exv10w212








Exhibit 10.212







NOVATION AND AMENDMENT AGREEMENT



This Novation and Amendment Agreement (the “Agreement”), dated as of January 1, 2010 (the
“Effective Date”), is made by and between Peerless Insurance Company (“Peerless”), Liberty Mutual
Insurance Company (“Liberty”) and Bridgefield Employers Insurance Company (“Bridgefield”).
Capitalized terms used herein but not defined shall have the meaning ascribed thereto in the
Reinsurance Agreement (as hereinafter defined).




RECITALS



WHEREAS, Peerless, Liberty and Bridgefield entered into that certain Novation and Amendment
Agreement, dated as of January 1, 2008, which novated and amended that certain Reinsurance
Agreement, dated as of January 1, 1999 (the “Reinsurance Agreement”);



WHEREAS, the parties desire to substitute Liberty for Peerless as the “Reinsurer” under the
Reinsurance Agreement;



WHEREAS, Bridgefield consents to the novation set forth herein; and



WHEREAS, subject to such novation, Liberty and Bridgefield desire to amend the Reinsurance
Agreement as provided herein.



NOW,
THEREFORE, in consideration of the  mutual promises and covenants contained herein and for
other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:



1. Effective as of the Effective Date:



(a) Liberty shall replace Peerless for all purposes under the Reinsurance Agreement as the
original Reinsurer.



(b) Liberty shall assume all of the past, present and future obligations of Peerless which arise
out of, relate to, or are in any way connected with, the Reinsurance Agreement, whether known or
unknown, reported or unreported.



(c) Liberty
shall be substituted for Peerless, in Peerless’s name, place and stead, as the
“Reinsurer” under the Reinsurance Agreement so as to effect a complete novation of the Reinsurance
Agreement from Peerless to Liberty, and Peerless shall be simultaneously released from any and all
liabilities or obligations thereunder.



(d) Liberty shall be entitled to all of the past, present and future rights of Peerless under the
Reinsurance Agreement, and shall be entitled to enforce all such rights in the name, place and
stead of Peerless.



(e) The reference to “Peerless Insurance Company, a New Hampshire stock insurance company (the
“Reinsurer”)” in the first paragraph of the Reinsurance Agreement, as amended, is deleted and
replaced with “Liberty Mutual Insurance Company, a Massachusetts stock insurance company (the
“Reinsurer”)”.





1









 







(f) The address for notices to the Reinsurer set forth in Section 12.1 of the Reinsurance
Agreement is deleted in its entirety and replaced with the following:



Liberty Mutual Insurance Company 

175 Berkeley Street 

Boston, Massachusetts
02117-0140 

Attention: President



2. Except as expressly set forth herein and amended hereby, the Reinsurance Agreement shall remain
in full force and effect.



3. Bridgefield releases and discharges Peerless from all obligations with respect to the
Reinsurance Agreement and consents that Liberty shall perform
obligations under the  Reinsurance
Agreement and be bound by its terms in all respects as if Liberty were named as a party to the
Reinsurance Agreement in place of Peerless. Bridgefield affirms its duty to perform its obligations
under the Reinsurance Agreement and to be bound by its terms in all respects with Liberty
substituted as a party to the  Reinsurance Agreement in place of Peerless.



4. This
Agreement shall be governed by and construed in accordance with the
laws of the  Commonwealth
of Massachusetts. Any dispute, controversy, or claim arising out of or relating to this Agreement,
or the breach, termination, or invalidity thereof, shall be governed by the “Arbitration”
provisions of the Reinsurance Agreement.





2









 







IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the Effective Date.




	 	 	 	 	 

	LIBERTY MUTUAL INSURANCE COMPANY	 	 
	 
	 	 	 	 
	By: 

Title:

	 	/s/ John D. Doyle
 

VP Comptroller
	 	 
	 
	 	 	 	 
	BRIDGEFIELD
EMPLOYERS INSURANCE COMPANY	 	 
	 
	 	 	 	 
	By: 

Title:

	 	/s/ Michael J. Fallon
 

Chief Financial Officer
	 	 
	 
	 	 	 	 
	PEERLESS INSURANCE COMPANY	 	 
	 
	 	 	 	 
	By: 

Title:

	 	/s/ Michael J. Fallon
 

Chief Financial Officer
	 	 






3









 






Execution Copy




WORKERS’ COMPENSATION EXCESS OF LOSS

REINSURANCE ADDENDUM 1

NO. 0100200-SUM08



TO NOVATION AND AMENDMENT AGREEMENTS



EFFECTIVE JANUARY 1, 2010



between



BRIDGEFIELD CASUALTY INSURANCE COMPANY

BRIDGEFIELD EMPLOYERS INSURANCE COMPANY

Lakeland, Florida



(hereinafter referred to as the “Company”)



and



PEERLESS INSURANCE COMPANY

Keene, New Hampshire



(hereinafter referred to as the “Subscribing Reinsurer”)



	 	 	 

	Effective: January 1, 2010

	 	Workers’ Compensation Excess of Loss
	 

	 	Reinsurance Addendum 1
	 

	 	No. 0100200-SUM08






 









 






WORKERS’ COMPENSATION EXCESS OF LOSS REINSURANCE ADDENDUM 1

NO. 0100200-SUM08



	 	 	 	 	 	 	 	 	 
	CONTENTS	 	ARTICLE	 	PAGE
	ACCESS TO RECORDS
	 	 	14	 	 	 	8	 
	AMENDMENTS
	 	 	15	 	 	 	9	 
	ARBITRATION
	 	 	16	 	 	 	9	 
	ASSIGNMENT, NOVATION or TRANSFER
	 	 	17	 	 	 	11	 
	BUSINESS COVERED
	 	 	1	 	 	 	1	 
	CONFIDENTIALITY CLAUSE
	 	 	18	 	 	 	12	 
	CURRENCY
	 	 	19	 	 	 	13	 
	DIVIDENDS AND TAXES
	 	 	20	 	 	 	13	 
	EFFECTIVE DATE AND TERMINATION
	 	 	2	 	 	 	2	 
	ENTIRE AGREEMENT
	 	 	21	 	 	 	13	 
	ERRORS OR OMISSIONS
	 	 	22	 	 	 	14	 
	EXCLUSIONS
	 	 	9	 	 	 	4	 
	EXTRA CONTRACTUAL OBLIGATIONS
	 	 	8	 	 	 	4	 
	FEDERAL EXCISE TAX
	 	 	23	 	 	 	14	 
	FEDERAL TERRORISM EXCESS RECOVERY CLAUSE
	 	 	24	 	 	 	14	 
	GOVERNING LAW
	 	 	25	 	 	 	15	 
	INSOLVENCY
	 	 	26	 	 	 	15	 
	INTEREST PENALTY
	 	 	27	 	 	 	16	 
	LIMIT AND RETENTION
	 	 	4	 	 	 	2	 
	LOSS ADJUSTMENTS AND SETTLEMENTS
	 	 	28	 	 	 	16	 
	LOSS IN EXCESS OF POLICY LIMITS
	 	 	7	 	 	 	3	 
	LOSS OCCURRENCE
	 	 	11	 	 	 	6	 
	MEDIATION
	 	 	29	 	 	 	17	 
	OFFSET
	 	 	30	 	 	 	18	 
	REINSURANCE CLAIMS OBLIGATIONS
	 	 	31	 	 	 	18	 
	REINSURANCE PREMIUM
	 	 	12	 	 	 	7	 
	REPORTS AND REMITTANCES
	 	 	13	 	 	 	7	 
	SALVAGE AND SUBROGATION
	 	 	32I	 	 	 	18	 
	SERVICE OF SUIT
	 	 	33	 	 	 	19	 
	SEVERABILITY
	 	 	34	 	 	 	19	 
	SPECIAL ACCEPTANCES
	 	 	10	 	 	 	6	 
	SPECIAL CONDITIONS
	 	 	35	 	 	 	20	 
	TERRITORY
	 	 	3	 	 	 	2	 
	THIRD PARTIES
	 	 	36	 	 	 	23	 
	ULTIMATE NET LOSS
	 	 	6	 	 	 	2	 
	UNAUTHORIZED REINSURENCE
	 	 	37	 	 	 	23	 
	WARRANTIES
	 	 	5	 	 	 	2	 
	ATTACHMENTS:
	 	 	 	 	 	 	 	 
	EXHIBIT A — FIRST EXCESS OF LOSS
	 	 	 	 	 	 	 	 
	EXHIBIT B — SECOND EXCESS OF LOSS
	 	 	 	 	 	 	 	 
	EXHIBIT C
— THIRD EXCESS OF LOSS
	 	 	 	 	 	 	 	 
	EXHIBIT D — FOURTH EXCESS OF LOSS
	 	 	 	 	 	 	 	 






	 	 	 

	Effective: January 1, 2010

	 	Workers’ Compensation Excess of Loss
	 

	 	Reinsurance Addendum 1
	 

	 	No. 0100200-SUM08






 









 






INSOLVENCY FUNDS EXCLUSION CLAUSE

NUCLEAR INCIDENT EXCLUSION CLAUSE — LIABILITY — REINSURANCE — U.S.A.

NUCLEAR INCIDENT EXCLUSION CLAUSE — LIABILITY — REINSURANCE — CANADA.

NUCLEAR INCIDENT EXCLUSION CLAUSE — REINSURANCE — NO. 4.





	 	 	 

	Effective: January 1, 2010

	 	Workers’ Compensation Excess of Loss
	 

	 	Reinsurance Addendum 1
	 

	 	No. 0100200-SUM08





 









 





WORKER’S COMPENSATION EXCESS OF LOSS

REINSURANCE ADDENDUM 1

NO. 0100200-SUM08




(hereinafter referred to as the “Contract”)



between



BRIDGEFIELD CASUALTY INSURANCE COMPANY

BRIDGEFIELD EMPLOYERS INSURANCE COMPANY

Lakeland, Florida



(hereinafter referred to as the “Company”)



and



PEERLESS INSURANCE COMPANY

Keene, New Hampshire


(hereinafter referred to as the “Subscribing Reinsurer”)


WHEREAS, the Company, the Subscribing Reinsurer and Liberty Mutual Insurance Company entered into
Novation and Amendment Agreements (“Novations”) effective January 1, 2010; and



WHEREAS, the Company, the Subscribing Reinsurer and Liberty Mutual Insurance Company did not intend
the business covered by this Contract to be subject to the Novations; and



WHEREAS, at all relevant times the Company, the Subscribing Reinsurer and Liberty Mutual Insurance
Company have acted in accordance with such intent and the terms and provisions of this Contract.



NOW, THEREFORE, IN CONSIDERATION, in consideration of the mutual promises and covenants contained
herein and for other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Company, the Subscribing Reinsurer and Liberty Mutual Insurance Company
agrees as follows:




ARTICLE 1 — BUSINESS COVERED





	A.	 	This Contract shall indemnify the Company on an excess of loss basis in respect of the
Ultimate
Net Loss as a  result of losses for Policies in force at 12:01 a.m. Local Standard Time,
January 1,
2008, and new and renewal Policies becoming effective on or after said date, subject to the
terms
and conditions contained herein.
	 
	B.	 	This Contract is solely between the Company and the Subscribing Reinsurer, and nothing
contained in this Contract shall create any obligations or establish any rights against the
Subscribing Reinsurer in favor of any person or entity not a party hereto.
	 
	C.	 	The term “Policies” shall mean each of the binders, policies, endorsements and contracts of
insurance or reinsurance on the business covered hereunder.
	 
	D.	 	Under this Contract, the indemnity for reinsured loss applies only to Workers Compensation
and
Employers Liability business written by the Company, except as may be excluded under Article
IX — Exclusions of this Contract.





	 	 	 	 	 

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ARTICLE 2 — EFFECTIVE DATE AND TERMINATION





	A.	 	This Contract shall is effective with respect to losses occurring on or between 12:01 a.m.,
Local
Standard Time, January 1, 2008 and 12:01 a.m. Local Standard Time, January 1, 2009.
	 
	B.	 	The Subscribing Reinsurer shall have no liability for losses occurring subsequent to 12:01
a.m.
Local Standard Time, January 1, 2009, pursuant to this Addendum.
	 
	C.	 	If a loss covered hereunder is in progress at 12:01 a.m. Local Standard Time, January 1,
2009, it
is agreed that, subject to the other conditions of this Contract, the Subscribing Reinsurer
shall
indemnify the Company as if the entire loss had occurred prior to 12:01 a.m. Local Standard
Time, January 1, 2009.





ARTICLE 3 — TERRITORY (LM-02200-2005.06.02-A)



The territorial limits of this Contract shall be identical with those of the Policies.




ARTICLE 4 — LIMIT AND RETENTION





	A.	 	The limits and retentions provided under this Contract are as set forth in the Exhibits
A., B., C. and
D. attached hereto and made a part of this Contract.
	 
	B.	 	The Company’s retention and the Subscribing Reinsurer’s limit of liability for each Loss
Occurrence, set forth in Section I of the Exhibits A., B., C. and D. attached hereto,
shall apply
irrespective of the number of Policies affected or number of hazards in one Policy, except
as
provided for in Article V — Warranties.
	 
	C.	 	Reinsurance of the Company’s retention, set forth in each Exhibit, shall not be deducted
in
arriving at the Ultimate Net Loss herein.





ARTICLE 5 — WARRANTIES



Notwithstanding any other provision of this Contract, the maximum amount included in the Ultimate
Net Loss under this Contract shall be:





	A.	 	$5,000,000 each Life as respects Workers’ Compensation business;






	B.	 	$2,000,000 Employers Liability coverage limit each Policy.





ARTICLE
6 — ULTIMATE NET LOSS (LM-02400-2006.11.08-A)





	A.	 	The term “Ultimate Net Loss” as used in this Contract shall mean: (1) all amounts paid
or due and payable by the Company in the investigation, appraisal, adjustment,
settlement, litigation, defense or appeal, or payment of claims or judgments arising from
each and every Loss Occurrence for which the Company is or may be found liable under the
Policies, less salvages and subrogation recoveries and amounts recovered or recoverable
under pooling agreements or other reinsurances, whether collectible or not. “Ultimate Net
Loss” includes, but is not limited to, the following paid or due and payable amounts:
loss adjustment expenses, defense costs, court costs, supersedeas and appeal bond costs,
Post or Prejudgment Interest and Delayed Damages, Attorneys Fees and Expenses,
Claim-Specific Declaratory Judgment





	 	 	 	 	 

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	 	 	Expenses, a pro rata share of salaries and expenses of the Company’s or its
affiliates’ field employees according to the time occupied in adjusting, defending,
and settling such loss, and expenses of all of the Company’s or its affiliates’
officers and employees incurred in connection with the loss; (except that salaries of
officers and employees engaged in general management and located in the home office of
the Company or its affiliates and any office expense of the Company or its affiliates
shall not be included) and all other costs of investigation or litigation, (2) Extra
Contractual Obligations (as defined in the Extra Contractual Obligations Article), and
(3) Loss in excess of original Policy limits (as described in the Loss in Excess of
Original Policy Limits Article).
	 
	B.	 	“Claim-Specific Declaratory Judgment Expenses” shall be defined as fees and expenses
incurred in actions brought to determine whether the Company has a defense and/or
indemnification obligation for individual claims presented against Policies covered
under this
Contract. Any Claim-Specific Declaratory Judgment Expense shall be deemed to have been
fully incurred on the same date as the insured’s original loss (if any) giving rise to
the action,
unless otherwise provided for within this Contract.
	 
	C.	 	The term “Attorneys’ Fees and Expenses” as used above, means the fees and expenses of
attorneys, including the fees and expenses of the Company’s or its affiliate’s in-house
attorneys providing legal advice on coverage questions and/or defending the Company in
coverage litigation, and fees and expenses of staff counsel in the defense of
policyholder
claims. Such Attorneys’ Fees and Expenses for in-house attorneys and staff counsel
shall be
calculated at the rate for such attorneys plus the expenses incurred by such attorneys,
but
excluding office expenses of the Company and its affiliates and salaries and expenses
of their
other employees.
	 
	D.	 	“Post or Prejudgment Interest or Delayed Damages” shall mean interest or damages added
to a settlement, verdict, award, or judgment based on the period of time prior to or
after the
settlement, verdict, award, or judgment whether or not made part of the settlement,
verdict,
award, or judgment.
	 
	E.	 	Nothing in this Article shall be construed to mean that losses under this Contract are not
recoverable until the Company’s Ultimate Net Loss has been ascertained. In the event a
verdict
or judgment is reduced by an appeal or a settlement subsequent to the entry of the
judgment,
thereby resulting in an ultimate saving on such verdict or judgment, or in the event a
judgment is
reversed outright, the loss adjustment expense incurred in securing such final reduction
or
reversal shall be prorated between the Reinsurers and the Company in the proportion that
each
benefits from such reduction or reversal, and the expenses incurred up to the time of the
original
verdict or judgment shall be added to the Ultimate Net Loss. In the event there is no
reduction or
reversal of a verdict or judgment, the loss adjustment expense incurred in attempting to
secure
such reduction or reversal shall be added to the Ultimate Net Loss.





ARTICLE 7 — LOSS IN EXCESS OF POLICY LIMITS (LM-01600-2005.08.24-A)





	A.	 	This Contract shall protect the Company within the limits hereof, for 90% of any Loss in
excess of
the Company’s original Policy limit where Loss in excess of the limit has been incurred
because of
a failure by the Company or by a third-party claims administrator to settle within the
Policy limit or
by reason of alleged or actual negligence, fraud, or bad faith in rejecting an offer of
settlement or
in defending or prosecuting litigation, including appeals, arbitration, or any alternative
dispute
resolution or settlement discussions involving any claim.
	 
	B.	 	However, the above paragraph shall not apply where the Loss has been incurred due to the
fraud
of a member of the Board of Directors or a Corporate Officer of the Company acting
individually or





	 	 	 	 	 

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	 	 	collectively or in collusion with any individual or corporation or any other organization
or party involved in the presentation, defense or settlement of any claim covered
hereunder.
	 
	C.	 	With regard to excess of Policy limits, the word “Loss” shall mean any amounts for which
the Company would have been contractually liable to pay had it not been for the limit of the
original Policy. The date on which any Loss in excess of the Company’s original Policy limit
is incurred by the Company shall be deemed, in all circumstances, to be the date of the
original Loss Occurrence, accident, casualty, disaster, or Loss, as selected by the Company.





ARTICLE 8 — EXTRA CONTRACTUAL OBLIGATIONS (LM-00900-2007.03.28-A)





	A.	 	This Contract shall protect the Company within the limits hereof for 90% of Extra
Contractual
Obligations. “Extra Contractual Obligations” are defined as any actual or potential
liabilities not
covered under any other provision of this Contract, arising from or relating to any
alleged or actual
act, error or omission, whether intentional or otherwise, or from any alleged or actual
negligence,
tortious conduct, reckless conduct, violations of statutes or regulations governing the
conduct of
insurance companies and/or claims adjusters, or bad faith in connection with: (i) the
handling of
any claim under the Policies covered by this Contract, such liabilities arising because
of, but not
limited to, the following: failure by the Company or by a third party claims administrator
to settle
within the Policy limit, or by reason of alleged or actual negligence, fraud or bad faith
of the
Company or by a third party claims administrator in rejecting an offer of settlement, or
in
defending or prosecuting litigation, including appeals, arbitration, or any alternative
dispute
resolution or settlement discussions involving any claim; or (ii) the providing of or
failure to provide
any loss control or loss prevention services in connection with any Policy hereunder.
	 
	B.	 	The date on which any Extra Contractual Obligation is incurred shall be deemed, in all
circumstances, to be the date of the original Loss Occurrence, accident, casualty,
disaster, or
loss, as selected by the Company.
	 
	C.	 	However, this Article shall not apply where the Loss has been incurred due to the fraud of
a
member of the Board of Directors or a corporate officer of the Company acting individually
or
collectively or in collusion with any individual or corporation or any other organization
or party
involved in the presentation, defense or settlement of any claim covered hereunder.





ARTICLE 9 — EXCLUSIONS



THIS AGREEMENT DOES NOT COVER:





	A.	 	THE FOLLOWING GENERAL CATEGORIES






	 	1.	 	Assumed reinsurance other than inter-company agreements.
	 
	 	2.	 	Loss or damage caused directly or indirectly by: (a) enemy attack by armed
forces including action taken by military, naval or air forces in resisting an actual
or an immediately impending enemy attack; (b) invasion; (c) revolution; (d)
bombardment; (e) hostilities; (f) acts of foreign enemies; (g) civil war; (h)
rebellion; (i) insurrection; (j) military or usurped power;
(k) martial law; (l) intervention; or (m) confiscation by order of any government or public authority.
However this exclusion would not apply to loss or damage covered under a standard
form of Policy containing a standard war exclusion clause.
	 
	 	3.	 	Insolvency Funds as per the attached Insolvency Funds Exclusion Clause,
which is made part of this Contract.





	 	 	 	 	 

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	 	4.	 	Business derived from any Pool, Association, including Joint Underwriting
Association, Syndicate, Exchange, Plan, Fund or other facility directly as a member,
subscriber or participant, or indirectly by way of reinsurance or assessments;
provided this exclusion shall not apply to Automobile or Workers Compensation
assigned risks which may be currently or subsequently covered hereunder.
	 
	 	5.	 	Pollution Liability, to the extent excluded in the original Policies and
endorsements except when a judicial entity invalidates the Policies’ exclusion or in
any jurisdiction whose regulatory authorities have prohibited the exclusion.
	 
	 	6.	 	Asbestos liability, to the extent excluded in the original Policies and
endorsements except when a judicial entity invalidates the Policies’ exclusion or in
any jurisdiction whose regulatory authorities have prohibited the exclusion.
	 
	 	7.	 	Nuclear Risks as defined in the Nuclear Incident Exclusion Clauses which are
attached and made part of this Contract:






	 	a.	 	Nuclear Incident Exclusion Clause — Liability — Reinsurance — U.S.A.
	 
	 	b.	 	Nuclear Incident Exclusion Clause — Liability — Reinsurance — Canada.
	 
	 	c.	 	Nuclear Incident Exclusion Clause — Reinsurance — No. 4.






	B.	 	THE FOLLOWING RISKS AS RESPECTS WORKERS COMPENSATION AND EMPLOYERS
LIABILITY:






	 	1.	 	Construction of airports, bridges unless the span is less than 75 feet
between pillars, tunnels, dams and reservoirs.
	 
	 	2.	 	Gas utilities.
	 
	 	3.	 	Gas and oil refineries. This exclusion is not to apply to the construction
and maintenance of such exposures which shall include, but not be limited to,
landscaping, road construction, excavation and water hauling, plumbing and electrical
services.
	 
	 	4.	 	Garbage and refuse dumps.
	 
	 	5.	 	The following classes of contractors;






	 	a.	 	blasting contractors (whose primary business operation is blasting for others);
	 
	 	b.	 	insulation contractors, except insulation contractors
installing fiberglass or
Styrofoam insulation.






	 	6.	 	Underground mining operations.
	 
	 	7.	 	Professional sports teams.
	 
	 	8.	 	Airline crews.
	 
	 	9.	 	Business in which the principal operations are classified as;






	 	a.	 	aviation;
	 
	 	b.	 	manufacture, transportation, handling or storage of fireworks,
fuses and other
substances made for the express purpose of exploding;
	 
	 	c.	 	operation of any carrier on rails; however, this exclusion does
not apply to
Railroad Protective Liability forms.






	 	10.	 	Liability under the Jones Act and Maritime Employers Liability Act.






	C.	 	THE FOLLOWING RISKS AS RESPECTS TERRORISM
	 
	 	 	Terrorism losses arising from Airports, Bridges, Government Buildings, Nuclear Facilities,
Office Buildings over 25 stories, Security Services, Stadiums and Tunnels, Nuclear,
Biological and Chemical exposures, Explosive Manufacturing risks, Fertilizer
mixing plants, Railroads,





	 	 	 	 	 

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	 	 	Amusement/Theme parks with greater than 5,000 person capacity, Distribution
and manufacturing of weapons/munitions.
	 
	D.	 	Policies issued to insureds regularly engaged in other operations, a minor part of
which involves
classes excluded under this Article, shall not be excluded, however this shall not apply
to items
identified as excluded in paragraph A.2. – A.7 above. The Company shall be the sole judge
of
what is “incidental”.
	 
	E.	 	In the event the Company is inadvertently bound on any Risk which is excluded under
this
Contract, the reinsurance provided under this Contract shall apply to such Risk until
discovery by
the Company within its Home Office of the existence of such Risk and for 45 days
thereafter or for
the period required by statutes, and shall then cease unless within such period, the
Company has
received from the Subscribing Reinsurer written notice of its approval of such Risk.
However this
shall not apply to inadvertently bound Risks identified as excluded in paragraph A.2 –
A.7 above.
	 
	F.	 	Notwithstanding exclusions listed in A.5 and A.6 above, if a competent court has
rendered
adverse judgment interpreting an ISO or Company exclusion wording, the Subscribing
Reinsurer
will cover that portion of the judgment regarding losses due to pollution subject to all
terms and
conditions of this Contract.
	 
	G.	 	The Company and the Subscribing Reinsurer have agreed on the Company’s Underwriting
Guidelines as respects Policies covered under this Contract.





ARTICLE 10 — SPECIAL ACCEPTANCES



It is understood and agreed the Company may submit Risks excluded above to the Subscribing
Reinsurer for coverage hereunder and, if specifically accepted by the Subscribing Reinsurer,
such Risks shall then be covered under the terms of this Contract, except as such terms shall
be modified by such acceptance. A Subscribing Reinsurer’s failure to respond within 5 full
business days shall be deemed approval of a risk submitted for special acceptance. Once a Risk
has been accepted under the provisions of this Article, it will automatically be included at
renewal unless there have been material changes to the Risk, in which case the Risk will be
resubmitted. The Company submitted and received approval for the following risk to be covered:




Insured: Pece of Mind Disposal, Inc.

Policy No.: 0830-34965

Policy Effective Dates: 08/27/08 – 08/31/09 and 08/31/09 – 08/31/10




ARTICLE 11 — LOSS OCCURRENCE



The term “Loss Occurrence” shall mean any accident, disaster, casualty or happening or series
of accidents, disasters, casualties or happenings arising out of or following the same cause or
a series of similar causes. The term “Loss Occurrence” shall be held to include:





	A.	 	As respects an occupational or other disease or cumulative injury under Workers
Compensation and Employers Liability, each case of an employee contracting any disease for
which the Company may be liable shall be considered a separate and distinct occurrence and
the date of each occurrence shall be deemed to be as follows:






	 	1.	 	If the case is compensable under the Workers Compensation Law or any Occupational
Disease Compensation Act, the date of the beginning of the disability for which
compensation is payable;





	 	 	 	 	 

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	 	2.	 	If the case is not compensable under the Workers Compensation Law or any
Occupational Disease Compensation Act, the date of the disability due to said disease
actually began;
	 
	 	3.	 	Where claim is made after employment has ceased, then the date of the
cessation of employment shall be deemed to be the date of disability;
	 
	 	4.	 	Notwithstanding the foregoing, in the incidence of a sudden catastrophic
event not exceeding 72 hours in duration including traumatic injury or death, all
losses to all employers shall be deemed a Loss Occurrence.





ARTICLE 12 — REINSURANCE PREMIUM



The rates set forth in Section 4 of the attached Exhibits A., B., C. and D., shall be applied to
the Subject Earned Premium for the Business Covered hereunder, as stated in Paragraph D. of
Article I – Business Covered.





	A.	 	The term “ Earned Premium” as used herein is equal to the sum of the Net Premiums Written
on
the business covered hereunder during the period under consideration, plus the unearned
premium reserve as respects premiums in force at the beginning of such period, less the
unearned premium reserve as respects premiums in force at the end of the period, said
unearned
premium is to be calculated on a monthly pro rata basis.
	 
	B.	 	The term “Net Premiums Written” shall mean gross premiums written less returns, allowances
and reinsurances which inure to the benefit of the Subscribing Reinsurer.





ARTICLE 13 — REPORTS AND REMITTANCES





	A.	 	The Company shall furnish the Subscribing Reinsurer with all necessary data respecting
premiums and losses for as long as one of the parties hereto has a claim against the other
arising
from this Contract.
	 
	B.	 	Reinsurance Premiums are settled between the Company and the Subscribing Reinsurer, no
less
frequently than on a quarterly basis.
	 
	 	 	For purposes of calculating the minimum and deposit premium paid by each company
(Bridgefield Casualty Insurance Company and Bridgefield Employers Insurance Company), the
minimum and deposit premium was multiplied by the ratio that the Subject Earned Premium of
each bore to the total Subject Earned Premium of the Company. The Company submitted
finalized accounts to the Subscribing Reinsurer in 2009, summarizing the actual Subject
Earned Premium for the previous year. The difference between the Annual Deposit premium
and the actual Subject Earned Premium was settled to/from the Company. However, the annual
adjusted premium was not less than the Annual Minimum premium for each layer, set forth
below:





	 	 	 	 	 	 	 	 	 
	 	 	Annual	 	Annual
	Layer	 	Deposit	 	Minimum
	First Layer
	 	$	7,012,000	 	 	$	6,310,800	 
	Second Layer
	 	$	5,779,000	 	 	$	5,201,100	 
	Third Layer
	 	$	2,023,000	 	 	$	1,820,700	 
	Fourth Laver
	 	$	1,015,000	 	 	$	913,500	 
	 
	Total
	 	$	15,829,000	 	 	$	14,246,100	 






	 	 	 	 	 

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	C.	 	The Subscribing Reinsurer has made payment to the Company for its portion of Loss and Loss
Adjustment Expense obligations presented prior to 12:01 a.m. Local Standard time, January
1, 2009 and shall immediately make payment to the Company for its portion of the Loss and
Loss Adjustment Expenses obligations, upon reasonable evidence to be furnished by the
Company, of the amount due or to be due after the effective date of this contract.





ARTICLE 14 — ACCESS TO RECORDS (LM-00100-2007.08.13-A)





	A.	 	A. Except as otherwise provided in this Article, the Subscribing Reinsurer, or its duly
authorized
representative, may upon reasonable prior written notice to the Company, at the
Subscribing
Reinsurer’s own expense, examine at the offices of the Company or its affiliates, during
normal
office hours, the Company’s accounting, underwriting, or claim records and files, or any
such
additional relevant records and files, as they exist in the Company’s or its affiliates’
possession or
reasonable control, relating to business ceded under this Contract. The Subscribing
Reinsurer’s
notice shall reasonably describe the nature of the inspection that it wishes to conduct,
the persons
conducting the inspection and upon notice of available files from the Company, the files
that it
wishes to review. Subject to the limitations expressed in this Article, this right of
inspection shall
survive termination or expiration of this Contract and shall continue as long as either
Party has
any rights or obligations under this Contract.
	 
	B.	 	The Company reserves the right to deny the Subscribing Reinsurer access to records or
files concerning any particular 

claim(s) if the Subscribing Reinsurer has not disputed liability
for payment of such claim(s), and payment of such claim(s) is more than ninety (90) days
overdue according to the Company’s records. The Company shall, however, prior to an arbitration
demand that may be instituted by either party, continue to respond to reasonable specific
requests for information and questions raised by the Subscribing Reinsurer concerning such claims;
and nothing in this Article shall restrict the right or ability of the Subscribing Reinsurer
to seek discovery of relevant information in an arbitration proceeding pursuant to the Arbitration
Article of this Contract.
	 
	C.	 	As a condition precedent to access to records under this Article, the Subscribing
Reinsurer, its
personnel and any authorized third party representative of the Subscribing Reinsurer shall
agree
to the provisions of the Confidentiality Article of this Contract.
	 
	D.	 	The Company reserves the right to withhold any documents from the Subscribing Reinsurer
(1)
concerning Trade Secrets of the Company or its affiliates, (2) subject to the terms of a
third party
non-disclosure agreement with the Company or its affiliates requiring third party consent
to
disclosure, (3) subject to the Work Product Privilege or Attorney-Client Privilege or (4)
concerning
individual private information that as a matter of law cannot be disclosed by the Company
or its
affiliates (hereinafter referred to in the Contract as “Privileged Documents”). The
Company shall
reasonably try to exempt the Subscribing Reinsurers from any third party non-disclosure
agreement or obtain consent from the third party to disclose to the Subscribing Reinsurer.
	 
	E.	 	Notwithstanding the foregoing, the Company shall permit and not object to the Subscribing
Reinsurer’s access to Privileged Documents falling within (3) above, in connection with
the
underlying claim reinsured hereunder following final settlement or final adjudication of
the case or
cases involving such claim, with prejudice against all claimants, and all parties to such
adjudications; provided that the Company, may defer release of such Privileged Documents
if
there are subrogation, contribution, or other third party actions with respect to that
claim or case,
which might jeopardize the Company’s or its affiliates’ defense by release of such
Privileged
Documents. In the event that the Company shall seek to defer release of such Privileged
Documents or to withhold documents concerning Trade Secrets, it will in consultation with
the
Subscribing Reinsurer take other steps as reasonably necessary to provide the Subscribing





	 	 	 	 	 

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	 	 	Reinsurer with the information it reasonably requires to indemnify the Company
without causing a loss of such privileges or protections. The Subscribing Reinsurer,
however, shall not have access to Privileged Documents relating to any dispute between
the Company and the Subscribing Reinsurer.
	 
	F.	 	For purposes of this Article, “Trade Secrets” shall have the meaning provided in
Section 1839 of the United States Economic Espionage Act of 1996. “Attorney-Client
Privilege” shall mean communications of a confidential nature between a) the Company or its
affiliates, or anyone retained by or in the control of the Company or its affiliates, or
their in-house or outside legal counsel, or anyone in the control of such legal counsel,
and b) any in-house or outside legal counsel which relate to legal advice being sought by
the Company or its affiliates and/or which contains legal advice being provided to the
Company or its affiliates. “Work Product Privilege” shall mean communications, written
materials and tangible things prepared by or for in-house or outside counsel, or prepared
by or for the Company or its affiliates, in anticipation of or in connection with
litigation, arbitration, or other dispute resolution proceedings.





ARTICLE 15 — AMENDMENTS



This Contract may be amended by mutual consent of the parties expressed in an addendum; and such
addendum, when executed by both parties, shall be deemed to be an integral part of this Contract
and binding on the parties hereto.




ARTICLE 16 — ARBITRATION (LM-00200-2007.05.03-A)





	A.	 	Disputes to be Arbitrated. With the exception of any dispute resolution
procedures that are
otherwise contained in this Contract, any and all disputes between the Company and any
Subscribing Reinsurer or Reinsurers (“Party individually or “Parties” collectively)
arising out of,
relating to, or concerning this Contract, whether sounding in contract or tort and
whether arising
during or after this Contract’s formation, or after its termination, including disputes
as to whether
the Contract was validly formed or is voidable, shall be submitted to the decision of an
arbitration
panel (“Panel”). The Panel shall consist of an umpire and two party-appointed
arbitrators unless a
Party meets the requirements of Paragraph C of this Article and demands arbitration
pursuant
thereto, in which case the Panel would consist of an umpire only.
	 
	B.	 	Procedures. Except as provided herein, any arbitration shall be based upon the
Procedures for
the resolution of U.S. Insurance and Reinsurance Disputes, Regular Panel Version, dated
April
2004 (the “Procedures”), developed by the Insurance and Reinsurance Dispute Resolution
Task
Force, subject to the following modifications:






	 	1.	 	Qualifications of the arbitrators and umpires shall be in accordance
with Alternative section 6.2 of the Procedures.
	 
	 	2.	 	The Parties hereby designate the umpire list maintained by ARIAS (U.S.)
as the list to be used in the event that section 6.7(a) of the Procedures is
invoked.
	 
	 	3.	 	Unless otherwise mutually agreed, the members of the Panel shall be
impartial and disinterested. The members of the Panel may not be: (1) in the
control of any Party or its parent, affiliate, or agent, (2) a former director or
officer of any Party or its parent, affiliate, or agent, or (3) a likely witness in
the arbitration. The requirement of impartiality means that all members of the
Panel shall have the same obligation to approach the Panel’s duties and decisions
with fairness and without consideration for the fact that Panel members may have
been appointed by one of the Parties. The requirement of impartiality does not mean
that any arbitrator can have no previous knowledge of or experience with respect to
issues involved in the dispute or disputes.





	 	 	 	 	 

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	 	4.	 	The first sentence of Section 10.4 of the Procedures shall be replaced by the
following sentence: “The Panel shall require that each Party submit concise written
statements of position, including summaries of the facts and evidence a Party intends
to present, discussion of the applicable law and the basis for the requested Award or
denial of relief sought.”
	 
	 	5.	 	Once the Panel has been constituted, no Party (or anyone acting for a Party)
shall have any communications concerning the arbitration or any of the issues before
the Panel with any member of the Panel that is not also disclosed to all other Parties
and all members of the Panel. Each Panel member shall have a continuing duty to
disclose promptly to all Parties and all Panel members any violation of this
prohibition and the specifics of any improper communications that occurred. This
prohibition shall remain in place until all challenges to any arbitration awards and
decisions have been either waived or finally concluded.
	 
	 	6.	 	Section 11.1 of the Procedures shall be replaced by the following provision:
“The Parties may propound discovery seeking disclosure of such information and/or
documents relevant to the dispute or necessary for the proper resolution of the
dispute.”
	 
	 	7.	 	Position statements may be amended at any reasonable time, but not later
than the close of discovery without a showing to the Panel that the amending Party
could not reasonably have raised the new claim or issue at an earlier time.
	 
	 	8.	 	The Panel shall hold an evidentiary hearing, if one is necessary, within one
year of the arbitration demand, unless the Parties otherwise agree. Should a Party
seek a reasonable extension to this time frame for good cause shown, the other
Party’s agreement shall not be unreasonably withheld.
	 
	 	9.	 	To the extent permitted by the law, the Panel shall have the authority to
issue subpoenas and other orders to enforce its decisions.
	 
	 	10.	 	The Panel may award reasonable attorneys’ fees and arbitration costs to the
prevailing Party, as determined by the Panel.
	 
	 	11.	 	Section 14.3 of the Procedures shall be replaced by the following provision:
“The Panel shall make a decision and issue an award with regard to the terms
expressed in this Contract, and the custom and practice of the property and casualty
insurance and reinsurance business. The Panel shall not be obligated to follow the
strict rules of law and evidence.”






	C.	 	Alternative Streamlined Procedures. Notwithstanding the foregoing provisions of this
Article, the
Alternative Streamlined Procedures set forth in section 16 of the Procedures, as modified
by
sections B3, B4, and B9 through B11 of this Article, shall apply in the event that, in a
consolidated
proceeding or otherwise, the Party initiating arbitration is seeking payment of a total
amount that is
no greater than one million dollars ($1,000,000), or the currency equivalent thereof.
Sections
16.1, 16.2, 16.3 and the second sentence of section 16.4 of the Alternative Streamlined
Procedures shall not apply. The Parties agree to comply with section 6.7 of the Procedures
to
appoint a single umpire, and hereby designate the umpire list maintained by ARIAS (U.S.)
as the
list to be used in section 6.7(a).
	 
	D.	 	Hearing Location. The hearing shall be held in Boston, Massachusetts, unless the
Parties
mutually agree to a different location.
	 
	E.	 	Confirmation. Either Party may apply to a court of competent jurisdiction for an
order confirming
any award of the Panel; a judgment of that court shall thereupon be entered on any award.
If
such an order is issued, the Party against whom confirmation is sought shall pay the
attorneys’
fees incurred of the Party who applied for the confirmation order and all court costs of
any such
proceeding.





	 	 	 	 	 

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	F.	 	Equitable Relief from a Court of Law. Nothing herein shall be construed to prevent any
participating Party from applying to a court of competent jurisdiction to issue a
restraining order or other equitable relief to maintain the “status quo” of the Parties
participating in the arbitration pending the decision and award by the Panel.
	 
	G.	 	Consolidated Proceedings.






	 	1.	 	Same contract, single Subscribing Reinsurer. Both the Company and any
single Subscribing Reinsurer on this Contract have the right to combine any and
all disputes between them that concern this Contract (including any renewal of
this Contract or any contract for which this Contract is a renewal) into a single
arbitration proceeding before a single Panel, except that the standard for
determining whether a Party may add a new issue, claim, or dispute to an
arbitration proceeding shall be the standard for amending a Position statement, as
set forth in Paragraph B7 of this Article.
	 
	 	2.	 	Multiple contracts, single Subscribing Reinsurer. The Company has the
right to combine any and all disputes between the Company and a single Subscribing
Reinsurer into a single arbitration proceeding before a single Panel where such
disputes involve this Contract and any additional contracts between the two
Parties, except that the standard for determining whether a Party may add a new
issue, claim, or dispute to an arbitration proceeding shall be the standard for
amending a Position statement, as set forth in Paragraph B7 of this Article.
	 
	 	3.	 	Same contract, multiple Reinsurers. At the Company’s option, if more
than one Subscribing Reinsurer is involved in arbitration relating to this
Contract, where there are common questions of law or fact and a possibility of
conflicting awards or inconsistent results, all such Reinsurers shall constitute
and act as one Party for purposes of this Article and communications shall be made
by the Company to each of the Reinsurers constituting the one Party; provided,
however, that the Reinsurers shall have the right to assert several, rather than
joint defenses or claims, and to be represented by separate counsel. This
provision shall not change the liability of each of the Reinsurers under the terms
of this Contract from several to joint.






	H.	 	Choice of Law. The law set forth in the Governing Law Article shall apply to
this Arbitration Article. In addition, to the extent the Panel (or the umpire in an
Alternative Streamlined Procedure) looks to applicable law, such Panel or umpire shall
apply the law as set forth in the Governing Law Article of this Contract.
	 
	I.	 	Option to Litigate. Notwithstanding the foregoing provisions of this Article, to
the extent that the
Company has demanded payment of a total amount of at least twenty million dollars
($20,000,000) or the currency equivalent thereof from any Subscribing Reinsurer or from
the Reinsurers, the Company reserves the right to initiate litigation to resolve any
disputes arising from such demand.
	 
	J.	 	Survival of Article. This Article shall survive the termination or expiration of this
Contract.





ARTICLE
17 — ASSIGNMENT, NOVATION, OR TRANSFER (LM-00300-2007.10.05-A)



This Contract shall be binding upon and inure to the benefit of the Company and the
Subscribing Reinsurer and their respective successors and assigns; provided, however, that
this Contract may not be assigned, novated or transferred, including any attempted transfer
of rights and/or obligations under any U.S. or foreign statute, legislation or
jurisprudence, by either the Company or the Subscribing Reinsurer, or as the result of the
actions of a parent company or affiliated entity of either, without the prior written
consent of the other. In the event of any assignment, novation or transfer, the assignor,
novator or transferor shall remain liable under this Contract, and further guarantees the




	 	 	 	 	 

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performance of all obligations of any assignee, novatee or transferee under this Contract.
Notwithstanding the foregoing, the Company may assign this Contract to an affiliated
entity, without the Subscribing Reinsurer’s written consent.




ARTICLE 18 — CONFIDENTIALITY CLAUSE (LM-00400-2005.11.10-A)





	A.	 	Confidential Information. The submission materials, and any Policy,
financial, underwriting, accounting, and claims information, data statements,
representations, and other materials provided by the Company or it affiliates and
received by the Subscribing Reinsurer in the course of an audit, inspection, or
otherwise, represent confidential or proprietary information (“Confidential
Information”). This Confidential Information is intended for the sole use of the
Subscribing Reinsurer (and its retrocessionaires, respective auditors, accountants, and
legal counsel) as may be necessary in analyzing and/or accepting a participation in and/
or executing its responsibilities under or related to this Contract. The Subscribing
Reinsurer acknowledges and agrees that with respect to any review of Confidential
Information by the Subscribing Reinsurer, and/or discussion of Confidential Information,
the Company and its affiliates do not waive and do not intend to waive any available
privilege or protection. The review of Confidential Information by the Subscribing
Reinsurer and/or discussion of Confidential Information with the Company or its
affiliates shall not destroy, waive, or otherwise impair the proprietary and/or protected
status of any Confidential Information or any information revealed in such discussion
with the personnel of the Company or its affiliates, whether reviewed by and/or discussed
with the Subscribing Reinsurer intentionally or inadvertently, nor does the review of the
Confidential Information and/or discussion of Confidential Information with the Company
or its affiliates constitute an estoppel or waiver of the Company’s or its affiliates’
rights to assert the attorney-client or work-product privileges, or any other applicable
privilege or protection, over certain documents contained in the Company’s or its
affiliates’ files and/or certain information.
	 
	B.	 	The Company and the Subscribing Reinsurer agree that no confidentiality obligations
will apply to Confidential Information to the extent such Confidential Information: (1)
is or becomes available to the public, other than as a result of impermissible disclosure
by the Subscribing Reinsurer, (2) was or became available lawfully to the Subscribing
Reinsurer from a source, other than the Company, its affiliates or their personnel, that
is not subject to a confidentiality obligation, (3) was developed independently by the
Subscribing Reinsurer prior to disclosure by the Company, its affiliates or their
personnel, as demonstrated by the Subscribing Reinsurer’s records, or (4) is required to
be disclosed by law, regulation, court, or regulatory agency action, subject to Paragraph
E of this Article.
	 
	C.	 	The Subscribing Reinsurer agrees to preserve all confidentiality and privilege
pertaining to all Confidential Information provided by the Company and all knowledge and
information gained through its review of Confidential Information or discussions with the
personnel of the Company or its affiliates. The Subscribing Reinsurer further agrees not
to disclose any such Confidential Information to any other person or entity except as
such disclosure may be necessary to its retrocessionaires, accountants, attorneys,
auditors, actuaries or third party catastrophe modelers or as otherwise required by law.
The Subscribing Reinsurer agrees that no Confidential Information is to be copied and/or
removed from the Company’s or its affiliates’ premises without the express permission of
the Company.
	 
	D.	 	Non-Public Personally Identifiable Information. Additionally, any disclosure
of non-public personally identifiable information shall comply with all state and federal
statutes and regulations governing the disclosure of non-public personally identifiable
information. “Non-public personally identifiable information” is financial or medical
information of or concerning a private person which either has been obtained from sources
which are not available to the general public or obtained from the person who is the
subject and which information is included in data files exchanged by





	 	 	 	 	 

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	 	 	the parties hereto. For the purposes hereof, the terms shall include data elements such
as names and addresses of individuals. Disclosing or using this information for any
purpose beyond the scope of this Contract, or beyond the exceptions set forth above, is
expressly forbidden without the prior consent of the Company.
	 
	E.	 	Third-Party Demand. Should the Subscribing Reinsurer receive a third-party
demand pursuant to subpoena, summons, or court or governmental order, to disclose
Confidential Information (including Non-public personally identifiable information) that
has been provided by the Company or its affiliates, the Subscribing Reinsurer shall make
commercially reasonable efforts to notify the Company promptly upon receipt of the demand
and prior to disclosure of the Confidential Information and provide the Company a
reasonable opportunity to object to the disclosure. If the Company timely objects to the
release of the Confidential Information, the Subscribing Reinsurer will comply with the
reasonable requests of the Company in connection with the Company’s efforts to resist
release of the Confidential Information. The Company shall bear the cost of resisting the
release of the Confidential Information.
	 
	F.	 	Survival. The parties agree that the obligations contained in this Article
shall survive the expiration or termination of this Contract.





ARTICLE 19 — CURRENCY (LM-00500-2005.08.09)



Whenever a reference to a monetary currency appears in this Contract, it shall be construed to
mean United States Dollars (“USD”). However, in those cases where the Policies are issued by
the Company using Canadian Dollars (“CAD”), it shall mean Canadian Dollars. All payments made
by either party shall be made in United States Dollars except that payments made involving
Policies issued using Canadian Dollars shall be made in Canadian Dollars. All amounts paid or
received by the Company in any other currency shall be converted into United States Dollars at
the rate of exchange on the date at which it is entered on the books of the Company.




ARTICLE 20 — DIVIDENDS AND TAXES (LM-00600-2005.06.02-A)



In consideration of the terms of this Contract, the Company shall not claim any deduction in
respect of any amount paid as dividends or as reinsurance premium when making tax returns,
other than income or profits tax returns to any State or to the District of Columbia.




ARTICLE 21 — ENTIRE AGREEMENT (LM-00701-2005.08.24-A)



This Contract and the Novations of which it forms a part, shall constitute the entire
agreement between the Company and the Subscribing Reinsurer with respect to the subject matter
of this Contract and shall supersede all prior understandings, negotiations and discussions,
whether oral or written, by or between the Company and the Subscribing Reinsurer relating to
the subject matter hereof. There are no general or specific warranties, representations or
other agreements by or among the Company and the Subscribing Reinsurer in connection with
entering into this Contract except as specifically set forth in this Contract. Notwithstanding
the foregoing, this Contract may be amended or modified only by a writing signed by both the
both the Company and the Subscribing Reinsurer.




	 	 	 	 	 

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ARTICLE 22 — ERRORS AND OMISSIONS (LM-00800-2005.06.02-A)



Any inadvertent delay, omission, or error in complying with the terms and conditions of this
Contract shall not be held to relieve either party hereto from any liability, which would attach
to it hereunder if such delay, omission, or error had not been made, provided such delay,
omission, or error is rectified upon discovery.




ARTICLE 23 — FEDERAL EXCISE TAX (LM-01000-2005.08.24-A)





	A.	 	This Article is applicable to any Subscribing Reinsurer who is domiciled outside of the
United States of America, except for any Subscribing Reinsurer exempt from Federal Excise
Tax. A Subscribing Reinsurer that claims exempt status from Federal Excise Tax shall provide
to the Company, upon its request, proof that the exempt status adequately satisfies the
demands of the U.S. Internal Revenue Service, Department of the Treasury, or its successor
and/or other applicable U.S. government authority.
	 
	B.	 	Each Subscribing Reinsurer shall allow the applicable percentage of the premium payable
hereon (as imposed under Section 4371 of the Internal Revenue Code) for the purpose of
paying Federal Excise Tax to the extent such premium is subject to such tax.
	 
	C.	 	In the event of any return of premium, the Subscribing Reinsurer shall deduct the
aforesaid percentage from the return premium payable hereon and the Company or its agent
shall recover such tax from the United States Government.





ARTICLE 24 — FEDERAL TERRORISM EXCESS RECOVERY (LM-01100-2007.12.28-A)





	A	 	Any loss reimbursement the Company receives from the United States Government under the
Terrorism Risk Insurance Act of 2002 and any subsequent amendments thereto (“TRIA”) as a
result of loss occurrences commencing during the term of this Contract shall apply as
follows:
	 
	B.	 	Except as provided below, any loss reimbursement under TRIA shall inure solely to the
benefit of the Company and shall be entirely disregarded in applying all of the provisions
of this Contract.
	 
	C.	 	If one or more loss occurrences commencing during the term of this Contract result(s) in
reinsurance recoveries to the Company under this Contract and reimbursement under TRIA, and
such amounts, together with any other reinsurance recoveries to the Company for said loss
occurrence(s), exceed the total amount of “Insured Losses” to the Company, any amount in
excess thereof shall be held by the Company. The Company shall then reimburse the
Subscribing Reinsurer a portion of such excess recovery in an amount equal to the
proportion that the Subscribing Reinsurer’s payment under this Contract bears to the total
treaty reinsurance recoveries to the Company for Insured Losses for said loss
occurrence(s). Provided, however, that in no event shall such reimbursement exceed the
amount paid by the Subscribing Reinsurer to the Company under this Contract.
	 
	D.	 	For purposes hereof, if a loss reimbursement received by the Company under TRIA is based
on the Company’s Insured Losses in more than one loss occurrence and neither the Secretary
of the Treasury nor his delegate specifies the amount of loss allocable to each respective
loss occurrence, the reimbursement shall be pro-rated in the proportion that the Company’s
Insured Losses in each loss occurrence bears to the Company’s total Insured Losses
resulting from all loss occurrences to which the reimbursement applies.
	 
	E.	 	For purposes of this Article, “Insured Loss(es)” shall have the same meaning as set
forth in Section 102(5) of TRIA.





	 	 	 	 	 

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ARTICLE 25 — GOVERNING LAW (LM-01200-2005.06.02-A)



The validity and interpretation of this Contract shall be governed by and construed in accordance
with the law of the Commonwealth of Massachusetts.



ARTICLE 26 — INSOLVENCY (LM-01300-2005.08.24-A)



(If more than one reinsured company is referenced within the definition of “Company” in the
Preamble to this Contract, this Article shall apply severally to each such company. Further, this
Article and the laws of the domiciliary state shall apply in the event of the insolvency of any
company intended to be covered hereunder. In the event of a conflict between any provision of this
Article and the laws of the domiciliary state of any company intended to be covered hereunder, that
domiciliary state’s laws shall prevail.)





	A.	 	In the event of the insolvency of the Company, reinsurance under this Contract shall be
payable on demand, with reasonable provision for verification, on the basis of claims allowed
against the insolvent Company by any court of competent jurisdiction or by any liquidator,
receiver, conservator, or statutory successor of the Company having authority to allow such
claims, without diminution because of such insolvency or because such liquidator, receiver,
conservator, or statutory successor has failed to pay all or a portion of any claims. Such
payments by the Subscribing Reinsurer shall be made directly to the Company or its
liquidator, receiver, conservator, or statutory successor, except to the extent Section
4118(a) of the New York Insurance Law applies, or except (a) where the Contract specifically
provides another payee of such reinsurance in the event of the insolvency of the Company, or
(b) where the Subscribing Reinsurer with the consent of the direct insured or insureds has
assumed such Policy obligations of the Company as direct obligations of the Subscribing
Reinsurer to the payees under such Policies and in substitution for the obligations of the
Company to such payees.
	 
	B.	 	It is agreed, however, that the liquidator, receiver, conservator, or statutory successor of
the insolvent Company shall give written notice to the Subscribing Reinsurer of the pendency
of a claim against the insolvent Company on the Policy or Policies reinsured within a
reasonable time after such claim is filed in the insolvency proceeding and that during the
pendency of such claim the Subscribing Reinsurer may investigate such claim and interpose, at
its own expense, in the proceeding where such claim is to be adjudicated, any defense or
defenses which it may deem available to the Company or its liquidator, receiver, conservator,
or statutory successor. The expense thus incurred by the Subscribing Reinsurer shall be
chargeable, subject to court approval, against the insolvent Company as part of the expense
of liquidation to the extent of a proportionate share of the benefit, which may accrue to the
Company solely as a result of the defense undertaken by the Subscribing Reinsurer.
	 
	C.	 	Where two or more Reinsurers are involved in the same claim and a majority in interest
elects to interpose defense to such claim, the expense shall be apportioned in accordance
with the terms of this Contract as though such expense had been incurred by the insolvent
Company.
	 
	D.	 	With respect to California Workers Compensation loss(es), it is agreed that in the event of
any delinquency proceeding, receivership, or insolvency of the Company and/or the failure of
the Subscribing Reinsurer, for any reason, to make payments under this Contract, the
Insurance Commissioner of California may, upon 30-days notice, draw upon any sums from the
deposit made by the Subscribing Reinsurer in accordance with the provisions of sections 11691
– 11703 of the California Insurance Code.





	 	 	 	 	 

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ARTICLE 27 — INTEREST PENALTY (LM-01400-2005.08.24-A)





	A.	 	The interest amounts provided for in this Article shall apply to the Subscribing Reinsurer
or to the
Company in the following circumstances:






	 	1.	 	If a loss payment owed by the Subscribing Reinsurer to the Company is not
received within 45 calendar days following the date of presentation to the
Subscribing Reinsurer of information necessary to approve payment of the claim,
and/or
	 
	 	2.	 	If any premium payment owed by the Company to the Subscribing Reinsurer is
not received within 45 calendar days following the date on which payment is due,
and/or
	 
	 	3.	 	If any premium adjustment, agreed by either Party to the other, is not
received within 150 calendar days following the expiry or anniversary of this
Contract, and/or
	 
	 	4.	 	If any return of premiums, commissions, profit sharing, or any amounts not
provided in subparagraphs 1, 2, and 3 above, are not received in accordance with the
date specified in this Contract or if no date is specified, within 90 calendar days
following the date the debtor Party received the billing.






	B.	 	Failure by the Subscribing Reinsurer or Company to comply with their respective payment
obligations within the time periods as herein provided shall, as of that date, be subject to
an interest payment computed by multiplying the amount due by a variable rate consisting of
the U.S. Prime Rate as published in the Eastern Edition of The Wall Street Journal on
the first day of the calendar month in which the amount became past due, plus 2%. The
variable rate shall be adjusted monthly thereafter to equal the U.S. Prime Rate as published
in the Eastern Edition of The Wall Street Journal on the first day of each successive
month during which the amount due remains unpaid, plus 2%. The product shall then be
multiplied by 1/365 for each day after the due date that the amount due and the interest
amount remain unpaid. Any interest that occurs pursuant to this Article shall be calculated
by the Party to which it is owed.
	 
	C.	 	The validity of any claim or payment may be contested under the provisions of this Contract.
If the debtor Party prevails in arbitration or any other proceeding with respect to the
amounts in dispute, there shall be no interest penalty due. If the creditor Party wholly or
partially prevails on any of the amounts in dispute, the interest penalty shall be awarded as
outlined above. Such interest penalty shall be calculated from the date the monies were due
and owing to the date of resolution of the arbitration or proceeding, and shall be payable as
of the date of resolution of the arbitration or proceeding.
	 
	D.	 	If a Subscribing Reinsurer advances the entire or partial payment of any claim it is
contesting, and wholly or partially prevails in the contest, the Company shall promptly
return the applicable amount of such payment. The arbitrator(s) hearing such dispute shall
determine if interest shall be added to the amount returned by the Company.
	 
	E.	 	Any interest owing pursuant to this Article may be waived by the Party to which it is owed.
Further, any interest calculated pursuant to this Article that is $100 or less shall be waived. Any
waiver of any interest pursuant to this paragraph, however, shall not affect the waiving Party’s
right to claim and/or pursue interest for any other failure by the other Party to make payment when
due under this Article.




ARTICLE 28 — LOSS ADJUSTMENT AND SETTLEMENT (LM-01500-2006.09.07-A)





	A.	 	The Company shall give notice, as soon as practicable, to the Subscribing Reinsurer of any
claim that it has reason to believe could involve this Contract. The Company shall keep the
Subscribing





	 	 	 	 	 

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	 	 	Reinsurer informed of significant developments likely to affect the cost of any claim or
claims hereunder.
	 
	B.	 	The Company may commence, continue, defend, settle, or withdraw from actions, suits, or
prosecutions and, generally, do all such things relating to any claim or loss in which the
Subscribing Reinsurer is interested as, in the Company’s judgment, may be beneficial or
expedient to the Company and the Subscribing Reinsurer. The Company shall be the sole judge
as to what claims are covered under the Policies. All of the Ultimate Net Loss and Loss
Occurrences, as well as all loss settlements made and judgments paid by the Company,
provided they are within the terms of this Contract either under the strict conditions of
the Policies or by way of compromise, shall be unconditionally binding upon the Subscribing
Reinsurer, who agrees to pay all amounts for which they are liable immediately upon
reasonable evidence of the amount due being furnished to the Subscribing Reinsurer by the
Company. The true intent of this Contract is that the Subscribing Reinsurer shall, in every
case to which this Contract applies, follow the settlements and the fortunes of the Company.
	 
	C.	 	The Company shall advise the Subscribing Reinsurer of all claims which:






	 	1.	 	Are reserved by the Company in excess of 50.0% of the Company’s retention.




ARTICLE 29 — MEDIATION (LM-03000-2005.12.20-A)





	A.	 	In the event of any dispute or difference of opinion arising out of or relating to this
Contract, including but not limited to the formation, interpretation, performance or breach
of this Contract, whether such dispute arises before or after the expiration of this
Contract, the Company and the Subscribing Reinsurer may mutually agree in writing that,
prior to or at any time during an arbitration proceeding, they will submit such dispute or
difference of opinion to non-binding mediation which will be held at a location mutually
agreed by the parties. The parties agree that any non-binding mediation conducted during any
stage of an arbitration process shall be conducted concurrently with such arbitration
process, and that the arbitration process or proceedings shall not be stayed unless both the
Company and the Subscribing Reinsurer otherwise agree.
	 
	B.	 	Each Party shall submit a list of not more than four (4) potential mediators to the other
party within the fourteen (14) days of reaching such mutual agreement. The two Parties shall
then agree on the appointment on one (1) mediator from the combined lists within seven (7)
days. The mediator shall be a neutral, impartial third party, without past employment or
directorial relationships with the parties to the mediation. Such mediator shall make full
disclosure of all past partisan relationships with either the Company or Subscribing
Reinsurer to the parties within seven (7) days of his or her notification that he or she has
been selected as a Mediator.
	 
	C.	 	If the Company and the Subscribing Reinsurer cannot agree on a mediator within twenty-one
(21) days from the date of a mutual agreement to mediate, then arbitration proceedings may
commence in accordance with the Arbitration Article.
	 
	D.	 	The mediator will schedule an initial mediation session within thirty (30) days of his or
her appointment and will be responsible for the formulation of an agenda to be distributed
to the parties involved in the mediation not less than five (5) days before the mediation
commences.
	 
	E.	 	The mediator will not have the power of enforcement of any agreement between the parties
nor will the mediator have any right to assess any damages, including punitive damages, to
either party participating in the mediation.





	 	 	 	 	 

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	F.	 	If, in the opinion of the mediator, the parties cannot resolve the dispute or difference of
opinion, arbitration proceedings may commence in accordance with the Arbitration Article. In
any event, the mediation shall conclude within sixty (60) days of its referral to the
mediator. Should the mediation not be resolved in sixty (60) days, then arbitration
proceedings may commence in accordance with the Arbitration Article.
	 
	G.	 	Each Party shall bear the expense of its own representatives and shall jointly and equally
bear with the other Party the expenses of the mediator and the place of mediation.




ARTICLE 30 — OFFSET (LM-01700-2005.06.02-A)



Each Party to this Contract together with their successors or assigns shall have and may exercise,
at any time, the right to offset any balance(s) due the other (or, if more than one, any other).
Such offset may include balances due under this Contract, and any other contracts between the
parties, whether such balances arises from premium, losses, or otherwise, and regardless of the
capacity of any party, whether as assuming and/or ceding insurer, under the various reinsurance
contracts involved, provided however, that in the event of insolvency of a Party hereto, offsets
shall only be allowed in accordance with the provisions of the applicable law, statute, or
regulation governing such offset.



ARTICLE 31 — REINSURER CLAIMS OBLIGATIONS (LM-03100-2007.10.10-A)



It is understood and agreed that the Subscribing Reinsurer will fulfill its obligations under the
Loss Adjustment and Settlement Article, until all claims have been reported and settled. Without
first obtaining the Company’s written consent, the Subscribing Reinsurer will not, either directly
or as the result of an action of a parent company or an affiliated entity, invoke any U.S. or
foreign statute, legislation, or jurisprudence that purports to enable the Subscribing Reinsurer
to require the Company to settle their claims liabilities, including but not limited to any
estimated or undetermined claims liabilities, under this Contract on an accelerated basis. It is
further expressly understood and agreed that in the event the Subscribing Reinsurer attempts to
require the Company to settle their claims liabilities on an accelerated basis, the Company shall
continue to have the right to utilize or to draw upon Letters of Credit or other collateral, under
the terms of this Contract. This Article does not prevent the Company and the Subscribing
Reinsurer from settling any claims liabilities using a commutation process that is agreeable to
both parties. This Article shall in no way affect the rights and obligations of the Company and
the Subscribing Reinsurer under the Insolvency Article.



ARTICLE 32 — SALVAGE AND SUBROGATION (LM-01800-2006.09.12-A)





	A.	 	The Subscribing Reinsurer shall be credited with its share of salvage and/or subrogation in
respect of claims and settlements under this Contract, less its share of recovery expense.
Unless the Company and the Subscribing Reinsurer agree to waive such rights in the settlement
of a disputed claim, or the Company and the Subscribing Reinsurer agree to the contrary, the
Company enforces the right to salvage and/or subrogation and shall prosecute all claims
arising out of such right. Should the Company refuse or neglect to enforce this right, the
Subscribing Reinsurer is hereby empowered and authorized to institute appropriate action in
the name of the Company.
	 
	B.	 	Amounts recovered from salvage and/or subrogation and the expense of any salvage and/or
subrogation proceedings brought by the Company or the Subscribing Reinsurer to enforce such
rights shall be apportioned between the Company and the Subscribing Reinsurer in the ratio of
their respective interests in the total salvage and/or subrogation recovery, and shall be in
addition to the limits hereon. In the event there is a failure to obtain a salvage and/or
subrogation





	 	 	 	 	 

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	 	 	recovery, the expense of the proceedings shall be apportioned between the Company and the
Subscribing Reinsurer in the ratio of their respective interests in the total loss.
	 
	C.	 	All salvage and/or subrogation recoveries obtained by either party, subsequent to payments
made by the Subscribing Reinsurer under this Contract, shall be applied as if obtained prior
to said payments and all necessary adjustments shall be made between the Company and the
Subscribing Reinsurer as soon as practicable after said salvage and/or subrogation recovery
is obtained.
	 
	D.	 	The Company shall have the right, before the happening of the loss, to waive its right of
subrogation as to that loss.




ARTICLE 33 — SERVICE OF SUIT (LM-01900-2005.08.24-A)



(This article applies to unauthorized Reinsurers and to Reinsurers who are domiciled outside the
United States of America.)





	A.	 	This Service of Suit Article will not be read to conflict with or override the obligations
of the parties to arbitrate their disputes as provided for in the Arbitration Article. This
Article is intended as an aid to compelling arbitration or enforcing such arbitration or
arbitral award, not as an alternative to the Arbitration Article for resolving disputes
arising out of this Contract.
	 
	B.	 	In the event of the failure of the Subscribing Reinsurer to pay any amount claimed to be due
hereunder, the Subscribing Reinsurer, at the request of the Company, will submit to the
jurisdiction of a Court of competent jurisdiction within the United States. Nothing in this
Article constitutes or should be understood to constitute a waiver of the Subscribing
Reinsurer’s right to commence an action in any Court of competent jurisdiction in the United
States, to remove an action to a United States District Court, or to seek a transfer of a
case to another Court as permitted by the laws of the United States or of any state in the
United States. The Subscribing Reinsurer, once the appropriate Court is selected, whether
such court is the one originally chosen by the Company and accepted by the Subscribing
Reinsurer or is determined by removal, transfer, or otherwise, as provided for above, will
comply with all requirements necessary to give said Court jurisdiction and, in any suit
instituted against any of them upon this Contract, will abide by the final decision of such
Court or of any Appellate Court in the event of an appeal.
	 
	C.	 	Service of process in such suit may be made upon; Mendes & Mount, LLP, 750 Seventh Avenue,
New York, NY 10019-6829.)
	 
	D.	 	The above-named are authorized and directed to accept service of process on behalf of the
Subscribing Reinsurer in any such suit. Further, pursuant to any statute of any state,
territory, or district of the United States that makes provision therefore, the Subscribing
Reinsurer hereby designates the Superintendent, Commissioner, or Director of Insurance, or
other officer specified for that purpose in the statute, or their successor(s) in office, as
their true and lawful attorney upon whom may be served any lawful process in any action,
suit, or proceedings instituted by or on behalf of the Company or any beneficiary hereunder
arising out of this Contract, and hereby designate the above-named as the person to whom the
said officer is authorized to mail such process or a true copy thereof.




ARTICLE 34 — SEVERABILITY (LM-02000-2005.06.02-A)



If any provision of this Contract shall be rendered illegal or unenforceable by the laws,
regulations, or public policy of any state, such provision shall be considered void in such state,
but this shall not affect the




	 	 	 	 	 

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validity or enforceability of any other provision of this Contract or the enforceability of such
provision in any other jurisdiction.



ARTICLE 35 — SPECIAL CONDITIONS (LM-02100-2007.10.05-A)



A. This Article applies only in the event that:





	 	1.	 	A State Insurance Department or other legal authority orders the Subscribing
Reinsurer to cease writing business or has imposed upon it any other restrictions on
or conditions relating to the Subscribing Reinsurer’s license or conduct of business
in any jurisdiction; or
	 
	 	2.	 	The Subscribing Reinsurer has become insolvent or has been placed into
liquidation or receivership (whether voluntary or involuntary), or there have been
instituted against it proceedings for the appointment of a receiver, liquidator,
rehabilitator, conservator, trustee in bankruptcy, or other agent known by whatever
name, to take possession of its assets or control of its operations; or
	 
	 	3.	 	The Subscribing Reinsurer’s policyholders’ surplus or equity has been reduced
by 25% or there has been a 25% reduction in the Subscribing Reinsurer’s stamp capacity
or funds at Lloyd’s of the amount of surplus at the inception of this Contract; or
	 
	 	4.	 	The Subscribing Reinsurer has entered into a definitive agreement to become
merged with, acquired, or controlled by any company, corporation, or individual(s) not
controlling the Subscribing Reinsurer’s operations at the inception of this Contract;
or
	 
	 	5.	 	The Subscribing Reinsurer’s A.M. Best Rating has been assigned or downgraded
below A- or Standard and Poor’s Rating has been assigned or downgraded below A-; or
	 
	 	6.	 	The Subscribing Reinsurer fails to maintain its surplus at a level of at least
200% of the Subscribing Reinsurer’s Authorized Control Level Risk-Based Capital; or
	 
	 	7.	 	The Subscribing Reinsurer announces intentions to cease underwriting operations; or
	 
	 	8.	 	The Subscribing Reinsurer voluntarily ceases underwriting operations; or
	 
	 	9.	 	The Subscribing Reinsurer has reinsured its entire liability under this Contract; or.
	 
	 	10.	 	The Subscribing Reinsurer, directly or through the actions of a parent company
or an affiliated entity, has or has attempted to assign, novate or transfer the
Subscribing Reinsurer’s rights and/or obligations under this Contract, including any
attempted transfer of rights and/or obligations under any U.S. or foreign statute,
legislation or jurisprudence, without the Company’s prior written consent; or
	 
	 	11.	 	The Subscribing Reinsurer, directly or through the actions of a parent company
or an affiliated entity, has invoked any U.S. or foreign statute, legislation or
jurisprudence which purports to enable the Reinsurer to require the Company to settle
its claims liabilities, including but not limited to any estimated or undetermined
claims liabilities under this Contract, on an accelerated basis. This condition does
not apply to any attempt to enforce a settlement of claims liabilities under a
commutation process to which the parties have agreed.






	B.	 	If one or more of the above-stated circumstances occur, the Company shall provide the
Subscribing Reinsurer with a written statement of the Subscribing Reinsurer’s share of all
paid recoverables, case reserves, loss adjustment expenses, incurred but not reported losses,
reserves for unearned premium, and ceding commissions due under this Contract (collectively
“Obligations”). Within fifteen (15) days of the Subscribing Reinsurer’s receipt of such
statement, the Subscribing Reinsurer agrees to fund all Obligations by clean, irrevocable,
and unconditional Letters of Credit payable exclusively to the Company and issued by a bank
acceptable to the





	 	 	 	 	 

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	 	 	Company. At the Company’s request, the Subscribing Reinsurer shall agree to provide
separate Letters of Credit for any distinct legal entities within the Company covered under
this Contract. Such Letters of Credit shall be issued for a period of not less than one
year, and shall be automatically extended for one year from their dates of expiration or
any future expiration dates, unless sixty (60) days prior to any expiration date the
issuing bank shall notify the Company by certified mail that the issuing bank elects not to
extend any Letter of Credit for any additional period.
	 
	C.	 	The Subscribing Reinsurer and Company agree that the Letters of Credit provided by the
Subscribing Reinsurer, pursuant to the provisions of this Contract, may be drawn upon at any
time, notwithstanding any other provision of this Contract, and be utilized by the Company, or
any successor, by operation of law, of the Company, including without limitation, any
liquidator, rehabilitator, receiver, or conservator of the Company, without diminution because
of the insolvency of the Company or the Subscribing Reinsurer for one or more of the following
purposes:






	 	1.	 	To pay or reimburse the Company for:






	 	a.	 	The Subscribing Reinsurer’s share under this Contract of
premiums returned, but not yet recovered from the Subscribing Reinsurer, to
the owners of Policies reinsured under this Contract due to cancellations of
such Policies; and
	 
	 	b.	 	The Subscribing Reinsurer’s share, under this Contract, of
surrenders and benefits or liabilities paid by the Company, but not yet
recovered from the Subscribing Reinsurer, under the terms and provisions of
the Policies reinsured under this Contract; and
	 
	 	c.	 	Any other amounts necessary to secure the credit or reduction
from liability for
reinsurance taken by the Company.






	 	2.	 	Where the Letters of Credit will expire without renewal or be reduced or
replaced by Letters of Credit for a reduced amount and where the Subscribing
Reinsurer’s entire obligations under this Contract remain unliquidated and
undischarged ten (10) days prior to the termination date, to withdraw amounts equal
to the Subscribing Reinsurer’s share of the liabilities, to the extent that the
liabilities have not yet been funded by the Subscribing Reinsurer and exceed the
amount of any reduced or replacement Letters of Credit, and deposit those amounts in
a separate account in the name of the Company in a qualified U.S. financial
institution apart from its general assets, in trust for such uses and purposes as
specified above as may remain after withdrawal and for any period after the
termination date.






	D.	 	At annual intervals, or at the Company’s option, on a quarterly basis, the Company shall
prepare an adjusted statement of the Subscribing Reinsurer’s Obligations, for the sole
purpose of amending the Letters of Credit, in the following manner:






	 	1.	 	If the statement shows that the Subscribing Reinsurer’s Obligations exceed
the balance of credit as of the statement date, the Subscribing Reinsurer shall,
within fifteen (15) days after receipt of notice of such excess, secure delivery to
the Company of an amendment to the Letters of Credit increasing the amount of credit
by the amount of such difference.
	 
	 	2.	 	If, however, the statement shows that the Subscribing Reinsurer’s
Obligations are less than the balance of credit as of the statement date, the Company
shall, within fifteen (15) days after receipt of written request from the Subscribing
Reinsurer, release such excess credit by agreeing to secure an amendment to the
Letters of Credit reducing the amount of credit available by the amount of such
excess credit.





	 	 	 	 	 

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	E.	 	If the Subscribing Reinsurer fails to fund such Obligations by Letters of Credit as
described above, the Company may terminate this Contract at any time by the giving of
thirty (30) days prior written notice to the Subscribing Reinsurer.
	 
	F.	 	The coverage afforded by this Contract shall cease as of the date of termination and the
Subscribing Reinsurer shall return the unearned premium, if any. If coverage hereunder
terminates while a claim covered by this Contract is in progress, the Subscribing Reinsurer
shall be liable subject to all other conditions hereof for its proportion of the entire
claim, provided that the event giving rise to the claim started before such termination.
	 
	G.	 	If the Company elects to terminate this Contract, the Company shall have the option to
commute the Subscribing Reinsurer’s liability for loss(es), whether reported or unreported,
comprising the sum total of the present value of the ceded: (1) case reserves and allocated
loss adjustment expense, (2) projected ultimate losses, (3) any unearned premium reserve,
and (4) undiscounted outstanding paid claims (hereinafter the “Commutation Losses”), on
Policies covered by this Contract as of the effective date of termination.






	 	1.	 	The Company shall submit a statement of valuation showing the elements
considered reasonable to establish the Commutation Losses, and the Subscribing
Reinsurer shall pay the amount requested. In the event the Company and the
Subscribing Reinsurer cannot agree on the statement of valuation of the Subscribing
Reinsurer’s liability under such Policies, either party may request in writing that
the differences be settled by a panel of three actuaries. Each party shall appoint
an actuary to assess such liability within fifteen (15) days after receipt of the
written request for commutation. Upon such appointment, the two actuaries shall
appoint a third actuary. If the two actuaries fail to agree on the third actuary
within thirty (30) days of their appointment, each of them shall nominate three
individuals, of whom the other shall decline two, and the final decision shall be
made by drawing lots. The actuaries shall then investigate and capitalize such
Commutation Loss(es) within thirty (30) days. As used herein, “capitalize” shall
mean to determine the present value of Commutation Losses, without regard to the
Subscribing Reinsurer’s ability to pay such losses. The panel shall meet in Boston,
Massachusetts, unless the Company and Subscribing Reinsurer agree otherwise.
	 
	 	2.	 	All actuaries shall be disinterested in the outcome of the commutation and
shall be Fellows of the Society of Actuaries/Fellows of the Casualty Actuarial
Society. Except as stated below, the expense of the actuaries and of the commutation
shall be equally divided between the parties of the commutation.
	 
	 	3.	 	The decision in writing of the actuaries, when filed with the parties
hereto, shall be final and binding, except that if the Company does not agree with
the capitalized value of the Commutation Loss(es), the Company shall have no
obligation to commute. In the event the Company does not agree with the capitalized
value of the Commutation Loss(es) and does not move forward with commutation, the
expense of the actuaries including reasonable expense of the actuary appointed by
the Subscribing Reinsurer will be paid by the Company. If the Contract is commuted,
payment by the Subscribing Reinsurer to the Company or any other third party
mutually agreed upon by the Subscribing Reinsurer and the Company shall constitute a
complete and final release of the Subscribing Reinsurer in respect to its liability
under this Contract.






	H.	 	Termination under the terms of this Article can be made after the date of expiration of
this Contract.





	 	 	 	 	 

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ARTICLE
36 — THIRD PARTIES (LM-02700-2005.09.27-A)



This Contract shall not be deemed to give any right or remedy to any third party whatsoever
unless said right or remedy is specifically granted to such third party by the terms of this
Contract.



ARTICLE 37 — UNAUTHORIZED REINSURANCE (LM-02500-2006.10.26-A)



(Applies only to a Subscribing Reinsurer who at the inception of the Contract or at any time
thereafter does not qualify for full credit with any insurance regulatory authority having
jurisdiction over the Company’s reserves.)





	A.	 	As regards Policies issued by the Company coming within the scope of this Contract, the
Company agrees that when it shall file with the insurance regulatory authority or set up on
its books reserves for unearned premium and losses covered hereunder which it shall be
required by law to set up, it will forward to the Subscribing Reinsurer a statement showing
the proportion of such reserves which is applicable to the Subscribing Reinsurer. The
Subscribing Reinsurer hereby agrees to fund such reserves in respect of unearned premium,
known outstanding losses that have been reported to the Subscribing Reinsurer and allocated
loss adjustment expense relating thereto, losses and allocated loss adjustment expense paid
by the Company but not recovered from the Subscribing Reinsurer, plus reserves for losses
incurred but not reported as determined by the Company, as shown in the statement prepared
by the Company (hereinafter referred to as “Subscribing Reinsurer Obligations”) by funds
withheld, cash advances, or Letters of Credit unless the Company and the Subscribing
Reinsurer otherwise agree, and/or the method of funding is determined by applicable law,
statute, or regulation, the Subscribing Reinsurer shall agree to fund such Subscribing
Reinsurer Obligations by Letters of Credit.
	 
	B.	 	When funding by Letters of Credit, the Subscribing Reinsurer agrees to apply for and
secure timely delivery to the Company of clean, irrevocable, and unconditional Letters of
Credit issued by a bank that is a qualified U.S. financial institution and containing
provisions acceptable to the insurance regulatory authorities having jurisdiction over the
Company’s reserves in an amount equal to the Subscribing Reinsurer’s proportion of said
reserves. Such Letters of Credit shall be issued for a period of not less than one year,
and shall be automatically extended for one year from their date of expiration or any
future expiration date unless 60 days prior to any expiration date the issuing bank shall
notify the Company by certified mail that the issuing bank elects not to consider the
Letters of Credit extended for any additional period.
	 
	C.	 	The Subscribing Reinsurer and Company agree that the Letters of Credit provided by the
Subscribing Reinsurer pursuant to the provisions of this Contract may be drawn upon at any
time, notwithstanding any other provision of this Contract, and be utilized by the Company,
or any successor, by operation of law, of the Company, including without limitation, any
liquidator, rehabilitator, receiver, or conservator of the Company, without diminution
because of the insolvency of the Company or the Subscribing Reinsurer for one or more of
the following purposes:






	 	1.	 	To reimburse the Company for the Subscribing Reinsurer’s share of premiums
returned to the owners of Policies reinsured under this Contract because of
cancellations of the Policies;
	 
	 	2.	 	To reimburse the Company for the Subscribing Reinsurer’s share of
surrenders and benefits or losses paid by the Company under provisions of the
Policies reinsured under this Contract;
	 
	 	3.	 	To fund an account with the Company in an amount at least equal to the
deduction for reinsurance ceded from the Company’s liabilities for Policies ceded
under this Contract. The account shall include, but not be limited to, amounts for
Policy reserves, claims and





	 	 	 	 	 

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	 	 	 	losses incurred (including losses incurred but not reported), loss adjustment
expenses, and unearned premium reserves; and
	 
	 	4.	 	To pay any other amounts the Company claims are due under this Contract.






	D.	 	The issuing bank shall have no responsibility whatsoever in connection with the propriety
of withdrawals made by the Company or the disposition of funds withdrawn, except to ensure
that withdrawals are made only upon the order of properly authorized representatives of the
Company.
	 
	E.	 	At annual intervals, or at the Company’s option, on a quarterly basis, the Company shall
prepare a specific statement of the Subscribing Reinsurer’s Obligations, for the sole
purpose of amending the Letters of Credit, in the following manner:






	 	1.	 	If the statement shows that the Subscribing Reinsurer’s Obligations exceed
the balance of credit as of the statement date, the Subscribing Reinsurer shall,
within 30 days after receipt of notice of such excess, secure delivery to the Company
of an amendment to the Letters of Credit increasing the amount of credit by the
amount of such difference.
	 
	 	2.	 	If, however, the statement shows that the Subscribing Reinsurer’s
Obligations are less than the balance of credit as of the statement date, the Company
shall, within 30 days after receipt of written request from the Subscribing
Reinsurer, release such excess credit by agreeing to secure an amendment to the
Letters of Credit reducing the amount of credit available by the amount of such
excess credit.






	F.	 	Any and all disputes between the Company and any Subscribing Reinsurer or Reinsurers
(“Party”, individually, or “Parties”, collectively) arising out of, relating to, or
concerning this Article shall be resolved pursuant to the ARIAS-U.S. Newer Arbitrator
Program. Unless the Parties otherwise agree, the ARIAS Newer Arbitrator Program expedited
proceeding with a single Newer Arbitrator shall be used to resolve any such disputes.





	 	 	 	 	 

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IN WITNESS WHEREOF, the parties hereto have caused this Contract to be executed in triplicate, by
their duly authorized representatives.



In Boston, Massachusetts, this 8th day of September, 2010.




	 	 	 	 	 

	ATTEST:

	 	BRIDGEFIELD CASUALTY INSURANCE COMPANY	 	 
	 

	 	BRIDGEFIELD EMPLOYERS INSURANCE COMPANY	 	 
	 
	 	 	 	 
	/s/ Kristin Ciotti

	 	/s/ John D. Doyle	 	 
	 

Signature

	 	 

Signature
	 	 
	 
	 	 	 	 
	Kristin Ciotti

	 	John D. Doyle	 	 
	 

	 	 	 	 
	Name

	 	Name	 	 
	 
	 	 	 	 
	Assistant Secretary

	 	Vice President and Comptroller	 	 
	 

	 	 	 	 
	Title

	 	Title	 	 





And in
Boston, Massachusetts, this
8th day of September, 2010.




	 	 	 	 	 

	ATTEST:

	 	PEERLESS INSURANCE COMPANY	 	 
	 
	 	 	 	 
	/s/ Kristin Ciotti

	 	/s/ Michael J. Fallon	 	 
	 

Signature

	 	 

Signature
	 	 
	 
	 	 	 	 
	Kristin Ciotti

	 	Michael J. Fallon	 	 
	 

	 	 	 	 
	Name

	 	Name	 	 
	 
	 	 	 	 
	Assistant Secretary

	 	Treasurer and Chief Financial Officer	 	 
	 

	 	 	 	 
	Title

	 	Title	 	 





And in Boston, Massachusetts, this 8th day of September, 2010.




	 	 	 	 	 

	ATTEST:

	 	LIBERTY MUTUAL INSURANCE COMPANY	 	 
	 
	 	 	 	 
	/s/ Kristin Ciotti

	 	/s/ John D. Doyle	 	 
	 

Signature

	 	 

Signature
	 	 
	 
	 	 	 	 
	Kristin Ciotti

	 	John D. Doyle	 	 
	 

	 	 	 	 
	Name

	 	Name	 	 
	 
	 	 	 	 
	Assistant Secretary

	 	Vice President and Comptroller	 	 
	 

	 	 	 	 
	Title

	 	Title	 	 







	 	 	 	 	 

	Effective: January 1, 2010

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EXHIBIT A — FIRST EXCESS OF LOSS



SECTION
1 — LIMIT AND RETENTION (amounts shown are in terms of Ultimate Net Loss)





	A.	 	The Company shall retain the first $2,000,000 of Ultimate Net Loss as respects any one
Loss Occurrence. The Subscribing Reinsurer shall then be liable for the amount by which the
Company’s Ultimate Net Loss exceeds the retention of $2,000,000 but the liability of the
Subscribing Reinsurer shall never exceed $1,000,000 any one Loss.
	 
	B.	 	It is understood and agreed that the limit and retention described above applies to both
Bridgefield Casualty Insurance Company and Bridgefield Employers Insurance Company. Any Loss
Occurrence affecting each of them shall be combined with respect to the application of the
limit and retention set forth herein. The limit, retention and reinsurance recovery will be
allocated in the same ratio that the Ultimate Net Loss from each bears to the total Ultimate
Net Loss of the Company.




SECTION 2 — REINSTATEMENT





	A.	 	It is understood and agreed that each claim hereunder reduces the amount of indemnity
from the time of occurrence of the loss by the sum paid, but any amount so exhausted is
hereby reinstated from the time the Loss Occurrence commences without payment of additional
premium. For purposes of calculating reinstatement premium, the reinsurance premium shall
be multiplied by the ratio that each of the Bridgefield Casualty Insurance Company and
Bridgefield Employers Insurance Company’s reinsurance recovery bears to the total
reinsurance recovery of the Company.






SECTION 3 — DEFINITION




	A.	 	An “Act of Terrorism” for purposes of this Contract shall mean:







	 	1.	 	Any actual or threatened violent act or act harmful to human life, tangible or
intangible property or infrastructure directed towards or having the effect of (a)
influencing or protesting against any de jure or de facto government or policy
thereof, (b) intimidating, coercing or putting in fear a civilian population or
section thereof for the purpose of establishing or advancing a specific ideological,
religious or political system of thought, perpetrated by a specific individual or
group directly or indirectly through agents acting on behalf of said individual or
group or (c) retaliating against any country for direct or vicarious support by that
country of any other government or political system.
	 
	 	2.	 	Any act deemed or declared by the Federal Office of Homeland Security to be
terrorism or a terrorist act shall also be considered an “Act of Terrorism” for
purposes of this Contract.




SECTION 4 — REINSURANCE PREMIUM




	 	 	 	 	 
	 	 	Rate applied to
	First Layer	 	Subject Earned Premium
	Workers’ Compensation

	 	 	0.984	%
	 
	Estimated Subject Earned Premium:

	 	$	712,464,000	 






	 	 	 	 	 

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EXHIBIT B — SECOND EXCESS OF LOSS



SECTION
1 — LIMIT AND RETENTION (amounts shown are in terms of Ultimate Net Loss)





	A.	 	The Company shall retain the first $3,000,000 of Ultimate Net Loss as respects any one Loss
Occurrence. The Subscribing Reinsurer shall then be liable for the amount by which the
Company’s Ultimate Net Loss exceeds the retention of $3,000,000 but the liability of the
Subscribing Reinsurer shall never exceed $2,000,000 any one Loss Occurrence.
	 
	B.	 	It is understood and agreed that the limit and retention described above applies to both
Bridgefield Casualty Insurance Company and Bridgefield Employers Insurance Company. Any Loss
Occurrence affecting each of them shall be combined with respect to the application of the
limit and retention set forth herein. The limit, retention and reinsurance recovery will be
allocated in the same ratio that the Ultimate Net Loss from each bears to the total Ultimate
Net Loss of the Company.




SECTION 2 — REINSTATEMENT





	A.	 	It is understood and agreed that each claim hereunder reduces the amount of indemnity from the
time of occurrence of the loss by the sum paid, but any amount so exhausted is hereby
reinstated from the time the Loss Occurrence commences without payment of additional
premium. For purposes of calculating reinstatement premium, the reinsurance premium shall be
multiplied by the ratio that each of the Bridgefield Casualty Insurance Company and
Bridgefield Employers Insurance Company’s reinsurance recovery bears to the total
reinsurance recovery of the Company.




SECTION 3 — DEFINITION





	A.	 	An “Act of Terrorism” for purposes of this Contract shall mean:






	 	1.	 	Any actual or threatened violent act or act harmful to human life, tangible or
intangible property or infrastructure directed towards or having the effect of (a)
influencing or protesting against any de jure or de facto government or policy thereof,
(b) intimidating, coercing or putting in fear a civilian population or section thereof
for the purpose of establishing or advancing a specific ideological, religious or
political system of thought, perpetrated by a specific individual or group directly or
indirectly through agents acting on behalf of said individual or group or (c) retaliating
against any country for direct or vicarious support by that country of any other
government or political system.
	 
	 	2.	 	Any act deemed or declared by the Federal Office of Homeland Security to be
terrorism or a terrorist act shall also be considered an “Act of Terrorism” for purposes
of this Contract.




SECTION 4 — REINSURANCE PREMIUM




	 	 	 	 	 
	 	 	Rate applied to
	Second Layer	 	Subject Earned Premium
	Workers’ Compensation

	 	 	0.811	%
	 
	Estimated Subject Earned Premium:

	 	$	712,464,000	 







	 	 	 	 	 

	Effective: January 1, 2010

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EXHIBIT C — THIRD EXCESS OF LOSS



SECTION 1 — LIMIT AND RETENTION (amounts shown are in terms of Ultimate Net Loss)





	A.	 	The Company shall retain the first $5,000,000 of Ultimate Net Loss as respects any one
Loss Occurrence. The Subscribing Reinsurer shall then be liable for the amount by which the
Company’s Ultimate Net Loss exceeds the retention of $5,000,000 but the liability of the
Subscribing Reinsurer shall never exceed $5,000,000 any one Loss Occurrence and shall be
further limited in each calendar year during the term of this Contract to an aggregate
liability of $25,000,000.
	 
	B.	 	It is understood and agreed that the limit and retention described above applies to
both Bridgefield Casualty Insurance Company and Bridgefield Employers Insurance Company.
Any Loss Occurrence affecting each of them shall be combined with respect to the
application of the limit and retention set forth herein. The limit, retention and
reinsurance recovery will be allocated in the same ratio that the Ultimate Net Loss from
each bears to the total Ultimate Net Loss of the Company.




SECTION 2 — REINSTATEMENT





	A.	 	It is understood and agreed that each claim hereunder reduces the amount of indemnity from the
time of occurrence of the loss by the sum paid, but any amount so exhausted is hereby
reinstated from the time the Loss Occurrence commences without payment of additional
premium. For purposes of calculating reinstatement premium, the reinsurance premium
shall be multiplied by the ratio that each of the Bridgefield Casualty Insurance Company
and Bridgefield Employers Insurance Company’s reinsurance recovery bears to the total
reinsurance recovery of the Company.




SECTION 3 — DEFINITION





	A.	 	An “Act of Terrorism” for purposes of this Contract shall mean:






	 	1.	 	Any actual or threatened violent act or act harmful to human life, tangible or
intangible property or infrastructure directed towards or having the effect of (a)
influencing or protesting against any de jure or de facto government or policy
thereof, (b) intimidating, coercing or putting in fear a civilian population or
section thereof for the purpose of establishing or advancing a specific ideological,
religious or political system of thought, perpetrated by a specific individual or
group directly or indirectly through agents acting on behalf of said individual or
group or (c) retaliating against any country for direct or vicarious support by that
country of any other government or political system.
	 
	 	2.	 	Any act deemed or declared by the Federal Office of Homeland Security to be
terrorism or a terrorist act shall also be considered an “Act of Terrorism” for
purposes of this Contract.




SECTION 4 — REINSURANCE PREMIUM




	 	 	 	 	 
	 	 	Rate applied to
	Second Layer	 	Subject Earned Premium
	Workers’ Compensation

	 	 	0.284	%
	 
	Estimated Subject Earned Premium:

	 	$	712,464,000	 






	 	 	 	 	 

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EXHIBIT D — FOURTH EXCESS OF LOSS



SECTION 1 — LIMIT AND RETENTION (amounts shown are in terms of Ultimate Net Loss)





	A.	 	The Company shall retain the first $10,000,000 of Ultimate Net Loss as respects any one Loss
Occurrence. The Subscribing Reinsurer shall then be liable for the amount by which the
Company’s Ultimate Net Loss exceeds the retention of $10,000,000 but the liability of the
Subscribing Reinsurer shall never exceed $15,000,000 any one Loss Occurrence and shall be
further limited in all to $30,000,000 in each calendar year during the term of this Contract.
	 
	B.	 	It is understood and agreed that the limit and retention described above applies to both
Bridgefield Casualty Insurance Company and Bridgefield Employers Insurance Company. Any Loss
Occurrence affecting each of them shall be combined with respect to the application of the
limit and retention set forth herein. The limit, retention and reinsurance recovery will be
allocated in the same ratio that the Ultimate Net Loss from each bears to the total Ultimate
Net Loss of the Company.




SECTION 2 — REINSTATEMENT





	A.	 	It is understood and agreed that each claim hereunder reduces the amount of indemnity from the
time of occurrence of the loss by the sum paid, but any amount so exhausted is hereby
reinstated from the time the Loss Occurrence commences without payment of additional
premium. For purposes of calculating reinstatement premium, the reinsurance premium shall
be multiplied by the ratio that each of the Bridgefield Casualty Insurance Company and
Bridgefield Employers Insurance Company’s reinsurance recovery bears to the total
reinsurance recovery of the Company.




SECTION 3 — DEFINITION





	A.	 	An “Act of Terrorism” for purposes of this Contract shall mean;






	 	1.	 	Any actual or threatened violent act or act harmful to human life, tangible or
intangible property or infrastructure directed towards or having the effect of (a)
influencing or protesting against any de jure or de facto government or policy thereof,
(b) intimidating, coercing or putting in fear a civilian population or section thereof
for the purpose of establishing or advancing a specific ideological, religious or
political system of thought, perpetrated by a specific individual or group directly or
indirectly through agents acting on behalf of said individual or group or (c)
retaliating against any country for direct or vicarious support by that country of any
other government or political system.
	 
	 	2.	 	Any act deemed or declared by the Federal Office of Homeland Security to be
terrorism or a terrorist act shall also be considered an “Act of Terrorism” for purposes
of this Contract.




SECTION 4 — REINSURANCE PREMIUM




	 	 	 	 	 
	 	 	Rate applied to
	Second Layer	 	Subject Earned Premium
	Workers’ Compensation

	 	 	0.142	%
	 
	Estimated Subject Earned Premium:

	 	$	712,464,000	 






	 	 	 	 	 

	Effective: January 1, 2010

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SUPPLEMENT TO THE ATTACHMENTS



DEFINITION OF IDENTIFICATION TERMS USED WITHIN THE ATTACHMENTS




	A.	 	Wherever the term “Company” or “Reinsured” or “Reassured” or whatever other term is used to
designate the reinsured company or companies within the various attachments to the reinsurance
agreement, the term shall be understood to mean Company or Reinsured or Reassured or whatever
other term is used in the attached reinsurance agreement to designate the reinsured company or
companies.
	 
	B.	 	Wherever the term “Agreement” or “Contract” or “Policy” or whatever other term is used to
designate
the attached reinsurance contract within the various attachments to the reinsurance contract,
the
term shall be understood to mean Agreement or Contract or Policy or whatever other term is
used to
designate the attached reinsurance contract.
	 
	C.	 	Wherever the term “Reinsured” or “Reinsurers” or “Underwriters” or whatever other term is
used to
designate the reinsurer or reinsurers in the various attachments to the reinsurance
agreement, the
term shall be understood to mean Reinsurer or Reinsurers or Underwriters or whatever other
term is
used to designate the reinsuring company or companies.





INSOLVENCY FUNDS EXCLUSION CLAUSE



This Contract excludes all liability of the Company arising by Agreement, operation of law, or
otherwise from its participation or membership, whether voluntary or involuntary, in any
insolvency fund or from reimbursement of any person for any such liability. “Insolvency fund”
includes any guaranty fund, insolvency fund, plan, pool, association, fund or other arrangement,
howsoever denominated, established or governed, which provides for any assessment of or payment or
assumption by any person of part or all of any claim, debt, charge, fee, or other obligation of an
insurer, or its successors or assigns, which has been declared by any competent authority to be
insolvent or which is otherwise deemed unable to meet any claim, debt, charge, fee or other
obligation in whole or in part.




	 	 	 	 	 

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NUCLEAR INCIDENT EXCLUSION CLAUSE — LIABILITY — REINSURANCE — U.S.A. N.M.A. 1590





	1.	 	This reinsurance does not cover any loss or liability accruing to the Reassured as a member
of, or subscriber to, any association of insurers or reinsurers formed for the purpose of
covering nuclear energy risks or as a direct or indirect reinsurer of any such member,
subscriber or association.
	 
	2.	 	Without in any way restricting the operation of paragraph 1. of this Clause it is understood
and agreed that for all purposes of this reinsurance all the original Policies of the
Reassured (new, renewal and replacement) of the classes specified in Clause II. in this
paragraph 2. from the time specified in Clause III. in this paragraph 2. shall be deemed to
include the following provision (specified as the Limited Exclusion Provision):






	 	 	LIMITED EXCLUSION PROVISION*






	 	I.	 	It is agreed that the policy does not apply under any liability coverage, to
injury, sickness, disease, death or destruction, bodily injury or property damage with
respect to which an insured under the policy is also an insured under a nuclear energy
liability policy issued by Nuclear Energy Liability Insurance Association, Mutual Atomic
Energy Liability Underwriters or Nuclear Insurance Association of Canada, or would be an
insured under any such policy but for its termination upon exhaustion of its limit of
liability.
	 
	 	II.	 	Family Automobile Policies (liability only), Special Automobile Policies (private
passenger automobiles, liability only), Farmers Comprehensive Personal Liabilities
Policies (liability only), Comprehensive Personal Liability Policies (liability only) or
Policies of a similar nature; and the liability portion of combination forms related to
the four classes of Policies stated above, such as the Comprehensive Dwelling Policy and
the applicable types of Homeowners Policies.
	 
	 	III.	 	The inception dates and thereafter of all original Policies as described in II. above,
whether new, renewal or replacement, being Policies which either






	 	(a)	 	become effective on or after 1st May, 1960, or
	 
	 	(b)	 	become effective before that date and contain the Limited Exclusion
Provision set out above; provided this paragraph 2. shall not be applicable to
Family Automobile Policies, Special Automobile Policies, or Policies or combination
Policies of a similar nature, issued by the Reassured on New York risks, until 90
days following approval of the Limited Exclusion Provision by the Governmental
Authority having jurisdiction thereof.






	3.	 	Except for those classes of Policies specified in Clause II. of paragraph 2. and without in
any way restricting the operation of paragraph 1. of this Clause, it is understood and agreed
that for all purposes of this reinsurance the original liability Policies of the Reassured
(new, renewal and replacement) affording the following coverages:
	 
	 	 	Owners, Landlords and Tenants Liability, Agreementual Liability, Elevator Liability, Owners
or Agreementors (including railroad) Protective Liability, Manufacturers and Agreementors
Liability, Product Liability, Professional and Malpractice Liability, Storekeepers Liability,
Garage Liability, Automobile Liability (including Massachusetts Motor Vehicle or Garage
Liability) shall be deemed to include with respect to such coverages, from the time specified
in Clause V. of this paragraph 3., the following provision (specified as the Broad Exclusion
Provision):






	 	 	BROAD EXCLUSION PROVISION*
	 
	 	 	It is agreed that the policy does not apply:





	 	 	 	 	 

	N.M.A. 1590

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	 	I.	 	Under any Liability Coverage to injury, sickness, disease, death or destruction, bodily
injury or
property damage






	 	(a)	 	with respect to which an insured under the policy is also an insured under
nuclear energy liability policy issued by Nuclear Energy Liability Insurance
Association, Mutual Atomic Energy Liability Underwriters or Nuclear Insurance
Association of Canada, or would be an insured under any such policy but for its
termination upon exhaustion of its limit of liability; or
	 
	 	(b)	 	resulting from the hazardous properties of nuclear material and with
respect to which (1) any person or organization is required to maintain financial
protection pursuant to the Atomic Energy Act of 1954, or any law amendatory thereof,
or (2) the insured is, or had this Policy not been issued would be, entitled to
indemnity from the United States of America, or any agency thereof, under any
agreement entered into by the United States of America, or any agency thereof, with
any person or organization.






	 	II.	 	Under any Medical Payments Coverage, or under any Supplementary Payments
Provision relating to immediate medical or surgical relief, first aid, to expenses
incurred with respect to bodily injury, sickness, disease or death, bodily injury
resulting from the hazardous properties of nuclear material and arising out of the
question of a nuclear facility by any person or organization.
	 
	 	III.	 	Under any Liability Coverage, to injury, sickness, disease, death or
destruction, bodily injury or property damage resulting from the hazardous properties
of nuclear material, if






	 	(a)	 	the nuclear material (1) is at any nuclear facility owned by, or operated by
or on behalf of, an insured or (2) has been discharged or dispersed therefrom;
	 
	 	(b)	 	the nuclear material is contained in spent fuel or waste at any time
possessed, handled, used, processed, stored, transported or disposed of by or on
behalf of an insured; or
	 
	 	(c)	 	the injury, sickness, disease, death or destruction, bodily injury or
property damage arises out of the furnishing by an insured of services, materials,
parts or equipment in connection with the planning, construction, maintenance,
operation or use of any nuclear facility, but if such facility is located within the
United States of America, its territories, or possessions or Canada, this exclusion
(c) applies only to injury to or destruction of property at such nuclear facility,
property damage to such nuclear facility and any property threat.






	 	IV.	 	As used in this endorsement:






	 	 	 	“hazardous properties” include radioactive, toxic or explosive properties;
“nuclear material” means source material, special nuclear material or byproduct
material; “source material,” “special nuclear material,” and “byproduct material”
have the meanings given them in the Atomic Energy Act of 1954 or in any law
amendatory thereof; “spent fuel” means any fuel element or fuel component, solid
or liquid, which has been used or exposed to radiation in a nuclear reactor;
“waste” means any waste material (1) containing byproduct material other than the
tailings or wastes produced by the extraction or concentration of uranium or
thorium from any ore processed for its source material
	 
	 	 	 	content and (2) resulting from the operation by any person or organization of any
nuclear facility included within the definition of nuclear facility under
paragraph (a) or (b) thereof; “nuclear facility” means






	 	(a)	 	any nuclear reactor,





	 	 	 	 	 

	N.M.A. 1590

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	 	(b)	 	any equipment or device designed or used for (1) separating the
isotopes of uranium or plutonium, (2) processing or utilizing spent fuel,
or (3) handling, processing or packaging waste,
	 
	 	(c)	 	any equipment or device used for the processing,
fabricating or alloying of special nuclear material if at any time the
total amount of such material in the custody of the insured at the premises
where such equipment or device is located consists of or contains more than
25 grams of plutonium or uranium 233 or any combination thereof, or more
than 250 grams of uranium 235,
	 
	 	(d)	 	any structure, basin, excavation, premises or place
prepared or used for the storage or disposal of waste






	 	 	 	and includes the site on which any of the foregoing is located, all operations
conducted on such site and all premises used for such operations; “nuclear
reactor” means any apparatus designed or used to sustain nuclear fission in a
self-supporting chain reaction or to contain a critical mass of fissionable
material; with respect to injury to or destruction of property, the word
“injury” or “destruction” includes all forms of radioactive contamination of
property; “property damage” includes all forms of radioactive contamination of
property.






	 	V.	 	The inception dates and thereafter of all original Policies affording
coverages specified in this paragraph 3., whether new, renewal or replacement,
being Policies which become effective on or after 1st May, 1960, provided this
paragraph 3. shall not be applicable to






	 	(i)	 	Garage and Automobile Policies issued by the Reassured on New York risks, or
	 
	 	(ii)	 	Statutory liability insurance required under Chapter 90,
General Laws of Massachusetts, until 90 days following approval of the
Broad Exclusion Provision by the Governmental Authority having jurisdiction
thereof.






	4.	 	Without in any way restricting the operations of paragraph 1. of this Clause, it is
understood and agreed that paragraphs 2. and 3. above are not applicable to original
liability Policies of the Reassured in Canada, and that with respect to such Policies,
this Clause shall be deemed to include the Nuclear Energy Liability Exclusion Provisions
adopted by the Canadian Underwriters’ Association or the Independent Insurance Conference
of Canada.







 




			
	*	NOTE: 	The words printed in BOLD TYPE in the Limited Exclusion Provision and in the Broad
Exclusion Provision shall apply only in relation to original liability Policies which
include a Limited Exclusion Provision or a Broad Exclusion Provision containing those
words.





	 	 	 	 	 

	N.M.A. 1590

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NUCLEAR INCIDENT EXCLUSION CLAUSE — LIABILITY — REINSURANCE — CANADA





	 	 	N.M.A. 1979
	 
	1.	 	This Contract does not cover any loss or liability accruing to the Company as a member
of, or subscriber to, any association of insurers or reinsurers formed for the purpose of
covering nuclear energy risks or as a direct or indirect reinsurer of any such member,
subscriber or association.
	 
	2.	 	Without in any way restricting the operation of Paragraph 1. of this Clause, it is
agreed that for all purposes of this Contract all the original liability Contracts of the
Company, whether new, renewal or replacement, of the following classes, namely,






	 	 	 	Personal Liability

Farmers’ Liability

Storekeepers’ Liability






	 	 	which become effective on or after 31st December 1984, shall be deemed to include, from
their inception dates and thereafter, the following provision:
	 
	 	 	Limited Exclusion Provision -
	 
	 	 	This Policy does not apply to bodily injury or property damage with respect to which the
Insured is also insured under a Contract of nuclear energy liability insurance (whether
the Insured is unnamed in such Contract and whether or not it is legally enforceable by
the Insured) issued by the Nuclear Insurance Association of Canada or any other group or
pool of insurers or would be an Insured under any such Policy but for its termination upon
exhaustion of its limits of liability.
	 
	 	 	With respect to property, loss of use of such property shall be deemed to be property
damage.
	 
	3.	 	Without in any way restricting the operation of Paragraph 1. of this Clause, it is
agreed that for all purposes of this Contract all the original liability Contracts of the
Company, whether new, renewal or replacement, of any class whatsoever (other than Personal
Liability, Farmers’ Liability, Storekeepers’ Liability or Automobile Liability Contracts),
which become effective on or after 31st December 1984, shall be deemed to include, from
their inception dates and thereafter, the following provision:
	 
	 	 	Broad Exclusion Provision -
	 
	 	 	It is agreed that this Policy does not apply:






	 	(a)	 	to liability imposed by or arising under the Nuclear Liability Act; nor
	 
	 	(b)	 	to bodily injury or property damage with respect to which an Insured under
this Policy is also insured under a Contract of nuclear energy liability insurance
(whether the Insured is unnamed in such Contract and whether or not it is legally
enforceable by the Insured) issued by the Nuclear Association of Canada or any other
insurer or group or pool of insurers or would be an Insured under any such Policy but
for its termination upon exhaustion of its limit of liability; nor
	 
	 	(c)	 	to bodily injury or property damage resulting directly or indirectly from
the nuclear energy hazard arising from:






	 	(i)	 	the ownership, maintenance, operation or use of a nuclear facility by or on behalf of an Insured;
	 
	 	(ii)	 	the furnishing of an Insured of services, materials, parts or equipment in
connection with the planning, construction, maintenance, operation or use
of any nuclear facility; and





	 	 	 	 	 

	N.M.A. 1979

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	 	(iii)	 	the possession, consumption, use, handling, disposal or transportation of
fissionable substances, or of other radioactive material (except
radioactive isotopes, away from a nuclear facility, which have reached the
final stage of fabrication so as to be usable for any scientific, medical,
agricultural, commercial or industrial purpose) used, distributed, handled
or sold by an Insured.




As used in this Policy:





	(1)	 	The term “nuclear energy hazard” means the radioactive, toxic, explosive, or other
hazardous properties of radioactive material;
	 
	(2)	 	The term “radioactive material” means uranium, thorium, plutonium, neptunium,
their respective derivatives and compounds, radioactive isotopes of other elements and
any other substances that the Atomic Energy Control Board may, by regulation, designate
as being prescribed substances capable of releasing atomic energy, or as being requisite
for the production, use or application of atomic energy;
	 
	(3)	 	The term “nuclear facility” means:






	 	(a)	 	any apparatus designed or used to sustain nuclear fission in a
self-supporting chain reaction or to contain a critical mass of plutonium, thorium
and uranium or any one or more of them;
	 
	 	(b)	 	any equipment or device designed or used for (i) separating the isotopes
of plutonium, thorium and uranium or any one or more of them, (ii) processing or
utilizing spent fuel, or (iii) handling, processing or packaging waste;
	 
	 	(c)	 	any equipment or device used for the processing, fabricating or alloying
of plutonium, thorium or uranium enriched in the isotope uranium 233 or in the
isotope uranium 235, or any one or more of them if at any time the total amount of
such material in the custody of the Insured at the premises where such equipment or
device is located consists of or contains more than 25 grams of plutonium or
uranium 233 or any combination thereof, or more than 250 grams of uranium 235;
	 
	 	(d)	 	any structure, basin, excavation, premises or place prepared or used for
the storage or disposal of waste radioactive material; and includes the site on
which any of the foregoing is located, together with all operations conducted
thereon and all premises used for such operations.






	(4)	 	The term “fissionable substance” means any prescribed substance that is, or from
which can be obtained, a substance capable of releasing atomic energy by nuclear fission.
	 
	(5)	 	With respect to property, loss of use of such property shall be deemed to be property
damage.





	 	 	 	 	 

	N.M.A. 1979

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NUCLEAR INCIDENT EXCLUSION CLAUSE — REINSURANCE — NO. 4





	1.	 	This Reinsurance does not cover any loss or liability accruing to the Reassured as a member
of, or subscriber to, any association of insurers or reinsurers formed for the purpose of
covering nuclear energy risks or as a direct or indirect reinsurer of any such member,
subscriber or association.
	 
	2.	 	Without in any way restricting the operations of Nuclear Incident Exclusion Clauses, —
Liability, — Physical Damage, — Boiler and Machinery and paragraph 1. of this Clause, it is
understood and agreed that for all purposes of the reinsurance assumed by the Reinsurer from
the Reinsured, all original insurance Policies or Contracts of the Reinsured (new, renewal
and replacement) shall be deemed to include the applicable existing Nuclear Clause and/or
Nuclear Exclusion Clause(s) in effect at the time and any subsequent revisions thereto as
agreed upon and approved by the Insurance Industry and/or a qualified Advisory or Rating
Bureau.





	 	 	 	 	 

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WORKERS’ COMPENSATION CATASTROPHE EXCESS OF LOSS

REINSURANCE ADDENDUM 2

No. 0100300-SUM08




TO NOVATION AND AMENDMENT AGREEMENTS



EFFECTIVE JANUARY 1, 2010



between



BRIDGEFIELD CASUALTY INSURANCE COMPANY

BRIDGEFIELD EMPLOYERS INSURANCE COMPANY

Lakeland, Florida



(hereinafter referred to as the “Company”)



and



PEERLESS INSURANCE COMPANY 

Keene,
New Hampshire



(hereinafter referred to as the “Subscribing Reinsurer”)



	 	 	 

	Effective: January 1, 2010

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WORKERS’ COMPENSATION CATASTROHE EXCESS OF LOSS REINSURANCE ADDENDUM 2

No. 0100300-SUM08




	 	 	 	 	 	 	 	 	 
	Clause	 	Article Number	 	Page
	ACCESS TO RECORDS
	 	 	16	 	 	 	9	 
	ARBITRATION
	 	 	19	 	 	 	11	 
	ASSIGNMENT, NOVATION or TRANSFER
	 	 	4	 	 	 	2	 
	BUSINESS COVERED
	 	 	1	 	 	 	1	 
	COMMENCEMENT AND TERMINATION
	 	 	2	 	 	 	2	 
	COMMUTATION
	 	 	13	 	 	 	7	 
	CONFIDENTIALITY CLAUSE
	 	 	26	 	 	 	17	 
	CURRENCY
	 	 	15	 	 	 	9	 
	DEFINITIONS
	 	 	5	 	 	 	2	 
	DEFINITION OF LOSS OCCURRENCE
	 	 	10	 	 	 	6	 
	DIVIDENDS AND TAXES
	 	 	21	 	 	 	15	 
	ENTIRE AGREEMENT
	 	 	29	 	 	 	19	 
	ERRORS OR OMISSIONS
	 	 	17	 	 	 	10	 
	EXCLUSIONS
	 	 	6	 	 	 	2	 
	EXTRA CONTRACTUAL OBLIGATIONS
	 	 	11	 	 	 	6	 
	FEDERAL EXCISE TAX
	 	 	22	 	 	 	14	 
	FEDERAL TERRORISM RECOVERY
	 	 	30	 	 	 	19	 
	GOVERNING LAW
	 	 	27	 	 	 	18	 
	INSOLVENCY
	 	 	18	 	 	 	10	 
	INTEREST PENALTY
	 	 	20	 	 	 	13	 
	LOSS ADJUSTMENT AND SETTLEMENT
	 	 	9	 	 	 	5	 
	LOSS IN EXCESS OF POLICY LIMITS
	 	 	12	 	 	 	7	 
	OFFSET
	 	 	23	 	 	 	15	 
	REINSURER CLAIMS OBLIGATIONS
	 	 	32	 	 	 	22	 
	SALVAGE AND SUBROGATION
	 	 	14	 	 	 	8	 
	SELF INSURED OBLIGATIONS
	 	 	7	 	 	 	4	 
	SERVICE OF SUIT
	 	 	24	 	 	 	15	 
	SEVERABILITY
	 	 	28	 	 	 	18	 
	SPECIAL CONDITIONS
	 	 	31	 	 	 	19	 
	TERRITORY
	 	 	3	 	 	 	2	 
	ULTIMATE NET LOSS
	 	 	8	 	 	 	4	 
	UNAUTHORIZED REINSURANCE
	 	 	25	 	 	 	16	 
	 
	 	 	 	 	 	 	 	 
	ATTACHMENTS:
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	EXHIBIT A — FIRST EXCESS OF LOSS
	 	 	 	 	 	 	 	 
	EXHIBIT B — SECOND EXCESS OF LOSS
	 	 	 	 	 	 	 	 
	EXHIBIT C — THIRD EXCESS OF LOSS
	 	 	 	 	 	 	 	 
	WAR AND TERRORISM EXCLUSION ENDORSEMENT (NBCR)
	 	 	 	 	 	 	 	 






	 	 	 

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WORKERS’ COMPENSATION CATASTROPHE

EXCESS OF LOSS REINSURANCE ADDENDUM 2

No. 0100300-SUM08




(hereinafter referred to as the “Contract”)



between



BRIDGEFIELD CASUALTY INSURANCE COMPANY

BRIDGEFIELD EMPLOYERS INSURANCE COMPANY



Lakeland, Florida

(hereinafter referred to as the “Company”)



and



PEERLESS INSURANCE COMPANY



(hereinafter referred to as the “Subscribing Reinsurer”)


WHEREAS, the Company, the Subscribing Reinsurer and Liberty Mutual Insurance Company entered into
Novation and Amendment Agreements (“Novations”) effective January 1, 2010; and



WHEREAS, the Company, the Subscribing Reinsurer and Liberty Mutual Insurance Company did not
intend the business covered by this Contract to be subject to the Novations; and



WHEREAS, at all relevant times the Company, the Subscribing Reinsurer and Liberty Mutual Insurance
Company have acted in accordance with such intent and the terms and provisions of this Contract.



NOW, THEREFORE, IN CONSIDERATION, in consideration of the mutual promises and covenants contained
herein and for other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Company, the Subscribing Reinsurer and Liberty Mutual Insurance Company
agrees as follows:



ARTICLE 1 — BUSINESS COVERED



The Subscribing Reinsurer hereby agrees to indemnify the Company for all sums paid or payable for
losses occurring for Workers’ Compensation Policies in force at 12:01 a.m., Local Standard Time,
January 1, 2008, and new and renewed Policies becoming effective on or after said date, to the
extent and on the terms and conditions and subject to the exceptions, exclusions and limitations
hereinafter set forth and as provided in Exhibits A, B and C, which are attached hereto and made
part of this Contract. For purposes of identification, Exhibits A, B and C are entitled as follows:




	 	 	 

	EXHIBIT “A” –

	 	FIRST WORKERS’ COMPENSATION
	 

	 	CATASTROPHE EXCESS OF LOSS REINSURANCE
	 

	 	($75,000,000 excess $25,000,000)
	 
	 	 
	EXHIBIT “B” –

	 	SECOND WORKERS’ COMPENSATION
	 

	 	CATASTROPHE EXCESS OF LOSS REINSURANCE
	 

	 	($400,000,000 excess $100,000,000)
	 
	 	 
	EXHIBIT “C” –

	 	THIRD WORKERS’ COMPENSATION
	 

	 	CATASTROPHE EXCESS OF LOSS REINSURANCE
	 

	 	($700,000,000 excess $500,000,000)






	 	 	 	 	 

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ARTICLE 2 — COMMENCEMENT AND EXPIRATION





	A.	 	This Contract is effective with respect to Loss Occurrences taking place on or between 12:01
a.m., Local Standard Time, January 1, 2008 and 12:01 a.m., Local Standard Time, January 1, 2009.
Local Standard Time refers to the location of the risk.
	 
	B.	 	The Subscribing Reinsurer shall have no liability for losses arising out of occurrences
commencing
subsequent to 12:01 a.m., Local Standard Time, January 1, 2009, pursuant to this Addendum.
	 
	C.	 	If a Loss Occurrence covered hereunder is in progress at 12:01 a.m., Local Standard Time,
January 1, 2009, it is agreed that, subject to the other conditions of the Contract, the Subscribing
Reinsurer shall indemnify the Company as if the entire Loss Occurrence had occurred prior to 12:10
a.m., Local Standard Time, January 1, 2009.




ARTICLE 3 — TERRITORY (LM-02201-2005.06.02-A)



This Contract is worldwide in scope and shall cover risks wherever located.



ARTICLE 4 — ASSIGNMENT, NOVATION, OR TRANSFER (LM-00300-2005.08.24-A)



This Contract shall be binding upon and inure to the benefit of the Company and the Subscribing
Reinsurer and their respective successors and assigns; provided, however, that this Contract may
not be assigned, novated or transferred, including any attempted transfer of rights and/or
obligations under any U.S. or foreign statute, legislation or jurisprudence, by either the Company
or the Subscribing Reinsurer, or as the result of the actions of a parent company or affiliated
entity of either, without the prior written consent of the other. In the event of any assignment,
novation or transfer, the assignor, novator or transferor shall remain liable under this Contract,
and further guarantees the performance of all obligations of any assignee, novatee or transferee
under this Contract. Notwithstanding the foregoing, the Company may assign this Contract to an
affiliated entity, without the Subscribing Reinsurer’s written consent.



ARTICLE 5 — DEFINITIONS





	A.	 	The term “Policy” or “Policies,” as used in this Contract, means any written or oral binder,
policy, cover note, or contract of insurance or reinsurance and/or any endorsement to any of the
foregoing, issued, accepted, or held covered provisionally or otherwise, by or on behalf of the
Company for business covered under this Contract, except as excluded under Article 6 — Exclusions of
this Contract.
	 
	B.	 	The term “Workers’ Compensation Policies,” as used in this Contract, means Workers’
Compensation Policies, including all Policies providing coverage for benefits or other
amounts payable under any workers compensation law or any similar law; Employer’s Liability
coverage under any Policy; Foreign Voluntary Workers’ Compensation coverage under any Policy,
Foreign Workers’ Compensation coverage under any Policy; and Excess Workers’ Compensation and
Employers Liability coverage under any Policy.




ARTICLE 6 — EXCLUSIONS





	A.	 	This Contract does not apply to and specifically excludes the following:






	 	 	Section 1






	 	a.	 	Occupational Disease unless arising from a sudden and accidental event of not more than
forty-eight (48) hours in duration.





	 	 	 	 	 

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	 	b.	 	Cumulative Trauma.
	 
	 	c.	 	Nuclear Accident.
	 
	 	d.	 	All liability of the Company arising by contract, operation of law, or
otherwise, from its
participation or membership, whether voluntary or involuntary, in any insolvency
fund.
“Insolvency fund” includes any guaranty fund, insolvency fund, plan, pool,
association, fund
or other arrangement, however, denominated, established or governed, which provides
for
any assessment of or payment or assumption by the Company of part or all of any
claim,
debt, charge, fee or other obligation of any insurer, or its successors or assigns,
which has
been declared by any competent authority to be insolvent, or which is otherwise
deemed
unable to meet any claim, debt, charge, fee or other obligation in whole or in
part.
	 
	 	e.	 	Reinsurance Assumed except for inter-company.
	 
	 	f.	 	War and Terrorism as per the attached War and Terrorism Exclusions Endorsement
(NBCR).
	 
	 	g.	 	Loss arising out of injury and/or death to people while located in California
as the result of
the peril of earthquake (only as respects Exhibit C).




Section 2





	 	a.	 	Offshore Oil Rigs.
	 
	 	b.	 	Jones Act.
	 
	 	c.	 	Professional Sports Teams.
	 
	 	d.	 	Airline Crews, except USAIG business written on behalf of the Company.
	 
	 	e.	 	Any of the following occupations, employments or risks (except when not
disclosed to the
Company, when incidental to a non-excluded risk (the Company to be the sole judge
of
what is incidental) or when insured through voluntary or statutory pools or
assigned risk
plans):






	 	1)	 	The navigation and operation of vessels on the high seas in foreign commerce;
	 
	 	2)	 	Underground coal mining;
	 
	 	3)	 	Fireworks manufacturing;
	 
	 	4)	 	Manufacturing of fuses used with explosive risks and fireworks;
	 
	 	5)	 	Explosive risks, as per the following:






	 	(i)	 	Manufacture of any explosive substance intended for use as an explosive;
	 
	 	(ii)	 	Manufacture of any product, other than Fireworks
and Fuses, in which any such explosive substance is an ingredient;
	 
	 	(iii)	 	The loading of any such explosive substance
into containers for use as explosive objects, propellant charges or
detonating devices, and the incidental storage thereof;
	 
	 	(iv)	 	Handling, transportation or storage of any such
explosive substance intended solely for war purposes.






	B.	 	If any risks reinsured hereunder, but falling within the scope of the exclusions in Section
2 are
assigned to the Company under any assigned risk plan, the coverage afforded by this
Contract shall
apply to such risks, but only for the Policy limits prescribed by said plan, and subject to
the limits of
this Contract.
	 
	C.	 	The above exclusions within Section 2 shall not apply when they are merely incidental to the
main
operations of the insured, provided such main operations are covered by the Company and are
not
themselves excluded from the scope of this Contract. The Company shall be the sole judge of
what
is “incidental”.





	 	 	 	 	 

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	D.	 	Should the Company, by reason of an inadvertent act, error, or omission, be bound to
afford
coverage excluded hereunder within Section 2 the Subscribing Reinsurer shall waive the
exclusion(s). The duration of said waiver shall not extend beyond the time that notice of
such
coverage has been received by the responsible underwriting authority of the Company plus
the
minimum time period required thereafter for the Company, as applicable, to terminate such
coverage.
	 
	E.	 	The Company may submit to the Subscribing Reinsurer for special acceptance hereunder,
business
not covered by this Contract. If said business is accepted by the Subscribing Reinsurer, it
shall be
subject to the terms of this Contract, except as such terms are modified by such acceptance.
Any
special acceptance business covered under the reinsurance agreement being replaced by this
Contract shall be automatically covered hereunder. Further, should the Subscribing Reinsurer
become a party to this Contract subsequent to the acceptance of any business not normally
covered
hereunder, they shall automatically accept same as being a part of this Contract. The
Company
submitted and received approval for the following risks to be covered:
	 
	 	 	Insured: Pece of Mind Disposal, Inc.

Policy No.: 0830-34966

Policy Effective Dates: 08/27/07 – 08/27/08 and 08/27/08 – 08/31/09




ARTICLE 7 — SELF-INSURED OBLIGATIONS





	A.	 	A Policy issued by the Company wherein the Company, is named as the insured either alone or
jointly with another party shall, subject to the other terms and conditions of this
Contract, be deemed
to be a Policy coming within the scope of this Contract, notwithstanding that no legal
liability may
arise in respect thereof by reason of the fact that the Company is the insured or one of
the insureds.
	 
	B.	 	Any such Policy shall have been issued prior to loss on the same form and at the same
premium as
if the insured and the Company were dealing at arm’s length and claims, if any, under such
Policy
shall be settled strictly in accordance with the Policy conditions.




ARTICLE 8 — ULTIMATE NET LOSS (LM-02400-2006.11.08-A)





	A.	 	The term “Ultimate Net Loss” as used in this Contract shall mean: (1) all amounts paid or
due and
payable by the Company in the investigation, appraisal, adjustment, settlement, litigation,
defense or
appeal, or payment of claims or judgments arising from each and every loss occurrence for
which
the Company is or may be found liable under the Policies, less salvages and subrogation
recoveries
and amounts recovered or recoverable under pooling agreements or other reinsurances,
whether
collectible or not. “Ultimate Net Loss” includes, but is not limited to, the following paid
or due and
payable amounts: loss adjustment expenses, defense costs, court costs, supersedeas and
appeal
bond costs, Post or Prejudgment Interest and Delayed Damages, Attorneys Fees and Expenses,
Claim-Specific Declaratory Judgment Expenses, a pro rata share of salaries and expenses of
the
Company’s or its affiliates’ field employees according to the time occupied in adjusting,
defending,
and settling such loss, and expenses of all of the Company’s or its affiliates’ officers
and employees
incurred in connection with the loss; (except that salaries of officers and employees
engaged in
general management and located in the home office of the Company or its affiliates and any
office
expense of the Company or its affiliates shall not be included), and all other costs of
investigation
or litigation, (2) Extra Contractual Obligations (as defined in the Extra Contractual
Obligations
Article) and (3) Losses in Excess of Original Policy Limits (as defined in the Loss in
Excess of
Original Policy Limits Article).
	 
	B.	 	“Claim-Specific Declaratory Judgment Expenses” shall be defined as fees and expenses
incurred in
actions brought to determine whether the Company has a defense and/or indemnification
obligation
for individual claims presented against Policies covered under this Contract. Any
Claim-Specific





	 	 	 	 	 

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	 	 	Declaratory Judgment Expense shall be deemed to have been fully incurred on the same
date as the insured’s original loss (if any) giving rise to the action, unless otherwise
provided for within this Contract.
	 
	C.	 	The term “Attorneys’ Fees and Expenses” as used above, means the fees and expenses of
attorneys, including the fees and expenses of the Company’s or its affiliates’ in-house
attorneys
providing legal advice on coverage questions and/or defending the Company in coverage
litigation,
and fees and expenses of staff counsel in the defense of policyholder claims subject to this
Contract. Such Attorneys’ Fees and Expenses for in-house attorneys and staff counsel shall
be
calculated at the rate for such attorneys plus the expenses incurred by such attorneys, but
excluding
office expenses of the Company and its affiliates and salaries and expenses of their other
employees.
	 
	D.	 	“Post or Prejudgment Interest or Delayed Damages” shall mean interest or damages added to a
settlement, verdict, award, or judgment based on the period of time prior to or after the
settlement,
verdict, award, or judgment whether or not made part of the settlement, verdict, award, or
judgment.
	 
	F.	 	Nothing in this Article shall be construed to mean that losses under this Contract are not
recoverable
until the Ultimate Net Loss has been ascertained. In the event a verdict or judgment is
reduced by an appeal or a settlement subsequent to the entry of the judgment, thereby
resulting in an ultimate saving on such verdict or judgment, or in the event a judgment is
reversed outright, the loss adjustment expense incurred in securing such final reduction or
reversal shall be prorated between the Reinsurers and the Company in the proportion that
each benefits from such reduction or reversal, and the expenses incurred up to the time of
the original verdict or judgment shall be added to the Ultimate Net Loss. In the event there
is no reduction or reversal of a verdict or judgment, the loss adjustment expense incurred
in attempting to secure such reduction or reversal shall be added to the Ultimate Net Loss.




ARTICLE 9 — LOSS ADJUSTMENT AND SETTLEMENT (LM-01500-2006.09.07-A)





	A.	 	The Company shall give notice, as soon as practicable, to the Subscribing Reinsurer of any
claim
that it has reason to believe could involve this Contract. The Company shall keep the
Subscribing
Reinsurer informed of significant developments likely to affect the cost of any claim or
claims
hereunder.
	 
	B.	 	The Company may commence, continue, defend, settle, or withdraw from actions, suits, or
prosecutions and, generally, do all such things relating to any claim or loss in which the
Subscribing
Reinsurer is interested as, in the Company’s judgment, may be beneficial or expedient to
the
Company and the Subscribing Reinsurer. The Company shall be the sole judge as to what
claims
are covered under the Policies. All of the Ultimate Net Loss, as well as all loss
settlements made
and judgments paid by the Company, provided they are within the terms of this Contract
either
under the strict conditions of the Policies or by way of compromise, shall be
unconditionally binding
upon the Subscribing Reinsurer, who agrees to pay all amounts for which they are liable
immediately upon reasonable evidence of the amount due being furnished to the Subscribing
Reinsurer by the Company. The true intent of this Contract is that the Subscribing
Reinsurer shall,
in every case to which this Contract applies, follow the settlements of the Company.




ARTICLE 10 — DEFINITION OF LOSS OCCURRENCE




	 	 	 	 	 

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	A.	 	The term “Loss Occurrence”, as used in this Contract, shall mean any one accident or
occurrence
or series of accidents or occurrences arising out of one event. All losses that are
attributable
directly or indirectly to one cause or one series of similar causes shall be deemed to
constitute one
event.
	 
	B.	 	As regards an act of Terrorism, multiple incidents which occur within a one hundred
sixty-eight (168)
hour period and appear to be carried out in concert or to have a related purpose or common
leadership shall be considered one “Loss Occurrence”.
	 
	C.	 	An act of terrorism means any activity that (1) involves a violent act or the unlawful use
force or an
unlawful act dangerous to human life, tangible or intangible property or infrastructure,
or threat
thereof; and (2) appears to be intended to (i) intimidate or coerce a civilian population,
or any
segment thereof, or (ii) disrupt any segment of the economy of a government de jure or de
facto,
state, or country; or (iii) overthrow, influence, or affect the conduct or policy of any
government de
jure or de facto by intimidation or coercion; or (iv) affect the conduct of a
government de jure or de
facto by mass destruction, assassination, kidnapping or hostage-taking.
	 
	D.	 	However, with respect to Natural Disasters the term “Loss Occurrence” shall mean any one or
more
occurrences, disasters or casualties arising out of or caused by the perils described
below (a natural
Act of God) during any continuous period of one hundred sixty-eight (168) hours.






	 	1.	 	As regards the perils of tornado, cyclone, windstorm, hurricane and/or hail,
“loss occurrence” shall mean all losses occasioned by tornadoes, cyclones, windstorm,
hurricanes or hailstorms occurring during any continuous period of one hundred
sixty-eight (168) hours, and arising from the same atmospheric disturbance;
	 
	 	2.	 	As regards the peril of earthquake, “loss occurrence” shall mean all losses
occasioned by earthquakes, including ensuing fire, flood or tidal wave occurring
during any continuous period of one hundred sixty-eight (168) hours;
	 
	 	3.	 	As regards the following perils, “loss occurrence” shall mean all losses
occasioned by the following perils during any continuous period of one hundred
sixty-eight (168) hours:






	 	a)	 	Volcanic eruption;
	 
	 	b)	 	Flood, tides, tidal waves;
	 
	 	c)	 	Landslide/mudslide;
	 
	 	d)	 	Meteors.




ARTICLE 11 — EXTRA CONTRACTUAL OBLIGATIONS (LM-00900-2007.03.28-A)





	A.	 	This Contract shall protect the Company within the limits hereof for ninety percent (90%) of
Extra Contractual Obligations. “Extra Contractual Obligations” are defined as any actual or
potential liabilities not covered under any other provision of this Contract, arising from or
relating to any alleged or actual act, error or omission, whether intentional or otherwise,
or from any alleged or actual negligence, tortious conduct, reckless conduct, violations of
statutes or regulations governing the conduct of insurance companies and/or claims adjusters,
or bad faith in connection with: (i) the handling of any claim under the Policies covered by
this Contract, such liabilities arising because of, but not limited to, the following:
failure by the Company or by a third party claims administrator to settle within the Policy
limit, or by reason of alleged or actual negligence, fraud or bad faith of the Company or by
a third party claims administrator in rejecting an offer of settlement, or in defending or
prosecuting litigation, including appeals, arbitration, or any alternative dispute resolution
or settlement discussions involving any claim; or (ii) the providing of or failure to provide
any loss control or loss prevention services in connection with any Policy hereunder.





	 	 	 	 	 

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	B.	 	The date on which any Extra Contractual Obligation is incurred by the Company shall
be deemed, in all circumstances, to be the date of the original Occurrence, loss
occurrence, accident, casualty, disaster, or loss, as selected by the Company.
	 
	C.	 	However, this Article shall not apply where the loss has been incurred due to the
fraud of a member of the Board of Directors or a corporate officer of the Company acting
individually or collectively or in collusion with any individual or corporation or any
other organization or party involved in the presentation, defense or settlement of any
claim covered hereunder.





ARTICLE 12 — LOSS IN EXCESS OF ORIGINAL POLICY LIMITS (LM-01600-2005.08.24-A)





	A.	 	This Contract shall protect the Company within the limits hereof for ninety percent
(90%) of any Loss in excess of the Company’s original Policy limit where Loss in excess
of the limit has been incurred because of a failure by the Company or by a third-party
claims administrator to settle within the Policy limit or by reason of alleged or actual
negligence, fraud, or bad faith in rejecting an offer of settlement or in defending or
prosecuting litigation, including appeals, arbitration, or any alternative dispute
resolution or settlement discussions involving any claim.
	 
	B.	 	However, the above paragraph shall not apply where the loss has been incurred due
to the fraud of a member of the Board of Directors or a Corporate Officer of the
Company acting individually or collectively or in collusion with any individual or
corporation or any other organization or party involved in the presentation, defense or
settlement of any claim covered hereunder.
	 
	C.	 	With regard to excess of Policy limits, the word “Loss” shall mean any amounts for
which the Company would have been contractually liable to pay had it not been for the
limit of the original Policy. The date on which any Loss in excess of the Company’s
original Policy limit is incurred by the Company shall be deemed, in all circumstances,
to be the date of the original Occurrence, accident, casualty, disaster, loss
occurrence or loss, as selected by the Company.





ARTICLE 13 — COMMUTATION (LM-02601-2005.08.18-W)





	A.	 	Eighty-four (84) months after the expiry of this Contract, the Company shall advise the
Subscribing
Reinsurer of any loss occurrence which may not have been finally settled and which may
cause a claim under this Contract. Upon review, if either the Company or any
Subscribing Reinsurer requests commutation, such commutation shall proceed for all
Subscribing Reinsurers, as follows:






	 	1.	 	The Company shall prepare a final claim against the Subscribing Reinsurer
in respect of such Loss Occurrence.
	 
	 	2.	 	The Company and the Subscribing Reinsurer shall review the final claim
and shall attempt to reach settlement by mutual agreement.
	 
	 	3.	 	The final claim shall be calculated in accordance with the
following criteria:






	 	a.	 	Mortality assumptions shall be calculated from the
latest available United States Census Table as follows:






	 	•	 	Survivor Benefits      - Total Female or Male, whichever applies
	 
	 	•	 	Disability Benefits     - Total Population






	 	 	 	The mortality assumptions should reflect: (a) the mortality improvement
since the publication of the most recent U.S. Census Table, and (b) the
life impairment of the injured worker.
	 
	 	b.	 	Remarriage expectations shall be in accordance with the
assumptions used by the National Council on Compensation Insurance in its
statistical tables, adjusted for the gender of the survivor.





	 	 	 	 	 

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	 	c.	 	For all future medical costs, projected cash payments shall be based
upon projected long-term medical care and rehabilitation requirements, using
the average annual Medical Consumer Price Index (CPI) escalation rate of the
past twenty (20) years using the most recent published tables, going back
twenty (20) years.
	 
	 	d.	 	For all future indemnity costs, projected cash payments shall
be calculated based upon the average historical actual Cost-Of-Living
Adjustment (COLA) over, however many years of information are available, but
no more than twenty (20) years; up through the most recent published data that
is available from the State or Federal governing body over Workers
Compensation, whichever may apply.
	 
	 	e.	 	The annual interest discount percentage shall be calculated as
the average yield to maturity of all United States Treasury Bonds maturing
during the calendar quarter that is fifteen (15) years after the calendar
quarter in which the commutation date falls.
	 
	 	f.	 	The final claim shall be the amount of cash payments made,
plus the discounted present value of the future payments as determined by the
above calculations. The final claim with respect to each injured worker or
fatality shall then be capped at $10,000,000 ($5,000,000 as respects the
coverage provided in Exhibit A). The resulting individual values shall then be
summed together. The Company’s retention shall then be subtracted from this
amount and the Subscribing Reinsurer shall pay up to the per occurrence limit
afforded under this Contract.






	B.	 	In the event the Company and the Subscribing Reinsurer are unable to reach a settlement
following the criteria laid out in steps A.1.a-f above, then the Company and the Subscribing
Reinsurer shall, within four (4) weeks from the written request of one of the parties,
mutually appoint an independent actuarial consulting firm or, in the event that they fail to
agree on the selection of an independent actuarial consulting firm within four (4) weeks,
each party shall name three independent actuarial consulting firms of which the other party
shall decline two, and the decision shall be made by drawing lots. The appointed independent
actuarial consulting firm shall investigate, determine, and value the Loss Occurrence. The
valuation of such Loss Occurrence shall use the assumptions and methodologies as stated
above. The independent actuarial consulting firm’s decisions to the valuation of such final
claim shall be final and binding.
	 
	C.	 	Payment by the Subscribing Reinsurer to the Company or any other third party mutually agreed
upon by the Subscribing Reinsurer and the Company of the final claim as determined by the
procedures described above, in respect of each such Loss Occurrence shall constitute complete
release of the Subscribing Reinsurer from liability for each such Loss Occurrence.





ARTICLE 14 — SALVAGE AND SUBROGATION (LM-01800-2006.09.12-A)





	A.	 	The Subscribing Reinsurer shall be credited with its share of salvage and/or subrogation in
respect of claims and settlements under this Contract, less its share of recovery expense.
Unless the Company agrees to waive such rights in the settlement of a disputed claim, or the
Company and the Subscribing Reinsurer agree to the contrary, the Company shall enforce the
right to salvage and/or subrogation and shall prosecute all claims arising out of such right.
Should the Company refuse or neglect to enforce this right, the Subscribing Reinsurer is
hereby empowered and authorized to institute appropriate action in the name of the Company.
	 
	B.	 	Amounts recovered from salvage and/or subrogation and the expense of any salvage and/or
subrogation proceedings brought by the Company or the Subscribing Reinsurer to enforce such
rights shall be apportioned between the Company and the Subscribing Reinsurer in the ratio of
their respective interests in the total salvage and/or subrogations recovery, and shall be in
addition to the limits hereon. In the event there is a failure to obtain a salvage and/or
subrogation recovery, the





	 	 	 	 	 

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	 	 	expense of the proceedings shall be apportioned between the Company and the Subscribing
Reinsurer in the ratio of their respective interests in the total
Loss.
	 
	C.	 	All salvage and/or subrogation recoveries obtained by either party, subsequent to payments
made by the Subscribing Reinsurer under this Contract, shall be applied as if obtained prior
to said payments and all necessary adjustments shall be made between the Company and the
Subscribing Reinsurer as soon as practicable after said salvage and/or subrogation recovery
is obtained.
	 
	D.	 	The Company shall have the right, before the happening of the Loss, to waive its right of
subrogation as to that Loss.





ARTICLE 15 — CURRENCY (LM-00500-2005.08.09)



Whenever a reference to a monetary currency appears in this Contract, it shall be construed to
mean United States Dollars (“USD”). All payments made by either party shall be made in United
States Dollars. All amounts paid or received by the Company in any other currency shall be
converted into United States Dollars at the rate of exchange on the date at which it is entered on
the books of the Company.




ARTICLE 16 — ACCESS TO RECORDS (LM-00100-2007.08.13-A)





	A.	 	Except as otherwise provided in this Article, the Subscribing Reinsurer, or its duly
authorized representative, may upon reasonable prior written notice to the Company, at the
Subscribing Reinsurer’s own expense, examine at the offices of the Company or its affiliates,
during normal office hours, the Company’s Policy, accounting, underwriting, or claim records
and files, or any such additional relevant records and files, as they exist in the Company’s
or its affiliates’ possession or reasonable control, relating to business ceded under this
Contract. The Subscribing Reinsurer’s notice shall reasonably describe the nature of the
inspection that it wishes to conduct, the persons conducting the inspection and upon notice
of available files from the Company, the files that it wishes to review. Subject to the
limitations expressed in this Article, this right of inspection shall survive termination or
expiration of this Contract and shall continue as long as either Party has any rights or
obligations under this Contract.
	 
	B.	 	The Company reserves the right to deny the Subscribing Reinsurer access to records or files
concerning any particular claim(s) if the Subscribing Reinsurer has not disputed liability
for payment of such claim(s), and payment of such claim(s) is more than ninety (90) days
overdue according to the Company’s records. The Company shall, however, prior to an
arbitration demand that may be instituted by either party, continue to respond to reasonable
specific requests for information and questions raised by the Subscribing Reinsurer
concerning such claims; and nothing in this Article shall restrict the right or ability of
the Subscribing Reinsurer to seek discovery of relevant information in an arbitration
proceeding pursuant to the Arbitration Article of this Contract.
	 
	C.	 	As a condition precedent to access to records under this Article, the Subscribing Reinsurer,
its personnel and any authorized third party representative of the Subscribing Reinsurer
shall agree to the provisions of the Confidentiality Article of this Contract.
	 
	D.	 	The Company reserves the right to withhold any documents from the Subscribing Reinsurer (1)
concerning Trade Secrets of the Company or its affiliates, (2) subject to the terms of a
third party non-disclosure agreement with the Company or its affiliates requiring third party
consent to disclosure, (3) subject to the Work Product Privilege or Attorney-Client Privilege
or (4) concerning individual private information that as a matter of law cannot be disclosed
by the Company or its affiliates (hereinafter referred to in the Contract as “Privileged
Documents”). The Company shall reasonably try to exempt the Subscribing Reinsurers from any
third party non-disclosure agreement or obtain consent from the third party to disclose to
the Subscribing Reinsurers.





	 	 	 	 	 

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	E.	 	Notwithstanding the foregoing, the Company shall permit and not object to the Subscribing
Reinsurer’s access to Privileged Documents falling within (3) above, in connection with the
underlying claim reinsured hereunder following final settlement or final adjudication of the
case or cases involving such claim, with prejudice against all claimants, and all parties to
such adjudications; provided that the Company, may defer release of such Privileged
Documents if there are subrogation, contribution, or other third party actions with respect
to that claim or case, which might jeopardize the Company’s or its affiliates’ defense by
release of such Privileged Documents. In the event that the Company shall seek to defer
release of such Privileged Documents or to withhold documents concerning Trade Secrets, it
will in consultation with the Subscribing Reinsurer take other steps as reasonably necessary
to provide the Subscribing Reinsurer with the information it reasonably requires to
indemnify the Company without causing a loss of such privileges or protections. The
Subscribing Reinsurer, however, shall not have access to Privileged Documents relating to
any dispute between the Company and the Subscribing Reinsurer.
	 
	F.	 	For purposes of this Article, “Trade Secrets” shall have the meaning provided in Section
1839 of the United States Economic Espionage Act of 1996. “Attorney–Client Privilege” shall
mean communications of a confidential nature between 1) the Company or its affiliates, or
anyone retained by or in the control of the Company or its affiliates, or their in-house or
outside legal counsel, or anyone in the control of such legal counsel, and 2) any in-house or
outside legal counsel which relate to legal advice being sought by the Company or its
affiliates and/or which contains legal advice being provided to the Company or its
affiliates. “Work Product Privilege” shall mean communications, written materials and
tangible things prepared by or for in-house or outside counsel, or prepared by or for the
Company or its affiliates, in anticipation of or in connection with litigation, arbitration,
or other dispute resolution proceedings.





ARTICLE 17 — ERRORS AND OMISSIONS (LM-00800-2005.06.02-A)





	A.	 	Any inadvertent delay, omission, or error in complying with the terms and conditions of this
Contract shall not be held to relieve either party hereto from any liability, which would
attach to it hereunder if such delay, omission, or error had not been made, provided such
delay, omission, or error is rectified upon discovery.
	 
	B.	 	However, this Article shall not override the application of the commutation of losses as set
forth in Commutation Article.





ARTICLE 18 — INSOLVENCY (LM-01300-2005.08.24-A)



(If more than one reinsured company is referenced within the definition of “Company” in the
Preamble to this Contract, this Article shall apply severally to each such company. Further, this
Article and the laws of the domiciliary state shall apply in the event of the insolvency of any
company intended to be covered hereunder. In the event of a conflict between any provision of this
Article and the laws of the domiciliary state of any company intended to be covered hereunder, that
domiciliary state’s laws shall prevail.)





	A.	 	In the event of the insolvency of the Company, reinsurance under this Contract shall be payable
on demand, with reasonable provision for verification, on the basis of claims allowed against
the insolvent Company by any court of competent jurisdiction or by any liquidator, receiver,
conservator, or statutory successor of the Company having authority to allow such claims,
without diminution because of such insolvency or because such liquidator, receiver,
conservator, or statutory successor has failed to pay all or a portion of any claims. Such
payments by the Subscribing Reinsurer shall be made directly to the Company or its
liquidator, receiver, conservator, or statutory successor, except to the extent Section
4118(a) of the New York Insurance Law applies, or except (1) where the Contract specifically
provides another payee of such reinsurance in the event of the insolvency of the Company, or
(2) where the Subscribing Reinsurer with the consent of the direct insured or insureds has
assumed such Policy obligations of the Company as direct obligations of





	 	 	 	 	 

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	 	 	the Subscribing Reinsurer to the payees under such Policies and in substitution for the
obligations of the Company to such payees.
	 
	B.	 	It is agreed, however, that the liquidator, receiver, conservator, or statutory successor of
the insolvent Company shall give written notice to the Subscribing Reinsurer of the pendency
of a claim against the insolvent Company on the Policy or Policies reinsured within a
reasonable time after such claim is filed in the insolvency proceeding and that during the
pendency of such claim the Subscribing Reinsurer may investigate such claim and interpose, at
its own expense, in the proceeding where such claim is to be adjudicated, any defense or
defenses which it may deem available to the Company or its liquidator, receiver, conservator,
or statutory successor. The expense thus incurred by the Subscribing Reinsurer shall be
chargeable, subject to court approval, against the insolvent Company as part of the expense of
liquidation to the extent of a proportionate share of the benefit, which may accrue to the
Company solely as a result of the defense undertaken by the Subscribing Reinsurer.
	 
	C.	 	Where two or more Reinsurers are involved in the same claim and a majority in interest elects
to interpose defense to such claim, the expense shall be apportioned in accordance with the
terms of this Contract as though such expense had been incurred by the insolvent Company.
	 
	D.	 	Applicable to a Subscribing Reinsurer licensed to write Workers’ Compensation business
in California.




With respect to California Workers Compensation loss(es), it is agreed that in the event of
any delinquency proceeding, receivership, or insolvency of the Company and/or the failure of
the Subscribing Reinsurer, for any reason, to make payments under this Contract, the
Insurance Commissioner of California may, upon thirty (30)-days notice, draw upon any sums
from the deposit made by the Subscribing Reinsurer in accordance with the provisions of
sections 11691 – 11703 of the California Insurance Code.





ARTICLE 19 — ARBITRATION (LM-00200-2007.05.03-A)





	A.	 	Disputes to be Arbitrated. With the exception of any dispute resolution procedures
that are otherwise contained in this Contract, any and all disputes between the Company and
any Subscribing Reinsurer or Reinsurers (“Party” individually or “Parties” collectively)
arising out of, relating to, or concerning this Contract, whether sounding in contract or
tort and whether arising during or after this Contract’s formation, or after its termination,
including disputes as to whether the Contract was validly formed or is voidable, shall be
submitted to the decision of an arbitration panel (“Panel”). The Panel shall consist of an
umpire and two (2) party-appointed arbitrators unless a Party meets the requirements of
Paragraph C of this Article and demands arbitration pursuant thereto, in which case the Panel
would consist of an umpire only.
	 
	B.	 	Procedures. Except as provided herein, any arbitration shall be based upon the
Procedures for the resolution of U.S. Insurance and Reinsurance Disputes, Regular Panel
Version, dated April 2004 (the “Procedures”), developed by the Insurance and Reinsurance
Dispute Resolution Task Force, subject to the following modifications:






	 	1.	 	Qualifications of the arbitrators and umpires shall be in accordance with
Alternative section 6.2 of the Procedures.
	 
	 	2.	 	The Parties hereby designate the umpire list maintained by ARIAS (U.S.) as the
list to be used in the event that section 6.7(a) of the Procedures is invoked.
	 
	 	3.	 	Unless otherwise mutually agreed, the members of the Panel shall be impartial
and disinterested. The members of the Panel may not be: (1) in the control of any
Party or its parent, affiliate, or agent, (2) a former director or officer of any
Party or its parent, affiliate, or agent, or (3) a likely witness in the arbitration.
The requirement of impartiality means that all members of the Panel shall have the
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	 	 	 	and decisions with fairness and without consideration for the fact that Panel
members may have been appointed by one of the Parties. The requirement of
impartiality does not mean that any arbitrator can have no previous knowledge of or
experience with respect to issues involved in the dispute or disputes.
	 
	 	4.	 	The first sentence of Section 10.4 of the Procedures shall be replaced by the
following sentence: “The Panel shall require that each Party submit concise written
statements of position, including summaries of the facts and evidence a Party intends
to present, discussion of the applicable law and the basis for the requested Award or
denial of relief sought.”
	 
	 	5.	 	Once the Panel has been constituted, no Party (or anyone acting for a Party)
shall have any communications concerning the arbitration or any of the issues before
the Panel with any member of the Panel that is not also disclosed to all other Parties
and all members of the Panel. Each Panel member shall have a continuing duty to
disclose promptly to all Parties and all Panel members any violation of this
prohibition and the specifics of any improper communications that occurred. This
prohibition shall remain in place until all challenges to any arbitration awards and
decisions have been either waived or finally concluded.
	 
	 	6.	 	Section 11.1 of the Procedures shall be replaced by the following provision:
“The Parties may propound discovery seeking disclosure of such information and/or
documents relevant to the dispute or necessary for the proper resolution of the
dispute.”
	 
	 	7.	 	Position statements may be amended at any reasonable time, but not later than
the close of discovery without a showing to the Panel that the amending Party could
not reasonably have raised the new claim or issue at an earlier time.
	 
	 	8.	 	The Panel shall hold an evidentiary hearing, if one is necessary, within one
year of the arbitration demand, unless the Parties otherwise agree. Should a Party
seek a reasonable extension to this time frame for good cause shown, the other Party’s
agreement shall not be unreasonably withheld.
	 
	 	9.	 	To the extent permitted by the law, the Panel shall have the authority to
issue subpoenas and other orders to enforce its decisions.
	 
	 	10.	 	The Panel may award reasonable attorneys’ fees and arbitration costs to the
prevailing Party, as determined by the Panel.
	 
	 	11.	 	Section 14.3 of the Procedures shall be replaced by the following provision:
“The Panel shall make a decision and issue an award with regard to the terms expressed
in this Contract, and the custom and practice of the property and casualty insurance
and reinsurance business. The Panel shall not be obligated to follow the strict rules
of law and evidence.”






	C.	 	Alternative Streamlined Procedures. Notwithstanding the foregoing provisions of this
Article, the Alternative Streamlined Procedures set forth in section 16 of the Procedures, as
modified by sections B3, B4, and B9 through B11 of this Article, shall apply in the event
that, in a consolidated proceeding or otherwise, the Party initiating arbitration is seeking
payment of a total amount that is no greater than one million dollars ($1,000,000), or the
currency equivalent thereof. Sections 16.1, 16.2, 16.3 and the second sentence of section
16.4 of the Alternative Streamlined Procedures shall not apply. The Parties agree to comply
with section 6.7 of the Procedures to appoint a single umpire, and hereby designate the
umpire list maintained by ARIAS (U.S.) as the list to be used in section 6.7(a).
	 
	D.	 	Hearing Location. The hearing shall be held in Boston, Massachusetts, unless the
Parties mutually agree to a different location.
	 
	E.	 	Confirmation. Either Party may apply to a court of competent jurisdiction for an
order confirming any award of the Panel; a judgment of that court shall thereupon be entered
on any award. If such





	 	 	 	 	 

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	 	 	an order is issued, the Party against whom confirmation is sought shall pay the attorneys’
fees incurred of the Party who applied for the confirmation order and all court costs of
any such proceeding.
	 
	F.	 	Equitable Relief from a Court of Law. Nothing herein shall be construed to prevent
any participating Party from applying to a court of competent jurisdiction to issue a
restraining order or other equitable relief to maintain the “status quo” of the Parties
participating in the arbitration pending the decision and award by the Panel.
	 
	G.	 	Consolidated Proceedings.






	 	1.	 	Same contract, single Subscribing Reinsurer. Both the Company and any single
Subscribing Reinsurer on this Contract have the right to combine any and all disputes
between them that concern this Contract (including any renewal of this Contract or any
contract for which this Contract is a renewal) into a single arbitration proceeding
before a single Panel, except that the standard for determining whether a Party may add
a new issue, claim, or dispute to an arbitration proceeding shall be the standard for
amending a Position statement, as set forth in Paragraph B7 of this Article.
	 
	 	2.	 	Multiple contracts, single Subscribing Reinsurer. The Company has the right to
combine any and all disputes between the Company and a single Subscribing Reinsurer
into a single arbitration proceeding before a single Panel where such disputes involve
this Contract and any additional contracts between the two Parties, except that the
standard for determining whether a Party may add a new issue, claim, or dispute to an
arbitration proceeding shall be the standard for amending a Position statement, as set
forth in Paragraph B7 of this Article.
	 
	 	3.	 	Same contract, multiple Reinsurers. At the Company’s option, if more than one
Subscribing Reinsurer is involved in arbitration relating to this Contract, where
there are common questions of law or fact and a possibility of conflicting awards or
inconsistent results, all such Reinsurers shall constitute and act as one Party for
purposes of this Article and communications shall be made by the Company to each of
the Reinsurers constituting the one Party; provided, however, that the Reinsurers
shall have the right to assert several, rather than joint defenses or claims, and to
be represented by separate counsel. This provision shall not change the liability of
each of the Reinsurers under the terms of this Contract from several to joint.






	H.	 	Choice of Law. The law set forth in the Governing Law Article shall apply to this
Arbitration Article. In addition, to the extent the Panel (or the umpire in an Alternative
Streamlined Procedure) looks to applicable law, such Panel or umpire shall apply the law as
set forth in the Governing Law Article of this Contract.
	 
	I.	 	Survival of Article. This Article shall survive the termination or expiration of this
Contract.





ARTICLE 20 — INTEREST PENALTY (LM-01400-2005.08.24-A)





	A.	 	The interest amounts provided for in this Article shall apply to the Subscribing Reinsurer or to
the Company in the following circumstances:






	 	1.	 	If a loss payment owed by the Subscribing Reinsurer to the Company is not
received within forty five (45) calendar days following the date of presentation to
the Subscribing Reinsurer of information necessary to approve payment of the claim,
and/or
	 
	 	2.	 	If any premium payment owed by the Company to the Subscribing Reinsurer is
not received within forty five (45) calendar days following the date on which payment
is due, and/or





	 	 	 	 	 

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	 	3.	 	If any premium adjustment, agreed by either Party to the other, is not received
within one hundred fifty (150) calendar days following the expiry or anniversary of
this Contract, and/or
	 
	 	4.	 	If any return of premiums, commissions, profit sharing, or any amounts not
provided in subparagraphs 1, 2, and 3 above, are not received in accordance with the
date specified in this Contract or if no date is specified, within ninety (90)
calendar days following the date the debtor Party received the billing.






	B.	 	Failure by the Subscribing Reinsurer or Company to comply with their respective payment
obligations within the time periods as herein provided shall, as of that date, be subject to
an interest payment computed by multiplying the amount due by a variable rate consisting of
the U.S. Prime Rate as published in the Eastern Edition of The Wall Street Journal on
the first day of the calendar month in which the amount became past due, plus two percent
(2%). The variable rate shall be adjusted monthly thereafter to equal the U.S. Prime Rate as
published in the Eastern Edition of The Wall Street Journal on the first day of each
successive month during which the amount due remains unpaid, plus two percent (2%). The
product shall then be multiplied by 1/365 for each day after the due date that the amount due
and the interest amount remain unpaid. Any interest that occurs pursuant to this Article
shall be calculated by the Party to which it is owed.
	 
	C.	 	The validity of any claim or payment may be contested under the provisions of this
Contract. If the debtor Party prevails in arbitration or any other proceeding with respect
to the amounts in dispute, there shall be no interest penalty due. If the creditor Party
wholly or partially prevails on any of the amounts in dispute, the interest penalty shall be
awarded as outlined above. Such interest penalty shall be calculated from the date the
monies were due and owing to the date of resolution of the arbitration or proceeding, and
shall be payable as of the date of resolution of the arbitration or proceeding.
	 
	D.	 	If a Subscribing Reinsurer advances the entire or partial payment of any claim it is
contesting, and wholly or partially prevails in the contest, the Company shall promptly
return the applicable amount of such payment. The arbitrator(s) hearing such dispute shall
determine if interest shall be added to the amount returned by the Company.
	 
	E.	 	Any interest owing pursuant to this Article may be waived by the Party to which it is owed.
Further, any interest calculated pursuant to this Article that is one hundred dollars ($100)
or less shall be waived. Any waiver of any interest pursuant to this paragraph, however,
shall not affect the waiving Party’s right to claim and/or pursue interest for any other
failure by the other Party to make payment when due under this Article.





ARTICLE 21 — DIVIDENDS AND TAXES (LM-00600-2005.06.02-A)



In consideration of the terms of this Contract, the Company shall not claim any deduction in
respect of any amount paid as dividends or as reinsurance premium when making tax returns, other
than income or profits tax returns to any State or to the District of Columbia.




ARTICLE 22 — FEDERAL EXCISE TAX (LM-01000-2005.08.24-A)





	A.	 	This Article is applicable to any Subscribing Reinsurer who is domiciled outside of the
United States of America, except for any Subscribing Reinsurer exempt from Federal Excise
Tax. A Subscribing Reinsurer that claims exempt status from Federal Excise Tax shall provide
to the Company, upon its request, proof that the exempt status adequately satisfies the
demands of the U.S. Internal Revenue Agency and/or other applicable U.S. government
authority.





	 	 	 	 	 

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	B.	 	Each Subscribing Reinsurer shall allow the applicable percentage of the premium payable
hereon (as imposed under Section 4371 of the Internal Revenue Code) for the purpose of
paying Federal Excise Tax to the extent such premium is subject to such tax.
	 
	C.	 	In the event of any return of premium, the Subscribing Reinsurer shall deduct the aforesaid
percentage from the return premium payable hereon and the Company or its agent shall recover
such tax from the United States Government.





ARTICLE 23 — OFFSET (LM-01701-2005.06.02-A)



Each party to this Contract together with their successors or assigns shall have and may exercise,
at any time, the right to offset any balance(s) due the other (or, if more than one, any other)
under this Contract. Such offset may include balances due under this Contract regardless of whether
such balances arise from premiums, losses, or otherwise, provided however, that in the event of
insolvency of a party hereto, offsets shall only be allowed in accordance with the provisions of
the applicable law, statute, or regulation governing such offset.




ARTICLE 24 — SERVICE OF SUIT (LM-01900-2005.08.24-A)



(This Article applies to unauthorized Reinsurers and to Reinsurers who are domiciled outside the
United States of America.)





	A.	 	This Service of Suit Article will not be read to conflict with or override the obligations
of the parties to arbitrate their disputes as provided for in the Arbitration Article. This
Article is intended as an aid to compelling arbitration or enforcing such arbitration or
arbitral award, not as an alternative to the Arbitration Article for resolving disputes
arising out of this Contract.
	 
	B.	 	In the event of the failure of the Subscribing Reinsurer to pay any amount claimed to be due
hereunder, the Subscribing Reinsurer, at the request of the Company, will submit to the
jurisdiction of a Court of competent jurisdiction within the United States. Nothing in this
Article constitutes or should be understood to constitute a waiver of the Subscribing
Reinsurer’s right to commence an action in any Court of competent jurisdiction in the United
States, to remove an action to a United States District Court, or to seek a transfer of a
case to another Court as permitted by the laws of the United States or of any state in the
United States. The Subscribing Reinsurer, once the appropriate Court is selected, whether
such court is the one originally chosen by the Company and accepted by the Subscribing
Reinsurer or is determined by removal, transfer, or otherwise, as provided for above, will
comply with all requirements necessary to give said Court jurisdiction and, in any suit
instituted against any of them upon this Contract, will abide by the final decision of such
Court or of any Appellate Court in the event of an appeal.
	 
	C.	 	Service of process in such suit may be made upon Mendes & Mount, LLP, 750 Seventh Avenue,
New York, NY 10019-6829.
	 
	D.	 	The above-named are authorized and directed to accept service of process on behalf of the
Subscribing Reinsurer in any such suit. Further, pursuant to any statute of any state,
territory, or district of the United States that makes provision therefore, the Subscribing
Reinsurer hereby designates the Superintendent, Commissioner, or Director of Insurance, or
other officer specified for that purpose in the statute, or their successor(s) in office, as
their true and lawful attorney upon whom may be served any lawful process in any action,
suit, or proceedings instituted by or on behalf of the Company or any beneficiary hereunder
arising out of this Contract, and hereby designate the above-named as the person to whom the
said officer is authorized to mail such process or a true copy
thereof.





	 	 	 	 	 

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ARTICLE 25 — UNAUTHORIZED REINSURANCE (LM-02500-2006.10.26-A)



(Applies only to a Subscribing Reinsurer who at the inception of the Contract or at any time
thereafter does not qualify for full credit with any insurance regulatory authority having
jurisdiction over the Company’s reserves.)





	A.	 	As regards Policies or bonds issued by the Company coming within the scope of this Contract,
the Company agrees that when it shall file with the insurance regulatory authority or set up
on its books reserves for unearned premium and losses covered hereunder which it shall be
required by law to set up, it will forward to the Subscribing Reinsurer a statement showing
the proportion of such reserves which is applicable to the Subscribing Reinsurer. The
Subscribing Reinsurer hereby agrees to fund such reserves in respect of unearned premium,
known outstanding losses that have been reported to the Subscribing Reinsurer and allocated
loss adjustment expense relating thereto, losses and allocated loss adjustment expense paid by
the Company but not recovered from the Subscribing Reinsurer, plus reserves for losses
incurred but not reported as determined by the Company, as shown in the statement prepared by
the Company (hereinafter referred to as “Subscribing Reinsurer Obligations”) by funds
withheld, cash advances, or Letters of Credit. Unless the Company and the Subscribing
Reinsurer otherwise agree, and/or the method of funding is determined by applicable law,
statute, or regulation, the Subscribing Reinsurer shall agree to fund such Subscribing
Reinsurer Obligations by Letters of Credit.
	 
	B.	 	When funding by Letters of Credit, the Subscribing Reinsurer agrees to apply for and secure
timely delivery to the Company of clean, irrevocable, and unconditional Letters of Credit
issued by a bank that is a qualified U.S. financial institution and containing provisions
acceptable to the insurance regulatory authorities having jurisdiction over the Company’s
reserves in an amount equal to the Subscribing Reinsurer’s proportion of said reserves. Such
Letters of Credit shall be issued for a period of not less than one year, and shall be
automatically extended for one year from their date of expiration or any future expiration
date unless sixty (60) days prior to any expiration date the issuing bank shall notify the
Company by certified mail that the issuing bank elects not to consider the Letters of Credit
extended for any additional period.
	 
	C.	 	The Subscribing Reinsurer and Company agree that the Letters of Credit provided by the
Subscribing Reinsurer pursuant to the provisions of this Contract may be drawn upon at any
time, notwithstanding any other provision of this Contract, and be utilized by the Company,
or any successor, by operation of law, of the Company, including without limitation, any
liquidator, rehabilitator, receiver, or conservator of the Company, without diminution
because of the insolvency of the Company or the Subscribing Reinsurer for one or more of the
following purposes:






	 	1.	 	To pay or reimburse the Company for:






	 	a.	 	The Subscribing Reinsurer’s share under this Contract of
premiums returned, but not yet recovered from the Subscribing Reinsurer, to
the owners of Policies reinsured under this Contract on account of
cancellations of such Policies; and
	 
	 	b.	 	The Subscribing Reinsurer’s share, under this Contract, of
surrenders and benefits or losses paid by the Company, but not yet
recovered from the Subscribing Reinsurer, under the terms and provisions of
the Policies reinsured under this Contract; and
	 
	 	c.	 	The Subscribing Reinsurer’s share of any other amounts
necessary to secure the credit or reduction from liability for






	 	2.	 	Where the Letters of Credit will expire without renewal or be reduced or
replaced by Letters of Credit for a reduced amount and where the Subscribing
Reinsurer’s entire obligations under this Contract remain unliquidated and
undischarged ten (10) days prior to the termination date, to withdraw amounts equal to
the Subscribing Reinsurer’s share of the liabilities, to the extent that the
liabilities have not yet been funded by the Subscribing Reinsurer and exceed the
amount of any reduced or replacement Letters of Credit, and deposit those amounts in a
separate account in the name of the Company in a qualified





	 	 	 	 	 

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	 	 	 	U.S. financial institution apart from its general assets, in trust for such uses
and purposes specified in above as may remain after withdrawal and for any period
after the termination date.






	D.	 	The issuing bank shall have no responsibility whatsoever in connection with the propriety of
withdrawals made by the Company or the disposition of funds withdrawn, except to ensure that
withdrawals are made only upon the order of properly authorized representatives of the Company
as applicable.
	 
	E.	 	At annual intervals, or at the Company’s option, on a quarterly basis, the Company shall
prepare a specific statement of the Subscribing Reinsurer’s Obligations, for the sole purpose
of amending the Letters of Credit, in the following manner:






	 	1.	 	If the statement shows that the Subscribing Reinsurer’s Obligations exceed the
balance of credit as of the statement date, the Subscribing Reinsurer shall, within
thirty (30) days after receipt of notice of such excess, secure delivery to the
Company of an amendment to the Letters of Credit increasing the amount of credit by
the amount of such difference.
	 
	 	2.	 	If, however, the statement shows that the Subscribing Reinsurer’s Obligations
are less than the balance of credit as of the statement date, the Company shall,
within thirty (30) days after receipt of written request from the Subscribing
Reinsurer, release such excess credit by agreeing to secure an amendment to the
Letters of Credit reducing the amount of credit available by the amount of such excess
credit.






	F.	 	Any and all disputes between the Company and any Subscribing Reinsurer or Reinsurers
(“Party”, individually, or “Parties”, collectively) arising out of, relating to, or
concerning this Article shall be resolved pursuant to the ARIAS-U.S. Newer Arbitrator
Program. Unless the Parties otherwise agree, the ARIAS Newer Arbitrator Program expedited
proceeding with a single Newer Arbitrator shall be used to resolve any such disputes.





ARTICLE 26 — CONFIDENTIALITY (LM-00400-2005.11.10-A)





	A.	 	Confidential Information. The submission materials, and any Policy, financial,
underwriting, accounting, and claims information, data statements, representations, and other
materials provided by the Company or it affiliates and received by the Subscribing Reinsurer
in the course of an audit, inspection, or otherwise, represent confidential or proprietary
information (“Confidential Information”). This Confidential Information is intended for the
sole use of the Subscribing Reinsurer (and its retrocessionaires, respective auditors,
accountants, and legal counsel) as may be necessary in analyzing and/or accepting a
participation in and/or executing its responsibilities under or related to this Contract.
The Subscribing Reinsurer acknowledges and agrees that with respect to any review of
Confidential Information by the Subscribing Reinsurer, and/or discussion of Confidential
Information, the Company and its affiliates do not waive and do not intend to waive any
available privilege or protection. The review of Confidential Information by the Subscribing
Reinsurer and/or discussion of Confidential Information with the Company or its affiliates
shall not destroy, waive, or otherwise impair the proprietary and/or protected status of any
Confidential Information or any information revealed in such discussion with the personnel of
the Company or its affiliates, whether reviewed by and/or discussed with the Subscribing
Reinsurer intentionally or inadvertently, nor does the review of the Confidential Information
and/or discussion of Confidential Information with the Company or its affiliates constitute
an estoppel or waiver of the Company’s or its affiliates’ rights to assert the
attorney-client or work-product privileges, or any other applicable privilege or protection,
over certain documents contained in the Company’s or its affiliates’ files and/or certain
information.
	 
	B.	 	The Company and the Subscribing Reinsurer agree that no confidentiality obligations will
apply to Confidential Information to the extent such Confidential Information: (1) is or
becomes available to





	 	 	 	 	 

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	 	 	the public, other than as a result of impermissible disclosure by the Subscribing
Reinsurer, (2) was or became available lawfully to the Subscribing Reinsurer from a source,
other than the Company, its affiliates or their personnel, that is not subject to a
confidentiality obligation, (3) was developed independently by the Subscribing Reinsurer
prior to disclosure by the Company, its affiliates or their personnel, as demonstrated by
the Subscribing Reinsurer’s records, or (4) is required to be disclosed by law, regulation,
court, or regulatory agency action, subject to Paragraph E of this Article.
	 
	C.	 	The Subscribing Reinsurer agrees to preserve all confidentiality and privilege pertaining to
all Confidential Information provided by the Company and all knowledge and information gained
through its review of Confidential Information or discussions with the personnel of the
Company or its affiliates. The Subscribing Reinsurer further agrees not to disclose any such
Confidential Information to any other person or entity except as such disclosure may be
necessary to its retrocessionaires, accountants, attorneys, auditors, actuaries or third
party catastrophe modelers or as otherwise required by law. The Subscribing Reinsurer agrees
that no Confidential Information is to be copied and/or removed from the Company’s or its
affiliates’ premises without the express permission of the Company.
	 
	D.	 	Non-Public Personally Identifiable Information. Additionally, any disclosure of
non-public personally identifiable information shall comply with all state and federal
statutes and regulations governing the disclosure of non-public personally identifiable
information. “Non-public personally identifiable information” is financial or medical
information of or concerning a private person which either has been obtained from sources
which are not available to the general public or obtained from the person who is the subject
and which information is included in data files exchanged by the parties hereto. For the
purposes hereof, the terms shall include data elements such as names and addresses of
individuals. Disclosing or using this information for any purpose beyond the scope of this
Contract, or beyond the exceptions set forth above, is expressly forbidden without the prior
consent of the Company.
	 
	E.	 	Third-Party Demand. Should the Subscribing Reinsurer receive a third-party demand
pursuant to subpoena, summons, or court or governmental order, to disclose Confidential
Information (including Non-public personally identifiable information) that has been provided
by the Company or its affiliates, the Subscribing Reinsurer shall make commercially
reasonable efforts to notify the Company promptly upon receipt of the demand and prior to
disclosure of the Confidential Information and provide the Company a reasonable opportunity
to object to the disclosure. If the Company timely objects to the release of the Confidential
Information, the Subscribing Reinsurer will comply with the reasonable requests of the
Company in connection with the Company’s efforts to resist release of the Confidential
Information. The Company shall bear the cost of resisting the release of the Confidential
Information.
	 
	F.	 	Survival. The parties agree that the obligations contained in this Article shall
survive the expiration or termination of this Contract.





ARTICLE 27 — GOVERNING LAW (LM-01200-2005.06.02-A)



The validity and interpretation of this Contract shall be governed by and construed in accordance
with the law of the Commonwealth of Massachusetts.




ARTICLE 28 — SEVERABILITY (LM-02000-2005.06.02-A)



If any provision of this Contract shall be rendered illegal or unenforceable by the laws,
regulations, or public policy of any state, such provision shall be considered void in such state,
but this shall not affect the validity or enforceability of any other provision of this Contract or
the enforceability of such provision in any other jurisdiction.




	 	 	 	 	 

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ARTICLE 29 — ENTIRE AGREEMENT (LM-00701-2005.08.24-A)



This Contract and the Novations of which it forms a part, shall constitute the entire agreement
between the Company and the Subscribing Reinsurer with respect to the subject matter of this
Contract and shall supersede all prior understandings, negotiations and discussions, whether oral
or written, by or between the Company and the Subscribing Reinsurer relating to the subject matter
hereof. There are no general or specific warranties, representations or other agreements by or
among the Company and the Subscribing Reinsurer in connection with entering into this Contract
except as specifically set forth in this Contract. Notwithstanding the foregoing, this contract may
be amended or modified only by a writing signed by both the Company and the Subscribing Reinsurer.




ARTICLE 30 — FEDERAL TERRORISM EXCESS RECOVERY (LM-01100-2007.12.28-A)





	A.	 	Any loss reimbursement the Company receives from the United States Government under the
Terrorism Risk Insurance Act of 2002 and any subsequent amendments thereto (“TRIA”) as a
result of loss occurrences commencing during the term of this Contract shall apply as
follows:
	 
	B.	 	Except as provided below, any loss reimbursement under TRIA shall inure solely to the
benefit of the Company and shall be entirely disregarded in applying all of the provisions of
this Contract.
	 
	C.	 	If one or more loss occurrences commencing during the term of this Contract result(s) in
reinsurance recoveries to the Company under this Contract and reimbursement under TRIA, and
such amounts, together with any other reinsurance recoveries to the Company for said loss
occurrence(s), exceed the total amount of “Insured Losses” to the Company, any amount in
excess thereof shall be held by the Company. The Company shall then reimburse the Subscribing
Reinsurer a portion of such excess recovery in an amount equal to the proportion that the
Subscribing Reinsurer’s payment under this Contract bears to the total treaty reinsurance
recoveries to the Company for Insured Losses for said loss occurrence(s). Provided, however,
that in no event shall such reimbursement exceed the amount paid by the Subscribing Reinsurer
to the Company under this Contract.
	 
	D.	 	For purposes hereof, if a loss reimbursement received by the Company under TRIA is based on
the Company’s Insured Losses in more than one loss occurrence and neither the Secretary of
the Treasury nor his delegate specifies the amount of loss allocable to each respective loss
occurrence, the reimbursement shall be pro-rated in the proportion that the Company’s Insured
Losses in each loss occurrence bears to the Company’s total Insured Losses resulting from all
loss occurrences to which the reimbursement applies.
	 
	E.	 	For purposes of this Article, “Insured Loss (es)” shall have the same
meaning as set forth in Section 102(5) of TRIA.





ARTICLE 31 — SPECIAL CONDITIONS (LM-02100-2006.11.27-A)





	A.	 	This Article applies only in the event that:






	 	1.	 	A State Insurance Department or other legal authority orders the Subscribing
Reinsurer to cease writing business or has imposed upon it any other restrictions on
or conditions relating to the Subscribing Reinsurer’s license or conduct of business
in any jurisdiction; or
	 
	 	2.	 	The Subscribing Reinsurer has become insolvent or has been placed into
liquidation or receivership (whether voluntary or involuntary), or there have been
instituted against it proceedings for the appointment of a receiver, liquidator,
rehabilitator, conservator, trustee in bankruptcy, or other agent known by whatever
name, to take possession of its assets or control of its operations; or





	 	 	 	 	 

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	 	3.	 	The Subscribing Reinsurer’s policyholders’ surplus or equity has been reduced by
twenty five percent (25%) or there has been a twenty five percent (25%) reduction in
the Subscribing Reinsurer’s Stamp Capacity or funds at Lloyd’s at the inception of
this Contract; or
	 
	 	4.	 	The Subscribing Reinsurer has entered into a definitive agreement to become
merged with, acquired, or controlled by any unaffiliated company, corporation, or
individual(s) not controlling the Subscribing Reinsurer’s operations at the inception
of this Contract; or
	 
	 	5.	 	The Subscribing Reinsurer’s A.M. Best Rating has been assigned or downgraded
below A-or Standard and Poor’s Rating has been assigned or downgraded below A-; or
	 
	 	6.	 	The Subscribing Reinsurer fails to maintain its surplus at a level of at least
two hundred percent (200%) of the Subscribing Reinsurer’s Authorized Control Level
Risk-Based Capital; or
	 
	 	7.	 	The Subscribing Reinsurer announces intentions to cease underwriting operations; or
	 
	 	8.	 	The Subscribing Reinsurer voluntarily ceases underwriting operations; or
	 
	 	9.	 	The Subscribing Reinsurer has reinsured its entire liability
under this Contract; or.
	 
	 	10.	 	The Subscribing Reinsurer, directly or through the actions of a parent company
or an affiliated entity, has or has attempted to assign, novate or-transfer the
Subscribing Reinsurer’s rights and/or obligations under this Contract, including any
attempted transfer of rights and/or obligations under any U.S. or foreign statute,
legislation or jurisprudence, without the Company’s prior written consent; or
	 
	 	11.	 	The Subscribing Reinsurer, directly or through the actions of a parent company
or affiliated entity, has invoked any U.S. or foreign statute or jurisprudence which
purports to enable the Reinsurer to require the Company to settle its claims
liabilities, including but not limited to any estimated or undetermined claims
liabilities under this Contract, on an accelerated basis. This condition does not
apply to any attempt to enforce a settlement of claims liabilities under a commutation
process to which the Company has agreed.






	B.	 	If one or more of the above-stated circumstances occur, the Company shall provide the
Subscribing Reinsurer with a written statement of the Subscribing Reinsurer’s share of all
paid recoverables, case reserves, loss adjustment expenses, incurred but not reported losses,
reserves for unearned premium, and ceding commissions due under this Contract (collectively
“Obligations”). Within fifteen (15) days of the Subscribing Reinsurer’s receipt of such
statement, the Subscribing Reinsurer agrees to fund all Obligations by clean, irrevocable,
and unconditional Letters of Credit payable exclusively to the Company and issued by a bank
acceptable to the Company. At the Company’s request, the Subscribing Reinsurer shall agree to
provide separate Letters of Credit for any affiliates of the Company covered under this
Contract. Such Letters of Credit shall be issued for a period of not less than one year, and
shall be automatically extended for one year from their dates of expiration or any future
expiration dates, unless sixty (60) days prior to any expiration date the issuing bank shall
notify the Company by certified mail that the issuing bank elects not to extend any Letter of
Credit for any additional period.
	 
	C.	 	The Subscribing Reinsurer and Company agree that the Letters of Credit provided by the
Subscribing Reinsurer, pursuant to the provisions of this Contract, may be drawn upon at any
time, notwithstanding any other provision of this Contract, and be utilized by the Company
or any successor, by operation of law, of the Company, including without limitation, any
liquidator, rehabilitator, receiver, or conservator of the Company, without diminution
because of the insolvency of the Company or the Subscribing Reinsurer for one or more of the
following purposes:






	 	1.	 	To pay or reimburse the Company for:





	 	 	 	 	 

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	 	a.	 	The Subscribing Reinsurer’s share under this Contract of premiums
returned, but not yet recovered from the Subscribing Reinsurer, to the
owners of Policies reinsured under this Contract due to cancellations of
such Policies; and
	 
	 	b.	 	The Subscribing Reinsurer’s share, under this Contract, of
surrenders and benefits or liabilities paid by the Company but not yet
recovered from the Subscribing Reinsurer, under the terms and provisions of
the Policies reinsured under this Contract; and
	 
	 	C.	 	Any other amounts necessary to secure the credit or reduction from liability for
reinsurance taken by the Company.






	 	2.	 	Where the Letters of Credit will expire without renewal or be reduced or replaced by
Letters of Credit for a reduced amount and where the Subscribing Reinsurer’s
entire obligations under this Contract remain unliquidated and undischarged ten
(10) days prior to the termination date, to withdraw amounts equal to the
Subscribing Reinsurer’s share of the liabilities, to the extent that the
liabilities have not yet been funded by the Subscribing Reinsurer and exceed the
amount of any reduced or replacement Letters of Credit, and deposit those amounts
in a separate account in the name of the Company in a qualified U.S. financial
institution apart from its general assets, in trust for such uses and purposes as
specified above as may remain after withdrawal and for any period after the
termination date.






	D.	 	At annual intervals, or at the Company’s option, on a quarterly basis, the Company shall
prepare an adjusted statement of the Subscribing Reinsurer’s Obligations, for the sole
purpose of amending the Letters of Credit, in the following manner:






	 	1.	 	If the statement shows that the Subscribing Reinsurer’s Obligations exceed the
balance of credit as of the statement date, the Subscribing Reinsurer shall, within
fifteen (15) days after receipt of notice of such excess, secure delivery to the
Company of an amendment to the Letters of Credit increasing the amount of credit by the
amount of such difference.
	 
	 	2.	 	If, however, the statement shows that the Subscribing Reinsurer’s Obligations
are less than the balance of credit as of the statement date, the Company shall,
within fifteen (15) days after receipt of written request from the Subscribing
Reinsurer, release such excess credit by agreeing to secure an amendment to the
Letters of Credit reducing the amount of credit available by the amount of such excess
credit.






	E.	 	If the Subscribing Reinsurer fails to fund such Obligations by Letters of Credit as
described above, the Company may terminate this Contract at any time by the giving of thirty
(30) days prior written notice to the Subscribing Reinsurer.
	 
	F.	 	The coverage afforded by this Contract shall cease as of the date of termination and the
Subscribing Reinsurer shall return the unearned premium, if any. If coverage hereunder
terminates while a claim covered by this Contract is in progress, the Subscribing Reinsurer
shall be liable subject to all other conditions hereof for its proportion of the entire
claim, provided that the event giving rise to the claim started before such termination.
	 
	G.	 	If the Company elects to terminate this Contract, the Company shall have the option to
commute the Subscribing Reinsurer’s liability for loss(es), whether reported or unreported,
comprising the sum total of the present value of the ceded: (1) case reserves and allocated
loss adjustment expense, (2) projected ultimate losses, (3) any unearned premium reserve, and
(4) undiscounted outstanding paid claims (hereinafter the “Commutation Losses”), on Policies
covered by this Contract as of the effective date of termination.






	 	1.	 	The Company shall submit a statement of valuation showing the elements considered
reasonable to establish the Commutation Losses, and the Subscribing Reinsurer shall pay the
amount requested. In the event the Company and the Subscribing Reinsurer cannot agree on the
statement of valuation of the Subscribing Reinsurer’s liability under such





	 	 	 	 	 

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	 	 	 	Policies, either party may request in writing that the differences be settled by a
panel of three actuaries. Each party shall appoint an actuary to assess such
liability within fifteen (15) days after receipt of the written request for
commutation. Upon such appointment, the two (2) actuaries shall appoint a third
actuary. If the two (2) actuaries fail to agree on the third actuary within thirty
(30) days of their appointment, each of them shall nominate three (3) individuals,
of whom the other shall decline two (2), and the final decision shall be made by
drawing lots. The actuaries shall then investigate and capitalize such Commutation
Loss(es) within thirty (30) days. As used herein, “capitalize” shall mean to
determine the present value of Commutation Losses, without regard to the Subscribing
Reinsurer’s ability to pay such losses. The panel shall meet in Boston,
Massachusetts, unless the Company and Subscribing Reinsurer agree otherwise.
	 
	 	2.	 	All actuaries shall be disinterested in the outcome of the commutation and
shall be Fellows of the Society of Actuaries/Fellows of the Casualty Actuarial
Society. Except as stated below, the expense of the actuaries and of the commutation
shall be equally divided between the parties of the commutation.
	 
	 	3.	 	The decision in writing of the actuaries, when filed with the parties hereto,
shall be final and binding, except that if the Company does not agree with the
capitalized value of the Commutation Loss(es), the Company shall have no obligation to
commute. In the event the Company does not agree with the capitalized value of the
Commutation Loss(es) and does not move forward with commutation, the expense of the
actuaries, including reasonable expense of the actuary appointed by the Subscribing
Reinsurer, will be paid by the Company. If the Contract is commuted, payment by the
Subscribing Reinsurer to the Company or any other third party mutually agreed upon by
the Subscribing Reinsurer and the Company shall constitute a complete and final
release of the Subscribing Reinsurer in respect to its liability under this Contract.






	H.	 	Termination under the terms of this Article can be made after the date of expiration of this
Contract.





ARTICLE 32 — REINSURER CLAIMS OBLIGATIONS (LM-03100-2007.10.10-A)



It is understood and agreed that the Subscribing Reinsurer will fulfill its obligations under the
Loss Adjustment and Settlement Article, until all claims have been reported and settled. Without
first obtaining the Company’s written consent, the Subscribing Reinsurer will not, either directly
or as the result of an action of a parent company or an affiliated entity, invoke any U.S. or
foreign statute, legislation, or jurisprudence that purports to enable the Subscribing Reinsurer
to require the Company to settle their claims liabilities, including but not limited to any
estimated or undetermined claims liabilities, under this Contract on an accelerated basis. It is
further expressly understood and agreed that in the event the Subscribing Reinsurer attempts to
require the Company to settle their claims liabilities on an accelerated basis, the Company shall
continue to have the right to utilize or to draw upon Letters of Credit or other collateral, under
the terms of this Contract. This Article does not prevent the Company and the Subscribing
Reinsurer from settling any claims liabilities using a commutation process that is agreeable to
both parties. This Article shall in no way affect the rights and obligations of the Company and
the Subscribing Reinsurer under the Insolvency Article.




	 	 	 	 	 

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IN WITNESS WHEREOF, the parties hereto have caused this Contract to be executed in
triplicate, by their duly authorized representatives.



In Boston, Massachusetts, this 8th day of September, 2010.




	 	 	 	 	 

	ATTEST:

	 	BRIDGEFIELD CASUALTY INSURANCE COMPANY	 	 
	 

	 	BRIDGEFIELD EMPLOYERS INSURANCE COMPANY	 	 
	 
	 	 	 	 
	/s/ Kristin Ciotti

	 	/s/ John D. Doyle	 	 
	 

Signature

	 	 

Signature
	 	 
	 
	 	 	 	 
	Kristin Ciotti

	 	John D. Doyle	 	 
	 

	 	 	 	 
	Name

	 	Name	 	 
	 
	 	 	 	 
	Assistant Secretary

	 	Vice President and Comptroller	 	 
	 

	 	 	 	 
	Title

	 	Title	 	 





And in Boston, Massachusetts, this 8th day of September, 2010.




	 	 	 	 	 

	ATTEST:

	 	PEERLESS INSURANCE COMPANY	 	 
	 
	 	 	 	 
	/s/ Kristin Ciotti

	 	/s/ Michael J. Fallon	 	 
	 

Signature

	 	 

Signature
	 	 
	 
	 	 	 	 
	Kristin Ciotti

	 	Michael J. Fallon	 	 
	 

	 	 	 	 
	Name

	 	Name	 	 
	 
	 	 	 	 
	Assistant Secretary

	 	Treasurer and Chief Financial Officer	 	 
	 

	 	 	 	 
	Title

	 	Title	 	 





And in Boston, Massachusetts, this 8th day of September, 2010.




	 	 	 	 	 

	ATTEST:

	 	LIBERTY MUTUAL INSURANCE COMPANY	 	 
	 
	 	 	 	 
	/s/ Kristin Ciotti

	 	/s/ John D. Doyle	 	 
	 

Signature

	 	 

Signature
	 	 
	 
	 	 	 	 
	Kristin Ciotti

	 	John D. Doyle	 	 
	 

	 	 	 	 
	Name

	 	Name	 	 
	 
	 	 	 	 
	Assistant Secretary

	 	Vice President and Comptroller	 	 
	 

	 	 	 	 
	Title

	 	Title	 	 







	 	 	 	 	 

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EXHIBIT A




FIRST WORKERS’ COMPENSATION

CATASTROPHE EXCESS OF LOSS REINSURANCE

$75,000,000 excess $25,000,000



SECTION 1 — LIMIT AND RETENTION





	A.	 	Under this Exhibit the Subscribing Reinsurer shall be liable for the Ultimate Net Loss in
excess of $25,000,000 each Loss Occurrence (regardless of the number of policies under which
such loss is payable or the number of different interests insured) subject to a limit of
$75,000,000 each Loss Occurrence. The maximum contribution to the Ultimate Net Loss shall be
limited to a maximum per life recovery of $5,000,000 (discounted to net present value in
accordance with the provisions of the Commutation Article).
	 
	B.	 	Notwithstanding the Subscribing Reinsurer’s liability on each Loss Occurrence, the
Subscribing Reinsurer’s liability shall further be limited to $150,000,000 for all such loss
occurrences recoverable during the term of this Contract.
	 
	C.	 	It is understood and agreed that the limit and retention described above applies to the
Company, and to Liberty Mutual Insurance Company, Liberty Mutual Fire Insurance Company, and
all of their affiliates (other than the Company), hereinafter “the LMG Companies”. Any loss
occurrence affecting both the LMG Companies, on the one hand, and the Company, on the other,
shall be combined with respect to the application of the limit and retention set forth
herein. The limit, retention, and reinsurance recovery will be allocated to the Company in
the same ratio that the Ultimate Net Loss bears to the total Ultimate Net Loss of the
Company, on the one hand, and the LMG Companies, on the other. It is further understood and
agreed that the limit and retention described above applies to both Bridgefield Casualty
Insurance Company and Bridgefield Employers Insurance Company. Any Loss Occurrence affecting
each of them shall be combined with respect to the application of the limit and retention set
forth herein. The limit and retention will be allocated in the same ratio that the Ultimate
Net Loss from each bears to the total Ultimate Net Loss of the Company.





SECTION 2 — PREMIUM





	A.	 	The premium paid to the Subscribing Reinsurer under this Exhibit shall be calculated at a
rate of 0.005% of the gross net written premium for the Business Covered hereunder, as stated
in the Business Covered Article.
	 
	B.	 	The term “gross net written premium” shall mean gross written premiums less return premiums
for cancellations and reductions in rates and less premium paid for reinsurance inuring to
the Subscribing Reinsurer’s benefit, if any.
	 
	C.	 	The Company paid to the Subscribing Reinsurer a minimum and deposit premium of $37,000 in
equal quarterly installments of $9,250 on January 1, April 1, July 1 and October 1, 2008. For
purposes of calculating minimum and deposit premium paid by each of the Bridgefield Casualty
Insurance Company and Bridgefield Employers Insurance Company, the minimum and deposit premium
was multiplied by the ratio that the subject written premium of each bore to the total subject
written premium of the Company.
	 
	D.	 	The Company furnished to the Subscribing Reinsurer, a finalized statement of the actual gross
net written premium, as defined herein, for the previous year. The difference between the
minimum and deposit premium paid under this Exhibit and the actual gross net written premium
was settled to/from the Company.





	 	 	 	 	 

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	E.	 	The Company has provided to the Subscribing Reinsurer, any reports necessary for annual
statement purposes.





SECTION 3 — REINSTATEMENT





	A.	 	In the event of the whole or any portion of the coverage under this Exhibit being exhausted
by a loss occurrence, the amount so exhausted is automatically reinstated from the time of
the Loss Occurrence. The Company shall pay to the Subscribing Reinsurer for such
reinstatement an additional premium calculated at pro rata of 100% of the premium, being pro
rata as to the fraction of the face value under this Exhibit (being $75,000,000) reinstated.
For purposes of calculating reinstatement premium, the reinsurance premium is deemed to be
$10,800,000, multiplied by the ratio that the Company’s reinsurance recovery bears to the
total reinsurance recovery of the Company and the LMG Companies. It is further understood
for purposes of calculating reinstatement premium due from the Company, the reinsurance
premium shall be multiplied by the ratio that each of the Bridgefield Casualty Insurance
Company and Bridgefield Employers Insurance Company’s reinsurance recovery bears to the
total reinsurance recovery of the Company.
	 
	B.	 	Notwithstanding anything contained herein to the contrary, the Subscribing Reinsurer’s
liability under this Exhibit shall not exceed $75,000,000 for any one Loss Occurrence nor
$150,000,000 for loss or losses occasioned by all loss occurrences under this Exhibit during
the term of this Contract.
	 
	C.	 	In the event of a paid loss hereunder, there shall be simultaneous settlement of
reinstatement premium by the Company. In the event a reinstatement premium is paid prior to
the calculation of the annual premium in accordance with the first paragraph of SECTION 2 of
this Exhibit the reinstatement premium shall be provisionally calculated upon the deemed
premium of $10,800,000 for the LMG Companies and the Company and adjusted subsequently when
the premium adjustment is made for the LMG Companies and the Company.





SECTION 4 — SUBSCRIBING REINSURER INTERESTS AND LIABILITIES



It is hereby agreed by and between the Company on the one part and the Subscribing Reinsurer on the
other part that the Subscribing Reinsurer’s share in the interests and liabilities as set forth in
this Exhibit, shall be 50%.




	 	 	 	 	 

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EXHIBIT B




SECOND WORKERS’ COMPENSATION

CATASTROPHE EXCESS OF LOSS REINSURANCE

$400,000,000 excess $100,000,000)



SECTION 1 — LIMIT AND RETENTION





	A.	 	Under this Exhibit the Subscribing Reinsurer shall be liable for the Ultimate Net Loss in
excess of $100,000,000 each Loss Occurrence (regardless of the number of policies under which
such loss is payable or the number of different interests insured) subject to a limit of
$400,000,000 each Loss Occurrence. The maximum contribution to the Ultimate Net Loss shall be
limited to a maximum per life recovery of $10,000,000 (discounted to net present value in
accordance with the provisions of the Commutation Article).
	 
	B.	 	Notwithstanding Subscribing Reinsurer’s liability on each Loss Occurrence, Subscribing
Reinsurer’s liability shall further be limited to $800,000,000 for all such loss occurrences
recoverable during the term of this Contract.
	 
	C.	 	It is understood and agreed that the limit and retention described above applies to the
Company, and to Liberty Mutual Insurance Company, Liberty Mutual Fire Insurance Company, and
all of their affiliates (other than the Company), hereinafter “the LMG Companies”. Any loss
occurrence affecting both the LMG Companies, on the one hand, and the Company, on the other,
shall be combined with respect to the application of the limit and retention set forth
herein. The limit, retention, and reinsurance recovery will be allocated to the Company in
the same ratio that the Ultimate Net Loss bears to the total Ultimate Net Loss of the
Company, on the one hand, and the LMG Companies, on the other. It is further understood and
agreed that the limit and retention described above applies to both Bridgefield Casualty
Insurance Company and Bridgefield Employers Insurance Company. Any Loss Occurrence affecting
each of them shall be combined with respect to the application of the limit and retention set
forth herein. The limit and retention will be allocated in the same ratio that the Ultimate
Net Loss from each bears to the total Ultimate Net Loss of the Company.





SECTION 2 — PREMIUM





	A.	 	The premium paid to the Subscribing Reinsurer under this Exhibit shall be calculated at a
rate of 0.002% of the gross net written premium for the Business Covered hereunder, as state
in the Business Covered Article.
	 
	B.	 	The term “gross net written premium” shall mean gross written premiums less return premiums
for cancellations and reductions in rates and less premium paid for reinsurance inuring to
the Subscribing Reinsurer’s benefit, if any.
	 
	C.	 	The Company paid to the Subscribing Reinsurer a minimum and deposit premium of $15,000 in
equal quarterly installments of $3,750 on January 1, April 1, July 1 and October 1, 2008. For
purposes of calculating minimum and deposit premium paid by each of the Bridgefield Casualty
Insurance Company and Bridgefield Employers Insurance Company, the minimum and deposit
premium was multiplied by the ratio that the subject written premium of each bore to the
total subject written premium of the Company.
	 
	D.	 	The Company furnished to the Subscribing Reinsurer, a finalized statement of the actual
gross net written premium, as defined herein, for the previous year. The difference between
the minimum and deposit premium paid under this Exhibit and the actual gross net written
premium was settled to/from the Company.





	 	 	 	 	 

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	E.	 	The Company has provided to the Subscribing Reinsurer, any reports necessary for annual
statement purposes.





SECTION 3 — REINSTATEMENT





	A.	 	In the event of the whole or any portion of the coverage under this Exhibit being exhausted
by a loss occurrence, the amount so exhausted is automatically reinstated from the time of
the loss occurrence. The Company shall pay to the Subscribing Reinsurer for such
reinstatement an additional premium calculated at pro rata of 100% of the premium under this
Exhibit, being pro rata as to the fraction of the face value under this Exhibit (being
$400,000,000) reinstated. For purposes of calculating reinstatement premium, the reinsurance
premium is deemed to be $7,500,000, multiplied by the ratio that the Company’s reinsurance
recovery bears to the total reinsurance recovery of the Company and the LMG Companies. It is
further understood and agreed that the limit and retention described above applies to both
Bridgefield Casualty Insurance Company and Bridgefield Employers Insurance Company. Any Loss
Occurrence affecting each of them shall be combined with respect to the application of the
limit and retention set forth herein. The limit and retention will be allocated in the same
ratio that the Ultimate Net Loss from each bears to the total Ultimate Net Loss of the
Company.
	 
	B.	 	Notwithstanding anything contained herein to the contrary, the Subscribing Reinsurer’s
liability under this Exhibit shall not exceed $400,000,000 for any one Loss Occurrence nor
$800,000,000 for loss or losses occasioned by all loss occurrences under this Exhibit during
the term of this Contract.
	 
	C.	 	In the event of a paid loss hereunder, there shall be simultaneous settlement of
reinstatement premium by the Company. In the event a reinstatement premium is paid prior to
the calculation of the annual premium in accordance with the first paragraph of SECTION 2 of
this Exhibit the reinstatement premium shall be provisionally calculated upon the deemed
premium of $7,500,000 for the LMG Companies and the Company and adjusted subsequently when the
premium adjustment is made.





SECTION 4 — SUBSCRIBING REINSURER INTERESTS AND LIABILITIES



It is hereby agreed by and between the Company on the one part and the Subscribing Reinsurer on
the other part that the Subscribing Reinsurer’s share in the interests and liabilities as set
forth in this Exhibit, shall be 75%.




	 	 	 	 	 

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EXHIBIT C



SECOND WORKERS’ COMPENSATION

CATASTROPHE EXCESS OF LOSS REINSURANCE

$700,000,000 excess $500,000,000)




	A.	 	Under this Exhibit the Subscribing Reinsurer shall be liable for the Ultimate Net Loss in
excess of $500,000,000 each Loss Occurrence (regardless of the number of policies under which
such loss is payable or the number of different interests insured) subject to a limit of
$700,000,000 each Loss Occurrence. The maximum contribution to the Ultimate Net Loss shall be
limited to a maximum per life recovery of $10,000,000 (discounted to net present value in
accordance with the provisions of the Commutation Article).
	 
	B.	 	Notwithstanding Subscribing Reinsurer’s liability on each Loss Occurrence, Subscribing
Reinsurer’s liability shall further be limited to $1,400,000,000 for all such loss
occurrences recoverable during the term of this Contract.
	 
	C.	 	It is understood and agreed that the limit and retention described above applies to the
Company, and to Liberty Mutual Insurance Company, Liberty Mutual Fire Insurance Company, and
all of their affiliates (other than the Company), hereinafter “the LMG Companies”. Any loss
occurrence affecting both the LMG Companies, on the one hand, and the Company, on the other,
shall be combined with respect to the application of the limit and retention set forth
herein. The limit, retention, and reinsurance recovery will be allocated to the Company in
the same ratio that the Ultimate Net Loss bears to the total Ultimate Net Loss of the
Company, on the one hand, and the LMG Companies, on the other. It is further understood and
agreed that the limit and retention described above applies to both Bridgefield Casualty
Insurance Company and Bridgefield Employers Insurance Company. Any Loss Occurrence affecting
each of them shall be combined with respect to the application of the limit and retention set
forth herein. The limit and retention will be allocated in the same ratio that the Ultimate
Net Loss from each bears to the total Ultimate Net Loss of the Company.





SECTION 2 — PREMIUM





	A.	 	The premium paid to the Subscribing Reinsurer under this Exhibit shall be calculated at a
rate of 0.002% of the gross net written premium for the Business Covered hereunder, as stated
in the Business Covered Article.
	 
	B.	 	The term “gross net written premium” shall mean gross written premiums less return premiums
for cancellations and reductions in rates and less premium paid for reinsurance inuring to
the Subscribing Reinsurer’s benefit, if any.
	 
	C.	 	The Company paid to the Subscribing Reinsurer a minimum and deposit premium of $14,000 in
equal quarterly installments of $3,500 on January 1, April 1, July 1 and October 1, 2008. For
purposes of calculating minimum and deposit premium paid by each of the Bridgefield Casualty
Insurance Company and Bridgefield Employers Insurance Company, the minimum and deposit
premium was multiplied by the ratio that the subject written premium of each bore to the
total subject written premium of the Company.
	 
	D.	 	The Company furnished to the Subscribing Reinsurer, a finalized statement of the actual
gross net written premium, as defined herein, for the previous year. The difference between
the minimum and deposit premium paid under this Exhibit and the actual gross net written
premium was settled to/from the Company.
	 
	E.	 	The Company has provided to the Subscribing Reinsurer, any reports necessary for annual
statement purposes.





	 	 	 	 	 

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SECTION 3 — REINSTATEMENT





	A.	 	In the event of the whole or any portion of the coverage under this Exhibit being exhausted
by a loss occurrence, the amount so exhausted is automatically reinstated from the time of
the loss occurrence. The Company shall pay to the Subscribing Reinsurer for such
reinstatement an additional premium calculated at pro rata of 100% of the premium under this
Exhibit, being pro rata as to the fraction of the face value under this Exhibit (being
$700,000,000) reinstated. For purposes of calculating reinstatement premium, the reinsurance
premium is deemed to be $15,750,000, multiplied by the ratio that the Company’s reinsurance
recovery bears to the total reinsurance recovery of the Company and the LMG Companies. It is
further understood and agreed that the limit and retention described above applies to both
Bridgefield Casualty Insurance Company and Bridgefield Employers Insurance Company. Any Loss
Occurrence affecting each of them shall be combined with respect to the application of the
limit and retention set forth herein. The limit and retention will be allocated in the same
ratio that the Ultimate Net Loss from each bears to the total Ultimate Net Loss of the
Company.
	 
	B.	 	Notwithstanding anything contained herein to the contrary, the Subscribing Reinsurer’s
liability under this Exhibit shall not exceed $700,000,000 for any one Loss Occurrence nor
$1,400,000,000 for loss or losses occasioned by all loss occurrences under this Exhibit
during the term of this Contract.
	 
	C.	 	In the event of a paid loss hereunder, there shall be simultaneous settlement of
reinstatement premium by the Company. In the event a reinstatement premium is paid prior to
the calculation of the annual premium in accordance with the first paragraph of SECTION 2 of
this Exhibit the reinstatement premium shall be provisionally calculated upon the deemed
premium of $15,750,000 for the LMG Companies and the Company and adjusted subsequently when
the premium adjustment is made.





SECTION 4 — SUBSCRIBING REINSURER INTERESTS AND LIABILITIES



It is hereby agreed by and between the Company on the one part and the Subscribing Reinsurer on
the other part that the Subscribing Reinsurer’s share in the interests and liabilities as set
forth in this Exhibit, shall be 100%.




	 	 	 	 	 

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WAR AND TERRORISM EXCLUSION ENDORSEMENT (NBCR)



Notwithstanding any provision to the contrary within this reinsurance or any endorsement thereto
it is agreed that this reinsurance excludes all actual or alleged losses, liabilities, damage,
injuries, defense costs, costs or expense(s) directly or indirectly arising out of, contributed
by, caused by, resulting from, or in connection with any of the following regardless of any other
cause or event contributing concurrently or in any other sequence to the loss:





	(1)	 	war, invasion, acts of foreign enemies, hostilities or warlike operations (whether war be
declared or not), civil war, mutiny, revolution, rebellion, insurrection, uprising, military
or usurped power, confiscation by order of any public authority or government de jure or de
facto, martial law;
	 
	(2)	 	any act of terrorism.




For the purpose of this endorsement an act of terrorism means any activity that (1) involves a
violent act or the unlawful use force or an unlawful act dangerous to human life, tangible or
intangible property or infrastructure, or threat thereof; and (2) appears to be intended to (i)
intimidate or coerce a civilian population, or any segment thereof, or (ii) disrupt any segment of
the economy of a government de jure or de facto, state, or country; or (iii) overthrow, influence,
or affect the conduct or policy of any government de jure or de facto by intimidation or coercion;
or (iv) affect the conduct of a government de jure or de facto by mass destruction, assassination,
kidnapping or hostage-taking.



This endorsement also excludes from coverage all actual or alleged losses, liabilities, damages,
injuries, defense costs, costs or expenses directly or indirectly arising out of, contributed by,
caused by, resulting from or in connection with any action taken in controlling, preventing,
suppressing, retaliating against, or responding to (1), and/or (2) above.



However, with respect to (2) above, this exclusion only applies if one or more of the following
are attributable to an incident:





	(1)	 	The “terrorism” involves the use, release or escape of nuclear materials, or directly or
indirectly results in nuclear reaction or radiation or radioactive contamination; or
	 
	(2)	 	The “terrorism” is carried out by means of the dispersal or application of pathogenic or
poisonous biological or chemical materials; or
	 
	(3)	 	Pathogenic or poisonous biological or chemical materials are released, and it appears that
one purpose of the “terrorism” was to release such materials.




In the event any portion of this endorsement is found to be invalid or unenforceable, the
remainder shall remain in full force and effect.




	 	 	 	 	 

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WORKERS’ COMPENSATION EXCESS OF LOSS

REINSURANCE ADDENDUM 3

NO. 0100200-SUM09




TO NOVATION AND AMENDMENT AGREEMENTS



EFFECTIVE JANUARY 1,2010



between



BRIDGEFIELD CASUALTY INSURANCE COMPANY

BRIDGEFIELD EMPLOYERS INSURANCE COMPANY

Lakeland, Florida



(hereinafter referred to as the “Company”)



and



PEERLESS INSURANCE COMPANY

Keene, New Hampshire



(hereinafter referred to as the “Subscribing Reinsurer”)



	 	 	 

	Effective: January 1, 2010

	 	Workers’ Compensation Excess of Loss
	 

	 	Reinsurance Addendum 3
	 

	 	No. 0100200-SUM09






 









 





WORKERS’ COMPENSATION EXCESS OF LOSS REINSURANCE ADDENDUM 3

NO. 0100200-SUM09




	 	 	 	 	 	 	 	 	 
	CONTENTS	 	ARTICLE	 	PAGE
	ACCESS TO RECORDS
	 	 	14	 	 	 	8	 
	AMENDMENTS
	 	 	15	 	 	 	10	 
	ARBITRATION
	 	 	16	 	 	 	10	 
	ASSIGNMENT, NOVATION or TRANSFER
	 	 	17	 	 	 	12	 
	BUSINESS COVERED
	 	 	1	 	 	 	1	 
	CONFIDENTIALITY CLAUSE
	 	 	18	 	 	 	13	 
	CURRENCY
	 	 	19	 	 	 	14	 
	DIVIDENDS AND TAXES
	 	 	20	 	 	 	14	 
	EFFECTIVE DATE AND TERMINATION
	 	 	2	 	 	 	2	 
	ENTIRE AGREEMENT
	 	 	21	 	 	 	14	 
	ERRORS OR OMISSIONS
	 	 	22	 	 	 	14	 
	EXCLUSIONS
	 	 	9	 	 	 	4	 
	EXTRA CONTRACTUAL OBLIGATIONS
	 	 	8	 	 	 	4	 
	FEDERAL EXCISE TAX
	 	 	23	 	 	 	14	 
	FEDERAL TERRORISM EXCESS RECOVERY CLAUSE
	 	 	24	 	 	 	15	 
	GOVERNING LAW
	 	 	25	 	 	 	15	 
	INSOLVENCY
	 	 	26	 	 	 	15	 
	INTEREST PENALTY
	 	 	27	 	 	 	16	 
	LIMIT AND RETENTION
	 	 	4	 	 	 	2	 
	LOSS ADJUSTMENTS AND SETTLEMENTS
	 	 	28	 	 	 	17	 
	LOSS IN EXCESS OF POLICY LIMITS
	 	 	7	 	 	 	3	 
	LOSS OCCURRENCE
	 	 	11	 	 	 	7	 
	MEDIATION
	 	 	29	 	 	 	18	 
	OFFSET
	 	 	30	 	 	 	18	 
	REINSURANCE CLAIMS OBLIGATIONS
	 	 	31	 	 	 	19	 
	REINSURANCE PREMIUM
	 	 	12	 	 	 	7	 
	REPORTS AND REMITTANCES
	 	 	13	 	 	 	8	 
	SALVAGE AND SUBROGATION
	 	 	32	 	 	 	19	 
	SERVICE OF SUIT
	 	 	33	 	 	 	20	 
	SEVERABILITY
	 	 	34	 	 	 	20	 
	SPECIAL ACCEPTANCES
	 	 	10	 	 	 	7	 
	SPECIAL CONDITIONS
	 	 	35	 	 	 	20	 
	TERRITORY
	 	 	3	 	 	 	2	 
	THIRD PARTIES
	 	 	36	 	 	 	24	 
	ULTIMATE NET LOSS
	 	 	6	 	 	 	2	 
	UNAUTHORIZED REINSURENCE
	 	 	37	 	 	 	24	 
	WARRANTIES
	 	 	5	 	 	 	2	 
	ATTACHMENTS:
	 	 	 	 	 	 	 	 
	EXHIBIT A — FIRST EXCESS OF LOSS
	 	 	 	 	 	 	 	 
	EXHIBIT B — SECOND EXCESS OF LOSS
	 	 	 	 	 	 	 	 
	EXHIBIT C — THIRD EXCESS OF LOSS
	 	 	 	 	 	 	 	 
	INSOLVENCY FUNDS EXCLUSION CLAUSE
	 	 	 	 	 	 	 	 






	 	 	 

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NUCLEAR INCIDENT EXCLUSION CLAUSE — LIABILITY — REINSURANCE — U.S.A.

NUCLEAR INCIDENT EXCLUSION CLAUSE — LIABILITY — REINSURANCE — CANADA.

NUCLEAR INCIDENT EXCLUSION CLAUSE — REINSURANCE — NO. 4.




	 	 	 

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WORKER’S COMPENSATION EXCESS OF LOSS

REINSURANCE ADDENDUM 3

NO. 0100200-SUM09




(hereinafter referred to as the “Contract”)



between



BRIDGEFIELD CASUALTY INSURANCE COMPANY

BRIDGEFIELD EMPLOYERS INSURANCE COMPANY

Lakeland, Florida



(hereinafter referred to as the “Company”)



and



PEERLESS INSURANCE COMPANY

Keene, New Hampshire



(hereinafter referred to as the “Subscribing Reinsurer”)


WHEREAS, the Company, the Subscribing Reinsurer and Liberty Mutual Insurance Company entered
into Novation and Amendment Agreements (“Novations”) effective January 1, 2010; and



WHEREAS, the Company, the Subscribing Reinsurer and Liberty Mutual Insurance Company did not
intend the business covered by this Contract to be subject to the Novations; and



WHEREAS, at all relevant times the Company, the Subscribing Reinsurer and Liberty Mutual
Insurance Company have acted in accordance with such intent and the terms and provisions of
this Contract.



NOW, THEREFORE, IN CONSIDERATION, in consideration of the mutual promises and covenants
contained herein and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Company, the Subscribing Reinsurer and Liberty Mutual
Insurance Company agrees as follows:




ARTICLE 1 — BUSINESS COVERED





	A.	 	This Contract shall indemnify the Company on an excess of loss basis in respect of
the Ultimate Net Loss as a result of losses occurring for Policies in force at 12:01 a.m.
Local Standard Time, January 1, 2009, and new and renewal Policies becoming effective on
or after said date, subject to the terms and conditions contained herein.
	 
	B.	 	This Contract is solely between the Company and the Subscribing Reinsurer, and
nothing contained in this Contract shall create any obligations or establish any rights
against the Subscribing Reinsurer in favor of any person or entity not a party hereto.
	 
	C.	 	The term “Policies” shall mean each of the binders, policies, endorsements and
contracts of insurance or reinsurance on the business covered hereunder.





	 	 	 	 	 

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	D.	 	Under this Contract, the indemnity for reinsured loss applies only to Workers
Compensation and Employers Liability business written by the Company, except as may be
excluded under the Exclusions Article.





ARTICLE 2 — EFFECTIVE DATE AND TERMINATION





	A.	 	This Contract shall is effective with respect to losses occurring on or between 12:01
a.m., Local Standard Time, January 1, 2009 and 12:01 a.m. Local Standard Time, January 1,
2010.
	 
	B.	 	The Subscribing Reinsurer shall have no liability for losses occurring subsequent to
12:01 a.m. Local Standard Time, January 1, 2010.
	 
	C.	 	If a loss covered hereunder is in progress at 12:01 a.m. Local Standard Time, January 1,
2010, it is agreed that, subject to the other conditions of this Contract, the Subscribing
Reinsurer shall indemnify the Company as if the entire loss had occurred prior to 12:01 a.m.
Local Standard Time, January 1, 2010.





ARTICLE 3 — TERRITORY (LM-02200-2005.06.02-A)



The territorial limits of this Contract shall be identical with those of the Policies.




ARTICLE 4 — LIMIT AND RETENTION





	A.	 	The limits and retentions provided under this Contract are as set forth in the Exhibits
A., B. and C. attached hereto and made a part of this Contract.
	 
	B.	 	The Company’s retention and the Subscribing Reinsurer’s limit of liability for each Loss
Occurrence, set forth in Section I of the Exhibits A., B. and C. attached hereto, shall
apply irrespective of the number of Policies affected or number of hazards in one Policy,
except as provided for in the Warranties Article.
	 
	C.	 	Reinsurance of the Company’s retention, set forth in each Exhibit, shall not be deducted
in arriving at the Ultimate Net Loss herein.





ARTICLE 5 — WARRANTIES



Notwithstanding any other provision of this Contract, the maximum amount included in the Ultimate
Net Loss under this Contract shall be:





	A.	 	$5,000,000 each Life as respects Workers’ Compensation business;
	 
	B.	 	$2,000,000 Employers Liability coverage limit each Policy.





ARTICLE 6 — ULTIMATE NET LOSS (LM-02400-2008.05.13-A)





	A.	 	“Ultimate Net Loss” as used in this Contract shall mean: (1) all amounts paid or due and
payable by the Company in the investigation, appraisal, adjustment, settlement, litigation,
defense or appeal, or payment of claims or judgments arising from each and every loss,
and/or Loss Occurrence for which the Company is or may be found liable under the
Policies, less salvages





	 	 	 	 	 

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	 	 	and subrogation recoveries and amounts recovered or recoverable under pooling agreements
or other reinsurances, whether collectible, or not. “Ultimate Net Loss” includes, but is
not limited to, the following paid or due and payable amounts: loss adjustment expenses,
defense costs, court costs, supersedeas and appeal bond costs, Post or Prejudgment
Interest or Delayed Damages, Attorneys Fees and Expenses, Claim-Specific Declaratory
Judgment Expenses, a pro rata share of salaries and expenses of the Company’s or its
affiliates’ field employees according to the time occupied in adjusting, defending, and
settling such loss, and expenses of all of the Company’s or its affiliates’ officers and
employees incurred in connection with the loss; (except that salaries of officers and
employees engaged in general management of the Company or its affiliates’ and any office
expense of the Company or its affiliates’ shall not be included), and all other costs of
investigation or litigation (2) Extra Contractual Obligations (as defined in the Extra
Contractual Obligations Article), and (3) Loss in Excess of Original Policy Limits (as
described in the Loss in Excess of Original Policy Limits Article).
	 
	B.	 	Nothing herein shall be construed to mean that losses under this Contract are not
recoverable until the Company’s Ultimate Net Loss has been ascertained.
	 
	C.	 	“Claim-Specific Declaratory Judgment Expenses” shall mean the fees and expenses incurred
in actions brought to determine whether the Company has a defense and/or indemnification
obligation for individual claims presented against Policies covered under this Contract. Any
Claim-Specific Declaratory Judgment Expense shall be deemed to have been fully incurred on
the same date as the insured’s original loss or Loss Occurrence (if any) giving rise to the
action, unless otherwise provided for within this Contract.
	 
	D.	 	“Attorneys’ Fees and Expenses” as used above, shall mean all fees and expenses of
attorneys, including but not limited to the fees and expenses of the Company’s or its
affiliates’ in-house attorneys providing legal advice on coverage questions and/or defending
the Company in coverage litigation, and fees and expenses of staff counsel in the defense of
policyholder claims. Such Attorneys’ Fees and Expenses for in-house attorneys and staff
counsel shall be calculated at the rate for such attorneys plus the expenses incurred by
such attorneys, but excluding office expenses of the Company and its affiliates and salaries
and expenses of their other employees.
	 
	E.	 	“Post or Prejudgment Interest or Delayed Damages” shall mean interest or damages added to
a settlement, verdict, award, or judgment based on the period of time prior to or after the
settlement, verdict, award, or judgment whether or not expressly identified as such.





ARTICLE 7 — LOSS IN EXCESS OF POLICY LIMITS (LM-01600-2005.08.24-A)





	A.	 	This Contract shall protect the Company within the limits hereof, for 90% of any Loss in
excess of the Company’s original Policy limit where Loss in excess of the limit has been
incurred because of a failure by the Company or by a third-party claims administrator to
settle within the Policy limit or by reason of alleged or actual negligence, fraud, or bad
faith in rejecting an offer of settlement or in defending or prosecuting litigation,
including appeals, arbitration, or any alternative dispute resolution or settlement
discussions involving any claim.
	 
	B.	 	However, the above paragraph shall not apply where the Loss has been incurred due to the
fraud of a member of the Board of Directors or a Corporate Officer of the Company acting
individually or collectively or in collusion with any individual or corporation or any other
organization or party involved in the presentation, defense or settlement of any claim
covered hereunder.
	 
	C.	 	With regard to excess of Policy limits, the word “Loss” shall mean any amounts for which
the Company would have been contractually liable to pay had it not been for the limit of the
original Policy. The date on which any Loss in excess of the Company’s original Policy limit
is incurred by





	 	 	 	 	 

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	 	 	the Company shall be deemed, in all circumstances, to be the date of the original Loss
Occurrence, accident, casualty, disaster, or Loss, as selected by the Company.





ARTICLE 8 — EXTRA CONTRACTUAL OBLIGATIONS (LM-00900-2007.03.28-A)





	A.	 	This Contract shall protect the Company within the limits hereof for 90% of Extra Contractual
Obligations. “Extra Contractual Obligations” are defined as any actual or potential
liabilities not covered under any other provision of this Contract, arising from or relating
to any alleged or actual act, error or omission, whether intentional or otherwise, or from any
alleged or actual negligence, tortious conduct, reckless conduct, violations of statutes or
regulations governing the conduct of insurance companies and/or claims adjusters, or bad faith
in connection with: (i) the handling of any claim under the Policies covered by this Contract,
such liabilities arising because of, but not limited to, the following: failure by the Company
or by a third party claims administrator to settle within the Policy limit, or by reason of
alleged or actual negligence, fraud or bad faith of the Company or by a third party claims
administrator in rejecting an offer of settlement, or in defending or prosecuting litigation,
including appeals, arbitration, or any alternative dispute resolution or settlement
discussions involving any claim; or (ii) the providing of or failure to provide any loss
control or loss prevention services in connection with any Policy hereunder.
	 
	B.	 	The date on which any Extra Contractual Obligation is incurred shall be deemed, in all
circumstances, to be the date of the original Loss Occurrence, accident, casualty, disaster,
or loss, as selected by the Company.
	 
	C.	 	However, this Article shall not apply where the Loss has been incurred due to the fraud of a
member of the Board of Directors or a corporate officer of the Company acting individually or
collectively or in collusion with any individual or corporation or any other organization or
party involved in the presentation, defense or settlement of any claim covered hereunder.





ARTICLE 9 — EXCLUSIONS



THIS AGREEMENT DOES NOT COVER:





	A.	 	THE FOLLOWING GENERAL CATEGORIES






	 	1.	 	Assumed reinsurance other than inter-company agreements.
	 
	 	2.	 	Loss or damage caused directly or indirectly by:






	 	(a)	 	 foreign enemy attack by armed forces including action
taken by military, naval or air forces in resisting an actual or an immediately
impending enemy attack;
	 
	 	(b)	 	 invasion;
	 
	 	(c)	 	 insurrection;
	 
	 	(d)	 	 rebellion;
	 
	 	(e)	 	revolution;
	 
	 	(f)	 	intervention;
	 
	 	(g)	 	civil war;
	 
	 	(h)	 	 military or usurped power;
	 
	 	(i)	 	 hostilities;
	 
	 	(j)	 	bombardment;
	 
	 	(k)	 	martial law;
	 
	 	(l)	 	acts of foreign enemies; or





	 	 	 	 	 

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	 	(m)	 	confiscation by order of any government or public authority.
	 
	 	
However this exclusion would not apply to loss or damage covered under a standard
form of Policy containing a standard war exclusion clause.






	 	3.	 	All liability of the Company arising by contract, operation of the law, or
otherwise, from its participation or membership, whether voluntary or involuntary, in
any insolvency fund. “Insolvency Fund” includes any guaranty fund, insolvency fund,
plan, pool, association, fund or other arrangement, howsoever denominated,
established or governed, which provides for any assessment of or payment or
assumption by the Company of part or all of any claim, debt, charge, fee, or other
obligation on an insurer, or its successors or assigns, which has been declared by
any competent authority to be insolvent, or which is otherwise deemed unable to meet
any claim, debt, charge, fee or other obligation in whole or in part.
	 
	 	4.	 	Business derived from any Pool, Association, including Joint Underwriting
Association, Syndicate, Exchange, Plan, Fund or other facility directly as a member,
subscriber or participant, or indirectly by way of reinsurance or assessments;
provided this exclusion shall not apply to Automobile Liability or Workers
Compensation assigned risks which may be currently or subsequently covered
hereunder.
	 
	 	5.	 	Seepage and Pollution to the extent excluded in the original Policies and
endorsements except when a judicial entity invalidates the Policies’ exclusion or in
any jurisdiction whose regulatory authorities have prohibited the exclusion.
	 
	 	6.	 	Asbestos liability to the extent excluded in the original Policies and
endorsements except when a judicial entity invalidates the Policies’ exclusion or in
any jurisdiction whose regulatory authorities have prohibited the exclusion.
	 
	 	7.	 	Nuclear Risks as defined in the Nuclear Incident Exclusion Clauses which
are attached and made part of this Contract:






	 	a.	 	Nuclear Incident Exclusion Clause — Liability — Reinsurance — U.S.A.
	 
	 	b.	 	Nuclear Incident Exclusion Clause — Liability — Reinsurance — Canada.
	 
	 	c.	 	Nuclear Energy Risks Exclusion Clause (Reinsurance)
(1994) (Worldwide excluding U.S.A. and Canada).






	B.	 	THE FOLLOWING RISKS AS RESPECTS WORKERS COMPENSATION AND EMPLOYERS LIABILITY:






	 	1.	 	Airports, bridges unless the span is less than 75 feet between pillars,
tunnels, dams and reservoirs.
	 
	 	2.	 	Gas utilities.
	 
	 	3.	 	Gas and oil refineries. This exclusion is not to apply to the construction
and maintenance of such exposures which shall include, but not be limited to,
landscaping, road construction, excavation and water hauling, plumbing and
electrical services.
	 
	 	4.	 	The following classes of contractors;






	 	a.	 	insulation contractors, except insulation contractors installing
fiberglass or Styrofoam insulation and not involved in the removal of non-fiberglass or
Styrofoam insulation.






	 	6.	 	Any of the following occupations, employments or risks (except when not disclosed to
the Company or when incidental to a non-excluded risk (the Company to be the sole
judge of what is incidental) or when insured through voluntary or statutory pools
or assigned risk plans):






	 	a.	 	navigation and operation of vessels on the high seas in foreign commerce;





	 	 	 	 	 

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	 	b.	 	underground mining operations;
	 
	 	c.	 	fireworks manufacturing;
	 
	 	d.	 	manufacturing of fuses used with explosive risks and fireworks;
	 
	 	e.	 	explosive risks, as per the following:






	 	(i)	 	Manufacture of the explosive substance intended for use as an explosive;
	 
	 	(ii)	 	Manufacture of any product, other than Fireworks
and Fuses, in which any such explosive substance is an ingredient;
	 
	 	(iii)	 	The loading of any such explosive substance
into containers for use as explosive objects, propellant charges or
detonating devices, and the incidental storage thereof;
	 
	 	(iv)	 	Handling, transportation or storage of any such
explosive substance intended solely for war purposes.






	 	7.	 	Professional sports teams.
	 
	 	8.	 	Airline crews.
	 
	 	9.	 	Business in which the principal operations are classified as;






	 	a.	 	aviation;
	 
	 	b.	 	blasting services provided for others and business involving
the manufacture, transportation, handling or storage of fireworks, fuses, and
other substances made for the express purpose of exploding. This exclusion
shall not apply to commodities used industrially and which are only
incidentally explosive;
	 
	 	c.	 	operation of any carrier on rails; however, this exclusion
does not apply to Railroad Protective Liability forms.






	 	10.	 	Jones Act.
	 
	 	11.	 	Offshore Oil Rigs.






	C.	 	THE FOLLOWING RISKS AS RESPECTS TERRORISM
	 
	 	 	Terrorism losses arising from Airports, Bridges, Government Buildings, Nuclear Facilities,
Office Buildings over 25 stories, Security Services, Stadiums and Tunnels, Nuclear,
Biological and Chemical exposures, Explosive Manufacturing risks, Fertilizer mixing plants,
Railroads, Amusement/Theme parks with greater than 5,000 person capacity, Distribution and
manufacturing of weapons/munitions.






	D.	 	The above exclusions shall not apply when they are merely incidental to the main operations
of the insured, however this shall not apply to any incidental operations identified as
excluded in paragraph A1. through A.7. above. The Company shall be the sole judge of what is
“incidental” as documented in their underwriting files.
	 
	E.	 	In the Event the Company is inadvertently bound on any risk which is excluded under this
Program, the reinsurance provided under this Program shall apply to such risk until discovery
by the Company within its Home Office of the existence of such risk and for 45 days thereafter
or for the period required by statutes, and shall then cease unless thereafter or for the
period required by statutes, and shall then cease unless within such period the Company has
received from the Reinsurer written notice of its approval of such risk.
	 
	F.	 	Notwithstanding exclusions listed in A5 and A6 above, if a competent court has rendered
adverse judgment interpreting an ISO or Company exclusion workings, the Reinsurer will cover
that portion of the judgment regarding losses due to pollution subject to all terms and
conditions of this Program.





	 	 	 	 	 

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	G.	 	The Company and the Reinsurer have agreed on the Company’s Underwriting Guidelines
as respects Policies covered under this Program.





ARTICLE 10 — SPECIAL ACCEPTANCES



It is understood and agreed the Company may submit Risks excluded above to the Subscribing
Reinsurer for coverage hereunder and, if specifically accepted by the Subscribing Reinsurer,
such Risks shall then be covered under the terms of this Contract, except as such terms shall
be modified by such acceptance. A Subscribing Reinsurer’s failure to respond within 5 full
business days shall be deemed approval of a risk submitted for special acceptance. Once a Risk
has been accepted under the provisions of this Article, it will automatically be included at
renewal unless there have been material changes to the Risk, in which case the Risk will be
resubmitted. The Company submitted and received approval for the following risk to be covered:




Insured: Pece of Mind Disposal, Inc.

Policy No.: 0830-34965

Policy Effective Dates: 08/27/08 – 08/31/09 and 08/31/09 – 08/31/10




ARTICLE 11 — LOSS OCCURRENCE



The term “Loss Occurrence” shall mean any accident, disaster, casualty or happening or series
of accidents, disasters, casualties or happenings arising out of or following the same cause or
a series of similar causes. The term “Loss Occurrence” shall be held to include:





	A.	 	As respects an occupational or other disease or cumulative injury under Workers
Compensation and Employers Liability, each case of an employee contracting any disease for
which the Company may be liable shall be considered a separate and distinct occurrence and
the date of each occurrence shall be deemed to be as follows:






	 	1.	 	If the case is compensable under the Workers Compensation Law or any
Occupational Disease Compensation Act, the date of the beginning of the disability
for which compensation is payable;
	 
	 	2.	 	If the case is not compensable under the Workers Compensation Law or
any Occupational Disease Compensation Act, the date of the disability due to said
disease actually began;
	 
	 	3.	 	Where claim is made after employment has ceased, then the date of the
cessation of employment shall be deemed to be the date of disability;
	 
	 	4.	 	Notwithstanding the foregoing, in the incidence of a sudden
catastrophic event not exceeding 72 hours in duration including traumatic injury
or death, all losses to all employers shall be deemed a Loss Occurrence.





ARTICLE 12 — REINSURANCE PREMIUM



The rates set forth in Section 4 of the attached Exhibits A., B. and C. shall be applied to the
Subject Earned Premium for the Business Covered hereunder, as stated in Paragraph D. of the
Business Covered Article.





	A.	 	The term “ Earned Premium” as used herein is equal to the sum of the Net Premiums
Written on the business covered hereunder during the period under consideration, plus the
unearned premium reserve as respects premiums in force at the beginning of such period,
less the





	 	 	 	 	 

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	 	 	unearned premium reserve as respects premiums in force at the end of the period, said
unearned premium is to be calculated on a monthly pro rata basis.
	 
	B.	 	The term “Net Premiums Written” shall mean gross premiums written less returns,
allowances and reinsurances which inure to the benefit of the Subscribing Reinsurer.





ARTICLE 13 — REPORTS AND REMITTANCES





	A.	 	The Company shall furnish the Subscribing Reinsurer with all necessary data respecting
premiums and losses for as long as one of the parties hereto has a claim against the other
arising from this Contract.
	 
	B.	 	Reinsurance Premiums are settled between the Company and the Subscribing Reinsurer, no
less frequently than on a quarterly basis. For purposes of calculating the minimum and
deposit premium paid by each company (Bridgefield Casualty Insurance Company and
Bridgefield Employers Insurance Company), the minimum and deposit premium was multiplied by
the ratio that the Subject Earned Premium of each bore to the total Subject Earned Premium
of the Company. The Company submitted finalized accounts to the Subscribing Reinsurer in
2010, summarizing the actual Subject Earned Premium for the previous year. The difference
between the Annual Deposit premium and the actual Subject Earned Premium was settled
to/from the Company. However, the annual adjusted premium was not less than the Annual
Minimum premium for each layer, set forth below:





	 	 	 	 	 	 	 	 	 
	 	 	Annual	 	Annual
	Layer	 	Deposit	 	Minimum
	First Layer
	 	$	5,199,290	 	 	$	4,159,432	 
	Second Layer
	 	$	2,462,822	 	 	$	1,970,258	 
	Third Layer
	 	$	1.751,340	 	 	$	1.401.072	 
	 
	Total
	 	$	9,413,452	 	 	$	7,530,762	 







	C.	 	The Subscribing Reinsurer has made payment to the Company for its portion of Loss and
Loss Adjustment Expense obligations presented prior to 12:01 a.m. Local Standard time,
January 1, 2010 and shall immediately make payment to the Company for its portion of the
Loss and Loss Adjustment Expenses obligations, upon reasonable evidence to be furnished by
the Company, of the amount due or to be due after the effective date of this contract.





ARTICLE 14 — ACCESS TO RECORDS (LM-00100-2008.08.25-A)





	A.	 	Except as otherwise provided in this Article, the Subscribing Reinsurer, or its duly
authorized
representative, may upon reasonable prior written notice to the Company, at the
Subscribing Reinsurer’s own expense, examine at the offices of the Company or its
affiliates, during normal office hours, the Company’s Policy, accounting, underwriting,
or claim records and files, or any such additional relevant records and files, as they
exist in the Company’s or its affiliates’ possession or reasonable control, relating to
business ceded under this Contract. The Subscribing Reinsurer’s notice shall reasonably
describe the nature of the inspection that it wishes to conduct, the persons conducting
the inspection and, upon notice of available files from the Company, the files that it
wishes to review. Subject to the limitations expressed in this Article, this right of
inspection shall survive termination or expiration of this Contract and shall continue
as long as either Party has any rights or obligations under this Contract.





	 	 	 	 	 

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	B.	 	The Company reserves the right to deny the Subscribing Reinsurer access to records or
files concerning any particular claim(s) if the Subscribing Reinsurer has not disputed
liability for payment of such claim(s), and payment of such claim(s) is(are) more than
ninety (90) days overdue according to the Company’s records. The Company shall, however,
prior to an arbitration demand that may be instituted by either party, continue to
respond to reasonable specific requests for information and questions raised by the
Subscribing Reinsurer concerning such claims; and nothing in this Article shall restrict
the right or ability of the Subscribing Reinsurer to seek discovery of relevant
information in a proceeding pursuant to the Arbitration Article of this Contract.






	C.	 	As a condition precedent to access to records under this Article, the Subscribing
Reinsurer, its personnel, and any authorized third party representative of the Subscribing
Reinsurer shall agree to the provisions of the Confidentiality Article of this Contract.
	 
	D.	 	The Company reserves the right to withhold any documents from the Subscribing
Reinsurer: (1) concerning Trade Secrets of the Company or its affiliates, (2) subject to
the terms of a third party non-disclosure agreement with the Company or its affiliates
requiring third party consent to disclosure, (3) subject to the Work-Product Privilege or
Attorney-Client Privilege, or (4) concerning individual private information that, as a
matter of law, cannot be disclosed by the Company or its affiliates (hereinafter referred
to in the Contract as “Privileged Documents”). The Company shall reasonably try to exempt
the Subscribing Reinsurer from any third party non-disclosure agreement or obtain consent
from the third party to disclose to the Subscribing Reinsurer.
	 
	E.	 	Notwithstanding the foregoing, the Company shall permit and not object to the
Subscribing Reinsurer’s access to Privileged Documents falling within (3) above, in
connection with the underlying claim reinsured hereunder following final settlement or
final adjudication of the case or cases involving such claim, with prejudice against all
claimants, and all parties to such adjudications; provided that the Company, may defer
release of such Privileged Documents if there are subrogation, contribution, or other
third party actions with respect to that claim or case, which may jeopardize the Company’s
or its affiliates’ defense by release of such Privileged Documents. In the event that the
Company shall seek to defer release of such Privileged Documents or to withhold documents
concerning Trade Secrets, it will in consultation with the Subscribing Reinsurer take
other steps as reasonably necessary to provide the Subscribing Reinsurer with the
information it reasonably requires to indemnify the Company without causing a loss of such
privileges or protections. The Subscribing Reinsurer, however, shall not have access to
Privileged Documents relating to any dispute between the Company and the Subscribing
Reinsurer.
	 
	F.	 	For purposes of this Article, “Trade Secrets” shall have the meaning provided in
Section 1839 of the United States Economic Espionage Act of 1996. “Attorney-Client
Privilege” shall mean communications of a confidential nature between: (1) the Company or
its affiliates, or anyone retained by or in the control of the Company or its affiliates,
or their in-house or outside legal counsel, or anyone in the control of such legal
counsel, and (2) any in-house or outside legal counsel which relate to legal advice being
sought by the Company or its affiliates and/or which contains legal advice being provided
to the Company or its affiliates. “Work-Product Privilege” shall mean communications,
written materials, and tangible things prepared by or for in-house or outside counsel, or
prepared by or for the Company or its affiliates, in anticipation of or in connection with
litigation, arbitration, or other dispute resolution proceedings.





	 	 	 	 	 

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ARTICLE 15 — AMENDMENTS



This Contract may be amended by mutual consent of the parties expressed in an addendum; and
such addendum, when executed by both parties, shall be deemed to be an integral part of this
Contract and binding on the parties hereto.




ARTICLE 16 — ARBITRATION (LM-00200-2008.06.27-A)





	A.	 	Disputes to be Arbitrated. With the exception of any dispute resolution
procedures that are otherwise contained in this Contract, any and all disputes between
the Company and any Subscribing Reinsurer or Reinsurers (“Party” individually or
“Parties” collectively) arising out of, relating to, or concerning this Contract, whether
sounding in contract or tort and whether arising during or after this Contract’s
formation, or after its termination, including disputes as to whether the Contract was
validly formed or is voidable, shall be submitted to the decision of an arbitration panel
(“Panel”). The Panel shall consist of an umpire and two party-appointed arbitrators
unless a Party meets the requirements of Paragraph C of this Article and demands
arbitration pursuant thereto, in which case the Panel would consist of an umpire only.
	 
	B.	 	Procedures. Except as provided herein, any arbitration shall be based upon
the Procedures for the Resolution of U.S. Insurance and Reinsurance Disputes, Regular
Panel Version, dated April 2004 (the “Procedures”), developed by the Insurance and
Reinsurance Dispute Resolution Task Force, subject to the following modifications:






	 	1.	 	Qualifications of the arbitrators and umpires shall be in accordance
with section 6.2 of the Procedures, except that other professionals who have
worked for at least 10 years for an insurer or reinsurer shall also be qualified
to serve as an arbitrator or umpire.
	 
	 	2.	 	The Parties hereby designate the umpire list maintained by ARIAS
(U.S.) as the list to be used in the event that section 6.7(a) of the Procedures
is invoked.
	 
	 	3.	 	Unless otherwise mutually agreed, the members of the Panel shall be
impartial and disinterested. The members of the Panel may not be: (1) in the
control of any Party or its parent, affiliate, or agent, (2) a former director or
officer of any Party or its parent, affiliate, or agent, or (3) a likely witness
in the arbitration. The requirement of impartiality means that all members of the
Panel shall have the same obligation to approach the Panel’s duties and decisions
with fairness and without consideration for the fact that Panel members may have
been appointed by one of the Parties. The requirement of impartiality does not
mean that any arbitrator can have no previous knowledge of or experience with
respect to issues involved in the dispute or disputes.
	 
	 	4.	 	The first sentence of Section 10.4 of the Procedures shall be
replaced by the following sentence: “The Panel shall require that each Party
submit concise written statements of position, including summaries of the facts
and evidence a Party intends to present, discussion of the applicable law and the
basis for the requested Award or denial of relief sought.”
	 
	 	5.	 	Once the Panel has been constituted, no Party (or anyone acting for
a Party) shall have any communications concerning the arbitration or any of the
issues before the Panel with any member of the Panel that is not also disclosed
to all other Parties and all members of the Panel. Each Panel member shall have a
continuing duty to disclose promptly to all Parties and all Panel members any
violation of this prohibition and the specifics of any improper communications
that occurred. This prohibition shall remain in place until all challenges to any
arbitration awards and decisions have been either waived or finally concluded.





	 	 	 	 	 

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	 	6.	 	Section 11.1 of the Procedures shall be replaced by the following provision:
“The Parties may propound discovery seeking disclosure of such information and/or
documents relevant to the dispute or necessary for the proper resolution of the
dispute.”
	 
	 	7.	 	Position statements may be amended at any reasonable time, but not later
than the close of discovery, without a showing to the Panel that the amending Party
could not reasonably have raised the new claim or issue at an earlier time.
	 
	 	8.	 	The Panel shall hold an evidentiary hearing, if one is necessary, within
one year of the arbitration demand, unless the Parties otherwise agree. Should a
Party seek a reasonable extension to this time frame for good cause shown, the
other Party’s agreement shall not be unreasonably withheld.
	 
	 	9.	 	To the extent permitted by the law, the Panel shall have the authority
to issue subpoenas and other orders to enforce its decisions.
	 
	 	10.	 	The Panel may award reasonable attorneys’ fees and arbitration costs to
the prevailing Party, as determined by the Panel.
	 
	 	11.	 	Section 14.3 of the Procedures shall be replaced by the following
provision: “The Panel shall make a decision and issue an award with regard to the
terms expressed in this Contract, and the custom and practice of the property and
casualty insurance and reinsurance business. The Panel shall not be obligated to
follow the strict rules of law and evidence.”






	C.	 	Alternative Streamlined Procedures. Notwithstanding the foregoing provisions of
this Article, the Alternative Streamlined Procedures set forth in section 16 of the
Procedures, as modified by sections B3, B4, and B9 through B11 of this Article, shall apply
in the event that, in a consolidated proceeding or otherwise, the Party initiating
arbitration is seeking payment of a total amount that is no greater than one million
dollars ($1,000,000), or the currency equivalent thereof. Sections 16.1, 16.2, 16.3 and the
second sentence of section 16.4 of the Alternative Streamlined Procedures shall not apply.
The Parties agree to comply with section 6.7 of the Procedures to appoint a single umpire,
and hereby designate the umpire list maintained by ARIAS (U.S.) as the list to be used in
section 6.7(a).
	 
	D.	 	Hearing Location. The hearing shall be held in Boston, Massachusetts, unless the
Parties mutually agree to a different location.
	 
	E.	 	Confirmation. Either Party may apply to a court of competent jurisdiction for an
order confirming any award of the Panel; a judgment of that court shall thereupon be
entered on any award. If the application for confirmation is contested and a judgment is
issued, confirming the award, then the Party against whom confirmation is sought shall pay
the attorneys’ fees incurred by the Party who applied for the confirmation and all court
costs of any such proceeding.
	 
	F.	 	Equitable Relief from a Court of Law. Nothing herein shall be construed to
prevent any participating Party from applying to a court of competent jurisdiction to issue
a restraining order or other equitable relief to maintain the “status quo” of the Parties
participating in the arbitration pending the decision and award by the Panel.
	 
	G.	 	Consolidated Proceedings.






	 	1.	 	Same contract, single Subscribing Reinsurer. Both the Company and any
single Subscribing Reinsurer on this Contract have the right to combine any and all
disputes between them that concern this Contract (including any renewal of this
Contract or any contract for which this Contract is a renewal) into a single
arbitration proceeding before a single Panel, except that the standard for
determining whether a Party may add a new issue, claim, or





	 	 	 	 	 

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	 	 	 	dispute to an arbitration proceeding shall be the standard for amending a
Position statement, as set forth in Paragraph B7 of this Article.
	 
	 	2.	 	Multiple contracts, single Subscribing Reinsurer.






	 	a.	 	Either the Company or any single Subscribing Reinsurer
has the right to combine one arbitration proceeding before a single Panel
where such disputes involve this Contract and any additional contracts
between the two Parties.
	 
	 	b.	 	Notwithstanding the foregoing, subject in each
instance to the mutual agreement of the Parties, new issues, claims, or
disputes may be added to such existing arbitration proceeding.






	 	3.	 	Same contract, multiple Reinsurers. At the Company’s option, if more
than one Subscribing Reinsurer is involved in arbitration relating to this
Contract, where there are common questions of law or fact and a possibility of
conflicting awards or inconsistent results, all such Reinsurers shall constitute
and act as one Party for purposes of this Article and communications shall be made
by the Company to each of the Reinsurers constituting the one Party; provided,
however, that the Reinsurers shall have the right to assert several, rather than
joint defenses or claims, and to be represented by separate counsel. This
provision shall not change the liability of each of the Reinsurers under the terms
of this Contract from several to joint.






	H.	 	Choice of Law. The law set forth in the Governing Law Article shall apply to
this Arbitration Article. In addition, to the extent the Panel (or the umpire in an
Alternative Streamlined Procedure) looks to applicable law, such Panel or umpire shall
apply the law as set forth in the Governing Law Article of this Contract.
	 
	I.	 	Option to Litigate. Notwithstanding the foregoing provisions of this Article, to the
extent that either
Party has demanded payment of a total amount of at least twenty million dollars
($20,000,000) or the currency equivalent thereof under this Contract, and an
arbitration demand has been served, either Party retains the option to initiate
litigation to resolve any disputes arising from such demand, provided however, that the
Party initiating such option to litigate must file suit within 60 days from the date on
which the arbitration demand was served. The Parties hereby waive their rights to a
jury trial in connection with any such litigation.
	 
	J.	 	Survival of Article. This Article shall survive the termination or expiration of
this Contract.





ARTICLE 17-ASSIGNMENT, NOVATION, OR TRANSFER (LM-00300-2008.05.13-A)



This Contract shall be binding upon and inure to the benefit of the Company and the
Subscribing Reinsurer and their respective successors and assigns provided, however, that
this Contract may not be assigned, novated or transferred, including any attempted transfer
of rights and/or obligations under any U.S. or foreign statute, legislation or
jurisprudence, by either the Company or the Subscribing Reinsurer, or as the result of the
action(s) of a parent company or an affiliated entity of either, without the prior written
consent of the other. In the event of any assignment, novation, or transfer, the assignor,
novator, or transferor shall remain liable under this Contract, and further guarantees the
performance of all obligations of any assignee, novatee, or transferee under this Contract.
Notwithstanding the foregoing, the Company may assign this Contract to an insurance entity
controlling, controlled by or under common control with the Company, without the
Subscribing Reinsurer’s written consent.




	 	 	 	 	 

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ARTICLE 18 — CONFIDENTIALITY CLAUSE (LM-00400-2008.08.15-A)





	A.	 	Confidential Information. The submission materials, and any Policy, financial,
underwriting, accounting, and claims information, data statements, representations, and
other materials provided by the Company or its affiliates and received by the Subscribing
Reinsurer in the course of an audit, inspection, or otherwise in connection with this
Contract, represent confidential or proprietary information (“Confidential Information”).
This Confidential Information is intended for the sole use of the Subscribing Reinsurer
(and its retrocessionaires, respective auditors, accountants, and legal counsel) as may be
necessary in analyzing and/or accepting a participation in and/ or executing its
responsibilities under or related to this Contract or its internal reinsurance operations.
The Subscribing Reinsurer acknowledges and agrees that with respect to any review of
Confidential Information by the Subscribing Reinsurer, and/or discussion of Confidential
Information, the Company and its affiliates do not waive and do not intend to waive any
available privilege or protection. The review of Confidential Information by the
Subscribing Reinsurer and/or discussion of Confidential Information with the Company or its
affiliates shall not destroy, waive, or otherwise impair the proprietary and/or protected
status of any Confidential Information or any information revealed in such discussion with
the personnel of the Company or its affiliates, whether reviewed by and/or discussed with
the Subscribing Reinsurer intentionally or inadvertently, nor does the review of the
Confidential Information and/or discussion of Confidential Information with the Company or
its affiliates constitute an estoppel or waiver of the Company’s or its affiliates’ rights
to assert the attorney-client or work-product privileges, or any other applicable privilege
or protection over certain documents contained in the Company’s or its affiliates’ files
and/or certain information.
	 
	B.	 	The Company and the Subscribing Reinsurer agree that no confidentiality obligations
will apply to Confidential Information to the extent such Confidential Information: (1) is
or becomes available to the public, other than as a result of impermissible disclosure by
the Subscribing Reinsurer, (2) was or became available lawfully to the Subscribing
Reinsurer from a source, other than the Company, its affiliates, or their personnel, that
is not subject to a confidentiality obligation, (3) was developed independently by the
Subscribing Reinsurer prior to disclosure by the Company, its affiliates or their
personnel, as demonstrated by the Subscribing Reinsurer’s records, or (4) is required to
be disclosed by law, regulation, court, or regulatory agency action, subject to the Third-Party Demand paragraph of this Article.
	 
	C.	 	The Subscribing Reinsurer agrees to preserve all confidentiality and privilege
pertaining to all Confidential Information provided by the Company and all knowledge and
information gained through its review of Confidential Information or discussions of the
Confidential Information with the personnel of the Company or its affiliates. The
Subscribing Reinsurer further agrees not to disclose any such Confidential Information to
any other person or entity, except as such disclosure may be necessary to its
retrocessionaires, accountants, attorneys, auditors, actuaries or third party catastrophe
modelers or as otherwise required by law. The Subscribing Reinsurer agrees that no
Confidential Information is to be copied and/or removed from the Company’s or its
affiliates’ premises without the express permission of the Company.
	 
	D.	 	Non-Public Personally Identifiable Information. Additionally, any disclosure
of Non-Public Personally Identifiable Information shall comply with all state and federal
statutes and regulations governing the disclosure of Non-Public Personally Identifiable
Information. “Non-Public Personally Identifiable Information” shall be defined as this
term or a similar term as defined in any applicable state, provincial, territory, or
federal law. Disclosing or using this information for any purpose not authorized by
applicable law is expressly forbidden without the prior consent of the Company.
	 
	E.	 	Third-Party Demand. Should the Subscribing Reinsurer receive a third-party
demand pursuant to subpoena, summons, or court or governmental order, to disclose
Confidential Information (including Non-Public Personally Identifiable Information) that
has been provided by the Company





	 	 	 	 	 

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	 	 	or its affiliates, the Subscribing Reinsurer shall make commercially reasonable
efforts to notify the Company promptly upon receipt of the demand and prior to
disclosure of the Confidential Information and provide the Company a reasonable
opportunity to object to the disclosure. If the Company timely objects to the release
of the Confidential Information, the Subscribing Reinsurer will comply with the
reasonable requests of the Company in connection with the Company’s efforts to resist
release of the Confidential Information. The Company shall bear the cost of resisting
the release of the Confidential Information.
	 
	F.	 	Survival. The parties agree that the obligations contained in this Article shall
survive the expiration or termination of this Contract.





ARTICLE 19 — CURRENCY (LM-00500-2005.08.09)



Whenever a reference to a monetary currency appears in this Contract, it shall be construed
to mean United States Dollars (“USD”). However, in those cases where the Policies are issued
by the Company using Canadian Dollars (“CAD”), it shall mean Canadian Dollars. All payments
made by either party shall be made in United States Dollars except that payments made
involving Policies issued using Canadian Dollars shall be made in Canadian Dollars. All
amounts paid or received by the Company in any other currency shall be converted into United
States Dollars at the rate of exchange on the date at which it is entered on the books of
the Company.




ARTICLE 20 — DIVIDENDS AND TAXES (LM-00600-2008.10.10-A)



In consideration of the terms of this Contract, the Company shall not claim any deduction in
respect of any amount paid as dividends or as reinsurance premium when making tax returns,
other than income or profits tax any State or to the District of Columbia.




ARTICLE 21 — ENTIRE AGREEMENT (LM-00701-2008.08.15-A)



This Contract and the Novations of which it forms a part, shall constitute the entire
agreement between the Company and the Subscribing Reinsurer with respect to the subject
matter of this Contract and shall supersede all prior understandings, negotiations and
discussions, whether oral or written, by or between the Company and the Subscribing
Reinsurer relating to the subject matter hereof. There are no general or specific
warranties, representations or other agreements by or among the Company and the Subscribing
Reinsurer in connection with entering into this Contract except as specifically set forth in
this Contract. Notwithstanding the foregoing, this Contract may be amended or modified only
by a writing signed by both the both the Company and the Subscribing Reinsurer.




ARTICLE 22 — ERRORS AND OMISSIONS (LM-00800-2005.06.02-A)



Any inadvertent delay, omission, or error in complying with the terms and conditions of this
Contract shall not be held to relieve either party hereto from any liability, which would
attach to it hereunder if such delay, omission, or error had not been made, provided such
delay, omission, or error is rectified upon discovery.




ARTICLE 23 — FEDERAL EXCISE TAX (LM-01000-2008.08.15-A)





	A.	 	This Article is applicable to any Subscribing Reinsurer who is domiciled outside
of the United States of America, except for any Subscribing Reinsurer exempt from
Federal Excise Tax. A Subscribing Reinsurer that claims exempt status from Federal
Excise Tax shall provide to the





	 	 	 	 	 

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	 	 	Company, upon its request, proof that the exempt status adequately satisfies the demands
of the U.S. Internal Revenue Service, Department of the Treasury, or its successor
and/or other applicable U.S. government authority.
	 
	B.	 	Each Subscribing Reinsurer shall allow the applicable percentage of the premium
payable hereon (as imposed under Section 4371 of the Internal Revenue Code) for the
purpose of paying Federal Excise Tax to the extent such premium is subject to such tax.
	 
	C.	 	In the event of any return of premium, the Subscribing Reinsurer shall deduct the
aforesaid percentage from the return premium payable hereon and the Company or its agent
shall recover such tax from the United States Government.





ARTICLE 24 — FEDERAL TERRORISM EXCESS RECOVERY (LM-01100-2008.08.06-A)





	A	 	Any loss reimbursement the Company receives from the United States Government under the
Terrorism Risk Insurance Act of 2002 and any subsequent amendments thereto (“TRIA”) as
a result of loss occurrences commencing during the term of this Contract shall apply as
follows:
	 
	B.	 	Except as provided below, any loss reimbursement under TRIA shall inure solely to the
benefit of the Company and shall be entirely disregarded in applying all of the provisions
of this Contract.
	 
	C.	 	If one or more loss occurrences commencing during the term of this Contract result(s)
in reinsurance recoveries to the Company under this Contract and reimbursement under TRIA,
and such amounts, together with any other reinsurance recoveries to the Company for said
loss occurrence(s), exceed the total amount of “Insured Losses” to the Company, any amount
in excess thereof shall be held by the Company. The Company shall then reimburse the
Subscribing Reinsurer a portion of such excess recovery in an amount equal to the
proportion that the Subscribing Reinsurer’s payment under this Contract bears to the total
treaty reinsurance recoveries to the Company for Insured Losses for said loss
occurrence(s). Provided, however, that in no event shall such reimbursement exceed the
amount paid by the Subscribing Reinsurer to the Company under this Contract.
	 
	D.	 	For purposes hereof, if a loss reimbursement received by the Company under TRIA is
based on the Company’s Insured Losses in more than one loss occurrence and neither the
Secretary of the Treasury nor his delegate specifies the amount of loss allocable to each
respective loss occurrence, the reimbursement shall be pro-rated in the proportion that
the Company’s Insured Losses in each loss occurrence bears to the Company’s total Insured
Losses resulting from all loss occurrences to which the reimbursement applies.
	 
	E.	 	For purposes of this Article, “Insured Loss(es)” shall have the same meaning as set
forth in Section 102(5) of TRIA.





ARTICLE 25 — GOVERNING LAW (LM-01200-2008.09.18-A)



The validity and interpretation of this Contract shall be governed by and construed in
accordance with the law of the Commonwealth of Massachusetts, without regard to conflicts of law
principles.




ARTICLE 26 — INSOLVENCY (LM-01300-2008.07.25-A)



(If more than one reinsured company is referenced within the definition of “Company” in the
Preamble to this Contract, this Article shall apply severally to each such company. Further,
this Article and the laws of




	 	 	 	 	 

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the domiciliary state shall apply in the event of the insolvency of any company intended to be
covered hereunder. In the event of a conflict between any provision of this Article and the laws of
the domiciliary state of any company intended to be covered hereunder, that domiciliary state’s
laws shall prevail.)





	A.	 	In the event of the insolvency of the Company, reinsurance under this Contract shall be
payable, with reasonable provision for verification, on the basis of claims allowed against
the insolvent Company by any court of competent jurisdiction or by any liquidator, receiver,
conservator, or statutory successor of the Company having authority to allow such claims,
without diminution because of such insolvency or because such liquidator, receiver,
conservator, or statutory successor has failed to pay all or a portion of any claims. Such
payments by the Subscribing Reinsurer shall be made directly to the Company or its
liquidator, receiver, conservator, or statutory successor, except to the extent Section
4118(a) of the New York Insurance Law applies, or except (a) where the Contract specifically
provides another payee of such reinsurance in the event of the insolvency of the Company, or
(b) where the Subscribing Reinsurer with the consent of the direct insured or insureds has
assumed such Policy obligations of the Company as direct obligations of the Subscribing
Reinsurer to the payees under such Policies and in substitution for the obligations of the
Company to such payees.
	 
	B.	 	It is agreed, however, that the liquidator, receiver, conservator, or statutory successor of
the insolvent Company shall give written notice to the Subscribing Reinsurer of the pendency
of a claim against the insolvent Company on the Policy or Policies reinsured within a
reasonable time after such claim is filed in the insolvency proceeding and that during the
pendency of such claim the Subscribing Reinsurer may investigate such claim and interpose, at
its own expense, in the proceeding where such claim is to be adjudicated, any defense or
defenses which it may deem available to the Company or its liquidator, receiver, conservator,
or statutory successor. The expense thus incurred by the Subscribing Reinsurer shall be
chargeable, subject to court approval, against the insolvent Company as part of the expense
of liquidation to the extent of a proportionate share of the benefit, which may accrue to the
Company solely as a result of the defense undertaken by the Subscribing Reinsurer.
	 
	C.	 	Where two or more Reinsurers are involved in the same claim and a majority in interest
elects to interpose defense to such claim, the expense shall be apportioned in accordance
with the terms of this Contract as though such expense had been incurred by the insolvent
Company.
	 
	D.	 	With respect to California Workers Compensation loss(es), it is agreed that in the event of
any delinquency proceeding, receivership, or insolvency of the Company and/or the failure of
the Subscribing Reinsurer, for any reason, to make payments under this Contract, the
Insurance Commissioner of California may, upon 30-days notice, draw upon any sums from the
deposit made by the Subscribing Reinsurer in accordance with the provisions of sections 11691
 — 11703 of the California Insurance Code.





ARTICLE 27 — INTEREST PENALTY (LM-01400-2005.08.24-A)





	A.	 	The interest amounts provided for in this Article shall apply to the Subscribing
Reinsurer or to the Company in the following circumstances:






	 	1.	 	If a loss payment owed by the Subscribing Reinsurer to the Company is not
received within 45 calendar days following the date of presentation to the
Subscribing Reinsurer of information necessary to approve payment of the claim,
and/or
	 
	 	2.	 	If any premium payment owed by the Company to the Subscribing Reinsurer is
not received within 45 calendar days following the date on which payment is due,
and/or
	 
	 	3.	 	If any premium adjustment, agreed by either Party to the other, is not
received within 150 calendar days following the expiry or anniversary of this
Contract, and/or





	 	 	 	 	 

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	 	4.	 	If any return of premiums, commissions, profit sharing, or any amounts not provided in
subparagraphs 1, 2, and 3 above, are not received in accordance with the date
specified in this Contract or if no date is specified, within 90 calendar days
following the date the debtor Party received the billing.






	B.	 	Failure by the Subscribing Reinsurer or Company to comply with their respective
payment obligations within the time periods as herein provided shall, as of that date, be
subject to an interest payment computed by multiplying the amount due by a variable rate
consisting of the U.S. Prime Rate as published in the Eastern Edition of The Wall
Street Journal on the first day of the calendar month in which the amount became past
due, plus 2%. The variable rate shall be adjusted monthly thereafter to equal the U.S.
Prime Rate as published in the Eastern Edition of The Wall Street Journal on the
first day of each successive month during which the amount due remains unpaid, plus 2%.
The product shall then be multiplied by 1/365 for each day after the due date that the
amount due and the interest amount remain unpaid. Any interest that occurs pursuant to
this Article shall be calculated by the Party to which it is owed.
	 
	C.	 	The validity of any claim or payment may be contested under the provisions of this
Contract. If the debtor Party prevails in arbitration or any other proceeding with respect
to the amounts in dispute, there shall be no interest penalty due. If the creditor Party
wholly or partially prevails on any of the amounts in dispute, the interest penalty shall
be awarded as outlined above. Such interest penalty shall be calculated from the date the
monies were due and owing to the date of resolution of the arbitration or proceeding, and
shall be payable as of the date of resolution of the arbitration or proceeding.
	 
	D.	 	If a Subscribing Reinsurer advances the entire or partial payment of any claim it is
contesting, and wholly or partially prevails in the contest, the Company shall promptly
return the applicable amount of such payment. The arbitrator(s) hearing such dispute shall
determine if interest shall be added to the amount returned by the Company.
	 
	E.	 	Any interest owing pursuant to this Article may be waived by the Party to which it is
owed. Further, any interest calculated pursuant to this Article that is $100 or less shall
be waived. Any waiver of any interest pursuant to this paragraph, however, shall not
affect the waiving Party’s right to claim and/or pursue interest for any other failure by
the other Party to make payment when due under this Article.





ARTICLE 28 — LOSS ADJUSTMENT AND SETTLEMENT (LM-01500-2006.09.07-A)





	A.	 	The Company shall give notice, as soon as practicable, to the Subscribing Reinsurer of
any claim that it has reason to believe could involve this Contract. The Company shall
keep the Subscribing Reinsurer informed of significant developments likely to affect the
cost of any claim or claims hereunder.
	 
	B.	 	The Company may commence, continue, defend, settle, or withdraw from actions, suits,
or prosecutions and, generally, do all such things relating to any claim or loss in which
the Subscribing Reinsurer is interested as, in the Company’s judgment, may be beneficial
or expedient to the Company and the Subscribing Reinsurer. The Company shall be the sole
judge as to what claims are covered under the Policies. All of the Ultimate Net Loss and
Loss Occurrences, as well as all loss settlements made and judgments paid by the Company,
provided they are within the terms of this Contract either under the strict conditions of
the Policies or by way of compromise, shall be unconditionally binding upon the
Subscribing Reinsurer, who agrees to pay all amounts for which they are liable immediately
upon reasonable evidence of the amount due being furnished to the Subscribing Reinsurer by
the Company. The true intent of this





	 	 	 	 	 

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	 	 	Contract is that the Subscribing Reinsurer shall, in every case to which this Contract
applies, follow the settlements and the fortunes of the Company.
	 
	C.	 	The Company shall advise the Subscribing Reinsurer of all claims which:






	 	1.	 	Are reserved by the Company in excess of 50.0% of the Company’s retention.





ARTICLE 29 — MEDIATION (LM-03000-2005.12.20-A)





	A.	 	In the event of any dispute or difference of opinion arising out of or relating to this
Contract, including but not limited to the formation, interpretation, performance or breach
of this Contract, whether such dispute arises before or after the expiration of this
Contract, the Company and the Subscribing Reinsurer may mutually agree in writing that,
prior to or at any time during an arbitration proceeding, they will submit such dispute or
difference of opinion to non-binding mediation which will be held at a location mutually
agreed by the parties. The parties agree that any non-binding mediation conducted during
any stage of an arbitration process shall be conducted concurrently with such arbitration
process, and that the arbitration process or proceedings shall not be stayed unless both
the Company and the Subscribing Reinsurer otherwise agree.
	 
	B.	 	Each Party shall submit a list of not more than four (4) potential mediators to the
other party within the fourteen (14) days of reaching such mutual agreement. The two
Parties shall then agree on the appointment on one (1) mediator from the combined lists
within seven (7) days. The mediator shall be a neutral, impartial third party, without past
employment or directorial relationships with the parties to the mediation. Such mediator
shall make full disclosure of all past partisan relationships with either the Company or
Subscribing Reinsurer to the parties within seven (7) days of his or her notification that
he or she has been selected as a Mediator.
	 
	C.	 	If the Company and the Subscribing Reinsurer cannot agree on a mediator within
twenty-one (21) days from the date of a mutual agreement to mediate, then arbitration
proceedings may commence in accordance with the Arbitration Article.
	 
	D.	 	The mediator will schedule an initial mediation session within thirty (30) days of his
or her appointment and will be responsible for the formulation of an agenda to be
distributed to the parties involved in the mediation not less than five (5) days before the
mediation commences.
	 
	E.	 	The mediator will not have the power of enforcement of any agreement between the parties
nor will the mediator have any right to assess any damages, including punitive damages, to
either party participating in the mediation.
	 
	F.	 	If, in the opinion of the mediator, the parties cannot resolve the dispute or difference
of opinion, arbitration proceedings may commence in accordance with the Arbitration
Article. In any event, the mediation shall conclude within sixty (60) days of its referral
to the mediator. Should the mediation not be resolved in sixty (60) days, then arbitration
proceedings may commence in accordance with the Arbitration Article.
	 
	G.	 	Each Party shall bear the expense of its own representatives and shall jointly and
equally bear with the other Party the expenses of the mediator and the place of mediation.





ARTICLE 30 — OFFSET (LM-01701-2005.06.02-A)



Each party to this Contract together with their successors or assigns shall have and may
exercise, at any time, the right to offset any balance(s) due the other (or, if more than one,
any other) under this Contract.




	 	 	 	 	 

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Such offset may include balances due under this Contract regardless of whether
such balances arise from premiums, losses, or otherwise, provided however, that in the
event of insolvency of a party hereto, offsets shall only be allowed in accordance with
the provisions of the applicable law, statute, or regulation governing such offset.



ARTICLE 31 — REINSURER CLAIMS OBLIGATIONS (LM-03100-2008.07.21-A)



It is understood and agreed that the Subscribing Reinsurer will fulfill its obligations
under the Loss Adjustment and Settlement Article, until all claims have been reported
and settled. Without first obtaining the Company’s written consent, the Subscribing
Reinsurer will not, either directly or as the result of an action of a parent company
or an affiliated entity, invoke any U.S. or foreign statute, legislation, or
jurisprudence that purports to enable the Subscribing Reinsurer to require the Company
to settle their claims liabilities, including but not limited to any estimated or
undetermined claims liabilities, under this Contract on an accelerated basis. If the
Subscribing Reinsurer has provided collateral relating to this Contract and the
Subscribing Reinsurer attempts to require the Company to settle their claims
liabilities on an accelerated basis, the Company shall have the right to utilize or to
draw upon Letters of Credit or other collateral, under the terms of this Contract, or
as otherwise agreed between the Subscribing Reinsurer and the Company. This Article
does not prevent the Company and the Subscribing Reinsurer from settling any claims
liabilities using a commutation process that is agreeable to both parties. This Article
shall in no way affect the rights and obligations of the Company and the Subscribing
Reinsurer under the Insolvency Article.



ARTICLE 32 — SALVAGE AND SUBROGATION (LM-01800-2008.08.15-A)





	A.	 	The Subscribing Reinsurer shall be credited with its share of salvage and/or
subrogation in respect of claims and settlements under this Contract, less its
share of recovery expense. Unless the Company agrees to waive such rights in the
settlement of a disputed claim, or the Company and Subscribing Reinsurer agree to
the contrary, the Company shall enforce the right to salvage and/or subrogation
and shall prosecute all claims arising out of such right. Should the Company
refuse or neglect to enforce this right, the Subscribing Reinsurer is hereby
empowered and authorized to institute appropriate action in the name of the
Company.
	 
	B.	 	Amounts recovered from salvage and/or subrogation and the expense of any
salvage and/or subrogation proceedings brought by the Company or the Subscribing
Reinsurer to enforce such rights shall be apportioned between the Company and the
Subscribing Reinsurer in the ratio of their respective interests in the total
salvage and/or subrogation recovery, and shall be in addition to the limits
hereon. In the event there is a failure to obtain a salvage and/or subrogation
recovery, the expense of the proceedings shall be apportioned between the Company
and the Subscribing Reinsurer in the ratio of their respective interests in the
total loss.
	 
	C.	 	All salvage and/or subrogation recoveries obtained by either party,
subsequent to payments made by the Subscribing Reinsurer under this Contract,
shall be applied as if obtained prior to said payments and all necessary
adjustments shall be made between the Company and the Subscribing Reinsurer as
soon as practicable after said salvage and/or subrogation recovery is obtained.
	 
	D.	 	The Company shall have the right, before the happening of the loss, to waive
its right of subrogation as to that loss.





					
	 	 	 	 	 
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ARTICLE 33 — SERVICE OF SUIT (LM-01900-2008.07.17-A)



(This article applies to unauthorized reinsurers and to reinsurers who are domiciled
outside the United States of America.)





	A.	 	This Service of Suit Article will not be read to conflict with or override
the obligations of the parties to arbitrate their disputes as provided for in the
Arbitration Article. This Article is intended as an aid to compelling arbitration
or enforcing such arbitration or arbitral award, not as an alternative to the
Arbitration Article for resolving disputes arising out of this Contract.
	 
	B.	 	In the event of the failure of the Subscribing Reinsurer to pay any amount
claimed to be due hereunder, the Subscribing Reinsurer, at the request of the
Company, will submit to the jurisdiction of a Court of competent jurisdiction
within the United States. Nothing in this Article constitutes or should be
understood to constitute a waiver of the Subscribing Reinsurer’s right to
commence an action in any Court of competent jurisdiction in the United States,
to remove an action to a United States District Court, or to seek a transfer of a
case to another Court as permitted by the laws of the United States or of any
state in the United States. The Subscribing Reinsurer, once the appropriate Court
is selected, whether such court is the one originally chosen by the Company and
accepted by the Subscribing Reinsurer or is determined by removal, transfer, or
otherwise, as provided for above, will comply with all requirements necessary to
give said Court jurisdiction and, in any suit instituted against any of them upon
this Contract, will abide by the final decision of such Court or of any Appellate
Court in the event of an appeal.
	 
	C.	 	Service of process in such suit may be made upon Mendes & Mount, LLP, 750
Seventh Avenue, New York, NY 10019-6829.
	 
	D.	 	The above-named are authorized and directed to accept service of process on
behalf of the Subscribing Reinsurer in any such suit. Further, pursuant to any
statute of any state, territory, or district of the United States that makes
provision therefore, the Subscribing Reinsurer hereby designates the
Superintendent, Commissioner, or Director of Insurance, or other officer
specified for that purpose in the statute, or their successor(s) in office, as
their true and lawful attorney upon whom may be served any lawful process in any
action, suit, or proceedings instituted by or on behalf of the Company or any
beneficiary hereunder arising out of this Contract, and hereby designate the
above-named as the person to whom the said officer is authorized to mail such
process or a true copy thereof.




ARTICLE 34 — SEVERABILITY (LM-02000-2005.06.02-A)



If any provision of this Contract shall be rendered illegal or unenforceable by the
laws, regulations, or public policy of any state, such provision shall be considered
void in such state, but this shall not affect the validity or enforceability of any
other provision of this Contract or the enforceability of such provision in any other
jurisdiction.



ARTICLE 35 — SPECIAL CONDITIONS (LM-02100-2008.11.18-A)





	A.	 	This Article applies only in the event that:






	 	1.	 	A State Insurance Department or other legal authority orders the Subscribing Reinsurer
to cease writing business or has imposed upon it any other restrictions on
or conditions relating to the Subscribing Reinsurer’s license or conduct
of business in any jurisdiction; or





					
	 	 	 	 	 
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	 	2.	 	The Subscribing Reinsurer has become insolvent or has been placed
into liquidation or receivership (whether voluntary or involuntary), or
there have been instituted against it proceedings for the appointment of
a receiver, liquidator, rehabilitator, conservator, trustee in
bankruptcy, or other agent known by whatever name, to take possession of
its assets or control of its operations; or
	 
	 	3.	 	The Subscribing Reinsurer’s policyholders’ surplus or equity
has been reduced by 25% or more from the amount on the effective date of
this Contract, or has been reduced by 25% or more in any period of twelve
(12) months or less after the effective date of this Contract; or
	 
	 	4.	 	As respects a Subscribing Reinsurer domiciled outside the
United States other than Lloyd’s syndicate, such Subscribing Reinsurer’s
Shareholder Funds, Net Worth or Capital & Surplus has been reduced by 25%
or more from the amount on the effective date of this Contract, or has
been reduced by 25% or more in any period of twelve (12) months or less
after the effective date of this Contract; or
	 
	 	5.	 	As respects a Subscribing Reinsurer who is a Lloyd’s syndicate,
such Subscribing Reinsurer’s Stamp Capacity or Funds at Lloyd’s has been
reduced by 25% or more from the amount on the effective date of this
Contract or has been reduced by 25% or more in any period of twelve (12)
months or less after the effective date of this Contract; or
	 
	 	6.	 	The Subscribing Reinsurer has entered into a definitive
agreement to become merged with, acquired, or controlled by any company,
corporation, or individual(s) not controlling the Subscribing Reinsurer’s
operations at the inception of this Contract; or
	 
	 	7.	 	The Subscribing Reinsurer’s A.M. Best’s financial strength
rating has been assigned or downgraded below A- or Standard and Poor’s
financial strength rating has been assigned or downgraded be!ow A-; or
	 
	 	8.	 	As respects a Subscribing Reinsurer who is subject to an
Authorized Control Level Risk-Based Capital Requirement, such Subscribing
Reinsurer fails to maintain its surplus at a level of at least 200% of
the Subscribing Reinsurer’s Authorized Control Level Risk-Based Capital;
or
	 
	 	9.	 	The Subscribing Reinsurer announces intentions to cease underwriting operations; or
	 
	 	10.	 	The Subscribing Reinsurer voluntarily ceases underwriting operations; or
	 
	 	11.	 	The Subscribing Reinsurer has reinsured its entire liability under this Contract; or
	 
	 	12.	 	The Subscribing Reinsurer, directly or through the actions of a
parent company or an affiliated entity, has or has attempted to assign,
novate or transfer the Subscribing Reinsurer’s rights and/or obligations
under this Contract, including any attempted transfer of rights and/or
obligations under any U.S. or foreign statute, legislation or
jurisprudence, without the Company’s prior written consent; or
	 
	 	13.	 	The Subscribing Reinsurer, directly or through the actions of a
parent company or an affiliated entity, has invoked any U.S. or foreign
statute, legislation or jurisprudence which purports to enable the
Subscribing Reinsurer to require the Company to settle its claims
liabilities, including but not limited to any estimated or undetermined
claims liabilities under this Contract, on an accelerated basis. This
does not include any attempt to enforce a settlement of claims
liabilities under a commutation process to which the parties have agreed.






	B.	 	If one or more of the circumstances in Paragraph A (1) through (13) occur (a “Trigger Event”),
the
Subscribing Reinsurer shall provide the Company with written notice within
five (5) business days from the happening of a Trigger Event. Following its
receipt of notice of a Trigger Event from the Subscribing Reinsurer, the
Company may terminate this Contract, upon thirty (30) days written notice to
the Subscribing Reinsurer.





					
	 	 	 	 	 
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	C.	 	Irrespective of the Subscribing Reinsurer’s failure to provide the
Company with timely written notice of the happening of a Trigger Event,
upon occurrence of a Trigger Event, the Company may terminate this Contract
at any time, upon thirty (30) days written notice to the Subscribing
Reinsurer. No failure or delay by the Company in exercising its option
under this section will operate as a waiver thereof.
	 
	D.	 	Termination under this Article can be made after the date of expiration of this
Contract.
	 
	E.	 	If this Contract is terminated under this Article, this Contract
shall remain in full force and effect as respects the Company’s and the
Subscribing Reinsurer’s respective rights and obligations, prior to the
effective date and time of termination. The coverage afforded by this
Contract shall cease as of the date and time of termination and the
Subscribing Reinsurer shall return the unearned premium, if any, within
fifteen (15) days of the termination date. If coverage hereunder terminates
while a claim covered by this Contract is in progress, the Subscribing
Reinsurer shall be liable, subject to all conditions hereof, for its
proportion of the entire claim, provided the event giving rise to the claim
started before such termination.






	F.	1. 	 	If the Company elects to terminate this Contract under this Article, the Company may
also elect to commute this Contract. Such election to commute shall be
made either within the written thirty (30) day notice to the
Subscribing Reinsurer of the Company’s intention to terminate this
Contract, or by written notice thereafter. If the Company elects to
commute, the Subscribing Reinsurer has the option to provide security
for its Obligations (as defined herein), as an alternative to
commutation. The Subscribing Reinsurer shall notify the Company of
its decision to provide security for its Obligations within fifteen
(15) business days of the receipt of written notice of the Company’s
election to commute. If the Subscribing Reinsurer elects to provide
security for its Obligations under this Contract, the Company shall
provide the Subscribing Reinsurer with a written statement of the
Subscribing Reinsurer’s share of all paid recoverables, case
reserves, loss adjustment expenses, incurred but not reported losses,
reserves for unearned premium, and ceding commissions due under this
Contract prior to the effective date and time of termination
(collectively “Obligations”). Within fifteen (15) days of the
Subscribing Reinsurer’s receipt of such statement, the Subscribing
Reinsurer shall fund all Obligations by securing clean, irrevocable,
and unconditional Letters of Credit, payable exclusively to the
Company and issued by a bank acceptable to the Company. Any Letters
of Credit provided by the Subscribing Reinsurer under the
Unauthorized Reinsurance Article of this Contract also constitute
funding under this Article.
	 
	 	2.	 	Any Letters of Credit secured by the Subscribing
Reinsurer shall be issued for a period of not less than one year, and
shall be automatically extended for one year from their dates of
expiration or any future expiration dates, unless sixty (60) days
prior to any expiration date the issuing bank shall notify the
Company, by certified mail that the issuing bank elects not to extend
any Letter of Credit for any additional period.
	 
	 	3.	 	The Subscribing Reinsurer and the Company agree that
the Letters of Credit provided by the Subscribing Reinsurer, pursuant
to the provisions of this Article, may be drawn upon at any time,
notwithstanding any other provision of this Contract, and be utilized
by the Company or any successor, by operation of law, of the Company,
including without limitation, any liquidator, rehabilitator, receiver,
or conservator of the Company, without diminution because of the
insolvency of the Company or the Subscribing Reinsurer for one or more
of the following purposes:






	 	a.	 	To pay or reimburse the Company for:






	 	i.	 	The Subscribing Reinsurer’s share under this Contract of premiums
returned, but not yet recovered from the Subscribing
Reinsurer, to the owners of Policies reinsured under
this Contract due to cancellations of such Policies; and





					
	 	 	 	 	 
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	 	ii.	 	The Subscribing Reinsurer’s share, under this Contract, of
surrenders and benefits or liabilities paid by the Company, but not
yet recovered from the Subscribing Reinsurer, under the
terms and provisions of the Policies reinsured under this
Contract; and
	 
	 	iii.	 	Any other amounts necessary to
secure the credit or reduction from liability for reinsurance
taken by the Company.






	 	4.	 	Where the Letters of Credit will expire without renewal or
be reduced or replaced by Letters of Credit for a reduced amount and
where the Subscribing Reinsurer’s Obligations under this Contract remain
unliquidated and undischarged ten (10) days prior to the expiration of
the Letter of Credit, to withdraw amounts equal to the Subscribing
Reinsurer’s Obligations, to the extent that the liabilities have not yet
been funded by the Subscribing Reinsurer and exceed the amount of any
reduced or replacement Letters of Credit.
	 
	 	5.	 	If the Company has concluded that the issuing bank’s
financial condition is such that the value of the security represented by
the Letter of Credit may be in jeopardy, the Company, may withdraw
amounts equal to the Subscribing Reinsurer’s Obligations.
	 
	 	6.	 	If the Company draws on the Letter of Credit to obtain a
cash advance, under paragraphs F.4 or F.5, the Company, will hold the
amount of the cash advance so obtained in trust in the name of the
Company in any qualified United States financial institution as defined
by the Insurance Law of the Company’s domiciliary state, solely to secure
the Obligations and for the use and purposes enumerated above. The
Company will return any balance to the Subscribing Reinsurer upon the
complete and final liquidation and discharge of all of the Subscribing
Reinsurer’s Obligations to the Company under this Contract or in the
event the Subscribing Reinsurer provides alternative or replacement
security consistent with the terms hereof and acceptable to the Company.






	G.	 	If the Company elects to commute this Contract and the Subscribing
Reinsurer does not fund its Obligations under this Contract, then:






	 	1.	 	The Company shall submit a statement of valuation showing
the Subscribing Reinsurer’s liability for loss(es), whether reported or
unreported, comprising the sum total of the present value of the ceded:
(a) case reserves and allocated loss adjustment expense, (b) projected
ultimate losses, (c) any unearned premium reserve, and (d) undiscounted
outstanding paid claims (hereinafter the “Commutation Losses”), on
Policies covered by this Contract as of the effective date and time of
termination. If the Subscribing Reinsurer agrees with the statement of
valuation, the Subscribing Reinsurer shall pay the amount requested
within ten (10) days of receipt of the statement of valuation.
	 
	 	2.	 	In the event the Company and the Subscribing Reinsurer
cannot agree on the statement of valuation of the Subscribing Reinsurer’s
liability under such Policies, either party may request in writing that
the differences be settled by a panel of three actuaries. Each party
shall appoint an actuary to assess such liability within fifteen (15)
days after receipt of the written request for commutation. Upon such
appointment, the two actuaries shall appoint a third actuary. If the two
actuaries fail to agree on the third actuary within thirty (30) days of
their appointment, each of them shall nominate three individuals, of whom
the other shall decline two, and the final decision shall be made by
drawing lots.
	 
	 	3.	 	The actuaries shall then investigate and Capitalize such
Commutation Loss(es) within thirty (30) days. As used herein,
“Capitalize” shall mean to determine the present value of Commutation
Losses, without regard to the Subscribing Reinsurer’s ability to pay such
losses. The panel shall meet in Boston, Massachusetts, unless the Company
and Subscribing Reinsurer agree otherwise.






	 	a.	 	All actuaries shall be disinterested in the outcome of the commutation and
shall
be Fellows of the Society of Actuaries/Fellows of the Casualty Actuarial
Society.





					
	 	 	 	 	 
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	 	 	 	Except as stated below, the expense of the actuaries and of the
commutation shall be equally divided between the parties of the
commutation.
	 
	 	b.	 	The decision in writing of the actuaries, when
filed with the parties hereto, shall be final and binding, except that
if the Company does not agree with the Capitalized value of the
Commutation Loss(es), the Company shall have no obligation to commute.
In the event the Company does not agree with the Capitalized value of
the Commutation Loss(es) and does not move forward with commutation, the
Company will pay the expense of the actuaries, including reasonable
expense of the actuary appointed by the Subscribing Reinsurer.
	 
	 	c.	 	If the Contract is commuted, payment by the
Subscribing Reinsurer to the Company or any other third party mutually
agreed upon by the Subscribing Reinsurer and the Company shall
constitute a complete and final release of the Subscribing Reinsurer in
respect to its liability under this Contract.






	 	4.	 	The commutation process described in this Article shall not be subject to any
other
dispute resolution process, including but not limited to the Arbitration
Article of this Contract.




ARTICLE 36 — THIRD PARTIES (LM-02700-2005.09.27-A)



This Contract shall not be deemed to give any right or remedy to any third party whatsoever
unless said right or remedy is specifically granted to such third party by the terms of
this Contract.



ARTICLE 37 — UNAUTHORIZED REINSURANCE (LM-02500-2008.09.24-A)



(Applies only to a Subscribing Reinsurer who at the inception of the Contract or at any
time thereafter does not qualify for full credit with any insurance regulatory authority
having jurisdiction over the Company’s reserves.)





	A.	 	As regards Policies issued by the Company coming within the scope of this
Contract, the Company agrees that when it shall file with the insurance regulatory
authority or set up on its books reserves for unearned premium and losses covered
hereunder which it shall be required by law to set up, it will forward to the
Subscribing Reinsurer a statement showing the proportion of such reserves which is
applicable to the Subscribing Reinsurer. The Subscribing Reinsurer hereby agrees to
fund such reserves in respect of unearned premium, known outstanding losses that have
been reported to the Subscribing Reinsurer and allocated loss adjustment expense
relating thereto, losses and allocated loss adjustment expense paid by the Company but
not recovered from the Subscribing Reinsurer, plus reserves for losses incurred but
not reported as determined by the Company, as shown in the statement prepared by the
Company (hereinafter referred to as “ Subscribing Reinsurer Obligations”) by Letters
of Credit, unless the Company and the Subscribing Reinsurer otherwise agree, and/or
the method of funding is determined by applicable law, statute, or regulation.
	 
	B.	 	When funding by Letters of Credit, the Subscribing Reinsurer agrees to apply
for and secure timely delivery to the Company of clean, irrevocable, and unconditional
Letters of Credit issued by a bank that is a qualified U.S. financial institution and
containing provisions acceptable to the insurance regulatory authorities having
jurisdiction over the Company’s reserves in an amount equal to the Subscribing
Reinsurer’s proportion of said reserves. At the Company’s request, the Subscribing
Reinsurer will agree to provide separate Letters of Credit for any Affiliates covered
under this Contract. Such Letters of Credit shall be issued for a period of not less
than one year, and shall be automatically extended for one year from the date of
expiration or any future expiration date unless 60 days prior to any expiration date,
the issuing bank shall notify the





					
	 	 	 	 	 
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	 	 	Company by certified mail that the issuing bank elects not to consider the Letters of
Credit extended for any additional period.
	 
	C.	 	The Subscribing Reinsurer and Company agree that the Letters of Credit provided by the
Subscribing Reinsurer pursuant to the provisions of this Contract may be drawn upon at any
time, notwithstanding any other provision of this Contract, and be utilized by the Company,
or any successor, by operation of law, of the Company, including without limitation, any
liquidator, rehabilitator, receiver, or conservator of the Company, without diminution
because of the insolvency of the Company or the Subscribing Reinsurer for one or more of the
following purposes:






	 	1.	 	To pay or reimburse the Company for:






	 	a.	 	The Subscribing Reinsurer’s share under this Contract of
premiums returned, but not yet recovered from the Subscribing Reinsurer, to
the owners of Policies reinsured under this Contract on account of
cancellations of such Policies; and
	 
	 	b.	 	The Subscribing Reinsurer’s share, under this Contract, of
surrenders and benefits or losses paid by the Company, but not yet recovered
from the Subscribing Reinsurer, under the terms and provisions of the
Policies reinsured under this Contract; and
	 
	 	c.	 	Any other amounts necessary to secure the credit or
reduction from liability for reinsurance taken by the Company.






	 	2.	 	Where the Letters of Credit will expire without renewal or be reduced or
replaced by Letters of Credit for a reduced amount and where the Subscribing
Reinsurer’s entire obligations under this Contract remain unliquidated and
undischarged 10 days prior to the termination date, to withdraw amounts equal to the
Subscribing Reinsurer’s share of the liabilities, to the extent that the liabilities
have not yet been funded by the Subscribing Reinsurer and exceed the amount of any
reduced or replacement Letters of Credit, and deposit those amounts in a separate
account in the name of the Company in a qualified U.S. financial institution, apart
from its general assets, in trust for such uses and purposes specified in above as
may remain after withdrawal and for any period after the termination date.






	D.	 	At annual intervals, or at the Company’s option, on a quarterly basis, the Company shall
prepare a specific statement of the Subscribing Reinsurer’s Obligations, for the sole
purpose of amending the Letters of Credit, in the following manner:






	 	1.	 	If the statement shows that the Subscribing Reinsurer’s Obligations exceed
the balance of credit as of the statement date, the Subscribing Reinsurer shall,
within 30 days after receipt of notice of such excess, secure delivery to the Company
of an amendment to the Letters of Credit increasing the amount of credit by the
amount of such difference.
	 
	 	2.	 	If, however, the statement shows that the Subscribing Reinsurer’s
Obligations are less than the balance of credit as of the statement date, the Company
shall, within 30 days after receipt of written request from the Subscribing
Reinsurer, release such excess credit by agreeing to secure an amendment to the
Letters of Credit reducing the amount of credit available by the amount of such
excess credit.






	E.	 	Any and all disputes between the Company and any Subscribing Reinsurer or Reinsurers (“Party”,
individually, or “Parties”, collectively) arising out of, relating to, or concerning this
Article shall be resolved pursuant to the ARIAS-U.S. Newer Arbitrator Program. Unless the
Parties otherwise agree, the ARIAS Newer Arbitrator Program expedited proceeding with a
single Newer Arbitrator shall be used to resolve any such disputes.





					
	 	 	 	 	 
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IN WITNESS WHEREOF, the parties hereto have caused this Contract to be executed in
triplicate, by their duly authorized representatives.



In Boston, Massachusetts, this 8th day of September, 2010.




	 	 	 

	ATTEST:

	 	BRIDGEFIELD CASUALTY INSURANCE COMPANY
	 

	 	BRIDGEFIELD EMPLOYERS INSURANCE COMPANY
	 
	 	 
	/s/ Kristin Ciotti

	 	/s/ John D. Doyle
	 

	 	 
	Signature

	 	Signature
	 
	 	 
	Kristin Ciotti

	 	John D. Doyle
	 

	 	 
	Name

	 	Name
	 
	 	 
	Assistant Secretary

	 	Vice President and Comptroller
	 

	 	 
	Title

	 	Title
	 
	 	 
	And in Boston, Massachusetts,
this 8th
day of September, 2010.


	 
	 	 
	ATTEST:

	 	PEERLESS INSURANCE COMPANY
	 
	 	 
	/s/ Kristin Ciotti

	 	/s/ Michael J. Fallon
	 

	 	 
	Signature

	 	Signature
	 
	 	 
	Kristin Ciotti

	 	Michael J. Fallon
	 

	 	 
	Name

	 	Name
	 
	 	 
	Assistant Secretary

	 	Treasurer and Chief Financial Officer
	 

	 	 
	Title

	 	Title
	 
	 	 
	And in Boston, Massachusetts,
this 8th day of September, 2010.


	 
	 	 
	ATTEST:

	 	LIBERTY MUTUAL INSURANCE COMPANY
	 
	 	 
	Kristin Ciotti

	 	John D. Doyle
	 

	 	 
	Name

	 	Name
	 
	 	 
	Assistant Secretary

	 	Vice President and Comptroller
	 

	 	 
	Title

	 	Title
	 
	 	 
	/s/ Kristin Ciotti

	 	/s/ John D. Doyle
	 

	 	 
	 Signature

	 	 Signature






					
	 	 	 	 	 
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EXHIBIT A — FIRST EXCESS OF LOSS



SECTION 1 — LIMIT AND RETENTION (amounts shown are in terms of Ultimate Net Loss)





	A.	 	The Company shall retain the first $3,000,000 of Ultimate Net Loss as respects any
one Loss Occurrence. The Subscribing Reinsurer shall then be liable for the amount by
which the Company’s Ultimate Net Loss exceeds the retention of $3,000,000 but the
liability of the Subscribing Reinsurer shall never exceed $2,000,000 any one Loss.
	 
	B.	 	It is understood and agreed that the limit and retention described above applies to
both Bridgefield Casualty Insurance Company and Bridgefield Employers Insurance Company.
Any Loss Occurrence affecting each of them shall be combined with respect to the
application of the limit and retention set forth herein. The limit, retention and
reinsurance recovery will be allocated in the same ratio that the Ultimate Net Loss from
each bears to the total Ultimate Net Loss of the Company.




SECTION 2 — REINSTATEMENT





	A.	 	It is understood and agreed that each claim hereunder reduces the amount of
indemnity from the time of occurrence of the loss by the sum paid, but any amount so
exhausted is hereby reinstated from the time the Loss Occurrence commences without
payment of additional premium. For purposes of calculating reinstatement premium, the
reinsurance premium shall be multiplied by the ratio that each of the Bridgefield
Casualty Insurance Company and Bridgefield Employers Insurance Company’s reinsurance
recovery bears to the total reinsurance recovery of the Company.




SECTION 3 — DEFINITION





	A.	 	An “Act of Terrorism” for purposes of this Contract shall mean:






	 	1.	 	Any actual or threatened violent act or act harmful to human life,
tangible or intangible property or infrastructure directed towards or having the
effect of (a) influencing or protesting against any de jure or de facto government
or policy thereof, (b) intimidating, coercing or putting in fear a civilian
population or section thereof for the purpose of establishing or advancing a
specific ideological, religious or political system of thought, perpetrated by a
specific individual or group directly or indirectly through agents acting on behalf
of said individual or group or (c) retaliating against any country for direct or
vicarious support by that country of any other government or political system.
	 
	 	2.	 	Any act deemed or declared by the Federal Office of Homeland Security to
be terrorism or a terrorist act shall also be considered an “Act of Terrorism” for
purposes of this Contract.




SECTION 4 — REINSURANCE PREMIUM




	 	 	 	 	 
	 	 	Rate applied to
	First Layer	 	Subject Earned Premium
	Workers’ Compensation
	 	 	0.950	%
	 
	 	 	 	 
	Estimated Subject Earned
Premium:
	 	$	547,293,758	 






					
	 	 	 	 	 
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SECTION 4 — SUBSCRIBING REINSURER INTERESTS AND LIABILITIES



It is hereby agreed by and between the Company on the one part and the Subscribing Reinsurer on
the other part that the Subscribing Reinsurer’s share in the interests and liabilities as set
forth in this Exhibit, shall be 85%.




					
	 	 	 	 	 
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EXHIBIT B — SECOND EXCESS OF LOSS



SECTION 1 — LIMIT AND RETENTION (amounts shown are in terms of Ultimate Net
Loss)





	A.	 	The Company shall retain the first $5,000,000 of Ultimate Net Loss
as respects any one Loss Occurrence. The Subscribing Reinsurer shall then be
liable for the amount by which the Company’s Ultimate Net Loss exceeds the
retention of $5,000,000 but the liability of the Subscribing Reinsurer shall
never exceed $5,000,000 any one Loss Occurrence and shall be further limited in
each calendar year during the term of this Contract to an aggregate liability of
$25,000,000.
	 
	B.	 	It is understood and agreed that the limit and retention described
above applies to both Bridgefield Casualty Insurance Company and Bridgefield
Employers Insurance Company. Any Loss Occurrence affecting each of them shall be
combined with respect to the application of the limit and retention set forth
herein. The limit, retention and reinsurance recovery will be allocated in the
same ratio that the Ultimate Net Loss from each bears to the total Ultimate Net
Loss of the Company.




SECTION 2 — REINSTATEMENT





	A.	 	It is understood and agreed that each claim hereunder reduces the amount of indemnity
from the
time of occurrence of the loss by the sum paid, but any amount so exhausted is
hereby reinstated from the time the Loss Occurrence commences without payment
of additional premium. For purposes of calculating reinstatement premium, the
reinsurance premium shall be multiplied by the ratio that each of the
Bridgefield Casualty Insurance Company and Bridgefield Employers Insurance
Company’s reinsurance recovery bears to the total reinsurance recovery of the
Company.




SECTION 3 — DEFINITION





	A.	 	An “Act of Terrorism” for purposes of this Contract shall mean:






	 	1.	 	Any actual or threatened violent act or act harmful to
human life, tangible or intangible property or infrastructure directed
towards or having the effect of (a) influencing or protesting against any
de jure or de facto government or policy thereof, (b) intimidating,
coercing or putting in fear a civilian population or section thereof for
the purpose of establishing or advancing a specific ideological, religious
or political system of thought, perpetrated by a specific individual or
group directly or indirectly through agents acting on behalf of said
individual or group or (c) retaliating against any country for direct or
vicarious support by that country of any other government or political
system.
	 
	 	2.	 	Any act deemed or declared by the Federal Office of
Homeland Security to be terrorism or a terrorist act shall also be
considered an “Act of Terrorism” for purposes of this Contract.




SECTION 4 — REINSURANCE PREMIUM




	 	 	 	 	 
	 	 	Rate applied to
	Second Layer	 	Subject Earned Premium
	Workers’ Compensation
	 	 	0.450	%
	 
	 	 	 	 
	Estimated Subject Earned
Premium:
	 	$	547,293,758	 






					
	 	 	 	 	 
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SECTION 4 — SUBSCRIBING REINSURER INTERESTS AND LIABILITIES



It is hereby agreed by and between the Company on the one part and the Subscribing Reinsurer
on the other part that the Subscribing Reinsurer’s share in the interests and liabilities as
set forth in this Exhibit, shall be 85%.




					
	 	 	 	 	 
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EXHIBIT C — THIRD EXCESS OF LOSS



SECTION 1 — LIMIT AND RETENTION (amounts shown are in terms of Ultimate Net Loss)





	A.	 	The Company shall retain the first $10,000,000 of Ultimate Net Loss as respects any
one Loss Occurrence. The Subscribing Reinsurer shall then be liable for the amount by
which the Company’s Ultimate Net Loss exceeds the retention of $10,000,000 but the
liability of the Subscribing Reinsurer shall never exceed $15,000,000 any one Loss
Occurrence and shall be further limited in all to $30,000,000 in each calendar year
during the term of this Contract.
	 
	B.	 	It is understood and agreed that the limit and retention described above applies to
both Bridgefield Casualty Insurance Company and Bridgefield Employers Insurance Company.
Any Loss Occurrence affecting each of them shall be combined with respect to the
application of the limit and retention set forth herein. The limit, retention and
reinsurance recovery will be allocated in the same ratio that the Ultimate Net Loss from
each bears to the total Ultimate Net Loss of the Company.




SECTION 2 — REINSTATEMENT





	A.	 	It is understood and agreed that each claim hereunder reduces the amount of
indemnity from the time of occurrence of the loss by the sum paid, but any amount so
exhausted is hereby reinstated from the time the Loss Occurrence commences without
payment of additional premium. For purposes of calculating reinstatement premium, the
reinsurance premium shall be multiplied by the ratio that each of the Bridgefield
Casualty Insurance Company and Bridgefield Employers Insurance Company’s reinsurance
recovery bears to the total reinsurance recovery of the Company.




SECTION 3 — DEFINITION





	A.	 	An “Act of Terrorism” for purposes of this Contract shall mean:






	 	1.	 	Any actual or threatened violent act or act harmful to human life,
tangible or intangible property or infrastructure directed towards or having the
effect of (a) influencing or protesting against any de jure or de facto government
or policy thereof, (b) intimidating, coercing or putting in fear a civilian
population or section thereof for the purpose of establishing or advancing a
specific ideological, religious or political system of thought, perpetrated by a
specific individual or group directly or indirectly through agents acting on behalf
of said individual or group or (c) retaliating against any country for direct or
vicarious support by that country of any other government or political system.
	 
	 	2.	 	Any act deemed or declared by the Federal Office of Homeland Security to
be terrorism or a terrorist act shall also be considered an “Act of Terrorism” for
purposes of this Contract.




SECTION 4 — REINSURANCE PREMIUM




	 	 	 	 	 
	 	 	Rate applied to
	Second Layer	 	Subject Earned Premium
	Workers’ Compensation
	 	 	0.320	%
	 
	 	 	 	 
	Estimated Subject Earned
Premium:
	 	$	547,293,758	 






					
	 	 	 	 	 
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SECTION 4 — SUBSCRIBING REINSURER INTERESTS AND LIABILITIES



It is hereby agreed by and between the Company on the one part and the Subscribing
Reinsurer on the other part that the Subscribing Reinsurer’s share in the interests and
liabilities as set forth in this Exhibit, shall be 85%.




					
	 	 	 	 	 
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SUPPLEMENT TO THE ATTACHMENTS




DEFINITION OF IDENTIFICATION TERMS USED WITHIN THE ATTACHMENTS




	A.	 	Wherever the term “Company” or “Reinsured” or “Reassured” or whatever other
term is used to designate the reinsured company or companies within the various
attachments to the reinsurance agreement, the term shall be understood to mean
Company or Reinsured or Reassured or whatever other term is used in the attached
reinsurance agreement to designate the reinsured company or companies.
	 
	B.	 	Wherever the term “Agreement” or “Contract” or “Policy” or whatever other
term is used to designate the attached reinsurance contract within the various
attachments to the reinsurance contract, the term shall be understood to mean
Agreement or Contract or Policy or whatever other term is used to designate the
attached reinsurance contract.
	 
	C.	 	Wherever the term “Reinsurer” or “Reinsurers” or “Underwriters” or whatever
other term is used to designate the reinsurer or reinsurers in the various
attachments to the reinsurance agreement, the term shall be understood to mean
Reinsurer or Reinsurers or Underwriters or whatever other term is used to
designate the reinsuring company or companies.





					
	 	 	 	 	 
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NUCLEAR
INCIDENT EXCLUSION CLAUSE — LIABILITY — REINSURANCE — U.S.A. N.M.A 1590





	1.	 	This reinsurance does not cover any loss or liability accruing to
the Reassured as a member of, or subscriber to, any association of insurers
or reinsurers formed for the purpose of covering nuclear energy risks or as
a direct or indirect reinsurer of any such member, subscriber or
association.
	 
	2.	 	Without in any way restricting the operation of paragraph 1. of
this Clause it is understood and agreed that for all purposes of this
reinsurance all the original Policies of the Reassured (new, renewal and
replacement) of the classes specified in Clause II. in this paragraph 2.
from the time specified in Clause III. in this paragraph 2. shall be deemed
to include the following provision (specified as the Limited Exclusion
Provision):
	 
	 	 	LIMITED EXCLUSION PROVISION*






	 	I.	 	It is agreed that the policy does not apply under any
liability coverage, to injury, sickness, disease, death or destruction,
bodily injury or property damage with respect to which an insured under
the policy is also an insured under a nuclear energy liability policy
issued by Nuclear Energy Liability Insurance Association, Mutual Atomic
Energy Liability Underwriters or Nuclear Insurance Association of
Canada, or would be an insured under any such policy but for its
termination upon exhaustion of its limit of liability.
	 
	 	II.	 	Family Automobile Policies (liability only), Special
Automobile Policies (private passenger automobiles, liability only),
Farmers Comprehensive Personal Liabilities Policies (liability only),
Comprehensive Personal Liability Policies (liability only) or Policies
of a similar nature; and the liability portion of combination forms
related to the four classes of Policies stated above, such as the
Comprehensive Dwelling Policy and the applicable types of Homeowners
Policies.
	 
	 	III.	 	The inception dates and thereafter of all original Policies as described
in II. above, whether new, renewal or replacement, being Policies which
either






	 	(a)	 	become effective on or after 1st May, 1960, or
	 
	 	(b)	 	become effective before that date and contain the
Limited Exclusion Provision set out above; provided this paragraph 2.
shall not be applicable to Family Automobile Policies, Special
Automobile Policies, or Policies or combination Policies of a similar
nature, issued by the Reassured on New York risks, until 90 days
following approval of the Limited Exclusion Provision by the
Governmental Authority having jurisdiction thereof.






	3.	 	Except for those classes of Policies specified in Clause II. of
paragraph 2. and without in any way restricting the operation of paragraph
1. of this Clause, it is understood and agreed that for all purposes of this
reinsurance the original liability Policies of the Reassured (new, renewal
and replacement) affording the following coverages:
	 
	 	 	Owners, Landlords and Tenants Liability, Agreementual Liability, Elevator
Liability, Owners or Agreementors (including railroad) Protective Liability,
Manufacturers and Agreementors Liability, Product Liability, Professional and
Malpractice Liability, Storekeepers Liability, Garage Liability, Automobile
Liability (including Massachusetts Motor Vehicle or Garage Liability) shall
be deemed to include with respect to such coverages, from the time specified
in Clause V. of this paragraph 3., the following provision (specified as the
Broad Exclusion Provision):
	 
	 	 	BROAD EXCLUSION PROVISION*
	 
	 	 	It is agreed that the policy does not apply:





					
	 	 	 	 	 
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	I.	 	Under any Liability Coverage to injury, sickness, disease, death or destruction,
bodily injury or property damage






	 	(a)	 	with respect to which an insured under the policy is also an insured
under nuclear energy liability policy issued by Nuclear Energy Liability
Insurance Association, Mutual Atomic Energy Liability Underwriters or Nuclear
Insurance Association of Canada, or would be an insured under any such policy
but for its termination upon exhaustion of its limit of liability; or
	 
	 	(b)	 	resulting from the hazardous properties of nuclear material and
with respect to which (1) any person or organization is required to maintain
financial protection pursuant to the Atomic Energy Act of 1954, or any law
amendatory thereof, or (2) the insured is, or had this Policy not been issued
would be, entitled to indemnity from the United States of America, or any
agency thereof, under any agreement entered into by the United States of
America, or any agency thereof, with any person or organization.






	II.	 	Under any Medical Payments Coverage, or under any Supplementary
Payments Provision relating to immediate medical or surgical relief, first aid,
to expenses incurred with respect to bodily injury, sickness, disease or death,
bodily injury resulting from the hazardous properties of nuclear material and
arising out of the question of a nuclear facility by any person or organization.
	 
	III.	 	Under any Liability Coverage, to injury, sickness, disease, death or
destruction, bodily injury or property damage resulting from the hazardous
properties of nuclear material, if






	 	(a)	 	the nuclear material (1) is at any nuclear facility owned by, or
operated by or on behalf of, an insured or (2) has been discharged or
dispersed therefrom;
	 
	 	(b)	 	the nuclear material is contained in spent fuel or waste at any
time possessed, handled, used, processed, stored, transported or disposed of
by or on behalf of an insured; or
	 
	 	(c)	 	the injury, sickness, disease, death or destruction, bodily injury
or property damage arises out of the furnishing by an insured of services,
materials, parts or equipment in connection with the planning, construction,
maintenance, operation or use of any nuclear facility, but if such facility is
located within the United States of America, its territories, or possessions
or Canada, this exclusion (c) applies only to injury to or destruction of
property at such nuclear facility, property damage to such nuclear facility
and any property threat.






	IV.	 	As used in this endorsement:






	 	 	 	“hazardous properties” include radioactive, toxic or explosive properties;
“nuclear material” means source material, special nuclear material or
byproduct material; “source material,” “special nuclear material,” and
“byproduct material” have the meanings given them in the Atomic Energy Act
of 1954 or in any law amendatory thereof; “spent fuel” means any fuel
element or fuel component, solid or liquid, which has been used or exposed
to radiation in a nuclear reactor; “waste” means any waste material (1)
containing byproduct material other than the tailings or wastes produced by
the extraction or concentration of uranium or thorium from any ore processed
for its source material
	 
	 	 	 	content and (2) resulting from the operation by any person or organization
of any nuclear facility included within the definition of nuclear facility
under paragraph (a) or (b) thereof; “nuclear facility” means






	 	(a)	 	any nuclear reactor,





					
	 	 	 	 	 
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	 	(b)	 	any equipment or device designed or used for (1) separating the
isotopes of uranium or plutonium, (2) processing or utilizing spent
fuel, or (3) handling, processing or packaging waste,
	 
	 	(c)	 	any equipment or device used for the processing,
fabricating or alloying of special nuclear material if at any time
the total amount of such material in the custody of the insured at
the premises where such equipment or device is located consists of
or contains more than 25 grams of plutonium or uranium 233 or any
combination thereof, or more than 250 grams of uranium 235,
	 
	 	(d)	 	any structure, basin, excavation, premises or place
prepared or used for the storage or disposal of waste






	 	 	 	and includes the site on which any of the foregoing is located, all
operations conducted on such site and all premises used for such
operations; “nuclear reactor” means any apparatus designed or used to
sustain nuclear fission in a self-supporting chain reaction or to contain
a critical mass of fissionable material; with respect to injury to or
destruction of property, the word “injury” or “destruction” includes all
forms of radioactive contamination of property; “property damage”
includes all forms of radioactive contamination of property.






	 	V.	 	The inception dates and thereafter of all original Policies
affording coverages specified in this paragraph 3., whether new, renewal or
replacement, being Policies which become effective on or after 1st May,
1960, provided this paragraph 3. shall not be applicable to






	 	(i)	 	Garage and Automobile Policies issued by the Reassured on New York risks, or
	 
	 	(ii)	 	Statutory liability insurance required under Chapter
90, General Laws of Massachusetts, until 90 days following approval
of the Broad Exclusion Provision by the Governmental Authority
having jurisdiction thereof.






	4.	 	Without in any way restricting the operations of paragraph 1. of this Clause,
it is understood and agreed that paragraphs 2. and 3. above are not applicable to
original liability Policies of the Reassured in Canada, and that with respect to
such Policies, this Clause shall be deemed to include the Nuclear Energy
Liability Exclusion Provisions adopted by the Canadian Underwriters’ Association
or the Independent Insurance Conference of Canada.







 




			
	*NOTE:	 	The words printed in BOLD TYPE in the Limited Exclusion Provision and in the
Broad Exclusion Provision shall apply only in relation to original liability
Policies which include a Limited Exclusion Provision or a Broad Exclusion
Provision containing those words.





					
	 	 	 	 	 
	N.M.A. 1590
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NUCLEAR INCIDENT EXCLUSION CLAUSE — LIABILITY — REINSURANCE — CANADA





	1.	 	This Contract does not cover any loss or liability accruing to the
Company as a member of, or subscriber to, any association of insurers or
reinsurers formed for the purpose of covering nuclear energy risks or as a
direct or indirect reinsurer of any such member, subscriber or association.
	 
	2.	 	Without in any way restricting the operation of paragraph 1. of
this clause, it is agreed that for all purposes of this Contract all the
original liability contracts of the Reinsured, whether new, renewal or
replacement, of the following classes, namely,




Personal Liability

Farmers’ Liability

Storekeepers’ Liability





	 	 	which become effective on or after 31st December 1992, shall be deemed to
include, from their inception dates and thereafter, the following provision:
	 
	 	 	Limited Exclusion Provision —
	 
	 	 	This Policy does not apply to bodily injury or property damage with respect
to which the Insured is also insured under a Contract of nuclear energy
liability insurance (whether the Insured is unnamed in such Contract and
whether or not it is legally enforceable by the Insured) issued by the
Nuclear Insurance Association of Canada or any other group or pool of
insurers or would be an Insured under any such Policy but for its termination
upon exhaustion of its limits of liability.
	 
	 	 	With respect to property, loss of use of such property shall be deemed to be property
damage.
	 
	3.	 	Without in any way restricting the operation of paragraph 1. of
this clause, it is agreed that for all purposes of this Contract all the
original liability contracts of the Reinsured, whether new, renewal or
replacement, of any class whatsoever (other than Personal Liability, Farmers’
Liability, Storekeepers’ Liability or Automobile Liability contracts), which
become effective on or after 31st December 1992, shall be deemed to include,
from their inception dates and thereafter, the following provision:
	 
	 	 	Broad Exclusion Provision —
	 
	 	 	It is agreed that this Policy does not apply:






	 	(a)	 	To liability imposed by or arising under the nuclear
liability act, law or statute or any law amendatory thereof; nor;
	 
	 	(b)	 	to bodily injury or property damage with respect to which
an Insured under this policy is also insured under a contract of nuclear
energy liability insurance (whether the Insured is unnamed in such
contract and whether or not it is legally enforceable by the Insured)
issued by the Nuclear Insurance Association of Canada or any other
insurer or group or pool of insurers or would be an Insured under any
such policy but for its termination upon exhaustion of its limit of
liability; nor
	 
	 	(c)	 	to bodily injury or property damage resulting directly or
indirectly from the nuclear energy hazard arising from:






	 	(i)	 	the ownership, maintenance, operation or use of a nuclear facility by or on
behalf of an Insured;
	 
	 	(ii)	 	the furnishing of an Insured of services, materials, parts or equipment in
connection with the planning, construction, maintenance, operation
or use of any nuclear facility; and





					
	 	 	 	 	 
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	 	(iii)	 	the possession, consumption, use, handling, disposal or
transportation of
fissionable substances, or of other radioactive material
(except radioactive isotopes, away from a nuclear facility,
which have reached the final stage of fabrication so as to be
usable for any scientific, medical, agricultural, commercial or
industrial purpose) used, distributed, handled or sold by an
Insured.






	 	 	As used in this Policy:






	 	(1)	 	The term “nuclear energy hazard” means the radioactive,
toxic, explosive, or other hazardous properties of radioactive material;
	 
	 	(2)	 	The term “radioactive material” means uranium, thorium,
plutonium, neptunium, their respective derivatives and compounds,
radioactive isotopes of other elements and any other substances that the
Atomic Energy Control Board may, by regulation, designate as being
prescribed substances capable of releasing atomic energy, or as being
requisite for the production, use or application of atomic energy;
	 
	 	(3)	 	The term “nuclear facility” means:






	 	(a)	 	any apparatus designed or used to sustain nuclear
fission in a self-supporting chain reaction or to contain a critical
mass of plutonium, thorium and uranium or any one or more of them;
	 
	 	(b)	 	any equipment or device designed or used for (i)
separating the isotopes of plutonium, thorium and uranium or any one
or more of them, (ii) processing or utilizing spent fuel, or (iii)
handling, processing or packaging waste;
	 
	 	(c)	 	any equipment or device used for the processing,
fabricating or alloying of plutonium, thorium or uranium enriched in
the isotope uranium 233 or in the isotope uranium 235, or any one or
more of them if at any time the total amount of such material in the
custody of the Insured at the premises where such equipment or device
is located consists of or contains more than 25 grams of plutonium or
uranium 233 or any combination thereof, or more than 250 grams of
uranium 235;
	 
	 	(d)	 	any structure, basin, excavation, premises or place
prepared or used for the storage or disposal of waste radioactive
material;






	 	 	 	and includes the site on which any of the foregoing is located, together with
all operations conducted thereon and all premises used for such operations.
	 
	 	(4)	 	The term “fissionable substance” means any prescribed
substance that is, or from which can be obtained, a substance capable of
releasing atomic energy by nuclear fission.
	 
	 	(5)	 	With respect to property, loss of use of such property shall be deemed to be
property damage.





NMA 1979a

(01.01.96) Form approved by Lloyd’s Underwriters’ Non-Marine Association Limited





			
	NOTES:	 	Wherever used herein the terms:






			
	“Reinsured”	 	shall be understood to mean “Company”, “Reinsurer”,
“Reassured” or whatever other term is used in the attached
reinsurance document to designate the reinsured company or
companies.





					
	 	 	 	 	 
	N.M.A. 1979
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	     “Agreement”	 	shall be understood to mean “Agreement”,
“contract”, “policy” or whatever other term is used to
designate the attached reinsurance document.






			
	     “Reinsurers”	 	shall be understood to mean “Reinsurers”, “Underwriters”
or whatever other term is used in the attached reinsurance
document to designate the reinsurer or reinsurers.





					
	 	 	 	 	 
	N.M.A. 1979
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NUCLEAR
ENERGY RISKS EXCLUSION CLAUSE (REINSURANCE) (1994) (WORLDWIDE

EXCLUDING U.S.A. AND CANADA)



This Agreement shall exclude Nuclear Energy Risks whether such risks are written directly and/or by
way of reinsurance and/or via Pools and/or Associations.



For all purposes of this Agreement Nuclear Energy Risks shall mean all first party and/or third
party insurances or reinsurances (other than Worker’ Compensation and Employers’ Liability) in
respect of:





	 	(I)	 	All Property on the site of a nuclear power station.
	 
	 	 	 	Nuclear Reactors, reactor buildings and plant and equipment therein on any site
other than a nuclear power station.
	 
	 	(II)	 	All Property, on any site (including but not limited to the sites referred
to in (I) above) used or having been used for:






	 	(a)	 	the generation of nuclear energy; or
	 
	 	(b)	 	the Production, Use or Storage of Nuclear Material.






	 	(III)	 	Any other Property eligible for insurance by the relevant local Nuclear
Insurance Pool and/or Association but only to the extent of the requirements of that
local Pool and/or Association.
	 
	 	(IV)	 	The supply of goods and services to any of the sites, described in (I) to
(III) above, unless such insurances or reinsurances shall exclude the perils of
irradiation and contamination by Nuclear Material.




Except as undernoted, Nuclear Energy Risks shall not include:





	 	(i)	 	Any insurance or reinsurance in respect of the construction or erection or
installation
or replacement or repair or maintenance or decommissioning of property as described
in (I) to (III) above (including contractors’ plant and equipment);
	 
	 	(ii)	 	Any machinery Breakdown or other Engineering insurance or reinsurance not
coming within the scope of (i) above.




Provided always that such insurance or reinsurance shall exclude the perils of irradiation and
contamination by Nuclear Material.



However, the above exemption shall not extend to:





	 	(1)	 	The provision of any insurance or reinsurance whatsoever in respect of:






	 	(a)	 	nuclear material;
	 
	 	(b)	 	Any Property in the High Radioactivity Zone of Area of any
Nuclear Installation as from the introduction of Nuclear Material or — for
reactor installation — as from fuel loading or first criticality where so
agreed with the relevant local Nuclear Insurance Pool and/or Association.






	 	(2)	 	The provision of any insurance or reinsurance for the undernoted perils:






	 	-	 	fire, lightening, explosion;
	 
	 	-	 	earthquake;





	 	 	 	 	 

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	 	-	 	aircraft and other aerial devices or
	 
	 	-	 	articles dropped therefrom;
	 
	 	-	 	irradiation and radioactive contamination;
	 
	 	-	 	any other peril insured by the relevant local Nuclear Insurance Pool and/or
Association;






	 	 	 	in respect of any other Property not specified in (1) above directly involves the
Production, use or Storage of Nuclear Material as from the introduction of Nuclear
Material into such Property.




Definitions



“Nuclear Material” means:





	 	(i)	 	Nuclear fuel, other than natural uranium and depleted uranium, capable of producing
energy by a self-sustaining chain process of nuclear fission outside a Nuclear
reactor, either alone or in combination with some other material; and
	 
	 	(ii)	 	Radioactive Products or Waste.




“Radioactive Products or waste” means any radioactive material produced in, or any material made
radioactive by exposure to the radiation incidental to the production or utilization of nuclear
fuel, but does not include radioisotopes which have reached the final stage of fabrication so as to
be usable for any scientific, medical, agricultural, commercial or industrial purpose.



“Nuclear Installation” means:





	 	(i)	 	Any Nuclear reactor;
	 
	 	(ii)	 	Any factory using nuclear fuel for the production of Nuclear material, or
factory for the processing of Nuclear Material, including any factory for the
reprocessing of irradiated nuclear fuel; and
	 
	 	(iii)	 	Any facility where Nuclear Material is stored, other than storage
incidental to the carriage of such material.




“Nuclear Reactor” means any structure containing nuclear fuel in such an arrangement that a
self-sustaining chain process of nuclear fission can occur therein without an additional source of
neutrons.



“Production, use or Storage of Nuclear Material” means the production, manufacture, enrichment,
conditioning, processing, reprocessing, use, storage, handling and disposal of Nuclear Material.



“Property” shall mean all land, buildings, structures, plant, equipment, vehicles, contents
(including but not limited to liquids and gases) and all materials of whatever description whether
fixed or not.



“High Radioactivity Zone or Area” means:





	 	(i)	 	For nuclear power stations and Nuclear Reactors, the vessel or structure which
immediately contains the core (including its supports and shrouding) and all the
contents thereof, the fuel elements, the control rods and the irradiated fuel
store; and
	 
	 	(ii)	 	For non-reactor Nuclear Installation, any area where the level of
radioactivity requires the provision of a biological shield.






N.M.A. 1975(a)




	 	 	 	 	 

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April 1, 1994




	 	 	 	 	 

	NOTES:	 	Wherever used herein the terms:
	 
	 	 	 	 
	 

	 	“Reinsured”
	 	shall be understood to mean “Company”, “Reinsurer”, “Reassured” or
whatever other term is used in the attached reinsurance document to
designate the reinsured company or companies.
	 
	 	 	 	 
	 

	 	“Agreement”
	 	shall be understood to mean “Agreement”, “contract”, “policy” or
whatever other term is used to designate the attached reinsurance
document.





“Reinsurers” shall be understood to mean “Reinsurers”, “Underwriters” or whatever other
term is used in the attached reinsurance document to designate the reinsurer or
reinsurers.





	 	 	 	 	 

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WORKERS’ COMPENSATION CATASTROPHE EXCESS OF LOSS

REINSURANCE ADDENDUM 4

No. 0100300-SUM09




TO NOVATION AND AMENDMENT AGREEMENTS



EFFECTIVE JANUARY 1, 2010



between



BRIDGEFIELD CASUALTY INSURANCE COMPANY

BRIDGEFIELD EMPLOYERS INSURANCE COMPANY

Lakeland, Florida



(hereinafter referred to as the “Company”)



and



PEERLESS INSURANCE COMPANY

Keene, New Hampshire



(hereinafter referred to as the “Subscribing Reinsurer”)



	 	 	 	 	 

	Effective: January 1, 2010

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	 	 	 	Addendum 4
	 

	 	 	 	No. 0100300-SUM09






 









 





WORKERS’ COMPENSATION CATASTROHE EXCESS OF LOSS REINSURANCE ADDENDUM 4

NO. 0100300-SUM09




	 	 	 	 	 	 	 	 	 
	Clause	 	Article No.	 	Page
	ACCESS TO RECORDS
	 	 	16	 	 	 	9	 
	ARBITRATION
	 	 	19	 	 	 	114	 
	ASSIGNMENT, NOVATION or TRANSFER
	 	 	4	 	 	 	2	 
	BUSINESS COVERED
	 	 	1	 	 	 	1	 
	COMMENCEMENT AND EXPIRATION
	 	 	2	 	 	 	2	 
	COMMUTATION
	 	 	13	 	 	 	7	 
	CONFIDENTIALITY
	 	 	26	 	 	 	17	 
	CURRENCY
	 	 	15	 	 	 	9	 
	DEFINITIONS
	 	 	5	 	 	 	2	 
	DEFINITION OF LOSS OCCURRENCE
	 	 	10	 	 	 	5	 
	DIVIDENDS AND TAXES
	 	 	21	 	 	 	15	 
	ENTIRE AGREEMENT
	 	 	29	 	 	 	19	 
	ERRORS OR OMISSIONS
	 	 	17	 	 	 	10	 
	EXCLUSIONS
	 	 	6	 	 	 	2	 
	EXTRA CONTRACTUAL OBLIGATIONS
	 	 	11	 	 	 	6	 
	FEDERAL EXCISE TAX
	 	 	22	 	 	 	15	 
	FEDERAL TERRORISM EXCESS RECOVERY
	 	 	30	 	 	 	19	 
	GOVERNING LAW
	 	 	27	 	 	 	19	 
	INSOLVENCY
	 	 	18	 	 	 	10	 
	INTEREST PENALTY
	 	 	20	 	 	 	14	 
	LOSS ADJUSTMENT AND SETTLEMENT
	 	 	9	 	 	 	5	 
	LOSS IN EXCESS OF POLICY LIMITS
	 	 	12	 	 	 	7	 
	OFFSET
	 	 	23	 	 	 	15	 
	REINSURER CLAIMS OBLIGATIONS
	 	 	32	 	 	 	23	 
	SALVAGE AND SUBROGATION
	 	 	14	 	 	 	8	 
	SELF INSURED OBLIGATIONS
	 	 	7	 	 	 	4	 
	SERVICE OF SUIT
	 	 	24	 	 	 	15	 
	SEVERABILITY
	 	 	28	 	 	 	19	 
	SPECIAL CONDITIONS
	 	 	31	 	 	 	20	 
	TERRITORY
	 	 	3	 	 	 	2	 
	ULTIMATE NET LOSS
	 	 	8	 	 	 	4	 
	UNAUTHORIZED REINSURANCE
	 	 	25	 	 	 	16	 





ATTACHMENTS:




EXHIBIT A — FIRST EXCESS OF LOSS — $75,000,000 x $25,000,000

EXHIBIT B — SECOND EXCESS OF LOSS — $400,000,000 x $100,000,000

EXHIBIT C — THIRD EXCESS OF LOSS — $700,000,000 x $500,000,000

WAR AND TERRORISM EXCLUSION ENDORSEMENT (NBCR)




	 	 	 	 	 

	Effective: January 1, 2010

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	 	 	 	No. 0100300-SUM09






 









 





WORKERS’ COMPENSATION CATASTROPHE

EXCESS OF LOSS REINSURANCE ADDENDUM 4

No. 0100300-SUM09




(hereinafter referred to as the “Contract”)



between



BRIDGEFIELD CASUALTY INSURANCE COMPANY

BRIDGEFIELD EMPLOYERS INSURANCE COMPANY



Lakeland, Florida

(hereinafter referred to as the “Company”)



and



PEERLESS INSURANCE COMPANY



(hereinafter referred to as the “Subscribing Reinsurer”)


WHEREAS, the Company, the Subscribing Reinsurer and Liberty Mutual Insurance Company entered into
Novation and Amendment Agreements (“Novations”) effective January 1, 2010; and



WHEREAS, the Company, the Subscribing Reinsurer and Liberty Mutual Insurance Company did not
intend the business covered by this Contract to be subject to the Novations; and



WHEREAS, at all relevant times the Company, the Subscribing Reinsurer and Liberty Mutual Insurance
Company have acted in accordance with such intent and the terms and provisions of this Contract.



NOW, THEREFORE, IN CONSIDERATION, in consideration of the mutual promises and covenants contained
herein and for other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Company, the Subscribing Reinsurer and Liberty Mutual Insurance Company
agrees as follows:



ARTICLE 1 — BUSINESS COVERED



The Subscribing Reinsurer hereby agrees to indemnify the Company for all sums paid or payable for
losses occurring for Workers’ Compensation Policies in force at 12:01 a.m., Local Standard Time,
January 1, 2009, and new and renewed Policies becoming effective on or after said date, to the
extent and on the terms and conditions and subject to the exceptions, exclusions and limitations
hereinafter set forth and as provided in Exhibits A, B and C, which are attached hereto and made
part of this Contract. For purposes of identification, Exhibits A, B and C are entitled as follows:




	 	 	 

	EXHIBIT “A” —

	 	FIRST WORKERS’ COMPENSATION CATASTROPHE
EXCESS OF LOSS REINSURANCE — ALL PERILS
($75,000,000 excess $25,000,000)
	 
	 	 
	EXHIBIT “B” —

	 	SECOND WORKERS’ COMPENSATION CATASTROPHE
EXCESS OF LOSS REINSURANCE — ALL PERILS
($400,000,000 excess $100,000,000)
	 
	 	 
	EXHIBIT “C” —

	 	THIRD WORKERS’ COMPENSATION CATASTROPHE
EXCESS OF LOSS REINSURANCE — ALL PERILS
($700,000,000 excess $500,000,000)






	 	 	 	 	 

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ARTICLE 2 — COMMENCEMENT AND EXPIRATION





	A.	 	This Contract is effective with respect to Loss Occurrences taking place on or between 12:01
a.m., Local Standard Time, January 1, 2009 and 12:01 a.m., Local Standard Time, January 1,
2010. Local Standard Time refers to the location of the risk.
	 
	B.	 	The Subscribing Reinsurer shall have no liability for losses arising out of occurrences
commencing subsequent to 12:01 a.m., Local Standard Time, January 1, 2010.
	 
	C.	 	If a Loss Occurrence covered hereunder is in progress at 12:01 a.m., Local Standard Time,
January 1, 2010, it is agreed that, subject to the other conditions of the Contract, the
Subscribing Reinsurer shall indemnify the Company as if the entire Loss Occurrence had
occurred prior to 12:10 a.m., Local Standard Time, January 1, 2010.




ARTICLE 3 — TERRITORY (LM-02201-2005.06.02-A)



This Contract is worldwide in scope and shall cover risks wherever located.



ARTICLE 4 — ASSIGNMENT, NOVATION, OR TRANSFER (LM-00300-2008.05.13-A)



This Contract shall be binding upon and inure to the benefit of the Company and the Subscribing
Reinsurer and their respective successors and assigns provided, however, that this Contract may
not be assigned, novated or transferred, including any attempted transfer of rights and/or
obligations under any U.S. or foreign statute, legislation or jurisprudence, by either the Company
or the Subscribing Reinsurer, or as the result of the action(s) of a parent company or an
affiliated entity of either, without the prior written consent of the other. In the event of any
assignment, novation or transfer, the assignor, novator or transferor shall remain liable under
this Contract, and further guarantees the performance of all obligations of any assignee, novatee
or transferee under this Contract. Notwithstanding the foregoing, the Company may assign this
Contract to an insurance entity controlling, controlled by or under common control with the
Company, without the Subscribing Reinsurer’s written consent.



ARTICLE 5 — DEFINITIONS





	A.	 	The term “Policy” or “Policies,” as used in this Contract, means any written or oral binder,
policy, cover note, or contract of insurance or reinsurance and/or any endorsement to any of
the foregoing, issued, accepted, or held covered provisionally or otherwise, by or on behalf
of the Company for business covered under this Contract, except as excluded under Article 6 —
Exclusions of this Contract.
	 
	B.	 	The term “Workers’ Compensation Policies,” as used in this Contract, means Workers’
Compensation Policies, including all Policies providing coverage for benefits or other
amounts payable under any workers compensation law or any similar law; Employer’s Liability
coverage under any Policy; Foreign Voluntary Workers’ Compensation coverage under any Policy,
Foreign Workers’ Compensation coverage under any Policy; and Excess Workers’ Compensation and
Employer’s Liability coverage under any Policy.




ARTICLE 6 — EXCLUSIONS





	A.	 	This Contract does not apply to and specifically excludes the following:





	 	 	 	 	 

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	 	 	Section 1






	 	a.	 	Occupational Disease unless arising from a sudden and accidental event of not
more than forty-eight (48) hours in duration.
	 
	 	b.	 	Cumulative Trauma.
	 
	 	c.	 	Nuclear Accident.
	 
	 	d.	 	All liability of the Company arising by contract, operation of law, or
otherwise, from its participation or membership, whether voluntary or involuntary, in
any insolvency fund. “Insolvency fund” includes any guaranty fund, insolvency fund,
plan, pool, association, fund or other arrangement, however denominated, established or
governed, which provides for any assessment of or payment or assumption by the Company
of part or all of any claim, debt, charge, fee or other obligation of any insurer, or
its successors or assigns, which has been declared by any competent authority to be
insolvent, or which is otherwise deemed unable to meet any claim, debt, charge, fee or
other obligation in whole or in part.
	 
	 	e.	 	Reinsurance Assumed except for inter-company.
	 
	 	f.	 	War and Terrorism as per the attached War and Terrorism Exclusions Endorsement
(NBCR).






	 	 	Section 2






	 	a.	 	Offshore Oil Rigs.
	 
	 	b.	 	Jones Act.
	 
	 	c.	 	Professional Sports Teams.
	 
	 	d.	 	Airline Crews, except USAIG business written on behalf of the Company.
	 
	 	e.	 	Any of the following occupations, employments or risks (except when not disclosed
to the Company, when incidental to a non-excluded risk (the Company to be the sole judge
of what is incidental) or when insured through voluntary or statutory pools or assigned
risk plans):






	 	1)	 	The navigation and operation of vessels on the high seas in foreign commerce;
	 
	 	2)	 	Underground coal mining;
	 
	 	3)	 	Fireworks manufacturing;
	 
	 	4)	 	Manufacturing of fuses used with explosive risks and fireworks;
	 
	 	5)	 	Explosive risks, as per the following:






	 	(i)	 	Manufacture of any explosive substance intended for use as an explosive;
	 
	 	(ii)	 	Manufacture of any product, other than Fireworks and
Fuses, in which any such explosive substance is an ingredient;
	 
	 	(iii)	 	The loading of any such explosive substance into
containers for use as explosive objects, propellant charges or detonating
devices, and the incidental storage thereof;
	 
	 	(iv)	 	Handling, transportation or storage of any such
explosive substance intended solely for war purposes.






	B.	 	If any risks reinsured hereunder, but falling within the scope of the exclusions in Section
2 are assigned to the Company under any assigned risk plan, the coverage afforded by this
Contract shall apply to such risks, but only for the Policy limits prescribed by said plan,
and subject to the limits of this Contract.
	 
	C.	 	The above exclusions within Section 2 shall not apply when they are merely incidental to the
main operations of the insured, provided such main operations are covered by the Company and
are not





	 	 	 	 	 

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	 	 	themselves excluded from the scope of this Contract. The Company shall be the sole judge of
what is “incidental”.
	 
	D.	 	Should the Company, by reason of an inadvertent act, error, or omission, be bound to afford
coverage excluded within Section 2 above, the Subscribing Reinsurer shall waive the
exclusion(s). The duration of said waiver shall not extend beyond the time that notice of
such coverage has been received by the responsible underwriting authority of the Company plus
the minimum time period required thereafter for the Company to terminate such coverage.
	 
	E.	 	The Company may submit to the Subscribing Reinsurer for special acceptance hereunder,
business not covered by this Contract. If said business is accepted by the Subscribing
Reinsurer, it shall be subject to the terms of this Contract, except as such terms are
modified by such acceptance. Any special acceptance business covered under the reinsurance
agreement being replaced by this Contract shall be automatically covered hereunder. Further,
should the Subscribing Reinsurer become a party to this Contract subsequent to the acceptance
of any business not normally covered hereunder, they shall automatically accept same as being
a part of this Contract. The Company submitted and received approval for the following risks
to be covered:
	 
	 	 	Insured: Pece of Mind Disposal, Inc.

Policy No.: 0830-34965

Policy Effective Dates: 08/27/08 – 08/31/09 and 08/31/09 – 08/31/10




ARTICLE 7 — SELF-INSURED OBLIGATIONS





	A.	 	A Policy issued by the Company wherein the Company, as applicable, is named as the insured
either alone or jointly with another party shall, subject to the other terms and conditions
of this Contract, be deemed to be a Policy coming within the scope of this Contract,
notwithstanding that no legal liability may arise in respect thereof by reason of the fact
that the Company is the insured or one of the insureds.
	 
	B.	 	Any such Policy shall have been issued prior to loss on the same form and at the same
premium as if the insured and the Company were dealing at arm’s length and claims, if any,
under such Policy shall be settled strictly in accordance with the Policy conditions.




ARTICLE 8 — ULTIMATE NET LOSS (LM-02400-2008.05.13-A)





	A.	 	“Ultimate Net Loss” as used in this Contract shall mean: (1) all amounts paid or due and
payable by the Company in the investigation, appraisal, adjustment, settlement, litigation,
defense or appeal, or payment of claims or judgments arising from each and every loss, and/or
Loss Occurrence for which the Company is or may be found liable under the Policies, less
salvages and subrogation recoveries and amounts recovered or recoverable under pooling
agreements or other reinsurances, whether collectible, or not. “Ultimate Net Loss” includes,
but is not limited to, the following paid or due and payable amounts: loss adjustment
expenses, defense costs, court costs, supersedeas and appeal bond costs, Post or Prejudgment
Interest or Delayed Damages, Attorneys Fees and Expenses, Claim-Specific Declaratory Judgment
Expenses, a pro rata share of salaries and expenses of the Company’s or its affiliates’ field
employees according to the time occupied in adjusting, defending, and settling such loss, and
expenses of all of the Company’s or its affiliates’ officers and employees incurred in
connection with the loss; (except that salaries of officers and employees engaged in general
management of the Company or its affiliates’ and any office expense of the Company or its
affiliates’ shall not be included), and all other costs of investigation or litigation (2)
Extra Contractual Obligations (as defined in the Extra Contractual Obligations Article), and
(3) Loss in Excess of Original Policy Limits (as described in the Loss in Excess of Original
Policy Limits Article).





	 	 	 	 	 

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	B.	 	Nothing herein shall be construed to mean that losses under this Contract are not
recoverable until the Company’s Ultimate Net Loss has been ascertained.
	 
	C.	 	“Claim-Specific Declaratory Judgment Expenses” shall mean the fees and expenses incurred in
actions brought to determine whether the Company has a defense and/or indemnification
obligation for individual claims presented against Policies covered under this Contract. Any
Claim-Specific Declaratory Judgment Expense shall be deemed to have been fully incurred on
the same date as the insured’s original loss or Loss Occurrence (if any) giving rise to the
action, unless otherwise provided for within this Contract.
	 
	D.	 	“Attorneys’ Fees and Expenses” as used above, shall mean all fees and expenses of attorneys,
including but not limited to the fees and expenses of the Company’s or its affiliates’
in-house attorneys providing legal advice on coverage questions and/or defending the Company
in coverage litigation, and fees and expenses of staff counsel in the defense of policyholder
claims. Such Attorneys’ Fees and Expenses for in-house attorneys and staff counsel shall be
calculated at the rate for such attorneys plus the expenses incurred by such attorneys, but
excluding office expenses of the Company and its affiliates and salaries and expenses of
their other employees.
	 
	E.	 	“Post or Prejudgment Interest or Delayed Damages” shall mean interest or damages added to a
settlement, verdict, award, or judgment based on the period of time prior to or after the
settlement, verdict, award, or judgment whether or not expressly identified as such.




ARTICLE 9 — LOSS ADJUSTMENT AND SETTLEMENT (LM-01500-2006.09.07-A)





	A.	 	The Company shall give notice, as soon as practicable, to the Subscribing Reinsurer of any
claim that it has reason to believe could involve this Contract. The Company shall keep the
Subscribing Reinsurer informed of significant developments likely to affect the cost of any
claim or claims hereunder.
	 
	B.	 	The Company may commence, continue, defend, settle, or withdraw from actions, suits, or
prosecutions and, generally, do all such things relating to any claim or loss in which the
Subscribing Reinsurer is interested as, in the Company’s may be beneficial or expedient to
the Company and the Subscribing Reinsurer. The Company shall be the sole judge as to what
claims are covered under the Policies. All of the Ultimate Net Loss, as well as all loss
settlements made and judgments paid by the Company, provided they are within the terms of
this Contract either under the strict conditions of the Policies or by way of compromise,
shall be unconditionally binding upon the Subscribing Reinsurer, who agrees to pay all
amounts for which they are liable immediately upon reasonable evidence of the amount due
being furnished to the Subscribing Reinsurer by the Company. The true intent of this Contract
is that the Subscribing Reinsurer shall, in every case to which this Contract applies, follow
the settlements of the Company.




ARTICLE 10 — DEFINITION OF LOSS OCCURRENCE





	A.	 	The term “Loss Occurrence”, as used in this Contract, shall mean any one accident or
occurrence or series of accidents or occurrences arising out of one event. All losses that
are attributable directly or indirectly to one cause or one series of similar causes shall be
deemed to constitute one event.
	 
	B.	 	As regards an act of Terrorism, multiple incidents which occur within one hundred
sixty-eight (168) hour period and appear to be carried out in concert or to have a related
purpose or common leadership shall be considered one “Loss Occurrence”.





	 	 	 	 	 

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	C.	 	An act of terrorism means any activity that (1) involves a violent act or the unlawful use
of force or an unlawful act dangerous to human life, tangible or intangible property or
infrastructure, or threat thereof; and (2) appears to be intended to (i) intimidate or coerce
a civilian population, or any segment thereof, or (ii) disrupt any segment of the economy of
a government de jure or de facto, state, or country; or (iii) overthrow, influence, or affect
the conduct or policy of any government de jure or de facto by intimidation or coercion; or
(iv) affect the conduct of a government de jure or de facto by mass destruction,
assassination, kidnapping or hostage-taking.
	 
	D.	 	However, with respect to Natural Disasters the term “Loss Occurrence” shall mean any one or
more occurrences, disasters or casualties arising out of or caused by the perils described
below (a natural Act of God) during any continuous period of one hundred sixty-eight (168)
hours.






	 	1.	 	As regards the perils of tornado, cyclone, windstorm, hurricane and/or hail,
including ensuing storm surge or collapse, “Loss Occurrence” shall mean all losses
occasioned by tornadoes, cyclones, windstorm, hurricanes or hailstorms, including
ensuing storm surge or collapse, occurring during any continuous period of one hundred
sixty-eight (168) hours, and arising from the same atmospheric disturbance;
	 
	 	2.	 	As regards the peril of earthquake, “Loss Occurrence” shall mean all losses
occasioned by earthquakes, including ensuing fire, flood or tidal wave occurring during
any continuous period of one hundred sixty-eight (168) hours;
	 
	 	3.	 	As regards the following perils, “Loss Occurrence” shall mean all losses
occasioned by the following perils during any continuous period of one hundred
sixty-eight (168) hours:






	 	a)	 	Volcanic eruption;
	 
	 	b)	 	Flood, tides, tidal waves;
	 
	 	c)	 	Landslide/mudslide;
	 
	 	d)	 	Meteors.




ARTICLE 11 — EXTRA CONTRACTUAL OBLIGATIONS (LM-00900-2007.03.28-A)





	A.	 	This Contract shall protect the Company within the limits hereof for one hundred percent
(100%) of Extra Contractual Obligations. “Extra Contractual Obligations” are defined as any
actual or potential liabilities not covered under any other provision of this Contract,
arising from or relating to any alleged or actual act, error or omission, whether intentional
or otherwise, or from any alleged or actual negligence, tortious conduct, reckless conduct,
violations of statutes or regulations governing the conduct of insurance companies and/or
claims adjusters, or bad faith in connection with: (i) the handling of any claim under the
Policies covered by this Contract, such liabilities arising because of, but not limited to,
the following: failure by the Company or by a third party claims administrator to settle
within the Policy limit, or by reason of alleged or actual negligence, fraud or bad faith of
the Company or by a third party claims administrator in rejecting an offer of settlement, or
in defending or prosecuting litigation, including appeals, arbitration, or any alternative
dispute resolution or settlement discussions involving any claim; or (ii) the providing of or
failure to provide any loss control or loss prevention services in connection with any Policy
hereunder.
	 
	B.	 	The date on which any Extra Contractual Obligation is incurred by the Company shall be
deemed, in all circumstances, to be the date of the original Occurrence, loss occurrence,
accident, casualty, disaster, or loss, as selected by the Company.
	 
	C.	 	However, this Article shall not apply where the loss has been incurred due to the fraud of a
member of the Board of Directors or a corporate officer of the Company acting individually or
collectively or in collusion with any individual or corporation or any other organization or
party involved in the presentation, defense or settlement of any claim covered hereunder.





	 	 	 	 	 

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ARTICLE 12 — LOSS IN EXCESS OF ORIGINAL POLICY LIMITS (LM-01600-2005.08.24-A)





	A.	 	This Contract shall protect the Company within the limits hereof, for one hundred percent
(100%) of any Loss in excess of the Company’s original Policy limit where Loss in excess of
the limit has been incurred because of a failure by the Company, or by a third-party claims
administrator to settle within the Policy limit or by reason of alleged or actual negligence,
fraud, or bad faith in rejecting an offer of settlement or in defending or prosecuting
litigation, including appeals, arbitration, or any alternative dispute resolution or
settlement discussions involving any claim.
	 
	B.	 	However, the above paragraph shall not apply where the Loss has been incurred due to the
fraud of a member of the Board of Directors or a Corporate Officer of the Company acting
individually or collectively or in collusion with any individual or corporation or any other
organization or party involved in the presentation, defense or settlement of any claim
covered hereunder.
	 
	C.	 	With regard to excess of Policy limits, the word “Loss” shall mean any amounts for which the
Company would have been contractually liable to pay had it not been for the limit of the
original Policy. The date on which any Loss in excess of the Company’s original Policy limit
is incurred by the Company shall be deemed, in all circumstances, to be the date of the
original Occurrence, accident, casualty, disaster, loss occurrence or loss, as selected by
the Company.




ARTICLE 13 — COMMUTATION (LM-02601-2007.10.29-W)





	A.	 	Eighty-four (84) months after the expiry of this Contract, the Company shall advise the
Subscribing
Reinsurer of any Loss Occurrence which may not have been finally settled and which may cause
a claim under this Contract. Upon review, if either the Company or any Subscribing Reinsurer
requests commutation, such commutation shall proceed for all Subscribing Reinsurers, as
follows:






	 	1.	 	The Company shall prepare a final claim against the Subscribing Reinsurer in
respect of such Loss Occurrence.
	 
	 	2.	 	The Company and the Subscribing Reinsurer shall review the final claim and shall
attempt to reach settlement by mutual agreement.
	 
	 	3.	 	The final claim shall be calculated in accordance with the following criteria:






	 	a.	 	Mortality assumptions shall be calculated from the latest available
United States Census Table as follows:






	 	•	 	Survivor Benefits  	 	- Total Female or Male, whichever applies
	 
	 	•	 	Disability Benefits  	 	- Total Population






	 	 	 	The mortality assumptions should reflect: (a) the mortality improvement since
the publication of the most recent U.S. Census Table, and (b) the life
impairment of the injured worker.
	 
	 	b.	 	Remarriage expectations shall be in accordance with the assumptions
used by the National Council on Compensation Insurance in its statistical tables,
adjusted for the gender of the survivor.
	 
	 	c.	 	For all future medical costs, projected cash payments shall be based
upon projected long-term medical care and rehabilitation requirements, using the
average annual Medical Consumer Price Index (CPI) escalation rate of the past
twenty (20) years using the most recent published tables, going back twenty (20)
years.
	 
	 	d.	 	For all future indemnity costs, projected cash payments shall be
calculated based upon the average historical actual Cost-Of-Living Adjustment
(COLA) over however many years of information are available, but no more than
twenty (20) years; up





	 	 	 	 	 

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	 	 	 	through the most recent published data that is available from the State or
Federal governing body over Workers Compensation, whichever may apply.
	 
	 	e.	 	The annual interest discount percentage shall be calculated as the
average yield to maturity of all United States Treasury Bonds maturing during the
calendar quarter that is fifteen (15) years after the calendar quarter in which
the commutation date falls.
	 
	 	f.	 	The final claim shall be the amount of cash payments made, plus the
discounted present value of the future payments as determined by the above
calculations. The final claim with respect to each injured worker or fatality
shall then be capped at $10,000,000 ($5,000,000 as respects the coverage provided
in Exhibit A). The resulting individual values shall then be summed together. The
Company’s retention shall then be subtracted from this amount and the Subscribing
Reinsurer shall pay up to the per occurrence limit afforded under this Contract.






	B.	 	In the event the Company and the Subscribing Reinsurer are unable to reach a settlement
following the criteria laid out in steps A.1.a-f above, then the Company and the Subscribing
Reinsurer shall, within four (4) weeks from the written request of one of the parties,
mutually appoint an independent actuarial consulting firm or, in the event that they fail to
agree on the selection of an independent actuarial consulting firm within four (4) weeks,
each party shall name three (3) independent actuarial consulting firms of which the other
party shall decline two (2), and the decision shall be made by drawing lots. The appointed
independent actuarial consulting firm shall investigate, determine, and value the Loss
Occurrence. The valuation of such Loss Occurrence shall use the assumptions and methodologies
as stated above. The independent actuarial consulting firm’s decisions to the valuation of
such final claim shall be final and binding. The commutation process described in this
Article shall not be subject to any other dispute resolution process, including but not
limited to the Arbitration Article of this Contract.
	 
	C.	 	Payment by the Subscribing Reinsurer to the Company or any other third party mutually agreed
upon by the Subscribing Reinsurer and the Company of the final claim as determined by the
procedures described above, in respect of each such Loss Occurrence shall constitute complete
release of the Subscribing Reinsurer from liability for each such Loss Occurrence.
	 
	D.	 	This Article does not preclude termination or commutation of this Contract as provided in the
Special Conditions Article.




ARTICLE 14 — SALVAGE AND SUBROGATION (LM-01800-2008.08.15-A)





	A.	 	The Subscribing Reinsurer shall be credited with its share of salvage and/or subrogation in
respect of claims and settlements under this Contract, less its share of recovery expense.
Unless the Company agrees to waive such rights in the settlement of a disputed claim, or the
Company and Subscribing Reinsurer agree to the contrary, the Company shall enforce the right
to salvage and/or subrogation and shall prosecute all claims arising out of such right.
Should the Company refuse or neglect to enforce this right, the Subscribing Reinsurer is
hereby empowered and authorized to institute appropriate action in the name of the Company.
	 
	B.	 	Amounts recovered from salvage and/or subrogation and the expense of any salvage and/or
subrogation proceedings brought by the Company or the Subscribing Reinsurer to enforce such
rights shall be apportioned between the Company and the Subscribing Reinsurer in the ratio of
their respective interests in the total salvage and/or subrogation recovery, and shall be in
addition to the limits hereon. In the event there is a failure to obtain a salvage and/or
subrogation recovery, the





	 	 	 	 	 

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	 	 	expense of the proceedings shall be apportioned between the Company and the Subscribing
Reinsurer in the ratio of their respective interests in the total loss.
	 
	C.	 	All salvage and/or subrogation recoveries obtained by either party, subsequent to payments
made by the Subscribing Reinsurer under this Contract, shall be applied as if obtained prior
to said payments and all necessary adjustments shall be made between the Company and the
Subscribing Reinsurer as soon as practicable after said salvage and/or subrogation recovery is
obtained.
	 
	D.	 	The Company shall have the right, before the happening of the loss, to waive its right of
subrogation as to that loss.




ARTICLE 15 — CURRENCY (LM-00500-2005.08.09)



Whenever a reference to a monetary currency appears in this Contract, it shall be construed to
mean United States Dollars ($). All payments made by either party shall be made in United States
Dollars. All amounts paid or received by the Company in any other currency shall be converted into
United States Dollars at the rate of exchange on the date at which it is entered on the books of
the Company.



ARTICLE 16 — ACCESS TO RECORDS (LM-00100-2008.08.25-A)





	A.	 	Except as otherwise provided in this Article, the Subscribing Reinsurer, or its duly
authorized representative, may upon reasonable prior written notice to the Company, at the
Subscribing Reinsurer’s own expense, examine at the offices of the Company or its affiliates,
during normal office hours, the Company’s Policy, accounting, underwriting, or claim records
and files, or any such additional relevant records and files, as they exist in the Company’s
or its affiliates’ possession or reasonable control, relating to business ceded under this
Contract. The Subscribing Reinsurer’s notice shall reasonably describe the nature of the
inspection that it wishes to conduct, the persons conducting the inspection and upon notice
of available files from the Company, the files that it wishes to review. Subject to the
limitations expressed in this Article, this right of inspection shall survive termination or
expiration of this Contract and shall continue as long as either Party has any rights or
obligations under this Contract.
	 
	B.	 	The Company reserves the right to deny the Subscribing Reinsurer access to records or files
concerning any particular claim(s) if the Subscribing Reinsurer has not disputed liability
for payment of such claim(s), and payment of such claim(s) is (are) more than ninety (90)
days overdue according to the Company’s records. The Company shall, however, prior to an
arbitration demand that may be instituted by either party, continue to respond to reasonable
specific requests for information and questions raised by the Subscribing Reinsurer
concerning such claims; and nothing in this Article shall restrict the right or ability of
the Subscribing Reinsurer to seek discovery of relevant information in a proceeding pursuant
to the Arbitration Article of this Contract.
	 
	C.	 	As a condition precedent to access to records under this Article, the Subscribing Reinsurer,
its personnel and any authorized third party representative of the Subscribing Reinsurer
shall agree to the provisions of the Confidentiality Article of this Contract.
	 
	D.	 	The Company reserves the right to withhold any documents from the Subscribing Reinsurer (1)
concerning Trade Secrets of the Company or its affiliates, (2) subject to the terms of a
third party non-disclosure agreement with the Company or its affiliates requiring third party
consent to disclosure, (3) subject to the Work Product Privilege or Attorney-Client Privilege
or (4) concerning individual private information that as a matter of law cannot be disclosed
by the Company or its affiliates (hereinafter referred to in the Contract as “Privileged
Documents”). The Company shall





	 	 	 	 	 

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	 	 	reasonably try to exempt the Subscribing Reinsurers from any third party non-disclosure
agreement or obtain consent from the third party to disclose to the Subscribing Reinsurers.
	 
	E.	 	Notwithstanding the foregoing, the Company shall permit and not object to the Subscribing
Reinsurer’s access to Privileged Documents falling within (3) above, in connection with the
underlying claim reinsured hereunder following final settlement or final adjudication of the
case or cases involving such claim, with prejudice against ail claimants, and all parties to
such adjudications; provided that the Company, may defer release of such Privileged Documents
if there are subrogation, contribution, or other third party actions with respect to that
claim or case, which may jeopardize the Company’s or its affiliates’ defense by release of
such Privileged Documents. In the event that the Company shall seek to defer release of such
Privileged Documents or to withhold documents concerning Trade Secrets, it will in
consultation with the Subscribing Reinsurer take other steps as reasonably necessary to
provide the Subscribing Reinsurer with the information it reasonably requires to indemnify
the Company without causing a loss of such privileges or protections. The Subscribing
Reinsurer, however, shall not have access to Privileged Documents relating to any dispute
between the Company and the Subscribing Reinsurer.
	 
	F.	 	For purposes of this Article, “Trade Secrets” shall have the meaning provided in Section
1839 of the United States Economic Espionage Act of 1996. “Attorney—Client Privilege” shall
mean communications of a confidential nature between 1) the Company or its affiliates, or
anyone retained by or in the control of the Company or its affiliates, or their in-house or
outside legal counsel, or anyone in the control of such legal counsel, and 2) any in-house or
outside legal counsel which relate to legal advice being sought by the Company or its
affiliates and/or which contains legal advice being provided to the Company or its
affiliates. “Work Product Privilege” shall mean communications, written materials and
tangible things prepared by or for in-house or outside counsel, or prepared by or for the
Company or its affiliates, in anticipation of or in connection with litigation, arbitration,
or other dispute resolution proceedings.




ARTICLE 17 — ERRORS AND OMISSIONS (LM-00800-2005.06.02-A)





	A.	 	Any inadvertent delay, omission, or error in complying with the terms and conditions of this
Contract shall not be held to relieve either party hereto from any liability, which would
attach to it hereunder if such delay, omission, or error had not been made, provided such
delay, omission, or error is rectified upon discovery.
	 
	B.	 	However, this Article shall not override the application of the commutation of losses as set
forth in the Commutation Article or the Special Conditions Article of this Contract.




ARTICLE 18 — INSOLVENCY (LM-01300-2008.07.25-A)



If more than one reinsured company is referenced within the definition of “Company” in the
Preamble to this Contract, this Article shall apply severally to each such company. Further, this
Article and the laws of the domiciliary state shall apply in the event of the insolvency of any
company intended to be covered hereunder. In the event of a conflict between any provision of this
Article and the laws of the domiciliary state of any company intended to be covered hereunder,
that domiciliary state’s laws shall prevail.





	A.	 	In the event of the insolvency of the Company, reinsurance under this Contract shall be payable
with reasonable provision for verification, on the basis of claims allowed against the
insolvent Company by any court of competent jurisdiction or by any liquidator, receiver,
conservator, or statutory successor of the Company having authority to allow such claims,
without diminution because of such insolvency or because such liquidator, receiver,
conservator, or statutory successor has failed to pay all or a portion of any claims. Such
payments by the Subscribing





	 	 	 	 	 

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	 	 	Reinsurer shall be made directly to the Company or its liquidator, receiver, conservator, or
statutory successor, except to the extent Section 4118(a) of the New York Insurance Law
applies, or except (1) where the Contract specifically provides another payee of such
reinsurance in the event of the insolvency of the Company, or (2) where the Subscribing
Reinsurer with the consent of the direct insured or insureds has assumed such Policy
obligations of the Company as direct obligations of the Subscribing Reinsurer to the payees
under such Policies and in substitution for the obligations of the Company to such payees.
	 
	B.	 	It is agreed, however, that the liquidator, receiver, conservator, or statutory successor of
the insolvent Company shall give written notice to the Subscribing Reinsurer of the pendency
of a claim against the insolvent Company on the Policy or Policies reinsured within a
reasonable time after such claim is filed in the insolvency proceeding and that during the
pendency of such claim the Subscribing Reinsurer may investigate such claim and interpose, at
its own expense, in the proceeding where such claim is to be adjudicated, any defense or
defenses which it may deem available to the Company or its liquidator, receiver, conservator,
or statutory successor. The expense thus incurred by the Subscribing Reinsurer shall be
chargeable, subject to court approval, against the insolvent Company as part of the expense
of liquidation to the extent of a proportionate share of the benefit, which may accrue to the
Company solely as a result of the defense undertaken by the Subscribing Reinsurer.
	 
	C.	 	Where two or more Reinsurers are involved in the same claim and a majority in interest
elects to interpose defense to such claim, the expense shall be apportioned in accordance
with the terms of this Contract as though such expense had been incurred by the insolvent
Company.
	 
	D.	 	Applicable to a Subscribing Reinsurer licensed to write Workers’ Compensation business
in California. With respect to California Workers Compensation loss(es), it is agreed
that in the event of any delinquency proceeding, receivership, or insolvency of the Company
and/or the failure of the Subscribing Reinsurer, for any reason, to make payments under this
Contract, the Insurance Commissioner of California may, upon 30-days notice, draw upon any
sums from the deposit made by the Subscribing Reinsurer in accordance with the provisions of
sections 11691 – 11703 of the California Insurance Code.




ARTICLE 19 — ARBITRATION (LM-00200-2008.06.27-A)





	A.	 	Disputes to be Arbitrated. With the exception of any dispute resolution procedures
that are otherwise contained in this Contract, any and all disputes between the Company and
any Subscribing Reinsurer or Reinsurers (“Party” individually or “Parties” collectively)
arising out of, relating to, or concerning this Contract, whether sounding in contract or
tort and whether arising during or after this Contract’s formation, or after its termination,
including disputes as to whether the Contract was validly formed or is voidable, shall be
submitted to the decision of an arbitration panel (“Panel”). The Panel shall consist of an
umpire and two party-appointed arbitrators unless a Party meets the requirements of Paragraph
C of this Article and demands arbitration pursuant thereto, in which case the Panel would
consist of an umpire only.
	 
	B.	 	Procedures. Except as provided herein, any arbitration shall be based upon the
Procedures for the Resolution of U.S. Insurance and Reinsurance Disputes, Regular Panel
Version, dated April 2004 (the “Procedures”), developed by the Insurance and Reinsurance
Dispute Resolution Task Force, subject to the following modifications:






	 	1.	 	Qualifications of the arbitrators and umpires shall be in accordance with section 6.2 of
the
Procedures, except that other professionals who have worked for at least 10 years for
an insurer or reinsurer shall also be qualified to serve as an arbitrator or umpire.





	 	 	 	 	 

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	 	2.	 	The Parties hereby designate the umpire list maintained by ARIAS (U.S.) as the list
to be used in the event that section 6.7(a) of the Procedures is invoked.
	 
	 	3.	 	Unless otherwise mutually agreed, the members of the Panel shall be impartial and
disinterested. The members of the Panel may not be: (1) in the control of any Party or
its parent, affiliate, or agent, (2) a former director or officer of any Party or its
parent, affiliate, or agent, or (3) a likely witness in the arbitration. The requirement
of impartiality means that all members of the Panel shall have the same obligation to
approach the Panel’s duties and decisions with fairness and without consideration for
the fact that Panel members may have been appointed by one of the Parties. The
requirement of impartiality does not mean that any arbitrator can have no previous
knowledge of or experience with respect to issues involved in the dispute or disputes.
	 
	 	4.	 	The first sentence of Section 10.4 of the Procedures shall be replaced by the
following sentence: “The Panel shall require that each Party submit concise written
statements of position, including summaries of the facts and evidence a Party intends to
present, discussion of the applicable law and the basis for the requested Award or
denial of relief sought.”
	 
	 	5.	 	Once the Panel has been constituted, no Party (or anyone acting for a Party)
shall have any communications concerning the arbitration or any of the issues before
the Panel with any member of the Panel that is not also disclosed to all other Parties
and all members of the Panel. Each Panel member shall have a continuing duty to
disclose promptly to all Parties and all Panel members any violation of this
prohibition and the specifics of any improper communications that occurred. This
prohibition shall remain in place until all challenges to any arbitration awards and
decisions have been either waived or finally concluded.
	 
	 	6.	 	Section 11.1 of the Procedures shall be replaced by the following provision:
“The Parties may propound discovery seeking disclosure of such information and/or
documents relevant to the dispute or necessary for the proper resolution of the
dispute.”
	 
	 	7.	 	Position statements may be amended at any reasonable time, but not later than
the close of discovery without a showing to the Panel that the amending Party could not
reasonably have raised the new claim or issue at an earlier time.
	 
	 	8.	 	The Panel shall hold an evidentiary hearing, if one is necessary, within one
year of the arbitration demand, unless the Parties otherwise agree. Should a Party seek
a reasonable extension to this time frame for good cause shown, the other Party’s
agreement shall not be unreasonably withheld.
	 
	 	9.	 	To the extent permitted by the law, the Panel shall have the authority to issue
subpoenas and other orders to enforce its decisions.
	 
	 	10.	 	The Panel may award reasonable attorneys’ fees and arbitration costs to the
prevailing Party, as determined by the Panel.
	 
	 	11.	 	Section 14.3 of the Procedures shall be replaced by the following provision:
“The Panel shall make a decision and issue an award with regard to the terms expressed
in this Contract, and the custom and practice of the property and casualty insurance
and reinsurance business. The Panel shall not be obligated to follow the strict rules
of law and evidence.”






	C.	 	Alternative Streamlined Procedures. Notwithstanding the foregoing provisions of this
Article, the Alternative Streamlined Procedures set forth in section 16 of the Procedures, as
modified by sections B3, B4, and B9 through B11 of this Article, shall apply in the event
that, in a consolidated proceeding or otherwise, the Party initiating arbitration is seeking
payment of a total amount that is no greater than one million dollars ($1,000,000), or the
currency equivalent thereof. Sections 16.1, 16.2,16.3 and the second sentence of section 16.4
of the Alternative Streamlined Procedures shall





	 	 	 	 	 

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	 	 	not apply. The Parties agree to comply with section 6.7 of the Procedures to appoint a
single umpire, and hereby designate the umpire list maintained by ARIAS (U.S.) as the list
to be used in section 6.7(a).
	 
	D.	 	Hearing Location. The hearing shall be held in Boston, Massachusetts, unless the
Parties mutually agree to a different location.
	 
	E.	 	Confirmation. Either Party may apply to a court of competent jurisdiction for an
order confirming any award of the Panel; a judgment of that court shall thereupon be entered
on any award. If the application for confirmation is contested and a judgment is issued
confirming the award, then the Party against whom confirmation is sought shall pay the
attorneys’ fees incurred by the Party who applied for the confirmation and all court costs of
any such proceeding.
	 
	F.	 	Equitable Relief from a Court of Law. Nothing herein shall be construed to prevent
any participating Party from applying to a court of competent jurisdiction to issue a
restraining order or other equitable relief to maintain the “status quo” of the Parties
participating in the arbitration pending the decision and award by the Panel.
	 
	G.	 	Consolidated Proceedings.






	 	1.	 	Same contract, single Subscribing Reinsurer. Both the Company and any single Subscribing
Reinsurer on this Contract have the right to combine any and all disputes between them
that concern this Contract (including any renewal of this Contract or any contract for
which this Contract is a renewal) into a single arbitration proceeding before a single
Panel, except that the standard for determining whether a Party may add a new issue,
claim, or dispute to an arbitration proceeding shall be the standard for amending a
Position statement, as set forth in Paragraph B7 of this Article.
	 
	 	2.	 	Multiple contracts, single Subscribing Reinsurer.






	 	a.	 	Either the Company or any single Subscribing Reinsurer has the right
to combine any and all disputes between the Company and such single Subscribing
Reinsurer into one arbitration proceeding before a single Panel where such
disputes involve this Contract and any additional contracts between the two
Parties, except that the standard for determining whether a Party may add a new
issue, claim, or dispute to an arbitration proceeding shall be the standard for
amending a Position statement, as set forth in Paragraph B7 of this Article.
	 
	 	b.	 	Notwithstanding the foregoing, subject in each instance to the
mutual agreement of the Parties, new issues, claims, or disputes may be added to
such existing arbitration proceeding.






	 	3.	 	Same contract, multiple Reinsurers. At the Company’s option, if more than one
Subscribing Reinsurer is involved in arbitration relating to this Contract, where there
are common questions of law or fact and a possibility of conflicting awards or
inconsistent results, all such Reinsurers shall constitute and act as one Party for
purposes of this Article and communications shall be made by the Company to each of the
Reinsurers constituting the one Party; provided, however, that the Reinsurers shall
have the right to assert several, rather than joint defenses or claims, and to be
represented by separate counsel. This provision shall not change the liability of each
of the Reinsurers under the terms of this Contract from several to joint.






	H.	 	Choice of Law. The law set forth in the Governing Law Article shall apply to this
Arbitration Article. In addition, to the extent the Panel (or the umpire in an Alternative
Streamlined Procedure) looks to applicable law, such Panel or umpire shall apply the law as
set forth in the Governing Law Article of this Contract.





	 	 	 	 	 

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	I.	 	Survival of Article. This Article shall survive the termination or expiration of this
Contract.




ARTICLE 20 — INTEREST PENALTY (LM-01400-2005.08.24-A)





	A.	 	The interest amounts provided for in this Article shall apply to the Subscribing Reinsurer or
to the Company in the following circumstances:






	 	1.	 	If a loss payment owed by the Subscribing Reinsurer to the Company is not
received within 45 calendar days following the date of presentation to the Subscribing
Reinsurer of information necessary to approve payment of the claim, and/or
	 
	 	2.	 	If any premium payment owed by the Company to the Subscribing Reinsurer is not
received within 45 calendar days following the
date on which payment is due, and/or
	 
	 	3.	 	If any premium adjustment, agreed by either party to the other, is not received
within 150 calendar days following the expiry or anniversary of this Contract, and/or
	 
	 	4.	 	If any return of premiums, commissions, profit sharing, or any amounts not
provided in subparagraphs 1, 2, and 3 above, are not received in accordance with the
date specified in this Contract or if no date is specified, within 90 calendar days
following the date the debtor party received the billing.






	B.	 	Failure by the Subscribing Reinsurer or Company to comply with their respective payment
obligations within the time periods as herein provided shall, as of that date, be subject to
an interest payment computed by multiplying the amount due by a variable rate consisting of
the U.S. Prime Rate as published in the Eastern Edition of The Wall Street Journal on
the first day of the calendar month in which the amount became past due, plus 2%. The
variable rate shall be adjusted monthly thereafter to equal the U.S. Prime Rate as published
in the Eastern Edition of The Wall Street Journal on the first day of each successive
month during which the amount due remains unpaid, plus 2%. The product shall then be
multiplied by 1/365 for each day after the due date that the amount due and the interest
amount remain unpaid. Any interest that occurs pursuant to this Article shall be calculated
by the party to which it is owed.
	 
	C.	 	The validity of any claim or payment may be contested under the provisions of this Contract.
If the debtor party prevails in an arbitration or any other proceeding with respect to the
amounts in dispute, there shall be no interest penalty due. If the creditor party wholly or
partially prevails on any of the amounts in dispute, the interest penalty shall be awarded as
outlined above. Such interest penalty shall be calculated from the date the monies were due
and owing to the date of resolution of the arbitration or proceeding, and shall be payable as
of the date of resolution of the arbitration or proceeding.
	 
	D.	 	If a Subscribing Reinsurer advances the entire or partial payment of any claim it is
contesting, and wholly or partially prevails in the contest, the Company shall promptly
return the applicable amount of such payment. The arbitrator(s) hearing such dispute shall
determine if interest shall be added to the amount returned by the Company.
	 
	E.	 	Any interest owing pursuant to this Article may be waived by the party to which it is owed.
Further, any interest calculated pursuant to this Article that is $100 or less shall be
waived. Any waiver of any interest pursuant to this paragraph, however, shall not affect the
waiving party’s right to claim and/or pursue interest for any other failure by the other
party to make payment when due under this Article.





	 	 	 	 	 

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ARTICLE 21 — DIVIDENDS AND TAXES (LM-00600-2008.10.10-A)



In consideration of the terms of this Contract, the Company shall not claim any deduction in
respect of any amount paid as dividends or as reinsurance premium when making tax returns, other
than income or profits tax returns to any State or to the District of Columbia.



ARTICLE 22 — FEDERAL EXCISE TAX (LM-01000-2008.08.15-A)





	A.	 	This Article is applicable to any Subscribing Reinsurer who is domiciled outside of the
United States of America, except for any Subscribing Reinsurer exempt from Federal Excise
Tax. A Subscribing Reinsurer that claims exempt status from Federal Excise Tax shall provide
to the Company, upon its request, proof that the exempt status adequately satisfies the
demands of the U.S. Internal Revenue Service, Department of the Treasury, or its successor
and/or other applicable U.S. government authority.
	 
	B.	 	Each Subscribing Reinsurer shall allow the applicable percentage of the premium payable
hereon (as imposed under Section 4371 of the Internal Revenue Code) for the purpose of paying
Federal Excise Tax to the extent such premium is subject to such tax.
	 
	C.	 	In the event of any return of premium, the Subscribing Reinsurer shall deduct the aforesaid
percentage from the return premium payable hereon and the Company or its agent shall recover
such tax from the United States Government.




ARTICLE 23 — OFFSET (LM-01701-2005.06.02-A)



Each party to this Contract together with their successors or assigns shall have and may exercise,
at any time, the right to offset any balance(s) due the other (or, if more than one, any other)
under this Contract. Such offset may include balances due under this Contract regardless of
whether such balances arise from premiums, losses, or otherwise, provided however, that in the
event of insolvency of a party hereto, offsets shall only be allowed in accordance with the
provisions of the applicable law, statute, or regulation governing such offset.



ARTICLE 24 — SERVICE OF SUIT (LM-01900-2008.07.17-A)



(This article applies to unauthorized reinsurers and to reinsurers who are domiciled outside the
United States of America.)





	A.	 	This Service of Suit Article will not be read to conflict with or override the obligations
of the parties to arbitrate their disputes as provided for in the Arbitration Article. This
Article is intended as an aid to compelling arbitration or enforcing such arbitration or
arbitral award, not as an alternative to the Arbitration Article for resolving disputes
arising out of this Contract.
	 
	B.	 	In the event of the failure of the Subscribing Reinsurer to pay any amount claimed to be due
hereunder, the Subscribing Reinsurer, at the request of the Company, will submit to the
jurisdiction of a Court of competent jurisdiction within the United States. Nothing in this
Article constitutes or should be understood to constitute a waiver of the Subscribing
Reinsurer’s right to commence an action in any Court of competent jurisdiction in the United
States, to remove an action to a United States District Court, or to seek a transfer of a
case to another Court as permitted by the laws of the United States or of any state in the
United States. The Subscribing Reinsurer, once the appropriate Court is selected, whether
such court is the one originally chosen by the Company and accepted by the Subscribing
Reinsurer or is determined by removal, transfer, or otherwise, as provided for above, will
comply with all requirements necessary to give said Court jurisdiction and, in any suit





	 	 	 	 	 

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	 	 	instituted against any of them upon this Contract, will abide by the final decision of such
Court or of any Appellate Court in the event of an appeal.
	 
	C.	 	Service of process in such suit may be made upon Mendes & Mount, LLP, 750 Seventh Avenue,
New York, NY 10019-6829.
	 
	D.	 	The above-named are authorized and directed to accept service of process on behalf of the
Subscribing Reinsurer in any such suit. Further, pursuant to any statute of any state,
territory, or district of the United States that makes provision therefore, the Subscribing
Reinsurer hereby designates the Superintendent, Commissioner, or Director of Insurance, or
other officer specified for that purpose in the statute, or their successor(s) in office, as
their true and lawful attorney upon whom may be served any lawful process in any action,
suit, or proceedings instituted by or on behalf of the Company or any beneficiary hereunder
arising out of this Contract, and hereby designate the above-named as the person to whom the
said officer is authorized to mail such process or a true copy thereof.




ARTICLE 25 — UNAUTHORIZED REINSURANCE (LM-02500-2008.09.24-A)



(Applies only to a Subscribing Reinsurer who at the inception of the Contract or at any time
thereafter does not qualify for full credit with any insurance regulatory authority having
jurisdiction over the Company’s reserves.)





	A.	 	As regards Policies issued by the Company coming within the scope of this Contract, the
Company agrees that when it shall file with the insurance regulatory authority or set up on
its books reserves for unearned premium and losses covered hereunder which it shall be
required by law to set up, it will forward to the Subscribing Reinsurer a statement showing
the proportion of such reserves which is applicable to the Subscribing Reinsurer. The
Subscribing Reinsurer hereby agrees to fund such reserves in respect of unearned premium,
known outstanding losses that have been reported to the Subscribing Reinsurer and allocated
loss adjustment expense relating thereto, losses and allocated loss adjustment expense paid
by the Company but not recovered from the Subscribing Reinsurer, plus reserves for losses
incurred but not reported as determined by the Company, as shown in the statement prepared by
the Company (hereinafter referred to as “ Subscribing Reinsurer Obligations”) by Letters of
Credit, unless the Company and the Subscribing Reinsurer otherwise agree, and/or the method
of funding is determined by applicable law, statute, or regulation.
	 
	B.	 	When funding by Letters of Credit, the Subscribing Reinsurer agrees to apply for and secure
timely delivery to the Company of clean, irrevocable, and unconditional Letters of Credit
issued by a bank that is a qualified U.S. financial institution and containing provisions
acceptable to the insurance regulatory authorities having jurisdiction over the Company’s
reserves in an amount equal to the Subscribing Reinsurer’s proportion of said reserves. At
the Company’s request, the Subscribing Reinsurer will agree to provide separate Letters of
Credit for any Affiliates covered under this Contract. Such Letters of Credit shall be issued
for a period of not less than one year, and shall be automatically extended for one year from
the date of expiration or any future expiration date unless 60 days prior to any expiration
date, the issuing bank shall notify the Company by certified mail that the issuing bank
elects not to consider the Letters of Credit extended for any additional period.
	 
	C.	 	The Subscribing Reinsurer and Company agree that the Letters of Credit provided by the
Subscribing Reinsurer pursuant to the provisions of this Contract may be drawn upon at any
time, notwithstanding any other provision of this Contract, and be utilized by the Company,
or any successor, by operation of law, of the Company, including without limitation, any
liquidator, rehabilitator, receiver, or conservator of the Company, without diminution
because of the insolvency of the Company or the Subscribing Reinsurer for one or more of the
following purposes:





	 	 	 	 	 

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	 	1.	 	To pay or reimburse the Company for:






	 	a.	 	The Subscribing Reinsurer’s share under this Contract of premiums
returned, but not yet recovered from the Subscribing Reinsurer, to the owners of
Policies reinsured under this Contract on account of cancellations of such
Policies; and
	 
	 	b.	 	The Subscribing Reinsurer’s share, under this Contract, of
surrenders and benefits or losses paid by the Company, but not yet recovered from
the Subscribing Reinsurer, under the terms and provisions of the Policies
reinsured under this Contract; and
	 
	 	c.	 	Any other amounts necessary to secure the credit or reduction from
liability for reinsurance taken by the Company.






	 	2.	 	Where the Letters of Credit will expire without renewal or be reduced or
replaced by Letters of Credit for a reduced amount and where the Subscribing
Reinsurer’s entire obligations under this Contract remain unliquidated and undischarged
10 days prior to the termination date, to withdraw amounts equal to the Subscribing
Reinsurer’s share of the liabilities, to the extent that the liabilities have not yet
been funded by the Subscribing Reinsurer and exceed the amount of any reduced or
replacement Letters of Credit, and deposit those amounts in a separate account in the
name of the Company in a qualified U.S. financial institution, apart from its general
assets, in trust for such uses and purposes specified in above as may remain after
withdrawal and for any period after the termination date.






	D.	 	At annual intervals, or at the Company’s option, on a quarterly basis, the Company shall prepare
a specific statement of the Subscribing Reinsurer’s Obligations, for the sole purpose of
amending the Letters of Credit, in the following manner:






	 	1.	 	If the statement shows that the Subscribing Reinsurer’s Obligations exceed the
balance of credit as of the statement date, the Subscribing Reinsurer shall, within 30
days after receipt of notice of such excess, secure delivery to the Company of an
amendment to the Letters of Credit increasing the amount of credit by the amount of
such difference.
	 
	 	2.	 	If, however, the statement shows that the Subscribing Reinsurer’s Obligations
are less than the balance of credit as of the statement date, the Company shall, within
30 days after receipt of written request from the Subscribing Reinsurer, release such
excess credit by agreeing to secure an amendment to the Letters of Credit reducing the
amount of credit available by the amount of such excess credit.






	E.	 	Any and all disputes between the Company and any Subscribing Reinsurer or Reinsurers
(“Party”, individually, or “Parties”, collectively) arising out of, relating to, or
concerning this Article shall be resolved pursuant to the ARIAS-U.S. Newer Arbitrator
Program. Unless the Parties otherwise agree, the ARIAS Newer Arbitrator Program expedited
proceeding with a single Newer Arbitrator shall be used to resolve any such disputes.




ARTICLE 26 — CONFIDENTIALITY (LM-00400-2008.08.15-A)





	A.	 	Confidential Information. The submission materials, and any Policy, financial,
underwriting,
accounting, and claims information, data statements, representations, and other materials
provided by the Company or its affiliates and received by the Subscribing Reinsurer in the
course of an audit, inspection, or otherwise, represent confidential or proprietary
information (“Confidential Information”). This Confidential Information is intended for the
sole use of the Subscribing Reinsurer (and its retrocessionaires, accountants, attorneys,
auditors, actuaries or third party catastrophe modelers or others where required by law) as
may be necessary in analyzing and/or accepting a participation in and/ or executing its
responsibilities under or related to this Contract. The Subscribing Reinsurer acknowledges
and agrees that with respect to any review of Confidential





	 	 	 	 	 

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	 	 	Information by the Subscribing Reinsurer, and/or discussion of Confidential Information, the
Company and its affiliates do not waive and do not intend to waive any available privilege or
protection. The review of Confidential Information by the Subscribing Reinsurer and/or
discussion of Confidential Information with the Company or its affiliates shall not destroy,
waive, or otherwise impair the proprietary and/or protected status of any Confidential
Information or any information revealed in such discussion with the personnel of the Company
or its affiliates, whether reviewed by and/or discussed with the Subscribing Reinsurer
intentionally or inadvertently, nor does the review of the Confidential Information and/or
discussion of Confidential Information with the Company or its affiliates constitute an
estoppel or waiver of the Company’s or its affiliates’ rights to assert the attorney-client
or work-product privileges, or any other applicable privilege or protection, over certain
documents contained in the Company’s or its affiliates’ files and/or certain information.
	 
	B.	 	The Company and the Subscribing Reinsurer agree that no confidentiality obligations will
apply to Confidential Information to the extent such Confidential Information: (1) is or
becomes available to the public, other than as a result of impermissible disclosure by the
Subscribing Reinsurer, (2) was or became available lawfully to the Subscribing Reinsurer from
a source, other than the Company, its affiliates or their personnel, that is not subject to a
confidentiality obligation, (3) was developed independently by the Subscribing Reinsurer
prior to disclosure by the Company, its affiliates or their personnel, as demonstrated by the
Subscribing Reinsurer’s records, or (4) is required to be disclosed by law, regulation,
court, or regulatory agency action, subject to the Third Party Demand Paragraph of this
article.
	 
	C.	 	The Subscribing Reinsurer agrees to preserve all confidentiality and privilege pertaining to
all Confidential Information provided by the Company and all knowledge and information gained
through its review of Confidential Information or discussions with the personnel of the
Company or its affiliates. The Subscribing Reinsurer further agrees not to disclose any such
Confidential Information to any other person or entity except as such disclosure may be
necessary to its retrocessionaires, accountants, attorneys, auditors, actuaries or third
party catastrophe modelers or as otherwise required by law. The Subscribing Reinsurer agrees
that no Confidential Information is to be copied and/or removed from the Company’s or its
affiliates’ premises without the express permission of the Company.
	 
	D.	 	Non-Public Personally Identifiable Information. Additionally, any disclosure of
Non-Public Personally Identifiable information shall comply with all state and federal
statutes and regulations governing the disclosure of Non-Public Personally Identifiable
information. “Non-Public Personally Identifiable information” shall be defined as this term
or a similar term is defined in any applicable state, provincial, territory, or federal law.
Disclosing or using this information for any purpose not authorized by applicable law is
expressly forbidden without the prior consent of the Company.
	 
	E.	 	Third-Party Demand. Should the Subscribing Reinsurer receive a third-party demand
pursuant to subpoena, summons, or court or governmental order, to disclose Confidential
Information (including Non-Public Personally Identifiable Information) that has been provided
by the Company or its affiliates, the Subscribing Reinsurer shall make commercially
reasonable efforts to notify the Company promptly upon receipt of the demand and prior to
disclosure of the Confidential Information and provide the Company a reasonable opportunity
to object to the disclosure. If the Company timely objects to the release of the Confidential
Information, the Subscribing Reinsurer will comply with the reasonable requests of the
Company in connection with the Company’s efforts to resist release of the Confidential
Information. The Company shall bear the cost of resisting the release of the Confidential
Information.
	 
	F.	 	Survival. The parties agree that the obligations contained in this Article shall
survive the expiration or termination of this Contract.





	 	 	 	 	 

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ARTICLE 27 — GOVERNING LAW (LM-01200-2008.09.18-A)



The validity and interpretation of this Contract shall be governed by and construed in accordance
with the law of the Commonwealth of Massachusetts, without regard to conflicts of law principles.



ARTICLE 28 — SEVERABILITY (LM-02000-2005.06.02-A)



If any provision of this Contract shall be rendered illegal or unenforceable by the laws,
regulations, or public policy of any state, such provision shall be considered void in such state,
but this shall not affect the validity or enforceability of any other provision of this Contract or
the enforceability of such provision in any other jurisdiction.



ARTICLE 29 — ENTIRE AGREEMENT (LM-00701-2008.08.15-A)



This Contract and the Novations of which it forms a part, shall constitute the entire agreement
between the Company and the Subscribing Reinsurer with respect to the subject matter of this
Contract and shall supersede all prior understandings, negotiations and discussions, whether oral
or written, by or between the Company and the Subscribing Reinsurer relating to the subject matter
hereof. There are no general or specific warranties, representations or other agreements by or
among the Company and the Subscribing Reinsurer in connection with entering into this Contract
except as specifically set forth in this Contract. Notwithstanding the foregoing, this Contract
may be amended or modified only by a writing signed by both the Company and the Subscribing
Reinsurer.



ARTICLE 30 — FEDERAL TERRORISM EXCESS RECOVERY (LM-01100-2008.08.06-A)





	A.	 	Any loss reimbursement the Company receives from the United States Government under the
Terrorism Risk Insurance Act of 2002 as amended by the Terrorism Risk Insurance Extension Act
of 2005 and as further amended by the Terrorism Risk Insurance Program Reauthorization Act of
2007 (“TRIA”) as a result of Loss Occurrences commencing during the term of this Contract
shall apply as follows:
	 
	B.	 	Except as provided below, any loss reimbursement under TRIA shall inure solely to the
benefit of the Company and shall be entirely disregarded in applying all of the provisions of
this Contract.
	 
	C.	 	If one or more Loss Occurrences commencing during the term of this Contract result(s) in
reinsurance recoveries to the Company under this Contract and reimbursement under TRIA, and
such amounts, together with any other reinsurance recoveries to the Company for said loss
occurrence(s), exceed the total amount of “Insured Losses” to the Company, any amount in
excess thereof shall be held by the Company. The Company shall then reimburse the Subscribing
Reinsurer a portion of such excess recovery in an amount equal to the proportion that the
Subscribing Reinsurer’s payment under this Contract bears to the total treaty reinsurance
recoveries to the Company for Insured Losses for said Loss Occurrence(s). Provided, however,
that in no event shall such reimbursement exceed the amount paid by the Subscribing Reinsurer
to the Company under this Contract.
	 
	D.	 	For purposes hereof, if a loss reimbursement received by the Company under TRIA is based on
the Company’s Insured Losses in more than one Loss Occurrence and neither the Secretary of
the Treasury nor his delegatee specifies the amount of loss allocable to each respective Loss
Occurrence, the reimbursement shall be pro-rated in the proportion that the Company’s Insured
Losses in each Loss Occurrence bears to the Company’s total Insured Losses resulting from all
Loss Occurrences to which the reimbursement applies.





	 	 	 	 	 

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	E.	 	For purposes of this Article, “Insured Loss (es)” shall have the same meaning as set
forth in Section 102(5) of TRIA.





ARTICLE 31 — SPECIAL CONDITIONS (LM-02100-2008.11.18-A)





	A.	 	This Article applies only in the event that:






	 	1.	 	A State Insurance Department or other legal authority orders the
Subscribing Reinsurer to cease writing business or has imposed upon it any other
restrictions on or conditions relating to the Subscribing Reinsurer’s license or
conduct of business in any jurisdiction; or
	 
	 	2.	 	The Subscribing Reinsurer has become insolvent or has been placed into
liquidation or receivership (whether voluntary or involuntary), or there have been
instituted against it proceedings for the appointment of a receiver, liquidator,
rehabilitator, conservator, trustee in bankruptcy, or other agent known by whatever
name, to take possession of its assets or control of its operations; or
	 
	 	3.	 	The Subscribing Reinsurer’s policyholders’ surplus or equity has been
reduced by 25% or more from the amount on the effective date of this Contract, or
has been reduced by 25% or more in any period of twelve (12) months or less after
the effective date of this Contract; or
	 
	 	4.	 	As respects a Subscribing Reinsurer domiciled outside the United States
other than Lloyd’s syndicate, such Subscribing Reinsurer’s Shareholder Funds, Net
Worth or Capital & Surplus has been reduced by 25% or more from the amount on the
effective date of this Contract, or has been reduced by 25% or more in any period
of twelve (12) months or less after the effective date of this Contract; or
	 
	 	5.	 	As respects a Subscribing Reinsurer who is a Lloyd’s syndicate, such
Subscribing Reinsurer’s Stamp Capacity or Funds at Lloyd’s has been reduced by 25%
or more from the amount on the effective date of this Contract or has been reduced
by 25% or more in any period of twelve (12) months or less after the effective date
of this Contract; or
	 
	 	6.	 	The Subscribing Reinsurer has entered into a definitive agreement to
become merged with, acquired, or controlled by any company, corporation, or
individual(s) not controlling the Subscribing Reinsurer’s operations at the
inception of this Contract; or
	 
	 	7.	 	The Subscribing Reinsurer’s A.M. Best’s financial strength rating has been
assigned or downgraded below A- or Standard and Poor’s financial strength rating
has been assigned or downgraded below A-; or
	 
	 	8.	 	As respects a Subscribing Reinsurer who is subject to an Authorized
Control Level Risk-Based Capital Requirement, such Subscribing Reinsurer fails to
maintain its surplus at a level of at least 200% of the Subscribing Reinsurer’s
Authorized Control Level Risk-Based Capital; or
	 
	 	9.	 	The Subscribing Reinsurer announces intentions to cease underwriting operations; or
	 
	 	10.	 	The Subscribing Reinsurer voluntarily ceases underwriting operations; or
	 
	 	11.	 	The Subscribing Reinsurer has reinsured its entire liability under this Contract; or
	 
	 	12.	 	The Subscribing Reinsurer, directly or through the actions of a parent
company or an affiliated entity, has or has attempted to assign, novate or transfer
the Subscribing Reinsurer’s rights and/or obligations under this Contract,
including any attempted transfer of rights and/or obligations under any U.S. or
foreign statute, legislation or jurisprudence, without the Company’s prior written
consent; or





	 	 	 	 	 

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	 	13.	 	The Subscribing Reinsurer, directly or through the actions of a parent
company or an affiliated entity, has invoked any U.S. or foreign statute,
legislation or jurisprudence which purports to enable the Subscribing Reinsurer to
require the Company to settle its claims liabilities, including but not limited to
any estimated or undetermined claims liabilities under this Contract, on an
accelerated basis. This does not include any attempt to enforce a settlement of
claims liabilities under a commutation process to which the parties have agreed.






	B.	 	If one or more of the circumstances in Paragraph A (1) through (13) occur (a “Trigger
Event”), the Subscribing Reinsurer shall provide the Company with written notice within five
(5) business days from the happening of a Trigger Event. Following its receipt of notice of a
Trigger Event from the Subscribing Reinsurer, the Company may terminate this Contract, upon
thirty (30) days written notice to the Subscribing Reinsurer.
	 
	C.	 	Irrespective of the Subscribing Reinsurer’s failure to provide the Company with timely
written notice of the happening of a Trigger Event, upon occurrence of a Trigger Event, the
Company may terminate this Contract at any time, upon thirty (30) days written notice to the
Subscribing Reinsurer. No failure or delay by the Company in exercising its option under this
section will operate as a waiver thereof.
	 
	D.	 	Termination under this Article can be made after the date of expiration of this Contract.
	 
	E.	 	If this Contract is terminated under this Article, this Contract shall remain in full force
and effect as respects the Company’s and the Subscribing Reinsurer’s respective rights and
obligations, prior to the effective date and time of termination. The coverage afforded by
this Contract shall cease as of the date and time of termination and the Subscribing
Reinsurer shall return the unearned premium, if any, within fifteen (15) days of the
termination date. If coverage hereunder terminates while a claim covered by this Contract is
in progress, the Subscribing Reinsurer shall be liable, subject to all conditions hereof, for
its proportion of the entire claim, provided the event giving rise to the claim started
before such termination.






	F.	1.	 	If the Company elects to terminate this Contract under this Article, the Company may also
elect to commute this Contract. Such election to commute shall be made either
within the written thirty (30) day notice to the Subscribing Reinsurer of the
Company’s intention to terminate this Contract, or by written notice thereafter.
If the Company elects to commute, the Subscribing Reinsurer has the option to
provide security for its Obligations (as defined herein), as an alternative to
commutation. The Subscribing Reinsurer shall notify the Company of its decision to
provide security for its Obligations within fifteen (15) business days of the
receipt of written notice of the Company’s election to commute. If the Subscribing
Reinsurer elects to provide security for its Obligations under this Contract, the
Company shall provide the Subscribing Reinsurer with a written statement of the
Subscribing Reinsurer’s share of all paid recoverables, case reserves, loss
adjustment expenses, incurred but not reported losses, reserves for unearned
premium, and ceding commissions due under this Contract prior to the effective
date and time of termination (collectively “Obligations”). Within fifteen (15)
days of the Subscribing Reinsurer’s receipt of such statement, the Subscribing
Reinsurer shall fund all Obligations by securing clean, irrevocable, and
unconditional Letters of Credit, payable exclusively to the Company and issued by
a bank acceptable to the Company. Any Letters of Credit provided by the
Subscribing Reinsurer under the Unauthorized Reinsurance Article of this Contract
also constitute funding under this Article.






	 	2.	 	Any Letters of Credit secured by the Subscribing Reinsurer shall be issued for a period
of not less than one year, and shall be automatically extended for one year from
their dates of expiration or any future expiration dates, unless sixty (60) days
prior to any expiration date





	 	 	 	 	 

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	 	 	 	the issuing bank shall notify the Company, by certified mail that the
issuing bank elects not to extend any Letter of Credit for any additional period.






	 	3.	 	The Subscribing Reinsurer and the Company agree that the Letters of Credit
provided by the Subscribing Reinsurer, pursuant to the provisions of this Article,
may be drawn upon at any time, notwithstanding any other provision of this
Contract, and be utilized by the Company or any successor, by operation of law, of
the Company, including without limitation, any liquidator, rehabilitator, receiver,
or conservator of the Company, without diminution because of the insolvency of the
Company or the Subscribing Reinsurer for one or more of the following purposes:






	 	a.	 	To pay or reimburse the Company for:






	 	i.	 	The Subscribing Reinsurer’s share under this Contract of premiums
returned, but not yet recovered from the Subscribing Reinsurer, to
the owners of Policies reinsured under this Contract due to
cancellations of such Policies; and
	 
	 	ii.	 	The Subscribing Reinsurer’s share, under this Contract, of surrenders
and benefits or liabilities paid by the Company, but not yet recovered
from the Subscribing Reinsurer, under the terms and provisions of
the Policies reinsured under this Contract; and
	 
	 	iii.	 	Any other amounts necessary to secure the credit or reduction from
liability for reinsurance taken by the Company.






	 	4.	 	Where the Letters of Credit will expire without renewal or be reduced or
replaced by Letters of Credit for a reduced amount and where the Subscribing
Reinsurer’s Obligations under this Contract remain unliquidated and undischarged
ten (10) days prior to the expiration of the Letter of Credit, to withdraw amounts
equal to the Subscribing Reinsurer’s Obligations, to the extent that the
liabilities have not yet been funded by the Subscribing Reinsurer and exceed the
amount of any reduced or replacement Letters of Credit.
	 
	 	5.	 	If the Company has concluded that the issuing bank’s financial condition
is such that the value of the security represented by the Letter of Credit may be
in jeopardy, the Company, may withdraw amounts equal to the Subscribing Reinsurer’s
Obligations.
	 
	 	6.	 	If the Company draws on the Letter of Credit to obtain a cash advance,
under paragraphs F.4 or F.5, the Company, will hold the amount of the cash advance
so obtained in trust in the name of the Company in any qualified United States
financial institution as defined by the Insurance Law of the Company’s domiciliary
state, solely to secure the Obligations and for the use and purposes enumerated
above. The Company will return any balance to the Subscribing Reinsurer upon the
complete and final liquidation and discharge of all of the Subscribing Reinsurer’s
Obligations to the Company under this Contract or in the event the Subscribing
Reinsurer provides alternative or replacement security consistent with the terms
hereof and acceptable to the Company.






	G.	 	If the Company elects to commute this Contract and the Subscribing Reinsurer does not fund its
Obligations under this Contract, then:






	 	1.	 	The Company shall submit a statement of valuation showing the Subscribing Reinsurer’s
liability for loss(es), whether reported or unreported, comprising the sum total
of the present value of the ceded: (a) case reserves and allocated loss
adjustment expense, (b) projected ultimate losses, (c) any unearned premium
reserve, and (d) undiscounted outstanding paid claims (hereinafter the
“Commutation Losses”), on Policies covered by this Contract as of the effective
date and time of termination. If the Subscribing Reinsurer agrees with the





	 	 	 	 	 

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	 	 	 	statement of valuation, the Subscribing Reinsurer shall pay the amount
requested within ten (10) days of receipt of the statement of valuation.






	 	2.	 	In the event the Company and the Subscribing Reinsurer cannot agree on
the statement of valuation of the Subscribing Reinsurer’s liability under such
Policies, either party may request in writing that the differences be settled by a
panel of three actuaries. Each party shall appoint an actuary to assess such
liability within fifteen (15) days after receipt of the written request for
commutation. Upon such appointment, the two actuaries shall appoint a third
actuary. If the two actuaries fail to agree on the third actuary within thirty (30)
days of their appointment, each of them shall nominate three individuals, of whom
the other shall decline two, and the final decision shall be made by drawing lots.
	 
	 	3.	 	The actuaries shall then investigate and Capitalize such Commutation
Loss(es) within thirty (30) days. As used herein, “Capitalize” shall mean to
determine the present value of Commutation Losses, without regard to the
Subscribing Reinsurer’s ability to pay such losses. The panel shall meet in Boston,
Massachusetts, unless the Company and Subscribing Reinsurer agree otherwise.






	 	a.	 	All actuaries shall be disinterested in the outcome of the
commutation and shall be Fellows of the Society of Actuaries/Fellows of the
Casualty Actuarial Society. Except as stated below, the expense of the
actuaries and of the commutation shall be equally divided between the
parties of the commutation.
	 
	 	b.	 	The decision in writing of the actuaries, when filed with
the parties hereto, shall be final and binding, except that if the Company
does not agree with the Capitalized value of the Commutation Loss(es), the
Company shall have no obligation to commute. In the event the Company does
not agree with the Capitalized value of the Commutation Loss(es) and does
not move forward with commutation, the Company will pay the expense of the
actuaries, including reasonable expense of the actuary appointed by the
Subscribing Reinsurer.
	 
	 	c.	 	If the Contract is commuted, payment by the Subscribing
Reinsurer to the Company or any other third party mutually agreed upon by
the Subscribing Reinsurer and the Company shall constitute a complete and
final release of the Subscribing Reinsurer in respect to its liability under
this Contract.






	 	4.	 	The commutation process described in this Article shall not be subject to
any other dispute resolution process, including but not limited to the Arbitration
Article of this Contract.





ARTICLE 32 — REINSURER CLAIMS OBLIGATIONS (LM-03100-2008.07.21-A)



It is understood and agreed that the Subscribing Reinsurer will fulfill its obligations under
the Loss Adjustment and Settlement Article, until all claims have been reported and settled.
Without first obtaining the Company’s written consent, the Subscribing Reinsurer will not,
either directly or as the result of an action of a parent company or an affiliated entity,
invoke any U.S. or foreign statute, legislation, or jurisprudence that purports to enable the
Subscribing Reinsurer to require the Company to settle their claims liabilities, including but
not limited to any estimated or undetermined claims liabilities, under this Contract on an
accelerated basis. If the Subscribing Reinsurer has provided collateral relating to this
Contract and the Subscribing Reinsurer attempts to require the Company to settle their claims
liabilities on an accelerated basis, the Company shall have the right to utilize or to draw
upon Letters of Credit or other collateral, under the terms of this Contract, or as otherwise
agreed between the Subscribing Reinsurer and the Company. This Article does not prevent the
Company and the Subscribing Reinsurer from settling any claims liabilities using a commutation
process that is agreeable to both parties. This Article shall in no way affect the rights and
obligations of the Company and the Subscribing Reinsurer under the Insolvency Article.




	 	 	 	 	 

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IN WITNESS WHEREOF, the parties hereto have caused this Contract to be executed in triplicate, by
their duly authorized representatives.



In Boston, Massachusetts, this 8th day of September, 2010.




	 	 	 	 	 

	ATTEST:

	 	BRIDGEFIELD CASUALTY INSURANCE COMPANY	 	 
	 

	 	BRIDGEFIELD EMPLOYERS INSURANCE COMPANY	 	 
	 
	 	 	 	 
	/s/ Kristin Ciotti

	 	/s/ John D. Doyle	 	 
	 

Signature

	 	 

Signature
	 	 
	 
	 	 	 	 
	Kristin Ciotti

	 	John D. Doyle	 	 
	 

	 	 	 	 
	Name

	 	Name	 	 
	 
	 	 	 	 
	Assistant Secretary

	 	Vice President and Comptroller	 	 
	 

	 	 	 	 
	Title

	 	Title	 	 





And in
Boston, Massachusetts, this
8th day of September, 2010.




	 	 	 	 	 

	ATTEST:

	 	PEERLESS INSURANCE COMPANY	 	 
	 
	 	 	 	 
	/s/ Kristin Ciotti

	 	/s/ Michael J. Fallon	 	 
	 

Signature

	 	 

Signature
	 	 
	 
	 	 	 	 
	Kristin Ciotti

	 	Michael J. Fallon	 	 
	 

	 	 	 	 
	Name

	 	Name	 	 
	 
	 	 	 	 
	Assistant Secretary

	 	Treasurer and Chief Financial Officer	 	 
	 

	 	 	 	 
	Title

	 	Title	 	 





And in Boston, Massachusetts, this 8th day of September, 2010.




	 	 	 	 	 

	ATTEST:

	 	LIBERTY MUTUAL INSURANCE COMPANY	 	 
	 
	 	 	 	 
	Kristin Ciotti

	 	John D. Doyle	 	 
	 

	 	 	 	 
	Name

	 	Name	 	 
	 
	 	 	 	 
	Assistant Secretary

	 	Vice President and Comptroller	 	 
	 

	 	 	 	 
	Title

	 	Title	 	 
	 
	 	 	 	 
	/s/ Kristin Ciotti

	 	/s/ John D. Doyle	 	 
	 

Signature

	 	 

Signature
	 	 







	 	 	 	 	 

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EXHIBIT A




FIRST WORKERS’ COMPENSATION

CATASTROPHE EXCESS OF LOSS REINSURANCE

$75,000,000 excess $25,000,000 (ALL PERILS)



SECTION 1 — LIMIT AND RETENTION





	A.	 	Under this Exhibit the Subscribing Reinsurer shall be liable for the Ultimate Net
Loss in excess of $25,000,000 each Loss Occurrence (regardless of the number of
Policies under which such loss is payable or the number of different interests
insured) subject to a limit of $75,000,000 each Loss Occurrence. The maximum
contribution to the Ultimate Net Loss shall be limited to a maximum per life recovery
of $5,000,000 (discounted to net present value in accordance with the provisions of
the Commutation Article).
	 
	B.	 	Notwithstanding the Subscribing Reinsurer’s liability on each Loss Occurrence, the
Subscribing Reinsurer’s liability shall further be limited to $150,000,000 for all
such loss occurrences recoverable during the term of this Contract.
	 
	C.	 	It is understood and agreed that the limit and retention described above applies to
the Company, and to Liberty Mutual Insurance Company, Liberty Mutual Fire Insurance
Company, and all of their affiliates (other than the Company), hereinafter “the LMG
Companies”. Any loss occurrence affecting both the LMG Companies, on the one hand,
and the Company, on the other, shall be combined with respect to the application of
the limit and retention set forth herein. The limit, retention, and reinsurance
recovery shall be allocated to the Company in the same ratio that the Ultimate Net
Loss bears to the total Ultimate Net Loss of the Company, on the one hand, and the
LMG Companies, on the other. It is further understood and agreed that the limit and
retention described above applies to both Bridgefield Casualty Insurance Company and
Bridgefield Employers Insurance Company. Any Loss Occurrence affecting each of them
shall be combined with respect to the application of the limit and retention set
forth herein. The limit and retention shall be allocated in the same ratio that the
Ultimate Net Loss from each bears to the total Ultimate Net Loss of the Company.





SECTION 2 — PREMIUM





	A.	 	The premium paid to the Subscribing Reinsurer under this Exhibit shall be calculated
at a rate of 0.030% of the gross net written premium for the Business Covered
hereunder, as stated in the Business Covered Article.
	 
	B.	 	The term “gross net written premium” shall mean gross written premiums less return
premiums for cancellations and reductions in rates and less premium paid for
reinsurance inuring to the Subscribing Reinsurer’s benefit, if any.
	 
	C.	 	The Company paid to the Subscribing Reinsurer a minimum and deposit premium of
$162,000 which was settled between the Company and Subscribing Reinsurer no less
frequently than on a quarterly basis. For purposes of calculating minimum and deposit
premium paid by each of the Bridgefield Casualty Insurance Company and Bridgefield
Employers Insurance Company, the minimum and deposit premium was multiplied by the
ratio that the subject written premium of each bore to the total subject written
premium of the Company.
	 
	D.	 	The Company furnished to the Subscribing Reinsurer, a finalized statement of the
actual gross net written premium, as defined herein, for the previous year. The
difference between the minimum and





	 	 	 	 	 

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	 	 	deposit premium paid under this Exhibit and the actual gross net written premium was
settled to/from the Company.






	E.	 	The Company has provided to the Subscribing Reinsurer, any reports necessary for annual
statement purposes.





SECTION 3 — REINSTATEMENT





	A.	 	In the event of the whole or any portion of the coverage under this Exhibit being
exhausted by a Loss Occurrence, the amount so exhausted is automatically reinstated from the
time of the Loss Occurrence. The Company shall pay to the Subscribing Reinsurer for such
reinstatement an additional premium calculated at pro rata of one hundred percent (100%) of
the premium being pro rata as to the fraction of the face value under this Exhibit (being
$75,000,000) reinstated. For purposes of calculating reinstatement premium, the reinsurance
premium is deemed to be $8,750,000, multiplied by the ratio that the Company’s reinsurance
recovery bears to the total reinsurance recovery of the Company and the LMG Companies. It is
further understood for purposes of calculating reinstatement premium due from the Company,
the reinsurance premium shall be multiplied by the ratio that each of the Bridgefield
Casualty Insurance Company and Bridgefield Employers Insurance Company’s reinsurance
recovery bears to the total reinsurance recovery of the Company.
	 
	B.	 	Notwithstanding anything contained herein to the contrary, for any one Loss Occurrence nor
$150,000,000 in the aggregate for all Loss Occurrences under this Exhibit during the term of
this Contract.
	 
	C.	 	In the event of a paid loss hereunder, there shall be simultaneous settlement of
reinstatement premium by the Company. In the event a reinstatement premium is paid prior to
the calculation of the annual premium in accordance with the first paragraph of SECTION 2 of
this Exhibit, the reinstatement premium shall be provisionally calculated upon the minimum
and deemed premium of $8,750,000 and adjusted subsequently when the premium adjustment is
made for the LMG Companies and the Company.





SECTION 4 — SUBSCRIBING REINSURER INTERESTS AND LIABILITIES



It is hereby agreed by and between the Company on the one part and the Subscribing Reinsurer
on the other part that the Subscribing Reinsurer’s share in the interests and liabilities as
set forth in this Exhibit, shall be 50%.




	 	 	 	 	 

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EXHIBIT B




SECOND WORKERS’ COMPENSATION

CATASTROPHE EXCESS OF LOSS REINSURANCE

$400,000,000 excess $100,000,000) (ALL PERILS)



SECTION 1 — LIMIT AND RETENTION





	A.	 	Under this Exhibit the Subscribing Reinsurer shall be liable for the Ultimate Net Loss in
excess of $100,000,000 each Loss Occurrence (regardless of the number of policies under which
such loss is payable or the number of different interests insured) subject to a limit of
$400,000,000 each Loss Occurrence. The maximum contribution to the Ultimate Net Loss shall be
limited to a maximum per life recovery of $10,000,000 (discounted to net present value in
accordance with the provisions of the Commutation Article).
	 
	B.	 	Notwithstanding Subscribing Reinsurer’s liability on each Loss Occurrence, Subscribing
Reinsurer’s liability shall further be limited to $800,000,000 for all such loss occurrences
recoverable during the term of this Contract.
	 
	C.	 	It is understood and agreed that the limit and retention described above applies to the
Company, and to Liberty Mutual Insurance Company, Liberty Mutual Fire Insurance Company, and
all of their affiliates (other than the Company), hereinafter “the LMG Companies”. Any loss
occurrence affecting both the LMG Companies, on the one hand, and the Company, on the other,
shall be combined with respect to the application of the limit and retention set forth
herein. The limit, retention and reinsurance recovery will be allocated to the Company in the
same ratio that the Ultimate Net Loss bears to the total Ultimate Net Loss of the Company, on
the one hand, and the LMG Companies, on the other. It is further understood and agreed that
the limit and retention described above applies to both Bridgefield Casualty Insurance
Company and Bridgefield Employers Insurance Company. Any Loss Occurrence affecting each of
them shall be combined with respect to the application of the limit and retention set forth
herein. The limit and retention will be allocated in the same ratio that the Ultimate Net
Loss from each bears to the total Ultimate Net Loss of the Company.





SECTION 2 — PREMIUM





	A.	 	The premium paid to the Subscribing Reinsurer under this Exhibit shall be calculated at a
rate of 0.028% of the gross net written premium for the Business Covered hereunder, as stated
in the Business Covered Article.
	 
	B.	 	The term “gross net written premium” shall mean gross written premiums less return premiums
for cancellations and reductions in rates and less premium paid for reinsurance inuring to
the Subscribing Reinsurer’s benefit, if any.
	 
	C.	 	The Company paid to the Subscribing Reinsurer a minimum and deposit premium of $154,000
which was settled between the Company and Subscribing Reinsurer no less frequently than on a
quarterly basis. For purposes of calculating minimum and deposit premium paid by each of the
Bridgefield Casualty Insurance Company and Bridgefield Employers Insurance Company, the
minimum and deposit premium was multiplied by the ratio that the subject written premium of
each bore to the total subject written premium of the Company.
	 
	D.	 	The Company furnished to the Subscribing Reinsurer, a finalized statement of the actual
gross net written premium, as defined herein, for the previous year. The difference between
the minimum and





	 	 	 	 	 

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	 	 	deposit premium paid under this Exhibit and the actual gross net written premium was
settled to/from the Company.






	E.	 	The Company has provided to the Subscribing Reinsurer, any reports necessary for annual
statement purposes.





SECTION 3 — REINSTATEMENT





	A.	 	In the event of the whole or any portion of the coverage under this Exhibit being exhausted
by a Loss Occurrence, the amount so exhausted is automatically reinstated from the time of
the Loss Occurrence. The Company shall pay to the Subscribing Reinsurer for such
reinstatement an additional premium calculated at pro rata of one hundred percent (100%) of
the premium, being pro rata as to the fraction of the face value under this Exhibit (being
$400,000,000) reinstated. For purposes of calculating reinstatement premium, the reinsurance
premium is deemed to be $23,538,000, multiplied by the ratio that the Company’s reinsurance
recovery bears to the total reinsurance recovery of the Company and the LMG Companies. It is
further understood for purposes of calculating reinstatement premium due from the Company,
the reinsurance premium shall be multiplied by the ratio that each of the Bridgefield
Casualty Insurance Company and Bridgefield Employers Insurance Company’s reinsurance recovery
bears to the total reinsurance recovery of the Company.
	 
	B.	 	Notwithstanding anything contained herein to the contrary, the Subscribing Reinsurer’s
liability under this Exhibit shall not exceed $400,000,000 for any one Loss Occurrence nor
$800,000,000 in the aggregate for all Loss Occurrences under this Exhibit during the term of
this Contract.
	 
	C.	 	In the event of a paid loss hereunder, there shall be simultaneous settlement of
reinstatement premium by the Company. In the event a reinstatement premium is paid prior to
the calculation of the annual premium in accordance with the first paragraph of SECTION 2 of
this Exhibit, the reinstatement premium shall be provisionally calculated upon the minimum and
deemed premium of $23,538,000 and adjusted subsequently when the premium adjustment is made
for the LMG Companies and the Company.





SECTION 4 — SUBSCRIBING REINSURER INTERESTS AND LIABILITIES



It is hereby agreed by and between the Company on the one part and the Subscribing Reinsurer on
the other part that the Subscribing Reinsurer’s share in the interests and liabilities as set
forth in this Exhibit, shall be 75%.




	 	 	 	 	 

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EXHIBIT C




THIRD WORKERS’ COMPENSATION

CATASTROPHE EXCESS OF LOSS REINSURANCE

$700,000,000 excess $500,000,000) (ALL PERILS)



SECTION 1 — LIMIT AND RETENTION





	A.	 	Under this Exhibit the Subscribing Reinsurer shall be liable for the Ultimate Net Loss in
excess of $500,000,000 each Loss Occurrence (regardless of the number of policies under which
such loss is payable or the number of different interests insured) subject to a limit of
$700,000,000 each Loss Occurrence. The maximum contribution to the Ultimate Net Loss shall be
limited to a maximum per life recovery of $10,000,000 (discounted to net present value in
accordance with the provisions of the Commutation Article).
	 
	B.	 	Notwithstanding Subscribing Reinsurer’s liability on each Loss Occurrence, Subscribing
Reinsurer’s liability shall further be limited to $1,400,000,000 for all such loss
occurrences recoverable during the term of this Contract.
	 
	C.	 	It is understood and agreed that the limit and retention described above applies to the
Company, and to Liberty Mutual Insurance Company, Liberty Mutual Fire Insurance Company, and
all of their affiliates (other than the Company), hereinafter “the LMG Companies”. Any loss
occurrence affecting both the LMG Companies, on the one hand, and the Company, on the other,
shall be combined with respect to the application of the limit and retention set forth
herein. The limit, retention and reinsurance recovery be allocated to the Company in the same
ratio that the Ultimate Net Loss bears to the total Ultimate Net Loss of the Company, on the
one hand, and the LMG Companies, on the other. It is further understood and agreed that the
limit and retention described above applies to both Bridgefield Casualty Insurance Company
and Bridgefield Employers Insurance Company. Any Loss Occurrence affecting each of them shall
be combined with respect to the application of the limit and retention set forth herein. The
limit and retention will be allocated in the same ratio that the Ultimate Net Loss from each
bears to the total Ultimate Net Loss of the Company.





SECTION 2 — PREMIUM





	A.	 	The premium paid to the Subscribing Reinsurer under this Exhibit shall be calculated at a
rate of 0.024% of the gross net written premium for the Business Covered hereunder, as stated
in the Business Covered Article.
	 
	B.	 	The term “gross net written premium” shall mean gross written premiums less return premiums
for cancellations and reductions in rates and less premium paid for reinsurance inuring to
the Subscribing Reinsurer’s benefit, if any.
	 
	C.	 	The Company paid to the Subscribing Reinsurer a minimum and deposit premium of $132,000
which was settled between the Company and Subscribing Reinsurer no less frequently than on a
quarterly basis. For purposes of calculating minimum and deposit premium paid by each of the
Bridgefield Casualty Insurance Company and Bridgefield Employers Insurance Company, the
minimum and deposit premium was multiplied by the ratio that the subject written premium of
each bore to the total subject written premium of the Company.
	 
	D.	 	The Company furnished to the Subscribing Reinsurer, a finalized statement of the actual
gross net written premium, as defined herein, for the previous year. The difference between
the minimum and





	 	 	 	 	 

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	 	 	deposit premium paid under this Exhibit and the actual gross net written premium
was settled to/from the Company.






	E.	 	The Company has provided to the Subscribing Reinsurer, any reports necessary for annual
statement purposes.





SECTION 3 — REINSTATEMENT





	A.	 	In the event of the whole or any portion of the coverage under this Exhibit being exhausted by
a Loss Occurrence, the amount so exhausted is automatically reinstated from the time of
the Loss Occurrence. The Company shall pay to the Subscribing Reinsurer for such
reinstatement an additional premium calculated at pro rata of one hundred percent (100%)
of the premium, being pro rata as to the fraction of the face value under this Exhibit
(being $700,000,000) reinstated. For purposes of calculating reinstatement premium, the
reinsurance premium is deemed to be $21,250,000, multiplied by the ratio that the
Company’s reinsurance recovery bears to the total reinsurance recovery of the Company
and the LMG Companies. It is further understood for purposes of calculating
reinstatement premium due from the Company, the reinsurance premium shall be multiplied
by the ratio that each of the Bridgefield Casualty Insurance Company and Bridgefield
Employers Insurance Company’s reinsurance recovery bears to the total reinsurance
recovery of the Company.
	 
	B.	 	Notwithstanding anything contained herein to the contrary, the Subscribing Reinsurer’s
liability under this Exhibit shall not exceed $700,000,000 for any one Loss Occurrence
nor $1,400,000,000 in the aggregate for all Loss Occurrences under this Exhibit during
the term of this Contract.
	 
	C.	 	In the event of a paid loss hereunder, there shall be simultaneous settlement of
reinstatement premium by the Company. In the event a reinstatement premium is paid prior to
the calculation of the annual premium in accordance with the first paragraph of SECTION 2
of this Exhibit, the reinstatement premium shall be provisionally calculated upon the
minimum and deemed premium of $21,250,000 and adjusted subsequently when the premium
adjustment is made for the LMG Companies and the Company.





SECTION 4 — SUBSCRIBING REINSURER INTERESTS AND LIABILITIES



It is hereby agreed by and between the Company on the one part and the Subscribing Reinsurer on
the other part that the Subscribing Reinsurer’s share in the interests and liabilities as set
forth in this Exhibit, shall be 100%.




	 	 	 	 	 

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WAR AND TERRORISM EXCLUSION ENDORSEMENT (NBCR) (LM-03200-2008.08.06-W)



Notwithstanding any provision to the contrary within this reinsurance or any endorsement
thereto it is agreed that this reinsurance excludes all actual or alleged losses, liabilities,
damage, injuries, defense costs, costs or expense(s) directly or indirectly arising out of,
contributed by, caused by, resulting from, or in connection with any action taken in
controlling, preventing, suppressing, retaliating against, or responding to any of the
following regardless of any other cause or event contributing concurrently or in any other
sequence to the loss:





	(1)	 	War, invasion, acts of foreign enemies, hostilities or warlike operations (whether war
be declared or not), civil war, mutiny, revolution, rebellion, insurrection, uprising,
military or usurped power, confiscation by order of any public authority or government de
jure or de facto, martial law; or
	 
	(2)	 	A “Certified Act of Terrorism” under the terms of the Terrorism Risk Insurance Act of
2002, as amended by the Terrorism Risk Insurance Extension Act of 2005 and the Terrorism
Risk Insurance Program Reauthorization Act of 2007 hereafter (“TRIA”) but only if one or
more of the following are attributable to such Certified Act of Terrorism:






	 	a.	 	It involves the use, release or escape of nuclear materials,
or directly or indirectly results in nuclear reaction or radiation or
radioactive contamination; or
	 
	 	b.	 	It is carried out by means of the dispersal or application of
pathogenic or poisonous biological or chemical materials; or
	 
	 	c.	 	Pathogenic or poisonous biological or chemical materials are
released, and it appears that one purpose of the Certified Act of Terrorism
was to release such materials.




“Certified Act of Terrorism” shall have the meaning currently set forth in Section 102(1)(A)
of TRIA or as hereafter amended.




	 	 	 	 	 

	Effective: January 1, 2010

	 	Page 31 of 31
	 	Summit — Workers’ Compensation

Catastrophe Excess of Loss Reinsurance

Addendum 4

No. 0100300-SUM09