exv10w53






Exhibit 10(53)




SERVICES AND INDEMNITY AGREEMENT



This Services and Indemnity Agreement, (hereinafter referred to as the “Agreement”) is made and
entered into by and between Western Surety Company a South Dakota domiciled property and casualty
insurer with principal offices located in Sioux Falls, South Dakota (hereinafter referred to as the
“REINSURER”) and Continental Casualty Company, an Illinois domiciled property and casualty insurer
with principal offices located at 333 S. Wabash, Chicago, Illinois, 60604, and its affiliates
(hereinafter referred to as the “COMPANY”), effective January 1, 2011, for the benefit of the
REINSURER and the COMPANY.



WHEREAS, the COMPANY and the REINSURER have entered into a Surety Quota Share Treaty, (hereinafter
referred to as the “Reinsurance Agreement”) effective January 1, 2011 for certain Surety Bonds
issued by the COMPANY in the United States on behalf of various principals of REINSURER and
reinsured 100% by the REINSURER (as defined in the Reinsurance Agreement, and hereinafter referred
to as the “Policies”), pursuant to the terms of such Reinsurance Agreement; and



WHEREAS, the REINSURER possesses the staff and expertise to administer the Policies and the
REINSURER agrees to assume certain duties and responsibilities to administer such Policies; and



WHEREAS, the COMPANY’S offer to write such business is based on the REINSURER’S acceptance of such
duties and responsibilities as described herein;



NOW, THEREFORE, the parties in consideration of the mutual agreements, covenants, and provisions
herein contained, agree as follows:




1. TERM



This Agreement shall take effect with the Reinsurance Agreement and have the same term as provided
in the Reinsurance Agreement, except as specified in Sections 4.5 and 4.7 of Article 4 and Section
8.6 of Article 8 of this Agreement. If this Agreement is terminated or expires for any reason, the
Reinsurance Agreement shall simultaneously terminate or expire.




2. APPOINTMENTS



Section 2.1: The REINSURER shall serve as the COMPANY’S underwriting agent for the Policies and
shall adjust any claims made under the Policies as provided herein.



Section 2.2: In consideration for these appointments, the REINSURER and the COMPANY agree to
exercise all authority and perform all duties required by this Agreement.




Services & Indemnity Agreement

Effective: January 1, 2011

Page 1 of 7





 









 

 





3. UNDERWRITING AUTHORITY AND RELATED DUTIES



Section 3.1: The REINSURER is authorized and agrees to underwrite, price, issue, and cancel or
nonrenew the Policies, on the COMPANY’S behalf and in its name, subject to limitations provided
herein. The REINSURER warrants that it shall underwrite, price, issue, and cancel or nonrenew the
Policies in a timely and professional manner through qualified persons, fully familiar with
generally accepted standards in the United States or according to the COMPANY’S formal written
guidelines as may be provided from time to time to the REINSURER.



Section 3.2: Nothing stated anywhere in this Agreement shall impair the REINSURER’S right to
cancel or nonrenew any Policy on the COMPANY’S behalf and in its name, providing such action is in
full compliance with applicable law and the COMPANY receives advance notice of the REINSURER’S
intent. The COMPANY has the right to cancel or nonrenew any Policy upon the prior approval of the
REINSURER, such approval not to be unreasonably withheld, unless this Agreement expires or is
terminated, whereupon the COMPANY may do so without prior approval but shall provide ten (10)
calendar days prior written notice to the REINSURER.



Section 3.3: The COMPANY agrees that it shall, upon written request from the REINSURER, promptly
appoint such persons as agents of the COMPANY or grant such persons a power of attorney as
requested by the REINSURER. The COMPANY also agrees that it shall, upon written request from the
REINSURER promptly file with appropriate regulatory authorities such forms and rates as requested
by the REINSURER. The REINSURER’s staff shall perform the administrative functions necessary for
the COMPANY to make such appointment, grant such powers and to make such filings.




4. CLAIMS AUTHORITY AND RELATED DUTIES



Section 4.1: The COMPANY hereby agrees and authorizes the REINSURER to adjust and pay all claims
arising under the Policies issued under this Agreement, on the COMPANY’S behalf and in its name,
except as provided in Section 4.7 of Article 4 herein. The REINSURER warrants that any claims
arising under the Policies shall be handled in a timely and professional manner by qualified
persons, fully familiar with generally accepted claims handling standards in the United States or
according to the COMPANY’s formal written guidelines as may be provided from time to time to the
REINSURER. The REINSURER is authorized and agrees to investigate, monitor, and handle any claims
under any of the Policies issued under this Agreement, on the COMPANY’S behalf and in its name, or
to retain any independent claims consultant or adjuster as may be required.



Section 4.2: THE COMPANY and the REINSURER shall provide the other with prompt notification of any
losses or claims, or any information that makes a loss or claim reasonably likely under the
Policies and as provided elsewhere in this Agreement.




Services & Indemnity Agreement

Effective: January 1, 2011

Page 2 of 7




 









 

 

Section 4.3: In recognition of statutory, regulatory and legal duties to handle claims in a prompt
and fair manner, the COMPANY and the REINSURER agree to exercise their best efforts and cooperate
fully with the other to handle claims in said manner and in full compliance with all such
requirements.



Section 4.4: Within 20 calendar days after the end of each calendar month while this Agreement is
in effect, the REINSURER shall promptly report to the COMPANY on all open and closed claims handled
by it during such month in the reporting format as mutually agreed to between the COMPANY and the
REINSURER. Such reports shall include information on all claims and allocated claims expenses
reserved, paid and outstanding. The REINSURER shall send the COMPANY a copy of any claim file upon
request by the COMPANY. All claim files shall be the joint property of the COMPANY and the
REINSURER during the period this Agreement is in effect.



Section 4.5: Upon termination of this Agreement, or in the event of an order of liquidation of the
COMPANY during the period this Agreement is in effect, such files shall become the sole property of
the COMPANY or its estate. The REINSURER shall have reasonable access to, and the right to copy,
any such claim files in the COMPANY’S possession on a timely basis, if requested.



Section 4.6: The REINSURER shall pursue salvage or subrogation on the COMPANY’S behalf and in its
name, in all appropriate cases, on any claims arising under the Policies.



Section 4.7: In the event this Agreement is terminated and unless otherwise mutually agreed to
between the COMPANY and the REINSURER, the REINSURER shall have the right to settle and handle all
subsequent claims and losses until such time as all Policies underwritten or serviced by REINSURER
pursuant to this Agreement have expired and the Reinsurance Agreement has expired, and all known
claims thereunder have been paid or settled, have runoff or otherwise have been disposed of in the
judgment of the COMPANY, and all incurred but not reported loss reserves as respects the business
covered by the Reinsurance Agreement have been reduced to zero, and any amounts owed to the COMPANY
by others or under the Reinsurance Agreement in regard to any claims have been collected by the
COMPANY. Reinsurance indemnity for any claim or loss discussed herein shall be provided in
accordance with the terms and conditions of the Reinsurance Agreement.



Section 4.8: All claims and/or losses handled by the REINSURER pursuant to Section 4.7 herein
shall be reported to the COMPANY by the REINSURER within forty-five (45) calendar days after the
end of each calendar quarter in such reporting format as requested by the COMPANY.




5. ACCOUNTING AUTHORITY AND RELATED DUTIES



The parties agree that the REINSURER shall serve as the COMPANY’S agent for the billing and
collection of all premiums due and owing for such Policies.




Services & Indemnity Agreement

Effective: January 1, 2011

Page 3 of 7




 









 

 


6. REGULATORY COMPLIANCE AND RELATED DUTIES



Section 6.1: The COMPANY and the REINSURER agree to use their best efforts to achieve full
compliance with all applicable statutory, regulatory and legal requirements.



Section 6.2: THE COMPANY and the REINSURER agree to provide the other, promptly upon request, with
all information and support required for any regulatory compliance obligation and for any reports,
statements or other filings required by regulatory authorities.



Section 6.3: The REINSURER agrees to monitor all legal, statutory and regulatory developments
affecting the Policies hereunder and promptly report same to the COMPANY. Should any such changes
affect the Policies hereunder, the parties agree to ensure full compliance with such changes. The
COMPANY agrees to prepare any documentation necessary to assure such compliance. In the event that
the COMPANY becomes aware of any such development, it shall report it promptly to the REINSURER.



Section 6.4: In the event that any State, by statute, regulation or otherwise, prohibits or
restricts the REINSURER’S authority hereunder, the parties agree that this Agreement and the
underlying Reinsurance Agreement are terminated or modified in accordance with the provisions of
same.




7. COMPENSATION



The parties agree that as compensation for the performance of the mutual duties specified
hereunder, COMPANY shall pay the REINSURER $50,000 per calendar quarter during the term of this
Agreement, each such payment to be due at March 31, June 30, September 30, and December 31, 2011.




8. INDEMNIFICATION



Section 8.1 In addition to the obligations of the REINSURER pursuant to the terms of the
Reinsurance Agreement, the REINSURER shall indemnify the COMPANY as follows in Sections 8.2 and
8.3. However, Sections 8.2 and 8.3 shall not apply to any liability, claim, suit, demand, damages
(including punitive and exemplary damages), judgment, cost, interest and expense (including but not
limited to attorneys’ fees and disbursements) or regulatory fines or administrative penalties
caused by the action of or the failure to take action by any employee of the COMPANY. Nor shall
Sections 8.2 and 8.3 prevent the application of any available reinsurance proceeds.



Section 8.2: The REINSURER shall indemnify, defend and hold harmless the COMPANY, its agents,
employees, subsidiaries and affiliates from and against all liability, claims, suits, demands,
damages (including punitive and exemplary damages), judgments, costs, interest and expense
(including but not limited to attorneys’ fees and disbursements) or regulatory




Services & Indemnity Agreement

Effective: January 1, 2011

Page 4 of 7




 









 

 

fines or administrative penalties arising out of, or in connection with, any Policy issued under
this Agreement and reinsured under the Reinsurance Agreement, including but not limited to
underwriting activities, Policy issuance, claim handling and the resolution of coverage issues;
provided, however, that not withstanding any other provisions of the Agreement, such
indemnification by the REINSURER shall not extend to any matter subject to the obligations of the
COMPANY or its affiliates under the Reinsurance Agreement.



Section 8.3: The REINSURER agrees to indemnify, defend and hold the COMPANY harmless and make full
and prompt reimbursement for any regulatory fines or administrative penalties levied against the
COMPANY relating to the REINSURER’S failure to fulfill any Policy, rate, claim payment or other
filing or obligations required by or to regulatory authorities. The COMPANY shall use its best
efforts to advise the REINSURER as soon as possible of any such fine or penalty, or any information
indicating that a fine or penalty may be levied.



Section 8.4: 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.



Section 8.5: The COMPANY agrees to save, indemnify, and hold REINSURER harmless against any and
all loss, liability or damage resulting from any misrepresentation or breach of warranty by the
COMPANY under the terms of this Agreement.



Section 8.6: The indemnities provided in Sections 8.1, 8.2, 8.4 and 8.5 herein shall survive any
termination of this Agreement.




9. REPRESENTATIONS AND WARRANTIES OF COMPANY



The COMPANY hereby represents and warrants to the REINSURER that all Surety Business (as that term
is defined in the Reinsurance Agreement) written, renewed or assumed by the COMPANY, or by any
company that is an affiliate of the COMPANY on or after January 1, 2011, shall be coded as PR 66
(as that term is defined in the COMPANY’s records), and covenants that if it is discovered that any
Surety Business written or assumed by the COMPANY or by any company that is an affiliate of the
COMPANY on or after the January 1, 2011 which has not been specifically excluded from cession under
the Reinsurance Agreement and has not been coded as PR 66, then that Surety Business shall be ceded
under the terms of the Reinsurance Agreement as if that Surety Business has been coded as PR 66.




10. ARBITRATION



In the event of an irreconcilable dispute between the parties to this Agreement, such dispute shall
be submitted for decision to the process of arbitration in the manner and pursuant to the procedure
set forth in the ARBITRATION Article of the Reinsurance Agreement.




Services & Indemnity Agreement

Effective: January 1, 2011

Page 5 of 7




 









 

 


11. MODIFICATION



There shall be no modification of or change in the terms of this Agreement or the Reinsurance
Agreement without the written approval of the COMPANY and the audit committee of CNA Surety
Corporation.




12. BINDING EFFECT OF AGREEMENT



This Agreement shall be binding upon and inure to the benefit of the parties, their successors and
assigns.




13. TERMINATION



Section 13.1: This Agreement and the REINSURER’S obligations, except as specified in Article 1,
Sections 4.5 and 4.7 of Article 4, and Section 8.6 of Article 8 hereunder, shall terminate
automatically and without notice upon the occurrence of any one or more of the following events:
(a) termination of the Reinsurance Agreement; or (b) termination or modification of REINSURER’S
participation in the Reinsurance Agreement.



Section 13.2: Any termination of REINSURER’S obligations hereunder shall be subject always to
REINSURER’S duty to satisfy, fulfill, fully perform and discharge all obligations which may accrue
through, but not beyond, the effective date and time of such termination.



Section 13.3: This Agreement, except as specified in Article 1, Sections 4.5 and 4.7 of Article 4,
and Section 8.6 of Article 8, may be terminated at any time by mutual written agreement.




14. CONTRIBUTION



The REINSURER, upon any payment hereunder, shall fully share in the subrogation, contribution and
salvage rights of the COMPANY, as applicable, to the extent of REINSURER’S payment to the
COMPANY.




15. RESOLUTION OF CONFLICTING TERMS



In the event of any conflict or inconsistency between this Agreement and the Reinsurance Agreement,
this Agreement shall prevail and be controlling. Any irreconcilable dispute between parties to
this Agreement shall be resolved by arbitration, in the manner and pursuant to the procedure set
forth in the Reinsurance Agreement, as set forth in Article 10 of this Agreement.




Services & Indemnity Agreement

Effective: January 1, 2011

Page 6 of 7




 









 

 


16. SEVERABILITY



In the event any provision of this Agreement shall be declared invalid or unenforceable by any
regulatory body or court having jurisdiction, such validity or enforceability shall not affect the
validity or enforceability of the remaining portions of this Agreement.




17. HONORABLE UNDERTAKING



The purposes of this Agreement are not to be defeated by narrow or technical legal interpretations
of its provisions. The Agreement shall be construed as an honorable undertaking and should be
interpreted for the purposes of giving effect to the real intentions of the parties hereto.



IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in duplicate by
their duly authorized representatives.




CONTINENTAL CASUALTY COMPANY






	 	 	 	 	 	 	 
	By:
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	Printed Name:	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	Title:
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	Date:
	 	 	 	 	 	 
	 	 	 	 	 






WESTERN SURETY COMPANY





	 	 	 	 	 	 	 
	By:
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	Printed Name:	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	Title:
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	Date:
	 	 	 	 	 	 
	 	 	 	 	 





Services & Indemnity Agreement

Effective: January 1, 2011

Page 7 of 7