Exhibit 10.66

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FIRST-FOURTH EXCESS OF LOSS REINSURANCE AGREEMENT
(hereinafter referred to as the “Agreement”)

entered into by and between

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
(hereinafter collectively referred to as the “Company”)

and

The Subscribing Reinsurer(s) executing the
Interests and Liabilities Contract(s)
attached to and forming a part
of this Agreement
(hereinafter referred to as the “Reinsurer”)

WITNESSETH:

The Reinsurer hereby reinsures the Company to the extent and on the terms and
conditions subject to the exceptions, exclusions and limitations hereinafter set
forth and nothing hereinafter shall in any manner create any obligations or
establish any rights against the Reinsurer in favor of any third parties or any
persons not parties to this Agreement.

ARTICLE 1

BUSINESS COVERED

The Reinsurer agrees to reimburse the Company, on an excess of loss basis, for
the amount of ultimate net loss which the Company may pay as the result of
claims made during the term of this Agreement under the Classes of Insurance set
forth below with respect to subject policies which are in force or may
hereinafter come into force during the term of this Agreement, except as
excluded under the Exclusions Article subject to the limitations set forth in
the Limits of Cover Article.

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CLASSES OF INSURANCE

 

 

 

1.

Physicians and 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 and
Excess);

 

 

 

 

 

 

(b)

Claims Made Coverage Hospitals and Medical Centers (Primary and 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.

ARTICLE 2

TERRITORY

This Contract shall apply to losses occurring within the territorial limits of
the Company’s original policies, contracts, and binders of insurance or
reinsurance.

ARTICLE 3

EXCLUSIONS

This Agreement specifically excludes:

 

1.

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, 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.

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2.

Loss or Liability excluded by the provisions of the attached “Nuclear Energy
Risk Exclusion Clause (Reinsurance) (1994) (Worldwide Excluding U.S.A. and
Canada)” and “Nuclear Incident Exclusion Clause - Liability - Reinsurance”.

 

 

 

 

3.

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

 

 

 

 

4.

All actual or alleged losses, liabilities, damages, injuries, defense costs,
costs or expense(s) directly or indirectly arising out of, contributed by,
caused by, resulting from, or in connection with any of the following regardless
of any other cause or event contributing concurrently or in any other sequence
of the loss:

 

 

 

 

 

a.

war, invasion, acts of foreign enemies, hostilities or warlike operations
(whether war be declared or not), civil war, mutiny, revolution, rebellion,
insurrection, uprising, military or usurped power, confiscation by order of any
public authority or government de jure or de facto, martial law;

 

 

 

 

 

 

b.

riots, strikes, or civil commotion; or

 

 

 

 

 

 

c.

any act of terrorism.

 

 

 

 

 

 

For purposes of this endorsement, an act of terrorism means an activity that (a)
involves a violent act or the unlawful use of force or an unlawful act dangerous
to human life, tangible or intangible property or infrastructure, or a threat
thereof; and (b) appears to be intended to (i) intimidate or coerce a civilian
population, or (ii) disrupt any segment of the economy of a government de jure
or de facto, state, or country; or (iii) overthrow, influence, or affect the
conduct or policy of any government de jure or de facto by intimidation or
coercion; or (iv) affect the conduct of a government de jure or de facto by mass
destruction, assassination, kidnapping or hostage-taking.

 

 

 

 

 

This exclusion also applies to all actual or alleged losses, liabilities,
damages, injuries, defense costs, costs or expenses directly or indirectly
arising out of, contributed by, caused by, resulting from, or in connection with
any action taken in controlling, preventing, suppressing, retaliating against,
or responding to (a), (b), and/or (c) above.

 

 

 

 

 

If the Reinsurer alleges that by reason of this exclusion any actual or alleged
losses, liabilities, damages, injuries, defense costs, costs or expenses is not
covered by this reinsurance agreement the burden of proving the contrary shall
be upon the Company.

 

 

 

 

 

In the event any portion of this exclusion is found to be invalid or
unenforceable, the remainder shall remain in full force and effect.

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ARTICLE 4

TERM

A.

Except as provided in paragraph C. below, this Agreement shall apply to claims
made during the twelve (12) month period beginning January 1, 2002 through
December 31, 2002.  In the event a loss, as defined in the Definitions Article,
involves a loss or losses covered under the current Agreement Year and a prior
Agreement Year(s), no recovery shall be made hereunder in respect of any loss
which occurred prior to:

 

 

 

1.

January 1, 1979 as regards Extra Contractual Obligations (as provided for in the
Extra Contractual Obligations Article).

 

 

 

 

2.

January 1, 1976 as regards all other business.

 

 

 

B.

It is understood however, that in respect of Personal Liability and Discovery
Period coverage for Deceased, Disabled, Retired and Withdrawing Physicians and
for Physicians ceasing Medical Practice within the State, this Agreement covers
claims made during the period of this Agreement.  In the event this Agreement is
not renewed, all such liability shall be assumed by the Company with effect from
the date of cancellation.

 

 

C.

Notwithstanding the above and without prejudice to any rights or remedies the
Reinsurer may otherwise have, the Reinsurer may terminate this Agreement upon 60
days’ prior written notice to the Company in the event that control of the
Company is transferred by change of ownership or otherwise.

 

 

D.

The provisions of paragraphs A. and B. notwithstanding, the Company may, at its
option, elect to continue to cover the in-force portfolio of liability covered
on the date of expiration or termination for a further period of twelve (12)
months, at terms to be mutually agreed.  Should the Company exercise this
option, the Company shall give the Reinsurer notice prior to expiration or
termination that it wishes to exercise this option.

 

 

E.

If any law or regulation of the federal, state or local government or any
jurisdiction in which the Company is doing business shall render illegal the
arrangements made herein, this Agreement can be terminated immediately insofar
as it applies to such jurisdiction by the Company giving notice to the Reinsurer
to such effect.

 

 

F.

Notwithstanding the expiration of this Agreement as hereinabove 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 expiration or termination shall be fully performed and
discharged.

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ARTICLE 5

ATTACHMENT OF LIABILITY

A.

For purposes of determining the attachment of the Reinsurer’s 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.

 

 

B.

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

ARTICLE 6

WARRANTIES

The Company warrants the following in respect of the business covered hereunder:

 

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 twelve
(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.

 

 

 

 

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.

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ARTICLE 7

DEFINITIONS

A.

The term “each and every loss” shall mean the happening of one or a series of
related acts, errors, or omissions to act, accidents or occurrences arising out
of one event.

 

 

B.

The term “Gross Net Earned Premium Income” shall mean the gross earned premium
on business the subject matter hereof less cancellations and return premiums and
less premiums paid for reinsurance recoveries under which would inure to the
benefit of the Reinsurer.  Such Premium Income shall be understood to include:

 

 

 

1.

That content of pre-paid premiums under policies in respect of Deceased,
Disabled and Retired Insureds, the coverage for which becomes effective during
the Agreement period.

 

 

 

 

2.

The premium transferred internally by the Company from a prior Agreement, in
respect of Deceased, Disabled and Retired Insureds and in respect of other
withdrawing Insureds who have purchased extended coverage under Reporting
Endorsements.

 

 

 

C.

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 in-force 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.

ARTICLE 8

NET RETAINED LINES

A.

This Agreement applies to only that portion of any insurance which the Company
retains net for its own account; and in calculating the amount of any loss
hereunder and also in computing the amount or amounts in excess of which this
Agreement attaches, only loss or losses in respect of that portion of any
insurance which the Company retains net for its own account shall be included.

 

 

B.

The amount of the Reinsurer’s liability hereunder in respect of any loss or
losses shall not be increased by reason of the inability of the Company to
collect from any other underwriters, whether specific or general, any amount
which may become due from them, whether such inability arises from the
insolvency of such other underwriters or otherwise.

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ARTICLE 9

ULTIMATE NET LOSS

A.

The term “ultimate net loss” as used herein shall be understood to mean the sum
actually paid by the Company in settlement of losses for which it is held
liable, including loss adjustment expense, 80% of Extra Contractual Obligations
and 100% of loss in Excess of Original Policy Limits as provided in the
respectively captioned Articles, after making proper deductions for all
recoveries, salvages, and claims upon other reinsurances and insurances which
inure to the benefit of the Reinsurer under this Agreement, whether collectible
or not; provided, however, that in the event of the insolvency of the Company,
“ultimate net loss” shall mean the amount of loss which the Company has incurred
or for which it is liable, and payment by the Reinsurer shall be made to the
liquidator, receiver or statutory successor of the Company in accordance with
the provisions of the Insolvency Article in this Agreement.  The ultimate net
loss shall include Declaratory Judgment Expenses incurred in connection with
coverage questions and legal actions related to a specific claim.  Nothing in
this clause, however, shall be construed to mean that losses under this
Agreement are not recoverable until the ultimate net loss of the Company has
been ascertained.

 

 

B.

“Loss adjustment expense” means all costs and expenses allocable 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, and including
(a) pre-judgment interest, unless included as part of the award or judgment; (b)
post-judgment interest; and (c) legal expenses and costs incurred in connection
with coverage questions and legal actions connected thereto.  Office expenses
and salaries of officials and employees not classified as loss adjusters are not
chargeable as expenses for the purpose of this paragraph.

 

 

C.

In the event a verdict or judgment is reduced by an appeal or a settlement,
subsequent to the entry of a judgment, resulting in an ultimate saving on such
verdict or judgment, or a judgment is reversed outright, the expense incurred in
securing such final reduction or reversal shall (1) be prorated between the
Reinsurer and the Company in proportion that each benefits from such reduction
or reversal and the expense incurred up to the time of the original verdict or
judgment shall be prorated in proportion to each party’s interest in such
verdict or judgment; or (2) when the terms and conditions of the Company’s
original policies reinsured hereunder include expenses as part of the policy
limit, be added to the Company’s ultimate net loss.

ARTICLE 10

EXCESS OF ORIGINAL POLICY LIMITS

A.

This Agreement shall protect the Company, within the limits hereof, in
connection with any loss in excess of the limit of its original policy, such
loss in excess of the limit having been

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incurred because of failure by it to settle within the policy limit, or by
reason of alleged or actual negligence, fraud or bad faith in rejecting an offer
of settlement or in the preparation of the defense or in the trial of any action
against its insured or in the preparation or prosecution of an appeal consequent
upon such action.

 

 

B.

However, this Article shall not apply where the loss has been incurred due to
the fraud of a member of the Board of Directors or a corporate officer 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.

 

 

C.

For the purposes of this Article, the word “loss” shall mean any amounts for
which the Company would have been contractually liable to pay had it not been
for the limit of the original policy.

ARTICLE 11

EXTRA CONTRACTUAL OBLIGATIONS

A.

This Agreement shall protect the Company within the limits hereof, where the
ultimate net loss includes Extra Contractual Obligations.  “Extra Contractual
Obligations” are defined as those liabilities not covered under any other
provision of this Agreement and which arise from handling of any claim on
business covered hereunder, such liabilities arising because of, but not limited
to the following: failure by the Company to settle within the policy limit, or
by reason of alleged or actual negligence, fraud or bad faith in rejecting an
offer of settlement or in the preparation of the defense or in the trial of any
action against its insured or reinsured or in the preparation or prosecution of
an appeal consequent upon such action.

 

 

B.

The date on which an Extra Contractual Obligation is incurred by the Company
shall be deemed, in all circumstances, to be the date of the original accident,
casualty, disaster or loss and furthermore, for the purposes hereof be deemed to
follow the claims made provisions of this Agreement, subject always to the
provisions of the Term Article.

 

 

C.

However, this Article shall not apply where the loss has been incurred due to
the fraud of a member of the Board of Directors or a corporate officer 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.

ARTICLE 12

NOTICE OF LOSS

A.

In the event of a claim arising hereunder which either results in or appears to
be of serious enough nature as probably to result in a loss involving this
Agreement, the Company shall give notice as soon as reasonably practicable to
the Reinsurer and the Company shall keep the Reinsurer advised of all subsequent
developments in connection therewith.

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B.

The Company shall also promptly notify the Reinsurer of all incidents involving
the following injuries for which the Company has established an indemnity
reserve of $550,000 or greater and with policy limits to affect the Reinsurer:

 

 

 

1.

Death of high wage earner with two or more dependents.

 

 

 

 

2.

Brain Injury.

 

 

 

 

3.

Nerve Injury.

 

 

 

 

4.

Paralysis - cord injury.

 

 

 

 

5.

Amputations.

 

 

 

 

6.

Internal injuries which require continuous treatment (e.g., Dialysis,
Hyperalimentation, failure to diagnose).

 

 

 

 

7.

Blindness.

 

 

 

C.

All loss settlements made by the Company, provided they are within the terms of
the Company’s original policies and of this Agreement, shall be unconditionally
binding upon Reinsurer and amounts falling to the share of the Reinsurer shall
be payable to the Company in accordance with the provisions set forth in
paragraph C. of the Reports and Remittances Article.

ARTICLE 13

COMMUTATION

A.

The Company or the Reinsurer may at any time express its desire to the other
party to commute all losses which are applicable to any Agreement year and which
are still unsettled.  In such event the Company and the Reinsurer shall mutually
determine and evaluate such losses and the payment by the Reinsurer of its
proportion of the amount so ascertained and mutually agreed to be the value of
such losses shall relieve the Reinsurer of all further liability, in respect of
each Agreement year, both in respect of known or unknown losses.

 

 

B.

In the event that the Company transfers control or institutes changes in its
claims handling procedures or loss reserving process in a manner which
materially affects the parties hereunder, the Reinsurer may express its desire
to the Company to commute all losses which are applicable to each Agreement year
and which are still unsettled upon 60 days prior written notice.  Upon such
event the Company and the Reinsurer shall mutually determine and evaluate such
losses and the payment by the Reinsurer of its proportion of the amount so
ascertained and mutually agreed to be the value of such losses shall relieve the
Reinsurer of all further liability, in respect of each Agreement year both in
respect of known or unknown losses.

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C.

If agreement cannot be reached, the Company and the Reinsurer may mutually
appoint an Actuary or Appraiser to investigate, determine and capitalize such
claim or claims.  If both parties then agree, the Reinsurer shall pay its
proportion of the amount so determined to be the capitalized value of such claim
or claims.

 

 

D.

If the parties, as outlined in paragraph C above, fail to agree, they may agree
to settle any difference using a panel of three Actuaries, one to be chosen by
each party and the third by the two so chosen.  If either party refuses or
neglects to appoint an Actuary within 30 days, the other party may appoint two
Actuaries.  If the two Actuaries fail to agree on the selection of a third
Actuary within 30 days of their appointment, each of them shall name two, of
whom the other shall decline one, and the decision shall be made by drawing
lots.  All the Actuaries shall be regularly engaged in the valuation of Medical
Malpractice claims and shall be Fellows of the Casualty Actuarial Society or of
the American Academy of Actuaries.  None of the Actuaries shall be under the
control of either party to this Contract. Each party shall submit its case to
its Actuary within 30 days of the appointment of the third Actuary.  The
decision in writing of any two Actuaries, when filed with the parties hereto,
shall be final and binding on both parties.  The expense of the Actuaries and of
the commutation shall be equally divided between the two parties.  Said
commutation shall take place in the Venue of Commutation (e.g., Company’s head
office), unless some other place is mutually agreed upon by the Company and the
Reinsurer.

ARTICLE 14

REPORTS AND REMITTANCES

A.

The Company shall provide the Reinsurer within forty-five (45) days at the end
of each quarter, all necessary data respecting premiums and losses, including
reserves thereon, as at dates and on forms mutually acceptable to the Company
and the Reinsurer.

 

 

B.

Payments of deposit premium and adjusted premium shall be made in accordance
with the provisions of the Premium Article.

 

 

C.

Payment by the Reinsurer of its portion of loss and loss expenses paid by the
Company shall be made by the Reinsurer to the Company as soon as possible, but
not later than sixty (60) days after proof of payment by the Company is received
by the Reinsurer.

ARTICLE 15

OFFSET

The Company and the Reinsurer may offset any balance or amount due from one
party to the other under this Agreement or any other agreement heretofore or
hereafter entered into between the Company and the Reinsurer, whether acting as
assuming reinsurer or ceding company.  This provision shall not be affected by
the insolvency of either party to this Agreement.

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ARTICLE 16

CONFIDENTIALITY

A.

This Agreement and the pre-agreement documentation may contain confidential or
proprietary information of either party to this Agreement.  All parties shall
maintain the confidentiality of this information and shall not disclose these to
any third party without the other party’s approval.

 

 

B.

Notwithstanding the above, any party may disclose such information without
further approval from the other party in answer to interrogations, subpoenas or
other legal/arbitration process as well as to the Company’s reinsurance
intermediary hereon, the Reinsurer’s retrocessionaires or in response to
requests by governmental and regulatory agencies.  In addition the parties may
disclose such information to their accountants and outside legal counsel as may
be necessary.

ARTICLE 17

CURRENCY

Premiums shall be payable by the Company and losses shall be paid to the Company
in United States currency.

ARTICLE 18

FEDERAL EXCISE TAX

(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 Service 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 shall
deduct the aforesaid 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 19

TAXES

The Company shall be liable for all taxes on premiums reported to the Reinsurer
hereunder and shall reimburse the Reinsurer for such taxes where the Reinsurer
is required to pay the same.

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The Company agrees, when making tax returns, not to claim any deduction for
premiums ceded hereunder.

ARTICLE 20

ERRORS AND OMISSIONS

Any inadvertent delay, omission or error shall not be held to relieve either
party hereto from any liability which would attach to it hereunder if such
delay, omission or error had not been made, provided such delay, omission or
error is rectified immediately upon discovery; provided, however, this Article
is not to override retroactive dates specified in the Term Article.

ARTICLE 21

ACCESS TO RECORDS

A.

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 authorized
representatives, all books, records and papers of the Company in connection with
this reinsurance hereunder or the subject matter thereof.

 

 

B.

The Reinsurer shall be afforded the opportunity, at its own expense to appoint
an agent of its own choice to assess the Company’s claims procedures who shall
report to the Reinsurer the results of such.

ARTICLE 22

FUNDING

(This Article is only applicable to those Reinsurer(s) who cannot qualify for
credit by the State having jurisdiction over the Company’s loss reserves.)

A.

As regards policies or bonds issued by the Company coming within the scope of
this Agreement, the Company agrees that, when it shall file with the Insurance
Department or set up on its books reserves for losses covered hereunder which it
shall be required by law to set up, it shall forward to the Reinsurer a
statement showing the proportion of such loss reserves which is applicable to
the Reinsurer.  The Reinsurer hereby agrees that it shall apply for and secure
delivery to the Company of a clean, irrevocable and unconditional Letter of
Credit, issued by a bank which is acceptable to the regulatory authority(ies)
having jurisdiction over the Company’s loss reserves in an amount equal to the
Reinsurer’s proportion of reserves in respect of known outstanding losses that
have been reported to the Reinsurer and allocated loss expenses relating
thereto, plus reserves for losses incurred but not reported, as shown in the
statement prepared by the Company (see attached schedule).

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B.

The Letter of Credit shall be issued for a period of not less than one (1) year,
and shall be automatically extended for one (1) year from its date of expiration
or any future expiration date unless thirty (30) days prior to any expiration
date the issuing bank shall notify the Company by registered mail that the bank
elects not to consider the Letter of Credit extended for any additional period. 
An issuing bank, not a member of the Federal Reserve System or not chartered in
New York State shall provide sixty (60) days notice to the Company prior to any
expiration in the event of non-extension.

 

 

C.

Notwithstanding any other provision of this Agreement, the Company or its
successors in interest may draw upon such credit at any time without diminution
because of the insolvency of the Company or of the Reinsurer for one or more of
the following purposes only:

 

 

 

1.

To pay the Reinsurer’s share or to reimburse the Company for the Reinsurer’s
share of any loss reinsured by this Agreement, the payment of which has been
agreed by the Reinsurer 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 share of any liability reinsured by this Agreement.

 

 

 

 

3.

In the event of expiration of the Letter of Credit as provided for above, to
establish deposit of the Reinsurer’s share of known and reported outstanding
losses and allocated expenses relating thereto under this Agreement.  Such cash
deposit shall be held in an interest bearing account separate from the Company’s
other assets, and interest thereon shall accrue to the benefit of 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, for the sole purpose
of amending the Letter of Credit, of the Reinsurer’s share of known and reported
outstanding losses and allocated expenses relating thereto, plus reserves for
losses incurred but not reported.  If the statement shows that Reinsurer’s share
of such losses and allocated loss expenses exceeds the balance of credit as of
the statement date, the Reinsurer shall, within thirty (30) days after receipt
of notice of such excess, secure delivery to the Company of an amendment of the
Letter of Credit increasing the amount of credit by the amount of such
difference.  If, however, the statement shows that the Reinsurer’s share of
known and reported outstanding losses plus allocated loss expenses relating
thereto, plus reserves for losses incurred but not reported is less than the
balance of credit as of the statement date, the Company shall, within thirty
(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.

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ARTICLE 23

SPECIAL FUNDING

A.

If, during the period of this Agreement and thereafter, as respects any
outstanding liabilities hereunder, the Reinsurer shall fail to pay any loss
payable hereunder within the time prescribed, the Reinsurer agrees that it shall
fund uncollected paid losses and loss adjustment expenses within thirty (30)
days from the date of written demand by the Company to so fund.  Such demand
shall not be made unless balances are sixty (60) days or more past the due date
of payment specified in this Agreement.

 

 

B.

The Reinsurer shall have the sole option of determining the method of funding
referred to above, provided it is acceptable to the insurance regulatory
authorities involved.  If the Reinsurer elects to fund the aforesaid loss by a
Letter of Credit, the procedures set forth in the Funding Article in respect of
Letters of Credit shall apply.  If the Reinsurer has already funded obligations
hereunder in accordance with the Funding Article in this Agreement, it agrees
that such funds as are required to pay overdue losses may immediately be drawn
down by the Company.

 

 

C.

The phrase “any loss payable” as used in paragraph A. above shall mean any
ultimate net loss subject to recovery under this Agreement wherein the Reinsurer
has not disputed said loss in writing within the due date for payment.

 

 

D.

The Company shall provide the Reinsurer with a reinsurance proof of loss and
such other substantive loss material reflecting the nature of the settlement
(i.e., applicable Proofs of Loss, Releases, adjuster’s reports, etc.).  If,
subsequent to receipt of this material, the information supplied is insufficient
or not in accordance with the contractual conditions, then the payment due date
as defined in the Reports and Remittances Article, shall be deemed to be the
date upon which the Reinsurer received such additional substantive material
necessary to approve payment of the claim, or the date the claim is presented in
a manner acceptable to the Reinsurer.

ARTICLE 24

ARBITRATION

A.

As a condition precedent to any right of action hereunder, any dispute arising
out of the interpretation, performance or breach of this Agreement, including
the formation or validity thereof, shall be submitted for decision to a panel of
three arbitrators. Notice requesting arbitration shall be in writing and sent
certified or registered mail, return receipt requested.

 

 

B.

One arbitrator shall be chosen by each party and the two arbitrators shall,
before instituting the hearing, choose an impartial third arbitrator who shall
preside at the hearing.  If either party fails to appoint its arbitrator within
thirty (30) days after being requested to do so

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by the other party, the latter, after ten (10) days’ notice by certified or
registered mail of its intention to do so, may appoint the second arbitrator.

 

 

C.

If the two arbitrators are unable to agree upon the third arbitrator within
thirty (30) days of their appointment, the deficiency shall be supplied on the
application of the party requesting arbitration by an appointment made by the
American Arbitration Association.  Notwithstanding the appointment of any third
Arbitrator by the American Arbitration Association, the arbitration proceedings
shall not be governed by the American Arbitration Association’s commercial
arbitration rules.

 

 

D.

All arbitrators shall be disinterested active or former executive officers of
insurance or reinsurance companies or Underwriters at Lloyd’s, London.

 

 

E.

Within thirty (30) days after notice of appointment of all arbitrators, the
panel shall meet and determine timely periods for briefs, discovery procedures
and schedules for hearings.

 

 

F.

The panel shall be relieved of all judicial formality and shall not be bound by
the strict rules of procedure and evidence  Unless the panel agrees otherwise,
arbitration shall take place in Los Angeles, California, but the venue may be
changed when deemed by the panel to be in the best interest of the arbitration
proceeding.  Insofar as the arbitration panel looks to substantive law, it shall
consider the law of the State of California.  The decision of any two
arbitrators when rendered in writing shall be final and binding.  The panel is
empowered to grant interim relief as it may deem appropriate.

 

 

G.

The panel shall make its decision considering the custom and practice of the
applicable insurance and reinsurance business within sixty (60) days following
the termination of the hearings.  Judgment upon the award may be entered in a
court having jurisdiction thereof.

 

 

H.

Each party shall bear the expense of its own arbitrator and shall jointly and
equally bear with the other party the cost of the third arbitrator.  The
remaining costs of the arbitration shall be allocated by the panel.  The panel
may, at its discretion, award such further costs and expenses as it considers
appropriate, including but not limited to attorneys fees, to the extent
permitted by law.

ARTICLE 25

SERVICE OF SUIT (U.S.A.)

(This Article applies only to those reinsurers not domiciled in the United
States of America, and/or not authorized in any state, territory and/or district
of the United States of America where authorization is required by insurance
regulatory authorities.)

A.

It is agreed that in the event of the failure of the Reinsurer hereon to pay any
amount claimed to be due hereunder, the Reinsurer hereon, at the request of the
Company, shall submit to the jurisdiction of a court of competent jurisdiction
within the United States of

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America.  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 of America, 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 of America or of any State
in the United States of America.  It is further agreed that service of process
in such suit may be made upon Messrs. Mendes & Mount, 725 South Figueroa, Suite
1990, Los Angeles, CA 90017, and that in any suit instituted, the Reinsurer
shall abide by the final decision of such court or of any appellate court in the
event of an appeal.

 

 

B.

The above-named are authorized and directed to accept service of process on
behalf of the Reinsurer in any such suit and/or upon the request of the Company
to give written undertaking to the Company that they shall enter a general
appearance upon the Reinsurer’s behalf in the event such a suit shall be
instituted.

 

 

C.

Further, pursuant to any statute of any state, territory or district of the
United States of America which makes provision therefor, the Reinsurer hereon
hereby designates the Superintendent, Commissioner or Director of Insurance or
other officer specified for that purpose in the statute, or its successor or
successors in office, as their true and lawful attorney upon whom may be served
any lawful process in action, suit or proceeding instituted by or on behalf of
the Company or any beneficiary hereunder arising out of this Agreement, and
hereby designate the above-named as the firm to whom the said officer is
authorized to mail such process or a true copy thereof.

ARTICLE 26

INSOLVENCY

A.

The portion of any risk or obligation assumed by the Reinsurer, when such
portion is ascertained, shall be payable on demand of the Company at the same
time as the Company shall pay its net retained portion of such risk or
obligation, with reasonable provision for verification before payment, and the
reinsurance shall be payable by the Reinsurer, on the basis of the liability of
the Company under the policy or policies reinsured without diminution because of
the insolvency of the Company.

 

 

B.

In the event of the insolvency of one or more than one of the companies,
reinsurance under this Agreement shall be payable immediately on demand, with
reasonable provision for verification, on the basis of claims allowed against
the insolvent company(ies) by any court of competent jurisdiction or by any
liquidator, receiver, or statutory successor of the Company(ies) having
authority to allow such claims, without diminution because of such insolvency or
because such liquidator, receiver, or statutory successor has failed to pay all
or a portion  of  any  claims.

 

 

 

Such payments by the Reinsurer shall be made directly to the Company or its
liquidator, receiver or statutory successor, except where the contract of
insurance or reinsurance

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provides another payee of such reinsurance in the event of the insolvency of the
Company(ies).

 

 

C.

It is agreed, however, that the liquidator or receiver or statutory successor of
the insolvent Company(ies) shall give written notice to the Reinsurer of the
pendency of a claim against the insolvent Company(ies) on the policy or policies
reinsured within a reasonable time after such claim is filed in the insolvency
proceeding 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 which it may deem
available to the Company(ies) or its liquidator or receiver or statutory
successor.  The expense thus incurred by the Reinsurer shall be chargeable,
subject to court approval, against the insolvent Company(ies) as part of the
expense of liquidation to the extent of a proportionate share of the benefit
which may accrue to the Company(ies) solely as a result of the defense
undertaken by the Reinsurer.

 

 

D.

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 Agreement as though such
expense had been incurred by the insolvent Company(ies).

ARTICLE 27

INTERMEDIARY

Guy Carpenter & Company, Inc. is hereby recognized as the Intermediary
negotiating this Agreement 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 Guy Carpenter & Company, Inc., 3600 Minnesota Drive, Suite
400, Edina MN 55435.  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.

ARTICLE 28

GOVERNING LAW

This Agreement shall be governed by and interpreted in accordance with the laws
of the State of California, U.S.A.

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ARTICLE 29

SEVERAL LIABILITY NOTICE

The Subscribing Reinsurers’ obligations under contracts of reinsurance to which
they subscribe are several and not joint and are limited solely to the extent of
their individual subscriptions.  The subscribing reinsurers are not responsible
for the subscription of any co-subscribing reinsurer who for any reason does not
satisfy all or part of its obligations.

ARTICLE 30

MODE OF EXECUTION

1.

This Agreement may be executed by:

 

 

 

(a)

An original written ink signature of paper documents.

 

 

 

 

(b)

An exchange of facsimile copies showing the original written ink signature of
paper documents.

 

 

 

 

(c)

Electronic signature technology employing computer software and a digital
signature or digitizer pen pad to capture a person’s handwritten signature in
such a manner that the signature is unique to the person signing, is under the
sole control of the person signing, is capable of verification to authenticate
the signature and is linked to the document signed in such a manner that if the
data is changed, such signature is invalidated.

 

 

 

2.

The use of any one or a combination of these methods of execution shall
constitute a legally binding and valid signing of this Agreement.  This
Agreement may be executed in one or more counterparts, each of which, when duly
executed, shall be deemed an original.

IN WITNESS WHEREOF, the Company has caused this Contract to be executed by its
duly authorized representative(s) this _____day of __________, in the year of
________.

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

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EXHIBIT A - FIRST LAYER

attaching to and forming a part of the

FIRST-FOURTH EXCESS OF LOSS REINSURANCE AGREEMENT

LIMITS OF COVER

A.

As respects Physicians and Surgeons Comprehensive Professional and Business
Liability Policies, including clinics and clinical laboratories, Professional
and Business Liability policies for Healthcare Facilities, and Errors and
Omissions liability policies for Managed Care Organizations and Directors and
Officers Liability Policies in force during the term of this Agreement, the
Company shall retain for its own account and pay under one or more of the
Company’s policies the first $1,250,000 ultimate net loss, each and every loss
and the Reinsurer agrees to reimburse the Company for the amount of ultimate net
loss paid in excess of $1,250,000, each and every loss, but the Reinsurer’s
liability shall not exceed $3,750,000 resulting from each and every loss.

 

 

B.

As respects Professional and Business Liability Policies for Hospitals in force
during the term of this Agreement, the Company shall retain for its own account
and pay under one or more of the Company’s policies the first $2,000,000
ultimate net loss, each and every loss and the Reinsurer agrees to reimburse the
Company for the amount of ultimate net loss paid in excess of $2,000,000, each
and every loss, but the Reinsurer’s liability shall not exceed $3,000,000
resulting from each and every loss.

 

 

C.

It is understood and agreed that this Agreement shall respond to individual
losses under Physicians and Surgeons Comprehensive Professional and Business
Liability Policies, including clinics and clinical laboratories, Professional
and Business Liability Policies for Healthcare Facilities, Errors and Omissions
Liability Policies for Managed Care Organizations, and Directors and Officers
Liability Policies and/or any combination thereof, in excess of $1,250,000
arising from any one incident.  However, in the event any such combined loss
includes Professional and Business Liability Policies for Hospitals, then this
Agreement shall attach in excess of $2,000,000 arising from any one incident.

 

 

D.

The Reinsurer’s aggregate liability from all losses under this Exhibit during
the term of this Agreement shall not exceed $15,000,000.

 

 

E.

Notwithstanding the foregoing, it is a condition hereto that an Annual Aggregate
Deductible of $2,750,000, otherwise recoverable under this Exhibit, shall first
be deducted before any liability attaches hereon.

PREMIUM

A.

The Company shall pay to the Reinsurer a deposit premium of $7,232,000 payable
in equal installments of $3,616,000 on January 1 and July 1 of 2002.

 

 

B.

As soon as practicable after expiration of this Agreement, the Company shall
calculate the premium due the Reinsurer based on a rate of 4.50% of the Gross
Net Earned Premium Income accounted for by the Company during the term of this
Agreement on all business subject matter of the Agreement, subject to a minimum
premium of $5,785,600.  In the event the premium due hereunder is greater than
the deposit premium paid, the difference shall be paid to the Reinsurer
forthwith.  If the actual premium is less than the deposit

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premium paid, the difference shall be refunded to the Company, subject to the
minimum premium.

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EXHIBIT B - SECOND LAYER

attaching to and forming a part of the

FIRST-FOURTH EXCESS OF LOSS REINSURANCE AGREEMENT

LIMITS OF COVER

A.

The Company shall retain for its own account and pay under one or more of the
Company’s policies the first $5,000,000 ultimate net loss, each and every loss
and the Reinsurer agrees to reimburse the Company for the amount of ultimate net
loss paid in excess of $5,000,000, each and every loss, but the Reinsurer’s
liability under this Exhibit shall not exceed $5,000,000 resulting from each and
every loss.

 

 

B.

Notwithstanding the foregoing it is a condition hereto that an Annual Aggregate
Deductible of $1,000,000, and otherwise recoverable under this Exhibit, shall
first be deducted before any liability attaches hereon.

 

 

PREMIUM

 

A.

The Company shall pay to the Reinsurer a deposit premium of $2,600,000 payable
in equal installments of $1,300,000 on January 1 and July 1 of 2002.

 

 

B.

As soon as practicable after expiration of this Agreement, the Company shall
calculate the premium due the Reinsurer based on a rate of 1.62% of the Gross
Net Earned Premium Income accounted for by the Company during the term of this
Agreement on all business subject matter of the Agreement, subject to a minimum
premium of $2,080,000.  In the event the premium due hereunder is greater than
the deposit premium paid, the difference shall be paid to the Reinsurer
forthwith.  If the actual premium is less than the deposit premium paid, the
difference shall be refunded to the Company, subject to the minimum premium.

 

 

REINSTATEMENT

 

A.

In the event of any portion of the coverage under this Exhibit being depleted or
exhausted by loss, the amount so depleted or exhausted shall be reinstated from
the time claim is first made and the Company shall pay the Reinsurer for such
reinstatement an additional premium calculated as follows:

 

 

 

1.

For the first $5,000,000 so reinstated, 60% of the annual reinsurance premium
pro rated as to the amount so reinstated;

 

 

 

 

2.

For the second $5,000,000 so reinstated, 100% of the annual reinsurance premium
pro rated as to the amount so reinstated.

 

 

 

 

All calculations of reinstatement premiums shall be based on paid losses only.

 

 

B.

Nevertheless, the Reinsurer’s liability shall never be more than $5,000,000 in
respect of any claim made, nor more than the Maximum Annual Aggregate Amount
Recoverable under this Exhibit of $15,000,000 in all during the term of the
Agreement.

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EXHIBIT C - THIRD LAYER

attaching to and forming a part of the

FIRST-FOURTH EXCESS OF LOSS REINSURANCE AGREEMENT

LIMITS OF COVER

 

The Company shall retain for its own account and pay under one or more of the
Company’s policies the first $10,000,000 ultimate net loss, each and every loss
and the Reinsurer agrees to reimburse the Company for the amount of ultimate net
loss paid in excess of $10,000,000, each and every loss, but the Reinsurer’s
maximum liability shall not exceed $10,000,000 resulting from each and every
loss.

PREMIUM

A.

The Company shall pay to the Reinsurer a deposit premium of $1,880,000 payable
in equal installments of $940,000 on January 1 and July 1 of 2002.

 

 

B.

As soon as practicable after expiration of this Agreement, the Company shall
calculate the premium due the Reinsurer based on a rate of 1.17% of the Gross
Net Earned Premium Income accounted for by the Company during the term of this
Agreement on all business subject matter of the Agreement, subject to a minimum
premium of $1,504,000.  In the event the premium due hereunder is greater than
the deposit premium paid, the difference shall be paid to the Reinsurer
forthwith.  If the actual premium is less than the deposit premium paid, the
difference shall be refunded to the Company, subject to the minimum premium.

REINSTATEMENT

A.

In the event of any portion of the coverage under this Exhibit being depleted or
exhausted by loss, the amount so depleted or exhausted shall be reinstated from
the time claim is first made and the Company shall pay the Reinsurer for such
reinstatement an additional premium calculated as 100% of the annual reinsurance
premium pro rated as to the amount so reinstated.  All calculations of
reinstatement premiums shall be based on paid losses only.

 

 

B.

Nevertheless, the Reinsurer’s liability shall never be more than $10,000,000 in
respect of any claim made, nor more than the Maximum Annual Aggregate Amount
Recoverable under this Exhibit of $20,000,000 in all during the term of the
Agreement.

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EXHIBIT D - FOURTH LAYER

attaching to and forming a part of the

FIRST-FOURTH EXCESS OF LOSS REINSURANCE AGREEMENT

LIMITS OF COVER

 

The Company shall retain for its own account and pay under one or more of the
Company’s policies the first $20,000,000 ultimate net loss, each and every loss
and the Reinsurer agrees to reimburse the Company for the amount of ultimate net
loss paid in excess of $20,000,000, each and every loss, but the Reinsurer’s
maximum liability shall not exceed $30,000,000 resulting from each and every
loss.

PREMIUM

A.

The Company shall pay to the Reinsurer a deposit premium of $1,300,000 payable
in equal installments of $650,000 on January 1 and July 1 of 2002.

 

 

B.

As soon as practicable after expiration of this Agreement, the Company shall
calculate the premium due the Reinsurer based on a rate of 0.82% of the Gross
Net Earned Premium Income accounted for by the Company during the term of this
Agreement on all business subject matter of the Agreement, subject to a minimum
premium of $1,040,000.  In the event the premium due hereunder is greater than
the deposit premium paid, the difference shall be paid to the Reinsurer
forthwith.  If the actual premium is less than the deposit premium paid, the
difference shall be refunded to the Company, subject to the minimum premium.

REINSTATEMENT

A.

In the event of any portion of the coverage under this Exhibit being depleted or
exhausted by loss, the amount so depleted or exhausted shall be reinstated from
the time claim is first made and the Company shall pay the Reinsurer for such
reinstatement an additional premium calculated as 100% of the annual reinsurance
premium pro rated as to the amount so reinstated.  All calculations of
reinstatement premiums shall be based on paid losses only.

 

 

B.

Nevertheless, the Reinsurer’s liability shall never be more than $30,000,000 in
respect of any claim made, nor more than the Maximum Annual Aggregate Amount
Recoverable under this Exhibit of $60,000,000 in all during the term of the
Agreement.

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LOSS FUNDING - INCLUDING IBNR

THIS IS APPLICABLE TO NON-ADMITTED REINSURERS ONLY

After consultation with its outside Actuaries, Tillinghast, Towers Perrin, the
Company intends to use the following IBNR factors applied to Gross Reinsurance
Premiums for 2002 Letter of Credit Funding purposes applicable to Non-Admitted
Reinsurers only:

Period

 

IBNR
Factor

 

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

 

Current Year
 

 

97.00

%

First Development Year
 

 

40.00

%

Second Development Year
 

 

17.00

%

Third Development Year
 

 

7.00

%

Fourth Development Year & Subsequent
 

 

2.00

%

The Letter of Credit Funding requirement for IBNR shall be net of any Specific
Case Base Loss Reserves. Therefore, the factors outlined above represent the
ceiling for the sum of Specific Case Base Loss Reserves and IBNR.  Further, a
cap of five times the Gross Reinsurance Premium shall apply as the Lifetime IBNR
Maximum for each Treaty Year.

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NUCLEAR ENERGY RISKS EXCLUSION CLAUSE (REINSURANCE) (1994)
(WORLDWIDE EXCLUDING U.S.A. AND CANADA)

This Agreement shall exclude Nuclear Energy Risks whether such risks are written
directly and/or by way of reinsurance and/or via Pools and/or Associations.

For all purposes of this Agreement Nuclear Energy Risks shall mean all first
party and/or third party insurances or reinsurances (other than Workers’
Compensation and Employers’ Liability) in respect of:

 

(I)

All Property on the site of a nuclear power station.

 

 

 

 

 

Nuclear Reactors, reactor buildings and plant and equipment therein on any site
other than a nuclear power station.

 

 

 

 

(II)

All Property, on any site (including but not limited to the sites referred to in
(I) above) used or having been used for:

 

 

 

 

 

(a)

the generation of nuclear energy; or

 

 

 

 

 

 

(b)

the Production, Use or Storage of Nuclear Material.

 

 

 

 

 

(III)

Any other Property eligible for insurance by the relevant local Nuclear
Insurance Pool and/or Association but only to the extent of the requirements of
that local Pool and/or Association.

 

 

 

 

(IV)

The supply of goods and services to any of the sites, described in (I) to (III)
above, unless such insurances or reinsurances shall exclude the perils of
irradiation and contamination by Nuclear Material.

Except as undernoted, Nuclear Energy Risks shall not include:

 

(i)

Any insurance or reinsurance in respect of the construction or erection or
installation or replacement or repair or maintenance or decommissioning of
Property as described in (I) to (III) above (including contractors’ plant and
equipment);

 

 

 

 

(ii)

Any Machinery Breakdown or other Engineering insurance or reinsurance not coming
within the scope of (i) above.

Provided always that such insurance or reinsurance shall exclude the perils of
irradiation and contamination by Nuclear Material.

However, the above exemption shall not extend to:

 

(1)

The provision of any insurance or reinsurance whatsoever in respect of:

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(a)

Nuclear Material;

 
 

 

 

 
 

(b)

Any Property in the High Radioactivity Zone or Area of any Nuclear Installation
as from the introduction of Nuclear Material or - for reactor installations - as
from fuel loading or first criticality where so agreed with the relevant local
Nuclear Insurance Pool and/or Association.

 
 

 

 

 
(2)

The provision of any insurance or reinsurance for the undernoted perils:

 
 

 

 
 

•   fire, lightning, explosion;

 
 

•   earthquake;

 
 

•   aircraft and other aerial devices or

 
 

•   articles dropped therefrom;

 
 

•   irradiation and radioactive contamination;

 
 

•   any other peril insured by the relevant

 
 

     local Nuclear Insurance Pool and/or Association;

 
 

 

 
 

in respect of any other Property not specified in (1) above which directly
involves the Production, Use or Storage of Nuclear Material as from the
introduction of Nuclear Material into such Property.

Definitions

“Nuclear Material” means:

 

(i)

Nuclear fuel, other than natural uranium and depleted uranium, capable of
producing energy by a self-sustaining chain process of nuclear fission outside a
Nuclear Reactor, either alone or in combination with some other material; and

 

 

 

 

(ii)

Radioactive Products or Waste.

“Radioactive Products or Waste” means any radioactive material produced in, or
any material made radioactive by exposure to the radiation incidental to the
production or utilisation of nuclear fuel, but does not include radioisotopes
which have reached the final stage of fabrication so as to be usable for any
scientific, medical, agricultural, commercial or industrial purpose.

“Nuclear Installation” means:

 

(i)

Any Nuclear Reactor;

 

 

 

 

(ii)

Any factory using nuclear fuel for the production of Nuclear Material, or any
factory for the processing of Nuclear Material, including any factory for the
reprocessing of irradiated nuclear fuel; and

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(iii)

Any facility where Nuclear Material is stored, other than storage incidental to
the carriage of such material.

“Nuclear Reactor” means any structure containing nuclear fuel in such an
arrangement that a self-sustaining chain process of nuclear fission can occur
therein without an additional source of neutrons.

“Production, Use or Storage of Nuclear Material” means the production,
manufacture, enrichment, conditioning, processing, reprocessing, use, storage,
handling and disposal of Nuclear Material.

“Property” shall mean all land, buildings, structures, plant, equipment,
vehicles, contents (including but not limited to liquids and gases) and all
materials of whatever description whether fixed or not.

“High Radioactivity Zone or Area” means:

 

(i)

For nuclear power stations and Nuclear Reactors, the vessel or structure which
immediately contains the core (including its supports and shrouding) and all the
contents thereof, the fuel elements, the control rods and the irradiated fuel
store; and

 

 

 

 

(ii)

For non-reactor Nuclear Installations, any area where the level of radioactivity
requires the provision of a biological shield.

N.M.A. 1975(a)
April 1, 1994

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NOTES:

Wherever used herein the terms:

 

 

 

 

“Reinsured”

shall be understood to mean “Company”, “Reinsured”, “Reassured” or whatever
other term is used in the attached reinsurance document to designate the
reinsured company or companies.

 

 

 

 

“Agreement”

shall be understood to mean “Agreement”, “Contract”, “Policy” or whatever other
term is used to designate the attached reinsurance document.

 

 

 

 

“Reinsurers”

shall be understood to mean “Reinsurers”, “Underwriters” or whatever other term
is used in the attached reinsurance document to designate the reinsurer or
reinsurers.

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NUCLEAR INCIDENT EXCLUSION CLAUSE - LIABILITY - REINSURANCE - U.S.A.

(1)

This reinsurance does not cover any loss or liability accruing to the Reassured
as a member of, or subscriber to, any association of insurers or reinsurers
formed for the purpose of covering nuclear energy risks or as a direct or
indirect reinsurer of any such member, subscriber or association.

 

 

(2)

Without in any way restricting the operation of paragraph (1) of this Clause it
is understood and agreed that for all purposes of this reinsurance all the
original policies of the Reassured (new, renewal and replacement) of the classes
specified in Clause II of this paragraph (2) from the time specified in Clause
III in this paragraph (2) shall be deemed to include the following provision
(specified as the Limited Exclusion Provision):

 

 

 

Limited Exclusion Provision.*

 

 

 

 

 

I.

It is agreed that the policy does not apply under any liability coverage, to

 

 

 

 

 

 

injury, sickness, disease, death or destruction

 

 

 

 

 

 

 

bodily injury or property damage

 

 

 

 

 

 

with respect to which an insured under the policy is also an insured under a
nuclear energy liability policy issued by Nuclear Energy Liability Insurance
Association, Mutual Atomic Energy Liability Underwriters or Nuclear Insurance
Association of Canada, or would be an insured under any such policy but for its
termination upon exhaustion of its limit of liability.

 

 

 

 

II.

Family Automobile Policies (liability only), Special Automobile Policies
(private passenger automobiles, liability only), Farmers Comprehensive Personal
Liability Policies (liability only), Comprehensive Personal Liability Policies
(liability only) or policies of a similar nature; and the liability portion of
combination forms related to the four classes of policies stated above, such as
the Comprehensive Dwelling Policy and the applicable types of Homeowners
Policies.

 

 

 

 

III.

The inception dates and thereafter of all original policies as described in II
above, whether new, renewal or replacement, being policies which either

 

 

 

 

 

(a)

become effective on or after 1st May, 1960, or

 

 

 

 

 

 

(b)

become effective before that date and contain the Limited Exclusion Provision
set out above;

 

 

 

 

 

 

provided this paragraph (2) shall not be applicable to Family Automobile
Policies, Special Automobile Policies, or policies or combination policies of a
similar nature, issued by the Reassured on New York risks, until 90 days
following approval of the Limited Exclusion Provision by the Governmental
Authority having jurisdiction thereof.

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(3)

Except for those classes of policies specified in Clause II of paragraph (2) and
without in any way restricting the operation of paragraph (1) of this Clause, it
is understood and agreed that for all purposes of this reinsurance the original
liability policies of the Reassured (new, renewal and replacement) affording the
following coverages:

 

 

 

 

Owners, Landlords and Tenants Liability, Contractual Liability, Elevator
Liability, Owners or Contractors (including railroad) Protective Liability,
Manufacturers and Contractors Liability, Product Liability, Professional and
Malpractice Liability, Storekeepers Liability, Garage Liability, Automobile
Liability (including Massachusetts Motor Vehicle or Garage Liability)

 

 

 

 

shall be deemed to include, with respect to such coverages, from the time
specified in Clause V of this paragraph (3), the following provision (specified
as the Broad Exclusion Provision):

 

 

 

Broad Exclusion Provision.*

 

 

 

It is agreed that the policy does not apply:

 

 

 

I.

Under any Liability Coverage, to

 

 

 

 

 

injury, sickness, disease, death or destruction

 

 

 

 

 

bodily injury or property damage

 

 

 

 

 

(a)

with respect to which an insured under the policy is also an insured under a
nuclear energy liability policy issued by Nuclear Energy Liability Insurance
Association, Mutual Atomic Energy Liability Underwriters or Nuclear Insurance
Association of Canada, or would be an insured under any such policy but for its
termination upon exhaustion of its limit of liability; or

 

 

 

 

 

 

(b)

resulting from the hazardous properties of nuclear material and with respect to
which (1) any person or organization is required to maintain financial
protection pursuant to the Atomic Energy Act of 1954, or any law amendatory
thereof, or (2) the insured is, or had this policy not been issued would be,
entitled to indemnity from the United States of America, or any agency thereof,
under any agreement entered into by the United States of America, or any agency
thereof, with any person or organization.

 

 

 

 

 

II.

Under any Medical Payments Coverage, or under any Supplementary Payments
Provision relating to

 

 

 

 

 

 

immediate medical or surgical relief

 

 

 

 

 

 

 

first aid,

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to expenses incurred with respect to

 

 

 

 

 

 

bodily injury, sickness, disease or death

 

 

 

 

 

 

 

bodily injury

 

 

 

 

 

 

resulting from the hazardous properties of nuclear material and arising out of
the operation of a nuclear facility by any person or organization.

 

 

 

 

III.

Under any Liability Coverage, to

 

 

 

 

 

 

injury, sickness, disease, death or destruction

 

 

 

 

 

 

 

bodily injury or property damage

 

 

 

 

 

 

resulting from the hazardous properties of nuclear material, if

 

 

 

 

 

(a)

the nuclear material (1) is at any nuclear facility owned by, or operated by or
on behalf of, an insured or (2) has been discharged or dispersed therefrom;

 

 

 

 

 

 

(b)

the nuclear material is contained in spent fuel or waste at any time possessed,
handled, used, processed, stored, transported or disposed of by or on behalf of
an insured; or

 

 

 

 

 

 

(c)

the

 

 

 

 

 

 

 

 

injury, sickness, disease, death or destruction

 

 

 

 

 

 

 

 

 

bodily injury or property damage

 

 

 

 

 

 

 

 

arises out of the furnishing by an insured of services, materials, parts or
equipment in connection with the planning, construction, maintenance, operation
or use of any nuclear facility, but if such facility is located within the
United States of America, its territories or possessions or Canada, this
exclusion (c) applies only to

 

 

 

 

 

 

 

 

injury to or destruction of property at such nuclear facility.

 

 

 

 

 

 

 

 

 

property damage to such nuclear facility and any property thereat.

 

 

 

 

 

 

IV.

As used in this endorsement:

 

 

 

 

 

“hazardous properties” include radioactive, toxic or explosive properties;
“nuclear material” means source material, special nuclear material or byproduct
material; “source material”, “special nuclear material”, and “byproduct
material” have the

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meanings given them in the Atomic Energy Act of 1954 or in any law amendatory
thereof; “spent fuel” means any fuel element or fuel component, solid or liquid,
which has been used or exposed to radiation in a nuclear reactor; “waste” means
any waste material (1) containing byproduct material other than the tailings or
wastes produced by the extraction or concentration of uranium or thorium from
any ore processed primarily for its source material content and (2) resulting
from the operation by any person or organization of any nuclear facility
included under the first two paragraphs of the definition of nuclear facility;
“nuclear facility” means

 

 

 

 

 

(a)

any nuclear reactor,

 

 

 

 

 

 

(b)

any equipment or device designed or used for (1) separating the isotopes of
uranium or plutonium, (2) processing or utilizing spent fuel, or (3) handling,
processing or packaging waste,

 

 

 

 

 

 

(c)

any equipment or device used for the processing, fabricating or alloying of
special nuclear material if at any time the total amount of such material in the
custody of the insured at the premises where such equipment or device is located
consists of or contains more than 25 grams of plutonium or uranium 233 or any
combination thereof, or more than 250 grams of uranium 235,

 

 

 

 

 

 

(d)

any structure, basin, excavation, premises or place prepared or used for the
storage or disposal of waste,

 

 

 

 

 

 

and includes the site on which any of the foregoing is located, all operations
conducted on such site and all premises used for such operations; “nuclear
reactor” means any apparatus designed or used to sustain nuclear fission in a
self-supporting chain reaction or to contain a critical mass of fissionable
material;

 

 

 

 

 

With respect to injury to or destruction of property, the word “injury” or
“destruction” includes all forms of radioactive contamination of property.
“property damage” includes all forms of radioactive contamination of property.

 

 

 

 

V.

The inception dates and thereafter of all original policies affording coverages
specified in this paragraph (3), whether new, renewal or replacement, being
policies which become effective on or after 1st May, 1960, provided this
paragraph (3) shall not be applicable to

 

 

 

 

 

(i)

Garage and Automobile Policies issued by the Reassured on New York risks, or

 

 

 

 

 

 

(ii)

statutory liability insurance required under Chapter 90, General Laws of
Massachusetts,

 

 

 

 

 

 

until 90 days following approval of the Broad Exclusion Provision by the
Governmental Authority having jurisdiction thereof.

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(4)

Without in any way restricting the operation of paragraph (1) of this Clause, it
is understood and agreed that paragraphs (2) and (3) above are not applicable to
original liability policies of the Reassured in Canada and that with respect to
such policies this Clause shall be deemed to include the Nuclear Energy
Liability Exclusion Provisions adopted by the Canadian Underwriters’ Association
or the Independent Insurance Conference of Canada.

*NOTE.   The words printed in italics in the Limited Exclusion Provision and in
the Broad Exclusion Provision shall apply only in relation to original liability
policies which include a Limited Exclusion Provision or a Broad Exclusion
Provision containing those words.

NOTES:

Wherever used herein the terms:

 

 

 

“Reassured”

shall be understood to mean “Company”, “Reinsured”, “Reassured” or whatever
other term is used in the attached reinsurance document to designate the
reinsured company or companies.

 

 

 

 

“Agreement”

shall be understood to mean “Agreement”, “Contract”, “Policy” or whatever other
term is used to designate the attached reinsurance document.

 

 

 

 

“Reinsurers”

shall be understood to mean “Reinsurers”, “Underwriters” or whatever other term
is used in the attached reinsurance document to designate the reinsurer or
reinsurers.

 

 

 

21/9/67
NMA 1590 (amended)

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