Exhibit 10.83

 

Guy Carpenter & Company, Inc.

44 Whippany Road

P.O. Box 1926

Morristown, NJ 07962-1926

973 285 7900  Fax 917 934 9700

 

Cover Note

 

File #:                  8493-00-0009-00

Effective Date:  January 1, 2005

 

COMPANY:

 

SCPIE HOLDINGS, INC.,

AND/OR SCPIE INDEMNITY COMPANY,

AND/OR AMERICAN HEALTHCARE INDEMNITY COMPANY,

AND/OR AMERICAN HEALTHCARE SPECIALTY COMPANY,

AND/OR SCPIE INSURANCE SERVICES, INC.,

AND/OR SCPIE MANAGEMENT SERVICES, INC.,

LOS ANGELES, CALIFORNIA

 

TYPE

 

FIRST – THIRD EXCESS OF LOSS REINSURANCE AGREEMENT

 

BUSINESS COVERED:

 

  1. Physicians & Surgeons Comprehensive Professional and Business Liability,
including Clinics and Clinical Laboratories.

 

  2. Professional and Business Liability Policies for Hospitals and Healthcare
Facilities, including:

 

  a. Modified Claims Made Coverage Hospitals and Medical Centers (Primary &
Excess);

 

  b. Claims Made Coverage Hospitals and Medical Centers (Primary & Excess);

 

  c. Excess Automobile Liability and Excess Employers Liability associated with
the policy forms outlined above.

 

  3. Errors and Omissions Liability Policies for Managed Care Organizations, and
Directors and Officers Liability Policies.

 

  4. Physicians and Surgeons Comprehensive Professional Liability and Personal
Umbrella Business underwritten by Brown & Brown, Inc., Tampa, Florida.

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Page:                     2 of 9

File #:                    8493-00-0009-00

Effective Date:    January 1, 2005

 

TERM:

 

January 1, 2005 to December 31, 2005 as respects claims made during the calendar
year 2005.

 

The term “claims made” as used herein shall mean (A) In respect of Claims Made
Policies, claims first notified to the Company during the term of this Agreement
on any inforce policy or reporting endorsement arising out of incidents
subsequent to the retroactive date of said policy as the result of the rendering
of or failure to render a professional service or the reporting of losses which
arise from the insured premises and operations incidental to the practice of a
physician, hospital or managed care organization and/or (B) In respect of
Occurrence, or Modified Claims Made Policies, claims or losses first notified to
the Company during the term of this Agreement.

 

Retroactive date January 1, 1976, except for Extra Contractual Obligations which
is January 1, 1979.

 

In the event of cancellation or non-renewal, and at the option of the Reinsured,
Reinsurers agree to run-off policies in force until natural expiration not to
exceed 12 months from the expiration date hereon, at terms to be mutually
agreed.

 

TERRITORY:

 

As per the Company’s original policies, contracts, or binders.

 

EXCLUSIONS:

 

  1. Insolvency Funds.

 

  2. Nuclear Incident - Liability - Reinsurance.

 

  3. Assumed Reinsurance other than for Licensing, Financial Rating Purposes or
Acquisition Purposes.

 

  4. Terrorism per NMA 2929.

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Page:                     3 of 9

File #:                    8493-00-0009-00

Effective Date:    January 1, 2005

 

RETENTION AND LIMIT:

 

First Layer:

 

  A.) $3,000,000 each and every loss in excess of $2,000,000 each and every
loss.

 

Reinsurers maximum aggregate liability, during the term of this Agreement shall
be $18,000,000.

 

Not withstanding the foregoing it is a condition hereto that an Annual Aggregate
Deductible of $3,000,000, otherwise recoverable, shall first be deducted before
any liability attaches hereon.

 

Second Layer:

 

A.)

  $5,000,000 each and every loss in excess of $5,000,000 each and every loss.

B.)

  Reinstatements -    First - Computed Pro-Rata as to amount, 60% as to Premium.
         Second - Computed Pro-Rata as to amount, 100% as to Premium.

 

Third Layer:

 

A.)

  $10,000,000 each and every loss in excess of $10,000,000 each and every loss.

B.)

  Reinstatement -    One in all computed Pro-Rata as to amount, 100% as to
Premium.

 

WARRANTY:

 

  1.) In respect of Physicians and Surgeons Comprehensive Professional and
Business Liability Policies, including Clinics and Clinical Laboratories, the
Maximum Policy Limit is $10,000,000 subject to inuring protection of $8,000,000
in excess of $2,000,000 with a maximum aggregate of $8,000,000 during each 12
month period, or so deemed.

 

  2.) Coverage for Professional and Business Liability Policies for Hospitals is
restricted to policies incepting prior to January 1, 2002, the Maximum Policy
Limit is $50,000,000, or so deemed.

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Page:                     4 of 9

File #:                    8493-00-0009-00

Effective Date:    January 1, 2005

 

WARRANTY (Continued):

 

  3.) In respect of Professional and Business Liability Policies for Healthcare
Facilities, the Maximum Policy Limit is $10,000,000 for policies incepting prior
to January 1, 2002, and $5,000,000 for policies incepting on or after January 1,
2002, or so deemed.

 

  4.) In respect of Errors and Omissions Liability Policies for Managed Care
Organizations, Directors and Officers Liability Policies, and Employment
Practices Liability Insurance, the Maximum Policy Limit is $5,000,000 for
policies incepting prior to January 1, 2002, and $1,000,000 for policies
incepting on or after January 1, 2002, or so deemed.

 

  5.) In respect of Professional and Business Liability Policies for Dentists,
excluding coverages for Oral and Maxillofacial Surgeons, the Maximum Policy
Limit is $10,000,000, for policies incepting prior to January 1, 2002, and
$2,000,000 for policies incepting on or after January 1, 2002, or so deemed.

 

PREMIUM:

 

First Layer:

 

4.43% of G.N.E.P.I.

Deposit - $6,158,000 payable $3,079,000 semi-annually.

Minimum - $4,926,400

 

Second Layer:

 

2.47% of G.N.E.P.I.

Deposit - $3,433,000 payable $1,716,500 semi-annually.

Minimum - $2,746,000

 

Third Layer:

 

1.45% of G.N.E.P.I.

Deposit - $2,016,000 payable $1,008,000 semi-annually.

Minimum - $1,612,800

 

ATTACHMENT OF LIABILITY:

 

  (A) For purposes of determining the attachment of the Reinsurers liability
hereunder as respects any one loss, all losses (including Discovery Period
Losses) involving one or more Original Insureds, arising from the same incident,
and in which First Notice of Claim or Circumstance is notified to the Company
during the term of this Agreement shall be covered hereunder.

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Page:                     5 of 9

File #:                    8493-00-0009-00

Effective Date:    January 1, 2005

 

ATTACHMENT OF LIABILITY (Continued):

 

  (B) The date of a loss hereunder shall be the earliest date, within the term
of this Agreement, that the Company has received First Notice of Claim or
Circumstance.

 

CONTINGENT COMMISSION (FIRST LAYER ONLY):

 

  A. Within 45 days following December 31, 2008, and annually thereafter until
all losses on Claims Made during the term of this Contract are settled, a
contingent commission calculation shall be prepared by the Company in accordance
with the following:

 

  1. “Income” means the reinsurance premium for the First Layer for the term of
this Contract.

 

  2. “Outgo” means the sum of:

 

  a. Losses and Loss Adjustment Expense paid by the Reinsurer on Claims Made
under the First Layer during the term of this Contract, plus

 

  b. The outstanding case reserves of the Reinsurer on Claims Made under the
First Layer during the term of this Contract, plus

 

  c. The Reinsurer’s expense allowance of 30% of Income, plus

 

  d. As respects any Subscribing Reinsurer who participated on all Predecessor
Contracts, the cumulative deficit from the Predecessor Contracts, if any (i.e.,
the amount by which Reinsurer’s share of losses incurred under those contracts
exceeds the Reinsurer’s earned premium under those contracts).

 

  B. The contingent commission shall be 25% of the amount by which Income
exceeds Outgo.

 

  C. As respects the first calculation of contingent commission hereunder, the
Reinsurer shall remit to the Company, as promptly as possible after receipt and
verification of the Company’s report, one-third of the contingent commission
shown to be due to the Company. As respects the second calculation, the
Reinsurer shall remit to the Company, as promptly as possible after receipt and
verification of the Company’s report, two-thirds of the contingent commission
shown to be due to the Company, less any contingent commission previously paid.
As respects the third and each subsequent calculation, the Reinsurer shall remit
to the Company, as promptly as possible after receipt and verification of the
Company’s report, the contingent commission shown to be due to the Company, less
any contingent commission previously paid.

 

  D. Should Outgo exceed Income, the difference shall be considered as the
Reinsurer’s deficit and shall be carried forward on an unlimited basis into the
calculations for the successors to this Contract, if any.

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Page:                     6 of 9

File #:                    8493-00-0009-00

Effective Date:    January 1, 2005

 

  E. “Predecessor Contracts” means the following reinsurance agreements (or
layers of reinsurance agreements) issued to the Company:

 

  1. Second Excess of Loss Reinsurance, effective January 1, 1997 (01-97-0021);

 

  2. Second Excess of Loss Reinsurance, effective January 1, 1998 (01-98-0021);

 

  3. Second Excess of Loss Reinsurance, effective January 1, 1999
(8493-00-0001-99-02);

 

  4. First Excess of Loss Reinsurance, effective January 1, 2000 Contract
8493-0009-2000-1;

 

  5. First Layer of First - Fifth Excess of Loss Reinsurance, effective January
1, 2001. Contract 8493-0009-01;

 

  6. First Layer of First - Fifth Excess of Reinsurance, effective January 1,
2002. Contract 8493-0009-01.

 

  7. First Layer of First - Fifth Excess of Loss Reinsurance, effective January
1, 2003. Contract 8493-0009-00;

 

  8. First Layer of First - Fifth Excess of Loss Reinsurance, effective January
1, 2004 contract 8493-0009-00.

 

ACCOUNTING:

 

Premiums - Payments within 60 days of respective due date.

Losses - Payments within 60 days of receipt of proof of loss.

Outstanding losses reported individually as they occur.

 

GENERAL CONDITIONS:

 

Loss Adjustment Expenses to be included with the Ultimate Net Loss.

Excess of Original Policy Limits Clause

80% Extra Contractual Obligations Clause

Ultimate Net Loss Clause including Declaratory Judgement Expenses incurred in

    connection with coverage questions and legal actions related to a specific
claim.

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Page:                     7 of 9

File #:                    8493-00-0009-00

Effective Date:    January 1, 2005

 

Net Retained Lines Clause

Notice of Loss Clause

Loss Funding Clause - Including IBNR (See Attached)

Special Funding Clause

Confidentiality Clause

Commutation Clause by Mutual Agreement

Federal Excise Tax Clause

Errors and Omissions Clause

Insolvency Clause

Offset Clause – BRMA 36A

Service of Suit Clause

Mode of Execution Clause

Arbitration Clause

Access to Records Clause

Guy Carpenter & Company, Inc. Intermediary Clause

 

INFORMATION:

 

2004 Premium Estimates by Line:

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Physicians SCPIE

   $ 100,000,000

Physicians (Standard) AHI-CA

   $ 19,000,000

Physicians Other than CA. Std. AHI

   $ 3,600,000

Physicians - Non Standard AHI

   $ 3,000,000     

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Subtotal:

   $ 125,600,000

Healthcare Facilities

   $ 9,000,000

Heathcare Providers

   $ 1,800,000

Umbrella

   $ 600,000

Managed Care E&O

   $ 1,000,000

Directors & Officers

   $ 540,000

SCPIE Best Defense

   $ 460,000     

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Subtotal:

   $ 13,400,000

Grand Total:

   $ 139,000,000

 

REGULATION 98:

 

Premium and loss payments made to Guy Carpenter shall be deposited in a Premium
and Loss Account in accordance with Section 32.3(a)(1) of Regulation 98 of the
New York Insurance Department. The parties hereto consent to withdrawals from
said account in accordance with Section 32.3(a)(3) of the Regulation, including
interest and Federal Excise Tax.

 

BROKERAGE:

 

10.00%

 

The brokerage rate on reinstatement premium shall be 5% for those markets paying
brokerage on such premium.

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Page:                     8 of 9

File #:                    8493-00-0009-00

Effective Date:    January 1, 2005

 

EFFECTED WITH:

 

Reinsurer

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   FEIN #

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   1st Layer

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    2nd Layer

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    3rd Layer

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Hannover Rückversicherung-AG

   AA-1340125    35.0000 %   30.0000 %   15.0000 % Guy Carpenter & Company,
Limited                         Alea London Limited on behalf of Alea London
Limited    AA-1120146    2.0000 %   4.0000 %   NIL  

Aspen Insurance UK Limited

   AA-1120337    8.2110 %   5.1040 %   6.7460 %

QBE Reinsurance (Europe) Limited

   AA-1780070    6.6350 %   9.5300 %   8.6950 %

Lloyd’s Underwriter Syndicate No. 0435 FDY

   AA-1126435    NIL     9.1689 %   13.4094 %

Lloyd’s Underwriter Syndicate No. 0570 ATR

   AA-1126570    NIL     1.0000 %   2.5000 %

Lloyd’s Underwriter Syndicate No. 0623 AFB

   AA-1126623    NIL     0.7500 %   3.7546 %

Lloyd’s Underwriter Syndicate No. 0727 SAM

   AA-1126727    NIL     1.7500 %   2.0000 %

Lloyd’s Underwriter Syndicate No. 0780 ADV

   AA-1126780    1.1350 %   1.4712 %   4.3638 %

Lloyd’s Underwriter Syndicate No. 1084 CSL

   AA-1127084    NIL     0.7356 %   3.1289 %

Lloyd’s Underwriter Syndicate No. 2001 AML

   AA-1128001    NIL     NIL     1.5000 %

Lloyd’s Underwriter Syndicate No. 2003 SJC

   AA-1128003    3.6345 %   NIL     6.0047 %

Lloyd’s Underwriter Syndicate No. 2488 AGM

   AA-1128488    20.0000 %   16.5000 %   NIL  

Lloyd’s Underwriter Syndicate No. 2623 AFB

   AA-1128623    NIL     1.7500 %   8.7608 %

Lloyd’s Underwriter Syndicate No. 2791 MAP

   AA-1128791    14.0095 %   6.1779 %   6.7047 %

Lloyd’s Underwriter Syndicate No. 2987 BRT

   AA-1128987    NIL     4.9327 %   6.2577 %

Lloyd’s Underwriter Syndicate No. 4472 LIB

   AA-1126006    9.3750 %   7.1297 %   11.1744 %          

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Total

        100.0000 %   100.0000 %   100.0000 %          

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Page:                     9 of 9

File #:                    8493-00-0009-00

Effective Date:    January 1, 2005

 

This Cover Note confirms the terms and conditions of the reinsurance negotiated
with the listed reinsurers on your behalf. In the event that any of these
details do not meet with your approval, or the security of the participating
reinsurers does not meet with your requirements, please notify this office
immediately. If all is in order, please sign and return one copy of this Cover
Note to confirm your approval and complete our files.

 

/s/ Paul Molloy

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/s/ A. Clarke Blanton

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Officer Title

Guy Carpenter & Company, Inc.

March 7, 2005

 

Officer Title

Guy Carpenter & Company, Inc.

March 7, 2005

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Date

 

  Date

/s/ Donald J. Zuk

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SCPIE Indemnity Company

 

   

March 9, 2005

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    Date