Exhibit 10.40


Underlying Excess Workers’
Compensation

Reinsurance Contract

Effective: January 1, 2002


 


issued to


 


AmCOMP Preferred Insurance Company

North Palm Beach, Florida

AmCOMP Assurance Corporation

North Palm Beach, Florida




and


 


any and all insurance companies which are now or 

hereafter come under the same ownership or management as the

AmCOMP Group


North Palm Beach, Florida


 


	
  

  	
   

  
	
   

  	
   

  



 


 





















 


Underlying Excess Workers’
Compensation 

Reinsurance Contract


Effective: January 1, 2002


 


issued to


 


AmCOMP Preferred Insurance Company

North Palm Beach, Florida 

AmCOMP Assurance Corporation

North Palm Beach, Florida


 


and


 


any and all insurance companies which are now or 

hereafter come under the same ownership or management as the

AmCOMP Group 

North Palm Beach, Florida


 


	
  Reinsurer

  	
   

  	
  Participation

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  American Re-Insurance
  Company, A Delaware Corporation

  	
   

  	
  100

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  100

  	
  %

  



 





















 


Table of Contents


 


	
  Article

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  I

  	
   

  	
  Classes of Business
  Reinsured

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  II

  	
   

  	
  Commencement and
  Termination

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  III

  	
   

  	
  Special Termination

  	
  2

  
	
   

  	
   

  	
   

  	
   

  
	
  IV

  	
   

  	
  Territory (BRMA 51A)

  	
  3

  
	
   

  	
   

  	
   

  	
   

  
	
  V

  	
   

  	
  Exclusions

  	
  3

  
	
   

  	
   

  	
   

  	
   

  
	
  VI

  	
   

  	
  Retention and Limit

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
  VII

  	
   

  	
  Definitions

  	
  8

  
	
   

  	
   

  	
   

  	
   

  
	
  VIII

  	
   

  	
  Other Reinsurance

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  IX

  	
   

  	
  Claims

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  X

  	
   

  	
  Subrogation

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  XI

  	
   

  	
  Premium

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  XII

  	
   

  	
  Late Payments

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
  XIII

  	
   

  	
  Offset and Security

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
  XIV

  	
   

  	
  Access to Records (BRMA
  1D)

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
  XV

  	
   

  	
  Liability of the
  Reinsurer

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
  XVI

  	
   

  	
  Net Retained Lines
  (BRMA 32E)

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
  XVII

  	
   

  	
  Errors and Omissions
  (BRMA 14F)

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
  XVIII

  	
   

  	
  Taxes (BRMA 50B)

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
  XIX

  	
   

  	
  Unauthorized Reinsurers

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
  XX

  	
   

  	
  Insolvency

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  XXI

  	
   

  	
  Arbitration (BRMA 6J)

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
  XXII

  	
   

  	
  Service of Suit (BRMA
  49C)

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  XXIII

  	
   

  	
  Material Changes

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  XXIV

  	
   

  	
  Agency Agreement

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  XXV

  	
   

  	
  Intermediary (BRMA 23A)

  	
  20

  



 





















 


Underlying Excess Workers’
Compensation

Reinsurance Contract

Effective:
January 1, 2002


 


issued to


 


AmCOMP Preferred Insurance Company


North Palm Beach, Florida


AmCOMP Assurance Corporation


North Palm Beach, Florida


 


and


 


any and all insurance companies which are now or 

hereafter come under the same ownership or management as the


AmCOMP Group


North Palm Beach, Florida


(hereinafter
referred to collectively as the “Company”)


 


by


 


The Subscribing Reinsurer(s) Executing the


Interests and Liabilities Agreement(s)


Attached Hereto


(hereinafter
referred to as the “Reinsurer”)


 


Article I
- Classes of Business Reinsured


 


By this Contract the
Reinsurer agrees to reinsure the excess liability which may accrue to the
Company under its policies, contracts and binders of insurance or reinsurance
(hereinafter called “policies”) issued or renewed on or after the effective
date hereof, and classified by the Company as Workers’ Compensation and
Employers Liability business, subject to the terms, conditions and limitations
hereinafter set forth.


 


Article II
- Commencement and Termination


 


A.           This Contract shall become effective on
January 1, 2002, with respect to losses arising out of occurrences
commencing on or after that date, and shall continue in force thereafter until
terminated.


 


B.             Either party may terminate this Contract
at the end of any contract year by giving the other party not less than 90 days
prior notice by certified mail.


 


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C.             Unless the Company elects that the
Reinsurer have no liability for losses arising out of occurrences commencing
after the effective date of termination, and so notifies the Reinsurer prior to
or within 72 hours after the
effective date of termination, reinsurance hereunder on business in force on
the effective date of termination shall remain in full force and effect until
expiration, cancellation or next premium anniversary of such business,
whichever first occurs, but in no event beyond 12 months, plus odd time (not to
exceed 18 months in all), following the effective date of termination.


 


D.            Notwithstanding the provisions above, in
the event that any policy subject to this Contract is required by statute,
regulation or by order of an insurance department to be continued in force, the
Reinsurer agrees to extend reinsurance coverage hereunder with respect to such
policy until such policy may be canceled or non-renewed by the Company.


 


E.              “Contract year” as used herein shall mean
the period from January 1, 2002 through December 31, 2002, and each
subsequent 12-month period (or portion thereof) thereafter that this Contract
continues in force.


 


Article III
- Special Termination


 


Notwithstanding the
provisions of Article II, the Reinsurer may terminate this Contract on a
“runoff” or “cutoff” basis at any time by giving the Company not less than 45
days prior notice by certified mail in the event any of the following occur:


 


1.               The Company’s policyholders’ surplus
drops 25.0% or more in any 90-day period beginning on or after April 1,
2002. The first 90-day period shall be measured against policyholders’ surplus
as provided in the Company’s year-end 2001 NAIC Statutory annual statement;


 


2.               The Company fails to pay reinsurance
premiums in accordance with this Contract;


 


3.               The Company merges with, or is acquired
by any other company, corporation or individual(s) not controlling the
Company’s operations previously;


 


4.               The sale of any material portion of the
Company or the sale or purchase of a portfolio of the Company’s business
reasonably considered by the Reinsurer to be material to the business subject
to this Contract;


 


5.               The Company’s underwriting abilities are
restricted in any way by the Insurance Department of the State of Florida or
any court of competent jurisdiction.


 


6.               There is any material change in the Company’s
existing senior management.


 


 


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Article IV
- Territory (BRMA 51A)


 


The territorial limits of
this Contract shall be identical with those of the Company’s policies.


 


Article V - Exclusions


 


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


 


1.               Reinsurance assumed by the Company under
obligatory reinsurance agreements, except;


 


a.               Agency reinsurance where the policies
involved are to be reunderwritten in accordance with the underwriting standards
of the Company and reissued as Company policies at the next anniversary or
expiration date;


 


b.              Intercompany reinsurance between any of
the reinsured companies under this Contract.


 


2.               Ex-gratia payments.


 


3.               Risks subject to a deductible in excess
of $25,000, or a self-insured retention excess of $25,000, unless such
deductible or self-insured retention is otherwise mandated by statute or
regulatory authority.


 


4.               Nuclear risks as defined in the “Nuclear
Incident Exclusion Clause - Liability - Reinsurance (U.S.A.)” and the “Nuclear
Incident Exclusion Clause - Liability - Reinsurance (Canada)” and loss or
liability defined in the “Nuclear Incident Exclusion Clause - Reinsurance -
No. 4” attached to and forming part of this Contract.


 


5.               Pollution liability coverages excluded
under the provisions of the “Pollution Exclusion Clause - General Liability -
Reinsurance (BRMA 39C)” attached to and forming part of this Contract.


 


6.               Liability as a member, subscriber or
reinsurer of any Pool, Syndicate or Association, but this exclusion shall not
apply to Assigned Risk Plans or similar state-mandated plans.


 


7.               All liability of the Company arising by
contract, operation of law, or otherwise, from its participation or membership,
whether voluntary or involuntary, in any insolvency fund. “Insolvency fund”
includes any guaranty fund, insolvency fund, plan, pool, association, fund or
other arrangement, however denominated, established or governed, which provides
for any assessment of or payment or assumption by the Company of part or all of
any claim, debt, charge, fee or other obligation of an insurer, or its
successors or assigns, which has been declared by any competent authority to be


 


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insolvent, or which
is otherwise deemed unable to
meet any claim, debt, charge, fee or other obligation in whole or in part.


 


8.               Any claim caused or contributed to by
war, perpetrated by an official, employee or agent of a foreign state acting
for or on behalf of such state.


 


9.               Operation under the jurisdiction of the
U.S. Longshore and Harbor Workers’ Compensation Act, the Jones Act and the
Maritime Employers Liability Act, except for incidental exposures (i.e., 10% or
less of the insured’s payroll).


 


10.         Operations employing the process of
nuclear fission or fusion or handling of radioactive material, which operations
include but are not limited to:


 


a.               The use of nuclear reactors such as
atomic piles, particle accelerators or generators, or


 


b.              The use, handling or transportation of
radioactive materials, or the use, handling or transportation of any weapon of
war or explosive device employing nuclear fission or fusion.


 


However,
subparagraphs a and b above shall not apply to:


 


i.                  The exclusive use of
particle accelerators incidental to ordinary industrial or education
research pursuits, or


 


ii.               The exclusive use, handling or
transportation of radioisotopes for medical or industrial use, or to radium or
radium compounds.


 


11.         Operation of docks or wharves as related
to port authorities.


 


12.         The manufacturing, mining, refining,
processing, distribution, installation, removal or encapsulment of asbestos.


 


13.         Risks involving known exposure to the
following substances:


 


a.               Dioxin,


 


b.              Polychlorinated biphenols,


 


c.               Asbestos.


 


14.         All railway operations except sidetrack
agreements.


 


15.         Amusement parks, carnivals or circuses.
This exclusion shall not include miniature golf courses or driving range
operations.


 


 


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16.         Subaquaeous operations.


 


17.         Underground mining, however this
exclusion shall not be construed to apply to open pit-quarrying or “surface
mining” operations.


 


18.         Blasting operations.


 


19.         Demolition of buildings or structures in
excess of five stories.


 


20.         Shoring, underpinning or moving of
buildings or structures.


 


21.         Erection or repair of scaffolds if 10.0%
or more of the insured’s annual remuneration is attributed to NCCI
Class Code 9529.


 


22.         Construction of tunnels or dams.


 


23.         Fireworks, fuses, or any explosive
substance (as defined below) as follows:


 


a.               Manufacturers or importers of such items.


 


b.              Loading of such items into containers for
use as explosive objects, propellant charges or detonation devices and the
storage thereof.


 


c.               Manufacturers or importers of any product
in which such items are an ingredient.


 


d.              Handling, storage, transportation or use
of such items.


 


“Explosive
substance” is defined as any substance manufactured for the express purpose of
exploding as differentiated from commodities used industrially and which are
only incidentally explosive.


 


24.         Onshore and offshore gas and oil drilling
operations.


 


25.         Operations where principal business
includes the use of any owned or unowned aircraft, or any device or machine
intended for and/or aiding in the achievement of atmospheric flight, projection
or orbit, for flight, and/or the ownership or operation of any airport. This
exclusion shall not apply where exposure is incidental (i.e., constitutes 10.0%
or less of the insured’s payroll) to the principal business operations and the
aircraft contains eight seats or fewer.


 


26.         Municipal law enforcement organizations
and municipal fire fighting organizations.


 


27.         Logging or forestry operations.


 


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28.         Professional employment organizations
(PEO’s).


 


6


















 


29.   Operations where the
principal business of the risk is manufacturing, production, distribution,
refining or storage of natural or artificial fuel, gas, butane, propane,
liquefied petroleum gases or gasoline. This exclusion shall not apply to any
risk whose principal business operations are any of the following:


 


a.     Retail gasoline service
station, either full or self service;


 


b.     Convenience store with
gasoline sales with its petroleum gas and/or storage tanks located below
ground;


 


c.     Any risk with a known
incidental gasoline or diesel fuel storage and/or transportation exposure. For
purposes of this exclusion, “incidental” will be defined as less than or equal
to a total for any and all tanks at a covered location of no more than 1,000
gallons for propane and 10,000 gallons for gasoline or diesel fuel.


 


B.    In the event the Company is
inadvertently bound on any risk which is excluded under subparagraph 9 or
subparagraphs 14 through 29 of paragraph A above, the reinsurance provided
under this Contract shall apply on such risk until discovery by the Company of
the existence of such risk and for 30 days thereafter, or unless otherwise
mandated by statute or regulatory authority. Coverage shall cease after such
time, unless the Company has received from the Reinsurer written notice of its
approval of such risk within 30 days.


 


C.    Notwithstanding the
foregoing, any reinsurance falling within the scope of one or more of the
exclusions set forth above that is specially accepted by the Reinsurer from the
Company shall be covered under this Contract and subject to all of the terms
and conditions hereof, except as such terms are modified by the special
acceptance.


 


Article VI - Retention and Limit


 


A.    As respects all losses
subject hereto except losses arising out of an occurrence of terrorism, the
Company shall retain and be liable for the first $500,000 of ultimate net loss
(whether involving any one or any combination of the classes of business
covered hereunder, regardless of the number of policies under which such loss
is payable or the number of different interests insured) arising out of each
occurrence. The Reinsurer shall then be liable for the amount by which such
ultimate net loss exceeds the Company’s retention, but the liability of the
Reinsurer shall not exceed $500,000 as respects any one occurrence.


 


B.    As respects all losses
arising out of an occurrence of terrorism, the Company shall retain and be
liable for the first $500,000 of ultimate net loss (whether involving any one
or any combination of the classes of business covered hereunder, regardless of
the number of policies under which such loss is payable or the number of
different interests insured) arising out of each occurrence. The Reinsurer
shall then be liable for the amount by which such ultimate net loss exceeds the
Company’s retention, but the liability of the Reinsurer shall not exceed
$500,000 as respects any one occurrence, nor shall it exceed $500,000 as
respects all occurrences of terrorism during the term of this Contract.


 


C.    Notwithstanding the
provisions of paragraphs A and B above, if the Company’s net earned premium
subject hereto exceeds $155,000,000 in any one contract year (excluding the
runoff period of the final contract year), the Company’s recoveries as respects
occurrences


 


 


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commencing during that contract year, shall be reduced in the same
proportion that $155,000,000 bears to the Company’s actual net earned premium
in such contract year. Any recoveries made prior to determination of the
Company’s net earned premium for the contract year shall be adjusted
accordingly.


 


Article VII
- Definitions


 


A.    “Ultimate net loss” as used
herein is defined as the sum or sums (including loss in excess of policy
limits, extra contractual obligations and any loss adjustment expense, as
hereinafter defined) paid or payable by the Company in settlement of claims and
in satisfaction of judgments rendered on account of such claims, after
deduction of all recoveries from subrogation, all recoveries and all claims on
inuring insurance or reinsurance, whether collectible or not. Nothing herein
shall be construed to mean that losses under this Contract are not recoverable
until the Company’s ultimate net loss has been ascertained.


 


B,    “Loss in excess of policy
limits” and “extra contractual obligations” as used herein shall be defined as
follows:


 


1.     “Loss in excess of policy
limits” shall mean 90.0% of any amount paid or payable by the Company in excess
of its policy limits, but otherwise within the terms of its policy, such loss
in excess of the Company’s policy limits having been incurred because of, but
not limited to, failure by the Company to settle within the policy limits or by
reason of the Company’s alleged or actual negligence, fraud or bad faith in
rejecting an offer of settlement or in the preparation of the defense or in the
trial of an action against its insured or reinsured or in the preparation or
prosecution of an appeal consequent upon such an action.


 


2.     “Extra contractual obligations”
shall mean 90.0% of any punitive, exemplary, compensatory or consequential
damages paid or payable by the Company, not covered by any other provision of
this Contract and which arise from the handling of any claim on business
subject to this Contract, such liabilities arising because of, but not limited
to, failure by the Company to settle within the policy limits or by reason of
the Company’s alleged or actual negligence, fraud or bad faith in rejecting an
offer of settlement or in the preparation of the defense or in the trial of an
action against its insured or reinsured or in the preparation or prosecution of
an appeal consequent upon such an action. An extra contractual obligation shall
be deemed, in all circumstances, to have occurred on the same date as the loss
covered or alleged to be covered under the policy.


 


Notwithstanding anything stated herein, this Contract shall not apply
to any loss in excess of policy limits or any extra contractual obligation
incurred by the Company as a result of any fraudulent and/or criminal act by
any officer or director of the Company acting individually or collectively or
in collusion with any individual or corporation or any other organization or
party involved in the presentation, defense or settlement of any claim covered
hereunder.


 


 


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C.    “Occurrence” as used herein
is defined as an accident or occurrence or a series of accidents or occurrences
arising out of or caused by one event, whether involving one or more of the
Company’s policies, except that:


 


1.     As respects workers’
compensation policies, each occupational or industrial disease or cumulative
injury case contracted by an employee of an insured shall be deemed to have
been caused by a separate occurrence commencing on:


 


a.     The date of disability for
which compensation is payable if the case is compensable under the Workers’
Compensation Law;


 


b.     The date disability due to
the disease actually began if the case is not compensable under the Workers’
Compensation Law; or


 


c.     The date of cessation of
employment if claim is made after employment has ceased.


 


2.     Notwithstanding the provisions
of subparagraph 1 above, as respects losses resulting from occupational disease
and cumulative trauma suffered by employees of an insured for which the
employer is liable as a result of a sudden and accidental event not exceeding
48 hours in duration, all such losses shall be considered one occurrence and
may be combined with losses not classified as occupational disease or cumulative
trauma which arise out of the same event and the combination of such losses
shall be considered as one occurrence within the meaning hereof.


 


3.     Notwithstanding the foregoing, the following
shall apply to occurrences involving natural disasters:


 


a.     An occurrence shall be
limited to damage, injury or loss arising out of a natural disaster during any
continuous 168 hour period.


 


b.     The Company may choose the
date and time when such 168 hour period commences and if the occurrence is of
greater duration than 168 hours, the Company may divide such occurrence into
two or more occurrences, provided no two periods overlap and provided no period
commences earlier than the date and time of the first loss to the Company in
such occurrence.


 


c.     “Natural disaster” shall
mean loss caused by the perils of tornado, cyclone, windstorm, hurricane and
hail arising from the same atmospheric disturbance; earthquake, including
ensuing fire, landslide, mudslide, flood, tidal wave; volcanic eruptions;
flood; tides; tidal wave; landslide/mudslide; and meteors.


 


D.    “Occupational or Industrial
Disease” shall mean any abnormal condition that fulfills all of the following
conditions:


 


 


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1.     It is not traceable to a
definite compensable accident occurring during the employee’s present or past
employment; and


 


2.     It has been caused by
exposure to a disease producing agent or agents present in the workers’
occupational environment; and


 


3.     It has resulted in a
disability or death.


 


E.     “Cumulative Injury” is any
injury that fulfills all of the following conditions:


 


1.     It is not traceable to a
definite compensable accident occurring during the employee’s present or past
employment; and


 


2.     It has occurred from, and
has been aggravated by, a repetitive employment-related activity; and


 


3.     It has resulted in a
disability or death.


 


F.     “Loss adjustment expense” as
used herein shall mean expenses assignable to the investigation, appraisal,
adjustment, settlement, litigation, defense and/or appeal of specific claims,
regardless of how such expenses are classified for statutory reporting
purposes. Loss adjustment expense shall include, but not be limited to,
interest on judgments, expenses of outside adjusters and declaratory judgment
expenses or other legal expenses and costs incurred in connection with coverage
questions and legal actions connected thereto, but shall not include office
expenses or salaries of the Company’s regular employees other than medical
management personnel whose cost the Company will bill to specific cases on a
time and expense basis.


 


G.    “Terrorism” as used herein
is defined as any act defined as such by the Federal government as determined
by the Federal Office of Homeland Security or other such Federal agency that may
hold jurisdiction over whether a given act is terrorist in nature, or in the
absence of any such federal determination, any act including any threat of any
act within the United States causing loss or damage to property (whether
tangible or intangible) or injury to persons for which there is reasonable
belief that the perpetrator undertook such act for political, ideological,
social or religious reasons and that the perpetrator’s principal purpose was
to: (1) engender fear among the American people for their safety;
(2) disrupt any segment of the American economy; or (3) influence
governmental action or policy, provided, however, that an act of terrorism for
purposes of this definition shall not include any act as described above
perpetrated by an official, employee, or agent of a foreign state acting for or
on behalf of such state, such acts to be considered “war” for purposes of this
definition.


 


 


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Article VIII - Other Reinsurance


 


A.    The Company
shall be permitted to carry facultative reinsurance, recoveries under which
shall inure to the benefit of this Contract.


 


B.    The Company
shall be permitted to carry underlying quota share reinsurance, recoveries
under which shall inure solely to the benefit of the Company and be entirely
disregarded in applying all of the provisions of this Contract.


 


Article IX -
Claims


 


A.    Whenever a claim
is reserved by the Company for an amount greater than $250,000 hereunder and/or
whenever a claim appears likely to result in a claim under this Contract, the
Company shall notify the Reinsurer. Further, the Company shall notify the
Reinsurer whenever a claim involves a fatality, amputation, spinal cord damage,
brain damage, blindness, extensive burns or multiple fractures, regardless of
liability, if the policy limits or statutory benefits applicable to the claim
are greater than the Company’s retention hereunder. The Reinsurer shall have
the right to participate, at its own expense, in the defense of any claim or
suit or proceeding involving this reinsurance.


 


B.    All claim
settlements made by the Company, provided they are within the terms of this
Contract, shall be binding upon the Reinsurer, and the Reinsurer agrees to pay
all amounts for which it may be liable upon receipt of reasonable evidence of
the amount paid by the Company.


 


Article X -
Subrogation


 


The Reinsurer shall be credited with recoveries from
subrogation (i.e., reimbursement obtained or recovery made by the Company, less
the actual cost, excluding salaries of officials and employees of the Company
and sums paid to attorneys as retainer, of obtaining such reimbursement or
making such recovery) on account of claims and settlements involving
reinsurance hereunder. Recoveries therefrom shall always be used to reimburse
the excess carriers in the reverse order of their priority according to their
participation before being used in any way to reimburse the Company for its
primary loss. The Company hereby agrees to enforce its rights to subrogation
relating to any loss, a part of which loss was sustained by the Reinsurer, and
to prosecute all claims arising out of such rights.


 


Article XI - Premium


 


A.    As premium for
the reinsurance provided hereunder during each contract year, the Company shall
pay the Reinsurer 3.15% of its net earned premium for the contract year,
subject to an annual minimum premium of $3,827,250.


 


 


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B.    The Company
shall pay the Reinsurer an annual deposit premium of $4,252,500 in four equal
installments of $1,063,125 on January 1, April 1, July 1 and
October 1 of each contract year. However, no deposit premium installments
shall be due after the effective date of termination.


 


C.    Within 60 days
following the end of each contract year and within 60 days following the
12-month period thereafter, the Company shall provide a report to the Reinsurer
setting forth the premium due hereunder for the contract year, computed in
accordance with paragraph A, and any additional premium due the Reinsurer or
return premium due the Company shall be remitted promptly.


 


D.    In the event
this Contract is terminated on a “runoff” basis, the Company shall pay the
Reinsurer premium for the “runoff” period equal to the percentage, shown in
paragraph A above, of the Company’s unearned premium applicable to subject
business in force on the effective date of termination, payable in four equal
installments on the first day of each three-month period during the runoff
period.


 


E.     “Net earned
premium” as used herein is defined as the Company’s gross earned premium for
the classes of business subject to this Contract, adjusted for experience
modification, discounts, credits, surcharges, expense constants and deductible
credits, plus or minus the Reinsurer’s pro rata share of any premium arising
from audit adjustments, minus cancellation and return premium, minus premiums
paid for facultative reinsurance which inures to the benefit of this Contract.


 


Article XII - Late Payments


 


A.    The provisions
of this Article shall not be implemented unless specifically invoked, in
writing, by one of the parties to this Contract.


 


B.    In the event
any premium, loss or other payment due either party is not received by the
intermediary named Article XXV (hereinafter referred to as the “Intermediary”)
by the payment due date, the party to whom payment is due may, by notifying the
Intermediary in writing, require the debtor party to pay, and the debtor party
agrees to pay, an interest penalty on the amount past due calculated for each
such payment on the last business day of each month as follows:


 


1.     The number of full days
which have expired since the due date or the last monthly calculation,
whichever the lesser, times


 


2.     l/365ths of the six-month
United States Treasury Bill rate as quoted in The
Wall Street Journal on the first business day of the month for which
the calculation is made; times


 


3.     The amount past due,
including accrued interest.


 


 


 


12





















 


It is agreed that interest
shall accumulate until payment of the original amount due plus interest
penalties have been received by the Intermediary.


 


C.    The
establishment of the due date shall, for purposes of this
Article, be determined as follows:


 


1.     As respects the payment of
routine deposits and premiums due the Reinsurer, the due date shall be as
provided for in the applicable section of this Contract. In the event
a due date is not specifically stated for a given payment, it shall be deemed
due 30 days after the date of transmittal by the Intermediary of the initial
billing for each such payment.


 


2.     Any claim or loss payment
due the Company hereunder shall be deemed due 30 business days after the proof
of loss or demand for payment is transmitted to the Reinsurer. If such loss or
claim payment is not received within the 30 days, interest will accrue on the
payment or amount overdue in accordance with paragraph B above, from the date
the proof of loss or demand for payment was transmitted to the Reinsurer.


 


3.     As respects any payment,
adjustment or return due either party not otherwise provided for in
subparagraphs 1 and 2 above, the due date
shall be as provided for in the applicable section of this Contract. In
the event a due date is not specifically stated for a given payment, it shall
be deemed due 30 business days following transmittal of written notification
that the provisions of this Article have been invoked.


 


For purposes of interest calculations only, amounts due hereunder shall
be deemed paid upon receipt by the Intermediary.


 


D.    Nothing herein
shall be construed as limiting or prohibiting a subscribing reinsurer from
contesting the validity of any claim, or from participating in the defense of
any claim or suit, or prohibiting either party from contesting the validity of
any payment or from initiating any arbitration or other proceeding in
accordance with the provisions of this Contract. If the debtor party prevails
in an arbitration or other proceeding, then any interest penalties due
hereunder on the amount in dispute shall be null and void. If the debtor party
loses in such proceeding, then the interest penalty on the amount determined to
be due hereunder shall be calculated in accordance with the provisions set
forth above unless otherwise determined by such proceedings. If a debtor party
advances payment of any amount it is contesting, and proves to be correct in
its contestation, either in whole or in part, the other party shall reimburse
the debtor party for any such excess payment made plus interest on the excess
amount calculated in accordance with this Article.


 


E.     Interest
penalties arising out of the application of this Article that are $50,000
or less from any party shall be waived unless there is a pattern of late
payments consisting of three or more items over the course of any 12-month period.


 


 


13


















 


Article XIII - Offset and
Security


 


A.    Each party hereto has the right, which may
be exercised at any time, to offset any amounts, whether on account of premiums
or losses or otherwise, due from such party to another party under this
Contract or any other reinsurance contract heretofore or hereafter entered into
between them, against any amounts, whether on account of premiums or losses or
otherwise due from the latter party to the former party. The party asserting
the right of offset may exercise this right, whether as assuming or ceding
insurer or in both roles in the relevant agreement or agreements.


 


B.    Each party hereby assigns and pledges to the
other party (or to each other party, if more than one) all of its rights under
this Contract to receive premium or loss payments at any time from such other
party (“collateral”), to secure its premium or loss obligations to such other
party at any time under this Contract and any other reinsurance agreement
heretofore or hereafter entered into by and between them (“secured
obligations”). If at any time a party is in default under any secured
obligation or shall be subject to any liquidation, rehabilitation,
reorganization or conservation proceeding, each other party shall be entitled
in its discretion, to apply, or to withhold for the purpose of applying in due
course, any collateral assigned and pledged to it by the former party and
otherwise to realize upon such collateral as security for such secured
obligations.


 


C.    The security interest described herein, and
the term “collateral,” shall apply to all payments and other proceeds in
respect of the rights assigned and pledged. A party’s security interest in
collateral shall be deemed evidenced only by the counterpart of this Contract
delivered to such party.


 


D.    Each right under this Article is a
separate and independent right, exercisable, without notice or demand, alone or
together with other rights, in the sole election of the party entitled thereto,
and no waiver, delay, or failure to exercise, in respect of any right, shall
constitute a waiver of any other right. The provisions of this
Article shall survive any cancellation or other termination of this
Contract.


 


E.     In the event of the insolvency of a party
hereto, offsets shall only be allowed in accordance with the laws of the
insolvent party’s state of domicile.


 


Article XIV
- Access to Records (BRMA 1D)


 


The Reinsurer or its
designated representatives shall have access at any reasonable time to all
records of the Company which pertain in any way to this reinsurance.


 


14





















 


Article XV
- Liability of the Reinsurer


 


A.    The liability of the Reinsurer shall follow
that of the Company in every case and be subject in all respects to all the
general and specific stipulations, clauses, waivers and modifications of the
Company’s policies and any endorsements thereon. However, in no event shall
this be construed in any way to provide coverage outside the terms and
conditions set forth in this Contract.


 


B.    Nothing herein shall in any manner create
any obligations or establish any rights against the Reinsurer in favor of any
third party or any persons not parties to this Contract.


 


Article XVI
- Net Retained Lines (BRMA 32E)


 


A.    This Contract applies only to that portion of
any policy which the Company retains net for its own account (prior to
deduction of any underlying reinsurance specifically permitted in this
Contract), and in calculating the amount of any loss hereunder and also in
computing the amount or amounts in excess of which this Contract attaches, only
loss or losses in respect of that portion of any policy which the Company
retains net for its own account shall be included.


 


B.    The amount of the Reinsurer’s liability
hereunder in respect of any loss or losses shall not be increased by reason of
the inability of the Company to collect from any other reinsurer(s), whether
specific or general, any amounts which may have become due from such
reinsurer(s), whether such inability arises from the insolvency of such other
reinsurer(s) or otherwise.


 


Article XVII
- Errors and Omissions (BRMA 14F)


 


Inadvertent delays,
errors or omissions made in connection with this Contract or any transaction
hereunder shall not relieve either party from any liability which would have
attached had such delay, error or omission not occurred, provided always that
such error or omission is rectified as soon as possible after discovery.


 


Article XVIII - Taxes (BRMA 50B)


 


In consideration of the
terms under which this Contract is issued, the Company will not claim a
deduction in respect of the premium hereon when making tax returns, other than
income or profits tax returns, to any state or territory of the United States
of America or the District of Columbia.


 


15





















 


Article XIX
- Unauthorized Reinsurers


 


A.    If the Reinsurer is unauthorized in any
state of the United States of America or the District of Columbia, the
Reinsurer agrees to fund its share of the Company’s ceded outstanding loss and
loss adjustment expense reserves (including incurred but not reported loss
reserves) by:


 


1.     Clean,
irrevocable and unconditional letters of credit issued and confirmed, if
confirmation is required by the insurance regulatory authorities involved, by a
bank or banks meeting the NAIC Securities Valuation Office credit standards for
issuers of letters of credit and acceptable to said insurance regulatory
authorities; and/or


 


2.     Escrow
accounts for the benefit of the Company; and/or 


 


3.     Cash
advances;


 


if, without such
funding, a penalty would accrue to the Company on any financial statement it is
required to file with the insurance regulatory authorities involved. The
Reinsurer, at its sole option, may fund in other than cash if its method and
form of funding are acceptable to the insurance regulatory authorities
involved.


 


B.    With regard to funding in whole or in part
by letters of credit, it is agreed that each letter of credit will be in a form
acceptable to insurance regulatory authorities involved, will be issued for a
term of at least one year and will include an “evergreen clause,” which
automatically extends the term for at least one additional year at each
expiration date unless written notice of non-renewal is given to the Company
not less than 30 days prior to said expiration date. The Company and the
Reinsurer further agree, notwithstanding anything to the contrary in this
Contract, that said letters of credit may be drawn upon by the Company or its
successors in interest at any time, without diminution because of the
insolvency of the Company or the Reinsurer, but only for one or more of the
following purposes:


 


1.     To
reimburse itself for the Reinsurer’s share of losses and/or loss adjustment
expense paid under the terms of policies reinsured hereunder, unless paid in
cash by the Reinsurer;


 


2.     To
reimburse itself for the Reinsurer’s share of any other amounts claimed to be
due hereunder, unless paid in cash by the Reinsurer;


 


3.     To fund a
cash account in an amount equal to the Reinsurer’s share of any ceded
outstanding loss and loss adjustment expense reserves (including incurred but
not reported loss reserves) funded by means of a letter of credit which is
under non-renewal notice, if said letter of credit has not been renewed or
replaced by the Reinsurer 10 days prior to its expiration date;


 


4.     To refund
to the Reinsurer any sum in excess of the actual amount required to fund the
Reinsurer’s share of the Company’s ceded outstanding loss and loss adjustment


 


16





















 


expense reserves
(including incurred but not reported loss reserves), if so requested by the
Reinsurer.


 


In the event the
amount drawn by the Company on any letter of credit is in excess of the actual
amount required for B(1) or B(3), or in the case of B(2), the actual
amount determined to be due, the Company shall promptly return to the Reinsurer
the excess amount so drawn.


 


Article XX - Insolvency


 


A.    In the
event of the insolvency of one or more of the reinsured companies, this
reinsurance shall be payable directly to the company or to its liquidator,
receiver, conservator or statutory successor on the basis of the liability of
the company without diminution because of the insolvency of the company or
because the liquidator, receiver, conservator or statutory successor of the
company has failed to pay all or a portion of any claim. It is agreed, however,
that the liquidator, receiver, conservator or statutory successor of the
company shall give written notice to the Reinsurer of the pendency of a claim against
the company indicating the policy or bond reinsured which claim would involve a
possible liability on the part of the Reinsurer within a reasonable time after
such claim is filed in the conservation or liquidation proceeding or in the
receivership, and that during the pendency of such claim, the Reinsurer may
investigate such claim and interpose, at its own expense, in the proceeding
where such claim is to be adjudicated, any defense or defenses that it may deem
available to the company or its liquidator, receiver, conservator or statutory
successor. The expense thus incurred by the Reinsurer shall be chargeable,
subject to the approval of the Court, against the company as part of the
expense of conservation or liquidation to the extent of a pro rata share of the
benefit which may accrue to the company solely as a result of the defense
undertaken by the Reinsurer.


 


B.    Where two
or more reinsurers are involved in the same claim and a majority in interest
elect to interpose defense to such claim, the expense shall be apportioned in
accordance with the terms of this Contract as though such expense had been
incurred by the company.


 


C.    It is
further understood and agreed that, in the event of the insolvency of one or
more of the reinsured companies, the reinsurance under this Contract shall be
payable directly by the Reinsurer to the company or to its liquidator, receiver
or statutory successor, except as provided by Section 4118(a) of the
New York Insurance Law or except (1) where this Contract specifically
provides another payee of such reinsurance in the event of the insolvency of
the company or (2) where the Reinsurer with the consent of the direct
insured or insureds has assumed such policy obligations of the company as
direct obligations of the Reinsurer to the payees under such policies and in
substitution for the obligations of the company to such payees.


 


17





















 


Article XXI - Arbitration
(BRMA 6J)


 


A.    As a
condition precedent to any right of action hereunder, in the event of any
dispute or difference of opinion hereafter arising with respect to this
Contract, it is hereby mutually agreed that such dispute or difference of
opinion shall be submitted to arbitration. One Arbiter shall be chosen by the
Company, the other by the Reinsurer, and an Umpire shall be chosen by the two
Arbiters before they enter upon arbitration, all of whom shall be active or
retired disinterested executive officers of insurance or reinsurance companies
or Lloyd’s London Underwriters. In the event that either party should fail to
choose an Arbiter within 30 days following a written request by the other party
to do so, the requesting party may choose two Arbiters who shall in turn choose
an Umpire before entering upon arbitration. If the two Arbiters fail to agree
upon the selection of an Umpire within 30 days following their appointment,
each Arbiter shall nominate three candidates within 10 days thereafter, two of
whom the other shall decline, and the decision shall be made by drawing lots.


 


B.    Each party
shall present its case to the Arbiters within 30 days following the date of
appointment of the Umpire. The Arbiters shall consider this Contract as an
honorable engagement rather than merely as a legal obligation and they are
relieved of all judicial formalities and may abstain from following the strict
rules of law. The decision of the Arbiters shall be final and binding on
both parties; but failing to agree, they shall call in the Umpire and the
decision of the majority shall be final and binding upon both parties. Judgment
upon the final decision of the Arbiters may be entered in any court of
competent jurisdiction.


 


C.    If more
than one reinsurer is involved in the same dispute, all such reinsurers shall
constitute and act as one party for purposes of this Article and
communications shall be made by the Company to each of the reinsurers
constituting one party, provided, however, that nothing herein shall impair the
rights of such reinsurers to assert several, rather than joint, defenses or
claims, nor be construed as changing the liability of the reinsurers
participating under the terms of this Contract from several to joint.


 


D.    Each party
shall bear the expense of its own Arbiter, and shall jointly and equally bear
with the other the expense of the Umpire and of the arbitration. In the event
that the two Arbiters are chosen by one party, as above provided, the expense
of the Arbiters, the Umpire and the arbitration shall be equally divided
between the two parties.


 


E.     Any
arbitration proceedings shall take place at a location mutually agreed upon by
the parties to this Contract, but notwithstanding the location of the
arbitration, all proceedings pursuant hereto shall be governed by the law of
the state in which the Company has its principal office.


 


18





















 


Article XXII
- Service of Suit (BRMA 49C)


 


(Applicable if the
Reinsurer is not domiciled in the United States of America, and/or is not
authorized in any State, Territory or District of the United States where
authorization is required by insurance regulatory authorities)


 


A.    It is
agreed that in the event the Reinsurer fails to pay any amount claimed to be
due hereunder, the Reinsurer, at the request of the Company, will submit to the
jurisdiction of a court of competent jurisdiction within the United States.
Nothing in this Article constitutes or should be understood to constitute
a waiver of the Reinsurer’s rights to commence an action in any court of
competent jurisdiction in the
United States, to remove an action to a United States District Court, or to
seek a transfer of a case to another court as permitted by the laws of the
United States or of any state in the United States.


 


B.    Further,
pursuant to any statute of any state, territory or district of the United
States which makes provision therefor, the Reinsurer hereby designates the
party named in its Interests and Liabilities Agreement, or if no party is named
therein, the Superintendent, Commissioner or Director of Insurance or other
officer specified for that purpose in the statute, or his successor or
successors in office, as its true and lawful attorney upon whom may be served
any lawful process in any action, suit or proceeding instituted by or on behalf
of the Company or any beneficiary hereunder arising out of this Contract.


 


Article XXIII
- Material Changes


 


A.    It is
understood that no material changes in business practices will take place
during the term of this Contract that would significantly change the
underwriting results of the subject business without prior approval by the Lead
Reinsurer (i.e., American Re-Insurance Company, A Delaware Corporation)
including, but not limited to, policyholder dividends, claims handling and/or
settlement, business mix (i.e., hazard group, and class of insureds).  If a material change in the Company’s
business practices is to occur during the period, the Reinsurer shall be
allowed to negotiate changes in the contractual terms of the Contract
retroactively to remedy the change.


 


B.    It is further
agreed that the Company will furnish statutory quarterly and annual financial
statements to the Reinsurer at the same time these reports are filed with
regulatory authorities.


 


Article XXIV
- Agency Agreement


 


If more than one
reinsured company is named as a party to this Contract, the first named company
shall be deemed the agent of the other reinsured companies (subject to the
provisions of Article XX) for purposes of sending or receiving notices
required by the terms and conditions of this Contract, and for purposes of
remitting or receiving any monies due any party.


 


19





















 


Article XXV
- Intermediary (BRMA 23A)


 


Benfield Blanch Inc. is
hereby recognized as the Intermediary negotiating this Contract for all business
hereunder. All communications (including but not limited to notices,
statements, premium, return premium, commissions, taxes, losses, loss
adjustment expense, salvages and loss settlements) relating thereto shall be
transmitted to the Company or the Reinsurer through Benfield Blanch Inc., 3600
West 80th Street, Minneapolis, Minnesota 55431. Payments by the Company to the
Intermediary shall be deemed to constitute payment to the Reinsurer. Payments
by the Reinsurer to the Intermediary shall be deemed to constitute payment to
the Company only to the extent that such payments are actually received by the
Company.


 


In Witness Whereof, the Company by its duly authorized
representative has executed this Contract as of the date undermentioned at:


 


North Palm Beach, Florida
this 28 day of May in the year 2002.


 


	
   

  	
  /s/ Debra Cerre-Ruedisili,
  President

  
	
   

  	
  AmCOMP Preferred
  Insurance Company (for and on behalf of the 

  “Company”)

  



 


20


















 


U.S.A.


 


NUCLEAR INCIDENT EXCLUSION CLAUSE - LIABILITY -
REINSURANCE


(Approved by Lloyd’s Underwriters’
Fire and Non-Marine Association)


 


(1)       This reinsurance does
not cover any loss or liability accruing to the Reassured as a member of, or
subscriber to, a association of insurers or reinsurers formed for the purpose
of covering nuclear energy risks or as a direct or indirect reinsurer any such
member, subscriber or association.


 


(2)       Without in any way
restricting the operation of paragraph (1) of this Clause it is understood
and agreed that for purposes of this reinsurance all the original policies of
the Reassured (new, renewal and replacement) of the classes specified Clause II
of this paragraph (2) from the time specified in Clause III in this paragraph
(2) shall be deemed to include the following provision (specified as the
Limited Exclusion Provision):


 


Limited
Exclusion Provision.*


 


I.      It is
agreed that the policy does not apply under any liability coverage,

to    (injury, sickness,
disease, death or destruction with respect to which an insured under
the

       (bodily injury or property damage

policy is also an insured under a nuclear energy liability policy issued by
Nuclear Energy Liability Insurance Association, Mutual Atomic Energy Liability
Underwriters or Nuclear Insurance Association of Canada, or [ILLEGIBLE] be an
insured under any such policy but for its termination upon exhaustion of its
limit of liability.


 


II.    Family
Automobile Policies (liability only), Special Automobile Policies (private passenger
automobiles, liability only), Farmers Comprehensive Personal Liability Policies
(liability only), Comprehensive Personal Liability Policies (liability only) or
policies of a similar nature; and the liability portion of combination forms
related to [ILLEGIBLE] four classes of policies stated above, such as the
Comprehensive Dwelling Policy and the applicable types Homeowners Policies.


 


III.   The
inception dates and thereafter of all original policies as described in II
above, whether new, renewal replacement, being policies which either


 


(a)   become
effective on or after 1st May, 1960, or


(b)   become
effective before that date and contain the Limited Exclusion Provision set out
above; 


 


provided this
paragraph (2) shall not be applicable to Family Automobile Policies,
Special Automobile [ILLEGIBLE] or policies or combination policies of a similar
nature, issued by the Reassured on New York risks, until 90 days following
approval of the Limited Exclusion Provision by the Governmental Authority
having jurisdiction thereof.


 


(3)       Except for those classes
of policies specified in Clause II of paragraph (2) and without in any way
restricting operation of paragraph (1) of this Clause, it is understood
and agreed that for all purposes of this reinsurance the [ILLEGIBLE] liability
policies of the Reassured (new, renewal and replacement) affording the
following coverages:


 


Owners, Landlords
and Tenants Liability, Contractual Liability, Elevator Liability, Owners or
Contractors including railroad) Protective Liability, Manufacturers and
Contractors Liability, Product Liability, Professional [ILLEGIBLE] Malpractice
Liability, Storekeepers Liability, Garage Liability, Automobile Liability
(including Massachusetts [ILLEGIBLE] Vehicle or Garage Liability)


 


shall be deemed to
include, with respect to such coverages, from the time specified in Clause V of
this paragraph (3), following provision (specified as the Broad Exclusion
Provision):


 


Broad
Exclusion Provision.*


 


It is agreed that the
policy does not apply:


 


I.      Under any
Liability Coverage to       (injury,  sickness,
disease, death or destruction


(bodily injury or property damage


 


(a)   with
respect to which an insured under the policy is also an insured under a nuclear
energy liability policy issued by Nuclear Energy Liability Insurance
Association, Mutual Atomic Energy Liability [ILLEGIBLE] or Nuclear Insurance
Association of Canada, or would be an insured under any such policy but for
termination upon exhaustion of its limit of liability; or


 


(b)   resulting
from the hazardous properties of nuclear material and with respect to which (I)
any person organization is required to maintain financial protection pursuant
to the Atomic Energy Act of 1954, any law amendatory thereof, or (2) the
insured is, or had this policy not been issued would be, entitled indemnity
from the United States of America, or any agency thereof, under any agreement
entered into the United States of America, or any agency thereof, with any
person or organization.


 


 





















 


II.    Under any
Medical Payments Coverage, or under any Supplementary Payments Provision

relating to (immediate medical or surgical relief to
expenses incurred with respect

                 (first
aid,

to (bodily injury, sickness, disease or
death resulting from the hazardous properties of

    (bodily injury

nuclear material and arising out of the operation of a nuclear facility by any
person or organization.


 


III.   Under any
Liability Coverage to  (injury, sickness,
disease, death or destruction

                                                     (bodily
injury or property damage

resulting from the hazardous properties of nuclear material, if


 


(a)   the nuclear
material (1) is at any nuclear facility owned by, or operated by or on
behalf of, an insured (2) has been discharged or dispersed therefrom;


 


(b)   the nuclear
material is contained in spent fuel or waste at any time possessed, handled,
used, processed stored, transported or disposed of by or on behalf of an
insured; or


 


(c)   the    (injury, sickness, disease, death or destruction arises out of the furnishing by an
insured

      (bodily injury or property damage

of services, materials, parts or equipment in connection with the planning,
construction, [ILLEGIBLE] operation or use of any nuclear facility, but if such
facility is located within the United States of America its territories, or
possessions or Canada, this exclusion (c) applies

only to (injury to or destruction of
property at such nuclear facility

            (property
damage to such nuclear facility and any property thereat


 


IV.   As used in
this endorsement:


 


“hazardous
properties” include radioactive, toxic or explosive properties; “nuclear
material” means [ILLEGIBLE] material, special nuclear material or byproduct
material; “source material”, “special nuclear material”, [ILLEGIBLE] “byproduct
material” have the meanings given them in the Atomic Energy Act of 1954 or in
any law [ILLEGIBLE] thereof; “spent fuel” means any fuel element or fuel
component, solid or liquid, which has been used or exposed to radiation in a
nuclear reactor, “waste” means any waste material (1) containing byproduct
material [ILLEGIBLE] (2) resulting from the operation
by any person or organization of any nuclear facility included within
[ILLEGIBLE] definition of nuclear facility under paragraph (a) or
(b) thereof; “nuclear facility” means


 


(a)   any nuclear
reactor,


 


(b)   any
equipment or device designed or used for (1) separating the isotopes of
uranium or plutonium (2) processing or utilizing spent fuel, or
(3) handling processing or packaging waste,


 


(c)   any
equipment or device used for the processing, fabricating or alloying of special
nuclear material if at any time the total amount of such material in the
custody of the insured at the premises where such equipment device is located
consists of or contains more than 25 grams of plutonium or uranium 233 or any
combination thereof, or more than 250 grams of uranium 235,


 


(d)   any
structure, basin, excavation, premises or place prepared or used for the
storage or disposal of waste, and includes the site on which any of the
foregoing is located, all operations conducted on such site and premises used
for such operations: “nuclear reactor” means any apparatus designed or used to
sustain nuclear fission in a self-supporting chain reaction or to contain a
critical mass of fissionable material;


 


(    With
respect to injury to or destruction of property, the word “injury” or
“destruction”


 


(    “property damage” includes all forms of
radioactive contamination of property, 


 


(    includes
all forms of radioactive contamination of property.


 


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


 


(i)    Garage and Automobile Policies issued by the
Reassured on New York risks, or 


 


(ii)   statutory
liability insurance required under Chapter 90, General Laws of Massachusetts,
until 90 [ILLEGIBLE] following approval of the Broad Exclusion Provision by the
Governmental Authority having jurisdiction thereof 


 


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


 










*NOTE.
The words printed in italics in the Limited Exclusion Provision and in the
Broad Exclusion Provision shall apply [ILLEGIBLE] [ILLEGIBLE] to original liability policies which include a
Limited Exclusion Provision or a Broad Exclusion Provision contain [ILLEGIBLE] words.


 


21/9/67


 


N.M.A. 1590


 


 





















 


NUCLEAR INCIDENT EXCLUSION CLAUSE - LIABILITY - REINSURANCE

CANADA


 


1.            This Agreement does not cover any
loss or liability accruing to the Reinsured as a member of, or subscriber
[ILLEGIBLE] any association of insurers or reinsurers formed for the purpose of
covering nuclear energy risks or as a direct [ILLEGIBLE] indirect reinsurer of
any such member, subscriber, or association.


 


2,             Without in any way restricting the operation of
paragraph 1 of this clause it is agreed that for all purposes of [ILLEGIBLE] Agreement
all the original liability contracts of the Reinsured, whether new, renewal or
replacement, of the following classes, namely,


 


Personal
Liability, 

Farmers Liability, 

Storekeepers Liability,


 


which become
effective on or after 31st December 1984, shall be deemed to include, from
their inception dates [ILLEGIBLE] thereafter, the following provision: —


 


Limited
Exclusion Provision


 


This Policy does
not apply to bodily injury or property damage with respect to which the Insured
is also [ILLEGIBLE] under a contract of nuclear energy liability insurance
(whether the Insured is named in such contract or not [ILLEGIBLE] whether or
not it is legally enforceable by the Insured) issued by the Nuclear Insurance
Association of [ILLEGIBLE] or any other group or pool of insurers or would be
an Insured under any such policy but for its termination [ILLEGIBLE] exhaustion
of its limit of liability.


 


With respect to
property, loss of use of such property shall be deemed to be property damage.


 


3.             Without in any way restricting the operation of
paragraph 1 of this clause it is agreed that for all purposes of [ILLEGIBLE]
Agreement all the original liability contracts of the Reinsured, whether new,
renewal or replacement, of any [ILLEGIBLE] whatsoever (other than Personal
Liability, Farmers Liability, Storekeepers Liability or Automobile [ILLEGIBLE]
contracts), which become effective on or after 31st December 1984, shall
be deemed to include, from their [ILLEGIBLE] dates and thereafter, the
following provision: —


 


Broad Exclusion Provision


 


It is agreed that
this Policy does not apply:


 


(a)       to
liability imposed by or arising under the Nuclear Liability Act; or


 


(b)      to
bodily injury or property damage with respect to which an Insured under this
Policy is also [ILLEGIBLE] under a contract of nuclear energy liability
insurance (whether the Insured is named in such contract or [ILLEGIBLE] and
whether or not it is legally enforceable by the Insured) issued by the Nuclear
Insurance [ILLEGIBLE] Canada or any other insurer or group or pool of insurers
or would be an Insured under any such policy [ILLEGIBLE] for its termination
upon exhaustion of its limit of liability; or


 


(c)       to
bodily injury or property damage resulting directly or indirectly from the
nuclear energy hazard [ILLEGIBLE] from:


 


[ILLEGIBLE] the
ownership, maintenance, operation or use of a nuclear facility by or on behalf
of an Insured;


 


[ILLEGIBLE]
furnishing by an Insured of services, materials, parts or equipment in
connection with [ILLEGIBLE], construction, maintenance, operation or use of any
nuclear facility; and


 


 





















 


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


 


As used in
this Policy:


 


(I)       The
term “nuclear energy hazard” means the radioactive, toxic, explosive or other
[ILLEGIBLE] properties of radioactive material;


 


(II)      The
term “radioactive material” means uranium, thorium, plutonium, neptunium, their
[ILLEGIBLE] derivatives and compounds, radioactive isotopes of other elements
and any other substances that [ILLEGIBLE] Atomic Energy Control Board may, by
regulation, designate as being prescribed substances [ILLEGIBLE] of releasing
atomic energy, or as being requisite for the production, use or application of
[ILLEGIBLE] energy;


 


(III)     The
term “nuclear facility” means:


 


(a)      any
apparatus designed or used to sustain nuclear fission in a self-supporting
chain reaction [ILLEGIBLE] to contain a critical mass of plutonium, thorium and
uranium or any one or more of them;


 


(b)      any
equipment or device designed or used for (i) separating the isotopes of
plutonium, thorium and uranium or any one or more of them, (ii) processing
or utilizing spent fuel, or [ILLEGIBLE] handling, processing or packaging
waste;


 


(c)      any
equipment or device used for the processing, fabricating or alloying of
plutonium, thorium or uranium enriched in the isotope uranium 233 or in the
isotope uranium 235, or any one [ILLEGIBLE] more of them if at any time the
total amount of such material in the custody of the Insured [ILLEGIBLE] the
premises where such equipment or device is located consists of or contains more
than [ILLEGIBLE] grams of plutonium or uranium 233 or any combination thereof,
or more than 250 grams [ILLEGIBLE] uranium 235;


 


(d)      any
structure, basin, excavation, premises or place prepared or used for the
storage or [ILLEGIBLE] of waste radioactive material;


 


and includes the
site on which any of the foregoing is located, together with all [ILLEGIBLE]
conducted thereon and all premises used for such operations.


 


(IV)     The term
“fissionable substance” means any prescribed substance that is, or from which
can [ILLEGIBLE] obtained, a substance capable of releasing atomic energy by
nuclear fission.


 


(V)      With
respect to property, loss of use of such property shall be deemed to be
property damage.


 


 





















 


NUCLEAR INCIDENT EXCLUSION CLAUSE
REINSURANCE - NO. 4


 


(1)       This
reinsurance does not cover any loss or liability accruing to the Reassured as a
member of, or subscriber to, any association of insurers formed for the purpose
of covering nuclear energy risks or as a direct or indirect reinsurer of any
such member, subscriber or association.


 


(2)       Without
in any way restricting the operations of Nuclear Incident Exclusion Clause
No. 1B - Liability, No. 2 - Physical Damage, No. 3 - Boiler and
Machinery and paragraph (1) of this clause, it is understood and agreed
that for all purposes as respects the reinsurance assumed by the Reinsurer from
the Reassured, all original insurance policies or contracts of the Reassured
(new, renewal and replacement) shall be deemed to include the applicable
existing Nuclear Clause and/or Nuclear Exclusion Clause(s) in effect at the time
and any subsequent revisions thereto as agreed upon and approved by the
Insurance Industry and/or a qualified Advisory or Rating Bureau.


 





















 


POLLUTION EXCLUSION CLAUSE - GENERAL LIABILITY - REINSURANCE


 


A.    This
reinsurance excludes all loss and/or liability accruing to the reinsured
company as a result of:


 


1.     bodily
injury or property damage arising out of the actual, alleged or threatened
discharge, dispersal, release or escape of pollutants:


 


a.     at or from
premises owned, rented or occupied by a named insured;


 


b.     at or from
any site or location used by or for a named insured or others for the handling,
storage, disposal, processing or treatment of waste;


 


c.     which are
at any time transported, handled, stored, treated, disposed of, or processed as
waste by or for a named insured or any person or organization for whom a named
insured may be legally responsible; or


 


d.     at or from
any site or location on which a named insured or any contractors or
subcontractors working directly or indirectly on behalf of a named insured are
performing operations:


 


(i)    if the
pollutants are brought on or to the site or location in connection with such
operations; or


 


(ii)   if the
operations are to test for, monitor, clean up, remove, contain, treat, detoxify
or neutralize the pollutants;


 


2      any
governmental direction or request that a named insured test for, monitor, clean
up, remove, contain, treat, detoxify or neutralize pollutants.


 


B.    Subparagraphs
A(1)(a) and A(1)(d)(i) above do not apply to bodily injury or
property damage caused by heat, smoke or fumes from a hostile fire.


 


C.    “Hostile
fire” means a fire which becomes uncontrollable or breaks out from where it was
intended to be.


 


D.    “Pollutants”
means any solid, liquid, gaseous or thermal irritant or contaminant, including
smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes
material to be recycled, reconditioned or reclaimed.