exv10w1




Exhibit 10.1





EXECUTION VERSION




 






ADMINISTRATIVE SERVICES AGREEMENT



BY AND AMONG



CONTINENTAL CASUALTY COMPANY



THE CONTINENTAL INSURANCE COMPANY



CONTINENTAL REINSURANCE CORPORATION INTERNATIONAL, LTD.



CNA INSURANCE COMPANY LIMITED



AND



NATIONAL INDEMNITY COMPANY



DATED AUGUST 31, 2010



 















 





ADMINISTRATIVE SERVICES AGREEMENT




TABLE OF CONTENTS



	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	ARTICLE I

	 
	 	 	 	 	 	 
	DEFINITIONS

	 
	 	 	 	 	 	 
	1.1	 	Definitions
	 	 	2	 
	 	 	 
	 	 	 	 
	ARTICLE II

	 
	 	 	 	 	 	 
	AUTHORITY; SERVICE STANDARDS

	 
	 	 	 	 	 	 
	2.1	 	Appointment
	 	 	5	 
	2.2	 	Services Standards
	 	 	5	 
	2.3	 	Compliance; Licensure
	 	 	6	 
	2.4	 	Independent Contractor
	 	 	6	 
	2.5	 	Subcontracting
	 	 	7	 
	2.6	 	Monitoring
	 	 	7	 
	 	 	 
	 	 	 	 
	ARTICLE III

	 
	 	 	 	 	 	 
	COMPENSATION

	 
	 	 	 	 	 	 
	3.1	 	Compensation
	 	 	8	 
	 	 	 
	 	 	 	 
	ARTICLE IV

	 
	 	 	 	 	 	 
	ADMINISTRATIVE SERVICES

	 
	 	 	 	 	 	 
	4.1	 	Administrative Services
	 	 	8	 
	4.2	 	Mixed Accounts
	 	 	10	 
	4.3	 	GRM Book of Business
	 	 	12	 
	4.4	 	Extracontractual Damages
	 	 	13	 
	4.5	 	Conflict of Interest
	 	 	13	 
	 
	 	 	 	 	 	 
	ARTICLE V

	 
	 	 	 	 	 	 
	CLAIMS HANDLING SERVICES

	 
	 	 	 	 	 	 
	5.1	 	Claims Handling Services
	 	 	14	 






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	 	 	 	 	Page	 
	ARTICLE VI

	 
	 	 	 	 	 	 
	ADMINISTRATION OF THIRD PARTY REINSURANCE AGREEMENTS

	 
	 	 	 	 	 	 
	6.1	 	Third Party Reinsurance Administration
	 	 	15	 
	6.2	 	Collateral
	 	 	16	 
	6.3	 	Commutations
	 	 	16	 
	6.4	 	Collection of Third Party Reinsurance Recoverables
	 	 	16	 
	6.5	 	Third Party Reinsurance Allocation Agreement
	 	 	16	 
	 
	 	 	 	 	 	 
	ARTICLE VII

	 
	 	 	 	 	 	 
	REGULATORY COMPLIANCE AND REPORTING

	 
	 	 	 	 	 	 
	7.1	 	Regulatory Filings and Examinations
	 	 	17	 
	 
	 	 	 	 	 	 
	ARTICLE VIII

	 
	 	 	 	 	 	 
	OTHER REPORTING OBLIGATIONS

	 
	 	 	 	 	 	 
	8.1	 	Financial Reporting Obligations
	 	 	17	 
	8.2	 	Change in Status
	 	 	19	 
	8.3	 	Administrator Controls
	 	 	19	 
	 
	 	 	 	 	 	 
	ARTICLE IX

	 
	 	 	 	 	 	 
	BOOKS AND RECORDS
	 
	 	 	 	 	 	 
	9.1	 	Transfer and Ownership of Books and Records
	 	 	20	 
	9.2	 	Maintenance of Books and Records
	 	 	20	 
	9.3	 	Access to Books Records
	 	 	20	 
	 
	 	 	 	 	 	 
	ARTICLE X

	 
	 	 	 	 	 	 
	INABILITY TO PERFORM SERVICES; ERRORS

	 
	 	 	 	 	 	 
	10.1	 	Capacity
	 	 	22	 
	10.2	 	Inability to Perform Services
	 	 	22	 
	10.3	 	Errors
	 	 	22	 
	 
	 	 	 	 	 	 
	ARTICLE XI

	 
	 	 	 	 	 	 
	LEGAL ACTIONS

	 
	 	 	 	 	 	 
	11.1	 	Regulatory Proceedings
	 	 	23	 
	11.2	 	Notification Requirements
	 	 	23	 
	11.3	 	Right to Associate
	 	 	24	 






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	 	 	 	 	Page	 
	ARTICLE XII

	 
	 	 	 	 	 	 
	BANK ACCOUNTS

	 
	 	 	 	 	 	 
	12.1	 	Bank Accounts
	 	 	24	 
	 
	 	 	 	 	 	 
	ARTICLE XIII
	 
	 	 	 	 	 	 
	COOPERATION
	 
	 	 	 	 	 	 
	13.1	 	Cooperation
	 	 	25	 
	13.2	 	Relationship Management
	 	 	25	 
	 
	 	 	 	 	 	 
	ARTICLE XIV

	 
	 	 	 	 	 	 
	DURATION; TERMINATION

	 
	 	 	 	 	 	 
	14.1	 	Duration
	 	 	26	 
	14.2	 	Termination
	 	 	26	 
	14.3	 	Certain Actions Related to Termination
	 	 	27	 
	14.4	 	Survival
	 	 	28	 
	 	 	 
	 	 	 	 
	ARTICLE XV

	 
	 	 	 	 	 	 
	CONFIDENTIALITY; PRIVACY REQUIREMENTS

	 
	 	 	 	 	 	 
	15.1	 	Definitions
	 	 	28	 
	15.2	 	Obligations
	 	 	29	 
	15.3	 	Exceptions to Confidential Treatment
	 	 	30	 
	15.4	 	Privacy
	 	 	31	 
	15.5	 	Regulatory and Legal Communication
	 	 	33	 
	 
	 	 	 	 	 	 
	ARTICLE XVI

	 
	 	 	 	 	 	 
	FORCE MAJEURE

	 
	 	 	 	 	 	 
	16.1	 	Force Majeure Event
	 	 	34	 
	 
	 	 	 	 	 	 
	ARTICLE XVII
	 
	 	 	 	 	 	 
	INDEMNIFICATION
	 
	 	 	 	 	 	 
	17.1	 	Indemnification Obligation of Administrator
	 	 	34	 
	17.2	 	Indemnification Obligation of Reinsureds
	 	 	35	 
	17.3	 	Notice of Indemnification Request
	 	 	35	 
	17.4	 	Notice of an Asserted Liability
	 	 	35	 
	17.5	 	Procedures
	 	 	36	 
	17.6	 	Survival
	 	 	37	 






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	 	 	 	 	Page	 
	ARTICLE XVIII

	 
	 	 	 	 	 	 
	DISPUTE RESOLUTION; ARBITRATION

	 
	 	 	 	 	 	 
	18.1	 	Dispute Resolution; Arbitration
	 	 	37	 
	 
	 	 	 	 	 	 
	ARTICLE XIX

	 
	 	 	 	 	 	 
	MISCELLANEOUS

	 
	 	 	 	 	 	 
	19.1	 	Notices
	 	 	37	 
	19.2	 	Entire Agreement
	 	 	38	 
	19.3	 	Waiver and Amendment
	 	 	38	 
	19.4	 	Successors and Assigns
	 	 	39	 
	19.5	 	Headings
	 	 	39	 
	19.6	 	Construction; Interpretation
	 	 	39	 
	19.7	 	Governing Law and Jurisdiction
	 	 	39	 
	19.8	 	No Third Party Beneficiaries
	 	 	40	 
	19.9	 	Counterparts
	 	 	40	 
	19.10	 	Severability
	 	 	40	 
	19.11	 	Specific Performance
	 	 	41	 
	19.12	 	Waiver of Jury Trial
	 	 	41	 
	19.13	 	Incontestability
	 	 	42	 
	19.14	 	Set-Off
	 	 	42	 
	19.15	 	Currency
	 	 	42	 






	 	 	 

	LIST OF EXHIBITS

	 
	 	 
	Exhibit A

	 	Business Associate Agreement
	 
	 	 
	LIST OF SCHEDULES 

	 
	 	 
	Schedule A-1

	 	Claims Administration System
	Schedule A-2

	 	Items and services associated in supplying Administrator with access to CAS
	Schedule B

	 	GRM Book of Business
	Schedule C

	 	Designations of Primary Handlers to administer existing Mixed Accounts
	Schedule D

	 	Form of Quarterly Data File







iv











 





ADMINISTRATIVE SERVICES AGREEMENT




          THIS ADMINISTRATIVE SERVICES AGREEMENT (hereinafter referred to as this “Administrative
Services Agreement”), dated as of August 31, 2010 (the “Effective Date”), is made and
entered into by and among Continental Casualty Company, an Illinois property and casualty insurance
company (“CCC”), The Continental Insurance Company, a Pennsylvania property and casualty
insurance company (“CIC”), Continental Reinsurance Corporation International, Ltd., a
Bermuda long-term insurance company (“CRCI”), and CNA Insurance Company Limited, a United
Kingdom property and casualty insurance company (“CICL” and together with CCC, CIC and
CRCI, “Reinsureds”), and National Indemnity Company, a Nebraska property and casualty
company (“Administrator” and the Administrator taken together with the Reinsureds, each a
“Party” and, collectively, the “Parties”).




WITNESSETH:



          WHEREAS, pursuant to a Master Transaction Agreement (the “Master Transaction
Agreement”), dated as of July 14, 2010, among the Parties and Berkshire Hathaway Inc., a
Delaware corporation and the ultimate parent company of the Reinsurer (“Berkshire”),
Reinsureds and Administrator have agreed to enter into a loss portfolio reinsurance transaction,
pursuant to which Reinsureds will cede all liabilities related to Asbestos Claims and Pollution
Claims under the Business Covered to Administrator, and pursuant to which Administrator will
indemnify Reinsureds for such liabilities up to an aggregate limit of four billion dollars
($4,000,000,000), net of any Third Party Reinsurance Recoverables and Other Recoveries;




          WHEREAS, pursuant to a Loss Portfolio Transfer Reinsurance Agreement among Reinsureds and
Administrator dated as of the date hereof, and referenced in the Master Transaction Agreement as
the “LPT Reinsurance Agreement,” Administrator shall indemnify Reinsureds for 100% of the
Ultimate Net Loss, subject to the LPT Limit; and




          WHEREAS, Reinsureds desire that Administrator perform certain administrative functions on
behalf of Reinsureds from and after the date hereof with respect to the Reinsured Contracts and
Third Party Reinsurance Agreements as they relate to the Business Covered, and the Parties hereto
have agreed to enter into this Administrative Services Agreement as a condition of Administrator
entering into the LPT Reinsurance Agreement.




          NOW, THEREFORE, for and in consideration of these premises and the promises and the mutual
agreements hereinafter set forth and set forth in the Master Transaction Agreement and LPT
Reinsurance Agreement, the Parties agree as follows:






 









 








ARTICLE I




DEFINITIONS



     1.1 Definitions.



          In this Administrative Services Agreement, unless the context requires otherwise, words and
expressions used in the Master Transaction Agreement and the LPT Reinsurance Agreement shall bear
the same meaning when used in this Administrative Services Agreement. All capitalized terms not
otherwise defined in this Administrative Services Agreement shall have the meaning given them under
the Master Transaction Agreement or LPT Reinsurance Agreement, as applicable.




          The following terms shall have the respective meanings set forth below throughout this
Administrative Services Agreement:



“Administrator’s Actuarial Report” shall have the meaning set forth in Section
8.1(a) hereof.



“Administrative Accounts” shall have the meaning set forth in Section 12.1(a)
hereof.



“Administrative Services” shall have the meaning set forth in Section 2.1(a)
hereof.



“Administrative Services Agreement” shall have the meaning set forth in the preamble.



“Administrator” shall have the meaning set forth in the preamble.



“Administrator Losses” shall have the meaning set forth in Section 17.2 hereof.



“Allocated Bill” shall have the meaning set forth in Section 4.3(a) hereof.



“Asserted Liability” shall have the meaning set forth in Section 17.4 hereof.



“Berkshire” shall have the meaning set forth in the preamble hereof.



“Berkshire Controlled Entity” shall have the meaning set forth in Section 4.5(a)
hereof.



“Berkshire Owned Entity” shall have the meaning set forth in Section 4.5(a) hereof.







2









 







“Business Associate Agreement” means the business associate agreement attached hereto as
Exhibit A.



“Claims Administration System” or “CAS” shall have the meaning set forth in
Section 3.1(b)hereof.



“CCC” shall have the meaning set forth in the preamble hereof.



“CIC” shall have the meaning set forth in the preamble hereof.



“CICL” shall have the meaning set forth in the preamble hereof.



“Collection Expenses” means the reasonable out-of-pocket expenses incurred by any Party in
connection with the negotiation and collection of Third Party Reinsurance Recoverables or
Commutation Payments.



“Confidential Information” shall have the meaning set forth in Section 15.1(a)
hereof.



“CRCI” shall have the meaning set forth in the preamble hereof.



“Direct Costs” shall have the meaning set forth in Section 4.2(c) hereof.



“Effective Date” shall have the meaning set forth in the preamble hereof.



“Force Majeure Event” shall have the meaning set forth in Section 16.1 hereof.



“GRM Book of Business” shall have the meaning set forth in Section 4.1(a)(xiii)
hereof.



“Gross Third Party Reinsurance Recoverables” means any amounts actually collected by the
Reinsureds or the Reinsurer (acting on behalf of the Reinsureds) in connection with Third Party
Reinsurance Agreements.



“Indemnified Party” shall have the meaning set forth in Section 17.3 hereof.



“Indemnifying Party” shall have the meaning set forth in Section 17.3 hereof.







3









 







“Legal Proceeding” means any litigation, arbitration, mediation or other legal action.



“LPT Reinsurance Agreement” shall have the meaning set forth in the recitals.



“Master Transaction Agreement” shall have the meaning set forth in the recitals.



“Mixed Account” shall have the meaning set forth in Section 4.2(a) hereof.



“Nonpublic Personal Information” shall have the meaning set forth in Section
15.1(b) hereof.



“Party” or “Parties” shall have the meaning set forth in the recitals.



“Personal Information” shall have the meaning set forth in Section 15.1(c) hereof.



“Primary Handler” shall have the meaning set forth is Section 4.2(a)(i) hereof.



“Quarterly Data File” shall have the meaning set forth in Section 8.1(d).



“Reinsureds” shall have the meaning set forth in the preamble.



“Reinsureds’ Actuarial Report” shall have the meaning set forth in Section 8.1(c).



“Reinsureds Losses” shall have the meaning set forth in Section 17.1 hereof.



“Reverse Transition Services Agreement” shall have the meaning set forth in Section
14.3(a)(i) hereof.



“Security Incident” shall have the meaning set forth in Section 15.5(c) hereof.



“Subcontractor” shall have the meaning set forth in Section 2.5 hereof.



“Third Party Claimant” shall have the meaning set forth in Section 17.4 hereof.



“Third Party Reinsurance Recoverables” means Gross Third Party Reinsurance Recoverables,
less Collection Expenses.







4









 








ARTICLE II




AUTHORITY; SERVICE STANDARDS



     2.1 Appointment.




     (a) Reinsureds hereby appoint Administrator, for the period specified in Article
XIV hereof, and Administrator hereby accepts appointment, to provide as an independent
contractor of Reinsureds all such administrative and other services with respect to the LPT
Reinsurance Agreement and with respect to the Reinsured Contracts and the Third Party
Reinsurance Agreements with respect to the Business Covered, including those services set
forth in this Administrative Services Agreement (the “Administrative Services”), all
on the terms, and subject to the limitations, as set forth in this Administrative Services
Agreement.




     (b) The Parties shall cooperate fully in the transfer of responsibility for the
performance of the Administrative Services from Reinsureds to Administrator in accordance
with the terms of this Administrative Services Agreement and the Transition Services
Agreement.




     (c) In order to assist Administrator in the performance of the Administrative Services
hereunder, Reinsureds shall deliver to Administrator and, if requested by Administrator, to
Resolute Management Inc., an appropriate power of attorney which shall nominate, constitute
and appoint Administrator as their attorney-in-fact with respect to the rights, duties, and
privileges and obligations of Administrator in and to the Reinsured Contracts and Third
Party Reinsurance Agreements as respects the Business Covered, with full power and authority
to act in the name, place and stead of Reinsureds with respect thereto, including the power,
without reservation, to service the Reinsured Contracts and Third Party Reinsurance
Agreements as respects the Business Covered, to adjust, to defend, to settle and to pay A&P
Claims, and to take such other and further action as may be necessary or desirable to effect
the transactions contemplated by the Master Transaction Agreement and this Administrative
Services Agreement, but in all cases only to the extent of the rights and authority granted
to Administrator pursuant to this Administrative Services Agreement and in accordance with
the terms of this Administrative Services Agreement.



     2.2 Services Standards.



          Administrator agrees to perform all Administrative Services and is hereby authorized to do so
on behalf of Reinsureds. Administrator shall perform the Administrative Services in a professional
and competent manner and in accordance with (i) the terms of the Reinsured Contracts and the Third
Party Reinsurance Agreements, (ii) to the extent not in conflict with any other provision of this
Section 2.2, standards of service that conform with Administrator’s service standards for
administering similar insurance contracts issued by





5









 







Administrator in its own name, and (iii) Applicable Law, including maintenance by
Administrator of all licenses, authorizations, permits and qualifications from Governmental
Authorities necessary to perform the Administrative Services required by this Administrative
Services Agreement. Administrator shall use its reasonable best efforts to avoid doing anything
which might reasonably be expected to prejudice or bring into disrepute the reputation of
Reinsureds or their respective directors and officers as professional claims managers.
Administrator acknowledges that the performance of all Administrative Services required by this
Administrative Services Agreement in a professional and competent manner is of critical importance
to Reinsureds.




     2.3 Compliance; Licensure.




     (a) Administrator shall comply with all Applicable Laws in connection with the
performance of its duties hereunder and shall act consistently in all material respects
with, and not cause Reinsureds to be out of compliance with, the terms of the Reinsured
Contracts and Third Party Reinsurance Agreements. Should Administrator, or any
Subcontractor permitted under Section 2.5 of this Administrative Services Agreement,
violate any Applicable Law relating to its performance under this Administrative Services
Agreement that results in a regulatory fine, penalty, monetary payment or settlement
(including expense reimbursement) imposed on Reinsureds or its Affiliates, Administrator
shall reimburse the Reinsureds or its Affiliates for such regulatory fine, penalty, monetary
payment or settlement. Administrator shall communicate promptly to Reinsureds upon
knowledge of the non-renewal, lapse, suspension or termination of any licenses required by
Applicable Law in connection with the administration of the Reinsured Contracts and Third
Party Reinsurance Agreements. If, in the ordinary course of operations, Administrator
determines that there exists any material operational concerns or failures with respect to
any of the Reinsured Contracts or Third Party Reinsurance Agreements, Administrator shall
notify Reinsureds and, in consultation with Reinsureds, take all reasonable actions
necessary to bring such Reinsured Contracts and/or Third Party Reinsurance Agreements into
operational compliance.




     (b) Administrator shall use commercially reasonable efforts to ensure that it or any of
its Affiliates that is subcontracted to provide any Administrative Service continue to be,
and their respective employees, agents and representatives are, or shall become and remain,
licensed, in whatever capacity is required, including without limitation third-party
administrator licenses, by the Governmental Authorities of all jurisdictions in which
Reinsureds are licensed as of the Effective Date. Administrator shall bear all costs and
expenses relating to its own licensing and the licensing of its employees, agents and
representatives.



     2.4 Independent Contractor.



          For all purposes hereof, Administrator shall at all times act as an independent contractor and
Administrator and its Affiliates, on the one hand, and Reinsureds and their Affiliates, on the
other hand, shall not be deemed an employee, representative, joint venture or





6









 







fiduciary of one another, nor shall this Administrative Services Agreement or the
Administrative Services or any activity or any transaction contemplated hereby be deemed to create
any partnership or joint venture between the Parties or among their Affiliates. Administrator and
its Representatives are not eligible for, nor may they participate in, any employee benefit plans
of Reinsureds or any of their Affiliates. Reinsureds and their Representatives are not eligible
for, nor may they participate in, any employee benefit plans of Administrator or any of its
Affiliates.




     2.5 Subcontracting.



          Administrator shall not subcontract the performance of any services that Administrator is to
provide hereunder to another Person (the “Subcontractor”) without the prior written consent
of Reinsureds (which consent shall not be unreasonably withheld); provided, however, that such
consent will not be required if the applicable Subcontractor is Resolute Management Inc. for such
time as it is an Affiliate of Administrator and; provided further, however, that in the case of
Administrative Services relating to other than claims handling, Reinsureds’ consent will not be
required if (i) the applicable Subcontractor is an Affiliate of Administrator or (ii) the
applicable Subcontractor is to provide those services that it provides to any Reinsureds as of the
date hereof with respect to the Business Covered. Notwithstanding the foregoing, Administrator
shall not permit a Subcontractor (other than Resolute Management Inc. for such time as it is an
Affiliate of Administrator) to access or use the CAS without Reinsureds’ prior written consent. In
the event of such subcontracting, Administrator shall not be relieved from any of its obligations
or liabilities hereunder, including compliance with Applicable Law and maintenance of proper
licensure, and Administrator shall remain responsible for all obligations or liabilities of such
Subcontractor with respect to the providing of such service or services as if provided by
Administrator; provided that if employees of the Subcontractor providing a service meet applicable
licensing requirements, Administrator shall be deemed to be in compliance with said licensure
requirements.




     2.6 Monitoring.



          At any time during the term of this Administrative Services Agreement, Reinsureds shall have
the right to appoint a representative to monitor the A&P Business at the facilities maintained for
such A&P Business by the Administrator or its permitted Subcontractors; provided, however, that any
representative appointed by the Reinsureds pursuant to this Section 2.6 who is not an
officer, director or employee of the Reinsureds shall not have any conflict of interest with
Administrator; provided, however, that any such monitoring shall be conducted at the sole expense
of the Reinsureds.





7









 





ARTICLE III




COMPENSATION



     3.1 Compensation.



     (a) Except as otherwise provided in Section 4.2, Administrator agrees to
perform the Administrative Services with respect to the Business Covered at its own expense
and without any rights of reimbursement from Reinsureds, in consideration of Reinsureds
having entered into the Master Transaction Agreement, the LPT Reinsurance Agreement and for
other good and valuable consideration, the receipt of which is hereby acknowledged.




     (b) At the reasonable request of Administrator, Reinsureds agree to provide the
technology and required databases listed on Schedule A-1 (the “Claims
Administration System” or “CAS”) to Administrator for a period of one year from
the Effective Date pursuant to the Transition Services Agreement. Administrator agrees to
reimburse the Reinsureds for their actual costs for items or services associated in
supplying Administrator with access to the CAS as provided in Schedule A-2.




     (c) At the reasonable request of Administrator, Reinsureds shall perform searches for
policy, reinsurance and underwriting files of Reinsureds and shall provide copies and if
necessary testimony with respect to, such policy, reinsurance and underwriting files, to
Administrator. Administrator shall pay (i) Reinsureds’ reasonable hourly rates for the
performance of such searches for policy, reinsurance and underwriting files, (ii) for all of
the copies made pursuant to this Section 3.1(c) and (iii) Reinsureds’ reasonable
hourly rates for time spent in connection with providing testimony as to these matters.




     (d) Reinsureds shall store and maintain closed claim files at their own expense and in
accordance with the Reinsureds’ then current policy for storing and maintaining such closed
claim files.



ARTICLE IV




ADMINISTRATIVE SERVICES 



     4.1 Administrative Services.




     (a) In accordance with the terms of this Administrative Services Agreement,
Administrator shall provide and perform all Administrative Services with respect to the
Business Covered, including:




          (i) to adjust, handle, agree, settle, pay, compromise or repudiate any claims or any
other liability, outgoing or expense;



8









 






          (ii) to commence, conduct, pursue, settle, appeal or compromise any legal arbitration
or other proceedings whatsoever;




          (iii) to collect claim refunds, salvages and reinsurance recoveries;




          (iv) to agree to, or exercise any right to, set-off any claims against reinsurance
recoveries or vice versa or to settle any balance of account owing to or from Reinsureds
solely in relation to the Business Covered;




          (v) to agree, on behalf of Reinsureds, to fund the obligations of any third party in
connection with any A&P Claim;




          (vi) to agree to any without prejudice payment or any other extra-contractual
obligation of or on behalf of Reinsureds;




          (vii) to enter into any arrangements which Administrator considers will or may avoid or
reduce any liability;




          (viii) to use the name of any Reinsureds in connection with the exercise of any or all
of the powers conferred by this Administrative Services Agreement;




          (ix) to exercise any rights of subrogation or other rights of recovery, excluding any
such rights to recover billed Retrospective Premiums;




          (x) to enter into discussions or negotiations with any insured or reinsured Person or
their Representatives in connection with the Business Covered;




          (xi) to enter into, amend or cancel any arrangements or agreements with third parties,
including in relation to the handling or collection of claims, debts or reinsurance
recoveries;




          (xii) to retain and instruct lawyers, claims adjusters or other consultants or experts;




          (xiii) to administer the Business Covered that arises from those pool, syndicate,
association or other sources set forth on Schedule B hereto (the “GRM Book of
Business”) in accordance with the protocol set forth in Section 4.3;



9









 






          (xiv) to coordinate with Reinsureds on the handling of escheat claims; and




          (xv) to share information received from Reinsureds, including any information in their
files and records, with other insurers, reinsurers, claimants and other Persons as may be
necessary in the judgment of Administrator to carry out the Administrative Services.




     (b) The Administrative Services which will be undertaken by Administrator will include
all matters relating to the administration, settlement and payment of claims arising under
the Business Covered, together with all other matters required to give full effect to the
terms of the LPT Reinsurance Agreement. Reinsureds shall have no authority to settle,
commute or compromise any direct A&P Claim or any reinsurance claim arising from an A&P
Claim, except with the consent of Administrator (which consent shall not be unreasonably
withheld) and except with respect to claims brought by or against a Berkshire Owned Entity.



     4.2 Mixed Accounts.




     (a) The Parties acknowledge that an account with Reinsured Contracts may involve a
claim or related claims that are in part or in whole not an Asbestos Claim or a Pollution
Claim. An account with Reinsured Contracts which includes both A&P Claims and Non-A&P
Claims is referred to in this Administrative Services Agreement as a “Mixed
Account.” As used in this Section 4.2(a), “account” shall mean an
insured or cedent under a Reinsured Contract.




          (i) For Mixed Accounts, the Parties shall meet as promptly as practicable and determine
whether the administration of a Mixed Account shall be done by a single claim handler (the
“Primary Handler”). In the event that the Parties fail to mutually agree to an
account being administered by a Primary Handler, then such Mixed Account shall be
administered pursuant to Section 4.2(a)(ii). The Parties agree that the accounts
set forth on Schedule C hereto shall be handled by the designated Primary Handler.




          (ii) Subject to Section 4.2(a)(i), in the administration of Mixed Accounts, (A)
Reinsureds shall administer such portions of the Mixed Account that relate to Non-A&P
Claims, and (B) Administrator shall administer such portions of the Mixed Account that
relate to A&P Claims. Administrator and Reinsureds shall establish and maintain an open
channel of communication with each other with respect to the claims contained within each
Mixed Account.



10









 






     (b) For Mixed Accounts administered by a Primary Handler, the Primary Handler shall
review, analyze, process and collect all associated inward and outward reinsurance as well
as perform all other Administrative Services necessary to adjust the claim and/or receive
Third Party Reinsurance Recoverables or Other Recoveries, including distributions from any
insolvent estate and any reinsurer for all agreed A&P Claims and Non-A&P Claims on the Mixed
Account. Administrator and Reinsureds shall establish and maintain an open channel of
communication with each other with respect to the claims contained within each Mixed
Account, and shall cooperate with each other to resolve all such claims in a timely and
efficient manner. The Primary Handler shall not have the authority to enter into any
agreement to pay, in the aggregate, more than $1,000,000 in any Ultimate Net Loss allocable
to the other Party without the prior consent of the other Party, which consent shall not be
unreasonably delayed or withheld.




     (c) With respect to costs associated with administering a Mixed Account, the Primary
Handler shall be reimbursed by the other Party for Direct Costs. All such Direct Costs
shall be billed by the Primary Handler, to the other Party, on a quarterly basis. Upon
receipt of a billing statement from the Primary Handler, which sets forth the Direct Costs,
the other Party shall reimburse the Primary Handler within thirty (30) calendar days.
“Direct Costs” as referenced herein refers to the salary and benefits of the claims
handler (which benefits will be calculated at thirty percent (30%) of salary) for the actual
hours devoted by that claims handler to the Mixed Account.




     (d) To the extent practicable, all payments, in a Mixed Account claim, for indemnity
for bodily injury or property damage for an individual plaintiff shall be allocated among
the Parties based upon the actual cause of the injury or damage for such plaintiff,
identified at the time of settlement or judgment. If information as to the actual cause of
injury or damage is unclear or unavailable, then indemnity payments shall be allocated among
the Parties based upon the best available information within one year after the settlement
or judgment as to any claims in such account. Such indemnity payments will be billed as
they are incurred. Upon receipt of a billing statement from the Primary Handler for such
indemnity payments, the other Party shall reimburse the Primary Handler within thirty (30)
calendar days without prejudice to either Party’s right to adjust any allocation within one
year of the settlement or judgment.




     (e) In the event that Allocated Loss Adjustment Expenses or Declaratory Judgment
Expenses are incurred for Mixed Accounts, and allocation to specific claims is not
practicable, then such expense payments shall be provisionally allocated among the Parties,
on an equitable basis, in accordance with each Party’s respective financial exposure to the
claims in question. Such expense payments will be billed as they are incurred and shall be
without prejudice to either Party’s right to adjust any allocation in accordance with the
manner indemnity payments have been allocated up to one year after settlement or judgment as
to any claims in the account. Upon receipt of a billing



11









 







statement from the Primary Handler for such expense payments, the other Party shall
reimburse the Primary Handler within thirty (30) calendar days.




     (f) In the event that a claim arises subject to Section 4.2(d) and Section
4.2(e), above, the Parties shall use reasonable best efforts to obtain the data and
information required to establish accurate allocations among the Parties. Notwithstanding
the foregoing, prior the Closing Date, the Parties may establish mutually agreed upon
protocols for certain accounts and such protocols may set forth alternative allocations
arrangements with respect to each such account.



     4.3 GRM Book of Business.



          In the administration of the GRM Book of Business, the Parties shall allocate indemnity
payments, Allocated Loss Adjustment Expenses and Declaratory Judgment Expenses as follows:





     (a) In the event that the manager of a GRM Book of Business delivers a bill that
allocates as between A&P Claims and Non-A&P Claims (an “Allocated Bill”), the
Parties shall defer to the allocations set forth in the Allocated Bill.




     (b) In the event that no Allocated Bill pursuant to Section 4.3(a), above, is
received, the Administrator shall use reasonable best efforts to obtain, from the manager of
a GRM Book of Business, data and information required to establish an equitable allocation
between A&P Claims and Non-A&P Claims among the Parties.




     (c) In the event that (i) no Allocated Bill pursuant to Section 4.3(a), above,
is received, and (ii) reasonably satisfactory data cannot be obtained pursuant to
Section 4.3(b), above, the allocation between A&P Claims and Non-A&P Claims shall be
in proportion to the manner in which the GRM Book of Business actuarial report has estimated
its ultimate liability for A&P Claims and Non-A&P Claims.




     (d) In the event that information required to make an allocation pursuant to this
Section 4.3 is not forthcoming within ninety (90) calendar days of receipt of a
bill, such allocation shall be made on an interim and without prejudice basis in proportion
to the prior allocation for such GRM Book of Business exposure.




12









 





     4.4 Extracontractual Damages.



     (a) Extracontractual Damages covered under the LPT Reinsurance Agreement shall be paid
by Administrator and any such payments shall be applied against the LPT Limit.




     (b) For the avoidance of doubt, notwithstanding anything to the contrary in this
Administrative Services Agreement, any liability of Reinsureds or a CNA Insurer for the
intentional and malicious acts or omissions of its employees, officers or directors (as so
determined by final adjudication by any Order, writ, injunction, directive, judgment or
decree of a court of competent jurisdiction applicable to the Parties) shall be paid by such
Reinsureds or CNA Insurer and any such payment shall not affect the LPT Limit.




     (c) For the avoidance of doubt, notwithstanding anything to the contrary in this
Administrative Services Agreement, any liability of Administrator as a result of its
intentional and malicious acts or omissions of its employees, officers or directors (as so
determined by final adjudication by any Order, writ, injunction, directive, judgment or
decree of a court of competent jurisdiction applicable to the Parties) shall be paid by
Administrator; provided, however, any such payment shall not affect the LPT Limit.



     4.5 Conflict of Interest.




     (a) Subject to Section 4.5(b) below, whenever a claim arises: (i) by, or from,
Reinsureds against (A) Berkshire or any insurer, reinsurer or other company that is a direct
or indirect Subsidiary of Berkshire (each, a “Berkshire Owned Entity”), or (B) a
Berkshire Owned Entity or any insurer, reinsurer or other company that is one hundred
percent reinsured by a direct or indirect Subsidiary of Berkshire (each, a “Berkshire
Controlled Entity”), or (C) that involve Administrator or another Berkshire Controlled
Entity as an administrator for a third party, or (ii) against Reinsureds by, or from, (A) a
Berkshire Owned Entity, or (B) a Berkshire Controlled Entity, or (C) that involve
Administrator or another Berkshire Controlled Entity as an administrator for a third party,
Administrator agrees that it will handle such claims under this Administrative Services
Agreement in good faith and with due regard for the singular interests of Reinsureds. At
Reinsureds’ discretion, Reinsureds may direct Administrator in the administration of any
claim (i) by, or from, a Berkshire Owned Entity against Reinsureds or (ii) against a
Berkshire Owned Entity by, or from, Reinsureds.




     (b) In the event of the occurrence of a conflict of interest, pursuant to this
Section 4.5, involving (i) a Berkshire Controlled Entity, (ii) any claim by, or
from, a Berkshire Owned Entity against Reinsureds, or (iii) any claim against a Berkshire
Owned Entity by, or from, Reinsureds, Administrator shall obtain the Reinsureds’ prior
approval before committing to a resolution of such conflicted matter, which such approval
shall not be unreasonably delayed or withheld. For the avoidance of doubt, all liabilities,
fees, costs and expenses associated with the administration of such Third Party Reinsurance
Agreements and any payments and recovery under such Third Party Reinsurance Agreements shall
be covered by the LPT Reinsurance Agreement.




13











 





ARTICLE V




CLAIMS HANDLING SERVICES 



     5.1 Claims Handling Services.


          The Administrative Services shall include, as necessary and appropriate, all functions
relating to the handling of A&P Claims, including those functions set forth in this Section
5.1.


          (a) Administrator shall acknowledge, consider, review, investigate, deny, settle, pay
or otherwise dispose of each A&P Claim. Administrator shall pay, using its own funds, A&P
Claims and associated expenses as Ultimate Net Loss under the LPT Reinsurance Agreement and
subject to the terms of the LPT Reinsurance Agreement.


          (b) Without limiting paragraph (a) of this Section 5.1, Administrator shall:




          (i) establish, maintain and organize A&P Claim files and maintain and organize other
A&P Claims-related records;




          (ii) review all A&P Claims and determine whether the claimant is eligible for payment
and if so, the nature and extent of such payment;




          (iii) maintain trained claims personnel;




          (iv) maintain a complaint log with respect to the Reinsured Contracts in accordance
with applicable requirements of Governmental Authorities and provide a copy of such log upon
Reinsureds’ request;




          (v) gather all information necessary for Reinsureds to comply with regulatory reporting
requirements related to A&P Claims detail, including Medicare Set Aside reporting;




          (vi) respond promptly to all written or oral A&P Claims-related communications that
Administrator reasonably believes to require a response; and



14









 







          (vii) in accordance with Articles VII and XI hereof, respond to, or
assist Reinsureds’ in responding to, regulatory and legal matters to the extent such matters
relate to A&P Claims.



ARTICLE VI




ADMINISTRATION OF THIRD PARTY REINSURANCE AGREEMENTS



     6.1 Third Party Reinsurance Administration.


          The Administrative Services provided by Administrator with respect to the Third Party
Reinsurance Agreements with respect to the Business Covered shall include the following:




     (a) administer and collect, on behalf of and in the name of the applicable Reinsureds,
Third Party Reinsurance Recoverables and Other Recoveries due in respect of the Reinsured
Liabilities in accordance with the contractual terms of the applicable Third Party
Reinsurance Agreements and Reinsured Contracts in a commercially reasonable manner
consistent;




     (b) cede all A&P Claims in the first instance to the applicable Third Party Reinsurance
Agreements before ceding such claims to the LPT Reinsurance Agreement; provided, however,
that Administrator may not cede any such claims to Third Party Reinsurance Agreements whose
aggregate limits have been exhausted;




     (c) provide all necessary litigation functions with respect to the Third Party
Reinsurance Agreements;




     (d) initiate Legal Proceedings in the name of the applicable Reinsureds in those
instances where such action is necessary in order for the applicable Reinsureds to enforce
or protect its rights under the Third Party Reinsurance Agreements in respect of the
Business Covered;




     (e) consult with Reinsureds in the filing of proofs of claim in any insolvent estate or
scheme of arrangement;




     (f) comply with any applicable notice requirements under the Third Party Reinsurance
Agreements; and



15









 






     (g) perform other certain administrative functions relating to the Third Party
Reinsurance Agreements with respect to the Business Covered as agreed to the Parties from
time to time.


          In determining the amount of the Third Party Reinsurance Recoverables, there shall first be
deducted from any amount recovered the out-of-pocket expenses incurred in effectuating the recovery
(including, without limitation, all court, arbitration, mediation or other dispute resolution
costs, attorneys’ fees and expenses, but excluding overhead, salaries and expenses of officers and
employees of Reinsureds and similar internal costs), except to the extent otherwise paid or
reimbursed by Reinsurers hereunder.



     6.2 Collateral.




     With prior notice to the applicable Reinsureds, Administrator shall have the authority to
secure any letter of credit or other funds held as appropriate under third party contracts and draw
upon any letter of credit, trust, funds withheld, offset or take any action in the name of
Reinsureds in relation to any collateral security maintained in the name, or on behalf, of such
Reinsureds under the Third Party Reinsurance Agreements.



     6.3 Commutations.




     Notwithstanding any other provision of this Administrative Services Agreement to the contrary,
no Party shall have authority to commute any Third Party Reinsurance Agreements which relates to
the Business Covered without the written consent of the other Party.



     6.4 Collection of Third Party Reinsurance Recoverables.




     Administrator shall have the authority to decide not to collect Third Party Reinsurance
Recoverables solely related to the Business Covered that Administrator deems uncollectible;
provided, however, that Administrator shall not decide to forego the collection of any Third Party
Reinsurance Recoverable that involves a Mixed Account claim that it is administering without the
prior written consent of Reinsureds. Reinsureds shall not decide to forgo the collection of any
Third Party Reinsurance Recoverable that involves a Mixed Account claim that it is administering
without the prior written consent of the Administrator.



     6.5 Third Party Reinsurance Allocation Agreement.




     The Parties acknowledge that amounts recoverable under the Third Party Reinsurance Agreements
will be allocable to Administrator for the Business Covered and to the Reinsureds for all other
claims in accordance with the terms of the Third Party Reinsurance Allocation Agreement.



16









 





ARTICLE VII




REGULATORY COMPLIANCE AND REPORTING



     7.1 Regulatory Filings and Examinations.




     (a) Commencing on the Effective Date, Administrator shall take all necessary action
within its control so that Reinsureds, solely with respect to the Business Covered, satisfy
all current and future informational reporting and any other requirements imposed by any
Governmental Authority. Without limiting the foregoing, Administrator shall timely prepare
such reports and summaries, including statistical summaries, as are necessary to satisfy any
requirements imposed by a Governmental Authority upon Reinsureds with respect to the
Business Covered. In addition, Administrator, upon Reinsureds’ reasonable request, shall
promptly provide to such Reinsureds copies of all existing records relating to the Reinsured
Contracts and Third Party Reinsurance Agreements (including, with respect to records
maintained in machine readable form, hard copies) that are necessary to satisfy such
requirements.




     (b) Administrator shall reasonably assist Reinsureds and cooperate with Reinsureds in
doing all things necessary, proper or advisable in connection with any and all market
conduct or other examinations by Governmental Authorities relating to the Business Covered.




     (c) Any reports or other materials required to be prepared by Administrator under this
Section 7.1 shall be prepared on a timely basis in order for Reinsureds to comply
with any filing deadlines required by contract or by Reinsureds’ internal procedures and
policies, in each case to the extent previously provided to Administrator with sufficient
advance notice thereof and reasonably consistent with Administrator’s own internal systems
and procedures, or by Applicable Law. All such reports shall include such information as
may reasonably be required by Reinsureds, as applicable, and shall be provided in a form,
electronic or otherwise, as is reasonably requested by Reinsureds, as applicable.



ARTICLE VIII




OTHER REPORTING OBLIGATIONS 



     8.1 Financial Reporting Obligations.


          Administrator shall assume the reporting and accounting obligations set forth in this
Section 8.1.



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     (a) On an annual basis, Administrator shall prepare, or have prepared, an actuarial
analysis of the Reserves related to the Business Covered on a gross, ceded and net basis
prior to the application of the LPT Reinsurance Agreement (“Administrator’s Actuarial
Report”). The Administrator’s Actuarial Report shall include both (i) an analysis of
gross, ceded and net Reserves prior to the application of the LPT Reinsurance Agreement,
prepared by a qualified actuary with a Fellow of the Casualty Actuarial Society designation
in accordance with all applicable actuarial standards, and (ii) the Administrator’s
documentation and rationale supporting how the actuary’s analysis was used in making
decisions pertaining to estimates of Ultimate Net Losses for Business Covered.
Administrator shall provide to Reinsureds a copy of the Administrator’s Actuarial Report no
later than November 1st of each year.




     (b) On an annual basis, Administrator shall provide to Reinsureds a current estimate of
the ultimate exposure for Loss and expenses (which estimate shall include paid loss, paid
Allocated Loss Adjustment Expenses, paid Declaratory Judgment Expense, loss reserves,
Allocated Loss Adjustment Expenses reserves and Declaratory Judgment Expense reserves)
related to the Business Covered, by account, on a gross, ceded and net basis prior to the
application of the LPT Reinsurance Agreement.




     (c) Administrator shall allow Reinsureds and their Representatives access to
Administrator’s actuarial and claims personnel, documentation, systems and records to the
extent required by Reinsureds in order to complete their review of the Administrator’s
Actuarial Report and complete the Reinsureds’ actuarial report (the “Reinsureds’
Actuarial Report”) and statutory actuarial opinion.




     (d) Subject to an early processing systems cut-off date that is mutually agreed upon by
the Parties, within two (2) Business Days after the end of each quarter, Administrator shall
deliver to Reinsureds a quarterly data file (each a “Quarterly Data File”),
substantially in the form set forth in Schedule D hereto, as required for financial
reporting and other purposes, including requisite coding necessary for all statutory
reporting obligations; it being understood that the initial Quarterly Data File shall be for
the period from the Effective Date to the last day of the quarter in which this
Administrative Services Agreement is executed.




     (e) In addition to the reports described in paragraphs (a) through (d) of this
Section 8.1, the Parties agree that Administrator shall provide Reinsureds
information related to the Business Covered under the Reinsured Contracts and/or Third Party
Reinsurance Agreements and copies of any other reports that are produced by Administrator.




     (f) Solely for the purposes of determining (i) the Required Amount in a Reinsurance
Credit Event, (ii) the Security Amount in a Collateral Triggering Event or (iii) if the
Administrator may exercise its withdrawal rights pursuant to Section 6.2(c) of



18









 






the Collateral Trust Agreement, Administrator may request, from time to time during the
term of this Administrative Services Agreement, a copy of the Reinsureds’ Actuarial Report
for the purpose of reviewing the Reinsureds’ calculation of Reserves. Upon receipt of such
request, Reinsureds shall provide a copy of the most recent available Reinsureds’ Actuarial
Report as promptly as possible to Administrator. If Administrator objects to the
Reinsured’s calculation of Reserves for the purposes set forth in this Section
8.1(f)(i)-(iii), above, the Parties shall retain either Milliman Inc. or Towers Watson
or, if both firms refuse to act in such capacity, such other nationally recognized
independent actuarial firm as may be agreed by the Parties, to conduct a review of the
calculation of the Reserves set forth in such Reinsureds’ Actuarial report, and to prepare a
report setting forth its findings and conclusions on such matter. The fees, costs and
expenses of retaining such an actuarial firm shall be allocated by the actuarial firm
between the Parties in accordance with the actuarial firm’s judgment as to the relative
merits of the Parties’ proposals in respect of the disputed items.



     8.2 Change in Status.




     (a) Administrator shall (a) notify Reinsureds in writing promptly following (i) the
public announcement of entry into any agreement that would result in a majority of the
capital stock of Administrator no longer being owned or controlled, directly or indirectly,
by Berkshire (or its successor) or (ii) the adoption of any plan to liquidate, merge or
dissolve Administrator and (b) obtain the prior written consent of Reinsureds prior to the
sale or transfer of assets of Administrator or any of its Affiliates that would render
Administrator unable to perform its obligations under this Administrative Services
Agreement. Twenty (20) calendar days prior to the closing of any transaction contemplated
by sub-clause (a) in the preceding sentence, the successor or survivor of the transaction
shall reaffirm in writing its obligations under this Administrative Services Agreement in
writing to Reinsureds.




     (b) Administrator shall notify Reinsureds in writing prior to any material change to
its claims handling personnel or operations.



     8.3 Administrator Controls.


          Administrator represents that during the term of this Administrative Services Agreement it
will continue to maintain its accounting and oversight controls with respect to its operations
consistent with the requirements under the Sarbanes-Oxley Act of 2002 (as that statute may be
amended from time to time) and with past practice, to the extent consistent with Applicable Law and
taking into consideration the wind-down of the Business Covered. Administrator shall provide
Reinsureds with documentation supporting such compliance upon the request of Reinsureds.



19









 








ARTICLE IX




BOOKS AND RECORDS



     9.1 Transfer and Ownership of Books and Records.




     In accordance with Section 5.7 of the Master Transaction Agreement, prior to Closing, the
Parties shall in good faith agree upon a protocol to (a) transfer to Administrator the Books and
Records following the Closing and/or (b) provide Administrator with reasonable access to the Books
and Records during normal business hours following the Closing. Notwithstanding the foregoing,
Reinsureds shall retain legal ownership of such Books and Records and shall be entitled to retain
one or more copies and/or originals of such Books and Records. With respect to any Books and
Records which are archived, the Parties agree that Reinsureds shall not be required to transfer
such archived Books and Records to Administrator at the Closing, but instead shall provide
Administrator with reasonable access to such archived Books and Records. At any time following the
Closing, Reinsureds shall transfer all or a portion of the archived Books and Records to
Administrator upon Administrator’s reasonable request.



     9.2 Maintenance of Books and Records.




     Administrator shall maintain (including, backing up its computer files, and maintaining
facilities and procedures for safekeeping and retaining documents) Books and Records (which term,
for purposes of this Administrative Services Agreement if the context requires, shall include (i)
any such material developed after the date hereof by a Party or its Affiliates and (ii) any
archived Books and Records) of all transactions pertaining to the Business Covered in accordance
with the record retention requirements in effect from time to time for Administrator’s business not
covered by this Administrative Services Agreement.



     9.3 Access to Books Records.




     (a) Administrator and Reinsureds shall each make the Books and Records (which term, for
purposes of this Administrative Services Agreement if the context requires, shall include
(i) any such material developed after the date hereof by a Party or its Affiliates and (ii)
any archived Books and Records) in its possession or under its control reasonably available
to Reinsureds or Administrator, as applicable, or their Representatives during normal office
hours for such auditing or any other purposes related to the LPT Reinsurance Agreement or
this Administrative Services Agreement as Reinsureds or Administrator, as applicable, may
require. Reinsureds or Administrator, as applicable, shall, at their own expense, be
entitled to make copies of the Books and Records for these purposes. Administrator will
provide all needed information, including access to claim files and personnel, for the
purpose of periodically updating actuarial studies of gross liabilities of the Business
Covered. This obligation shall survive the



20









 






expiration of this Administrative Services Agreement and shall continue for so long as
Administrator may have any liability arising under this Administrative Services Agreement or
the LPT Reinsurance Agreement.




     (b) Administrator shall make the Books and Records and its personnel reasonably
available at any such location and manner as may be required by the terms of any Third Party
Reinsurance Agreement.




     (c) The Books and Records shall at all reasonable times be open for inspection by
Administrator (where such Books and Records are being kept by Reinsureds) and by Reinsureds
(where such Books and Records are being kept by Administrator) and (in each case) their
respective Representatives during normal business hours and on reasonable notice, for such
auditing or other purposes as Administrator or Reinsureds may require. Administrator shall
permit Reinsureds and their Representatives, and Reinsureds shall permit Administrator and
its Representatives, to make copies of such Books and Records. This obligation shall
survive the expiration of this Administrative Services Agreement and continue for so long as
Administrator may have any liability arising under this Administrative Services Agreement or
the LPT Reinsurance Agreement.




     (d) Upon Administrator’s reasonable request, Reinsureds shall transfer to Administrator
any archived Books and Records that Administrator requests pertaining to the Business
Covered.




     (e) Administrator shall not, and shall cause its Affiliates to not, dispose of, alter
or destroy any Books and Records related to A&P Claims or other relevant materials other
than in accordance with Administrator’s books and records retention policies as may be in
effect from time to time, but in no event will Administrator dispose of, alter or destroy,
or cause or permit any of its Affiliates to dispose of, alter or destroy, any such Books and
Records or other relevant materials (i) prior to the seventh anniversary of the Closing and
(ii) without providing Reinsureds with advance written notice and the opportunity to take
possession of such Books and Records.




     (f) Notwithstanding any other provision of this Section 9.3, a Party shall not
be obligated to provide such access to any Books and Records, employees or information if
such Party determines, in its reasonable judgment, that doing so would violate Applicable
Law or a contract, agreement or obligation of confidentiality owing to a third party;
provided, however, that the Parties requesting access shall have the right to require such
other Party to use its commercially reasonable efforts to take steps in order to provide
such access without causing such violations.



21









 





ARTICLE X




INABILITY TO PERFORM SERVICES; ERRORS 



     10.1 Capacity.




     (a) Administrator shall at all times maintain all necessary licenses, authorizations,
permits and qualifications from Governmental Authorities under Applicable Laws that
Administrator is required to maintain in order to perform the Administrative Services in the
manner required by this Administrative Services Agreement.




     (b) Subject to Section 2.5 of this Administrative Services Agreement and to the
terms of the Transition Services Agreement, Administrator shall at all times maintain
sufficient facilities and trained personnel of the kind necessary to perform its obligations
under this Administrative Services Agreement in accordance with the performance standards
set forth herein.




     (c) Administrator may carry out its obligations under this Article X through
Resolute Management Inc.



     10.2 Inability to Perform Services.




     In the event that Administrator shall be unable to perform normal and routine services as
required by this Administrative Services Agreement for any reason for a period that can reasonably
be expected to exceed thirty (30) calendar days, Administrator shall provide notice to Reinsureds
of its inability to perform the services and shall cooperate with Reinsureds in obtaining an
alternative means of providing such services. Administrator will be responsible for all costs
incurred in restoring services except in cases where such inability to provide services results
solely from Reinsureds failure to provide the Claims Administration System in accordance with the
terms of the Transition Services Agreement, in which case Reinsureds shall be responsible for all
costs reasonably incurred by Administrator in restoring services.



     10.3 Errors.




     Administrator shall, at its own expense, use commercially reasonable efforts to correct any
errors in Administrative Services caused by it as soon as practicable after discovering such error
or receiving notice thereof from Reinsureds or other Person.



22









 





ARTICLE XI




LEGAL ACTIONS 



     11.1 Regulatory Proceedings.




     (a) If Reinsureds or Administrator receives notice of, or otherwise becomes aware of,
any regulatory investigation, examination or proceeding or other significant inquiry
relating to the Reinsured Contracts and Third Party Reinsurance Agreements, Reinsureds (to
the extent pertaining to the Business Covered) or Administrator, as applicable, shall
promptly notify the other Party. Unless Reinsureds choose to delegate responsibility to
Administrator with respect to a specific matter, Reinsureds shall respond to and resolve all
regulatory matters and regulatory investigations, examinations, inquiries and proceedings
relating to the Business Covered with the full assistance and cooperation of Administrator.




     (b) Notwithstanding anything to the contrary contained in this Administrative Services
Agreement, neither Reinsureds nor Administrator shall have the authority to institute,
prosecute or maintain any regulatory proceedings on behalf of the other Party without the
prior written consent of such other Party.



     11.2 Notification Requirements.




     (a) If Reinsureds or Administrator receives notice of any litigation, arbitration,
declaratory judgment or other legal proceeding against a Party to this Administrative
Services Agreement that has been instituted either under, arising out of, or relating to any
Reinsured Contract or Third Party Reinsurance Agreement in respect to the Business Covered,
Reinsureds or Administrator, as applicable, shall promptly notify the other Party.




     (b) Administrator shall promptly notify Reinsureds in writing of any potential loss
from an A&P Claim, set of interrelated A&P Claims, or a single account, which is reasonably
likely to involve a loss, on a gross of third party ceded reinsurance basis, in the amount
of $10,000,000 or greater. Administrator shall provide Reinsureds with quarterly progress
reports regarding such A&P Claims or accounts.




     (c) At least ten (10) calendar days prior to making any third-party reinsurance cession
of over $10,000,000, Administrator shall provide a draft copy of the billing to Reinsureds.




     (d) Administrator shall promptly notify Reinsureds in writing whenever a Berkshire
Controlled Entity is an opposing party in any litigation, arbitration, declaratory



23









 






judgment or other legal proceeding against Reinsureds that has been instituted either
under, arising out of, or relating to any Reinsured Contract or Third Party Reinsurance
Agreement in respect to the Business Covered.




     (e) Administrator shall promptly notify Reinsureds in writing of any events that
constitute a Reinsurance Credit Event.



     11.3 Right to Associate.


          Administrator shall prosecute or defend, at its own expense pursuant to the terms of this
Administrative Services Agreement and the LPT Reinsurance Agreement and in the name of the
applicable Reinsureds when necessary, any litigation, arbitration or other legal proceeding brought
on any Reinsured Contract or Third Party Reinsurance Agreement with respect to the Business
Covered. Administrator, when so requested, shall afford Reinsureds an opportunity to be associated
with Administrator, at the expense of Reinsureds, in the defense of any claim, suit or proceeding
involving the Business Covered and the Parties shall cooperate in every respect in the prosecution
or defense of such claim, suit or proceeding. Any recovery for the benefit of Reinsureds shall be
first used to reimburse Administrator for its expenses in connection with the proceedings and the
remainder used as a recovery under the terms of the LPT Reinsurance Agreement.



ARTICLE XII




BANK ACCOUNTS



     12.1 Bank Accounts.




     (a) As soon as reasonably practicable after the Effective Date, Administrator shall
open and maintain accounts into and out of which all payments due from Administrator under
the LPT Reinsurance Agreement shall be paid and all recoverables due Administrator under the
LPT Reinsurance Agreement shall be received (the “Administrative Accounts”).




     (b) Administrator may open and maintain such bank accounts in its own name as it may
require in relation to the provision of the Administrative Services, and Reinsureds hereby
authorize all payments to be made from and all recoveries paid to such accounts in
connection with the provision of the Administrative Services.




     (c) Reinsureds and Administrator shall cooperate in procuring that, as soon as
reasonably practicable, following the Effective Date, changes to the instruction and finance
systems are made so as to enable payments and recoveries to be paid into and from the
Administrative Accounts. All costs of changes will be paid by Administrator.



24









 






To the extent that payments and recoveries are made after the Effective Date from
accounts held by Reinsureds, Reinsureds and Administrator shall cooperate in setting up
reimbursement procedures for payment of amounts due between the Administrator and
Reinsureds.



ARTICLE XIII




     COOPERATION



     13.1 Cooperation.




     The Parties shall cooperate in a commercially reasonable manner in order that the duties
assumed by Administrator will be effectively, efficiently and promptly discharged, and will not
take any actions which would frustrate the intent of the transactions contemplated by this
Administrative Services Agreement, the Master Transition Agreement, the LPT Reinsurance Agreement
or any other Ancillary Agreements. Each Party shall, at all reasonable times under the
circumstances, make available to the other Party properly authorized personnel for the purpose of
consultation and decision.



     13.2 Relationship Management.




     In the interest of effective effectuation of this Administrative Services Agreement, the
Parties will seek in good faith to have primary communications regarding documents, records, and
request for information under this Administrative Services Agreement be made through the following
authorized Representatives:




For Administrator:





Brian G. Snover

Vice President and General Counsel

Berkshire Hathaway Reinsurance Division

100 First Stamford Place

Stamford, CT 06902

Fax: (203) 363-5221





For Reinsureds:





Michael P. Warnick

Senior Vice President and Deputy General Counsel

CNA Financial Corporation

333 S. Wabash Avenue

Chicago, IL 60604

Fax: (312) 755-2479



25









 









          Any Party may change its Representative pursuant to this Section 13.2 on fifteen (15)
calendar days’ advance notice in writing to the other Parties.



ARTICLE XIV




DURATION; TERMINATION



     14.1 Duration.


          This Administrative Services Agreement shall commence on the date of its execution and shall
continue until it is terminated under Section 14.2.



     14.2 Termination.




     (a) Subject to the provisions regarding survivability set forth in Section 14.4
hereof, this Administrative Services Agreement shall terminate:




          (i) at any time upon the mutual written consent of the Parties, which writing shall
state the effective date of termination, and consistent with Section 14.3 hereof,
shall set forth in reasonable detail the procedure for transferring the Administrative
Services to Reinsureds or their designee;




          (ii) automatically upon termination of Administrator’s liability under the LPT
Reinsurance Agreement. Under all circumstances Administrator’s liability under this
Administrative Services Agreement shall cease at the close of the Business Day on which
Administrator has paid an Ultimate Net Loss equal to the LPT Limit;




          (iii) at the option of Reinsureds, upon written notice to Administrator, if
Administrator becomes subject to dissolution, liquidation, conservation, rehabilitation,
bankruptcy, statutory reorganization, receivership, compulsory composition, or similar
proceedings in any jurisdiction, or if creditors of Administrator take over its management,
or if Administrator otherwise enters into any arrangement with creditors, or makes an
assignment for the benefit of creditors, or if any significant part of Administrator’s
undertakings or property is impounded or confiscated by action of any Governmental
Authority.




     (b) In the event that this Administrative Services Agreement is terminated pursuant to
Section 14.2(a)(iii), Reinsureds shall promptly select a third-party



26









 






administrator reasonably acceptable to Administrator to perform the Administrative
Services.




     (c) Following any termination of this Administrative Services Agreement by Reinsureds
pursuant to Section 14.2(a)(iii), Administrator shall reimburse Reinsureds for any
reasonable out-of-pocket costs arising as a result of such termination, including, without
limitation, (i) the cost of transitioning the Administrative Services to a substitute
provider of Reinsureds, (ii) any fees paid to any such substitute provider and (iii) any
reasonable costs incurred by Reinsureds with respect to the Administrative Services after
termination of this Administrative Services Agreement subject to the LPT Reinsurance
Agreement continuing to be unexhausted.



     14.3 Certain Actions Related to Termination.




     (a) In the event that (x) either of the Parties reasonably determines that the
aggregate Ultimate Net Loss incurred by Administrator under the LPT Reinsurance Agreement on
a paid basis is reduced to one billion dollars ($1,000,000,000) or (y) any notice of
termination is given under either the LPT Reinsurance Agreement or this Administrative
Services Agreement, then, upon the request of Reinsureds:




          (i) Reinsureds and Administrator shall negotiate in good faith a services agreement
(the “Reverse Transition Services Agreement”) containing terms and conditions
mutually acceptable to the Parties, whereby Administrator and its Affiliates will provide,
at actual cost (exclusive of any overhead allocation), all transition or administrative
services reasonably necessary or appropriate in order to transition the administration of
the A&P Business to Reinsureds, which services will be provided for a period of not less
than one (1) year following the termination or expiration of this Administrative Services
Agreement.




          (ii) Administrator shall provide to Reinsureds a true and complete list of each
employee of Administrator or its Affiliates who is primarily dedicated to the administration
of the A&P Business, including each such employee’s classification, hire date, department
function, office location, current annual salary and most recent annual bonus target.
Administrator shall provide updates to such list from time to time upon the reasonable
request of Reinsureds, and shall reasonably cooperate with and assist Reinsureds in
connection with making offers of employment to any such employees for employment commencing
on or after the termination or expiration of this Administrative Services Agreement.




          (iii) To ensure an effective transition and transfer of the administration of the A&P
Business, Administrator shall, and shall cause its Affiliates and their respective
Representatives to, fully cooperate and work with Reinsureds in transition planning and
implementation. Reinsureds shall reimburse Administrator for any out of



27









 






pocket expenses incurred by Administrator or its Affiliates in connection with any
actions undertaken by Administrator at the request of Reinsureds in transitioning the
administration of the A&P Business to Reinsureds.




     (b) Unless otherwise agreed to by the Parties, upon the termination or expiration of
this Administrative Services Agreement, Administrator shall, and shall cause each of its
Affiliates, to, promptly transfer to Reinsureds, or their designee, originals or copies of
all Books and Records in the possession or control of such Persons.




     (c) Unless otherwise agreed to in writing by the Parties, from and after the
termination or expiration of this Administrative Services Agreement, Administrator shall,
and shall cause its Affiliates and their respective Representatives to, fully cooperate with
Reinsureds in connection with transitioning the administration of the A&P Business to
Reinsureds or their designee, including in connection with any regulatory or tax audits or
proceedings relating to any period during which Administrator was providing services
pursuant to this Administrative Services Agreement.




     (d) If requested by Reinsureds pursuant to Section 14.3(b), upon the
termination or expiration of this Administrative Services Agreement, Administrator and
Reinsureds shall execute and deliver the Reverse Transition Services Agreement.



     14.4 Survival.



     The provisions of Section 9.3, paragraphs (b) and (c) of Section 14.2,
Section 14.3, Section 14.4, Article XV, Article XVII, and
Sections 19.1, 19.7, 19.10 and 19.12 shall survive the termination
of this Administrative Services Agreement.



ARTICLE XV




CONFIDENTIALITY; PRIVACY REQUIREMENTS



     15.1 Definitions.


          The following terms, when used in this Administrative Services Agreement, shall have the
meanings set forth in this Section:




     (a) As used herein, “Confidential Information” means any information of
Administrator or Reinsureds that is not generally known to the public and at the time of
disclosure is identified, or would reasonably be understood by the receiving Party to be
proprietary or confidential, whether or not so marked and whether disclosed in oral,
written, visual, electronic or other form, and to which the receiving Party (or its
contractors or agents) has access to in connection with this Administrative Services



28









 






Agreement. For purposes of clarification, Confidential Information includes: (i)
business plans, strategies, forecasts, projects and analyses; (ii) financial information and
fee structures; (iii) business processes, methods and models; (iv) employee and supplier
information; (v) product and service specifications; (vi) manufacturing, purchasing,
logistics, sales and marketing information; (vii) methods and training materials; and (viii)
the terms and conditions of this Administrative Services Agreement, and in the case of
Reinsureds, also includes (A) information about or owned by Reinsureds’ customers, insureds,
or claimants; (B) information treated or defined as confidential under the Reinsureds’
standards; (C) Reinsureds’ data and Personal Information; and (D) the CAS.




     (b) “Nonpublic Personal Information” is as defined in Title V of the Financial
Modernization Act (the Gramm-Leach-Bliley Act) (15 U.S.C.6801 et seq.) and related
Applicable Law. Nonpublic Personal Information is individually identifiable financial and
medical or health-related information, including application, policy, or claim information;
social security numbers, personal financial information, health information; medical
records; and names or lists of individuals derived from nonpublic personally identifiable
information becoming known by Administrator through the performance of its obligations under
this Administrative Services Agreement.




     (c) “Personal Information” shall mean any information about an individual, in
whatever form received or created, whether prepared by Administrator, Reinsureds or
otherwise, that contains or otherwise reflects information that identifies or about which
there is a reasonable basis to believe can be used to identify the individual. Personal
Information includes Nonpublic Personal Information.



     15.2 Obligations.


          The receiving Party will use the same care and discretion to avoid disclosure, publication or
dissemination of any Confidential Information received from the disclosing Party as the receiving
Party uses with its own similar information that it does not wish to disclose, publish or
disseminate (but in no event less than a reasonable degree of care). The receiving Party will: (a)
use the disclosing Party’s Confidential Information only for the purpose for which it is disclosed
in connection with the performance of its obligations under this Administrative Services Agreement
or the full enjoyment of its rights hereunder; and (b) not disclose the disclosing Party’s
Confidential Information except to: (i) its employees, agents and contractors, who have a need to
know such Confidential Information in connection with the performance of its obligations under this
Administrative Services Agreement or the full enjoyment of its rights hereunder who have executed
agreements obligating them to keep the Confidential Information confidential, (ii) its legal,
financial or other professional advisors as reasonably necessary to provide or benefit from the
Administrative Services, (iii) an Affiliate of Reinsureds in connection with the use or receipt of
Administrative Services by such Affiliate pursuant to this Administrative Services Agreement, or
(iv) an Administrator Affiliate, Subcontractor and/or employees of approved Subcontractor, in each
case, solely in connection with and as required by their performance of Administrative Services.
The receiving Party shall ensure that any Affiliates, Subcontractors, advisors and any other third
parties to whom Confidential Information




29











 




is disclosed hereunder have signed an agreement with the same or similar confidentiality
obligations as set forth herein. The receiving Party is liable for any unauthorized disclosure or
misappropriation of Confidential Information by any of its personnel, agents, Subcontractors or
advisors. The receiving Party will promptly report to the disclosing Party any breaches in
confidentiality of which it is aware that may materially affect the disclosing Party and specify
the corrective action taken. Administrator will not commingle the Confidential Information or
Personal Information of Reinsureds with any other personal or confidential information.





	 	15.3	 	Exceptions to Confidential Treatment.






     (a) General. Except with respect to Personal Information of Reinsureds, this
Administrative Services Agreement imposes no obligation upon either Party with respect to
information that: (i) the receiving Party possessed prior to disclosure by the disclosing
Party, without an obligation of confidentiality; (ii) is or becomes publicly available
without breach of this Administrative Services Agreement by the receiving Party; (iii) is or
was independently developed by the receiving Party without the use of any Confidential
Information of the disclosing Party other than in connection with the Administrative
Services; (iv) is or was disclosed by the disclosing Party without imposing any obligation
of confidentiality on the receiving Party; or (v) is or was received by the receiving party
from a third party that does not have an obligation of confidentiality to the disclosing
party or its Affiliates.




     (b) Required Disclosure. If either party is requested or required to disclose
Confidential Information of the other pursuant to any judicial or administrative process,
then such receiving party shall, to the extent it may legally do so, promptly notify the
other party in writing of such request or requirement. The party whose Confidential
Information is requested or required to be disclosed shall either: (i) promptly seek
protective relief from such disclosure obligation, or (ii) direct the receiving party to
comply with such request or requirement. The receiving party shall cooperate with efforts
of the disclosing party to maintain the confidentiality of such information or to resist
compulsory disclosure thereof, to the extent it may legally do so, but any costs incurred by
the receiving party shall be reimbursed by the disclosing party. If, after a reasonable
opportunity to seek protective relief, such relief is not obtained by disclosing party, or
if such party fails to obtain such relief, the receiving party may disclose such portion of
such Confidential Information that the receiving party reasonably believes, on the basis of
advice of such party’s counsel, such party is legally obligated to disclose. Either Party
may disclose Confidential Information to a state insurance regulator or to a tax authority
as required under Applicable Law or as required to support that Party’s position on any tax
return.




     (c) Return or Destruction. At Reinsureds’ request and upon the termination of
this Administrative Services Agreement, Administrator will return or certify or cause the
return or certification of destruction by its Subcontractors of all of Reinsureds’
Confidential Information in Administrator’s possession or control. Reinsureds will have



30









 






the same obligations with respect to Administrator’s Confidential Information as
Administrator has with respect to Reinsureds’ Confidential Information under this section.
The Parties shall be entitled to retain an archival copy of any Confidential Information
(excluding Personal Information) to the extent required to enforce the terms of this
Administrative Services Agreement or to comply with Applicable Law or to support its
position on any tax return; provided, that such Confidential Information will be returned or
destroyed in accordance with this provision upon the expiration of the period specified in
the Applicable Law, the expiration of the applicable statute of limitations and the final
resolution of any pending dispute.




	 	15.4	 	Privacy.





          To the extent of any conflict between the requirements of Section 15.2 and this
Section 15.4, this Section 15.4 shall govern and control with respect to Personal
Information.





     (a) Acknowledgement. Administrator acknowledges that it may have access to
Personal Information in order to perform its duties under this Administrative Services
Agreement and that Personal Information is protected under Applicable Law.




     (b) Use and Disclosure. Administrator agrees to use and disclose the Personal
Information only: (i) as required for it to perform its duties and obligations under this
Administrative Services Agreement; (ii) for any lawful purpose related to this
Administrative Services Agreement; and (iii) as permitted by Applicable Law.




     (c) Privacy Protection Protocol. Administrator shall at all times maintain a
privacy protection protocol, which is sufficient to assure compliance with nondisclosure,
privacy, security and other provisions of this Administrative Services Agreement that relate
to Personal Information and Confidential Information and with all Applicable Law to the
extent of Administrator’s obligations under Section 2.4.




     (d) Security Precautions. Administrator shall take all reasonable security
precautions to maintain the confidentiality and security of all Personal Information, take
all steps necessary to protect against unauthorized access to Personal Information, and to
protect against any anticipated threats or hazards to the security of such information.
Among other things, Administrator shall: (i) limit access to Personal Information to those
actually performing Administrative Services for Reinsureds; (ii) limit access of personnel
performing Administrative Services for Reinsureds to that Personal Information actually
required for the performance of Administrative Services for Reinsureds; (iii) take all
reasonable and necessary steps to ensure that Personal Information is transmitted only in a
secure manner including by encryption or equivalent means; and (iv) take all reasonable and
necessary steps to ensure that Personal Information is minimally disclosed, combined,
amended, deleted, or otherwise altered by Administrator personnel so as to maintain its
integrity and accuracy.



31









 






     (e) Protected Health Information. If Administrator or Administrator personnel
will have access to “protected health information” (as such term is defined by the HIPAA
Privacy Rule), Administrator shall execute the Business Associate Agreement substantially in
the form attached hereto as Exhibit A. Administrator and Administrator personnel
shall comply with the terms of the Business Associate Agreement in performing the applicable
Administrative Services. Administrator shall be responsible under this Administrative
Services Agreement for any failure of Administrator or Administrator personnel to comply
with the terms of the Business Associate Agreement or the Applicable Laws referenced in the
Business Associate Agreement applicable to Administrator in the same manner and to the same
extent it would be responsible for any failure to comply with its other obligations under
this Administrative Services Agreement.




     (f) Privacy Breach. If Administrator breaches the provisions of this
Section 15.4, Administrator agrees to immediately notify Reinsureds and cooperate
with Reinsureds in mitigating any potential damages by, at Administrator’s expense:




          (i) immediately endeavoring to recover all Personal Information from the unauthorized
recipient, if known, and instructing the unauthorized recipient to cease and desist from any
use of the improperly disclosed Personal Information;




          (ii) at the request of Reinsureds, returning within ten (10) Business Days all Personal
Information provided by Reinsureds to Administrator pursuant to this Section 15.4;




          (iii) at the request of Reinsureds, deleting from Administrator electronic systems and
physical records within ten (10) Business Days all Personal Information provided by
Reinsureds and providing certification that such deletion has occurred;




          (iv) assisting and cooperating with any demand forwarded by Reinsureds to Administrator
as a result of a court order imposed on Reinsureds or from a Governmental Authority having
jurisdiction over Reinsureds; and




          (v) assisting with taking any other remedial steps reasonably required by Reinsureds.




     (g) No Limitation. The inclusion of this Section 15.4 relating
primarily to Personal Information shall not, in any way, limit the obligations of
Administrator under other sections of this Administrative Services Agreement that relate to
the protection of Confidential Information generally.



32









 






	 	15.5	 	Regulatory and Legal Communication.






     To the extent Administrator may legally do so:




     (a) Government Requests. Administrator agrees that, should any Governmental
Authority request Administrator to submit any information or provide any communication
related to the Administrative Services provided pursuant to this Administrative Services
Agreement, Administrator will notify Reinsureds immediately upon receipt of such request.
In no case shall said notice be received by Reinsureds later than five (5) calendar days
after receipt by Administrator. Administrator must contact Reinsureds prior to any response
Administrator would make to any Governmental Authority that involves Reinsureds, Reinsureds’
clients, or any Reinsureds relationship with such Governmental Authority. This provision
does not apply to reviews by tax authorities or to state insurance departments in connection
with financial examinations.




     (b) Notice. Without limiting anything in subsection (a) above, Administrator
shall provide Reinsureds with prompt notice of any Governmental Authority review, audit or
inspection of Administrator’s facilities, processes, or products under the FCPA or any
anti-bribery Applicable Law that relates to the Administrative Services furnished to
Reinsureds under this Administrative Services Agreement. Even if Reinsureds are not
otherwise identified as involved in the review, audit, or inspection, Administrator shall
provide Reinsureds with the summary results of any such review, audit or inspection. If not
legally prohibited, Administrator shall provide Reinsureds a reasonable opportunity to
provide assistance to Administrator in responding to any such review, audit or inspection.




     (c) Security Incident. In the event of an incident that does, or is reasonably
likely to, result in an unauthorized disclosure of, or access to, Personal Information (a
“Security Incident”), Administrator shall immediately notify Reinsureds of the
Security Incident, and Administrator shall promptly (and in any event as soon as reasonably
practical) (i) perform a root cause analysis and prepare a corrective action plan, (ii)
provide Reinsureds with written reports and detailed information regarding any such Security
Incident, including how and when such Security Incident occurred and what actions
Administrator is taking to remedy such Security Incident, (iii) cooperate in the
investigation of the Security Incident at Reinsureds’ request, (iv) reimburse Reinsureds for
their costs of notifying any individuals and/or authorities of the Security Incident if
Reinsureds, in their good faith judgment, consider notification necessary, (v) remediate
such Security Incident or potential Security Incident and take commercially reasonable
actions to prevent its recurrence; provided, however, to the extent such Security Incident
or potential Security Incident is not caused by Administrator’s or its Subcontractors’
failure to comply with this Administrative Services Agreement, Reinsureds shall reimburse
Administrator for Administrator’s reasonable expenses incurred in such remediation, and (vi)
promptly restore any lost Reinsureds data to the last available back-up.



33









 






     (d) Material Breach. A breach of this Article XV may be a material
breach of this Administrative Services Agreement. Each Party acknowledges that monetary
damages may not be a sufficient remedy for unauthorized disclosure of Confidential
Information or Personal Information and that each Party shall be entitled, in addition to
any other rights or remedies available at law or in equity, to seek such injunctive or
equitable relief as may be deemed proper by a court of competent jurisdiction.



ARTICLE XVI




FORCE MAJEURE




	 	16.1	 	Force Majeure Event.





          Except for any failure of either Party to comply with the provisions of the Disaster Recovery
Plans, neither Party shall have any liability or responsibility, and shall be excused from
performance for, any interruption, delay, impairment or other failure to fulfill any obligation
under this Administrative Services Agreement to the extent and so long as the fulfillment of such
obligation is interrupted, delayed, impaired, prevented or frustrated as a result of or by natural
disaster, hurricane, earthquake, floods, fire, catastrophic weather conditions, diseases or other
elements of nature or acts of God, acts of war (declared or undeclared), insurrection, riot, civil
disturbance or disorders, rebellion, sabotage, government regulations or directives, embargoes,
terrorist acts, or explosions, strikes, failure of or damage to public utility (“Force Majeure
Event”); provided that such Party uses best efforts promptly to overcome or mitigate the cause
of such delay or failure to perform, including the implementation of the Disaster Recovery Plans.
Any Party so delayed in its performance shall immediately notify the other thereof by telephone and
confirm promptly thereafter in writing, describing in reasonable detail the circumstances causing
such delay, and shall resume the performance of its obligations as promptly as reasonably
practicable after the Force Majeure Event has ceased to exist.




ARTICLE XVII




INDEMNIFICATION 




	 	17.1	 	Indemnification Obligation of Administrator.





          Administrator agrees to indemnify and hold harmless Reinsureds and each of their directors,
officers, employees, agents or Affiliates (and the directors, officers, employees and agents of
such Affiliates) from any and all losses, liabilities, costs, claims, demands, compensatory, extra
contractual and/or punitive damages, fines, penalties and expenses (including reasonable attorneys’
fees and expenses) (collectively, “Reinsureds Losses”) resulting in damages not included
within the definition of Ultimate Net Loss arising out of or caused by: (i) any actual or alleged
fraud, theft or embezzlement by officers, employees or agents of Administrator or its
Subcontractors during the term of this Administrative Services Agreement; (ii) the failure, either
intentional or unintentional, of Administrator or its






34









 







Subcontractors to properly perform the services or take the actions required by this
Administrative Services Agreement, including, without limitation, the failure to properly process,
evaluate and pay disbursement requests in accordance with the terms of this Administrative Services
Agreement; (iii) any other act of negligence or willful misconduct committed by officers, agents or
employees of Administrator or its Subcontractors during the term of this Administrative Services
Agreement; or (iv) any failure of Administrator or its Subcontractors to comply with Applicable
Laws during the term of this Administrative Services Agreement. Nothing herein shall be construed
to require Administrator to indemnify Reinsureds with respect to any act or omission where the
decision to take or omit such action was with the agreement of Reinsureds.





	 	17.2	 	Indemnification Obligation of Reinsureds.





          Reinsureds agree to indemnify and hold harmless Administrator and any of its directors,
officers, employees, agents or Affiliates (and the directors, officers, employees and agents of
such Affiliates) from any and all losses, liabilities, costs, claims, demands, compensatory, extra
contractual and/or punitive damages, fines, penalties and expenses (including reasonable attorneys’
fees and expenses) (collectively, “Administrator Losses”) arising out of or caused by: (i)
fraud, theft or embezzlement by officers, employees or agents of Reinsureds during the term of this
Administrative Services Agreement; (ii) any other act of negligence or willful misconduct committed
by officers, agents or employees of Reinsureds during the term of this Administrative Services
Agreement; or (iii) any failure of Reinsureds to comply with Applicable Laws during the term of
this Administrative Services Agreement other than any failure on the part of Reinsureds or
Administrator caused by the action or inaction of Administrator, including when acting in the name
or on behalf of Reinsureds, whether or not in compliance with the terms of this Administrative
Services Agreement. Nothing herein shall be construed to require Reinsureds to indemnify
Administrator with respect to any act or omission where the decision to take or omit such action
was with the agreement of Administrator.





	 	17.3	 	Notice of Indemnification Request.





          In the event that either Party asserts a claim for indemnification hereunder, such Party
seeking indemnification (the “Indemnified Party”) shall give written notice to the other
Party (the “Indemnifying Party”) specifying the facts constituting the basis for, and the
amount (if known) of, the claim asserted within one year of the date the claim is asserted against
or should be known by the Indemnified Party.





	 	17.4	 	Notice of an Asserted Liability.





          If an Indemnified Party asserts, or may in the future seek to assert, a claim for
indemnification hereunder because of a claim or demand made, or an action, proceeding or
investigation instituted, by any person not a party to this Administrative Services Agreement (a
“Third Party Claimant”) that may result in an Administrator Loss with respect to which
Administrator is entitled to indemnification pursuant to Section 17.2 hereof or Reinsureds
Loss with respect to which Reinsureds are entitled to indemnification pursuant to Section
17.1 hereof






35









 







(an “Asserted Liability”), the Indemnified Party shall so notify the Indemnifying
Party as promptly as practicable, but in no event later than ten (10) Business Days after such
Asserted Liability is actually known to the Indemnified Party. Failure to deliver notice with
respect to an Asserted Liability in a timely manner shall not be deemed a waiver of the Indemnified
Party’s right to indemnification for Losses in connection with such Asserted Liability but the
amount of reimbursement to which the Indemnified Party is entitled shall be reduced by the amount,
if any, by which the Indemnified Party’s Losses would have been less had such notice been timely
delivered.





	 	17.5	 	Procedures.






     (a) The Indemnifying Party shall have the right, upon written notice to the Indemnified
Party, to investigate, contest, defend or settle the Asserted Liability; provided that the
Indemnified Party may, at its option and at its own expense, participate in the
investigation, contesting, defense or settlement of any such Asserted Liability through
representatives and counsel of its own choosing. The failure of the Indemnifying Party to
respond in writing to proper notice of an Asserted Liability within ten (10) calendar days
after receipt thereof shall be deemed an election not to defend the same. Unless and until
the Indemnifying Party elects to defend the Asserted Liability, the Indemnified Party shall
have the right, at its option and at the Indemnifying Party’s expense, to do so in such
manner as it deems appropriate, including, but not limited to, settling such Asserted
Liability (after giving notice of the settlement to the Indemnifying Party) on such terms as
the Indemnified Party deems appropriate.




     (b) Except as provided in the immediately preceding sentence, the Indemnified Party
shall not settle or compromise any Asserted Liability for which it seeks indemnification
hereunder without the prior written consent of the Indemnifying Party (which shall not be
unreasonably withheld) during the ten (10) calendar day period specified above.




     (c) The Indemnifying Party shall be entitled to participate in (but not to control) the
defense of any Asserted Liability which it has elected, or is deemed to have elected, not to
defend, with its own counsel and at its own expense.




     (d) Except as provided in the first sentence of paragraph (a) of this Section
17.5, the Indemnifying Party shall bear all reasonable costs of defending any Asserted
Liability and shall indemnify and hold the Indemnified Party harmless against and from all
costs, fees and expenses incurred in connection with defending such Asserted Liability.




     (e) Administrator and Reinsureds shall make mutually available to each other all
relevant information in their possession relating to any Asserted Liability (except to the
extent that such action would result in a loss of attorney-client privilege) and shall
cooperate with each other in the defense thereof.



36









 






	 	17.6	 	Survival.





          The provisions of this Article XVII shall survive the termination of this
Administrative Services Agreement for a period of one year.




ARTICLE XVIII




DISPUTE RESOLUTION; ARBITRATION 




	 	18.1	 	Dispute Resolution; Arbitration.





          If Reinsureds and Administrator are unable to resolve any dispute arising from this
Administrative Services Agreement, the matter will be handled in accordance with the dispute
resolution and arbitration procedures set forth in Article X and Article XI of the
Master Transaction Agreement.




ARTICLE XIX




MISCELLANEOUS 




	 	19.1	 	Notices.





          Any notice, request, demand, waiver, consent, approval or other communication required or
permitted to be given by any Party hereunder shall be in writing and shall be delivered personally,
sent by facsimile transmission, sent by registered or certified mail, postage prepaid, or sent by a
standard overnight courier of national reputation with written confirmation of delivery. Any such
notice shall be deemed given when so delivered personally, or if sent by facsimile transmission, on
the date received (provided that any notice received after 5:00 p.m. (addressee’s local time) shall
be deemed given at 9:00 a.m. (addressee’s local time) on the next Business Day), or if mailed, on
the date shown on the receipt therefor, or if sent by overnight courier, on the date shown on the
written confirmation of delivery. Such notices shall be given to the following address:



To CNA Parties:



CNA Financial Corporation

333 S. Wabash Avenue

Chicago, IL 60604

Attention: Jonathan D. Kantor

Executive Vice President,

General Counsel and Secretary

Fax: (312) 817-0511





37









 







With a copy to:



CNA Financial Corporation

333 S. Wabash Avenue

Chicago, IL 60604

Attention: Michael P. Warnick

Senior Vice President and Deputy General Counsel

Fax: (312) 755-2479



To Administrator:



National Indemnity Company

100 First Stamford Place

Stamford, CT 06902

Attention: General Counsel

Fax: (203) 363-5221



With a copy to:



National Indemnity Company

3024 Harney Street

Omaha, NE 68131

Attention: Treasurer

Fax: (402) 916-3030




Any Party may change its notice provisions on fifteen (15) calendar days’ advance notice in
writing to the other Parties.





	 	19.2	 	Entire Agreement.





          This Administrative Services Agreement (including the exhibits and schedules hereto), the
Master Transaction Agreement and the other Ancillary Agreements and any other documents delivered
pursuant hereto and thereto, constitute the entire agreement among the Parties and their respective
Affiliates with respect to the subject matter hereof and supersede all prior negotiations,
discussions, writings, agreements and understandings, oral and written, among the Parties with
respect to the subject matter hereof and thereof.





	 	19.3	 	Waiver and Amendment.





          This Administrative Services Agreement may be amended, superseded, canceled, renewed or
extended, and the terms hereof may be waived, only by an instrument in writing signed by the
Parties, or, in the case of a waiver, by the Party waiving compliance. No delay on the part of any
Party in exercising any right, power or privilege hereunder shall operate as a






38









 







waiver thereof, nor shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other such right, power or privilege. No waiver of any
breach of this Administrative Services Agreement shall be held to constitute a waiver of any other
or subsequent breach.





	 	19.4	 	Successors and Assigns.





          The rights and obligations of the Parties under this Administrative Services Agreement shall
not be subject to assignment without the prior written consent of the other Parties, and any
attempted assignment without the prior written consent of the other Parties shall be invalid ab
initio. The terms of this Administrative Services Agreement shall be binding upon and inure to the
benefit of and be enforceable by and against the successors and permitted assigns of the Parties.





	 	19.5	 	Headings.





          The headings of this Administrative Services Agreement are for convenience of reference only
and shall not define or limit any of the terms or provisions hereof.





	 	19.6	 	Construction; Interpretation.





          Reinsureds and Administrator have participated jointly in the negotiation and drafting of this
Administrative Services Agreement. In the event of an ambiguity or question of intent or
interpretation arises, this Administrative Services Agreement shall be construed as if drafted
jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring
either Party by virtue of the authorship of any of the provisions of this Administrative Services
Agreement. When a reference is made to an Article, Section, Schedule or Exhibit such reference
shall be to an Article, Section, Schedule or Exhibit of or to this Administrative Services
Agreement unless otherwise indicated. Whenever the words “include,” “includes” or “including” are
used in this Administrative Services Agreement, they shall be deemed to be followed by the words
“without limitation.” The word “Agreement,” means this Administrative Services Agreement as
amended or supplemented, together with all Exhibits and Schedules attached hereto or incorporated
by reference, and the words “hereof,” “herein,” “hereto,” “hereunder” and other words of similar
import shall refer to this Administrative Services Agreement in its entirety and not to any
particular Article, Section or provision of this Administrative Services Agreement. The references
to “$” shall be to United States dollars. Reference to any Applicable Law means such Applicable
Law as amended, modified, codified, replaced or reenacted, and all rules and regulations
promulgated thereunder. References to a Person are also to its successors and permitted assigns.





	 	19.7	 	Governing Law and Jurisdiction.





          This Administrative Services Agreement shall be governed by and construed in accordance with
the laws of the State of New York without regard to such state’s principles of






39









 







conflict of laws that could compel the application of the laws of another jurisdiction.
SUBJECT TO ARTICLE XVIII, ANY SUIT, ACTION OR PROCEEDING TO COMPEL ARBITRATION OR FOR
TEMPORARY INJUNCTIVE RELIEF IN AID OF ARBITRATION OR TO PRESERVE THE STATUS QUO PENDING THE
APPOINTMENT OF THE ARBITRATOR(S) SHALL BE BROUGHT BY THE PARTIES SOLELY IN THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, PROVIDED THAT IF SAID COURT DETERMINES THAT
IT DOES NOT HAVE SUBJECT MATTER JURISDICTION THEN SAID ACTIONS MAY BE BROUGHT IN THE SUPREME COURT
OF THE STATE OF NEW YORK FOR NEW YORK COUNTY; AND EACH REINSUREDS AND ADMINISTRATOR EACH HEREBY
IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS FOR SUCH PURPOSE AND ANY APPELLATE
COURTS THEREOF, EXCEPT THAT ANY FINAL ARBITRAL AWARD RENDERED IN ACCORDANCE WITH ARTICLE
XVIII MAY BE ENTERED AND ENFORCED IN ANY COURT HAVING JURISDICTION OVER ANY PARTY OR ANY OF ITS
ASSETS.





	 	19.8	 	No Third Party Beneficiaries.





          Except as otherwise expressly set forth in any provision of this Administrative Services
Agreement, nothing in this Administrative Services Agreement is intended or shall be construed to
give any Person, other than the Parties, any legal or equitable right, remedy or claim under or in
respect of this Administrative Services Agreement or any provision contained herein.





	 	19.9	 	Counterparts.





          This Administrative Services Agreement may be executed by the Parties in separate
counterparts; each of which when so executed and delivered shall be an original, but all such
counterparts shall together constitute one and the same instrument binding upon all of the Parties
notwithstanding the fact that all Parties are not signatory to the original or the same
counterpart. Each counterpart may consist of a number of copies hereof each signed by less than
all, but together signed by all of the Parties. Each counterpart may be delivered by facsimile
transmission, which transmission shall be deemed delivery of an originally executed document.





	 	19.10	 	Severability.





          Any term or provision of this Administrative Services Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Administrative Services Agreement or affecting the validity or
enforceability of any of the terms or provisions of this Administrative Services Agreement in any
other jurisdiction, so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any Party. If any provision of this






40









 







Administrative Services Agreement is so broad as to be unenforceable, that provision shall be
interpreted to be only so broad as is enforceable. In the event of such invalidity or
unenforceability of any term or provision of this Administrative Services Agreement, such term or
provision shall be reformed and the Parties shall use their commercially reasonable efforts to
reform such terms or provisions to carry out the commercial intent of the Parties as reflected
herein, while curing the circumstance giving rise to the invalidity or unenforceability of such
term or provision.





	 	19.11	 	Specific Performance.





          Each of the Parties acknowledges and agrees that the other Party would be irreparably damaged
in the event that any of the provisions of this Administrative Services Agreement were not
performed or complied with in accordance with their specific terms or were otherwise breached,
violated or unfulfilled. Accordingly, each of the Parties agrees that the other Party shall be
entitled to an injunction or injunctions to prevent noncompliance with, or breaches or violations
of, the provisions of this Administrative Services Agreement by the other Party and to enforce
specifically this Administrative Services Agreement and the terms and provisions hereof in any
action instituted in accordance with Section 19.7, in addition to any other remedy to which
such Party may be entitled, at law or in equity. In the event that any action is brought in equity
to enforce the provisions of this Administrative Services Agreement, no Party will allege, and each
Party hereby waives the defense or counterclaim, that there is an adequate remedy at law. The
Parties further agree that (i) by seeking the remedies provided for in this Section 19.11,
a Party shall not in any respect waive its right to seek any other form of relief that may be
available to a Party under this Administrative Services Agreement, including monetary damages in
the event that this Administrative Services Agreement has been terminated or in the event that the
remedies provided for in this Section 19.11 are not available or otherwise are not granted
and (ii) nothing contained in this Section 19.11 shall require any Party to institute any
action (or limit any Party’s right to institute any action for) specific performance under this
Section 19.11 before exercising any termination right under Article XIV nor shall
the commencement of any action pursuant to this Section 19.11 or anything contained in this
Section 19.11 restrict or limit any Party’s right to terminate this Administrative Services
Agreement in accordance with the terms of Article XIV or pursue any other remedies under
this Administrative Services Agreement that may be available then or thereafter.





	 	19.12	 	Waiver of Jury Trial.





          EACH OF THE PARTIES HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS ADMINISTRATIVE SERVICES AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED BY THIS ADMINISTRATIVE SERVICES AGREEMENT. EACH OF THE PARTIES HEREBY (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTIES HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT SUCH OTHER PARTIES WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER,






41









 







AND (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS ADMINISTRATIVE SERVICES
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS ADMINISTRATIVE SERVICES AGREEMENT, AS
APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION
19.12.





	 	19.13	 	Incontestability.





          In consideration of the mutual covenants and agreements contained herein, each Party does
hereby agree that this Administrative Services Agreement, and each and every provision hereof, is
and shall be enforceable by and between them according to its terms, and each Party does hereby
agree that it shall not contest in any respect the validity or enforceability hereof.





	 	19.14	 	Set-Off.





          Any debts or credits, matured or unmatured, liquidated or unliquidated, regardless of when
they arose or were incurred, in favor of or against either of the Reinsureds or Administrator with
respect to this Administrative Services Agreement are deemed mutual debts or credits, as the case
may be, and shall be set off, and only the net balance shall be allowed or paid.





	 	19.15	 	Currency.





          All financial data required to be provided pursuant to the terms of this Administrative
Services Agreement shall be expressed in United States dollars. All payments and all settlements
of account between the Parties shall be in United States currency unless otherwise agreed by the
Parties.




(The remainder of this page has been intentionally left blank.)




42









 





          IN WITNESS WHEREOF, this Administrative Services Agreement has been duly executed by a duly
authorized officer of each Party hereto as of the date first above written.




	 	 	 	 	 
	 	CONTINENTAL CASUALTY COMPANY

 	 
	 	By:  	/s/ Lawrence J. Boysen
 	 
	 	 	Name:  	Lawrence J. Boysen 	 
	 	 	Title:  	Senior Vice President and Corporate Controller 	 
	 
	 	THE CONTINENTAL INSURANCE COMPANY

 	 
	 	By:  	/s/ Lawrence J. Boysen
 	 
	 	 	Name:  	Lawrence J. Boysen 	 
	 	 	Title:  	Senior Vice President and Corporate Controller 	 
	 
	 	CONTINENTAL REINSURANCE 

CORPORATION INTERNATIONAL, LTD.

 	 
	 	By:  	/s/ Lawrence J. Boysen
 	 
	 	 	Name:  	Lawrence J. Boysen 	 
	 	 	Title:  	Chairman of the Board and President 	 
	 
	 	CNA INSURANCE COMPANY LIMITED

 	 
	 	By:  	/s/ Lawrence J. Boysen
 	 
	 	 	Name:  	Lawrence J. Boysen 	 
	 	 	Title:  	Authorized Representative 	 
	 
	 	NATIONAL INDEMNITY COMPANY 

 	 
	 	By:  	/s/ Brian Snover
 	 
	 	 	Name:  	Brian Snover 	 
	 	 	Title:  	Vice President 	 



 









 






EXHIBIT A




[Form of Business Associate Agreement]




BUSINESS ASSOCIATE AGREEMENT 



          
This Business Associate Agreement (the “Business Associate Agreement”), dated as of
___, 2010 (the “Effective Date”), is made and entered into by and among Continental
Casualty Company, an Illinois property and casualty insurance company (“CCC”), The
Continental Insurance Company, a Pennsylvania property and casualty insurance company
(“CIC”), Continental Reinsurance Corporation International, Ltd., a Bermuda long-term
insurance company (“CRCI”), and CNA Insurance Company Limited, a United Kingdom property
and casualty insurance company (“CICL” and together with CCC, CIC and CRCI,
“Reinsureds”), and National Indemnity Company, a Nebraska property and casualty company
(“Administrator”).



          
WHEREAS, pursuant to a Master Transaction Agreement (the “Master Transaction
Agreement”), dated as of July 14, 2010, among Reinsureds and Administrator, Reinsureds and
Administrator have agreed to enter into a loss portfolio reinsurance transaction, pursuant to which
Reinsureds will cede all liabilities related to asbestos and pollution claims under the Business
Covered to Administrator, and pursuant to which Administrator will indemnify Reinsureds for such
liabilities up to an aggregate limit of four billion dollars ($4,000,000,000), net of any Third
Party Reinsurance Recoverables and Other Recoveries; 


          
WHEREAS, pursuant to a Loss Portfolio Transfer Reinsurance Agreement among Reinsureds and
Administrator dated as of August 31, 2010, and referenced in the Master Transaction Agreement as
the “LPT Reinsurance Agreement,” Administrator shall indemnify Reinsureds for 100% of the
Ultimate Net Loss, subject to the LPT Limit;



          
WHEREAS, pursuant to an Administrative Services Agreement (the “Administrative Services
Agreement,” dated as of August 31, 2010, Administrator shall perform certain administrative
functions on behalf of Reinsureds with respect to the Reinsured Contracts and Third Party
Reinsurance Agreements as they relate to the Business Covered; and



          WHEREAS, Reinsureds and Administrator are entering into this Business Associate Agreement to
comply with the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”)
Privacy Rule and Security Standards as those terms are defined in this Business Associate
Agreement.






 









 








          NOW, THEREFORE, for and in consideration of these premises and the promises and the mutual
agreements hereinafter set forth and set forth in the Master Transaction Agreement, the LPT
Reinsurance Agreement and the Administrative Services Agreement, Reinsureds and Administrator
(individually, a “Party” and collectively, the “Parties”) agree as follows:




I. DEFINITIONS




          All capitalized terms not otherwise defined in this Business Associate Agreement shall have
the meaning given them under the Master Transaction Agreement, LPT Reinsurance Agreement, or
Administrative Services Agreement, as applicable. The following terms used in this Business
Associate Agreement shall have the same meaning as those terms in the HIPAA Privacy Rule and
Security Standards, currently defined, in relevant part:



“Protected Health Information” shall mean Individually Identifiable Health Information
transmitted or maintained in any form or medium that Administrator creates or receives from or on
behalf of Reinsureds in the course of fulfilling its obligations under this Business Associate
Agreement. “Protected Health Information” shall not include (i) education records covered by the
Family Educational Rights and Privacy Act, as amended, 20 U.S.C. §1232g, (ii) records described in
20 U.S.C. §1232g(a)(4)(B)(iv), and (iii) employment records held by Reinsureds in their role as
employers.



“Designated Record Set” shall mean a group of records maintained by or for Reinsureds that
is (i) the medical records and billing records about individuals maintained by or for Reinsureds,
(ii) the enrollment, payment, claims adjudication, and case or medical management record systems
maintained by or for a health plan; or (iii) used, in whole or in part, by or for Reinsureds to
make decisions about individuals. As used herein, the term “Record” means any item,
collection, or grouping of information that includes Protected Health Information and is
maintained, collected, used, or disseminated by or for Reinsureds.



“Electronic Media” shall mean (i) electronic storage media including memory devices in
computers (hard drives) and any removable/transportable digital memory medium, such as magnetic
tape or disk, optical disk, or digital memory card; or (ii) transmission media used to exchange
information already in electronic storage media. Transmission media include, for example, the
internet (wide-open), extranet (using internet technology to link a business with information
accessible only to collaborating parties), leased lines, dial-up lines, private networks, and the
physical movement of removable/transportable electronic storage media. Certain transmissions,
including paper, via facsimile, and of voice, via telephone, are not considered to be transmissions
via electronic media, because the information being exchanged did not exist in electronic form
before transmission.



“Electronic Protected Health Information” shall mean Protected Health Information that is
transmitted by or maintained in Electronic Media.








 









 







“Individually Identifiable Health Information” shall mean information that is a subset of
health information, including demographic information collected from an individual, and





	 	(i)	 	is created or received by a health care provider, health plan, employer, or
health care clearinghouse; and
	 
	 	(ii)	 	relates to the past, present, or future physical or mental health or condition
of an individual; the provision of health care to an individual; or the past, present
or future payment for the provision of health care to an individual; and (a) identifies
the individual, or (b) with respect to which there is a reasonable basis to believe the
information can be used to identify the individual; and
	 
	 	(iii)	 	relates to identifiable non-health information including but not limited to an
individual’s address, phone number and/or Social Security number.




“Privacy Rule” shall mean the Standards for Privacy of Individually Identifiable Health
Information at 45 CFR Part 160 and Part 164, Subparts A and E.



“Secretary” shall mean the Secretary of the Department of Health and Human Services.



“Security Incident” means the attempted or successful unauthorized access, use, disclosure,
modification, or destruction of information or interference with system operations in an
information system.



“Security Standards” shall mean the HIPAA Security Standards, 45 C.F.R. Parts 160 and 164




II. OBLIGATIONS OF ADMINISTRATOR



Section 1. Use and Disclosure of Protected Health Information.



Administrator may use and disclose Protected Health Information only to carry out the obligations
of Administrator set forth in this Business Associate Agreement, the Administrative Services
Agreement or as required by law, subject to the provisions set forth in this Business Associate
Agreement. Administrator shall neither use nor disclose Protected Health Information for the
purpose of creating de-identified information that will be used for any purpose other than as
directed by Reinsureds to carry out the obligations of Administrator set forth in this Business
Associate Agreement or the Administrative Services Agreement, or as required by law.








 









 







Section 2. Safeguards Against Misuse of Information.



Administrator agrees that it will implement appropriate safeguards to prevent the use or disclosure
of Protected Health Information in any manner other than pursuant to the terms and conditions of
this Business Associate Agreement. Administrator shall implement administrative, physical and
technical safeguards that reasonably and appropriately protect the confidentiality, integrity, and
availability of the Electronic Protected Health Information that it creates, receives, maintains,
or transmits on behalf of Reinsureds, as required by the Security Standards.



Section 3. Reporting of Uses and Disclosures of Protected Health Information and Security
Incidents. 



Upon becoming aware of a use or disclosure of Protected Health Information in violation of this
Business Associate Agreement, Administrator shall promptly report such use or disclosure to
Reinsureds. Administrator shall promptly report to Reinsureds any Security Incident of which it
becomes aware.



Section 4. Agreements with Third Parties.



Administrator shall ensure that any agent or subcontractor of Administrator to whom Administrator
provides Protected Health Information that is received from Reinsureds, or created or received by
Administrator on behalf of Reinsureds, agrees to be bound by the same restrictions and conditions
that apply to Administrator pursuant to this Business Associate Agreement with respect to such
Protected Health Information. Administrator warrants and represents that in the event of a
disclosure of Protected Health Information to any third party, the information disclosed shall be
no more than the minimum necessary for the intended purpose. Administrator shall ensure that any
agent or subcontractor of Administrator to whom Administrator provides Electronic Protected Health
Information agrees to implement reasonable and appropriate safeguards to protect such information.



Section 5. Access to Information.



In the event Administrator maintains Protected Health Information in a Designated Record Set,
Administrator shall, within thirty (30) days of receipt of a request from Reinsureds, provide to
Reinsureds Protected Health Information in Administrator’s possession that is required for
Reinsureds to respond to an individual’s request for access to Protected Health Information made
pursuant to 45 C.F.R. § 164.524 or other applicable law. In the event any individual requests
access to Protected Health Information directly from Administrator, whether or not Administrator is
in possession of Protected Health Information, Administrator may not approve or deny access to the
Protected Health Information requested. Rather, Administrator shall, within five (5) Business Days,
forward such request to Reinsureds.








 









 







Section 6. Availability of Protected Health Information for Amendment.



In the event Administrator maintains Protected Health Information in a Designated Record Set,
Administrator shall, within thirty (30) days of receipt of a request from Reinsureds, provide to
Reinsureds Protected Health Information in Administrator’s possession that is required for
Reinsureds to respond to an individual’s request to amend Protected Health Information made
pursuant to 45 C.F.R. § 164.526 or other applicable law. If the request is approved, Administrator
shall incorporate any such amendments to the Protected Health Information as required by 45 C.F.R.
§164.526 or other applicable law. In the event that the request for the amendment of Protected
Health Information is made directly to the Administrator, whether or not Administrator is in
possession of Protected Health Information, Administrator may not approve or deny the requested
amendment. Rather, Administrator shall, within five (5) Business Days forward such request to
Reinsureds.



Section 7. Accounting of Disclosures.



Administrator agrees to document such disclosures of Protected Health Information and information
related to such disclosures as would be required for Reinsureds to respond to a request by an
individual for an accounting of disclosures of Protected Health Information in accordance with 45
CFR § 164.528 or other applicable law. Administrator shall, within sixty (60) Business Days of
receipt of a request from Reinsureds, provide to Reinsureds such information as is in
Administrator’s possession and is required for Reinsureds to respond to a request for an accounting
made in accordance with 45 C.F.R. 164.528 or other applicable law. In the event the request for an
accounting is delivered directly to Administrator, Administrator shall, within five (5) Business
Days, forward such request to Reinsureds. It shall be Reinsureds’ responsibility to prepare and
deliver any such accounting requested.



Section 8. Availability of Books and Records.



Administrator hereby agrees to make its applicable internal practices, books and records, including
policies and procedure, available to the Secretary for purposes of determining Reinsureds’ and
Administrator’s compliance with the Privacy Rule and Security Standards. The practices, books and
records subject to this Section are those practices, books and records that relate to the use and
disclosure of Protected Health Information that is created by Administrator on behalf of
Reinsureds, received by Administrator from Reinsureds, or received by Administrator from a third
party on behalf of Reinsureds.




III. Term and Termination



Section 1. Term.



The Term of this Business Associate Agreement shall be effective as of the Effective Date, and
shall terminate when all of the Protected Health Information provided by Reinsureds to
Administrator, or created or received by Administrator on behalf of Reinsureds, is destroyed or
returned to Reinsureds, or, if it is infeasible to return or destroy Protected Health Information,






 









 







protections are extended to such information, in accordance with the termination provisions in this
Article III.



Section 2. Effect of Termination.



(a) Except as provided in paragraph (b) of this Section, upon termination of this Business
Associate Agreement, for any reason, Administrator shall return or destroy all Protected Health
Information received from Reinsureds, or created or received by Administrator on behalf of
Reinsureds. This provision shall apply to Protected Health Information that is in the possession of
subcontractors or agents of Administrator. Administrator shall retain no copies of the Protected
Health Information.



(b) In the event that Administrator determines that returning or destroying the Protected Health
Information is infeasible, Administrator shall provide to Reinsureds notification of the conditions
that make return or destruction infeasible. Upon Reinsureds’ determination that return or
destruction of Protected Health Information is infeasible, Administrator shall extend the
protections of this Business Associate Agreement to such Protected Health Information and limit
further uses and disclosures of such Protected Health Information to those purposes that make the
return or destruction infeasible, for so long as Administrator maintains such Protected Health
Information.




IV. MISCELLANEOUS



Section 1. Limitation of Liability. No exculpation or limitation on Administrator’s
liability set forth in the Administrative Services Agreement shall apply to damages suffered by
Reinsureds as a result of Administrator’s breach of this Business Associate Agreement.



Section 2. Indemnification. Each Party acknowledges and agrees that the provisions of
Article IX of the Master Transaction Agreement apply to the indemnification rights and
obligations of each Party pursuant to this Agreement.



Section 3. Regulatory References. A reference in this Business Associate Agreement to a
section in the HIPAA Privacy Rule or Security Standards means the section as in effect or as
amended.



Section 4. Amendment. In the event that state or federal law or regulation, or an
arbitration or judicial interpretation of same, or any regulatory or enforcement action should
explicitly or otherwise require that this Business Associate Agreement be changed, altered or
modified, then the Reinsureds shall notify Administrator and provide such required amendment, and
the Reinsureds and Administrator shall continue to perform services under this Business Associate
Agreement as modified.








 









 







Section 5. Survival. The respective rights and obligations of Administrator under
Section III(2)(b) (Effect of Termination), Section IV(1) (Limitation of Liability),
Section IV(2) (Indemnification), Section IV(3) (Regulatory References) and
Section IV(5) (Survival) of this Business Associate Agreement shall survive the termination
of this Business Associate Agreement.




V. EFFECT OF BUSINESS ASSOCIATE AGREEMENT



To the extent that this Business Associate Agreement conflicts with the terms of the Administrative
Services Agreement or any other agreement between Reinsureds and Administrator relating to
Protected Health Information, the terms of this Business Associate Agreement shall take precedence.




[Remainder of page left intentionally blank]








 









 








          IN WITNESS WHEREOF, this Business Associate Agreement has been duly executed by a duly
authorized officer of each Party hereto as of the date first above written.




	 	 	 	 	 
	 	CONTINENTAL CASUALTY COMPANY

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



	 	 	 	 	 
	 	THE CONTINENTAL INSURANCE
COMPANY

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



	 	 	 	 	 
	 	CONTINENTAL REINSURANCE 

CORPORATION INTERNATIONAL, LTD.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



	 	 	 	 	 
	 	CNA INSURANCE COMPANY LIMITED

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



	 	 	 	 	 
	 	NATIONAL INDEMNITY COMPANY 

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title: