R:\97RIL\11873.DOC
Aggregate Excess of Loss
Reinsurance Contract
Effective: January 1, 1997
issued to
Associated International Insurance Company
Woodland Hills, California
Calvert Insurance Company
Philadelphia, Pennsylvania
Timberline Insurance Company
Eugene Oregon
through the auspices of
Gryphon Insurance Group, Inc.
New York, New York
E. W. Blanch Co.
Reinsurance Services
3500 West 80th Street
Minneapolis, Minnesota 55431
Aggregate Excess of Loss
Reinsurance Contract
Effective: January 1, 1997
issued to
Associated International Insurance Company
Woodland Hills, California
Calvert Insurance Company
Philadelphia, Pennsylvania
Timberline Insurance Company
Eugene Oregon
through the auspices of
Gryphon Insurance Group, Inc.
New York, New York
Reinsurer Participation
Scandinavian Reinsurance Company, Ltd. 100.0%
Total 100.0%
E. W. Blanch Co.
Reinsurance Services
3500 West 80th Street
Minneapolis, Minnesota 55431
Table of Contents
Article Page
I Business Reinsured 1
II Term 1
III Territory (BRMA 51A) 2
IV Exclusions 2
V Retention and Limit 3
VI Definitions 3
VII Other Reinsurance 5
VIII Loss Notices and Settlements 5
IX Salvage and Subrogation 6
X Reinsurance Premium 6
XI Late Payments 7
XII Experience Account 8
XIII Commutation 9
XIV Offset (BRMA 36C) 10
XV Access to Records (BRMA 1D) 10
XVI Net Retained Lines (BRMA 32B) 10
XVII Errors and Omissions (BRMA 14F) 11
XVIII Currency (BRMA 12A) 11
XIX Taxes (BRMA 50C) 11
XX Insolvency 11
XXI Arbitration 12
XXII Service of Suit (BRMA 49C) 13
XXIII Agency Agreement 14
XXIV Intermediary (BRMA 23A) 14
Aggregate Excess of Loss
Reinsurance Contract
Effective: January 1, 1997
issued to
Associated International Insurance Company
Woodland Hills, California
Calvert Insurance Company
Philadelphia, Pennsylvania
Timberline Insurance Company
Eugene Oregon
through the auspices of
Gryphon Insurance Group, Inc.
New York, New York
(hereinafter referred to collectively as the "Company")
by
The Subscribing Reinsurer(s) Executing the
Interests and Liabilities Agreement(s)
Attached Hereto
(hereinafter referred to as the "Reinsurer")
Article I - Business Reinsured
A. By this Contract the Reinsurer agrees to reinsure and/or
indemnify the Company for the net excess liability which may
accrue to the Company during each accident year (as
hereinafter defined) under its policies, contracts and binders
of insurance or reinsurance (hereinafter called "policies") in
force on the effective date hereof, issued or renewed on or
after that date, for all business written by the Company
(direct and assumed), subject to the terms, conditions and
limitations hereinafter set forth.
B. Losses arising under policies covered hereunder shall be
allocated to an accident year according to the instructions
for compiling the Company's Annual Statement as filed with the
Company's state of domicile.
Article II - Term
A. This Contract shall become effective on January 1, 1997, with
respect to losses occurring during accident years commencing
on or after that date, and shall remain in force until
December 31, 1999, both days inclusive. Notwithstanding the
foregoing, in the event any state auditor determines this
Contract is not in compliance with any rule or regulation
pertaining to this reinsurance, this Contract may be rescinded
by the Company with not less than 30 days prior notice to the
Reinsurer by certified mail.
B. Either party may terminate this Contract at the end of any
accident year by giving the other party not less than 90 days
prior notice by certified mail.
Article III - Territory (BRMA 51A)
The territorial limits of this Contract shall be identical with
those of the Company's policies.
Article IV - Exclusions
This Contract does not apply to and specifically excludes the
following:
1. Reinsurance assumed by the Company (unless an assumed
program has been specifically declared and accepted by the
reinsurers of the Company's underlying per event
reinsurance program), except inter-company reinsurance
between any member companies of Gryphon Insurance Group,
Inc.
2. Financial guarantee and insolvency.
3. Business written by the Company on a co-indemnity
basis where the Company is not an equal or controlling
carrier.
4. Nuclear risks as defined in the "Nuclear Incident
Exclusion Clause - Physical Damage -Reinsurance (U.S.A.),"
the "Nuclear Incident Exclusion Clause - Physical Damage -
Reinsurance (Canada)," the "Nuclear Incident Exclusion
Clause - Liability - Reinsurance (U.S.A.)" and the
"Nuclear Incident Exclusion Clause - Liability -
Reinsurance (Canada)" attached to and forming part of this
Contract.
5. Liability as a member, subscriber or reinsurer of any
Pool, Syndicate or Association, which is not underwritten
or controlled by the Company. However, this exclusion
shall not apply to Assigned Risk Plans or similar plans.
6. 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, however denominated, established or
governed, which provides for any assessment of or payment
or assumption by the Company of part or all of any claim,
debt, charge, fee or other obligation of an insurer, or
its successors or assigns, which has been declared by any
competent authority to be insolvent, or which is otherwise
deemed unable to meet any claim, debt, charge, fee or
other obligation in whole or in part.
Article V - Retention and Limit
A. No claim shall be made under this Contract for any accident
year unless and until the Company shall have first incurred an
amount of ultimate net loss on business covered during the
accident year in excess of 55% of its net earned premium for
the accident year. The Reinsurer shall then be liable for the
amount by which the Company's ultimate net loss exceeds its
retention, but the liability of the Reinsurer shall not exceed
an amount of ultimate net loss equal to 300% of the
reinsurance premium hereunder for any one accident year, nor
shall it exceed an amount of ultimate net loss equal to 200%
of the reinsurance premium hereunder for the term of this
Contract as respects all loss subject to this Contract.
B. Notwithstanding paragraph A above, in the event this Contract
is commuted at the Company's option in accordance with Article
XIII, the aggregate limit provided hereunder shall be reduced
as follows:
1. If this Contract is terminated on December 31, 1997,
then the aggregate limit shall be reduced to 150% of the
reinsurance premium hereunder for the 12-month term of
this Contract;
2. If this Contract is terminated on December 31, 1998,
then the aggregate limit shall be reduced to 160% of the
reinsurance premium hereunder for the 24-month term of
this Contract.
C. It is also agreed that should the sum of the incurred losses
subject to this Contract in the first and second accident
years exceed $22,500,000, the Company's retention in the third
accident year shall be increased to 60% of the Company's net
earned premium for the third accident year.
D. As respects business subject to this Contract, in the event
that the subject net earned premium volume for the Property
Difference in Conditions book is below 15% of the total
subject net premium volume, then the Company's retention shall
be increased by 0.9% for every 1% that the Property Difference
in Conditions percentage share is below 15%.
E. With respect to business subject hereunder, the maximum policy
limit (except statutory) with respect to any one coverage, any
one policy shall be deemed not to exceed $5,000,000, with
limits written in excess of this amount deemed reinsured
elsewhere.
Article VI - Definitions
A. "Net excess liability" as used herein shall mean those amounts
payable by the Company as defined in the ultimate net loss
definition set forth in paragraph B below.
B. "Ultimate net loss" as used herein is defined as the sum or
sums (including loss in excess of policy limits, extra
contractual obligations, prejudgment interest if included as
part of an award or judgment and any loss adjustment expense,
as herein after defined) paid or payable by the Company in
settlement of claims and in satisfaction of judgments rendered
on account of such claims, after deduction of all salvage, all
recoveries and all claims on inuring insurance or reinsurance,
whether collectible or not. Nothing herein shall be construed
to mean that losses under this Contract are not recoverable
until the Company's ultimate net loss has been ascertained.
Notwithstanding anything to the contrary contained in this
Contract, in arriving at the ultimate net loss of the Company
hereunder, property catastrophe losses shall be limited to
$7,500,000 per event and in the aggregate for any one accident
year but under no circumstances shall property catastrophe
losses be more than $15,000,000 for the term of this Contract.
For purposes hereof, "property catastrophe loss" shall be
defined as net loss and allocated loss adjustment expense,
including incurred but not reported losses, on business
subject to this Contract arising from insured events
identified and numbered as property catastrophe losses by the
Property Claims Service, occurring during the term of this
Contract.
C. "Loss in excess of policy limits" and "extra contractual
obligations" as used herein shall mean:
1. "Loss in excess of policy limits" shall mean 90% of
any amount paid or payable by the Company under a policy
ceded to this Contract in excess of its policy limits, but
otherwise within the terms of its policy, as a result of
an action against it by its insured or its insured's
assignee to recover damages the insured is legally
obligated to pay to a third party claimant because of the
Company's alleged or actual negligence or bad faith in
rejecting a settlement within policy limits, or in
discharging its duty to defend or prepare the defense in
the trial of an action against its insured, or in
discharging its duty to prepare or prosecute an appeal
consequent upon such an action.
2. "Extra contractual obligations" shall mean 90% of any
punitive, exemplary, compensatory or consequential
damages, other than loss in excess of policy limits, paid
or payable by the Company under a policy ceded to this
Contract as a result of an action against it by its
insured, its insured's assignee or a third party claimant,
which action alleges negligence or bad faith on the part
of the Company in handling a claim under a policy subject
to this Contract.
Any loss in excess of policy limits or extra contractual
obligation shall be deemed to have occurred on the same date
as the loss covered or alleged to be covered under the policy.
Notwithstanding anything stated herein, this Contract shall
not apply to any loss incurred by the Company as a result of
any fraudulent and/or criminal act by any officer or director
of the Company acting individually or collectively or in
collusion with an individual or corporation or any other
organization or party involved in the presentation, defense or
settlement of any claim covered hereunder
D. "Loss adjustment expense" as used herein shall mean expenses
allocable to the investigation, defense and/or settlement of
specific claims, including 1) prejudgment interest, unless
included as part of the award or judgment; 2) post-judgment
interest; and 3) legal expenses and costs incurred in
connection with coverage questions and legal actions connected
thereto; but not including office expenses or salaries of the
Company's regular employees, except that allocated outside
costs of the Company's or RA&MCO's salaried adjusters shall be
included. Claim costs shall also be included which are
incurred by RA&MCO and billed hourly to the Company in
accordance with its management agreement.
With respect to legal expenses and costs incurred in direct
connection with declaratory judgment actions brought to
resolve policy language coverage disputes between the Company
and its insured, such expenses shall, for purposes of this
Contract, not exceed an amount equal to the applicable limit
of the policy or policies involved unless agreed to by the
Reinsurer.
E. "Accident year" as used herein shall mean the period from
January 1, 1997 to December 31, 1997, both days inclusive, and
each respective 12-month period thereafter that this Contract
remains in force.
F. "Net earned premium" as used herein is defined as gross earned
premium of the Company for the classes of business reinsured
hereunder, less the earned portion of premiums ceded by the
Company for reinsurance which inures to the benefit of this
Contract or increases the Company's available capacity.
Article VII - Other Reinsurance
A. Notwithstanding the provisions of paragraph E of Article V,
the Company is permitted, but not required, to purchase other
facultative and/or other treaty reinsurance on business
subject to this Contract. Premiums ceded by the Company for
reinsurance which inures to the benefit of this Contract or
increases the Company' s available capacity shall be deducted
in determining subject premium hereunder as provided in
Article X.
B. It is agreed by the Company that inuring reinsurance
agreements in force at the inception of this Contract shall
remain in force during the term of this Contract, or so
deemed.
Article VIII - Loss Notices and Settlements
A. Whenever losses sustained by the Company appear likely to
result in a claim hereunder, the Company shall notify the
Reinsurer, and the Reinsurer shall have the right to
participate in the adjustment of such losses at its own
expense.
B. All loss settlements made by the Company, provided they are
within the terms of this Contract, shall be binding upon the
Reinsurer, and the Reinsurer agrees to pay all amounts for
which it may be liable upon receipt of reasonable evidence of
the amount paid (or scheduled to be paid) by the Company.
C. Within 60 days after the end of each calendar quarter during
or after the end of each accident year, the Company shall
report to the Reinsurer its aggregate ultimate net loss paid
for the accident year as of the end of the quarter. If the
aggregate ultimate net loss paid exceeds an amount equal to
the Company's retention hereunder for the accident year based
on an estimate of the Company's net earned premium for the
accident year, the Reinsurer shall pay its portion of such
estimated excess (net of any prior payments for the accident
year). However, any such payment by the Reinsurer shall be
provisional, subject to adjustment when the Company's actual
ultimate net loss and net earned premium for the accident year
have been determined.
Article IX - Salvage and Subrogation
The Reinsurer shall be credited with salvage (i.e., reimbursement
obtained or recovery made by the Company, less the actual cost,
excluding salaries of officials and employees of the Company and
sums paid to attorneys as retainer, of obtaining such
reimbursement or making such recovery) on account of claims and
settlements involving reinsurance hereunder. Salvage thereon
shall always be used to reimburse the excess carriers in the
reverse order of their priority according to their participation
before being used in any way to reimburse the Company for its
primary loss. The Company hereby agrees to enforce its rights to
salvage or subrogation relating to any loss, a part of which loss
was sustained by the Reinsurer, and to prosecute all claims
arising out of such rights.
Article X - Reinsurance Premium
A. As premium for the reinsurance provided hereunder, the Company
shall pay the Reinsurer 7.0% of its net earned premium for
each accident year covered under this Contract.
B. As respects the first accident year, the Company shall pay the
Reinsurer an annual minimum and deposit premium of $7,500,000,
payable in equal semiannual installments of $3,750,000 at
January 1 and July 1, 1997. As respects the second and third
accident years, the annual minimum and deposit premium shall
be mutually agreed between the Company and Reinsurer.
C. Within 60 days after the end of each accident year, the
Company shall provide a report to the Reinsurer setting forth
the premium due hereunder, computed in accordance with
paragraph A, and if the premium so computed is greater than
the previously paid minimum and deposit premium, the balance
shall be remitted by the Company with its report.
Article XI - Late Payments
A. It is understood and agreed that the provisions of this
Article shall not be implemented unless specifically invoked,
in writing, by one of the parties to this Contract.
B. In the event any premium, loss or other payment due either
party is not received by the intermediary named in Article
XXIV (hereinafter referred to as the "Intermediary") by the
payment due date, the party to whom payment is due may, by
notifying the Intermediary in writing, require the debtor
party to pay, and the debtor party agrees to pay, an interest
penalty on the amount past due calculated for each such
payment on the last business day of each month as follows:
1. The number of full days which have expired since the
due date or the last monthly calculation, whichever the
lesser; times
2. 1/365th of the six month (or nearest thereto) U.S.
Treasury Bill rate, as quoted in The Wall Street Journal
on the first business day of the month for which the
calculation is being made; times
3. The amount past due, including accrued interest.
It is agreed that interest shall accumulate until payment of
the original amount due plus interest penalties have been
received by the Intermediary.
C. The establishment of the due date shall, for purposes of this
Article, be determined as follows:
1. As respects the payment of routine deposits and
premiums due the Reinsurer, the due date shall be as
provided for in the applicable section of this Contract.
In the event a due date is not specifically stated for a
given payment, it shall be deemed due 45 days after the
date of transmittal by the Intermediary of the initial
billing for each such payment.
2. Any claim or loss payment due the Company hereunder
shall be deemed due five business days following receipt
by the applicable Subscribing Reinsurer of written
notification that payment has been received from
Subscribing Reinsurers constituting at least 662/3% of the
interests and liabilities of all Subscribing Reinsurers
participating under the applicable layer of this Contract,
who are active as of the due date; it being understood
that said date shall not be later than 75 days from the
date of transmittal by the Intermediary of the initial
billing for each such payment.
3. As respects any payment, adjustment or return due
either party not otherwise provided for in subparagraphs 1
and 2 of paragraph C above, the due date shall be deemed
as five business days following receipt of written
notification that the provisions of this Article have been
invoked.
For purposes of interest calculations only, amounts due
hereunder shall be deemed paid upon receipt by the
Intermediary.
D. Nothing herein shall be construed as limiting or prohibiting
1) a Subscribing Reinsurer from contesting the validity of any
claim, or from participating in the defense or control of any
claim or suit; or 2) either party from contesting the validity
of any payment, or from initiating any arbitration or other
proceeding in accordance with the provisions of this Contract.
If the debtor party prevails in an arbitration or other
proceeding, then any interest penalties due hereunder on the
amount in dispute shall be null and void. If the debtor party
loses in such proceeding, then the interest penalty on the
amount determined to be due hereunder shall be calculated in
accordance with the provisions set forth above unless
otherwise determined by such proceedings. If a debtor party
advances payment of any amount it is contesting, and proves to
be correct in its contestation, either in whole or in part,
the other party shall reimburse the debtor party for any such
excess payment made plus interest on the excess amount
calculated in accordance with this Article.
E. As provided under Article VIII, it is understood and agreed
that the Company shall furnish the Reinsurer with usual and
customary claim information and nothing herein shall be
construed as limiting or prohibiting a Subscribing Reinsurer
from requesting additional information that it may deem
necessary.
F. As respects subparagraph 2 of paragraph C above, a Subscribing
Reinsurer shall be deemed not to be active when it 1) ceases
assuming new or renewal reinsurance business through the
Intermediary; 2) is declared insolvent, or put in liquidation,
conservatorship or rehabilitation by a competent regulatory
authority or court; 3) is declared insolvent, or is the
subject of an administrative order or enters provisional
liquidation and/or liquidation; or 4) has a reduction in its
statutory surplus or shareholders' funds of 50% or more from
its statutory surplus or shareholders' funds as of the
effective date of this Contract.
G. Interest penalties arising out of the application of this
Article that are $100 or less from any party shall be waived
unless there is a pattern of late payments consisting of three
or more items over the course of any 12-month period.
Article XII - Experience Account
A. An "Experience Account" shall be maintained for each accident
year covered under this Contract. The "Experience Account
Balance" shall equal the sum of the "Experience Account" for
the accident years covered under this Contract. The
"Experience Account" for an individual accident year shall, at
any point in time, be defined as:
1. 100% of the cumulative earned reinsurance premium
paid to the Reinsurer hereunder for the accident year;
less
2. The cumulative Reinsurer's Margin paid for the
accident year as defined herein; less
3. 100% of cumulative ultimate net loss payments for the
accident year made by the Reinsurer; plus
4. The cumulative Experience Account Investment Credit
for the accident year since the inception of this
Contract.
B. The Experience Account Investment Credit shall be computed
separately for each accident year and shall, for any accident
year, equal the average daily balance of the Experience
Account during that accident year (or portion thereof)
multiplied by the interest credit rate (or pro rata portion
thereof) applicable to the individual accident year, credited
annually, in arrears. The cumulative Experience Account
Investment Credit for any accident year shall equal the sum of
the Experience Account Investment Credit for such account for
each accident year since the inception of this Contract.
C. The interest credit rate applicable to the Experience Account
for an accident year covered under this Contract shall be
equal to the one (1) year U.S. Treasury note rate as published
in The Wall Street Journal on the first business day of such
accident year.
D. The "Reinsurer's Margin" for each accident year shall be an
amount equal to 12.5% of the earned reinsurance premium for
the accident year.
Article XIII - Commutation
A. Subject to the terms of this Article, the Company may, at its
sole option, commute this Contract at any December 31, with 90
days prior written notice by the Company to the Reinsurer.
B. If the Company elects to commute this Contract, the Reinsurer
shall pay to the Company the following amounts within 60
business days of the date of Commutation:
1. Commuted Value of ceded unpaid ultimate net loss:
a. If, at the time of Commutation, the ceded unpaid
ultimate net loss, as defined herein, is less than or
equal to the balance in the Experience Account, the
Reinsurer agrees to pay all ceded unpaid ultimate net
loss at the amount valued by the Company.
b. If, at the time of Commutation, the ceded unpaid
ultimate net loss is greater than the balance in the
Experience Account, the ceded unpaid ultimate net loss
shall be commuted at a present value amount to be
mutually agreed. If the present value amount of the
ceded unpaid ultimate net loss cannot be mutually
agreed by the Company and the Reinsurer, then a
mutually acceptable independent third party actuary
shall be called upon to make an independent estimation
of the present value amount of the ceded unpaid
ultimate net loss (the cost of which shall be shared
equally by the Company and Reinsurer). If the actuary's
estimation is acceptable to both Reinsurer and Company,
then this Contract shall be commuted at the value as
estimated by the actuary. If the actuary's value is
unacceptable to either the Company or the Reinsurer, or
if the parties cannot agree on the selection of the
actuary, then this Contract will not be commuted at
that time.
2. Profit Sharing - Upon Commutation under subparagraph
1 above, the Reinsurer shall pay to the Company a Profit
Sharing equal to the positive balance, if any, of the
Experience Account after deducting the value of the
commuted ceded unpaid ultimate net loss as per
subparagraph 1 above.
C. Payment of the ceded unpaid ultimate net loss and Profit
Sharing, if any, by the Reinsurer as described above shall
constitute a complete and final release of the Reinsurer in
respect of any and all of the Reinsurer's obligations of any
nature whatsoever to the Company under or related to this
Contract.
Article XIV - Offset (BRMA 36C)
The Company and the Reinsurer shall have the right to offset any
balance or amounts due from one party to the other under the
terms of this Contract. The party asserting the right of offset
may exercise such right any time whether the balances due are on
account of premiums or losses or otherwise.
Article XV - Access to Records (BRMA 1D)
The Reinsurer or its designated representatives shall have access
at any reasonable time to all records of the Company which
pertain in any way to this reinsurance.
Article XVI - Net Retained Lines (BRMA 32B)
A. This Contract applies only to that portion of any policy which
the Company retains net for its own account, and in
calculating the amount of any loss hereunder and also in
computing the amount or amounts in excess of which this
Contract attaches, only loss or losses in respect of that
portion of any policy which the Company retains net for its
own account shall be included.
B. The amount of the Reinsurer's liability hereunder in respect
of any loss or losses shall not be increased by reason of the
inability of the Company to collect from any other
reinsurer(s), whether specific or general, any amounts which
may have become due from such reinsurer(s), whether such
inability arises from the insolvency of such other
reinsurer(s) or otherwise.
Article XVII - Errors and Omissions (BRMA 14F)
Inadvertent delays, errors or omissions made in connection with
this Contract or any transaction hereunder shall not relieve
either party from any liability which would have attached had
such delay, error or omission not occurred, provided always that
such error or omission is rectified as soon as possible after
discovery.
Article XVIII - Currency (BRMA 12A)
A. Whenever the word "Dollars" or the "$" sign appears in this
Contract, they shall be construed to mean United States
Dollars and all transactions under this Contract shall be in
United States Dollars.
B. Amounts paid or received by the Company in any other currency
shall be converted to United States Dollars at the rate of
exchange at the date such transaction is entered into the
books of the Company.
Article XIX - Taxes (BRMA 50C)
In consideration of the terms under which this Contract is
issued, the Company will not claim a deduction in respect of the
premium hereon when making tax returns, other than income or
profits tax returns, to any state or territory of the United
States of America, the District of Columbia or Canada.
Article XX - Insolvency
A. In the event of the insolvency of one or more of the reinsured
companies, this reinsurance shall be payable directly to the
company or to its liquidator, receiver, conservator or
statutory successor immediately upon demand, with reasonable
provision for verification, 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 indicating the policy
or bond reinsured which claim would involve a possible
liability on the part of the Reinsurer within a reasonable
time after such claim is filed in the conservation or
liquidation proceeding or in the receivership, and that during
the pendency of such claim, the Reinsurer may investigate such
claim and interpose, at its own expense, in the proceeding
where such claim is to be adjudicated, any defense or defenses
that it may deem available to the company or its liquidator,
receiver, conservator or statutory successor. The expense thus
incurred by the Reinsurer shall be chargeable, subject to the
approval of the Court, against the company as part of the
expense of conservation or liquidation to the extent of a pro
rata share of the benefit which may accrue to the company
solely as a result of the defense undertaken by the Reinsurer.
B. Where two or more reinsurers are involved in the same claim
and a majority in interest elect to interpose defense to such
claim, the expense shall be apportioned in accordance with the
terms of this Contract as though such expense had been
incurred by the company.
C. It is further understood and agreed that, in the event of the
insolvency of one or more of the reinsured companies, the
reinsurance under this Contract shall be payable directly by
the Reinsurer to the company or to its liquidator, receiver or
statutory successor, except as provided by Section 4118(a) of
the New York Insurance Law or except (1) where this Contract
specifically provides another payee of such reinsurance in the
event of the insolvency of the company or (2) where the
Reinsurer with the consent of the direct insured or insureds
has assumed such policy obligations of the company as direct
obligations of the Reinsurer to the payees under such policies
and in substitution for the obligations of the company to such
payees.
Article XXI - Arbitration
A. As a condition precedent to any right of action hereunder, any
dispute arising out of the interpretation, performance or
breach of this Contract, including the formation or validity
thereof, shall be submitted for decision to a panel of three
arbitrators. Notice requesting arbitration will be in writing
and sent certified or registered mail, return receipt
requested.
B. One arbitrator shall be chosen by each party and the two
arbitrators shall, before instituting the hearing, choose an
impartial third arbitrator who shall preside at the hearing.
If either party fails to appoint its arbitrator within thirty
(30) days after being requested to do so by the other party,
the latter, after ten (10) days notice by certified or
registered mail of its intention to do so, may appoint the
second arbitrator.
C. If the two arbitrators are unable to agree upon the third
arbitrator within thirty (30) days of their appointment, the
two arbitrators will jointly petition the American Arbitration
Association to appoint the third arbitrator from the AAA's
Panel of Reinsurance Arbitrators.
D. All arbitrators shall be disinterested active or former
executive officers of insurance or reinsurance companies,
underwriters at Lloyd's of London, reinsurance intermediaries
and attorneys actively or formerly engaged in practicing law
in the areas of insurance or reinsurance.
E. Within thirty (30) days after notice of appointment of all
arbitrators, the panel shall meet and determine timely periods
for briefs, discovery procedures and schedules for hearings.
F. The panel shall be relieved of all judicial formality and
shall not be bound by the strict rules of procedure and
evidence. The arbitration shall take place in Woodland Hills,
California or, if unanimously agreed by the panel, any other
mutually acceptable location.
G. If more than one reinsurer is involved in the same dispute,
all such reinsurers shall constitute and act as one party for
purposes of this article. However, nothing shall impair the
rights of such reinsurers to assert several rather than joint
defenses or claims, nor shall this provision be construed as
changing the liability of the reinsurers under the terms of
this Contract from several to joint.
H. The panel shall make its decision considering custom and
practice as promptly as possible following the termination of
hearings. The decision of any two arbitrators, when rendered
in writing shall be final and binding, and judgment upon the
award may be entered in any court having jurisdiction. The
panel is empowered to grant such interim relief as it may deem
appropriate.
I. Each party shall bear the expense of its own arbitrator and
shall jointly and equally with the other party bear the cost
of the third arbitrator. The remaining costs of the
arbitration shall be allocated by the panel. The panel may, at
its discretion, award such further costs and expenses as it
considers appropriate, including but not limited to attorney's
fees and interest to the extent permitted by law. Insofar as
the arbitration panel chooses to look to substantive law, it
shall consider the law of the State of California.
Article XXII - Service of Suit (BRMA 49C)
(Applicable if the Reinsurer is not domiciled in the United
States of America, and/or is not authorized in any State,
Territory or District of the United States where authorization is
required by insurance regulatory authorities)
A. It is agreed that in the event the Reinsurer fails to pay any
amount claimed to be due hereunder, the Reinsurer, at the
request of the Company, will submit to the jurisdiction of a
court of competent jurisdiction within the United States.
Nothing in this Article constitutes or should be understood to
constitute a waiver of the Reinsurer's rights to commence an
action in any court of competent jurisdiction in the United
States, to remove an action to a United States District Court,
or to seek a transfer of a case to another court as permitted
by the laws of the United States or of any state in the United
States.
B. Further, pursuant to any statute of any state, territory or
district of the United States which makes provision therefor,
the Reinsurer hereby designates the party named in its
Interests and Liabilities Agreement, or if no party is named
therein, the Superintendent, Commissioner or Director of
Insurance or other officer specified for that purpose in the
statute, or his successor or successors in office, as its 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.
Article XXIII - Agency Agreement
Gryphon Insurance Group, Inc. shall be deemed the agent of the
other reinsured companies for purposes of sending or receiving
notices required by the terms and conditions of this Contract,
and for purposes of remitting or receiving any monies due any
party.
Article XXIV - Intermediary (BRMA 23A)
E. W. Blanch Co. is hereby recognized as the Intermediary
negotiating this Contract for all business hereunder. All
communications (including but not limited to notices, statements,
premium, return premium, commissions, taxes, losses, loss
adjustment expense, salvages and loss settlements) relating
thereto shall be transmitted to the Company or the Reinsurer
through E. W. Blanch Co., Reinsurance Services, 3500 West 80th
Street, Minneapolis, Minnesota 55431. 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.
In Witness Whereof, the Company by its duly authorized
representative has executed this Contract as of the date
undermentioned at:
New York, New York,this ____ day of ______________ 199___.
________________________________________
Gryphon Insurance Group, Inc., on behalf of
Associated International Insurance Company
Calvert Insurance Company
Timberline Insurance Company