R:\97R\15030.DOC
Commercial Automobile Quota Share
Reinsurance Contract
Effective: December 31, 1997
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
I Business Reinsured 3
II Commencement and Termination 3
III Territory (BRMA 51A) 4
IV Exclusions 4
V Retention and Limit 5
VI Assignments and Assessments 5
VII Loss in Excess of Policy Limits/ECO 6
VIII Other Reinsurance 6
IX Claims and Loss Adjustment Expense 6
X Salvage and Subrogation 7
XI Original Conditions (BRMA 37B) 7
XII Commission 8
XIII Contingent Commission 8
XIV Reports and Remittances 9
XV Late Payments 10
XVI Offset (BRMA 36C) 11
XVII Access to Records (BRMA 1D) 11
XVIII Errors and Omissions (BRMA 14F) 11
XIX Taxes (BRMA 50B) 12
XX Unauthorized Reinsurers 12
XXI Insolvency 13
XXII Arbitration 14
XXIII Service of Suit (BRMA 49C) 15
XXIV Agency Agreement 15
XXV Intermediary (BRMA 23A) 15
Commercial Automobile Quota Share
Reinsurance Contract
Effective: December 31, 1997
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 Agreements
Attached Hereto
(hereinafter referred to as the "Reinsurer")
Article I - Business Reinsured
A. By this Contract the Company obligates itself to cede to the
Reinsurer and the Reinsurer obligates itself to accept quota
share reinsurance of the Company's net liability under
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 Commercial Automobile Bodily
Injury and Property Damage Liability, Commercial Automobile
Physical Damage, Cargo Property and General Liability
business.
B. "Net liability" as used herein is defined as the Company's
gross liability remaining after cessions, if any, to other pro
rata reinsurers.
C. The liability of the Reinsurer with respect to each cession
hereunder shall commence obligatorily and simultaneously with
that of the Company, subject to the terms, conditions and
limitations hereinafter set forth.
D. It is understood that the classes of business reinsured under
this Contract are deemed to include coverages required under
Section 30 of the Motor Carrier Act of 1980 and/or any
amendments thereto.
Article II - Commencement and Termination
A. This Contract shall become effective on December 31, 1997,
with respect to losses occurring on or after that date, and
shall continue in force thereafter until terminated.
Notwithstanding the foregoing, in the event negotiations for a
renewal of this Contract are not completed by any December 31,
at the Company's option, this Contract shall be extended
through March 31 of the subsequent calendar year and any
notices of cancellation issued by either the Company or
Reinsurer shall also be extended through that March 31.
B. Either party may terminate this Contract on any December 31 by
giving the other party not less than 90 days prior notice by
certified mail.
C. Unless the Company elects to reassume the ceded unearned
premium in force on the effective date of termination, and so
notifies the Reinsurer prior to or as promptly as possible
after the effective date of termination, reinsurance hereunder
on business in force on the effective date of termination
shall remain in full force and effect until expiration,
cancellation or next premium anniversary of such business,
whichever first occurs, but in no event beyond 12 months
following the effective date of termination.
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. All business not specifically classified and covered
in accordance with the provisions of Article I.
2. Treaty and facultative reinsurance.
3. Business written by the Company on a co-indemnity
basis where the Company is not the controlling carrier.
4. Nuclear risks as defined in the "Nuclear Incident
Exclusion Clause - Physical Damage - Reinsurance" and the
"Nuclear Incident Exclusion Clause - Liability -
Reinsurance" attached to and forming part of this
Contract.
5. 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.
6. Liability as a member, subscriber or reinsurer of any
Pool, Syndicate or Association, and any FAIR Plan or other
combination of insurers or reinsurers formed for the
purpose of covering specific perils, specific classes of
business or for the purpose of insuring risks located in
specific geographical areas.
7. Except as provided in Article VI, 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 the 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 is otherwise deemed unable to meet any
claim, debt, charge, fee or other obligation in whole or
in part.
8. Seepage and Pollution is excluded per ISO policy or
endorsement forms, or so deemed. Notwithstanding the
foregoing, the Reinsurer agrees that this reinsurance
exclusion shall not apply to coverage provided by ISO Form
CA 99-48, "Pollution Liability - Broadened Coverage for
Covered Autos - Business Auto and Truckers Coverage
Forms," MCS-90 or the original policies or endorsements
issued in any state where the primary seepage and
pollution exclusions have not been approved or are not
permitted to be included or attached to original policies.
Further, the Reinsurer agrees that this reinsurance
exclusion shall not apply in any case where the Company
has included the primary seepage and pollution exclusion
within an original policy or endorsement but has sustained
a loss as a result of that primary seepage and pollution
exclusion being deemed invalid or inapplicable by a court
of law.
B. Notwithstanding the foregoing, any reinsurance falling within
the scope of the exclusion set forth in subparagraph 8 of
paragraph A that is specially accepted by the Reinsurer from
the Company shall be covered under this Contract and be
subject to the terms hereof, except as such terms shall be
modified by the special acceptance. Furthermore, the
exclusion set forth in subparagraph 8 of paragraph A 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. If the Company is bound, without the knowledge and contrary to
the instructions of the Company's supervisory underwriting
personnel, on any business falling within the scope of the
exclusion set forth in subparagraph 8 of paragraph A, the
exclusion shall be suspended with respect to such business
until 30 days after an underwriting supervisor of the Company
acquires knowledge thereof or until the Company is able to
cancel in compliance with statutory terms, whichever is
longer.
D. If the Company is required to accept an assigned risk which
conflicts with the exclusion set forth in subparagraph 8 of
paragraph A, reinsurance shall apply, but in no event shall
the Reinsurer's liability exceed the limit set forth in
Article V.
Article V - Retention and Limit
As respects business subject to this Contract, the Company shall
retain and be liable for 50.0% of its net liability. The Company
shall cede to the Reinsurer and the Reinsurer agrees to accept
50.0% of the Company's net liability.
Article VI - Assignments and Assessments
A. Reinsurance under this Contract shall apply to risks assigned
to the Company under any Assigned Risk Plan if, in the opinion
of the Company, such risks were assigned to the Company
because of the business written and reinsured hereunder.
B. Reinsurance under this Contract shall also apply to a
proportion of any assessments made against the Company
pursuant to those laws and regulations creating obligatory
funds (including insurance guaranty and insolvency funds to
the extent that such costs are transferable to the
policyholder), pools, joint underwriting associations, FAIR
plans and similar plans, said proportion to be the proportion
of the Company's total premiums causing the assessment which
were or are subject to this Contract.
C. In the event this Contract is terminated, unless the Company
elects cutoff, the provisions of this Article shall continue
to apply for as long as the Company is required to accept
assignments and/or assessments because of the business
reinsured hereunder.
Article VII - Loss in Excess of Policy Limits/ECO
A. In the event the Company pays or is held liable to pay an
amount of loss in excess of its policy limit, but otherwise
within the terms of its policy (hereinafter called "loss in
excess of policy limits") or any punitive, exemplary,
compensatory or consequential damages, other than loss in
excess of policy limits (hereinafter called "extra contractual
obligations") because of alleged or actual bad faith or
negligence on its part 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 policyholder, or
in discharging its duty to prepare or prosecute an appeal
consequent upon such an action, or in otherwise handling a
claim under a policy subject to this Contract, 90.0% of the
loss in excess of policy limits and/or 90.0% of the extra
contractual obligations shall be added to the Company's loss,
if any, under the policy involved, and the sum thereof shall
be subject to the provisions of the Article V.
B. An 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.
C. Notwithstanding anything stated herein, this Contract shall
not apply to any loss in excess of policy limits or any extra
contractual obligation 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 any individual or corporation or any other
organization or party involved in the presentation, defense or
settlement of any claim covered hereunder.
D. Recoveries from any form of insurance or reinsurance which
protects the Company against claims the subject matter of this
Article shall inure to the benefit of this Contract.
Article VIII - Other Reinsurance
The Company shall maintain in force excess of loss reinsurance
with limits of $24,500,000 excess of $500,000 each loss event,
recoveries under which shall inure to the benefit of this
Contract. Premiums ceded by the Company for reinsurance which
inures to the benefit of this Contract shall be deducted in
determining subject premium hereunder as provided in Article XI.
Article IX - Claims and Loss Adjustment Expense
A. Losses shall be reported by the Company in summary form as
hereinafter provided, but the Company shall notify the
Reinsurer immediately when a specific case involves unusual
circumstances or large loss possibilities. Further, the
Company shall notify the Reinsurer whenever a claim involves a
fatality, amputation, spinal cord damage, brain damage,
blindness, extensive burns or multiple fractures, regardless
of liability. The Reinsurer shall have the right to
participate, at its own expense, in the defense or control of
any claim or suit or proceeding involving this reinsurance.
B. All loss settlements made by the Company, provided they are
within the terms of the original policies (other than extra
contractual obligations and loss in excess of policy limits),
shall be binding upon the Reinsurer, and the Reinsurer agrees
to pay or allow, as the case may be, its proportion of each
such settlement in accordance with Article XIV. It is agreed,
however, that if the Reinsurer's share of any loss is equal to
or greater than $250,000, the Reinsurer will pay its share of
said loss as promptly as possible after receipt of reasonable
evidence of the amount paid by the Company.
C. In the event of a claim under a policy subject hereto, the
Reinsurer shall be liable for its proportionate share of loss
adjustment expenses incurred by the Company in connection
therewith, and shall be credited with its proportionate share
of any recoveries of such expense.
D. "Loss adjustment expenses" 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; 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 salaried adjusters shall be included.
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 by the
Reinsurer.
Article X - 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 XI - Original Conditions (BRMA 37B)
A. All reinsurance under this Contract shall be subject to the
same rates, terms, conditions, waivers and interpretations and
to the same modifications and alterations as the respective
policies of the Company. However, in no event shall this be
construed in any way to provide coverage outside the terms and
conditions set forth in this Contract. The Reinsurer shall be
credited with its exact proportion of the original premiums
received by the Company, prior to disbursement of any
dividends, but after deduction of premiums, if any, ceded by
the Company for inuring reinsurance.
B. Nothing herein shall in any manner create any obligations or
establish any rights against the Reinsurer in favor of any
third party or any persons not parties to this Contract.
Article XII - Commission
A. The Reinsurer shall allow the Company a 32.5% commission on
all premiums ceded to the Reinsurer hereunder. The Company
shall allow the Reinsurer return commission on return premiums
at the same rate.
B. It is expressly agreed that the ceding commission allowed the
Company includes provision for all dividends, commissions,
taxes, assessments (except as provided in Article VI), and all
other expenses of whatever nature, except loss adjustment
expense.
Article XIII - Contingent Commission
A. The Reinsurer shall pay the Company a contingent commission
equal to 20.0% of the net profit, if any, accruing to the
Reinsurer during each accounting period defined herein. The
first accounting period shall be from the effective date of
this Contract through December 31, 1998, and each subsequent
12-month period (or 15-month period if this Contract is
extended through March 31 of any calendar year as provided in
paragraph A of Article II) shall be a separate accounting
period. However, if this Contract is terminated, the final
accounting period shall be from the beginning of the then
current accounting period through the date of termination if
this Contract is terminated on a "cutoff" basis, or the end of
the runoff period if this Contract is terminated on a "runoff"
basis.
B. The Reinsurer's net profit for each accounting period shall be
calculated in accordance with the following formula, it being
understood that a positive balance equals net profit and a
negative balance equals net loss:
1. Premiums earned for the accounting period; less
2. Ceding commission allowed the Company on premiums
earned for the accounting period; less
3. Expenses incurred by the Reinsurer at 15.0% of
premiums earned for the accounting period; less
4. Losses incurred for the accounting period; less
5. The Reinsurer's net loss, if any, from the
immediately preceding accounting period.
C. As respects each accounting period except the final accounting
period, the Company shall calculate and report the Reinsurer's
net profit within 60 days following 24 months after the end of
each accounting period, and within 60 days after the end of
each 12-month period thereafter until all losses subject
hereto have been finally settled. As respects the final
accounting period, the Company shall calculate and report the
Reinsurer's net profit within 60 days after the date of
termination, and within 60 days after the end of each 12-month
period thereafter until all losses subject hereto have been
finally settled. Each such calculation for each accounting
period shall be based on cumulative transactions hereunder
from the beginning of the accounting period through the date
of calculation, including the Reinsurer's net loss, if any,
from the immediately preceding accounting period. As respects
the initial calculation referred to above, any contingent
commission shown to be due the Company shall be paid by the
Reinsurer as promptly as possible after receipt and
verification of the Company's report. As respects each
recalculation, any additional contingent commission shown to
be due the Company shall be paid by the Reinsurer as promptly
as possible after receipt and verification of the Company's
report. Any return contingent commission shown to be due the
Reinsurer shall be paid by the Company with its report.
D. "Premiums earned" as used herein shall mean ceded unearned
premiums at the beginning of the accounting period, plus ceded
net written premiums during the period, less ceded unearned
premiums at the end of the period.
E. "Losses incurred" as used herein shall mean ceded losses and
loss adjustment expense paid as of the effective date of
calculation, plus the ceded reserves for losses and loss
adjustment expense outstanding as of the same date, all as
respects losses occurring during the accounting period under
consideration.
Article XIV - Reports and Remittances
A. As promptly as possible after the effective date of this
Contract, the Company shall remit the Reinsurer's share of the
unearned premium (less commission thereon) applicable to
subject business in force at the effective date of this
Contract.
B. Within 60 days after the end of each month, the Company shall
report to the Reinsurer:
1. Ceded net written premium for the month;
2. Commission thereon;
3. Ceded losses and loss adjustment expense paid during
the month (net of any recoveries during the month under
the "cash call" provisions of Article IX).
The positive balance of (1) less (2) less (3) shall be
remitted by the Company with its report. Any balance shown to
be due the Company shall be remitted by the Reinsurer as
promptly as possible after receipt and verification of the
Company's report.
C. Within 60 days after the end of each calendar quarter, the
Company shall report to the Reinsurer the ceded unearned
premiums and ceded outstanding loss reserves as of the end of
the calendar quarter.
D. Annually, the Company shall furnish the Reinsurer with such
information as the Reinsurer may require to complete its
Annual Convention Statement.
Article XV - 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 XXV
(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 any routine payment, adjustment or return
due either party, 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 "cash call" payment due the Company in accordance
with paragraph B of Article IX shall be deemed due
10 business days after the proof of loss or demand for
payment is transmitted to the Reinsurer. If such payment
is not received within the 10 days, interest will accrue
on the payment or amount overdue in accordance with
paragraph B above, from the date the proof of loss or
demand for payment was transmitted to the Reinsurer.
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 10 business days following transmittal 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 IX, 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. 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 XVI - 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 XVII - 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 XVIII - 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 XIX - Taxes (BRMA 50B)
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 or the District of Columbia.
Article XX - 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 unearned
premium and outstanding loss and loss adjustment expense
reserves (including incurred but not reported loss 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. 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
unearned premiums returned to insureds on account of
policy cancellations, unless paid in cash by the
Reinsurer;
2. To reimburse itself for the Reinsurer's share of
losses and/or loss adjustment expense paid under the terms
of policies reinsured hereunder, unless paid in cash by
the Reinsurer;
3. To reimburse itself for the Reinsurer's share of any
other amounts claimed to be due hereunder, unless paid in
cash by the Reinsurer;
4. To fund a cash account in an amount equal to the
Reinsurer's share of any ceded unearned premium and/or
outstanding loss and loss adjustment expense reserves
(including incurred but not reported loss 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;
5. 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 unearned premium and/or outstanding
loss and loss adjustment expense reserves (including
incurred but not reported loss 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 B(1),
B(2) or B(4), or in the case of B(3), the actual amount
determined to be due, the Company shall promptly return to the
Reinsurer the excess amount so drawn.
Article XXI - 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 XXII - 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 30 days
after being requested to do so by the other party, the latter,
after ten 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 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 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 XXIII - 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 XXIV - Agency Agreement
Gryphon Insurance Group, Inc. shall be deemed the agent of the
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 XXV - 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___.
__________________________________________________
Associated International Insurance Company
Calvert Insurance Company