Exhibit 10.1

SETTLEMENT AGREEMENT

THIS SETTLEMENT AGREEMENT (“Agreement”), dated the 14th day of December, 2006
(“Effective Date”), is made by and between SCPIE Holdings Inc., a Delaware
corporation (“SCPIE”), on the one hand, and Joseph Stilwell, Stilwell Value LLC
and Stilwell Value Partners III, L.P. (collectively, the “Stilwell Group”), on
the other hand.

WHEREAS, SCPIE and the Stilwell Group have agreed that it is in their mutual
interests to enter into this Agreement, among other things, to set forth certain
agreements concerning SCPIE’s 2007 Annual Meeting of Stockholders (including all
adjournments or postponements thereof (the “2007 Annual Meeting”)), as
hereinafter described.

NOW, THEREFORE, in consideration of the premises and the representations,
warranties, and agreements contained herein, and other good and valuable
consideration, the parties hereto mutually agree as follows:

1. Representations and Warranties of Stilwell Group. The Stilwell Group hereby
represents and warrants to SCPIE as follows:

a. The Stilwell Group has beneficial ownership of 847,400 shares of common stock
of SCPIE and has full and complete authority to enter into this Agreement and to
bind the entire number of shares of the common stock of SCPIE which it holds, or
may hold, including any shares purchased in the future, to the terms of this
Agreement. This Agreement constitutes a valid and binding agreement of the
Stilwell Group. No “affiliate” or “associate” (as such terms are defined in the
Securities Exchange Act of 1934, as amended (the “Exchange Act”)) of the
Stilwell Group beneficially owns any shares or rights to acquire shares of
common stock of SCPIE.

b. There are no arrangements, agreements or understandings between the Stilwell
Group and SCPIE other than as set forth in this Agreement.

2. Representations and Warranties of SCPIE. SCPIE hereby represents and warrants
to the Stilwell Group, as follows:

a. SCPIE has full power and authority to enter into and perform its obligations
under this Agreement, and the execution and delivery of this Agreement by SCPIE
has been duly authorized by the Board of Directors of SCPIE and requires no
further Board of Directors or stockholder action. The Board of Directors of
SCPIE may be referred to hereinafter as the “Board”. This Agreement constitutes
a valid and binding obligation of SCPIE and the performance of its terms does
not constitute a violation of its certificate of incorporation or by-laws.

b. There are no arrangements, agreements or understandings between the Stilwell
Group and SCPIE other than as set forth in this Agreement.

 

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3. Stilwell Group’s Prohibited Conduct. No member of the Stilwell Group or any
of their affiliates, associates or other persons acting in concert with them,
shall, directly or indirectly,

a. solicit (as such term is used in the proxy rules of the Securities and
Exchange Commission) proxies or consents, or participate in any manner in the
solicitation of proxies or consents, from SCPIE’s stockholders to elect persons
to the Board or to approve shareholder proposals,

b. make any public statement critical of SCPIE, or its Directors or management,
or in favor of any proposal opposed by the Board,

c. initiate any litigation against SCPIE or any of its Directors or officers,
except to enforce the terms of this Agreement, and duties arising out of their
services as Directors,

d. make or be the proponent of any shareholder proposal, whether pursuant to
Rule 14a-8 of the Exchange Act or otherwise,

e. acquire, offer or propose to acquire, or agree to acquire (except, in any
case, by way of stock dividends or other distributions or offerings made
available to holders of SCPIE common stock generally), directly or indirectly,
or retain ownership of any SCPIE common stock, if when taken together with the
SCPIE common stock beneficially owned by the Stilwell Group would constitute
more than 9.9% of the then outstanding shares of SCPIE; provided that
“beneficial ownership” shall have the meaning ascribed thereto under
Section 13(d) of the Exchange Act,

f. make any public announcement with respect to any proposal or offer involving,
or propose to enter into, or assist or encourage any other person with respect
to, directly or indirectly, any merger, consolidation, business combination,
tender or exchange offer, sale or purchase of assets, sale or purchase of
securities, dissolution, liquidation, restructuring, recapitalization or similar
transactions of or involving SCPIE, or to propose as a Director any of the
foregoing types of transactions,

g. form, join or in any way participate in any “group” (within the meaning of
Section 13(d)(3) of the Exchange Act) with respect to SCPIE common stock,

h. deposit any SCPIE common stock in any voting trust or subject any SCPIE
common stock to any arrangement or agreement with respect to the voting of any
SCPIE common stock,

i. execute any written consent as stockholders with respect to SCPIE or its
common stock, except as set forth herein,

j. otherwise act, alone or in concert with others, to control or seek to control
or influence or seek to influence the stockholders, management, the Board or
policies of SCPIE, other than through non-public communications with the
Directors of SCPIE; provided, that, subject to clause (f) above, nothing herein
shall limit Joseph Stilwell from acting in his capacity as a Director of SCPIE
in accordance

 

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with his fiduciary duties at any meeting of the Board, including his ability to
discuss and vote upon the items in clause (f) above,

k. seek, alone or in concert with others, (i) to call a meeting of stockholders,
(ii) representation on the Board of SCPIE or its subsidiaries, except as set
forth herein, or (iii) the removal of any member of the SCPIE Board or any of
its subsidiaries, except if any such action mentioned in this clause (k) is
approved by the SCPIE Board as a result of a majority vote of the Directors
other than Stilwell,

l. make any publicly disclosed proposal regarding any of the foregoing,

m. publicly make any request to amend, waive or terminate any provision of this
Agreement,

n. advise, finance, assist or encourage any other person or entity in connection
with any of the foregoing, or

o. otherwise take, or cause others to take, any action inconsistent with any of
the foregoing.

4. Voting at Meetings of Stockholders. The Stilwell Group shall vote all of the
shares of SCPIE common stock beneficially owned by its members for each of
SCPIE’s nominees for election to the SCPIE Board and, in other matters, in
accordance with the recommendation of the SCPIE Board, or, if so directed by the
Board, pro rata with all other stockholders.

5. Directorships and Committees. SCPIE agrees that Joseph Stilwell (“Stilwell”)
will be appointed to the Board of SCPIE, effective January 15, 2007, and in
accordance with the following terms:

a. Stilwell will be appointed to the Class of Directors of SCPIE whose terms
expire at the 2007 Annual Meeting and to the Strategic Planning Committee of the
SCPIE Board.

b. Stilwell will be entitled to receive the identical compensation and benefits
being paid to the other non-employee Directors of SCPIE.

c. No member of the Stilwell Group shall accept any incentive or compensation
that would influence any member of the Stilwell Group to recommend that SCPIE
enter into a transaction for the sale of SCPIE or to recommend any other
significant initiative affecting SCPIE and its stockholders. For purposes of
this subparagraph 5(c), neither an increase in the value of the Stilwell Group’s
holdings in SCPIE shares nor any fees earned by Stilwell in connection with
managing his limited partnerships shall constitute an incentive or compensation
hereunder.

d. SCPIE and its Board agree to nominate and support Stilwell for re-election to
the Board of SCPIE at the 2007 Annual Meeting for a term that expires at the
2010 Annual Meeting of Stockholders.

6. Litigation. During the term of this Agreement, SCPIE will not, directly or
indirectly, initiate any litigation against the Stilwell Group, except to

 

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enforce the terms of this Agreement and duties arising out of Stilwell’s service
as a Director.

7. Dispositions. The Stilwell Group agrees that any disposition of shares of
common stock of SCPIE will be made in open market transactions in a manner
designed to effect an orderly disposition of such shares. The Stilwell Group
further agrees that it will not transfer or dispose of any shares of SCPIE
common stock if, as a result of such disposition or transfer, to the knowledge
of any member of the Stilwell Group, the person making such acquisition will
beneficially own, together with its affiliates and any member of a “group”
(within the meaning of the Exchange Act) in which such acquiror is a party,
immediately following such acquisition, 5% or more of the SCPIE common stock
then outstanding.

8. Certification of Ownership. The Stilwell Group shall, upon request of SCPIE,
certify to SCPIE as to the amount of shares it beneficially owns.

9. Termination.

a. This Agreement shall terminate and Stilwell shall immediately tender his
resignation from the Board of SCPIE, if requested by the Board of SCPIE as a
result of a majority vote of the Directors other than Stilwell in favor of such
resignation by the Board of SCPIE, upon the earliest of (i) the Stilwell Group
having beneficial ownership of less than five percent of the outstanding shares
of common stock of SCPIE; (ii) any person becoming the beneficial owner of more
than 50% of SCPIE’s voting stock, including as a result of any merger,
acquisition or other type of business combination; (iii) the death or incapacity
of Joseph Stilwell; (iv) the third anniversary of the Effective Date; and
(v) the dissolution, merger or any other transaction which results in the
failure of Stilwell Value LLC or Stilwell Value Partners III, L.P. to exist as a
legal entity; provided that, with respect to the preceding clause (v), at the
option of SCPIE, this Agreement shall be binding on their respective successors
and it shall be a condition of such dissolution or other transaction that such
successor so agree.

b. This Agreement shall terminate if Stilwell resigns from the Board. If
Stilwell resigns from the Board prior to January 1, 2008, then, notwithstanding
the provisions of paragraph 3(k)(ii), the Stilwell Group shall not be precluded
hereunder from duly noticing an intent to nominate Directors for SCPIE’s 2008
Annual Meeting of Stockholders, if the deadline for such notice falls before
January 1, 2008.

c. If this Agreement terminates prior to January 1, 2008, then paragraphs 3, 4
and 12 through 24 shall survive and remain effective until January 1, 2008.

d. If Stilwell is required to resign from the Board pursuant to sub-paragraph
9(a), then any public announcement of such resignation by the parties hereto
shall state that such resignation is being tendered pursuant to the terms hereof
and not as a result of any disagreement with the Board or management of SCPIE.
Notwithstanding the foregoing sub-paragraph 9(a), the Stilwell Group’s
obligations under this paragraph 9 shall not be triggered if it becomes the
beneficial owner of less than five percent of the outstanding common stock of
SCPIE as the result of an

 

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issuance of common stock by SCPIE which, by increasing the number of shares
outstanding, decreases the proportionate number of shares beneficially owned by
the Stilwell Group; provided, however, that if the Stilwell Group shall become
the beneficial owner of less than five percent of the common stock of SCPIE then
outstanding by reason of a share issuance by SCPIE and shall, after such share
issuance by SCPIE, sell or dispose of a proportionate amount of SCPIE common
stock that would have otherwise lowered the Stilwell Group’s percentage
ownership of SCPIE to less than 5% of the number of shares of common stock of
SCPIE outstanding as of the Effective Date, then the Stilwell Group’s
obligations under this paragraph 9 shall be triggered.

e. The Stilwell Group hereby forever waives and releases, and covenants not to
sue, any of SCPIE’s current Directors or current Officers, for any claim or
cause of action based on any act, omission, or failure to act by SCPIE’s current
Directors or current Officers, which occurred prior to the Effective Date,
however, this waiver and release and covenant not to sue does not include the
right to sue to enforce the terms of this Agreement and does not extend to acts
which are criminal. The Stilwell Group is not aware of the existence of any
claims it currently possesses against SCPIE. The Stilwell Group also agrees that
no member of the Stilwell Group will make any public statement which directly or
indirectly impugns the character, integrity or personal reputation of any of
SCPIE’s current Directors. The release contained above shall survive the
termination of the Agreement.

10. Public Announcement. The parties shall promptly disclose the existence of
this Agreement after its execution pursuant to a joint press release in a form
reasonably satisfactory to Stilwell; provided, however, neither party shall
disclose the existence of this Agreement until the press release is issued.
Stilwell shall be deemed to have approved and consented to the public disclosure
of the press release attached hereto as Attachment A for all purposes under this
Agreement.

11. Material Nonpublic Information. In connection with this Agreement and the
Stilwell Group’s ongoing relationship with SCPIE, there may be instances in
which material nonpublic information concerning SCPIE will be divulged to
members of the Stilwell Group or its affiliates or associates who are not at
that time members of the SCPIE Board by SCPIE, Stilwell or other SCPIE
representatives or agents. The Stilwell Group expressly acknowledges that
federal and state securities laws prohibit any person who misappropriates
material nonpublic information about a company from purchasing or selling
securities of such company, or from communicating such information to any other
person under circumstances in which it is reasonably foreseeable that such
person is likely to purchase or sell such securities. The Stilwell Group further
acknowledges that Stilwell will be subject to SCPIE’s insider trading and
disclosure policies, as in effect from time to time, at any time while he is on
the Board to the same extent as the other Directors of SCPIE. To the extent SEC
Regulation FD may apply, in accordance with Section 243.100 (2)(ii) of
Regulation FD, the Stilwell Group expressly agrees to maintain material
nonpublic information concerning SCPIE in confidence.

12. Remedies. SCPIE and the Stilwell Group acknowledge and agree that a breach
or threatened breach by either party may give rise to irreparable injury
inadequately compensable in damages, and accordingly each party shall be
entitled to injunctive relief to prevent a breach of the provisions hereof and
to enforce

 

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specifically the terms and provisions hereof in any state or federal court
having jurisdiction, in addition to any other remedy to which such aggrieved
party may be entitled to at law or in equity. In the event either party
institutes any legal action to enforce such party’s rights under, or recover
damages for breach of, this Agreement, the prevailing party or parties in such
action shall be entitled to recover from the other party or parties all costs
and expenses, including but not limited to reasonable attorneys’ fees, court
costs, witness fees, disbursements and any other expenses of litigation or
negotiation incurred by such prevailing party or parties.

13. Notices. All notice requirements and other communications shall be deemed
given when delivered or on the following business day after being sent by
overnight courier with a nationally recognized courier service such as Federal
Express, addressed to the Stilwell Group and SCPIE as follows:

SCPIE:

SCPIE Holdings Inc.

1888 Century Park East

Los Angeles, CA 90067

Attention: General Counsel

With a copy to:

Milton A. Miller, Esq.

Latham & Watkins LLP

633 W. 5th Street, Suite 4000

Los Angeles, CA 90071

The Stilwell Group:

Mr. Joseph Stilwell

26 Broadway, 23rd Floor

New York, New York 10004

With a copy to:

Spencer L. Schneider, Esq.

70 Lafayette Street

New York, NY 10013

14. Entire Agreement. This Agreement constitutes the entire agreement between
the parties hereto pertaining to the subject matter hereof and supersedes all
prior and contemporaneous agreements, understandings, negotiations and
discussions of the parties in connection therewith not referred to herein.

15. Counterparts; Facsimile. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, and signature
pages may be delivered by facsimile, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same agreement.

 

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16. Headings. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.

17. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware, without regard to
choice of law principles that would compel the application of the laws of any
other jurisdiction.

18. Severability. In the event one or more of the provisions of this Agreement
should, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provisions of this Agreement, and this Agreement shall be construed as if
such invalid, illegal or unenforceable provision had never been contained
herein.

19. Successors and Assigns. This Agreement shall not be assignable by any of the
parties to this Agreement. This Agreement, however, shall be binding on
successors of the parties hereto.

20. Survival of Representations, Warranties and Agreements. All representations,
warranties, covenants and agreements made herein shall survive the execution and
delivery of this Agreement.

21. Amendments. This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a written agreement
executed by all of the parties hereto.

22. Further Action. Each party agrees to execute any and all documents, and to
do and perform any and all acts and things necessary or proper to effectuate or
further evidence the terms and provisions of this Agreement.

23. Consent to Jurisdiction. Each of the parties hereby irrevocably submits to
the exclusive jurisdiction of any United States Federal or state court sitting
in the State of Delaware in any action or proceeding arising out of or relating
to this Agreement and each of the parties hereby irrevocably agrees that all
claims in respect of such action or proceeding may be heard and determined in
any such court.

24. Expenses. Each party agrees to bear its own expenses in connection with the
transactions contemplated hereby.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.

 

SCPIE HOLDINGS INC. By:   /s/ Donald J. Zuk  

Donald J. Zuk

President and CEO

 

JOSEPH STILWELL   /s/ Joseph Stilwell

 

STILWELL VALUE LLC By:   /s/ Joseph Stilwell  

JOSEPH STILWELL

Managing and Sole Member

 

STILWELL VALUE PARTNERS III, L.P. By:   /s/ Joseph Stilwell  

STILWELL VALUE LLC

General Partner, by Joseph Stilwell, Managing and Sole Member

 

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ATTACHMENT A

 

(Investors)

  

Robert B. Tschudy

Senior Vice President and CFO

SCPIE Holdings Inc.

310/557-8739

e-mail: rtschudy@scpie.com

 

Roger Pondel

PondelWilkinson Inc.

310/279-5980

e-mail: rpondel@pondel.com

   (Media)   

Howard Bender

Vice President/Communications

SCPIE Holdings Inc.

310/551-5948

E-MAIL: HBENDER@SCPIE.COM

SCPIE HOLDINGS TO ADD INVESTOR JOSEPH STILWELL

TO ITS BOARD OF DIRECTORS

Los Angeles, California – December 15, 2006 – SCPIE Holdings Inc. (NYSE:SKP)
announced today that Joseph Stilwell will be joining SCPIE’s Board of Directors
on January 15, 2007. He is replacing Donald (Pat) Newell, who is resigning from
the Board on the same date. Stilwell is a New York-based private investor, and
his Stilwell Group is one of SCPIE’s largest stockholders.

In connection with Stilwell’s appointment, the Stilwell Group and SCPIE have
entered into a three-year settlement agreement, which provides that the Stilwell
Group will support SCPIE’s slate of nominees at its 2007 Annual Meeting of
Stockholders. SCPIE will nominate Stilwell at the meeting for a three-year term.
Additionally, the Stilwell Group will support SCPIE’s slate of directors at its
2008 and 2009 Annual Meetings of Stockholders, unless prior to such meetings
Stilwell resigns from the Board or the settlement agreement is otherwise
terminated.

SCPIE also announced that Stilwell has been appointed to the Strategic Planning
Committee of the Board of Directors, effective January 15, 2007.

“We are pleased to welcome Joseph Stilwell to our Board,” said Donald J. Zuk,
SCPIE President and Chief Executive Officer. “We have maintained an ongoing
dialogue with Joe as his group has increased its position in the Company. His
experience with board affiliations on companies similar to SCPIE will make him
an excellent addition to our Board.

“In turn, I want to thank Pat Newell for his years of service on our Board, and
recognize him for his many contributions. His three decades with SCPIE are most
appreciated; he will be missed.”

 

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About SCPIE Holdings

SCPIE Holdings Inc. is a leading provider of healthcare liability insurance for
physicians, oral and maxillofacial surgeons, and other healthcare providers, as
well as medical groups and healthcare facilities. Since the company was founded
in 1976, it has carved out a significant niche in the insurance industry by
providing innovative products and services specifically for the healthcare
community.

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Forward-Looking Statements

In addition to historical information, this news release contains
forward-looking statements that are based upon SCPIE’s estimates and
expectations concerning future events and are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
reflected in the forward-looking statements. Forward-looking statements include
statements herein regarding SCPIE’s future annual meeting of stockholders. In
light of the significant uncertainties inherent in the forward-looking
information herein, the inclusion of such information should not be regarded as
a representation by SCPIE or any other person that SCPIE’s objectives or plans
will be realized.

 

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