Exhibit
10.48


 


Catastrophe
Workers’ Compensation

Reinsurance Contract

Effective: January 1, 2005


 


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


 





 





















 


Table of
Contents


 


	
  Article

  	
   

  	
   

  	
  Page

  
	
  I

  	
   

  	
  Classes of Business
  Reinsured

  	
  1

  
	
  II

  	
   

  	
  Term

  	
  1

  
	
  III

  	
   

  	
  Special Termination

  	
  2

  
	
  IV

  	
   

  	
  Territory (BRMA 51A)

  	
  3

  
	
  V

  	
   

  	
  Exclusions

  	
  3

  
	
  VI

  	
   

  	
  Retention and Limit

  	
  7

  
	
  VII

  	
   

  	
  Reinstatement

  	
  7

  
	
  VIII

  	
   

  	
  Definitions

  	
  8

  
	
  IX

  	
   

  	
  Other Reinsurance

  	
  10

  
	
  X

  	
   

  	
  Annuities at Company’s
  Option

  	
  10

  
	
  XI

  	
   

  	
  Claims

  	
  11

  
	
  XII

  	
   

  	
  Commutation

  	
  11

  
	
  XIII

  	
   

  	
  Special Commutation

  	
  12

  
	
  XIV

  	
   

  	
  Subrogation

  	
  13

  
	
  XV

  	
   

  	
  Premium

  	
  14

  
	
  XVI

  	
   

  	
  Late
  Payments

  	
  14

  
	
  XVII

  	
   

  	
  Offset (BRMA 36C)

  	
  15

  
	
  XVIII

  	
   

  	
  Access to Records (BRMA
  1D)

  	
  16

  
	
  XIX

  	
   

  	
  Liability of the Reinsurer

  	
  16

  
	
  XX

  	
   

  	
  Net Retained Lines (BRMA
  32E)

  	
  16

  
	
  XXI

  	
   

  	
  Errors and Omissions

  	
  16

  
	
  XXII

  	
   

  	
  Currency (BRMA 12A)

  	
  16

  
	
  XXIII

  	
   

  	
  Taxes (BRMA 50B)

  	
  17

  
	
  XXIV

  	
   

  	
  Federal Excise Tax

  	
  17

  
	
  XXV

  	
   

  	
  Reserves

  	
  17

  
	
  XXVI

  	
   

  	
  Insolvency

  	
  19

  
	
  XXVII

  	
   

  	
  Arbitration

  	
  19

  
	
  XXVIII

  	
   

  	
  Service of Suit (BRMA 49C)

  	
  20

  
	
  XXIX

  	
   

  	
  Agency Agreement

  	
  21

  
	
  XXX

  	
   

  	
  Governing Law (BRMA 71B)

  	
  21

  
	
  XXXI

  	
   

  	
  Intermediary (BRMA 23A)

  	
  21

  



 





















 


Catastrophe
Workers’ Compensation

Reinsurance Contract

Effective: January 1, 2005


 


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”) in force at the effective date
hereof or issued or renewed on or after that date, and classified by the
Company as Workers’ Compensation and Employers Liability business, subject to
the terms, conditions and limitations hereinafter set forth.


 


Article II - Term


 


A.           This Contract shall become effective on January 1, 2005, with
respect to losses arising out of occurrences commencing on or after that date,
and shall remain in force until December 31, 2005, both days inclusive.


 


B.             Unless otherwise mutually agreed, the
Reinsurer shall have no liability for losses arising out of occurrences
commencing after the effective date of termination or expiration.


 


C.             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 following the termination
or expiration of this Contract with respect to such policy until the first date
that the Company may lawfully non-renew, cancel or terminate such policy,
whether or not the


 


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Company actually does non-renew, cancel or terminate
such policy. However, under no circumstances shall runoff coverage under this
paragraph exceed 23 months.


 


D.            Seven years after the termination or
expiration of this Contract, 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.


 


Article III - Special Termination


 


Notwithstanding
the provisions of paragraph A of Article II, the Company may terminate a
Subscribing Reinsurer’s percentage share in this Contract if any of the
following circumstances occur, such termination to be effective at any point in
time of the Company’s choosing, including retroactive, but not prior to the
beginning of the calendar quarter in which the triggering circumstance occurs
as respects subparagraphs 1 through 6 or from discovery as respects
subparagraph 7:


 


1.               The Subscribing Reinsurer’s policyholders’
surplus at the inception of this Contract has been reduced by more than 20.0%
of the amount of surplus 12 months prior to that date; or


 


2.               The Subscribing Reinsurer’s policyholders’
surplus at any time during the term of this Contract has been reduced by more
than 20.0% of the amount of surplus at the date of the Subscribing Reinsurer’s
most recent financial statement filed with regulatory authorities and available
to the public as of the inception of this Contract; or


 


3.               The Subscribing Reinsurer’s A.M. Best’s
rating has been assigned or downgraded below A- (including any “Not Rated”
rating) and/or Standard & Poor’s rating has been assigned or
downgraded below BBB+ (including any “Not Rated” rating); or


 


4.               The Subscribing Reinsurer has become merged
with, acquired by or controlled by any other company, corporation or
individual(s) not controlling the Subscribing Reinsurer’s operations
previously; or


 


5.               A State Insurance Department or other legal
authority has ordered the Subscribing Reinsurer to cease writing business; or


 


6.               The Subscribing Reinsurer has become
insolvent or has been placed into liquidation or receivership (whether
voluntary or involuntary) or proceedings have been instituted against the
Subscribing Reinsurer for the appointment of a receiver, liquidator, rehabilitator,
conservator or trustee in bankruptcy, or other agent known by whatever name, to
take possession of its assets or control of its operations; or


 


7.               The Subscribing Reinsurer has ceased assuming
new and renewal property and casualty treaty reinsurance business.


 


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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, 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 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.               Loss or liability as excluded in the “War
Risk Exclusion Clause (Reinsurance)” attached to and forming part of this
Contract.


 


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9.               Operation under the jurisdiction of the
United States Longshore and Harbor Workers’ Compensation Act or the Jones Act,
except for incidental exposures (i.e., 10.0% or less of the insured’s estimated
payroll when the account is quoted).


 


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 apply
to 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, except for incidental exposures (i.e., 10.0% or
less of the insured’s estimated payroll when the account is quoted).


 


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


 


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


 


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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 (except as previously provided for, on an incidental basis, in
exclusion 18);


 


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


 


d.              Handling, storage, transportation or use of
such items (except as previously provided for, on an incidental basis, in
exclusion 18).


 


“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, whether professional or voluntary.


 


27.         Logging or forestry operations.


 


28.         Professional employment organizations (PEO’s).


 


29.         Professional sports teams.


 


30.         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.


 


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31.         Notwithstanding any provision to the contrary within this Contract or
any amendment thereto, loss, damage, cost or expense directly or indirectly
caused by, contributed to by, resulting from or arising out of or in connection
with any “act of terrorism” as defined in the Terrorism Risk Insurance Act of
2002 (the “Terrorism Act”), regardless of any other cause or event contributing
concurrently or in any sequence to the loss.


 


In the event that the Terrorism Act terminates or
expires, then in respect of any occurrences commencing after the termination or
expiration of the Terrorism Act, the Reinsurer hereon will not be liable for
any “Foreign Act of Terrorism.” A Foreign Act of Terrorism is defined to be:


 


a.               A violent act or an act that is dangerous to:


 


i.                  Human life; or


 


ii.               Property; or


 


iii.            Infrastructure; and


 


b.              Which has resulted in damage within the
United States of America; and


 


c.               Which was committed by an individual or
individuals acting on behalf of any foreign person or foreign interest, as part
of an effort to coerce or put in fear the civilian population of the United
States of America or to influence the policy or affect the conduct of the
Government of the United States of America by coercion.


 


However, an act shall not be considered a “Foreign
Act of Terrorism” if the property and casualty insurance losses resulting from
the act, in the aggregate, do not exceed $5,000,000. “Property and casualty
insurance” as used herein shall have the meaning set forth in Section 102(12)
of the Terrorism Act, irregardless of whether the Terrorism Act has terminated
or expired.


 


Notwithstanding the above and subject otherwise to
the terms, conditions, and limitations of this Contract, this Contract will pay
actual loss, damage, cost, and expense caused by any act of terrorism which
does not meet the definition of “act of terrorism” set forth in the Terrorism
Act, or “Foreign Act of Terrorism” should the Terrorism Act no longer be
applicable, provided that in no event will this Contract provide coverage for
loss, damage, cost, or expense directly or indirectly caused by, contributed to
by, resulting from, or arising out of or in connection with biological,
chemical, or nuclear explosion, pollution, contamination and/or fire following
thereon.


 


B.             In the event the Company is inadvertently
bound on any risk which is excluded under subparagraph 9, subparagraphs 14
through 27, or subparagraph 30 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 for a period of time
specific to the applicable state cancellation requirements, not to exceed 120
days. This limitation shall not apply as respects Arizona. Coverage shall cease
after such time or at policy anniversary as respects Arizona policies, unless
the Company has received from the Reinsurer written notice of its approval of
such risk within 30 days.


 


6





















 


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. In the
event a reinsurer becomes a party to this Contract subsequent to one or more
special acceptances hereunder, the new reinsurer shall automatically accept
such special acceptance(s) as being covered hereunder.


 


Article VI - Retention and Limit


 


A.           The Company shall retain and be liable for the first $10,000,000 of
ultimate net loss (regardless of the combination of classes of business, number
of policies or number of interests involved) 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 $10,000,000 as respects any one occurrence.


 


B.             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 from the ground up.


 


Article VII - Reinstatement


 


A.           In the event all or any portion of the reinsurance hereunder is
exhausted by loss, the amount so exhausted shall be reinstated immediately from
the time the 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
reinstated (based on the loss paid by the Reinsurer); times


 


2.               The earned reinsurance premium for the term
of this Contract (exclusive of reinstatement premium).


 


B.             Whenever the Company requests payment by the
Reinsurer of any loss hereunder, the Company shall submit a statement to the
Reinsurer of reinstatement premium due the Reinsurer. If the earned reinsurance
premium for the term of this Contract has not been finally determined as of the
date of any such statement, the calculation of reinstatement premium due shall
be based on the annual deposit premium and shall be readjusted when the earned
reinsurance premium for the term of this Contract has been finally determined. Any
reinstatement premium shown to be due the Reinsurer as reflected by any such statement
(less prior payments, if any) shall be payable by the Company concurrently with
payment by the Reinsurer of the requested loss. 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 hereunder shall not exceed $10,000,000 as respects
loss or losses arising out of any one occurrence, nor shall it exceed
$20,000,000 in all during the term of this Contract.


 


7





















 


Article VIII - 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 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 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.


 


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


 


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:


 


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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
72 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:


 


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:


 


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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 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.


 


Article IX - 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 X - Annuities at Company’s Option


 


A.           Whenever the Company is required, or elects, to purchase an annuity or
to negotiate a structured settlement in excess of the retention of this
Contract, either in satisfaction of a judgment or in an out-of-court settlement
or otherwise, the cost of the annuity or the structured settlement, as the case
may be, shall be deemed part of the Company’s ultimate net loss, provided such
annuity or structured settlement terms grant the Company full and final release
as respects the indemnity portion of the settlement. Additionally, it is the Company’s
intent to place all annuities or structured settlements with a carrier whose A.M.
Best’s rating is “A” or better.


 


B.             The terms “annuity” or “structured settlement”
shall be understood to mean any insurance policy, lump sum payment, agreement
or device of whatever nature resulting in the payment of a lump sum by the
Company in settlement of any or all future liabilities which may attach to it
as a result of an occurrence.


 


C.             In the event the Company purchases an annuity
which inures in whole or in part to the benefit of the Reinsurer, it is
understood that the liability of the Reinsurer is not released thereby. In the
event the Company is required to provide benefits not provided by the annuity
for whatever reason, the Reinsurer shall pay its proportional share of any
loss.


 


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Article XI - Claims


 


A.           Whenever a claim or settlement by the Company appears likely, in the
sole judgment of the Company, 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 or extensive burns, regardless of liability, including
all subsequent developments. 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 such settlements 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 XII - 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 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.


 


11





















 


Article XIII - Special Commutation


 


A.           In the event a Subscribing Reinsurer meets one or more of the following
conditions, the Company may require a commutation of that portion of any excess
loss hereunder represented by any outstanding claim or claims, including any
related loss adjustment expense.


 


1.               The Subscribing Reinsurer’s A.M. Best’s
rating has been assigned or downgraded below A- (including any “Not Rated”
rating) and/or Standard & Poor’s rating has been assigned or
downgraded below BBB+ (including any “Not Rated” rating); or


 


2.               The Subscribing Reinsurer has ceased assuming
new or renewal property and casualty treaty reinsurance business.


 


“Outstanding claim or claims” shall be defined as
known or unknown claims, including any billed yet unpaid claims. However,
unless otherwise mutually agreed, this paragraph A shall not apply unless the
outstanding claim or claims is for an amount not less than $5,000.


 


B.             If the Company elects to require commutation
as provided in paragraph A above, the Company shall submit a Statement of
Valuation of the outstanding claim or claims as of the last day of the month
immediately preceding the month in which the Company elects to require
commutation, as determined by the Company. Such Statement of Valuation shall include
the elements considered reasonable to establish the excess loss and shall set
forth or attach the information relied upon by the Company and the methodology
employed to calculate the excess loss. The Subscribing Reinsurer shall then pay
the amount requested within 30 calendar days of receipt of such Statement of
Valuation, unless the Subscribing Reinsurer needs additional information from
the Company to assess the Company’s Statement of Valuation or contests such
amount.


 


C.             If the Subscribing Reinsurer needs additional
information from the Company to assess the Company’s Statement of Valuation or
contests the amount requested, the Subscribing Reinsurer shall so notify the
Company within 15 calendar days of receipt of the Company’s Statement of
Valuation. The Company shall supply any reasonably requested information to the
Subscribing Reinsurer within 15 calendar days of receipt of the notification.
Within 30 calendar days of the date of the notification or of the receipt of
the information, whichever is later, the Subscribing Reinsurer shall provide
the Company with its Statement of Valuation of the outstanding claim or claims
as of the last day of the month immediately preceding the month in which the
Company elects to require commutation, as determined by the Subscribing
Reinsurer. Such Statement of Valuation shall include the elements considered
reasonable to establish the excess loss and shall set forth or attach the information
relied upon by the Subscribing Reinsurer and the methodology employed to calculate
the excess loss.


 


D.            In the event the Subscribing Reinsurer’s
Statement of Valuation of the outstanding claim or claims is viewed as
unacceptable to the Company, the Company may either abandon the commutation
effort, or may seek to settle any difference by using an independent actuary agreed
to by the parties.


 


E.              If the parties cannot agree on an acceptable
independent actuary within 15 calendar days of the date of the Subscribing
Reinsurer’s Statement of Valuation, then each party shall appoint an actuary as
party arbitrators for the limited and sole purpose of selecting an


 


12





















 


independent actuary. If the actuaries cannot agree
on an acceptable independent actuary within 15 calendar days of the date of the
Subscribing Reinsurer’s Statement of Valuation, the Company shall supply the
Subscribing Reinsurer with a list of at least three proposed independent
actuaries, and the Subscribing Reinsurer shall select the independent actuary
from that list.


 


F.              Upon selection of the independent actuary,
both parties shall present their respective written submissions to the
independent actuary. The independent actuary may, at his or her discretion,
request additional information. The independent actuary shall issue his or her
decision within 45 calendar days after the written submissions have been filed
and any additional information has been provided.


 


G.             The decision of the independent actuary shall
be final and binding. The expense of the independent actuary shall be equally
divided between the two parties. For the purposes of this Article, unless
mutually agreed otherwise, an “independent actuary” shall be an actuary who
satisfies each of the following criteria:


 


1.               Is regularly engaged in the valuation of
claims resulting from lines of business subject to this Contract; and


 


2.               Is either a Fellow of the Casualty Actuarial
Society or of the American Academy of Actuaries; and


 


3.               Is disinterested and impartial regarding this
commutation.


 


H.            Notwithstanding paragraphs A, B and C above,
in the event that the Subscribing Reinsurer no longer meets any of the
conditions specified in subparagraph 1 or 2 in paragraph A above, this
commutation may continue on a mutually agreed basis.


 


I.                 Payment by the Subscribing Reinsurer of the
amount requested in accordance with paragraph B, C or F above, shall release
the Subscribing Reinsurer from all further liability for outstanding claim or
claims, known or unknown, under this Contract and shall release the Company from
all further liability for payments of salvage or subrogation amounts, known or
unknown, to the Subscribing Reinsurer under this Contract.


 


J.                In the event of any conflict between this Article and
any other article of this Contract, the terms of this Article shall
control.


 


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


 


Article XIV - 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


 


13





















 


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 XV - Premium


 


A.           As premium for the reinsurance provided hereunder, the Company shall
pay the Reinsurer 0.20% of its net earned premium for the term of this
Contract, subject to a minimum premium of $482,400 (or a pro rata portion
thereof if this Contract is terminated prior to December 31, 2005).


 


B.             The Company shall pay the Reinsurer an annual
deposit premium of $536,000 in four equal installments of $134,000 on January 1,
April 1, July 1 and October 1 of 2005. However, no deposit
premium installments shall be due after the effective date of termination.


 


C.             Within 60 days following the termination or
expiration of this Contract 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 term of this Contract, computed in accordance
with paragraph A, and any additional premium due the Reinsurer shall be remitted
by the Company with its report. If the premium so computed is less than the previously
paid, but more than the minimum premium, the balance shall be refunded by the Reinsurer
to the Company within 30 days of the report.


 


D.            “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 XVI - 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 in Article XXXI
(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.               1/365ths 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.


 


14





















 


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 and
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 and 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 $1,000 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 XVII
- Offset
(BRMA 36C)


 


The
Company and the Reinsurer shall have the right to offset any balance or amounts
due from one party to the other under the terms of this Contract. The party
asserting the right of offset


 


15





















 


may exercise such right any time whether the
balances due are on account of premiums or losses or otherwise.


 


Article XVIII - 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 XIX - 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 XX - 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 XXI - Errors and Omissions


 


Except
as provided in paragraph D 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 XXII - Currency (BRMA 12A)


 


A.           Whenever the word “Dollars” or the “$” sign appears in this Contract,
they shall be construed to mean United States Dollars and all transactions
under this Contract shall be in United States Dollars.


 


16





















 


B.             Amounts paid or received by the Company in
any other currency shall be converted to United States Dollars at the rate of
exchange at the date such transaction is entered on the books of the Company.


 


Article XXIII - 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 XXIV - Federal Excise Tax


 


A.           The Reinsurer has agreed to allow for the purpose of paying the Federal
Excise Tax the applicable percentage of the premium payable hereon (as imposed
under Section 4371 of the Internal Revenue Code) to the extent such
premium is subject to the Federal Excise Tax.


 


B.                 In the event of any return of premium
becoming due hereunder the Reinsurer will deduct the applicable percentage from
the return premium payable hereon and the Company or its agent should take
steps to recover the tax from the United States Government.


 


Article XXV - Reserves


 


(Applies
only to a reinsurer which (1) does not qualify for full credit with any
insurance regulatory authority having jurisdiction over the Company’s reserves,
or (2) which is or becomes rated “B++” or lower or holds a “Not Rated”
rating by A.M. Best or is or becomes rated BBB+ or lower by Standard &
Poor’s, unless the Reinsurer has an A.M. Best’s rating of “A” or Standard &
Poor’s rating of “A” and group policyholders’ surplus equal to or above
$2,000,000,000 at the beginning of this Contract)


 


A.           As regards policies or bonds issued by the Company coming within the
scope of this Contract, the Company agrees that when it shall file with the
insurance regulatory authority or set up on its books reserves for unearned
premium (includes deposit premiums paid in excess of ceded premiums earned by
the Reinsurer) losses covered hereunder which it shall be required by law to
set up, it will forward to the Reinsurer a statement showing the proportion of
such reserves which is applicable to the Reinsurer. The Reinsurer hereby agrees
to fund such reserves in respect of known outstanding losses that have been
reported to the Reinsurer and allocated loss adjustment expense relating
thereto, losses and allocated loss adjustment expense paid by the Company but
not recovered from the Reinsurer, plus reserves for losses and allocated loss
adjustment expense incurred but not reported, as shown in the statement
prepared by the Company (hereinafter referred to as “Reinsurer’s Obligations”)
by Regulation 114 trust accounts, funds withheld, cash advances or a Letter of
Credit, or combination thereof. The Reinsurer shall have the option of
determining the method of funding provided it is acceptable to the insurance
regulatory authorities having jurisdiction over the Company’s reserves.


 


17





















 


B.             When funding by a Letter of Credit, the
Reinsurer agrees to apply for and secure timely delivery to the Company of a
clean, irrevocable and unconditional Letter of Credit issued by a bank meeting
the NAIC Securities Valuation Office credit standards for issuers of Letters of
Credit and containing provisions acceptable to the insurance regulatory
authorities having jurisdiction over the Company’s reserves in an amount equal
to the Reinsurer’s proportion of said reserves. Such Letter of Credit shall be
issued for a period of not less than one year, and shall contain an “evergreen”
clause, which automatically extends the term for one year from its date of
expiration or any future expiration date unless 30 days (60 days where required
by insurance regulatory authorities) prior to any expiration date the issuing
bank shall notify the Company by certified or registered mail that the issuing
bank elects not to consider the Letter of Credit extended for any additional
period.


 


C.             The Reinsurer and Company agree that the
Letters of Credit provided by the Reinsurer pursuant to the provisions of this
Contract may be drawn upon at any time, notwithstanding any other provision of
this Contract, and be utilized by the Company or any successor, by operation of
law, of the Company including, without limitation, any liquidator,
rehabilitator, receiver or conservator of the Company for the following
purposes, unless otherwise provided for in a separate Trust Agreement:


 


1.               To reimburse the Company for the Reinsurer’s
Obligations, the payment of which is due under the terms of this Contract and
which has not been otherwise paid;


 


2.               To make refund of any sum which is in excess
of the actual amount required to pay the Reinsurer’s Obligations under this
Contract, if so requested by the Reinsurer;


 


3.               To fund an account with the Company for the
Reinsurer’s Obligations, Such cash deposit shall be held in an interest bearing
account separate from the Company’s other assets, and interest thereon not in excess
of the prime rate shall accrue to the benefit of the Reinsurer;


 


4.               To pay the Reinsurer’s share of any other
amounts the Company claims are due under this Contract.


 


In the event the amount drawn by the Company on any
Letter of Credit is in excess of the actual amount required for subparagraphs 1
or 3, or in the case of subparagraph 4, the actual amount determined to be due,
the Company shall promptly return to the Reinsurer the excess amount so drawn.
All of the foregoing shall be applied without diminution because of insolvency
on the part of the Company or the Reinsurer.


 


D.            The issuing bank shall have no responsibility
whatsoever in connection with the propriety of withdrawals made by the Company
or the disposition of funds withdrawn, except to ensure that withdrawals are
made only upon the order of properly authorized representatives of the Company.


 


E.              At quarterly intervals and on an estimated
basis 45 days prior to each December 31, or more frequently as agreed but
never more frequently than quarterly, the Company shall prepare a specific
statement of the Reinsurer’s Obligations, for the sole purpose of amending the
Letter of Credit, in the following manner:


 


1.               If the statement shows that the Reinsurer’s
Obligations exceed the balance of credit as of the statement date, the
Reinsurer shall, within 30 days after receipt of notice of


 


18





















 


such excess, secure delivery to the Company of an
amendment to the Letter of Credit increasing the amount of credit by the amount
of such difference.


 


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


 


Article XXVI
- 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 XXVII - Arbitration


 


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


 


19





















 


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, the Umpire shall be appointed in
accordance with the procedures of the American Arbitration Association.


 


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 XXVIII - 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.


 


20





















 


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 XXIX - 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 XXVI) 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 XXX - Governing Law (BRMA 71B)


 


This
Contract shall be governed by and construed in accordance with the laws of the
State of Florida.


 


Article XXXI - Intermediary (BRMA 23A)


 


Benfield
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 Inc. 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 April in the year 2005.

  
	
   

  
	
   

  	
  /s/ ILLEGIBLE

  
	
   

  	
  AmCOMP Preferred Insurance Company

  
	
   

  	
  AmCOMP Assurance Corporation

  
	
   

  	
  any and all insurance companies which are now or hereafter come under

  
	
   

  	
  the same ownership or management as the AmCOMP Group

  



 


 


21





















 


Nuclear
Incident Exclusion Clause - Liability - Reinsurance (U.S.A.)


(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, any
association of insurers or reinsurers formed for the purpose of covering
nuclear energy risks or as a direct or indirect reinsurer of any such member,
subscriber or association.


 


(2)               Without in any way restricting the operation
of paragraph (1) of this Clause it is understood and agreed that for all purposes
of this reinsurance all the original policies of the Reassured (new, renewal
and replacement) of the classes specified in Clause II 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


(bodily injury or property damage


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


II.                  Family Automobile Policies (liability only),
Special Automobile Policies (private passenger automobiles, liability only),
Farmers Comprehensive Personal 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 the
four classes of policies stated above, such as the Comprehensive Dwelling
Policy and the applicable types of Homeowners Policies.


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


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


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


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


 


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


 


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


 


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


 


Broad Exclusion Provision.*


 


It is agreed that the policy
does not apply:


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
Underwriters or Nuclear Insurance Association of Canada, or would be an insured
under any such policy but for its termination upon exhaustion of its limit of
liability; or


(b)               resulting from the hazardous properties of
nuclear material and with respect to which (1) any person or organization
is required to maintain financial protection pursuant to the Atomic Energy Act
of 1954, or any law amendatory thereof, or (2) the insured is, or had this
policy not been issued would be, entitled to indemnity from the United States
of America, or any agency thereof, under any agreement entered into by the
United States of America, or any agency thereof, with any person or
organization.


 


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


(immediate
medical or surgical relief


(first aid, 


to expenses incurred with respect to


(bodily
injury, sickness, disease or death


(bodily injury


resulting from the hazardous properties of nuclear
material and arising out of the 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 or (2) has
been discharged or dispersed therefrom;


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


(c)              the


(injury, sickness, disease, death
or destruction


(bodily injury or property damage


arises out of the furnishing by an insured of
services, materials, parts or equipment in connection with the planning,
construction, maintenance, operation or use of any nuclear facility, but if
such facility is located within the United States of America, its territories,
or possessions or Canada, this exclusion (c) applies only to


(injury to or destruction of
property at such nuclear facility


(property damage to such nuclear facility and any
property thereat.


IV.              As used in this endorsement:


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


(a)              any nuclear reactor,


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


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


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


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


(“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 (3), whether
new, renewal or replacement, being policies which become effective on or after
1st May, 1960, provided this paragraph (3) shall not be applicable to


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


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


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


 










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


 


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Nuclear
Incident Exclusion Clause Reinsurance - No. 4


 


(1)                                  This reinsurance does not cover any loss or
liability accruing to the Reassured as a member of, or subscriber to, any
association of insurers 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.


 





















 


War Risk
Exclusion Clause (Reinsurance)


 


As
regards interests which at time of loss or damage are on shore, no liability
shall attach hereto in respect of any loss or damage which is occasioned by
war, invasion, hostilities, acts of foreign enemies, civil war, rebellion,
insurrection, military or usurped power, or martial law or confiscation by
order of any government or public authority.


 


Nevertheless, this clause shall not be construed to
apply to loss or damage occasioned by riots, strikes, civil commotion,
vandalism or malicious damage.


 


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