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EXHIBIT 10.27
AMERICAN RE-INSURANCE PLACEMENT SLIP
QUOTA SHARE REINSURANCE AGREEMENT
COMPANY REINSURED: Financial Pacific Insurance Company
APPLICATION OF AGREEMENT: Commercial Excess Liability
EFFECTIVE: January 1, 1998
COMPANY'S POLICY LIMIT: $10,000,000
REINSURER'S LIMITS OF LIABILITY: 100% of $10,000,000
excess of Primary
90% of $2,000,000 in excess of
limits for ECO/XPL combined
COMPANY RETENTION: Nil% excess of Primary
RISK UNDERWRITING AND PRICING: Per the Company's underwriting
guidelines and rates.
PREMIUM: 100% of premium applicable to reinsured
limits of liability
CEDING COMMISSION: 35%
CANCELLATION: At any time with 90 days notice by
either party to the agreement
TERMS AND CONDITIONS WITHIN AGREEMENT
COMMERCIAL EXCLUSIONS ATTACHED
COMMERCIAL UNDERLYING INSURANCE ATTACHED
DEFINITIONS ATTACHED
INSOLVENCY ATTACHED
OFFSET AND SECURITY ATTACHED
COMMENCEMENT AND TERMINATION ATTACHED
LOSSES AND LOSS ADJUSTMENT EXPENSES ATTACHED
REPORTS AND REMITTANCES ATTACHED
ACCESS TO RECORDS ATTACHED
RESERVES AND TAXES ATTACHED
CHANGE IN POLICY FORMS ATTACHED
EXTRA CONTRACTUAL OBLIGATIONS ATTACHED
EXCESS JUDGMENTS CLAUSE ATTACHED
ACCEPTED BY: OFFERRED BY:
FINANCIAL PACIFIC INSURANCE CO. AMERICAN RE-INSURANCE COMPANY
[SIG] [SIG]
- ------------------------------- -----------------------------------
DATE: 10/23/97 DATE: 10/3/97
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AMERICAN RE-INSURANCE COMPANY PLACEMENT SLIP
COMMERCIAL EXCLUSIONS
A. This Contract does not apply to and specifically excludes the following:
1. Business accepted by the Company as reinsurance from other
insurers except agency reinsurance where risk underwriting and
all servicing, including claim handling, is done by the Company.
2. Any loss or liability accruing to the Company directly or
indirectly from any insurance written by or through any pool or
association including pools or associations in which membership
by the company is required under any statutes or regulations.
3. 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, insolvency fund, plan, pool,
association, fund or other arrangement, howsoever denominated,
established or governed, which provides for any assessment of or
payment or assumption by the Company of part or all of any
claim, debt, charge, fee, or other obligation of an insurer, or
its successors or assigns, which has been declared by any
competent authority to be insolvent, or which is otherwise
deemed unable to meet any claim, debt, charge, fee, or other
obligation in whole or in part.
4. 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.
5. Business written to apply in excess of a deductible or
self-insured amount of more than $100,000, including Umbrella
business.
6. Aviation liability including aerospace and satellite business
7. Workers' Compensation business, including Longshoremen's and
Harbor Workers' Act and Jones Act.
8. Kidnap and Ransom, Surety, Credit, Financial Guarantee or
Fiduciary Insurance.
9. Retail liquor law liability except where liquor constitutes less
than 50% of sales. Specifically excluded are bars and retail
liquor stores.
10. Insurance covering damage claims for the withdrawal, inspection,
repair, replacement, or loss of use of the insured's products or
of any property of which such products form a part of, or if
such products or property are withdrawn from the market or from
use because of any known or suspected defect or deficiency
therein.
11. Liabilities for bodily injury, personal damage and/or property
damage from asbestos and/or asbestos products, including but not
limited to liability arising from the mining, manufacture,
installation, transport, storage, habitation or use of
materials, products or structure containing asbestos.
12. Any loss or liability accruing to the Company arising out of the
Employee Retirement Income Security Act of 1974 (ERISA), or
amendments thereto.
13. Fidelity and Surety
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AMERICAN RE-INSURANCE COMPANY PLACEMENT SLIP
COMMERCIAL EXCLUSIONS
14. Watercraft liability except for boats less than 50 feet in length.
15. All professional liability and/or malpractice insurance except as
pertains to barber and beauty shops, funeral directors, druggists,
opticians and optometrists.
16. Liability insurance relating to products or completed operations
involving the manufacture or importation of:
a. Cosmetics, hair or skin products,
b. Drugs, pharmaceuticals or agricultural chemicals;
c. Aircraft, aircraft parts or aircraft engines, all motorized
vehicles, or mobile equipment;
d. Heavy machinery and equipment, home power tools, or oil drilling
equipment.
17. Liability insurance relating to premises or operations primarily
involving:
a. Aircraft airports, as respects coverage for all liability arising
out of the ownership, maintenance, or use of any aircraft or
flight operations;
b. Amusements parks, carnivals, circuses, speed contests and racing;
c. Manufacturing, packing, handling, shipping or storage of
explosives, ammunitions, fuses, arms, magnesium, fireworks,
nitroglycerin, celluloid, pyroxylin or explosive substances
intended for use as an explosive.
d. Gas or public utility companies, gas or public utility works, or
gas lease operations;
e. Production, refining, handling, shipping or storage of natural of
artificial fuel gases, synthetic or coal or shale based fuel,
butane, propane, gasoline or liquefied petroleum gas;
f. Oil and gas risks, by which is meant drilling rigs, exploration
risks, cracking plants, refineries and depots, and oil and gas
pipelines;
g. Railroad operations, specifically "line" or "on track" operations
of actual railroads;
h. Ship building, ship repair yard, dry docks, stevedoring;
i. Tunneling, subway and underground mining;
j. Offshore or subaqueous work;
k. Wrecking of structures over eight stories in height, or marine
wrecking;
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AMERICAN RE-INSURANCE COMPANY PLACEMENT SLIP
COMMERCIAL EXCLUSIONS
l. Ski resorts;
m. Waste disposal and deposit sites except when written in
conjunction with either a refuse hauler or recycling account;
n. Crane rentals without operators whose primary business is crane
rentals;
o. Scaffold installation, repair, removal or rental, unless
incidental;
p. Aerial crop dusting to include application of fertilizers,
herbicides, pesticides;
q. Warehousemen's legal liability;
r. Automobile racing and racetracks;
s. Taxis;
t. Blasting contractors;
u. Licensed roofing contractors whose primary business is such;
v. Wrap up construction projects.
18. Nuclear risks as defined in the "Nuclear Incident Exclusion
Clause-Liability Reinsurance" attached to and forming part of this
Contract.
19. Pollution liability as excluded by the Company's policies. It is
hereby warranted that any Commercial General Liability policy issued
by the Company will also include ISO pollution exclusion language.
B. If the Company provides insurance for an insured with respect to any
premises, operations products or completed operations listed in
subparagraphs 16 and 17 of paragraph A above, except subparagraphs 17(c)
and 17(d), and if such premises, operations, products or completed
operations constitute only a minor incidental part of the total premises,
operations, products or completed operations of the insured, such
exclusion (s) shall not apply.
C. If the Company is bound, without the knowledge of and contrary to the
instructions of the Company's supervisory underwriting personnel, on any
business failing within the scope of one or more of the exclusions set
forth in subparagraphs 14 through 19 of paragraph A above, these
exclusions, except those set forth in subparagraphs 15, 17(c) , 17(d), 18
and 19 shall be suspended with the respect to such business until 65 days
(60 discovery days plus 5 mailing days) after an underwriting supervisor
of the Company acquires knowledge of such business.
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AMERICAN RE-INSURANCE COMPANY PLACEMENT SLIP
COMMERCIAL UNDERLYING INSURANCE
(a) The Underlying carrier must be Financial Pacific.
(b) The following underlying limits shall be required and
maintained:
1. Comprehensive General Liability
$1,000,000 each occurrence limit
$1,000,000 personal and advertising injury limit
$1,000,000 general aggregate limit (other than
products-completed operations)
$1,000,000 products-completed operations aggregate limit
2. Comprehensive Auto Liability
Single Limit Liability
$1,000,000 each accident
Split-Limits Liability
$1,000,000 bodily injury each person
$1,000,000 bodily injury each occurrence
$1,000,000 property damage each accident
3. Employers' Liability
Bodily Injury Liability
$500,000 each accident (by accident)
$500,000 policy limit (by disease)
$500,000 each employee (by disease)
(c) Other underlying limits may be required for certain classes of risks
and shall be so stated in the Company's Umbrella Underwriting
Guidelines.
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AMERICAN RE-INSURANCE COMPANY PLACEMENT SLIP
DEFINITIONS
a) The term "net retained insurance liability" as used herein means the
remaining portion of the Company's gross liability on the policies covered
hereunder after deducting all excess of loss reinsurance and all pro rata
reinsurance, other than the quota share reinsurance provided under this
Agreement.
(b) The definition of the term "occurrence" as used herein shall be the
definition of said term as set forth in the Company's policy, provided,
however, in the event said term is not defined in any policy covered
hereunder, then as respects such policy the term "each occurrence" as used
herein shall be understood to mean each accident or occurrence or series
of accidents or occurrences arising out of one event, and shall include
aggregate limits of liability for a period not exceeding 12 months when
such Company's policy covered hereunder applies in excess of aggregate
limits.
(c) If the date of loss, accident or occurrence cannot be specifically
determined, the date of loss, accident or occurrence shall be the
inception date of the original policy (i.e., the policy reinsured
hereunder); such policy period shall be deemed not to exceed 12 calendar
months.
(d) The term "policies" as used herein means each of the Company's
binders, policies and contracts providing insurance and reinsurance on the
business reinsured under this Agreement.
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AMERICAN RE-INSURANCE COMPANY PLACEMENT SLIP
INSOLVENCY (CALIFORNIA)
(a) In the event of the insolvency of the Company and the
appointment of a conservator, liquidator or statutory successor of the Company,
the reinsurance provided by this Agreement shall be payable to such conservator,
liquidator or statutory successor immediately upon demand, subject to the right
of offset and with reasonable provision for verification of the Reinsurer's
liability, on the basis of claims allowed against the insolvent Company by any
court of competent jurisdiction or by any conservator, liquidator, or statutory
successor of the Company having authority to allow such claims, without
diminution because of such insolvency or because such conservator, liquidator or
statutory successor has failed to pay all or a portion of any claims. Payments
by the Reinsurer as above set forth shall be made directly to the Company or to
its conservator, liquidator or statutory successor, except where this Agreement
specifically provides another payee of such reinsurance in the event of the
insolvency of the Company.
(b) In the event of the insolvency of the Company, the liquidator,
conservator or statutory successor of the Company shall give the Reinsurer
written notice of the pendency of each claim against the Company on a policy or
bond reinsured within a reasonable time after such claim is filed in the
insolvency proceeding. During the pendency of such claim, the Reinsurer may, at
its own expense, investigate such claim and interpose in the proceeding where
such claim is to be adjudicated any defense or defenses which it may deem
available to the Company, its conservator, liquidator or statutory successor.
Subject to court approval, any expense thus incurred by the Reinsurer shall be
chargeable against the Company as part of the expense of liquidation to the
extent of such proportionate share of the benefit as shall accrue to the Company
solely as a result of the defense undertaken by the Reinsurer.
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AMERICAN RE-INSURANCE COMPANY PLACEMENT SLIP
OFFSET AND SECURITY CLAUSE
(a) Each party hereto has the right, which may be exercised at any
time, to offset any amounts, whether on account of premiums or losses or
otherwise, due from such party to another party under this agreement or any
other reinsurance agreement heretofore or hereafter entered into between them,
against any amounts, whether on account of premiums or losses or otherwise due
from the latter party to the former party. The party asserting the right of
offset may exercise this right, whether as assuming or ceding insurer or in both
roles in the relevant agreement or agreements.
(b) Each party hereby assigns and pledges to the other party (or to
each other party, if more than one) all of its rights under this agreement to
receive premium or loss payments at any time from such other party
("Collateral"), to secure its premium or loss obligations to such other party at
any time under this agreement and any other reinsurance agreement heretofore or
hereinafter entered into by and between them ("Secured Obligations"). If at any
time a party is in default under any Secured Obligation or shall be subject to
any liquidation, rehabilitation, reorganization or conservation proceeding, each
other party shall be entitled in its discretion, to apply, or to withhold for
the purpose of applying in due course, any Collateral assigned and pledged to it
by the former party and otherwise to realize upon such Collateral as security
for such Secured Obligations.
(c) The security interest described herein, and the term
"Collateral," shall apply to all payments and other proceeds in respect of the
rights assigned and pledged. A party's security interest in Collateral shall be
deemed evidenced only by the counterpart of this Agreement delivered to such
party.
(d) Each right under this Article is a separate and independent
right, exercisable, without notice or demand, alone or together with other
rights, in the sole election of the party entitled thereto, and no waiver,
delay, or failure to exercise, in respect of any right shall constitute a waiver
of any other right. The provisions of this Article shall survive any
cancellation or other termination of this Agreement.
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AMERICAN RE-INSURANCE COMPANY PLACEMENT SLIP
COMMENCEMENT AND TERMINATION
(a) This Agreement shall take effect as of 12:01 A.M., January 1,
1998 and is entered into for an unlimited period but either party may terminate
this Agreement at any time by giving not less than 90 days notice in writing to
the other party.
(b) The Reinsurer shall participate in business coming within the
terms of this Agreement until the date of termination of this Agreement.
(c) In the event of cancellation of this Agreement, the Reinsurer
shall not be liable for any losses occurring under new and renewal policies
becoming effective after the date of cancellation. The Reinsurer shall remain
liable for losses occurring after the date of cancellation on all policies in
force at such cancellation date until the next annual anniversary date or prior
termination date of such policies; provided, however, any reinsurance still in
force one year after the date of cancellation of this Agreement shall be
automatically canceled at that time and the Reinsurer shall not be liable for
losses occurring thereafter. The Reinsurer shall return to the Company the
unearned premiums on the business in force, calculated on the monthly pro rata
basis less the commissions allowed thereon.
(d) Every notice of termination shall be given by certified letter
addressed to the intended recipient at such recipient's address as herein above
set forth. In determining whether the requisite number of days' notice has been
given in any case, the date of termination shall be counted but the date of
mailing shall not.
(e) Notwithstanding the termination of this Agreement as herein
above provided, the provisions of this Agreement shall continue to apply to all
unfinished business hereunder to the end that all obligations and liabilities
incurred by each party hereunder prior to such termination shall be fully
performed and discharged.
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AMERICAN RE-INSURANCE COMPANY PLACEMENT SLIP
LOSSES AND LOSS ADJUSTMENT EXPENSES
(a) The Reinsurer, in proportion to its participation, shall pay to
the Company a pro rata share of sums actually paid by the Company in settlement
of losses under its policies; provided, however, that in the event of the
insolvency of the Company payment of loss for which the Company is liable shall
be made by the Reinsurer to the liquidator, receiver or statutory successor of
the Company in accordance with the provisions of Article XIV of this Agreement.
(b) The Reinsurer shall bear its pro rata share of all expenses
incurred by the Company in the investigation, adjustment and litigation of all
claims under its policies, excluding the office expenses of the Company and the
salaries and expenses of its officials and employees.
(c) The Reinsurer shall benefit pro rata in all salvages, discounts
and other recoveries.
(d) The Company shall advise the Reinsurer promptly of all claims
and any subsequent developments pertaining thereto which may develop into losses
involving reinsurance hereunder.
(e) The Company has the obligation to investigate and, to the extent
that may be required by the policies reinsured hereunder, defend any claim
affecting this reinsurance and to pursue such claim to final determination.
(f) It is understood 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 or control of any claim or suit or proceeding
involving this reinsurance; and the Company and the Reinsurer shall cooperate in
every respect in the defense of such suit or claim or proceeding.
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AMERICAN RE-INSURANCE COMPANY PLACEMENT SLIP
OTHER TERMS AND CONDITIONS
REPORTS AND REMITTANCES
(a) Within 30 days after the end of each month, the Company shall
furnish to the Reinsurer a bordereau indicating, as respects each policy covered
hereunder the name of the Insured, the policy number, term, limit of liability
and original premium, plus any additional or return premiums as respects each
cession and the reinsurance premiums thereon.
(b) Within 30 days after the end of each month, the Company shall
render a monthly account summarizing the premiums ceded, return premiums and
commissions on net premiums. The balance due either party shall be remitted with
the account.
(c) Payment by the Reinsurer of its proportion of loss and loss
expenses paid by the Company will be made by the Reinsurer to the Company within
15 days after proof of payment by the Company is received by the Reinsurer. The
Reinsurer shall have the right, at its option, to offset the amount of such loss
against any balance or balances past due.
ACCESS TO RECORDS
The Company shall place at the disposal of the Reinsurer and the
Reinsurer shall have the right to inspect, through its authorized
representatives, at all reasonable times during the currency of this Agreement
and thereafter, the books, records and papers of the Company pertaining to the
reinsurance provided hereunder and all claims made in connection therewith.
RESERVES AND TAXES
(a) The Reinsurer shall maintain legal reserves with respect to
unearned premiums and claims hereunder.
(b) The Company will be liable for all taxes on premiums reported to
the Reinsurer hereunder and will reimburse the Reinsurer for such taxes where
the Reinsurer is required to pay the same.
CHANGE IN POLICY FORMS
The Company and the Reinsurer have agreed on the Company's form as
respects the policies covered hereunder and the Company shall advise the
Reinsurer of any change in such policy form.
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AMERICAN RE-INSURANCE COMPANY PLACEMENT SLIP
EXTRA CONTRACTUAL OBLIGATIONS
(a) As reinsured under this Agreement, the Company shall be
protected for any Extra Contractual Obligation awarded by a court of competent
jurisdiction against the Company. Such Extra Contractual Obligation shall be
added to the amount of the award in addition to the Company's policy limit and
the sum thereof shall be considered one loss subject to the exclusions and
limitations set forth in this Agreement.
(b) Extra Contractual Obligation shall be defined as those
liabilities, not covered under any other provision of this Agreement, and any
legal costs and expenses incurred in connection therewith, which arise from the
Company's handling of any claim on business covered hereunder as a result of the
failure by the Company to settle within the policy limit, or by reason of
alleged or actual negligence or bad faith or fraud, in rejecting an offer of
settlement, in the preparation of the defense, in the trial of any action
against its insured or in the preparation or prosecution of an appeal consequent
upon such action.
(c) For the purpose of the application of this Agreement an Extra
Contractual Obligation shall be deemed to have arisen on the same date as the
original loss that gave rise to the extra contractual obligation.
(d) However, this Article shall not apply where the Extra
Contractual Obligation has been incurred due to the fraud or criminal act of a
member of the Board of Directors, a corporate officer or an employee of the
Company or any other party or organization involved in the presentation, defense
or settlement of any claim covered hereunder acting individually or collectively
or in collusion with any individual or corporation.
(e) Recoveries from any form of insurance or reinsurance, whether
separately purchased from another insurance carrier or self insurance issued by
the Company to itself, which protects the Company against claims which are the
subject matter of this Article will inure to the benefit of the Reinsurer and
shall be first deducted to arrive at the amount of any Extra Contractual
Obligation covered hereunder, whether collectible or not
(f) If any provision of this Article shall be rendered illegal or
unenforceable by the laws, regulations or public policy of any state, such
provision shall be considered void in such state, but this shall not affect the
validity or enforceability of any other provision of this Agreement or the
enforceability of such provision in any other jurisdiction.
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AMERICAN RE-INSURANCE COMPANY PLACEMENT SLIP
EXCESS JUDGMENTS CLAUSE
(a) As reinsured under this Agreement, the Company shall be
protected for any Excess Judgment awarded by a court of competent jurisdiction
against the Company. Such Excess Judgment shall be added to the amount of the
award in addition to the Company's policy limit and the sum thereof shall be
considered one loss subject to the exclusions and limitations set forth in this
Agreement.
(b) Excess Judgment shall mean any amount in excess of the Company's
original policy limits, but otherwise within the coverage terms of the policy,
that is paid by the Company, together with any legal costs and expenses incurred
in connection therewith, as a result of an action against it by its insured or
its insured's assignee to recover damages, awarded by a court of competent
jurisdiction to a third party claimant, arising out of the Company's alleged or
actual negligence or bad faith or fraud in rejecting a settlement within the
policy limits, in discharging its duty to defend, in preparing the defense in an
action against its insured or in discharging its duty to prepare or prosecute an
appeal consequent upon such action.
(c) However this Article shall not apply where the Excess Judgment
has been incurred due to the fraud or criminal act of a member of the Board of
Directors, a corporate officer, an employee or an agent of the Company, or any
other party or organization involved in the presentation, defense or settlement
of any claim covered hereunder acting individually or collectively or in
collusion with any individual or corporation.
(d) Recoveries from any form of insurance or reinsurance, whether
separately purchased from another insurance carrier or self insurance issued by
the Company to itself, which protects the Company against claims which are the
subject matter of this Article will inure to the benefit of the Reinsurer and
shall be first deducted to arrive at the amount of any Excess Judgment
hereunder, whether collectible or not.
(e) If any provision of this Article shall be rendered illegal or
unenforceable by the laws, regulations or public policy of any state, such
provision shall be considered void in such state, but this shall not affect the
validity or enforceability of any other provision of this Agreement or the
enforceability of such provision in any other jurisdiction.
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AMERICAN RE-INSURANCE COMPANY PLACEMENT SLIP
ADDENDUM
COMMERCIAL UNDERLYING INSURANCE:
Section (a) shall be replaced by the following:
(a) The Underlying Carrier must be Financial Pacific or an A.M. Best B+ VII or
better carrier.
REPORTS AND REMITTANCES:
Section (b) shall be replaced by the following:
(b) The amount due the Reinsurer shall be remitted within ninety (90) days after
the close of each calendar quarter.
LOSS AND LOSS ADJUSTMENT EXPENSES:
Section (d) shall be replaced by the following:
(d) The Company shall advise the Reinsurer promptly of all claims and any
subsequent developments pertaining thereto which may develop into losses
involving reinsurance hereunder. In addition, the following categories of claims
shall be reported to the Reinsurer immediately, regardless of any questions of
liability of the insured or coverage under the policy:
1. Fatalities;
2. Paraplegics and quadriplegics;
3. Serious bums;
4. Serious brain injuries;
5. Amputation of any extremity;
6. Any loss on which the Company holds a loss reserve of greater
than or equal to $500,000 and on which this reinsurance may
apply.
ACCEPTED BY: OFFERED BY:
FINANCIAL PACIFIC INSURANCE CO. AMERICAN REINSURANCE COMPANY
[SIG] [SIG]
- ------------------------------ ------------------------------
DATE 10/23/97 DATE 10/22/97
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ANNUAL STATEMENT FOR THE YEAR 1997 OF THE FINANCIAL PACIFIC INSURANCE COMPANY
SCHEDULE Y - INFORMATION CONCERNING ACTIVITIES
OF INSURER MEMBERS OF A HOLDING COMPANY GROUP
PART I ORGANIZATIONAL CHART
[CHART]