Exhibit 10.45


 


Excess
Workers’ Compensation

Reinsurance
Contract

Effective:
January 1, 2004


 


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


 


 





 





















 


Excess
Workers’ Compensation

Reinsurance Contract

Effective: January 1, 2004


 


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 Workers’ Compensation Reinsurance


 


	
  Reinsurers

  	
   

  	
  Participations

  	
   

  
	
  American Re-Insurance Company, A Delaware
  Corporation

  	
   

  	
  35.0

  	
  %

  
	
  Employers Reinsurance Corporation

  	
   

  	
  10.0

  	
   

  
	
  Everest Reinsurance Company

  	
   

  	
  10.0

  	
   

  
	
  GE Reinsurance Corporation

  	
   

  	
  10.0

  	
   

  
	
  Hannover Ruckversicherungs-Aktiengesellschaft

  	
   

  	
  10.0

  	
   

  
	
  Max Re Ltd.

  	
   

  	
  25.0

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  100.0

  	
  %

  



 


Second Excess
Workers’ Compensation Reinsurance


 


	
  Reinsurers

  	
   

  	
  Participations

  	
   

  
	
  American Re-Insurance Company, A Delaware
  Corporation

  	
   

  	
  6.0

  	
  %

  
	
  Employers Reinsurance Corporation

  	
   

  	
  10.0

  	
   

  
	
  GE Reinsurance Corporation

  	
   

  	
  29.0

  	
   

  
	
  Hannover Ruckversicherungs-Aktiengesellschaft

  	
   

  	
  20.0

  	
   

  
	
  Max Re Ltd.

  	
   

  	
  25.0

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Through Benfield Limited

  	
   

  	
   

  	
   

  
	
  Companies Per Signing Schedule

  	
   

  	
  10.0

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  100.0

  	
  %

  



 


1





















 


Third Excess
Workers’ Compensation Reinsurance


 


	
  Reinsurers

  	
   

  	
  Participations

  	
   

  
	
  Employers Reinsurance Corporation

  	
   

  	
  10.0

  	
  %

  
	
  GE Reinsurance Corporation

  	
   

  	
  20.0

  	
   

  
	
  Hannover Ruckversicherungs-Aktiengesellschaft

  	
   

  	
  40.0

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Through Benfield Limited

  	
   

  	
   

  	
   

  
	
  Lloyd’s Underwriters and Companies

  	
   

  	
   

  	
   

  
	
  Per Signing
  Schedule(s)

  	
   

  	
  20.0

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  90.0% part of

  	
   

  
	
   

  	
   

  	
  100% share in the interests and liabilities of the
  “Reinsurer”

  	
   

  



 


2





















 


Excess
Workers’ Compensation

Reinsurance Contract


Effective:
January 1, 2004


 


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

  	
   

  	
  Commencement
  and Termination

  	
  1

  
	
  III

  	
   

  	
  Special
  Termination

  	
  2

  
	
  IV

  	
   

  	
  Territory
  (BRMA 51A)

  	
  3

  
	
  V

  	
   

  	
  Exclusions

  	
  3

  
	
  VI

  	
   

  	
  Retention
  and Limit

  	
  6

  
	
  VII

  	
   

  	
  Reinstatement

  	
  7

  
	
  VIII

  	
   

  	
  Definitions

  	
  8

  
	
  IX

  	
   

  	
  Other
  Reinsurance

  	
  11

  
	
  X

  	
   

  	
  Federal
  Terrorism Excess Recovery

  	
  11

  
	
  XI

  	
   

  	
  Annuities
  at Company’s Option

  	
  11

  
	
  XII

  	
   

  	
  Reports
  to Reinsurers

  	
  12

  
	
  XIII

  	
   

  	
  Subrogation

  	
  12

  
	
  XIV

  	
   

  	
  Premium

  	
  12

  
	
  XV

  	
   

  	
  Commission

  	
  13

  
	
  XVI

  	
   

  	
  Late Payments

  	
  13

  
	
  XVII

  	
   

  	
  Offset and
  Security

  	
  15

  
	
  XVIII

  	
   

  	
  Access
  to Records (BRMA 1D)

  	
  15

  
	
  XIX

  	
   

  	
  Liability of the Reinsurer

  	
  16

  
	
  XX

  	
   

  	
  Net Retained Lines (BRMA 32E)

  	
  16

  
	
  XXI

  	
   

  	
  Errors and Omissions (BRMA
  14F)

  	
  16

  
	
  XXII

  	
   

  	
  Currency (BRMA 12A)

  	
  16

  
	
  XXIII

  	
   

  	
  Taxes (BRMA 50B)

  	
  16

  
	
  XXIV

  	
   

  	
  Federal Excise Tax (BRMA
  17A)

  	
  17

  
	
  XXV

  	
   

  	
  Reserves

  	
  17

  
	
  XXVI

  	
   

  	
  Insolvency

  	
  19

  
	
  XXVII

  	
   

  	
  Arbitration

  	
  19

  
	
  XXVIII

  	
   

  	
  Service of Suit (BRMA 49C)

  	
  20

  
	
  XXIX

  	
   

  	
  Material Changes

  	
  21

  
	
  XXX

  	
   

  	
  Agency Agreement

  	
  21

  
	
  XXXI

  	
   

  	
  Intermediary (BRMA 23A)

  	
  21

  
	
   

  	
   

  	
  Schedule A

  	
   

  



 





















 


Excess
Workers’ Compensation

Reinsurance Contract


Effective:
January 1, 2004


 


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 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 at
12:01 a.m., Eastern Standard Time, January 1, 2004, 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
on any December 31 by giving the other party not less than 90 days prior notice
by certified mail.


 


C.             Unless the Company elects to reassume the
unearned reinsurance premium in force on 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


 


1





















 


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


 


E.              “Contract year” as used herein shall mean
the period from January 1, 2004 through December 31, 2004, and each subsequent
12-month period thereafter that this Contract continues in force. If this
Contract is terminated, the final contract year shall be the period from the
beginning of the then current contract year through the effective date of
termination if this Contract is on a “cutoff basis or through the end of the
“runoff’ period if this Contract is terminated on a “runoff” basis.


 


Article
III - Special Termination


 


A.           Notwithstanding the provisions of paragraph B of
Article II, either party may terminate this Contract at any time by giving 30
days prior written notice in the event any of the following circumstances occur
(if terminated by either party, said termination shall be on a “runoff” basis
unless the Company elects to have such termination on a “cutoff” basis;
however, termination shall be on a cutoff basis if the Reinsurer terminates
because the Company has failed to pay premium):


 


1.               The other party’s surplus at the beginning of any
contract year has been reduced by more than 25.0% of the amount of surplus 12
months prior to that date; or


 


2.               The other party’s policyholders’ surplus at any time
during any contract year has been reduced by more than 25.0% of the amount of
surplus at the date of the other party’s most recent financial statement filed
with regulatory authorities and available to the public as of the beginning of
the contract year; or


 


3.               The other party has become merged with, acquired by or
controlled by any other company, corporation or individual(s) not controlling
said party’s operations previously; or


 


4.               The purchase or sale of 51.0% or more of the Company
or its portfolio; or


 


5.               The State Insurance Department or other legal
authority in the other party’s state of domicile has ordered the other party to
cease writing business; or


 


6.               The other party has become insolvent or has been
placed into liquidation or receivership (whether voluntary or involuntary) or
proceedings have been instituted against the other party 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


 


2





















 


7.               The other party has ceased writing new and renewal
business; or


 


8.               The Reinsurer may terminate if the Company has failed
to pay reinsurance premiums in accordance with the Contract; or


 


9.               A material change has occurred in any two of the
Company’s three senior officers (i.e., the Chief Executive Officer, the
President, or the Chief Financial Officer).


 


B.             Notwithstanding the provisions of paragraph B of
Article II, the Company may terminate a Subscribing Reinsurer’s percentage
share in this Contract with 30 days prior written notice to the Subscribing
Reinsurer in the event the Subscribing Reinsurer’s A.M. Best’s rating has been
assigned or downgraded below A- (includes any NR rating) and/or Standard &
Poor’s rating has been assigned or downgraded below BBB+.


 


Article
IV - Territory (BRMA 51A)


 


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


 


Article V - Exclusions


 


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


 


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


 


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


 


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


 


2.               Ex-gratia payments.


 


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


 


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


 


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


 


3





















 


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.


 


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.


 


4





















 


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.


 


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.


 


5





















 


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, or retail gasoline marina;


 


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


 


31.         Acts of terrorism, as defined in
paragraph G of Article VIII, that involve the following or preparation of the
following:


 


a.               The use, release or escape of nuclear
materials, or that directly or indirectly result in nuclear reaction or
radiation or radioactive contamination; or


 


b.              That are carried out by means of the
dispersal or application of pathogenic or poisonous biological or chemical
materials and it appears that one purpose of the act of terrorism was to
release such materials.


 


B.             In the event the Company is inadvertently
bound on any risk which is excluded under subparagraph 9 or subparagraphs 14
through 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.


 


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.           As respects all losses subject hereto except losses
arising out of an occurrence of an act of terrorism, 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 (whether
involving any one or any combination of the classes of business covered
hereunder,


 


6





















 


regardless of the number
of policies under which such loss is payable or the number of different
interests insured), shown as “Company’s Retention” for that excess layer in
Schedule A attached hereto, arising out of each 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 retention, but the liability of the
Reinsurer 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
occurrence.


 


B.             As respects losses arising out of an
occurrence of an act of terrorism, as respects each excess layer of reinsurance
coverage provided hereunder, 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 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 retention, but the
liability of the Reinsurer shall not exceed the amount shown as “Reinsurer’s
Terrorism Per Occurrence Limit” for that excess layer in Schedule A attached
hereto as respects any one occurrence of an act of terrorism, nor shall it
exceed the amount shown as “Reinsurer’s Contract Year Terrorism Limit” for that
excess layer in Schedule A attached hereto as respects loss or losses arising
out of all occurrences of acts of terrorism during any one contract year.


 


C.             The Company deems that the maximum
Employers Liability policy limit subject hereto shall not exceed $1,000,000 for
policies issued in Texas and Illinois, or $2,000,000 for all other policies.
Policy limits in excess of the permissible amounts may be submitted by special
acceptance to the Reinsurer for coverage hereunder, subject to the provisions
of paragraph C of Article V.


 


Article VII - Reinstatement


 


A.           In the event all or any portion of the
reinsurance under any excess layer of reinsurance coverage provided by
paragraph A of Article VI of this Contract is exhausted by loss, the amount so
exhausted shall be reinstated immediately from the time the occurrence
commences hereon.


 


1.               As respects each amount so reinstated
under the first and second excess layers, the Company shall pay no additional
premium.


 


2.               As respects each amount so reinstated
under the third excess layer, the Company agrees to pay additional premium
equal to the product of the following:


 


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


 


b.              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 the third 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 the
third 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


 


7





















 


excess layer shall be
based on the annual deposit premium for that excess layer and shall be
readjusted when the earned reinsurance premium for that excess layer for the
contract year has been finally determined. Any reinstatement premium shown to
be due the Reinsurer for the third 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 the third excess layer of reinsurance
coverage provided by paragraph A of Article VI of this Contract shall not
exceed $5,000,000 as respects loss or losses arising out of any one occurrence,
nor shall it exceed $10,000,000 in all during any one contract year.


 


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.


 


8





















 


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:


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


c.               “Natural disaster” shall mean loss caused
by the perils of tornado, cyclone, windstorm, hurricane and hail arising from
the same atmospheric disturbance;


 


9





















 


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 claim-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.             “Act of terrorism” as used herein shall
include all loss, cost or expense, including fire following, related directly
or indirectly from either:


 


1.               Any act of any person or persons either
acting on behalf of or in connection with any organization or group with
activities directed towards overthrowing, intimidating, coercing or influencing
of any government de jure or de facto or of its populous or its
economic, political or social systems, by force, violence, weapons of mass
destruction, the destruction, disruption or subversion of communication and
information system infrastructures and/or its content thereof, or sabotage,
and/or threat therefrom; or


 


2.               An act of terrorism that is certified by
the Secretary of Treasury, in concurrence with the Secretary of State and the
Attorney General of the United States.


 


Terrorism losses also
include all actual or alleged losses, liabilities, damages, injuries, defense
costs, and costs or expenses directly or indirectly arising out of, contributed
by, caused by, resulting from, or in connection with any action taken in
controlling, preventing, suppressing, retaliating against, or responding to
such acts.


 


10





















 


Notwithstanding the
above, in the event a loss occurs on business subject hereunder which arises
out of an act of workplace violence and is not consistent with the provisions
of subparagraphs 1 and 2 above, such loss shall be covered hereunder, subject
to the provisions of Article V and all other provisions of this Contract and
not considered an act of terrorism. Further, any occurrence which is not or can
not be determined, classified or certified as per subparagraphs 1 and 2 above
shall be covered hereunder and not considered an act of terrorism.


 


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 quota share reinsurance and underlying excess 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 - Federal Terrorism Excess Recovery


 


A.           Any loss reimbursement the Company
receives from the United States Government under the Terrorism Risk Insurance
Act of 2002 (the “Terrorism Act”) as a result of occurrences commencing during
each contract year shall inure to the benefit of this Contract in the
proportion that the Company’s insured losses (as defined in the Terrorism Act)
in that occurrence under policies reinsured under this Contract bear to the
Company’s total insured losses in that occurrence.


 


B.             If a loss reimbursement received by the
Company under the Terrorism Act is based on the Company’s insured losses in
more than one occurrence and the United States Government does not designate
the amount allocable to each occurrence, the reimbursement shall be prorated in
the proportion that the Company’s insured losses in each occurrence bear to the
Company’s total insured losses arising out of all occurrences to which the
recovery applies.


 


Article
XI - 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 respect the indemnity potion
of the settlement. Additionally, it is the Company’s intent to place all annuities
or structured settlements with a carrier rated “A” or better by A.M. Best.


 


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.


 


11





















 


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.


 


Article
XII - Reports to Reinsurers


 


A.           Whenever a claim or settlement by the
Company hereunder is for an amount greater than $500,000 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 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. The Company shall also provide any additional information
that from time to time may be reasonably required by the Reinsurer to ascertain
liability under this Contract.


 


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 is liable upon receipt of reasonable evidence of the amount paid by
the Company.


 


Article XIII - Subrogation


 


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


 


Article
XIV - Premium


 


A.           As promptly as possible after the
effective date of this Contract, the Company shall remit the Reinsurer’s share
of the unearned premium (less commission thereon) for each excess layer of
reinsurance coverage provided by this Contract applicable to subject business
in force on the effective date of this Contract.


 


B.             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 12-month contract year in
accordance with the provisions of Article III), shown as


 


12





















 


“Annual Gross Minimum
Premium” for that excess layer in Schedule A attached hereto; or


 


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


 


C.             The Company shall pay the Reinsurer an
annual deposit premium for each excess layer of the amount, shown as “Annual Gross
Deposit Premium” for that excess layer in Schedule A attached hereto, in four
equal installments of the amount, shown as “Quarterly Gross 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.


 


D.            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 for each such
excess layer shall be remitted by the Company with its report. If the premium
so computed for any excess layer is less than the previously paid, but more
than the minimum premium, for that excess layer, the balance shall be returned
by the Reinsurer to the Company within 30 days of the report.


 


E.              “Net written premium” as used herein is
defined as the Company’s gross written 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 XV - Commission


 


A.           The Reinsurer shall allow the Company a
35.0% commission on all premiums ceded to the Reinsurer hereunder. The Company
shall allow the Reinsurer return commission on return deposit premiums at the
same rate.


 


B.             It is expressly agreed that the ceding commission
allowed the Company includes provision for all dividends, commissions, taxes,
assessments, and all other expenses of whatever nature, except loss adjustment
expense.


 


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 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


 


13





















 


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.


 


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.


 


14





















 


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
XVII - Offset and Security


 


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


 


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


 


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


 


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


 


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


 


Article
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.


 


15





















 


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 (BRMA 14F)


 


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


 


Article 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.


 


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


 


16





















 


profits tax returns, to
any state or territory of the United States of America or the District of
Columbia.


 


Article XXIV
- Federal Excise Tax (BRMA 17A)


 


(Applicable to those
reinsurers, excepting Underwriters at Lloyd’s London and other reinsurers
exempt from Federal Excise Tax, who are domiciled outside the United States of
America.)


 


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 does not qualify for full credit with any insurance regulatory
authority having jurisdiction over the Company’s reserves, or which is or
becomes rated “B++” or lower or holds an NR rating by A.M. Best or is or
becomes rated BBB or lower by Standard & Poor’s.)


 


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 premiums (includes deposit premiums paid in excess
of ceded premium earned by the Reinsurer) and 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
ceded unearned premiums and 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.


 


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


 


17





















 


(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 as 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 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.


 


18





















 


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 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.


 


19





















 


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.


 


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.


 


20





















 


Article XXIX
- Material Changes


 


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


 


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


 


Article XXX
- 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 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., 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.


 


21





















 


Schedule A


 


Excess Workers’ Compensation

Reinsurance Contract

Effective: January 1, 2004


 


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

  	
   

  	
  Third

  Excess

  	
   

  
	
  Company’s Retention

  	
   

  	
  $

  	
  1 ,000,000

  	
   

  	
  $

  	
  2,000,000

  	
   

  	
  $

  	
  5,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Reinsurer’s Per
  Occurrence Limit

  	
   

  	
  $

  	
  1,000,000

  	
   

  	
  $

  	
  3,000,000

  	
   

  	
  $

  	
  5,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Reinsurer’s Terrorism
  Per Occurrence Limit

  	
   

  	
  $

  	
  1 ,000,000

  	
   

  	
  $

  	
  3,000,000

  	
   

  	
  $

  	
  5,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Reinsurer’s Contract
  Year Terrorism Limit

  	
   

  	
  $

  	
  1 ,000,000

  	
   

  	
  $

  	
  3,000,000

  	
   

  	
  $

  	
  5,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Annual Gross Minimum
  Premium

  	
   

  	
  $

  	
  8,231 ,680

  	
   

  	
  $

  	
  6,097,500

  	
   

  	
  $

  	
  2,032,500

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Gross Premium Rate

  	
   

  	
  3.7969

  	
  %

  	
  2.8125

  	
  %

  	
  0.9375

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Annual Gross Deposit
  Premium

  	
   

  	
  $

  	
  10,289,600

  	
   

  	
  $

  	
  7,621,876

  	
   

  	
  $

  	
  2,540,624

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Quarterly Gross Deposit
  Premium

  	
   

  	
  $

  	
  2,572,400

  	
   

  	
  $

  	
  1 ,905,469

  	
   

  	
  $

  	
  635,156

  	
   

  



 


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.


 





















 


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 dale 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:


1.               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 Stales of America, or any agency thereof, with any
person or organization.


 


1





















 


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.


 


2





















 


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.


 





















 


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


 


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


 


Personal
Liability.

Farmers’ Liability.

Storekeepers’ Liability.


 


which become
effective on or after 31st December 1992, shall be deemed to include, from
their inception dates and thereafter, the following provision:-


 


Limited Exclusion
Provision.


 


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


 


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


 


3.               Without in any way restricting the
operation of paragraph 1 of this clause it is agreed that for all purposes of
this Agreement all the original liability contracts of the Reinsured, whether
new, renewal or replacement, of any class whatsoever (other than Personal
Liability, Farmers’ Liability, Storekeepers’ Liability or Automobile Liability
contracts), which become effective on or after 31st December 1992, shall
be deemed to include from their inception dates and thereafter, the following
provision:-


 


Broad Exclusion
Provision.


 


It is agreed that
this Policy does not apply:


 


(a)          to liability imposed by or arising from
any nuclear liability act, law or statute or any law amendatory thereof; nor


 


(b)         to bodily injury or property damage with
respect to which an Insured under this policy is also insured under a contract
of nuclear energy liability insurance (whether the Insured is unnamed in such
contract and whether or not it is legally enforceable by the Insured) issued by
the Nuclear Insurance Association of Canada or any other insurer or group or
pool of insurers or would be an Insured under any such policy but for its
termination upon exhaustion of its limit of liability; nor


 


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


 


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


 


1





















 


(ii)          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; and


 


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


 


As used in this
Policy:


 


1.               The term “nuclear energy hazard” means
the radioactive, toxic, explosive, or other hazardous properties of radioactive
material;


 


2.               The term “radioactive material” means
uranium, thorium, plutonium, neptunium, their respective derivatives and
compounds, radioactive isotopes of other elements and any other substances
which may be designated by or pursuant to any law, act or statute, or law
amendatory thereof as being prescribed substances capable of releasing atomic
energy, or as being requisite for the production, use or application of atomic
energy;


 


3.               The term “nuclear facility” means:


 


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


 


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


 


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


 


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


 


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


 


4.               The term “fissionable substance” means
any prescribed substance that is, or from which can be obtained, a substance
capable of releasing atomic energy by nuclear fission.


 


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


 


2





















 


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.