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EXHIBIT 10.63
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WORKERS' COMPENSATION QUOTA SHARE
LARGE ACCOUNT BUSINESS
REINSURANCE CONTRACT
EFFECTIVE: FEBRUARY 1, 1998
issued to
Superior National Insurance Group
Calabasas, California
E.W Blanch Co.
Reinsurance Services
3500 West 80th Street
Minneapolis, Minnesota 55431
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WORKERS' COMPENSATION QUOTA SHARE
LARGE ACCOUNT BUSINESS
REINSURANCE CONTRACT
EFFECTIVE: FEBRUARY 1, 1998
issued to
Superior National Insurance Group
Calabasas, California
REINSURER PARTICIPATION
WEB Management LLC (for and on behalf of
All American Life Insurance Company) 100.0%
TOTAL 100.0%
E. W. Blanch Co.
Reinsurance Services
3500 West 80th Street
Minneapolis, Minnesota 55431
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INTERESTS AND LIABILITIES AGREEMENT
of
All American Life Insurance Company
Chicago, Illinois
by
WEB Management LLC
Bloomfield, Connecticut
(hereinafter referred to as the "Subscribing Reinsurer")
with respect to the
WORKERS' COMPENSATION QUOTA SHARE
LARGE ACCOUNT BUSINESS
REINSURANCE CONTRACT
EFFECTIVE: FEBRUARY 1, 1998
issued to and duly executed by
Superior National Insurance Group
Calabasas, California
The Subscribing Reinsurer hereby accepts a 100.0% share in the interests and
liabilities of the "Reinsurer" as set forth in the attached Contract captioned
above.
This Agreement shall become effective at 12:01 a.m., Local Standard Time at the
location of the risk, February 1, 1998, and shall continue in force until 12:01
a.m., Local Standard Time at the location of the risk, February 1, 1999.
The Subscribing Reinsurer's share in the attached Contract shall be separate and
apart from the shares of the other reinsurers, and shall not be joint with the
shares of the other reinsurers, it being understood that the Subscribing
Reinsurer shall in no event participate in the interests and liabilities of the
other reinsurers.
IN WITNESS WHEREOF, the Subscribing Reinsurer by its duly authorized
representative has executed this Agreement as of the date undermentioned at:
Bloomfield, Connecticut,this _______ day of _____________________________199___.
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WEB Management LLC (for and on behalf of All
American Life Insurance Company)
E.W. BLANCH CO.
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TABLE OF CONTENTS
ARTICLE PAGE
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Preamble 1
I Classes of Business Reinsured 1
II Term 2
III Territory 2
IV Exclusions 2
V Retention and Limit 5
VI Loss in Excess of Policy Limits/ECO 5
VII Definitions 6
VIII Losses and Loss Adjustment Expense 6
IX Salvage and Subrogation 7
X Original Conditions 7
XI Ceding Commission 7
XII Contingent Commission 7
XIII Reports and Remittances 8
XIV Loss Reporting (Sunset Clause) 9
XV Offset (BRMA 36C) 9
XVI Access to Records (BRMA 1C) 9
XVII Errors and Omissions 10
XVIII Taxes (BRMA 50B) 10
XIX Federal Excise Tax (BRMA 17A) 10
XX Currency (BRMA 12A) 10
XXI Unauthorized Reinsurance 10
XXII Insolvency 12
XXIII Arbitration (BRMA 6J) 13
XXIV Controlling Law 14
XXV Service of Suit (BRMA 49C) 14
XXVI Savings Clause 15
XXVII Intermediary (BRMA 23A) 15
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WORKERS' COMPENSATION QUOTA SHARE
LARGE ACCOUNT BUSINESS
REINSURANCE CONTRACT
EFFECTIVE: FEBRUARY 1, 1998
issued to
Superior National Insurance Group
Calabasas, California
(hereinafter referred to as the "Company")
by
The Subscribing Reinsurer(s) Executing the
Interests and Liabilities Agreement(s)
Attached Hereto
(hereinafter referred to as the "Reinsurer")
PREAMBLE
The Superior National Insurance Group shall refer collectively to Superior
National Insurance Company and Superior Pacific Casualty Company, both of
Calabasas, California (and any member companies of the Superior National
Insurance Group which may hereafter be added).
ARTICLE I - CLASSES OF BUSINESS REINSURED
A. By this Contract the Company obligates itself to cede to the Reinsurer and
the Reinsurer obligates itself to accept quota share reinsurance of the
Company's net liability under policies, contracts and binders of insurance
or reinsurance (hereinafter called "policies") in force at the effective
date hereof or issued or renewed on or after that date, and classified by
the Company as Large Account Business (as defined in Article VII) covering
all business written and classified by the Company as Workers'
Compensation Insurance for statutory limits as required by the States of
Arizona and California.
B. The liability of the Reinsurer with respect to each cession hereunder
shall commence obligatorily and simultaneously with that of the Company,
subject to the terms, conditions and limitations hereinafter set forth.
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ARTICLE II - TERM
A. This Contract shall become effective at 12:01 a.m., Local Standard Time at
the location of the risk, February 1, 1998, with respect to losses arising
out of occurrences commencing on or after that time and date, and shall
remain in force until 12:01 a.m., Local Standard Time at the location of
the risk, February 1, 1999.
B. Unless the Company elects to reassume the ceded unearned premium in force
on the effective date of expiration, and so notifies the Reinsurer prior
to or as promptly as possible after the effective date of expiration,
reinsurance hereunder on business in force on the effective date of
expiration shall remain in full force and effect until expiration,
cancellation or next premium anniversary of such business, whichever first
occurs, but in no event beyond 12 months plus odd time (not exceeding 18
months in all) following the effective date of expiration.
C. Notwithstanding the expiration of this Contract as provided herein, the
provisions of this Contract 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 expiration shall be fully
performed and discharged.
ARTICLE III - TERRITORY
This Contract shall apply to policies issued in the United States of America
covering risks written in the States of Arizona and California.
ARTICLE IV - EXCLUSIONS
A. This Contract does not apply to and specifically excludes the following
business or risks, regardless of the type of policy issued by the Company:
1. Aggregate Excess Workers' Compensation.
2. Risks of which the flying hazard is the major part.
3. All reinsurance assumed other than reinsurance which covers business
underwritten by the Company.
4. Policies issued through ZC Insurance Company, and policies issued
with a Zurich Re (or affiliate) Assumption of Liability Endorsement.
5. 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 and including
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voluntary or involuntary market assistance programs; however, this
exclusion shall not apply to the Company's involuntary participation
in assigned risk plans insofar as the line of business is one
written by the Company.
6. All liability of the Company arising by contract, operation of law,
or otherwise, from its participation or membership, whether
voluntary or involuntary, in any insolvency fund. "Insolvency fund"
includes any guaranty fund, insolvency fund, plan, pool,
association, fund or other arrangement, however 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.
7. War risks as excluded by War Risks Exclusion Clause appearing in
subject original policies.
8. Operations employing the process of nuclear fission or fusion or
handling radioactive material, which operations include but are not
limited to:
a. The use of nuclear reactors such as atomic piles, particle
accelerators or generators; or
b. The use, handling or transportation of radioactive materials;
or
c. The use, handling or transportation of any weapon of war or
explosive device employing nuclear fission or fusion.
The preceding exclusions (a), (b) and (c) do not apply to:
i. The exclusive use of particle accelerators incidental to
ordinary industrial or educational research pursuits; or
ii. The exclusive use, handling or transportation of radio
isotopes for medical or industrial use; or
iii. Radium or radium compounds.
9. Insurance covering the following:
a. Commercial airlines;
b. Employers Liability.
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B. This Contract does not apply to and specifically excludes the following
operations when carried on as the principal operation of the original
insured:
1. Wrecking or demolition of buildings.
2. Underground mining operations.
3. Subway construction.
4. Subaqueous work.
5. Construction of tunnels or construction of new bridges and dams in
excess of 100 feet in length.
6. Offshore and onshore gas and oil drilling operations, except for
operations conducted in Kern County, California.
7. Manufacture, production, refining or processing of natural or
artificial fuel gases, butane, propane or liquefied petroleum gases
or gasoline.
8. Manufacture (or the loading into containers) of any explosive
substance intended for use as an explosive and any product in which
any explosive substance is an ingredient, and the handling,
transportation or storage thereof.
(Note: An "explosive" is defined as any substance manufactured for
the express purpose of exploding as differentiated from other
commodities used industrially and which are only incidentally
explosive, such as gasoline, fuel gases and dyestuffs.)
9. Storage, mining, handling, manufacturing, transport, distribution,
sale, installation or removal of asbestos products.
C. The above exclusions shall not apply as respects any liability of the
Company resulting from the assignment of individual policies from an
Assigned Risk Plan or similar facility. In no event, however, shall the
above Assigned Risk provision apply to the exclusions in paragraph A of
this Article.
D. In the event of the Company being bound without its knowledge on a risk
excluded from the protection of this Contract either by an existing
insured extending its operations or by an inadvertent acceptance or
otherwise, it is agreed that the Company shall be reinsured to the same
extent as if there were no exclusion, but only until discovery by a member
of the Company's Home Office Underwriting Department and for 30 days
thereafter. In no event, however, shall the above binder provision apply
to the exclusions in paragraph A of this Article.
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E. Notwithstanding the foregoing, any reinsurance falling within the scope of
one or more of the exclusions set forth above that is specially accepted
by the Reinsurer from the Company shall be covered under this Contract and
be subject to the terms hereof, except as such terms shall be modified by
the special acceptance.
ARTICLE V - RETENTION AND LIMIT
A. As respects business subject to this Contract, the Company shall cede to
the Reinsurer and the Reinsurer agrees to accept 100% of the Company's net
liability.
B. The Company shall purchase or be deemed to have purchased inuring
reinsurance to limit its loss subject hereto from any one occurrence
(inclusive of loss in excess of policy limits, extra contractual
obligations and loss adjustment expense) to $500,000.
ARTICLE VI - LOSS IN EXCESS OF POLICY LIMITS/ECO
A. In the event the Company pays or is held liable to pay an amount of loss
in excess of its policy limit, but otherwise within the terms of its
policy (hereinafter called "loss in excess of policy limits") or any
punitive, exemplary, compensatory or consequential damages, other than
loss in excess of policy limits (hereinafter called "extra contractual
obligations") because of alleged or actual bad faith or negligence on its
part in rejecting a settlement within policy limits, or in discharging its
duty to defend or prepare the defense in the trial of an action against
its policyholder, or in discharging its duty to prepare or prosecute an
appeal consequent upon such an action, or in otherwise handling a claim
under a policy subject to this Contract, the loss in excess of policy
limits and/or the extra contractual obligations shall be added to the
Company's loss, if any, under the policy involved, and the sum thereof
shall be subject to the provisions of Article V. However, the extra
contractual obligations coverage afforded hereunder shall not apply unless
the Company counsels with the Reinsurer and secures the Reinsurer's
written concurrence with respect to the actions to be taken to defend or
control the action against the Company prior to or at the time of the
trial which results in the loss in excess of policy limits or, if there is
no claim for loss in excess of policy limits, promptly following the
Company's first knowledge of an action against it alleging negligence or
bad faith.
B. An extra contractual obligation shall be deemed to have occurred on the
same date as the loss covered or alleged to be covered under the policy.
C. Notwithstanding anything stated herein, this Contract shall not apply to
any loss in excess of policy limits or any extra contractual obligation
incurred by the Company as a result of any fraudulent and/or criminal act
by any officer or director of the Company acting individually or
collectively or in collusion with any individual or corporation or any
other organization or party involved in the presentation, defense or
settlement of any claim covered hereunder.
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D. Recoveries from any form of insurance or reinsurance which protects the
Company against claims the subject matter of this Article shall inure to
the benefit of this Contract.
ARTICLE VII - DEFINITIONS
A. The term "net liability" as used herein means the remaining portion of the
Company's gross liability on each risk reinsured under this Contract after
deducting recoveries from all reinsurance, other than the reinsurance
provided hereunder.
B. The term "large account business" as used herein means policies of the
Company generating an estimated annualized premium volume at the inception
of the original policy of $100,000 or greater as calculated by the
Company.
C. The term "policies" as used herein means the Company's binders, policies
and contract providing insurance and reinsurance on the business covered
under this Contract. A policy written on an installment premium, reporting
form or continuous basis shall be considered renewed as of the end of each
annual period commencing with the inception date of the policy.
D. The term "loss adjustment expense" means all costs and expenses assignable
to a specific claim that are incurred by the Company in the investigation,
appraisal, adjustment, settlement, litigation, defense or appeal of a
specific claim, including court costs and costs of supersedeas and appeal
bonds, regardless of how such expenses are classified for statutory
reporting purposes. Loss adjustment expense shall include 1) prejudgment
interest, unless included as part of the award or judgment; 2)
postjudgment interest; 3) legal expenses and costs incurred in connection
with coverage questions and legal actions connected thereto; and 4) a pro
rata share of salaries and expenses of Company field employees, and
expenses of other Company employees who have been temporarily diverted
from their normal and customary duties and assigned to the field
adjustment of losses covered by this Contract. Loss adjustment expense
does not include salaries and expenses of employees, other than (4) above,
and office and other overhead expenses.
ARTICLE VIII - LOSSES AND LOSS ADJUSTMENT EXPENSE
A. Losses shall be reported by the Company in summary form as mutually
agreed. The Reinsurer shall have the right to participate, at its own
expense, in the defense or control of any claim or suit or proceeding
involving this reinsurance.
B. All loss settlements made by the Company, whether under strict policy
conditions or by way of compromise, shall be unconditionally binding upon
the Reinsurer, and the Reinsurer agrees to pay or allow, as the case may
be, its proportion of each such settlement in accordance with Article
XIII.
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C. In the event of payment of a claim under a policy subject hereto, the
Reinsurer shall be liable for its proportionate share of loss adjustment
expense incurred by or on behalf of the Company in connection therewith
and shall be credited with its proportionate share of any recoveries of
such expense.
ARTICLE IX - SALVAGE AND SUBROGATION
The Reinsurer shall be credited with its proportionate share of salvage (i.e.,
reimbursement obtained or recovery made by the Company, less the actual cost,
excluding salaries of officials and employees of the Company and sums paid to
attorneys as retainer, of obtaining such reimbursement or making such recovery)
on account of claims and settlements involving reinsurance hereunder. The
Company hereby agrees to enforce its rights to salvage or subrogation relating
to any loss, a part of which loss was sustained by the Reinsurer, and to
prosecute all claims arising out of such rights.
ARTICLE X - ORIGINAL CONDITIONS
A. All reinsurance under this Contract shall be subject to the same rates,
terms, conditions, waivers and interpretations and to the same
modifications and alterations as the respective policies of the Company.
However, in no event shall this be construed in any way to provide
coverage outside the terms and conditions set forth in this Contract. The
Reinsurer shall be credited with its exact proportion of the gross
premiums received by the Company, including disbursement of any dividends
and return premiums, if any.
B. Nothing herein shall in any manner create any obligations or establish any
rights against the Reinsurer in favor of any third party or any persons
not parties to this Contract.
ARTICLE XI - CEDING COMMISSION
A. The Reinsurer shall allow the Company a 35.0% commission on all original
gross premiums ceded to the Reinsurer hereunder. The Company shall allow
the Reinsurer return commission on return premiums at the same rate.
B. It is expressly agreed that the ceding commission allowed the Company
includes provision for all commissions, taxes, assessments, and all other
expenses of whatever nature, except loss adjustment expense.
ARTICLE XII - CONTINGENT COMMISSION
A. The Reinsurer shall pay the Company a contingent commission equal to 25.0%
of the net profit, if any, accruing to the Reinsurer under this Contract.
The Reinsurer's net profit under
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this Contract shall be calculated in accordance with the following
formula, it being understood that a positive balance equals net profit and
a negative balance equals net loss:
1. Premiums earned for the term of this Contract; less
2. Ceding commission allowed on (1) above; less
3. Expenses incurred by the Reinsurer at 17.5% of premiums earned for
the term of this Contract period; less
4. Losses incurred for the term of this Contract.
B. The Company shall calculate and report the Reinsurer's net profit within
60 days after the expiration of this Contract, and within 60 days after
the end of each 12-month period thereafter until all losses subject hereto
have been finally settled. Each such calculation for the term of this
Contract shall be based on cumulative transactions hereunder from
effective date of this Contract through the date of calculation. As
respects the initial calculation referred to above, any contingent
commission shown to be due the Company shall be paid by the Reinsurer as
promptly as possible after receipt and verification of the Company's
report. As respects each recalculation, any additional contingent
commission shown to be due the Company shall be paid by the Reinsurer as
promptly as possible after receipt and verification of the Company's
report. Any return contingent commission shown to be due the Reinsurer
shall be paid by the Company with its report.
C. "Premiums earned" as used herein shall mean ceded unearned premiums at the
effective date of this Contract, plus ceded net written premiums during
the term of this Contract, less ceded unearned premiums at the expiration
of this Contract.
D. "Losses incurred" as used herein shall mean ceded losses and loss
adjustment expense paid as of the effective date of calculation, plus the
ceded reserves for losses and loss adjustment expense outstanding as of
the same date, all as respects losses arising out of occurrences
commencing during the term of this Contract.
ARTICLE XIII - REPORTS AND REMITTANCES
A. As promptly as possible after the effective date of this Contract, the
Company shall remit the Reinsurer's share of the unearned premium (less
commission thereon) applicable to subject business in force at the
effective date of this Contract.
B. Within 60 days after the end of each month, the Company shall report to
the Reinsurer:
1. Ceded gross premiums for the month, including disbursement of
dividends and return premiums, if any;
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2. Ceding commission thereon;
3. Cost of inuring reinsurance;
4. Ceded losses and loss adjustment expense paid during the month;
5. Ceded unearned premium and ceded outstanding loss reserves as of the
end of the month.
The positive balance of (1) less (2) less (3) less (4) shall be remitted
by the Company with its report. Any balance shown to be due the Company
shall be remitted by the Reinsurer as promptly as possible after receipt
and verification of the Company's report. It is understood that premium
hereunder is payable as received by the Company on monthly billed
policies.
C. Annually, the Company shall furnish the Reinsurer with such information as
the Reinsurer may require to complete its Annual Convention Statement.
ARTICLE XIV - LOSS REPORTING (SUNSET CLAUSE)
Within ten years after the expiration of this Contract (or after the expiration
of the final original policy, if the Company has purchased runoff coverage), the
Company shall advise the Reinsurer of any outstanding claims and/or occurrences
(hereinafter referred to as "Claim") hereunder which have not been finally
settled and which may cause a recovery under this Contract, and no liability
shall attach hereunder for any claim not reported to the Reinsurer within this
ten-year period.
ARTICLE XV - OFFSET (BRMA 36C)
The Company and the Reinsurer shall have the right to offset any balance or
amounts due from one party to the other under the terms of this Contract. The
party asserting the right of offset may exercise such right any time whether the
balances due are on account of premiums or losses or otherwise.
ARTICLE XVI - ACCESS TO RECORDS (BRMA 1C)
The Company shall place at the disposal of the Reinsurer at all reasonable
times, and the Reinsurer shall have the right to inspect through its designated
representatives, during the term of this Contract and thereafter, all books,
records and papers of the Company in connection with any reinsurance hereunder,
or the subject matter hereof.
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ARTICLE XVII - ERRORS AND OMISSIONS
Except for the "sunset" provisions of Article XIV, inadvertent delays, errors or
omissions made in connection with this Contract or any transaction hereunder
shall not relieve either party from any liability which would have attached had
such delay, error or omission not occurred, provided always that such error or
omission is rectified as soon as possible after discovery.
ARTICLE XVIII - TAXES (BRMA 50B)
In consideration of the terms under which this Contract is issued, the Company
will not claim a deduction in respect of the premium hereon when making tax
returns, other than income or profits tax returns, to any state or territory of
the United States of America or the District of Columbia.
ARTICLE XIX - FEDERAL EXCISE TAX (BRMA 17A)
(Applicable to those reinsurers, excepting Underwriters at Lloyd's London and
other reinsurers exempt from Federal Excise Tax, who are domiciled outside the
United States of America.)
A. The Reinsurer has agreed to allow for the purpose of paying the Federal
Excise Tax the applicable percentage of the premium payable hereon (as
imposed under Section 4371 of the Internal Revenue Code) to the extent
such premium is subject to the Federal Excise Tax.
B. In the event of any return of premium becoming due hereunder the Reinsurer
will deduct the applicable percentage from the return premium payable
hereon and the Company or its agent should take steps to recover the tax
from the United States Government.
ARTICLE XX - CURRENCY (BRMA 12A)
A. Whenever the word "Dollars" or the "$" sign appears in this Contract, they
shall be construed to mean United States Dollars and all transactions
under this Contract shall be in United States Dollars.
B. Amounts paid or received by the Company in any other currency shall be
converted to United States Dollars at the rate of exchange at the date
such transaction is entered on the books of the Company.
ARTICLE XXI - UNAUTHORIZED REINSURANCE
A. As regards policies or bonds issued by the Company coming within the scope
of this Contract, the Company agrees that when it shall file with the
insurance regulatory authority or set up on its books reserves for
unearned premium and losses covered hereunder which it
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shall be required by law to set up, it will forward to the Reinsurer a
statement showing the proportion of such reserves which is applicable to
the Reinsurer. The Reinsurer hereby agrees to fund such reserves in
respect of unearned premium, known outstanding losses that have been
reported to the Reinsurer and loss adjustment expense relating thereto,
losses and loss adjustment expense paid by the Company but not recovered
from the Reinsurer, plus reserves for losses incurred but not reported, as
shown in the statement prepared by the Company (hereinafter referred to as
"Reinsurer's Obligations") by funds withheld, cash advances, funds on
deposit or a Letter of Credit as required by the applicable insurance
regulatory authorities to comply with state licensing requirements,
including California Special Schedule P. The Reinsurer shall have the
option of determining the method of funding provided it is acceptable to
the insurance regulatory authorities having jurisdiction over the
Company's reserves.
B. When funding by a Letter of Credit, the Reinsurer agrees to apply for and
secure timely delivery to the Company of a clean, irrevocable and
unconditional Letter of Credit issued by a bank and containing provisions
acceptable to the insurance regulatory authorities having jurisdiction
over the Company's reserves in an amount equal to the Reinsurer's
proportion of said reserves. Such Letter of Credit shall be issued for a
period of not less than one year, and shall be automatically extended for
one year from its date of expiration or any future expiration date unless
30 days (60 days where required by insurance regulatory authorities) prior
to any expiration date the issuing bank shall notify the Company by
certified or registered mail that the issuing bank elects not to consider
the Letter of Credit extended for any additional period.
C. The Reinsurer and Company agree that the Letters of Credit provided by the
Reinsurer pursuant to the provisions of this Contract may be drawn upon at
any time, notwithstanding any other provision of this Contract, and be
utilized by the Company or any successor, by operation of law, of the
Company including, without limitation, any liquidator, rehabilitator,
receiver or conservator of the Company for the following purposes, unless
otherwise provided for in a separate Trust Contract:
1. To reimburse the Company for the Reinsurer's Obligations, the
payment of which is due under the terms of this Contract and which
has not been otherwise paid;
2. To make refund of any sum which is in excess of the actual amount
required to pay the Reinsurer's Obligations under this Contract;
3. To fund an account with the Company for the Reinsurer's Obligations.
Such cash deposit shall be held in an interest bearing account
separate from the Company's other assets, and interest thereon not
in excess of the prime rate shall accrue to the benefit of the
Reinsurer;
4. To pay the Reinsurer's share of any other amounts the Company claims
are due under this Contract.
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In the event the amount drawn by the Company on any Letter of Credit is in
excess of the actual amount required for (1) or (3), or in the case of
(4), the actual amount determined to be due, the Company shall promptly
return to the Reinsurer the excess amount so drawn. All of the foregoing
shall be applied without diminution because of insolvency on the part of
the Company or the Reinsurer.
D. The issuing bank shall have no responsibility whatsoever in connection
with the propriety of withdrawals made by the Company or the disposition
of funds withdrawn, except to ensure that withdrawals are made only upon
the order of properly authorized representatives of the Company.
E. At annual intervals, or more frequently as agreed but never more
frequently than quarterly, the Company shall prepare a specific statement
of the Reinsurer's Obligations, for the sole purpose of amending the
Letter of Credit, in the following manner:
1. If the statement shows that the Reinsurer's Obligations exceed the
balance of credit as of the statement date, the Reinsurer shall,
within 30 days after receipt of notice of such excess, secure
delivery to the Company of an amendment to the Letter of Credit
increasing the amount of credit by the amount of such difference.
2. If, however, the statement shows that the Reinsurer's Obligations
are less than the balance of credit as of the statement date, the
Company shall, within 30 days after receipt of written request from
the Reinsurer, release such excess credit by agreeing to secure an
amendment to the Letter of Credit reducing the amount of credit
available by the amount of such excess credit.
ARTICLE XXII - INSOLVENCY
A. In the event of the insolvency of one or more of the reinsured companies,
this reinsurance shall be payable directly to the company or to its
liquidator, receiver, conservator or statutory successor immediately upon
demand, with reasonable provision for verification, on the basis of the
liability of the company without diminution because of the insolvency of
the company or because the liquidator, receiver, conservator or statutory
successor of the company has failed to pay all or a portion of any claim.
It is agreed, however, that the liquidator, receiver, conservator or
statutory successor of the company shall give written notice to the
Reinsurer of the pendency of a claim against the company indicating the
policy or bond reinsured which claim would involve a possible liability on
the part of the Reinsurer within a reasonable time after such claim is
filed in the conservation or liquidation proceeding or in the
receivership, and that during the pendency of such claim, the Reinsurer
may investigate such claim and interpose, at its own expense, in the
proceeding where such claim is to be adjudicated, any defense or defenses
that it may deem available to the company or its liquidator, receiver,
conservator or statutory successor. The expense thus incurred by the
Reinsurer shall be chargeable, subject to the approval of the Court,
against the company as part of the expense
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of conservation or liquidation to the extent of a pro rata share of the
benefit which may accrue to the company solely as a result of the defense
undertaken by the Reinsurer.
B. Where two or more reinsurers are involved in the same claim and a majority
in interest elect to interpose defense to such claim, the expense shall be
apportioned in accordance with the terms of this Contract as though such
expense had been incurred by the company.
C. It is further understood and agreed that, in the event of the insolvency
of one or more of the reinsured companies, the reinsurance under this
Contract shall be payable directly by the Reinsurer to the company or to
its liquidator, receiver or statutory successor, except as provided by
Section 4118(a) of the New York Insurance Law or except (1) where this
Contract specifically provides another payee of such reinsurance in the
event of the insolvency of the company or (2) where the Reinsurer with the
consent of the direct insured or insureds has assumed such policy
obligations of the company as direct obligations of the Reinsurer to the
payees under such policies and in substitution for the obligations of the
company to such payees.
ARTICLE XXIII - ARBITRATION (BRMA 6J)
A. As a condition precedent to any right of action hereunder, in the event of
any dispute or difference of opinion hereafter arising with respect to
this Contract, it is hereby mutually agreed that such dispute or
difference of opinion shall be submitted to arbitration. One Arbiter shall
be chosen by the Company, the other by the Reinsurer, and an Umpire shall
be chosen by the two Arbiters before they enter upon arbitration, all of
whom shall be active or retired disinterested executive officers of
insurance or reinsurance companies or Lloyd's London Underwriters. In the
event that either party should fail to choose an Arbiter within 30 days
following a written request by the other party to do so, the requesting
party may choose two Arbiters who shall in turn choose an Umpire before
entering upon arbitration. If the two Arbiters fail to agree upon the
selection of an Umpire within 30 days following their appointment, each
Arbiter shall nominate three candidates within 10 days thereafter, two of
whom the other shall decline, and the decision shall be made by drawing
lots.
B. Each party shall present its case to the Arbiters within 30 days following
the date of appointment of the Umpire. The Arbiters shall consider this
Contract as an honorable engagement rather than merely as a legal
obligation and they are relieved of all judicial formalities and may
abstain from following the strict rules of law. The decision of the
Arbiters shall be final and binding on both parties; but failing to agree,
they shall call in the Umpire and the decision of the majority shall be
final and binding upon both parties. Judgment upon the final decision of
the Arbiters may be entered in any court of competent jurisdiction.
C. If more than one reinsurer is involved in the same dispute, all such
reinsurers shall constitute and act as one party for purposes of this
Article and communications shall be made by the Company to each of the
reinsurers constituting one party, provided, however, that nothing
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herein shall impair the rights of such reinsurers to assert several,
rather than joint, defenses or claims, nor be construed as changing the
liability of the reinsurers participating under the terms of this Contract
from several to joint.
D. Each party shall bear the expense of its own Arbiter, and shall jointly
and equally bear with the other the expense of the Umpire and of the
arbitration. In the event that the two Arbiters are chosen by one party,
as above provided, the expense of the Arbiters, the Umpire and the
arbitration shall be equally divided between the two parties.
E. Any arbitration proceedings shall take place at a location mutually agreed
upon by the parties to this Contract, but notwithstanding the location of
the arbitration, all proceedings pursuant hereto shall be governed by the
law of the state in which the Company has its principal office.
ARTICLE XXIV - CONTROLLING LAW
This Contract shall be interpreted in all respects in accordance with the laws
of the State of California.
ARTICLE XXV - SERVICE OF SUIT (BRMA 49C)
(Applicable if the Reinsurer is not domiciled in the United States of America,
and/or is not authorized in any State, Territory or District of the United
States where authorization is required by insurance regulatory authorities)
A. It is agreed that in the event the Reinsurer fails to pay any amount
claimed to be due hereunder, the Reinsurer, at the request of the Company,
will submit to the jurisdiction of a court of competent jurisdiction
within the United States. Nothing in this Article constitutes or should be
understood to constitute a waiver of the Reinsurer's rights to commence an
action in any court of competent jurisdiction in the United States, to
remove an action to a United States District Court, or to seek a transfer
of a case to another court as permitted by the laws of the United States
or of any state in the United States.
B. Further, pursuant to any statute of any state, territory or district of
the United States which makes provision therefor, the Reinsurer hereby
designates the party named in its Interests and Liabilities Agreement, or
if no party is named therein, the Superintendent, Commissioner or Director
of Insurance or other officer specified for that purpose in the statute,
or his successor or successors in office, as its true and lawful attorney
upon whom may be served any lawful process in any action, suit or
proceeding instituted by or on behalf of the Company or any beneficiary
hereunder arising out of this Contract.
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ARTICLE XXVI - SAVINGS CLAUSE
If any law or regulation of the federal, state or local government of any
jurisdiction in which the Company is doing business shall render illegal any of
the arrangements made in this Contract, that portion of this Contract is hereby
terminated insofar as it applies to such jurisdiction.
ARTICLE XXVII - INTERMEDIARY (BRMA 23A)
E. W. Blanch Co. is hereby recognized as the Intermediary negotiating this
Contract for all business hereunder. All communications (including but not
limited to notices, statements, premium, return premium, commissions, taxes,
losses, loss adjustment expense, salvages and loss settlements) relating thereto
shall be transmitted to the Company or the Reinsurer through E. W. Blanch Co.,
Reinsurance Services, 3500 West 80th Street, Minneapolis, Minnesota 55431.
Payments by the Company to the Intermediary shall be deemed to constitute
payment to the Reinsurer. Payments by the Reinsurer to the Intermediary shall be
deemed to constitute payment to the Company only to the extent that such
payments are actually received by the Company.
IN WITNESS WHEREOF, the Company by its duly authorized representative has
executed this Contract as of the date undermentioned at:
Calabasas, California, this 28th day of May 1998.
/s/ MATTHEW NATALIZIO
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Superior National Insurance Group
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