EXCESS MAJOR MEDICAL REINSURANCE AGREEMENT
(No. 0076820/Specific and Aggregate Retentions)
January 1, 1993
CALFARM LIFE INSURANCE COMPANY
Sacramento, California
EXCESS MAJOR MEDICAL REINSURANCE AGREEMENT
(No. 0076820/Specific and Aggregate Retentions)
SCHEDULE
1. Reinsured: CalFarm Life Insurance Company
2. Address: Sacramento, California
3. Effective date: January 1, 1993
4. Liability period:
(a) First: Calendar year 1993
(b) Thereafter: Each calendar year with respect to which this agreement
is renewed in accordance with Article XII
5. Reinsured's policies to which this agreement applies:
(a) Group Health Master Policy No. GH-1000 (Revised 4/93) and certificates
issued thereunder covering members of California County Farm Bureaus
of the California Farm Bureau Federation, but this reinsurance
agreement does not apply to the medicare coverage provided under said
policy.
(b) Group Health Master Policy No. GH-1001 (Revised 9/89) and certificates
issued thereunder covering employees of the California County Farm
Bureau Federation and employees of the California County Farm Bureaus.
(c) Group Health Master Policy No. GH-1100 and certificates issued
thereunder covering employees of employers affiliated with the
California County Farm Bureaus of the California Farm Bureau
Federation.
(d) Group Health Master Policy No. GH-1150 and certificates issued
thereunder covering members of California County Farm Bureaus of the
California Farm Bureau Federation.
6. Retention each liability period:
(a) Specific retention each person:
The first $120,000 of loss paid by the Reinsured during the liability
period
(b) Aggregate retention all persons: $2,400,000
7. Reinsurance (in excess of specific and aggregate retentions) pertaining to
each person each liability period:
100% of loss paid by the Reinsured during the liability period with respect
to the person in excess of the total amount of loss retained by the
Reinsured with respect to the person under Section A and Section B of
Article II of this agreement
8. Maximum reinsurance limit each person:
An amount equal to the maximum lifetime benefit for the person provided by
the policy less the total amount of the loss pertaining to the person
retained by the Reinsured under Section A and Section B of Article II of
this agreement and under Section A and Section B of Article II of the 1985
medical treaty between the parties hereto, and less the Corporation's
indemnity with respect to the person under the 1985 medical treaty between
the parties hereto, but in no event more than $2,900,000, even though the
person may be covered under more than one policy
9. Reinsurance premium rates:
Monthly Rate
Policy Maximum Each Certificate
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$1,000,000 $3.49
$2,500,000 $3.73
$3,000,000 $3.80
The agreement of which this Schedule is a part is hereby executed in duplicate
by the parties hereto.
CALFARM LIFE INSURANCE EMPLOYERS REINSURANCE
COMPANY CORPORATION
/s/ SRZ /s/
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Title: Pres. Title: Second Vice President
/s/ JJT /s/
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Title: Sr. VP Title: Assistant Secretary
EXCESS MAJOR MEDICAL REINSURANCE AGREEMENT
EMPLOYERS REINSURANCE CORPORATION
of
Overland Park, Kansas
(herein called the Corporation)
agrees with the Reinsured named in the Schedule made a part hereof, in
consideration of the mutual covenants hereinafter contained, as follows:
ARTICLE I
APPLICATION OF AGREEMENT. This agreement applies to loss paid by the Reinsured
during the liability period(s) of this agreement under its policies specified in
Item 5 of the Schedule in force on or issued by the Reinsured to become
effective on or after the effective date of this agreement (hereinafter called
policies), and retained by the Reinsured after cession of all other reinsurance
whether collectible or not.
The attached Insolvency Clause is hereby made a part of this agreement.
ARTICLE II
RETENTION AND REINSURANCE. SECTION A. SPECIFIC RETENTION EACH PERSON EACH
LIABILITY PERIOD. As respects loss paid by the Reinsured during each liability
period pertaining to each person, the Reinsured shall retain under this
Section A the amount thereof indicated in Item 6(a) of the Schedule. Loss paid
during each liability period pertaining to each person in excess of the amount
specified in Item 6(a) of the Schedule shall be retained by the Reinsured under
Section B of this Article until the retention for Section B is satisfied,
whereupon such loss shall be subject to indemnity under Section C of this
Article.
SECTION B. AGGREGATE RETENTION ALL PERSONS EACH LIABILITY PERIOD. As respects
loss paid by the Reinsured during each liability period pertaining to all
persons in excess of the retention applicable to each liability period for each
person required by Section A of this Article, the Reinsured shall retain under
this Section B the amount thereof indicated in Item 6(b) of the Schedule.
SECTION C. REINSURANCE. As respects loss paid by the Reinsured during each
liability period pertaining to each person in excess of the retentions required
under Section A and Section B of this Article II, the Corporation hereby agrees
to indemnify the Reinsured against the percentage thereof specified in Item 7 of
the Schedule, subject to the reinsurance limit indicated in Item 8 of the
Schedule with respect to loss paid by the Reinsured during all liability periods
as pertaining to each person.
ARTICLE III
DEFINITIONS. As used in this agreement:
(a) The term "liability period" shall mean a period of time as specified in
Item 4 of the Schedule.
(b) The word "loss" shall mean only such amounts as are actually paid by the
Reinsured for medical benefits afforded under the policies, in settlement
of claims for medical benefits under the policies or in satisfaction of
judgments for medical benefits under the policies; but the word "loss"
shall not include:
(1) claim expenses or salaries paid to employees of the Reinsured;
(2) any amount paid by the Reinsured for:
(i) punitive or exemplary damages, or
(ii) compensatory damages awarded to any person,
arising out of the conduct of the Reinsured in the investigation,
trial or settlement of any claim or failure to pay or delay in payment
of any benefits under any policy; provided that, this subparagraph (2)
shall not apply if the Corporation has, in advance of any such conduct
by the Reinsured, counseled with the Reinsured and concurred in the
Reinsured's course of conduct;
(3) any statutory penalty imposed upon the Reinsured on account of any
unfair trade practice or any unfair claim practice.
(c) The word "person" shall mean any one individual who is entitled to benefits
under the policies.
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ARTICLE IV
REINSURANCE PREMIUM. The reinsurance premium due the Corporation under this
agreement shall be computed in accordance with the reinsurance premium rate(s)
specified in the Schedule. Such reinsurance premium shall not be subject to a
ceding commission to the Reinsured but shall be subject to profit commission as
hereinafter provided in Article V.
ARTICLE V
PROFIT COMMISSION. The Corporation does hereby agree to pay to the Reinsured
50% of the net profit, if any, accruing hereunder to the Corporation, calculated
with respect to each liability period in accordance with the following Schedule.
CREDITS
1. The reinsurance premium earned by the Corporation during the period,
determined in accordance with the rates specified in the Schedule.
2. Unpaid reinsurance losses at the end of the previous period.
CHARGES
1. The amount of losses paid by the Corporation pertaining to the period.
2. Unpaid reinsurance losses at the end of the period.
3. As respects the first period only, the amount of $________________
(carried forward from the 1985 medical treaty between the parties
hereto).
4. The Corporation's basic operating margin equal to 15% of Item 1 of
Credits.
5. The deficit, if any, at the end of the previous period.
The computation of profit commission for each liability period shall be made six
months after the end of the period, provided that, if losses are reported to the
Corporation more than six months after the end of the liability period in which
paid by the Reinsured, the profit commission for that liability period and all
liability periods thereafter shall be recomputed.
"Net profit" means the excess of Credits over Charges for any one liability
period.
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"Deficit" means the excess of Charges over Credits for any one liability period.
"Unpaid reinsurance losses" shall be established in accordance with the
Corporation's current actuarial formula for medical loss reserves.
If the computation for the final liability period produces a deficit which is
wholly or in part due to inadequacy or absence of loss reserves in connection
with any previous liability period, the profit commission for each liability
period will be recomputed, and losses paid shall be a charge to profits in the
liability period during which each accident took place or sickness commenced,
and the Reinsured will refund to the Corporation profit commission previously
paid by reason of such inadequacy or absence of loss reserves.
ARTICLE VI
REPORTING AND ACCOUNTING. Within 20 days after the close of each calendar
month, the Reinsured shall furnish the Corporation with a report (in a form
satisfactory to the Corporation) showing reinsurance premium due the
Corporation. The report shall also contain such other information as may be
required by the Corporation. The reinsurance premium due the Corporation shall
accompany the report.
ARTICLE VII
CLAIMS. The Reinsured agrees that it will cause to be investigated and settled
or defended all claims arising under the policies and that it will give prompt
notice to the Corporation of any event or development which, in the judgment of
the Reinsured, might result in a claim upon the Corporation hereunder, and will
forward promptly to the Corporation copies of such claim documentation as may be
requested by the Corporation.
The Corporation shall have the right, at its own expense, to participate jointly
with the Reinsured in the investigation, adjustment or defense of any claim
which, in the judgment of the Corporation, it is or might become exposed.
The Corporation shall reimburse the Reinsured or its legal representative
promptly for loss against which indemnity is herein provided, upon receipt in
the home office of the Corporation of satisfactory evidence of payment of such
loss.
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Within 35 days after the end of each calendar quarter, the Reinsured shall mail
to the Corporation a summary of the estimated values for the outstanding claims
reinsured by this agreement as of the last day of the quarter.
ARTICLE VIII
INSPECTION OF RECORDS. The Corporation may inspect the records of the Reinsured
pertaining to the policies reinsured hereunder.
ARTICLE IX
PREMIUM TAXES. The Corporation shall be under no obligation to reimburse the
Reinsured for any premium taxes paid by the Reinsured.
ARTICLE X
OFFSET. The Reinsured or the Corporation may offset any balance, whether on
account of premiums, commissions, loss or claim expenses due from one party to
the other under this agreement or under any other reinsurance agreement
heretofore or hereafter entered into between the Reinsured and the Corporation,
whether acting as assuming reinsurer or ceding company.
ARTICLE XI
ASSIGNMENTS AND CHANGES OF INTEREST. No assignment or change of the Reinsured's
interest hereunder, whether voluntary or involuntary and whether by merger or
reinsurance or its entire business with another company or otherwise, shall be
binding upon the Corporation.
ARTICLE XII
TERMINATION. This agreement shall continue in effect until January 1, 1994,
which shall be the termination date.
This agreement may be renewed by amendment executed by both parties.
This agreement does not apply to loss paid by the Reinsured on or after the
termination date of this agreement.
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INSOLVENCY CLAUSE
The ceding insurer and the reinsurer agree that, in the event of the insolvency
of the ceding insurer, as to all reinsurance made, ceded, renewed or otherwise
becoming effective after the effective date of this agreement, the reinsurance
shall be payable by the reinsurer on the basis of the amount of liability of the
ceding insurer under the contract or contracts reinsured without diminution
because of the insolvency of the ceding insurer; furthermore, that such amount
shall be paid directly to the ceding insurer or its liquidator, receiver or
other statutory successor, except as provided by Section 4118 of the Insurance
Law of New York, or except (a) where the contract specifically provides another
payee of such insurance in the event of the insolvency of the ceding insurer,
and 1b) where the reinsurer, with the consent of the direct insured or insureds,
has assumed such policy obligations of the ceding insurer as direct obligations
of the reinsurer to the payees under such policies and in substitution for the
obligations of the ceding insurer to such payee.
It is understood and agreed, however, that the obligations of the ceding company
as set forth in this reinsurance contract, including, among others, the duty to
investigate, settle and defend all claims arising under policies with respect to
which reinsurance is afforded by this agreement, shall remain unimpaired and
unaffected by the insolvency of the ceding insurer and shall be assumed by the
liquidator, receiver or statutory successor of the ceding insurer in the
liquidation or receivership proceeding and that such liquidator, receiver or
statutory successor shall give written notice to the reinsurer of the pendency
of a claim against the ceding insurer on the policy or bond reinsured within a
reasonable time after such claim is filed in the insolvency proceeding 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 which it may deem available to the ceding
insurer, its liquidator, receiver or statutory successor. The expense thus
incurred by the reinsurer shall be chargeable, subject to court approval,
against the insolvent ceding insurer as part of the expense of liquidation to
the extent of a proportionate share of the benefit which may accrue to the
ceding insurer solely as the result of the defense undertaken or asserted by the
reinsurer.
Where two or more reinsurers are involved in the same claim and a majority in
interest elect to interpose a defense to such claim, the expense shall be
apportioned in accordance with the terms of this reinsurance agreement as though
such expense been incurred by the ceding insurer.
Nothing hereinabove set forth in this insolvency clause shall in anywise change
the relationship or status of the parties hereto, to wit, that of ceding insurer
and reinsurer, nor enlarge the obligations of either party to each other, except
as specifically hereinabove provided, to wit, to pay the statutory successor on
the basis of the amount of liability of the ceding insurer under the contract or
contracts reinsured, rather than on the basis of the actual amount of loss
(dividends) paid by the liquidator, receiver or statutory successor to allowed
claimants, nor, except as hereinabove specifically provided, shall anything in
this insolvency clause in any manner create any obligations or establish any
rights against the reinsurer in favor of any third parties or any persons not
parties to this reinsurance contract.