Managing General Agency Agreement



 Exhibit 10.16 
 MANAGING GENERAL AGENCY AGREEMENT 
 (“Agreement”) 
 Between 
 Homeowners Choice Managers,
Inc. 
 (Hereinafter, individually or collectively, the “MGA”) 
 And 
 Homeowners Choice Property and Casualty Insurance Company, Inc.

 (Hereinafter called the “Company”) 
 Made as of the 30th day of March, 2007. 
 WHEREAS, the Company is admitted to transact
insurance business in the State of Florida, and issue policies of insurance in that state; and 
 WHEREAS, the Company desires MGA to
act as its exclusive managing general agent with respect to insurance policies for the authorized insurance coverages (the “Authorized Coverages”) set forth in Schedule I to this Agreement (the applied for, issued coverages are sometimes
referred to as the “Policy(ies)”) in the State of Florida, including renewals, issued from the Effective Date of this Agreement until terminated as hereinafter set forth; and 
 WHEREAS, MGA desires to produce, administer and manage the Policies and to adjust claims and provide other services in connection with such
policies including, but not limited to, marketing, claims analysis, general ledger accounting, information services, product and underwriting development and management, and catastrophe risk management on behalf of the Company. 
 NOW, THEREFORE, in consideration of the promises and the mutual covenants hereinafter contained, the parties have agreed that the terms of this
Agreement shall be 3 years effective as of March 30, 2007 (the “Effective Date”), renewable annually, thereafter and do otherwise agree as follows: 
 ARTICLE I—GENERAL PRINCIPLES 
 1.1. In accordance with § 626.7451, Florida Statutes
(“F.S.”), the Company appoints MGA for the purpose of producing and handling Policies for the Authorized Coverages of business set forth in Schedule I and issued or renewed on or after the Effective Date of this Agreement. MGA agrees to
produce the Authorized Coverages of business in accordance with the territory and limits of liability set forth in Schedule I hereto and the Company’s established and approved underwriting requirements and premiums for the Authorized Coverages
of business. 







 1.2. The Company, relying upon the expertise of MGA, grants authority to MGA hereunder solely with
respect to the Policies. Nonetheless, the Company being at risk and having ultimate responsibility and authority for the Policies issued by MGA, at all times shall have the ultimate responsibility and discretion with respect to all matters
pertaining to the Polices and to the general welfare of the Company. 
 1.3. Consistent with the intention of the parties to produce an
operating profit for the Company, MGA shall manage its affairs in accordance with the terms of the Agreement in an ethical and professional manner and in accordance with all applicable laws and regulations of the State of Florida. 
 1.4. The Company, relying upon the expertise of MGA, grants authority to MGA to solicit and negotiate reinsurance with respect to the programs authorized
by the Company. Nonetheless, the Company being at risk and having ultimate responsibility for all reinsurance contracts issued, will have the ultimate responsibility and discretion with respect to the approval and contracting for all reinsurance.

 1.5 The Term of this Agreement shall commence as of the effective date of this Agreement and shall continue for a period of three
(3) years thereafter unless sooner terminated pursuant to the terms of this Agreement. The MGA shall have the option to renew the term of this Agreement for an additional one (1) year period commencing after the initial three (3) year
term and any renewal term by providing written notice to the Company at least ninety (90) days prior to the expiration of the initial three (3) year term or any renewal thereof. 
 ARTICLE II—UNDERWRITING AUTHORITY 
 2.1. Agents. The Company hereby
grants to MGA authority to accept applications to issue the Policies received through appointed licensed insurance agents (“Producing Agents”) and agents authorized as “Brokering Agents” (as defined in Section 626.752,
F.S.). MGA may not authorize or facilitate the appointment of any insurance broker or agent, or any other entity, to issue Policies on behalf of the Company without the prior written consent of the Company. The MGA may not appoint a sub-managing
general agent for the business of the Company. The MGA may not permit any of its sub-producers to serve on its Board of Directors. 
  

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 2.2. Agent Agreements. Any and all agreements with any insurance broker, agent, Producing Agent,
Brokering Agent or other entity (hereinafter collectively called the “Agent”) shall be made directly between MGA and such Agent. Such agreements shall provide that with respect to any action taken or not taken by MGA in connection with a
Policy(ies) or this Agreement, the Agent shall look solely to MGA for any and all expenses, costs, causes of action and damages suffered by the Agent. Nothing in this Section is intended to create a cause or claim against MGA that the Agent would
not otherwise have against the Company. 
 2.3. Agent Responsibility. MGA shall bear sole responsibility to oversee the placement of
business through Agents. With respect to a Policy(ies) or this Agreement, MGA shall hold the Company harmless and reimburse the Company for any and all fines and expenses levied against or incurred by the Company as a result of MGA accepting
business from an unlicensed Agent, or the failure of the Company, MGA, or any Brokering Agent to comply with Section 626.752, F.S. regulating the exchange of business between Insurer and Brokering Agents, unless such costs and expenses result
solely from the Company’s failure to take legally required or reasonably necessary specific actions recommended to the Company by MGA. 
 2.4. Policy Services. Pursuant to the terms and provisions of this Agreement, the Company hereby grants to MGA authority to receive and accept proposals of insurance from the Effective Date of this Agreement until the termination of
this Agreement for the Authorized Coverages. Such authority shall include the binding of coverage, the issuing and endorsing of Policies in the name of the Company, and the canceling and non-renewing of such binders and contracts when the best
judgment of MGA dictates. 
 2.5. Underwriting. The Company grants MGA authority to provide the Policies pursuant to the underwriting
guidelines provided in writing to MGA by the Company. Such underwriting guidelines shall include, but not be limited to, guidelines pertaining to the basis of the rates to be charged, types of risks to be written, maximum limits of liability,
applicable exclusions, territorial limitations, policy cancellation provisions, and maximum policy period. All underwriting guidelines that the Company provides the MGA, in writing, shall be deemed incorporated in this Agreement by reference and
adoptions. The Company grants MGA authority to operate within written guidelines approved in writing by the Company, subject, however, to the professional judgment of supervisory underwriting personnel; and any Policy issued by or at 

  

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the request of MGA which does not fall within such guidelines shall, at the Company’s request, be promptly terminated, and MGA shall indemnify the
Company from and against any liability thereunder. 
 2.6. One-Year Terms. The Company grants MGA authority to issue or have issued
Policies having a maximum term of one year. 
 2.7. Policy Language. The Company grants MGA authority to utilize only insurance
contract wordings, endorsement wordings and rates that are approved by the Company and are properly filed and approved, to the extent necessary, by appropriate regulatory authorities of the State of Florida. 
 2.8. MGA Appointment: Maximum Annual Net Written Premium Production. The Company appoints MGA to issue Policies on behalf of the Company in the
State of Florida. Other than through MGA, Company agrees not to write the Authorized Coverages of business that the Company is duly licensed to write, or to appoint another managing general agent to write the Authorized Coverages of business that
the Company is duly licensed to write, in the State of Florida for during the term of this Agreement as set forth in paragraph 1.5 herein (the “Term”). Under no circumstances shall the MGA produce from the Authorized Coverages Net Written
Premium in excess of $150 million in any year without the express written approval of the Company for any Net Written Premium written in excess of the aforestated amount. 
 2.9. Policyholder Information. The Company shall not disclose, share, or otherwise make available to any other person, partnership, corporation, managing agent, agent, broker, independent agent or broker,
underwriting manager, or other insurer information regarding the Company’s policyholders who have been issued Policies pursuant to MGA’s authority under this Agreement until one year after the termination of this Agreement. The foregoing
limitation shall not prohibit the Company from disclosing such information to its independent accountants or auditors, insurance department examiners, or as otherwise required in the normal course of the Company’s business. Company and MGA
shall fully comply with the provisions of any applicable Federal laws and the laws of the State of Florida applicable to policyholder information. 
 2.10. Expirations. In the event of the termination of this Agreement, MGA’s records and the use and control of expirations of the Company’s business produced by Agents registered or appointed by the Company shall remain the
property of the MGA, subject to any rights in the Agents pursuant to the terms of any agreement between MGA and the Agent. 
  

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 2.11. Premium Financing. With respect to Policies, MGA shall have the authority to enter into
agreements with premium finance companies (“PFCs”), to receive notices of premium financing, to receive proceeds of premium financing, and to receive and act upon notices and requests of cancellations from PPCs. The MGA shall not delegate
this authority to any Agent. Subject to the PFCs contracts with the insureds and applicable statutes (e.g. F.S. §627.848) and rules, and to the extent of the contract balances due the PFCs from the insureds, the MGA shall return all unearned
premium directly to the PFCs to the extent held by MGA and shall cause the Agents to return all unearned commission to the PFCs to the extent held by the Agents. 
 ARTICLE III—HANDLING OF FUNDS 
 3.1. Depository Account. MGA shall accept in a fiduciary
capacity, on behalf of the Company, all premiums, policies, fees, interest, and service charges collected and other funds relating to the business written under this Agreement. The Company shall establish and maintain a “Depository
Account” in a bank mutually agreed upon by MGA and the Company. The bank must be a member of the Federal Reserve System whose accounts are insured by the Federal Deposit Insurance Corporation. All premiums, policy fees, interest, and service
charges collected by MGA shall be deposited into the Depository Account. Deposits to the Depository Account are to be made daily or no less seldom than weekly if daily determination of deposit amount required is not feasible. Subject to the terms of
this Agreement, the proceeds of the Depository Account shall be used for payments as directed by the Company. It is acknowledged and agreed that any investment income earned and costs assessed in connection with the Depository Account belong to the
Company. 
 3.2. No Commingling. The MGA shall not commingle any premium or escrow trust funds with personal accounts or other funds
held by MGA in any other capacity. 
 3.3. Premiums. MGA assumes responsibilities for, and shall promptly, on no less than a monthly
basis, pay the Company all premiums collected on Policies issued by or through MGA or on MGA’s behalf for the Company. 
 3.4.
Disbursement Account. The Company will maintain and adequately fund a Disbursement Account (“Disbursement Account”) for 

  

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the payment by MGA of unearned premiums arising due to cancellation or endorsement of the Company’s Policies produced by MGA. The Company and MGA shall
each have signature authority over this account. 
 3.5. Bank Failure. MGA shall not be liable for any loss which occurs by reason of
the default or failure of the bank in which the Depository Account and Disbursement Account are maintained and such loss shall not affect MGA’s obligations under this Agreement. 
 3.6. Return Commissions. MGA shall refund to the Company, unearned commissions on policy cancellations, reductions in premiums or any other return
premiums at the same rate of which such commissions were originally retained. 
 3.7. Policy Fee. MGA shall comply with the provisions
of Section 626.7451(11), F.S., and shall be entitled to retain as fully earned upon collection any duly authorized and collected per-policy fee pursuant to such section. The per-policy fee shall not exceed $25.00 or such other greater amount as
may be authorized under Florida law. In no instance shall the aggregate of the per-policy fees for a placement of business authorized under Section 626.7451(11), Florida Statutes, when combined with any other per-policy fee charged by the
Company, result in per-policy fees which exceed the aggregate amount of $25.00 or such other greater amount as may be authorized by Florida law. The per-policy fee shall be a component of the Company’s rate filing. 
 ARTICLE IV—OTHER REPORTS & REQUIREMENT 
 4.1. Underwriting Records. MGA shall maintain separate, complete and orderly underwriting files or electronic files, records and accounts of all transactions involving the Company in accordance with generally
accepted insurance and accounting practices. 
 4.2. Inspection. The Company or its authorized representatives shall have the right
(but not the obligation) at all reasonable times during business hours of operations to inspect MGA’s books, records and bank accounts, whether located, which pertain to the business which is the subject of this Agreement and shall have the
right to copy or make abstracts from such books and records. 
  

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 4.3. Written Operating Procedures. MGA shall establish and maintain written operating procedures
regarding the issuance of all Policies and endorsements, as well as the collection of premiums related thereto. Such procedures shall be forwarded to the Company and shall be subject to the Company’s review and written approval. 
 4.4. Financial Statement. Within one hundred fifty (150) days after the end of each fiscal year of MGA, MGA shall furnish the Company with
true copies of its unaudited financial statements and the audited, certified balance sheet and related statement of operations of MGA for such fiscal year. 
 4.5. Records. MGA shall maintain permanent physical or electronic copies of all Policies and applications or correspondence related to the Policies, either as hard copies, on microfiche or archived in
electronic media. The Company shall have access and the right to copy all accounts and records related to business written hereunder in a form usable by the Company. MGA shall provide access to all MGA’s books, bank accounts, and records to the
Department of Financial Services and Office of Insurance Regulation (collectively the “Department”) of the State of Florida in a form usable by the Department. All records shall be retained by the MGA according to the provisions of
Section 626.561, F.S. MGA will not destroy these permanent copies without the written permission of the Company for the longer of five (5) years from the termination date of the Policy or the period specified by the applicable Florida
statute regulating preservation of records. 
 4.6. Complaints: Company’s Duty to Forward Complaints. The MGA shall maintain and
make available for inspection by the Company, complaint log(s) of all written: (i) complaints and requests for assistance filed with MGA or the Company by the Department or any other agency or department of the State of Florida or any other
state or jurisdiction, at the request of an insured, claimant, lienholder, or any other interested party to a Policy or claim thereunder; and (ii) lawsuits and arbitrations. The log(s) will include the name of the complainant, the Policy number
and/or claim number, and the date the complaint was received. MGA shall maintain copies of the complaints and MGA’s written response regarding resolution and remedy of said complaint. The Company shall forward to MGA, by next day delivery
service, all complaints, time-demand correspondence, and subpoenas received by the Company relevant to the MGA on this Agreement. 
 4.7.
Licenses. The Company and MGA shall maintain all licenses and regulatory approvals necessary to conduct the business 

  

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covered under this Agreement. MGA represents that it holds a currently effective managing agent’s license in Florida and agrees to maintain such license
during the Term of this Agreement and any extensions thereof. 
 4.8. Cancellations. Notwithstanding the authority granted to MGA by
the Company, the Company may require MGA to terminate coverage provided by any Policy so long as such termination does not violate Florida law. If the Company exercises this right, the Company shall do so in a writing which includes the reasons for
such termination and which instructs MGA to send appropriate non-renewal or cancellation notice as required by contract wording or relevant regulatory or statutory authority to terminate coverage. 
 4.9. Agent Licensing. MGA is required and agrees to be in compliance with, and MGA shall make reasonable inquiry and take all reasonable steps to
ascertain that all Agents are in compliance with, all state laws and regulations, which affect the Policies and the Agents. MGA will utilize the E-APPOINT System through Agent and Agency Service division weblink. 
 4.10. IRS Forms. MGA shall prepare and furnish each Agent with an IRS form 1099 each year when required. 
 4.11. Advertisement. MGA shall obtain the approval of the Company before issuing any advertisement, circular, pamphlet or other publication, which
refers to the Company. 
 4.12. Report of Accounts. MGA shall render accounts to the Company detailing all transactions and remit all
funds due under the terms of this Agreement to the Company on a monthly or more frequent basis. 
 4.13. Additional Limitations on
Authority. The Company does not grant MGA authority to, and MGA shall not: 
 a. Cede, purchase, or bind any reinsurance or
retrocession, including but not limited to facultative or treaty, on behalf of the Company without approval by the Company. 
 b.
Commit the Company to participate in insurance or reinsurance syndicates. 
 c. Appoint any Agent or producer without assuring that
such Agent is lawfully licensed to transact the type of insurance for which such Agent is appointed. 
 d. Collect any payment from a
reinsurer or commit the insurer to any claims settlement with a reinsurer 

  

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without the Company’s prior approval. If prior approval is given, a report must be promptly forwarded to the Company. 
 e. Without the prior approval of the Company, pay or commit the Company to pay a claim over a specified amount, net of reinsurance, which exceeds
one (1%) percent of the Company’s policyholder’s surplus as of December 31 of the last completed calendar year. 
 ARTICLE V—MGA’S COMPENSATION 
 5.1. Compensation. The Company shall pay to MGA, as its sole and full
compensation for all authorized business placed with the Company under this Agreement, and not including the fees and expenses to be paid to MGA for those claim adjustment services provided in Article VII herein, the commission, profit sharing and
policy fee set forth in Schedule II to this Agreement (hereinafter the “Compensation”). 
 ARTICLE VI—EXPENSES

 6.1. MGA’s Expenses. Except as otherwise provided in this Agreement, MGA shall pay all expenses incurred by MGA in
connection with the underwriting, production, marketing and servicing of the Policies, including but not limited to the following: 
  

	 	a.	Printing of proposals, policy jackets, contracts of insurance, endorsements, cancellation notices, premium notices, records and reports, and all other documents required to fulfill
the obligations of MGA under this Agreement. 

  

	 	b.	Advertising and public relations expenses authorized by MGA. The Company’s prior written approval shall be required with respect to any advertising or public relations material
that contains the Company’s name and logo. 

  

	 	c.	MGA’s general office expenses, including rent, salaries, utilities, data processing performed by MGA, transportation, furniture, fixtures, equipment, supplies, telephone,
postage, and other general overhead expenses. 

  

	 	d.	Any commissions payable to MGA’s sub-producers. 

 6.2. Company’s Expenses. The Company shall pay directly all charges and expenses directly attributable to its operations, including but not being limited to the following: Board and Bureau fees; Florida guaranty funds
assessments and other assessments for, 

  

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or based on, business written pursuant to this Agreement; premium taxes and any other assessments levied by a state or local governmental authority on
business written hereunder; cost of reinsurance; legal and auditing expenses incurred at the direction of the Company. 
 6.3.
Reimbursement by MGA. In addition to any rights granted to the Company hereunder, the Company shall be entitled to immediate reimbursement or payment from MGA for all ordinary, reasonable and necessary costs, charges and expenses
(collectively called “Expenses”) paid or incurred by the Company by reason of or in connection with (i) the termination pursuant to Section 9.2 of this Agreement, or (ii) the breach or non-performance of any covenant or
obligation to be observed or performed by MGA or any Agent; provided, however that in the case of a breach or non-performance by MGA, the Company shall have given MGA written notice of the breach or non-performance and MGA shall not have cured same
within thirty (30) days after the date of the notice, or if same is of such a nature that it cannot reasonably be cured within such time, if MGA has not within such time commenced to cure same and does not diligently continue to and actually
cure same. Any expenses incurred by the Company after the giving of such notice shall be promptly reimbursed by MGA. Without limiting the generality of the foregoing, MGA’s covenants and obligations as referred to herein shall include but not
be limited to: 
  

	 	a.	the obligation to deposit, report and remit premiums to the company; 

  

	 	b.	the obligation to remit return premiums to the insureds when due; 

  

	 	c.	the obligation to process all policies, endorsements and notices of cancellation and/or non-renewal pursuant to the Company’s underwriting guidelines; 


 

	 	d.	the obligation to observe and comply with underwriting guidelines and sub-agent appointment procedures; 

  

	 	e.	the obligation to observe and comply with all statutes, regulations, rules and rates; 

  

	 	f.	the obligation to comply with the requirements of Article III hereinabove; and 

  

	 	g.	 The writing, binding or issuance of policies and risks by MGA not in accordance with the conditions set forth in this Agreement and any Addenda hereto constitutes a
breach of this Agreement, and any loss and expense incurred by the Company resulting from such breach shall be assumed by MGA. In the event the Company sustains a loss on a Policy or 



  

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risk which the MGA has written, issued or bound which is not within the scope of its authority under this Agreement and any addendum hereto, MGA shall
reimburse the Company for the amount of the loss plus the expenses incurred by the Company because of the loss. 


 6.4.
Coverage. In the event that any obligation to grant or extend insurance coverage is imposed on the Company by a Court or the Department or any other state or jurisdiction as a result of any breach or non-performance by MGA or any Agent of its
or their obligations under Policies, then and in that event, MGA shall (a) pay any fine or penalty imposed upon the Company and all Expenses incurred by the Company. MGA may seek reimbursement for such fine, penalty, or Expenses from the
responsible Agent or cause such Agent to pay such fine, penalty, or Expense. 
 ARTICLE VII—CLAIMS ADMINISTRATION SERVICES

 7.1. General Authority. The Company appoints MGA for the purpose of investigating, evaluating, handling, adjusting, and
settling each claim which may arise during the term of this Agreement under the Policies (“Claims Services”) within the established authority for claims as set forth in Schedule III which is incorporated herein by reference. 
 7.2. Duties of MGA. In addition to, and without limiting, any duties which may be owed by MGA pursuant to Florida law and the applicable
regulations pertaining thereto, MGA shall: 
  

	 	a.	Utilize and enter the Company claims data into the claims administrative system as directed by Company in a timely manner. 

  

	 	b.	Dedicate sufficient and appropriate human, equipment and computer resources to provide Company with the Claims Services enumerated in Schedule III to this Agreement. The Claims
Services shall use only Florida licensed adjusters (as defined in F.S. Chapter 626, Part VI), and licensed private investigators (as described in Chapter 493, F.S.), or catastrophic adjusters, where applicable (as defined in F.S. §626.859), and
such adjusters and investigators shall conform to the provisions of Rule 690-220.201, Florida Administrative Code (Ethical Requirements), Florida Statutes and any applicable rules, orders, or written interpretations of the Controlling Documents
issued by the Department. 

  

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	 	c.	Investigate, evaluate, handle, adjust and settle each claim assigned MGA within the authority established for claims as set forth in Schedule III, which authority is subject to
termination for cause or upon termination of this agreement in accordance with §626.7451(7)(d). 

  

	 	d.	Designate an employee to act as liaison with Company to facilitate the provision of the Claims Services. 

  

	 	e.	Maintain the confidentiality of data or information which is the property of Company and which is directly accessible to MGA in the implementation and performance of the Claims
Services. 

  

	 	f.	Maintain complete, accurate and orderly claims books, files, records and accounts of all transactions in accordance with generally accepted insurance and accounting practices, which
files shall be the joint property of the Company and MGA. The data in any electronic claims files maintained by the MGA shall be transmitted to the Company in a timely manner as reasonably directed by the Company. 

  

	 	g.	Maintain during the term of this Agreement copies of all claims and correspondence related to the claims for a period of six (6) years after the date of closure of such claim.
MGA shall not destroy these copies without the written permission of the Company. MGA may, with permission from Company, use magnetic, optical, and other types of technology to store such data. At the end of such six (6) year period relevant to
any claim, the Company shall authorize MGA to either (a) destroy the closed file or (b) return such file to Company at Company's expense. Upon an order of liquidation of the Company, the claims files shall become the sole property of the
Company or its estate once MGA has been paid for the services rendered. MGA shall have reasonable access to and the right to copy all files, books and records on a timely basis. 

  

	 	h.	 The MGA shall adjust and handle all claims still open upon termination or cancellation of this Agreement for an agreed upon fee per claim. Company shall continue to
be responsible for the payment and reimbursement of expenses for such claims as provided in this Article VII. Notwithstanding the foregoing, any settlement 



  

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authority granted to the MGA may be terminated for cause upon the Company’s written notice to the MGA or upon termination of this Agreement. The Company
may suspend the MGA’s settlement authority during the pendency of any dispute regarding the cause for termination. 


  

	 	i.	MGA agrees that all claims occurring during the Term of this Agreement will be reported to the Company and will be assigned to properly licensed persons. 


 

	 	j.	MGA agrees that Notice shall be sent by the MGA to the Company as soon as it becomes known that a claim: 

 a. Exceeds the limit set by the insurer; 
 b. Involves a coverage dispute; 
 c. Exceeds the managing general agent’s claims
settlement authority; 
 d. Is open for more than 6 months; or 
 e. Is closed by payment of an amount set by the Department or an amount set by the insurer, whichever is less. 
 7.3. Company Discretion. MGA acknowledges and agrees that Company, as the party at risk and having ultimate responsibility for the claims to be
administered by MGA, shall at all times have ultimate discretion and authority with respect to all matters pertaining to the claims including, without limitation, the processing, handling, disposition, settlement, defense and litigation of all
claims. The exercise or failure to exercise such discretion and authority shall not in any way diminish, impair or otherwise affect the obligations of MGA hereunder, including, without limitation, the obligations to exercise reasonable care, to act
in good faith, and to otherwise act in a prudent, fair and appropriate manner with regard to the Claims Services. 
 7.4. Duties of Company.

  

	 	a.	Company agrees that all claims occurring during the Term of, and under, this Agreement will be reported and assigned to MGA, unless Company otherwise notifies MGA. Company will
provide all information, in its possession, relevant to particular claims assigned to MGA in order for MGA to fulfill its duties and obligations as set out in Schedule III. MGA shall notify Company, in writing, should Company fail to provide any
relevant information requested by MGA regarding any specific claim. 

  

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	 	b.	Company shall appoint an individual with sufficient authority within Company’s organization to facilitate MGA’s performance of the Claims Services enumerated in Schedule
III. 

  

	 	c.	Company has ultimate authority and responsibility for authorizing claims payment and settlement over MGA’s authority of Twenty- five Thousand Dollars ($25,000.00).


  

	 	d.	Company shall provide to MGA at no cost to MGA access to the policy or claims administrator system of Company on a twenty-four (24) hours a day, seven (7) days a week
basis. 

 7.5. Audit Provisions. The Company, its employees, and/or its authorized agents shall have the right, at any
reasonable time during normal business hours and with reasonable notice to the MGA, to review and/or audit Company’s claim files maintained by the MGA. 
 7.6. Price and Payment. 
  

	 	a.	Company agrees to pay Claim Services, Fees and Rates as specified in Schedule III A through Schedule III C of this Agreement. Schedule III A shall govern the Service Fees and Rates
payable to MGA by Company on all new and renewal business written by Company. Schedule III B shall govern the Services Fees and Rates payable to MGA by Company for subrogation and salvage activities. Schedule III C shall govern the Services Fees and
Rates payable to MGA by Company for catastrophic management services. 

  

	 	b.	The Service Fees and Rates may increase or decrease by mutual written agreement, if changes in the Claims Services mutually agreed to in writing substantially alter the servicing
personnel, equipment, or result in the servicing being done on a different system. 

  

	 	c.	Company agrees to pay all tariffs and taxes that are now or may become applicable to the Claims Services rendered. 

  

	 	d.	Service Fees and Rates for Claims Services will be due and payable fifteen (15) days after the close of the month in which Claims Services are performed in amounts pursuant to
Schedules III A through III D attached to this Agreement. 

  

	 	e.	 MGA and Company will renegotiate, in good faith, the Claims Services Fees in the event of 



  

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statutory, regulatory, or judicial changes that require additional activities not contemplated at the inception of this Agreement. Should the parties be
unable to reach an agreement, either party may terminate this Agreement upon advance written notice to the other party at least ninety (90) days prior to the effective date of termination. 


 7.7. Definition and Payment of “Allocated Loss Adjustment Expense.” All Allocated Loss Adjustment Expenses shall be paid by the Company.
For purposes of this Agreement, Allocated Loss Adjustment Expense(s) shall mean any expense which is chargeable or attributable to the investigation, coverage analysis, adjustment, negotiation, settlement, defense or general handling of any
Claim(s) or action(s) related thereto, or to the protection and/or perfection of the Company’s and/or its insured’s right of subrogation, contribution or indemnification. Allocated Loss Adjustment Expense(s) includes, but is not
limited to, the following: 
  

	 	a.	Attorney’s fees and disbursements incurred in connection with the determination of coverage and/or the adjustment, defense, negotiation or settlement of any Claim;
attorney’s fees incurred for representation at depositions, hearings, pretrial conferences and/or trials; 

  

	 	b.	Costs incurred in handling any Alternative Dispute resolution proceeding (“ADR”), legal actions, including trials or appeals, or in pursuing any declaratory judgment
action, including deposition fees, cost of appeal bonds, court reporter or stenographic service fees, filing fees, and other court costs, fees and expenses, transcript or printing costs and all discovery expenses; fees for service of process; fees
for witnesses’ testimony, opinions, or attendance at hearings or trial; 

  

	 	c.	Statutory fines or penalties; pre- and post-judgment interest paid as a result of litigation, unless legal requirements define such interest as indemnity payments;


  

	 	d.	Subcontractors’ fees and travel expenses, including independent adjusters, automobile and property appraisers, to the extent that same are incurred in the adjustment,
negotiation, settlement or defense of any Claim (excluding MGA’s employees); 

  

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	 	e.	Experts’ fees including reconstruction experts, engineers, cause and origin reports, photographers, accountants, economists, metallurgists, cartographers, architects,
handwriting experts, physicians, appraisers and other natural and physical science experts, plus the costs associated with preparation of expert reports, depositions, and testimony; 

  

	 	f.	Fees for surveillance, undercover operative and detective services or any other investigations; 

  

	 	g.	Costs for medical examinations, or autopsies, including diagnostic services, and related transportation costs, fees for medical reports and rehabilitation evaluations;


  

	 	h.	Costs for any public records, medical records, credit bureau reports, and other like reports; 

  

	 	i.	Costs and expenses incurred where MGA determines it is reasonable to pursue the rights of contribution, indemnification or subrogation of the Company and/or its insured, including
attorney and collection agency fees and/or expenses; 

  

	 	j.	Medical or vocational rehabilitation expenses, and all other medical cost containment services, including, but not limited to, utilization review, pre-audit admission authorization,
hospital bill audit or adjudication, provider bill audit or adjudication, and review of medical case management; 

  

	 	k.	Extraordinary travel and related expenses incurred by MGA at the express written request and approval of a Company officer, which are not otherwise payable under this Agreement; and


  

	 	l.	With respect to MGA’s determination that an expense(s) incurred pursuant to this Agreement is an Allocated Loss Adjustment Expense, MGA makes no representation or warranty and
assumes no responsibility that such determination (i) is in compliance with or meets the requirements of any statistical plan filing, statutory, regulatory, or insurance industry reporting scheme or the definition of the Allocated Loss
Adjustment Expense thereunder; (ii) is or could be characterized as payment of loss or indemnity; or (iii) is or is not subject to insurance or reinsurance coverage or limits. Company agrees that it is responsible for making all such
judgments and for complying with any and all such requirements. 

  

 16 








 7.8. Limitation of Liability and Remedies. 
  

	 	a.	In providing the Claims Services hereunder, MGA shall have a duty to act with a reasonable due care and caution, in good faith, and in a prudent manner. MGA shall be liable to
Company for any loss or damage sustained by Company as a result of, or related in whole or part to, the bad faith, negligence or other intentional or unintentional misconduct on the part of MGA, or its officers, directors, employees or agents.


  

	 	b.	MGA agrees to indemnify, defend and hold harmless Company, its officers, directors, employees, agents, designees and affiliates (collectively “Indemnified Parties”), from
and against any and all claims, causes of action, liabilities, liens, fines, penalties, demands, costs, fees, expenses (including reasonable attorney’s fees), suits, judgments, adjudications and losses of whatever kind or nature incurred by, or
claimed against, any of the Indemnified Parties by reason of any bad faith, negligence, or other misconduct by MGA, or any of its officers, directors, employees or agents, or by reason of any breach of this Agreement by MGA.


  

	 	c.	MGA shall have no indemnity obligation under this Agreement for any act or omission of the MGA taken or omitted to be taken at the express direction of Company.


  

	 	d.	All indemnity obligations of MGA under this Agreement shall survive the termination or expiration of this Agreement. 

  

	 	e.	MGA warrants that it now has and shall maintain during the term of this Agreement for the protection and benefit of the Company and MGA liability insurance coverage in an amount of
not less than One Million Dollars ($1,000,000) for any one event and in an amount of not less than Two Million Dollars ($2,000,000) in the aggregate. Such coverages shall be in a form and with a company acceptable to Company and proof of such
coverages shall be provided to Company upon request. 

 ARTICLE VIII – PROFIT SHARING ARRANGEMENT 
 8.1. Not Applicable 
 ARTICLE IX- TERMINATION

  

 17 








 9.1. Continuing Authority. The authority of MGA to issue Policies under this Agreement shall be
continuous until terminated, except for mandatory renewals of existing Policies. This Agreement may be terminated by either party, at the end of any calendar quarter, without cause, by giving the other party not less than one hundred twenty
(120) days prior written notice of such termination. 
 9.2. Termination By Company with Cause. This Agreement shall terminate:

  

	 	a.	Automatically and immediately at the written election of the Company, if any public authority cancels or declines to renew any of the licenses of MGA necessary to fulfill the terms
of this Agreement. 

  

	 	b.	Automatically and immediately in the event of a transfer, sale or pledge of the majority of the stock or a substantial portion of the assets of MGA, unless this Agreement is
assigned with the express written consent of the Company, or unless the pledge of stock is to a federal or state charted bank to secure loans from the bank to MGA, provided in the event of such permitted pledge that this Agreement shall terminate if
the pledged stock is foreclosed upon or otherwise acquired by the pledgee. 

  

	 	c.	At the election of the Company upon MGA’s material violation of any provision of this Agreement; provided, however, that MGA will be allowed thirty (30) days, after written
notice, to cure any non-monetary breach or default. 

  

	 	d.	Immediately, at the election of the Company for the occurrence of any failure by MGA to comply with the provisions of Section 6.3 a. or b. 

 9.3. Termination by MGA. This Agreement may be terminated at the election of and upon written notice from MGA upon the failure of the Company:
(a) to remain licensed in the State of Florida; (b) to comply with Florida laws and Department Rules and Regulations; or (c) to comply with the material provisions of this Agreement; provided, however, that Company will be allowed
thirty 

	(30)	days, after written notice, to cure any non-monetary breach or default. 

 9.4. Suspension and Revocation of Authority. The Company may suspend MGA’s underwriting authority during the pendency of any dispute regarding the termination of this Agreement. The Company 

  

 18 








 
and MGA shall fulfill their obligations under the Policies regardless of any dispute. 
 9.5. Effect of Termination. In the event of proper termination of this Agreement: 
  

	 	a.	Except as set forth in Section 7.2.h. herein, the obligations of MGA and the Company under this Agreement shall be discharged promptly; 

  

	 	b.	No party shall have a claim upon the other for loss of prospective profit or damage to the business arising therefrom; and 

  

	 	c.	MGA’s records shall remain the property of MGA and left in MGA’s possession, provided MGA is in compliance with all of its obligations to the Company. Copies of such
documents shall be furnished Company by MGA upon written request of Company. 

 9.6. Run-off. 
  

	 	a.	The Company shall, concurrent with its notice of termination or within thirty (30) days of MGA’s notice of termination, notify MGA of whether the Company intends to have MGA
service the Policies through their run-off, or whether it intends to manage the run-off itself. Except as set forth in Section 7.2.h. herein, MGA’s compensation in either event is set forth in Schedule II to this Agreement. For purposes of
this Agreement, the term “run-off” shall mean confirming coverage under the Polices to claims adjusters, administering the in-force Policies and any required renewals and endorsement thereof, providing reports to the Company as elsewhere
required by this Agreement, paying premium to the Company and return premium to the insureds, collecting all sums due from Agents, including return commissions, and such other activities of MGA specifically required by this Agreement.


  

	 	b,	MGA shall upon demand return to the Company any Policies, forms or other supplies imprinted with the Company’s name regardless of who incurred the cost for same, or any
Policies, forms or other supplies furnished to MGA by the Company, with the exception of any forms which in MGA’s reasonable 

  

 19 









	 	 
opinion are required to complete an orderly run-off of operations. 


  

	 	c.	In the event this Agreement terminates and/or MGA refuses or is unable to administer and run-off business produced under this Agreement, then in that event MGA shall immediately
provide the Company with a tape back-up of all programs and data libraries, including updated source code and data files, used in the production and administration of business hereunder (the “Data”). The Company agrees that it shall
utilize the Data solely for the purpose of administering and running off the business produced hereunder. 

  

	 	d.	MGA hereby grants, at no cost to the Company, a limited license to the Company to use MGA’s Software in connection with the administration and run-off of the business produced
hereunder. MGA shall deliver the Software, together with the source and object code for the Software, as well as all available related manuals, immediately upon delivery of the Data to the Company as provided in the preceding Section.


 ARTICLE X—ARBITRATION 
 10.1. Any controversy, claim or dispute arising out of or relating to this Agreement, including questions regarding the arbitrability of any issues or the scope, applicability, enforceability, validity or breach of
this or any other provision of this Agreement or differences of opinion as to the interpretation of this Agreement, shall be submitted to arbitration, one arbitrator to be chosen by the Company, one by MGA, and an umpire by the two arbitrators (the
arbitrators and umpire are referred to as the “Panel”). 
 10.2. The Panel shall, unless the parties otherwise agree, shall meet in
Port St. Lucie, Florida. Members of the Panel shall be disinterested officers or former officers of property and casualty insurance companies or insurance agencies authorized to transact business in the State of Florida. 
 10.3. The arbitration shall be instituted by the claimant serving a notice upon the respondent setting forth a statement of the nature of the dispute and
the name, address and current (or last, if retired) employment position of the arbitrator appointed by the claimant. The respondent shall appoint its arbitrator within twenty (20) days after service of claimant’s notice and shall, within
such time, similarly notify claimant of the name, 

  

 20 








 
address and current (or last, if retired) employment position of the respondent’s arbitrator. If the respondent fails to appoint its arbitrator within
such twenty (20) day period, the claimant shall also appoint the second arbitrator within ten (10) days after the expiration of the twenty (20) days for respondent to appoint its arbitrator. If the two arbitrators fail to agree upon
the appointment of an umpire at the end of the twenty (20) days following the last date of the appointment of the arbitrators, then they each shall, within ten (10) days thereafter, name three (3) candidates who serve as umpire, and
within ten (10) days thereafter each shall decline two (2) of the candidates named by the other; within five (5) days thereafter, a decision shall be made by drawing lots as to which of the last two (2) candidates shall be the
umpire. 
 10.4. The respondent shall submit its statement within twenty (20) days after receipt of the claimant’s statement, and
the claimant may submit a reply statement within ten (10) days after the receipt of the respondent’s statement. Copies of all statements shall be sent to the parties and the Panel. 
 10.5. Any hearing shall commence within thirty (30) days following the selection of the umpire. The Panel shall render its decision within thirty
(30) days following the termination of the hearings unless the parties consent to an extension. 
 10.6. The Panel shall consider this
Agreement an honorable engagement rather than merely a legal obligation and shall make its decision with regard to the custom and usage of the insurance and reinsurance business. The Panel shall issue its decision in writing upon evidence introduced
at a hearing or by other means of submitting evidence in which strict rules of evidence need not be followed, but in which cross examination and rebuttal shall be allowed if requested. The majority decision of the Panel shall be final and binding
upon all parties to the proceeding. Judgment may be entered confirming the award of the Panel in any court having jurisdiction thereof. 
 10.7. Each party shall bear the expense of its own arbitrator and shall jointly and equally bear the expense of the umpire. The remaining costs of the arbitration proceedings shall be allocated by the Panel. 
 10.8. In the event of subsequent actions or proceedings necessary to enforce the judgment entered thereon or any other rights flowing therefrom, the
prevailing party shall be entitled to recover its reasonable attorney’s fees. 
  

 21 








 10.9. Any suit, action, or other proceeding by or against either party to this Agreement, including any
proceeding to compel arbitration, to confirm the arbitration award, or to enforce any remedy available to either party may be brought in the Circuit Court of the State of Florida, County of St. Lucie, or in the Untied States District Court for the
Middle District of Florida, and each of the parties hereto submits and consents to the nonexclusive jurisdiction of each such court for the purpose of any such suit, action or proceeding. The parties agree that process in any action or proceeding
shall be personally served and that such service shall be sufficient to confer in personam jurisdiction over the party so served. 
 ARTICLE XI—INDEMNITY AGREEMENT 
 11.1. MGA shall indemnify the Company and its subsidiaries, successors, reinsurers and
assignees, as well as their shareholders, directors, officers and agents against and in respect of any and all liabilities (as defined below), made or instituted against or incurred by the Company or such other indemnitees and which arise, either
directly or indirectly, out of any action or inaction of MGA or any Agent, or their employees or representatives, in connection with any obligations of MGA arising out of this Agreement including, but not limited to, any action or inaction of MGA
concerning the termination of Agent(s) pursuant to all applicable laws. This Section 11.1 does not apply to the extent that the loss resulted from action or inaction of MGA, which is a result of acting in accordance with the written
instructions of the Company. 
 11.2. The Company shall indemnify MGA and its subsidiaries, successors, reinsurers and assignees, as well as
their shareholders, directors, officers and agents against and in respect of any and all liabilities (as defined below) made or instituted against or incurred by MGA or such other indemnitees and which arise, either directly or indirectly, out of
any action or inaction of the Company, or their employees or representatives, in connection with any obligations of the Company arising out of this Agreement. 
 11.3. For purposes of this Article XI, “liabilities” means all claims, demands, actions, proceedings, liability, losses, damages, costs or expenses, including without limitation, attorneys’ fees,
disbursements and court costs. 
  

 22 








 11.4. The indemnification provisions of this Article XI do not apply to covered claims made under any
policy issued in accordance with this Agreement nor with regard to the Claims Services, as set forth in Section 7.8. herein. 
 11.5.
All indemnity obligations herein shall survive the termination or expiration of this Agreement. 
 ARTICLE XII - GENERAL PROVISIONS 

 12.1. Survival. Article X on Arbitration, Section 9.6 on “run-off”, and all other provisions of this Agreement that
are pertinent to the “run-off” and the Claims Services to be rendered under Section 7.2.h. shall survive the termination of this Agreement. 
 12.2. Independent Contractor Relationship. Nothing herein shall create the relationship of employer and employee between the Company and MGA, it being understood and agreed that MGA is an independent contractor
of the Company for the purposes set forth herein with all rights, powers and duties as such. 
 12.3. Non-Assignable. Neither Company
nor MGA may assign this Agreement or any part thereof to another person or entity. 
 12.4. Subcontracting. MGA may subcontract or
delegate its duties under this Agreement with other persons or entities, subject to the prior written consent of the Company, which consent may not be unreasonably withheld. 
 12.5. Modification. This Agreement may not be changed, nor may any provision hereof be waived, except by a written document signed by both parties
hereto. 
 12.6. Non-Waiver. The failure of the Company or MGA to insist on strict compliance with this Agreement, or to exercise any
right or remedy hereunder, shall not constitute a waiver of any rights contained herein or estop the parties from thereafter demanding full and complete compliance therewith, or prevent the parties from thereafter demanding full and complete
compliance therewith, nor prevent the parties from exercising any right or remedy in the future. 
  

 23 








 12.7. Notice. Any notice required or permitted to be given under this Agreement shall be in
writing and shall be deemed duly given if delivered personally, or by a recognized courier service, or by registered or certified mail, return receipt requested, to the party for whom it is intended at the following address or such other address as
the party may designate from time to time. 
  

					
	For MGA:	  	Homeowners Choice Managers, Inc	  	
		  	 145 NW Central Park Plaza #110
 Port St. Lucie, FL
34986
	  	
			
		  	Attn: Ronald E. Chapman	  	
			
	For the Company:	  	Homeowners Choice Property and Casualty	  	
		  	 Insurance Company
 145 NW Central Park Plaza
#110
 Port St. Lucie, FL 34986
	  	
			
		  	Attn: Francis X. McCahill III	  	

 Notices shall be deemed given when delivered, or three (3) days after delivery to the courier or mailing, as
above provided. 
 12.8. Invalidity. If any provision of this Agreement should be found to be invalid or unenforceable, the remaining
provisions of this Agreement shall remain in full force and effect. 
 12.9. Governing Law. This Agreement shall be interpreted under
and pursuant to the laws of the State of Florida. 
 12.10. Assigns. Subject to the provisions of 12.3 hereof, this Agreement shall
bind and benefit the successors and permitted assigns of the parties. 
  

 24 








 12.11. Counterparts. This Agreement may be executed in two (2) or more counterparts, each of
which shall be deemed an original but all of which together shall constitute one and the same agreement. 
 IN WITNESS WHEREOF, the
parties have caused this Agreement to be executed by their duly authorized officers as of the day and year first above written. 
  

							
	HOMEOWNERS CHOICE MANAGERS, Inc.
				
	 BY:
	 	 


	 		 	Date: 3/27/07
	 Its:
	 	Chief Operating Officer	 		 	
	
	HOMEOWNERS CHOICE Property and Casualty Insurance Company, Inc.
				
	 BY:
	 	 


	 		 	Date: 3/27/07
	 Its:
	 	President	 		 	

  

 25 








 SCHEDULE I 
 AUTHORIZED COVERAGES, TERRITORY 
 AND LIMITS OF COVERAGE 
 The MGA is authorized as respects: 
 Coverages: The MGA is authorized for all
coverages for which the Company is licensed. 
 Territory: The MGA is authorized to represent the Company in all territories in which the Company and MGA
have valid licenses and/or certificates of authority. 
 Limits: The MGA is authorized to commit the Company to all coverages and limits as further described
in the Company’s Underwriting Manual as filed by the Company with its rate and form filing with the Department. 
  

 26 








 SCHEDULE II 
 COMPENSATION 
 for MGA Services 
 Company and MGA agree to the following commission schedule for the Managing General Agent Services, excluding Claims Services, described in this Agreement and its Schedules with respect to Company’s new
and renewal business. 
 MGA shall retain Twenty-one and one half Percent (21.5 %) of the Company’s Total Written Annual Premium as commission for its
Managing General Agent Services, excluding Claims Services and policies assumed from Citizens. Such commission shall be deducted from the premiums remitted to Company by MGA and adjusted on the 15th day after the end of each month beginning March,
2007 and each and every consecutive month thereafter during the Term of the Agreement. These commissions will be adjusted when the Company’s Total Written Annual Premium is determined and identified on the Company’s annual report filed
with the Department. Any balance due from these adjustments shall be paid to the other party no later than March 15th of the year in which such annual report is due and filed. 
 Total Written Annual Premium shall exclude the MGA policy fee of $25.00 per policy, or other non-commissionable fees. 
  

 27 








 SCHEDULE III 
 To the 
 MANAGING GENERAL AGENCY AGREEMENT 
 By and between 
 Homeowners Choice Managers, Inc. 
 And 
 Homeowners Choice Property and Casualty
Insurance Company, Inc. 
  

	A.	SERVICES 

 During the term of this Agreement, MGA shall be the exclusive
provider of the claims administration services (the “Claims Services”) defined below for all reported and assigned claims of the Company for policies of insurance written by or through Company. MGA will provide the services and general
management of these Claims Services described herein for subject claims as follows: 
 1. Company grants MGA the authority to investigate,
evaluate, handle, adjust and settle each claim assigned according to applicable state law, the terms and conditions of the policy and any written standards that may be provided by Company in addition to the provisions of this Agreement. 

2. Loss reporting will be by Internet, fax, or phone. Losses may be reported 24 hours a day. The Internet, fax and phone reporting will be checked for
new losses every two (2) hours from 8:00 AM until 11:00 PM. 
 3. Coverage will be verified on all cases through the Company by
procedures mutually agreed upon, in writing, by the parties. Contact will be made with claimant or insured within twenty-four (24) hours of loss reporting, excluding catastrophic events. 
 4. MGA will administer the appraisal/assessment process and will use in this endeavor a combination of staff, adjusters, and appraisers. 
 5. MGA will perform all reasonable, necessary and customary administrative and clerical work in connection with claim or loss reports. 
  

 28 








 6. MGA will establish and maintain a claim file for each reported claim or loss with a copy of the policy
for each reported claim. The claim file will have an activity log which shall be reviewable at any and all reasonable times by the Company subject to the provisions of Section 7.5 of this Agreement. Catastrophe claims will not require an
activity log. 
 7. MGA will provide the Company with litigation management. MGA will work with counsel to determine the best course of
action within a reasonable budget within the scope of authority granted by the Company. The selection and retention of legal counsel shall be the Company’s sole prerogative. 
 8. For non-catastrophic claims, the MGA will enter in the Company’s designated claims administration system each claim and a recommended reserve
within forty-eight (48) hours which initial reserves will be a statistical reserve and adjusted within fourteen (14) days based upon adjuster’s inspection of damages. The Company shall have the ultimate authority in establishing all
reserves and all component aspects thereof. MGA shall consult with Company and provide written notice to Company in a timely manner with respect to any of the following: 
 (a) Any loss or claim resulting in legal action being instituted against MGA or the Company; 
 (b) Any loss
or claim causing a complaint to be filed with any regulatory authority; 
 (c) Any inquiry from any regulatory authority, including but not
limited to, any insurance department, with respect to any claim or claims. 
 (d) Any claim MGA deems appropriate to deny policy coverage or
involves a coverage dispute; 
 (e) Any claim which might ultimately result in the payment(s) in excess of Twenty-five Thousand Dollars
($25,000.00). MGA shall forward a copy of such claim file to Company at its request. Company grants MGA claims settlement authority up to Twenty-five Thousand Dollars $25,000.00; 
 (f) Any open claim that involves an allegation of extra-contractual obligations; 
  

 29 








 (g) Any claim involving a fatality, amputation, spinal cord or brain damage, loss of eyesight, extensive
burns, poisoning, or multiple fractures; 
 (h) Any claim involving a minor; or 
 (i) any claim involving a claim of bad faith or seeking class action certification. 
 9. MGA will perform periodic review (at least semi-annually) at mutually agreed upon intervals of outstanding claim reserves, and recommend changes to
outstanding claim reserves. 
 10. MGA will order checks and vouchers from Company and will prepare all compromises, releases, agreements and
any other documents reasonably necessary to finalize and close claims. For settlements of less than Twenty-five Thousand Dollars ($25,000.00), MGA will issue payments of claims and allocated loss adjustment expenses only on checks of, and as
authorized by, the Company. A check in payment of a claim shall be issued within forty-eight (48) hours after claim is determined payable by MGA, except in the event of a catastrophic event. 
 For purposes of settling claims and paying claim-related expenses for claims of Twenty-five Thousand Dollars ($25,000.00) or less, Company has agreed to
establish, maintain and fund a separate bank account from which MGA may draw against as hereinafter set forth (the “Claim Account”). MGA shall not retain more than sixty (60) days of estimated claims payments and allocated loss
adjustment expenses in the Claim Account. 
 Company agrees to deposit additional funds into the Claim Account on a weekly basis if necessary
to maintain it at a level sufficient to allow MGA to carry out its obligations under this Agreement. Company shall provide to MGA such information as is necessary for MGA to draw checks on the Claim Account. 
 MGA AND COMPANY WILL PREPARE PROCEDURES FOR THE PAYMENT OF CLAIMS IN EXCESS OF TWENTY-FIVE THOUSAND DOLLARS ($25,000.00) WHICH WRITTEN PROCEDURES SHALL
BE ATTACHED TO THIS AGREEMENT AND BE DEEMED INCORPORATED HEREIN BY REFERENCE. 
 MGA hereby agrees to prepare, sign and issue checks in
accordance with the procedures adopted by Company. Any check prepared by MGA on the Claim Account must be signed by authorized individuals. 
  

 30 








 MGA shall promptly transmit any monies collected through salvage and subrogation to the Company, and
maintain a register of all such collections in a register (the “Salvage and Subrogation Register”). The Salvage and Subrogation Register shall include, but shall not be limited to, the following information: date of receipt of funds, the
claim number, the payer, and the amount of such payment. 
 The MGA shall have a duty of fiduciary responsibility to Company as to all money
of the Company coming into the possession or control of the MGA. 
 11. Service standards and claims documentation will be in compliance with
all state regulations dealing with the adjusting and handling of claims. MGA will periodically review the development of the claims handling procedure with the Company to identify problems and recommend corrective action. 
 12. MGA will diligently pursue and prosecute Company’s salvage and subrogation rights relating to any losses. MGA will use reasonable efforts to
collect funds arising from the enforcement of such rights. 
  

	B.	LOCATION OF PROVISION OF SERVICES: 

 As mutually
agreed upon by the Company and MGA. 
  

 31 








 SCHEDULE III A 
 Fees Applicable to New and Renewal Business for Claims Services 
 Company and MGA agree to the following fee schedule
for the Claims Services described in this Agreement and its Schedules with respect to Company’s new and renewal business. 
 Company shall pay MGA 3.5% of the Company’s Total Written Annual Premium including premiums assumed from Citizens for Claims Services rendered by MGA. Such fees shall be payable on the 15th day of each month
beginning April, 2007 and each and every consecutive month thereafter during the Term of the Agreement. These fees will be adjusted when the Company’ s Total Written Annual Premium is determined and identified on the Company’s annual report filed with the Department. Any balance due from these adjustments shall be paid to the other party no later than March 15th of the
year in which such annual report is due and filed. 
 The above fees do not include Allocated Loss Adjustment Expenses as defined in Section 7.7. of the
Agreement. The above fees do not apply to class action suits, catastrophic events or subrogation or salvage activities. 
 Total Written Annual Premium shall
exclude the MGA policy fee of $25.00 per policy, or other non-commissionable fees. 
  

 32 








 SCHEDULE III B 
 Additional Compensation 
 On a monthly basis, the Company shall pay MGA 50% of all subrogation and salvage amounts
recovered by MGA. 
  

 33 








 SCHEDULE III C 
 Catastrophe Management Services & Fees 
 Catastrophe Loss expense shall be reimbursed as follows:

 A. MGA will be reimbursed monthly per the schedule below for catastrophe administration expenses. 
  

							
	 GROSS LOSS
	  	 SERVICE FEE
	  	 
	$           .01 - $    2,500.00	  	    $   325.00	  
	$  2,501.00 - $    5,000.00	  	    $   450.00	  
	$  5,001.00 - $    7,500.00	  	    $   575.00	  
	$  7,501.00 - $  10,000.00	  	    $   650.00	  
	$10,001.00 - $  15,000.00	  	    $   900.00	  
	$15,001.00 - $  20,000.00	  	    $1,100.00	  
	$20,001.00 - $  25.000.00	  	    $1,375.00	  
	$25,001.00 - $  50,000.00	  	    $1,575.00	  
	$50,001.00 - $100,000.00	  	    3% of Gross loss	  
	 Over $100,001.00
	  	    2% of Gross loss	  

 In addition to the above: 0.5% of written premium for catastrophe response preparation fees. 
 GROSS LOSS: Gross loss shall mean the agreed RCV loss before the application of the deductible or other limiting clauses. 
  
  

					
	File Set Up and Administration:	  	$0	  	 
	  
 Photographs
	  	  
 Includes 2, then $2.00/ea.
	  
	  
 Mileage
	  	  
 First 50 miles included $1.00 per mile thereafter
	  
	  
 Miscellaneous Expense
	  	  
 Actual Cost
	  

 Time and Expense charges are applicable to re-inspections and/or inspections wherein a known coverage concern is
advised at assignment (i.e.—wind/hail exclusion). Time and expense charged at $75.00 per hour. All additional charges and expenses charged at cost. 
  

 34