company shall issue to the
Investor that number of fully paid and nonassessable
Series A Preferred Shares having an aggregate liquidation
value equal to $20 million. In consideration of the
contribution of the remainder of the Investor Contribution
following the $20 Million Contribution (the "Remaining
Investor Contribution"), the Company shall issue to the
Investor that number of fully paid and nonassessable
Series A Preferred Shares having an aggregate liquidation
value equal to (x) the amount of the Remaining Investor
Contribution plus (y) an amount equal to the product of,
(1) the Remaining Investor Contribution, (2) 0.65 and (3)
the quotient of (I) the number of shares of Common Stock
beneficially owned or obtainable by the Investor and its
affiliates by virtue of ownership of the Series A
Preferred Shares (including any additional shares actually
issued by virtue of the provision permitting payment of
dividends in kind on the Series A Preferred Shares) and
the Series A Warrants and conversion or exercise thereof
divided by (II) the sum of (A) the total number of shares
of Common Stock of the Company outstanding at the date of
this Agreement plus (B) the number of shares referred to
in (I); provided, however, that the aggregate liquidation
value of any Series A Preferred Shares issued pursuant to
this sentence (without taking into account any Series A
Preferred Shares issuable as a dividend in kind on any
outstanding Series A Preferred Shares) shall not exceed
$63.2474 million. The amount represented as "(y)" in the
above formula is designed to represent Investor's
proportional share of the Company's after-tax loss
resulting from the Excess Loss Amount. Successive
contributions under this Section 4.3 for partial amounts
reflecting development over time shall be permitted, with
minimum cash contributions prior to the final contribution
being for no less than $10 million. In the event that the
Excess Loss Amount exceeds $95,000,000, the exercise
186
price of the Series A Warrants shall be reduced as
provided in the Series A Warrants."
Section 3. Defined Terms. Capitalized terms not otherwise
-------------
defined herein shall have the meanings ascribed to such terms in the Agreement.
Section 4. Reconfirmation of Agreement. Except as otherwise
---------------------------
provided herein, all of the terms and provisions of the Agreement shall remain
in full force and effect.
Section 5. Counterparts. This Amendment No. 1 shall be executed
------------
in any number of counterparts, each of which shall be deemed to be one and the
same instrument.
IN WITNESS WHEREOF, the Company and the Investor have executed
this Amendment No. 1 as of the date first above written.
20TH CENTURY INDUSTRIES
By: William L. Mellick
_____________________________________
Title: President & Chief Executive Officer
AMERICAN INTERNATIONAL GROUP, INC.
By: Robert M. Sandler
_____________________________________
Title: Senior Vice President
Kathleen E. Shannon
By: _____________________________________
Title: Secretary
187
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188
QUOTA SHARE REINSURANCE AGREEMENT
between
20TH CENTURY INSURANCE COMPANY
(hereinafter referred to as the "Company")
and
NEW HAMPSHIRE INSURANCE COMPANY (the "Reinsurer")
PREAMBLE
The Reinsurer hereby agrees to reinsure the Company in respect
of the Company's net liability under all policies, contracts and
binders of insurance (hereafter referred to as "policies") issued
during the term of this Agreement subject to the following terms
and conditions:
ARTICLE I
TERM
This Agreement shall be effective from 12:01 A.M., pacific
standard time, January 1, 1995 and shall remain continuously in
force through December 31, 1999. The Reinsurer has the option to
renew this Agreement annually for four additional years by
notifying the Company prior to December 31, 1999 or prior to the
expiration date of any renewal.
ARTICLE II
PARTICIPATION
The Company shall cede and the Reinsurer shall accept 10% of
the Company's net liability for losses on policies incepting during
the term of this Agreement. As consideration, the Reinsurer shall
receive a 10% share of the net written premiums, less ceding
commission as described in Article III, generated by such policies.
In the event the Reinsurer elects to renew this Agreement for
annual periods following December 31, 1999 the participation shall
be 8% on the first renewal, 6% on the second renewal, 4% on the
third renewal and 2% on the fourth renewal.
ARTICLE III
COMMISSION
The Reinsurer shall allow the Company a commission of 10.8% of
the ceded written premium for policies with effective dates from
January 1, 1995 and through December 31, 1995. For policies with
effective dates in each subsequent underwriting year, the
commission shall be equal to the rate of the Company's incurred
underwriting expenses (as recorded in the Company's statutory
statement) to net written premium for the prior calendar year.
189
ARTICLE IV
REPORTS AND ACCOUNTS
1. The Company shall furnish within forty-five days after
the close of each calendar quarter an account reflecting the
following separately for each underwriting year:
A. Net written premium ceded during the quarter (credited).
B. Commission on the ceded premium (debited).
C. Net paid losses (debited).
D. Net paid adjustment expenses (debited).
E. Net outstanding losses.
F. Net unearned premium.
If the balance of A through D is a credit such
amount shall be remitted with the account. If the
balance of A through D is a debit, the Reinsurer shall
remit such amount within 15 days of receipt of the
account. Accounts by line of business shall also
be provided by the Company including the aforementioned
information.
ARTICLE V
DEFINITION
Underwriting year shall mean all policies with effective dates
from 12:01 A.M., pacific standard time, January 1st through
December 31st of each calendar year.
Net written premium or net losses or net liability shall mean
the gross amount less deductions for all other reinsurance.
CURRENCY
All premium and loss payments hereunder shall be in United
States currency.
ARTICLE VI
ACCESS TO RECORDS
The Reinsurer or its duly appointed representatives shall have
free access at all reasonable times to such books and records of
those Divisions, Departments and Branch Offices of the Company
which are directly involved with the subject matter business of
this Agreement as shall reflect premium and loss transactions of
the Company for the purpose of obtaining any and all information
concerning this Agreement or the subject matter hereof. All non-
public information provided in the course of the inspection shall
be kept confidential by the Reinsurer as against third parties.
190
ARTICLE VII
INSOLVENCY
The portion of any risk or obligation assumed by the
Reinsurer, when such portion is ascertained, shall be payable on
demand of the Company at the same time as the Company shall pay its
net retained portion of such risk or obligation, with reasonable
provision for verification before payment, and the reinsurance
shall be payable by the Reinsurer on the basis of the liability of
the Company under the contract or contracts reinsured without
diminution because of the insolvency of the Company. 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. Immediately upon demand, on
the basis of the liability of the Company without 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 which would involve a
possible liability on the part of the Reinsurer, indicating the
policy or bond reinsured, within a reasonable time after such claim
is filed in the conservation or liquidation proceeding or in the
receivership. It is further agreed 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.
ARTICLE VIII
ARBITRATION
A. All disputes or differences arising out of the interpretation
of this Agreement shall be submitted to the decision of two
arbitrators, one to be chosen by each party, and in the event of
the arbitrators failing to agree, to the decision of an umpire to
be chosen by the arbitrators. The arbitrators and umpire shall be
disinterested active or retired executive officials of fire or
casualty insurance or reinsurance companies or Underwriters at
Lloyd's, London. If either of the parties fails to appoint an
arbitrator within one month after being required by the other party
in writing to do so, or if the arbitrators fail to appoint an
umpire within one month of a request in writing by either of them to
do so, such arbitrator or umpire, as the case may be, shall at the
request of either party be appointed by a Justice of the Supreme
Court of the State of New York.
B. The arbitration proceeding shall take place in the city in
which the Company's Head Office is located. The applicant shall
submit its case within one month after the appointment of the court
of arbitration, and the respondent shall submit its reply within
one month after the receipt of the claim. The arbitrators and
umpire are relieved from all judicial formality and may abstain
from following the strict rules of law. They shall settle any
dispute under the Agreement according to an equitable rather than
a strictly legal interpretation of its terms.
C. Their written decision shall be provided to both parties
within ninety days of the close of arbitration and shall be final
and not subject to appeal.
D. Each party shall bear the expenses of his arbitrator and shall
jointly and equally share with the other the expenses of the umpire
and of the arbitration.
E. This Article shall survive the termination of this Agreement.
191
ARTICLE IX
ERRORS AND OMISSIONS
Any inadvertent delay, omission or error shall not relieve
either party hereto from any liability which would attach to it
hereunder if such delay, omission or error had not been made,
provided such delay, omission or error is rectified immediately
upon discovery.
ARTICLE X
LOSS & LOSS ADJUSTMENT EXPENSE
A. The Company alone and at its full discretion shall adjust,
settle or compromise all claims and losses. All such adjustments,
settlements, and compromises shall be binding on the Reinsurer in
proportion to its 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
judgment may be beneficial or expedient, and all payments made and
costs and expenses incurred in connection therewith or in taking
legal advice therefor shall be shared by the Reinsurer
proportionately. The Reinsurer shall, on the other hand, benefit
proportionately from all reductions of losses by salvage,
compromise or otherwise.
ARTICLE XI
EXTRA CONTRACTUAL OBLIGATIONS
This Agreement shall protect the Company where the ultimate
net loss includes any extra contractual obligations. The term
"extra contractual obligations" is defined as those liabilities not
covered under any other provision of the 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 trail of any action against its insured or
reinsured or in the preparation of prosecution of an appeal
consequent upon such action. The Reinsurer's liability for extra
contractual obligations shall not exceed their participation of the
maximum limit of liability on the policy from which the extra
contractual obligation arises.
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 disaster and/or casualty. However, this
Article shall not apply where the loss has been incurred due to
fraud or a member of the Board of Directors or a corporate officer
of the Company acting individually or collectively or in collusion
with any individual or corporation or any other organization or
party involved in the presentation, defense or settlement of any
claim covered hereunder.
ARTICLE XII
OFFSET
Each party hereto shall have, and may exercise at any time and
from time to time, the right to offset any undisputed balance or
balances, whether on account of premiums or on account of losses or
otherwise, due from such party to the other party hereto under this
Agreement.
192
ARTICLE XIII
TERMINATION
Either party may terminate this Agreement with thirty days'
notice in the event that:
1. One party should at any time become insolvent, or suffer any
impairment of capital, or file a petition in bankruptcy, or go into
liquidation or rehabilitation, or have a receiver appointed, or be
acquired or controlled by any other insurance company or
organization, or
2. Any law or regulation of any Federal or any State or any Local
Government of any jurisdiction in which the Company is doing
business should render illegal the arrangement made herein, or
3. With the agreement of the other party.
In the event of termination, the Reinsurer shall refund to the
Company the applicable unearned premium minus the ceding commission
and shall continue to remain liable for all losses occurring prior
to the date of termination. However, if this Contract shall
terminate while a loss occurrence covered hereunder is in progress,
it is agreed that, subject to the other conditions of this
Contract, the Reinsurer is responsible for its proportion of the
entire loss.
ARTICLE XIV
TAX
In consideration of the terms under which this Agreement is
issued, the Company undertakes not to claim any deduction of the
premium hereon when making tax returns, other than income or
Profits Tax returns, to any State or Territory of the United States
or to the District of Columbia.
ARTICLE XV
COUNTERPARTS
This Agreement may be executed in counterparts, each of which
shall be an original, but all of which together shall constitute
one and the same instrument.
193
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized representatives,
this 16th day of December, 1994.
20TH CENTURY INSURANCE COMPANY
By: William L. Mellick
--------------------------
Title: President & Chief Operating Officer
NEW HAMPSHIRE INSURANCE COMPANY
By:
--------------------------
Title:
By:
--------------------------
Title:
194
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized representatives,
this 16th day of December, 1994.
20TH CENTURY INSURANCE COMPANY
By:
--------------------------
Title:
NEW HAMPSHIRE INSURANCE COMPANY
By: Howard I. Smith
--------------------------
Title: Vice President
By: Elizabeth M. Tuck
--------------------------
Title: Secretary
195
QUOTA SHARE REINSURANCE AGREEMENT
between
21ST CENTURY CASUALTY COMPANY
(hereinafter referred to as the "Company")
and
NEW HAMPSHIRE INSURANCE COMPANY (the "Reinsurer")
PREAMBLE
The Reinsurer hereby agrees to reinsure the Company in respect
of the Company's net liability under all policies, contracts and
binders of insurance (hereafter referred to as "policies") issued
during the term of this Agreement subject to the following terms
and conditions:
ARTICLE I
TERM
This Agreement shall be effective from 12:01 A.M., pacific
standard time, January 1, 1995 and shall remain continuously in
force through December 31, 1999. The Reinsurer has the option to
renew this Agreement annually for four additional years by
notifying the Company prior to December 31, 1999 or prior to the
expiration date of any renewal.
ARTICLE II
PARTICIPATION
The Company shall cede and the Reinsurer shall accept 10% of
the Company's net liability for losses on policies incepting during
the term of this Agreement. As consideration, the Reinsurer shall
receive a 10% share of the net written premiums, less ceding
commission as described in Article III, generated by such policies.
In the event the Reinsurer elects to renew this Agreement for
annual periods following December 31, 1999 the participation shall
be 8% on the first renewal, 6% on the second renewal, 4% on the
third renewal and 2% on the fourth renewal.
ARTICLE III
COMMISSION
The Reinsurer shall allow the Company a commission of 10.8% of
the ceded written premium for policies with effective dates from
January 1, 1995 and through December 31, 1995. For policies with
effective dates in each subsequent underwriting year, the
commission shall be equal to the rate of the Company's incurred
underwriting expenses (as recorded in the Company's statutory
statement) to net written premium for the prior calendar year.
196
ARTICLE IV
REPORTS AND ACCOUNTS
1. The Company shall furnish within forty-five days after
the close of each calendar quarter an account reflecting the
following separately for each underwriting year:
A. Net written premium ceded during the quarter (credited).
B. Commission on the ceded premium (debited).
C. Net paid losses (debited).
D. Net paid adjustment expenses (debited).
E. Net outstanding losses.
F. Net unearned premium.
If the balance of A through D is a credit such
amount shall be remitted with the account. If the
balance of A through D is a debit, the Reinsurer shall
remit such amount within 15 days of receipt of the
account. Accounts by line of business shall also
be provided by the Company including the aforementioned
information.
ARTICLE V
DEFINITION
Underwriting year shall mean all policies with effective dates
from 12:01 A.M., pacific standard time, January 1st through
December 31st of each calendar year.
Net written premium or net losses or net liability shall mean
the gross amount less deductions for all other reinsurance.
CURRENCY
All premium and loss payments hereunder shall be in United
States currency.
ARTICLE VI
ACCESS TO RECORDS
The Reinsurer or its duly appointed representatives shall have
free access at all reasonable times to such books and records of
those Divisions, Departments and Branch Offices of the Company
which are directly involved with the subject matter business of
this Agreement as shall reflect premium and loss transactions of
the Company for the purpose of obtaining any and all information
concerning this Agreement or the subject matter hereof. All non-
public information provided in the course of the inspection shall
be kept confidential by the Reinsurer as against third parties.
197
ARTICLE VII
INSOLVENCY
The portion of any risk or obligation assumed by the
Reinsurer, when such portion is ascertained, shall be payable on
demand of the Company at the same time as the Company shall pay its
net retained portion of such risk or obligation, with reasonable
provision for verification before payment, and the reinsurance
shall be payable by the Reinsurer on the basis of the liability of
the Company under the contract or contracts reinsured without
diminution because of the insolvency of the Company. 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. Immediately upon demand, on
the basis of the liability of the Company without 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 which would involve a
possible liability on the part of the Reinsurer, indicating the
policy or bond reinsured, within a reasonable time after such claim
is filed in the conservation or liquidation proceeding or in the
receivership. It is further agreed 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.
ARTICLE VIII
ARBITRATION
A. All disputes or differences arising out of the interpretation
of this Agreement shall be submitted to the decision of two
arbitrators, one to be chosen by each party, and in the event of
the arbitrators failing to agree, to the decision of an umpire to
be chosen by the arbitrators. The arbitrators and umpire shall be
disinterested active or retired executive officials of fire or
casualty insurance or reinsurance companies or Underwriters at
Lloyd's, London. If either of the parties fails to appoint an
arbitrator within one month after being required by the other party
in writing to do so, or if the arbitrators fail to appoint an
umpire within one month of a request in writing by either of them to
do so, such arbitrator or umpire, as the case may be, shall at the
request of either party be appointed by a Justice of the Supreme
Court of the State of New York.
B. The arbitration proceeding shall take place in the city in
which the Company's Head Office is located. The applicant shall
submit its case within one month after the appointment of the court
of arbitration, and the respondent shall submit its reply within
one month after the receipt of the claim. The arbitrators and
umpire are relieved from all judicial formality and may abstain
from following the strict rules of law. They shall settle any
dispute under the Agreement according to an equitable rather than
a strictly legal interpretation of its terms.
C. Their written decision shall be provided to both parties
within ninety days of the close of arbitration and shall be final
and not subject to appeal.
D. Each party shall bear the expenses of his arbitrator and shall
jointly and equally share with the other the expenses of the umpire
and of the arbitration.
E. This Article shall survive the termination of this Agreement.
198
ARTICLE IX
ERRORS AND OMISSIONS
Any inadvertent delay, omission or error shall not relieve
either party hereto from any liability which would attach to it
hereunder if such delay, omission or error had not been made,
provided such delay, omission or error is rectified immediately
upon discovery.
ARTICLE X
LOSS & LOSS ADJUSTMENT EXPENSE
A. The Company alone and at its full discretion shall adjust,
settle or compromise all claims and losses. All such adjustments,
settlements, and compromises shall be binding on the Reinsurer in
proportion to its 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
judgment may be beneficial or expedient, and all payments made and
costs and expenses incurred in connection therewith or in taking
legal advice therefor shall be shared by the Reinsurer
proportionately. The Reinsurer shall, on the other hand, benefit
proportionately from all reductions of losses by salvage,
compromise or otherwise.
ARTICLE XI
EXTRA CONTRACTUAL OBLIGATIONS
This Agreement shall protect the Company where the ultimate
net loss includes any extra contractual obligations. The term
"extra contractual obligations" is defined as those liabilities not
covered under any other provision of the 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 trail of any action against its insured or
reinsured or in the preparation of prosecution of an appeal
consequent upon such action. The Reinsurer's liability for extra
contractual obligations shall not exceed their participation of the
maximum limit of liability on the policy from which the extra
contractual obligation arises.
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 disaster and/or casualty. However, this
Article shall not apply where the loss has been incurred due to
fraud or a member of the Board of Directors or a corporate officer
of the Company acting individually or collectively or in collusion
with any individual or corporation or any other organization or
party involved in the presentation, defense or settlement of any
claim covered hereunder.
ARTICLE XII
OFFSET
Each party hereto shall have, and may exercise at any time and
from time to time, the right to offset any undisputed balance or
balances, whether on account of premiums or on account of losses or
otherwise, due from such party to the other party hereto under this
Agreement.
199
ARTICLE XIII
TERMINATION
Either party may terminate this Agreement with thirty days'
notice in the event that:
1. One party should at any time become insolvent, or suffer any
impairment of capital, or file a petition in bankruptcy, or go into
liquidation or rehabilitation, or have a receiver appointed, or be
acquired or controlled by any other insurance company or
organization, or
2. Any law or regulation of any Federal or any State or any Local
Government of any jurisdiction in which the Company is doing
business should render illegal the arrangement made herein, or
3. With the agreement of the other party.
In the event of termination, the Reinsurer shall refund to the
Company the applicable unearned premium minus the ceding commission
and shall continue to remain liable for all losses occurring prior
to the date of termination. However, if this Contract shall
terminate while a loss occurrence covered hereunder is in progress,
it is agreed that, subject to the other conditions of this
Contract, the Reinsurer is responsible for its proportion of the
entire loss.
ARTICLE XIV
TAX
In consideration of the terms under which this Agreement is
issued, the Company undertakes not to claim any deduction of the
premium hereon when making tax returns, other than income or
Profits Tax returns, to any State or Territory of the United States
or to the District of Columbia.
ARTICLE XV
COUNTERPARTS
This Agreement may be executed in counterparts, each of which
shall be an original, but all of which together shall constitute
one and the same instrument.
200
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized representatives,
this 16th day of December, 1994.
21ST CENTURY CASUALTY COMPANY
By: William L. Mellick
--------------------------
Title: President & Chief Operating Officer
NEW HAMPSHIRE INSURANCE COMPANY
By:
--------------------------
Title:
By:
--------------------------
Title:
201
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized representatives,
this 16th day of December, 1994.
21ST CENTURY CASUALTY COMPANY
By:
--------------------------
Title:
NEW HAMPSHIRE INSURANCE COMPANY
By: Howard I. Smith
--------------------------
Title: Vice President
By: Elizabeth M. Tuck
--------------------------
Title: Secretary