<PAGE>

                                                                   EXHIBIT 10.33

                               December 23, 2003


PERSONAL AND CONFIDENTIAL

William B. Cheeseman
[home address]


Dear Bill:

         As we have discussed, you and we have agreed that you are hereby
retiring from your employment with American Physicians Capital, Inc. and its
subsidiaries (collectively, the "Company") in all capacities and your position
as a director on each subsidiary board of directors on which you serve,
effective December 31, 2003, and that you will retire from the American
Physicians Capital board of directors not later than the date of the American
Physicians Capital, Inc. 2004 annual meeting of shareholders. This letter
agreement sets forth the entire understanding between us with respect to these
matters.

         1. You will be covered as an employee of the Company by your current
fringe benefits in accordance with their respective current terms and
provisions, as they may be amended from time to time as they relate to current
employees. These benefits will continue until December 31, 2003.

         2. Your severance from the Company will be considered a termination by
mutual written agreement under Section 5(E) of your Employment Agreement, dated
October 27, 1999 (the "Employment Agreement"). As such, your termination is
without "cause" as defined under Section 5(C) and Section 8(C) of the Employment
Agreement. The parties' obligations under Sections 6 through 21 of the
Employment Agreement, however, shall survive the termination of your employment.
Disputes arising under this letter agreement shall be resolved in accordance
with the provisions of Section 10 of the Employment Agreement.

         3. The parties agree that your termination under this letter agreement
should be considered a termination by mutual agreement. Pursuant to Section
1.3.6 of the Stock Purchase Agreement, dated August 31, 1999, by and among
Mutual Insurance Corporation of America, William B. Cheeseman and William J.
Gaugier (the "Stock Purchase Agreement"), the parties agree to accelerate all
annual payments calculated pursuant to the terms of the Stock Purchase
Agreement, and that this amount will be paid in full on January 2, 2004. You
agree that this payment shall constitute payment in full for all amounts due
under the Stock Purchase Agreement, and the parties agree that no provisions of
the Stock Purchase Agreement shall survive this Letter Agreement.

         4. On or before January 2, 2004, the Company will pay to you an amount
equal to $1,250,000 (two times your annual base salary for 2002) in
consideration of your covenant not to compete, as provided in and required by
Section 7 of the Employment Agreement (the "Non-Compete Payment").

         5. You hereby confirm your obligations under Section 7 of the
Employment Agreement. Effective on the Contract Date (as defined in paragraph 8
of this letter agreement), the Company acknowledges that the provisions of
Section 4.8 of the Stock Purchase Agreement are no longer applicable, and that
your employment with SCW Agency Group, Inc. ("SCW") (including without
limitation your service as a director, officer, or employee of SCW) will not be
considered a violation of Section 7 of the Employment Agreement as long as SCW
does not engage in a business or activity that

<PAGE>

competes with the Company's professional liability insurance business, except as
may be permitted by mutual agreement, or SCW's agreements with American
Physicians Assurance Corporation, and provided that SCW does not interfere or
attempt to interfere with any employment relationship between the Company and
any person employed now or in the future. Prior to the Contract Date, the
parties agree that you may be involved in negotiations and discussions regarding
the contractual relationship between SCW and the Company without violating
Section 7 of the Employment Agreement or Section 4.8 of the Stock Purchase
Agreement.

         6. On or before December 31, 2003, you and the Company will enter into
a one year consulting agreement on mutually acceptable terms, which will
include, without limitation, (a) payment by the Company to you of $10,000 per
month during the term of the consulting agreement and (b) your provision of
consulting services at the request of the Company. A copy of the Consulting
Agreement is attached hereto. The Company may terminate this consulting
agreement in accordance with the terms of paragraph 8.

         7. You currently have 360,000 options to purchase American Physicians
Capital stock, of which 143,400 have not yet vested, and an additional 32,200
shares of restricted stock, of which 17,600 shares are still restricted, all of
which have been granted to you pursuant to the Company's Stock Compensation Plan
(the "Plan"). The Compensation Committee of the American Physicians Capital
Board of Directors, pursuant to the authority granted to them by the Board of
Directors under the Plan, has resolved to vest your restricted stock effective
upon the termination of your employment. The Compensation Committee has also
resolved to interpret the Plan (including the option agreements with you granted
under the Plan) so that "employment" or "employment (or services)" as used in
Article V of the Plan and in the vesting provisions of any grant made under the
Plan shall be construed to include services to the Company as a consultant so
that the retirement as an employee of a holder of options who continues as a
consultant of the Company will not, by itself, result in the termination or
forfeiture of the options or unvested restricted shares, or the cessation of
vesting of the options or restricted shares.

         8. The parties are currently negotiating the terms of an amended Agency
Agreement between SCW and the Company and/or its subsidiaries (the "SCW
Contract"). The parties agree to use their best efforts to complete the
negotiation and execution of the SCW Contract as soon as practicable. For
purposes of this letter agreement, the "Contract Date" shall be the date on
which both SCW and the Company have approved the SCW Contract. In the event that
the SCW Contract has not been approved by both SCW and the Company on or before
January 21, 2004, then the Company shall have the unilateral right to terminate
the consulting agreement provided for in paragraph 5 immediately.

         9. All Company credit cards, final expense accounts and Company
property should be returned to the Company no later than December 31, 2003. All
copies of Company documents, reports, letters, manuals and other materials
(excepting only non-Company personal letters and memorabilia) in your possession
should also be turned over to the Company by December 31, 2003.

         10. Except for the specific terms and provisions of this letter
agreement (including without limitation the provisions in other agreements that
are stated above as surviving) and the consulting agreement that is contemplated
between you and the Company, the parties to this letter agreement, on behalf of
themselves and their heirs, executors, administrators and assigns, do hereby
fully and completely release and forever discharge each other party to this
letter agreement, and each of their current and former affiliates, predecessors,
successors, employees, shareholders, directors, officers, insurers, attorneys,
representatives, and assigns from all claims, actions, liabilities and losses of
any kind whatsoever known or unknown, and the consequences thereof, which you
may now have or may ever have against them arising on or prior to the date of
this letter agreement, including without limitation, all claims, actions,
liabilities and losses arising from or in any way connected with your employment
or

                                       2
<PAGE>

termination thereof, whether based on tort, contract (express or implied), or
any federal, state or local law or regulation (including, without limitation,
age discrimination under The Age Discrimination In Employment Act of 1967, as
amended), ("claims"); provided, however, that nothing in this paragraph shall be
deemed to release or discharge the following claims by either party:

         (a) claims that you may have for indemnification under the articles of
incorporation and bylaws of American Physicians Capital and its subsidiaries or
claims you may have under any insurance policy maintained by the Company which
covers directors and officers. Claims for your indemnification shall be granted
to the extent that the Company can do so lawfully under the Articles and Bylaws
of the Company;

         (b) liability for the amount of a financial benefit received by a
director to which he or she is not entitled;

         (c) liability for intentional infliction of harm on the Company or its
shareholders as a director;

         (d) liability for a violation of Section 551 of the Michigan Business
Corporation Act as a director; or

         (e) liability for an intentional criminal act as a director.

         Further, the parties expressly waive the provisions of any federal,
state or local law or any case law providing in substance that releases shall
not extend to claims unknown to the person executing such release.

         12. Other than to enforce this letter agreement, you agree not to
initiate or cause to be initiated against the Company, its subsidiaries or their
respective directors, officers, employees and agents any compliance review,
investigation, or proceeding of any kind, or participate in the same,
individually or as a representative or member of a class (except as required by
law), under any contract (express or implied), tort, or any federal, state or
local law or regulation.

         13. You understand that you do not waive rights or claims that may
arise after the date this letter agreement is executed. You understand,
acknowledge and agree that you are advised to consult with an attorney prior to
executing this letter agreement. You further understand that you have been given
21 days (or more) within which to consider this letter agreement or, if you have
signed this agreement before 21 days has elapsed, you have done so voluntarily
and knowingly. Nothing in this letter agreement is intended to limit your rights
under qualified employee benefit plans.

         14. You understand and agree that you may revoke this letter agreement
for a period of seven calendar days following the execution of the letter
agreement. The letter agreement is not effective until this revocation period
has expired. You understand that any revocation, to be effective, must be in
writing and either (a) postmarked within seven days of execution of this letter
agreement and addressed to Frank Freund, the Chief Financial Officer of the
Company, or (b) hand delivered to Frank Freund within seven days of execution of
this letter agreement. You understand that if revocation is made by mail,
mailing by certified mail, return receipt requested, is recommended to show
proof of mailing.

         15. This letter agreement may be executed in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement. Signatures to
this letter agreement made by a facsimile copy shall have the same force and
effect as original signatures.



                                       3
<PAGE>


         If you understand and agree to the foregoing terms, please execute the
letter in the space below and return it to me.

                                       Very truly yours,

                                       AMERICAN PHYSICIANS CAPITAL, INC.


                                       By:      /s/ Tomas R. Berglund, M.D.
                                           ---------------------------------
                                       Its:     Chairman of the Board
                                           --------------------------

Read, understood, accepted
and agreed this 23 day of
December, 2003.


/s/ William B. Cheeseman
------------------------
William B. Cheeseman




                                       4