EXHIBIT 10.6
CLAIMS SERVICE AGREEMENT
This agreement is among the TEXAS FAIR PLAN ASSOCIATION ("Association"), the
FAIR Plan's administrator TEXAS WINDSTORM INSURANCE ASSOCIATION ("TWIA"), and
INSURANCE MANAGEMENT SOLUTIONS, INC.("Servicer"), a corporation authorized to
serve as claims administrator, having a business address at 801 94TH Avenue
North, St. Petersburg, FL 33702. Association, TWIA and Servicer hereby agree
that Servicer will provide claims services to Association and TWIA for claims
ensuing from policies of the Association's Texas Policies of insurance issued
pursuant to Art. 21.49A, TEX. INS. Code and the Association Plan of Operation
according to the following terms and conditions:
1. EFFECTIVE DATE, TERM, AND CANCELLATION
This Agreement is effective as of February 17, 2003, and shall continue in
effect continuously until terminated by either party with sixty (60) days
written notice to the other party.
2. OBLIGATIONS OF SERVICER
The obligations of Servicer under this Agreement are to:
(A) Employ properly licensed claims adjusters ("Adjusters") to adjust
Claims and to exercise its best efforts to ensure that every adjuster,
investigator, and appraiser, whether an employee of Servicer or a
third party vendor, is in compliance with every applicable code,
statute, law or regulation.
(B) Use only Texas licensed adjusters and Texas defense attorneys approved
by the Association or TWIA to investigate, adjust, settle, pay, defend
or provide legal opinions regarding Claims of the Association and
otherwise administer Claims, to the extent it deems necessary in
accordance with its best professional judgment and subject to the
approval of the Association or TWIA. Servicer may meet its obligation
by engaging at its discretion and on behalf of Association and TWIA,
the services of persons or firms other than Servicer and Adjusters,
provided use of such other persons or firms does not violate any Texas
statutory or regulatory requirement. Servicer does not have an
obligation to continually seek approval of Servicer's employees
involved in the administration of claims under this Agreement however
the Association or TWIA can request that an employee of Servicer or a
previously approved third party vendor no longer handle Claims of the
Association and Servicer will comply with all such reasonable
requests.
(C) With respect to those claims which fall within the authority limit of
Servicer set forth in Schedule A of this Agreement, Servicer shall:
. Determine the amount of any settlement, including Allocated
Loss Adjustment Expenses, which should be paid on behalf of
Association for all Claims.
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. In those instances where the policy on which a Claim has
been filed contains language subrogating the rights of the
insured to the Association, Servicer will pursue collection
in accordance with guidelines approved in writing by
Association or TWIA; however, if such efforts are not
successful Servicer will inform the person or entity alleged
to have caused the loss that the matter will be turned over
to legal counsel for collection. The Association and TWIA
shall have the right of approval of any legal counsel
engaged in this respect, and Association shall be
responsible for the payment of the additional collection
expenses as an Allocated Loss Adjustment Expense, as defined
in item 6(A), Definitions.
. Make payment for settlement of claims and for Allocated Loss
Adjustment Expenses, including attorneys' fees and defense
costs, out of funds provided by the Association. Association
agrees that Servicer has no obligation to pay or otherwise
expend its funds for payment of Claims or Allocated Loss
Adjustment Expenses.
. Maintain a claim file on each reported Claim at the St.
Petersburg, FL office of Servicer. The claim files will be
the property of the Association and will be available for
inspection by the Association or TWIA upon reasonable
notice. Servicer shall store and retain all records produced
under this Agreement in accordance with the record retention
requirements of the Texas Department of Insurance and
accepted industry practice.
. Provide statistical or loss experience reports concerning
Claim status, Claims services, and Claims payments on a
monthly basis containing the content and the format required
by the Association or TWIA.
. Comply with all other terms of this Agreement.
. Maintain reserve amounts set at amounts that reflect the
probable cost to close Claims.
. Establish and maintain capacity for online Claims review by
the Association and TWIA.
. Maintain complaint log records in accordance with guidelines
provided by the Association and TWIA.
. Provide prior written notice of any files to be referred to
the Texas Department of Insurance Fraud Unit.
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D With respect to all Claims which fall outside Servicer's authority
limit set forth in Schedule A Servicer shall perform all the services
in C. above, subject however to Servicer's limit of authority, and
Servicer shall also:
. Send to the Association or TWIA a report within 30 days of
posting a reserve outside the Servicer's authority limit or
of Servicer's determination of the existence of other
criteria identifying the Claim as falling outside the
authority limit. The report shall be in a format approved by
the Association or TWIA.
. Send to the Association or TWIA additional information or
reports on Claims outside Servicer's authority as the
Association or TWIA may require on a case by case basis.
. Obtain written authorization for a settlement or payment in
excess of the authorized payment amount set out in Schedule
A of the Agreement.
3. OBLIGATIONS OF ASSOCIATION
The obligations of Association under this Agreement are to:
(A) Refer to Servicer all Claims which fall within the terms of this
Agreement immediately following receipt by the Association or TWIA of
notice of the Claim.
(B) Pay consideration monthly to Servicer in accordance with the terms of
this Agreement.
(C) Maintain sufficient monies with Servicer in the Claim Fund at all
times so that Servicer may pay Claims and Allocated Loss Adjustment
Expenses as required.
(D) Reimburse the Claim Fund on a daily basis or as needed.
(E) Notify reinsurers and others of any Claim required by Association to
be reported to them for any reason.
(F) Pay monthly to Servicer the fees as provided in Schedule A,
Compensation of Servicer.
(G) Comply with all other terms and conditions of this Agreement.
4. ADMINISTRATIVE PROVISIONS
(A) Servicer has full authority and control in all matters pertaining to
the investigation, adjustment, and administration of Claims covered by
this Agreement, subject to the ultimate authority of Association or
TWIA and the Discretionary Settlement Authority Limit.
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(B) This Agreement is for the sole benefit of the parties. Servicer shall
not be liable to any person not a party to this Agreement for any
loss, liability, damage, or expense relating in any way to the
services provided under this Agreement.
(C) Servicer has the right and duty to manage and conserve deposits of
Association into a Trust account of a standard bank acceptable to the
Association and TWIA and endorse checks. The Trust Fund is to be used
by Servicer to pay obligations of the Association, including Claim
settlements and Allocated Loss Adjustment Expenses. All Association or
TWIA funds shall be held by Servicer as a fiduciary.
(D) Servicer has the right and duty to communicate with any reinsurer
providing excess coverage (collectively "reinsurers") as required by
the Association or TWIA. Servicer shall provide information to any
such reinsurer, including data which relates to any open or closed
Claim or loss, regardless of whether such Claim or loss involves or
may involve that reinsurer, provided a full copy of such information
is simultaneously provided to the Association.
(E) The parties agree that the TWIA is entering into this Agreement for
the limited purposes of: receiving the benefits of the indemnification
provided by the Servicer hereunder; and acquiring the rights to
enforce the provisions of this Agreement. The parties further agree
that the TWIA will have no liability to the Servicer under this
Agreement.
(F) The Association and TWIA have authority to audit the files, business
records and services of Servicer related to this Agreement. The
Servicer, during the term of this Agreement and subsequent to any
termination, unless otherwise instructed by the Association or the
TWIA in writing, shall retain policy files and other relevant
documentation in accordance with instructions received from the
Association or the TWIA for a period not to exceed two years following
the termination of this Agreement or any renewal or extension thereof.
The Association shall reimburse the Servicer for its reasonable costs
of shipment of such files and documentation to the Association or its
designee.
5. ESTABLISHMENT OF ACCOUNT
(A) Association and TWIA shall open a deposit account at a commercial
bank.
(B) The account shall be closed following termination of this Agreement,
continuing long enough after contract termination for Servicer to
responsibly reconcile any outstanding checks and statements. Upon
termination, all funds in this account shall be distributed to the
Association.
6. DEFINITIONS
(A) Allocated Loss Adjustment Expense means any cost or expense incurred
by Servicer on behalf of Association as a result of engaging the
service of firms or persons other than Servicer and Servicer's
employees for work in connection with the investigation, adjustment,
settlement or defense of a Claim. Allocated Loss
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Adjustment Expenses include, but are not limited to the following: all
costs and expenses associated with subrogation; salvage;
rehabilitation; medical cost management; property, or other physical
damage; appraisals by others ; all court costs, fees, and expenses;
fees for service of process; fees to attorneys; the cost of services
of undercover operations and detectives; fees of independent adjusters
for investigation or adjustment of Claims in areas removed from
reasonable access by Adjusters outside the State of Texas; the cost of
employing experts for the purpose of preparing maps, photographs,
diagrams, and chemical or physical analysis, or for expert advice or
opinion; the cost of obtaining copies of any public records; the costs
of depositions and court reporters or recorded statements; and
additional fees associated with adjustment of catastrophe claims.
(B) Cancellation means the termination of this Agreement after one party
has given sixty (60) days prior written notice of cancellation to the
other party to this Agreement.
(C) Claim(s) means any demand for the benefits provided under subject
Policies of insurance lawfully issued by Association.
(D) Claim Fund means the money made available by Association to Servicer
for use in paying Allocated Loss Adjustment Expenses, Claims, and
defense costs.
(E) Discretionary Settlement Authority Limit means the total amount of
money specified in Schedule A, item 5 which Association authorizes
Servicer to spend without seeking prior approval from Association in
order to settle any single Claim. Such limit may be changed in the
sole discretion of Association or TWIA without affecting the other
terms and conditions of this Agreement. Allocated Loss Adjustment
Expenses and legal costs are subject to, and included in, the
Discretionary Settlement Limit.
(F) Policies means insurance policies of the Association pursuant to Art.
21.49A, TEX. INS. Code and the Association's Plan of Operation.
7. GENERAL PROVISIONS
(A) Servicer represents and warrants that this Agreement has been duly
authorized and is binding upon Servicer.
(B) This Agreement shall be construed in accordance with the laws of the
State of Texas and shall inure to and be binding upon the parties
hereto. Travis County, Texas shall be the venue for any litigation
arising out of or related to this Agreement.
(C) This Agreement constitutes the entire Agreement between the parties.
No amendments to or modifications of this Agreement shall be valid
unless made in writing and executed by the parties in the form of an
amendment to this Agreement.
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(D) If all or part of any covenant, condition, or other provision of this
Agreement is declared by a court of competent jurisdiction to be
invalid and not binding, such declaration shall in no way affect the
validity of the other remaining covenants, conditions, and provisions
of this Agreement.
(E) Servicer agrees to hold the Association and TWIA, their respective
Boards and Governing Committee (individually or collectively),
representatives or employees (the "Indemnified Party" or "Indemnified
Parties") harmless and agrees to indemnify same from any civil
penalties, damages, claims, causes of actions, or fines (including
attorneys fees) imposed, or sought to be imposed against an
Indemnified Party as a result of Servicer's performance, or failure or
deficiency of performance of any undertakings, obligations, or actions
under this Agreement. The foregoing "hold harmless" agreement shall
not apply to liabilities incurred through the reasonable action or
inaction of Servicer so long as the course of conduct is undertaken as
required under the terms of this Agreement or at the express direction
of the Association and in the good faith belief that Servicer is
operating in accordance with all applicable laws of Texas, rules of
the Department and the Plan of Operation of the Association.
(F) The Association agrees to hold Servicer harmless and agrees to
indemnify Servicer from any civil penalties, charges, claims, causes
of actions, or fines (including attorneys fees) imposed, or sought to
be imposed against Servicer as a result of the Association's or TWIA's
failure to perform any of their obligations under this Agreement or
the performance of Servicer's duties and responsibilities under this
Agreement or due to actions of Servicer which are at the express
direction of the Association, TWIA or required by the Plan of
Operation of the Association.
(G) This Agreement may not be assigned by either party without written
consent of the other party.
(H) This Agreement shall be binding and inure to the benefit of the
parties hereto and their successors and assigns.
(I) In the event any provision of this Agreement is contrary to any law or
regulation governing the parties or their performance under this
Agreement, such provision shall be modified, if possible, to conform
to such law or regulation so as to as nearly as possible comply with
the intent of the parties hereto.
(J) This Agreement supersedes all prior agreements between the parties
hereto concerning the subject matter hereto and all such prior
agreements shall be of no further force or effect.
(K) The headings and subheadings in this Agreement are inserted solely for
reference purposes and shall have no substantial significance in the
interpretation of this Agreement.
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FAIR PLAN ASSOCIATION
BY: /s/ Jim Oliver
--------------------------------
(Signature)
Jim Oliver, General Manager
(Printed name and title)
TEXAS WINDSTORM INSURANCE
ASSOCIATION
BY: /s/ Jim Oliver
--------------------------------
(Signature)
Jim Oliver, General Manager
(Printed name and title)
Insurance Management Solutions, Inc.
("SERVICER")
BY: /s/ D.M. Howard
--------------------------------
(Signature)
D.M. Howard, Pres/CEO
(Printed name and title)
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SCHEDULE A
COMPENSATION OF SERVICER
Claims Administration Fee:
1. $250.00 for each non-Catastrophe claim file opened, plus applicable sales
tax.
2. $210.00 for each Catastrophe claim file opened, plus applicable sales tax.
3. Catastrophe means an event or series of events that is assigned a unique
catastrophe number by Property Claims Services.
4. Claims Administration Fees shall be paid as follows:
(a) One-half when the claim file is opened; and
(b) One-half when the claim file is closed.
5. Servicer's discretionary settlement authority limit for comprehensive
personal liability is $10,000.00 per claim.
Servicer's discretionary settlement authority limit for property claims is
$25,000.00 per claim.
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