exv10w38






Exhibit 10.38





CONFIDENTIAL TREATMENT REQUESTED




INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND NOTED WITH “****”. AN UNREDACTED VERSION OF THIS DOCUMENT HAS ALSO BEEN PROVIDED TO THE SECURITIES AND EXCHANGE COMMISSION.





Effective this 1st day of December, 2008




CLAIMS SERVICE AGREEMENT



By and Between



NATIONAL UNION FIRE INSURANCE

COMPANY OF PITTSBURGH, PA.,



And Its Affiliated Insurance Companies



(hereinafter collectively called “Insurer”)



and



LOTSOLUTIONS, INC.



(hereinafter called the “Third Party Administrator”)



WITNESSETH:


WHEREAS, the Insurer desires to have Third Party Administrator provide the fair and expeditious
handling of claims in a professional manner and in accordance with all applicable laws, statutes
and regulations; and



WHEREAS, subject to the terms and conditions contained in this Agreement, the Insurer desires to
retain Third Party Administrator to provide those services, as specified herein; and



WHEREAS, the Third Party Administrator desires to be so retained by the Insurer to provide those
services specified herein and agrees to do so in a fair, expeditious and professional manner, and
in accordance with all applicable laws, statutes and regulations;



NOW,
THEREFORE, the Third Party Administrator and the Insurer, subject to the following terms,
conditions and limitations, agree as follows:




ARTICLE I — TERM



The Third Party Administrator agrees to provide all services agreed to herein, to the Insurer, in
connection with the claims arising under such policies as may be designated by Insurer
(“Policies”) and









 









 










Page 2 — Claims Service Agreement between National Union Fire Insurance Company of Pittsburgh, Pa.,
as Insurer, and LOTSolutions, Inc., as Third Party Administrator



occurring during the period commencing December 1, 2008, at 12:01 a.m. and continuing thereafter
until terminated pursuant to Article VII (Termination).



ARTICLE II — APPOINTMENT; POLICIES



During the term of this Agreement, Insurer appoints Third Party Administrator as its administrator
of the Policies, and Third Party Administrator hereby accepts such appointment, subject to the
terms and conditions of this Agreement. The Policies adjudicated hereunder will be designated in
writing from time to time by the Insurer upon thirty (30) days advance written notice to Third
Party Administrator.



ARTICLE III — TERRITORY



The territory (“Territory”) within which Third Party Administrator shall operate is limited to
those states which meet all of the following: (a) all states of the United States and all
provinces of Canada in which Third Party Administrator and Insurer are licensed to do business,
and (b) all states of the United States and provinces of Canada in which Third Party Administrator
is appointed by Insurer, and (c) all states of the United States and all provinces of Canada in
which the Policies have been approved, as appropriate, and (d) such states of the United States
and provinces of Canada as may be agreed upon by the parties, provided that the Insurer shall have
the right in its sole discretion to limit the Territory in which Third Party Administrator may act
hereunder. The Territory is assigned without exclusive rights of representation. Insurer reserves
the right to suspend Third Party Administrator’s authority at any time in the event regulatory,
economic or marketplace conditions dictate that continuation of the claims administration by the
Third Party Administrator in a specific jurisdiction would incur regulatory or economic liability
on the part of the Insurer upon immediate written notice to Third Party Administrator. In such
case, Insurer will assume responsibility for administration of claims until the conditions that
dictated the suspension of Third Party Administrator’s administration of claims in the affected
jurisdiction are resolved.



ARTICLE IV — COMPENSATION



In consideration for the Services performed hereunder, Insurer will compensate Third Party
Administrator in accordance with the provisions of Exhibit A.



ARTICLE V — DEFINITIONS





	A.	 	The term “Qualified Claim” as used herein shall mean any matter resulting from an allegedly
covered peril under one or more of the policies.






	B.	 	The term “Claims Adjusting Services” as used herein shall mean the furnishing by the Third
Party Administrator to the Insurer of the following services in compliance with the terms of
the applicable insurance policy, the attached Claims Handling Guidelines and all laws of the
applicable state:






	 	1.	 	pay all Qualified Claims timely, in accordance with the authority granted by
the Insurer via the attached Claims Handling Guidelines; and
	 
	 	2.	 	review all of the claims and prepare loss reports for losses occurring during
the term of this Agreement; and
	 
	 	3.	 	conduct an appropriate investigation of each Qualified Claim in accordance with
industry wide standards; and
	 
	 	4.	 	assure that each Qualified Claim file contains an itemized schedule of all
documentation in chronological order, including a complete Schedule of Payment or other
documentation of payment to allow the adjuster to properly evaluate the merits of the
Qualified Claim and to permit a determination of the Third Party Administrator’s
compliance with performance








 









 







Page 3 — Claims Service Agreement between National Union Fire Insurance Company of Pittsburgh, Pa.,
as Insurer, and LOTSolutions, Inc., as Third Party Administrator





	 	 	 	standards; such file must be readily available to the Insurer and shall be provided to
the Insurer within three (3) business days of its request; and
	 
	 	5.	 	provide in accordance with the attached Claims Handling Guidelines periodic
detailed narrative reports on the status of each Qualified Claim in excess of the
reporting level or reportable in accordance with the attached Claims Handling
Guidelines; and
	 
	 	6.	 	perform all administrative and clerical work in connection with Qualified
Claims including the preparation of checks and/or drafts drawn on the loss fund
established herein; and
	 
	 	7.	 	Refer all inquiries from state insurance departments, other regulatory agency,
insured, claimant, agent, broker, or other interested party, to the Insurer for
handling; and
	 
	 	8.	 	prepare and maintain files necessary for a) defense of claims; b) other
litigation (such as claims for subrogation, contribution or indemnity); c) other
proceedings; and d) the maintenance of control of activities and expenses; and
	 
	 	9.	 	adjust and/or settle claims in accordance with applicable policy coverage and
within authority levels granted in the attached Claims Handling Guidelines; and
	 
	 	10.	 	maintain closed files in accordance with the Insurer’s requirements as set
forth in Exhibit C (Summary of Document Retention Policy); and
	 
	 	11.	 	manage uncashed checks as abandoned property pursuant to applicable state law
and as directed by Insurer.






	D.	 	The term “Ex Gratia Payment” shall mean all payments made which are outside the terms of the
policies and are not indemnity costs or expenses associated with the terms and conditions
contained in this Agreement.






	E.	 	The term “Force Majeure” shall mean any Act of God, act of civil or military authority, war,
criminal act, fire, explosion, earthquake, flood, weather condition, power failure, labor
problem, accident, or any other cause, beyond either Party’s reasonable control.






	F.	 	All definitions set forth in any exhibit to this Agreement are
incorporated herein.





ARTICLE VI — OBLIGATIONS





	A.	 	The Third Party Administrator agrees to provide the Insurer with Claims Adjusting Services
as defined in Article V, B. in accordance with the attached Claims Handling Guidelines for
the price agreed to in Article IV hereof.






	B.	 	Licensing. The Third Party Administrator, or its life insurance affiliate, where
applicable, warrants and covenants that it has procured or will procure and will maintain all
licenses required by law to enable it to provide the services described in this Agreement for
the duration of this Agreement, that it has the competencies and the capabilities to perform
the services, and that it will manage the services provided hereunder in good faith and in
such a way and in such a manner as to insure that every adjuster, claims investigator,
appraiser and/or employee used by the Third Party Administrator will adjust and/or
investigate and adjust every claim or matter covered by this Agreement in accordance with
applicable laws, and in accordance with the terms of this Agreement.






	C.	 	Standards for Performance; Limitations.






	 	a.	 	Deadlines. At all times, **** percent (****%) of all
claims from **** Insureds must be processed and adjusted within ****
(****) days of receipt and **** percent (****%) of all claims
from non-**** Insureds must be processed
and adjusted within **** (****)









 









 







Page 4 — Claims Service Agreement between National Union Fire Insurance Company of Pittsburgh, Pa.,
as Insurer, and LOTSolutions, Inc., as Third Party Administrator





	 	 	 	days of receipt of all information reasonably required by Third Party Administrator, unless
Insurer provides in writing for a longer period of time.
	 
	 	b.	 	Financial Accuracy. At all times, Third Party Administrator shall maintain a
financial accuracy rate of **** percent (****%) for all claims.
	 
	 	c.	 	Procedural Accuracy. At all times, Third Party Administrator shall maintain a
procedural accuracy rate of **** percent (****%) for all claims.
	 
	 	d.	 	Limitations of Authority. The Third Party Administrator shall have authority to
adjudicate and pay claims up to and including the amount of ****
dollars ($****); for all claims exceeding the amount of **** dollars ($****), the Third Party
Administrator shall forward all such claims to Insurer for adjudication and direction
with regard to payment of such claims. Notwithstanding the foregoing, the Third Party
Administrator shall have no authority to adjudicate or pay claims for accidental death and
dismemberment benefits or any catastrophic claims. All accidental death and dismemberment
and catastrophic claims shall be forwarded to Insurer for adjudication and direction with
regard to payment of such claims.
	 
	 	e.	 	Service Level Standards. The Third Party Administrator shall adhere to the
service level standards set forth in Exhibit D, attached hereto and incorporated herein,
with regard to the performance of services hereunder.






	D.	 	The Third Party Administrator warrants and covenants that it will manage the services
provided hereunder in good faith and in such a way and in such a manner as to insure that
every adjuster, claims investigator, appraiser and/or employee or subcontractor used by the
Third Party Administrator will adjust and/or investigate every claim or matter covered by this
Agreement in accordance with applicable laws, and in accordance with the terms of this
Agreement.






	E.	 	The Third Party Administrator agrees that the Insurer may, at its sole discretion, audit
performance under this Agreement upon ten (10) days written notice to the Third Party
Administrator. Upon the Insurer’s request for an audit, the Third Party Administrator agrees
to make its books, records and files available for review during regular business hours at the
place or places of business where the books, records and files are maintained by the Third
Party Administrator.






	F.	 	The Third Party Administrator will obtain and maintain General Liability Insurance, Automobile
Liability
Insurance, Workers’ Compensation Insurance, Errors and Omissions Insurance (Professional
Liability Coverage) in the amount of five million dollars ($5,000,000) for a single occurrence
and in the amount of five million dollars ($5,000,000) in the aggregate and Fidelity Coverage
(Bond) in the amount of five hundred thousand dollars ($500,000), and providing coverage for
the Insurer as an additional insured under such liability and fidelity policies with respect to
any liability arising from the Third Party Administrator’s work under this Agreement. Upon
execution of this Agreement, the Third Party Administrator will provide the Insurer with
Certificates of Insurance which reflect the approved limits of liability and which name the
Insurer as an additional insured.






	G.	 	The Third Party Administrator agrees to indemnify, defend, and hold Insurer, as well as its
directors,
officers, attorneys, employees, agents, and/or other representatives wholly harmless from and
against any and all claims, including all allegations, demands, actions, damage, loss, costs,
and/or expenses whatsoever including, without limitation, attorneys’ fees and litigation
expense arising or resulting from any alleged act, error, or omission, including any
intentional tort, willful misconduct, negligence or gross negligence by the Third Party
Administrator or its directors, officers, attorneys, employees, agents, and/or other
representatives arising out of or in any way related to the Third Party Administrator’s
obligations under the terms of this Agreement. Likewise, the Insurer agrees to indemnify,
defend and hold the Third Party Administrator, its directors, officers, attorneys, employees,
agents, and/or other representatives, wholly harmless from and against any and all claims,
including all allegations, demands, actions, damage, loss, costs, and/or expenses whatsoever
including, without limitation, attorneys’ fees and litigation expense, arising or resulting
from any alleged act, error or omission,









 









 







Page 5 — Claims Service Agreement between National Union Fire Insurance Company of Pittsburgh, Pa.,
as Insurer, and LOTSolutions, Inc., as Third Party Administrator





	 	 	including any intentional tort, willful misconduct, negligence or gross negligence by the
Insurer, or its directors, officers, attorneys, employees, agents, and/or other representatives
under the terms of this Agreement.






	 	 	The Insurer and the Third Party Administrator agree that, to the extent that this defense and
indemnity provision provides for the defense of any litigation, each reserves the right to
select its attorneys, at its expense, who will defend such action, and to direct how such
action shall be defended.






	H.	 	The Third Party Administrator agrees to not subcontract services required hereunder to
others without the express written consent of the Insurer.






	I.	 	Subject to Article VI, Section H, above, the Third Party Administrator agrees to exercise
reasonable care in the selection of any subcontractor and/or any vendor, adjuster, claims
investigator, or appraiser retained to provide adjusting or claim related services hereunder,
and to ascertain that each vendor or subcontractor, including but not limited to adjusters,
appraisers, investigators, rehabilitation vendors, managed care organizations, vocational
rehabilitation, utilization review and hold proper licenses for the work to be performed and
are residents in those states requiring residency, and in which it renders services
hereunder. The Third Party Administrator retains all responsibility for the performance of
all services and obligations set forth in this Agreement, including all defense and indemnity
obligations set forth in Article VI, G.






	J.	 	The Third Party Administrator agrees to issue its checks from a designated bank account, to
be established by the Third Party Administrator for the sole benefit of the Insurer (the
“Loss Fund”) to be used solely for the purpose of the payment by the Third Party
Administrator of claims for which the Third Party Administrator is providing Claims Adjusting
Services hereunder. Such funds shall not be commingled with any other funds including, but
not limited to, funds from other carriers and the Third Party Administrators general
operating funds. All banking arrangements established by the Third Party Administrator must
comply with state laws and regulations. Third Party Administrator will submit reports on a
periodic basis (no more frequently than twice a week) to which the parties will agree. Such
report shall list each payment made by Third Party Administrator and such other information
as may be reasonably required by Insurer. No more frequently than twice a week, Insurer shall
transfer funds via wire transfer to the account established for the payment of claims for the
purpose of reimbursing the Loss Fund.






	K.	 	The Third Party Administrator agrees to furnish to the Insurer and its designees, on a
monthly basis, a “Loss Run” and a “Loss Fund Activity Report.” This loss run will be
submitted via CD-ROM or other mutually agreed upon electronic media. The term “Loss Run”
means a computer generated listing of claims that have been posted to the Third Party
Administrator’s MIS Data System. The term “Loss Fund Activity Report” means a computer
generated listing of accounting activity in the Loss Fund Account during the preceding month
that has posted to the Third Party Administrator’s MIS Data System. A maximum of five (5)
copies of any single listing will be provided by the Third Party Administrator for each
period at no extra fee. The Third Party Administrator reserves the unilateral right to amend
or alter the substance and form of the listings to be provided to the Insurer and/or its
designees hereunder if the Third Party Administrator hereafter amends or alters the substance
or form of such listings for its customers generally. The Third Party Administrator’s
obligations to furnish this information to the insured and/or broker shall be clearly set
forth in the Third Party Administrator’s Account Service Instructions.






	L.	 	The Insurer agrees to pay to the Third Party Administrator the Claims Service Fees
prescribed in Article IV. In the event Claims Service Fees are not paid by the Insurer to the
Third Party Administrator within sixty (60) days of date of invoice, the Third Party
Administrator may terminate this Agreement, at its option, in accordance with Section VII(C).
In the event that the Insurer disputes all or a part of an invoice, this provision will apply
to any undisputed portions of such invoice. However, this provision will not apply to that
portion which is in dispute, until the dispute has been resolved. Each party to this
Agreement shall exercise diligence in expediting the resolution of any such dispute.









 









 







Page 6 — Claims Service Agreement between National Union Fire Insurance Company of Pittsburgh, Pa.,
as Insurer, and LOTSolutions, Inc., as Third Party Administrator





	M.	 	The Insurer agrees to pay the Third Party Administrator, in addition to the agreed Claims
Service Fees prescribed in Article IV, in accordance with a mutually agreed upon method of
billing, for all claims service and for all claims and/or losses previously handled or
attempted to be handled by any person, firm or corporation or the Insurer’s Insured before
being assigned to the Third Party Administrator.






	N.	 	All records and data in any form pertaining to this Agreement including but not limited to
all claims files, all printed material, and claims forms are the property of Insurer only.
Third Party Administrator is acting solely in a custodial capacity as to any such records
used or held by Third Party Administrator, and such records will be turned over as directed
by Insurer immediately upon demand by Insurer. Third Party Administrator may not copy or
reproduce any administration manual or other such manual in any form without the prior
written consent of Insurer.





ARTICLE VII — TERMINATION





	A.	 	This Agreement covers the period stated in Article I. Any continuation or renewal of this
Agreement shall be the subject of further negotiation between the Insurer and the Third Party
Administrator. If this Agreement is terminated or not renewed, the Insurer shall exercise
one of the following options:






	 	1.	 	The Insurer may require the Third Party Administrator to complete the handling of all
claims which are covered under this Agreement or any previous agreement, whether reported
before or after the term of this Agreement subject, however, to the terms, conditions and
limitations of this Agreement and subject to mutually agreed upon fees for continuing
service. Adequate funds shall continue to be made available by the Insurer to the Third
Party Administrator for the payment of claims as outlined in Article VI, Paragraph J, until
all claims are closed; or
	 
	 	2.	 	The Insurer may require the Third Party Administrator to transfer all open files and/or
closed files to the Insurer or to a designated facility for future handling should the
Insurer’s audit of claim files reveal any violation of the Insurer’s Claim Handling
Guidelines. The Third Party Administrator
shall bear all costs and expenses incurred by all involved parties in the transfer of the
files and in providing for continuity in handling, compliance with the Insurer’s Claims
Handling Guidelines and the uninterrupted flow of all claims information required by this
Agreement to the Insurer.






	B.	 	This Agreement may be terminated by either the Insurer or the Third Party Administrator with
or without cause and for any reason whatsoever upon one hundred eighty (180) days prior
written notice.






	C.	 	Either party may terminate this Agreement immediately upon written notice to the other party:






	 	1.	 	if the other party fails to pay any amount due and owing pursuant to this Agreement,
provided that the breaching party has been given written notice of the amount overdue and
has not made full payment within thirty (30) days after receipt of such notice and such
amount is not in dispute;
	 
	 	2.	 	if the other party has breached any material term or condition of this Agreement,
provided that the breaching party has been given written notice of the breach and has not
cured such breach within fifteen (15) days after receipt of such notice; or
	 
	 	3.	 	(iii) upon the filing of any voluntary or involuntary petition in bankruptcy or for
other relief under any bankruptcy law or law for the relief of debtors by or with respect
to the other party, the liquidation or dissolution of such party, the assignment of any
portion of such party’s assets for the benefit of creditors or any similar arrangement or
the appointment of a receiver, trustee or similar person with respect to such party’s
assets.






	D.	 	Termination of this Agreement by either party hereto shall not relieve the Third Party
Administrator of its obligation to provide the Insurer and the Company with monthly electronic
files as they are currently being provided under all Claim Service Agreements between the
Third Party Administrator and the Insurer or its affiliated or subsidiary corporations,
unless the Insurer relieves the Third Party









 









 







Page 7 — Claims Service Agreement between National Union Fire Insurance Company of Pittsburgh, Pa.,
as Insurer, and LOTSolutions, Inc., as Third Party Administrator





	 	 	Administrator from such obligation upon receipt of a correct final tape when (i) the Insurer
elects the termination option in Paragraph A (2) of this Article, or (ii) all claims are closed
under this Agreement.






	E.	 	Termination of this Agreement by either party shall not relieve either party of any indemnity
obligations arising out of this Agreement.






	F.	 	The Third Party Administrator shall return to the Insurer the funds remaining in the Loss Fund
Account at the termination or expiration of this Agreement, or when the Third Party Administrator
concludes the handling of all claims covered hereunder, whichever is later.





ARTICLE VIII — ARBITRATION



All disputes or differences arising out of the performance of or the interpretation of this
Agreement must be settled by Arbitration.



If a dispute that the Third Party Administrator and the Insurer cannot settle by mutual agreement
arises about this Agreement or any transaction related to it, that dispute must be submitted to
three (3) arbitrators. The Insurer or the Third Party Administrator may submit to such arbitration
any dispute not resolved within thirty (30) days after it arises.



The Third Party Administrator must notify the Insurer, in writing, as soon as the Third Party
Administrator has submitted a dispute to arbitration. The Insurer must notify the Third Party
Administrator, in writing, as soon as the Insurer has submitted a dispute to arbitration.



This Section will apply whether that dispute arises before or after termination of this Agreement.



How
arbitrators must be chosen: The Third Party Administrator must choose one arbitrator and the
Insurer must choose another. The two arbitrators will choose the third. If the Third Party
Administrator
or the Insurer refuses or neglects to appoint an arbitrator within thirty (30) days after written
notice from the other party requesting it to do so, the requesting party may appoint two
arbitrators. If the two arbitrators fail to agree on the selection of a third arbitrator within
thirty (30) days of their appointment, either the Third Party Administrator or the Insurer may
make an application to a Justice of the Supreme Court, of the State of New York, County of New
York and the Court will appoint the third arbitrator.



Qualifications of arbitrators: Unless the Third Party Administrator and the Insurer agree
otherwise, all arbitrators must be executive officers or former executive officers of life and/or
accident and health insurance or reinsurance companies or insurance brokerage companies domiciled
in the United States of America not under the control of either party to this Agreement.



How the arbitration must proceed: The arbitration must take place in New York, New York unless the
Third Party Administrator and the Insurer agree otherwise. The arbitration must be governed by the
United States Arbitration Act, Title 9 U.S.C. Section 1, et seq. Judgment upon the award rendered
by the arbitrators may be entered by a court having jurisdiction thereof.



The Third Party Administrator and the Insurer must both submit their respective cases to the
arbitrators within thirty (30) days of the appointment of the third arbitrator. The arbitrators
must make their decision within sixty (60) days following the termination of the hearing, unless
the Third Party Administrator and the Insurer consent to an extension. The majority decision of
any two (2) arbitrators, when filed with the Third Party Administrator and the Insurer will be
final and binding on the Third Party Administrator and on the Insurer.



The arbitrators must interpret this Agreement as an honorable engagement and not merely a legal
obligation. They are relieved of all judicial formalities. They may abstain from following the
strict rules of law. They must make their award to effect the general purpose of this Agreement in
a reasonable manner.








 









 







Page 8 — Claims Service Agreement between National Union Fire Insurance Company of Pittsburgh, Pa.,
as Insurer, and LOTSolutions, Inc., as Third Party Administrator



The arbitrators must render their 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 must be allowed.



The arbitrators may award compensatory money damages and interest thereupon. They may order the
Third Party Administrator to provide collateral to the extent required by this Agreement. They
will have exclusive jurisdiction over the entire matter in dispute, including any question as to
its arbitrability. However, they will not have the power to award exemplary damages or punitive
damages, however denominated, whether or not multiplied, whether imposed by law or otherwise.



Expenses
of Arbitration: The Third Party Administrator and the Insurer must each bear the expense
of its respective arbitrator and must jointly and equally bear with each other the expense of the
third arbitrator and of the arbitration.



ARTICLE IX — CONTROLLING LAW



It is hereby agreed that this Agreement shall be interpreted and construed in accordance with
the laws of the State of New York and the proper venue for any action shall be in the State of New
York, County of New York.



ARTICLE X — NONWAIVER OF RIGHTS



Forbearance, neglect or failure by the Insurer or the Third Party Administrator to enforce
any or all of the provisions of this Agreement or to insist upon strict compliance by the other
shall not be construed as a waiver of any rights or privileges of the Insurer or the Third Party
Administrator. A waiver of a past act or circumstance shall not constitute or be a course of
conduct or waiver of any subsequent act or circumstance.



ARTICLE XI — CONFIDENTIALITY; PRIVACY; ASSIGNMENT OF STAFF; OFFICE OF FOREIGN ASSET
CONTROL COMPLIANCE





	A.	 	Duty of Confidentiality. In performing its obligations hereunder, the Third Party
Administrator
may have access to and receive disclosure of certain confidential and/or proprietary
information about the Insurer or the Insured, including, without limitation, loss data, service
instructions, billing processes and such other information and materials that the Insurer or
the Insured, as applicable, considers confidential and proprietary (“Confidential
Information”). The Third Party Administrator agrees to not give, sell or in any way transfer,
either directly or indirectly, Confidential Information to any third party without the prior
written approval of the Insurer, except as may be required by law. The Third Party Administrator
acknowledges and agrees that the restrictions contained in this paragraph are reasonable and
necessary to protect the legitimate business interests of the Insurer and the Insured, and that
any violation thereof by the Third Party Administrator would result in irreparable harm to
Insurer and the Insured. Accordingly, the Third Party Administrator agrees that upon the
violation by it of the restrictions contained in this paragraph, the Insurer shall be entitled
to obtain from any court of competent jurisdiction a preliminary and permanent injunction as
well as any other relief provided at law or equity, and that, notwithstanding the foregoing, no
right, power or remedy conferred upon or reserved or exercised by the Insurer in this paragraph
is intended to be exclusive of any other right, power or remedy, each and every one of which
(now or hereafter existing at law, in equity, by statute or otherwise) shall be cumulative and
concurrent. These obligations as to confidentiality and non-use shall survive the termination
of this Agreement.






	B.	 	Privacy. Insurer and Third Party Administrator agree that each shall comply with the
provisions of any laws and regulations requiring confidential treatment of information and
records determined to be non-public personal information under such laws and regulations,
including, without limitation, the Gramm-Leach-Bliley Act, any other federal and state privacy
laws, and Insurer’s written privacy policy, as may be amended from time to time and provided
to Third Party Administrator by Insurer.









 









 







Page 9 — Claims Service Agreement between National Union Fire Insurance Company of Pittsburgh, Pa.,
as Insurer, and LOTSolutions, Inc., as Third Party Administrator





	 	 	Third Party Administrator represents that it will comply with the applicable provisions of any
privacy laws and Insurer’s privacy policy and will not disclose, share, transfer, use or reuse
any non-public personal information of customers, except as authorized in writing by Insurer.
Any information provided by or transferred from Insurer to Third Party Administrator shall
remain Insurer’s exclusive property and shall not be inextricably commingled with information
of other clients, contractors or subcontractors of Third Party Administrator. Information so
transferred to Third Party Administrator shall be returned to Insurer within thirty (30) days
following termination of this Agreement for any reason. Third Party Administrator shall ensure
that all approved contractors or subcontractors also comply with the provisions of any laws and
regulations requiring confidential treatment of information and records determined to be
non-public personal information under such laws and regulations, including, without limitation,
the Gramm-Leach-Bliley Act, any other federal and state privacy laws. This provision shall
survive termination of this Agreement.






	C.	 	ASSIGNMENT OF THIRD PARTY ADMINISTRATOR’S STAFF. Third Party Administrator agrees not to
assign any individual to perform services for Insurer who has ever been convicted of a felony
involving dishonesty or a breach of trust. Third Party Administrator also agrees to take
reasonable steps to determine if any employees, contractors or subcontractors have ever been
convicted of any felony involving dishonesty or breach of trust. Further, Third Party
Administrator agrees that it will not knowingly or willfully permit any person, contractor or
subcontractor, if so convicted, to provide any services under this Agreement. Third Party
Administrator also agrees to promptly notify Insurer, in writing, of any employee, contractor
or subcontractor who, after the effective date of this Agreement, is convicted of a felony
involving dishonesty or breach of trust.






	D.	 	OFFICE OF FOREIGN ASSET CONTROL COMPLIANCE. The parties agree that in performing their
respective duties and services under this Agreement, they are required to comply with the
economic sanctions and trade embargoes administered and enforced by the U. S. Treasury
Department’s Office of Foreign Assets Control (“OFAC”). The parties agree that in performing
their respective duties and the services under this Agreement they shall not engage in
transactions that, unless specifically licensed by OFAC, involve (a) individuals or entities
appearing on the “Specially Designated Nationals and Blocked Persons” (“SDN”) list, or (b) the
Sanctioned Countries list.






	 	 	In performing their duties under this Agreement, the parties agree that neither shall issue or
cause to be issued a policy (a) to any individual or entity on the SDN list, (b) that insures
an individual or entity on the SDN list, or (c) where an individual or entity on the SDN list
benefits from or has an interest in the policy.






	 	 	Further, the parties agree that neither shall enter into a transaction or issue a policy that
insures a transaction that is prohibited under the individual country sanctions enforced by
OFAC.






	 	 	The parties agree that neither shall pay a claim, accept premium, furnish services or
products, or exchange monies or assets of any kind to or with an individual or entity on the
SDN list or connected in the manner described in the OFAC regulations to a Sanctioned Country.





ARTICLE XII — MERGER CLAUSE



This Agreement supersedes all previous agreements on the same subject matter whether oral or
written between the Insurer and the Third Party Administrator, and this Agreement, together with
Exhibits, constitutes the entire and sole contract between the Insurer and the Third Party
Administrator and any prior statements, agreements or representations between the Insurer and the
Third Party Administrator are merged herein. The following documents constitute the entire and
sole contract between the Insurer and the Third Party Administrator:





	A.	 	This Agreement;






	B.	 	Exhibit A, titled Compensation;










 









 










Page 10 — Claims Service Agreement between National Union Fire Insurance Company of Pittsburgh,
Pa., as Insurer, and LOTSolutions, Inc., as Third Party Administrator





	C.	 	Exhibit B, titled Summary of Document Retention Policy;
	 
	D.	 	Exhibit C, titled Claims Handling Guidelines; and






	E.	 	Exhibit D, titled Service Level Standards Addendum.




ARTICLE XIII — SUBSEQUENT AGREEMENTS TO BE IN WRITING



The provisions set out herein constitute the whole and entire Agreement between the Insurer and
the Third Party Administrator and may be altered only by mutual agreement, reduced to writing and
executed by the Vice President of the Insurer Claims and the Third Party Administrator. It is
specifically understood and agreed that this Agreement may be renewed in its entirety by written
addendum, which shall be executed by authorized representatives of the Insurer and the Third Party
Administrator.



IN WITNESS WHEREOF the parties hereto have caused this Agreement to be executed by their duly
authorized representatives this 27th day of April, 2009.




NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.




	 	 	 	 	 

	BY:

	 	/s/ A. Weinstein
 

(signature)
	 	 
	 
	 	 	 	 
	 

	 	A. Weinstein, As Its Attorney-In-Fact	 	 







			
	ADDRESS:	 	70 Pine Street

New York, NY 10270





LOTSOLUTIONS, INC.




	 	 	 	 	 

	BY:

	 	/s/ Richard S. Kahlbaugh
 

(signature)
	 	 
	 
	 	 	 	 
	 

	 	Richard S. Kahlbaugh, Chief Executive Officer  	 	 







			
	ADDRESS:	 	100 W. Bay Street

Jacksonville, FL 32202









 









 







Page 11 — Claims Service Agreement between National Union Fire Insurance Company of
Pittsburgh, Pa., as Insurer, and LOTSolutions, Inc., as Third Party Administrator




EXHIBIT A TO CLAIMS SERVICE AGREEMENT




COMPENSATION


Compensation
for the Services provided pursuant to this Agreement shall be ****
($****) dollars per **** Qualified Claim processed and **** ($****) dollars per Qualified
Claim for all other Qualified Claims processed in accordance with the authority granted by the
Insurer hereunder.



Third Party Administrator shall invoice Insurer for the following charges:





	 	1.	 	Non-routine Reports: Upon request, Third Party Administrator
will produce special reports above and beyond the standard information produced.
The parties will agree in advance on a price for such reports.
	 
	 	2.	 	Outside Professional Services: Fees for outside professional
services, including without limitation attorney fees, audit fees, tax fees or
technical support, will be passed through to Insurer; however, the parties will
consult and agree in advance prior to having Third Party Administrator coordinate
any such outside professional services with respect to this Agreement.
	 
	 	3.	 	Non-routine or Express Mailings: The Insurer will be billed for
any expedited postal service, express delivery or courier service requested by the
Insurer that is not related to a particular claim file, unless such costs are due
to an act or omission of Third Party Administrator in its performance of the
Services hereunder.










 









 










Page 12 — Claims Service Agreement between National Union Fire Insurance Company of Pittsburgh,
Pa., as Insurer, and LOTSolutions, Inc., as Third Party Administrator




EXHIBIT B TO CLAIMS SERVICE AGREEMENT




Summary of Document Retention Policy


Claim files for all lines and all jurisdictions must be maintained for at least seven (7)
years after closure. However, the following exceptions apply:



In cases involving minors, where the minor could have a claim when he/she reaches the age of
maturity, the destruction date should be determined on a case by case basis dependent upon
jurisdictional limitations.



In cases involving litigation, the destruction date should be determined only after the
lawsuit has concluded, the appeal process has concluded, or time for appeal has expired.



Insurer acknowledges that Third Party Administrator images all documents it receives or creates
and maintains such documents in imaged form, not in hard copy.








 









 







Page 13 — Claims Service Agreement between National Union Fire Insurance Company of Pittsburgh,
Pa., as Insurer, and LOTSolutions, Inc., as Third Party Administrator




EXHIBIT C TO CLAIMS SERVICE AGREEMENT








AIG




CLAIMS SERVICE




CLAIMS HANDLING GUIDELINES



FOR DOMESTIC ACCIDENT & HEALTH DIVISION



CLAIMS ADMINISTRATORS


These guidelines will establish procedures for adjusting losses on behalf of AIG Claims
Service (AIGCS) and AIG Member Companies (hereinafter referred to as the “Insurer”), to which all
Third Party Administrators are required to adhere, under the terms and conditions of the Claims
Service Agreement.



The claim handling, reporting and consulting guidelines outlined in these instructions have been
established by AIGCS and the Insurer. The claims administrator (hereinafter referred to as the
“Third Party Administrator”) may not deviate from these guidelines without prior approval from
AIGCS. The Third Party Administrator, administering claims on behalf of the Insurer, will, to the
best of its ability, comply with all rules, regulations and reporting requirements promulgated by
Federal, State/Commonwealth, Municipal and Provincial Regulatory Authorities relating to
adjusting, licensing, claim settlement and payments for all lines of business, and all
jurisdictions, in each state where claims adjusting activities are contemplated or where claims
adjusting takes place.



The Third Party Administrator will comply, to the best of its ability, with the Insurer’s Claims
Handling Guidelines, outlined herein, and incorporate the consulting and reporting criteria,
agreed upon with AIGCS and its insureds, in the Third Party Administrator Account Service
Instructions.








 









 




Page 14 — Claims Service Agreement between National Union Fire Insurance Company of Pittsburgh,
Pa., as Insurer, and LOTSolutions, Inc., as Third Party Administrator




ACKNOWLEDGMENTS:



State insurance regulations require prompt acknowledgment of receipt of claims. The Third Party
Administrator shall be responsible for compliance with such regulations.




AUDITS:



All claim files are the property of the Insurer and are subject to open and closed file audits.



Results of an audit will be discussed with the Third Party Administrator and a letter will be sent
by the Insurer setting forth the findings. A follow up audit will determine if corrective action
has been taken by the Third Party Administrator. Results will be monitored and failure to comply
may result in either suspension or termination of the Third Party Administrator. Any audit
reports, written or oral, are confidential and shall not be released to any third parties without
the prior written consent of the Insurer.




BONDS:



The Third Party Administrator does not have authority to purchase bonds of any type on behalf
of the Insurer. In the event a bond is needed for appeals or other purposes, contact the
Insurer.




COMPLAINTS:



Refer any written inquiry, complaint or request from an Insurance Department, other Regulatory
Agency, insured, claimant, agent, broker, or other interested party, to the Insurer.




COVERAGE CONFIRMATION AND COVERAGE ISSUES:



All files must reflect proper documentation that coverage has been reviewed and is in order. All
coverage issues must be reported to the Insurer. The Third Party Administrator must report same to
the Insurer by telephone within two (2) business days. The Third Party Administrator will be
guided appropriately by the Insurer. Following phone contact, the Third Party Administrator must
immediately refer the file to AIGCS.



For purposes of this provision of Exhibit C, “coverage issues” shall include, without limitation,
questions arising out of or resulting from:





	 	•	 	interpretations of policy provisions, including, without limitation, the trigger
event, the amount of benefits available, and/or the application of an exclusion; and/or
	 
	 	•	 	interpretations of applicable statutes, regulations or prevailing case law as may be
applicable to a claim.





DRAFT ISSUANCE:



Drafts/checks should be issued in accordance with the rules, regulations and laws applicable to
the jurisdictions involved. All drafts/checks will be issued by the Third Party Administrator. It
is the responsibility of the Third Party Administrator to timely request funds from AIGCS to
insure a continuous flow of payments as necessary.




EX GRATIA PAYMENTS:



The Third Party Administrator personnel do not have authority to make an “Ex Gratia Payment”
without prior written approval from the Insurer.




FILE RETENTION/DESTRUCTION PROCEDURES:



See Exhibit B of the Agreement.









 









 










Page 15 — Claims Service Agreement between National Union Fire Insurance Company of Pittsburgh,
Pa., as Insurer, and LOTSolutions, Inc., as Third Party Administrator




FORMS:



Third Party Administrator shall only use forms provided by Insurer in the routine handling of
claims. 



INVESTIGATION:



The Third Party Administrator is required to perform an appropriate investigation and adjust each
claim occurring within the Insurer’s contract period in accordance with the terms and conditions
of the Claims Service Agreement and of the applicable laws of the jurisdiction involved.
Investigation should be commensurate with the loss and provide information sufficient to bring the
claim to a timely and equitable conclusion.



Initial investigation is to be completed within **** days of receipt of the first report. Additional
investigation is to be completed within **** days of receipt of the first report. 

All claim activity
must be documented in the file.




LITIGATION MANAGEMENT:



Insurer shall control litigation arising out of claims adjudicated by Third Party Administrator
under this Agreement.




PENALTIES/FINES:



The Third Party Administrator will be held responsible for any fines, penalties, or interest
charges incurred by the Insurer as a result of the Third Party Administrator’s failure to comply
with the rules, regulations and laws by which these penalties are assessed.



Penalties/fines may not be charged as an Allocated Loss Expense to the claim file unless specific
written authorization is received from the Insurer.




PROCESSING RECOVERIES:



All refunds and voided checks should be made payable to the Third Party Administrator on behalf of
the Insurer and processed through the Third Party Administrators handling branch and/or
supervisory department.



Drafts and checks will be deposited by the Third Party Administrator to the individual insured’s
account and coded as a recovery through the Third Party Administrator’s statistical loss reporting
system.




REPORTABLE FILES:




The Third Party Administrator is required to report to the Insurer:





	•	 	Death claims
	 
	•	 	All lawsuits naming the Insurance Company as a defendant
	 
	•	 	All lawsuits involving class actions, allegations of bad faith, and violation of an unfair
claims practices act




Any issues impacting state laws, reserving issues, settlements and/or setting legal
precedents. 



REPORTING REQUIREMENTS:



A **** (****%) percent increase in claims volume within a week for permanent temporary
disability, accidental death and dismemberment, and/or accident medical expense claims should be
reported immediately, by phone, to the Insurer.









 









 










Page 16 — Claims Service Agreement between National Union Fire Insurance Company of Pittsburgh,
Pa., as Insurer, and LOTSolutions, Inc., as Third Party Administrator




SIGNATURES (CHECKS AND DOCUMENTS)



Any check or draft which requires a signature from the Insurer, should be sent with a letter of
explanation and a return envelope to Insurer.




CONTACT PERSONS:




Insurer:




Name, Title, and Company: Eileen Duffy, Assistant Vice President, AIG Claim Services, Inc.

Address: 600 King Street, 5th Floor, Wilmington, DE 19801

Phone Number: 302 661-8901

Fax Number: 302 661-8959

E-mail Address: eileen.duffy@aig.com




Third Party Administrator:




Name, Title and Company: Robert S. Fullington, President, LOTSolutions, Inc.

Address: 100 West Bay Street, Jacksonville, FL 32202

Phone Number: (904) 350-9660

Fax Number: (904) 354-4525

E-mail Address: bfullington@lotsolutions.com









 









 










Page 17 — Claims Service Agreement between National Union Fire Insurance Company of Pittsburgh,
Pa., as Insurer, and LOTSolutions, Inc., as Third Party Administrator




EXHIBIT D 




SERVICE LEVEL STANDARDS


Third Party Administrator shall provide Insurer results for each of the performance standards shown
below on an average monthly basis.





	1.	 	Maintain adequate personnel to ensure customer service phone calls are answered as follows:






	 	a.	 	**** percent (****%) or more within **** (****) seconds
	 
	 	b.	 	Average abandonment rate of **** percent (****%) or below






	2.	 	Maintain adequate personnel, training and procedures to ensure that in written and
oral communication with Insureds, customer service personnel provide accurate information
specific to the Policies in all material respects with an overall error rate of less than ****
percent (****%) per month.
	 
	3.	 	Response to Insureds’ inquiries and complaints within **** (****) business days
	 
	4.	 	Written Correspondence Resolved:






	 	a.	 	**** percent (****%) or more within **** (****) business days of receipt
	 
	 	b.	 	**** percent (****%) within **** (****) business days of receipt






	5.	 	Response to a request from Insurer within **** (****) hours
	 
	6.	 	Request for Claim Form






	 	a.	 	Form Request: **** percent (****%) within **** (****) business days of receipt









 









 








AMENDMENT NO. 1




to the



CLAIMS SERVICES AGREEMENT



between



NATIONAL UNION FIRE INSURANCE COMPANY OF

PITTSBURGH, PA

And Its Affiliated Insurance Companies

(hereinafter collectively called “Insurer”)



and



LOTSOLUTIONS, INC.

(hereinafter called “Third Party Administrator”)


This Amendment No. 1 (“Amendment”), entered into effective August 1, 2010 (“Effective Date”),
amends the Claims Service Agreement by and between Third Party Administrator and Insurer dated
December 1, 2008 (the “Agreement”). Capitalized terms used, but not otherwise defined, herein shall
have the meanings ascribed to them in the Agreement.





	 	1.	 	It is mutually agreed, effective August 1, 2010, Exhibit A of the Agreement shall be
deleted in its entirety and replaced with new Exhibit A in the form which is attached
hereto and made a part hereof.
	 
	 	2.	 	It is mutually agreed, effective August 1, 2010, that Third Party Administrator shall
provide Insurer a one-time credit in the aggregate amount of $****, which shall be
credited to Insurer in twelve equal monthly installments of $**** and netted against
any amounts then due and owing to Third Party Administrator pursuant to Exhibit A under
the Agreement. Said monthly credits shall commence with the monthly invoice that is due
and owing in the month following the date on which Insurer has paid Third Party
Administrator in full all invoices for periods prior to August 1, 2010. Once said credit
has been fully issued, no other credit is due or owing to Insurer as of the date of this
Amendment.




All other terms and provisions of the Agreement not in conflict with this Amendment shall remain
unchanged and in effect. This Amendment may be executed in one or more counterparts, each of which
shall be deemed an original and all of which together shall constitute one and the same instrument.
Counterpart signature pages to this Amendment transmitted by facsimile transmission, by electronic
mail in “portable document format” (“.pdf”) form, or by any other electronic means intended to
preserve the original graphic and pictorial appearance of a document, will have the same effect as
physical delivery of the paper document bearing an original signature.




[SIGNATURE LINES ON NEXT PAGE]









Page 1 of 4









 










IN WITNESS WHEREOF the parties, by their respective duly authorized officers, have caused this
Amendment to be executed as of the Effective Date.




	 	 	 	 	 
	 	LOTSOLUTIONS, INC.

 	 
	 	By:  	/s/ Robert S. Fullington	 
	 	Title: 	 President 	 
	 	 	 	 
	 
	 	NATIONAL UNION FIRE INSURANCE 

COMPANY OF PITTSBURGH, PA

 	 
	 	By:  	[ILLEGIBLE] 	 
	 	Title: 	 As Its Attorney-In-Fact 	 
	 	 	 	 
	 








Page 2 of 4









 











EXHIBIT A TO CLAIMS SERVICE AGREEMENT




COMPENSATION



Claims Adjusting Services Fee Structure




Compensation for Services provided pursuant to this Agreement shall be as follows:





	 	A.	 	**** Qualified Claims






	 	 	 	A fee of $**** will be charged per Qualified Claim Processed. Services
include claim form production and delivery, opening and establishing a claim,
policy record creation, adjudication, payment and denials. Any claim closed due to
no activity by the claimant of **** days or more and reopened will be subject to a
new fee.






	 	B.	 	All Other Qualified Claims






	 	1.	 	Opening a Claim — Insurer, or its designated administrators, will
collect information from an insured daily and enter data into Third Party
Administrator’s file to open a new claim. Third Party Administrator will process
the data file, produce a claim form, and mail the form to the insured. The fee for
this service is $**** per form mailed, excluding **** Qualified Claims.
	 
	 	2.	 	Physician Office Visit (“POV”) Claims — A fee of $**** per claim will
be charged for processing the claim form or other documentation received from an
insured or from someone acting on their behalf. Any claim closed due to no activity
by the claimant of **** days or more and reopened will be subject to a new fee.
	 
	 	3.	 	Group Policy Claims (Non-POV) — A fee of $**** per claim will be
charged for processing the claim form or other documentation received from an
insured or from someone acting on their behalf. Any claim closed due to no activity
by the claimant of **** days or more and reopened will be subject to a new fee.
	 
	 	4.	 	Individual Policies (Non-POV) — A fee of $**** will be charged for
processing a claim form or documentation received from an insured, or from someone
acting on their behalf, for any individual policy containing a pre-exiting
exclusion. Any claim closed after **** days due to no activity by the claimant and
reopened will be subject to a new fee.
	 
	 	5.	 	Establish a New Claim — A fee of $**** will be charged for each claim
form received for which a claim has not been previously opened in the system. Third
Party Administrator will open and set-up the claim for processing. This fee is in
addition to the claim adjudication fee listed above.




Page 3 of 4









 






	 	6.	 	Claim Form Request — A fee of $**** will be charged for each call received by
Third Party Administrator’s Customer Service Representative requesting a
claim form. Third Party Administrator will collect information from the insured and enter
information in the system. This fee is in addition to the Opening a Claim and the
applicable claim adjudication fee specified above.
	 
	 	7.	 	Claim Form Requests Received Through Interactive Voice Recognition
(IVR) and Web — Third Party Administrator will collect from the IVR and/or Web services
application and populate the Claims adjudication system. A fee of $**** will be charged
for each claim setup access using the IVR and/or Web service applications requesting a
claim form. This fee is in addition to the Opening a Claim and applicable claim
adjudication fee listed above.






	 	C.	 	Non-Routine Reports: Upon request, Third Party Administrator will produce special
reports above and beyond the standard information produced. The parties will agree in advance
on a price for such reports. Routine Reports shall include: Claims Open Report, POV Claims
Report, Group Policies (non-POV) Report, Individual Policies (non-POV) Report, Establishing a
New Claim Report, Claims Form Request Report.
	 
	 	D.	 	Outside Professional Services: Fees for outside professional services, including
without limitation attorney fees, audit fee, medical peer review fee, toxicology expert review
fee, medical record fee, postage rate increases, tax fee or technical support, will be passed
through to the Insurer; however, the parties will consult and agree in advance prior to having
Third Party Administrator coordinate any such outside professional services with respect to
this Agreement. Third Party Administrator is not required to obtain prior approval to submit
any claim for a peer or toxicology expert review.
	 
	 	E.	 	Non-Routine or Express Mailings: The Insurer will be billed for any expedited postal
service, express delivery or courier service requested by the Insurer, unless such costs are
due to an act or omission of Third Party Administrator in its performance of the Service
hereunder.
	 
	 	F.	 	Dispute Resolution: The Insurer will be billed an hourly rate of $**** for Legal
Department Assistance and $**** per hour for all others responding to Department of
Insurance Complaints, Appeals, Escalations and Attorney
Letters.






Page 4 of 4