EXHIBIT 10.1
INSURANCE ADMINISTRATION SERVICES AGREEMENT
THIS INSURANCE ADMINISTRATION SERVICES AGREEMENT ("Agreement") is
effective as of the 1st day of March, 2002 ("Effective Date"), by and between
INSURANCE MANAGEMENT SOLUTIONS, INC. ("IMS"), a corporation organized and
existing under the laws of the State of Florida with its principal place of
business located at 360 Central Avenue, St. Petersburg, Florida 33701, and
ISLAND INSURANCE COMPANIES, LTD. (herein referred to as "Customer") having
their principal place of business at 1022 Bethel Street, Honolulu, HI
96806-1520.
WHEREAS, Customer wishes to engage the services of IMS to administer
certain of the Customer's obligations for the lines of business ("Authorized
Lines of Business") in the state(s) ("Authorized States") set forth in SCHEDULE
A;
WHEREAS, IMS wishes to provide such insurance administration services
as set forth herein.
NOW THEREFORE, IN CONSIDERATION OF the mutual covenants and agreements
hereinafter set forth, the parties hereto do covenant and agree as follows:
ARTICLE I. DEFINITIONS
Unless the context clearly requires otherwise, the following terms when used in
this Agreement shall have the meanings set forth below:
A. "Affiliate" is any company which controls, is controlled by, or under
common control with, a party, and "control" is defined as owning 50%
or more of such entity.
B. "Authorized Lines of Business" means the lines of business expressly
set forth in SCHEDULE A of this Agreement.
C. "Authorized States" means the states expressly set forth in SCHEDULE A
of this Agreement.
D. "Business Day" means any day other than a Saturday, Sunday or other
day which is a bank holiday for Florida State banks or an IMS paid
holiday (New Year's Day, Memorial Day, Independence Day, Thanksgiving
Day, day after Thanksgiving, Christmas Eve (after 12 P.M. Eastern
Standard Time) and Christmas Day).
E. "Change of Control" means (a) a sale, transfer or pledge, or the
issuance of fifty (50%) percent or more of the voting stock of a party
hereto to any third party that is not an Affiliate of such party; or
(b) a sale, transfer or pledge of a substantial portion of the
material assets of a party, or any merger or consolidation of a party
with another entity or entities.
F. "Insurance Administration Services" means the services set forth in
this Agreement and EXHIBIT I hereto in the Authorized States in
accordance with the terms of the Agreement, and all applicable laws
and regulations.
G. "Insurance Program" means the Customer's insurance products within the
Authorized Line(s) of Business to be offered within the Authorized
States.
H. "Technical Information" means and shall include (without limitation)
computer programs, databases, designs, algorithms, processes,
structures, data formats, business methods, know how, and research and
development information.
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ARTICLE II. TERM
The term of the Agreement shall commence on the Effective Date and shall have a
minimum operating term ("Minimum Operating Term") of Thirty-six (36) full
calendar months following the Effective Date. However, the term of this
Agreement shall automatically extend for an additional operating term
("Extended Operating Term") of twelve (12) calendar months at the end of the
Minimum Operating Term, or at the end of any Extended Operating Term, unless
terminated earlier pursuant to the termination provisions within Article VIII.
ARTICLE III. RESPONSIBILITIES OF IMS
A. IMS shall dedicate the human, equipment and computer resources
commercially reasonably required to provide Customer with the
Insurance Administration Services, during the term of this Agreement,
for the Insurance Program within Authorized States specified in
SCHEDULE A.
B. IMS shall designate an employee ("Account Manager") of sufficient
status and authority to act as liaison with Customer to facilitate
IMS' performance of the Insurance Administration Services under this
Agreement. The Account Manager shall provide written and/or oral
communication of the status of administration of the Insurance
Administration Services as agreed to by and between Account Manager
and Customer.
C. IMS shall, based on accepted industry standards and in accordance with
generally accepted insurance and accounting practices as designated by
the applicable regulatory bodies and the National Flood Insurance
Program ("NFIP"), maintain complete and orderly records and policy
and/or claims files as may be required as a result of IMS performing
the Insurance Administration Services on behalf of Customer. These
files shall be retained by IMS, in a format or media defined by IMS
which shall be in compliance with applicable laws and regulations, for
a minimum of four (4) years or the period specified by the applicable
statutes regulating the preservation of records. Customer may request
that its records be returned to it at its expense at the expiration of
the minimum four (4) year period; provided, however, IMS shall be
entitled to retain copies thereof.
ARTICLE IV. RESPONSIBILITIES OF CUSTOMER
A. During the term of this Agreement, Customer shall provide to IMS, in a
timely manner, any and all data, information and other items
reasonably required to enable IMS to perform the Insurance
Administration Services specified in EXHIBIT I of this Agreement.
Customer represents and warrants to IMS that it owns and possesses all
property rights to its corporate and subsidiary logos and hereby
grants and warrants to IMS a limited, non-transferable,
non-assignable, license to use Customer's corporate and subsidiary
logos (and any other copyrighted or trademarked property of Customer
that may be provided to IMS under this Agreement) while performing the
Insurance Administration Services. Customer acknowledges and agrees
that delays in delivery of required documentation, data and/or
information by Customer will result in a similar delay in fulfilling
Insurance Administration Services, and that such a delay in performing
the Insurance Administration Services shall not be deemed a breach of
the Agreement.
B. CUSTOMER ACKNOWLEDGES AND AGREES THAT IMS ASSUMES NO INSURANCE RISK
FOR THE BUSINESS PROCESSED UNDER THIS AGREEMENT.
C. Customer shall designate manager level employee(s) of sufficient
status and binding decision making authority to act as liaisons with
IMS and to facilitate Customer's role as IMS performs the Insurance
Administration Services specified in EXHIBIT I of this Agreement.
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ARTICLE V. CUSTOMER ACCESS TO RECORDS / CONFIDENTIAL INFORMATION
A. At Customer's expense, Customer will be permitted reasonable access
(as set forth herein) to all records and information maintained by IMS
on behalf of Customer (excluding, specifically, proprietary Technical
Information) reasonably necessary to: (i) audit the completeness and
accuracy of the Insurance Administration Services provided under this
Agreement and reports produced for Customer pursuant to this
Agreement; (ii) verify the accuracy and validity of all billings and
charges to Customer under this Agreement; and (iii) verify IMS'
overall compliance with the material terms of this Agreement and
applicable laws and regulations.
Access to IMS' records, for the foregoing purposes, will be provided
during normal business hours upon ten (10) Business Days prior written
notice to IMS by Customer for so long as IMS is required to maintain
such records under this Agreement; except in the case of regulatory
inquiry, in which case access will be granted on any Business Day with
twenty four (24) hours of prior written notice to IMS.
At Customer's expense, Customer will be permitted to copy those IMS
records subject to audit in accordance with this Article. Upon
reasonable written request by Customer, and at Customer's expense, IMS
will promptly mail or fax to Customer supporting documentation
concerning any specific transaction processed by IMS under the terms
of this Agreement.
IMS will provide reasonably adequate workspace for Customer to conduct
audits in accordance with this Article. Further, Customer or its
representatives shall take precautions, when conducting audits under
this Article, not to disrupt IMS' ongoing business activities.
B. The recipient ("Recipient") of confidential data and/or information
pursuant to this Agreement shall maintain the confidentiality of all
data and/or information which is the property of the other party
("Disclosing Party"), whether originally supplied by the Disclosing
Party, or whether generated by the Disclosing Party in the course of
performing or facilitating the Insurance Administration Services under
this Agreement and which is directly accessible to the Recipient or is
in the possession of Recipient in the implementation, facilitation
and/or performance of the Insurance Administration Services. During
any term of this Agreement, Recipient may acquire, know, or have
within its possession, information (including, but not limited to,
Technical Information) and/or data of the Disclosing Party concerning
commercial and trade affairs, rating and underwriting rules and
guidelines, the identity of clients, the identity of insureds and
beneficiaries, claims, benefits, rates and Agents, financial
information, the Proprietary System (as defined at Article VII (A)
herein), the Third Party Proprietary System (as defined in Article VII
(B) herein) and business practices of the Disclosing Party
("Confidential Information"). Confidential Information which is
provided in tangible form must be clearly marked "Confidential",
"Proprietary" or the substantial equivalent thereof, or if orally
disclosed must be clearly identified as "Confidential" or
"Proprietary" at the time of the disclosure (except for IMS' Technical
Information, the identity of Customer's clients, the identity of
Customer's insureds and beneficiaries, claims, benefits, and Agents,
which will be deemed "Confidential Information" under this Agreement,
regardless of whether marked as such). Except as required by law,
Recipient shall keep Disclosing Party's Confidential Information
confidential and shall only use the Confidential Information in
performing or facilitating the Insurance Administration Services under
this Agreement. Recipient shall not disclose the Confidential
Information without Disclosing Party's prior written permission except
to Recipient's employees who require the information to perform or
facilitate the Insurance Administration Services under this Agreement.
Each party hereto, as a Recipient, warrants to the other that
appropriate measures shall be taken by Recipient to safeguard the
confidentiality of the Confidential Information, with a level of care
at least equal to the level of care with which Recipient safeguards
its own confidential or proprietary information. All employees, agents
or representatives of Recipient and any third parties who are given
access to the Confidential Information shall be under written
obligation to Recipient to maintain such information in confidence.
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IMS and Customer agree that any Recipient shall have no obligation
with respect to any information or data which:
a) is already rightfully known to Recipient through means other
than Disclosing Party; or
b) is or becomes publicly known through no wrongful act of
Recipient; or
c) is rightfully obtained by Recipient from a third-party
without similar restriction and without breach of this
Agreement; or
d) is independently developed by Recipient without breach of
this Agreement.
Disclosing Party shall retain title to all Confidential Information
(whether tangible or intangible) delivered thereby pursuant to this
Agreement. Recipient shall not copy, reproduce or use any Confidential
Information without written authorization of Disclosing Party, except
as may be reasonably required to accomplish the Insurance
Administration Services under this Agreement. Upon written request of
Disclosing Party Recipient shall promptly return, or destroy with
specific written permission of the Disclosing Party, all tangible
copies containing Confidential Information, except those copies kept
in the regular course of business, or that are required to be kept
pursuant to any state or federal administrative, regulatory or
statutory mandates. The obligations under this Paragraph (B) shall
survive the termination of this Agreement. Notwithstanding the
foregoing, this Article shall not prevent the disclosure of
Confidential Information to the extent legally required by any court
or regulatory entity having jurisdiction over the parties.
For purposes of Article V (B), Recipient and Disclosing Party shall
include within their meaning all respective subsidiaries, agents, or
Affiliates of the Recipient and Disclosing Party.
ARTICLE VI. EXPENSES AND FEES
A. In consideration of IMS providing Insurance Administration Services
described herein, Customer shall pay IMS, as applicable, miscellaneous
fee ("Miscellaneous Fee"), servicing fee ("Service Fee") and claim
administration fee ("Claim Administration Fee") for each Authorized
Line of Business, as specified in SCHEDULE B. The performance by IMS
of any service or function that is outside of the scope of the
Insurance Administration Services shall require the payment by
Customer of additional consideration (in addition to the Service Fees)
as mutually agreed between IMS and Customer.
B. Except for the Service Fee, which is based upon a percentage of the
adjusted net written premium and the Claim Administration Fee, the
Miscellaneous Fees specified in Section IV of SCHEDULE B hereto may be
increased (up to a maximum of five percent (5%) per year from the
prior year) effective as of each anniversary of the Effective Date by
the percentage increase in the United States Consumer Price Index for
all Urban Users (CPI-U) as reported by the United States Bureau of
Labor Statistics for the most recently completed calendar year that
IMS is performing services on behalf of the Customer. In the event
that a vendor supplying a service or product to IMS, which service or
product is used by IMS to provide the Insurance Administration
Services to Customer, increases its rates charged to IMS, IMS may
increase the Service Fees, Claim Administration Fees, and
Miscellaneous Fees set forth in Schedule B to incorporate such
increased costs and will provide Customer with documentation verifying
the increase.
C. Customer shall reimburse IMS for travel, living and out-of-pocket
expenses incurred by IMS personnel in the performance of training
relative to the Insurance Administration Services to be performed
under this Agreement.
D. Customer agrees to pay any and all tariffs and taxes that are now or
may become applicable to the Insurance Administration Services
rendered hereunder, including, but not limited to, sales, use, and
personal property taxes, or any other form of tax based on Insurance
Administration Services performed, equipment used by IMS solely for
Customer, and the communicating or storage of data used by IMS solely
for Customer, but excluding taxes on the net income of IMS.
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E. Subject to the terms of this Agreement, all fees and expenses to be
payable by Customer to IMS or any third party under this Agreement
shall be paid within thirty (30) calendar days after Customer's
receipt of IMS' monthly statement for all services provided to
Customer under this Agreement. IMS will calculate the fees owed to IMS
by Customer and will send a statement to Customer within two (2) weeks
of the last day of the month for which fees are owed. Customer's
failure to pay all fees and expenses when due shall be considered a
material breach of this Agreement. Further, if Customer fails to pay
any fees and expenses due IMS as herein provided, Customer shall pay
to IMS in addition to all sums otherwise due, interest which shall
accrue at 1.5% per month on such delinquency from the date the fees or
expenses became past due. Failure or forbearance to exercise any of
its rights and privileges hereunder shall not constitute the
forfeiture or waiver of such rights and privileges on the part of IMS.
F. Prior to renewal of this Agreement for any Extended Operating Term,
IMS may modify SCHEDULE B in its discretion to reflect any increase in
the cost of providing the Insurance Administration Services
(including, but not limited to statutory, regulatory, or judicial
changes that require IMS to incur additional cost or expenses in
performing the Insurance Administration Services) or to remain
competitive with the rates currently being charged within the industry
for like services. Any modification of SCHEDULE B shall be proposed to
Customer at least twelve (12) months prior to the expiration of any
term of this Agreement.
ARTICLE VII. LICENSE, TRADE SECRET AND PROPRIETARY RIGHTS
A. IMS from time to time may use its own proprietary computer software
products and account servicing methods and procedures ("Proprietary
System"), which are identified, described or referenced in EXHIBIT I
hereto, in the performance of the Insurance Administration Services.
During any term of this Agreement, IMS grants a personal,
non-transferable, non-assignable, non-exclusive license to Customer to
use portions of the Proprietary System as necessary for IMS to perform
the Insurance Administration Services under this Agreement. Further,
no provision within this Agreement shall be interpreted as prohibiting
IMS from selling or licensing its Proprietary System to any other
customer or prospective customer of IMS.
B. IMS, from time to time, may also use proprietary third party computer
software products and third party account servicing methods and
procedures ("Third Party Proprietary System"), which are identified,
described or referenced in EXHIBIT I hereto in the performance of the
Insurance Administration Services. No provision within this Agreement
shall be interpreted as prohibiting IMS or the Third Party Proprietary
System vendor from selling or licensing the Third Party Proprietary
System, or modifications and enhancements to the Third Party
Proprietary System, to any other customer or prospective customer of
IMS, so long as Customer's Confidential Information is not disclosed.
C. Other than the limited rights to use the Proprietary System and the
Third Party Proprietary System, as provided in Article VII (A) and (B)
above, this Agreement grants to Customer no right to possess or
reproduce, download, reverse engineer, or obtain any other interest
in, the Proprietary System or the Third Party Proprietary System, or
their specifications in any tangible or intangible medium. Customer
may not mortgage, hypothecate, sell, assign, pledge, lease, transfer,
license, or sublicense the Proprietary System or the Third Party
Proprietary System, nor allow any person, firm, entity or corporation
to transmit, copy, reproduce, download, reverse engineer, or obtain
any other interest in the Proprietary System or the Third Party
Proprietary System, or their specifications in whole or in part. In
the event Customer shall come into possession of any source or object
code associated with the Proprietary System or the Third Party
Proprietary System, Customer shall immediately notify IMS and return
the source or object code associated with Proprietary System or the
Third Party Proprietary System in its possession and all copies of any
kind thereof to IMS.
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D. Customer covenants and agrees not to disclose or otherwise make the
Proprietary System or the Third Party Proprietary System available to
any person other than employees, insurance sales agents ("Agents") or
representatives of the Customer required to have access or use of the
Proprietary System or the Third Party Proprietary System to facilitate
IMS' or Customer's performance under this Agreement. Customer agrees
to obligate each such employee, Agents, or representative to a level
of care sufficient to protect the Proprietary System and the Third
Party Proprietary System from unauthorized disclosure.
E. The obligations of Customer under this Article shall survive
termination of this Agreement, regardless of the reason for
termination.
ARTICLE VIII. TERMINATION
A. Either party may terminate this Agreement at the end of the Minimum
Operating Term or at the end of any Extended Operating Term, provided
the terminating party gives the other party at least three (3) months
prior written notice of such termination.
B. This Agreement shall also terminate:
a) at the election of the Customer, upon written notice to IMS,
if IMS becomes insolvent, if it makes an assignment for the benefit of
its creditors, if a petition for relief under the United States
Bankruptcy Code is filed by or against it and it is not dismissed
within thirty (30) days of being filed, or if a trustee, receiver or
other custodian of its assets is appointed;
b) at the election of IMS, upon written notice to Customer, if
Customer becomes insolvent, if it makes an assignment for the benefit
of its creditors, if a petition for relief under the United States
Bankruptcy Code is filed by or against it and it is not dismissed
within thirty (30) days of being filed, or if a trustee, receiver or
other custodian of its assets is appointed (including, but not limited
to, any proceeding pursuant to any state or federal action governing
insurer insolvency);
c) at the election of the Customer, if IMS materially breaches
any provision of this Agreement and fails to cure such breach within
sixty (60) days after written notice thereof is given to IMS by the
Customer;
d) at the election of IMS, if Customer materially breaches any
provision of this Agreement and fails to cure such breach within sixty
(60) days after written notice thereof is given to Customer by IMS
(except for Customer's failure to pay any and all fees and expenses
due under Article VI of this Agreement, in which case Customer must
cure such breach within thirty (30) days after written notice thereof
is given to Customer by IMS);
e) at the election of IMS, upon written notice to Customer, in
the event of a Change of Control of Customer unless (i) Customer has
provided IMS not less than sixty (60) days advance written notice of
the proposed Change of Control and (ii) IMS has agreed in writing to
such Change of Control.
The initiation under this Agreement of any dispute resolution procedure shall
not prevent a party from terminating this Agreement in accordance with this
Article VIII.
C. On expiration or termination of this Agreement, IMS shall return to
Customer all of Customer's Confidential Information, either in
electronic or hard copy form, in IMS' possession and delete any
electronic copies thereof related to the Insurance Administration
Services provided by IMS during the term of this Agreement; Customer
shall do the same and cause Customer's agents and representatives
(including, but not limited to, any third party given access to the
Confidential Information) to do the same relative to IMS' Confidential
Information. Customer shall pay IMS (in accordance with SCHEDULE B
then in effect) any and all Service Fees, Claim Administration
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Fees, Miscellaneous Fees and third party fees due IMS for Insurance
Administration Services performed pursuant to this Agreement. If
Customer requires assistance in converting Customer's data to a new
format, or requires assistance from IMS relative to Customer's
transition to an alternative claim administration arrangement, then
IMS shall provide such services at the then current rates charged by
IMS for the services specified in Section IV of SCHEDULE B. These
obligations under this Paragraph (C) shall survive any termination of
this Agreement.
ARTICLE IX. WARRANTIES AND COVENANTS
IMS covenants that IMS will comply in all material respects with the law of the
state or states covered by this Agreement and with the rules and regulations of
all regulatory authorities having jurisdiction over IMS' activities, and shall,
whenever necessary, maintain at its own expense all required licenses to
transact business in such states. IMS warrants to Customer that (a) IMS owns or
otherwise has the right to use the Proprietary System used to perform the
Insurance Administration Services, and the rights to such Proprietary System
granted hereunder will not knowingly infringe upon a third party's copyright or
patent rights; (b) IMS is duly authorized to transact the business of servicing
insurance companies; and (c) the express warranties provided here and elsewhere
in this Agreement are IMS' only warranties and no other warranty, express or
implied, including any warranty of merchantability, fitness or fitness for a
particular purpose, will apply to the provision of Insurance Administration
Services under this Agreement.
ARTICLE X LIABILITY, LIMIT OF LIABILITY, INDEMNITIES AND REMEDIES
A. The parties shall assume the following obligations and liabilities as
specified below and subject to the limitations on liability set forth
in Article X, (B) below:
a) IMS shall indemnify, defend and hold harmless Customer, its
officers, directors, employees and controlling persons from
any liability, cost, loss, fine, penalty, claim, demand,
damage or expense, including reasonable attorney's fees,
incurred directly as a result of any act, error or omission
by the IMS, or incurred directly as a result of any material
breach of IMS' obligations under this Agreement, or the
material breach of any representation or warranty made by IMS
to Customer pursuant hereto;
b) Customer shall indemnify, defend and hold harmless IMS, its
officers, directors, employees and controlling persons from
any liability, cost, loss, fine, penalty, claim, demand,
damage or expense, including reasonable attorney's fees,
incurred directly as a result of any act, error or omission
by the Customer, or directly as a result of any material
breach of Customer's obligations under this Agreement, or the
material breach of any representation or warranty made by
Customer to IMS pursuant hereto;
c) Customer agrees that in the event IMS is in violation of any
code, statute or law(s) due to the acts or omissions of
Customer, or the servants, employees, representatives,
adjusters, or Agents of Customer, then Customer shall assume
the responsibility and liability for such acts or omissions
and shall indemnify and hold IMS harmless for any such
liability;
B. Except for: (i) fees and expenses payable to IMS under Article VI of
this Agreement; (ii) acts of fraud, or willful misconduct; and (iii)
violations of Article VII of this Agreement, each party's maximum
liability ("Maximum Liability") to the other party for any cause
whatsoever, during any one calendar year shall be limited to direct
damages incurred by that party and shall not exceed the amount of
compensation paid by the Customer under SCHEDULE B of this Agreement
for the six (6) months immediately preceding the breach or cause of
liability. Further, IMS shall not be liable for any lost profits,
business goodwill, or other consequential, punitive, special or
incidental damages incurred by Customer.
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C. If data is processed in error due directly to an error or defect in
the Insurance Administration Services provided by IMS, then upon IMS
receiving notice of such error or defect, IMS shall reprocess such
data without charge to Customer.
D. All parties agree to promptly give the others notice upon being
notified or becoming aware of any and all allegations or claims, which
could give rise to a claim under this Article.
ARTICLE XI. GENERAL AGREEMENTS
A. This Agreement and all matters arising hereunder shall be governed by
and determined in accordance with the laws of the State of Florida
without giving effect to any choice of law provisions.
B. The parties shall not be liable or deemed to be in default hereunder
for any delay or failure in performance under this Agreement or
interruption of the Insurance Administration Services resulting,
directly or indirectly, from acts of God (including but not limited to
weather catastrophes such as floods, hurricanes, tornadoes,
windstorms, ice storms, blizzards and hail storms), 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.
C. Any and all notices, designations, consents, offers, acceptances, or
any other communication provided for herein shall be given in writing
by hand delivery, by overnight carrier, by registered or certified
mail or by facsimile transmission and shall be addressed as follows:
As to Customer: Island Insurance Companies, Ltd.
1022 Bethel Street
Honolulu, HI 96806-1520
Fax Number: (808) 564-8177
Attention: Harvey Y.F. Lee,
Assistant Vice President
As to IMS: Insurance Management Solutions, Inc.
801 94th Avenue North
St. Petersburg, Florida
Fax Number: (727) 803-2076
Attention: David Howard, President
Notices sent by hand delivery shall be deemed effective on the date of
actual hand delivery. Notices sent by overnight carrier shall be
deemed effective on the next Business Day after being placed into the
hands of the overnight carrier. Notices sent by registered or
certified mail shall be deemed effective on the fifth Business Day
after being deposited into the post office. Notices sent by facsimile
transmission shall be deemed to be effective on the day when sent if
sent prior to 4:30 p.m. (the time being determined by the time zone of
the recipient), otherwise they shall be deemed effective on the next
Business Day.
D. This Agreement, and the exhibits, schedules and appendices attached
hereto, contain all of the prior oral and/or previously written
agreements, representations, and arrangements between the parties
hereto. There are no representations or warranties other than those
set forth herein. No change or modification of this Agreement,
including the exhibits, schedules and appendices hereto, shall be
valid unless the same shall be in writing and signed by all of the
parties hereto. All exhibits, schedules, appendices, addendum of any
kind, or attachments to this Agreement shall be made a part of this
Agreement and shall be subject to all terms and conditions of this
Agreement. Articles V (B), VII, and VIII (C) shall survive any
termination of this Agreement.
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E. Words of a gender used in this Agreement shall be held to include any
other gender, the words in a singular number held to include the
plural, when the sentence so requires. Article headings are intended
for purposes of description only and shall not be used for purposes of
interpretation of this Agreement.
F. Should any part of this Agreement for any reason be declared invalid,
such decision shall not effect the validity of any remaining portion,
which remaining portion shall remain in full force and effect as if
the Agreement had been executed with the invalid portion thereof
eliminated. It is, therefore, declared the intention of the parties
hereto that each of them will have executed the remaining portion of
this Agreement without including therein any such part, parts or
portion which may, for any reason, be hereafter declared void.
G. If either party should bring a Court action alleging breach of this
Agreement or seeking to enforce, rescind, renounce, declare, void or
terminate this Agreement or any provisions thereof, the prevailing
party shall be entitled to recover all of its legal expenses,
including reasonable attorneys' fees and costs (including legal
expenses for any appeals taken), and to have the same awarded as part
of the judgment in the proceeding in which such legal expenses and
attorneys' fees were incurred.
H. Customer shall not assign this Agreement or any of its rights
hereunder without the prior written consent of IMS.
I. The parties agree not to disclose the terms and conditions of this
Agreement to any third party, except (i) as required in the normal
conduct of Customer's business, or (ii) as required by law or
regulation including, without limitation, any Federal securities law,
or regulation.
ARTICLE XII. DISPUTE RESOLUTION PROCEDURES
A. The parties will attempt in good faith to promptly resolve any
material dispute regarding this Agreement by negotiations between
senior management ("Senior Management") of the parties. Senior
Management of each party will meet within ten (10) calendar days of
notice ("Notice of Dispute") by a party of the existence of a material
dispute, at a mutually agreed time and place, to resolve the material
dispute. Senior Management, who shall have the authority to settle the
dispute, shall prepare and exchange memoranda stating the issues in
the material dispute and their positions. If the material dispute is
not resolved to the mutual satisfaction of the parties within seven
(7) calendar days of the meeting of Senior Management, then the
parties may attempt to resolve the controversy using mediation.
B. If the matter has not been resolved pursuant to the aforesaid
mediation procedure within thirty (30) calendar days of the issuance
of a party of a Notice of Dispute, or if either party will not
participate in mediation, then either party may initiate arbitration
upon fifteen (15) calendar days written notice to the other party.
Notwithstanding the foregoing, all deadlines specified above may be
extended upon mutual written agreement of the parties.
C. Except for the right of either party to apply to a court of competent
jurisdiction for review of the award of arbitration, for a temporary
restraining order, preliminary injunction or other equitable relief to
preserve the status quo, or disputes relating to breach of the
confidentiality, non-disclosure or trade secret provisions of this
Agreement, all claims, disputes, controversies and other matters
relating to breach of this Agreement, and which cannot be resolved by
the parties shall be settled by arbitration in accordance with this
Agreement.
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D. Notice requesting arbitration ("Arbitration Notice"), or any other
notice made in connection therewith, shall be made in writing by one
party and sent by certified mail, return receipt requested, to the
other party. The Arbitration Notice shall state in particular all
issues to be resolved in the view of the complaining party, shall
appoint the arbitrator selected by the complaining party and shall set
a tentative date for the arbitration hearing, which date shall be no
sooner than forty-five (45) calendar days and no later than ninety
(90) calendar days from the date that the Arbitration Notice is
mailed. Within twenty (20) calendar days of receipt of the complaining
party's Arbitration Notice, the respondent shall notify the
complaining party of the location for conducting arbitration and the
name of its appointed arbitrator. When the two arbitrators have been
appointed, they shall agree on a third independent arbitrator and
shall appoint such person by written notice to the parties signed by
both arbitrators within thirty (30) calendar days from the date of the
appointment of the second arbitrator. If the two arbitrators fail to
agree upon the appointment of an independent arbitrator at the end of
thirty (30) calendar days following the appointment of the second
arbitrator, then the independent arbitrator shall be appointed by the
American Arbitration Association ("AAA"), or its successor, in
accordance with its then prevailing commercial arbitration rules then
in effect. The three (3) arbitrators shall constitute the arbitration
board ("Board").
E. The members of the Board shall be active or retired (i) lawyers or
professionals familiar with insurance and/or (ii) active or former
officers or management employees of insurance and/or data processing
firms and/or software development companies. The person selected by
the two respective arbitrators appointed by the parties shall be the
umpire or chief arbitrator and must be a licensed attorney.
F. Arbitration shall be conducted in accordance with the Commercial Rules
of the American Arbitration Association ("AAA") then in effect except
as modified herein.
G. The parties agree that all then current employees of each with
material relevant information will be voluntarily produced, at the
employer's expense, for all proper discovery and arbitration hearings.
H. The cost of the arbitration relative to the arbitrators and the AAA
("Costs") shall be borne equally pending the arbitrators' award. Each
party shall bear its own expenses for attorneys' fees. The prevailing
party in any arbitration proceeding hereunder shall be entitled, in
addition to such other relief as may be granted, to recover the
portion of the Costs incurred by that party in connection with
arbitration under the Agreement prior to the award.
I. The parties agree that the Board shall be required to render its
decision in writing within thirty (30) calendar days of the conclusion
of the arbitration proceedings, unless such time shall be extended by
mutual written agreement of the parties.
J. With respect to any matter brought before the Board, the Board shall
make a decision having regard to the intentions of the parties, the
terms of this Agreement, and custom and usage of the insurance and
data processing industry. Such decisions shall be in writing and shall
state the findings of fact and conclusions of law upon which the
decision is based, provided that such decision may not (i) award
consequential, punitive, special, incidental or exemplary damages, or
(ii) include a suspension of this Agreement or any provisions hereof.
The decision shall be based exclusively upon the evidence presented by
the parties at a hearing in which evidence shall be allowed. Said
decisions may be reviewable and vacated, modified or corrected, in
whole or in part, by appropriate courts of competent jurisdiction for
clear abuses of discretion or errors at law by the Board. If the
decision is not vacated, modified, or corrected in whole or in part
upon an appeal, such decision shall be final and binding upon all
parties to the proceeding and may be entered by either party in any
court having competent jurisdiction.
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IN WITNESS WHEREOF, the parties hereto by their respective duly authorized
representatives have executed this Agreement to be effective as of the 1st day
of March, 2002.
"IMS"
INSURANCE MANAGEMENT SOLUTIONS, INC.
By: /s/ D.M. Howard
-----------------------------------
As its: President/CEO
-------------------------------
Date: 04/10/02
---------------------------------
"CUSTOMER"
ISLAND INSURANCE COMPANIES, LTD.
By: /s/ Raymond M. (unreadable)
-----------------------------------
As its: Vice President
-------------------------------
Date: 03/22/02
---------------------------------
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SCHEDULES:
SCHEDULE "A" - AUTHORIZED STATES AND INSURANCE PROGRAM
SCHEDULE "B" - FEE SCHEDULE
EXHIBITS:
EXHIBIT 1 - WYO FLOOD INSURANCE SERVICES
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SCHEDULE A
AUTHORIZED STATES AND INSURANCE PROGRAM
IMS shall provide Insurance Administration Services as described in EXHIBIT I
for the following authorized line(s) of business ("Authorized Line of
Business") in the following authorized state(s) ("Authorized States"):
1. AUTHORIZED LINE OF BUSINESS:
WYO Flood Insurance
2. AUTHORIZED STATES:
The States of Hawaii and such other states as may be mutually agreed
upon in writing by Customer and IMS.
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SCHEDULE B
FEE SCHEDULE
* Indicates that material has been omitted and confidential treatment has been
requested therefor. All such omitted material has been filed separately with the
SEC pursuant to Rule 24b-2.
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EXHIBIT I
INSURANCE ADMINISTRATION SERVICES (WYO FLOOD)
WHEREAS, The Federal Emergency Management Agency ("FEMA") and the
Federal Insurance Administration ("FIA") administer the National Flood
Insurance Program ("NFIP") and Customer is an insurance company duly licensed
to write flood insurance in the state or states to which this Agreement
pertains and is approved by FIA to act as a Write Your Own Company ("WYO
Company") under the Write Your Own Flood Insurance Program ("WYO Flood
Program"), a program offered under the NFIP; and
WHEREAS, Customer wishes to engage the services of IMS to administer
certain of the Customer's obligations as a WYO Company in the state(s)
("Authorized States") set forth in SCHEDULE A.
1) DEFINITIONS. Capitalized terms not otherwise defined in the Agreement
or in this Exhibit shall be construed as otherwise generally
understood in the insurance and data processing industry.
2) POLICY ADMINISTRATION. IMS shall administer Customer's WYO Flood
Program policies ("WYO Policies") performing the services listed
hereunder in accordance with the NFIP, as amended, and all
implementing regulations as well as Customer's Write Your-Own
Arrangement ("Arrangement") with FEMA. The same standards by which
Customer is bound shall be those by which IMS is bound to Customer.
a) Underwriting.
- Review WYO Policy application for completeness/contact Agent
as applicable;
- Create WYO Policy file;
- Underwriting based on NFIP guidelines.
b) Data Entry. (subject to the 120 Day Internet Access Milestones
specified in Schedule B)
- New WYO Policy business;
- WYO Policy changes;
- Mortgagee changes;
- WYO Flood insurance Agent changes;
- Endorsements;
- Cancellations.
c) WYO Policy Issuance.
- WYO Policy for new business, renewals and endorsements where
declaration page issuance is required;
- WYO Policy Renewal processing;
- WYO Policy automated rating;
- WYO Policy print declarations and related WYO Policy forms.
d) Billing & Collection.
- Print invoices, reminders, cancellation notification, return
WYO Policy premium disbursements;
- Mortgage activity processing;
- EFT processing;
- Process cancellations for non-payment.
e) Customer Service.
- Provide a dedicated customer service support call center;
- Respond to Customer's WYO Policyholder and WYO flood
insurance sales Agent telephone inquires;
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- Process requests for WYO Policy changes;
- Respond to correspondence related to WYO Policy and WYO
Policy claim administration services;
- Track and respond to complaints related to WYO Policy and/or
WYO Policy claim administration services; IMS customer
service hours of operation 8:00 a.m. to 8:00 p.m. Eastern
Standard Time ("EST").
f) Bureau Reporting.
- Process and balance WYO Policy premium and WYO Policy loss
data;
- Edit and correct invalid data;
- Prepare and mail Bureau transmittals;
- To the best of IMS knowledge, provide on-going regulatory
changes;
- Maintain WYO Policy history files.
g) Accounting Administration/Premium.
- Posting, balancing, and control of WYO Policy premium
receivable;
- Accounting and payment of Customer's WYO flood insurance
Agents WYO Policy commissions;
- Issuance, control and accounting for disbursements for WYO
Policy premium refunds, WYO Policy commissions.
h) Financial Accounting.
- Issuance, control and accounting for disbursements for
general expenses;
- Day-to-day management of short term cash;
- Provide reasonable and customary financial management
reports.
i) Treasury.
- Receive and post WYO Policy payments;
- Issuance, control and accounting for disbursements of WYO
Policy premium related expenses;
- Bank reconciliation of WYO Policy premium disbursements;
- OCR WYO Policy payment processing;
- Mortgagee billing.
j) Agency Administration.
- Agent of record assignment and control;
- 1099 reporting;
- Maintain WYO flood insurance Agent files.
k) Print & Distribution Services.
- Automated document library;
- Electronic document assembly;
- Electronic document archival/retrieval;
- Automated finishing/insertion facility;
- Mail pre-sort facility;
- Mailing WYO Policy, WYO Policy billings and WYO Policy
renewals (including postage and supplies);
- Document Imaging.
l) System Administration.
- Availability of Proprietary System to Customer and Customer's
WYO Policy claim vendor;
- Process daily, weekly, monthly, and annual cycles;
- Internet processing capabilities subject to Internet use
limitations specified in Schedule B.
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3) CASH MANAGEMENT.
a) Banking Arrangement. IMS and Customer shall establish a banking
arrangement that complies with the Arrangement and other WYO Flood
program requirements, and which will provide for the establishment of
an NFIP restricted account ("Restricted Account") with Customer as
custodian, and a FEMA letter of credit ("Letter of Credit"), with
additional accounts as needed to facilitate WYO Flood Program
operations, all in conformity with FEMA/FIA guidelines. Customer shall
grant specific IMS' employees check-signing authority on any
Restricted Account and the authority to initiate appropriate drawdowns
against Customer's Letter of Credit, in order for IMS to act on
Customer's behalf in making disbursements for Customer liabilities
established by the Arrangement, the WYO Flood Program, and this
Agreement. All such authorizations shall be in writing and may be
revoked, amended or modified at any time by Customer upon thirty (30)
days advanced written notice to IMS. Notwithstanding the foregoing,
IMS shall not draw down on Letter of Credit for an amount that exceeds
$50,000.00 without prior approval from the Chief Financial Officer of
Customer, which approval shall not be unreasonably withheld and shall
be given within 24 hours of the request being made by IMS.
b) Premium Remittance -IMS shall establish procedures, as determined by
FIA, for a timely deposit and remittance of funds to the U.S. Treasury
via authorized automatic clearinghouse mechanism. Gross premium
collected by IMS, for WYO Flood program business written under this
Agreement, shall be remitted to the FIA by IMS net of the established
NFIP Expense Allowance. ("Allowance") , which Allowance expenses to be
paid under the Allowance include Carrier's operating and
administrative expenses.
c) Financial Data - IMS shall maintain supporting documentation for all
bank accounts over which it has authority. On a monthly basis, IMS
shall prepare financial data, reflecting all debits and credits with
respect to WYO Flood Program business administered under this
Agreement, including agents' commissions and IMS' Service Fees paid.
d) WYO Flood Program Reimbursements - Any WYO Flood Program
reimbursements made pursuant to the Arrangement, including, but not
limited to, those for the unallocated loss adjustments expenses, the
allocated loss adjustments, and for approved special allocated loss
adjustments expenses, shall be payable to IMS upon receipt by
Customer.
e) Marketing Goals - Customer shall maintain responsibility for any risk,
or shall be entitled to any reward, that may be associated with
achieving or failing to achieve any marketing goal set by the FIA or
FEMA.
4) CLAIM ADMINISTRATION. IMS shall provide Claims administration in
accordance with the Arrangement, the Financial Control Plan and the
Agreement, which claim administration processing services are outlined
below. Any litigation costs not reimbursed by FEMA would be the
responsibility of the Customer. IMS may also rely on the information
and direction contained in the WYO Flood Program Claims Manual, the
FEMA Adjuster Manual, the Flood Insurance Agent's Manual, the Standard
Flood Insurance Policy, the WYO Operational Overview, and/or other WYO
Flood Program instructional material.
a) Claim Management Facilitation.
- Twenty-four (24) hour reporting capability, first notice of
loss, coverage for verification and WYO Policy claim;
- Investigation of WYO Policy claim;
- Fast track unit;
- Reinspection and audit;
- Claims handling standards/best practices;
- Claim check issuance;
- Management reports;
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- WYO Policyholder satisfaction surveys;
- Special Investigation Unit ("SIU") services;
- Salvage & subrogation claim processing;
- Litigation support.
b) Catastrophe Preparation and Response.
- Preparedness by developing media reference guides and
notices, adjuster workshops, and training manuals; provide
storm tracking; reserve equipment and supplies; establish
procedures;
- Response in case of a catastrophic event by establishing and
staffing satellite service centers; automating the
distribution of claims to adjusters; internal
examinations/external reinspections;
- Recovery by providing management reports, audit/reinspection
program, SIU and oversight operations.
5) ADJUSTING FIRM. IMS' Colonial Catastrophe Claims Service will be the
authorized adjusting firm ("Adjusting Firm") for all claims adjusting
work on behalf of Customer. However, Customer may designate a
different Adjusting Firm with thirty (30) days written notice to IMS.
6) DISASTER RECOVERY PLAN. IMS shall perform its' full range Disaster
Recovery Plan on an annual basis. Customer has the right to observe
the Disaster Recovery Plan at its own expense, provided that it has
requested in writing to participate within thirty (30) days of planned
execution.
7) STATISTICAL REPORTING. IMS shall maintain Customer's data within IMS'
policy, claims and general ledger systems. IMS shall prepare and
submit to FIA, monthly financial and statistical reports,
reconciliation reports, certifications, and statistical tapes on
Customer's behalf, in accordance with WYO Flood Program Accounting
Procedures and the Transaction Record Reporting and Processing Plan
("TRRP Plan").
8) SPECIAL SERVICES.
a) Audit - At Customer's expense and at IMS' premises, IMS shall
conduct a biennial audit of any and all WYO Flood Program
business written by Customer pursuant to this Agreement. IMS
shall select an independent auditor and IMS shall present the
expense estimate for the biennial audit to Customer. Within
fifteen (15) days of receiving the estimate, Customer shall
have the option of selecting their own independent auditor to
conduct the audit or proceed with the independent auditor
selected by IMS.
b) Zone Determination Services - IMS shall provide flood zone
determinations to the Customer (or Customer's agents) to
assist in writing a WYO Policy to be placed with the Customer
and administered by IMS.
c) Rating Software - From the Effective Date of this Agreement
up to the one (1) year anniversary of the date that IMS
provides internet access (which shall include deployment of
the internet access into live production) to any of
Customer's insurance sales agents for the Authorized Line of
Business within the Authorized States, IMS will make
available to Customer and/or Customer's insurance sales
agents, rating software (which by definition is a Proprietary
System) for the ability to provide quotations, prepare new
business applications, endorsements and cancellation of the
WYO Policy.
d) Training - Upon Customer's request and excluding travel
expenses, IMS will provide four (4) training sessions per
calendar year to Customer and/or Customer's Agents. Customer
will provide the training facility. Additional requests for
training will be charged at One Hundred and Twenty Five
Dollars ($125) per day plus reasonable per diem and travel
expenses incurred.
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e) Marketing Material. IMS will make available to Customer its
marketing or promotional materials, which IMS may customize
and produce for Customer at Customer's expense.
f) Agency Rollover Services. Within a reasonable time of
Customer's request, IMS will provide rollover services to
those Customer agents that wish to roll over 500 or more WYO
Policies in their book of business to Customer. In the event
that there are several Agents within a concentrated
geographical area wishing to roll over 500 or more WYO
Policies to Customer, IMS will provide rollover service to
all Agents within that area at the same time. Due to the
potential size of the project, IMS will need Customer to
provide a full listing of Agents, location and size of
business. IMS will create a schedule to perform this service.
g) Additional Fees & Services. Additional services not specified
in this Agreement may be provided by as mutually agreed upon
in writing between the Customer and IMS in writing.
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