Exhibit 10.17
CLAIMS ADMINISTRATION
SERVICES AGREEMENT
THIS CLAIMS ADMINISTRATION SERVICES AGREEMENT ("Agreement"), dated as of
the 1st day of October, 1997 ("Effective Date"), is made by and between The
Millers Mutual Fire Insurance Company, a Texas mutual insurance company
("Millers Mutual"), The Millers Casualty Insurance Company, a Texas insurance
company ("Millers Casualty"), and INSpire Insurance Solutions, Inc., a Texas
corporation ("INSpire").
Whereas, Millers Mutual and Millers Casualty shall be collectively referred
to as the "Customer"; and
Whereas, Customer and INSpire are parties to an Amended Service Contract,
effective July 1, 1997, as amended (the "Prior Service Contract), pursuant to
which INSpire provides certain claims administration services to Customer; and
Whereas, Customer is desirous of INSpire providing claims administration
services for which Customer is otherwise responsible in providing insurance to
its customers, as set forth in this Agreement; and
Whereas, INSpire wishes to provide such Services for Customer; and
Whereas, Customer and INSpire desire to amend and restate in its entirety
the Prior Service Contract; and
Whereas, the parties hereto wish to reduce their Agreement to writing;
Now, therefore, for and in consideration of the premises set forth below
and other good and valuable consideration, the receipt and sufficiency of which
is expressly acknowledged, Customer and INSpire hereby agree as follows:
ARTICLE 1. SERVICES
The "Services" to be performed by INSpire are set forth in Exhibit I to
this Agreement. All claims adjusting functions shall be performed by properly
trained and licensed insurance adjusters.
ARTICLE 2. TERM
2.1 The term of this Agreement shall commence on the Effective Date and
shall have a "Minimum Term" of 60 full calendar months unless
terminated earlier pursuant to the provisions of this Agreement. The
Agreement shall automatically be renewed and extended after the
conclusion of the Minimum Term for an additional renewal term or terms
of 36 months unless terminated pursuant to the provisions of Article
8.
ARTICLE 3. DUTIES OF INSPIRE
3.1 INSpire shall dedicate in its discretion the appropriate human,
equipment, and computer resources to provide and, during the term of
this Agreement will provide, Customer with the Services enumerated in
Exhibit I of this Agreement for the Lines of Business and States
specified in Exhibit I.
3.2 INSpire shall investigate, evaluate, and handle each claim reported
within the established authority for claims as set forth in Exhibit I
attached hereto and made part of the Agreement.
3.3 INSpire will designate an employee to act as liaison with Customer to
facilitate the provision of the Services.
3.4 INSpire shall maintain the confidentiality of data or information
which is the property of Customer and which is directly accessible to
INSpire in the implementation and performance of the Services.
3.5 INSpire shall maintain complete, accurate and orderly claims books,
files, records and accounts of all transactions in accordance with
generally accepted insurance and accounting practices.
3.6 INSpire shall maintain permanent copies of all claims and
correspondence related to the claims. INSpire shall not destroy these
permanent copies without the written permission of the Customer for a
period of at least five (5) years from the date of the last file
activity, or the period specified by the applicable state statute
regulating preservation of records, whichever is longer. At the end of
such five year period, upon INSpire's written request for
instructions, the Customer shall authorize INSpire to either (a)
destroy the closed files or (b) return such files to Customer at
Customer's expense. Notwithstanding the foregoing, any claim file
involving a minor shall be separately identified and returned to
Customer at the end of such five year period. Claim files shall be the
property of the Customer. Upon an order of liquidation of Customer,
the files shall become the sole property of Customer or Customer's
estate. INSpire may, at its discretion, use magnetic, optical, and
other types of technology to store such data.
3.7 All claims still open upon termination or cancellation of this
Agreement will require one of the following to occur:
(a) All open claims will be handled on the pre-agreed monthly fee per
claim; or
(b) All open claims will be handled on a time and expense basis at
then current prevailing rates; or
(c) All open claims will be returned to Customer, with any holdover
reverting to a time and expense basis at then current prevailing
rates.
INSpire and Customer will mutually agree on this determination.
3.8 INSpire acknowledges and agrees that Customer, being at risk and
having ultimate responsibility for the claims to be administered by
INSpire, shall at all times have ultimate discretion with respect to
all matters pertaining to the claims.
3.9 INSpire will not assume the responsibility for direct notification to
any excess or quota share insurance carrier of claims; however,
reports will be provided as requested by Customer.
3.10 INSpire and Customer acknowledge that this Agreement does not apply to
policies written by Customer through any managing general agencies.
ARTICLE 4. DUTIES OF CUSTOMER
4.1 Customer agrees that all claims occurring during the term of this
Agreement will be reported to INSpire, unless otherwise notified by
the Customer and approved by INSpire. Customer will provide all
information relevant to particular claims to INSpire in order for
INSpire to fulfill its duties and obligations as set out in Exhibit I.
4.2 Customer has ultimate authority and responsibility for authorizing
claims payment and settlement.
ARTICLE 5. AUDIT PROVISIONS
INSpire shall maintain records of amounts billable to and payments
made on behalf of Customer. In addition, INSpire shall maintain records of
the data utilized to perform the Services defined in Exhibit I of the
Agreement until five years following the date of last file activity, or
the period specified by the applicable state statute, whichever is the
later unless such records are earlier returned to Customer. INSpire agrees
to provide reasonable supporting documentation concerning any disputed
invoice amount to Customer within 15 days after Customer provides written
notification of the dispute to INSpire. Customer and an auditor selected
by Customer shall have access to all such records for the purposes of
audit and verification during normal business hours during the full term
of this Agreement and during the respective periods in which INSpire is
required to maintain such records.
ARTICLE 6. PRICE AND PAYMENT
6.1 Customer agrees to pay Service Fees and Rates as specified in Exhibit
II hereto.
6.2 The Services Fees and Rates in Exhibit II hereto may be increased
effective as of each anniversary of the Effective Date during the
existence of this Agreement by the percentage change in the United
States Consumer Price Index for all Urban Users (CPI-U) published by
the United States Bureau of Labor Statistics, for the immediately
preceding calendar year. In the event a vendor supplying any service
or product to INSpire required for INSpire to provide the Services to
Customer increases its rates charged to INSpire, INSpire may increase
the contracted rates set forth herein to include such increased costs.
6.3 The Service Fees and Rates may increase by mutual agreement, if
changes in the Services mutually agreed to in writing substantially
alter the servicing personnel, equipment, or result in the servicing
being done on a different system.
6.4 When Customer requests INSpire personnel to travel to any location for
the purpose of performing specific claims work under this Agreement,
the Customer will, in addition to the charges specified for Services,
pay INSpire for all reasonable travel, lodging and out-of-pocket
expenses.
6.5 Customer agrees to pay all tariffs and taxes that are now or may
become applicable to the Services rendered hereunder, as measured by
payments made by Customer to INSpire under this Agreement, or as
required to be collected by INSpire or paid by INSpire to tax
authorities based on this Agreement. This provision includes but is
not limited to sales, use, or any other form of tax based on Services
performed, but does not include taxes based upon the net income of
INSpire.
6.6 Service Fees and Rates for Services will be due and payable 15 days
after the close of the month in which services are performed.
6.7 Customer agrees that INSpire will have the right to renegotiate the
Service Fees in the event of statutory, regulatory, or judicial
changes that require additional activities not contemplated at the
inception of this Agreement.
ARTICLE 7. LICENSE, TRADE SECRET AND PROPRIETARY RIGHTS
7.1 Although INSpire from time to time may use its own proprietary
computer software products in the performance of the Services
enumerated in Exhibit I of this Agreement, this Agreement does not
grant a license or any other interest to Customer for the use of any
software products.
7.2 This Agreement grants to Customer no right to possess or reproduce, or
any other interest in, the computer software programs performing all
or any part of the Services or their specifications in any tangible or
intangible medium. Customer may not mortgage, hypothecate, sell,
assign, pledge, lease, transfer, license or sublicense the computer
software programs performing all or any part of the Services, nor
allow any person, firm, or corporation to transmit, copy or reproduce
the computer software programs performing all or any part of the
Services or their specifications in whole or in part. In the event
Customer shall come into possession of the computer software programs
performing all or any part of the Services, Customer shall immediately
notify INSpire and return the computer software programs performing
the Services and all copies of any kind thereof to INSpire upon
INSpire's request.
7.3 Customer promises and agrees not to disclose or otherwise make
computer software programs performing all or any part of the Services
available to any person other than employees of Customer required to
have such knowledge for normal use of them. Customer agrees to
obligate each such employee to a level of care sufficient to protect
the computer software programs performing all or any part of the
Services from unauthorized disclosure.
7.4 INSpire warrants and represents that it owns, or is licensed with
respect to, all software it will employ in the performance of this
Agreement. In the event this Agreement is terminated, INSpire will
grant a license, upon terms and conditions set forth in a licensing
agreement, to Customer to use the software which INSpire employs in
the performance of this Agreement to the extent INSpire is not
otherwise prohibited from doing so by contract or by operation of law.
INSpire shall use its best efforts to deliver the software, as well as
all necessary manuals, to the Customer immediately upon delivery of
data to the Customer.
7.5 THE OBLIGATION OF CUSTOMER UNDER THIS ARTICLE SHALL CONTINUE AFTER
THIS AGREEMENT IS TERMINATED.
ARTICLE 8. TERMINATION
8.1 Either party may terminate this Agreement without cause at the
expiration of the Minimum Term set forth in Section 2.1, provided the
other party receives at least six (6) months prior written notice of
termination. Termination without cause during any renewal term would
also require six months notice.
8.2 Either party may terminate this Agreement upon breach by the other
party of any one or more of the terms and conditions of this Agreement
or the related Exhibits, provided that the party in breach is notified
in writing by the other party of the breach and the breach is not
cured or a satisfactory resolution agreed upon in writing within
thirty (30) days of such written notification, or if such breach is
non-monetary and is of such a nature that it cannot reasonably be
cured within such time commenced to cure same and does not diligently
continue to and actually cure same within a reasonable period
thereafter. The obligation of INSpire referred to in this Section 8.2
shall include, and shall be limited to:
(a) the obligation to observe and comply with applicable laws,
regulations, rules and rates affecting the transaction of
business hereunder; and
(b) the obligation to provide Services set forth in Exhibit I.
8.3 In the event either party makes a general assignment for the benefit
of creditors or files a voluntary petition in bankruptcy or petitions
for reorganization or arrangement under the bankruptcy laws, or if a
petition in bankruptcy is filed against either party and remains
undismissed for a period of thirty (30) days, or if a receiver or
trustee is appointed for all or any part of the property and assets of
either party, the other party may terminate the Agreement immediately.
8.4 Rights Upon Termination. Upon expiration or termination of this
Agreement:
(a) The obligations of the Customer and INSpire to the date of
termination shall be discharged promptly.
(b) INSpire shall promptly return to the Customer any forms or other
supplies imprinted with the Customer's name, regardless of who
incurred the cost for same.
ARTICLE 9. LIMITATION OF LIABILITY AND REMEDIES
9.1 If data is processed in error due to an error or defect in the
Services provided by INSpire, then upon INSpire receiving notice of
such error or defect, INSpire shall reprocess such data without charge
to Customer.
9.2 INSpire shall indemnify, protect, defend and hold Customer, its
officers, directors, shareholders and employees harmless from and
against any and all losses, damages, liabilities, fines, settlements,
penalties and judgments (including reasonable costs and attorney's
fees) (herein "Damages") arising out of or resulting from the
negligent, willful or intentional acts of INSpire performed in
connection with this Agreement or arising from a breach of this
Agreement by INSpire. Customer shall indemnify, protect, defend and
hold INSpire, its officers, directors, shareholders and employees
harmless from and against any and all Damages arising out of or
resulting from the negligent, willful or intentional acts of Customer
performed in connection with this Agreement or arising from a breach
of this Agreement by Customer. This indemnity shall survive the
earlier expiration or termination of this Agreement.
9.3 In providing services hereunder, INSpire shall have a duty to act, and
cause its affiliates and designees to act, in a reasonably prudent
manner. Neither INSpire, nor any officer, director, employee or agent
of INSpire shall be liable to Customer for any error of judgment or
for any loss incurred by Customer in connection with the matters to
which this Agreement relates, except a loss resulting from the gross
negligence or willful misconduct on the part of INSpire.
9.4 Customer's remedies and INSpire's liability for breaches of this
Agreement and errors or defects in the delivery of Services are
limited to the remedies and liabilities set forth in Sections 8.2,
9.1, 9.2 and 9.3 of this Agreement. INSpire's remedies and Customer's
liability for breaches of this Agreement are limited to the remedies
and liabilities set forth in Sections 8.2, 9.2 and 9.3 of this
Agreement.
ARTICLE 10. GENERAL
10.1 The parties shall not be liable or deemed to be in default for any
delay or failure in performance under this Agreement or interruption
of Service resulting, directly or indirectly, from acts of God, civil
or military authority, labor disputes, shortages of suitable parts,
materials, labor or transportation or any similar cause beyond the
reasonable control of the parties.
10.2 All notices which are required to be given or submitted pursuant to
this Agreement shall be in writing and shall be either delivered in
person or sent by certified mail, return receipt requested, to the
address set forth herein or to such other address as the parties may
from time to time designate in writing for such purposes. Notices
shall be deemed to have been given at the time when personally
delivered or, if mailed in a certified post-paid envelope, upon the
fifth day after the date such notice shall be postmarked. All notices
to INSpire shall be addressed to the attention of the Chief Financial
Officer.
10.3 The parties covenant and promise not to disclose the terms and
conditions of this Agreement to any third party unless expressly
agreed to by the parties. Notwithstanding the foregoing, the parties
agree that disclosure may be made to any auditors, regulators,
carriers, or reinsurers on a need to know basis only without prior
consent.
10.4 This Agreement and any Exhibits made a part hereof: (a) constitute the
entire Agreement between the parties and supersede and merge any and
all prior discussions, representations, negotiations, correspondence,
writings and other Agreements and together state the entire
understanding and agreement between INSpire and Customer with respect
to the Services described; (b) may be amended or modified only in a
written instrument agreed to and signed by INSpire and Customer; and
(c) shall be deemed to have been entered into and executed in the
State of Texas and shall be construed, performed and enforced in all
respects in accordance with the laws of that state. For purposes of
venue, this Agreement is performable in Tarrant County, Texas.
10.5 Neither party hereto shall be deemed to have waived any rights or
remedies accruing to it hereunder unless such waiver is in writing and
signed by such party. No delay or omission by either party hereto in
exercising any right shall operate as a waiver of said right on any
future occasion. All rights and remedies hereunder shall be cumulative
and may be exercised singularly or concurrently.
10.6 The descriptive headings of this Agreement are intended for reference
only and shall not affect the construction or interpretation of this
Agreement.
10.7 Wherever the singular of any term is used herein it shall be deemed to
include the plural wherever the plural thereof may be applicable.
10.8 The parties shall not assign this Agreement or any of its rights
hereunder without the prior written consent of the other party which
consent shall not be unreasonably withheld unless the proposed
assignment is to a competitor of the other party.
10.9 If any provision of this Agreement or any Exhibit hereto or the
application thereof to any party or circumstances shall, to any
extent, now or hereafter be or become invalid or unenforceable, the
remainder of this Agreement shall not be affected thereby and every
other provision of this Agreement shall be valid and enforceable to
the fullest extent permitted by law.
10.10 In the event of any action between Customer and INSpire seeking
enforcement of any of the terms and conditions of this Agreement, the
prevailing party to such action shall be awarded its reasonable costs
and expenses, including its court costs and reasonable attorney's
fees.
10.11 The parties hereto are independent contractors of one another, and
they should not in any instance be construed as partners or joint
venturers.
INSPIRE AND CUSTOMER CERTIFY BY THEIR UNDERSIGNED AUTHORIZED AGENTS THAT
THEY HAVE READ THIS AGREEMENT, INCLUDING ALL EXHIBITS HERETO, AND AGREE TO BE
BOUND BY ITS TERMS AND CONDITIONS.
EXECUTED to be effective the 1st day of October, 1997.
INSpire Insurance Solutions, Inc. The Millers Mutual Fire Insurance
Company
By: /S/ JEFFREY W. ROBINSON By: /S/ JOY J. KELLER
------------------------------- -----------------------------
Name: Jeffrey W. Robinson Name: Joy J. Keller
Title: Executive Vice President Title: Executive Vice President
and CFO
The Millers Casualty Insurance
Company
By: /S/ JOY J. KELLER
-----------------------------
Name: Joy J. Keller
Title: Executive Vice President
and CFO
EXHIBIT I
to the
CLAIMS ADMINISTRATION SERVICES AGREEMENT
by and between
INSPIRE INSURANCE SOLUTIONS, INC.
and
MILLERS INSURANCE GROUP
A. SERVICES
During the term of this Agreement, INSpire shall provide the Claims
Administration Services defined below for the Lines of Business (Section B of
this Exhibit I) for the States specified (Section C of this Exhibit I) written
by or through Customer. INSpire will, in accordance with guidance and direction
provided by the Customer, provide all Claims Administration Services and general
management of these Services described herein for subject claims as follows:
1. Customer grants INSpire the authority to investigate, evaluate, and handle
each claim reported according to applicable state law, the terms and
conditions of the policy and any written standards provided by Customer.
INSpire shall not have any authority to alter or discharge any policy or
waive any policy provision or condition.
2. INSpire will set up a claims operation center that will function as a
control unit.
3. Coverage will be verified on all cases.
4. INSpire will administer the appraisal/assessment process and will use in
this endeavor a combination of staff, independent appraisers and direct
repair facilities.
5. INSpire will perform all reasonable and necessary administrative and
clerical work in connection with claim or loss reports.
6. INSpire will establish and maintain a claim file for each reported claim
or loss. The claim file will have a daily activity log, which shall be
available for review at any and all reasonable times by the Customer
subject to the provisions of Article V of the Agreement.
7. INSpire will record and report each claim promptly to the Customer with a
recommended reserve. INSpire shall consult with Customer with respect to
any of the following:
(a) Any loss or claim resulting in legal action being instituted against
INSpire or the Customer;
(b) Any loss or claim causing a complaint to be filed with any regulatory
authority;
(c) Any inquiry from any regulatory authority, including but not limited
to any insurance department, with respect to any claim or claims, even
if no complaint causes such inquiry;
(d) Any claim in which INSpire deems appropriate to rescind policy
coverage for material misrepresentation;
(e) Any claim involving an allegation of extra contractual obligations or
bad faith claim handling;
(f) Any claim involving a fatality, amputation, spinal cord or brain
damage, loss of eyesight, extensive burns, poisoning, or multiple
fractures;
(g) Any claim that the Customer desires to be kept advised of during the
life of the claim; or
(h) Any claim where there has been a demand for policy limits and INSpire
does not evaluate the value of the claim to include settlement at that
amount.
8. INSpire will provide monthly and year-to-date reports on all claims
activity including new claims reported, claims pending, claims closed and
reserve changes. The reports will include:
(a) Information and statistical data: (i) required by Insurance Services
Office ("ISO"), and (ii) necessary for Customer to prepare any reports
required by the National Association of Insurance Commissioners, or
(iii) other reports reasonably requested by Customer;
(b) Loss Runs with paid claims and outstanding reserves remaining at the
end of each monthly report period, categorized as indemnity, medical
payment, or loss adjustment expense, plus any other information
required by the Annual Statement instructions or state regulatory
agencies;
(c) Check Registers;
(d) Reports needed by Customer for the filing of reinsurance claims or
quarterly reinsurance updates.
9. INSpire will perform a periodic review at mutually agreed upon intervals
of outstanding claim reserves and recommend changes to outstanding claim
reserves.
10. INSpire will prepare checks and vouchers, compromises, releases,
agreements and any other documents reasonably necessary to finalize and
close claims. INSpire will issue payments of claims and allocate loss
adjustment expenses only within the guidelines as authorized by Customer.
For purposes of settling claims and paying claim-related expenses,
Customer has agreed to establish, maintain and fund a separate bank
account from which INSpire may draw against as hereinafter set forth (the
"Claim Account").
Customer agrees to deposit additional funds into the Claims Account on a
weekly basis if necessary to maintain it at a level sufficient to allow
INSpire to carry out its obligations under this Agreement. INSpire shall
regularly provide information and estimates to Customer to enable Customer
to maintain the Claims Account at an appropriate level. Customer shall
provide to INSpire such information as is necessary for INSpire to draw
checks on the Claims Account.
INSpire hereby guarantees that any check it prepares will be signed and
issued only in accordance with the procedures adopted by Customer. Any
check prepared by INSpire on the Claims Account must be signed by two
authorized individuals.
INSpire shall promptly deposit any monies collected through salvage and
subrogation to the Claim Account, and maintain a register of all such
collections and deposits (the "Salvage and Subrogation Register"). The
Salvage and Subrogation Register shall include, but shall not be limited
to, the following information: date of deposit, date of receipt of funds,
the claim number, the payer, and the amount and purpose of such payment.
The Claim Register shall include, but shall not be limited to, the
following information: claim number, date of check, payee, amount and
check number.
INSpire shall reconcile the Claim Register and the Salvage and Subrogation
Register to the Claim Account on a monthly basis.
11. Service standards and claims documentation will be in accordance with
standards set by Customer and agreed to by INSpire. INSpire will be in
compliance with all state regulations dealing with the adjusting and
handling of claims. INSpire will periodically review the development of
the claims handling procedure with the Customer to identify problems and
recommend corrective action.
12. INSpire will diligently pursue and prosecute Customer's salvage and
subrogation rights relating to any losses. INSpire will use reasonable
efforts to collect and deposit funds arising from the enforcement of such
rights into the Claim Account. INSpire will report monthly on
salvage/subrogation receipts.
13. INSpire will provide Special Investigative Services in accordance with
guidelines agreed to by Customer on a time and expense basis.
14. INSpire will provide Customer claim information to prepare reports (i)
required by the Internal Revenue Service, and (ii) other reports
reasonably requested by Customer.
B. AUTHORIZED LINES OF BUSINESS:
Private Passenger Automobile, Homeowners, Commercial Casualty Multi-Peril,
Commercial Property, Farm-owners, Umbrella.
C. AUTHORIZED STATES:
Alabama Louisiana Oklahoma
Arizona Michigan Oregon
Arkansas Minnesota South Carolina
California Mississippi South Dakota
Colorado Missouri Tennessee
Florida Montana Texas
Idaho Nebraska Utah
Illinois Nevada Washington
Indiana New Mexico Wisconsin
Iowa North Carolina Wyoming
Kansas North Dakota
Kentucky Ohio
D. LOCATION OF PROVISION OF SERVICES:
INSpire shall provide the Services defined above at an INSpire service
center.
EXHIBIT II
SERVICE FEES & RATES
CONSULTANTS $125.00 per hour
PROGRAMMERS $125.00 per hour
CLAIMS ADMINISTRATION SERVICES
Fees will be based on a charge per claim as defined below. A claim is
defined as an open feature as shown below. Monthly maintenance fees are
for claims open greater than 31 days at each month end.
Feature New Claim Fee Monthly Fee
------- ------------- -----------
Auto BI/UM $450 $450
Auto Non-BI/UM $250 $50
Auto First Party $150 $50
Homeowners $600 $60
Commercial Property $700 $70
Commercial Casualty $1,000 $100
Subrogation 25% of recoveries
Salvage 15% of recoveries
SIU Services $60.00/hr. plus
outside fees
Homeowner, Commercial Property and Commercial Casualty claims with an
incurred loss greater than $100,000 will be billed at "time and expense",
rather than the rates shown on the above schedule. "Time and expense" is
defined as $60.00 per hour plus any outside adjusting fees.
EXPENSES EXCLUDED.
Legal, Reconstruction Experts, Agronomist and Engineers.
SPECIAL FEES
Claim system modifications requested and approved by Customer will be
charged to the Customer on a time and materials basis utilizing the
appropriate mix of service personnel required to perform the modification.
Additional reports or modifications to agreed upon reports will also be
charged to Customer on a time and materials basis utilizing the
appropriate mix of service personnel required to perform the modifications
or produce new reports. Hourly rates for such personnel are listed above.