Document:

exv10w186

EXHIBIT
10.186

LIBERTY MUTUAL INSURANCE COMPANY

LIBERTY MUTUAL FIRE INSURANCE COMPANY

LIBERTY MUTUAL (BERMUDA) LTD.

LIBERTY INSURANCE CORPORATION

LIBERTY NORTHWEST INSURANCE CORPORATION

WORKERS’ COMPENSATION AND GENERAL LIABILITY

SIXTH EXCESS OF LOSS REINSURANCE CONTRACT

PREAMBLE

The Reinsurers hereby reinsure the Company to the extent and on the terms and conditions and
subject to the exceptions, exclusions and limitations hereinafter set forth.

ARTICLE 1 — EXHIBITS COVERED

The Company shall reinsure with the Reinsurers and the Reinsurers shall accept reinsurance
from the Company as set forth in Exhibits “A” and “B”, which are attached hereto and made part of
this Contract, such Exhibits being entitled for purposes of identification as follows:

     Exhibit “A” Excess of Loss Reinsurance of General Liability

     Exhibit “B” Excess of Loss
Reinsurance of Workers’ Compensation

ARTICLE 2 — RETENTION BY COMPANY

This Contract applies only to such portion of any obligation of the Company as the Company
retains net for its own account, and in calculating the amount of any loss hereunder and in
computing the amount or amounts in excess of which this Contract attaches only loss or losses in
respect to that portion of any obligation which the Company retains net for its own account shall
be included.

It is agreed that the amount or amounts of the Reinsurers’ liability hereunder in respect of any
losses shall not be increased by reason of the inability of the Company to collect from any other
Reinsurers whether specific or general, any amount or amounts which may have become due from them
whether such inability arises from the insolvency of such other Reinsurers or otherwise.

ARTICLE 3 — REINSURANCE PREMIUM

	(a)	 	The Reinsurers’ premium for the reinsurance provided under
this Contract shall be computed by the application of a rate

 

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 of .003% to the Company’s net premium written on the business covered under Exhibits “A” and
“B” subject to an annual minimum and deposit premium of $52,800 for the combined Sixth
Excess of Loss Layer provided under Exhibits “A” and “B”.

	(b)	 	The minimum and deposit premium as provided for in (a) above shall be payable to Reinsurers
in four equal quarterly installments at the beginning of each calendar quarter. The Company
shall undertake to furnish Reinsurers at the conclusion of each year a report of the net
premiums written during such year. If the annual developed reinsurance premium for the Sixth
Excess of Loss Reinsurance under Exhibits“A” and “B” computed in accordance with the
provisions of (a) above is greater than the minimum and deposit premium, the additional
premium shall be promptly paid to the Reinsurers.
	 
	(c)	 	The term “net premium written” shall mean gross premiums written by the Company on the
business covered hereunder less return premiums for cancellations and reductions and less
premiums on reinsurance which inures to the benefit of the Reinsurers. No deduction shall
be made for dividends declared, paid or credited to policyholders of the Company.

ARTICLE 4 — SUBROGATION

The Company hereby agrees to enforce such subrogation rights as it may obtain by virtue of
payments made under its policies, but in case the Company shall refuse or neglect to do so, the
Reinsurers are hereby authorized and empowered to bring any appropriate action in the name of the
Company or its policyholders or otherwise to enforce such rights.

The expense of any subrogation proceedings brought by the Company or the Reinsurers to enforce such
rights shall be apportioned between the Company and the Reinsurers in the ratio of their respective
interests in the total subrogation recovery but in the event there is a failure to make a
subrogation recovery the expense of the proceedings shall be apportioned between the Company and
the Reinsurers in the ratio of their respective interests in the total loss.

All subrogation recoveries made by either party subsequent to payments made by the Reinsurers under
this Contract shall be applied as if made prior to said payments and all necessary adjustments
shall be made between the Company and the Reinsurers as soon as practicable after said subrogation
recovery is made.

The Company shall have the right, before the happening of the accident or occurrence to waive its
right of subrogation.

 

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ARTICLE 5 — TAX

In consideration of the terms under which this Contract is issued, the Company undertakes
not to claim any deduction in respect of the premium hereon when making tax returns, other than
Income or Profits tax returns to any State or to the District of Columbia.

ARTICLE 6 — PAYMENTS UNDER THIS CONTRACT

All amounts due to either party hereunder shall be payable in United States currency.

ARTICLE 7 — ACCESS TO RECORDS

The Reinsurers or their duly appointed representatives shall at reasonable times, have free
access to all books and records of the Company and of its agents or attorneys for the purpose of
obtaining any further information concerning this reinsurance or the subject matter hereof.

ARTICLE 8 — INSOLVENCY

The reinsurance provided by this Contract shall be payable by the Reinsurers directly to the
Company or to its liquidator, receiver or statutory successor on the basis of the liability of the
Company under the contracts reinsured without diminution because of the insolvency of the Company.
In the event of the insolvency of the Company, the liquidator or receiver or statutory successor of
the Company shall give written notice of the pendency of each claim against the Company on a policy
or bond reinsured within a reasonable time after such claim is filed in the insolvency proceeding;
and during the pendency of such claim, the Reinsurers may investigate such claim and interpose, at
their own expense, in the proceeding where such claim is to be adjudicated any defense or defenses
which it may deem available to the Company, its liquidator or receiver or statutory successor. The
expense thus incurred by the Reinsurers shall be chargeable, subject to court approval, against the
Company as a part of the expense of liquidation to the extent of such proportionate share of the
benefit as shall accrue to the Company solely as a result of the defense undertaken by the
Reinsurers.

The reinsurance shall be payable as hereinbefore in the above paragraph provided except as
otherwise provided by Section 315 (relating to Fidelity and Surety Risks) of the Insurance Law of
New York or except (a) where the Contract specifically provides another payee of such reinsurance
in the event of the insolvency of the

 

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Company and (b) where the Reinsurers with the consent of the direct insured or insureds have
assumed such policy obligations of the Reinsurers to the payees under such policies and in
substitution for the obligations of the Company to such payees.

ARTICLE 9 — ARBITRATION

As a condition precedent to any right of action hereunder, any dispute arising out of this Contract
shall be submitted to the decision of a board of arbitration of two arbitrators and an umpire,
meeting in Boston, Massachusetts unless otherwise agreed.

The members of the board of arbitration shall be active or retired disinterested officials of
insurance or reinsurance companies, or Lloyds Underwriters. Each party shall appoint its
arbitrator and the two arbitrators shall choose an umpire before instituting the hearing. In the
event that either party should fail to choose an arbitrator within thirty (30) days following a
written request by the other party to enter upon arbitration, the requesting party may choose two
arbitrators who shall in turn choose an umpire before entering upon arbitration. In the event the
two arbitrators fail to agree on an umpire either party shall have the right to submit the matter
to the American Arbitration Association in effect at that time.

Each party shall present its case to the arbitrators within sixty (60) days following the date
of their appointment. The board shall make its decision with regard to the custom and usage of the
insurance and reinsurance business. The board shall issue its decision in writing based upon a
hearing in which evidence may be introduced without following strict rules of evidence but in
which cross examination and rebuttal shall be allowed. The board shall make its decision within 60
days following the termination of the hearings unless the parties consent to an extension. The
majority decision of the board shall be final and binding upon all parties to the proceeding.
Judgement may be entered upon the award of the board in any court having jurisdiction thereof.

If more than one Reinsurer is involved in the same dispute, all such Reinsurers shall constitute
and act as one party for purposes of this clause and communications shall be made by the Reassured
to each of the Reinsurers constituting the one party, provided, however, that nothing therein
shall impair the rights of such Reinsurers to assert several, rather than joint, defenses or
claims, nor be construed as changing the liability of the Reinsurers under the terms of this
Contract from several to joint.

Each party shall bear the expense of its own arbitrator and shall jointly and equally bear with
the other party the expense of the

 

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umpire. The remaining costs of the arbitration proceedings shall be allocated by the board.

ARTICLE 10 — OFFSET

Each party hereto shall have the right to offset any balance or balances, whether on account of
premiums or on account of losses, due from one party to any other party under this Contract against
any balance or balances currently due and payable to the one party from the other party under this
Contract.

ARTICLE 11 — ADVANCES

If the Reinsurer is unauthorized in any State of the United States of America or the
District of Columbia where authorization is required by insurance regulatory authorities, the
Reinsurers will fund (provided particulars are received forty-five days prior to the date funding
is required by the Company) outstanding losses by either cash advances, escrow accounts for the
benefit of the Company, Letters of Credit, or a combination thereof, if a penalty would accrue to
the Company on its statement without such funding. The Reinsurers shall have the sole option of
determining the method of funding referred to above provided it is acceptable to the insurance
regulatory authorities involved.

LOSS
RESERVES: (U.S. Dollar Reinsurance Letter of Credit) (Applies only to those
Reinsurers who are domiciled outside the United States of America who cannot qualify for credit by
the State having jurisdiction over the Company’s loss reserves).

As regards policies or bonds issued by the Company coming within the scope of this Contract, the
Company agrees that when it shall file with the Insurance Department or set up on its books
reserves for losses covered hereunder which it shall be required to set up by law it will forward
to the Reinsurers a statement showing the proportion of such loss reserves which is applicable to
them. The Reinsurers hereby agree that they will apply for and secure delivery to the Company a
clean irrevocable Letter of Credit issued by Citibank N.A. in an amount equal to Reinsurers’
proportion of said loss reserves.

 

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The Company undertakes to use and apply any amounts which it may draw upon such Credit pursuant to
the terms of the Contract under which the Letter of Credit is held, and for the following purposes
only:

	 	A.	 	To pay the Reinsurers’ share or to reimburse the Company for the
Reinsurers’ share of any liability for loss reinsured by this Contract.
	 
	 	B.	 	To make refund of any sum which is in excess of the actual amount
required to pay Reinsurers’ share of any liability reinsured by this
Contract.

Citibank N.A. shall have no responsibility whatsoever in connection with the propriety of
withdrawals made by the Company or the disposition of funds withdrawn, except to see that
withdrawals are made only upon the order of properly authorized representatives of the Company.

ARTICLE 12 — SERVICE OF SUIT

This Article applies to other than authorized Reinsurers and to Reinsurers domiciled outside
the United States of America.

In the event of the failure of the Reinsurers to pay any amount claimed to be due hereunder, the
Reinsurers, at the request of the Company, will submit to the jurisdiction of any court of
competent jurisdiction within the United States and will comply with all requirements necessary to
give such court jurisdiction and all matters arising hereunder shall be determined in accordance
with the law and practice of such court.

Service of process in such suit may be made upon Messrs. Mendes and Mount, Three Park Avenue, New
York, New York 10016, or any other designated attorney, and that in any suit instituted, the
Reinsurers will abide by the final decision of such court or of any appellate court in the event of
an appeal.

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

Further, pursuant to any statute of any state, territory or district of the United States which
makes provisions therefore, the Reinsurers hereby designate the Superintendent, Commissioner or
Director of Insurance or other officer specified for that purpose in the statute, or his successor
or successors in office, as their

 

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true and lawful attorney upon whom may be served any lawful process in any action, suit or
proceeding instituted by or on behalf of the Company or any beneficiary hereunder arising out of
this Contract of reinsurance, and hereby designate the above named as the person to whom the said
officer is authorized to mail such process or a true copy thereof.

ARTICLE 13 — ERRORS AND OMISSIONS

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

ARTICLE 14 — COMMENCEMENT AND TERMINATION

This Contract applies only to accidents or occurrences happening during its effective
period. This Contract is effective at Midnight, December 31, 1983 Standard Time in Boston,
Massachusetts and shall remain in force continuously unless terminated at midnight on any
subsequent December 31 by either party giving the other at least three months prior notice of
cancellation. Otherwise, this Contract may be cancelled only by mutual consent, or if required by
law or administrative order.

ARTICLE 15 — REINSURANCE INTERMEDIARY DESIGNATION

Holborn Agency Corporation, 90 John Street, New York, New York 10038 is hereby recognized as
the Intermediary negotiating this Contract for all business hereunder. All communications
(including but not limited to notices, statements, premiums, return premiums, commissions, taxes,
losses, loss adjustment expense, salvages and loss settlements) relating thereto shall be
transmitted to the Company or the Reinsurers through Holborn Agency Corporation. Payments by the
Company to the Intermediary shall be deemed to constitute payment to the Reinsurer. Payments by
the Reinsurers to the Intermediary shall be deemed to constitute payment to the Company only to the
extent that such payments are actually received by the Company.

ARTICLE 16 — INTERPRETATION

The validity and interpretation of this Contract and of each Article and part thereof shall
be governed by the Law of the Commonwealth of Massachusetts.

EE/tlh — 8/9/84

 

 

EXHIBIT A

EXCESS OF LOSS REINSURANCE OF GENERAL LIABILITY

SECTION 1 — COVERAGE

The Reinsurers hereby reinsure the Company, subject to the provisions and conditions herein
contained, in respect of liability which may accrue to the Company under any contracts of insurance
or reinsurance (hereinafter referred to as obligations of the Company), but excluding liability in
connection with the following class of business or contracts:

Workers’ Compensation and Employers’ Liability insurance, but this exclusion shall not
apply to Workers’ Compensation or Employers’ Liability coverage given under public
liability policies written by the Company (other than Umbrella Excess Liability
policies).

Bankers’ and Brokers’ insurances or reinsurances issued by the Company meaning
contracts issued to banks, trust companies, building and loan companies, safe
deposit companies, investment companies, including investment trusts, finance
companies, credit unions, stock or security brokers, or to similar financial
institutions, insuring them against loss from the following hazards:

Infidelity
of employees and/or partners
Unfaithful performance of
duties by employees
and/or partners

Loss of property in
transit

Forgery or alteration of negotiable or other paper Burglary, robbery,
theft, false pretenses or fraud
Mysterious desappearance or misplacement
of
property

Loss of property from safe deposit boxes or other
depositories

Damage
to or destruction of money or securities
Counterfeiting
of currencies or securities

Motor Vehicle Physical Damage Insurance, but this exclusion shall not apply to Motor Vehicle
Property Damage Liability Insurance.

Credit Insurance and/or Financial Guarantee.

Fire Insurance, including the coverages ordinarily written under Extended Coverage
Endorsements.

Business ceded to and assumed from the Pollution Liability Insurance Association.

 

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Group Health, Disability, Hospital or Surgical Insurance, but this exclusion shall not apply to any
loss due to two or more persons insured under one or more Group policies suffering bodily injuries,
including death resulting therefrom, as a result of one accident or series of accidents arising out
of one event.

Livestock Mortality Insurance.

Surety business, but this exclusion shall not apply to faithful performance bonds or public
official bonds; provided, however, that the Reinsurers shall not be liable for any loss resulting
from the insolvency of any firm, company, corporation or bank with which a guaranteed official has
deposited funds in the course of his duties.

Insurance covering the liability of owners or operators of aircraft carrying passengers for hire
for injuries to such passengers.

Contracts of insurance written on any cost-plus plan which provides for payment of the full amount
of all losses, however great, by the policyholder. This exclusion shall not apply to contracts of
insurance, premiums for which are determined by a retrospective rating plan which provides for a
specific maximum premium or a formula for determination of a maximum premium.

Contracts of liability insurance covering injuries to persons or property arising out of the rail
operations of Class 1 railroads; but this exclusion shall not apply to railroad Protective
Liability policies issued at the request of the Company’s policyholders doing work for or on the
premises of such railroads.

Liability under any Insolvency Fund arising by contract, operation of law or otherwise, whether
voluntary or involuntary. “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 has been otherwise deemed
unable to meet any claim, debt, charge, fee or other obligation in whole or in part.

Excess of Loss Reinsurance Contracts.

This
Contract is subject to the Nuclear Incident Exclusion Clause — Liability — Reinsurance and the
Nuclear Incident Exclusion Clause -Physical Damage — Reinsurance attached hereto.

 

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SECTION 2 — LIMIT OF LIABILITY

The Reinsurer shall be liable for ultimate net loss in excess of the sum of $45,000,000 of ultimate
net loss each and every accident or occurrence in respect of business the subject matter of this
Exhibit, subject to a limit of $10,000,000 on account of each and every accident or occurrence.

It is also agreed that subrogation expense incurred shall be paid in addition to the applicable
limits of liability set forth in this Section 2, on the basis provided in Article 4 of the
Contract.

For purposes of this Exhibit, it is agreed that the Company’s limit of liability under any and all
policies of Personal Accident Insurance (individual and group) covering any one individual shall be
considered as not exceeding $300,000. Subject to this Agreement and subject to the limits set
forth in this Section 2, it is agreed that the Company is reinsured hereunder for the excess of the
amounts set forth in this Section 2 of ultimate net loss any one accident, or series of accidents
arising out of one event involving more than one person covered under such policies issued by the
Company.

SECTION 3 — ULTIMATE NET LOSS

The term “Ultimate Net Loss” as used in this Exhibit shall mean the amount actually paid by the
Company (including but not limited to loss adjustment expenses, attorneys’ fees and other costs of
investigation or litigation) in settlement of or payment of claims or judgements arising from each
and every loss for which the Company is or may be found liable under its contracts of insurance or
reinsurance, less salvages and subrogation recoveries and amounts recovered or recoverable under
pooling agreements or other reinsurances, whether collectible, or not; provided, however, that in
the event of the insolvency of the Company, “Ultimate Net Loss” shall mean the amount of loss
(including but not limited to loss adjustment expenses, attorneys’ fees and other costs of
investigation or litigation) which the Company has incurred or for which it is liable, and payment
by the Reinsurers shall be made to the liquidator, receiver or statutory successor of the Company
in accordance with the provisions of Article 8 of this Contract. Salaries and expenses of
employees of the Company shall not be included in ascertaining ultimate net loss.

This Contract shall protect the Company within the limit hereof, in connection with any loss for
which the Company may be legally liable to pay in excess of the limit of its original policy, where
loss in excess of the limit has been incurred because of its failure to settle within the policy
limit or by reason of alleged or actual negligence, fraud or bad faith in rejecting an offer of

 

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settlement or in the preparation of the defense or in the trial of any action against its insured
or in the preparation of prosecution of an appeal consequent upon such action.

It is agreed that the Company may carry underlying limits of indemnity recoveries under which shall
inure to the sole benefit of the Company and shall be disregarded in computing the net excess loss
in excess of which this Contract attaches.

SECTION 4 — DEFINITION OF “EACH AND EVERY ACCIDENT OR OCCURRENCE”

The term “each and every accident or occurrence” as used in this Exhibit is defined as
follows according to the class or risk involved:

	 	A.	 	Fidelity and Forgery
	 
	 	 	 	All losses resulting from any fraudulent or dishonest act or omission or series thereof
on the part of any one person or of several persons acting in collusion (whether
employees or not) and irrespective of the number of the Company’s obligations involved;
provided, that in the case of any loss involving two or more persons acting in
collusion, losses resulting from separate acts or omissions on the part of each such
person shall be included as part of such loss.

	 	1.	 	It is agreed that each and every loss occurring prior to
midnight on the date of termination of this Contract and discovered not
later than three years after such termination (excluding only any loss
which occurred wholly prior to midnight on the effective date of this
Contract) shall be recoverable under this Contract.
	 
	 	2.	 	It is further agreed that each and every loss
resulting from a series of acts or omissions, some prior to and some
subsequent to midnight on the effective date of this Contract, shall
be disregarded.

	 	 	 	As regards losses arising under policies and/or contracts covering on a “losses
discovered” or “claims made during” basis (that is to say policies and/or contracts in
which the date of discovery of the loss, or the date the claim is made against the
insured or is first notified to the Company, determines under which policy and/or
contract the loss is collectible), such losses are covered hereunder

 

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	 	 	 	and the date of the discovery of such loss or the date such claim is made or first notified
shall be deemed to be the date of loss occurring for the purposes of
this Contract, provided that the date of the discovery of the loss or the date the claim is made or first notified
falls within the period covered by this Contract.
	 
	 	 	 	For the purposes of the foregoing the date of first discovery of a “loss” or the date the
claim is first made against an insured or first notified to the Company shall be the date
applicable to the entire loss and/or claim and the Reinsurers shall be liable for their
proportion of the entire loss and/or claim irrespective of the expiry date of this Contract
and provided that such first discovery date or first date such claim is made or notified
falls within the period of this Contract.
	 
	 	B.	 	Liability Insurance Written Subject to an Aggregate Limit
	 
	 	 	 	As respects each and every liability insurance policy issued by the Company which contains
one or more aggregate limits of liability on a policy year basis, and as respects each such
aggregate limit under each policy year, the aggregate amount of all losses occurring during
one policy year. Where the Company issues more than one such policy to the same policyholder
such policies shall together be treated as though they were one policy. Losses under such
policies shall for the purposes of this reinsurance contract be deemed to have occurred in
the calendar year in which the inception date of the policy falls, except that as respects
such policies issued for a period in excess of twelve months, losses for the first twelve
month period shall be deemed to have occurred in the calendar year in which the inception
date of the policy falls and losses for each succeeding twelve month period or part thereof
shall be deemed to have occurred in the calendar year in which the anniversary date of the
policy starting such period falls.
	 
	 	C.	 	All Other Classes or Risks Covered hereunder (Including Completed Operations)
	 
	 	 	 	All injuries to persons and all losses of, injury to or destruction of property resulting
from each accident or loss, or from each series of accidents or losses proximately arising
out of or following on any one cause or event.

 

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SECTION 5 — EXTRA CONTRACTUAL OBLIGATIONS

This Contract shall protect the Company within the limits hereof for 80% of Extra
Contractual Obligations, where the ultimate net loss includes any Extra Contractual Obligations.
“Extra Contractual Obligations” are defined as those liabilities not covered under any other
provision of this Contract and which arise from the handling of any claim on business covered
hereunder, such liabilities arising because of, but not limited to, the following: failure by the
Company to settle within the policy limit, or by reason of alleged or actual negligence, fraud or
bad faith in rejecting an offer of settlement or in the preparation of the defense or in the. trial
of any action against its Insured or Reinsured or in the preparation or prosecution of an appeal
consequent upon such action.

The date on which any Extra Contractual Obligation is incurred by the Company shall be deemed,
in all circumstances, to be the date of the original accident, casualty, disaster or loss
occurrence.

However, this Article shall not apply where the loss has been incurred due to the fraud of a member
of the Board of Directors or a corporate officer of the Company acting individually or collectively
or in collusion with any individual or corporation or any other organization or party involved in
the presentation, defense or settlement of any claim covered hereunder.

SECTION 6 — CLAIMS AGAINST REINSURERS

The Company shall be the sole judge as to what claims are covered under its policies, and
all loss settlements made and all judgements paid by the Company, provided they are within the
terms and conditions of this Exhibit, shall be unconditionally binding upon the Reinsurers and
amounts falling to the share of the Reinsurers shall be immediately due and payable by them upon
reasonable evidence of the amount paid being given by the Company. Nevertheless, it is understood
and agreed that in the event of a loss hereunder, or of an event or happening likely to result in a
loss hereunder, the Reinsurers shall have the right, if they so elect, to cooperate with the
Company in the defense or settlement of original losses under its obligations.

All settlements of losses effected by the Company shall be binding upon the Reinsurers, and the
Reinsurers shall be liable for their proportion thereof.

This Exhibit A is attached to and forms part of the Workers’ Compensation and General
Liability Sixth Excess of Loss Reinsurance Contract issued to LIBERTY MUTUAL INSURANCE COMPANY,
LIBERTY MUTUAL FIRE INSURANCE COMPANY, LIBERTY MUTUAL (BERMUDA) LTD., LIBERTY INSURANCE CORPORATION
and LIBERTY NORTHWEST INSURANCE CORPORATION.

EE/tlh — 8/9/84

 

 

EXHIBIT B

EXCESS OF LOSS REINSURANCE OF WORKERS’ COMPENSATION

SECTION 1 — COVERAGE

The Reinsurers hereby reinsure the Company in respect of the liability of the Company, under (1)
policies (the premium for which is classified by the Company, for internal purposes, as “Workers’
Compensation” or “Employers’ Liability”) by which the Company insures the liability of employers
under law or contract which imposes liability upon such employer for injury, sickness or disease,
including death resulting therefrom, sustained by his employees, and (2) Employers Liability
coverage provided under Umbrella Excess Liability policies.

SECTION 2 — LIMITS OF LIABILITY

The Reinsurers shall be liable for ultimate net loss in excess of the sum of $45,000,000 of
ultimate net loss each and every accident or occurrence in respect of business the subject matter
of this Exhibit, subject to a limit of $10,000,000 on account of each and every accident or
occurrence.

It is also agreed that subrogation expense incurred shall be paid in addition to the applicable
limits of liability set forth in this Section 2, on the basis provided in Article 4 of the
Contract.

SECTION 3 — ULTIMATE NET LOSS

The term “ultimate net loss” as used in this Exhibit means the amount actually paid by the Company
(including but not limited to medical losses, interests, costs and allocated claim expense) in
respect of claims arising from any one accident or occurrence, for which the Company is or may be
found liable, after making proper deductions for amounts paid or due under other reinsurance
(whether collectible or not), subrogation recoveries, overpayments collected, and refunds to the
Company from the New York Aggregate Trust Fund, second injury funds and other such funds; provided,
however, that in the event of the insolvency of the Company, “ultimate net loss” as used in this
Exhibit means the amount of loss (including but not limited to medical losses, interests, costs and
allocated claim expense) in respect of claims arising from any one accident or occurrence which the
Company has incurred or for which it is liable, and payment by the Reinsurers shall be made to the
liquidator, receiver or statutory successor of the Company in accordance with the provisions of
Article 8 of this Contract. Expenses for salaried employees of the Company incurred in litigation
and the investigation or adjustment of claims or suits and subrogation expense referred to in
Article 4 shall be disregarded in ascertaining ultimate net loss.

 

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This Contract shall protect the Company within the limit hereof in connection with any loss for
which the Company may be legally liable to pay in excess of the limit of its original policy, where
loss in excess of the limit has been incurred because of its failure to settle within the policy
limit or by reason of alleged or actual negligence, fraud or bad faith in rejecting an offer of
settlement or in the preparation of the defense or in the trial of any action against its insured
or in the preparation of prosecution of an appeal consequent upon such action.

It is agreed that the Company may carry underlying limits of indemnity recoveries under which shall
inure to the sole benefit of the Company and shall be disregarded in computing the net excess loss
in excess of which this Contract attaches.

SECTION 4 — EXCLUSIONS

This Exhibit does not apply:

	A.	 	To excess of loss reinsurance contracts.
	 
	B.	 	To the following occupations, employments or risks (except when not disclosed to the Company,
when incidental to a non- excluded risk (the company to be the sole judge of what is incidental) or when insured through voluntary or statutory pools or assigned risk plans):

	 	1.	 	The navigation and operation of vessels on the
high seas in foreign commerce;
	 
	 	2.	 	Underground coal mining;
	 
	 	3.	 	Fireworks manufacturing;
	 
	 	4.	 	Fuse manufacturing;
	 
	 	5.	 	Explosive risks, viz

	 	(a)	 	Manufacture of any explosive substance
intended for use as an explosive;
	 
	 	(b)	 	Manufacture of any product, other than
Fireworks and Fuses, in which any such explosive substance is
an ingredient;
	 
	 	(c)	 	The loading of any such explosive substance into containers for use as explosive objects,
propellant charges or detonating devices, and the incidental
storage thereof;
	 
	 	(d)	 	Handling transportation or storage of
any such explosive substance intended solely for war
purposes.

	C.	 	To any accident or occurrence as to which the Company is

 

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	 	 	entitled to recover the full amount of the loss under an insurance policy written on a
cost-plus plan, that is to say, a plan which provides for the payment of the full amount of
all losses, however great, by the policyholder. This exclusion does not apply to bar
recovery from the Reinsurers with respect to accidents or occurrences under
retrospectively-rated policies.
	 
	D.	 	Liability under any Insolvency Fund arising by contract,
operation of law or otherwise, whether voluntary or involuntary. “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 has been otherwise deemed unable to meet any
claim, debt, charge, fee or other obligation in whole or in part.

SECTION 5 — DEFINITIONS

As used in this Exhibit the following terms shall have the meanings stated herein:

	A.	 	“Policies”. Policies, contracts, endorsements or binders, including but not limited to
those by which the Company undertakes to offer and pay “voluntary compensation” benefits,
those by which the Company undertakes to make payments to augment compensation benefits those
by which the Company affords reinsurance or excess insurance to Workers’ Compensation or
Employers’ Liability risks and those by which the Company undertakes to participate in
voluntary or statutory pools or assigned-risk plans.
	 
	B.	 	“Explosive Substance”. Any substance manufactured for the express purpose of exploding as
differentiated from commodities used industrially and which are only incidentally explosive
 — such as gasoline, celluloid, fuel gases and dyestuffs.
	 
	C.	 	“Accident or Occurrence.” Any one accident or occurrence or series of accidents or
occurrences arising out of one event provided that, with respect to disease or death resulting
therefrom, the terms accident or occurrence and series of accidents or occurrences shall mean
the claim or series of claims occasioned by the disease or diseases having a common cause or
origin. The Company shall be the sole judge of what constitutes disease or diseases having a
common cause or origin. The Company shall assign the claim or series of claims to a policy
year of coverage under any one policy or

 

- 4 -

	 	 	renewal thereof and will be bound by the following principles:

	 	1.	 	If the liability is placed solely upon the employer or
insurer as of the date the claimant’s disability commences or
becomes manifest and that date is within a period of coverage under
an applicable policy issued
by the Company, the loss shall be deemed to have been sustained by
the Company at such date.
	 
	 	2.	 	If assignment is not made on the basis stated in the
preceding subparagraph the claim is to be assigned to the policy
year of the date of claimant’s last injurious exposure during a
period of coverage under an applicable policy issued by the Company.

	 	 	Notwithstanding anything to the contrary above set forth, it is agreed that the date of the
loss occurrence for the purpose of this reinsurance shall be deemed to be the inception,
anniversary or renewal date of the Company’s original policy. Losses occurring under a
policy in-force at December 31, 1983 shall be assigned to this Agreement to the extent such
losses are not assignable to the 1983 Contract year.
	 
	 	 	Notwithstanding the foregoing, where a policyholder requests that it be issued two or more
policies in circumstances where applicable manual rules permit the issuance of a single
policy such policies shall be regarded as a single policy for purposes of assigning disease
claims to a policy year coverage.
	 
	 	 	“Policy year” shall mean each separate original policy period of not exceeding twelve months
commencing at the inception, anniversary or renewal date on or after the inception of this
Agreement.

SECTION 6 — EXTRA CONTRACTUAL OBLIGATIONS

This Contract shall protect the Company within the limits hereof for 80% of Extra Contractual
Obligations, where the ultimate net loss includes any Extra Contractual Obligations. “Extra
Contractual Obligations” are defined as those liabilities not covered under any other provision of
this Contract and which arise from the handling of any claim on business covered hereunder, such
liabilities arising because of, but not limited to, the following: failure by the Company to
settle within the policy limit, or by reason of alleged or actual negligence, fraud or bad faith in
rejecting an offer of settlement or in the preparation of the defense or in the trial of any action
against its Insured or Reinsured or in the preparation or prosecution of an appeal consequent upon
such action.

REVISED — Sixth Casualty Excess

 

- 5 -

The date on which any Extra Contractual Obligation is incurred by the Company
shall be deemed, in all circumstances, to be the date of the original accident, casualty,
disaster or loss occurrence.

However, this Article shall not apply where the loss has been incurred due to the fraud of a
member of the Board of Directors or a corporate officer of the Company acting individually or
collectively or in collusion with any individual or corporation or any other organization or
party involved in the presentation, defense or settlement of any
claim covered hereunder.

SECTION 7 — NOTICE TO REINSURERS

As soon as practicable after it appears probable that the Company’s
ultimate net loss on account of any one accident or occurrence will
exceed the amount above which the Reinsurers are liable under this
Exhibit, the Company shall notify the Reinsurers and provide them
full information relative thereto, and copies of all papers that
may be desired by them, and the Reinsurers shall be given every
opportunity to participate in the defense of any such suit, proceeding or claim at their own
expense.

SECTION 8 — PAYMENT BY THE COMPANY

The Company shall be the sole judge as to what claims are covered under its policies, as to
the liability of the Company therefor and as to the amounts which the Company should pay thereon,
and the Reinsurers shall be bound by the judgement of the Company as to such matters.

All settlements of losses effected by the Company shall be binding upon the Reinsurers, and the
Reinsurers shall be liable for their proportion thereof.

SECTION 9 — CLAIMS AGAINST REINSURERS

The Company shall, after it has paid any amount of ultimate net loss for which the
Reinsurers may be liable under this Exhibit, submit to the Reinsurers a definite claim for such
amount. If any subsequent losses shall be paid by the Company on account of the same accident or
occurrence, additional claims hereunder shall be similarly made from time to time. Losses shall
be due and payable by the Reinsurers within fifteen days after claim hereunder is proved.

All salvages, recoveries and payments recovered or received subsequent to a loss settlement under
this Exhibit shall be applied as

 

- 6 -

if recovered or received prior to the said settlement and all necessary adjustments shall be
made by the parties hereto.

SECTION 10 — COMMUTATION

Within 48 months from the expiration of each annual period of this Contract the Company
shall submit a statement to the Reinsurers listing amounts paid and reserved for all Workers’
Compensation claims under this Agreement. This statement shall form the basis of an agreed value
for all such losses. The amounts of reserves contained therein shall be calculated in accordance
with the following criteria:

	 	1.	 	Mortality assumptions will be calculated from the latest
available United States census tables as follows:

	 
	 	 	 	Survivor Benefits  — Total Females
	 
	 	 	 	Disability Benefits — Total Males
	 
	 	2.	 	The annual interest discount percentage shall be an average
(rounded to the nearest one-half percentage point) of the before-tax
yields of the Company’s investment purchases for the three latest
available calendar years.
	 
	 	3.	 	Remarriage expectations will be in accordance with the
assumptions used by the National Council on Compensation Insurance in
its statistical tables.
	 
	 	4.	 	For all future medical costs, and annuity calculation shall be based
upon the Company’s evaluation of long term medical care and rehabilitation requirements, using an annual discount of 0% and an annual escalation of 0%.

The above criteria shall not apply to losses with future escalation of indemnity benefits as
described below:

	 	1.	 	Annuity values for “index-linked” benefits shall be calculated based
upon an annual discount of 0% and an annual escalation of 0%.
	 
	 	2.	 	For “index-linked” benefits, remarriage expectations will not
be used.

Except as may be mutually agreed for specific losses, these calculations shall be considered the
final and agreed value of all known workers’ compensation losses for the applicable annual period
of this Contract. A resulting payment, if any, shall be accepted by the Company in full settlement
of the Reinsurers’ liability for all such losses. In the event that a workers’ compensation loss
is

 

- 7 -

not reported to the Company until after the Company’s statement has been submitted, immediate
notice of such loss shall be given to the Reinsurers in order that an agreed present value may be
determined.

SECTION 11 — TWO PERSON WARRANTY

No loss shall be recoverable unless at least two employees of one or more insureds are
involved in the same accident or occurrence or series of accidents or occurrences originating from
one event and the payments to at least two employees are more than $50,000 each. This Warranty does
not apply to Employers Liability Coverage.

This Exhibit B is attached to and forms part of the Workers’ Compensation and General
Liability Sixth Excess of Loss Reinsurance Contract issued to LIBERTY MUTUAL INSURANCE COMPANY,
LIBERTY MUTUAL FIRE INSURANCE COMPANY, LIBERTY MUTUAL (BERMUDA) LTD., LIBERTY INSURANCE CORPORATION
and LIBERTY NORTHWEST INSURANCE CORPORATION.

EE/tlh — 8/9/84

 

 

NUCLEAR
INCIDENT EXCLUSION CLAUSE —  PHYSICAL DAMAGE — REINSURANCE

(Wherever the word “Reassured” appears in this clause, it shall be deemed to
read “Reassured”, “Reinsured”,
“Company”, or whatever other word is employed
throughout the text of the reinsurance agreement to which this clause is attached
to designate the company or companies reinsured.)

     1. This
Reinsurance does not cover any loss or liability accruing to the Reassured, directly
or indirectly, and whether as Insurer or Reinsurer, from any Pool of Insurers or Reinsurers
formed for the purpose of covering Atomic or Nuclear Energy risks.

     2. Without in any way restricting the operation of paragraph (1) of this Clause, this
Reinsurance does not cover any loss or liability accruing to the Reassured, directly or
indirectly and whether as Insurer or Reinsurer, from any insurance against Physical Damage
(including business interruption or consequential loss arising out of such Physical Damage) to:

	 	I.	 	Nuclear reactor power plants including all auxiliary property on the site, or
	 
	 	II.	 	Any other nuclear reactor installation, including laboratories handling
radioactive materials in connection with reactor installations, and “critical
facilities” as such, or
	 
	 	III.	 	Installations for fabricating complete fuel elements or for processing
substantial quantities of “special nuclear material.” and for reprocessing, salvaging,
chemically separating, storing or disposing of “spent” nuclear fuel or waste materials,
or
	 
	 	IV.	 	Installations other than those listed in paragraph (2) III above using
substantial quantities of radioactive isotopes or other products of nuclear fission.

     3. Without in any way restricting the operations of paragraphs (1) and (2) hereof, this
Reinsurance does not cover any loss or liability by radioactive contamination accruing to the
Reassured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance on
property which is on the same site as a nuclear reactor power plant or other nuclear installation
and which normally would be insured therewith except that this paragraph (3) shall not operate

	 	(a)	 	where Reassured does not have knowledge of such nuclear reactor power plant
or nuclear installation, or
	 
	 	(b)	 	where said insurance contains a provision excluding coverage for damage to
property caused by or resulting from radioactive contamination, however caused.
However on and after 1st January 1960 this sub-paragraph (b) shall only apply
provided the said radioactive contamination exclusion provision has been approved by
the Governmental Authority having jurisdiction thereof.

     4. Without
in any way restricting the operations of paragraphs (1). (2) and (3) hereof, this
Reinsurance does not cover any loss or liability by radioactive contamination accruing to the
Reassured, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive
contamination is a named hazard specifically insured against.

     5. It is understood and agreed that this Clause shall not extend to risks using radioactive
isotopes in any form where the nuclear exposure is not considered by the Reassured to be the
primary hazard.

     6. The term “special nuclear material” shall have the meaning given it in the Atomic Energy
Act of 1954, or by any law amendatory thereof.

     7. Reassured to be sole judge of what constitutes:

	 	(a)	 	substantial quantities, and
	 
	 	(b)	 	the extent of installation, plant or site.

12/12/57

 

 

NUCLEAR INCIDENT EXCLUSION CLAUSE — LIABILITY — REINSURANCE

	(1)	 	This Agreement does not cover any loss or liability accruing to the
Reassured as a member of, or subscriber to, any association of insurers or reinsurers formed for
the purpose of covering nuclear energy risks or as a direct or indirect reinsurer of any such
member, subscriber or association.
	 
	(2)	 	Without in any way restricting the operation of paragraph (1) of this Clause it is
understood and agreed that for all purposes of this Agreement all the original policies of the
Reassured (new, renewal and replacement) of the classes specified in Clause II of this
paragraph (2) from the time specified in Clause III in this paragraph (2) shall be deemed to
include the following provision (specified as the Limited Exclusion Provision):
	 
	 	 	Limited Exclusion Provision.

	 	I.	 	It is agreed that the policy does not apply under any liability coverage, to
injury, sickness, disease, death or destruction with respect to which an insured under
the policy is also an insured under a nuclear energy liability policy issued by Nuclear
Energy Liability Insurance Association, Mutual Atomic Energy Liability Underwriters or
Nuclear Insurance Association of Canada, or would be an insured under any such policy but
for its termination upon exhaustion of its limit of liability.
	 
	 	II.	 	Family Automobile Policies (liability only), Special Automobile Policies (private
passenger automobiles, liability only), Farmers Comprehensive Personal Liability Policies
(liability only), Comprehensive Personal Liability Policies ( liability only) or policies
of a similar nature; and the liability portion of combination forms related to the four
classes of policies stated above, such as the Comprehensive Dwelling Policy and the
applicable types of Homeowners Policies.
	 
	 	III.	 	The inception dates and thereafter of all original policies as described in II
above, whether new, renewal or replacement, being policies which either

	 	(a)	 	become effective on or after 1st May, 1960, or
	 
	 	(b)	 	become effective before that date and contain the Limited
Exclusion Provision set out above;

	 	 	 	provided this paragraph (2) shall not be applicable to Family Automobile Policies,
Special Automobile Policies, or policies or combination policies of a similar
nature, issued by the Reassured on New York risks, until 90 days following
approval of the Limited Exclusion Provision by the Governmental Authority having
jurisdiction thereof.

 

- 2 -

	(3)	 	Except for those classes of policies specified in clause II of paragraph (2) and without in
any way restricting the operation of paragraph (1) of this Clause, it is understood and agreed
that for all purposes of this Agreement the original liability policies of the Reassured (new,
renewal and replacement) affording the following coverages:

	 	 	 	Owners, Landlords and Tenants Liability, Contractual Liability, Elevator Liability, Owners
or Contractors (including railroad) Protective Liability, Manufacturers and Contractors
Liability, Product Liability, Professional and Malpractice Liability, Storekeepers
Liability, Garage Liability, Automobile Liability (including Massachusetts Motor Vehicle or
Garage Liability)

	 	 	shall be deemed to include, with respect to such coverages, from the time specified in Clause V of
this paragraph (3), the following provision (specified as the Broad Exclusion Provision):
	 
	 	 	Broad Exclusion Provision.
	 
	 	 	It is agreed that the policy does not apply:

	 	I.	 	Under any Liability Coverage, to injury, sickness, disease, death or destruction

	 	(a)	 	with respect to which an insured under the policy is also an insured under a
nuclear energy liability policy issued by Nuclear Energy Liability Insurance
Association, Mutual Atomic Energy Liability Underwriters or Nuclear Insurance
Association of Canada, or would be an insured under any such policy but for its
termination upon exhaustion of its limit of liability; or
	 
	 	(b)	 	resulting from the hazardous properties of nuclear material and with
respect to which (1) any person or organization is required to maintain financial
protection pursuant to the Atomic Energy Act of 1954, or any law amendatory
thereof, or (2) the insured is, or had this policy not been issued would be,
entitled to indemnity from the United States of America,
or any agency thereof, under any agreement entered into by the
United States of America, or any agency thereof, with any person or
organization.

	 	II.	 	Under any Medical Payments Coverage, or under any Supplementary Payments Provision
relating to immediate medical or surgical relief, to expenses incurred with respect to
bodily injury, sickness, disease or death resulting from the hazardous properties of
nuclear material and arising out of the operation of a nuclear facility by any person or
organization.
	 
	 	III.	 	Under any Liability Coverage, to injury, sickness, disease, death or destruction
resulting from the hazardous properties of nuclear material, if

	 	(a)	 	the nuclear material (1) is at any nuclear facility owned by, or operated
by or on behalf of, an insured or (2) has been discharged or dispersed therefrom;

 

-3-

	 	(b)	 	the nuclear material is contained in spent fuel or waste at
any time possessed, handled, used, processed, stored, transported or disposed of by or
on behalf of an insured; or
	 
	 	(c)	 	the injury, sickness, disease, death or destruction arises out of the furnishing
by an insured of services, materials, parts or equipment in connection with the
planning, construction, maintenance, operation or use of any nuclear facility, but if
such facility is located within the United States of America, its territories or
possessions or Canada, this exclusion (c) applies only to injury to or destruction of
property at such nuclear facility.

	 	IV.	 	As used in this endorsement:
	 
	 	 	 	“hazardous properties” include radioactive, toxic or explosive properties; “nuclear material”
means source material, special nuclear material or byproduct material; “source material”,
“special nuclear material”, and “byproduct material” have the meanings given them in the
Atomic Energy Act of 1954 or in any law amendatory thereof; “spent fuel” means any fuel
element or fuel component, solid or liquid, which has been used or exposed to radiation in a
nuclear reactor; “waste” means any waste material (1) containing byproduct material other than
the tailings or wastes produced by the extraction or concentration of uranium or thorium from
any ore processed primarily for its source material content and (2) resulting from the
operation by any person or organization of any nuclear facility included within the definition
of nuclear facility under paragraph (a) or (b) thereof; “nuclear facility” means

	 	(a)	 	any nuclear reactor,
	 
	 	(b)	 	any equipment or device designed or used for (1) separating the isotopes of
uranium or plutonium, (2) processing or utilizing spent fuel, or (3) handling,
processing or packaging waste,
	 
	 	(c)	 	any equipment or device used for the processing, fabricating or alloying of special
nuclear material if at any time the total amount of such material in the custody of the
insured at the premises where such equipment or device is located consists of or contains
more than 25 grams of plutonium or uranium 233 or any combination thereof, or more than
250 grams of uranium 235,
	 
	 	(d)	 	any structure, basin, excavation, premises or place prepared or used for the
storage or disposal of waste,

	 	 	 	and includes the site on which any of the foregoing is located, all operations conducted on
such site and all premises used for such operations; “nuclear reactor” means any apparatus
designed or used to sustain nuclear fission in a self-supporting chain reaction or to contain a critical mass of fissionable material.
	 
	 	 	 	With respect to injury to or destruction of property, the word “injury” or “destruction”
includes all forms of radioactive contamination of property.

 

-4-

	 	V.	 	The inception dates and thereafter of all original policies affording
coverages specified in this paragraph (3), whether new, renewal or
replacement, being policies which either

	 	(a)	 	become effective on or after 1st May, 1960, or
	 
	 	(b)	 	become effective before that date and contain the Broad
Exclusion Provision set out above;

	 	 	 	provided this paragraph (3) shall not be applicable to

	 	(i)	 	Garage and Automobile Policies issued by the Reassured on New York risks, or
	 
	 	(ii)	 	statutory liability insurance required under Chapter 90,
General Laws of Massachusetts,

	 	 	 	until 90 days following approval of the Broad Exclusion Provision by the
Governmental Authority having jurisdiction thereof.
	 
	 	 	 	It is further provided that original liability policies affording coverages described in
this paragraph (3), (other than those policies and coverages described in (i) and
(ii) above), which become effective before 1st May, 1960, and do not contain the Broad
Exclusion Provision set out above, but which contain the Broad Exclusion Provision set out
in N.M.A. 1118, shall be construed as if incorporating such portions of the Broad Exclusion
Provision set out above as are more liberal to the holders of such policies.

	(4)	 	Without in any way restricting the operation of paragraph (1) of this clause it is understood and
agreed that original liability policies of the Reassured, for those classes of policies

	 	(a)	 	described in Clause II of paragraph (2) effective before 1st
June, 1958, or
	 
	 	(b)	 	described in paragraph (3) effective before 1st March, 1958,

	 	 	shall be free until their natural expiry dates or 1st June, 1963, whichever first occurs, from the
application of the other provisions of this Clause.
	 
	(5)	 	Without in any way restricting the operation of paragraph (1) of this Clause, it is understood and
agreed that paragraphs (2) and (3) above are not applicable to original liability policies of the
Reassured in Canada and that with respect to such policies this Clause shall be deemed to include
the Nuclear Energy Liability Exclusion Provisions actually used on such policies by the Reassured;
provided that if the Reassured shall fail to include such Exclusion Provisions in any such policy
where it is legally permitted to do so, such policy shall be deemed to include such Exclusion
Provisions.

 

LIBERTY MUTUAL INSURANCE COMPANY

LIBERTY MUTUAL FIRE INSURANCE COMPANY

LIBERTY MUTUAL (BERMUDA) LTD.

LIBERTY INSURANCE CORPORATION

LIBERTY NORTHWEST INSURANCE CORPORATION

WORKERS’ COMPENSATION AND GENERAL LIABILITY

SIXTH EXCESS OF LOSS REINSURANCE CONTRACT

INTERESTS AND LIABILITIES AGREEMENT

IT IS HEREBY MUTUALLY AGREED, by and between LIBERTY MUTUAL INSURANCE COMPANY and LIBERTY MUTUAL
FIRE INSURANCE COMPANY, Boston, Massachusetts, LIBERTY MUTUAL (BERMUDA) LTD., Hamilton, Bermuda,
LIBERTY INSURANCE CORPORATION a Delaware Corporation and LIBERTY NORTHWEST INSURANCE CORPORATION,
Portland, Oregon (hereinafter called the “Company”) of the one part, and the undersigned Reinsurer
(hereinafter called the “Reinsurer”) of the other part, that the Reinsurer shall have a 1.50%
share in the Interests and Liabilities of the “Reinsurers” as set forth in the document attached
hereto. The share of the Reinsurer shall be separate and apart from the shares of the other
Reinsurers, and shall not be joint with those of the other Reinsurers, and the Reinsurer shall in
no event participate in the Interests and Liabilities of the other Reinsurers.

The premium for this reinsurance shall be the Reinsurer’s percentage share of the premium provided
under Article 3 of the attached document, and shall be payable as herein provided.

This Agreement shall be effective Midnight, December 31, 1983 and shall remain in full force unless
terminated in accordance with the termination provisions of Article 14 of the attached document.

IN WITNESS WHEREOF, the parties hereto, by their respective duly authorized officers, have executed
this Agreement as of the dates undermentioned.

At Boston, Massachusetts this 14th day of September, 1984, for and on behalf of:

	 	 	 	 	 

	 	 	LIBERTY MUTUAL INSURANCE COMPANY
	 	 	LIBERTY MUTUAL FIRE INSURANCE COMPANY
	 	 	LIBERTY MUTUAL (BERMUDA) LTD.
	 	 	LIBERTY INSURANCE CORPORATION
	 	 	LIBERTY NORTHWEST INSURANCE CORPORATION
	 
	 	 	 	 
	 

	 	BY:
	 	/s/
	 

	 	 	 	 
	 	 	TITLE: ASSISTANT SECRETARY

and at Princeton, New Jersey this 16th day of October, 1984, for and on behalf of:

	 	 	 	 	 

	 	 	ATLAS ASSURANCE COMPANY OF AMERICA by GRE-RE OF AMERICA CORPORATION
	 
	 	 	 	 
	 

	 	BY:
	 	/s/
	 

	 	 	 	 
	 	 	TITLE: Vice President

EE/tlh — 8/15/84

 

 

\

LIBERTY MUTUAL INSURANCE COMPANY

LIBERTY MUTUAL FIRE INSURANCE COMPANY

LIBERTY MUTUAL (BERMUDA) LTD.

LIBERTY INSURANCE CORPORATION

LIBERTY NORTHWEST INSURANCE CORPORATION

WORKERS’ COMPENSATION AND GENERAL LIABILITY

SIXTH EXCESS OF LOSS REINSURANCE CONTRACT

INTERESTS AND LIABILITIES AGREEMENT

IT IS HEREBY MUTUALLY AGREED, by and between LIBERTY MUTUAL INSURANCE COMPANY and LIBERTY MUTUAL
FIRE INSURANCE COMPANY, Boston, Massachusetts, LIBERTY MUTUAL (BERMUDA) LTD., Hamilton, Bermuda,
LIBERTY INSURANCE CORPORATION a Delaware Corporation and LIBERTY NORTHWEST INSURANCE CORPORATION,
Portland, Oregon (hereinafter called the “Company”) of the one part, and the undersigned Reinsurer
(hereinafter called the “Reinsurer”) of the other part, that the Reinsurer shall have a 3.75%
share in the Interests and Liabilities of the “Reinsurers” as set forth in the document attached
hereto. The share of the Reinsurer shall be separate and apart from the shares of the other
Reinsurers, and shall not be joint with those of the other Reinsurers, and the Reinsurer shall in
no event participate in the Interests and Liabilities of the other Reinsurers.

The premium for this reinsurance shall be the Reinsurer’s percentage share of the premium provided
under Article 3 of the attached document, and shall be payable as herein provided.

This Agreement shall be effective Midnight, December 31, 1983 and shall remain in full force unless
terminated in accordance with the termination provisions of Article 14 of the attached document.

IN WITNESS WHEREOF, the parties hereto, by their respective duly authorized officers, have executed
this Agreement as of the dates undermentioned.

At Boston, Massachusetts this 14th day of September, 1984, for and on behalf of:

	 	 	 	 	 

	 	 	LIBERTY MUTUAL INSURANCE COMPANY
	 	 	LIBERTY MUTUAL FIRE INSURANCE COMPANY
	 	 	LIBERTY MUTUAL (BERMUDA) LTD.
	 	 	LIBERTY INSURANCE CORPORATION
	 	 	LIBERTY NORTHWEST INSURANCE CORPORATION
	 
	 	 	 	 
	 

	 	BY:
	 	/s/;
	 

	 	 	 	 
	 	 	TITLE: ASSISTANT SECRETARY

and at Indianapolis, Indiana this 4th day of October, 1984, for and on behalf of:

	 	 	 	 	 

	 	 	AMERICAN UNION INSURANCE COMPANY OF NEW YORK
	 
	 	 	 	 
	 

	 	BY:
	 	/s/
	 

	 	 	 	 
	 	 	TITLE: ASST. VICE PRESIDENT

EE/tlh — 8/15/84exv10w187

EXHIBIT
10.187

LIBERTY MUTUAL INSURANCE COMPANY

LIBERTY MUTUAL FIRE INSURANCE COMPANY

LIBERTY MUTUAL (BERMUDA) LTD.

LIBERTY INSURANCE CORPORATION

LIBERTY NORTHWEST INSURANCE CORPORATION

WORKERS’ COMPENSATION AND GENERAL LIABILITY

SEVENTH EXCESS OF LOSS REINSURANCE CONTRACT

PREAMBLE

The Reinsurers hereby reinsure the Company to the extent and on the terms and conditions and
subject to the exceptions, exclusions and limitations hereinafter set forth.

ARTICLE 1 — EXHIBITS COVERED

The Company shall reinsure with the Reinsurers and the Reinsurers shall accept reinsurance
from the Company as set forth in Exhibits “A” and “B”, which are attached hereto and made part of
this Contract, such Exhibits being entitled for purposes of identification as follows:

Exhibit “A” Excess of Loss Reinsurance of General Liability

Exhibit “B” Excess of Loss Reinsurance of Workers’ Compensation

ARTICLE 2 — RETENTION BY COMPANY

This Contract applies only to such portion of any obligation of the Company as the Company
retains net for its own account, and in calculating the amount of any loss hereunder and in
computing the amount or amounts in excess of which this Contract attaches only loss or losses in
respect to that portion of any obligation which the Company retains net for its own account shall
be included.

It is agreed that the amount or amounts of the Reinsurers’ liability hereunder in respect of any
losses shall not be increased by reason of the inability of the Company to collect from any other
Reinsurers whether specific or general, any amount or amounts which may have become due from them
whether such inability arises from the insolvency of such other Reinsurers or otherwise.

ARTICLE 3 — REINSURANCE PREMIUM

	(a)	 	The Reinsurers’ premium for the reinsurance provided under
this Contract shall be computed by the application of a rate

 

-2-

	 	 	of .04% to the Company’s net premium written on the business
covered under Exhibits “A” and “B” subject to an annual
minimum and deposit premium of $800,000 for the combined
Seventh Excess of Loss Layer provided under Exhibits “A” and “B”.
	 
	(b)	 	The minimum and deposit premium as provided for in (a) above shall be payable to Reinsurers
in four equal quarterly installments at the beginning of each calendar quarter. The Company
shall undertake to furnish Reinsurers at the conclusion of each year a report of the net
premiums written during such year. If the annual developed reinsurance premium for the
Seventh Excess of Loss Reinsurance under Exhibits “A” and “B” computed in accordance with the
provisions of (a) above is greater than the minimum and deposit premium, the additional
premium shall be promptly paid to the Reinsurers.
	 
	(c)	 	The term “net premium written” shall mean gross premiums written by the Company on the
business covered hereunder less return premiums for cancellations and reductions and less
premiums on reinsurance which inures to the benefit of the Reinsurers. No deduction shall
be made for dividends declared, paid or credited to policyholders of the Company.

ARTICLE 4 — SUBROGATION

The Company hereby agrees to enforce such subrogation rights as it may obtain by virtue of
payments made under its policies, but in case the Company shall refuse or neglect to do so, the
Reinsurers are hereby authorized and empowered to bring any appropriate action in the name of the
Company or its policyholders or otherwise to enforce such rights.

The expense of any subrogation proceedings brought by the Company or the Reinsurers to enforce such
rights shall be apportioned between the Company and the Reinsurers in the ratio of their respective
interests in the total subrogation recovery but in the event there is a failure to make a
subrogation recovery the expense of the proceedings shall be apportioned between the Company and
the Reinsurers in the ratio of their respective interests in the total loss.

All subrogation recoveries made by either party subsequent to payments made by the Reinsurers under
this Contract shall be applied as if made prior to said payments and all necessary adjustments
shall be made between the Company and the Reinsurers as soon as practicable after said subrogation
recovery is made.

The Company shall have the right, before the happening of the accident or occurrence to waive its
right of subrogation.

 

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ARTICLE 5 — TAX

In consideration of the terms under which this Contract is issued, the Company undertakes not
to claim any deduction in respect of the premium hereon when making tax returns, other than Income
or Profits tax returns to any State or to the District of Columbia.

ARTICLE 6 — PAYMENTS UNDER THIS CONTRACT

All amounts due to either party hereunder shall be payable in United States currency.

ARTICLE 7 — ACCESS TO RECORDS

The Reinsurers or their duly appointed representatives shall at reasonable times, have free
access to all books and records of the Company and of its agents or attorneys for the purpose of
obtaining any further information concerning this reinsurance or the subject matter hereof.

ARTICLE 8 — INSOLVENCY

The reinsurance provided by this Contract shall be payable by the Reinsurers directly to the
Company or to its liquidator, receiver or statutory successor on the basis of the liability of the
Company under the contracts reinsured without diminution because of the insolvency of the Company.
In the event of the insolvency of the Company, the liquidator or receiver or statutory successor of
the Company shall give written notice of the pendency of each claim against the Company on a policy
or bond reinsured within a reasonable time after such claim is filed in the insolvency proceeding;
and during the pendency of such claim, the Reinsurers may investigate such claim and interpose, at
their own expense, in the proceeding where such claim is to be adjudicated any defense or defenses
which it may deem available to the Company, its liquidator or receiver or statutory successor. The
expense thus incurred by the Reinsurers shall be chargeable, subject to court approval, against the
Company as a part of the expense of liquidation to the extent of such proportionate share of the
benefit as shall accrue to the Company solely as a result of the defense undertaken by the
Reinsurers.

The reinsurance shall be payable as hereinbefore in the above paragraph provided except as
otherwise provided by Section 315 (relating to Fidelity and Surety Risks) of the Insurance Law of
New York or except (a) where the Contract specifically provides another payee of such reinsurance
in the event of the insolvency of the

 

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Company and (b) where the Reinsurers with the consent of the direct insured or insureds have
assumed such policy obligations of the Reinsurers to the payees under such policies and in
substitution for the obligations of the Company to such payees.

ARTICLE 9 — ARBITRATION

As a condition precedent to any right of action hereunder, any dispute arising out of this Contract
shall be submitted to the decision of a board of arbitration of two arbitrators and an umpire,
meeting in Boston, Massachusetts unless otherwise agreed.

The members of the board of arbitration shall be active or retired disinterested officials of
insurance or reinsurance companies, or Lloyds Underwriters. Each party shall appoint its
arbitrator and the two arbitrators shall choose an umpire before instituting the hearing. In the
event that either party should fail to choose an arbitrator within thirty (30) days following a
written request by the other party to enter upon arbitration, the requesting party may choose two
arbitrators who shall in turn choose an umpire before entering upon arbitration. In the event the
two arbitrators fail to agree on an umpire either party shall have the right to submit the matter
to the American Arbitration Association in effect at that time.

Each party shall present its case to the arbitrators within sixty (60) days following the date of
their appointment. The board shall make its decision with regard to the custom and usage of the
insurance and reinsurance business. The board shall issue its decision in writing based upon a
hearing in which evidence may be introduced without following strict rules of evidence but in which
cross examination and rebuttal shall be allowed. The board shall make its decision within 60 days
following the termination of the hearings unless the parties consent to an extension. The majority
decision of the board shall be final and binding upon all parties to the proceeding. Judgement may
be entered upon the award of the board in any court having jurisdiction thereof.

If more than one Reinsurer is involved in the same dispute, all such Reinsurers shall constitute
and act as one party for purposes of this clause and communications shall be made by the Reassured
to each of the Reinsurers constituting the one party, provided, however, that nothing therein shall
impair the rights of such Reinsurers to assert several, rather than joint, defenses or claims, nor
be construed as changing the liability of the Reinsurers under the terms of this Contract from
several to joint.

Each party shall bear the expense of its own arbitrator and shall jointly and equally bear with the
other party the expense of the

 

-5-

umpire. The remaining costs of the arbitration proceedings shall be allocated by the board.

ARTICLE 10 — OFFSET

Each party hereto shall have the right to offset any balance or balances, whether on account
of premiums or on account of losses, due from one party to any other party under this Contract
against any balance or balances currently due and payable to the one party from the other party
under this Contract.

ARTICLE 11 — ADVANCES

If the Reinsurer is unauthorized in any State of the United States of America or the
District of Columbia where authorization is required by insurance regulatory authorities, the
Reinsurers will fund (provided particulars are received forty-five days prior to the date funding
is required by the Company) outstanding losses by either cash advances, escrow accounts for the
benefit of the Company, Letters of Credit, or a combination thereof, if a penalty would accrue to
the Company on its statement without such funding. The Reinsurers shall have the sole option of
determining the method of funding referred to above provided it is acceptable to the insurance
regulatory authorities involved.

LOSS RESERVES: (U.S. Dollar Reinsurance Letter of Credit) (Applies only to those
Reinsurers who are domiciled outside the United States of America who cannot qualify for credit by
the State having jurisdiction over the Company’s loss reserves).

As regards policies or bonds issued by the Company coming within the scope of this Contract, the
Company agrees that when it shall file with the Insurance Department or set up on its books
reserves for losses covered hereunder which it shall be required to set up by law it will forward
to the Reinsurers a statement showing the proportion of such loss reserves which is applicable to
them. The Reinsurers hereby agree that they will apply for and secure delivery to the Company a
clean irrevocable Letter of Credit issued by Citibank N.A. in an amount equal to Reinsurers’
proportion of said loss reserves.

 

-6-

The Company undertakes to use and apply any amounts which it may
draw upon such Credit pursuant to the terms of the Contract under
which the Letter of Credit is held, and for the following purposes only:

	 	A.	 	To pay the Reinsurers’ share or to reimburse the Company for the
Reinsurers’ share of any liability for loss reinsured by this Contract.
	 
	 	B.	 	To make refund of any sum which is in excess of the actual amount
required to pay Reinsurers’ share of any liability reinsured by this
Contract.

Citibank N.A. shall have no responsibility whatsoever in connection with the propriety of
withdrawals made by the Company or the disposition of funds withdrawn, except to see that
withdrawals are made only upon the order of properly authorized representatives of the Company.

ARTICLE 12 — SERVICE OF SUIT

This Article applies to other than authorized Reinsurers and to Reinsurers domiciled
outside the United States of America.

In the event of the failure of the Reinsurer to pay any amount claimed to be due hereunder, the
Reinsurer agrees that, at the request of the Company, the Reinsurer will submit to the jurisdiction
of any court of competent jurisdiction in any State of the United States, will comply with all
requirements necessary to give such court jurisdiction, and will abide by the final decision of
such court, or of any Appellate court in the event of an appeal, with all relevant matters to be
determined in accordance with the law and practice of such court.

It is further agreed that pursuant to any statute of any state, territory, or district of the
United States which makes provision therefor, the Reinsurer hereby designates the superintendent,
commissioner or director of insurance, or other officer specified for that purpose in the statute,
or his successor or successors in office, as its true and lawful attorney upon whom may be served
any lawful process in any action, suit or proceeding arising out of this Contract instituted by or
on behalf of the Company or any beneficiary hereunder.

 

-7-

Further, it is agreed that service of process in such suit when instituted in the State of New York
may be made upon the firm of Mendes & Mount, Three Park Avenue, New York, New York 10016, and the
firm of Mendes & Mount is hereby authorized to accept service of process on behalf of the Reinsurer
in any such suit instituted in the State of New York, and upon request of the Company to give a
written undertaking to the Company that it will enter a general appearance on the Reinsurer’s
behalf in the event such a suit shall be instituted in the State of New York.

ARTICLE 13 — ERRORS AND OMISSIONS

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

ARTICLE 14 — COMMENCEMENT AND TERMINATION

This Contract applies only to accidents or occurrences happening during its effective period. This
Contract is effective at Midnight, December 31, 1984 Standard Time in Boston, Massachusetts and
shall remain in force continuously unless terminated at midnight on any subsequent December 31 by
either party giving the other at least three months prior notice of cancellation. Otherwise, this
Contract may be cancelled only by mutual consent, or if required by law or administrative order.

ARTICLE 15 — REINSURANCE INTERMEDIARY DESIGNATION

Holborn Agency Corporation, 90 John Street, New York, New York 10038 is hereby recognized as the
Intermediary negotiating this Contract for all business hereunder. All communications (including
but not limited to notices, statements, premiums, return premiums, commissions, taxes, losses, loss
adjustment expense, salvages and loss settlements) relating thereto shall be transmitted to the
Company or the Reinsurers through Holborn Agency Corporation. Payments by the Company to the
Intermediary shall be deemed to constitute payment to the Reinsurer. Payments by the Reinsurers to
the Intermediary shall be deemed to constitute payment to the Company only to the extent that such
payments are actually received by the Company.

ARTICLE 16 — INTERPRETATION

The validity and interpretation of this Contract and of each Article and part thereof shall
be governed by the Law of the Commonwealth of Massachusetts.

LD:ki — 6/7/85

 

 

EXHIBIT A

EXCESS OF LOSS REINSURANCE OF GENERAL LIABILITY

SECTION 1 — COVERAGE

The Reinsurers hereby reinsure the Company, subject to the provisions and conditions herein
contained, in respect of liability which may accrue to the Company under any contracts of insurance
or reinsurance (hereinafter referred to as obligations of the Company), but excluding liability in
connection with the following class of business or contracts:

Workers’ Compensation and Employers’ Liability insurance, but this exclusion shall not
apply to Workers’ Compensation or Employers’ Liability coverage given under public
liability policies written by the Company (other than Umbrella Excess Liability
policies).

Bankers’ and Brokers’ insurances or reinsurances issued by the Company meaning
contracts issued to banks, trust companies, building and loan companies, safe
deposit companies, investment companies, including investment trusts, finance
companies, credit unions, stock or security brokers, or to similar financial
institutions, insuring them against loss from the following hazards:

Infidelity of employees and/or partners
 

Unfaithful performance of duties by employees and/or partners

Loss of property in transit

Forgery or alteration of negotiable or other paper
 

Burglary, robbery, theft, false pretenses or fraud
 

Mysterious disappearance or misplacement of property

Loss of property from safe deposit boxes or other depositories

Damage to or destruction of money or securities
 

Counterfeiting of currencies or securities

Motor Vehicle Physical Damage Insurance, but this exclusion shall not apply to Motor Vehicle
Property Damage Liability Insurance.

Credit Insurance and/or Financial Guarantee.

Fire Insurance, including the coverages ordinarily written under Extended Coverage
Endorsements.

Business ceded to and assumed from the Pollution Liability Insurance Association.

 

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Group Health, Disability, Hospital or Surgical Insurance, but this exclusion shall not apply to any
loss due to two or more persons insured under one or more Group policies suffering bodily injuries,
including death resulting therefrom, as a result of one accident or series of accidents arising out
of one event.

Livestock Mortality Insurance.

Surety business, but this exclusion shall not apply to faithful performance bonds or public
official bonds; provided, however, that the Reinsurers shall not be liable for any loss resulting
from the insolvency of any firm, company, corporation or bank with which a guaranteed official has
deposited funds in the course of his duties.

Insurance covering the liability of owners or operators of aircraft carrying passengers for hire
for injuries to such passengers.

Contracts of insurance written on any cost-plus plan which provides for payment of the full amount
of all losses, however great, by the policyholder. This exclusion shall not apply to contracts of
insurance, premiums for which are determined by a retrospective rating plan which provides for a
specific maximum premium or a formula for determination of a maximum premium.

Contracts of liability insurance covering injuries to persons or property arising out of the rail
operations of Class 1 railroads; but this exclusion shall not apply to railroad Protective
Liability policies issued at the request of the Company’s policyholders doing work for or on the
premises of such railroads.

Liability under any Insolvency Fund arising by contract, operation of law or otherwise, whether
voluntary or involuntary. “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 has been otherwise deemed unable to
meet any claim, debt, charge, fee or other obligation in whole or in part.

Excess of Loss Reinsurance Contracts.

This Contract is subject to the Nuclear Incident Exclusion Clause — Liability — Reinsurance and the
Nuclear Incident Exclusion Clause — Physical Damage — Reinsurance attached hereto.

 

-3-

SECTION 2 — LIMIT OF LIABILITY

The Reinsurer shall be liable for ultimate net loss in excess of the sum of $75,000,000 of
ultimate net loss each and every accident or occurrence in respect of business the subject matter
of this Exhibit, subject to a limit of $25,000,000 on account of each and every accident or
occurrence.

It is also agreed that subrogation expense incurred shall be paid in addition to the applicable
limits of liability set forth in this Section 2, on the basis provided in Article 4 of the
Contract.

For purposes of this Exhibit, it is agreed that the Company’s limit of liability under any and all
policies of Personal Accident Insurance (individual and group) covering any one individual shall be
considered as not exceeding $300,000. Subject to this Agreement and subject to the limits set
forth in this Section 2, it is agreed that the Company is reinsured hereunder for the excess of the
amounts set forth in this Section 2 of ultimate net loss any one accident, or series of accidents
arising out of one event involving more than one person covered under such policies issued by the
Company.

SECTION 3 — ULTIMATE NET LOSS

The term “Ultimate Net Loss” as used in this Exhibit shall mean the amount actually paid by
the Company (including but not limited to loss adjustment expenses, attorneys’ fees and other costs
of investigation or litigation) in settlement of or payment of claims or judgements arising from
each and every loss for which the Company is or may be found liable under its contracts of
insurance or reinsurance, less salvages and subrogation recoveries and amounts recovered or
recoverable under pooling agreements or other reinsurances, whether collectible, or not; provided,
however, that in the event of the insolvency of the Company, “Ultimate Net Loss” shall mean the
amount of loss (including but not limited to loss adjustment expenses, attorneys’ fees and other
costs of investigation or litigation) which the Company has incurred or for which it is liable, and
payment by the Reinsurers shall be made to the liquidator, receiver or statutory successor of the
Company in accordance with the provisions of Article 8 of this Contract. Salaries and expenses of
employees of the Company shall not be included in ascertaining ultimate net loss.

This Contract shall protect the Company within the limit hereof, in connection with any loss for
which the Company may be legally liable to pay in excess of the limit of its original policy, where
loss in excess of the limit has been incurred because of its failure to settle within the policy
limit or by reason of alleged or actual negligence, fraud or bad faith in rejecting an offer of

 

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settlement or in the preparation of the defense or in the trial of any action against its insured
or in the preparation of prosecution of an appeal consequent upon such action.

It is agreed that the Company may carry underlying limits of indemnity recoveries under which shall
inure to the sole benefit of the Company and shall be disregarded in computing the net excess
loss in excess of which this Contract attaches.

SECTION 4 — DEFINITION OF “EACH AND EVERY ACCIDENT OR OCCURRENCE”

The term “each and every accident or occurrence” as used in this Exhibit is defined as
follows according to the class or risk involved:

	 	A.	 	Fidelity and Forgery
	 
	 	 	 	All losses resulting from any fraudulent or dishonest act or omission or series
thereof on the part of any one person or of several persons acting in collusion
(whether employees or not) and irrespective of the number of the Company’s obligations
involved; provided, that in the case of any loss involving two or more persons acting
in collusion, losses resulting from separate acts or omissions on the part of each
such person shall be included as part of such loss.

	 	1.	 	It is agreed that each and every loss occurring prior
to midnight on the date of termination of this Contract and discovered
not later than three years after such termination (excluding only any
loss which occurred wholly prior to midnight on the effective date of
this Contract) shall be recoverable under this Contract.
	 
	 	2.	 	It is further agreed that each and every loss
resulting from a series of acts or omissions, some prior to and some
subsequent to midnight on the effective date of this Contract, shall
be disregarded.

	 	 	 	As regards losses arising under policies and/or contracts covering on a “losses
discovered” or “claims made during” basis (that is to say policies and/or contracts in
which the date of discovery of the loss, or the date the claim is made against the
insured or is first notified to the Company, determines under which policy and/or
contract the loss is collectible), such losses are covered hereunder

 

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	 	 	 	and the date of the discovery of such loss or the date such claim is made or first
notified shall be deemed to be the date of loss occurring for the purposes of this Contract,
provided that the date of the discovery of the loss or the date the claim is made or first
notified falls within the period covered by this Contract.
	 
	 	 	 	For the purposes of the foregoing the date of first discovery of a “loss” or the date the
claim is first made against an insured or first notified to the Company shall be the date
applicable to the entire loss and/or claim and the Reinsurers shall be liable for their
proportion of the entire loss and/or claim irrespective of the expiry date of this Contract
and provided that such first discovery date or first date such claim is made or notified
falls within the period of this Contract.
	 
	 	B.	 	Liability Insurance Written Subject to an Aggregate Limit
	 
	 	 	 	As respects each and every liability insurance policy issued by the Company which contains
one or more aggregate limits of liability on a policy year basis, and as respects each such
aggregate limit under each policy year, the aggregate amount of all losses occurring during
one policy year. Where the Company issues more than one such policy to the same policyholder
such policies shall together be treated as though they were one policy. Losses under such
policies shall for the purposes of this reinsurance contract be deemed to have occurred in
the calendar year in which the inception date of the policy falls, except that as respects
such policies issued for a period in excess of twelve months, losses for the first twelve
month period shall be deemed to have occurred in the calendar year in which the inception
date of the policy falls and losses for each succeeding twelve month period or part thereof
shall be deemed to have occurred in the calendar year in which the anniversary date of the
policy starting such period falls.
	 
	 	C.	 	All Other Classes or Risks Covered hereunder (Including Completed Operations)
	 
	 	 	 	All injuries to persons and all losses of, injury to or destruction of property
resulting from each accident or loss, or from each series of accidents or losses proximately arising out of or following on any one cause or event.

 

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SECTION 5 — EXTRA CONTRACTUAL OBLIGATIONS

This Contract shall protect the Company within the limits hereof for 80% of Extra Contractual
Obligations, where the ultimate net loss includes any Extra Contractual Obligations. “Extra
Contractual Obligations” are defined as those liabilities not covered under any other provision of
this Contract and which arise from the handling of any claim on business covered hereunder, such
liabilities arising because of, but not limited to, the following: failure by the Company to
settle within the policy limit, or by reason of alleged or actual negligence, fraud or bad faith in
rejecting an offer of settlement or in the preparation of the defense or in the trial of any action
against its Insured or Reinsured or in the preparation or prosecution of an appeal consequent upon
such action.

The date on which any Extra Contractual Obligation is incurred by the Company shall be deemed,
in all circumstances, to be the date of the original accident, casualty, disaster or loss
occurrence.

However, this Article shall not apply where the loss has been incurred due to the fraud of a member
of the Board of Directors or a corporate officer of the Company acting individually or collectively
or in collusion with any individual or corporation or any other organization or party involved in
the presentation, defense or settlement of any claim covered hereunder.

SECTION 6 — CLAIMS AGAINST REINSURERS

The Company shall be the sole judge as to what claims are covered under its policies, and all
loss settlements made and all judgements paid by the Company, provided they are within the terms
and conditions of this Exhibit, shall be unconditionally binding upon the Reinsurers and amounts
falling to the share of the Reinsurers shall be immediately due and payable by them upon reasonable
evidence of the amount paid being given by the Company. Nevertheless, it is understood and agreed
that in the event of a loss hereunder, or of an event or happening likely to result in a loss
hereunder, the Reinsurers shall have the right, if they so elect, to cooperate with the Company in
the defense or settlement of original losses under its obligations.

All settlements of losses effected by the Company shall be binding upon the Reinsurers, and the
Reinsurers shall be liable for their proportion thereof.

This Exhibit A is attached to and forms part of the Workers’ Compensation and General
Liability Seventh Excess of Loss Reinsurance Contract issued to LIBERTY MUTUAL INSURANCE COMPANY,
LIBERTY MUTUAL FIRE INSURANCE COMPANY, LIBERTY MUTUAL (BERMUDA) LTD., LIBERTY INSURANCE CORPORATION
and LIBERTY NORTHWEST INSURANCE CORPORATION.

LD:ki — 6/7/85

 

 

EXHIBIT B

EXCESS OF LOSS REINSURANCE OF WORKERS’ COMPENSATION

SECTION 1 — COVERAGE

The Reinsurers hereby reinsure the Company in respect of the liability of the Company, under
(1) policies (the premium for which is classified by the Company, for internal purposes, as
“Workers’ Compensation” or “Employers’ Liability”) by which the Company insures the liability of
employers under law or contract which imposes liability upon such employer for injury, sickness or
disease, including death resulting therefrom, sustained by his employees, and (2) Employers
Liability coverage provided under Umbrella Excess Liability policies.

SECTION 2 — LIMITS OF LIABILITY

The Reinsurers shall be liable for ultimate net loss in excess of the sum of $75,000,000 of
ultimate net loss each and every accident or occurrence in respect of business the subject matter
of this Exhibit, subject to a limit of $25,000,000 on account of each and every accident or
occurrence.

It is also agreed that subrogation expense incurred shall be paid in addition to the applicable
limits of liability set forth in this Section 2, on the basis provided in Article 4 of the
Contract.

SECTION 3 — ULTIMATE NET LOSS

The term “ultimate net loss” as used in this Exhibit means the amount actually paid by the
Company (including but not limited to medical losses, interests, costs and allocated claim expense)
in respect of claims arising from any one accident or occurrence, for which the Company is or may
be found liable, after making proper deductions for amounts paid or due under other reinsurance
(whether collectible or not), subrogation recoveries, overpayments collected, and refunds to the
Company from the New York Aggregate Trust Fund, second injury funds and other such funds; provided,
however, that in the event of the insolvency of the Company, “ultimate net loss” as used in this
Exhibit means the amount of loss (including but not limited to medical losses, interests, costs and
allocated claim expense) in respect of claims arising from any one accident or occurrence which the
Company has incurred or for which it is liable, and payment by the Reinsurers shall be made to the
liquidator, receiver or statutory successor of the Company in accordance with the provisions of
Article 8 of this Contract. Expenses for salaried employees of the Company incurred in litigation
and the investigation or adjustment of claims or suits and subrogation expense referred to in
Article 4 shall be disregarded in ascertaining ultimate net loss.

 

-2-

This Contract shall protect the Company within the limit hereof in connection with any loss
for which the Company may be legally liable to pay in excess of the limit of its original policy,
where loss in excess of the limit has been incurred because of its failure to settle within the
policy limit or by reason of alleged or actual negligence, fraud or bad faith in rejecting an offer
of settlement or in the preparation of the defense or in the trial of any action against its
insured or in the preparation of prosecution of an appeal consequent upon such action.

It is agreed that the Company may carry underlying limits of indemnity recoveries under which shall
inure to the sole benefit of the Company and shall be disregarded in computing the net excess loss
in excess of which this Contract attaches.

SECTION 4 — EXCLUSIONS

This Exhibit does not apply:

	A.	 	To excess of loss reinsurance contracts.
	 
	B.	 	To the following occupations, employments or risks (except when not disclosed to the
Company, when incidental to a non-excluded risk (the company to be the sole judge of what is
incidental) or when insured through voluntary or statutory pools or assigned risk plans):

	 	1.	 	The navigation and operation of vessels on the high
seas in foreign commerce;
	 
	 	2.	 	Underground coal mining;
	 
	 	3.	 	Fireworks manufacturing;
	 
	 	4.	 	Fuse manufacturing;
	 
	 	5.	 	Explosive risks, viz

	 	(a)	 	Manufacture of any explosive substance
intended for use as an explosive;
	 
	 	(b)	 	Manufacture of any product, other than
Fireworks and Fuses, in which any such explosive substance is
an ingredient;
	 
	 	(c)	 	The loading of any such explosive substance into containers for use as explosive objects,
propellant charges or detonating devices, and the incidental
storage thereof;
	 
	 	(d)	 	Handling transportation or storage of any
such explosive substance intended solely for war purposes.

	C.	 	To any accident or occurrence as to which the Company is

 

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	 	 	entitled to recover the full amount of the loss under an insurance policy written on
a cost-plus plan, that is to say, a plan which provides for the payment of the full amount
of all losses, however great, by the policyholder. This exclusion does not apply to bar
recovery from the Reinsurers with respect to accidents or occurrences under
retrospectively-rated policies.
	 
	D.	 	Liability under any Insolvency Fund arising by contract,
operation of law or otherwise, whether voluntary or involuntary. “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 has been otherwise deemed unable to meet any
claim, debt, charge, fee or other obligation in whole or in part.

SECTION 5 — DEFINITIONS

As used in this Exhibit the following terms shall have the meanings stated herein:

	A.	 	“Policies”. Policies, contracts, endorsements or binders, including but not limited to
those by which the Company undertakes to offer and pay “voluntary compensation” benefits,
those by which the Company undertakes to make payments to augment compensation benefits those
by which the Company affords reinsurance or excess insurance to Workers’ Compensation or
Employers’ Liability risks and those by which the Company undertakes to participate in
voluntary or statutory pools or assigned-risk plans.
	 
	B.	 	“Explosive Substance”. Any substance manufactured for the express purpose of exploding as
differentiated from commodities used industrially and which are only incidentally explosive
 — such as gasoline, celluloid, fuel gases and dyestuffs.
	 
	C.	 	“Accident or Occurrence.” Any one accident or occurrence or series of accidents or
occurrences arising out of one event provided that, with respect to disease or death resulting
therefrom, the terms accident or occurrence and series of accidents or occurrences shall mean
the claim or series of claims occasioned by the disease or diseases having a common cause or
origin. The Company shall be the sole judge of what constitutes disease or diseases having a
common cause or origin. The Company shall assign the claim or series of claims to a policy
year of coverage under any one policy or

 

-4-

	 	 	renewal thereof and will be bound by the following principles:

	 	1.	 	If the liability is placed solely upon the employer or
insurer as of the date the claimant’s disability commences or
becomes manifest and that date is within a period of coverage
under an applicable policy issued
by the Company, the loss shall be deemed to have been sustained by
the Company at such date.
	 
	 	2.	 	If assignment is not made on the basis stated in the
preceding subparagraph the claim is to be assigned to the policy
year of the date of claimant’s last injurious exposure during a
period of coverage under an applicable policy issued by the
Company.

	 	 	Notwithstanding anything to the contrary above set forth, it is agreed that the date of the
loss occurrence for the purpose of this reinsurance shall be deemed to be the inception,
anniversary or renewal date of the Company’s original policy. Losses occurring under a
policy in-force at December 31, 1984 shall be assigned to this Agreement to the extent such
losses are not assignable to the 1984 Contract year.
	 
	 	 	Notwithstanding the foregoing, where a policyholder requests that it be issued two or more
policies in circumstances where applicable manual rules permit the issuance of a single
policy such policies shall be regarded as a single policy for purposes of assigning disease
claims to a policy year coverage.
	 
	 	 	“Policy year” shall mean each separate original policy period of not exceeding twelve months
commencing at the inception, anniversary or renewal date on or after the inception of this
Agreement.

SECTION 6 — EXTRA CONTRACTUAL OBLIGATIONS

This Contract shall protect the Company within the limits hereof for 80% of Extra Contractual
Obligations, where the ultimate net loss includes any Extra Contractual Obligations. “Extra
Contractual Obligations” are defined as those liabilities not covered under any other provision of
this Contract and which arise from the handling of any claim on business covered hereunder, such
liabilities arising because of, but not limited to, the following: failure by the Company to
settle within the policy limit, or by reason of alleged or actual negligence, fraud or bad faith in
rejecting an offer of settlement or in the preparation of the defense or in the trial of any action
against its Insured or Reinsured or in the preparation or prosecution of an appeal consequent upon
such action.

 

-5-

The date on which any Extra Contractual Obligation is incurred by the Company shall be deemed,
in all circumstances, to be the date of the original accident, casualty, disaster or loss
occurrence.

However, this Article shall not apply where the loss has been incurred due to the fraud of a member
of the Board of Directors or a corporate officer of the Company acting individually or collectively
or in collusion with any individual or corporation or any other organization or party involved in
the presentation, defense or settlement of any claim covered hereunder.

SECTION 7 — NOTICE TO REINSURERS

As soon as practicable after it appears probable that the Company’s ultimate net loss on account of
any one accident or occurrence will exceed the amount above which the Reinsurers are liable under
this Exhibit, the Company shall notify the Reinsurers and provide them full information relative
thereto, and copies of all papers that may be desired by them, and the Reinsurers shall be given
every opportunity to participate in the defense of any such suit, proceeding or claim at their own
expense.

SECTION 8 — PAYMENT BY THE COMPANY

The Company shall be the sole judge as to what claims are covered under its policies, as to the
liability of the Company therefor and as to the amounts which the Company should pay thereon, and
the Reinsurers shall be bound by the judgement of the Company as to such matters.

All settlements of losses effected by the Company shall be binding upon the Reinsurers, and the
Reinsurers shall be liable for their proportion thereof.

SECTION 9 — CLAIMS AGAINST REINSURERS

The Company shall, after it has paid any amount of ultimate net loss for which the Reinsurers may
be liable under this Exhibit, submit to the Reinsurers a definite claim for such amount. If any
subsequent losses shall be paid by the Company on account of the same accident or occurrence,
additional claims hereunder shall be similarly made from time to time. Losses shall be due and
payable by the Reinsurers within fifteen days after claim hereunder is proved.

All salvages, recoveries and payments recovered or received subsequent to a loss settlement under
this Exhibit shall be applied as

 

-6-

if recovered or received prior to the said settlement and all necessary adjustments shall be
made by the parties hereto.

SECTION 10 — COMMUTATION

Within 48 months from the expiration of each annual period of this Contract the Company shall
submit a statement to the Reinsurers listing amounts paid and reserved for all Workers’
Compensation claims under this Agreement. This statement shall form the basis of an agreed value
for all such losses. The amounts of reserves contained therein shall be calculated in accordance
with the following criteria:

	 	1.	 	Mortality assumptions will be calculated from the latest
available United States census tables as follows:

Survivor Benefits  — Total Females

Disability Benefits — Total Males

	 	2.	 	The annual interest discount percentage shall be an average
(rounded to the nearest one-half percentage point) of the before-tax
yields of the Company’s investment purchases for the three latest
available calendar years.
	 
	 	3.	 	Remarriage expectations will be in accordance with the
assumptions used by the National Council on Compensation Insurance in
its statistical tables.
	 
	 	4.	 	For all future medical costs, and annuity calculation shall be based
upon the Company’s evaluation of long term medical care and rehabilitation requirements, using an annual discount of 0% and an annual escalation of 0%.

The above criteria shall not apply to losses with future escalation of indemnity benefits as
described below:

	 	1.	 	Annuity values for “index-linked” benefits shall be calculated based
upon an annual discount of 0% and an annual escalation of 0%.
	 
	 	2.	 	For “index-linked” benefits, remarriage expectations will not be used.

Except as may be mutually agreed for specific losses, these calculations shall be considered the
final and agreed value of all known workers’ compensation losses for the applicable annual period
of this Contract. A resulting payment, if any, shall be accepted by the Company in full settlement
of the Reinsurers’ liability for all such losses. In the event that a workers’ compensation loss
is

 

-7-

not reported to the Company until after the Company’s statement has been submitted, immediate
notice of such loss shall be given to the Reinsurers in order that an agreed present value may be
determined.

SECTION 11 — TWO PERSON WARRANTY

No loss shall be recoverable unless at least two employees of one or more insureds are
involved in the same accident or occurrence or series of accidents or occurrences originating from
one event and
the payments to at least two employees are more than $50,000 each. This Warranty does not apply to
Employers Liability Coverage.

This Exhibit B is attached to and forms part of the Workers’ Compensation and General Liability
Seventh Excess of Loss Reinsurance
Contract issued to LIBERTY MUTUAL INSURANCE COMPANY, LIBERTY MUTUAL FIRE INSURANCE COMPANY,
LIBERTY MUTUAL (BERMUDA) LTD., LIBERTY
INSURANCE CORPORATION and LIBERTY NORTHWEST INSURANCE CORPORATION.

LD:ki — 6/7/85

 

 

NUCLEAR INCIDENT EXCLUSION CLAUSE — LIABILITY — REINSURANCE

	(1)	 	This Agreement does not cover any loss or liability accruing to the Reassured as a member
of, or subscriber to, any association of insurers or reinsurers formed for the purpose of covering nuclear energy risks or as a direct or
indirect reinsurer of any such member, subscriber or association.
	 
	(2)	 	Without in any way restricting the operation of paragraph (1) of this Clause it is understood
and agreed that for all purposes of this Agreement all the original policies of the Reassured
(new, renewal and replacement) of the classes specified in Clause II of this paragraph (2)
from the time specified in Clause III in this paragraph (2) shall be deemed to include the
following provision (specified as the Limited Exclusion Provision):
	 
	 	 	Limited Exclusion Provision.

	 	I.	 	It is agreed that the policy does not apply under any liability coverage, to
injury, sickness, disease, death or destruction with respect to which an insured under
the policy is also an insured under a nuclear energy liability policy issued by Nuclear
Energy Liability Insurance Association, Mutual Atomic Energy Liability Underwriters or
Nuclear Insurance Association of Canada, or would be an insured under any such policy
but for its termination upon exhaustion of its limit of liability.
	 
	 	II.	 	Family Automobile Policies (liability only), Special Automobile Policies
(private passenger automobiles, liability only), Farmers Comprehensive Personal
Liability Policies (liability only), Comprehensive Personal Liability Policies (liability only) or policies of a similar nature; and the liability portion of combination
forms related to the four classes of policies stated above, such as the Comprehensive Dwelling Policy and the applicable types of Homeowners Policies.
	 
	 	III.	 	The inception dates and thereafter of all original policies as described
in II above, whether new, renewal or replacement, being policies which either

	 	(a)	 	become effective on or after 1st May, 1960, or
	 
	 	(b)	 	become effective before that date and contain the Limited
Exclusion Provision set out above;

	 	 	 	provided this paragraph (2) shall not be applicable to Family Automobile
Policies, Special Automobile Policies, or policies or combination policies of a
similar nature, issued by the Reassured on New York risks, until 90 days
following approval of the Limited Exclusion Provision by the Governmental
Authority having jurisdiction thereof.

 

-2-

	(3)	 	Except for those classes of policies specified in clause II of paragraph (2) and without
in any way restricting the operation of paragraph (1) of this Clause, it is understood and
agreed that for all purposes of this Agreement the original liability policies of the
Reassured (new, renewal and replacement) affording the following coverages:

	 	 	 	Owners, Landlords and Tenants Liability, Contractual Liability, Elevator Liability,
Owners or Contractors (including railroad) Protective Liability, Manufacturers and
Contractors Liability, Product Liability, Professional and Malpractice Liability,
Storekeepers Liability, Garage Liability, Automobile Liability (including
Massachusetts Motor Vehicle or Garage Liability)

	 	 	shall be deemed to include, with respect to such coverages, from the time specified in Clause
V of this paragraph (3), the following provision (specified as the Broad Exclusion
Provision):
	 
	 	 	Broad Exclusion Provision.
	 
	 	 	It is agreed that the policy does not apply:

	 	I.	 	Under any Liability Coverage, to injury, sickness, disease, death or
destruction

	 	(a)	 	with respect to which an insured under the policy is also an
insured under a nuclear energy liability policy issued by Nuclear Energy
Liability Insurance Association, Mutual Atomic Energy Liability Underwriters or
Nuclear Insurance Association of Canada, or would be an insured under any such
policy but for its termination upon exhaustion of its limit of liability; or
	 
	 	(b)	 	resulting from the hazardous properties of nuclear material
and with respect to which (1) any person or organization is required to
maintain financial protection pursuant to the Atomic Energy Act of 1954, or
any law amendatory thereof, or (2) the insured is, or had this policy not
been issued would be, entitled to indemnity from the United States of
America, or any agency thereof, under any agreement entered into by the
United States of America, or any agency thereof, with any person or
organization.

	 	II.	 	Under any Medical Payments Coverage, or under any Supplementary Payments
Provision relating to immediate medical or surgical relief, to expenses incurred
with respect to bodily injury, sickness, disease or death resulting from the
hazardous properties of nuclear material and arising out of the operation of a
nuclear facility by any person or organization.
	 
	 	III.	 	Under any Liability Coverage, to injury, sickness, disease, death or
destruction resulting from the hazardous properties of nuclear material, if

	 	(a)	 	the nuclear material (1) is at any nuclear facility owned
by, or operated by or on behalf of, an insured or (2) has been discharged
or dispersed therefrom;

 

-3-

	 	(b)	 	the nuclear material is contained in spent fuel or waste at
any time possessed, handled, used, processed, stored, transported or disposed of by or
on behalf of an insured; or
	 
	 	(c)	 	the injury, sickness, disease, death or destruction arises out of the furnishing
by an insured of services, materials, parts or equipment in connection with the
planning, construction, maintenance, operation or use of any nuclear facility, but if
such facility is located within the United States of America, its territories or
possessions or Canada, this exclusion (c) applies only to injury to or destruction of
property at such nuclear facility.

	 	IV.	 	As used in this endorsement:
	 
	 	 	 	“hazardous properties” include radioactive, toxic or explosive properties; “nuclear material”
means source material, special nuclear material or byproduct material; “source material”,
“special nuclear material”, and “byproduct material” have the meanings given them in the
Atomic Energy Act of 1954 or in any law amendatory thereof; “spent fuel” means any fuel
element or fuel component, solid or liquid, which has been used or exposed to radiation in a
nuclear reactor; “waste” means any waste material (1) containing byproduct material other than
the tailings or wastes produced by the extraction or concentration of uranium or thorium from
any ore processed primarily for its source material content and (2) resulting from the
operation by any person or organization of any nuclear facility included within the definition
of nuclear facility under paragraph (a) or (b) thereof; “nuclear facility”. means

	 	(a)	 	any nuclear reactor,
	 
	 	(b)	 	any equipment or device designed or used for (1) separating the isotopes of
uranium or plutonium, (2) processing or utilizing spent fuel, or (3) handling,
processing or packaging waste,
	 
	 	(c)	 	any equipment or device used for the processing, fabricating or alloying of
special nuclear material if at any time the total amount of such material in the custody
of the insured at the premises where such equipment or device is located consists of or
contains more than 25 grams of plutonium or uranium 233 or any combination thereof, or
more than 250 grams of uranium 235,
	 
	 	(d)	 	any structure, basin, excavation, premises or place prepared or used for the
storage or disposal of waste,

	 	 	 	and includes the site on which any of the foregoing is located, all operations conducted on
such site and all premises used for such operations; “nuclear reactor” means any, apparatus
designed or used to sustain nuclear fission in a self-supporting chain reaction or to contain
a critical mass of fissionable material.
	 
	 	 	 	With respect to injury to or destruction of property, the word “injury” or “destruction”
includes all forms of radioactive contamination of property.

 

-4-

	 	V.	 	The inception dates and thereafter of all original policies
affording coverages specified in this paragraph (3), whether new, renewal
or replacement, being policies which either

	 	(a)	 	become effective on or after 1st May, 1960, or
	 
	 	(b)	 	become effective before that date and contain the
Broad Exclusion Provision set out above;

	 	 	 	provided this paragraph (3) shall not be applicable to

	 	(i)	 	Garage and Automobile Policies issued by the
Reassured on New York risks, or
	 
	 	(ii)	 	statutory liability insurance required under
Chapter 90, General Laws of Massachusetts,

	 	 	 	until 90 days following approval of the Broad Exclusion Provision by the
Governmental Authority having jurisdiction thereof.
	 
	 	 	 	It is further provided that original liability policies affording coverages
described in this paragraph (3), (other than those policies and coverages
described in (i) and (ii) above), which become effective before 1st May, 1960,
and do not contain the Broad Exclusion Provision set out above, but which contain
the Broad Exclusion Provision set out in N.M.A. 1118, shall be construed as if
incorporating such portions of the Broad Exclusion Provision set out above as are
more liberal to the holders of such policies.

	(4)	 	Without in any way restricting the operation of paragraph (1) of this clause it is understood
and agreed that original liability policies of the Reassured, for those classes of policies

	 	(a)	 	described in Clause II of paragraph (2) effective before
1st June, 1958, or
	 
	 	(b)	 	described in paragraph (3) effective before 1st March, 1958,

	 	 	shall be free until their natural expiry dates or 1st June, 1963, whichever first
occurs, from the application of the other provisions of this Clause.
	 
	(5)	 	Without in any way restricting the operation of paragraph (1) of this Clause, it is
understood and agreed that paragraphs (2) and (3) above are not applicable to original
liability policies of the Reassured in Canada and that with respect to such policies this
Clause shall be deemed to include the Nuclear Energy Liability Exclusion Provisions actually
used on such policies by the Reassured; provided that if the Reassured shall fail to include
such Exclusion Provisions in any such policy where it is legally permitted to do so, such
policy shall be deemed to include such Exclusion Provisions.

 

 

NUCLEAR INCIDENT EXCLUSION CLAUSE — PHYSICAL DAMAGE — REINSURANCE

(Wherever the word “Reassured” appears in this clause, it shall be deemed to reed
“Reassured”, “Reinsured”, “Company”, or whatever other word is employed throughout the
text of the reinsurance agreement to which this clause is attached to designate the
company or companies reinsured.)

     1. This Reinsurance does not cover any loss or liability accruing to the Reassured,
directly or indirectly, and whether as Insurer or Reinsurer, from any Pool of Insurers or
Reinsurers formed for the purpose of covering Atomic or Nuclear Energy risks.

     2. Without in any way restricting the operation of paragraph (1) of this Clause, this
Reinsurance does not cover any loss or liability accruing to the Reassured, directly or indirectly
and whether as Insurer or Reinsurer, from any insurance against Physical Damage (including business
interruption or consequential loss arising out of such Physical Damage) to:

	 	I.	 	Nuclear reactor power plants including all auxiliary property on the site, or
	 
	 	II.	 	Any other nuclear reactor installation, including laboratories handling
radioactive materials in connection with, reactor installations, and “critical
facilities” as such, or
	 
	 	III.	 	Installations for fabricating complete fuel elements or for processing
substantial quantities of “special nuclear material,” and for reprocessing, salvaging,
chemically separating, storing or disposing of “spent” nuclear fuel or waste materials,
or
	 
	 	IV.	 	Installations other than those listed in paragraph (2) III above using substantial
quantities of radioactive isotopes or other products of nuclear fission.

     3. Without in any way restricting the operations of paragraphs (1) and (2) hereof, this
Reinsurance does not cover any loss or liability by radioactive contamination accruing to the
Reassured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance on
property which is on the same site as a nuclear reactor power plant or other nuclear installation
and which normally would be insured therewith except that this paragraph (3) shall not operate

	 	(a)	 	where Reassured does not have knowledge of such nuclear reactor power plant or
nuclear installation, or
	 
	 	(b)	 	where said insurance contains a provision excluding coverage for damage to
property caused by or resulting from radioactive contamination, however caused. However
on and after 1st January 1960 this sub-paragraph (b) shall only apply provided the said
radioactive contamination exclusion provision has been approved by the Governmental
Authority having jurisdiction thereof.

     4. Without in any way restricting the operations of paragraphs (1), (2) and (3) hereof, this
Reinsurance does not cover any loss or liability by radioactive contamination accruing to the
Reassured, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive
contamination is a named hazard specifically insured against.

     5. It is understood and agreed that this Clause shall not extend to risks using radioactive
isotopes in any form where the nuclear exposure is not considered by the Reassured to be the
primary hazard.

     6. The term “special nuclear material” shall have the meaning given it in the Atomic Energy
Act of 1954, or by any law amendatory thereof.

     7. Reassured to be sole judge of what constitutes:

	 	(a)	 	substantial quantities, and
	 
	 	(b)	 	the extent of installation, plant or site.

12/12/57

 

LIBERTY MUTUAL INSURANCE COMPANY

LIBERTY MUTUAL FIRE INSURANCE COMPANY

LIBERTY MUTUAL (BERMUDA) LTD.

LIBERTY INSURANCE CORPORATION

LIBERTY NORTHWEST INSURANCE CORPORATION

WORKERS’ COMPENSATION AND GENERAL LIABILITY

SEVENTH EXCESS OF LOSS REINSURANCE CONTRACT

INTERESTS AND LIABILITIES AGREEMENT

IT IS HEREBY MUTUALLY AGREED, by and between LIBERTY MUTUAL INSURANCE COMPANY and LIBERTY
MUTUAL FIRE INSURANCE COMPANY, Boston, Massachusetts, LIBERTY MUTUAL (BERMUDA) LTD., Hamilton,
Bermuda, LIBERTY INSURANCE CORPORATION a Delaware Corporation and LIBERTY NORTHWEST INSURANCE
CORPORATION, Portland, Oregon (hereinafter called the “Company”) of the one part, and the
undersigned Reinsurer (hereinafter called the “Reinsurer”) of the other part, that the Reinsurer
shall have a 2.0% share in the Interests and Liabilities of the “Reinsurers” as set forth in the
document attached hereto. The share of the Reinsurer shall be separate and apart from the shares
of the other Reinsurers, and shall not be joint with those of the other Reinsurers, and the
Reinsurer shall in no event participate in the Interests and Liabilities of the other Reinsurers.

The premium for this reinsurance shall be the Reinsurer’s percentage share of the premium provided
under Article 3 of the attached document, and shall be payable as herein provided.

This Agreement shall be effective Midnight, December 31, 1984 and shall remain in full force
unless terminated in accordance with the termination provisions of Article 14 of the attached
document.

IN WITNESS WHEREOF, the parties hereto, by their respective duly authorized officers, have
executed this Agreement as of the dates undermentioned.

At Boston, Massachusetts this 1st day of October, 1985, for and on behalf
of:

	 	 	 	 	 	 	 

	 	 	LIBERTY MUTUAL INSURANCE COMPANY

LIBERTY MUTUAL FIRE INSURANCE COMPANY

LIBERTY MUTUAL (BERMUDA) LTD.

LIBERTY INSURANCE CORPORATION

LIBERTY NORTHWEST INSURANCE CORPORATION	 	 
	 
	 	 	 	 	 	 
	 
	 	BY:
TITLE:	 	/s/  

ASSISTANT SECRETARY	 	 

and at Indianapolis, Indiana this 3rd day of April, 1986, for and on behalf of:

	 	 	 	 	 	 	 

	 	 	AMERICAN UNION INSURANCE COMPANY OF

NEW YORK	 	 
	 
	 	 	 	 	 	 
	LD:ki — 6/7/85
	 	BY:

TITLE:	 	/s/
 

ASST. VICE PRESIDENT

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