1
Exhibit 10.28
COMMUTATION AGREEMENT
(hereinafter "this Agreement")
THIS AGREEMENT is made and entered into to be effective as of the 31st day
of March, 1998, by and between Insurance Company of North America, Pacific
Employers Insurance Company and CIGNA Insurance Company of Illinois (hereinafter
collectively the "Company"), and Manufacturers Indemnity and Insurance Company
of America, a Colorado company (hereinafter the "Reinsurer").
WITNESSETH THAT:
WHEREAS, some or all of the entities comprising the Company and the
Reinsurer entered into certain reinsurance agreements (hereinafter collectively,
the "Reinsurance Agreement"), pursuant to which the Company ceded to the
Reinsurer a stated portion of the Company's liability for losses incurred under
the Company's workers' compensation and employer's liability insurance policies
listed on Exhibit A hereto (the " WC Policies") and the liability insurance
policies listed on Exhibit B hereto (the "Liability Policies")(the WC Policies
and Liability Policies shall collectively be referred to herein as the
"Policies"); and
WHEREAS, the Company and the Reinsurer wish to cancel and commute the
Reinsurer's liabilities under the Reinsurance Agreements on the terms and
conditions hereinafter set forth;
NOW, THEREFORE, the parties hereto, intending to be legally bound, agree as
follows:
1. The Company hereby agrees to commute and release the Reinsurer from all
further reinsurance liabilities under the Reinsurance Agreements with respect to
losses and related allocated claims expense arising under the Policies (the
"Commuted Liabilities"). The Company and the Reinsurer hereby agree that all of
their respective rights, duties and obligations under the Reinsurance Agreement
with respect to the Commuted Liabilities are herewith commuted and canceled, and
release and discharge one another from any further liability or obligation with
respect thereto. The Company's said commutation, cancellation, release and
discharge of the Reinsurer is subject to the Company's receipt of payment in
full of the amount set forth in Paragraph 2 below.
2. The Reinsurer shall transfer cash reserves to the Company in the amount
of US$486,969 as consideration for the Company's release and commutation of
Reinsurer's liabilities for the WC Policies as set forth herein; provided,
however, that this amount shall include $61,967 currently held by the Company as
a Paid Loss Deposit Fund and $3,572 recently paid to the Company by the
Reinsurer as a reinsurance payment. The Reinsurer shall transfer
2
cash reserves to the Company in the amount of US$ 548,038.00 as consideration
for the Company's release and commutation of Reinsurer's liabilities for the
Liability Policies as set forth herein. Such amounts shall be payable
immediately upon the parties' execution of this Agreement.
3. The Reinsurer agrees to cooperate in good faith in the defense of all
claims for which liability has been commuted by the Company hereunder and to
make available to the Company all files, records, reports and other information
in its possession pertaining to such claims.
4. This Commutation Agreement shall be governed and construed in accordance
with the laws of the State of New York.
5. (a) All disputes or differences arising out of the interpretation of
this Agreement shall be submitted to the binding decision of three (3)
arbitrators, one to be chosen by each party, and an umpire to be chosen by the
arbitrators. The arbitrators and umpire shall be disinterested active or retired
executive officials of fire or casualty insurance or reinsurance companies. If
either of the parties fails to appoint an arbitrator within one (1) month after
being required by the other party in writing to do so, or if the arbitrators
fail to appoint an umpire, within (1) month of receipt of a request in writing
by either of them to do so, such arbitrator or umpire, as the case may be, shall
at the request of either of them to do so, such arbitrator or umpire, as the
case may be, shall at the request of either party be appointed by a judge of the
State of New York.
(b) The arbitration proceedings shall take place in New York, New York. The
applicant shall submit its case within one (1) month after the appointment of
the Court of Arbitration, and the respondent shall submit his reply within one
(1) month after receipt of a claim. The arbitrators and umpire are relieved from
all judicial formality and may abstain from following the strict rules of law.
(c) The arbitrators and umpire shall not award punitive damages.. They
shall settle any dispute under this agreement according to an equitable rather
than a strictly legal interpretation of its terms and their decision shall be
provided to the parties in writing and shall be final and not subject to appeal,
in the absence of fraud or other wrongful conduct. Judgement may be entered upon
the award of the arbitrators in any court having jurisdiction thereof.
(d) Each party shall bear the expenses of its arbitrator and shall jointly
and equally share with the other the expense of the umpire and of the
arbitration.
IN WITNESS WHEREOF, the undersigned parties have executed this Agreement on
the dates set forth below, but to be effective on the 31st day of March, 1998.
-2-
3
Manufacturers Indemnity and Insurance Insurance Company of North America
Company of America
- ------------------------------ ------------------------------
Name: Name:
Title: Title:
------------------------ ------------------------
Date: Date:
------------------------- -------------------------
Pacific Employers Insurance Company CIGNA Insurance Company of Illinois
- ------------------------------ ------------------------------
Name: Name:
Title: Title:
------------------------ ------------------------
Date: Date:
------------------------- -------------------------
-3-
4
EXHIBIT A TO COMMUTATION AGREEMENT
LIST OF WC POLICIES
Commutation Agreement - Policy Listing
---------------------------- ------------------------------------------------------------ ---------------------
Workers Compensation Statutory Company Policy Term
---------------------------- ------------------------------------------------------------ ---------------------
RSC C1 8146472 Insurance Company of North America 05/01/88-89
RSC C1 8146484 CIGNA Insurance Company of Illinois 05/01/88-89
---------------------------- ------------------------------------------------------------ ---------------------
RSC C3 3059991 Pacific Employers Insurance Company 05/01/89-90
RSC C3 3060002 CIGNA Insurance Company of Illinois 05/01/89-90
---------------------------- ------------------------------------------------------------ ---------------------
RSC C3 5332777 Pacific Employers Insurance Company 05/01/90-91
RSC C3 5332789 CIGNA Insurance Company of Illinois 05/01/90-91
---------------------------- ------------------------------------------------------------ ---------------------
RSC C3 6897314 Pacific Employers Insurance Company 05/01/91-92
---------------------------- ------------------------------------------------------------ ---------------------
RSC C3 8469447 Pacific Employers Insurance Company 05/01/92-93
---------------------------- ------------------------------------------------------------ ---------------------
-4-
5
EXHIBIT B TO COMMUTATION AGREEMENT
LIST OF LIABILITY POLICIES
---------------------------- ------------------------------------------------------------ ---------------------
Excess Policy Statutory Company Policy Term
---------------------------- ------------------------------------------------------------ ---------------------
XCP G0663770A Insurance Company of North America 05/01/88-89
---------------------------- ------------------------------------------------------------ ---------------------
XCP G06638934 Insurance Company of North America 05/01/89-90
---------------------------- ------------------------------------------------------------ ---------------------
XCP G13965481 Insurance Company of North America 05/01/90-91
---------------------------- ------------------------------------------------------------ ---------------------
XCP G06639707 Insurance Company of North America 05/01/91-92
---------------------------- ------------------------------------------------------------ ---------------------
-5-