E. W. BLANCH CO.
R:\98R\15527.DOC Reinsurance Services
Page 3
Blanch Catastrophe Plan
First Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to
Associated International Insurance Company
Woodland Hills, California
Calvert Insurance Company
Hoboken, New Jersey
and
any additional company established or acquired
by Associated International Insurance Company, Calvert Insurance
Company, or
Gryphon Holdings, Inc., New York, New York,
to be included hereunder
E. W. Blanch Co.
Reinsurance Services
3500 West 80th Street
Minneapolis, Minnesota 55431
Table of Contents
Article Page
Preamble 3
I Classes of Business Reinsured 3
II Commencement and Termination 4
III Territory 4
IV Exclusions 5
V Retention and Limit 8
VI Definitions 8
VII Other Reinsurance 9
VIII Loss Notices and Settlements 10
IX Salvage and Subrogation 10
X Special Provisions 10
XI Premium 10
XII Commutation of Losses 11
XIII Contract Experience Account 11
XIV Offset (BRMA 36C) 12
XV Access to Records (BRMA 1D) 12
XVI Net Retained Lines (BRMA 32E) 12
XVII Errors and Omissions (BRMA 14F) 12
XVIII Currency (BRMA 12A) 13
XIX Taxes (BRMA 50C) 13
XX Federal Excise Tax (BRMA 17A) 13
XXI Unauthorized Reinsurers 13
XXII Insolvency 15
XXIII Arbitration 15
XXIV Service of Suit (BRMA 49C) 16
XXV Enforceability 17
XXVI Entire Agreement 17
XXVII Agency Agreement 17
XXVIII Intermediary (BRMA 23A) 17
Blanch Catastrophe Plan
First Excess Catastrophe
Reinsurance Contract
Effective: January 1, 1998
issued to
Associated International Insurance Company
Woodland Hills, California
Calvert Insurance Company
Hoboken, New Jersey
and
any additional company established or acquired
by Associated International Insurance Company, Calvert Insurance
Company, or
Gryphon Holdings, Inc., New York, New York,
to be included hereunder
(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 "Subscribing Reinsurers")
Preamble
It is understood that the Subscribing Reinsurers participating in
this Contract through the Intermediary named in Article XXVIII
have a 95.0% part of 100% share in the interests and liabilities
of the "Reinsurer."
Article I - Classes of Business Reinsured
By this Contract the Reinsurer agrees to reinsure the excess
liability which may accrue to the Company under its policies,
contracts and binders of insurance or reinsurance (hereinafter
called "policies") in force at the effective date hereof or
issued or renewed on or after that date, and classified by the
Company as Property business underwritten by Associated
International Insurance Company, subject to the terms, conditions
and limitations set forth herein.
Article II - Commencement and Termination
A. This Contract shall become effective on January 1, 1998, with
respect to losses arising out of loss occurrences commencing
on or after that date, and shall remain in force until
December 31, 2002, both days inclusive, or until terminated by
either party pursuant to the provisions of paragraph B of this
Article.
B. Either party may terminate this Contract on any December 31 by
giving the other party not less than 90 days prior written
notice by certified mail. In the event a loss occurrence(s)
commences during the last 90 days of any contract year, the
party giving notice may rescind its notice during the 90-day
notice period.
C. In the event of a sale, merger or acquisition of the Company,
which results in a change of, or loss of control, by current
owners and/or management of the Company, this Contract will
follow that sale, merger or acquisition and continue in force
as respects the new owners and/or management or may be
canceled by the Reinsurer within 60 days of the effective date
of such sale, merger or acquisition. Upon such termination,
the risks bound by the Company through the date of sale,
merger of acquisition will be subject to this agreement on a
run off basis, subject to the limit of liability as expressed
in Article V.
"Change of, or loss of control," as used herein, means any
transaction or series of transactions in which any person or
group (within the meaning of Sections 13(d) and 14(d) of the
Securities and Exchange Act) other than the Company and its
subsidiaries acquires all or substantially all of the
Company's assets or becomes the direct or indirect beneficial
owner, by way of merger, consolidation, other business
combination or otherwise, of greater than 20.0% of the total
voting power entitled to vote in the election of directors of
the Company or the surviving entity (if other than the
Company).
D. In the event of termination in accordance with this Article,
the Reinsurer shall have no liability hereunder with respect
to losses arising out of loss occurrences commencing after the
date of termination.
E. If this Contract is terminated while a loss occurrence covered
hereunder is in progress, the Reinsurer's liability hereunder
shall, subject to the other terms and conditions of this
Contract, be determined as if the entire loss occurrence had
occurred prior to the termination date of this Contract,
provided that no part of such loss occurrence is claimed
against any renewal or replacement of this Contract.
Article III - Territory
This Contract shall apply to the territorial limits set forth in
the Company's policies reinsured hereunder.
Article IV - Exclusions
A. This Contract does not apply to and specifically excludes the
following:
1. Loss or liability excluded under the provisions of
the "Pools, Associations and Syndicates Exclusion Clause"
attached to and forming part of this Contract.
2. Nuclear risks as defined in the "Nuclear Incident
Exclusion Clause - Physical Damage - Reinsurance (U.S.A.)"
and the "Nuclear Incident Exclusion Clause - Physical
Damage - Reinsurance (Canada)" attached to and forming
part of this Contract.
3. All reinsurance assumed, with the exception of intra-
company reinsurance and specific insureds whose
reinsurance is written through their own captive company
and quoted by a non-related entity.
4. Risks of war, whether or not declared, invasion,
civil war, insurrection, rebellion, revolution or
confiscation by duly constituted governmental or civil
authority as excluded under a standard policy containing a
standard War Exclusion Clause.
5. Hail insurance or reinsurance covering growing,
drying or standing crops when written as such.
6. Flood when written as such; however, this exclusion
shall not apply to flood when included in Difference in
Conditions, Inland Marine and All Risk policies.
7. All armored car business except when written in
excess of $500,000.
8. Credit, financial or insolvency guarantees.
9. Livestock insurance or reinsurance when written as
such.
10. Third Party Bodily Injury and Property Damage
Liability, Medical Payments, Workers' Compensation,
Fidelity and Surety, whether written separately or as part
of a Multiple Peril policy. However, nothing herein
contained shall be construed as excluding liability for
damage to property in an insured's care, custody or
control or for which the insured may be liable.
11. Ocean Marine when written as such.
12. Aircraft, meaning direct damage to hulls insured
under Aircraft Hull policies, but not to exclude aircraft
hulls insured under regular Fire, Inland Marine and All
Risk policies (other than Aircraft Hull policies). In no
event shall any liability attach to the Reinsurer
hereunder in respect of aircraft while in flight or
taxiing.
13. Offshore drilling rigs.
14. Automobile risks insured under Automobile policies.
15. Boiler and Machinery when written as such.
16. Space and space related risks for the intention of
ignition of the launch vehicle which includes taxiing
within the launch site area and in flight.
17. Grain elevators.
18. Mechanical breakdowns when written as such.
19. Petrochemical risks and refineries.
20. Underground mining.
21. Inland Marine policies covering jewelers block and
motor truck cargo.
22. Mortgage Impairment insurance.
23. 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.
24. Kidnap and Ransom.
25. Residual Value and Credit insurance.
26. Crop insurance.
27. Burglary and Theft when written as such.
28. Strike insurance.
29. Product impairment, recall and tampering.
30. Data processing companies whose sole purpose is to
provide data processing services to other companies which
include media exposures defined as material on which data
is to be or is already stored (i.e., disks, magnetic and
paper tapes, drums, cores and programs).
31. Transmission and distribution lines.
32. Onshore drilling rigs.
33. Course of Construction risks covering dams, bridges,
tunnels, subways, construction work over water, or any
project involving water, unless the aforementioned
projects are incidental to the insured's total
construction project.
34. Rolling stock owned or operated by a railroad, but
this exclusion shall not apply to interests while
contained in buildings owned or leased by an insured.
35. Risks excluded under the provisions of the "Total
Insured Value Exclusion Clause" attached to and forming
part of this Contract.
36. Extra contractual obligations (i.e., any punitive,
exemplary, compensatory or consequential damages paid or
payable by the Company as a result of an action against it
by its insured or its insured's assignee, which action
alleges negligence or bad faith on the part of the Company
in handling a claim under a policy subject to this
Contract).
37. Loss in excess of policy limits (i.e., any amount
paid or payable by the Company 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).
B. Notwithstanding the foregoing, any exclusion set forth in
paragraph A (except subparagraphs 2, 3, 4, 6, 8, 11, 12, 13,
16, 23, 36 and 37) shall be waived automatically when, in the
opinion of the Company, the exposure excluded therein is
incidental to the principal exposure on the risk in question.
C. As regards business underwritten in the General E&S Division
of the Company:
1. Exclusions 15, 18, 33 and 34 of paragraph A shall be
waived.
2. Exclusion 35 (Total Insured Value) and Section B of
Exclusion 1 (Pools, Associations) of paragraph A shall be
waived except for risks with total insured values greater
than $300,000,000 in the State of California. This
exception contained in this paragraph only applies to
risks in the State of California.
3. Exclusion 14 (Automobile) of paragraph A shall be
waived as regards Automobile Floor Plans.
Article V - Retention and Limit
A. The Company shall retain and be liable for the first
$2,500,000 of ultimate net loss arising out of each loss
occurrence. The Reinsurer shall then be liable for 100.0% of
the amount by which such ultimate net loss exceeds the
Company's retention, but the liability of the Reinsurer shall
not exceed any of the following:
1. 100.0% of $15,000,000 as respects loss or losses
arising out of any one loss occurrence;
2. 100.0% of $30,000,000 as respects all losses arising
out of loss occurrences commencing during any one contract
year; or
3. 100.0% of $67,500,000 as respects all losses arising
out of loss occurrences commencing during the term of this
Contract.
B. No claim shall be made under this Contract in any one loss
occurrence unless at least two risks insured or reinsured by
the Company are involved in such loss occurrence. "Risk"
shall be defined as all the values at one location unless
otherwise stated in the Company's risk file, but not less than
all the values within four walls. For purposes of this
Article, the Company shall be the sole judge of what
constitutes "one risk."
Article VI - Definitions
A. "Ultimate net loss" as used herein is defined as the sum or
sums (including litigation expenses, interest on judgments and
all other loss adjustment expenses, including a pro rata share
of the salaries and expenses of the Company's field employees
according to the time occupied adjusting the loss and expenses
of the Company's officials incurred in connection with the
loss, but excluding office expenses and salaries of the
Company's officials and any normal overhead charges) 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.
B. The term "loss occurrence" shall mean the sum of all
individual losses directly occasioned by any one disaster,
accident or loss or series of disasters, accidents or losses
arising out of one event which occurs anywhere in the world
but limited in the United States of America and Canada to 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. However, the
event need not be limited to one state or province or
states or provinces contiguous thereto.
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 assured's premises by
strikers, provided such occupation commenced during the
aforesaid period.
3. As regards earthquake (the epicentre of which need
not necessarily be within the territorial confines
referred to in paragraph A 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 frozen pipes and tanks) may be
included in the Company's "loss occurrence."
For all "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.
No individual losses occasioned by an event that would be
covered by 72 hours clauses may be included in any "loss
occurrence" claimed under the 168 hours provision.
C. "Contract year" as used herein shall mean the period from
January 1, 1998 to December 31, 1998, both days inclusive, and
each respective twelve-month period thereafter that this
Contract continues in force.
Article VII - Other Reinsurance
The Company shall purchase or be deemed to have purchased inuring
excess per risk and/or pro rata reinsurance to limit its ultimate
net loss on any one risk, each loss (exclusive of extra
contractual obligations) to the amount as represented by the
Company to the Reinsurer. Annually, the Company shall notify the
Reinsurer of any material changes in the coverage provided by its
inuring reinsurance.
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 on a
quarterly basis (subject to the provisions of paragraph C
below) for which it may be liable following receipt of
reasonable evidence of the amount paid (or scheduled to be
paid) by the Company.
C. The Company may request early payment of loss in increments of
$1,000,000. This "cash call" provision is limited to one
request in any ten-day period. The Reinsurer agrees to pay
said requested amounts immediately upon receipt of reasonable
evidence of the amount paid (or scheduled to be paid) by the
Company.
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 - Special Provisions
As respects loss or damage or costs or expenses arising from
asbestos or seepage and/or pollution and/or contamination, other
than contamination from smoke damage, the maximum sublimit shall
be $25,000 per risk, each loss, except business classified as
Railroad in which case the sublimit shall be $250,000 each risk,
each loss. Nevertheless, this does not preclude payment of the
cost of removal of debris of property damaged by a loss otherwise
covered hereunder.
Article XI - Premium
A. As premium for the reinsurance coverage provided by this
Contract during each contract year, the Company shall pay the
Reinsurer an annual reinsurance premium equal to $5,700,000 in
semiannual installments of $2,850,000 on January 1 and July 1
of each contract year.
B. Notwithstanding the provisions of paragraph A above, if the
loss to the Reinsurer arising out of loss occurrences
commencing during the term of this Contract exceeds
$15,000,000, the Company agrees to pay additional premium for
loss amounts in excess of $15,000,000 up to $67,500,000, as
promptly as possible, with such additional premium to be equal
to the product of the following:
1. The percentage which any such loss amount bears to
the loss occurrence limit ($15,000,000); times
2. $5,700,000.
Article XII - Commutation of Losses
The Company shall commute the outstanding losses under this
Contract in accordance with the provisions of paragraph B of
Article XIII and the Reinsurer shall be bound to accept the
Company's valuation of such losses so long as the Contract
Experience Account balance is positive based upon the Company's
declaration/statement of the commuted value of the losses.
Payment thereof by the Reinsurer shall constitute a full and
final settlement of all losses hereunder (whether known or
unknown).
Article XIII - Contract Experience Account
A. The Reinsurer shall maintain a Contract Experience Account,
the balance of which shall equal the following:
1. The cumulative annual reinsurance premiums ceded
hereunder from inception through the date of calculation
in accordance with the provisions of paragraph A of
Article XI; plus
2. The cumulative additional premiums ceded hereunder
from inception through the date of calculation in
accordance with the provisions of paragraph B of Article
XI; less
3. $1,530,000 for each contract year; less
4. 10.0% of the cumulative additional premiums ceded
hereunder from inception through the date of calculation
in accordance with the provisions of paragraph B of
Article XI; less
5. Ceded incurred losses (incurred losses shall be
defined as ceded ultimate net losses paid from inception
plus ceded ultimate net loss outstanding as of the date of
calculation).
B. In the event this Contract terminates prior to December 31,
2002, the Reinsurer shall pay the Company an amount equal to
100% of the positive Contract Experience Account balance (as
defined in this Article) as of the date on which all losses
hereunder have been settled or commuted. Such payment shall
be remitted by the Reinsurer as promptly as possible after
that date, less any previous Contract Experience Account
balance payments.
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 32E)
A. This Contract applies only to that portion of any policy which
the Company retains net for its own account (prior to
deduction of any underlying reinsurance specifically permitted
in this Contract), 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 will be 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 on 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 - Federal Excise Tax (BRMA 17A)
(Applicable to those reinsurers, excepting Underwriters at
Lloyd's London and other reinsurers exempt from Federal Excise
Tax, who are domiciled outside the United States of America.)
A. The Reinsurer has agreed to allow for the purpose of paying
the Federal Excise Tax the applicable percentage of the
premium payable hereon (as imposed under Section 4371 of the
Internal Revenue Code) to the extent such premium is subject
to the Federal Excise Tax.
B. In the event of any return of premium becoming due hereunder
the Reinsurer will deduct the applicable percentage from the
return premium payable hereon and the Company or its agent
should take steps to recover the tax from the United States
Government.
Article XXI - Unauthorized Reinsurers
A. If the Reinsurer is unauthorized in any state of the United
States of America or the District of Columbia, the Reinsurer
agrees to fund its share of the Company's ceded United States
outstanding loss and loss adjustment expense reserves by:
1. Clean, irrevocable and unconditional letters of
credit issued and confirmed, if confirmation is required
by the insurance regulatory authorities involved, by a
bank or banks meeting the NAIC Securities Valuation Office
credit standards for issuers of letters of credit and
acceptable to said insurance regulatory authorities;
and/or
2. Escrow accounts for the benefit of the Company;
and/or
3. Cash advances;
if, without such funding, a penalty would accrue to the
Company on any financial statement it is required to file with
the insurance regulatory authorities involved. The Reinsurer,
at its sole option, may fund in other than cash if its method
and form of funding are acceptable to the insurance regulatory
authorities involved.
B. If the Reinsurer is unauthorized in any province or
jurisdiction of Canada, the Reinsurer agrees to fund 115% of
its share of the Company's ceded Canadian outstanding loss and
loss adjustment expense reserves by:
1. A clean, irrevocable and unconditional letter of
credit issued and confirmed, if confirmation is required
by the insurance regulatory authorities involved, by a
Canadian bank or banks meeting the NAIC Securities
Valuation Office credit standards for issuers of letters
of credit and acceptable to said insurance regulatory
authorities, for no more than 15/115ths of the total
funding required; and/or
2. Cash advances for the remaining balance of the
funding required;
if, without such funding, a penalty would accrue to the
Company on any financial statement it is required to file with
the insurance regulatory authorities involved.
C. With regard to funding in whole or in part by letters of
credit, it is agreed that each letter of credit will be in a
form acceptable to insurance regulatory authorities involved,
will be issued for a term of at least one year and will
include an "evergreen clause," which automatically extends the
term for at least one additional year at each expiration date
unless written notice of non-renewal is given to the Company
not less than 30 days prior to said expiration date. The
Company and the Reinsurer further agree, notwithstanding
anything to the contrary in this Contract, that said letters
of credit may be drawn upon by the Company or its successors
in interest at any time, without diminution because of the
insolvency of the Company or the Reinsurer, but only for one
or more of the following purposes:
1. To reimburse itself for the Reinsurer's share of
losses and/or loss adjustment expenses paid under the
terms of policies reinsured hereunder, unless paid in cash
by the Reinsurer;
2. To reimburse itself for the Reinsurer's share of any
other amounts claimed to be due hereunder, unless paid in
cash by the Reinsurer;
3. To fund a cash account in an amount equal to the
Reinsurer's share of any ceded outstanding loss and loss
adjustment expense reserves funded by means of a letter of
credit which is under non-renewal notice, if said letter
of credit has not been renewed or replaced by the
Reinsurer 10 days prior to its expiration date;
4. To refund to the Reinsurer any sum in excess of the
actual amount required to fund the Reinsurer's share of
the Company's ceded outstanding loss and loss adjustment
expense reserves, if so requested by the Reinsurer.
In the event the amount drawn by the Company on any letter of
credit is in excess of the actual amount required for C(1) or
C(3), or in the case of C(2), the actual amount determined to
be due, the Company shall promptly return to the Reinsurer the
excess amount so drawn.
Article XXII - Insolvency
A. In the event of the insolvency of one or both 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 both 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 XXIII - Arbitration
A. As a condition precedent to any right of action hereunder, in
the event of any dispute or difference of opinion hereafter
arising with respect to this Contract, it is hereby mutually
agreed that such dispute or difference of opinion shall be
submitted to arbitration. One Arbiter shall be chosen by the
Company, the other by the Reinsurer, and an Umpire shall be
chosen by the two Arbiters before they enter upon arbitration,
all of whom shall be active or retired disinterested executive
officers of insurance or reinsurance companies or Lloyd's
London Underwriters. In the event that either party should
fail to choose an Arbiter within 30 days following a written
request by the other party to do so, the requesting party may
choose two Arbiters who shall in turn choose an Umpire before
entering upon arbitration. If the two Arbiters fail to agree
upon the selection of an Umpire within 30 days following their
appointment, each Arbiter shall nominate three candidates
within 10 days thereafter, two of whom the other shall
decline, and the decision shall be made by drawing lots.
B. Each party shall present its case to the Arbiters within 30
days following the date of appointment of the Umpire. The
Arbiters shall consider this Contract as an honorable
engagement rather than merely as a legal obligation and they
are relieved of all judicial formalities and may abstain from
following the strict rules of law. The decision of the
Arbiters shall be final and binding on both parties; but
failing to agree, they shall call in the Umpire and the
decision of the majority shall be final and binding upon both
parties. Judgment upon the final decision of the Arbiters may
be entered in any court of competent jurisdiction.
C. 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 and communications shall be made by
the Company to each of the reinsurers constituting one party,
provided, however, that nothing herein shall impair the rights
of such reinsurers to assert several, rather than joint,
defenses or claims, nor be construed as changing the liability
of the reinsurers participating under the terms of this
Contract from several to joint.
D. Each party shall bear the expense of its own Arbiter, and
shall jointly and equally bear with the other the expense of
the Umpire and of the arbitration. In the event that the two
Arbiters are chosen by one party, as above provided, the
expense of the Arbiters, the Umpire and the arbitration shall
be equally divided between the two parties.
E. Any arbitration proceedings shall take place at Woodland
Hills, California, unless otherwise mutually agreed.
Article XXIV - 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 any
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 XXV - Enforceability
If any term or provision of this Contract is held to be invalid
or unenforceable, such invalidity or unenforceability shall not
affect any other term or provision hereof, and this Contract
shall continue in full force and effect as if such invalid or
unenforceable term or provision (to the extent of the invalidity
of unenforceability) had not been contained herein.
Article XXVI - Entire Agreement
By their signatures hereunto affixed, the parties to this
Contract stipulate that this Contract comprises the entire
agreement between the parties as to this transaction and that
there are no side agreements which would now or in the future
affect any terms or provisions of this Contract. Any changes to
this Contract must be agreed to in writing and signed by the
parties to this Contract.
Article XXVII - Agency Agreement
If more than one reinsured company is named as a party to this
Contract, the first named company 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 XXVIII - 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:
Woodland Hills, California,this _______ day of _______________199___.
__________________________________________________
Associated International Insurance Company
Calvert Insurance Company
TOTAL INSURED VALUE EXCLUSION CLAUSE
It is the mutual intention of the parties to exclude risks, other
than Offices, Hotels, Apartments, Hospitals, Educational
Establishments and Public Utilities (except Railroad Schedules),
and Builders Risks on the above classes, where at the time of
cession, the Total Insured Value over all interests exceeds
$300,000,000. However, the Company shall be protected hereunder,
subject to the other terms and conditions of this Contract, if
subsequent to cession being made, the Company becomes acquainted
with the true facts of the case and discovers that the mutual
intention has been inadvertently breached; on condition that the
Company shall at the first opportunity, and certainly by next
anniversary of the original policy, exclude the risk in question.
It is agreed that this mutual intention does not apply to
Contingent Business Interruption or to interests traditionally
underwritten as Inland Marine or to Stock and/or Contents written
on a blanket basis except where the Company is aware that the
Total Insured Value of $300,000,000 is already exceeded for
buildings, machinery, equipment and direct use and occupancy at
the key location.
Notwithstanding anything contained herein to the contrary, it is
the mutual intention of the parties in respect of Bridges and
Tunnels to exclude such risks where the Total Insured Value over
all interests exceeds $300,000,000.
It is understood and agreed that this Clause shall not apply
hereunder where the Company writes 100% of the risk.
POOLS, ASSOCIATIONS & SYNDICATES EXCLUSION CLAUSE
Section A:
Excluding:
(a) All business derived directly or indirectly from any
Pool, Association or Syndicate which maintains its own
reinsurance facilities.
(b) Any Pool or Scheme (whether voluntary or mandatory)
formed after March 1, 1968 for the purpose of insuring
property whether on a country-wide basis or in respect of
designated areas. This exclusion shall not apply to so-
called Automobile Insurance Plans or other Pools formed to
provide coverage for Automobile Physical Damage.
Section B:
It is agreed that business written by the Company for the
same perils, which is known at the time to be insured by, or in
excess of underlying amounts placed in the following Pools,
Associations or Syndicates, whether by way of insurance or
reinsurance, is excluded hereunder:
Industrial Risk Insurers,
Associated Factory Mutuals,
Improved Risk Mutuals,
Any Pool, Association or Syndicate formed for the purpose of
writing Oil, Gas or Petro-Chemical Plants and/or Oil or Gas
Drilling Rigs,
United States Aircraft Insurance Group,
Canadian Aircraft Insurance Group,
Associated Aviation Underwriters,
American Aviation Underwriters.
Section B does not apply:
(a) Where The Total Insured Value over all interests of
the risk in question is less than $300,000,000.
(b) To interests traditionally underwritten as Inland
Marine or stock and/or contents written on a blanket
basis.
(c) To Contingent Business Interruption, except when the
Company is aware that the key location is known at the
time to be insured in any Pool, Association or Syndicate
named above, other than as provided for under Section
B(a).
(d) To risks as follows:
Offices, Hotels, Apartments, Hospitals, Educational
Establishments, Public Utilities (other than railroad
schedules) and builder's risks on the classes of risks
specified in this subsection (d) only.
Where this clause attaches to Catastrophe Excesses,
the following Section C is added:
Section C:
Nevertheless the Reinsurer specifically agrees that liability
accruing to the Company from its participation in residual market
mechanisms including but not limited to:
(1) The following so-called "Coastal Pools":
Alabama Insurance Underwriting Association
Florida Windstorm Underwriting Association ("FWUA")
Louisiana Insurance Underwriting Association
Mississippi Windstorm Underwriting Association
North Carolina Insurance Underwriting Association
South Carolina Windstorm and Hail Underwriting
Association
Texas Catastrophe Property Insurance Association
AND
(2) All "Fair Plan" business
for all perils otherwise protected hereunder shall not be
excluded, except, however, that this reinsurance does not
include any increase in such liability resulting from:
(i) The inability of any other participant in such
"Coastal Pool" or "Fair Plan" to meet its liability.
(ii) Any claim against such "Coastal Pool" and/or "Fair
Plan" or any participant therein, including the Company,
whether by way of subrogation or otherwise, brought by or
on behalf of any insolvency fund (as defined in the
Insolvency Fund Exclusion Clause incorporated in this
Contract).