Exhibit 10.42


 


Catastrophe 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


 


	
  

  	
   

  
	
  BENFIELD BLANCH

  	
   

  



 


 





















 


Catastrophe 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


 


First Catastrophe Workers’ Compensation Reinsurance


 


	
  Reinsurers

  	
   

  	
  Participations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  American Re-Insurance Company, A Delaware
  Corporation

  	
   

  	
  10.0

  	
  %

  
	
  Arch Reinsurance Limited

  	
   

  	
  10.0

  	
   

  
	
  Everest Reinsurance Company

  	
   

  	
  20.0

  	
   

  
	
  Folksamerica Reinsurance Company

  	
   

  	
  10.0

  	
   

  
	
  Swiss Re
  Underwriters Agency, Inc. (for Swiss Reinsurance America Corporation)

  	
   

  	
  15.0

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Through Benfield Greig Limited

  	
   

  	
   

  	
   

  
	
  Lloyd’s Underwriters Per Signing Schedule(s)

  	
   

  	
  35.0

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  100.0

  	
  %

  



 


Second Catastrophe Workers’ Compensation Reinsurance


 


	
  Reinsurers

  	
   

  	
  Participations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Arch Reinsurance Limited

  	
   

  	
  20.0

  	
  %

  
	
  Gerling Global Reinsurance Corporation of America

  	
   

  	
  8.0

  	
   

  
	
  Liberty Mutual Insurance Company

  	
   

  	
  2.0

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Through Benfield Greig Limited

  	
   

  	
   

  	
   

  
	
  Lloyd’s Underwriters Per Signing Schedule(s)

  	
   

  	
  70.0

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  100.0

  	
  %

  



 


 





















 


Table of Contents


 


	
  Article

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  I

  	
   

  	
  Classes of Business Reinsured

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  II

  	
   

  	
  Commencement and Termination

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  III

  	
   

  	
  Territory (BRMA 51A)

  	
  2

  
	
   

  	
   

  	
   

  	
   

  
	
  IV

  	
   

  	
  Exclusions

  	
  2

  
	
   

  	
   

  	
   

  	
   

  
	
  V

  	
   

  	
  Retention and Limit

  	
  6

  
	
   

  	
   

  	
   

  	
   

  
	
  VI

  	
   

  	
  Reinstatement

  	
  6

  
	
   

  	
   

  	
   

  	
   

  
	
  VII

  	
   

  	
  Definitions

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
  VIII

  	
   

  	
  Other Reinsurance

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
  IX

  	
   

  	
  Claims

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
  X

  	
   

  	
  Commutation

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  XI

  	
   

  	
  Subrogation

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  XII

  	
   

  	
  Premium

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
  XIII

  	
   

  	
  Late Payments

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
  XIV

  	
   

  	
  Offset

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
  XV

  	
   

  	
  Access to Records (BRMA 1D)

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
  XVI

  	
   

  	
  Liability of the Reinsurer

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
  XVII

  	
   

  	
  Net Retained Lines (BRMA 32E)

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
  XVIII

  	
   

  	
  Errors and Omissions

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
  XIX

  	
   

  	
  Taxes (BRMA 50B)

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
  XX

  	
   

  	
  Unauthorized Reinsurers

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
  XXI

  	
   

  	
  Insolvency

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  XXII

  	
   

  	
  Arbitration (BRMA 6J)

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  XXIII

  	
   

  	
  Service of Suit (BRMA 49C)

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
  XXIV

  	
   

  	
  Agency Agreement

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  XXV

  	
   

  	
  Intermediary (BRMA 23A)

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Schedule A

  	
   

  



 


 


















 


Catastrophe 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 set forth herein and in Schedule A attached
to and forming part of this Contract.


 


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.


 


1





















 


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.     Seven years after the termination of this
Contract (or after the end of the runoff period, if applicable), the Company
shall advise the Reinsurer of any outstanding claims and/or occurrences (each
hereinafter referred to as a “claim”) arising during the term hereof, which
have not been finally settled and which may cause a recovery under this
Contract, and no liability shall attach hereunder for any claim not reported to
the Reinsurer within this seven year period.


 


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


 


Article
III - Territory (BRMA 51A)


 


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


 


Article IV - 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.


 


2





















 


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 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:


 


3





















 


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.


 


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.


 


4





















 


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.


 


28.   Professional employment organizations
(PEO’s).


 


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.


 


30.   Loss or liability arising out of an
occurrence of terrorism as defined herein.


 


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.


 


5


















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
V - Retention and Limit


 


A.    As respects each excess layer of reinsurance
coverage provided by this Contract, the Company shall retain and be liable for
the first amount of ultimate net loss, shown as “Company’s Retention” for that
excess layer in Schedule A attached hereto, arising out of each loss
occurrence. The Reinsurer shall then be liable, as respects each excess layer,
for the amount by which such ultimate net loss exceeds the Company’s applicable
retention, but the liability of the Reinsurer under each excess layer shall not
exceed the amount, shown as “Reinsurer’s Per Occurrence Limit” for that excess
layer in Schedule A attached hereto, as respects any one loss occurrence.


 


B.    The maximum policy limit as respects
Employers Liability policies subject hereto shall be $1,000,000 or so deemed,
unless otherwise mandated by statute or regulation.


 


C.    The Company’s ultimate net loss, for the
purpose of this Contract, shall be deemed to be a maximum of $5,000,000 any one
life.


 


Article
VI - Reinstatement


 


A.    In the event all or any portion of the
reinsurance under any excess layer of reinsurance coverage provided by this
Contract is exhausted by loss, the amount so exhausted shall be reinstated
immediately from the time the loss occurrence commences hereon. For each amount
so reinstated the Company agrees to pay additional premium equal to the product
of the following:


 


1.     The percentage of the occurrence limit for
the excess layer reinstated (based on the loss paid by the Reinsurer under that
excess layer); times


 


2.     The earned reinsurance premium for the
excess layer reinstated for the contract year (exclusive of reinstatement
premium).


 


B.    Whenever the Company requests payment by the
Reinsurer of any loss under any excess layer hereunder, the Company shall
submit a statement to the Reinsurer of reinstatement premium due the Reinsurer
for that excess layer. If the earned reinsurance premium for any excess layer
for the contract year has not been finally determined as of the date of any
such statement, the calculation of reinstatement premium due for that excess
layer shall be based on the annual deposit premium for that excess layer and
shall be readjusted when the earned


 


6





















 


reinsurance premium for
that excess layer for the contract year has been finally determined. Any
reinstatement premium shown to be due the Reinsurer for any excess layer as
reflected by any such statement (less prior payments, if any, for that excess
layer) shall be payable by the Company concurrently with payment by the
Reinsurer of the requested loss for that excess layer. Any return reinstatement
premium shown to be due the Company shall be remitted by the Reinsurer as
promptly as possible after receipt and verification of the Company’s statement.


 


C.    Notwithstanding anything stated herein, the
liability of the Reinsurer under any excess layer of reinsurance coverage
provided by this Contract shall not exceed either of the following:


 


1.     The amount, shown as “Reinsurer’s Per
Occurrence Limit” for that excess layer in Schedule A attached hereto, as
respects loss or losses arising out of any one loss occurrence; or


 


2.     The amount, shown as “Reinsurer’s Annual
Limit” for that excess layer in Schedule A attached hereto, in all during any
one contract year.


 


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:


 


I.      “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


 


7





















 


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 parry involved in the presentation,
defense or settlement of any claim covered hereunder.


 


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.


 


8





















 


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:


 


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 claims-specific 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 shall mean
activities against persons, organizations or property of any nature:


 


9





















 


1.     That involve the following or preparation
for the following:


 


a.     Use or threat of force or violence; or


 


b.     Commission or threat of a dangerous act; or


 


c.     Commission of threat of an act that
interferes with or disrupts an electronic communication, information or
mechanical system; and


 


2.     When one or both of the following
applies:


 


a.     The effect is to intimidate or coerce a
government or the civilian population or any segment thereof, or to disrupt any
segment of the economy; or


 


b.     It appears that the intent is to intimidate
or coerce a government, or to further political, ideological, religious, social
or economic objectives or to express (or to express opposition to) a philosophy
or ideology.


 


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 excess of loss reinsurance and 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 $5,000,000 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.


 


10





















 


Article X - Commutation


 


A.    Either the Company or the Reinsurer may
request commutation of that portion of any excess loss hereunder represented by
any outstanding claim or claims after seven years from the date of an
occurrence. If both parties desire to commute a claim or claims, then within 60
days after such agreement, the Company shall submit a statement of valuation of
the outstanding claim or claims showing the elements considered reasonable to
establish the ultimate net loss and the Reinsurer shall pay the amount
requested. Commutation of loss will be calculated on the present value of the
loss within the applicable layer of coverage.


 


B.    If agreement, as outlined in the paragraph
above, cannot be reached, the effort can be abandoned or, alternately, the
Company and the Reinsurer may mutually appoint an actuary or appraiser to
investigate, determine and capitalize such claim or claims. If both parties
then agree, the Reinsurer shall pay its proportion of the amount so determined
to be the capitalized value of such claim or claims.


 


C.    If the parties, as outlined in the
paragraphs above, fail to agree, they may abandon the effort or they may agree
to settle any difference using a panel of three actuaries, one to be chosen by
each party and the third by the two so chosen. If either party refuses or
neglects to appoint an actuary within 60 days, the other party may appoint two
actuaries. If the two actuaries fail to agree on the selection of a third
actuary within 60 days of their appointment, each of them shall name two, of
whom the other shall decline one and the decision shall be made by drawing
lots. All the actuaries shall be regularly engaged in the valuation of Workers’
Compensation claims and shall be Fellows of the Casualty Actuarial Society or
Members of the American Academy of Actuaries. None of the actuaries shall be
under the control of either party to this Contract.


 


D.    Each party shall submit its case to its
actuary within 60 days of the appointment of the third actuary. The decision in
writing of any two actuaries, when filed with the parties hereto, shall be
final and binding on both parties. The expense of the actuaries and of the
commutation shall be equally divided between the two parties. Said commutation
shall take place in North Palm Beach, Florida, unless some other place is
mutually agreed upon by the Company and the Reinsurer.


 


Article XI - 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


 


11





















 


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 XII - Premium


 


A.    As premium for each excess layer of
reinsurance coverage provided by this Contract, the Company shall pay the
Reinsurer the greater of the following for each contract year:


 


1.     The amount (or pro rata portion thereof if
this Contract is terminated prior to the end of any contract year), shown as
“Annual Minimum Premium” for that excess layer in Schedule A attached hereto;
or


 


2.     The percentage, shown as “Premium Rate” for that
excess layer in Schedule A attached hereto, of the Company’s net earned premium
for the contract year.


 


B.    The Company shall pay the Reinsurer an
annual deposit premium for each excess layer of the amount, shown as “Annual
Deposit Premium” for that excess layer in Schedule A attached hereto, in four
equal installments of the amount, shown as “Quarterly Deposit Premium” for that
excess layer in Schedule A attached hereto, 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 each excess layer for the contract year, computed in accordance
with paragraph A, and any additional premium due the Reinsurer or return
premium due the Company for each such excess layer 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 as respects each excess layer equal to the percentage, shown as “Premium
Rate” for that excess layer in Schedule A attached hereto, 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.


 


12


















 


Article XIII - 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.


 


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.


 


13





















 


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.


 


Article XIV - Offset


 


The Company and the Reinsurer may offset any balance
or amount due from one party to the other under this Contract or any other contract
heretofore or hereafter entered into between the Company and the Reinsurer,
whether acting as assuming reinsurer or ceding company. This provision shall
not be affected by the insolvency of either party to this Contract.


 


Article
XV - 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.


 


Article
XVI - 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.


 


14





















 


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 XVII - 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 XVIII - Errors and
Omissions


 


Except as provided in paragraph E of Article II,
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 XIX - 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.


 


Article XX - 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


 


15





















 


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 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(l) 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.


 


16





















 


Article XXI - 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.


 


Article XXII - 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


 


17





















 


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.


 


Article
XXIII - 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


 


18





















 


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 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 XXI) 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.


 


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 28th day of May in the year 2002.


 


	
   

  	
  /s/ Debra Cerre Ruedisili, President

  
	
   

  	
  AmComp Preferred Insurance Company (for and on
  behalf of the “Company”)

  



 


19


















 


Schedule A


 


Catastrophe 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


 


	
   

  	
   

  	
  First

  Excess

  	
   

  	
  Second

  Excess

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Company’s Retention

  	
   

  	
  $

  	
  10,000,000

  	
   

  	
  $

  	
  20,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Reinsurer’s Per
  Occurrence Limit

  	
   

  	
  $

  	
  10,000,000

  	
   

  	
  $

  	
  30,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Reinsurer’s Annual
  Limit 

  	
   

  	
  $

  	
  20,000,000

  	
   

  	
  $

  	
  60,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Annual Minimum Premium 

  	
   

  	
  $

  	
  911,250

  	
   

  	
  $

  	
  1,112,940

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Premium Rate

  	
   

  	
  0.750

  	
  %

  	
  0.916

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Annual Deposit Premium

  	
   

  	
  $

  	
  1,012,500

  	
   

  	
  $

  	
  1,236,600

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Quarterly Deposit
  Premium

  	
   

  	
  $

  	
  253,125

  	
   

  	
  $

  	
  309,150

  	
   

  
												



 


The figures listed above
for each excess layer shall apply to each Subscribing Reinsurer in the
percentage share for that excess layer as expressed in its Interests and
Liabilities Agreement attached hereto.


 


1





















 


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, association
of insurers or reinsurers formed for the purpose of covering nuclear energy
risks or as a direct or indirect reinsure 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 specific Clause II of this paragraph (2) from
the time specified in Clause II in this paragraph (2) shall be deemed to
include 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 [ILLEGIBLE] 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, [ILLEGIBLE] only), Farmers Comprehensive Personal
Liability Policies (liability only), Comprehensive Personal [ILLEGIBLE]
Policies (liability only) or policies of a similar nature; and the liability
portion of combination forms related to four classes of policies stated above,
such as the Comprehensive Dwelling Policy and the applicable type Homeowners
Policies.


 


III.   The
inception dates and thereafter of all original policies as described in II
above, whether new, [ILLEGIBLE] 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
[ILLEGIBLE] following approval of the Limited Exclusion Provision by the
Governmental Authority having [ILLEGIBLE] 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 ([ILLEGIBLE-railroad) 
Protective  Liability,  Manufacturers and  Contractors 
Liability,  Product  Liability, 
Professional Malpractice Liability, Storekeepers Liability, Garage Liability,
Automobile Liability (including Massachusetts M 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 no: 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 [ILLEGIBLE] 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
[ILLEGIBLE] termination upon exhaustion of its limit of liability; or


 


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


 


2





















 


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 (I) is at any nuclear facility owned by, or operated by or on behalf
of, an [ILLEGIBLE]

(2) has been discharged or dispersed therefrom;


 


(b)   the nuclear
material is contained in spent fuel or waste at any time possessed, handled,
used, [ILLEGIBLE] 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 [ILLEGIBLE] 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 so material, special nuclear material or byproduct material;
“source material”, “special nuclear material”, “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 [ILLEGIBLE] to radiation in a nuclear reactor;
“waste” means any waste material (1) containing byproduct material
(2) resulting from the operation by any person or organization of any
nuclear facility included within 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 pluton (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 time the total amount of such material in the custody of
the insured at the premises where such [ILLEGIBLE] device is located consists
of or contains more than 25 grams of plutonium or uranium 233 or 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 [ILLEGIBLE] premises used for such operations; “nuclear reactor” means any
apparatus designed or used to sustain [ILLEGIBLE] 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 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

following approval of the Broad Exclusion Provision by the Governmental
Authority having jurisdiction there


 


(4)  Without
in any way restricting the operation of paragraph (1) of this Clause, it
is understood and agreed paragraphs (2) and (3) above are not
applicable to original liability policies of the Reassured in Canada and that
with [ILLEGIBLE] 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 in relation to original liability
policies which include a Limited Exclusion Provision or a Broad Exclusion
Provision [ILLEGIBLE]
words.


 


3





















 


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 any
association of insurers or reinsurers formed for the purpose of covering
nuclear energy risks or as a [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 Agreement all the original liability contracts of the
Reinsured, whether new, renewal or replacement, of the follow 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 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 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.


 


5.     Without in
any way restricting the operation of paragraph 1 of this clause it is agreed
that for all purposes of 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 and whether or not it is
legally enforceable by the Insured) issued by the Nuclear Insurance Association
Canada or any other insurer or group or pool of insurers or would be an Insured
under any such policy 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:


 


(1)   the
ownership, maintenance, operation or use of a nuclear facility by or on behalf
of an Insured;


 


(2)   the
furnishing by an Insured of services, materials, parts or equipment in
connection with planning, construction, maintenance, operation or use of any
nuclear facility; and


 


4





















 


(3)   The
possession, consumption, use, handling, disposal or transportation of
fissionable substance; 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.


 


used in this Policy:


 


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


 


(II)   The term
“radioactive material” means uranium, thorium, plutonium, neptunium, their
respect derivatives and compounds, radioactive isotopes of other elements and
any other substances that 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 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, [ILLEGIBLE] and uranium or any one or more of them,
(ii) processing or utilizing spent fuel, or handling, processing or
packaging waste;


 


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


 


5





















 


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.


 


6





















 


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(l)(a) and A(l)(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.


 


7