Document:

EXHIBIT
10.1

 

 

SERVICE
LINE FOR HOMEOWNERS

REINSURANCE AGREEMENT

 

 

between

 

 

SAFETY
INSURANCE COMPANY

SAFETY INDEMNITY INSURANCE COMPANY

SAFETY PROPERTY AND CASUALTY INSURANCE COMPANY

 

 

and

 

 

THE
HARTFORD STEAM BOILER

INSPECTION AND INSURANCE COMPANY

 

 

Ref. No.
2010-033

 

 

Effective August 1, 2010

 

 

SERVICE
LINE FOR HOMEOWNERS

REINSURANCE AGREEMENT

 

TABLE OF
CONTENTS

 

	
  ARTICLE 1— BUSINESS COVERED

  	
  1

  
	
   

  	
   

  
	
  ARTICLE 2 — LIMIT OF LIABILITY

  	
  1

  
	
   

  	
   

  
	
  ARTICLE 3 — TERRITORY

  	
  1

  
	
   

  	
   

  
	
  ARTICLE 4 — FORMS, RATES AND RULES

  	
  1

  
	
   

  	
   

  
	
  ARTICLE 5 — DEFINITIONS

  	
  1

  
	
   

  	
   

  
	
  ARTICLE 6 — EXCLUSIONS

  	
  2

  
	
   

  	
   

  
	
  ARTICLE 7 — TERM AND TERMINATION

  	
  2

  
	
   

  	
   

  
	
  ARTICLE 8 — LOSS NOTIFICATION AND SETTLEMENT

  	
  3

  
	
   

  	
   

  
	
  ARTICLE 9 — INDEMNIFICATION AND DEFENSE

  	
  3

  
	
   

  	
   

  
	
  ARTICLE 10 — REINSURANCE PREMIUM

  	
  4

  
	
   

  	
   

  
	
  ARTICLE 11— REPORTS AND REMITTANCES

  	
  4

  
	
   

  	
   

  
	
  ARTICLE 12 ACCESS TO RECORDS

  	
  4

  
	
   

  	
   

  
	
  ARTICLE 13 — ARBITRATION

  	
  4

  
	
   

  	
   

  
	
  ARTICLE 14 - ENTIRE AGREEMENT

  	
  5

  
	
   

  	
   

  
	
  ARTICLE 15 — ERRORS AND OMISSIONS

  	
  5

  
	
   

  	
   

  
	
  ARTICLE 16 - GOVERNING LAW

  	
  5

  
	
   

  	
   

  
	
  ARTICLE 17 — INSOLVENCY

  	
  5

  
	
   

  	
   

  
	
  ARTICLE 18 — MODE OF EXECUTION

  	
  6

  
	
   

  	
   

  
	
  ARTICLE 19 - OFFSET

  	
  6

  
	
   

  	
   

  
	
  ARTICLE 20 - SEVERABILITY

  	
  6

  
	
   

  	
   

  
	
  ARTICLE 21— SPECIAL ACCEPTANCES

  	
  6

  
	
   

  	
   

  
	
  ARTICLE 22 - TAX

  	
  6

  

 

2

 

SERVICE
LINE FOR HOMEOWNERS

REINSURANCE AGREEMENT

 

(hereinafter called the “Agreement”)

between

 

SAFETY INSURANCE COMPANY

SAFETY INDEMNITY INSURANCE COMPANY

SAFETY PROPERTY AND CASUALTY INSURANCE COMPANY

 

(hereinafter called the “Company”)

and

THE HARTFORD STEAM BOILER
INSPECTION AND INSURANCE COMPANY

(hereinafter called the “Reinsurer”)

 

IN CONSIDERATION of the mutual covenants
hereinafter contained and upon the terms and conditions hereinafter set forth,
the parties hereto agree as follows:

 

ARTICLE 1 — BUSINESS COVERED

 

By this Agreement, the Company obligates itself to cede to the
Reinsurer and the Reinsurer obligates itself to accept as reinsurance 100% of
the Company’s liability as respects Service Line Failures occurring under a
Service Line Coverage Form attached to new, renewal and in-force Policies on or
after the effective date of this Agreement.

 

ARTICLE 2 — LIMIT OF LIABILITY

 

The Reinsurer’s liability shall not exceed $10,000 for any one Service
Line Failure, any one Policy. 

 

ARTICLE 3 — TERRITORY

 

This Agreement shall apply wherever the Company’s Policies hereunder apply.

 

ARTICLE 4 — FORMS, RATES AND RULES

 

Reinsurance will be provided only in accordance with forms, rates and
rules mutually acceptable to the Company and the Reinsurer which are on file
with the Reinsurer. The agreed forms, rates and rules shall be those set forth
in the “Service Line for Homeowners Underwriting Guidelines” in the most
current version held by the Company and on file with the Reinsurer,
(hereinafter referred to as “SL Guidelines”). SL Guidelines may be amended from
time to time, subject to approval in writing of both parties, and are
incorporated herein as if fully set forth in this Agreement.

 

ARTICLE 5 — DEFINITIONS

 

A. The term “Service Line
Coverage Form” shall mean any authorized form identified in the SL Guidelines.

 

1

 

B.             For the purposes of this
Agreement, the term “Service Line Failure” shall follow the definition set
forth under the Company’s Service Line Coverage Form, except as otherwise
excluded under the Exclusions Article.

 

C.             The term “Policy/Policies”
as used herein means the Company’s binders and policies which include the
Service Line Coverage Form.

 

ARTICLE 6 — EXCLUSIONS

 

This Agreement does not apply to and specifically excludes:

 

A. Loss or damage caused by or resulting from any of the following
causes of loss:

 

(1)   Fire; or water or other means used to extinguish a fire.

 

(2)   Explosion.

 

(3)   Lightning; windstorm or hail; smoke; aircraft; riot or civil
commotion; theft; breakage of glass.

 

B. War risk, bombardment, invasion,
insurrection, rebellion, revolution, civil war, military or usurped power, or
confiscation by order of any government or public authority, as excluded under
the original Policies.

 

C. The Company’s liability
as a voluntary or involuntary member, subscriber or reinsurer of any pool,
syndicate, association or other combination of insurers or reinsurers formed
for the purpose of covering specific perils, specific classes of business or
for the purpose of insuring risks located in specific geographical areas.

 

D. 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.

 

E. Nuclear risk:

 

(1)               This reinsurance does not
cover any loss or liability accruing to the Company as a member of, or
subscriber to, any association of insurers or reinsurers formed for the purpose
of covering nuclear energy risks or as a direct or indirect reinsurer of any
such member, subscriber or association.

 

(2)               Without in any way
restricting the operation of Paragraph (1) above, it is understood and agreed
that this reinsurance does not cover loss caused by or resulting from nuclear
reaction or radiation, or radioactive contamination, however caused, even
though any other cause or event contributes concurrently or in any sequence to
the loss. However, it is agreed that loss arising out of the use of radioactive
isotopes in any form is not hereby excluded from any reinsurance protection.

 

ARTICLE 7— TERM AND TERMINATION

 

A. This Agreement shall
become effective on August 1, 2010 and shall apply to Policies to which a
Service Line Coverage Form is added on or after such date.

 

2

 

B. This Agreement shall be
of unlimited duration but may be terminated by either party giving the other
180 days prior notice in writing; provided that the Reinsurer shall continue to
be bound hereunder for the balance of the term of all Policies which remain in
force on the termination date of this Agreement.

 

ARTICLE 8 — LOSS NOTIFICATION AND SETTLEMENT

 

A.                The Company will give the
Reinsurer notice as soon as practicable of any claim or loss arising under
coverages subject to this Agreement. The Reinsurer shall advise the Company of
its estimate of each such claim or loss, and keep the Company advised of any
change in such estimate.

 

B.                  The Reinsurer at its expense
will investigate, negotiate and enter into settlement agreements or defend all
such claims and losses in accordance with the terms of the coverage subject to
this Agreement, and shall defend and hold harmless the Company against any suit
brought solely under coverages subject to this Agreement; provided that the
Company may at its own expense participate in any such investigation,
negotiation, settlement or defense.

 

C.                  In the event of a settlement
by the Reinsurer of a claim or loss arising under coverages subject to this
Agreement, the Company will, pursuant to said settlement, make payment directly
to the Insured, under the coverages subject to this Agreement. Upon making such
payment, and when requested by the Reinsurer, the Company will secure its
subrogation rights under the terms of the coverage subject to this Agreement
and will then assign such subrogation rights to the Reinsurer.

 

D.                 In the event of a claim or
loss involving coverages subject to this Agreement and coverages not subject to
this Agreement:

 

(I) The Company and the Reinsures shall join in the investigation,
settlement, and defense of all such claims and losses.

 

(2)               Court costs, interest on
judgments, and the cost of defense, including attorneys’ fees, which arise in
connection with any investigation, adjustment, resistance to or negotiations
concerning settlement of such claims or losses, shall be apportioned between
the Company and the Reinsurer in proportion to their respective liabilities as
finally determined or as mutually agreed upon.

 

(3)               The Company and the
Reinsurer agree that the Service Line Coverage Form will be considered primary to
any overlapping coverage under other forms or endorsements in the Company’s
Policy.

 

ARTICLE 9 — INDEMNIFICATION AND DEFENSE

 

Each party hereto agrees to indemnify and defend the other party hereto
against any and all claims for loss, liability or damage arising out of or in
connection with the acts or omissions of employees and servants of such
indemnifying party, when such acts or omissions result from or are incidental
to activities and services conducted solely in connection with Policies issued
by the Company and reinsured, in whole or in part, by the Reinsurer. This
undertaking shall apply irrespective of any limit of liability stated in this
Agreement.

 

3

 

ARTICLE 10 — REINSURANCE PREMIUM

 

A.                The Company shall pay to the
Reinsurer a reinsurance premium calculated in accordance with the rates
contained in the SL Guidelines, or the pro-rata portion thereof for in-term
transactions or odd-term Policies.

 

B.                  In the event Special
Acceptances are covered hereunder as set forth in the Special Acceptances
Article, the Company shall pay to the Reinsurer the agreed reinsurance premium
as set forth in the written quotation issued by the Reinsurer and accepted by
the Company.

 

ARTICLE 11— REPORTS AND REMITTANCES

 

A.                Within 30 days after the
close of each month, the Company shall report to the Reinsurer the Reinsurance
Premium written during the month, as calculated in accordance with the
Reinsurance Premium Article, for Policies covered hereunder. The balance shall be
immediately due and payable thereafter by the debtor party.

 

B.                  Within 30 days after the
close of each month, the Reinsurer shall report to the Company all losses
authorized during that month by the Reinsurer pursuant to the Loss Notification
and Settlement Article. All such losses are to be individually listed and
identified. The balance shall become immediately due and payable thereafter by
the Reinsurer.

 

C.                  The Company shall
periodically furnish the Reinsurer such reports and information relating to the
Policies reinsured hereunder as may be reasonably required for loss adjustment
activities.

 

D.      Each party shall furnish the other such figures as may be
required for financial reporting purposes. 

 

ARTICLE 12 — ACCESS TO RECORDS

 

The Reinsurer, or its designated representative, shall have free access
at all reasonable times during and after the currency of this Agreement, to
books and records maintained by the Company, which are involved in the subject
matter of this Agreement and which pertain to the reinsurance provided
hereunder and all claims made in connection therewith.

 

ARTICLE 13 — ARBITRATION

 

A.                As a condition precedent to
any right of action hereunder, all disputes or differences arising out of this
Agreement, including the formation and validity thereof, shall be submitted to
the decision of a board of arbitration consisting of two arbitrators, one to be
chosen by each party and in the event of the arbitrators failing to agree, to
the decision of an umpire to be chosen by the arbitrators. The arbitrators and
umpire shall be disinterested active or retired officers of property or
casualty insurance or reinsurance companies. If either of the parties fails to
appoint an arbitrator within 60 days after being required by the other party in
writing to do so, or if the arbitrators fail to appoint an umpire, within 60
days of a request in writing by either of them to do so, such arbitrator or
umpire, as the case may be, shall at the request of either party be appointed
by any court of competent jurisdiction. If a member of a panel dies, becomes
disabled or is otherwise unwilling or unable to serve, a substitute shall be
selected in the same manner as the departing member was chosen and the
arbitration shall continue.

 

B.                  The applicant shall submit
its case within 60 days after the appointment of the board of arbitration, and
the respondent shall submit its reply within 60 days after receipt of the
claim. The arbitrators and umpire are relieved from all judicial formality and
may abstain from following the strict rules of

 

4

 

evidence. They shall settle any dispute under this
Agreement according to an equitable rather than a strictly legal interpretation
of its terms and their decision in writing shall be final and binding. Judgment
may be entered upon the final decision of the arbitrators in any court having
jurisdiction.

 

C.                  Each party shall bear the
expenses of its arbitrator and shall jointly and equally share with the other
the expense of the umpire and of the arbitration.

 

D.                 This Article shall survive
the termination of this Agreement. 

 

ARTICLE 14 - ENTIRE AGREEMENT

 

With respect to the business being reinsured hereunder, (i) this
Agreement, including any documents expressly incorporated by reference herein,
constitutes the entire agreement between the parties, and (ii) there are no
understandings or agreements between the parties other than those expressed in
this Agreement. Any change to or modification of this Agreement will be made by
written amendment to this Agreement and signed by the parties hereto.

 

ARTICLE 15 — ERRORS AND OMISSIONS

 

Any inadvertent delay, omission or error shall not 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
rectified immediately upon discovery.

 

ARTICLE 16 - GOVERNING LAW

 

This Agreement shall be governed by and construed in accordance with
the laws of the state of the Company’s domicile, without regard to its
conflicts of law principles.

 

ARTICLE 17 — INSOLVENCY

 

A.                In the event of the
insolvency of the Company, reinsurance due under this Agreement shall be
payable, with reasonable provision for verification, directly to the Company,
or its liquidator, receiver, conservator or statutory successor immediately
upon demand on the basis of liability of the Company without diminution because
of the insolvency of the Company or because the liquidator, receiver,
conservator or statutory successor of the Company has failed to pay all or a
portion of any claim, It is agreed, however, that the liquidator, receiver,
conservator or statutory successor of the Company shall give written notice to
the Reinsurer of the pendency of a claim against the Company which would
involve a possible liability on the part of the Reinsurer, indicating the
Policy reinsured within a reasonable time after such claim is filed in the
conservation or liquidation proceeding or in the receivership. It is further
agreed 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 which it may deem available
to the Company or its liquidator or receiver, conservator or statutory
successor. The expense thus incurred by the Reinsurer shall be chargeable,
subject to the approval of the Court, against the Company as part of the
expense of conservation or liquidation to the extent of a pro rata share of the
benefit which may accrue to the Company solely as a result of the defense
undertaken by the Reinsurer.

 

B.                  The reinsurance shall be
payable by the Reinsurer to the Company or its liquidator, receiver,
conservator or statutory successor, except as provided by Section 4118(a) of
the New York Insurance Law or except (a) where the Agreement specifically
provides another payee of such reinsurance in the event of the insolvency of
the Company, and (b) where the Reinsurer with the

 

5

 

consent of the direct insured or insureds has
assumed such Policy obligations of the Company as direct obligations of the
Reinsurer to the payees under such Policies and in substitution for the
obligations of the Company to such payees.

 

ARTICLE 18 — MODE OF EXECUTION

 

A.    This Agreement may be executed by:

 

(1) an original written ink
signature of paper documents;

 

(2) an exchange of facsimile
copies showing the original written ink signature of paper documents;

 

(3)
electronic signature technology employing computer software and a digital
signature or digitizer pen pad to capture a person’s handwritten signature in
such a manner that the signature is unique to the person signing, is under the
sole control of the person signing, is capable of verification to authenticate
the signature and is linked to the document signed in such a manner that if the
data is changed, such signature is invalidated.

 

B.                  The use of any one or a
combination of these methods of execution shall constitute a legally binding
and valid signing of this Agreement. This Agreement may be executed in one or
more counterparts, each of which, when duly executed, shall be deemed an
original.

 

ARTICLE 19 - OFFSET

 

Each party hereto shall have the right to offset any undisputed balance
or amounts due from one party to the other under this Agreement. The party
asserting the right of offset may exercise such right, whether the undisputed
balance or amounts due are on account of premiums, losses or otherwise.
However, in the event of the insolvency of any party hereto, offsets shall only
be allowed in accordance with the provisions of the applicable State Insurance
Law.

 

ARTICLE 20 - SEVERABILITY

 

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

 

ARTICLE 21— SPECIAL ACCEPTANCES

 

Business which is not within the scope of this Agreement may be
submitted to the Reinsurer for special acceptance hereunder and such business,
if accepted by the Reinsurer in writing, shall be subject to all terms,
conditions and limitations of this Agreement except as modified by the special
acceptance.

 

ARTICLE 22 - TAX

 

In consideration of the terms under which this Agreement is issued, the
Company undertakes not to claim any deduction of the premium hereon when making
Canadian tax returns or when making tax returns, other than income or profits
tax returns, to any state or territory of the United States or to the District
of Columbia.

 

6

 

IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be executed in Boston,
Massachusetts, this 28 day of July, 2010.

 

 

	
   

  	
  SAFETY INSURANCE COMPANY

  
	
   

  	
  SAFETY INDEMNITY INSURANCE COMPANY

  
	
   

  	
  SAFETY PROPERTY AND CASUALTY INSURANCE COMPANY

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Edward N. Patrick, Jr.

  	
   

  
	
   

  	
   

  	
  Edward N. Patrick, Jr. , Vice President, Underwriting

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Attest:

  	
  /s/ John F. Heffernon

  	
   

  
	
   

  	
   

  	
  John F. Heffernon , Director, Homeowner Underwriting

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  And in Hartford,
  Connecticut, this 16 day of July, 2010.

  
	
   

  
	
   

  	
  THE HARTFORD STEAM BOILER INSPECTION AND INSURANCE COMPANY

  
	
   

  
	
   

  
	
   

  	
  By:

  	
  /s/ Shannon F. Niezelski

  	
   

  
	
   

  	
   

  	
  Shannon F. Niezelski, Senior Vice President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ W.MacKay Heckles

  	
   

  
	
   

  	
   

  	
  W.MacKay Heckles, Senior Vice President and Chief Reinsurance Officer

  
					

 

7EXHIBIT 10.2

 

 

EQUIPMENT
BREAKDOWN FOR HOMEOWNERS

REINSURANCE AGREEMENT

 

 

Between

 

 

SAFETY
INSURANCE COMPANY

SAFETY INDEMNITY INSURANCE COMPANY

SAFETY PROPERTY AND CASUALTY INSURANCE COMPANY

 

 

and

 

 

THE
HARTFORD STEAM BOILER

INSPECTION AND INSURANCE COMPANY

 

 

Ref. No. 2010-034

 

 

Effective August 1,
2010

 

 

EQUIPMENT BREAKDOWN FOR
HOMEOWNERS

REINSURANCE AGREEMENT

 

TABLE OF CONTENTS

 

	
  ARTICLE 1— BUSINESS COVERED

  	
  1

  
	
   

  	
   

  
	
  ARTICLE 2 — LIMIT OF LIABILITY

  	
  1

  
	
   

  	
   

  
	
  ARTICLE 3 — TERRITORY

  	
  1

  
	
   

  	
   

  
	
  ARTICLE 4 — FORMS, RATES AND RULES

  	
  1

  
	
   

  	
   

  
	
  ARTICLE 5 — DEFINITIONS

  	
  2

  
	
   

  	
   

  
	
  ARTICLE 6 — EXCLUSIONS

  	
  2

  
	
   

  	
   

  
	
  ARTICLE 7 — TERM AND TERMINATION

  	
  3

  
	
   

  	
   

  
	
  ARTICLE 8 LOSS NOTIFICATION AND SETTLEMENT

  	
  3

  
	
   

  	
   

  
	
  ARTICLE 9 — INDEMNIFICATION AND DEFENSE

  	
  4

  
	
   

  	
   

  
	
  ARTICLE 10 — REINSURANCE PREMIUM

  	
  4

  
	
   

  	
   

  
	
  ARTICLE 11 — REPORTS AND REMITTANCES

  	
  4

  
	
   

  	
   

  
	
  ARTICLE 12 — ACCESS TO RECORDS

  	
  4

  
	
   

  	
   

  
	
  ARTICLE 13 — ARBITRATION

  	
  4

  
	
   

  	
   

  
	
  ARTICLE 14 - ENTIRE AGREEMENT

  	
  5

  
	
   

  	
   

  
	
  ARTICLE 15 — ERRORS AND OMISSIONS

  	
  5

  
	
   

  	
   

  
	
  ARTICLE 16 - GOVERNING LAW

  	
  5

  
	
   

  	
   

  
	
  ARTICLE 17 — INSOLVENCY

  	
  5

  
	
   

  	
   

  
	
  ARTICLE 18 — MODE OF EXECUTION

  	
  6

  
	
   

  	
   

  
	
  ARTICLE 19 - OFFSET

  	
  6

  
	
   

  	
   

  
	
  ARTICLE 20 - SEVERABILITY

  	
  6

  
	
   

  	
   

  
	
  ARTICLE 21— SPECIAL ACCEPTANCES

  	
  7

  
	
   

  	
   

  
	
  ARTICLE 22 TAX

  	
  7

  

 

2

 

EQUIPMENT BREAKDOWN FOR
HOMEOWNERS

REINSURANCE AGREEMENT

 

(hereinafter called the “Agreement”)

between

 

SAFETY INSURANCE COMPANY

SAFETY INDEMNITY INSURANCE COMPANY

SAFETY PROPERTY AND CASUALTY INSURANCE COMPANY

 

(hereinafter called the “Company”)

and

THE HARTFORD STEAM BOILER
INSPECTION AND INSURANCE COMPANY

(hereinafter called the “Reinsurer”)

 

IN CONSIDERATION of the mutual covenants hereinafter contained and upon
the terms and conditions hereinafter set forth, the parties hereto agree as
follows:

 

ARTICLE I— BUSINESS COVERED

 

By this Agreement, the Company obligates itself to cede to the
Reinsurer and the Reinsurer obligates itself to accept as reinsurance 100% of
the Equipment Breakdown liability of the Company as respects Accidents
occurring under new and renewal Policies becoming effective on or after the
effective date of this Agreement.

 

ARTICLE 2 — LIMIT OF LIABILITY

 

The Reinsurer’s liability shall not exceed $50,000 for any one
Accident, any one Policy. 

 

ARTICLE 3 — TERRITORY

 

This Agreement shall apply wherever the Company’s Policies hereunder
apply. 

 

ARTICLE 4 — FORMS, RATES AND RULES

 

Reinsurance will be provided only in accordance with forms, rates and rules mutually
acceptable to the Company and the Reinsurer which are on file with the
Reinsurer. The agreed forms, rates and rules shall be those set forth in
the “Equipment Breakdown for Homeowners Underwriting Guidelines” in the most
current version held by the Company and on file with the Reinsurer,
(hereinafter referred to as “EB HO Guidelines”). EB HO Guidelines may be
amended from time to time, subject to approval in writing of both parties, and
are incorporated herein as if fully set forth in this Agreement.

 

1

 

ARTICLE 5 — DEFINITIONS

 

A.                The term “Equipment
Breakdown” as used herein means coverage as provided under the Company’s
Policies by the addition of the equipment breakdown coverage endorsement,
except as otherwise excluded under the Exclusions Article.

 

B.                  For the purposes of this
Agreement, the term “Accident” shall follow the definition set forth under the
Company’s equipment breakdown coverage endorsement, except as otherwise
excluded under the Exclusions Article.

 

C.                  The term “Policy/Policies”
as used herein means the Company’s Homeowners binders and policies which
include the equipment breakdown coverage endorsement reinsured under this
Agreement.

 

ARTICLE 6 — EXCLUSIONS

 

This Agreement does not apply to and specifically excludes:

 

A. Loss or damage caused by or resulting from any of the following
causes of loss:

 

(1)              Fire (including fire resulting
from an Accident); or water or other means used to extinguish a fire.

 

(2)              Explosion.

 

(3)              Lightning; windstorm or
hail; smoke; aircraft or vehicles; riot or civil commotion; vandalism;
malicious mischief; theft; breakage of glass; falling objects; weight of snow,
ice or sleet; freezing (caused by cold weather); collapse.

 

(4)              Flood, surface water, waves,
tides, tidal waves, overflow of any body of water, or their spray, all whether
driven by wind or not; mudslide or mudflow; or water that backs up or overflows
from a sewer, drain or sump, and any other water damage including water damage
resulting from an Accident.

 

(5)              Any earth movement,
including but not limited to earthquake, subsidence, sinkhole collapse,
landslide, earth sinking, tsunami or volcanic action.

 

B. War risk, bombardment, invasion,
insurrection, rebellion, revolution, civil war, military or usurped power, or
confiscation by order of any government or public authority, as excluded under
the original Policies.

 

C. The Company’s liability
as a voluntary or involuntary member, subscriber or reinsurer of any pool,
syndicate, association or other combination of insurers or reinsurers formed
for the purpose of covering specific perils, specific classes of business or
for the purpose of insuring risks located in specific geographical areas.

 

D. 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.

 

E. Nuclear risk:

 

2

 

(1)          This reinsurance does not
cover any loss or liability accruing to the Company as a member of, or
subscriber to, any association of insurers or reinsurers formed for the purpose
of covering nuclear energy risks or as a direct or indirect reinsurer of any
such member, subscriber or association.

 

(2)          Without in any way
restricting the operation of Paragraph (1) above, it is understood and
agreed that this reinsurance does not cover loss caused by or resulting from
nuclear reaction or radiation, or radioactive contamination, however caused,
even though any other cause or event contributes concurrently or in any
sequence to the loss. However, it is agreed that loss arising out of the use of
radioactive isotopes in any form is not hereby excluded from any reinsurance
protection.

 

ARTICLE 7 — TERM AND TERMINATION

 

A.                This Agreement shall become
effective on August 1, 2010 and shall be of unlimited duration but may be
terminated by either party giving the other 180 days prior notice in writing.

 

B.                  The Reinsurer shall continue
to be bound hereunder for the balance of the term of all Policies which remain
in force on the termination date of this Agreement.

 

ARTICLE 8 — LOSS NOTIFICATION AND SETTLEMENT

 

A.                The Company will give the
Reinsurer notice as soon as practicable of any claim or loss arising under
coverages subject to this Agreement. The Reinsurer shall advise the Company of
its estimate of each such claim or loss, and keep the Company advised of any
change in such estimate.

 

B.                  The Reinsurer at its expense
will investigate, negotiate and enter into settlement agreements or defend all
such claims and losses in accordance with the terms of the coverage subject to
this Agreement, and shall defend and hold harmless the Company against any suit
brought solely under coverages subject to this Agreement; provided that the
Company may at its own expense participate in any such investigation,
negotiation, settlement or defense.

 

C.                  In the event of a settlement
by the Reinsurer of a claim or loss arising under coverages subject to this
Agreement, the Company will, pursuant to said settlement, make payment directly
to the Insured, under the coverages subject to this Agreement. Upon making such
payment, and when requested by the Reinsurer, the Company will secure its
subrogation rights under the terms of the coverage subject to this Agreement
and will then assign such subrogation rights to the Reinsurer.

 

D.                 In the event of a claim or
loss involving coverages subject to this Agreement and coverages not subject to
this Agreement:

 

(1)              The Company and the
Reinsurer shall join in the investigation, settlement, and defense of all such
claims and losses.

 

(2)              Court costs, interest on
judgments, and the cost of defense, including attorneys’ fees, which arise in
connection with any investigation, adjustment, resistance to or negotiations
concerning settlement of such claims or losses, shall be apportioned between
the Company and the Reinsurer in proportion to their respective liabilities as
finally determined or as mutually agreed upon.

 

(3)              The Company and the
Reinsurer agree that for any overlapping coverage, the Equipment Breakdown
coverage will not be considered “primary” or “specific” and the “Guiding

 

3

 

Principles” in use at such time shall apply to all
such claims or losses to the extent to which such “Guiding Principles” are
applicable.

 

ARTICLE 9 — INDEMNIFICATION AND DEFENSE

 

Each party hereto agrees to indemnify and defend the other party hereto
against any and all claims for loss, liability or damage arising out of or in
connection with the acts or omissions of employees and servants of such
indemnifying party, when such acts or omissions result from or are incidental
to activities and services conducted solely in connection with Policies issued
by the Company and reinsured, in whole or in part, by the Reinsurer. This
undertaking shall apply irrespective of any limit of liability stated in this
Agreement.

 

ARTICLE 10 REINSURANCE PREMIUM

 

A. The Company shall pay to
the Reinsurer a reinsurance premium calculated in accordance with the rates
contained in the ED HO Guidelines, or the pro-rata portion thereof for in-term
transactions or odd-term Policies.

 

D. In the event Special
Acceptances are covered hereunder as set forth in the Special Acceptances
Article, the Company shall pay to the Reinsurer the agreed reinsurance premium
as set forth in the written quotation issued by the Reinsurer and accepted by
the Company.

 

ARTICLE 11— REPORTS AND REMITTANCES

 

A.                Within 30 days after the
close of each month, the Company shall report to the Reinsurer the Reinsurance
Premium written during the month, as calculated in accordance with the
Reinsurance Premium Article, for Policies covered hereunder. The balance shall
be immediately due and payable thereafter by the debtor party.

 

B.                  Within 30 days after the
close of each month, the Reinsurer shall report to the Company all losses
authorized during that month by the Reinsurer pursuant to the Loss Notification
and Settlement Article. All such losses are to be individually listed and
identified. The balance shall become immediately due and payable thereafter by
the Reinsurer.

 

C.                  The Company shall
periodically furnish the Reinsurer such reports and information relating to the
Policies reinsured hereunder as may be reasonably required for loss adjustment
activities.

 

D.      Each party shall furnish the other such figures as may be
required for financial reporting purposes. 

 

ARTICLE 12 — ACCESS TO
RECORDS

 

The Reinsurer, or its designated representative, shall have free access
at all reasonable times during and after the currency of this Agreement, to
books and records maintained by the Company, which are involved in the subject
matter of this Agreement and which pertain to the reinsurance provided
hereunder and all claims made in connection therewith.

 

ARTICLE 13 — ARBITRATION

 

A. As a condition precedent
to any right of action hereunder, all disputes or differences arising out of
this Agreement, including the formation and validity thereof, shall be
submitted to the decision of a board of arbitration consisting of two
arbitrators, one to be chosen by each party and in the event of

 

4

 

the arbitrators failing to agree, to the decision of
an umpire to be chosen by the arbitrators. The arbitrators and umpire shall be
disinterested active or retired officers of property or casualty insurance or
reinsurance companies. If either of the parties fails to appoint an arbitrator
within 60 days after being required by the other party in writing to do so, or
if the arbitrators fail to appoint an umpire, within 60 days of a request in
writing by either of them to do so, such arbitrator or umpire, as the case may
be, shall at the request of either party be appointed by any court of competent
jurisdiction. If a member of a panel dies, becomes disabled or is otherwise
unwilling or unable to serve, a substitute shall be selected in the same manner
as the departing member was chosen and the arbitration shall continue.

 

B.                  The applicant shall submit
its case within 60 days after the appointment of the board of arbitration, and
the respondent shall submit its reply within 60 days after receipt of the
claim. The arbitrators and umpire are relieved from all judicial formality and
may abstain from following the strict rules of evidence. They shall settle
any dispute under this Agreement according to an equitable rather than a
strictly legal interpretation of its terms and their decision in writing shall
be final and binding. Judgment may be entered upon the final decision of the
arbitrators in any court having jurisdiction.

 

C.                  Each party shall bear the
expenses of its arbitrator and shall jointly and equally share with the other
the expense of the umpire and of the arbitration.

 

D.                 This Article shall
survive the termination of this Agreement.

 

ARTICLE 14 ENTIRE AGREEMENT

 

With respect to the business being reinsured hereunder, (i) this
Agreement, including any documents expressly incorporated by reference herein,
constitutes the entire agreement between the parties, and (ii) there are
no understandings or agreements between the parties other than those expressed
in this Agreement. Any change to or modification of this Agreement will be made
by written amendment to this Agreement and signed by the parties hereto.

 

ARTICLE 15 ERRORS AND OMISSIONS

 

Any inadvertent delay, omission or error shall not 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
rectified immediately upon discovery.

 

ARTICLE 16 - GOVERNING LAW

 

This Agreement shall be governed by and construed in accordance with
the laws of the state of the Company’s domicile, without regard to its
conflicts of law principles.

 

ARTICLE 17 — INSOLVENCY

 

A.  In the event of the insolvency of the Company,
reinsurance due under this Agreement shall be payable, with reasonable
provision for verification, directly to the Company, or its liquidator,
receiver, conservator or statutory successor immediately upon demand on the
basis of liability of the Company without diminution because of the insolvency
of the Company or because the liquidator, receiver, conservator or statutory
successor of the Company has failed to pay all or a portion of any claim. It is
agreed, however, that the liquidator, receiver, conservator or statutory
successor of the Company shall give written notice to the Reinsurer of the pendency
of a claim against the Company which would involve a possible liability on the
part of the Reinsurer, indicating the Policy reinsured

 

5

 

within a reasonable time after such claim is filed
in the conservation or liquidation proceeding or in the receivership. It is
further agreed 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 which it may
deem available to the Company or its liquidator or receiver, conservator or
statutory successor. The expense thus incurred by the Reinsurer shall be
chargeable, subject to the approval of the Court, against the Company as part of
the expense of conservation or liquidation to the extent of a pro rata share of
the benefit which may accrue to the Company solely as a result of the defense
undertaken by the Reinsurer.

 

B.  The reinsurance shall be payable by the
Reinsurer to the Company or its liquidator, receiver, conservator or statutory
successor, except as provided by Section 4118(a) of the New York
Insurance Law or except (a) where the Agreement specifically provides
another payee of such reinsurance in the event of the insolvency of the
Company, and (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.

 

ARTICLE 18 MODE OF EXECUTION

 

A. This Agreement may be executed by:

 

(1)              an original written ink
signature of paper documents;

 

(2)     an exchange of facsimile copies showing the original written ink
signature of paper documents;

 

(3)              electronic signature
technology employing computer software and a digital signature or digitizer pen
pad to capture a person’s handwritten signature in such a manner that the
signature is unique to the person signing, is under the sole control of the
person signing, is capable of verification to
authenticate the signature and is linked to the document signed in
such a manner that if the data is changed, such signature is invalidated.

 

B. The use of any one or a
combination of these methods of execution shall constitute a legally binding
and valid signing of this Agreement. This Agreement may be executed in one or
more counterparts, each of which, when duly executed, shall be deemed an
original.

 

ARTICLE 19 - OFFSET

 

Each party hereto shall have the right to offset any undisputed balance
or amounts due from one party to the other under this Agreement. The party
asserting the right of offset may exercise such right, whether the undisputed
balance or amounts due are on account of premiums, losses or otherwise.
However, in the event of the insolvency of any party hereto, offsets shall only
be allowed in accordance with the provisions of the applicable State Insurance
Law.

 

ARTICLE 20 - SEVERABILITY

 

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

 

6

 

ARTICLE 21— SPECIAL ACCEPTANCES

 

Business which is not within the scope of this Agreement may be
submitted to the Reinsurer for special acceptance hereunder and such business,
if accepted by the Reinsurer in writing, shall be subject to all terms,
conditions and limitations of this Agreement except as modified by the special
acceptance.

 

ARTICLE 22 - TAX

 

In consideration of the terms under which this Agreement is issued, the
Company undertakes not to claim any deduction of the premium hereon when making
Canadian tax returns or when making tax returns, other than income or profits
tax returns, to any state or territory of the United States or to the District
of Columbia.

 

IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be executed in Boston, Massachusetts, this 28 day of July 2010.

 

	
   

  	
  SAFETY INSURANCE COMPANY

  
	
   

  	
  SAFETY INDEMNITY INSURANCE COMPANY

  
	
   

  	
  SAFETY PROPERTY AND CASUALTY INSURANCE COMPANY

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Edward N. Patrick, Jr.

  	
   

  
	
   

  	
   

  	
  Edward N. Patrick, Jr. , Vice President, Underwriting

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Attest:

  	
  /s/ John F. Heffernon

  	
   

  
	
   

  	
   

  	
  John F. Heffernon , Director, Homeowner Underwriting

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  And in Hartford,
  Connecticut, this 16 day of July, 2010.

  
	
   

  
	
  THE HARTFORD STEAM BOILER
  INSPECTION AND INSURANCE COMPANY

  
	
   

  	
   

  
	
   

  
	
   

  	
  By:

  	
  /s/ Shannon F. Niezelski

  	
   

  
	
   

  	
   

  	
  Shannon F. Niezelski, Senior Vice President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ W.MacKay Heckles

  	
   

  
	
   

  	
   

  	
  W.MacKay Heckles, Senior Vice President and Chief Reinsurance Officer

  
					

 

7

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