Exhibit 10.69

 

 

PROPERTY CATASTROPHE OVERLYING EXCESS OF LOSS

REINSURANCE CONTRACT

 

 

ISSUED TO

 

STATE AUTOMOBILE MUTUAL INSURANCE COMPANY

MILBANK INSURANCE COMPANY

STATE AUTO NATIONAL INSURANCE COMPANY

STATE AUTO INSURANCE COMPANY OF WISCONSIN

FARMERS CASUALTY INSURANCE COMPANY

STATE AUTO INSURANCE COMPANY OF OHIO

MERIDIAN SECURITY INSURANCE COMPANY

MERIDIAN CITIZENS MUTUAL INSURANCE COMPANY

STATE AUTO FLORIDA INSURANCE COMPANY

 

 

BY

STATE AUTO PROPERTY AND CASUALTY INSURANCE COMPANY

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STATE AUTOMOBILE MUTUAL INSURANCE COMPANY

MILBANK INSURANCE COMPANY

STATE AUTO NATIONAL INSURANCE COMPANY

STATE AUTO INSURANCE COMPANY OF WISCONSIN

FARMERS CASUALTY INSURANCE COMPANY

STATE AUTO INSURANCE COMPANY OF OHIO

MERIDIAN SECURITY INSURANCE COMPANY

MERIDIAN CITIZENS MUTUAL INSURANCE COMPANY

STATE AUTO FLORIDA INSURANCE COMPANY

 

PROPERTY CATASTROPHE OVERLYING EXCESS OF LOSS

REINSURANCE CONTRACT

TABLE OF CONTENTS

 

ARTICLE NO.

  

TITLE

  

PAGE

ARTICLE 1

  

BUSINESS COVERED

  

1

ARTICLE II

  

EXCLUSIONS

  

1 - 3

ARTICLE III

  

TERM

  

3

ARTICLE IV

  

TERRITORY

  

3

ARTICLE V

  

AMOUNT OF LIMIT AND RETENTION

  

4

ARTICLE VI

  

ULTIMATE NET LOSS

  

4

ARTICLE VII

  

NET RETAINED LINES

  

4

ARTICLE VIII

  

UNDERLYING EXCESS

  

5

ARTICLE IX

  

DEFINITION OF LOSS OCCURRENCE

  

5 - 6

ARTICLE X

  

NOTICE OF LOSS AND LOSS SETTLEMENT

  

6

ARTICLE XI

  

PREMIUM

  

7

ARTICLE XII

  

CURRENCY

  

7

ARTICLE XIII

  

OFFSET

  

7

ARTICLE XIV

  

ACCESS TO RECORDS

  

7

ARTICLE XV

  

ERRORS AND OMISSIONS

  

7

ARTICLE XVI

  

TAXES

  

8

ARTICLE XVII

  

INSOLVENCY

  

8

ARTICLE XVIII

  

ARBITRATION

  

8 - 9

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Exhibit A

     

War Exclusion Clause

     

Pools, Associations & Syndicates Exclusion Clause

     

Nuclear Incident Exclusion Clause – Physical Damage – Reinsurance –
U.S.A.

     

Nuclear Incident Exclusion Clause – Physical Damage – Reinsurance –
CANADA

  

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PROPERTY CATASTROPHE OVERLYING EXCESS OF LOSS

REINSURANCE CONTRACT

between

STATE AUTOMOBILE MUTUAL INSURANCE COMPANY

MILBANK INSURANCE COMPANY

STATE AUTO NATIONAL INSURANCE COMPANY

STATE AUTO INSURANCE COMPANY OF WISCONSIN

FARMERS CASUALTY INSURANCE COMPANY

STATE AUTO INSURANCE COMPANY OF OHIO

MERIDIAN SECURITY INSURANCE COMPANY

MERIDIAN CITIZENS MUTUAL INSURANCE COMPANY

STATE AUTO FLORIDA INSURANCE COMPANY

(hereinafter collectively referred to as the “Company”)

and

STATE AUTO PROPERTY AND CASUALTY INSURANCE COMPANY

(hereinafter referred to as the Subscribing “Reinsurer”)

 

ARTICLE I

BUSINESS COVERED:

The Reinsurer shall indemnify the Company for the net excess liability as
hereinafter provided and specified, which may accrue to the Company as a result
of any loss or losses which may occur during the currency of the Contract under
any and all policies, contracts, binders and other evidence of insurance and
reinsurance, oral or written (hereinafter referred to as “Policies”) heretofore
or hereafter issued or entered into by or on behalf of the Company and
classified by the Company as Fire, Allied Lines, Homeowners (property
coverages), Farmowners (property coverages), Commercial Multiple Peril policies
(property coverages), Ocean Marine, Inland Marine and Automobile Physical
Damage.

 

ARTICLE II

EXCLUSIONS:

This Contract shall not apply to and specifically excludes the following:

 

 

1.

Business written and classified by the Company as:

 

 

a)

Aviation Insurance;

 

b)

Casualty Insurance (i.e. Accident, Health, Third Party Liability, Workers’
Compensation and Employers’ Liability, Fidelity, Plate Glass and Burglary and
Theft when written as such);

 

c)

Credit Insurance;

 

d)

Financial Guarantee Insurance;

 

e)

Insolvency Insurance;

 

f)

Life Insurance;

 

g)

Mortgage Impairment Insurance;

 

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h)

Title Insurance;

 

i)

Surety;

 

j)

Flood Insurance when written as such;

 

k)

Earthquake Insurance when written as such;

 

1)

Difference in Conditions Insurance when written as such;

 

m)

Ocean Marine Insurance when written as such, except yachts;

 

n)

Boiler and Machinery;

 

o)

Multiple Peril policies other than the Property coverages as included in the
Business Covered Section, hereof;

 

p)

Reinsurance assumed, but not to exclude so-called agency reinsurance,
reinsurance of an individual risk or policy, or any intercompany pooling
arrangements.

 

 

2.

Wind and Hail on growing and standing crops.

 

 

3.

Manufacture, processing, storage, filling or breaking down of explosives.

 

 

4.

Oil and petrochemical refineries and pipelines and oil or gas drilling rigs.

 

 

5.

Excess of Loss insurance or reinsurance where the deductible exceeds $500,000.

 

 

6.

Bridges and Tunnels where the Total Insured Value over all interests exceeds
$300,000,000.

 

 

7.

Extra Contractual Obligations and Loss in Excess of Policy Limits as per the
following definitions:

 

 

a)

Extra Contractual Obligations, which shall mean any punitive, exemplary,
compensatory or consequential damages, other than loss in excess of policy
limits, paid or payable by the Company as a result of an action against it by
its insured, its insured’s assignee or a third party claimant, by reason of
alleged or actual negligence, fraud or bad faith on the part of the Company in
handling a claim under a Policy subject to this Contract.

 

 

b)

Loss in Excess of Policy Limits, which shall mean an amount that the Company
would have been contractually liable to pay had it not been for the limit of the
original Policy as a result of an action against it by its insured or its
insured’s assignee. Such loss in excess of the limit shall have been incurred
because of 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 in the preparation or prosecution of an appeal
consequent upon such action.

 

 

8.

Loss/or Damage/or Costs/or Expenses arising from seepage and/or Pollution and/or
Contamination, other than Contamination from Smoke Damage. Nevertheless, this
exclusion does not preclude payment of the cost of removal of debris of property
damaged by a loss otherwise covered hereunder, but subject always to a limit of
25% of the Company’s property loss under the original Policy.

 

 

9.

Loss in respect of overhead transmission and distribution lines and their
supporting structure other than those on or within 150 meters (or 500 feet) of
the insured premises. It is understood and agreed that public utilities
extension and/or suppliers extension and/or contingent business interruption
coverages are not subject to this exclusion, provided that these are not part of
a transmitters’ or distributors’ Policy.

 

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10.

Liability of the Company arising by contract, operation of law, or otherwise,
from its participation or membership, whether voluntary or involuntary, in any
insolvency fund. “Insolvency Fund” includes any guaranty fund, insolvency fund,
plan, pool, association, fund or other arrangement, 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.

 

 

11.

War Risk as per the “War Exclusion Clause” attached hereto.

 

 

12.

Pools, Associations and Syndicates as per the “Pools, Associations & Syndicates
Exclusion Clause” attached hereto.

 

 

13.

Nuclear Incident as per the “Nuclear Incident Exclusion Clause - Physical Damage
- Reinsurance - U.S.A.” (NMA 1119) attached hereto.

 

 

14.

Nuclear Incident as per the “Nuclear Incident Exclusion Clause - Physical Damage
- Reinsurance - CANADA” (NMA 1980a) attached hereto.

 

 

15.

Loss, damage, costs, and/or expenses resulting from: i) the release or
dispersion of or contamination from harmful micro-organisms or other biological
contagion; ii) the release or dispersion of or contamination from harmful
chemical agents or contaminants; iii) the use of any nuclear device or release
or dispersion of radioactive contamination.

 

 

16.

Loss, damage, costs, and/or expenses resulting from an act of terrorism.

 

ARTICLE III

TERM:

The term of this Contract shall be from 12:01 A.M., Eastern Time, July 1, 2006
to 12:01 A.M., Eastern Time, July 1, 2007.

If this Contract expires while a Loss Occurrence covered hereunder is in
progress, the Reinsurer’s liability hereunder shall, subject to the other terms
and conditions of this Contract, be determined as if the entire Loss Occurrence
had occurred prior to the expiration of this Contract, provided that no part of
such Loss Occurrence is claimed against any renewal or replacement of this
Contract.

 

ARTICLE IV

TERRITORY:

This Contract shall cover wherever the Company’s Policies cover.

 

3

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ARTICLE V

AMOUNT OF LIMIT AND RETENTION:

No claim shall be made hereunder unless and until the Company, on a pooled basis
where applicable, shall have first sustained an Ultimate Net Loss (as defined
below) in excess of $135,000,000, regardless of the number of Policies under
which such loss is payable or the number of interests insured. The Reinsurer
shall then be liable for the amount of Ultimate Net Loss for the Company in
excess of $135,000,000 per occurrence, but the sum recoverable from the
Reinsurer shall not exceed $100,000,000 in respect of each such Loss Occurrence
and in respect of all Loss Occurrences during the term of this Contract.

The applicability of coverage under this Contract is subject to at least two
risks being involved in the same Loss Occurrence.

 

ARTICLE VI

ULTIMATE NET LOSS:

The term “Ultimate Net Loss” shall mean the amount that the Company pays as
insured losses. Ultimate Net Loss also includes, but is not limited to, all
expenses incurred by the Company in connection with the settlement of losses or
resistance to or negotiations concerning a loss, including salaries and expenses
of employees of the Company while diverted from their normal duties to the
service of field adjustment but shall not include any office expenses of the
Company. However, nothing in this Article shall be construed to prevent the
Company from including all such amounts defined as Ultimate Net Loss
attributable to the Group (as defined below), on a pooled basis where
applicable, for the first $135,000,000 of Ultimate Net Loss. The Group shall
mean, collectively, the Company and State Auto Property and Casualty Insurance
Company.

Subject to Article VIII, all salvages and recoveries and payments (net of the
cost of obtaining any salvage, recovery or payment), whether recovered or
received prior or subsequent to loss settlement under this Contract, including
amounts recoverable under other reinsurance, whether collected or not, shall be
applied as if recovered or received prior to the aforesaid settlement and shall
be deducted from the actual loss incurred to arrive at the amount of Ultimate
Net Loss. Nothing in this Article shall be construed to mean losses are not
recoverable until the Ultimate Net Loss to the Company has been ascertained.

 

ARTICLE VII

NET RETAINED LINES:

This Contract applies to only that portion of any Policy which the Company and
the other members of the Group, on a pooled basis where applicable, retains net
for its own account.

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

 

4

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ARTICLE VIII

UNDERLYING EXCESS:

The Company has in force underlying catastrophe excess of loss reinsurance and
recoveries thereunder shall be disregarded for all purposes of this Contract and
shall inure to the sole benefit of the Company.

 

ARTICLE IX

DEFINITION OF LOSS OCCURRENCE:

The term “Loss Occurrence” shall mean the sum of all individual losses directly
occasioned by any one disaster, accident or loss or series of disasters,
accidents or losses arising out of one event which occurs within the area of one
state of the United States or province of Canada and states or provinces
contiguous thereto and to one another. However, the duration and extent of any
one “Loss Occurrence” shall be limited to all individual losses sustained by the
Company occurring during any period of one hundred sixty-eight (168) consecutive
hours arising out of and directly occasioned by the same event except that the
term “Loss Occurrence” shall be further defined as follows:

 

 

A.

As regards windstorm, hail, tornado, hurricane, cyclone, including ensuing
collapse and water damage, all individual losses sustained by the Company
occurring during any period of seventy-two (72) consecutive hours arising out of
and directly occasioned by the same event. However, the event need not be
limited to one state or province or states or provinces contiguous thereto.

 

 

B.

As regards riot, riot attending a strike, civil commotion, vandalism and
malicious mischief, all individual losses sustained by the Company occurring
during any period of seventy-two (72) consecutive hours within the area of one
municipality or county and the municipalities or counties contiguous thereto
arising out of and directly occasioned by the same event. The maximum duration
of seventy-two (72) consecutive hours may be extended in respect of individual
losses which occur beyond such seventy-two (72) consecutive hours during the
continued occupation of an assured’s premises by strikers, provided such
occupation commenced during the aforesaid period.

 

 

C.

As regards earthquake (the epicentre of which need not necessarily be within the
territorial confines referred to in the opening paragraph of this Article) and
fire following directly occasioned by the earthquake, only those individual fire
losses which commence during the period of one hundred and sixty-eight
(168) consecutive hours may be included in the Company’s “Loss Occurrence.”

 

 

D.

As regards “freeze”, only individual losses directly occasioned by collapse,
breakage of glass and water damage (caused by bursting of frozen pipes and
tanks) may be included in the Company’s “Loss Occurrence.”

For all “Loss Occurrences” except as referred to under sub-paragraph B, the
Company may choose the date and time when any such period of consecutive hours
commences, provided that it is not earlier than the date and time of the
occurrence of the first recorded individual loss sustained by the Company
arising out of that disaster, accident, or loss and provided that only one such
period of one hundred and sixty-eight (168) consecutive hours shall apply with

 

5

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respect to one event, except for those “Loss Occurrences” referred to in
sub-paragraph A above, where only one such period of seventy-two
(72) consecutive hours shall apply with respect to one event, regardless of the
duration of the event.

As respect those “Loss Occurrences” referred to in sub-paragraph B above, if the
disaster, accident or loss occasioned by the event is of greater duration than
seventy-two (72) consecutive hours, then the Company may divide that disaster,
accident or loss into two or more “Loss Occurrences” provided no two periods
overlap and no individual loss is included in more than one such period and
provided that no period commences earlier than the date and time of the
occurrence of the first recorded individual loss sustained by the Company
arising out of that disaster, accident or loss.

No individual losses occasioned by an event that would be covered by seventy-two
(72) hours clauses may be included in any “Loss Occurrence” claimed under the
one hundred and sixty-eight (168) hours provision.

Losses directly or indirectly occasioned by:

 

 

a.

loss of, alteration of, or damage to

                or

 

b.

a reduction in the functionality, availability or operation of:

a computer system, hardware, program, software, data, information repository,
microchip, integrated circuit or similar device in computer equipment or
non-computer equipment, whether the property of the policyholder of the Company
or not, do not in and of themselves constitute an event unless arising out of
one or more of the following perils:

fire, lightning, explosion, aircraft, or vehicle impact, falling objects,
windstorm, hail, tornado, cyclone, hurricane, earthquake, volcano, tsunami,
flood, freeze or weight of snow.

 

ARTICLE X

NOTICE OF LOSS AND LOSS SETTLEMENT:

The Company shall adjust, settle, or compromise all claims and losses hereunder.

All loss settlements by the Company which comply with the terms hereof shall be
unconditionally binding upon the Reinsurer.

The Company shall advise the Reinsurer promptly of all claims and any subsequent
developments pertaining thereto, which may, in the Company’s opinion, develop
into losses involving Reinsurance hereunder. Inadvertent omission or oversight
in dispatching such advices shall in no way affect the liability of the
Reinsurer under this Contract provided the Company informs the Reinsurer of such
omission or oversight promptly upon its discovery.

The Reinsurer shall tender all loss payments as soon as practicable after
receipt of any proof of loss.

 

6

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ARTICLE XI

PREMIUM:

The premium to be paid to the Reinsurer shall be $3,760,000, payable in four
equal quarterly installments. Each company shall pay a percentage of the premium
based on its share of subject premium, as shown in Exhibit A.

 

ARTICLE XII

CURRENCY:

All retentions, limits and premiums referenced in this Contract are expressed in
United States Dollars and all payments made by either party shall be made in
United States Dollars.

Amounts paid or received by the Company in any other currency shall be converted
to United States Dollars at the rate of exchange at the date such transaction is
entered on the books of the Company.

 

ARTICLE XIII

OFFSET:

The Company and the Reinsurer, each at its option, may offset any balance or
balances, whether on account of premiums, claims and losses, loss expenses or
salvages due from one party to the other under this Contract; provided, however,
that in the event of the insolvency of a party hereto, offsets shall only be
allowed in accordance with applicable statutes and regulations.

 

ARTICLE XIV

ACCESS TO RECORDS:

The Company shall place at the disposal of the Reinsurer at all reasonable
times, and the Reinsurer shall have the right to inspect through its designated
representatives, during the term of this Contract and thereafter, all books,
records and papers of the Company in connection with any reinsurance hereunder,
or the subject matter hereof.

 

ARTICLE XV

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 either party if such
delay, omission or error had not been made, provided such delay, omission or
error is rectified as soon as practicable after discovery.

 

7

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ARTICLE XVI

TAXES:

In consideration of the terms under which this Contract is issued, the Company
will not claim a deduction in respect of the premium hereon when making tax
returns, other than income or profits tax returns, to any state or territory of
the United States of America, the District of Columbia or Canada.

 

ARTICLE XVII

INSOLVENCY:

The reinsurance under this Contract shall be payable by the Reinsurer on the
basis of the liability of one or more of the Companies under the Policy or
Policies reinsured without diminution because of the insolvency of one or more
of the Companies reinsured or because the liquidator, receiver, conservator or
statutory successor of the Company(ies) has failed to pay all or a portion of
any claim.

In the event of the insolvency of one or more of the Companies reinsured, the
liquidator, receiver, conservator or statutory successor of the 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
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, receiver, conservator 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.

Where two or more Reinsurers are involved in the same claim and a majority in
interest elect to interpose defense to such claim, the expense shall be
apportioned in accordance with the terms of this Contract as though such expense
had been incurred by the Company(ies).

In the event of the insolvency of one or more of the Companies reinsured, the
reinsurance under this Contract shall be payable by the Reinsurer directly to
the Company(ies) or to the liquidator, receiver, conservator or statutory
successor, except as provided by subsection (A) of section 4118 of the Insurance
Law of New York or except where (1) the Contract specifies another payee of such
Reinsurance in the event of the insolvency of the Company(ies) and (II) the
Reinsurer with the consent of the direct insureds and, with the prior approval
of the Superintendent of Insurance of New York to the certificate of assumption
issued to New York direct insureds, has assumed such Policy obligations of the
Company(ies) as its direct obligations to the payees under such Policies, in
substitution for the obligations of the Cornpany(ies) to such payees.

 

ARTICLE XVIII

ARBITRATION:

If any dispute shall arise between the parties to this Contract, either before
or after its termination, with reference to the interpretation of this Contract
or the rights of either party with respect to any transactions under this
Contract, including the formation or validity thereof, the dispute shall be
referred to three (3) arbitrators as a condition precedent to any right of
action arising under this

 

8

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Contract. The arbitrators shall be active or retired disinterested officers of
insurance or reinsurance companies or Lloyd’s Underwriters other than the
parties or their affiliates. One arbitrator shall be chosen by each party and
the third by the two so chosen. If either party refuses or neglects to appoint
an arbitrator within thirty (30) days after the receipt of written notice from
the other party requesting it to do so, the requesting party may nominate two
(2) arbitrators who shall choose the third.

In the event the arbitrators do not agree on the selection of the third
arbitrator within thirty (30) days after both arbitrators have been named, the
Company shall petition the American Arbitration Association to appoint the third
arbitrator. If the American Arbitration Association fails to appoint the third
arbitrator within thirty (30) days after it has been requested to do so, either
party may request a justice of a court of general jurisdiction of the state in
which the arbitration is to be held, to appoint an officer or retired officer of
an insurance or reinsurance company or Lloyd’s Underwriter as the third
arbitrator. In the event both parties request the appointment of the third
arbitrator, the third arbitrator shall be the soonest named in writing by the
justice of the court.

Each party shall submit its case to the arbitrators within thirty (30) days of
the appointment of the arbitrators. The arbitrators shall consider this Contract
an honorable engagement rather than merely a legal obligation; they are relieved
of all judicial formalities and may abstain from following the strict rules of
law. The decision of a majority of the arbitrators shall be final and binding on
both the Company and the Reinsurer. Judgment may be entered upon the award of
the arbitrators in any court having jurisdiction.

Each party shall bear the fee and expenses of its own arbitrator, one half of
the fee and the expenses of the third arbitrator and one half of the other
expenses of the arbitration. In the event both arbitrators are chosen by one
party, the fees of the arbitrators shall be equally divided between the parties.

Any such arbitration shall take place in Columbus, Ohio unless some other
location is mutually agreed upon by the parties.

With regard to State Auto Insurance Company of Wisconsin (“SAWI”) and in
compliance with Wis. Stat. Section 645.58(2), State Auto Property and Casualty
Insurance Company (the “Reinsurer”) agrees that this Reinsurance Contract cannot
and does not require SAWI to arbitrate an action on or related to this
Reinsurance Contract when SAWI is subject to a delinquency proceeding under
Subchapter III of Chapter 645 of the Wisconsin Statutes.

 

9

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EXHIBIT A

State Automobile Mutual Insurance Company

Milbank Insurance Company

State Auto National Insurance Company

State Auto Insurance Company of Wisconsin

Farmers Casualty Insurance Company

State Auto Insurance Company of Ohio

Meridian Security Insurance Company

Meridian Citizens Mutual Insurance Company

State Auto Florida Insurance Company

PROPERTY CATASTROPHE OVERLYING EXCESS OF LOSS REINSURANCE CONTRACT

FOR THE PERIOD

12:01 A.M., EASTERN TIME, JULY 1, 2006

THROUGH

12:01 A.M., EASTERN TIME, JULY 1, 2007

 

PREMIUM CALCULATION

Subject Premium Basis - July 1, 2005 through March 31, 2006

 

    

Annual

Statement Line

   Mutual    Milbank    National    SAIC of
Wisconsin    Farmers    SAIC of
Ohio    Meridian
Security    Meridian
Citizens
Mutual    State Auto
Florida    Total   1.0     @     100%    22,463,991    552,802    0    218,830
   284,597    1,094,187    2,961,675    681,606    440,773    28,698,461  
2.1     @     100%    13,669,014    425,993    0    124,945    296,651   
468,667    1,283,153    11,074    765,903    17,045,401   3.0     @       65%   
0    701    0    0    0    0    437    10,181,450    0    10,182,589  
4.0     @       65%    34,803,207    9,459,486    0    4,382,523    1,243,113   
733,516    5,366,576    0    1,999,745    57,988,166   5.0     @       50%   
10,223,391    968,027    0    0    431,693    0    900,082    0    1,090,781   
13,613,973   8.0     @       90%    190,523    220    0    469    1,123   
1,62,988    28,296    0    55,047    438,666   9.0     @     100%    9,586,110
   937,926    0    416,601    90,959    96,780    712,275    418    270,228   
12,111,296   12.0     @     100%    1,774,717    10,265    0    1,564    11,004
   20,718    353,771    165,996    569    2,338,604   21.1     @       50%   
22,810,977    5,901,765    4,308,670    3,747,939    1,787,429    643,251   
3,006,300    0    0    42,206,330   21.2     @       50%    5,274,505    193,531
   0    0    47,509    0    313,342    352,130    50    6,181,066               
                                          120,796,435    18,450,715    4,308,670
   8,892,870    4,194,078    3,220,108    14,925,907    11,392,674    4,623,096
   190,804,552

Percent of Total

   63.31%    9.67%    2.26%    4.66%    2.20%    1.69%    7.82%    5.97%   
2.42%    100.00%

Annual Premium

   2,380,456    363,592    84,976    175,216    82,720    63,544    294,032   
224,472    90,992    3,760,000

Quarterly Installment

   595,114    90,898    21,244    43,804    20,680    15,886    73,508    56,118
   22,748    940,000

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WAR EXCLUSION CLAUSE

 

As regards interests which at time of loss or damage are on shore, no liability
shall attach hereto in respect of any loss or damage which is occasioned by war,
invasion, hostilities, acts of foreign enemies, civil war, rebellion,
insurrection, military or usurped power, or martial law or confiscation by order
of any government or public authority.

This War Exclusion Clause shall not, however, apply to interests which at time
of loss or damage are within the territorial limits of the United States of
America (comprising the fifty States of the Union and the District of Columbia,
its territories and possessions, including the Commonwealth of Puerto Rico and
including Bridges between the United States of America and Mexico provided they
are under United States ownership), Canada, St. Pierre and Miquelon, provided
such interests are insured under policies, endorsements or binders containing a
standard war or hostilities or warlike operations exclusion clause.

Nevertheless, this Clause shall not be construed to apply to loss or damage
occasioned by riots, strikes, civil commotion, vandalism, and malicious damage.

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POOLS, ASSOCIATIONS & SYNDICATES EXCLUSION CLAUSE

 

SECTION A:

EXCLUDING:

 

 

(a)

All Business derived directly or indirectly from any Pool, Association or
Syndicate which maintains its own reinsurance facilities.

 

 

(b)

Any Pool or Scheme (whether voluntary or mandatory) formed after March 1, 1968
for the purpose of insuring Property whether on a country-wide basis or in
respect of designated areas. This exclusion shall not apply to so-called
Automobile Insurance Plans or other Pools formed to provide coverage for
Automobile Physical Damage.

SECTION B:

It is agreed that business written by the Company for the same perils, which is
known at the time to be insured by, or in excess of underlying amounts placed in
the following Pools, Associations, or Syndicates, whether by way of insurance or
reinsurance, is excluded hereunder:

Industrial Risk Insurers,

Associated Factory Mutuals,

Improved Risk Mutuals,

Any Pool, Association or Syndicate formed for the purpose of writing Oil, Gas or
Petro-Chemical Plants

    and/or Oil or Gas Drilling Rigs,

United States Aircraft Insurance Group,

Canadian Aircraft Insurance Group,

Associated Aviation Underwriters,

American Aviation Underwriters.

SECTION B does not apply:

 

 

(a)

Where the Total Insured Value over all interests of the risk in question is less
than $300,000,000.

 

 

(b)

To interests traditionally underwritten as Inland Marine or Stock and/or
Contents written on a Blanket basis.

 

 

(c)

To Contingent Business Interruption, except when the Company is aware that the
key location is known at the time to be insured in any Pool, Association or
Syndicate named above, other than as provided for under Section B (a).

 

 

(d)

To risks as follows:

Offices, Hotels, Apartments, Hospitals, Educational Establishments, Public
Utilities (other than Railroad Schedules) and Builder’s Risks on the classes of
risks specified in this subsection (d) only.

 

Page 1 of 3

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SECTION C:

NEVERTHELESS the Reinsurer specifically agrees that liability accruing to the
Company from its participation in residual market mechanisms including but not
limited to:

 

 

(1)

The following so-called “Coastal Pools”:

ALABAMA INSURANCE UNDERWRITING ASSOCIATION

MISSISSIPPI WINDSTORM UNDERWRITING ASSOCIATION

NORTH CAROLINA INSURANCE UNDERWRITING ASSOCIATION

SOUTH CAROLINA WINDSTORM AND HAIL UNDERWRITING ASSOCIATION

TEXAS WINDSTORM INSURANCE ASSOCIATION

AND

 

 

(2)

All “FAIR Plan” and “Rural Risk Plan” business

AND

 

 

(3)

The Louisiana Citizens Property Insurance Corporation, the Citizens Property
Insurance Corporation (“CPIC”) and the California Earthquake Authority (“CEA”)

for all perils otherwise protected hereunder shall not be excluded, except,
however, that this reinsurance does not include any increase in such liability
resulting from:

 

 

(i)

The inability of any other participant in such “Coastal Pool” and/or “FAIR Plan”
and/or “Rural Risk Plan” and/or Residual Market Mechanisms to meet its
liability.

 

 

(ii)

Any claim against such “Coastal Pool” and/or “FAIR Plan” and/or “Rural Risk
Plan” and/or Residual Market Mechanisms, or any participant therein, including
the Company, whether by way of subrogation or otherwise, brought by or on behalf
of any Insolvency Fund (as defined in the Insolvency Fund Exclusion Clause
incorporated in this Contract).

SECTION D:

 

 

(1)

Notwithstanding Section C above, in respect of the CEA, where an assessment is
made against the Company by the CEA, the Company may include in the Ultimate Net
Loss only that assessment directly attributable to each separate loss occurrence
covered hereunder. The Company’s initial capital contribution to the CEA shall
not be included in the Ultimate Net Loss.

 

 

(2)

Notwithstanding Section C above, in respect of the CPIC, where an assessment is
made against the Company by the CPIC, the maximum loss that the Company may
include in the Ultimate Net Loss in respect of any loss occurrence hereunder
shall not exceed the lesser of:

 

 

a)

The Company’s assessment from the CPIC for the accounting year in which the loss
occurrence commenced, or

 

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b)

The product of the following:

 

 

(i)

The Company’s percentage participation in the CPIC for the accounting year in
which the loss occurrence commenced; and

 

 

(ii)

The CPIC’s total losses in such loss occurrence.

Any assessments for accounting years subsequent to that in which the loss
occurrence commenced may not be included in the Ultimate Net Loss hereunder.
Moreover, notwithstanding Section C above, in respect of the CPIC, the Ultimate
Net Loss hereunder shall not include any monies expended to purchase or retire
bonds as a consequence of being a member of the CPIC. For the purposes of this
Contract, the Company may not include in the Ultimate Net Loss any assessment or
any percentage assessment levied by the CPIC to meet the obligations of an
insolvent insurer member or other party, or to meet any obligations arising from
the deferment by the CPIC of the collection of monies.

 

Page 3 of 3

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NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL DAMAGE -

REINSURANCE - U.S.A.

 

1)

This Agreement does not cover any loss or liability accruing to the Reinsured,
directly or indirectly, and whether as Insurer or Reinsurer, from any Pool of
Insurers or Reinsurers formed for the purpose of covering Atomic or Nuclear
Energy risks.

 

2)

Without in any way restricting the operation of paragraph 1) of this Clause,
this Agreement does not cover any loss or liability accruing to the Reinsured,
directly or indirectly, and whether as Insurer or Reinsurer, from any insurance
against Physical Damage (including business interruption or consequential loss
arising out of such Physical Damage) to:

 

 

I.

Nuclear reactor power plants including all auxiliary property on the site, or

 

 

II.

Any other nuclear reactor installation, including laboratories handling
radioactive materials in connection with reactor installations, and “critical
facilities” as such, or

 

 

III.

Installations for fabricating complete fuel elements or for processing
substantial quantities of “special nuclear material,” and for reprocessing,
salvaging, chemically separating, storing or disposing of “spent” nuclear fuel
or waste materials, or

 

 

IV.

Installations other than those listed in paragraph 2) III above using
substantial quantities of radioactive isotopes or other products of nuclear
fission.

 

3)

Without in any way restricting the operations of paragraphs 1) and 2) hereof,
this Agreement does not cover any loss or liability by radioactive contamination
accruing to the Reinsured, directly or indirectly, and whether as Insurer or
Reinsurer, from any insurance on property which is on the same site as a nuclear
reactor power plant or other nuclear installation and which normally would be
insured therewith except that this paragraph 3) shall not operate:

 

 

a)

where the Reinsured does not have knowledge of such nuclear reactor power plant
or nuclear installation, or

 

b)

where said insurance contains a provision excluding coverage for damage to
property caused by or resulting from radioactive contamination, however caused.
However, on and after 1st, January 1960 this sub-paragraph b) shall only apply
provided the said radioactive contamination exclusion provision has been
approved by the Governmental Authority having jurisdiction thereof.

 

4)

Without in any way restricting the operations of paragraphs 1), 2) and 3)
hereof, this Agreement does not cover any loss or liability by radioactive
contamination accruing to the Reinsured, directly or indirectly, and whether as
Insurer or Reinsurer, when such radioactive contamination is a named hazard
specifically insured against.

 

5)

It is understood and agreed that this Clause shall not extend to risks using
radioactive isotopes in any form where the nuclear exposure is not considered by
the Reinsured to be the primary hazard.

 

6)

The term “special nuclear material” shall have the meaning given it in the
Atomic Energy Act of 1954, or by any law amendatory thereof.

 

7)

Reinsured to be sole judge of what constitutes:

 

 

a)

substantial quantities, and

 

 

b)

the extent of installation, plant or site.

NOTE: Without in any way restricting the operation of paragraph 1) hereof, it is
understood and agreed that:

 

 

a)

all policies issued by the Reinsured on or before 31st, December 1957, shall be
free from the application of the other provision of this Clause until expiry
date or 31st, December 1960, whichever first occurs whereupon all the provisions
of this Clause shall apply,

 

 

b)

with respect to any risk located in Canada policies issued by the Reinsured on
or before 3lst, December 1958, shall be free from the application of the other
provisions of this Clause until expiry date or 31st, December 1960, whichever
first occurs whereupon all the provisions of this Clause shall apply.

 

12/12/57

N.M.A. 1119

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

NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL DAMAGE -

REINSURANCE - CANADA

 

1)

This Agreement does not cover any loss or liability accruing to the Reinsured,
directly or indirectly, and whether as Insurer or Reinsurer, from any Pool of
Insurers or Reinsurers formed for the purpose of covering Atomic or Nuclear
Energy risks.

 

2)

Without in any way restricting the operation of paragraph 1) of this Clause,
this Agreement does not cover any loss or liability accruing to the Reinsured,
directly or indirectly, and whether as Insurer or Reinsurer, from any insurance
against Physical Damage (including business interruption or consequential loss
arising out of such Physical Damage) to:

 

 

(a)

Nuclear reactor power plants including all auxiliary property on the site, or

 

(b)

Any other nuclear reactor installation, including laboratories handling
radioactive materials in connection with reactor installations, and critical
facilities as such, or

 

(c)

Installations for fabricating complete fuel elements or for processing
substantial quantities of prescribed substances, and for reprocessing,
salvaging, chemically separating, storing or disposing of spent nuclear fuel or
waste materials, or

 

(d)

Installations other than those listed in (c) above using substantial quantities
of radioactive isotopes or other products of nuclear fission,

 

3)

Without in any way restricting the operations of paragraphs 1) and 2) of this
Clause, this Agreement does not cover any loss or liability by radioactive
contamination accruing to the Reinsured, directly or indirectly, and whether as
Insurer or Reinsurer, from any insurance on property which is on the same site
as a nuclear reactor power plant or other nuclear installation and which
normally would be insured therewith, except that this paragraph 3) shall not
operate:

 

 

(a)

where the Reinsured does not have knowledge of such nuclear reactor power plant
or nuclear installation, or

 

(b)

where said insurance contains a provision excluding coverage for damage to
property caused by or resulting from radioactive contamination, however caused.

 

4)

Without in any way restricting the operations of paragraphs 1), 2) and 3) of
this Clause, this Agreement does not cover any loss or liability by radioactive
contamination accruing to the Reinsured, directly or indirectly, and whether as
Insurer or Reinsurer, when such radioactive contamination is a named hazard
specifically insured against.

 

5)

This Clause shall not extend to risks using radioactive isotopes in any form
where the nuclear exposure is not considered by the Reinsured to be the primary
hazard.

 

6)

The term “radioactive material” means uranium, thorium, plutonium, neptunium,
their derivatives and compounds, radioactive isotopes of other elements and any
other substances which may be designated by or pursuant to any law, act or
statute, or any law amendatory thereof as being prescribed substances capable of
releasing atomic energy, or as being requisite for the production, use or
application of atomic energy.

 

7)

Reinsured to be sole judge of what constitutes:

 

 

a)

substantial quantities, and

 

b)

the extent of installation, plant or site,

 

8)

Without in any way restricting the operation of paragraphs 1), 2), 3) and 4) of
this Clause, this Agreement does not cover any loss or liability accruing to the
Reinsured, directly or indirectly, and whether as Insurer or Reinsurer caused:

 

 

a)

by any nuclear incident as defined by The Nuclear Liability Act or any other
nuclear liability act, law or statute, or any law amendatory thereof or nuclear
explosion, except for ensuing loss or damage which results directly from fire,
lightning or explosion of natural, coal or manufactured gas;

 

b)

by contamination by radioactive material.

NOTE: Without in any way restricting the operation of paragraphs 1), 2), 3) and
4) of this Clause, paragraph 8) of this Clause shall only apply to all original
contracts of the Reinsured whether new, renewal or replacement which become
effective on or after December 31, 1992.

 

01/04/96

N.M.A. 1980a

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

INTERESTS AND LIABILITIES AGREEMENT

between

STATE AUTOMOBILE MUTUAL INSURANCE COMPANY

MILBANK INSURANCE COMPANY

STATE AUTO NATIONAL INSURANCE COMPANY

STATE AUTO INSURANCE COMPANY OF WISCONSIN

FARMERS CASUALTY INSURANCE COMPANY

STATE AUTO INSURANCE COMPANY OF OHIO

MERIDIAN SECURITY INSURANCE COMPANY

MERIDIAN CITIZENS MUTUAL INSURANCE COMPANY

STATE AUTO FLORIDA INSURANCE COMPANY

(the “Company”)

and

STATE AUTO PROPERTY AND CASUALTY INSURANCE COMPANY

(the Subscribing “Reinsurer”)

It is hereby mutually agreed by and between the Company on the one part, and the
Subscribing Reinsurer on the other part that effective July 1, 2006, the
Subscribing Reinsurer’s share of the Interests and Liabilities of the PROPERTY
CATASTROPHE OVERLYING EXCESS OF LOSS REINSURANCE CONTRACT attached hereto and
forming part of this Agreement, shall be for one hundred percent (100%).

IN WITNESS WHEREOF, the parties hereto by their authorized representative have
executed this Agreement as of the date specified below:

 

Signed in Columbus, Ohio this 5th day of July, 2006.

 

 

STATE AUTO PROPERTY AND CASUALTY INSURANCE COMPANY

By

 

/s/ John R. Lowther

   

Title Senior Vice President, Secretary and General Counsel

   

 

Page 1 of 2

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Signed in Columbus, Ohio this 5th day of July, 2006.

 

STATE AUTOMOBILE MUTUAL INSURANCE COMPANY

MILBANK INSURANCE COMPANY

STATE AUTO NATIONAL INSURANCE COMPANY

STATE AUTO INSURANCE COMPANY OF WISCONSIN

FARMERS CASUALTY INSURANCE COMPANY

STATE AUTO INSURANCE COMPANY OF OHIO

MERIDIAN SECURITY INSURANCE COMPANY

MERIDIAN CITIZENS MUTUAL INSURANCE COMPANY

STATE AUTO FLORIDA INSURANCE COMPANY

 

By

 

/s/ John R. Lowther                                         

   

Title Senior Vice President and General Counsel

   

 

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