Exhibit 10.2
INSURANCE ADMINISTRATION SERVICES AGREEMENT
THIS INSURANCE ADMINISTRATION SERVICES AGREEMENT ("Agreement") is
entered into by and between INSURANCE MANAGEMENT SOLUTIONS, INC. ("Vendor"), 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 FIRST INSURANCE COMPANY OF HAWAII, LTD ("Company"), an
insurer existing under the laws of the State of Hawaii with its principal place
of business located at 1100 Ward Avenue, Honolulu, HI 96814.
WHEREAS, the Federal Emergency Management Agency ("FEMA") and the
Federal Insurance Administration ("FIA") administer the National Flood Insurance
Program ("NFIP") and the Company 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 Flood Carrier ("WYO Carrier") under
the Write Your Own Flood Insurance Program ("WYO Flood Program"), a program
offered under the NFIP; and
WHEREAS, Vendor has been designated by FIA as a "qualified performer"
for the provision of services to WYO Carriers under the NFIP; and
WHEREAS, Company wishes to engage the services of Vendor to administer
certain of the Company's obligations in the state(s) ("Applicable States") set
forth herein;
WHEREAS, Vendor wishes to provide such 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:
I. AUTHORITY OF VENDOR.
A. Appointment - Company hereby grants Vendor the authority to
supervise and administer certain lines of Company's business
("Insurance Program"), as specified in Schedule A, in the
states ("Applicable States") expressly set forth in Schedule
A. Schedule A is attached to and hereto made a part of this
Agreement. Vendor hereby accepts such appointment, and the
grant of authority, and agrees to carry out the resulting
duties and responsibilities to the best of its ability,
knowledge, skill, and judgment, and in accordance with the
highest reasonably attainable standards of quality generally
utilized in the insurance and data processing industries.
B. Authority - Company hereby grants Vendor the authority to act
for and on behalf of Company in matters required for Vendor to
properly supervise and conduct the handling of the aforesaid
WYO Flood program, including the authority to collect and
remit premiums, process applications and other forms, issue
policies, and process claims, all in a manner consistent with,
pursuant to and as authorized by the provisions of the
National Flood Insurance Act of 1968 (as amended), the
regulations of the NFIP, FIA, FEMA and the terms of this
Agreement.
II. RESPONSIBILITIES OF VENDOR.
A. Policy Administration: Vendor shall administer Company's WYO
Flood Program policies ("WYO Policy", or the plural, "WYO
Policies") and in accordance therewith shall be responsible
for the following policy administration functions: compliance
with community eligibility/rating criteria; policyholder
eligibility determination; WYO Policy issuance, WYO Policy
endorsements; WYO Policy cancellations; WYP Policy
correspondence; payment of agents' commissions on Company's
behalf; and, the receipt, recording, control, timely deposit,
and disbursements of premium funds in connection with the
foregoing, all in accordance with the WYO Flood Program
Financial Control Plan ("Financial Control Plan")
requirements established by the FIA. Further, Vendor shall
reply to written and telephone inquiries from policyholders
and/or producers regarding any WYO Policy administered
pursuant to this Agreement.
B. Claim Service - Company shall have responsibility for the
administration and processing of WYO Policy claims ("Claim")
under this Agreement. Vendor shall provide the Systems
required for ???. Vendor will be responsible for check
disbursements and all required reporting to NFIP, FIA and
FEMA. Vendor will provide Catastrophe Claim Services that are
outlined in Schedule B of this Agreement.
C. Statistical Reporting - Vendor shall prepare and submit, to
FIA, monthly financial and statistical reports,
reconciliations, certifications, and statistical tapes on
Company's behalf, in accordance with WYO Flood Program
Accounting Procedures and the Transaction Record Reporting
and Processing Plan ("TRRP Plan"). Vendor shall submit copies
of all monthly reports to the Company.
D. Company Agents - Vendor shall provide to each Company Agent
appointed under this Agreement, a limited license to use
Vendor's FloodWriter(c)(tm) software program, and a current
flood zone determination for any WYO Policy application
submitted pursuant to this Agreement. Further, excluding
records required to be maintained by Company in accordance
with the FloodWriter(c)(tm) software license, Vendor shall
keep appropriate records, in conformity with Internal Revenue
Services regulations, for the purpose of preparing 1099
reports for Company Agent's commissions and Adjuster's fees
paid by Vendor on behalf of Company. The expense for the above
services has been incorporated in the Vendor's Monthly Service
Fee.
E. Time Standards - Vendor shall use it's best efforts to adhere
to certain time standards for performance, as may be outlined
and amended from time to time within the FEMA/FIA Financial
Assistance/Subsidy Arrangement ("Arrangement").
III. PREMIUM COLLECTION AND ARRANGEMENT
A. Banking Arrangement - Vendor and Company shall establish
banking arrangements which comply with the Arrangement and
other WYO Flood Program requirements, and which will provide
for the establishment of a NFIP restricted account
("Restricted Account") with company as custodian, and a FEMA
letter of credit ("Letter of Credit"), with additional
accounts as needed to facilitate operations, all in
conformity with FEMA/FIA guidelines. Company shall grant
specific Vendor employees checksigning authority on any
Restricted Account and the authority to initiate appropriate
drawdowns against Company's Letter of Credit, in order for
Vendor to act on Company's behalf in making
2
disbursements for Company 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 Company upon
thirty (30) days advanced written notice to Vendor.
B. Premium Remittance - Vendor shall be liable to the FIA for any
premiums Vendor has received on WYO Flood program business
written under this Agreement. Vendor shall establish
procedures for a timely deposit and remittance of funds to the
U.S. Treasury via authorized automatic clearinghouse
mechanism. Gross premium collected by Vendor, for WYO Flood
program business written under this Agreement, shall be
remitted to the FIA by Vendor net of the established NFIP
Allowable Expenses. "Allowable Expenses" shall mean a WYO
Carrier's operating and administrative expenses.
C. Financial Data - Vendor shall maintain supporting
documentation for all bank accounts over which it has
authority. At least monthly, Vendor shall prepare financial
data, by state, reflecting all debits and credits with respect
to WYO Flood Program business written pursuant to this
Agreement, including agents' commissions and Vendor's
Servicing Fees paid, during the preceding quarter.
IV. COMPANY ACCESS TO RECORDS
Vendor agrees to permit Company or its duly appointed representatives,
during the term of this Agreement, the right to visit, inspect,
examine, copy, verify and audit, at Vendor's offices, any of the
accounts, files, documents, books, reports and other records in
possession or control of Vendor relating directly to the WYO Flood
Program business covered by this Agreement. Such access shall be given
during reasonable business hours and upon ten (10) days prior written
notice to Vendor.
Furthermore, at Company's expense, Vendor shall conduct a biennial
audit of any and all WYO Flood Program business written by Company
pursuant to this Agreement. To minimize the expense incurred by Company
for such biennial audit, Vendor shall select an auditor, subject to
Company's approval, and shall coordinate the biennial audit.
V. EXPENSES AND FEES
A. Service Fee - Company shall pay Vendor, on a monthly basis,
a servicing fee ("Servicing Fee") as specified in the
Schedule B, which schedule is attached to and hereto made a
part of this Agreement.
B. Claims Administration Fee - If Vendor provides claims
administration services to Company, Company shall pay Vendor a
claims administration fee ("Claims Administration Fee") as
specified in the Schedule B.
C. Additional Service Expenses - In accordance with the
Arrangement, Company shall be liable for operating,
administrative and production expenses, including but not
limited to any State premium taxes, agents' commissions, or
any other expense of whatever nature incurred by the Company
in the performance of its obligations under the Arrangement.
D. Vendor Expenses - In consideration of the Servicing Fees and
Claims Administration Fees paid to Vendor, Vendor shall pay
the general expenses of processing the WYO Flood program
policies, including those of policy
3
administration, cash management, claims processing and
financial and transactional reporting.
E. WYO Flood Program Reimbursements - Any WYO Flood program
Reimbursements made pursuant to the Arrangement, including,
but not limited to, those for the unallocated loss expenses,
shall be payable to Vendor upon receipt by Company.
F. Marketing Goals - Company 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.
VI. ADDITIONAL SERVICES AND FEES
A. Agent or Company Training - Upon Company request, Vendor will
provide one training session per quarter, or four training
sessions per year, to company or Company's agents. Company
shall provide the training facility and pay Vendor reasonable
per diem and travel expenses incurred.
B. Marketing Material - Company may use Vendor's previously
developed marketing or promotional materials, which Vendor may
customize and produce for Company at company's expense.
C. Additional Fees and Service - Additional service not defined
in this Agreement may be provided as mutually agreed upon
between the Company and Vendor in writing.
VII. CONFIDENTIALITY OF DATA AND INFORMATION.
A. Confidential and Proprietary Information - Vendor and Company
acknowledge that any and all information concerning the
other's business is confidential and proprietary information
("Confidential Information") and neither party shall permit
the duplication, use, or disclosure of any such Confidential
Information to any person, other than its own employees,
agents or representatives who must have such information for
the performance of obligations hereunder, unless such
duplication, use, or disclosure is specifically authorized in
writing by the other party. Confidential information is not
meant to include any information which at the time of
disclosure is generally known to the public and/or the
insurance industry prior to the disclosure.
B. Trademarks, Service Marks, Trade Names - Neither party shall
use or duplicate the name(s), trademark(s), servicemark(s), or
trade name(s) (whether registered or not) of the other party
in public releases or advertising or in any other manner
unless such use or duplication is specifically authorized in
writing by the other party, except that Vendor may include
Company's name in a list of clients/customers without such
authorization.
C. Agreement Terms - Neither party shall disclose information as
to specific terms of this Agreement, in particular any details
about the work performed or the Service Fees or Claims
Administration Fees paid, without prior written consent of the
other party.
D. Company's Records - Vendor shall maintain system integrity and
data security necessary to protect Company's records and data
from loss and damage and to protect against unauthorized
disclosure of Company's Confidential Information as described
in Section VII(A) above.
4
E. Public Disclosure - The disclosure restrictions provided in
this section shall be extinguished at the time and to the
extent that the Confidential Information becomes generally
available to the public domain without the fault of either
Vendor or Company.
VIII. COMMENCEMENT AND TERMINATION.
A. Term of Agreement - This Agreement shall become effective on
the date that this document is executed by Company and by
Vendor and shall have a minimum term ("Initial Term") of
thirty six (36) full calendar months unless terminated earlier
pursuant to this section VIII (C) of this Agreement. At the
conclusion of the Initial Term ("Termination Date"), this
Agreement shall be renewed and extended for an additional
renewal term of thirty-six (36) months unless otherwise
terminated pursuant to this Section VIII (C).
B. Termination Without Cause - This Agreement may be terminated,
without cause, at any time after the Initial Term by either
party upon written notice of termination to the other, not
less than ninety (90) days prior to the Termination Date.
C. Termination for Cause - Any party may immediately terminate
this Agreement for cause upon written notice to the other
party in the event of:
1. Bankruptcy, receivership, of either party, regardless
of whether any of these occur voluntarily or
involuntarily; or
2. Failure by any party to fulfill a material obligation
under this Agreement, provided that such party has
been notified in writing of such failure and such
failure continues without cure for a period of ninety
(90) days after written notice thereof.
D. Accounting - Upon termination of this Agreement, Vendor shall
fully account to Company for all of its responsibilities and
activities pursuant to this Agreement.
IX. LIABILITY.
A. Limit of Liability - In no event shall Vendor's liability for
breach of this Agreement or any of its provisions exceed the
Company's earnings under this agreement for the three months
immediately preceding the breach. Vendor shall not be liable
for any lost profits, business goodwill, or other
consequential, punitive, special or incidental damages
incurred by Company.
B. Vendor Indemnification - Vendor shall indemnify, defend and
hold harmless Company, its officers, and directors from any
liability, cost, loss, fine, penalty, claim, demand, damage or
expense, including attorney's fees, incurred as a direct
result of any act, error or omission by Vendor, or incurred as
a result of any material breach of Vendor's obligations under
this Agreement. Vendor's indemnification under this paragraph
shall be in accordance with the limitations set forth in this
Agreement.
C. Company Indemnification - Company shall indemnify, defend and
hold harmless Vendor, its officers, and directors from any
liability, cost, loss, fine, penalty, claim, demand, damage or
expense, including attorney's fees, incurred as a
5
direct result of any act, error or omission by Company or
incurred as a result of any material breach of Company's
obligations under this Agreement. Company's indemnification
under this paragraph shall be in accordance with the
limitations set forth in this Agreement.
D. Notice of Claim - All parties agree to promptly give the other
notice upon being notified or becoming aware of an allegation
or claim which could give rise to a claim under this section.
X. GENERAL AGREEMENTS
A. Applicable Law - This Agreement in all matters arising
thereunder shall be governed by and determined in accordance
with the laws of the State of Florida. Venue for any actions
arising hereunder shall be in a State court of competent
jurisdiction in Pinellas County, Florida. Notwithstanding the
foregoing, this section shall not apply to any matter that
relates specifically to and involves an insured party,
including but not limited to Claims filed by an insured.
B. Entire Agreement - This Agreement, and any exhibits, schedules
or addenda 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 shall be
valid unless the same shall be in writing and signed by all of
the parties hereto. All schedules, 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.
C. Attorney's Fees - 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
attorney's 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
attorney's fees were incurred.
D. Company Warranties - Company warrants that it and that it is
licensed to engage in the insurance business in all
jurisdictions in which it has duly authorized Vendor to issue
policies or other insurance coverage in the Company's name.
Further, Company warrants to Vendor that it will comply with
the laws of the state or states covered by this Agreement and
with the rules and regulations of all regulatory authorities
having jurisdiction over Company's activities, and shall,
whenever necessary, maintain at its own expense all required
licenses to transact business in such states.
E. Vendor Warranties - Vendor warrants to Company that it is
duly authorized and incorporated to transact the business of
servicing insurance companies. Further, Vendor warrants to
Company that it will comply with the laws of the state or
states covered by this Agreement and with the rules and
regulations of all regulatory authorities having jurisdiction
over Vendor's activities, and shall, whenever necessary,
maintain at its own expense all required licenses other than
agents licenses unless specifically noted in Schedule A of
this agreement, to transact business in such states.
6
F. Invalidation - 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. Construction of Agreement - The parties acknowledge that each
party and its counsel have reviewed and revised this Agreement
and that the normal rule of construction to the effect that
any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement
or any amendments or exhibits hereto.
H. Miscellaneous - 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. Section headings are intended for purposes of
description only and shall not be used for purposes of
interpretation of this Agreement.
I. Notices - 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 Company: First Insurance Company of Hawaii, LTD
1100 Ward Avenue
Honolulu, HI 96814
(808) 545-3262
Attention: Antonio Abad, Assistant Vice President
As to Vendor: Insurance Management Solutions, Inc.
360 Central Avenue
St. Petersburg, FL 33701
Fax Number: (813) 823-6518
Attention: Kelly King, Senior Vice President
Notices sent by hand delivery shall be deemed effective on the
date of 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 third business day after being deposited into the post
office. Notices sent by facsimile transmission shall be deemed
to be effective on 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.
(The remainder of this page is intentionally left blank)
7
IN WITNESS WHEREOF, the parties hereto by their respective duly authorized
representatives have executed this Agreement to be effective as of the 22ND day
of MARCH, 1999.
"Vendor": "Company":
INSURANCE MANAGEMENT SOLUTIONS, INC. FIRST INSURANCE COMPANY OF HAWAII, LTD.
By: /s/ Kelly R. King By: /s/ Ernie L. Moore
---------------------------------------- -----------------------------------------
As its: SR. V.P. As its: SR. VICE PRESIDENT
------------------------------------ -------------------------------------
Date: 3/17/99 Date: 3-22-99
-------------------------------------- ---------------------------------------
</Table>
8
SCHEDULE A
APPLICABLE STATES AND INSURANCE PROGRAM
Company hereby authorizes Vendor to supervise and administer its Insurance
Program for the following line(s) of business in the following "Applicable
States":
LINES OF BUSINESS:
WYO Flood Insurance
APPLICABLE STATES:
Hawaii
9
SCHEDULE B
FEES
POLICY ADMINISTRATION
Company shall pay Vendor a monthly Servicing Fee of 8% Direct Written Premium,
for all Administration services rendered by Vendor pursuant to this Agreement.
The Service Fee shall be retained from the Restricted Account as an Allowable
Expense payable to Vendor.
CLAIM ADMINISTRATION
Company shall pay Vendor the following Claim Administration Fees:
Claim System Services: Vendor shall retain .25% of Direct Earned Premium for
the Claim System utilization and maintenance, training, check disbursement and
claim reporting requirements as outlined in the WYO Arrangement.
Catastrophe Services: Vendor will provide Full Catastrophe Flood Claim
Services. Vendor shall retain the full 3.3% Administration Fee and Fee Schedule
for Catastrophe Services.
The Claim Administration Fees shall be retained from the Restricted Account as
an Allowable Expense payable to Vendor.
10
ADDENDUM TO THE INSURANCE ADMINISTRATION SERVICES AGREEMENT
THIS ADDENDUM TO THE INSURANCE ADMINISTRATION SERVICES AGREEMENT (hereinafter,
"Addendum") dated this ___ day of ______________, 1999, by and between
INSURANCE MANAGEMENT SOLUTIONS, INC. ("Vendor"), and FIRST INSURANCE COMPANY OF
HAWAII, LTD. ("Company"), hereby modifies and supplements that INSURANCE
ADMINISTRATION SERVICES AGREEMENT (hereinafter, "Agreement"), by and between
the Company and Vendor, effective on March 22, 1999, and shall be attached to
and form a part of the Agreement.
I. Claim Service - Article II, Paragraph B of the Agreement is hereby
deleted and replaced with the following:
Claim Service - Vendor shall have responsibility for the
administration and processing of WYO Policy claims ("Claim") under
this Agreement. Vendor shall provide "Full Claim Service", which shall
be defined as processing and administering a Claim from the Claim's
inception until closing. The Claim shall be processed and administered
in accordance with the following procedures:
A. Processing. Vendor shall provide Claims processing in
accordance with the Arrangement and the Financial Control
Plan. Vendor may also rely on 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.
B. Catastrophe Office. A catastrophe team may be engaged at the
discretion of the Vendor to provide Claims support. Vendor
shall coordinate activities and shall provide information to
the FIA or its designee whenever a flood insurance
catastrophe office is established.
II. Schedule B - Schedule B of the Agreement is hereby modified as follows:
Catastrophe Services: Vendor shall retain 3.3% of the net Claim after
application of the deductible.
III. General Agreement - All provisions within the Agreement, not
inconsistent with this Addendum, shall remain in effect and are
enforceable.
IN WITNESS WHEREOF, the parties have executed this Agreement or caused
this Agreement to be duly executed by their corporate officers on the dates as
indicated hereafter.
<Table>
<Caption>
COMPANY: VENDOR:
FIRST INSURANCE COMPANY OF HAWAII, LTD. INSURANCE MANAGEMENT SOLUTIONS, INC.
By: /s/ Ernest H. Fukeda, Jr. By: /s/ C. Breakiron
-------------------------------------- ---------------------------------------
As its: VICE PRESIDENT As its: CFO
---------------------------------- -----------------------------------
Date: 1-28-2000 Date 1/30/00
------------------------------------ --------------------------------------
</Table>
Addendum to Insurance Administration Services Agreement
This addendum effective July 26, 2002 is hereby attached to and made a part of
the Insurance Administration Services Agreement dated March 22, 1999 between
Insurance Management Solutions, Inc. and First Insurance Company of Hawaii, Ltd.
The Insurance Administration Services Agreement is amended as follows:
Section VIII. Commencement and Termination.
A. Term of Agreement-
The following shall be deleted:
At the conclusion of the Initial Term ("Termination Date"), this
Agreement shall be renewed and extended for an additional renewal term
of thirty-six (36) months unless otherwise terminated pursuant to this
Section VIII(C).
And replaced with:
At the conclusion of the Initial Term ("Termination Date"), this
Agreement shall be renewed and extended for an additional term of
twelve (12) months unless otherwise terminated pursuant to this
Section VIII(C).
In all other respects, the Insurance Administration Services Agreement dated
March 22, 1999 shall remain unchanged.
IN WITNESS WHEREOF, the parties have executed or caused this aforementioned
Agreement as amended by this addendum to be duly executed by its corporate
officers on the dates as indicated hereafter.
Company: Vendor:
First Insurance Company of Hawaii, Ltd. Insurance Management Solutions, Inc.
By: /s/ Antonio Abad By: /s/ D. M. Howard
------------------------------------- ----------------------------------
As its: VICE PRESIDENT As its: PRES/CEO
-------------------------------- -----------------------------
Date: JULY 26, 2002 Date: July 31, 2002
---------------------------------- -------------------------------