KEMPER(R)

CONTRACTUAL LIABILITY COVERAGE PART DECLARATIONS

GENERAL LIABILITY POLICY NUMBER: 3AB 046337

1.   NAMED INSURED

     MECHANICAL BREAKDOWN ADMINISTRATORS, INC., A DELAWARE CORPORATION
     MECHANICAL BREAKDOWN ADMINISTRATORS, INC. OF ARIZONA

2.   MAILING ADDRESS

     9419 E. SAN SALVADOR, SUITE 105, SCOTTSDALE, AZ 85261

3.   POLICY PERIOD

     FROM: 07/ 01/ 00              TO: CONTINUOUS UNTIL CANCELLED

     12: 01 A. M. Standard Time At The Address Of The Named Insured

4.   COVERAGE

     The Insurance afforded is only with respect to Designated  Contracts issued
     by the Name Insured during the Policy Period stated above.

5.   THE  PREMIUM IS AN ADVANCE  DEPOSIT  PREMIUM  AND IS SUBJECT TO A QUARTERLY
     ADJUSTMENT.

     $100,000 Deposit Premium

6.   POLICY COMPOSITION

     The policy also includes the following endorsements:

         SC 72 00 (ED 07 98) SERVICE CONTRACT AMENDATORY ENDORSEMENT
         IL 70 21 (ED. 11 95) ARIZONA CHANGES--CANCELLATION AND NONRENEWAL
<PAGE>
SERVICE CONTRACT REIMBURSEMENT POLICY

In consideration of the payment of the premiums,  the statements included in the
Declarations and the terms and conditions of this policy, "The Company" provides
the following coverage to the "Named Insured."

A. INSURING AGREEMENT

     "The Company" agrees to pay to or on behalf of the "Named Insured" all sums
     which the "Named  Insured"  shall  become  legally  obligated  to pay under
     "Designated  Contracts" in accordance  with the terms of this policy.  "The
     Company"  shall  not have any duty to defend  the  "Named  Insured"  in any
     lawsuit or other judicial or administrative proceeding involving the "Named
     Insured."

B. DEFINITIONS

     "NAMED  INSURED" means the individual or firm named as the "Named  Insured"
     in the Declarations.

     "DESIGNATED  CONTRACT(S)"  means a  "Contractual  Obligation"  between  the
     "Named  Insured" and a "Contract  Holder"  provided that 1) the form of the
     "Designated  Contract" is approved in writing by "The Company";  and 2) the
     proper premium is timely paid.

     "CONTRACTUAL OBLIGATION" means the "Named Insured's" obligation to properly
     repair or replace covered components and their parts by a "Repair Facility"
     in  accordance  with the  terms  of the  "Designated  Contracts."  No other
     obligations or liabilities,  which may arise from  "Designated  Contracts,"
     are insured by this policy. The amount of a "Contractual  Obligation" shall
     not exceed the liability provided under the "Designated Contracts."

     "CONTRACT  HOLDER"  means any person or legal entity that legally  acquires
     the rights of ownership to a "Designated Contract" from the "Named Insured"
     or as a qualified transferee.

     "NONPAYMENT  OF  PREMIUM"  means  failure  by the  "Named  Insured"  to pay
     premiums to "The  Company" and includes  failure by the "Named  Insured" to
     implement a rate change within one hundred and eighty (180) days of written
     notification of such change by "The Company" to the "Named Insured."

     "THE COMPANY" means American Motorists Insurance Company.

     "CONTRACT  HOLDER  CLAIM"  means  a  claim  by  a  "Contract  Holder"  that
     constitutes a "Contractual Obligation."

     "LOSS" means expenses  incurred by the "Named Insured" or expenses incurred
     on behalf of the  "Named  Insured"  in the  performance  of a  "Contractual
     Obligation."

     "REPAIR  FACILITY" means a person or organization  authorized by the "Named
     Insured" to perform services under "Designated Contracts."

C.   PREMIUMS

     The premium stated in the  Declarations is the deposit premium for coverage
     under  this  policy.  The  specific  premium  amounts  for the  "Designated
     Contracts" covered hereunder is scheduled as an endorsement to the policy.

                                   Page 1 of 5
<PAGE>
D.   SETTLEMENT OF COMPANY'S LIABILITY

     "The  Company"  agrees to pay to or on behalf of the  "Named  Insured"  the
     reasonable  and  customary  cost of repairing or replacing  components  and
     their parts by a "Repair Facility" covered by valid "Designated Contracts,"
     subject to the terms and conditions of such "Designated Contracts" and this
     policy.  If the  "Named  Insured"  fails  to pay any  valid  claim  under a
     "Designated  Contract"  within  sixty (60) days after it is reported to the
     "Named Insured," the "Contract Holder" may make a direct claim against "The
     Company."  Bankruptcy  or  insolvency  of the  "Named  Insured"  or  "Named
     Insured's" estate shall not relieve "The Company" of any of its obligations
     hereunder.  In no event  shall  "The  Company's"  duty  continue  unless an
     acceptable substitute administrator or receiver is appointed by a competent
     jurisdiction to undertake the "Named Insured's" duties.

E.   EXCLUSIONS

     This policy does not apply to any liability of the "Named Insured":

     1.   For any and all third party  damages or claims  other than those which
          are covered by the terms of the "Designated  Contracts." These damages
          not covered include,  but are not limited to, bodily injury,  property
          damages, or punitive or exemplary damages for bad faith arising out of
          work  performed  by or on behalf of the  "Named  Insured"  under  such
          "Designated Contracts."

     2.   For "Designated  Contracts" that have not been previously  approved by
          "The Company" in writing or for "Designated  Contracts" for which "The
          Company" has not been fully paid the premium.

     3.   For breach of any and all expressed  warranties or implied  warranties
          of fitness or merchantability.

     4.   For any and all liabilities for negligence.

     5.   For the fees, costs, and expenses of any product recall arising from a
          deficiency in the performance or safety of the vehicle declared in the
          "Designated   Contracts,"  including  the  cost  of  parts  and  labor
          associated with such recall.

     6.   For any costs which are  recoverable  by the  "Contract  Holder"  from
          other insurance or any other source.

     7.   For any and all  liabilities or obligations  extending to anyone other
          than the "Contract Holder."

     8.   For any and all  obligations,  liabilities  or  claims  of the  "Named
          Insured" arising from any fraudulent, dishonest or criminal act of the
          "Named  Insured"  or for such  acts  arising  from  any of the  "Named
          Insured's"  agents,  directors,  officers  or  employees  or from  any
          "Repair  Facility"  whether the "Repair  Facility"  is  authorized  to
          perform the repair or not.

     9.   For any duty to defend the  "Named  Insured"  in any  lawsuit or other
          judicial or administrative proceeding involving the "Named Insured."

F.   ASSIGNMENT

     Assignment of interest  under this policy by the "Named  Insured" shall not
     bind "The Company" until its consent is endorsed thereon.

                                   Page 2 of 5
<PAGE>
G.   CONDITIONS

     The "Named  Insured" shall report to "The Company"  within thirty (30) days
     following the end of each month the number of "Designated Contracts" issued
     during the  previous  month and remit the  premium  due as set forth in the
     policy. In no case will a "Designated  Contract" reported later than ninety
     (90) days from its  inception be covered by the policy.  The report will be
     in a form reasonably satisfactory to "The Company."

     Premium - The premium for such  "Designated  Contracts" shall be determined
     in accordance  with the rates on file with "The Company." These rates shall
     remain in effect until modified by "The Company" and provided that at least
     one hundred and eighty (180) days prior written  notice of the change shall
     have been given to the "Named Insured."

     In the event of  cancellation  of this policy by either the "Named Insured"
     or  "The  Company,"  the  premium  paid by the  "Named  Insured"  from  the
     inception  through the  cancellation  of this policy  shall be deemed to be
     fully earned since "The  Company's"  liability  shall  continue  beyond the
     cancellation  date until all "Designated  Contracts" issued during the term
     of this policy have expired.

     Fraud  and  Misrepresentation  - This  policy  shall be void if the  "Named
     Insured" has concealed or misrepresented  any material fact or circumstance
     concerning  this insurance or the coverage  provided under the  "Designated
     Contract."

     Payment for Loss - Payment for "Loss" may not be required until thirty (30)
     days  after  proof of  "loss"  is filed and the  amount  is  determined  as
     provided in this policy.

     Recoveries  - After  payment  of  "Loss"  by  "The  Company,"  all  amounts
     recovered by "Named Insured" for which "Named Insured" has been indemnified
     shall  become the  property  of and be  forwarded  to "The  Company" by the
     "Named  Insured," up to the total  amount of "Loss" paid by "The  Company."
     Additionally,  "The Company"  shall have the right of  subrogation  for any
     amount of "Loss" paid.

     The "Named  Insured"  will be  required to report  claims from  "Designated
     Contracts"  to "The  Company" on a monthly  basis.  "The  Company"  and the
     "Named Insured" shall agree upon the format of such a report.

     This policy, including the terms, conditions,  limitations,  exceptions and
     exclusions  together with the  endorsements  and attached  papers,  if any,
     constitutes the entire policy of insurance.  No change in this policy shall
     be valid  unless in the form of an  endorsement  issued and forming part of
     this policy and signed by an authorized representative of "The Company."

     Bankruptcy or insolvency of "Named Insured," or "Named  Insured's"  estate,
     shall  not  relieve  "The  Company"  of any of its  obligations  hereunder,
     provided that in no event shall "The  Company's"  duty  continue  unless an
     acceptable  substitute  administrator  or receiver  shall be appointed by a
     competent jurisdiction to undertake "Named Insured's" duties.

     Territory  -  This  policy  covers  the  "Named  Insured"  for  "Designated
     Contracts" issued in the United States and Canada.

H.   CANCELLATION OR CHANGE

     "The Company" has the right to modify the rates attached to and made a part
     of this policy.  "The Company" must provide the "Named Insured" one hundred
     and eighty  (180) days written  notice of a rate  change.  Such rate change
     will apply only to  "Designated  Contracts"  sold on or after the effective
     date of the rate change.

     "The Company" shall have the right to cancel this policy after fifteen (15)
     days  written  notice for  nonpayment  of premium or for a false  statement
     knowingly made by the "Named  Insured" on the  application for insurance by

                                   Page 3 of 5
<PAGE>
     mailing  via  certified  mail,  return  receipt  requested,  to the  "Named
     Insured," at the address shown in the Declarations  section of this policy,
     written notice when such cancellation shall be effective.

     "The Company"  shall have the right to cancel this policy after one hundred
     and eighty (180) days written notice.  Written notice of such  cancellation
     shall be made via certified  mail,  return  receipt  requested.  The "Named
     Insured" has the right to cancel this policy by mailing to "The Company" or
     its authorized  agent immediate  written notice of its intent to do so. The
     "Named Insured's" cancellation shall be effective on the date stated in the
     written  notice  but not less  than  one  hundred  and  eighty  (180)  days
     following  receipt by "The Company"  unless mutual  agreement is reached by
     the parties for an earlier date. Delivery of such written notice, either by
     the "Named Insured" or "The Company," shall be equivalent to mailing.

     All premiums shall be fully earned by "The Company,"  regardless of whether
     termination is effected by the "Named Insured" or "The Company," subject to
     the provisions of Section C.

I.   EFFECT OF CANCELLATION

     In the event of  cancellation  of this policy,  "The Company"  shall remain
     liable  for  all  of  its  duties  and  obligations  pertaining  to  active
     "Designated  Contracts,"  including,  without  limitation,  the  payment of
     claims to the "Named  Insured," as  previously  described  hereunder,  with
     respect to any "Designated  Contracts"  issued by the "Named Insured" prior
     to the effective date of cancellation,  as long as all policy  requirements
     are met by the "Named Insured."

     Cancellation  shall not relieve the "Named Insured" of any of its duties or
     obligations under this policy, or its "Designated  Contracts," with respect
     to any  "Designated  Contracts"  issued by the "Named Insured" prior to the
     effective date of termination.

J.   INSPECTION AND AUDIT RIGHTS

     "The Company" and the "Named  Insured"  shall have the right to inspect and
     examine  the other's  premises,  books and other  records  (insofar as they
     relate to the insurance  provided by this  policy),  at any time during the
     policy period or any extension thereof, and within five (5) years after the
     final  termination  of this policy,  and to verify any  statements  made or
     submitted by or on behalf of the other.

K.   ACTION AGAINST THE COMPANY

     No action shall lie against "The Company" unless, as a condition  precedent
     thereto,  there  shall have been full  compliance  with all of the terms of
     this policy,  nor until the amount of the "Named  Insured's"  obligation to
     pay shall have been  finally  determined  either by  judgment  against  the
     "Named  Insured" after actual trial or by arbitration or written  agreement
     of the "Named Insured," the claimant and "The Company."

     Any person or  organization  or the legal  representative  thereof  who has
     secured  such  judgment or  arbitration  award or written  agreement  shall
     thereafter  be entitled  to recover  under this policy to the extent of the
     insurance afforded by this policy. No person or organization shall have any
     right  under  this  policy to join "The  Company"  as a party to any action
     against the "Named Insured" to determine the "Named  Insured's"  liability,
     nor shall "The  Company" be impleaded by the "Named  Insured," or its legal
     representative.

                                   Page 4 of 5
<PAGE>
L.   AMENDMENTS

     Notice to any  agent or  knowledge  possessed  by any agent or by any other
     person shall not effect a waiver or amendment in any part of this policy or
     stop "The Company" or the "Named  Insured"  from  asserting any right under
     the terms of this policy.

M.   THE NAMED INSURED'S DUTIES IN THE EVENT OF CLAIM

     In the event of an occurrence likely to give rise to a claim hereunder, the
     "Named  Insured"  shall send to "The  Company"  written  notice  containing
     particulars  sufficient  to identify  the "Named  Insured,"  the  "Contract
     Holder" and also  reasonably  obtainable  information  with  respect to the
     claim as soon as  practicable,  but in no event  later than (30) days after
     notification  of claim or loss is  received  by the  "Named  Insured."  The
     "Named Insured" and "The Company" shall agree upon the format of reporting.

     If any suit is brought against the "Named Insured"  related to the terms of
     the  "Designated  Contract,"  then "The Company"  shall remain  informed of
     developments,  and copies of every demand,  notice, and summons received by
     the "Named  Insured"  shall be forwarded to "The Company." This shall in no
     way be construed  as a commitment  to bear those costs that are excluded by
     Section E. EXCLUSIONS.

     The "Named Insured" agrees to report to "The Company" all paid and reported
     "Contract Holder Claims" on a monthly basis,  pursuant to Section G of this
     policy.

N.   SUBROGATION

     In the event of any  payment  by "The  Company"  under  this  policy,  "The
     Company"  shall  be  subrogated  to all the  "Named  Insured's"  rights  of
     recovery  therefor  against  any  person  or  organization  and the  "Named
     Insured" shall execute and deliver  instruments  and papers and do whatever
     else is  necessary  to secure such  rights.  The "Named  Insured"  shall do
     nothing after payment of a loss to prejudice such rights.

O.   LIMITS OF INSURANCE

     This policy will reimburse the "Named  Insured" an amount not to exceed the
     fair market value of the vehicle declared in the "Designated Contracts" for
     any single claim.

     In WITNESS WHEREOF, "The Company" has caused this policy to be executed and
     attested, but this policy shall not be valid unless countersigned by a duly
     authorized representative of "The Company."

                                   Page 5 of 5
<PAGE>
SERVICE CONTRACT AMENDATORY ENDORSEMENT

ATTACHED TO AND FORMING PART OF POLICY NUMBER: 3AB 046337

     Named Insured:

MECHANICAL BREAKDOWN ADMINISTRATORS, INC., A DELAWARE CORPORATION
MECHANICAL BREAKDOWN ADMINISTRATORS, INC. OF ARIZONA

This endorsement is effective 07/ 01/ 00, and amends the terms and conditions of
Policy Number 3AB 046337

A.   It is hereby  understood  and agreed that Section C. PREMIUMS  contained in
     the policy is deleted in its entirety and is amended to read as follows:

     PREMIUMS

     The premium stated in the  Declarations is the deposit premium for coverage
     under  this  policy.  The  specific  premium  amount  for each  "Designated
     Contract" covered hereunder is as per endorsement per "Designated Contract"
     sold during the term of this policy. The "Named Insured" shall make premium
     payments  on the first day of a calendar  quarter  reduced  by the  deposit
     premium.

B.   It is hereby  understood and agreed that Section D. SETTLEMENT OF COMPANY'S
     LIABILITY contained in the policy is deleted in its entirety and is amended
     to read as follows:

     SETTLEMENT OF COMPANY'S LIABILITY

     "The Company" agrees to pay the "Named Insured" all sums,  which the "Named
     Insured"  becomes  legally  obligated  to pay as  claims  arising  from the
     reasonable and customary costs as covered by valid "Designated  Contracts,"
     subject to the terms and conditions of such "Designated  Contracts" and the
     terms and conditions of the Self Insured Retention  Endorsement attached to
     and forming part of this policy.

C.   It is hereby  understood and agreed that the Premium and Payment for "Loss"
     subparagraphs of Section G. CONDITIONS  contained in the policy are deleted
     in their entirety and are amended as follows:

     The premium for such "Designated  Contract(s)" shall be as per endorsement,
     per  "Designated  Contract(s)"  sold.  The as per  endorsement,  rate shall
     remain in effect until  modified by "The  Company,"  and  provided  that at
     least as per endorsement days prior written notice of the change shall have
     been given to the "Named Insured."

     Payment for Loss - Payment  for "Loss" may not be  required  until the Self
     Insured Retention  described in the Self Insured Retention  Endorsement has
     been  exhausted and then only after proof of "Loss" is filed and the amount
     is determined as provided in this policy.

     All other terms and conditions  remain  unchanged and are in full force and
     effect.
<PAGE>
ARIZONA CHANGES -- CANCELLATION AND NONRENEWAL

THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.

This endorsement modifies insurance provided under the following:

BOILER AND MACHINERY COVERAGE PART
BUSINESSOWNERS POLICY
COMMERCIAL CRIME COVERAGE PART*
COMMERCIAL GENERAL LIABILITY COVERAGE PART
COMMERCIAL INLAND MARINE COVERAGE PART
COMMERCIAL PROPERTY COVERAGE PART
ELECTRONICS ERRORS AND OMISSIONS LIABILITY COVERAGE PART
FARM COVERAGE PART
LIQUOR LIABILITY COVERAGE PART
POLLUTION LIABILITY COVERAGE PART
PRODUCTS-COMPLETED OPERATIONS LIABILITY COVERAGE PART

* This endorsement does not apply to coverage  provided for employee  dishonesty
(Coverage Form A) or public employee dishonesty (Coverage Forms O and P).

A.   The following is added to the  CANCELLATION  Common Policy  Condition  (and
     applies except in situations where B., below, applies):

     7.   CANCELLATION OF POLICIES IN EFFECT FOR 60 DAYS OR MORE

          If this  policy  has been in  effect  for 60 days or more,  or if this
          policy is a renewal of a policy or any coverage part we issued, we may
          cancel  this policy or any  coverage  part only for one or more of the
          following reasons:

          a.   Nonpayment of premium;

          b.   Your  conviction  of a crime arising out of acts  increasing  the
               hazard insured against;

          c.   Acts  or  omissions  by you or your  representative  constituting
               fraud or material  misrepresentation  in the  procurement of this
               policy,  in continuing this policy or in presenting a claim under
               this policy;

          d.   Substantial change in the risk assumed, except to the extent that
               we should have reasonably foreseen the change or contemplated the
               risk in writing the contract;

          e.   Substantial breach of contractual duties or conditions;

                                   Page 1 of 4
<PAGE>
          f.   Loss  of  reinsurance  applicable  to the  risk  insured  against
               resulting from  termination of treaty or facultative  reinsurance
               initiated by our reinsurer or reinsurers;

          g.   Determination  by the Director of Insurance that the continuation
               of the policy would place us in violation of the  insurance  laws
               of this state or would jeopardize our solvency; or

          h.   Acts or omissions by you or your representative  which materially
               increase the hazard insured against.

B.   If the Commercial Property Coverage Part or the Farm Property Coverage Part
     provides coverage for:

     1.   Real property which is used predominantly for residential purposes and
          consist of one through four dwelling units; and/ or

     2.   Personal  property  (except  business or farm personal  property) of a
          person residing in such real property

     the following provisions apply (instead of those provided in item A. above)
     with respect to cancellation of such coverage:

     If this policy or coverage  part has been in effect for 60 days or more, or
     is a renewal of a policy we issued,  we may cancel  only for one or more of
     the following reasons:

     a.   Nonpayment of premium;

     b.   Your  conviction of a crime arising out of acts  increasing the hazard
          insured against;

     c.   Acts or omissions by you or your representative  constituting fraud or
          material  misrepresentation  in obtaining  the policy or this coverage
          part, continuing the policy

          If we cancel this policy or any coverage  part based on one or more of
          the above  reasons,  we will mail by certified mail to the first Named
          Insured, and mail to the agent, if any, written notice of cancellation
          stating the reasons for cancellation.  We will mail this notice to the
          last mailing addresses known to us, at least:

          a.   10 days before the effective  date of  cancellation  if we cancel
               for nonpayment of premium.

          b.   60 days before the effective  date of  cancellation  if we cancel
               for  any  of  the  other  reasons.

          or this coverage  part, or presenting a claim under the policy or this
          coverage part;

     d.   Discovery of grossly  negligent acts or omissions by you substantially
          increasing any of the hazards insured against;

     e.   Substantial change in the risk assumed by us, since the policy or this
          coverage  part  was  issued,  except  to the  extent  that  we  should
          reasonably  have  foreseen  the  change  or  contemplated  the risk in
          writing the contract;

     f.   A determination  by the Director of Insurance that the continuation of
          the policy or this  coverage  part would place us in  violation of the
          insurance laws of this state; or

     g.   Your  failure  to take  reasonable  steps to  eliminate  or reduce any
          conditions in or on the insured  premises which  contributed to a loss
          in the past or will increase the probability of future losses.

                                   Page 2 of 4
<PAGE>
     If we cancel  this  policy or this  coverage  part  based on one or more of
     these  reasons,  we will mail written notice of  cancellation,  stating the
     reason(s) for cancellation,  to the first Named Insured.  We will mail this
     notice to the last mailing address known to us, at least:

     1)   10 days before the  effective  date of  cancellation  if we cancel for
          nonpayment of premium.

     2)   30 days before the effective  date of  cancellation,  if we cancel for
          any of the other reasons.

C.   The following is added and supersedes any provision to the contrary:

     NONRENEWAL

     1.   If we elect not to renew this  policy or any  coverage  part,  we will
          mail by  certified  mail to the first Named  Insured,  and mail to the
          agent, if any, written notice of nonrenewal.  We will mail this notice
          to the last  mailing  addresses  known to us at least 60 days prior to
          the expiration of this policy or any coverage part.

     2.   If notice is mailed,  proof of  mailing  will be  sufficient  proof of
          notice.

     3.   If either one of the following  occurs, we are not required to provide
          written notice of nonrenewal:

          a.   We or a company  within the same  insurance  group has offered to
               issue a renewal policy; or

          b.   You have obtained replacement coverage or agreed in writing to do
               so.

D.   If the Commercial Property Coverage Part or the Farm Property Coverage Part
     provides coverage for:

     1.   Real property which is used predominantly for residential purposes and
          consists of one through four dwelling units; and/ or

     2.   Personal  property  (except  business or farm personal  property) of a
          person residing in such real property

                                   Page 3 of 4
<PAGE>
     the following provisions apply (instead of those provided in item C. above)
     with respect to nonrenewal of such coverage:

     1.   If we elect not to renew,  we will mail written  notice of nonrenewal,
          to the first  Named  Insured.  We will  mail  this  notice to the last
          mailing  address  known to us, at least 30 days  before the end of the
          policy period. Proof of mailing will be sufficient proof of notice.

     2.   If either one of the following  occurs, we are not required to provide
          notice of nonrenewal:

          a.   You have agreed to nonrenewal; or

          b.   You have accepted replacement coverage.

     3.   If our nonrenewal is based on the condition of the premises,  you will
          be given 30 days' notice to remedy the identified  conditions.  If the
          identified  conditions are remedied,  coverage will be renewed. If the
          identified  conditions are not remedied to our satisfaction,  you will
          be given an  additional 30 days,  upon payment of premium,  to correct
          the defective condition.

E.   The following Condition is added:

     RENEWAL

     1.   If we elect to renew this  policy and the renewal is subject to any of
          the following:

          a.   Increase in premium;

          b.   Change in deductible;

          c.   Reduction in limits of insurance; or

          d.   Substantial reduction in coverage;

          we will mail or deliver  written  notice of the change(s) to the first
          Named  Insured,  at the last mailing  address known to us, at least 60
          days before the anniversary or expiration date of the policy.

     2.   If renewal is subject to any  condition  described in 1. a. through 1.
          d. above, and we fail to provide notice 60 days before the anniversary
          or expiration date of this policy, the following  procedures apply:

          a.   The present policy will remain in effect until the earlier of the
               following:

               1)   60 days after the date of mailing or delivery of the notice;
                    or

               2)   The effective date of replacement  coverage  obtained by the
                    first Named Insured.

          b.   If the first Named Insured elects not to renew any earned premium
               for the period of  extension  of the  terminated  policy  will be
               calculated pro rata at the lower of the following rates:

               1)   The rates applicable to the terminated policy; or

               2)   The rates presently in effect.

          c.   If the first  Named  Insured  accepts  the  renewal,  the premium
               increase,  if  any,  and  other  changes  are  effective  the day
               following this policy's anniversary or expiration date.

THIS ENDORSEMENT MUST BE ATTACHED TO A CHANGE  ENDORSEMENT WHEN ISSUED AFTER THE
POLICY IS WRITTEN.

Includes  copyrighted  material  of  the  Insurance  Services  Office  with  its
permission.

                                   Page 4 of 4