Document:

exv10w1

 

Exhibit 10.1

CASUALTY EXCESS OF LOSS REINSURANCE

AGREEMENT

EFFECTIVE: January 1, 2007

the following member companies of the

PHILADELPHIA CONSOLIDATED HOLDING CORPORATION:

PHILADELPHIA INDEMNITY INSURANCE COMPANY

PHILADELPHIA INSURANCE COMPANY

both of Bala Cynwyd, Pennsylvania

 

 

CASUALTY EXCESS OF LOSS REINSURANCE AGREEMENT

January 1, 2007

	 	 	 	 	 	 	 
	ARTICLE	 	CONTENTS	 	PAGE
	 

	 	PREAMBLE
	 	 	1	 
	I

	 	BUSINESS COVERED
	 	 	1	 
	II

	 	EFFECTIVE DATE AND TERMINATION
	 	 	3	 
	III

	 	TERRITORY
	 	 	3	 
	IV

	 	LIMIT AND RETENTION
	 	 	3	 
	V

	 	WARRANTY
	 	 	4	 
	VI

	 	REINSTATEMENT
	 	 	5	 
	VII

	 	ULTIMATE NET LOSS
	 	 	5	 
	VIII

	 	LOSS IN EXCESS OF POLICY LIMITS
	 	 	6	 
	IX

	 	EXTRA CONTRACTUAL OBLIGATIONS
	 	 	7	 
	X

	 	EXCLUSIONS
	 	 	8	 
	XI

	 	SPECIAL ACCEPTANCE
	 	 	14	 
	XII

	 	LOSS OCCURRENCE
	 	 	14	 
	XIII

	 	REINSURANCE PREMIUM
	 	 	15	 
	XIV

	 	REPORTS AND REMITTANCES
	 	 	16	 
	XV

	 	CLAIMS
	 	 	17	 
	XVI

	 	SALVAGE AND SUBROGATION
	 	 	18	 
	XVII

	 	TERRORISM EXCESS RECOVERY
	 	 	18	 
	XVIII

	 	ACCESS TO RECORDS
	 	 	20	 
	XIX

	 	TAXES
	 	 	20	 
	XX

	 	CURRENCY
	 	 	20	 
	XXI

	 	OFFSET
	 	 	20	 
	XXII

	 	ERRORS OR OMISSIONS
	 	 	21	 
	XXIII

	 	DISPUTE RESOLUTION
	 	 	21	 
	XXIV

	 	INSOLVENCY
	 	 	23	 
	XXV

	 	SPECIAL TERMINATION
	 	 	23	 
	XXVI

	 	AMENDMENTS
	 	 	25	 
	 

	 	SIGNATURES
	 	 	25	 

ATTACHMENTS:

POLLUTION LIABILITY EXCLUSION CLAUSE — REINSURANCE

INSOLVENCY FUNDS EXCLUSION CLAUSE

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

NUCLEAR INCIDENT EXCLUSION CLAUSE — LIABILITY — REINSURANCE — CANADA

NUCLEAR INCIDENT EXCLUSION CLAUSE — REINSURANCE — NO. 4

PHARMACEUTICAL / MEDICAL COMPANY EXCLUSION LISTING

 

 

CASUALTY EXCESS OF LOSS REINSURANCE AGREEMENT

(hereinafter referred to as the “Agreement”)

between

the following member companies of the

PHILADELPHIA CONSOLIDATED HOLDING CORPORATION:

PHILADELPHIA INDEMNITY INSURANCE COMPANY

PHILADELPHIA INSURANCE COMPANY

both of Bala Cynwyd, Pennsylvania

(hereinafter referred to as “Company”)

and

SWISS REINSURANCE AMERICA CORPORATION

Armonk, New York

(hereinafter referred to as the “Reinsurer”)

Effective: January 1, 2007

ARTICLE I — BUSINESS COVERED

	A.	 	The Reinsurer shall indemnify the Company on an excess of loss basis in respect of the
Company’s Ultimate Net Loss paid by the Company as a result of losses occurring during the
term of this Agreement, for Policies in force as of January 1, 2007, and new and renewal
Policies becoming effective on or after said date, subject to the terms and conditions
contained herein.
	 
	B.	 	This Agreement is solely between the Company and the Reinsurer, and nothing contained in this
Agreement shall create any obligations or establish any rights against the Reinsurer in favor
of any person or entity not a party hereto.
	 
	C.	 	The performance of obligations by both parties under this Agreement shall be in accordance
with a fiduciary standard of good faith and fair dealing.
	 
	D.	 	The term “Policies” shall mean each of the Company’s binders, policies and contracts of
insurance on the business covered hereunder.

	 	 	 	 	 
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	E.	 	Under this Agreement, the indemnity for reinsured loss applies only to the following Classes
of Insurance, except as excluded under Article X — Exclusions of this Agreement.
	 
	 	 	The Classes of Insurance covered under this Article include business written by the
Company’s Commercial and Specialty Lines Divisions and classified by the Company as
Casualty and Liability, which is defined in the NAIC Annual Statement as:

	 	1.	 	Commercial Multiple Peril — Liability coverages only
	 
	 	2.	 	Commercial and Private Passenger Automobile Liability:
	 
	 	 	 	Bodily Injury Liability, Property Damage Liability, Medical Payments, Uninsured
Motorists, Underinsured Motorists and No-Fault Coverage.
	 
	 	3.	 	Other Liability — occurrence and claims made:
	 
	 	 	 	Bodily Injury Liability, Property Damage Liability, Personal and Advertising Injury
Liability, and Medical Payments Coverage when written as part of a Commercial or
Personal Package Policy or on a monoline basis. However, Advertising Injury
Liability shall only apply to this Agreement when written as part of a Commercial
Package Policy or a Commercial General Liability Coverage Form.
	 
	 	 	 	Commercial Umbrella Liability.
	 
	 	 	 	Professional Liability:
	 
	 	 	 	Director’s and Officers Liability For Profit and Not for Profit risks,
Miscellaneous Errors and Omissions Liability, Lawyers Professional Liability,
Accountants Professional Liability, Dentists professional Liability, Insurance
Agents professional liability, Miscellaneous Professional Liability, Employment
Practices Liability.

Furthermore, it is agreed that the Company may add other Casualty and Liability product lines of
business to the scope of this Contract with prior written approval of the Reinsurer, pursuant to
the Special Acceptance article.

	 	 	 	 	 
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ARTICLE II — EFFECTIVE DATE AND TERMINATION

	A.	 	This Agreement shall apply to losses occurring within the period commencing 12:01 a.m.,
Eastern Standard Time, January 1, 2007, and ending 12:01 a.m., Eastern Standard Time, January
1, 2008.
	 
	B.	 	During the running of such notice as stipulated in Paragraph A. above, the Reinsurer shall
participate in business coming within the terms of this Agreement until the date of
termination of this Agreement.
	 
	C.	 	In the event of termination of this Agreement, the Reinsurer shall be liable for losses
occurring prior to the date of termination; however, the Reinsurer shall have no liability for
losses occurring subsequent to the termination of this Agreement.

ARTICLE III — TERRITORY

This Agreement applies to Policies issued by the Company within the United States of America, its
territories and possessions, and Canada and shall apply to losses covered hereunder wherever
occurring.

ARTICLE IV — LIMIT AND RETENTION

	A.	 	The limits and retentions provided under this Agreement are set forth in the following Parts
I, II and III:
	 
	 	 	Part I — First Excess of Loss (Accounting Code No. POR376426)

The Company shall retain the first $2,000,000 of Ultimate Net Loss as respects any
one Loss Occurrence. The Reinsurer shall then be liable for the amount by which the
Company’s Ultimate Net Loss exceeds the Company’s retention of $2,000,000, but the
liability of the Reinsurer shall never exceed $3,000,000 with respect to any one
Loss Occurrence. However, in no event shall the liability of the Reinsurer arising
out of Act(s) of Terrorism exceed $3,000,000 during the term of this Agreement.

Part II — Second Excess of Loss (Accounting Code No.POR376428)

The Company shall retain the first $5,000,000 of Ultimate Net Loss as respects any
one Loss Occurrence. The Reinsurer shall then be liable for the amount by which the
Company’s Ultimate Net Loss exceeds the Company’s retention of $5,000,000, but the
liability of the Reinsurer shall never exceed $5,000,000 with respect to any one
Loss Occurrence. However, in no event

	 	 	 	 	 
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shall the liability of the Reinsurer arising out of Act(s) of Terrorism exceed
$5,000,000 during the term of this Agreement.

Part III — Third Excess of Loss (Accounting Code No. POR376430)

The Company shall retain the first $10,000,000 of Ultimate Net Loss as respects any
one Loss Occurrence. The Reinsurer shall then be liable for the amount by which the
Company’s Ultimate Net Loss exceeds the Company’s retention of $10,000,000, but the
liability of the Reinsurer shall never exceed $10,000,000 with respect to any one
Loss Occurrence. However, in no event shall the liability of the Reinsurer arising
out of Act(s) of Terrorism exceed $10,000,000 during the term of this Agreement.

	B.	 	The Company’s retention and the Reinsurer’s limit of liability for each Loss Occurrence, set
forth in Parts I, II and III above, shall apply irrespective of the number of Policies
affected or number of hazards in one Policy and regardless of the number of Classes of
Insurance involved.
	 
	C.	 	Reinsurance of the Company’s retention, set forth above, shall not be deducted in arriving at
the Company’s Ultimate Net Loss herein.
	 
	D.	 	An “Act of Terrorism” for purposes of this Agreement shall mean:

	 	1.	 	Any actual or threatened violent act or act harmful to human life, tangible
or intangible property or infrastructure directed towards or having the effect of (a)
influencing or protesting against any de jure or de facto government or policy
thereof, (b) intimidating, coercing or putting in fear a civilian population or
section thereof religious or political system of thought, perpetrated by a specific
individual or group directly or indirectly through agents acting on behalf of said
individual or group or (c) retaliating against any country for direct or vicarious
support by that country of any other government or political system.
	 
	 	2.	 	Any act declared pursuant to the Terrorism Risk Insurance Act of 2002, as
amended, shall also be considered an “Act of Terrorism” for purposes of this
Agreement.

ARTICLE V — WARRANTY

	A.	 	It is warranted, or so deemed, that casualty reinsurance is in effect for all policies issued
by or on behalf of the Company with limits greater than $1,000,000 per occurrence or claim
made. It is also warranted, or so deemed, that the Company has in effect an Insurance Company
Errors and Omissions policy with a limit of

	 	 	 	 	 
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$10,000,000 and a retention/deductible of $1,000,000. This insurance, or reinsurance,
whether collectible or not, and retention/deductible, shall be maintained until all losses
reinsured under this Agreement are fully discharged and shall inure to the benefit of the
reinsurer.

	B.	 	It is further warranted that policies subject to this Agreement with inuring coverage as
deemed above, shall not exceed a combined limit for both the Primary Policy and Umbrella
Policy of $11,000,000 per occurrence, or so deemed.
	 
	C.	 	The maximum policy period on business covered by this Agreement is one year plus odd time,
not to exceed 120 days.

ARTICLE VI — REINSTATEMENT

	A.	 	Each claim hereunder reduces the amount of indemnity from the time of occurrence of the loss
by the sum paid, but any amount so exhausted is hereby reinstated from the time the Loss
Occurrence commences hereon.
	 
	B.	 	For each amount so reinstated the Company agrees to pay an additional premium calculated at
pro rata of the annual premium hereon, being pro rata only as to the fraction of the limit of
liability of this Agreement (i.e., the fraction of $3,000,000 as respects Part I and
$5,000,000 as respects Part II and $10,000,000 as respects Part III) so reinstated and 100% as
to the term.
	 
	C.	 	Nevertheless, the Reinsurer’s liability hereunder shall never exceed $3,000,000 as respects
Part I and $5,000,000 as respects Part II and $10,000,000 as respects Part III in respect of
any one Loss Occurrence and shall be further limited in all during the term of this Agreement
$6,000,000 as respects Part I and $10,000,000 as respects Part II and $20,000,000.

ARTICLE VII — ULTIMATE NET LOSS

	A.	 	The term “Ultimate Net Loss” shall mean the actual sum paid by the Company in settlement of
losses or liability including interest accrued prior to judgment after making deductions for
all recoveries, including subrogation, salvages, and claims upon other reinsurances, whether
collectible or not, which inure to the benefit of the Reinsurer under this Agreement, and
shall include Loss Adjustment Expenses incurred by the Company; provided, however, that in the
event of the insolvency of the Company, Ultimate Net Loss shall mean the amount of loss and
Loss Adjustment Expenses for which the Company is liable, and payment by the Reinsurer shall
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successor of the Company in accordance with the provisions of Article XXIV— Insolvency of
this Agreement.

	B.	 	The term “Ultimate Net Loss” shall include 90% of Loss In Excess of Policy Limits and 90% of
Extra Contractual Obligations, as defined herein, but only as respects business covered under
this Agreement.
	 
	C.	 	The term “Loss Adjustment Expenses” shall mean all expenses incurred by the Company in
connection with the investigation, settlement, defense or litigation, including court costs
and post-judgment interest, of any claim or loss covered by the Policies reinsured under this
Agreement, and shall include Declaratory Judgment Expenses. However, the term “Loss
Adjustment Expenses” shall not include the salaries and expenses of Company employees, office
expenses and other overhead expenses.
	 
	D.	 	The term “Declaratory Judgment Expenses” shall mean all legal expenses, incurred in the
representation of the Company in litigation brought to determine the Company’s defense and/or
indemnification obligations that are allocable to any specific claim or loss applicable to
Policies subject to this Agreement. In addition, the Company shall promptly notify the
Reinsurer of any Declaratory Judgment Expenses subject to this Agreement.
	 
	E.	 	All recoveries, salvages or payments recovered or received subsequent to a loss settlement
under this Agreement shall be applied as if recovered or received prior to the aforesaid
settlement and all necessary adjustments to the loss settlement shall be made by the parties
hereto.
	 
	F.	 	Nothing in this Article shall be construed to mean that losses are not recoverable hereunder
until the Ultimate Net Loss of the Company has been ascertained.

ARTICLE VIII — LOSS IN EXCESS OF POLICY LIMITS

	A.	 	“Loss in Excess of Policy Limits” is defined as loss in excess of the limit of the original
Policy, such loss in excess of the limit having been incurred because of 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 in the preparation or prosecution of an appeal
consequent upon such action.
	 
	B.	 	However, this Article shall not apply where the loss has been incurred due to fraud by a
member of the Board of Directors or a corporate officer of the Company acting individually or
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corporation or any other organization or party involved in the presentation, defense or
settlement of any claim covered hereunder.

	C.	 	For the purposes of this Article, the word “loss” shall mean any amounts which the Company
would have been contractually liable to pay had it not been for the limit of the original
Policy.
	 
	D.	 	With respect to coverage provided under this Article, recoveries from any insurance or
reinsurance other than this Agreement shall be deducted to arrive at the amount of the
Company’s Ultimate Net Loss.

ARTICLE IX — EXTRA CONTRACTUAL OBLIGATIONS

	A.	 	“Extra Contractual Obligations” are defined as those liabilities not covered under any other
provision of this Agreement and which arise from the handling of any claim on business covered
hereunder, such liabilities arising because of, but not limited to, the following: failure by
the Company to settle within the Policy limit, or by reason of alleged or actual negligence,
fraud or bad faith in rejecting an offer of settlement or in the preparation of the defense or
in the trial of any action against its insured or in the preparation or prosecution of an
appeal consequent upon such action.
	 
	B.	 	The date on which an 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.
	 
	C.	 	However, coverage hereunder as respects Extra Contractual Obligations 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.
	 
	D.	 	Recoveries, collectibles or retention from any other form of insurance or reinsurance
including deductibles or self-insured retention which protect the Company against Extra
Contractual Obligations shall inure to the benefit of the Reinsurer and shall be deducted from
the total amount of Extra Contractual Obligations for purposes of determining the loss
hereunder.
	 
	E.	 	If any provision of this Article shall be rendered illegal or unenforceable by the laws,
regulations or public policy of any state, such provision shall be considered void in such
state, but this shall not affect the validity or enforceability of any other

	 	 	 	 	 
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provision of this Article or the enforceability of such provision in any other
jurisdiction.

ARTICLE X — EXCLUSIONS

THIS AGREEMENT DOES NOT COVER:

	A.	 	THE FOLLOWING GENERAL CATEGORIES:

	 	1.	 	Ex-gratia payments.
	 
	 	2.	 	Risks subject to a deductible or a self-insured retention excess of $250,000.
	 
	 	3.	 	Loss or damage caused directly or indirectly by: (a) enemy attack by armed
forces including action taken by military, naval or air forces in resisting an actual
or an immediately impending enemy attack; (b) invasion; (c) insurrection; (d)
rebellion; (e) revolution; (f) intervention; (g) civil war; and (h) usurped power.
	 
	 	4.	 	Reinsurance assumed by the Company.
	 
	 	5.	 	Business derived from any Pool, Association, including Joint Underwriting
Association, Syndicate, Exchange, Plan, Fund or other facility directly as a member,
subscriber or participant, or indirectly by way of reinsurance or assessments;
provided this exclusion shall not apply to Automobile or Workers Compensation assigned
risks which may be currently or subsequently covered hereunder.
	 
	 	6.	 	Pollution Liability as per the attached Pollution Liability Exclusion Clause
 — Reinsurance.
	 
	 	7.	 	Insolvency Funds as per the attached Insolvency Funds Exclusion Clause.
	 
	 	8.	 	Nuclear Incident Exclusion Clauses which are attached and made part of this
Agreement:

	 	a.	 	Nuclear Incident Exclusion Clause — Liability — Reinsurance —
U.S.A.
	 
	 	b.	 	Nuclear Incident Exclusion Clause — Liability — Reinsurance —
Canada.
	 
	 	c.	 	Nuclear Incident Exclusion Clause — Reinsurance — No. 4.

	 	 	 	 	 
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	 	9.	 	Any actual or alleged liability whatsoever for any claim or claims in respect
of loss or losses, directly or indirectly arising out of, resulting from, or in
consequence of asbestos, in whatever form or quantity.
	 
	 	10.	 	Any liability, loss, cost or expense of whatsoever nature directly or
indirectly caused by, contributed to by, resulting from, arising out of or in
connection with the use or release, or threat thereof, of any nuclear weapon or device
or chemical or biological agent, regardless of any other cause or event contributing
concurrently or in any other sequence to the loss.
	 
	 	11.	 	Policies covering the liability of any original insured whose annual gross
revenue, sales or receipts exceed $5,000,000,000.

	B.	 	THE FOLLOWING INSURANCE COVERAGES:

	 	1.	 	Fiduciary Liability except as respects Non Profits and private For Profit
entities other than financial institutions.
	 
	 	2.	 	Fidelity and Surety except as respects Non Profits and private For Profit
entities other than financial institutions.
	 
	 	3.	 	Credit and Financial Guarantee.
	 
	 	4.	 	Securities and Exchange Liability.
	 
	 	5.	 	Retroactive coverage.
	 
	 	6.	 	Personal Excess or Umbrella Liability.
	 
	 	7.	 	Medical malpractice for Doctors, Physicians, Surgeons, Nurses, Hospitals and
Clinics. This does not apply to medical professionals when written within the
Company’s package policy program business or for other non profit entities when the
professionals are not directly employed by the entity and who maintain an underlying
medical professional liability policy with limits of $1,000,000/$3,000,000 which is
primary to the Company’s insured policy, or so deemed.
	 
	 	8.	 	Advertisers’, Broadcasters’ and Telecasters’ Liability as respects Personal
Injury Liability except as provided under Commercial Package Policies or Commercial
General Liability Coverage Forms.
	 
	 	9.	 	Liquor Law Liability, except Host Liquor Law Liability, when written as such.

	 	 	 	 	 
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	 	10.	 	Kidnap, Extortion and Ransom Liability.
	 
	 	11.	 	Boiler and Machinery Insurance.
	 
	 	12.	 	Protection and Indemnity (Ocean Marine) when written as such.
	 
	 	13.	 	Workers Compensation.
	 
	 	14.	 	Business classified by the Company as Primary Rental Liability, Supplemental
Liability, Residual Value or GAAP Liability.
	 
	 	15.	 	New and Renewal business classified by the Company as Nursing Home or
Assisted Living General Liability or Professional Liability. However, this exclusion
shall not apply if the Company is required by the applicable regulatory authority(ies)
to renew any insured(s) policy.
	 
	 	16.	 	Products recall, Products integrity or Products impairment.

	C.	 	THE FOLLOWING RISKS AS RESPECTS AUTOMOBILE LIABILITY:

	 	1.	 	Vehicles used in or while in practice or preparation for, a prearranged
racing, speed, exhibition or demolition contest.
	 
	 	2.	 	All vehicles classified as “Public Automobiles” except church buses, social
service agency automobiles, van pools and vehicles used for the transportation of
employees.
	 
	 	3.	 	Fire, police, emergency or municipal vehicles except when written as part of
the Company’s Municipality or Volunteer Fire programs.
	 
	 	4.	 	Motorcycles except when written as part of the Company’s Motorcycle School
program and Municipality program, but not when operated on public roads.
	 
	 	5.	 	The rental or leasing of vehicles to others.
	 
	 	6.	 	Logging trucks.
	 
	 	7.	 	Vehicles regularly used to haul property of others and operating beyond a 200
mile radius.
	 
	 	8.	 	Newspaper delivery trucks.

	 	 	 	 	 
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	 	9.	 	Vehicles engaged in the transportation or distribution of fireworks, fuses,
explosives, ammunitions, natural or artificial fuel, gas, or liquefied petroleum gases
or gasoline.

	D.	 	THE FOLLOWING AS RESPECTS LIABILITY OTHER THAN AUTOMOBILE:

	 	1.	 	Risks involving known exposure to the following substances:

	 	a.	 	dioxin.
	 
	 	b.	 	polychlorinated biphenols.
	 
	 	c.	 	lead.
	 
	 	d.	 	silica.

	 	2.	 	Liability as respects Products and Completed Operations:

	 	a.	 	The manufacture, labeling or re-labeling, importation or
wholesale distribution of:

	 	(i)	 	Drugs or pharmaceuticals.
	 
	 	(ii)	 	Cosmetics.
	 
	 	(iii)	 	Herbicides, insecticides or pesticides.
	 
	 	(iv)	 	Petrochemical or electrical equipment used
for heating, lighting or cooking.
	 
	 	(v)	 	Industrial or toxic chemicals.
	 
	 	(vi)	 	Valves, gaskets or seals of a hydraulic,
petrochemical or high pressure nature.
	 
	 	(vii)	 	Medical supplies.
	 
	 	(viii)	 	Heavy machinery and equipment.
	 
	 	(ix)	 	Power tools.
	 
	 	(x)	 	Medical equipment used for diagnostic or life
sustaining purposes.

	 	b.	 	The manufacture or importing of motorized or self-propelled
vehicles and equipment.
	 
	 	c.	 	The manufacturing, importing, packing, canning, bottling or
processing of foodstuffs.
	 
	 	d.	 	The blending, mixing, processing or importing of animal feed.
	 
	 	e.	 	The manufacture, sale, distribution, handling, servicing or
maintenance of aircraft, aero spacecraft, missiles, satellites or any
component or components thereof.
	 
	 	f.	 	Exterior installation finishing systems (EIFS) or synthetic
stucco manufacturing, importation, installation.

	 	 	 	 	 
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	 	g.	 	Any insured contractors’ or developers’ operations which are
involved in the new construction of apartments, condominiums, cooperatives,
town houses or single family dwellings in Arizona, California, Colorado,
Hawaii, Nevada, South Carolina, Utah or Washington.

	 	3.	 	Ownership, operation or use of vessels exceeding 58 feet in length.
	 
	 	4.	 	All railway operations except sidetrack agreements.
	 
	 	5.	 	Amusement parks, carnivals or circuses, except incidental exposures when
written in conjunction with Human Services, Religious Organizations, Volunteer Fire
Companies or similar package business.
	 
	 	6.	 	Public assembly exposure in excess of 10,000 seating capacity or admissions
per event, per building or stadium; however, this exclusion does not apply to
walk-a-thons, bicycle races or similar events.
	 
	 	7.	 	Public gas, electric and water utility companies.
	 
	 	8.	 	Subaqueous operations.
	 
	 	9.	 	Mining.
	 
	 	10.	 	Blasting operations.
	 
	 	11.	 	Demolition of buildings or structures in excess of two stories.
	 
	 	12.	 	Shoring, underpinning or moving of buildings or structures.
	 
	 	13.	 	Manufacture, sale, rental, lease, erection or repair of scaffolds.
	 
	 	14.	 	Construction of bridges, tunnels or dams.
	 
	 	15.	 	a. Manufacturers or importers of fireworks, fuses, or any substance, as
defined and noted below, intended for use as an explosive.

	 	b.	 	Loading of fireworks, fuses, or any explosive substance
defined below into containers for use as explosive objects, propellant charges
or detonation devices and the storage thereof.
	 
	 	c.	 	Manufacturers or importers of any product in which fireworks,
fuses, or any explosive substance defined below is an ingredient.
	 
	 	d.	 	Handling, storage, transportation or use of fireworks, fuses,
or any explosive substance defined below.

	 	 	 	 	 
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	 	 	 	NOTE: An explosive substance is defined as any substance manufactured for the
express purpose of exploding as differentiated from commodities used industrially
and which are only incidentally explosive.
	 
	 	16.	 	Manufacture, production, refining, storage, wholesale distribution or
transportation of natural or artificial fuel, gas, butane, propane or liquefied
petroleum gases or gasoline.
	 
	 	17.	 	Onshore and offshore gas and oil drilling operations.
	 
	 	18.	 	Ownership, maintenance or use of any airport or aircraft, including fueling,
or any device or machine intended for and/or aiding in the achievement of atmospheric
flight, projection or orbit.
	 
	 	19.	 	Municipalities with populations over 75,000.
	 
	 	20.	 	Liability as respects companies identified in the attached Pharmaceutical /
Medical Company Exclusion Listing, including all affiliates and subsidiaries thereof.

	E.	 	Those exclusions set forth under Items 5. and 16. of Section D. shall not apply if the
exposure is incidental to the regular operations of the insured covered hereunder. An
exposure shall be considered incidental if it comprises 15% or less of the insured’s exposure
base.
	 
	F.	 	In the event the Company is inadvertently bound on any risk which is excluded under this
Agreement and identified below, the reinsurance provided under this Agreement shall apply to
such risk until discovery by the Company within its Home Office of the existence of such risk
and for 30 days thereafter, and shall then cease unless within the 30 day period, the Company
has received from the Reinsurer written notice of its approval of such risk:

	 	1.	 	As respects Automobile Liability:
	 
	 	 	 	Items 2. through 9. of Section C.
	 
	 	2.	 	As respects Liability Other Than Automobile:
	 
	 	 	 	Items 2. through 19. of Section D.

	 	 	 	 	 
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ARTICLE XI — SPECIAL ACCEPTANCE

Policies which are beyond the terms, conditions or limitations of this Agreement may be submitted
to the Reinsurer for special acceptance hereunder; and such Policies, if accepted in writing by the
Reinsurer, shall be subject to all of the terms, conditions and limitations of this Agreement,
except as modified by the special acceptance. Premiums and losses derived from any special
acceptance shall be included with other data for rating purposes under this Agreement.

ARTICLE XII — LOSS OCCURRENCE

The provisions under this Article are set forth in the following Parts I, II and III.

Part I — As respects Policies written on an occurrence basis:

The term “Loss Occurrence” shall mean any accident or occurrence or series of accidents or
occurrences arising out of any one event and happening within the term and scope of this Agreement.
Without limiting the generality of the foregoing, the term “Loss Occurrence” shall be held to
include:

	A.	 	As respects Products Bodily Injury and Products Property Damage Liability, injuries to all
persons and all damage to property of others occurring during a Policy Period and proceeding
from or traceable to the same causative agency shall be deemed to arise out of one Loss
Occurrence, and the date of such Loss Occurrence shall be deemed to be the commencing date of
the Policy Period. For the purpose of this provision, each annual period of a Policy which
continues in force for more than one year shall be deemed to be a separate Policy Period.
	 
	B.	 	As respects Bodily Injury Liability (other than Automobile and Products), said term shall
also be understood to mean, as regards each original assured, injuries to one or more than one
person resulting from infection, contagion, poisoning, or contamination proceeding from or
traceable to the same causative agency.
	 
	C.	 	As respects Property Damage Liability (other than Automobile and Products), said term shall
also, subject to Provisions 1. and 2. below, be understood to mean loss or losses caused by a
series of operations, events, or occurrences arising out of operations at one specific site
and which cannot be attributed to any single one of such operations, events or occurrences,
but rather to the cumulative effect of the same. In assessing each and every Loss Occurrence
within the foregoing definition, it is understood and agreed that:

	 	1.	 	the series of operations, events or occurrences shall not extend over a
period longer than 12 consecutive months; and

	 	 	 	 	 
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	 	2.	 	the Company may elect the date on which the period of not exceeding 12
consecutive months shall be deemed to have commenced.

In the event that the series of operations, events or occurrences extend over a period
longer than 12 consecutive months, then each consecutive period of 12 months, the first of
which commences on the date elected under 2. above, shall form the basis of claim under
this Agreement.

Part II — As respects Policies written on a claims-made basis:

	A.	 	The term “Loss Occurrence” shall mean each claim or series of claims made to the Company or
the insured, during the term of this Agreement arising out of one casualty or event.
	 
	B.	 	As respects a Loss Occurrence involving one or more Policies written on a claims made basis,
the date of Loss Occurrence for purposes of reinsurance, shall be considered the earliest date
when notice of claims is first received and recorded by the Company or the insured, and any
related claims reported subsequent to such date shall be included in such loss. However, if
notice of claims is first received and recorded by the Company or the insured, during an
Extended Reporting Period, the date of occurrence shall be deemed to be the last day of the
Policy Period.

Part III — As respects loss occurrence and claims-made Policies involved in the same Loss
Occurrence:

As respects a Loss Occurrence involving one or more Policies written on an occurrence basis and one
or more Policies written on a claims-made basis, it is understood that the earliest date on which
bodily injury or property damage occurs, and any related claims reported subsequent to such date
shall be included in such loss whether they are covered under occurrence or claims-made Policies.

ARTICLE XIII — REINSURANCE PREMIUM

	A.	 	The Company shall pay to the Reinsurer a premium for the reinsurance provided under the
First, Second, and Third Excess of Loss Layers at a rates set forth in Paragraph B below.
Such rates shall be applied to the Company’s Subject Earned Premium for term of this
Agreement.
	 
	B.	 	A deposit premium for each layer set forth below, shall be payable by the Company to the
Reinsurer in four equal installments each due January 1, April 1, July 1 and October 1.
Within 60 days after the termination of this Agreement, the

	 	 	 	 	 
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Company shall render a statement to the Reinsurer showing the actual reinsurance premiums
due hereunder. If such premium calculations differ from the deposit previously paid, the
debtor party shall pay the outstanding balance within 60 days after the termination of this
Agreement. However, in no event shall the adjusted premium be less than the minimum
premium for each layer, set forth below.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Rate	 	Deposit Premium	 	Minimum Premium	 	Quarterly Deposit
	First Excess Layer
	 	 	.06	%	 	$	572,765	 	 	$	458,212	 	 	$	143,191	 
	Second Excess Layer
	 	 	.07	%	 	$	668,226	 	 	$	534,581	 	 	$	167,056	 
	Third Excess Layer
	 	 	.13	%	 	$	1,240,990	 	 	$	992,792	 	 	$	310,248	 

	C.	 	The term “Subject Earned Premium” as used herein is equal to the sum of the Net Premiums
Written on the business covered hereunder during the period under consideration, plus the
unearned premium reserve as respects premiums in force at the beginning of such period, less
the unearned premium reserve as respects premiums in force at the end of the period, said
unearned premium is to be calculated on an actual daily basis or in accordance with the
Company’s methodology, as agreed.
	 
	D.	 	The term “Net Premiums Written” shall mean gross premiums written less returns, allowances
and reinsurances which inure to the benefit of the Reinsurer.

ARTICLE XIV — REPORTS AND REMITTANCES

	A.	 	The Company shall furnish the Reinsurer with all necessary data respecting premiums and
losses for as long as one of the parties hereto has a claim against the other arising from
this Agreement.
	 
	B.	 	All checks and supporting documentation shall be sent to the Reinsurer through one of the
options set forth below:

	 	a.	 	WIRE TRANSFER

	 	(i)	 	All wires should be sent to:

The Bank of New York

1 Wall Street

New York, NY 10286

Account Name: Swiss Reinsurance America Corporation

Account Number: 8900489197

ABA Number: 021000018

SWIFT: IRVTUS3N

	 	 	 	 	 
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	 	(ii)	 	All supporting documentation should be sent to:

Swiss Reinsurance America Corporation

Accounting Department

175 King Street

Armonk, NY 10504

	 	b.	 	LOCK BOX

Both checks and supporting documentation shall be sent to:
	 
	 	 	 	Swiss Reinsurance America Corporation

P.O. Box 7247-7281

Philadelphia, PA 19170-7281

	C.	 	Payment by the Reinsurer of its portion of loss and Loss Adjustment Expenses paid by the
Company shall be made by the Reinsurer to the Company within 15 days after proof of payment is
received by the Reinsurer.

ARTICLE XV — CLAIMS

	A.	 	The Company shall promptly notify the Reinsurer of each claim which may involve the
reinsurance provided hereunder and of all subsequent developments relating thereto, stating
the amount claimed and estimate of the Company’s Ultimate Net Loss and Loss Adjustment
Expenses. Notwithstanding the provisions set forth in any other Article herein, prompt
notification of loss shall be considered a condition precedent to liability under this
Agreement.
	 
	B.	 	The Company shall advise the Reinsurer of all claims which:

	 	1.	 	Are reserved by the Company for an amount in excess of 50% of its retention;
	 
	 	2.	 	Originate from fatal injuries;
	 
	 	3.	 	Originate from the following kinds of bodily injury:

	 	a.	 	Brain injuries resulting in impairment of physical function;
	 
	 	b.	 	Spinal injuries resulting in a partial or total paralysis of
upper or lower extremities;
	 
	 	c.	 	Amputation or permanent loss of use of upper or lower
extremities;
	 
	 	d.	 	Severe burn injuries;
	 
	 	e.	 	Loss of sight in one or both eyes;
	 
	 	f.	 	All other injuries likely to result in a permanent disability
rate of 50% or more.

	 	 	 	 	 
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	 	4.	 	Any action alleging Extra Contractual Obligations against the Company.

	 
	 	5.	 	Any Declaratory Judgment action brought by or against the Company.
	 
	 	6.	 	Any judgment against an insured for an amount in excess of the Company’s
policy limit.

	C.	 	The Company shall have the responsibility to investigate, defend or negotiate settlements of
all claims and lawsuits related to Policies written by the Company and reinsured under this
Agreement. The Reinsurer, at its own expense, may associate with the Company in the defense
or control of any claim, suit or other proceeding which involves or is likely to involve the
reinsurance provided under this Agreement, and the Company shall cooperate in every respect in
the defense of any such claim, suit or proceeding.

ARTICLE XVI — SALVAGE AND SUBROGATION

	A.	 	In the event of the payment of any indemnity by the Reinsurer under this Agreement, the
Reinsurer shall be subrogated, to the extent of such payment, to all of the rights of the
Company against any person or entity legally responsible for damages of the loss. The Company
agrees to enforce such rights; but, in case the Company refuses or neglects to do so, the
Reinsurer is hereby authorized and empowered to bring any appropriate action in the name of
the Company or their policyholders or otherwise to enforce such rights.
	 
	B.	 	From any amount recovered by subrogation, salvage or other means, there shall first be
deducted the expenses incurred in effecting the recovery. The balance shall then be used to
reimburse the excess carriers in the inverse order to that in which their respective
liabilities attached, before being used to reimburse the Company for its primary loss.

ARTICLE XVII — TERRORISM EXCESS RECOVERY

	A.	 	For purposes of this Article:

	 	1.	 	“Act” shall mean the Terrorism Risk Insurance Act of 2002, any amendments
thereto and any regulations promulgated thereunder.
	 
	 	2.	 	“Affiliate,” “Insured Losses,” and “Program year” shall have the meanings
provided in the Act.
	 
	 	3.	 	“Company” shall include the Company and all affiliates.

	B.	 	This reinsurance shall not apply to any fines, civil penalties or surcharges assessed
pursuant to the Act.

	 	 	 	 	 
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	C.	 	To the extent that the Company allocates Insured Losses and/or federal assistance under the
Act among affiliates, claims, contracts or otherwise in any manner which impacts the
reinsurance provided hereunder, the Company shall apply a reasonable allocation method
acceptable to the Reinsurer.
	 
	D.	 	To the extent that an Insured Loss is otherwise payable hereunder, the reinsurance provided
by this Agreement shall apply only to the portion of liability, loss, cost and/or expense
retained by the company net of any federal assistance pursuant to the Act. For each Program
Year, the liability of the Reinsurer for Insured Losses under this Agreement shall be reduced
by the ratio that the financial assistance under the Act allocated to Policies subject to this
Agreement bears to the Company’s total Insured Losses subject to this Agreement. If the
Company does not make such allocation, the liability the Reinsurer for the Insured Losses in
any Program Year under this Agreement shall be reduced by the ratio that the financial
assistance available to the Company under the Act for that program Year bears to the Company’s
total Insured Losses for the same Program Year.
	 
	E.	 	The parties recognize that, for any Program Year, the Reinsurer may without waiver of the
foregoing paragraphs make payments for Insured Losses which, together with available financial
assistance under the Act and the Company retentions and/or deductibles hereunder, exceed the
Company’s Insured Losses. In such event, the Reinsurer’s proportional share of all such
excess recovery (hereafter “Reinsurer’s Excess Share”) shall inure to the benefit of the
Reinsurer. All excess recovery described in this paragraph shall be allocated to the
Reinsurer and the Company in proportion to the respective liability of each for Insured
Losses, net of federal assistance under the Act, salvage, subrogation and other similar
recoveries, as applicable.
	 
	F.	 	In the event of a Reinsurer’s Excess Share, the Company shall:

	 	1.	 	Promptly pay the Reinsurer’s Excess Share to the Reinsurer; or
	 
	 	2.	 	Upon request of the Reinsurer at any time and at the Reinsurer’s sole
discretion, instead assign to the Reinsurer its rights to recover directly from the
federal government any portion of Reinsurer’s Excess Share not already paid to the
Reinsurer., at its own expense, to the extent reasonably necessary for the Reinsurer
to exercise those rights. If the Reinsurer is unable, for any reason, to exercise any
right assigned to it by the Company pursuant to this Article, the Company shall pay
the Reinsurer’s Excess Share to the Reinsurer as if no assignment had taken place to
the extent that the Company has not been deemed to have forfeited the right to
financial assistance under the Act by virtue of the attempted assignment.

	 	 	 	 	 
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	G.	 	In the event of an Insured Loss, the Company shall provide the Reinsurer with a monthly
report detailing claim settlement activities and financial assistance under the Act.
Calculations for each Program Year shall continue to be made until the settlement of all
Insured losses covered hereunder.

ARTICLE XVIII — ACCESS TO RECORDS

The Reinsurer or its duly authorized representatives shall have the right to examine, at the
offices of the Company at a reasonable time, during the currency of this Agreement or anytime
thereafter, all books and records of the Company relating to business which is the subject of this
Agreement.

ARTICLE XIX — TAXES

The Company shall be liable for all taxes on premiums paid to the Reinsurer under this Agreement,
except income or profit taxes of the Reinsurer, and shall indemnify and hold the Reinsurer harmless
for any such taxes which the Reinsurer may become obligated to pay to any local, state or federal
taxing authority.

ARTICLE XX — CURRENCY

Wherever the word “dollars” or the “$” symbol is used in this Agreement, it shall mean dollars of
the United States of America, excepting in those cases where the Policy is issued by the Company in
Canadian dollars, in which case it shall mean dollars of Canada. In the event the Company is
involved in a loss requiring payment in United States and Canadian currency, the Company’s
retention and the limit of liability of the Reinsurer shall be apportioned between the two
currencies in the same proportion as the amount of net loss in each currency bears to the total
amount of net loss paid by the Company. For the purposes of this Agreement, where the Company
receives premiums or pays losses in currencies other than United States or Canadian currency, such
premiums and losses shall be converted into United States dollars at the actual rates of exchange
at which the premiums and losses are entered in the Company’s books.

ARTICLE XXI — OFFSET

Each party to this Agreement together with their successors or assigns shall have and may exercise,
at any time, the right to offset any balance or balances due the other (or, if more than one, any
other). Such offset may include balances due under this Agreement and any other agreements
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whether such balances arise from premiums, losses or otherwise, and regardless of capacity of any
party, whether as assuming insurer and/or ceding insurer, under the various agreements involved,
provided however, that in the event of insolvency of a party hereto, offsets shall only be allowed
in accordance with the provisions of Section 7427 of the Insurance Law of the State of New York to
the extent such statute or any other applicable law, statute or regulation governing such offset
shall apply.

ARTICLE XXII — ERRORS OR OMISSIONS

Errors or omissions of an administrative nature on the part of the Company shall not invalidate the
reinsurance under this Agreement, provided such errors or omissions are corrected promptly after
discovery thereof; but the liability of the Reinsurer under this Agreement or any exhibits,
addenda, or endorsements attached hereto shall in no event exceed the limits specified herein nor
be extended to cover any risks, perils, lines of business or classes of insurance generally or
specifically excluded herein.

ARTICLE XXIII — DISPUTE RESOLUTION

Part I — Choice Of Law And Forum

Any dispute arising under this Agreement shall be resolved in the State of Pennsylvania,
and the laws of the State of Pennsylvania shall govern the interpretation and application
of this Agreement.

Part II — Mediation

If a dispute between the Company and the Reinsurer, arising out of the provisions of this
Agreement or concerning its interpretation or validity and whether arising before or after
termination of this Agreement has not been settled through negotiation, both parties agree
to try in good faith to settle such dispute by nonbinding mediation, before resorting to
arbitration.

Part III — Arbitration

	A.	 	Resolution of Disputes — As a condition precedent to any right of action arising hereunder,
any dispute not resolved by mediation between the Company and the Reinsurer arising out of the
provisions of this Agreement or concerning its interpretation or validity, whether arising
before or after termination of this Agreement, shall be submitted to arbitration in the manner
hereinafter set forth.
	 
	B.	 	Composition of Panel — Unless the parties agree upon a single arbitrator within 15 days after
the receipt of a notice of intention to arbitrate, all disputes shall be

	 	 	 	 	 
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submitted to an arbitration panel composed of two arbitrators and an umpire chosen in
accordance with Paragraph C. hereof.

	C.	 	Appointment of Arbitrators — The members of the arbitration panel shall be chosen from
persons knowledgeable in the insurance and reinsurance business. Unless a single arbitrator
is agreed upon, the party requesting arbitration (hereinafter referred to as the “claimant”)
shall appoint an arbitrator and give written notice thereof by certified mail, to the other
party (hereinafter referred to as the “respondent”) together with its notice of intention to
arbitrate. Within 30 days after receiving such notice, the respondent shall also appoint an
arbitrator and notify the claimant thereof by certified mail. Before instituting a hearing,
the two arbitrators so appointed shall choose an umpire. If, within 20 days after the
appointment of the arbitrator chosen by the respondent, the two arbitrators fail to agree upon
the appointment of an umpire, each of them shall nominate three individuals to serve as
umpire, of whom the other shall decline two and the umpire shall be chosen from the remaining
two by drawing lots. The name of the individual first drawn shall be the umpire.
	 
	D.	 	Failure of Party to Appoint an Arbitrator — If the respondent fails to appoint an arbitrator
within 30 days after receiving a notice of intention to arbitrate, the claimant’s arbitrator
shall appoint an arbitrator on behalf of the respondent, such arbitrator shall then, together
with the claimant’s arbitrator, choose an umpire as provided in Paragraph C. of Part III of
this Article.
	 
	E.	 	Submission of Dispute to Panel — Unless otherwise extended by the arbitration panel or
agreed to by the parties, each party shall submit its case to the panel within 30 days after
the selection of the umpire.
	 
	F.	 	Procedure Governing Arbitration — All proceedings before the panel shall be informal and the
panel shall not be bound by the formal rules of evidence. The panel shall have the power to
fix all procedural rules relating to the arbitration proceeding. In reaching any decision,
the panel shall give due consideration to the customs and usages of the insurance and
reinsurance business.
	 
	G.	 	Arbitration Award — The arbitration panel shall render its decision within 60 days after
termination of the proceeding, which decision shall be in writing, stating the reasons
therefor. The decision of the majority of the panel shall be final and binding on the parties
to the proceeding.
	 
	H.	 	Cost of Arbitration — Unless otherwise allocated by the panel, each party shall bear the
expense of its own arbitrator and shall jointly and equally bear with the other parties the
expense of the umpire and the arbitration.

	 	 	 	 	 
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ARTICLE XXIV — INSOLVENCY

	A.	 	In the event of insolvency of the Company, the reinsurance provided by this Agreement shall
be payable by the Reinsurer on the basis of the liability of the Company as respects Policies
covered hereunder, without diminution because of such insolvency, directly to the Company or
its liquidator, receiver, conservator or statutory successor except as provided in Sections
4118(a)(1)(A) and 1114(c) of the New York Insurance Law.
	 
	B.	 	The Reinsurer shall be given written notice of the pendency of each claim or loss which may
involve the reinsurance provided by this Agreement within a reasonable time after such claim
or loss is filed in the insolvency proceedings. The Reinsurer shall have the right to
investigate each such claim or loss and interpose, at its own expense, in the proceedings
where the claim or loss is to be adjudicated, any defense which it may deem available to the
Company, its liquidator, receiver, conservator or statutory successor. The expense thus
incurred by the Reinsurer shall be chargeable, subject to court approval, against the
insolvent Company as part of the expense of liquidation to the extent of a proportionate share
of the benefit which may accrue to the Company solely as a result of the defense undertaken by
the Reinsurer.
	 
	C.	 	In addition to the offset provisions set forth in Article — Offset, any debts or credits,
liquidated or unliquidated, in favor of or against either party on the date of the
receivership or liquidation order (except where the obligation was purchased by or transferred
to be used as an offset) are deemed mutual debts or credits and shall be set off with the
balance only to be allowed or paid. Although such claim on the part of either party against
the other may be unliquidated or undetermined in amount on the date of the entry of the
receivership or liquidation order, such claim will be regarded as being in existence as of
such date and any claims then in existence and held by the other party may be offset against
it.
	 
	D.	 	Nothing contained in this Article is intended to change the relationship or status of the
parties to this Agreement or to enlarge upon the rights or obligations of either party
hereunder except as provided herein.

ARTICLE XXV — SPECIAL TERMINATION

	A.	 	Notwithstanding the termination provisions set forth in Article — Effective Date and
Termination, this Agreement shall be:

	 	1.	 	Terminated automatically and simultaneously upon the happening of any of the
following events:

	 	 	 	 	 
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	 	a.	 	Entry of an order of liquidation, rehabilitation,
receivership or conservatorship with respect to the Company or the Reinsurer
by any court or regulatory authority;
	 
	 	b.	 	Assignment of this Agreement by either party;
	 
	 	c.	 	General reinsurance of any portion of the Company’s business
it retains net for its own account, as determined under the provisions of this
Agreement without prior consent of the Reinsurer.

	 	2.	 	Terminated by either party giving not less than 30 days prior written notice
to the other party upon the happening of the following event:
	 
	 	 	 	Any transfer of control of either party by change in ownership or
otherwise.
	 
	 	3.	 	Terminated by the Reinsurer by giving not less than 30 days prior written
notice to the Company upon the happening of the following event:
	 
	 	 	 	Failure of the Company to remit premiums in accordance with the provisions set
forth in this Agreement.
	 
	 	4.	 	Terminated in accordance with the provisions set forth in this Paragraph,
upon the discovery of the following event:
	 
	 	 	 	A reduction of 50% or more of the Company’s policyholders’ surplus during any
calendar year. Such reduction shall be determined by calculating the difference
between the Company’s prior year annual statement and each subsequent quarterly
statutory statement within such current calendar year.
	 
	 	 	 	As respects the event set forth in this Paragraph A.4., the Company shall be
obligated to notify the Reinsurer in writing within 30 days after the filing of its
quarterly statement. Upon receipt of such notification the Reinsurer shall have
the right to terminate this Agreement, by giving not less than 30 days notice of
its intention to do so.

	B.	 	Any notice of termination pursuant to the provisions set forth in Paragraphs A.2., A.3. and
A.4. above shall be sent by certified mail, return receipt requested. Such notice period
shall commence upon the other party’s receipt of the notice of termination.
	 
	C.	 	In the event of termination, as provided under the provisions of this Article, the Reinsurer
shall not be liable for losses occurring subsequent to the date of termination.

	 	 	 	 	 
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ARTICLE XXVI — AMENDMENTS

This Agreement may be amended by mutual consent of the parties expressed in an addendum; and such
addendum, when executed by both parties, shall be deemed to be an integral part of this Agreement
and binding on the parties hereto.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in duplicate, by
their duly authorized representatives as of the following dates:

In Bala Cynwyd, Pennsylvania, this 25th day of September, 2007.

ATTEST:

	 	 	 	 	 	 	 
	/s/ William McKenna

	 	 
	 	/s/ Christopher J. Maguire	 	 
	 

	 	 
	 	 

	 	 
	 
	 	 	 	 	 	 
	William McKenna

	 	 	 	Christopher J. Maguire	 	 
	 

Name

	 	 
	 	 

Name
	 	 
	 
	 	 	 	 	 	 
	Assistant Vice President — Reinsurance

	 	 	 	CUO & Executive Vice President	 	 
	 

Title

	 	 
	 	 

Title
	 	 

And in Overland Park, Kansas, this 24th day of September, 2007.

	 	 	 	 	 	 	 	 	 
	ATTEST:

	 	 	 	SWISS REINSURANCE AMERICA CORPORATION	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	/s/ Holly Lowe

	 	 	 	/s/ Paul Johnson
	 	 	.	 
	 

	 	 
	 	 

	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Holly Lowe

	 	 	 	Paul Johnson
	 	 	.	 
	 

Name

	 	 
	 	 

Name
	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Vice President

	 	 	 	Vice President and Attorney in Fact	 	 	 	 
	 

Title

	 	 
	 	 

Title
	 	 	 	 

	 	 	 	 	 
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SUPPLEMENT TO THE ATTACHMENTS

DEFINITION OF IDENTIFICATION TERMS USED WITHIN THE ATTACHMENTS

	A.	 	Wherever the term “Company” or “Reinsured” or “Reassured” or whatever other term is used to
designate the reinsured company or companies within the various attachments to the reinsurance
agreement, the term shall be understood to mean Company or Reinsured or Reassured or whatever
other term is used in the attached reinsurance agreement to designate the reinsured company or
companies.
	 
	B.	 	Wherever the term “Agreement” or “Contract” or “Policy” or whatever other term is used to
designate the attached reinsurance agreement within the various attachments to the reinsurance
agreement, the term shall be understood to mean Agreement or Contract or Policy or whatever
other term is used to designate the attached reinsurance agreement.
	 
	C.	 	Wherever the term “Reinsurer” or “Reinsurers” or “Underwriters” or whatever other term is
used to designate the reinsurer or reinsurers in the various attachments to the reinsurance
agreement, the term shall be understood to mean Reinsurer or Reinsurers or Underwriters or
whatever other term is used to designate the reinsuring company or companies.

 

 

POLLUTION LIABILITY EXCLUSION CLAUSE — REINSURANCE

This Reinsurance excludes:

	 	(1)	 	Any loss occurrence arising out of the actual, alleged or threatened
discharge, dispersal, release or escape of pollutants:

	 	a)	 	At or from premises owned, rented or occupied by an original
assured; or
	 
	 	b)	 	At or from any site or location used for the handling,
storage, disposal, processing or treatment of waste; or
	 
	 	c)	 	Which are at any time transported, handled, stored, treated,
disposed of, or processed as waste; or
	 
	 	d)	 	At or from any site or location on which any original assured
is performing operations:

	 	(i)	 	If the pollutants are brought on or to the
site or location in connection with such operations; or
	 
	 	(ii)	 	If the operations are to test for, monitor,
clean up, remove, contain, treat, detoxify or neutralize the
pollutants.

	 	(2)	 	Any liability, loss, cost or expense arising out of any governmental
direction or request to test for, monitor, clean up, remove, contain, treat, detoxify
or neutralize pollutants.

“Pollutants” means any solid, liquid, gaseous or thermal irritant or contaminant, including smoke,
vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled,
reconditioned or reclaimed.

Subparagraphs a) and d)(i) of paragraph (1) of this exclusion do not apply to loss occurrences
caused by heat, smoke or fumes from a hostile fire. As used herein, “hostile fire” means one which
becomes uncontrollable or breaks out from where it was intended to be.

“Original assured” as used herein means all insureds as defined in the policy issued by the
Company.

 

 

INSOLVENCY FUNDS EXCLUSION CLAUSE

This Agreement excludes all liability of the Company arising by contract, operation of law, or
otherwise from its participation or membership, whether voluntary or involuntary, in any insolvency
fund or from reimbursement of any person for any such liability. “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 any person of part or all of any claim, debt, charge, fee, or other obligation of an insurer, or
its successors or assigns, which has been declared by any competent authority to be insolvent or
which is otherwise deemed unable to meet any claim, debt, charge, fee or other obligation in whole
or in part.

 

 

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

N.M.A. 1590

	1.	 	This reinsurance does not cover any loss or liability accruing to the Reassured as a member
of, or subscriber to, any association of insurers or reinsurers formed for the purpose of
covering nuclear energy risks or as a direct or indirect reinsurer of any such member,
subscriber or association.
	 
	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 reinsurance all the original policies of the
Reassured (new, renewal and replacement) of the classes specified in Clause II. in 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, bodily injury or property damage with
respect to which an insured under the policy is also an insured under a nuclear energy
liability policy issued by Nuclear Energy Liability Insurance Association, Mutual
Atomic Energy Liability Underwriters or Nuclear Insurance Association of Canada, or
would be an insured under any such policy but for its termination upon exhaustion of
its limit of liability.
	 
	 	II.	 	Family Automobile Policies (liability only), Special Automobile Policies
(private passenger automobiles, liability only), Farmers Comprehensive Personal
Liabilities 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

-1-

 

	 	(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.

	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 reinsurance 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, bodily injury or property damage

	 	(a)	 	with respect to which an insured under the policy is also an
insured under nuclear energy liability policy issued by Nuclear Energy
Liability Insurance Association, Mutual Atomic Energy Liability Underwriters
or Nuclear Insurance Association of Canada, or would be an insured under any
such policy but for its termination upon exhaustion of its limit of liability;
or

-2-

 

	 	(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, first aid, to expenses
incurred with respect to bodily injury, sickness, disease or death, bodily injury
resulting from the hazardous properties of nuclear material and arising out of the
operation of a nuclear facility by any person or organization.
	 
	 	III.	 	Under any Liability Coverage, to injury, sickness, disease, death or
destruction, bodily injury or property damage resulting from the hazardous properties
of nuclear material, if

	 	(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;
	 
	 	(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, bodily
injury or property damage arises out of the furnishing by an insured of
services, materials, parts or equipment in connection with the planning,
construction, maintenance, operation or use of any nuclear facility, but if
such facility is located within the United States of America, its territories,
or possessions or Canada, this exclusion (c) applies only to injury to or
destruction of property at such nuclear facility, property damage to such
nuclear facility and any property thereat.

	 	IV.	 	As used in this endorsement:

-3-

 

	 	 	 	“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 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;
“property damage” includes all forms of radioactive contamination of property.

	 	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 become effective on or after 1st May, 1960, provided this paragraph 3.
shall not be applicable to

	 	(i)	 	Garage and Automobile Policies issued by the Reassured on New
York risks, or

-4-

 

	 	(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.

	4.	 	Without in any way restricting the operations 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 adopted by the Canadian
Underwriters’ Association or the Independent Insurance Conference of Canada.
	 
	*	 	NOTE: The words printed in BOLD TYPE in the Limited Exclusion Provision and in the Broad Exclusion
Provision shall apply only in relation to original liability policies which include a Limited
Exclusion Provision or a Broad Exclusion Provision containing those words.

-5-

 

     NUCLEAR INCIDENT EXCLUSION CLAUSE — LIABILITY — REINSURANCE — CANADA

     N.M.A. 1979a

	1.	 	This Agreement does not cover any loss or liability accruing to the Company as a member of,
or subscriber to, any association of insurers or reinsurers formed for the purpose of covering
nuclear energy risks or as a direct or indirect reinsurer of any such member, subscriber or
association.
	 
	2.	 	Without in any way restricting the operation of Paragraph 1. of this Clause, it is agreed
that for all purposes of this Agreement all the original liability contracts of the Company,
whether new, renewal or replacement, of the following classes, namely,

Personal Liability

Farmers’ Liability

Storekeepers’ Liability

which become effective on or after 31st December 1992, shall be deemed to include, from their
inception dates and thereafter, the following provision:

Limited Exclusion Provision -

This Policy does not apply to bodily injury or property damage with respect to which the
Insured is also insured under a contract of nuclear energy liability insurance (whether the
Insured is unnamed in such contract and whether or not it is legally enforceable by the
Insured) issued by the Nuclear Insurance Association of Canada or any other group or pool of
insurers or would be an Insured under any such policy but for its termination upon exhaustion
of its limits of liability.

With respect to property, loss of use of such property shall be deemed to be property damage.

	3.	 	Without in any way restricting the operation of Paragraph 1. of this Clause, it is agreed
that for all purposes of this Agreement all the original liability contracts of the Company,
whether new, renewal or replacement, of any class whatsoever (other than Personal Liability,
Farmers’ Liability, Storekeepers’ Liability or Automobile Liability contracts), which become
effective on or after 31st December 1992, shall be deemed to include, from their inception
dates and thereafter, the following provision:

-1-

 

Broad Exclusion Provision —

It is agreed that this Policy does not apply:

	 	(a)	 	to liability imposed by or arising from any nuclear liability act, law or statute
or any law amendatory thereof; nor
	 
	 	(b)	 	to bodily injury or property damage with respect to which an Insured under this
Policy is also insured under a contract of nuclear energy liability insurance (whether
the Insured is unnamed in such contract and whether or not it is legally enforceable by
the Insured) issued by the Nuclear Insurance Association of Canada or any other insurer
or group or pool of insurers or would be an Insured under any such policy but for its
termination upon exhaustion of its limit of liability; nor
	 
	 	(c)	 	to bodily injury or property damage resulting directly or indirectly from the
nuclear energy hazard arising from:

	 	(i)	 	the ownership, maintenance, operation or use of a
nuclear facility by or on behalf of an Insured;
	 
	 	(ii)	 	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; and
	 
	 	(iii)	 	the possession, consumption, use, handling, disposal
or transportation of fissionable substances, or of
other radioactive material (except radioactive
isotopes, away from a nuclear facility, which have
reached the final stage of fabrication so as to
be usable for any scientific, medical, agricultural,
commercial or industrial purpose) used, distributed,
handled or sold by an Insured.

As used in this Policy:

	 	(1)	 	The term “nuclear energy hazard” means the radioactive, toxic, explosive, or other
hazardous properties of radioactive material;
	 
	 	(2)	 	The term “radioactive material” means uranium, thorium, plutonium, neptunium, their
respective derivatives and compounds, radioactive isotopes of other elements and any
other substances which may be designated by or pursuant to any law, act or statute, or
law amendatory thereof as being prescribed substances capable of releasing atomic energy,
or as being requisite for the production, use or application of atomic energy;

-2-

 

	 	(3)	 	The term “nuclear facility” means:

	 	(a)	 	any apparatus designed or used to sustain nuclear fission in a
self-supporting chain reaction or to contain a critical mass of plutonium, thorium
and uranium or any one or more of them;
	 
	 	(b)	 	any equipment or device designed or used for (i) separating the
isotopes of plutonium, thorium and uranium or any one or more of them, (ii)
processing or utilizing spent fuel, or (iii) handling, processing or packaging
waste;
	 
	 	(c)	 	any equipment or device used for the processing, fabricating or
alloying of plutonium, thorium or uranium enriched in the isotope uranium 233 or in
the isotope uranium 235, or any one or more of them 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 radioactive material;

and includes the site on which any of the foregoing is located, together
with all operations conducted thereon and all premises used for such operations.

	 	(4)	 	The term “fissionable substance” means any prescribed substance that is, or from
which can be obtained, a substance capable of releasing atomic energy by nuclear fission.
	 
	 	(5)	 	With respect to property, loss of use of such property shall be deemed to be
property damage.

April 1, 1996

-3-

 

NUCLEAR INCIDENT EXCLUSION CLAUSE — REINSURANCE — NO. 4

	1.	 	This Reinsurance does not cover any loss or liability accruing to the Reassured as a member
of, or subscriber to, any association of insurers or reinsurers formed for the purpose of
covering nuclear energy risks or as a direct or indirect reinsurer of any such member,
subscriber or association.
	 
	2.	 	Without in any way restricting the operations of Nuclear Incident Exclusion Clauses, —
Liability, — Physical Damage, — Boiler and Machinery and paragraph 1. of this Clause, it is
understood and agreed that for all purposes of the reinsurance assumed by the Reinsurer from
the Reinsured, all original insurance policies or contracts of the Reinsured (new, renewal and
replacement) shall be deemed to include the applicable existing Nuclear Clause and/or Nuclear
Exclusion Clause(s) in effect at the time and any subsequent revisions thereto as agreed upon
and approved by the Insurance Industry and/or a qualified Advisory or Rating Bureau.

 

 

PHARMACEUTICAL / MEDICAL COMPANY EXCLUSION LISTING

	 	 	 
	ABBOTT LABORATORIES

	 	NOVARTIS
	AKZO NOBEL

	 	NOVO NORDISK
	ALLERGAN

	 	OTSUKA PHARMACEUTICAL
	ALPHARMA

	 	PFIZER
	ALTANA AG

	 	PLIVA
	AMGEN

	 	PROCTER & GAMBLE
	ASTELLAS

	 	PURDUE FREDERICK / PRA HOLDING
	ASTRAZENECA

	 	ROCHE
	BARR LABORATORIES

	 	SANKYO
	BAXTER INTERNATIONAL

	 	SANOFI-AVENTIS
	BAYER

	 	SCHERING AG
	BEAUFOUR IPSEN

	 	SCHERING-PLOUGH
	BIOGEN

	 	SCHWARZ PHARMA
	BIOMET

	 	SERONO
	BOEHRINGER INGELHEIM

	 	SHIONOGI
	BOSTON SCIENTIFIC CORPORATION

	 	SHIRE PHARMACEUTICALS
	BRISTOL-MYERS SQUIBB

	 	SMITH & NEPHEW
	CHIRON

	 	SOLVAY
	CSL

	 	ST. JUDE MEDICAL
	DAIICHI PHARMACEUTICAL

	 	STRYKER
	DAINIPPON PHARMACEUTICAL

	 	SUMITOMO PHARMACEUTICALS
	EDWARDS LIFESCIENCES

	 	SYNTHES-STRATEC
	EISAI

	 	TAKEDA
	ELAN

	 	TANABE
	FOREST LABORATORIES

	 	TAP PHARMACEUTICAL PRODUCTS
	GENENTECH

	 	TEVA PHARMACEUTICAL
	GENERAL ELECTRIC HEALTHCARE

	 	TYCO HEALTHCARE
	GENZYME

	 	UCB
	GLAXOSMITHKLINE

	 	WATSON PHARMACEUTICAL
	GUIDANT

	 	WYETH
	HOSPIRA

	 	ZIMMER
	IVAX
	 	 
	JOHNSON & JOHNSON
	 	 
	KING PHARMACEUTICALS
	 	 
	KYOWA HAKKO KOGYO
	 	 
	LABORATOIRE SERVIER
	 	 
	LILLY (ELI)
	 	 
	LUNDBECK
	 	 
	MEDIMMUNE
	 	 
	MEDTRONIC
	 	 
	MERCK & CO
	 	 
	MERCK KGAA
	 	 
	MINNESOTA MINING & MANUFACTURING
	 	 
	MYLAN LABORATORIES
	 	 

GROUP PRODUCT AND LIMITS COMMITTEE/2006 APRIL 10exv10w2

 

Exhibit 10.2

TABLE OF CONTENTS

to

AGREEMENT OF REINSURANCE

NO. 9034-07

between

PHILADELPHIA INDEMNITY INSURANCE COMPANY

PHILADELPHIA INSURANCE COMPANY

and

GENERAL REINSURANCE CORPORATION

	 	 	 	 	 
	 	 	 	 	Page
	 
	 	 	 	 
	GENERAL ARTICLES
	 
	 	 	 	 
	Article I
	 	SCOPE OF AGREEMENT	 	1
	Article II
	 	PARTIES TO THE AGREEMENT	 	1
	Article III
	 	MANAGEMENT OF CLAIMS AND LOSSES	 	2
	Article IV
	 	RECOVERIES	 	2
	Article V
	 	TRIA INUREMENT	 	2
	Article VI
	 	PREMIUM REPORTS AND REMITTANCES	 	3
	Article VII
	 	ERRORS AND OMISSIONS	 	3
	Article VIII
	 	SPECIAL ACCEPTANCES	 	3
	Article IX
	 	RESERVES AND TAXES	 	4
	Article X
	 	OFFSET	 	4
	Article XI
	 	INSPECTION OF RECORDS	 	4
	Article XII
	 	ARBITRATION	 	4
	Article XIII
	 	INSOLVENCY OF THE COMPANY	 	5
	Article XIV
	 	ENTIRE AGREEMENT	 	5
	 
	 	 	 	 
	EXHIBIT A — EXCESS OF LOSS REINSURANCE (Per Risk) of Property Business
	 
	 	 	 	 
	Section 1
	 	BUSINESS SUBJECT TO THIS EXHIBIT	 	A-1
	Section 2
	 	COMMENCEMENT	 	A-1
	Section 3
	 	LIABILITY OF THE REINSURER	 	A-1
	Section 4
	 	DEFINITIONS	 	A-2
	Section 5
	 	EXCLUSIONS	 	A-5
	Section 6
	 	OTHER REINSURANCE	 	A-8
	Section 7
	 	REINSURANCE PREMIUM	 	A-9
	Section 8
	 	REPORTS AND REMITTANCES	 	A-9
	Section 9
	 	AUTOMATIC REINSTATEMENT	 	A-10
	Section 10
	 	TERMINATION	 	A-11
	Section 11
	 	MORTGAGEE REINSURANCE ENDORSEMENT	 	A-11
	 
	 	 	 	 
	EXHIBIT B — EXCESS OF LOSS REINSURANCE (Per Risk) of Property Business (Coverage for Terrorism
Only)
	 
	 	 	 	 
	Section 1
	 	BUSINESS SUBJECT TO THIS EXHIBIT	 	B-1
	Section 2
	 	TERM	 	B-1
	Section 3
	 	LIABILITY OF THE REINSURER	 	B-1
	Section 4
	 	DEFINITIONS	 	B-2
	Section 5
	 	EXCLUSIONS	 	B-3
	Section 6
	 	REINSURANCE PREMIUM	 	B-3
	Section 7
	 	REPORTS AND REMITTANCES	 	B-3

GENERAL REINSURANCE CORPORATION

A Berkshire Hathaway Company

 

AGREEMENT OF REINSURANCE

NO. 9034-07

between

PHILADELPHIA INDEMNITY INSURANCE COMPANY

PHILADELPHIA INSURANCE COMPANY

One Bala Plaza, Suite 100

Bala Cynwyd, Pennsylvania 19004

(herein collectively referred to as the “Company”)

and

GENERAL REINSURANCE CORPORATION

a Delaware corporation

having its principal offices at

Financial Centre

695 East Main Street P.O. Box 10350

Stamford, Connecticut 06904-2350

(herein referred to as the “Reinsurer”)

 

In consideration of the promises set forth in this Agreement, the parties agree as follows:

Article I  —  SCOPE OF AGREEMENT

As a condition precedent to the Reinsurer’s obligations under this Agreement, the Company shall
cede to the Reinsurer the business described in this Agreement, and the Reinsurer shall accept such
business as reinsurance from the Company.

This Agreement is comprised of General Articles I through XIV and the Exhibit(s) listed below and
each Exhibit which may be made a part of this Agreement. The terms of the General Articles and of
the Exhibit(s) shall determine the rights and obligations of the parties. The terms of the General
Articles shall apply to each Exhibit unless specifically amended therein. In the event of
termination of all the Exhibits made a part of this Agreement, the General Articles shall
automatically terminate when the liability of the Reinsurer under said Exhibits ceases.

     EXHIBIT A  —  EXCESS OF LOSS REINSURANCE

of

Property Business

     EXHIBIT B  —  EXCESS OF LOSS REINSURANCE

of

Property Business (Coverage for Terrorism Only)

Article II  —  PARTIES TO THE AGREEMENT

This Agreement is solely between the Company and the Reinsurer. When more than one Company is
named as a party to this Agreement, the first Company named shall be the

-2-

GENERAL REINSURANCE CORPORATION

 

agent of the other companies as to all matters pertaining to this Agreement. Performance of the obligations of each
party under this Agreement shall be rendered solely to the other
party. However, if the Company becomes insolvent, the liability of the Reinsurer shall be modified
to the extent set forth in the article entitled INSOLVENCY OF THE COMPANY. In no instance shall
any insured of the Company or any claimant against an insured of the Company have any rights under
this Agreement.

Article III  —  MANAGEMENT OF CLAIMS AND LOSSES

The Company shall investigate and settle or defend all claims and losses. When requested by the
Reinsurer, the Company shall permit the Reinsurer, at the expense of the Reinsurer, to be
associated with the Company in the defense or control of any claim, loss, or legal proceeding which
involves or is likely to involve the Reinsurer. All payments of claims or losses by the Company
within the terms and limits of its policies which are within the limits set forth in the applicable
Exhibit shall be binding on the Reinsurer, subject to the terms of this Agreement.

Article IV  —  RECOVERIES

The Company shall pay to or credit the Reinsurer with the Reinsurer’s portion of any recovery
obtained from salvage, subrogation, or other insurance. Adjustment Expense for recoveries shall be
deducted from the amount recovered. However, if the Adjustment Expense incurred in obtaining
recoveries exceeds the amount recovered, if any, the excess Adjustment Expense shall be apportioned
between the parties in proportion to the liability of each party for the loss before the recovery
was obtained.

The Reinsurer shall be subrogated to the rights of the Company to the extent of its loss payments
to the Company. The Company agrees to enforce its rights of salvage, subrogation, and its rights
against insurers or to assign these rights to the Reinsurer.

If the reinsurance under an Exhibit is on a share basis, the recoveries shall be apportioned
between the parties in the same ratio as the amounts of their liabilities bear to the loss. If the
reinsurance under an Exhibit is on an excess basis, recoveries shall be distributed to the parties
in an order inverse to that in which their liabilities accrued.

Article V  —  TRIA INUREMENT

As respects any “insured loss”, as defined in the Terrorism Risk Insurance Act of 2002 (“the Act”),
for which the Reinsurer makes a payment to the Company under this Agreement, the following
provisions shall apply.

If the sum of:

	 	(a)	 	Financial assistance provided under the Act to the Company and its
affiliates, if any, (as “affiliate” is defined in the Act) with respect to all
“insured loss” that applies to each “program year”, as defined in the Act; and
	 
	 	(b)	 	Amounts due from all reinsurance which the Company and its
affiliates, if any, purchase, including but not limited to this reinsurance,
all other treaty reinsurance and all facultative reinsurance, and whether

-3-

GENERAL REINSURANCE CORPORATION

 

collectible or not, under which there is a recoverable for any such “insured
loss”,

exceeds the amount of the Company’s and its affiliates’, if any, gross “insured loss”, the excess
amount shall be allocated to the Reinsurer in the ratio that the Reinsurer’s liability for the
“insured loss” under this Agreement bears to the total collectible reinsurance recoverables for the
“insured loss” under (b) above.

Upon receipt of payment under the Act by the Company and its affiliates, if any, the Company shall
pay to or credit the Reinsurer under this Agreement with the Reinsurer’s share of such excess
amount determined in accordance with the preceding paragraph.

Article VI  —  PREMIUM REPORTS AND REMITTANCES

All reinsurance premium reports required by the Exhibit(s) attached hereto may be sent to:

     Client Accounting Unit

     General Reinsurance Corporation

     Financial Centre

     P.O. Box 10353

     Stamford, CT 06904-2353

All reinsurance premiums and any other amounts due the Reinsurer may be remitted to the following
lockbox address:

     General Reinsurance Corporation

     75 Remittance Drive

     Suite 2555

     Chicago, IL 60675-2555

Article VII  —  ERRORS AND OMISSIONS

The Reinsurer shall not be relieved of liability because of an error or accidental omission of the
Company in reporting any claim or loss or any business reinsured under this Agreement, provided
that the error or omission is rectified promptly after discovery. The Reinsurer shall be obligated
only for the return of the premium paid for business reported but not reinsured under this
Agreement.

Article VIII  —  SPECIAL ACCEPTANCES

Business not within the terms of this Agreement may be submitted to the Reinsurer for special
acceptance and, if accepted by the Reinsurer, shall be subject to all of the terms of this
Agreement except as modified by the special acceptance.

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GENERAL REINSURANCE CORPORATION

 

Article IX  —  RESERVES AND TAXES

The Reinsurer shall maintain the required reserves as to the Reinsurer’s portion of unearned
premium, if any, claims, losses, and Adjustment Expense.

The Company shall be liable for all premium taxes on premium ceded to the Reinsurer under this
Agreement. If the Reinsurer is obligated to pay any premium taxes on this premium, the Company
shall reimburse the Reinsurer; however, the Company shall not be required to pay taxes twice on the
same premium.

Article X  —  OFFSET

The Company or the Reinsurer may offset any balance, whether on account of premium, commission,
claims or losses, Adjustment Expense, salvage, or otherwise, due from one party to the other under
this Agreement or under any other agreement heretofore or hereafter entered into between the
Company and the Reinsurer.

Article XI  —  INSPECTION OF RECORDS

The Company shall allow the Reinsurer to inspect, at reasonable times, the records of the Company
relevant to the business reinsured under this Agreement, including the Company’s files concerning
claims, losses, or legal proceedings which involve or are likely to involve the Reinsurer. The
Reinsurer’s right of inspection shall continue after the termination of this Agreement.

Article XII  —  ARBITRATION

All unresolved differences of opinion between the Company and the Reinsurer relating to this
Agreement, including its formation and validity, shall be submitted to arbitration consisting of
one arbitrator chosen by the Company, one arbitrator chosen by the Reinsurer, and a third
arbitrator chosen by the first two arbitrators.

The party demanding arbitration shall communicate its demand for arbitration to the other party by
registered or certified mail, identifying the nature of the dispute and the name of its arbitrator,
and the other party shall then be bound to name its arbitrator within 30 days after receipt of the
demand.

Failure or refusal of the other party to so name its arbitrator shall empower the demanding party
to name the second arbitrator. If the first two arbitrators are unable to agree upon a third
arbitrator after the second arbitrator is named, each arbitrator shall name three candidates, two
of whom shall be declined by the other arbitrator, and the choice shall be made between the two
remaining candidates by drawing lots. The arbitrators shall be disinterested and shall be active
or retired officers of property or casualty insurance or reinsurance companies.

The arbitrators shall adopt their own rules and procedures and are relieved from judicial
formalities. In addition to considering the rules of law and the customs and practices of the
insurance and reinsurance business, the arbitrators shall make their award with a view to effecting
the intent of this Agreement.

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GENERAL REINSURANCE CORPORATION

 

The decision of the majority of the arbitrators shall be in writing and shall be final and binding
upon the parties.

Each party shall bear the cost of its own arbitrator and shall jointly and equally bear with the
other party the expense of the third arbitrator and other costs of the arbitration. In the event
both arbitrators are chosen by one party, the fees of all arbitrators shall be equally divided
between the parties.

The arbitration shall be held at the times and places agreed upon by the arbitrators.

Article XIII  —  INSOLVENCY OF THE COMPANY

In the event of the insolvency of the Company, the reinsurance proceeds will be paid to the Company
or the liquidator, with reasonable provision for verification, on the basis of the claim allowed in
the insolvency proceeding without diminution by reason of the inability of the Company to pay all
or part of the claim, except as otherwise specified in the statutes of any state having
jurisdiction of the insolvency proceedings or except where the Agreement, or other written
agreement, specifically provides another payee of such reinsurance in the event of insolvency.

The Reinsurer shall be given written notice of the pendency of each claim against the Company on
the policy(ies) reinsured hereunder within a reasonable time after such claim is filed in the
insolvency proceedings. The Reinsurer shall have the right to investigate each such claim and to
interpose, at its own expense, in the proceeding where such claim is to be adjudicated, any
defenses which it may deem available to the Company or its liquidator. The expense thus incurred
by the Reinsurer shall be chargeable, subject to court approval, against the insolvent Company as
part of the expense of liquidation to the extent of a proportionate share of the benefit which may
accrue to the Company solely as a result of the defense undertaken by the Reinsurer.

Article XIV  —  ENTIRE AGREEMENT

This Agreement constitutes the entire Agreement between the parties with respect to the business
reinsured hereunder. Any change or modification to this Agreement shall be made by written
amendment to this Agreement and signed by the parties hereto.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in

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GENERAL REINSURANCE CORPORATION

 

duplicate,

this 14th day of August , 2007,

	 	 	 	 	 
	 

	 	PHILADELPHIA INDEMNITY INSURANCE COMPANY
	 	 	PHILADELPHIA INSURANCE COMPANY	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	Christopher J. Maguire	 	 
	 

	 	EVP & CUO	 	 
	 
	 	 	 	 
	Attest: William A. McKenna
	 	 	 	 
	 
	 	 	 	 
	and this 13th day of August, 2007.
	 	 	 	 
	 
	 	 	 	 
	 

	 	GENERAL REINSURANCE CORPORATION	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	Joan LaFrance	 	 
	 

	 	Senior Vice President	 	 
	 
	 	 	 	 
	 

	      Attest: Karen Morello	 	 

GENERAL REINSURANCE CORPORATION
A Berkshire Hathaway Company

 

 

EXHIBIT A

Attached to and made a part of

Agreement of Reinsurance No. 9034-07

EXCESS OF LOSS REINSURANCE

(Per Risk)

of

Property Business

      

Section 1  —  BUSINESS SUBJECT TO THIS EXHIBIT

This Exhibit shall apply to Property Business written by the Company, which is defined as insurance
which is classified in the NAIC form of annual statement as fire, allied lines, inland marine,
commercial multiple peril (property coverages), associations homeowners multiple peril (property
coverages), or automobile physical damage (comprehensive and collision) when written on a garage
open lot basis or in the Company’s Antique/Collector Car Program, and as insurance that is
classified by the Company as crime and fidelity when written as part of a package policy, except
those lines specifically excluded in the section entitled EXCLUSIONS, on Risks wherever located in
the United States of America, its territories and possessions. On policies which provide inland
marine coverage beyond these territorial limits, the territorial limits of this Exhibit shall be
identical with those of the Company’s policies.

Section 2  —  COMMENCEMENT

This Exhibit shall apply to new and renewal policies of the Company becoming effective at and after
12:01 A.M., January 1, 2007, and to policies of the Company in force at 12:01 A.M., January 1,
2007, with respect to claims and losses resulting from Occurrences taking place at and after the
aforesaid time and date, and shall continue in force until terminated in accordance with the
provisions of the section entitled TERMINATION.

Section 3  —  LIABILITY OF THE REINSURER

The Reinsurer shall pay to the Company, with respect to each Risk of the Company, the amount of Net
Loss sustained by the Company in excess of the Company Retention but not exceeding the Limits of Liability of the Reinsurer as set forth in the Schedule of Reinsurance.

SCHEDULE OF REINSURANCE

 

	 	 	 	 	 	 	 	 	 
	Class of Business	 	Company Retention	 	Limits of Liability of the Reinsurer
	 
	 	 	 	 	 	 	 	 
	 
	 
	 	 	 	 	 	 	 	 
	Property Business

	 	$	2,000,000	 	 	First Excess Cover: The next

	 

	 	 	 	 	 	$3,000,000 in excess of the first

	 

	 	 	 	 	 	$2,000,000	 

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GENERAL REINSURANCE CORPORATION

 

SCHEDULE OF REINSURANCE (Continued)

 

	 	 	 	 	 
	Class of Business	 	Company Retention	 	Limits of Liability of the Reinsurer
	 
	 	 	 	 
	 
	 
	 	 	 	Second Excess Cover: The next
	 
	 	 	 	$5,000,000 in excess of the first
	 
	 	 	 	$5,000,000
	 
	 	 	 	 
	 
	 	 	 	Third Excess Cover: The next
	 
	 	 	 	$5,000,000 in excess of the first
	 
	 	 	 	$10,000,000
	 

The liability of the Reinsurer shall not exceed:

	 	(a)	 	$6,000,000 under the First Excess Cover nor $10,000,000 under the
Second Excess Cover nor $10,000,000 under the Third Excess Cover with respect
to all Net Loss on all Risks involved in one Occurrence.
	 
	 	(b)	 	$15,000,000 under the Second Excess Cover nor $15,000,000 under the
Third Excess Cover with respect to all Net Loss on all Risks involved in all
Occurrences (including Extra Contractual Obligations) taking place during each
Agreement Year. For purposes of this provision, upon a run off termination of
this Exhibit the last completed Agreement Year shall be combined with the
remaining period that reinsurance is afforded under this Exhibit to constitute
a single Agreement Year.

All insurance written under one or more policies of the Company against the same peril on the same
Risk shall be combined, and the Company Retention and the Limits of Liability of the Reinsurer
shall be determined on the basis of the sum of all insurance against the same peril and on the same
Risk which is in force at the time of a claim or loss.

Section 4  —  DEFINITIONS

	 	(a)	 	Company Retention
	 
	 	 	 	This term shall mean the amount the Company and its underlying facultative
reinsurers shall retain for its own account; however, this requirement shall
be satisfied if this amount is retained by the Company or its affiliated
companies under common management or common ownership.
	 
	 	(b)	 	Net Loss
	 
	 	 	 	This term shall mean all payments by the Company within the terms and limits
of its policies in settlement of claims or losses, after deduction of salvage
and other recoveries and after deduction of amounts due from all other
reinsurance, except underlying facultative reinsur-

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GENERAL REINSURANCE CORPORATION

 

	 	 	 	ance and catastrophe reinsurance, whether collectible or not. This term shall
include Adjustment Expense. If the Company becomes insolvent, this
definition shall be modified to the extent set forth in the article entitled
INSOLVENCY OF THE COMPANY.
	 
	 	 	 	Notwithstanding the provisions of the article entitled MANAGEMENT OF CLAIMS
AND LOSSES, this term shall also include 95% of Extra Contractual
Obligations, provided that the Reinsurer is given written notice of
circumstances which may result in an Extra Contractual Obligation within 36
months of the later of the termination date of this Exhibit or the
termination of reinsurance on the policy under which the Extra Contractual
Obligation arose.
	 
	 	 	 	Nothing in this definition shall imply that losses are not recoverable
hereunder until the Company’s Net Loss has been finally ascertained.
	 
	 	(c)	 	Adjustment Expense
	 
	 	 	 	This term shall mean expenditures by the Company within the terms of its
policies in the direct defense of claims and in connection with Extra
Contractual Obligations and as allocated to an individual claim or loss
(other than for office expenses and for the salaries and expenses of
employees of the Company or of any subsidiary or related or wholly owned
company of the Company) made in connection with the disposition of a claim,
loss, or legal proceeding including investigation, negotiation, and legal
expenses; court costs; prejudgment interest; and postjudgment interest.
	 
	 	 	 	Notwithstanding the provisions of the article entitled MANAGEMENT OF CLAIMS
AND LOSSES, this term shall also be deemed to include any expenses incurred
by the Company in bringing or in defending a declaratory judgment action
brought to determine the Company’s obligations to its insured with respect to
a specific claim under a policy (or coverage part thereof) reinsured
hereunder. However, the amount of any declaratory judgment expense that may
be included in computation of Adjustment Expense shall not exceed the lesser
of the amount of insurance under the policy or the Reinsurer’s Limit of
Liability for each Risk under this Exhibit.
	 
	 	 	 	The date on which a declaratory judgment expense is incurred by the Company
shall be deemed, in all circumstances, to be the date of the original
Occurrence.
	 
	 	(d)	 	Extra Contractual Obligations
	 
	 	 	 	This term shall mean a loss which is not covered under any other provision of
this Exhibit resulting from an action taken by the insured or assignee
arising from the Company’s handling of any claim otherwise covered under this
Exhibit on the Risks reinsured hereunder which have total amounts of
insurance greater than the Company Retention.

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GENERAL REINSURANCE CORPORATION

 

	 	 	 	The date on which an Extra Contractual Obligation is incurred by the Company
shall be deemed, in all circumstances, to be the date of the original
Occurrence.
	 
	 	 	 	There shall be no coverage hereunder where the Extra Contractual Obligation
has been incurred due to the fraud or criminal conduct of a member of the
Board of Directors, a corporate officer of the Company, or any other employee
of the Company, acting individually or collectively or in collusion with any
individual or corporation or any other organization or party involved in the
investigation, defense or settlement of any claim covered hereunder.
	 
	 	 	 	Any insurance which indemnifies or protects the Company against claims which
are the subject matter of this definition shall inure to the benefit of the
Reinsurer and shall be deducted to arrive at the amount of the Company’s Net
Loss.
	 
	 	(e)	 	Risk
	 
	 	 	 	The Company shall establish what constitutes one Risk and shall make such
determination based on the peril of fire at the time of acceptance, provided:
	 
	 	(1)	 	A Building and its contents, regardless of the number of insureds or
policies involved, including time element coverages, shall never be considered
more than one Risk.
	 
	 	 	 	When two or more Buildings and their contents, including time element
coverages, are situated at the same General Location, the Company shall
identify on its records at the time of acceptance by the Company those
individual Buildings and their contents, including time element coverages,
that are to be considered to constitute each Risk; if such identification is
not made, all of the Buildings and their contents situated at the same
General Location shall be considered one Risk.
	 
	 	 	 	When there are known and named extensions of coverage involving other risk
locations (including but not limited to suppliers extensions, customer
extensions and interdependencies and whether triggered by physical loss at
the risk location or another location) that are included and formally
recorded on the Company’s records at the time of acceptance of the Risk, all
such known and named extensions of coverage shall be included in calculation
of the one Risk.
	 
	 	(2)	 	Unknown, unnamed or unidentified extensions of coverage shall be
considered separate Risks. The maximum amount which may be included in Net
Loss with respect to each such Risk shall be $250,000. Further, the Limit of
Liability of the Reinsurer shall not exceed $500,000 of Net Loss with respect
to all such Risks involved in one Occurrence. Such Occurrence limit is part
of, and not in addition to the Occurrence limit stipulated in the section
entitled LIABILITY OF THE REINSURER.

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GENERAL REINSURANCE CORPORATION

 

	 	(3)	 	As respects the Company’s Antique/Collector Car Program, each
collection will be considered a Risk.
	 
	 	(f)	 	Building
	 
	 	 	 	This term shall mean each structure enclosed within exterior walls. Exterior
walls are defined as walls constructed on the perimeter foundation,
regardless of the number of additional structures or roofs placed upon this
perimeter foundation.
	 
	 	(g)	 	Occurrence
	 
	 	 	 	This term shall mean a loss or series of losses arising out of one event.
	 
	 	(h)	 	General Location
	 
	 	 	 	This term shall mean a contiguous and unbroken tract of land surrounded by
public roads, railroads, rivers or other natural barriers.
	 
	 	(i)	 	Agreement Year
	 
	 	 	 	This term shall mean each twelve month period commencing on January
1st.
	 
	 	(j)	 	Company’s Subject Earned Premium
	 
	 	 	 	This term shall mean the premium earned by the Company on the business
reinsured hereunder, after deduction from such premium earned of the portion
paid for share reinsurance which inures to the benefit of the Reinsurer.

Section 5  —  EXCLUSIONS

This Exhibit shall not apply to:

	 	(a)	 	Reinsurance assumed by the Company other than reinsurance of primary
business assumed from affiliated companies;
	 
	 	(b)	 	Nuclear incident per the Nuclear Incident Exclusion Clause — Physical
Damage — Reinsurance attached hereto;
	 
	 	(c)	 	Any loss or liability accruing to the Company directly or indirectly
from any insurance written by or through any pool or association including
pools or associations in which membership by the Company is required under any
statutes or regulations;
	 
	 	(d)	 	Any liability of the Company arising from its participation or
membership in any insolvency fund;
	 
	 	(e)	 	Any loss or damage directly or indirectly arising out of, caused by,
or resulting from war, as described in paragraph (1) below, or any act of
terrorism, as described in paragraphs (2), (3), (4) and (5) below. Such

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GENERAL REINSURANCE CORPORATION

 

	 	 	 	loss or damage is excluded regardless of (i) any other cause or event
contributing to such loss or damage in any way or at any time, or (ii)
whether such loss or damage is accidental or intentional.
	 
	 	(1)	 	War, including undeclared or civil war; warlike action by a military
force, including action in hindering or defending against an actual or
expected attack, by any government, sovereign or other authority using
military personnel or other agents; or insurrection, rebellion, revolution,
usurped power or action taken by governmental authority in hindering or
defending against any of these. War includes any activity that would be
included as an “act of terrorism” in paragraphs (2), (3), (4) and (5) below,
but for the fact that such activity was perpetrated by an official, employee
or agent of a foreign state acting for or on behalf of such state.
	 
	 	(2)	 	Any “act of terrorism”, as described in paragraphs (3), (4) and (5)
below, but only with respect to loss or damage that is not excluded by
paragraph (1) above.
	 
	 	(3)	 	Any act defined as an “act of terrorism” in the Terrorism Risk
Insurance Act of 2002.
	 
	 	(4)	 	Any act authorized by a governmental authority for the purpose of
preventing, terminating, countering or responding to any act or threat of
terrorism or for the purpose of preventing or minimizing the consequences of
any act or threat of terrorism.

	 	(5)	 	Any activity (other than an act described in (3)
above), including the threat of an activity or any preparation for
an activity, that (a) causes either (i) damage to property, or (ii)
injury to persons; and (b) appears to be intended to: (i) intimidate
or coerce a civilian population, or (ii) disrupt any segment of an
economy, or (iii) influence the policy of a government by
intimidation or coercion, or (iv) affect the conduct of a government
by destruction, assassination, kidnapping or hostage-taking, or (v)
advance a political, religious or ideological cause; provided,
however, that an “act of terrorism” for purposes of this exclusion
shall not include any act or threat as described above perpetrated
by an official, employee or agent of a foreign state acting for or
on behalf of such state.

	 	(f)	 	Risks written on a layered basis, whether primary or excess of loss,
or policies written with a deductible or franchise of more than $500,000;
however, this exclusion shall not apply to policies which provide a percentage
deductible or franchise in connection with windstorm, earthquake or flood;
	 
	 	(g)	 	Pollution to the extent excluded in the Company’s policies.
Nevertheless, if the insured elects to purchase any “buy back” or additional
coverage options, such options shall not be covered hereunder;

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GENERAL REINSURANCE CORPORATION

 

	 	(h)	 	Insurance against earthquake, except when written in conjunction with
fire and otherwise eligible perils;
	 
	 	(i)	 	Insurance on growing crops;
	 
	 	(j)	 	Insurance against flood, surface water, waves, tidal waves, overflow
of any body of water, or their spray, all whether driven by wind or not,
except when written in conjunction with fire and otherwise eligible perils;
	 
	 	(k)	 	Business classified as fidelity; however, this exclusion shall not
apply to crime and fidelity with limits no greater than $2,000,000 when
written as part of a package policy;
	 
	 	(l)	 	Credit insurance;
	 
	 	(m)	 	Business classified as boiler and machinery;
	 
	 	(n)	 	Mortgage impairment insurance and similar kinds of insurance,
howsoever styled, providing coverage to an insured with respect to its
mortgagee interest in property or its owner interest in foreclosed property;
	 
	 	(o)	 	Difference in conditions insurance and similar kinds of insurance,
howsoever styled, but not to include the Condominium Association Difference in
Conditions Coverage Form (PI-DIC-1, 11/03);
	 
	 	(p)	 	Risks which have a total insurable value of more than $250,000,000;
however, this exclusion shall not apply if the Company writes 100% of the
Risk;
	 
	 	(q)	 	Losses with respect to overhead transmission and distribution lines
and their supporting structures, other than those on or within 1,000 feet of
the insured premises. However, public utilities extension and/or suppliers
extension and/or contingent business interruption coverage are not subject to
this exclusion, provided these are not part of a transmitters’ or
distributors’ policy;
	 
	 	(r)	 	Inland marine business with respect to the following:

	 	(1)	 	Cargo insurance when written as such with respect to
ocean vessels;
	 
	 	(2)	 	Faulty film, tape, processing and editing insurance
and cast insurance;
	 
	 	(3)	 	Furriers’ customers policies;
	 
	 	(4)	 	Insurance on livestock under so-called “mortality
policies”;
	 
	 	(5)	 	Mining equipment while underground;
	 
	 	(6)	 	Registered mail and armored car insurance;

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GENERAL REINSURANCE CORPORATION

 

	 	(s)	 	Loss of, damage to, or failure of, or consequential loss resulting
therewith (including but not limited to earnings and extra expense) of
satellites, spacecraft, and launch vehicles, including cargo and freight
carried therein, in all phases of operation (including but not limited to
manufacturing, transit, pre-launch, launch, and in-orbit);
	 
	 	(t)	 	Losses arising, directly or indirectly, out of loss of, alteration
of, or damage to or a reduction in the functionality, availability or
operation of a computer system, hardware, program, software, data, information
repository, microchip, integrated circuit or similar device in computer
equipment or non-computer equipment, whether the property of the policyholder
of the Company or not, unless such loss arises out of physical damage
occurring at the insured’s premises as a result of the following perils to the
extent that these perils are covered under this Exhibit: fire, lightning,
explosion, windstorm or hail, smoke, aircraft or vehicles, riot or civil
commotion, sprinkler leakage, sinkhole collapse, volcanic action, falling
objects, weight of snow, ice or sleet, water damage, flood and/or earth
movement. Nothing in this exclusion shall be construed to extend coverage
under this Exhibit to any liability which would not have been covered in the
absence of this exclusion;
	 
	 	(u)	 	Mobile homes unless written as part of a commercial multiple peril
policy;
	 
	 	(v)	 	Watercraft, other than watercraft insured under a standard homeowners
policy or when written as part of contents coverage under a commercial
multiple peril policy.

If the Company is bound, without knowledge of or contrary to the instructions of the Company’s
supervisory underwriting personnel, on any business falling within the scope of one or more of the
exclusions set forth in this section, these exclusions, except (a) through (e), (g), (i), (k), (l)
and (n) shall be suspended with respect to such business until 60 days after an underwriting
supervisor of the Company acquires knowledge of such business.

Section 6  —  OTHER REINSURANCE

The obligations of the Company to reinsure business falling within the scope of this Exhibit and of
the Reinsurer to accept such reinsurance are mandatory and no other reinsurance (either facultative
or treaty) is permitted, except as provided for below.

When the amount of insurance written by the Company on an individual Risk exceeds $15,000,000, the
Company may purchase facultative excess of loss or share reinsurance for the excess amount on such
Risk. The Company may also purchase facultative excess of loss reinsurance or facultative share
reinsurance within the liability of the Reinsurer, if, in the underwriting judgment of the Company,
the Reinsurer will be benefited thereby.

The Company may also purchase facultative excess of loss reinsurance within the Company Retention.
In no event, however, shall the amount required with respect to the net Company Retention after
such reinsurance be reduced to less than $500,000.

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GENERAL REINSURANCE CORPORATION

 

Recoveries from catastrophe reinsurance shall be deemed not to reduce the amount required with
respect to the Company Retention.

Section 7  —  REINSURANCE PREMIUM

The Company shall pay to the Reinsurer:

	 	(a)	 	For the First Excess Cover, 1.90% of the Company’s Subject Earned
Premium;
	 
	 	(b)	 	For the Second Excess Cover, 0.88% of the Company’s Subject Earned
Premium;
	 
	 	(c)	 	For the Third Excess Cover, 0.29% of the Company’s Subject Earned
Premium.

     Section 8  —  REPORTS AND REMITTANCES

	 	(a)	 	Reinsurance Premium
	 
	 	 	 	Within 25 days after the close of each calendar quarter, the Company shall
render to the Reinsurer a report of the reinsurance premium for the quarter
with respect to the Company’s Subject Earned Premium during the quarter,
summarizing the reinsurance premium by line of insurance. The amount due the
Reinsurer, shall be remitted within 25 days after the close of the quarter.
	 
	 	(b)	 	Claims and Losses
	 
	 	 	 	The Company shall report promptly to the Reinsurer each claim or loss which
in the Company’s opinion may involve the reinsurance afforded by this
Exhibit. The Company shall also report promptly to the Reinsurer any action
alleging Extra Contractual Obligations against the Company or any declaratory
judgment action brought by or against the Company on the business reinsured
hereunder. The Company shall advise the Reinsurer of the estimated amount of
Net Loss in connection with each such claim or loss and of any subsequent
changes in such estimates.
	 
	 	 	 	Promptly upon receipt of a definitive statement of Net Loss from the Company,
but within no more than 25 days after receipt of such statement, the
Reinsurer shall pay to the Company the Reinsurer’s portion of Net Loss. The
Company shall report to the Reinsurer any subsequent changes in the amount of
Net Loss, and the amount due either party shall be remitted promptly, but
within no more than 25 days after receipt of such report.
	 
	 	(c)	 	P.C.S. Catastrophe Bulletins

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GENERAL REINSURANCE CORPORATION

 

	 	 	 	The Company shall furnish to the Reinsurer, upon request, the following
information with respect to each catastrophe set forth in the Catastrophe
Bulletins published by the Property Claim Services:

	 	(1)	 	The preliminary estimates of the amount recoverable
from the Reinsurer;
	 
	 	(2)	 	The Reinsurer’s portion of claims, losses, and
Adjustment Expenses paid less salvage recovered during each calendar
quarter;
	 
	 	(3)	 	The Reinsurer’s portion of reserves for claims,
losses, and Adjustment Expenses at the end of each calendar quarter.

	 	(d)	 	General
	 
	 	 	 	In addition to the reports required by (a), (b), and (c) above, the Company
shall furnish such other information as may be required by the Reinsurer for
the completion of the Reinsurer’s quarterly and annual statements and
internal records.
	 
	 	 	 	All reports shall be rendered on forms or in format acceptable to the Company
and the Reinsurer.

Section 9  —  AUTOMATIC REINSTATEMENT

The Limit of Liability of the Reinsurer with respect to each Risk shall be reduced by an amount
equal to the amount of liability paid by the Reinsurer, but that part of the liability of the
Reinsurer that is so reduced shall be automatically reinstated from the date of the Occurrence for
which payment is made; however, the Limits of Liability of the Reinsurer under the Second and Third
Excess Covers with respect to all Occurrences taking place during each Agreement Year shall not
exceed the amounts set forth in the section entitled LIABILITY OF THE REINSURER. In consideration
of this automatic reinstatement:

	 	(a)	 	For each amount so reinstated in the First Excess Cover, there shall
be no additional reinsurance premium;
	 
	 	(b)	 	For first $5,000,000 so reinstated in the Second and Third Excess
Covers, there shall be no additional reinsurance premium;
	 
	 	(c)	 	For the next $5,000,000, so reinstated in the Second Excess Cover,
the Company shall pay to the Reinsurer an additional reinsurance premium that
shall be the product of 100% of the reinsurance premium set forth in
sub-paragraph (b) of the section entitled REINSURANCE PREMIUM for the
Agreement Year multiplied by the amount of the reinstated Limit of Liability
of the Reinsurer divided by $5,000,000;
	 
	 	(d)	 	For the next $5,000,000, so reinstated in the Third Excess Cover, the
Company shall pay to the Reinsurer an additional reinsurance premium that
shall be the product of 100% of the reinsurance premium set forth in
sub-paragraph (c) of the section entitled REINSURANCE PREMIUM

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GENERAL REINSURANCE CORPORATION

 

	 	 	 	for the Agreement Year multiplied by the amount of the reinstated Limit of
Liability of the Reinsurer divided by $5,000,000.

The reinsurance premium so developed for each amount reinstated shall be in addition to the
reinsurance premium set forth in the section entitled REINSURANCE PREMIUM.

Section 10  —  TERMINATION

Either party may terminate this Exhibit at any time by sending to the other, by registered mail to
its principal office, notice stating the time and date when, not less than 90 days after the date
of mailing of such notice, termination shall be effective. Upon termination of this Exhibit, at
the Company’s option:

	 	(a)	 	The Reinsurer shall continue to be liable, with respect to policies
in force at the time and date of termination, for claims and losses resulting
from Occurrences taking place until the expiration, cancellation, or next
anniversary date, not to exceed one year, of each such policy of the Company,
which ever occurs first. The reinsurance premium for policies in force a the
time and date of termination shall be calculated by applying the provisions of
the section entitled REINSURANCE PREMIUM to the monthly earned premiums that
derive from the unearned premium applicable to policies in force at the time
and date of termination.
	 
	 	(b)	 	The Reinsurer shall not be liable for claims and losses resulting
from Occurrences taking place at and after the effective time and date of
termination.

Section 11  —  MORTGAGEE REINSURANCE ENDORSEMENTS

To induce a mortgagee named in a policy of the Company to accept such policy, the Company and the
Reinsurer may agree to name such mortgagee as a third party beneficiary in a Mortgagee Reinsurance
Endorsement made a part of this Exhibit. For each such Mortgagee Reinsurance Endorsement so
issued, the Company shall indemnify the Reinsurer for any and all liability, loss, cost, or expense
the Reinsurer may sustain or incur in excess of its obligations under this Exhibit by reason of the
issuance of such Mortgagee Reinsurance Endorsement.

If the Reinsurer becomes liable to a mortgagee under any Mortgagee Reinsurance Endorsement, the
Reinsurer shall, to the extent of its liability:

	 	(a)	 	Benefit pro-rata in reductions of the Company’s loss by salvage,
subrogation, compromise, or otherwise.
	 
	 	(b)	 	Be automatically subrogated to all of the mortgagee’s rights against
the Company under the policy.

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GENERAL REINSURANCE CORPORATION

 

	 	(c)	 	Be completely discharged from its obligation to make any payment to the
Company under this Exhibit and be entitled to set off against any amount due
from the Reinsurer to the Company under this or any other agreement for any
amounts for which the Reinsurer would not be liable except for the existence
of such Mortgagee Reinsurance Endorsement.

The Reinsurer shall have the right to cancel any Mortgagee Reinsurance Endorsement by notice to the
mortgagee.

Prior to the termination date, the Company shall advise the Reinsurer as to which of the above
options shall apply.

GENERAL REINSURANCE CORPORATION

A Berkshire Hathaway Company

 

EXHIBIT B

Attached to and made a part of

Agreement of Reinsurance No. 9034-07

EXCESS OF LOSS REINSURANCE

(Per Risk)

of

Property Business

(Coverage for Terrorism Only)

      

Section 1  —  BUSINESS SUBJECT TO THIS EXHIBIT

This Exhibit shall apply to Property Business written by the Company, as defined in Exhibit A to
this Agreement, but only as respects loss or damage directly or indirectly arising out of, caused
by, or resulting from Terrorism Occurrences taking place during the term of this Exhibit,
regardless of any other cause or event contributing to such loss or damage in any way or at any
time, or whether such loss or damage is accidental or intentional.

Section 2  —  TERM

This Exhibit shall apply to new and renewal policies of the Company becoming effective at and after
12:01 A.M., January 1, 2007, and to policies of the Company in force at 12:01 A.M., January 1,
2007, with respect to claims and losses resulting from Terrorism Occurrences taking place at and
after the aforesaid time and date, and prior to 12:01 A.M., January 1, 2008.

However, if Exhibit A to this Agreement is terminated within the term stipulated above, this
Exhibit will automatically terminate on the same date. In such instance, the Reinsurer shall not
be liable for Terrorism Occurrences taking place at and after the time and date of termination and
shall return to the Company the reinsurance premium unearned, calculated on the monthly pro rata
basis, as of such time and date.

Section 3  —  LIABILITY OF THE REINSURER

The Reinsurer shall pay to the Company, with respect to each Risk of the Company, the amount of Net
Loss sustained by the Company in excess of the Company Retention but not exceeding the Limits of
Liability of the Reinsurer as set forth in the Schedule of Reinsurance.

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GENERAL REINSURANCE CORPORATION

 

SCHEDULE OF REINSURANCE

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Class of Business	 	Company Retention	 	Limits of Liability of the Reinsurer
	 	 	 	 	 	 	First	 	Second
	 	 	 	 	 	 	Excess Cover	 	Excess Cover
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Property Business
	 	$	2,000,000	 	 	$	8,000,000	 	 	$	5,000,000	 
	 

The liability of the Reinsurer shall not exceed $8,000,000 under the First Excess Cover nor
$5,000,000 under the Second Excess Cover with respect to all Net Loss arising out of all loss or
damage directly or indirectly arising out of, caused by, or resulting from all Terrorism
Occurrences taking place during the term of this Exhibit, regardless of any other cause or event
contributing to such loss or damage in any way or at any time, or whether such loss or damage is
accidental or intentional.

All insurance written under one or more policies of the Company against the same peril on the same
Risk shall be combined, and the Company Retention and the Limits of Liability of the Reinsurer
shall be determined on the basis of the sum of all insurance against the same peril and on the same
Risk which is in force at the time of a claim or loss.

Section 4  —  DEFINITIONS

The terms “Company Retention”, “Net Loss”, “Adjustment Expense”, “Extra Contractual Obligations”,
“Risk”, “Building” and “General Location” shall have the same meaning as in Exhibit A to this
Agreement.

The term “Terrorism Occurrence” shall mean an Occurrence arising out of any Act of Terrorism, as
described in paragraphs (1) and (2) below.

	 	(1)	 	An Act of Terrorism means an activity, including the threat of an
activity or any preparation for an activity, that (a) causes either (i) damage
to property, or (ii) injury to persons; and (b) appears to be intended to: (i)
intimidate or coerce a civilian population, or (ii) disrupt any segment of an
economy, or (iii) influence the policy of a government by intimidation or
coercion, or (iv) affect the conduct of a government by destruction,
assassination, kidnapping or hostage-taking, or (v) advance a political,
religious or ideological cause; provided, however, that an Act of Terrorism
for purposes of this definition shall not include any act or threat as
described above perpetrated by an official, employee or agent of a foreign
state acting for or on behalf of such state.
	 
	 	(2)	 	An Act of Terrorism is also deemed to include any act authorized by a
governmental authority for the purpose of preventing, terminating, countering
or responding to any act or threat of terrorism or for the pur-

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GENERAL REINSURANCE CORPORATION

 

	 	 	 	pose of preventing or minimizing the consequences of any act or threat of
terrorism.

Section 5  —  EXCLUSIONS

This Exhibit shall be subject to the exclusions set forth in the section entitled EXCLUSIONS of
Exhibit A to this Agreement, except that for purposes of this Exhibit, exclusion (e) of said
Section is amended to read as follows:

	 	(e)	 	Any loss or damage directly or indirectly arising out of, caused by,
or resulting from war, including undeclared or civil war; warlike action by a
military force, including action in hindering or defending against an actual
or expected attack, by any government, sovereign or other authority using
military personnel or other agents; or insurrection, rebellion, revolution,
usurped power or action taken by governmental authority in hindering or
defending against any of these. War includes any activity that would be
included as an Act of Terrorism, but for the fact that such activity was
perpetrated by an official, employee or agent of a foreign state acting for or
on behalf of such state. Such loss or damage is excluded regardless of (i)
any other cause or event contributing to such loss or damage in any way or at
any time, or (ii) whether such loss or damage is accidental or intentional.

Section 6  —  REINSURANCE PREMIUM

The Company shall pay to the Reinsurer:

	 	(a)	 	For the First Excess Cover, a flat reinsurance premium of $640,000
for the term of this Exhibit;
	 
	 	(b)	 	For the Second Excess Cover, a flat reinsurance premium of $400,000
for the term of this Exhibit.

     Section 7  —  REPORTS AND REMITTANCES

	 	(a)	 	Reinsurance Premium
	 
	 	 	 	Within 25 days after the close of each calendar quarter, the Company shall
pay to the Reinsurer one quarter of the flat reinsurance premium stipulated
in the section entitled REINSURANCE PREMIUM.
	 
	 	(b)	 	Claims and Losses
	 
	 	 	 	The Company shall report promptly to the Reinsurer each claim or loss which
in the Company’s opinion may involve the reinsurance afforded by this
Exhibit. The Company shall also report promptly to the Reinsurer any action
alleging Extra Contractual Obligations against the Company or any declaratory
judgment action brought by or against the Company on the business reinsured
hereunder. The Company

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GENERAL REINSURANCE CORPORATION

 

	 	 	 	shalladvise the Reinsurer of the estimated amount of
Net Loss and Adjustment Expense in connection with each such claim or loss and of any
subsequent changes in such estimates.

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GENERAL REINSURANCE CORPORATION

 

	 	 	 	Promptly upon receipt of a definitive statement of Net Loss and Adjustment
Expense from the Company, but within no more than 25 days after receipt of
such statement, the Reinsurer shall pay to the Company the Reinsurer’s
portion of Net Loss and the Reinsurer’s portion of Adjustment Expense, if
any. The Company shall report to the Reinsurer any subsequent changes in
the amount of Net Loss and/or Adjustment Expense, and the amount due either
party shall be remitted promptly, but within no more than 25 days after
receipt of such report.
	 
	 	(c)	 	General
	 
	 	 	 	In addition to the reports required by (a), (b), and (c) above, the Company
shall furnish such other information as may be required by the Reinsurer for
the completion of the Reinsurer’s quarterly and annual statements and
internal records.
	 
	 	 	 	All reports shall be rendered on forms or in format acceptable to the
Company and the Reinsurer.

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GENERAL REINSURANCE CORPORATION

 

ENDORSEMENT NO. 6 REVISED

Attached to and made a part of

AGREEMENT OF REINSURANCE

NO. 9034

between

PHILADELPHIA INDEMNITY COMPANY

PHILADELPHIA INSURANCE COMPANY

(herein collectively referred to as the “Company”)

and

GENERAL REINSURANCE CORPORATION

(herein referred to as the “Reinsurer”)

IT IS MUTUALLY AGREED that, effective 12:01 A.M., January 1, 2007, this Agreement and Exhibit A
attached thereto are hereby terminated, having been replaced concurrently by Agreement No. 9034-07
between the Company and the Reinsurer. The Reinsurer shall not be liable for claims and losses
resulting from Occurrences taking place at and after such time and date.

IN
WITNESS WHEREOF, the parties hereto have caused this Endorsement to be executed in duplicate,

this 14th day of August, 2007,

	 	 	 	 	 
	 

	 	PHILADELPHIA INDEMNITY COMPANY
	 	 	PHILADELPHIA INSURANCE COMPANY	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	Christopher J. Maguire	 	 
	 

	 	EVP & CUO	 	 
	 
	 	 	 	 
	Attest: William A. McKenna
	 	 	 	 
	 
	 	 	 	 
	and
this 25th day of July, 2007.
	 	 	 	 
	 
	 	 	 	 
	 

	 	GENERAL REINSURANCE CORPORATION	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	Joan LaFrance	 	 
	 

	 	Senior Vice President	 	 
	 
	 	 	 	 
	Attest: Diane Hyland	 	 

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GENERAL REINSURANCE CORPORATION

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