EXHIBIT 10.35
WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY $5,000,000
EXCESS $5,000,000 PER OCCURRENCE EXCESS OF LOSS REINSURANCE
CONTRACT
issued to
SEABRIGHT INSURANCE COMPANY
CHICAGO, ILLINOIS
WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY $5,000,000 EXCESS
$5,000,000 PER OCCURRENCE EXCESS OF LOSS REINSURANCE CONTRACT
TABLE OF CONTENTS
PAGE
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ARTICLE
Preamble....................................................... 2
1 Business Reinsured............................................. 2
2 Retention and Limit............................................ 2
3 Term........................................................... 3
4 Special Termination............................................ 3
5 Territory...................................................... 5
6 Exclusions..................................................... 5
7 Premium........................................................ 7
8 No Paid Loss Recoverable Bonus................................. 8
9 Reinstatements................................................. 8
10 Reports........................................................ 9
11 Definitions.................................................... 9
12 Net Retained Lines............................................. 12
13 Extra Contractual Obligations.................................. 12
14 Loss in Excess of Policy Limits................................ 13
15 Legality....................................................... 13
16 Loss Funding................................................... 14
17 California SB 2093 Compliance.................................. 15
18 Delays, Errors or Omissions.................................... 16
19 Entire Agreement............................................... 16
20 Access to Records.............................................. 16
21 Insolvency..................................................... 17
22 Arbitration.................................................... 17
23 Taxes.......................................................... 18
24 Currency....................................................... 19
25 Service of Suit................................................ 19
26 Offset......................................................... 20
27 Loss Notices and Settlements................................... 20
28 Federal Terrorism Excess Recovery.............................. 21
29 Commutation.................................................... 22
30 Mode of Execution.............................................. 23
31 Intermediary................................................... 23
Company Signing Block ......................................... 24
ATTACHMENTS
Nuclear Incident Exclusion Clause - Liability -
Reinsurance - U.S.A............................................ 25
Effective: October 1, 2005 DOC: October 7, 2005
S32200-282
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WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY $5,000,000 EXCESS
$5,000,000 PER OCCURRENCE EXCESS OF LOSS REINSURANCE CONTRACT
This Contract is made and entered into by and between SEABRIGHT INSURANCE
COMPANY, Chicago, Illinois (hereinafter called the "Company"), and the
Subscribing Reinsurer specifically identified in the Interests and Liabilities
Agreement attaching to and forming a part of this Contract (hereinafter called
the "Reinsurer").
ARTICLE 1
BUSINESS REINSURED
This Contract is to indemnify the Company in respect of the net excess liability
as herein provided and specified that may accrue to the Company as a result of
any loss or losses that may occur during the term of this Contract under any
Policies classified by the Company as Workers' Compensation and Employers'
Liability Business (including U.S. Longshore and Harbor Workers' Compensation
Act, Jones Act, Federal Employers' Liability Act, and other Federal Acts) and
Maritime Employers' Liability, except when classified by the Company as Ocean
Marine, in force, written or renewed during the term of this Contract, by or on
behalf of the Company, subject to the terms and conditions herein contained.
ARTICLE 2
RETENTION AND LIMIT
The Reinsurer will be liable in respect of each and every Loss Occurrence,
irrespective of the number and kinds of Policies involved, for the Ultimate Net
Loss over and above an initial Ultimate Net Loss of $5,000,000 each and every
Loss Occurrence, subject to a limit of liability to the Reinsurer of $5,000,000
each and every Loss Occurrence.
The Reinsurer's aggregate limit of liability during the term of the Contract
will be $15,000,000.
Terrorism Sublimit: It is understood that the Terrorism Risk Insurance Act of
2002 (hereinafter called "TRIA") exclusion does not apply to the first
$5,000,000 of TRIA reinsurance loss recoverable from one or more Loss
Occurrences (other than losses from biological, chemical, radioactive or nuclear
incidents as defined in the Exclusions Article, which are absolutely excluded).
In the event TRIA is not extended or renewed the aforementioned sublimits and
terms shall apply to other foreign terrorism as defined in Exclusion G.2.
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Recoveries from the Company's underlying Workers' Compensation and Employers'
Liability Excess of Loss Reinsurance Contract layers, if any, will not be
deducted when establishing Ultimate Net Loss for purposes of this Article.
In order for coverage to attach hereunder, all losses must be reported to the
Reinsurer within 84 months after the expiration of this Contract (being before
October 1, 2013).
ARTICLE 3
TERM
This Contract will become effective 12:01 a.m., Local Standard Time, October 1,
2005, and will remain in full force and effect for twelve months, expiring 12:01
a.m., Local Standard Time, October 1, 2006 applying to Loss Occurrences
commencing during the term of this Contract.
Should this Contract expire while a loss subject to hourly limitations covered
hereunder involving natural disasters or occupational disease (including
cumulative trauma) is in progress, the Reinsurer shall be responsible for the
loss in progress in the same manner and to the same extent it would have been
responsible had the Contract expired the day following the conclusion of the
loss in progress.
At expiration, the Company may opt for run-off until the earlier of the
expiration or next renewal of Policies in force at expiration, but in no event
longer than 12 months, plus odd time, not to exceed 18 months in all from the
date of the expiration of this Contract. The premium applicable to the run-off
period shall be at the rate set forth in this Contract multiplied by the Gross
Net Earned Premium Income earned during each calendar quarter of the run-off
period for Policies in force as of the expiration date of this Contract. Such
premium shall be payable no later than 30 days after the end of each calendar
quarter during the run-off period.
In the event this Contract expires on a run-off basis, the Reinsurer's liability
hereunder shall continue if the Company is required by statute or regulation to
continue coverage, until the earliest date on which the Company may cancel the
Policy.
ARTICLE 4
SPECIAL TERMINATION
A. The Company may terminate the Reinsurer's share in this Contract at any
time by giving written notice to the Reinsurer in the event any of the
following circumstances occur:
1. The Reinsurer's policyholders' surplus at the inception of this
Contract has been reduced by more than 25% of the amount of surplus 12
months prior to that date.
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2. The Reinsurer's policyholders' surplus at any time during the term of
this Contract has been reduced by more than 25% of the amount of
surplus at the date of that party's most recent financial statement
filed with regulatory authorities and available to the public as of
the inception of this Contract.
3. The Reinsurer has become merged with, acquired by or controlled by any
other company, corporation, or individual(s) not controlling that
party's operations previously.
4. A state insurance department or other legal authority has ordered the
Reinsurer to cease writing business.
5. The Reinsurer has become insolvent or has been placed into liquidation
or receivership (whether voluntary or involuntary), or proceedings
have been instituted against the Reinsurer for the appointment of a
receiver, liquidator, rehabilitator, conservator, or trustee in
bankruptcy, or other agent known by whatever name, to take possession
of its assets or control of its operations.
6. The Reinsurer's A.M. Best's rating has been assigned or downgraded
below A- and/or its Standard & Poors rating has been assigned or
downgraded below BBB+.
7. The Reinsurer has reinsured its entire liability under this Contract
without the Company's prior written consent.
8. The Reinsurer has voluntarily ceased assuming new and renewal property
and casualty treaty reinsurance business.
B. In the event of such termination, the liability of the Reinsurer shall be
terminated in accordance with the provisions of the Term Article.
C. In the event of such termination, the Company has the option to require the
Reinsurer to immediately provide funding of any liabilities as set forth in
the Loss Funding Article. This paragraph does not apply to any Reinsurer to
the extent that the Reinsurer provides funding under the Loss Funding
Article or maintains a trust fund, approved by the regulatory authorities
having jurisdiction over the Company's credit for reinsurance, for the
payment of claims of the Reinsurer's U.S. ceding insurers.
D. In the event of such termination, the Reinsurer shall receive reinsurance
premium, including any minimum reinsurance premium stated in the Contract,
pro rata based on the period of their participation hereon. Reinstatement
premium, if any, shall be based on the reinsurance premium for the full
term of this Contract that the Reinsurer would have participated on had the
Reinsurer not been terminated.
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ARTICLE 5
TERRITORY
The territorial scope of this Contract will follow that of the Company's
Policies.
ARTICLE 6
EXCLUSIONS
This Contract does not cover:
A. Reinsurance assumed, except where the Policy is originally underwritten by
the Company and assumed by the Company.
B. Business excluded by the Nuclear Incident Exclusion Clause - Liability -
Reinsurance - U.S.A., No. 08-31-.1
C. Financial Guarantee and Insolvency.
D. War, as follows:
As regards interests which at time of loss or damage are on shore, 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.
This War Exclusion shall not, however, apply to interests which at time of
loss or damage are within the territorial limits of the United States of
America (comprising the fifty States of the Union, the District of
Columbia, and including bridges between the U.S.A. and Mexico provided they
are under United States ownership), Canada, St. Pierre and Miquelon,
provided such interests are insured under Policies containing a standard
war or hostilities or warlike operations exclusion clause.
E. Pools, Associations and Syndicates, except losses from Assigned Risk Plans
or similar plans are not excluded.
F. 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
guarantee 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.
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G. Terrorism, as follows:
1. This Contract shall exclude any "Insured Loss" resulting from an "Act
of Terrorism", both terms as defined in Section 102 of the Terrorism
Risk Insurance Act of 2002 ("TRIA"). During the term of this
Agreement, if TRIA is extended, renewed or succeeded without
interruption or adaptation beyond Program Year 3 (as defined in TRIA)
this exclusion shall remain in full force and effect.
2. In any other event, loss or damage resulting from any "Act of
Terrorism" as defined in this paragraph 2., or any threat thereof,
will not be covered hereunder. An "Act of Terrorism" will be defined
as:
a. a violent act or an act that is dangerous to:
i. human life; or
ii. property; or
iii. infrastructure;
b. that has resulted in damage within the United States of America,
or outside of the United States in the case of
i. an air carrier (as defined in section 40102 of title 49,
United States Code); or
ii. a vessel (United States flag vessel or vessel based
principally in the United States, on which United States
income tax is paid and whose insurance coverage is subject
to regulation in the United States); or
iii. the premises of a United States mission;
and
c. has been committed by an individual or individuals acting on
behalf of any foreign person or foreign interest, as part of an
effort to coerce or put in fear the civilian population of the
United States or to influence the policy or affect the conduct of
the Government of the United States of America by coercion;
3. Any acts of terrorism not falling within the definition of "Act of
Terrorism" set forth in TRIA or, if TRIA is not extended, renewed or
succeeded, not falling within the "Act of Terrorism" definition set
forth in paragraph 2., above, shall be covered hereunder provided, in
either case, that such loss or damage occurs in a line of insurance
otherwise covered by this Contract.
4. If TRIA is not extended, renewed or succeeded, any acts of terrorism
are to be declared by either the Director of the Federal Bureau of
Investigation (or the designee
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thereof) and/or the Director of the Department of Homeland Security
(or the designee thereof); however, whether the act of terrorism is
covered under this Contract will be determined by the parties with
reference to the "Act of Terrorism" as defined in paragraph 2.
5. If no determination has been made as required in paragraph 4. and the
Reinsurer asserts that the loss is caused by an "Act of Terrorism" as
defined in paragraph 2.a. through 2.c., whether the act constitutes an
"Act of Terrorism" and is excluded hereunder will be determined by the
parties in accordance with the definition of "Act of Terrorism", set
forth in paragraphs 2.a. through 2.c.
6. This Contract also excludes loss, damage, cost, or expense directly or
indirectly caused by, contributed to by, resulting from, or arising
out of or in connection with any action in controlling, preventing,
suppressing, retaliating against, or responding to any "Act of
Terrorism", set forth in paragraphs 2.a through 2.c. However, this
exclusion shall not apply to loss or liability resulting from
remedial, restorative or clean-up actions which are made subsequent to
the inception of any Act of Terrorism.
7. Notwithstanding any other provision in this Contract, in no event will
this Contract provide coverage for loss, damage, cost or expense
directly or indirectly caused by, contributed to by, resulting from,
or arising out of or in connection with biological, chemical,
radioactive or nuclear explosion, pollution, contamination and/or fire
following thereon.
H. Maritime Employers' Liability when classified by the Company as Ocean
Marine.
ARTICLE 7
PREMIUM
A. The Company will pay the Reinsurer a deposit premium of $1,980,000 for the
term of this Contract, to be paid in the amount of $495,000 on the first
day of each calendar quarter.
B. Within 60 days following the expiration of this Contract the Company will
calculate a premium at a rate of 1.000 % multiplied by the Company's Gross
Net Earned Premium for this Contract. Should the premium so calculated
exceed the deposit premium paid in accordance with Paragraph A. above, the
Company will immediately pay the Reinsurer the difference. Should the
premium so calculated be less than the deposit premium paid in accordance
with Paragraph A. above, the Reinsurer will immediately pay the Company the
difference subject to a minimum premium of $1,584,000.
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ARTICLE 8
NO PAID LOSS RECOVERABLE BONUS
Any time within twenty-four months from the expiration of this Contract and in
the event that the Reinsurer has not made any loss payments hereunder, at the
Company's option the Reinsurer will pay a No Paid Loss Recoverable Bonus (NPLRB)
to the Company calculated as follows:
A. Ceded reinsurance premium for the Contract; less,
B. Reinsurer's expense allowance equal to 30% of ceded reinsurance premium for
the Contract; equals,
C. Net profit for the Contract; times 50%.
The NPLRB will be paid simultaneously with commutation, thus constituting a
complete and final release of the Reinsurer in respect of any and all losses
covered under this Contract.
Should this Contract expire on a run-off basis, wherein the Reinsurer is liable
for losses occurring after the date of expiration, then such run-off period will
be considered as part of the Contract period for purposes of the NPLRB, and the
calculation date will be extended to not later than 36 months following the
expiration date of this Contract.
ARTICLE 9
REINSTATEMENTS
As respects the first limit of coverage, loss payments under this Contract will
reduce the limit of coverage afforded by the amounts paid, but the limit of
coverage will be reinstated from the time of the occurrence of the loss, and for
each amount so reinstated the Company agrees to pay an additional premium
calculated at pro rata of the Reinsurer's premium for the term of this Contract,
being pro rata only as to the fraction of the face value of this Contract (i.e.,
the fraction of $5,000,000) so reinstated.
As respects the second limit of coverage, loss payments under this Contract will
reduce the limit of coverage afforded by the amounts paid, but the limit of
coverage will be reinstated from the time of the occurrence of the loss without
payment of additional premium. Nevertheless, the Reinsurer's liability hereunder
shall never exceed $5,000,000 in respect of any one Loss Occurrence and, subject
to the limit in respect of any one Loss Occurrence, shall be further limited to
$15,000,000 during the term of this Contract by reason of any and all claims
arising hereunder.
If at the time of a loss settlement hereon the reinsurance premium, as
calculated in accordance with the Premium Article, is unknown, the above
calculation of reinstatement premium shall be
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based upon the deposit premium, subject to adjustment when the reinsurance
premium is finally established.
ARTICLE 10
REPORTS
Within 60 days following the expiration of this Contract, the Company will
furnish the Reinsurer with the following information:
A. Gross Net Earned Premium of the Company for the term of this Contract.
B. Any other information which the Reinsurer may require to prepare its Annual
Statement which is reasonably available to the Company.
ARTICLE 11
DEFINITIONS
A. The term "Ultimate Net Loss" as used in this Contract will mean the actual
loss paid by the Company or for which the Company becomes liable to pay,
such loss to include 90% of any Extra Contractual Obligation award (and
expense) as defined in the Extra Contractual Obligations Article, 90% of
any loss in excess of Policy limits award as defined in the Loss In Excess
Of Policy Limits Article, expenses of litigation and interest,
claim-specific declaratory judgment expenses, and all other loss expense of
the Company including, but not limited to, subrogation, salvage, and
recovery expenses (office expenses and salaries of officials and employees
not classified as loss adjusters are not chargeable as expenses for
purposes of this paragraph), but salvages and all recoveries, including
recoveries under all insurances or reinsurances which inure to the benefit
of this Contract (whether recovered or not), will be first deducted from
such loss to arrive at the amount of liability attaching hereunder.
All salvages, recoveries or payments recovered or received subsequent to
loss settlement hereunder will be applied as if recovered or received prior
to the aforesaid settlement, and all necessary adjustments will be made by
the parties hereto.
For purposes of this definition, the phrase "becomes liable to pay" will
mean the existence of a judgment which the Company does not intend to
appeal, or a release has been obtained by the Company, or the Company has
accepted a proof of loss.
The phrase "claim-specific declaratory judgment expense" as used in this
Contract will mean all expenses incurred by the Company in connection with
declaratory judgment actions that are brought to determine the Company's
defense and/or indemnification obligations and that are allocable to
specific Policies and claims subject to this Contract.
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Claim specific declaratory judgment expense will be deemed to have been
fully incurred by the Company on the date of the actual or alleged loss
under the Policy giving rise to the action.
Whenever the Company is required, or elects, to purchase an annuity, or to
negotiate a structured settlement, either in satisfaction of a judgment, or
in an out-of-court settlement, or otherwise, the sum of:
1. the cost of the annuity or the structured settlement, as the case may
be; and,
2. the amount of any expense or interest recoverable from the Reinsurer,
in accordance with the first paragraph of this definition,
will, subject to the other provisions of the Loss Occurrence definition, be
deemed the Company's Ultimate Net Loss; however, the cost of any annuity
may be included only if the issuer of the annuity has, at the time of the
purchase of such annuity, a rating of B+ or better assigned by A. M. Best
Co. Inc. or has been approved by the Reinsurer herein.
The terms "annuity" or "structured settlement" will be understood to mean
any insurance policy, lump sum payment, agreement or device of whatever
nature resulting in the payment of a lump sum by the Company in settlement
of all future liabilities which may attach to it as a result of a Loss
Occurrence.
In the event the Company purchases an annuity which inures in whole or in
part to the benefit of the Reinsurer, it is understood that the liability
of the Reinsurer is not released thereby. In the event the Company is
required to provide benefits not provided by the annuity, for whatever
reason, the Reinsurer will pay its proportional share of any loss.
Errors and Omissions Insurance which may now or in the future be carried by
the Company will inure to the benefit of this Contract and any recoveries
therefrom will first be deducted in arriving at the Ultimate Net Loss
hereunder.
Nothing in this clause will be construed to mean that losses are not
recoverable hereunder until the Company's Ultimate Net Loss has been
ascertained.
B. The term "Loss Occurrence" as used in this Contract will mean any one
disaster or casualty or accident or loss or series of disasters or
casualties or accidents or losses arising out of or caused by one event,
except that:
1. a. With respect to an occupational disease or other disease or
cumulative trauma suffered by an employee, and for which an
employer is liable, such occupational disease or other disease or
cumulative trauma will be deemed a separate Loss Occurrence. The
date of loss will be the date when compensable disability begins
and at no other date.
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b. If the Company shall sustain more than one loss arising from an
occupational or other disease or cumulative trauma from one
specific kind or class, suffered by more than one employee of the
same employer, the Company will aggregate into the same Loss
Occurrence all of the occupational or other disease or cumulative
trauma losses on an each employer, claims made basis (as respects
claims made to the Company within this Contract period). The date
of loss for each Loss Occurrence will be the date the first claim
is made to the Company.
Additional employee claims attributable to the same Loss
Occurrence will be included only if reported to the Reinsurer on
or before 36 months following the date of loss. However, in the
event a claim is presented in accordance with this section, the
Reinsurer will not be liable for any additional employee claims
in subsequent Contract periods for the same disease/employer.
Occupational or other disease or cumulative trauma coverage is
afforded hereunder only to claims made under the Company's first
Policy written for an insured or to Policies written 36 months
prior to the inception of this Contract, whichever is less.
c. The terms "occupational or other disease" and "cumulative trauma"
as used in this Contract will be as defined by applicable state
statutes, regulations or Federal Law.
d. The term "one specific kind or class" as used in the Contract
will be defined as each chemical, physical or biological factor
or condition actively causing a disease or injury.
2. Multiple "Acts of Terrorism" not otherwise excluded hereunder, which
occur within a 96-hour period and which have been determined by the
Director of the Federal Bureau of Investigation (or the designee
thereof) and/or the Director of the Department of Homeland Security
(or the designee thereof) or other federal agency to have been carried
out in concert or to have a related purpose or common leadership,
shall be considered to be one Loss Occurrence for the purposes of this
Contract. In the absence of such determination by the Director of the
Federal Bureau of Investigation (or the designee thereof) and/or the
Director of the Department of Homeland Security (or the designee
thereof) or other federal agency, the Company shall have the option of
aggregating all such Acts of Terrorism which occur within a 96 hour
period as one Loss Occurrence, regardless of their location. The
beginning of the 96 hour period shall be determined by the Company.
However, should the Director of the Federal Bureau of Investigation
(or the designee thereof) and/or the Director of the Department of
Homeland Security (or the designee thereof) or other federal agency
determine that such Acts of Terrorism have not been carried out in
concert or do not have a related purpose or common leadership, then
such Acts of Terrorism shall be considered separate Loss Occurrences
for the purpose of this Contract.
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C. The term "Gross Net Earned Premium" as used in this Contract will mean the
Gross Earned Premium of the Company's Policies reinsured hereunder, after
adjustments for applicable rating bureau experience debits or credits,
schedule or other underwriting credits or debits, Compensating Balance Plan
credits, and premium discount; however, prior to dividends, deductible
credits, self-insured retention credits for excess Policies over
self-insured retentions, and any premium adjustments for loss sensitive
Policies, less returned premium for cancellation and reductions, and less
premium for reinsurance that inures to the benefit of this Contract.
D. The term "Policy" as used in this Contract will mean any binder, policy, or
contract of insurance or reinsurance issued, accepted or held covered
provisionally or otherwise, by or on behalf of the Company.
ARTICLE 12
NET RETAINED LINES
This Contract applies only to that portion of any insurances or reinsurances
covered by this Contract which the Company retains net for its own account, and
in calculating the amount of any loss hereunder and also in computing the amount
in excess of which this Contract attaches, only loss or losses in respect of
that portion of any insurances or reinsurances which the Company retains net for
its own account will be included, it being understood and agreed that the amount
of the Reinsurer's liability hereunder in respect of any loss or losses will not
be increased by reason of the inability of the Company to collect from any other
reinsurers, whether specific or general, any amounts which may have become due
from them whether such inability arises from the insolvency of such other
reinsurers or otherwise. It is also understood that the Company may carry Quota
Share reinsurance and underlying Excess of Loss reinsurance on its net retained
liability, recoveries from which will be disregarded for purposes of this
Contract.
The Company is granted permission to purchase facultative reinsurance for an
amount in excess of its net retained liability, recoveries from which will inure
to the benefit of the Reinsurer hereon.
ARTICLE 13
EXTRA CONTRACTUAL OBLIGATIONS
This Contract will protect the Company, subject to the Reinsurer's limit of
liability appearing in the Retention and Limit Article of this Contract, where
the loss includes any Extra Contractual Obligations as provided for in the
definition of Ultimate Net Loss. "Extra Contractual Obligations" are defined as
those liabilities not covered under any other provision of this Contract and
which arise from handling of any claim on business covered hereunder, such
liabilities arising because of, but not limited to, the following: failure by
the Company to settle
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within the Policy limit, or by reason of alleged or actual negligence, fraud or
bad faith in rejecting an offer of settlement or in the preparation of the
defense or in the trial of any action against its insured or in the preparation
or prosecution of an appeal consequent upon such action.
The date on which any Extra Contractual Obligation is incurred by the Company
will be deemed, in all circumstances, to be the date of the original Loss
Occurrence.
However, this Article will not apply where the loss has been incurred due to the
fraud of a member of the Board of Directors or a corporate officer 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.
ARTICLE 14
LOSS IN EXCESS OF POLICY LIMITS
In the event the Ultimate Net Loss includes an amount in excess of the Company's
Policy limit, the amount of such loss, as provided for in the definition of
Ultimate Net Loss, in excess of the Company's Policy limit will be added to the
amount of the Company's Policy limit, and the sum thereof will be considered as
one Loss Occurrence, subject to the Reinsurer's limit of liability for one Loss
Occurrence appearing in the Retention and Limit Article of this Contract.
Coverage under this paragraph extends only to loss that would have been covered
had the limit of liability of the insured's Policy been adequate.
"Loss in Excess of Policy Limits" is defined as loss in excess of the Company's
original Policy, such loss in excess of the original Policy having been incurred
because of, but not limited to, failure by it to settle within the Policy limit
or by reason of alleged or actual negligence, fraud or bad faith in rejecting an
offer of settlement or in the preparation of the defense or in the trial of any
action against its insured or reinsured or in the preparation or prosecution of
an appeal consequent upon such action.
However, coverage under this Contract for Loss in Excess of Policy Limits will
not apply where such loss in excess of the original Policy limits has been
incurred due to fraud by a member of the Board of Directors or of a corporate
officer of the Company acting individually or collectively or in collusion with
any other organization or party involved in the presentation, defense or
settlement of any claim covered under this Contract.
ARTICLE 15
LEGALITY
Should the law of a political entity having jurisdiction over a party to this
Contract be in conflict with a portion or portions of this Contract such portion
or portions will be amended to the extent
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necessary to conform with the law, and the balance of this Contract will remain
unaltered and binding between the parties.
ARTICLE 16
LOSS FUNDING
This Article is only applicable to those Reinsurers who cannot qualify for
credit by the State having jurisdiction over the Company's loss reserves.
As regards Policies issued by the Company coming within the scope of this
Contract, the Company agrees that when it shall file with the insurance
department or set up on its books reserves for losses covered hereunder on
Policies subject to this Contract that it shall be required to set up by law, it
will forward to the Reinsurer a statement showing the proportion of such loss
reserves which is applicable to them.
The Reinsurer hereby agrees that it will apply for and secure delivery to the
Company a clean, irrevocable and unconditional Letter of Credit issued by a bank
chosen by the Reinsurer and acceptable to the appropriate insurance authorities,
in an amount equal to the Reinsurer's proportion of the loss reserves in respect
of known outstanding losses that have been reported to the Reinsurer, allocated
loss expenses relating thereto and Incurred But Not Reported loss and loss
expense as shown in the statement prepared by the Company.
The Letter of Credit shall be "Evergreen" and shall be issued for a period of
not less than one year, and shall be automatically extended for one year from
its date of expiration or any future expiration date unless thirty (30) days
prior to any expiration date, the bank shall notify the Company by certified or
registered mail that it elects not to consider the Letter of Credit extended for
any additional period.
The Company, or its successors in interest, undertakes to use and apply any
amounts which it may draw upon such Credit pursuant to the terms of the Contract
under which the Letter of Credit is held, and for the following purposes only:
A. To pay the Reinsurer's share or to reimburse the Company for the
Reinsurer's share of any liability for loss reinsured by this Contract, the
payment of which has been agreed by the Reinsurer and which has not
otherwise been paid.
B. To make refund of any sum that is in excess of the actual amount required
to pay the Reinsurer's share of any liability reinsured by this Contract.
C. In the event of expiration of the Letter of Credit as provided for above,
to establish deposit of the Reinsurer's share of known and reported
outstanding losses and allocated expenses relating thereto, and Incurred
But Not Reported loss and loss expense, under this Contract. Such cash
deposit shall be held in an interest bearing account separate from the
Company's
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other assets, and interest thereon shall accrue to the benefit of the
Reinsurer. It is understood and agreed that this procedure will be
implemented only in exceptional circumstances and that, if it is
implemented, the Company will ensure that a rate of interest is obtained
for the Reinsurer on such a deposit account that is at least equal to the
rate which would be paid by Citibank N.A. in New York, and further that the
Company will account to the Reinsurer on an annual basis for all interest
accruing on the cash deposit account for the benefit of the Reinsurer.
The bank chosen for the issuance of the Letter of Credit shall have no
responsibility whatsoever in connection with the propriety of withdrawals made
by the Company or the disposition of funds withdrawn, except to ensure that
withdrawals are made only upon the order of properly authorized representatives
of the Company.
At annual intervals, or more frequently as agreed but never more frequently than
semiannually, the Company shall prepare a specific statement, for the sole
purpose of amending the Letter of Credit, of the Reinsurer's share of known and
reported outstanding losses and allocated expenses relating thereto. If the
statement shows that the Reinsurer's share of such losses and allocated loss
expenses, and Incurred But Not Reported loss and loss expense, exceeds the
balance of credit as of the statement date, the Reinsurer shall, within thirty
(30) days after receipt of notice of such excess, secure delivery to the Company
of an amendment of the Letter of Credit increasing the amount of credit by the
amount of such difference. If, however, the statement shows that the Reinsurer's
share of known and reported outstanding losses plus allocated loss expenses, and
Incurred But Not Reported loss and loss expense, relating thereto is less than
the balance of credit as of the statement date, the Company shall, within thirty
(30) days after receipt of written request from the Reinsurer, release such
excess credit by agreeing to secure an amendment to the Letter of Credit
reducing the amount of credit available by the amount of such excess credit.
NOTE: Wherever used herein the term "State" shall be understood to mean the
state, province or Federal authority having jurisdiction over the Company's loss
reserves.
ARTICLE 17
CALIFORNIA SB 2093 COMPLIANCE
Any Reinsurer that has gained admission to transact Workers Compensation
reinsurance business in the State of California, or that is reinsuring the
injury, disablement, or death portions of Policies of Workers Compensation
insurance in the State of California under the class of disability insurance,
shall comply with all applicable provisions of California Insurance Code
Sections 11690-11703, revised. In the event of a delinquency proceeding,
receivership or insolvency of the Company, the Insurance Commissioner of the
State of California (the "Commissioner") shall have the right to draw on any
sums from the Reinsurer's deposit that are necessary for the Commissioner to pay
those reinsured claims and obligations, or to ensure their payment by the
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California Insurance Guarantee Association, deemed by the Commissioner due under
this Contract, upon failure of the Reinsurer for any reason to make payments
under this Contract. The Commissioner shall give 30 days' notice prior to
drawing upon these funds of an intent to do so. Notwithstanding the
Commissioner's right to draw on these funds, the Reinsurer shall otherwise
retain its right to determine the validity of those claims and obligations and
to contest their payment under this Contract. Prior to a Reinsurer's deposit
being drawn upon, in whole or in part, the Insurance Department of the State of
California (the "Department") shall provide the Reinsurer with an explanation of
procedures that the Reinsurer may use to explain to the Department why the use
of the Reinsurer's deposit may not be appropriate under this Contract.
ARTICLE 18
DELAYS, ERRORS OR OMISSIONS
Any inadvertent delay, omission or error will not be held to relieve either
party hereto from any liability which would attach to it hereunder if such
delay, omission or error had not been made, providing such delay, omission or
error is rectified upon discovery. Nevertheless, this Article shall not apply
with respect to loss reports rendered to the Reinsurer beyond the period
required to afford coverage in accordance with the Retention and Limit Article.
ARTICLE 19
ENTIRE AGREEMENT
This Contract constitutes the entire agreement between the parties with respect
to the business reinsured hereunder, and there are no understandings between the
parties other than as expressed in this Contract. Any change or modification to
this Contract will be made by written amendment to this Contract and signed by
the parties hereto.
ARTICLE 20
ACCESS TO RECORDS
The Reinsurer or its duly accredited representatives will have access to the
books and records in the possession of the Company on matters reasonably
relating to this Contract at all reasonable times for the purpose of obtaining
information concerning this Contract or the subject matter hereof.
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ARTICLE 21
INSOLVENCY
In the event of the insolvency of the Company, reinsurance under this Contract
shall be payable by the Reinsurer on the basis of the liability of the Company
under Policy or Policies reinsured without diminution because of the insolvency
of the Company, 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 when the Contract specifically provides another payee of such
reinsurance in the event of the insolvency of the Company or when 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.
It is agreed, however, that the liquidator or receiver or statutory successor of
the insolvent Company shall give written notice to the Reinsurer of the pendency
of a claim against the insolvent Company on the Policy or Policies reinsured
within a reasonable time after such claim is filed in the insolvency proceeding
and that during the pendency of such claim, the Reinsurer may investigate such
claim and interpose, at its own expense, in the proceeding when such claim is to
be adjudicated, any defense or defenses which it may deem available to the
Company or its liquidator or receiver or statutory successor. The expense thus
incurred by the Reinsurer shall be chargeable, subject to court approval,
against the insolvent Company as part of the expense of liquidation to the
extent of a proportionate share of the benefit which may accrue to the Company
solely as a result of the defense undertaken by the Reinsurer.
When two or more reinsurers are involved in the same claim and a majority in
interest elects 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 insolvent Company.
Should the Company go into liquidation or should a receiver be appointed, the
Reinsurer shall be entitled to deduct from any sums which may be due or may
become due to the Company under this reinsurance Contract any sums which are due
to the Reinsurer by the Company under this reinsurance Contract and which are
payable at a fixed or stated date as well as any other sums due the Reinsurer
which are permitted to be offset under applicable law.
ARTICLE 22
ARBITRATION
As a condition precedent to any right of action hereunder, any irreconcilable
dispute between the parties to this Contract will be submitted for decision to a
board of arbitration composed of two arbitrators and an umpire meeting in
Seattle, Washington.
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Arbitration shall be initiated by the delivery of a written notice of demand for
arbitration by one party to the other within a reasonable time after the dispute
has arisen.
The members of the board of arbitration shall be active or retired disinterested
officials of insurance or reinsurance companies, or Underwriters at Lloyd's,
London, not under the control or management of either party to this Contract.
Each party shall appoint its arbitrator, and the two arbitrators shall choose an
umpire before instituting the hearing. If the respondent fails to appoint its
arbitrator within four weeks after being requested to do so by the claimant, the
latter shall also appoint the second arbitrator. If the two arbitrators fail to
agree upon the appointment of an umpire within four weeks after their
nominations, each of them shall name three of whom the other shall decline two,
and the decision shall be made by drawing lots.
The claimant shall submit its initial brief within 45 days from appointment of
the umpire. The respondent shall submit its brief within 45 days thereafter, and
the claimant may submit a reply brief within 30 days after filing of the
respondent's brief.
The board shall make its decision with regard to the custom and usage of the
insurance and reinsurance business. The board shall issue its decision in
writing based upon a hearing in which evidence may be introduced without
following strict rules of evidence but in which cross-examination and rebuttal
shall be allowed. The board shall make its decision within 60 days following the
termination of the hearings unless the parties consent to an extension. The
majority decision of the board shall be final and binding upon all parties to
the proceeding. Judgment may be entered upon the award of the board in any court
having jurisdiction.
Each party shall bear the expense of its own arbitrator and shall jointly and
equally bear with the other party the expense of the umpire. The remaining costs
of the arbitration proceedings shall be allocated by the board.
ARTICLE 23
TAXES
A. In consideration of the terms under which this Contract is issued, the
Company undertakes not to claim any deduction 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 to the District of
Columbia.
B. 1. Each Reinsurer has agreed to allow, for the purpose of paying the
Federal Excise Tax, 1% of the premium payable hereon to the extent
such premium is subject to Federal Excise Tax.
2. In the event of any return of premium becoming due hereunder, the
Reinsurer shall deduct 1% from the amount of the return, and the
Company or its agent should take steps to recover the Tax from the
U.S. Government.
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ARTICLE 24
CURRENCY
The currency to be used for all purposes of this Contract will be United States
of America currency.
ARTICLE 25
SERVICE OF SUIT
A. This Article applies only to those Reinsurers not domiciled in the United
States of America, and/or not authorized in any state, territory and/or
district of the United States of America where authorization is required by
insurance regulatory authorities.
B. This Article shall not be read to conflict with or override the obligations
of the parties to arbitrate their disputes as provided for in the
Arbitration Article. This Article is intended as an aid to compelling
arbitration or enforcing such arbitration or arbitral award, not as an
alternative to the Arbitration Article for resolving disputes arising out
of this Contract.
C. In the event of the failure of the Reinsurer to pay any amount claimed to
be due hereunder, the Reinsurer, at the request of the Company, shall
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. The Reinsurer, once the appropriate court is
selected, whether such court is the one originally chosen by the Company
and accepted by Reinsurer or is determined by removal, transfer, or
otherwise, as provided for above, shall comply with all requirements
necessary to give said court jurisdiction and, in any suit instituted
against the Reinsurer upon this Contract, shall abide by the final decision
of such court or of any appellate court in the event of an appeal.
D. Service of process in such suit may be made upon Messrs. Mendes and Mount,
750 Seventh Avenue, New York, New York 10019-6829. The above-named are
authorized and directed to accept service of process on behalf of the
Reinsurer in any such suit.
E. Further, pursuant to any statute of any state, territory or district of the
United States that makes provision therefor, the Reinsurer hereby
designates 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, and
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hereby designates the above-named as the person to whom the said officer is
authorized to mail such process or a true copy thereof.
ARTICLE 26
OFFSET
The Company or the Reinsurer shall have and may exercise, at any time and from
time to time, the right to offset any balance or balances whether on account of
premiums or on account of losses or otherwise, due from one party to the other
party hereto under the terms of this Contract. The party asserting the right of
offset shall have and may exercise such right whether acting in the capacity of
assuming reinsurer or as ceding insurer.
ARTICLE 27
LOSS NOTICES AND SETTLEMENTS
The Company will advise the Reinsurer promptly of all claims which in the
opinion of the Company may involve the Reinsurer and of all subsequent
developments on these claims which may materially affect the position of the
Reinsurer, such advices to include any claim for which the reserve is 50% or
more of the Company's retention and, irrespective of the reserve or of any
question on liability or coverage, any claim falling within the following
categories:
A. Fatalities.
B. Bodily injuries involving:
1. brain injuries resulting in impairment of physical functions,
2. spinal injuries resulting in partial or total paralysis of upper or
lower extremities,
3. amputations of major limbs or permanent loss of use of upper or lower
extremities,
4. severe burn cases.
C. The Company will also advise the Reinsurer promptly as respects all other
injuries which are likely to result in a permanent disability rating of 50%
or more, if in the Company's opinion such injuries will involve the
Reinsurer.
Inadvertent omission in dispatching the aforementioned notices will in no way
affect the obligation of the Reinsurer under this Contract, provided the Company
informs the Reinsurer of such omission promptly upon discovery, however, the
provisions of the Delays, Errors or Omissions Article shall remain paramount.
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The Reinsurer agrees to abide by the loss settlements of the Company, it being
understood, however, that when so requested the Company will afford the
Reinsurer an opportunity to be associated with the Company, at the expense of
the Reinsurer, in the defense of any claim or suit or proceeding involving this
reinsurance and the Company will cooperate in every respect in the defense of
such claim, suit or proceeding.
The Reinsurer will pay its share of loss settlements immediately upon receipt of
proof of loss from the Company.
The Company may give the Reinsurer written notice of its intentions to pay a
loss on a certain date, and may demand payment of the Reinsurer's share of same
concurrently with payment by the Company to its insured(s), provided however,
the Company gives at least 15 days advance written notice of the date on which
the Company intends to pay the loss to its insured(s), demanding receipt of the
Reinsurer's share of such loss by such day.
The Reinsurer will pay its share of such loss notwithstanding any question or
objection it might have as to whether it is liable for its respective share of
such loss under the terms and conditions of this Contract, provided that the
Company has provided such information as is required to complete the loss
memorandum form with respect to such loss. Notwithstanding the foregoing,
payment of such an amount claimed due by the Company will not constitute a
waiver of a Reinsurer's right to request any amount so paid be returned to the
Reinsurer if it is later found that under the terms and conditions of this
Contract the Reinsurer was not liable for such amount claimed to be due by the
Company. The Company immediately will return to any such Reinsurer any such
amount paid by the Reinsurer that the Reinsurer was not liable to pay under
terms and conditions of this Contract.
ARTICLE 28
FEDERAL TERRORISM EXCESS RECOVERY
A. A pro rata share of the amount, if any, by which financial assistance paid
to the Company under the Terrorism Risk Insurance Act of 2002 ("TRIA") for
Acts of Terrorism occurring during any one Program Year, combined with the
Company's total private-sector reinsurance recoveries for such Acts of
Terrorism, exceeds the amount of Insured Losses paid by the Company for
such Acts of Terrorism, shall be reimbursed by the Company to the
Reinsurer. Such pro rata share shall be calculated by dividing:
1. the Reinsurer's payment under this Contract of Insured Losses for the
Program Year; by
2. the Company's total private-sector reinsurance recoveries arising from
all Act(s) of Terrorism covered under TRIA during the Program Year.
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B. Payment shall be made as promptly as possible after the Company's receipt
of any recovery in excess of its Insured Losses. The Company shall provide
the Reinsurer with all necessary data respecting the transactions covered
under this Article.
C. Such payment to the Reinsurer shall apply unless disallowed by the U.S.
Department of the Treasury.
D. "Act of Terrorism", "Insured Losses" and "Program Year" shall follow the
definitions provided in TRIA.
ARTICLE 29
COMMUTATION
This Article will only take effect should the parties hereto mutually agree to
commute losses under this Contract. There will be no obligation on the part of
either party to so commute.
In respect of all losses known to the Company which may have not been finally
settled and which have exceeded the Company's retention under this Contract, at
any time after seven years following the expiration of this Contract and upon
mutual agreement of the Company and the Reinsurer, said loss (including loss
expenses) may be commuted. The amount so commuted will be based on the amount of
loss which exceeds the Company's retention, and will be determined by employing
one of the following alternatives:
A. A present value calculation based on the following:
1. Indemnity benefits discounted for mortality and the time value of
money. Medical benefits based upon the Company's evaluation of
long-term medical care and rehabilitation requirements valued at
current cost levels, escalated at the average Medical Care Consumer
Price Index for the applicable region (CPIMC) and discounted for
mortality and the time value of money. The average CPIMC will be taken
over the five most recent (as of the time of commutation) September
30th values of the CPIMC.
2. The time value of money will be taken as the average five-year U.S.
Treasury Note yield. The average will be taken over the five most
recent (as of the time of commutation) September 30th values of the
yield.
3. Mortality will be based on the most recent U.S. Life Table (at the
time of commutation) unless medical evidence specific to an individual
case indicates that a reduced life expectancy would be appropriate.
B. The Company may purchase (or obtain a quotation for) an annuity from any
carrier who is "A" Class VIII or better rated by A. M. Best Company.
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The Reinsurer's proportion of the amount determined will be considered their
total liability for such loss and the lump sum payment thereof will constitute a
complete release of the Reinsurer from their liability for such loss.
The Company and the Reinsurer agree that, should a loss not in excess of the
Company's retention at the time of commutation subsequently exceed the Company's
retention at some future date, such loss may be subject to commutation on the
basis outlined above.
This Commutation Article will survive the expiration of this Contract.
ARTICLE 30
MODE OF EXECUTION
A. This Contract may be executed by:
1. An original written ink signature of paper documents.
2. An exchange of facsimile copies showing the original written ink
signature of paper documents.
3. Electronic signature technology employing computer software and a
digital signature or digitizer pen pad to capture a person's
handwritten signature in such a manner that the signature is unique to
the person signing, is under the sole control of the person signing,
is capable of verification to authenticate the signature and is linked
to the document signed in such a manner that if the data is changed,
such signature is invalidated.
B. The use of any one or a combination of these methods of execution will
constitute a legally binding and valid signing of this Contract. This
Contract may be executed in one or more counterparts, each of which, when
duly executed, will be deemed an original.
ARTICLE 31
INTERMEDIARY
Guy Carpenter & Company, Inc. is hereby recognized as the Intermediary
negotiating this Contract for all business hereunder. All communications,
including notices, premiums, return premiums, commissions, taxes, losses, loss
adjustment expenses, salvages and loss settlements relating thereto will be
transmitted to the Reinsurer or the Company through Guy Carpenter & Company,
Inc., One Convention Place, 701 Pike Street, Suite 2000, Seattle, Washington
98101. Payments by the Company to the Intermediary will be deemed to constitute
payment to the Reinsurer. Payments by the Reinsurer to the Intermediary will be
deemed only to constitute payment to the Company to the extent that such
payments are actually received by the Company.
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IN WITNESS WHEREOF, the Company has caused this Contract to be executed by its
duly authorized representative(s) this _____day of __________, in the year of
________.
SEABRIGHT INSURANCE COMPANY
----------
WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY $5,000,000 EXCESS
$5,000,000 PER OCCURRENCE EXCESS OF LOSS REINSURANCE CONTRACT
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NUCLEAR INCIDENT EXCLUSION CLAUSE - LIABILITY - REINSURANCE - U.S.A.
(Wherever the word "Reassured" appears in this clause, it shall be deemed to
read "Reassured," "Reinsured," "Company," or whatever other word is employed
throughout the text of the reinsurance agreement to which this clause is
attached to designate the company or companies reinsured.)
(1) This reinsurance does not cover any loss or liability accruing to the
Reassured as a member of, or subscriber to, any association of insurers or
reinsurers formed for the purpose of covering nuclear energy risks or as a
direct or indirect reinsurer of any such member, subscriber or association.
(2) Without in any way restricting the operation of paragraph (1) of this
Clause it is understood and agreed that for all purposes of this reinsurance all
the original policies of the Reassured (new, renewal and replacement) of the
classes specified in Clause II of this paragraph (2) from the time specified in
Clause III in this paragraph (2) shall be deemed to include the following
provision (specified as the Limited Exclusion Provision):
LIMITED EXCLUSION PROVISION.*
I. It is agreed that the policy does not apply under any liability
coverage,
( injury, sickness, disease, death or with respect to which an
to ( destruction insured under the policy is
( bodily injury or property damage also an insured under a
nuclear
energy liability policy issued by Nuclear Energy Liability Insurance
Association, Mutual Atomic Energy Liability Underwriters or Nuclear
Insurance Association of Canada, or would be an insured under any such
policy but for its termination upon exhaustion of its limit of
liability.
II. Family Automobile Policies (liability only), Special Automobile
Policies (private passenger automobiles, liability only), Farmers
Comprehensive Personal Liability Policies (liability only),
Comprehensive Personal Liability Policies (liability only) or policies
of a similar nature; and the liability portion of combination forms
related to the four classes of policies stated above, such as the
Comprehensive Dwelling Policy and the applicable types of Homeowners
Policies.
III. The inception dates and thereafter of all original policies as
described in II above, whether new, renewal or replacement, being
policies which either
(a) become effective on or after 1st May, 1960, or
(b) become effective before that date and contain the Limited
Exclusion Provision set out above; provided this paragraph (2)
shall not be applicable to Family Automobile Policies, Special
Automobile Policies, or policies or combination policies of a
similar nature, issued by the Reassured on New York risks, until
90 days following approval of the Limited Exclusion Provision by
the Governmental Authority having jurisdiction thereof.
(3) Except for those classes of policies specified in Clause II of
paragraph (2) and without in any way restricting the operation of paragraph (1)
of this Clause, it is understood and agreed that for all purposes of this
reinsurance the original liability policies of the Reassured (new, renewal and
replacement) affording the following coverages:
Owners, Landlords and Tenants Liability, Contractual Liability,
Elevator Liability, Owners or Contractors (including railroad)
Protective Liability, Manufacturers and Contractors Liability, Product
Liability, Professional and Malpractice Liability, Storekeepers
Liability, Garage Liability, Automobile Liability (including
Massachusetts Motor Vehicle or Garage Liability)
shall be deemed to include, with respect to such coverages, from the time
specified in Clause V of this paragraph (3), the following provision (specified
as the Broad Exclusion Provision):
BROAD EXCLUSION PROVISION.*
It is agreed that the policy does not apply:
I. Under any Liability Coverage, to ( injury, sickness, disease, death or
( destruction bodily injury or
( property damage
(a) with respect to which an insured under the policy is also an
insured under a nuclear energy liability policy issued by Nuclear
Energy Liability Insurance Association, Mutual Atomic Energy
Liability Underwriters or Nuclear Insurance Association of
Canada, or would be an insured under any such policy but for its
termination upon exhaustion of its limit of liability; or
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(b) resulting from the hazardous properties of nuclear material and
with respect to which (1) any person or organization is required
to maintain financial protection pursuant to the Atomic Energy
Act of 1954, or any law amendatory thereof, or (2) the insured
is, or had this policy not been issued would be, entitled to
indemnity from the United States of America, or any agency
thereof, under any agreement entered into by the United States of
America, or any agency thereof, with any person or organization.
II. Under any Medical Payments Coverage, or under any Supplementary
Payments Provision relating
( Immediate medical or surgical relief to expenses incurred with
to ( first aid, respect
( Bodily injury, sickness, disease or resulting from the
to ( death hazardous properties of
( bodily injury nuclear material and
arising out of the operation of a nuclear facility by any person or
organization.
( injury, sickness, disease, death or
III. Under any Liability Coverage, to ( destruction
( bodily injury or property damage
resulting from the hazardous properties of nuclear material, if
(a) the nuclear material (1) is at any nuclear facility owned by, or
operated by or on behalf of, an insured or (2) has been
discharged or dispersed therefrom;
(b) the nuclear material is contained in spent fuel or waste at any
time possessed, handled, used, processed, stored, transported or
disposed of by or on behalf of an insured; or
(c) the ( injury, sickness, disease, death or arises out of the
( destruction furnishing by an
( bodily injury or property damage insured of services,
materials, parts or equipment in connection with the planning,
construction, maintenance, operation or use of any nuclear
facility, but if such facility is located within the United
States of America, its territories or possessions or Canada, this
exclusion (c) applies only
to ( injury to or destruction of property at such nuclear
( facility.
( property damage to such nuclear facility and any property
( thereat.
IV. As used in this endorsement:
"HAZARDOUS PROPERTIES" include radioactive, toxic or explosive
properties; "NUCLEAR MATERIAL" means source material, special nuclear
material or byproduct material; "SOURCE MATERIAL," "SPECIAL NUCLEAR
MATERIAL," and "BYPRODUCT MATERIAL" have the meanings given them in
the Atomic Energy Act of 1954 or in any law amendatory thereof; "SPENT
FUEL" means any fuel element or fuel component, solid or liquid, which
has been used or exposed to radiation in a nuclear reactor; "WASTE"
means any waste material (1) containing byproduct material other than
tailings or wastes produced by the extraction or concentration of
uranium or thorium from any ore processed primarily for its source
material content, and (2) resulting from the operation by any person
or organization of any nuclear facility included under the first two
paragraphs of the definition of nuclear facility; "NUCLEAR FACILITY"
means
(a) any nuclear reactor,
(b) any equipment or device designed or used for (1) separating the
isotopes of uranium or plutonium, (2) processing or utilizing
spent fuel, or (3) handling, processing or packaging waste,
(c) any equipment or device used for the processing, fabricating or
alloying of special nuclear material if at any time the total
amount of such material in the custody of the insured at the
premises where such equipment or device is located consists of or
contains more than 25 grams of plutonium or uranium 233 or any
combination thereof, or more than 250 grams of uranium 235,
(d) any structure, basin, excavation, premises or place prepared or
used for the storage or disposal of waste,
and includes the site on which any of the foregoing is located, all
operations conducted on such site and all premises used for such
operations; "NUCLEAR REACTOR" means any apparatus designed or used to
sustain nuclear fission in a self-supporting chain reaction or to
contain a critical mass of fissionable material;
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With respect to injury to or destruction of property, the word
"injury" or destruction "property damage" includes all forms of
radioactive contamination of property. includes all forms of
radioactive contamination of property.
V. The inception dates and thereafter of all original policies affording
coverages specified in this paragraph (3), whether new, renewal or
replacement, being policies which become effective on or after 1st
May, 1960, provided this paragraph (3) shall not be applicable to
(i) Garage and Automobile Policies issued by the Reassured on New
York risks, or
(ii) statutory liability insurance required under Chapter 90, General
Laws of Massachusetts,
until 90 days following approval of the Broad Exclusion Provision by
the Governmental Authority having jurisdiction thereof.
(4) Without in any way restricting the operation of paragraph (1) of this
Clause, it is understood and agreed that paragraphs (2) and (3) above are not
applicable to original liability policies of the Reassured in Canada and that
with respect to such policies this Clause shall be deemed to include the Nuclear
Energy Liability Exclusion Provisions adopted by the Canadian Underwriters'
Association or the Independent Insurance Conference of Canada.
* NOTE. The words printed in italics in the Limited Exclusion Provision and
in the Broad Exclusion Provision shall apply only in relation to original
liability policies which include a Limited Exclusion Provision or a Broad
Exclusion Provision containing those words.
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