Exhibit 10.38


 





JARDINE SAYER


& Company,
Inc.


 


WORKERS
COMPENSATION AND EMPLOYERS LIABILITY

STATUTORY EXCESS OF LOSS REINSURANCE AGREEMENT

P-104/99


 


EFFECTIVE:
JANUARY 1, 1999


 


Pinnacle
Assurance Corporation,

AmComp Preferred Insurance Company,

Thomas Jefferson Insurance Company,

AmComp Insurance Company


 


A member
of the Jardine Lloyd Thompson Group plc


 





















 


WORKERS’
COMPENSATION AND EMPLOYERS LIABILITY

STATUTORY EXCESS OF LOSS REINSURANCE AGREEMENT

P-104/99


EFFECTIVE:
January 1, 1999


 


TABLE OF CONTENTS


 


	
  ARTICLE

  	
   

  	
  SUBJECT

  	
   

  	
  Page

  
	
  I

  	
   

  	
  BUSINESS COVERED

  	
   

  	
  1

  
	
  II

  	
   

  	
  TERM

  	
   

  	
  1

  
	
  III

  	
   

  	
  TERRITORY

  	
   

  	
  2

  
	
  IV

  	
   

  	
  EXCLUSIONS

  	
   

  	
  2

  
	
  V

  	
   

  	
  SPECIAL ACCEPTANCE

  	
   

  	
  4

  
	
  VI

  	
   

  	
  NET RETAINED LINES

  	
   

  	
  6

  
	
  VII

  	
   

  	
  OTHER REINSURANCE

  	
   

  	
  6

  
	
  VIII

  	
   

  	
  DEFINITIONS

  	
   

  	
  6

  
	
  IX

  	
   

  	
  LIMIT AND RETENTION

  	
   

  	
  8

  
	
  X

  	
   

  	
  RATE AND PREMIUM

  	
   

  	
  8

  
	
  XI

  	
   

  	
  EXTRA CONTRACTUAL
  OBLIGATIONS

  	
   

  	
  9

  
	
  XII

  	
   

  	
  EXCESS OF POLICY LIMITS

  	
   

  	
  9

  
	
  XIII

  	
   

  	
  OFFSET

  	
   

  	
  10

  
	
  XIV

  	
   

  	
  CURRENCY

  	
   

  	
  10

  
	
  XV

  	
   

  	
  ERRORS AND OMISSIONS

  	
   

  	
  10

  
	
  XVI

  	
   

  	
  TAXES

  	
   

  	
  11

  
	
  XVII

  	
   

  	
  INSPECTION

  	
   

  	
  11

  
	
  XVIII

  	
   

  	
  SERVICE OF SUIT

  	
   

  	
  11

  
	
  XIX

  	
   

  	
  INSOLVENCY

  	
   

  	
  12

  
	
  XX

  	
   

  	
  ARBITRATION

  	
   

  	
  13

  
	
  XXI

  	
   

  	
  SALVAGE AND SUBROGATION

  	
   

  	
  14

  
	
  XXII

  	
   

  	
  COMMUTATION

  	
   

  	
  14

  
	
  XXIII

  	
   

  	
  INTERMEDIARY

  	
   

  	
  16

  
	
  XXIV

  	
   

  	
  PARTICIPATION

  	
   

  	
  16

  
	
   

  	
   

  	
  SIGNATURE

  	
   

  	
  17

  



 


ATTACHMENT:


 


•                  NUCLEAR INCIDENT EXCLUSION CLAUSE – LIABILITY – USA -
NMA –1590


 





















 


WORKERS’
COMPENSATION AND EMPLOYERS LIABILITY

STATUTORY EXCESS OF LOSS REINSURANCE AGREEMENT

P-104/99

(hereinafter referred to as the “Agreement”)


 


This Agreement is made and entered into by and between
Pinnacle Assurance Corporation, AmComp Preferred Insurance Company, Thomas
Jefferson Insurance Company, AmComp Insurance Company, other member companies
of the AmComp Insurance Group, North Palm Beach, Florida, and certain quota
share Reinsurers (hereinafter collectively referred to as the “Company”) of the
one part and Continental Casualty Company (hereinafter referred to as the “Reinsurer”)
of the other part.


 


This Agreement replaces the fully executed WORKERS’
COMPENSATION AND EMPLOYERS LIABILITY STATUTORY EXCESS OF LOSS REINSURANCE
AGREEMENT - P-104/99, effective January 1, 1999.


 


ARTICLE I


 


BUSINESS COVERED


 


This Agreement is to indemnify the Company in respect
of the net excess liability as herein provided and specified which may accrue
to the Company as a result of any loss or losses which may occur during the
term of this Agreement in respect of in-force, new and renewal Policies issued
by or through Florida Administrative Services and/or Pinnacle Administrators,
Inc. on behalf of the Company, and classified by the Company as Workers’
Compensation and Employers’ Liability, including liability under U.S.
Longshoremen’s and Harbor Worker’s Compensation or similar acts of federal or
state law or common law on business underwritten by the Company.


 


ARTICLE II


 


TERM


 


This Agreement shall be effective for a period of
thirty-six months from 12:01 A.M., Standard Time (as defined in the Company’s
policies) January 1, 1999 to 12:01 A.M., Standard Time, January 1, 2002, on
in-force, new and renewal policies. The first accounting period shall be from
January 1, 1999 to January 1, 2000. The second accounting period shall be from
January 1, 2000 to January 1, 2001. The third accounting period shall be from
January 1, 2001 to January 1, 2002.


 


Upon expiration of this Agreement, coverage will
terminate on a “cut-off” basis. The Reinsurer shall not be liable for losses
occurring subsequent to the expiration date of this Agreement and no return
premium shall be due to the Company.


 


1





















 


However, upon expiration of this Agreement, the Company
may elect to purchase continuing coverage on a “run-off” basis, in which case
the Reinsurer shall remain liable for losses occurring on all Policies in force
as of the expiration of this Agreement until the termination or next
anniversary of such Policies, whichever occurs first.


 


“Run-off” coverage shall apply for a period of twelve
(12) months from the expiration of this Agreement plus odd time, if any, not to
exceed eighteen (18) months in all. The premium applicable to the “run-off”
period shall be the unearned premium reserve for policies in force as of the
expiration of this Agreement, payable in accordance with PREMIUM and REPORTS
AND REMITTANCES Articles of this Agreement.


 


Notwithstanding the foregoing, either party to this
Agreement shall have the right to cancel this Agreement immediately by giving
written notice to the other party by registered mail in the event that the
other party:


 


1
..                                  Suffers a reduction of policyholder surplus of 50% or
greater during the term of the Agreement; or


 


2.                                     Is declared insolvent, put in liquidation, or
restricted as to underwriting by any competent regulatory authority or court of
competent jurisdiction.


 


Immediate Termination shall apply on a “cut-off” basis
only.


 


ARTICLE III


 


TERRITORY


 


The territorial scope of this Agreement will cover that
of the Company’s policies, but is limited to policies issued to employers with
employees operating in the states of Florida, Alabama, Georgia, Illinois,
Indiana, Kentucky, Wisconsin, Tennessee, South Carolina and Ohio, but this
limitation will not apply to losses if the Company’s policies provide coverage
outside the aforesaid territorial limits.


 


Effective August 1, 1999, additional states are added,
as follows: Colorado, Mississippi, Missouri, Oklahoma, New Mexico, North
Carolina, Texas, Virginia, West Virginia, Louisiana, Arkansas and Arizona.


 


ARTICLE IV


 


EXCLUSIONS


 


This Agreement does not apply to and specifically
excludes the following:


 


A.                                   All reinsurance assumed by the Company; however, local
agency reinsurance accepted in the normal course of business will not be
excluded hereunder and inter-company pooling arrangements will not be excluded
hereunder.


 


2





















 


B.                                     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, howsoever 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.


 


C.                                     Loss or liability excluded by the Nuclear Incident
Exclusion Clause-Liability-Reinsurance U.S. as attached.


 


D.                                    Manufacturing, production and refining of petroleum and
its products.


 


E.                                      Professional sports teams.


 


F.                                      Operations where the governing classification are
railroad class codes.


 


G.                                     Offshore drilling.


 


H.                                    Tunneling operations involving tunnels over 100 feet in
length (auguring shall not be considered tunneling).


 


I.                                         Wrecking or demolition of buildings, structures or
vessels, but not to exclude the wrecking or demolition of buildings not
exceeding five stories in height.


 


J.                                        Financial Guarantee.


 


K.                                    Loss or liability arising from any participation in any
Pools, Associations and Syndicates.


 


L.                                      The manufacturing, storage, or transportation of
fireworks, ammunition, nitroglycerin, or other explosive devices.


 


M.                                 No reinsurance indemnity will be afforded under this
Agreement for:


 


(1)                                  Operations in which asbestos contracting related
classifications of 5472 or 5473 or Asbestos Goods Manufacturing classification
of 1852 are appropriately assigned.


 


(2)                                  Operations involving the installation or removal of
asbestos material, but not to exclude the incidental exposure to asbestos
material which may occur in the normal operations including, but not limited
to, plumbing, carpentry, other building contractors or subcontractors and
retail or wholesale distributors.


 


3





















 


N.                                    All risks involving exposure to the following
substances:


 


(1)                                  dioxin


 


(2)                                  polychlorinated byphenlyls.


 


Effective January 1, 2000, the
following classes of business shall be excluded: 


 


O.                                    Maritime Business.


 


P.                                      FELA Business.


 


If the Company is inadvertently bound or is unknowingly
exposed (due to error, automatic provisions of policy coverage, or as imposed
by law) on a risk otherwise excluded herein, such risk shall be covered until
the Company receives knowledge thereof, and pending cancellation of such risk,
for a period of ten days in addition to the time permitted for cancellation in
the original policy, such total not exceeding 70 days in all.


 


ARTICLE V


 


SPECIAL
ACCEPTANCE


 


Effective January 1, 1999


 


The Company may submit to the Wexford Underwriting
Managers, Inc., on behalf of the Reinsurer for special acceptance hereunder business
not covered by this Agreement. If said business is accepted by Wexford
Underwriting Managers, Inc., it shall be subject to the terms of this
Agreement, except as such terms are modified by such acceptance.


 


All individual waiver of Subrogation need to be
referred to Wexford Underwriting Managers Inc. prior to issuing.


 


The following additional Classifications are to be
submitted to Wexford Underwriting Managers, Inc. for approval prior to quoting
to determine if exposures pose more than an incidental hazard.


 


A.                                   Any account with manual Premium of $500,000 or more.


B.                                     Any account with an Experience Modification of 1.75 or
higher and premium of $100,000 or higher.


C.                                     Any account with more than incidental USL&H or
maritime exposure. Incidental is defined for the purposes of this Agreement as
not having more than twenty percent (20%) of the Insured’s overall workers’
compensation payroll (excluding clerical) assigned to this type of exposure.


 


4





















 


In addition, all accounts that have the following NCCI
Code Classifications shall be referred to Wexford Underwriting Managers, Inc.
prior to quoting:


 


	
  CODE

  	
   

  	
  CLASSIFICATION

  
	
   

  	
   

  	
   

  
	
  1164/1165

  	
   

  	
  Mining Risks

  
	
  2702

  	
   

  	
  Logging and Lumbering

  
	
  5551

  	
   

  	
  Roofing (all kinds)

  
	
  7219

  	
   

  	
  Trucking: other than local as a
  primary code.

  
	
  7720

  	
   

  	
  Police/Detective Agencies.

  
	
  8350

  	
   

  	
  Gas Dealers – LPG

  
	
  7538

  	
   

  	
  Electric Light or Power Line
  Construction.

  



 


Effective January 1, 2000


 


The following additional Classifications are to be
submitted to Wexford Underwriting Managers, Inc. for approval prior to quoting
to determine if exposures pose more than an incidental hazard.


 


A.                                   All Aircraft.


B.                                     Any account with manual Premium of $300,000 or more.


C.                                     Any account with an Experience Modification of 1.50 or
higher and premium of $100,000 or higher.


D.                                    Any account with more than incidental USL&H
exposure. Incidental is defined, for the purposes of this Agreement, as not
having more than ten percent (10%) of the Insured’s overall workers’
compensation payroll (excluding clerical) assigned to this type of exposure.


E.                                      All Hazard Group IV business.


F.                                      NCCI D&E and OD Accounts.


G.                                     Trucking, other than local with greater than 200 mile
radius. 


H.                                    All Firefighters.


I.                                       Accounts with Structural Iron/Steel erection.


 


In addition, all accounts that have the following NCCI
Code Classifications shall be referred to Wexford Underwriting Managers, Inc.
prior to quoting:


 


	
  CODE

  	
   

  	
  CLASSIFICATION

  
	
   

  	
   

  	
   

  
	
  1164/1165

  	
   

  	
  Mining Risks

  
	
  2702

  	
   

  	
  Logging and Lumbering

  
	
  5551

  	
   

  	
  Roofing (all kinds)

  
	
  7720

  	
   

  	
  Police/Detective Agencies.

  
	
  8350

  	
   

  	
  Gas Dealers – LPG

  
	
  7538

  	
   

  	
  Electric Light or Power Line
  Construction.

  



 


It is further agreed that, effective January 1, 2000,
the Waiver of Subrogation referral is removed from the Referral List.


 


5





















 


ARTICLE VI


 


NET RETAINED
LINES


 


This Agreement applies only to that portion of any
Policy which the Company retains net for its own account, and in calculating
the amount of any Loss hereunder and also in computing the amount or amounts in
excess of which this Agreement 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. 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 any amounts which may have become
due from them, whether such inability arises from the insolvency of such other
Reinsurer or otherwise.


 


ARTICLE VII


 


OTHER REINSURANCE


 


The Company is permitted to have other treaty
reinsurance. The premium for any such reinsurance that inures to the benefit of
this Agreement may be deducted from the Gross Subject Premium hereunder.
Additionally, the Company may purchase facultative reinsurance on any subject
risk it deems advisable, and the premium for that portion of the Company’s
policy reinsured elsewhere will be deducted from the Gross Subject Premium
hereunder.


 


ARTICLE VIII


 


DEFINITIONS


 


“Ultimate Net Loss” as used in this Agreement will mean
the amount on any settlement including Extra Contractual Obligations and Excess
of Policy Limits awards, or judgment paid by the Company or for which the
Company becomes liable to pay; such loss to include expenses of investigation,
litigation and interest (including interest accrued prior to final judgment if
included as part of loss on reinsured policies) after deduction of all
salvages, subrogations, discounts, and recoveries received by the Company, and
inuring reinsurance whether recovered or not. Loss will include loss expense
arising from the settlement of claims. Recoveries from the Company’s underlying
reinsurance agreements will not be deducted when establishing ultimate net loss
hereunder.


 


All salvages, recoveries, or reinsurance received
subsequent to any loss settlement hereunder will be applied as if received
prior to the settlement, and all necessary adjustments will be made by the
parties hereto. Nothing in this definition, however, should be construed to
mean that losses under this Agreement are not recoverable until the Company’s
ultimate net loss has been ascertained.


 


6





















 


“Loss expense” as used in this Agreement will mean all
expenses incurred by the Company in the investigation appraisal, adjustment,
litigation and/or defense of claims under policies reinsured hereunder,
including court costs and interest accrued prior to final judgment if included
as part of loss expenses on reinsured policies, interest accrued after final
judgment, legal expenses and cost incurred in connection with coverage
questions and legal actions connected thereto arising under reinsured policies
but excluding internal office expenses (except staff nurses) , salaries, per
diem, and other remuneration of regular Company employees. However, in the
event a verdict or judgment is reduced by an appeal or a settlement, subsequent
to the entry of the judgment resulting in an ultimate saving on such verdict or
judgment or a settlement is reversed outright, the loss expense incurred in
securing such final reduction or reversal shall be prorated between the
Reinsurer and the Company in the proportion that each benefits from such
reduction or reversal, and the expenses incurred up to the time of the original
verdict or judgment shall be a) prorated in proportion to each party’s interest
in such verdict or judgment, or b) added to the Company’s loss when the terms
and conditions of the Company’s original policies reinsured hereunder include
loss expense as part of the policy limit.


 


“Direct Earned Premium” as used in this Agreement is
defined as the earned portion of the premium for inforce, new and renewal
Policies ceded to this Agreement adjusted for experience modification,
discounts, credits, surcharges, expense constants and deductible credits, plus
or minus premium arising from audit adjustments, minus cancellation and return
premium, minus premiums paid for facultative reinsurance which inures to the
benefit of this Agreement.


 


“Occurrence” as used in this Agreement unless otherwise
defined in the policies reinsured hereunder will mean each and every accident,
disaster, occurrence or casualty, or series of accidents, disasters,
occurrences or casualties arising out of one event. Occupational disease shall
be deemed to take place on the date upon which the employee is last exposed at
work to conditions allegedly causing such occupational disease.


 


“Agreement Year” as used in this Agreement will mean
the period of 12 consecutive months commencing with the inception of this
Agreement and each anniversary thereof that this Agreement remains in effect
including run-off or short term cancellation.


 


The term “Policy” shall mean any oral or written
binder, policy, or contract of insurance or reinsurance issued, accepted or
held covered provisionally or otherwise, by or on behalf of the Company.


 


7





















 


ARTICLE IX


 


LIMIT AND
RETENTION


 


1 .                                    The Company shall retain for its own account and be
liable for the first $250,000 of Ultimate Net Loss resulting from each and
every Loss Occurrence that commences on or after the effective date of this
Agreement.


 


2.                                       The Reinsurer will then indemnify the Company for the
amount of Ultimate Net Loss in excess of $250,000, but the limit of liability
to the Reinsurer will not exceed Statutory limits for Workers’ Compensation or
$1,000,000 for Employers Liability of Ultimate Net Loss resulting from each and
every Loss Occurrence that commences on or after the effective date of this
Agreement.


 


ARTICLE X


 


RATE AND
PREMIUM


 


A.                                   The Company will pay the Reinsurer 2.00% of the Direct
Earned Premium on all in force, new and renewal policies written for the period
January 1, 1999 to January 1, 2000, and 3.0% of the Direct Earned Premium on
all in force, new and renewal policies written on and after January 1, 2000.
The Company will be subject to the following premium for each of the Agreement
Years:


 


	
   

  	
   

  	
  Minimum

  	
   

  	
  Deposit Premium

  	
   

  
	
  January 1, 1999 Agreement Year

  	
   

  	
  $

  	
  1,600,000

  	
   

  	
  $

  	
  2,000,000

  	
   

  
	
  January 1, 2000 Agreement Year

  	
   

  	
  $

  	
  2,592,000

  	
   

  	
  $

  	
  3,240,000

  	
   

  
	
  January 1, 2001 Agreement year

  	
   

  	
  $

  	
  3,360,000

  	
   

  	
  $

  	
  4,200,000

  	
   

  



 


The Deposit Premium is payable in
equal quarterly installments on January 31st, April 30th,
July 31st and October 31st of each Agreement year.


 


B.                                     Annually, within ninety days of the end of each
Agreement Year, the Company will report Direct Earned Premium earned during the
Agreement Year, apply a treaty rate as reflected above to such Direct Earned
Premium to determine the developed reinsurance premium, and remit to the
Reinsurer the difference between the developed reinsurance premium and the
Deposit Premium, if any.


 


C.                                     As respects each Agreement Year, if the developed
reinsurance premium calculated in Paragraph B. is less than the Minimum Premium,
the Reinsurer will refund the difference within thirty days of its receipt of
the Company’s report, subject to the minimum reinsurance premium for each
Agreement Year.


 


8





















 


ARTICLE XI


 


EXTRA CONTRACTUAL
OBLIGATIONS


 


This Agreement will extend to cover any losses arising
from claims related extra contractual obligations.


 


This Agreement shall protect the Company, within the
limits hereof, where the loss includes any Extra Contractual Obligations.
Eighty percent (80%) of the amount of any Extra Contractual Obligations shall
be added to the Ultimate Net Loss which is covered under the provisions of this
Agreement and the sum thereof shall be considered one loss subject to the
provisions of this Agreement.


 


“Extra Contractual Obligations” are defined as those
liabilities not covered under any other provision of this Agreement and which
arise from the handling of any claim on business covered hereunder, such
liabilities arising because of, but not limited to, the following: failure by
the Company to settle within the policy limit, or by reason of alleged or
actual negligence, fraud or bad faith in rejecting an offer of settlement or in
the preparation of the defense or in the trial of any action against its insured
or reinsured or in the preparation or prosecution of an appeal consequent upon
such action.


 


The date on which any Extra Contractual Obligation is
incurred by the Company shall be deemed, in all circumstances, to be the date
of the original loss from which the Extra Contractual Obligation arises.


 


However, this Article shall not apply where the loss
has been incurred due to fraud by a member of the Board of Directors or a
corporate officer 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.


 


ARTICLE XII


 


EXCESS OF POLICY
LIMITS


 


This Agreement will extend to cover any losses arising
from claims related excess limits liability.


 


This Agreement shall protect the Company, within the
limits hereof, in connection with Ultimate Net Loss in excess of the limit of
its original policy for which the Company may be legally liable to pay on
business covered hereunder, where loss in excess of the limit has been incurred
because of, but not limited to, its failure to settle within the original
policy limit by reason of alleged or actual negligence, fraud or bad faith in
rejecting an offer of settlement or in the preparation of the defense or in the
trial of any action against its insured or reinsured or in the preparation or
prosecution of an appeal consequent upon such action.


 


Eighty percent (80%) of the amount of any excess of
original policy limits shall be added to the Ultimate Net Loss which is covered
under the provisions of this Agreement.


 


9





















 


However, this Article shall not apply where the loss
has been incurred due to fraud by a member of the Board of Directors or a
corporate officer 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.


 


For the purpose of this Article, the word “loss” shall
mean any amounts for which the Company would have been contractually liable to
pay had it not been for the limit of the original policy.


 


ARTICLE XIII


 


OFFSET


 


Each party hereto shall have, and may exercise at any
time and from time to time, the right to offset any balances, whether on
account of premiums or on account of losses or otherwise, due from such party
to the other party hereto under this Agreement and the prior year’s Agreement
effective September 1, 1998 and may offset the same against any balance or
balances due to the former from the latter. The party asserting the right of
offset shall have and may exercise such right whether the balance or balances
due to such party from the other are on account of premiums or on account of
losses or otherwise and regardless of the capacity, whether as Company or as
Reinsurer, in which each party acted under this Agreement, provided, however,
that in the event of the insolvency of a party hereto, offsets shall only be
allowed in accordance with relevant statutes.


 


ARTICLE XIV


 


CURRENCY


 


All of the provisions of this Agreement involving
dollar amounts are expressed in terms of United States dollars and all premium
and loss payments hereunder shall be made in United States dollars.


 


ARTICLE XV


 


ERRORS AND
OMISSIONS


 


Any inadvertent delay, omission, or error shall not be
held to relieve either party hereto from any liability which would attach to it
hereunder if such delay, omission or error had not been made, provided such
delay, omission or error is promptly rectified upon discovery.


 


10





















 


ARTICLE XVI


 


TAXES


 


The Company will pay all taxes of premiums reported to
the Reinsurer on this Agreement.


 


ARTICLE XVII


 


INSPECTION


 


At all reasonable times at its regular place of
business, the Company shall place at the disposal of the Reinsurer and the
Reinsurer shall have the right to inspect, examine, audit, and verify through
its authorized representatives, all books, records, and papers of the Company
in connection with any reinsurance hereunder, or claims in connections
herewith.


 


The Reinsurer, at its own expense, will have the right
to make copies or extracts of any books, records, and papers.


 


ARTICLE XVIII


 


SERVICE OF SUIT


 


(This Clause is only applicable to unauthorized
Reinsurers, or to the Reinsurers who are domiciled outside the United States of
America.)


 


It is agreed that in the event of the failure of the
Reinsurer to pay any amount claimed to be due hereunder, the Reinsurer, at the
request of the Company, will submit to the jurisdiction of any Florida State
Court and will comply with all requirements necessary to give such Court
jurisdiction, and all matters arising hereunder shall be determined in
accordance with the law of the State of Florida and practice of such Court.
Nothing in this Clause 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.


 


It is further agreed that service of process in such
suit may be made upon Harris, Kukaey, Helgesen, P.A., or an agreed-upon
attorney, and that in any suit instituted, the Reinsurer will abide by the
final decision of such Court or of any Appellate Court in the event of an
appeal.


 


The above named are authorized and directed to accept
service of process on behalf of the Reinsurer in any such suit and/or upon the
request of the Company to give a written undertaking to the Company that they
will enter a general appearance upon the Reinsurer’s’ behalf in the event such
a suit shall be instituted.


 


11





















 


Further, pursuant to any statute of any State,
Territory or District of the United States which makes provision therefor, the
Reinsurer hereby designates the Superintendent, Commissioner or the Director of
Insurance or other officer specified for that purpose in the statute, or his
successor or successors in office, as his 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
Agreement, and hereby designates the above-named as the firm to whom the said
officer is authorized to mail such process or a true copy thereof.


 


ARTICLE XIX


 


INSOLVENCY


 


In the event of the insolvency of the Company, 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 any 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.


 


It is further understood and agreed that, in the event
of the insolvency of the Company, the reinsurance under this Agreement shall be
payable directly by the Reinsurer to the Company or to its liquidator,
receiver, conservator or statutory successor, except as provided by the
applicable reinsurance regulation or except (a) where the Agreement
specifically provides another payee of such reinsurance in the event of the
insolvency of the Company or (b) 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.


 


12





















 


ARTICLE XX


 


ARBITRATION


 


As a condition precedent to any right of action
hereunder, any dispute arising out of or related to the interpretation of this
Agreement whether arising before or after termination, not otherwise resolved
by the parties, shall be submitted to the decision of a board of arbitration
composed of three arbitrators, meeting in North Palm Beach, Florida unless
otherwise agreed.


 


The members of the board of arbitration shall be active
or retired, disinterested officials of insurance or reinsurance companies or
Lloyd’s of London Underwriters, or members of any Exchange formed for the
purpose of writing insurance or reinsurance. Each party shall appoint its
arbitrator, and the two arbitrators shall choose a third arbitrator before
instituting the hearing. If the respondent fails to appoint its arbitrator
within four weeks after being requested to do so by the claimant the claimant
shall also appoint the second arbitrator. If the two arbitrators fail to agree
upon the appointment of a third arbitrator within four weeks after their
nominations, each of them shall name three, of whom the other shall decline
two, and the decision shall be made by drawing lots.


 


The claimant shall submit its initial briefs within 20
days from the appointment of the third arbitrator. The respondent shall submit
its brief within 20 days thereafter, and the claimant may submit a reply brief
within 10 days after filing of respondent’s initial brief.


 


The board shall make its decision with due regard to
the custom and usage of the insurance and reinsurance business and with a view
to effecting the intent of this Agreement. The board is relieved from following
strict rules of law; however, insofar as the board looks to substantive law, it
shall consider the law of the state of Florida. The board shall issue its
decision in writing based upon a hearing in which evidence may be introduced
without following strict rules of evidence but in which cross-examination and
rebuttal shall be allowed. The board shall make its decision within 60 days
following the termination of the hearings unless the parties consent to an
extension. The majority decision of the board shall be final and binding upon
all parties to the proceeding. Judgment may be entered upon the award of the
board in any court having jurisdiction thereof.


 


13





















 


Each party shall bear the expense of its own arbitrator
and shall jointly and equally bear with the other party the expense of the
third arbitrator . The remaining costs of the arbitration proceedings shall be
allocated by the board. The board is prohibited from awarding punitive,
exemplary and/or treble damages of whatever nature in connection with any
arbitration proceeding concerning this Agreement.


 


ARTICLE XXI


 


SALVAGE AND
SUBROGATION


 


The Reinsurer shall be subrogated, as respects any loss
for which the Reinsurer shall actually pay or become liable, but only to the
extent of the amount of payment by, or the amount of liability to, the
Reinsurer, to all the rights of the Company against any person or other entity
who may be legally responsible in damages for said loss. The Company hereby
agrees to enforce such rights, but in case the Company shall refuse or neglect
to do so, the Reinsurer is hereby authorized and empowered to bring any
appropriate action in the name of the Company or its policyholders, or
otherwise to enforce such rights.


 


Any recoveries, salvages or reimbursements applying to
risks covered under this Agreement shall always be used to reimburse the excess
carriers (from the last to the first, beginning with the carrier of the last
excess), according to their participation, before being used in any way to
reimburse the Company for its primary loss, inclusive of original deductibles
where applicable.


 


All salvages, recoveries or reimbursements, after
deduction of loss adjustment expense applicable thereto, recovered or received
subsequent to a loss settlement under this Agreement shall be applied as if
recovered or received prior to the aforesaid settlement, and all necessary
adjustments shall be made by the parties hereto, provided always, that nothing
in this Article shall be construed to mean that losses under this Agreement are
not recoverable until the Company’s ultimate net loss has been ascertained.


 


ARTICLE XXII


 


COMMUTATION


 


The Company and the Reinsurer may commute outstanding
case reserves only by mutual consent. The Company shall submit a statement to
the Reinsurer listing payments and case reserves in respect of all incurred
losses reported to the Company subject to this Agreement. The statement shall
form the basis of an agreed value for such case reserves. The net present value
of case reserves contained therein shall be determined by employing one or more
of the following alternatives:


 


A.                                   Calculation based on the following criteria:


 


1.                                       In respect of all “index linked” benefits, annuity
values shall be calculated based upon annual discount of 0%, and an annual
escalation of 0%.


 


14





















 


2.                                       In respect of all un-indexed benefits, annuity values
shall be calculated based upon annual discount of 4%.


 


3.                                       In respect of all future medical costs, annuity
calculation shall be based upon the Company’s evaluation of long term medical
care and rehabilitation requirements, using an annual discount of 0% and an
annual escalation of 0%.


 


4.                                       Where applicable, survivor’s life expectancy as well as
remarriage probability shall be reflected in the calculation by employing
tables recommended by a mutually acceptable actuarial consultant.


 


B.                                     Any other method of calculating the agreed net present
value of one or more case reserves, as mutually agreed between the Company and
the Reinsurer.


 


Such calculation, if and when agreed by the Company and
the Reinsurer, shall be considered the final and agreed value of all commuted
case reserves subject to this Agreement and the resulting payment by the
Reinsurer shall be accepted by the Company in full settlement of the Reinsurer’s
liability for all such commuted case reserves.


 


If agreement cannot be reached, the effort will be
abandoned or, alternatively, if the Reinsurer and the Company agree to do so,
then the Company shall mutually appoint an independent actuary who shall
investigate, determine, and capitalize the net present value of any such
unsettled claims. The cost of any independent actuary shall be shared on an
equal basis by the Reinsurer and the Company.


 


In the event the Reinsurer and the Company cannot reach
an agreement on an independent actuary but agree to arbitration of the net
present value of outstanding losses, then each party shall appoint an actuary.
If either party refuses or neglects to appoint an actuary within 30 days after
settlement cannot be reached, the arbitration will be abandoned. The two chosen
actuaries shall then select a third actuary. If the two actuaries fail to agree
on the selection of a third actuary within 30 days after their appointment,
each of them shall name three individuals, of whom the other shall decline two,
and the decision shall be made by drawing lots.


 


All actuaries, selected by drawing lots, shall be
regularly engaged in the valuation of Workers’ Compensation claims and shall be
disinterested in the outcome of the commutation and shall be a Fellow of
Society of Actuaries/Fellow of the Casualty Actuarial Society or an Associate
of Society of Actuaries/Associate of Casualty Actuarial Society. The decision
in writing of any two actuaries, when filed with the parties hereto, will be
final and binding on both parties. The expenses of the actuaries and of the
commutation shall be equally divided between the two parties.


 


Any payment by the Reinsurer under this Article shall
constitute a complete release of the Reinsurer for their liability under the
excess layer(s) commuted as respects such claim.


 


15





















 


ARTICLE XXIII


 


INTERMEDIARY


 


Jardine Sayer & Company, Inc., is hereby recognized
as the Intermediary negotiating this Agreement for all business hereunder. All
communications, including notices, premiums, return premiums, commissions,
taxes, losses, loss adjustment expenses, salvages and loss settlements relating
thereto shall be transmitted to the Reinsurer or the Company through Jardine
Sayer & Company, Inc., P.O. Box 6400, Lawrenceville, New Jersey 08648-0400.
Payments made 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 only to constitute payment to the Company to the extent that such
payments are actually received by the Company.


 


ARTICLE XXIV


 


PARTICIPATION


 


WORKERS’ COMPENSATION AND EMPLOYERS LIABILITY STATUTORY
EXCESS OF LOSS REINSURANCE AGREEMENT EFFECTIVE: January 1, 1999. This Agreement
obligates the Reinsurer for the proportion shown below of the interests and
liabilities set forth under this Agreement.


 


IN WITNESS WHEREOF, the parties hereto, by their
authorized representatives, have executed this Agreement as of the following
dates.


 


In New York, this 15 day of June, 2000.


 


	
  100.0% Reinsurer: Continental
  Casualty Company

  



 


	
  /s/ [ILLEGIBLE]

  	
   

  
	
  Vice President

  	
   

  
	
  Title

  



 


In North Palm Beach, this 14 day of September, 2000.


 


PINNACLE ASSURANCE CORPORATION


AMCOMP PREFERRED INSURANCE COMPANY


THOMAS JEFFERSON INSURANCE COMPANY


AMCOMP INSURANCE COMPANY


 


 


	
  /s/ Donald Johnson

  	
   

  
	
  CFO

  	
   

  
	
  Title

  



 


16





















 





JARDINE SAYER


& Company,
Inc.


 


NUCLEAR INCIDENT
EXCLUSION CLAUSE - LIABILITY - REINSURANCE - U.S.A.


 


I.                                         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.


 


II.                                     Without in any way restricting the operation of
paragraph (I) 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 B in this paragraph (II)
shall be deemed to include the following provision (specified as the Limited
Exclusion Provision):


 


LIMITED EXCLUSION PROVISION*


 


A.           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.


 


B.             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.


 


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


 


1.                                       become effective on or after May 1st, 1960, or


 


2.                                       become effective before that date and contain the
Limited Exclusion Provision set out above:


 


Provided this paragraph (II) 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.


 


III.                                 Except for those classes of policies specified in
Clause B of paragraph (II) and without in any way restricting the operation of
paragraph (I) 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:


 


1





















 


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 E of this
paragraph (III), the following provision (specified as Broad Exclusion
Provision):


 


BROAD EXCLUSION PROVISION*


 


It is agreed that the policy does not apply:


 


A.           Under any
Liability Coverage, to: injury, sickness, disease, death or destruction,
bodily injury or property damage


 


1.                                       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


 


2.                                       resulting from 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 agency thereof, with any person or organization.


 


B.             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.


 


C.             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:


 


1.                                       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;


 


2





















 


2.                                       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


 


3.                                       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 (3) applies only to:


 


injury to
or destruction of property at such nuclear facility property damage to such nuclear facility and any
property thereat.


 


D.            As used in
this endorsement:


 


“hazardous properties” include
radioactive, toxic or explosive properties; “nuclear material” means source
material, special nuclear material or by-product material; “source material”, “special
nuclear material”, and “by-product 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 by-product 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 (1) or (2) thereof; “nuclear facility”
means


 


(1)                                  any nuclear reactor,


 


(2)                                  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,


 


(3)                                  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
Twenty-Five (25) grams of plutonium or uranium 233 or any combination thereof,
or more than Two Hundred Fifty (250) grams of uranium 235,


 


(4)                                  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;


 


3





















 


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.


 


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


 


1.                                       Garage and Automobile Policies issued by the Reassured
on New York risks, or


 


2.                                       statuary 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.


 


IV.                                 Without in any way restricting the operation of
paragraph (I) of this Clause, it is understood and agreed that paragraphs (II)
and (III) 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.


 


NOTES:                                                     The words underlined 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.


 


“Reassured”
                         shall be understood to mean “Reassured”, “Company”, “Reinsured”
or whatever other term is used in the attached reinsurance agreement to
designate the reinsured Company or Companies.


 


“Reinsurance”
               shall be understood to mean “Reinsurance”, “Contract”, “Agreement”,
“Policy” or whatever other term is used to designate the attached reinsurance
document.


 


4