E. W. BLANCH CO.
R:\98R\16342.DOC Reinsurance Services
Page 3
Entertainment Coded Excess of Loss
Reinsurance Contract
Effective: March 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
I Classes of Business Reinsured 3
II Term 3
III Territory (BRMA 51D) 4
IV Exclusions 4
V Retention and Limit 5
VI Other Reinsurance 6
VII Definitions 6
VIII Claims 9
IX Salvage and Subrogation 9
X Commission (BRMA 10A) 10
XI Premium 10
XII Late Payments 10
XIII Offset (BRMA 36C) 12
XIV Access to Records (BRMA 1D) 12
XV Liability of the Reinsurer 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
XXI Insolvency 15
XXII Arbitration 16
XXIII Service of Suit (BRMA 49C) 17
XXIV Agency Agreement 17
XXV Intermediary (BRMA 23A) 17
Schedule A
Entertainment Coded Excess of Loss
Reinsurance Contract
Effective: March 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 "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") issued or renewed on or after the effective
date hereof, and classified by the Company as Entertainment
Industry Insurance, including but not limited to Negative Film,
Faulty Stock/Camera, Props, Sets and Wardrobe, Producers
Liability, Third Party Property Damage, Extra Expense and Broad
Form All Risks Extra Expense, Office Contents, Automobile
Physical Damage, Money and Securities, Miscellaneous Equipment,
all types of Cast Insurance, Event Cancellation, Non-Appearance
and Other Contingency Coverages, and Other Property Floater
Coverages, subject to the terms, conditions and limitations
hereinafter set forth.
Article II - Commencement and Termination
A. This Contract shall become effective on March 1, 1998, with
respect to occurrences arising out of loss events commencing
on or after that date, and shall continue in force thereafter
until terminated. In the event renewal negotiations are not
completed by any June 30, at the Company's option, this
Contract shall continue in force through the following
September 30, and any notices of cancellation issued by either
the Company or Reinsurer shall also be extended through that
following September 30.
B. Either party may terminate this Contract on any June 30 by
giving the other party not less than 90 days prior notice by
certified mail.
C. Except as provided in paragraph D below, reinsurance hereunder
on business in force on the effective date of termination
shall remain in full force and effect until termination,
cancellation or next premium anniversary of such business,
whichever first occurs, following the effective date of
termination. However, these limitations shall not apply to
any Extended Discovery Endorsement provisions or policies.
D. Notwithstanding the provisions of paragraph C above, the
Company shall have the option of reassuming the unexpired
liability of the Reinsurer hereunder on business in force on
the effective date of termination, in which event the
Reinsurer shall not be liable for claims made or losses
arising out of loss events commencing after that date. As
respects policies providing an aggregate limit of liability
which are in force on the effective date of termination, the
Reinsurer shall be liable for the entire aggregate loss under
such policies if the inception date of the policy period falls
on or before the effective date of termination, as respects
policies written on an occurrence basis, or if the first claim
is made on or before the effective date of termination as
respects policies written on a claims made basis.
E. If this Contract is terminated while a loss event 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 event had
occurred prior to the termination of this Contract, provided
that no part of such loss event is claimed against any renewal
or replacement of this Contract.
Article III - Territory (BRMA 51D)
This Contract shall be worldwide in its geographical scope.
Article IV - Exclusions
This Contract does not apply to and specifically excludes the
following:
1. Financial guarantee and insolvency.
2. War as set out below:
a. In those cases where the original policy contains
a standard "War Exclusion Clause," this Contract shall
follow the wording of the original policy.
b. In those cases where the original policy does not
contain a standard "War Exclusion Clause" no liability
shall attach hereto in respect of any loss or damage
which is occasioned by war, invasion, hostilities, acts
of foreign enemies, civil war, rebellion, insurrection,
military or usurped power, or martial law, or
confiscation by order of any government or public
authority, but such exclusion shall not apply to
business classified by the Company as Third Party
Property Damage. Nevertheless, this clause shall not
be construed to apply to loss or damage occasioned by
riots, strikes, civil commotion, vandalism or malicious
damage, or to acts committed by agents of any
government, party or faction engaged in war,
hostilities or other warlike operations, provided such
agents are acting secretly and not in connection with
any operations of armed forces (whether military, naval
or air forces) in the country where the interests
insured are situated.
3. 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.
4. Nuclear Energy Risks as defined in the "Nuclear
Energy Risks Exclusion Clause (Liability and Physical
Damage) (Reinsurance) (1994) (Worldwide excluding U.S.A. &
Canada) - NMA 1975a" attached to and forming part of this
Contract.
5. All liability of the Company arising, by contract,
operation of law, or otherwise, from its participation or
membership, whether voluntary or involuntary, in any
insolvency fund. "Insolvency Fund" includes any guaranty
fund, insolvency fund, plan, pool, association, fund or
other arrangement, howsoever denominated, established or
governed, which provides for any assessment of or payment
or assumption by the Company of part or all of any claim,
debt, charge, fee, or other obligation of an insurer, or
its successors or assigns, which has been declared by any
competent authority to be insolvent, or which is otherwise
deemed unable to meet any claim, debt, charge, fee or
other obligation in whole or in part.
6. Loss or liability excluded under the provisions of
the "Pools, Associations and Syndicates Exclusion Clause"
attached to and forming part of this Contract.
7. Seepage and pollution as per the original policies
where legal, approved and applicable.
Article V - Retention and Limit
The Company shall retain and be liable for the first $10,000,000
of ultimate net loss as respects any one loss event. The
Reinsurer shall then be liable for the amount by which such
ultimate net loss exceeds the Company's retention, but the
liability of the Reinsurer shall not exceed $40,000,000 as
respects any one loss event.
Article VI - Other Reinsurance
The Company shall be permitted, but not required, to purchase
other pro rata 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.
Article VII - Definitions
A. "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 hereinafter 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 savage, 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. "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.
C. "Loss adjustment expense" shall mean expenses assignable to
the investigation, defense and/or settlement of specific
claims, regardless of how such expenses are classified for
statutory reporting purposes. Loss adjustment expense shall
include 1) prejudgment interest, unless included as part of
the award or judgment; 2) post-judgment interest; and
3) declaratory judgment expenses or other legal expenses and
costs incurred in connection with coverage questions and legal
actions connected thereto. Loss adjustment expense shall not
include office expenses or salaries of the Company's regular
employees, except that assigned 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 loss adjustment expense 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.
D. The term "loss event" as used herein shall mean an accident,
occurrence, claim made, loss discovered or any other
circumstance that triggers coverage as provided, defined, or
interpreted in the Company's original policies, however:
1. Where the Company's policy provides for an aggregate
limit of liability, the term "loss event" shall mean all
losses subject to that aggregate limit, each aggregate
period. For purposes of this Contract, the date of loss
for purposes of this reinsurance will be the inception
date of each aggregate period, as respects policies
written on an occurrence basis and the date the first
claim is made as respects policies written on a claims
made basis. Nevertheless, the Company may extract from
any aggregate "loss event" a single loss so it may be
combined with losses from other policies and submitted as
a single "loss event."
In the event the Company's losses arising out of a
single "loss event" involve policies providing different
types of coverage such as an occurrence and a claims made
policy, all losses can be combined and submitted as a
single "loss event" utilizing the occurrence date of loss
for the purpose of reinsurance coverage. In the event the
Company's losses arising out of a single "loss event"
involve multiple claims made policies, all losses can be
combined and submitted as a single "loss event" utilizing
the date the first claim is made for the purpose of
reinsurance coverage.
2. As respects policies written on a claims made basis,
the date of loss shall be the date the claim is made under
the original policy. As respects any extended reporting
or discovery period provisions under a claims made policy
subject hereto, it is understood and agreed that the
following shall apply:
a. Claims made against and/or reported to the Company
during the extended reporting discovery period shall be
deemed to have occurred on the last full day of the
applicable policy period;
b. If the Company issues a separate policy and/or
reinstates the aggregate limit provided under a policy,
premium and losses during the period to which said
separate policy and/or reinstated limit applies may, at
the time of issuance and at the Company's option, be
allocated to (i) the reinsurance contract which is in
effect at the effective date of said separate policy
and/or at the beginning of the period to which the
reinstated limit applies, or (ii) the reinsurance
contract which was in effect at the effective date of
the original policy. If the Company elects (i), said
losses shall be subject to a separate retention and
limit (as specified in the Article) from that of the
original policy period.
3. As respects property losses subject hereto, all
individual losses directly occasioned by any one disaster,
occurrence or loss or series of disasters, occurrences or
losses arising out of one occurrence which occurs anywhere
in the world, but limited in the United States of America
and Canada to 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 event"
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
loss event, except that the term "loss event" shall be
further defined as follows:
a. 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 loss
event. However, the loss event need not be limited to
one state or province or states or provinces contiguous
thereto.
b. 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 loss 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.
c. As regards earthquake (the epicenter of which need
not necessarily be within the territorial confines
referred to above) 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 event."
d. As regards "freeze," only individual losses
directly occasioned by collapse, breakage of glass and
water damage (caused by bursting frozen pipes and tanks
and melting snow) may be included in the Company's
"loss event."
Except for those "loss events" referred to in
subparagraphs a and b above, the Company may choose the
date and time when any such period of consecutive hours
commences, provided that it is not earlier than the date
and time of the occurrence of the first recorded
individual loss sustained by the Company arising out of
that disaster, occurrence or loss, and provided that only
one such period of 168 consecutive hours shall apply with
respect to one loss event.
However, as respects those "loss events" referred to
in subparagraphs a and b above, if the disaster,
occurrence or loss occasioned by the occurrence is of
greater duration than 72 consecutive hours, then the
Company may divide that disaster, occurrence or loss into
two or more "loss events," provided that no two periods
overlap and no individual loss is included in more than
one such period, and provided that no period commences
earlier than the date and time of the occurrence of the
first recorded individual loss sustained by the Company
arising out of that disaster, occurrence or loss.
It is understood that losses arising from a
combination of two or more perils as a result of the same
occurrence shall be considered as having arisen from one
"loss event." Notwithstanding the foregoing, the hourly
limitations as stated above shall not be exceeded as
respects the applicable perils and no single "loss event"
shall encompass a time period greater than 168 consecutive
hours.
Notwithstanding the foregoing, it is understood that the
Company shall be the sole judge of what constitutes a single
"loss event."
Article VIII - Claims
A. Whenever a loss sustained by the Company appears 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 the loss 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.
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 - Commission (BRMA 10A)
A. The Reinsurer shall allow the Company a 35.0% 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, and all other expenses of whatever nature,
except loss adjustment expense.
Article XI - Premium
A. As premium for the reinsurance provided hereunder, the Company
shall pay the Reinsurer a portion of its net written premium,
determined at the applicable reinsurance rates set forth in
Schedule A attached to and forming part of this Contract, less
commission allowed thereon.
B. Within 45 days after the end of each contract quarter, the
Company shall report its net written premium for the quarter.
The premium due the Reinsurer for the quarter, determined in
accordance with paragraph A above, shall be paid by the
Company with its report.
C. Within 45 days after the end of each contract quarter, the
Company shall calculate and report the unearned reinsurance
premium as of the end of the quarter.
D. "Net written premium" as used herein is defined as gross
written premium of the Company for the classes of business
reinsured hereunder, less cancellations and return premiums,
and less premiums ceded by the Company for reinsurance which
inures to the benefit of this Contract or increases the
Company's available capacity.
E. "Contract quarter" as used herein shall mean the period from
March 1, 1998, to June 30, 1998, both days inclusive, and each
respective twelve-month period thereafter that this Contract
continues in force.
Article XII - Late Payments
A. 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 XXVI (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. 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. 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 XIII - 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 XIV - 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 XV - Liability of the Reinsurer
A. The liability of the Reinsurer shall follow that of the
Company in every case and be subject in all respects to all
the general and specific stipulations, clauses, waivers and
modifications of the Company's policies and any endorsements
thereon. However, in no event shall this be construed in any
way to provide coverage outside the terms and conditions set
forth in this Contract.
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 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 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 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
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. 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 unearned premium and
outstanding loss and loss adjustment expense reserves
(including incurred but not reported loss 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
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 C(1),
C(2) or C(4), or in the case of C(3), 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 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 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.
F. It is agreed that the jurisdiction of the Arbiters to make or
render any decision or award shall be limited by the limit of
liability expressly hereinbefore set forth, and that the
Arbiters shall have no jurisdiction to make any decision or
render any award exceeding such expressly stated limit of
liability of the Reinsurer, nor do they have the jurisdiction
to authorize any punitive, exemplary or consequential damage
awards between the parties hereto.
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 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 XXV - Agency Agreement
Associated International Insurance 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 XXVI - 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
Schedule A
to the
Entertainment Coded Excess of Loss
Reinsurance Contract
Effective: March 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
Rating Table
Policy Limits Reinsurance Rate
0 to $10,000,000 0%
$10,000,001 to $20,000,000 18.0%
$20,000,001 to $30,000,000 33.0%
$30,000,001 to $40,000,000 40.0%
$40,000,001 and above 44.0%