Document:

exv10w178

EXHIBIT
10.178

COMMERCIAL UMBRELLA EXCESS OF LOSS

REINSURANCE CONTRACT

No. 2000310

EFFECTIVE JANUARY 1, 2007

between

PEERLESS INSURANCE COMPANY

Keene, New Hampshire

and

The reinsurers subscribing to the respective

Interests and Liabilities Agreements attached to

and forming part of this Contract

					
	 	 	 	 	 
	 
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COMMERCIAL UMBRELLA EXCESS OF LOSS REINSURANCE CONTRACT No. 2000310

	 	 	 	 	 	 	 
	ARTICLE	 	CONTENTS	 	PAGE
	 	 	PREAMBLE
	 	 	1	 
	I	 	BUSINESS COVERED
	 	 	1	 
	II	 	EFFECTIVE DATE AND TERMINATION
	 	 	2	 
	III	 	TERRITORY
	 	 	3	 
	IV	 	LIMIT AND RETENTION
	 	 	3	 
	V	 	NET LOSS
	 	 	5	 
	VI	 	LOSS IN EXCESS OF POLICY LIMITS
	 	 	5	 
	VII	 	EXTRA CONTRACTUAL OBLIGATIONS
	 	 	6	 
	VIII	 	EXCLUSIONS
	 	 	6	 
	IX	 	SPECIAL ACCEPTANCES
	 	 	10	 
	X	 	LOSS OCCURRENCE
	 	 	10	 
	XI	 	REINSURANCE PREMIUM
	 	 	12	 
	XII	 	REPORTS AND REMITTANCES
	 	 	12	 
	XIII	 	LOSS ADJUSTMENTS AND SETTLEMENTS
	 	 	13	 
	XIV	 	SALVAGE AND SUBROGATION
	 	 	13	 
	XV	 	FEDERAL TERRORISM EXCESS RECOVERY CLAUSE
	 	 	14	 
	XVI	 	ACCESS TO RECORDS
	 	 	14	 
	XVII	 	DIVIDENDS AND TAXES
	 	 	15	 
	XVIII	 	FEDERAL EXCISE TAX
	 	 	15	 
	XIX	 	GOVERNING LAW
	 	 	16	 
	XX	 	CURRENCY
	 	 	16	 
	XXI	 	OFFSET
	 	 	16	 
	XXII	 	ERRORS OR OMISSIONS
	 	 	16	 
	XXIII	 	INSOLVENCY
	 	 	16	 
	XXIV	 	MEDIATION
	 	 	17	 
	XXV	 	ARBITRATION
	 	 	18	 
	XXVI	 	SPECIAL CONDITIONS
	 	 	21	 
	XXVII	 	THIRD PARTIES
	 	 	23	 
	XXVIII	 	UNAUTHORIZED REINSURENCE
	 	 	23	 
	XXIX	 	SERVICE OF SUIT
	 	 	24	 
	XXX	 	CONFIDENTIALITY CLAUSE
	 	 	25	 
	XXXI	 	AMENDMENTS
	 	 	26	 
	XXXII	 	SEVERABILITY
	 	 	26	 
	XXXIII	 	INTEREST PENALTY
	 	 	26	 
	XXXIV	 	ASSIGNMENT
	 	 	27	 
	XXXV	 	ENTIRE AGREEMENT
	 	 	27	 

ATTACHMENTS:

APPENDIX A — DEFINITION OF PROFIT CENTER

APPENDIX B — PHARMACEUTICAL/MEDICAL RISKS

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.

					
	 	 	 	 	 
	 
	 	 	 	Commercial Umbrella Excess
	 
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COMMERCIAL UMBRELLA EXCESS OF LOSS

REINSURANCE CONTRACT

No. 2000310

(hereinafter referred to as the “Contract”)

between

PEERLESS INSURANCE COMPANY

Keene, New Hampshire

(hereinafter referred to as the “Company”)

and

The reinsurers subscribing to the respective

Interests and Liabilities Agreements attached to

and forming part of this Contract

(hereinafter referred to as the “Subscribing Reinsurer”)

ARTICLE I — BUSINESS COVERED

	A.	 	This Contract applies to all Policies, except as hereinafter excluded, written and
classified by the Company and the Legal Entities (as defined below) as Commercial Umbrella,
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 Contract is solely between the Company and the Subscribing Reinsurer, and nothing
contained in this Contract shall create any obligations or establish any rights against the
Subscribing Reinsurer in favor of any person or entity not a party hereto.
	 
	C.	 	The term “Policies” shall mean each of the Company’s or a Legal Entity’s binders, policies
and contracts of insurance or reinsurance on the business covered hereunder.
	 
	D.	 	Under this Contract, the indemnity for reinsured loss applies only to Commercial Umbrella
written by the Company or ceded to the Company directly or indirectly by a legal entity
listed below (each, a “Legal Entity” and, collectively, the “Legal Entities”)

American Ambassador Casualty Company, Lisle, Illinois

America First Insurance Company, Keene, New Hampshire,

America First Lloyd’s Insurance Company, Richardson, Texas,

Colorado Casualty Insurance Company, Englewood, Colorado,

Consolidated Insurance Company, Indianapolis, Indiana,

Excelsior Insurance Company, Keene, New Hampshire,

Globe American Casualty Company, Loveland, Ohio,

Golden Eagle Insurance Corporation, San Diego, California,

Hawkeye-Security Insurance Company, Waukesha, Wisconsin,

Indiana Insurance Company, Indianapolis, Indiana,

Liberty Mutual Mid-Atlantic Insurance Company, Camp Hill, Pennsylvania, for business written by the

Liberty Mutual Agency Markets Profit Centers covered under this Contract as defined in Appendix A

Liberty Northwest Insurance Corporation, Portland, Oregon,

Mid-American Fire and Casualty Company, Loveland, Ohio,

Montgomery Mutual Insurance Company, Columbia, Maryland,

					
	 	 	 	 	 
	 
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National Insurance Association, Indianapolis, Indiana,

North Pacific Insurance Company, Portland, Oregon,

Oregon Automobile Insurance Company, Portland, Oregon,

Peerless Indemnity Insurance Company, Lisle, Illinois,

The Midwestern Indemnity Company, Loveland, Ohio,

The Netherlands Insurance Company, Keene, New Hampshire,

Employers Insurance Company of Wausau, Wausau, Wisconsin, and 

Wausau General Insurance Company, Wausau, Wisconsin, and

Wausau Underwriters Insurance Company, Wausau, Wisconsin, and

Wausau Business Insurance Company, Wausau, Wisconsin, for business classified as Business Solutions Group or Wausau Business Unit only,

Liberty Mutual Insurance Company, Boston, Massachusetts (on behalf of The First Liberty
Insurance 
Corporation, LM Insurance Corporation, both of West Des Moines, Iowa, Liberty
Insurance 
Corporation, South Burlington, Vermont, Liberty Mutual Fire Insurance Company,
Wausau,
Wisconsin, for business classified as Business Solutions Group only)

Bridgefield Employers Insurance Company, Lakeland, Florida

Bridgefield Casualty Insurance Company, Lakeland, Florida

Liberty County Mutual Insurance Company, Irving, Texas, for business written by the Liberty
Mutual Agency Markets Profit Centers covered under this Contract as defined in Appendix A

OneBeacon Insurance Company, Boston, Massachusetts, for Policies subject to the rewritten
Indemnity Reinsurance Agreement by and between Peerless Insurance Company and OneBeacon
Insurance Company, collectively identified as Liberty Mutual Agency Markets Profit Centers
covered under this Contact as defined in Appendix A except as
excluded under Article VIII - Exclusions of this Contract.

ARTICLE II — EFFECTIVE DATE AND TERMINATION

	A.	 	This Contract shall become effective at 12:01 a.m., Local Standard Time, with respect to
Policies in force at 12:01 a.m., Local Standard Time, January 1, 2007, and new and renewal
Policies becoming effective on or after said date and shall remain in
force until 12:01 a.m.,
Local Standard Time, January 1, 2008.
	 
	B.	 	This Contract shall apply to loss occurrence and claims made Policies in accordance with the
following provisions:

	 	1.	 	As respects Policies written on an occurrence basis:
	 
	 	 	 	This Contract shall apply with respect to losses occurring on or after the inception date
of this Contract.
	 
	 	2.	 	As respects Policies written on a claims made basis:
	 
	 	 	 	This Contract shall apply to claims made Policies as respects claims received and recorded
by the Company or a Legal Entity, as applicable, or the insured, whichever comes first, at
and after the effective date of this Contract, provided that each such Policy includes a
specific retroactive date and the occurrence which results in each such claim takes place
on or after such retroactive date, and provided further that such retroactive date is on
or after the inception date of the first of one or more consecutive claims made Policies
issued by the Company or a Legal Entity, as applicable, or another insurer(s) to the named
insured.

					
	 	 	 	 	 
	 
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ARTICLE
III—TERRITORY

The territorial limits of this Contract shall be identical with those of the Policies.

ARTICLE IV — LIMIT AND RETENTION

	 	A.	 	The Subscribing Reinsurer shall be liable for 100% of the Net Loss in excess of
$5,000,000 for each and every loss, each and every occurrence, each and every Policy, but
the Subscribing Reinsurer shall not be liable for more than $10,000,000, except that this
Contract is subject to one additional Reinsurance contract limit per claim with regard to
Losses In Excess of Policy Limits or Extra Contractual Obligations, in any one loss
occurrence as respects each and every loss, each and every occurrence, each and every
policy
	 
	 	B.	 	Where the Company’s or a Legal Entity’s original Policy provides for aggregate limits
of liability, this Contract shall cover excess of $5,000,000 in the aggregate any one
original Policy during each original aggregate period; but the Subscribing Reinsurer shall
not be liable for more than $10,000,000 in the aggregate any one original Policy during
each original aggregate period.
	 
	 	C.	 	As respects aggregate coverages provided in Paragraph B of this Article IV — LIMIT AND
RETENTION, this Contract shall apply to the whole of each original aggregate period, not
exceeding twelve months, and notwithstanding the termination or expiration of this
Contract, provided the inception of such original aggregate period commences during the
term of this Contract.
	 
	 	D.	 	The term “original aggregate period” as used in Paragraphs B and C of this Article IV
 — LIMIT AND RETENTION, shall mean each separate original policy period, not exceeding
twelve months commencing at the inception, anniversary or renewal date of each covered
policy on or after January 1, 2007 and prior to the termination date of this Contract.
	 
	 	E.	 	For purposes of this Contract, the date of loss shall be the inception, anniversary or
renewal data of the policy as respects business covered on or after January 1, 2007 and
thereafter but prior to the termination date for each separate original aggregate period,
not exceeding twelve months.
	 
	 	F.	 	The term “aggregate” shall mean the net loss incurred in the aggregate during any one
original aggregate period, unless more specifically defined in the Policies, in which case
this Contract will follow the definitions therein.
	 
	 	G.	 	All Loss Adjustment Expenses paid by the Company or a Legal Entity as a result of Net
Losses covered hereunder shall be divided between the Company and the Subscribing
Reinsurers, without regard to the limit of this Contract, in proportion to their share of
the total loss giving rise to a claim hereunder.
	 
	 	H.	 	Loss Adjustment Expense(s) shall include but not be limited to the following amounts
paid or due and payable by the Company or a Legal Entity : a) expenses sustained in
connection with the settlement and litigation of claims and suits, satisfaction of
judgments, resistant to or negotiations concerning a loss (which shall include the pro
rata share of the Company or an affiliate’s field employees according to the time occupied
in adjusting such loss and the expenses of the Company or an affiliate’s employees but
shall not include any salaries of officers or normal overhead expenses of the Company or
its affiliates), b) Attorneys Fees and Expenses c) all other defense, litigation and
medical cost containment expenses, whether internal or external, arising

					
	 	 	 	 	 
	 
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	 	 	 	out of specific claims, d) all Post or Prejudgment Interest or Delayed Damages added to a
settlement, verdict, award, or judgment based on the period of time prior to or after the
settlement, verdict, award, or judgment that is not made part of the settlement, verdict,
award, or judgment, e) expenses sustained to obtain recoveries, salvages and other
reimbursements, or to secure the reversal or reduction of a verdict or judgment and f)
Claim-Specific Declaratory Judgment Expenses.
	 
	 	I.	 	“Claim-Specific Declaratory Judgment Expenses” shall be defined as fees and expenses
incurred in actions brought to determine whether the Company or a Legal Entity has a defense
and/or indemnification obligation for individual claims presented against Policies covered
under this Contract. Any Claim-Specific Declaratory Judgment Expense shall be deemed to have
been fully incurred on the same date as the insured’s original loss (if any) giving rise to
the action, unless otherwise provided for within this Contract.
	 
	 	J.	 	The term “Attorneys’ Fees and Expenses” as used above, means the fees and expenses of
attorneys, including the fees and expenses of the Company’s or its affiliates’ in-house
attorneys providing legal advice on coverage questions and/or defending the Company or a
Legal Entity in coverage litigation, and fees and expenses of staff counsel in the defense of
policyholder claims. Such Attorneys’ Fees and Expenses for in-house attorneys and staff
counsel shall be calculated at the rate for such attorneys plus the expenses incurred by such
attorneys, but excluding office expenses of the Company and its affiliates and salaries and
expenses of their other employees.
	 
	 	K.	 	It is understood and agreed that the Subscribing Reinsurer, in participation with the
Company, , shall pay its proportionate share of the Loss Adjustment Expenses which are
incurred by the Company or a Legal Entity:

	 	1.	 	In those instances where both the Primary and the Umbrella policy limits are
tendered simultaneously, or where the Primary limits have been tendered but not
actually paid.
	 
	 	2.	 	In those instances where the Primary limit is paid and the defense continues,
only the Subscribing Reinsurer shall be responsible for those adjustment expenses
incurred by the Company or a Legal Entity after payment of the Primary limit and these
Loss Adjustment Expenses shall be divided between the Company and the Subscribing
Reinsurer in proportion to their share of the Net Loss.
	 
	 	3.	 	In those instances where there is no Net Loss and only Loss Adjustment Expense,
the Company or a Legal Entity shall retain the first $5,000,000 of Loss Adjustment
Expense and the Subscribing Reinsurer shall be liable for 100% of the Loss Adjustment
Expense in excess of $5,000,000, but the Subscribing Reinsurer shall not be liable for
more than $10,000,000 for each and every loss, each and every occurrence, each and
every Policy.

	 	L.	 	Notwithstanding the above, with regard to an Act of Terrorism, the Subscribing Reinsurer
shall be liable for 100% of the Net Loss in excess of $5,000,000 for each and every loss,
each and every occurrence, each and every Policy, but the Subscribing Reinsurer shall not be
liable for more than $10,000,000 in any one loss occurrence as respects each and every loss,
each and every occurrence, each and every Policy, subject to an annual aggregate limit of
$10,000,000 for the term of this Contract. An “Act of Terrorism” for purposes of this
Contract 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,

					
	 	 	 	 	 
	 
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	 	 	 	coercing or putting in fear a civilian population or section thereof for the purpose
of establishing or advancing a specific ideological, 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 deemed or declared by the Federal Office of Homeland Security to
be terrorism or a terrorist act shall also be considered an “Act of Terrorism” for
purposes of this Contract

	 	M.	 	Reinsurance of the Company’s retention shall not be deducted in arriving at the
Ultimate Net Loss herein.

ARTICLE V — NET LOSS

	 	A.	 	The term “Net Loss” as used in this Contract shall mean all amounts paid or due and
payable by the Company or a Legal Entity within the terms and limits of their Policies
or by way of compromise in settlement of claims or losses, payment of benefits, or
satisfaction of judgments, settlements, verdicts or awards, including interest or
delayed damages when made part of the judgment, settlement, verdict or award, 90% of
any Losses in Excess of Policy Limits and 90% of any Extra Contractual Obligations
incurred by the Company or a Legal Entity, but shall not include Loss Adjustment
Expense.
	 
	 	B.	 	All savages, recoveries, payments and reversals or reductions of verdicts or
judgments whether recovered, received or obtained prior or subsequent to loss
settlement under this Contract, shall be applied as if recovered, received or obtained
prior to the aforesaid settlement an shall be deducted from the actual losses sustained
to arrive at the amount of the Net Loss.
	 
	 	C.	 	Nothing in this Article shall be construed to mean that losses under this Contract
are not recoverable until the Net Loss has been ascertained.

ARTICLE VI — LOSS IN EXCESS OF POLICY LIMITS

	 	A.	 	This Contract shall protect the Company for any Loss in excess of the original Policy
limit where Loss in excess of the limit has been incurred because of a failure by the
Company, a Legal Entity or by a third-party claims administrator 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 defending or prosecuting litigation, including
appeals, arbitration, or any alternative dispute resolution or settlement discussions
involving any claim, subject to one additional Reinsurance Contract limit per claim.
	 
	 	B.	 	However, the above paragraph 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 or a
Legal Entity 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.
	 
	 	C.	 	With regard to excess of Policy limits, the word “Loss” shall mean any amounts for
which the Company or a Legal Entity would have been contractually liable to pay had it not
been for the limit of the original Policy. The date on which any Loss in excess of the
original Policy limit is incurred by the Company or a Legal Entity shall be deemed, in all
circumstances, to be the date of the

					
	 	 	 	 	 
	 
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	 	 	 	original occurrence, accident, casualty, disaster, Loss Occurrence or loss, as selected by
the Company.
	 
	 	D.	 	The amount of any Loss in excess of the Policy limit arising out of an original
accident, casualty, disaster or loss occurrence covered by more than one Policy issued by
the Company or Legal Entity to the same insured will be apportioned to each such Policy on
a pro rata basis in the same proportion that the limit of each Policy bears to the total
limit of coverage provided by all such Policies for the original accident, casualty,
disaster or loss occurrence.

ARTICLE VII — EXTRA CONTRACTUAL OBLIGATIONS

	 	A.	 	This Contract shall protect the Company for Extra Contractual Obligations losses on
Policies exposing this Contract. “Extra Contractual Obligations” are defined as any actual
or potential liabilities not covered under any other provision of this Contract, arising
from or relating to any alleged or actual act, error or omission, whether intentional or
otherwise, or from any alleged or actual negligence, tortious conduct, reckless conduct,
violations of statutes or regulations governing the conduct of insurance companies and/or
claims adjusters, or bad faith in connection with: (i) the handling of any claim under the
Policies covered by this Contract, such liabilities arising because of, but not limited
to, the following: failure by the Company, a Legal Entity or by a third party claims
administrator to settle within the Policy limit, or by reason of alleged or actual
negligence, fraud or bad faith of the Company, a Legal Entity or by a third party claims
administrator in rejecting an offer of settlement, or in defending or prosecuting
litigation, including appeals, arbitration, or any alternative dispute resolution or
settlement discussions involving any claim; or (ii) the loss control or loss prevention of
any Policy hereunder.
	 
	 	B.	 	The date on which any Extra Contractual Obligation is incurred shall be deemed, in
all circumstances, to be the date of the original Occurrence, loss occurrence,
accident, casualty, disaster, or loss, as selected by the Company.
	 
	 	C.	 	However, this Article shall not apply where the loss has been incurred due to the
fraud of a member of the Board of Directors or a corporate officer of the Company or a
Legal Entity 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.

ARTICLE VIII — EXCLUSIONS

THIS AGREEMENT DOES NOT COVER:

	A.	 	THE FOLLOWING GENERAL CATEGORIES

	 	1.	 	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.
	 
	 	2.	 	Reinsurance assumed by the Company, except intercompany reinsurance.
	 
	 	3.	 	Business derived from any Pool, Association, including Joint Underwriting
Association, Syndicate, Exchange, Plan, Fund or other facility directly as a
member, subscriber or

					
	 	 	 	 	 
	 
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	 	 	 	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.
	 
	 	4.	 	Pollution Liability to the extent excluded in the original Policies and endorsements
except when a judicial entity invalidates the Policies’ exclusion or in any jurisdiction
whose regulatory authorities have prohibited the exclusion.
	 
	 	5.	 	Insolvency Funds as per the attached Insolvency Funds Exclusion Clause.
	 
	 	6.	 	Pharmaceutical/Medical Risks per the attached Appendix B
	 
	 	7	 	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.

	 	8.	 	Risks with umbrella coverage in excess of $200,000,000

	B.	 	THE FOLLOWING INSURANCE COVERAGES

	 	1.	 	Fiduciary Liability.
	 
	 	2.	 	Surety and Credit insurance.
	 
	 	3.	 	Fidelity Bonds.
	 
	 	4.	 	Credit and Financial Guarantee.
	 
	 	5.	 	Securities and Exchange Liability.
	 
	 	6.	 	Malpractice insurance, Directors and Officers Liability insurance or any form of
Errors and Omissions or Professional Liability insurance, except as provided for under
the Profit Center’s Underwriting Guidelines
	 
	 	7.	 	Advertisers’, Broadcasters’ and Telecasters’ Liability as respects Personal Injury
Liability except as provided for under the Profit Center’s Underwriting Guidelines.
	 
	 	8.	 	Kidnap, Extortion and Ransom Liability.
	 
	 	9.	 	Protection and Indemnity (Ocean Marine) except for hulls under 50 feet.
	 
	 	10.	 	Media business, defined as Feature Film and Major Motion Picture Studios, Commercial
Negative Film Coverages, Cast Coverage, Completion Bond and Television Productions, with
annual gross receipts greater than $25,000,000.
	 
	 	11.	 	Asbestos liability to the extent excluded in the original Policies and endorsements
except when a judicial entity invalidates the Policies’ exclusion or in any jurisdiction
whose regulatory authorities have prohibited the exclusion.

	C.	 	ANY COMMERCIAL UMBRELLA COVERAGE AS RESPECTS ANY OF THE FOLLOWING:

					
	 	 	 	 	 
	 
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	 	1.	 	Autos as used in or being prepared for, any professional or organized racing or demolition
contest or stunting activity except as provided for under ISO’s Business Auto and Garage
Policy.
	 
	 	2.	 	All vehicles classified as “Public Automobiles” except school buses, church buses, social
service agency automobiles, van pools, vehicles used for the transportation of employees and
courtesy vans and buses.
	 
	 	3.	 	All rental operations. An exception for rental vehicles shall apply as respects auto
dealerships when customer’s vehicle is being serviced.
	 
	 	4.	 	Vehicles regularly used to haul property of others and regularly operating beyond a 500 mile
radius.
	 
	 	5.	 	Newspaper delivery trucks except in non-metropolitan locations with a population of less
than 50,000.
	 
	 	6.	 	Vehicles engaged in the transportation or distribution of fireworks, fuses, explosives,
ammunitions, natural or artificial fuel gas, or liquefied petroleum gases or gasoline, except
when written as incidental coverage, as defined in the Profit Center’s Underwriting
Guidelines. This exclusion shall not apply to vehicles engaged in the transportation of
natural or artificial fuel gas or liquefied petroleum gases or gasoline when operations are
within a 500 mile radius.
	 
	 	7.	 	Liability as respects Products and Completed Operations:

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

	 	(i)	 	Drugs or pharmaceuticals.
	 
	 	(ii)	 	Cosmetics, defined as:

(1) articles intended to be rubbed, poured, sprinkled or sprayed on, introduced into,
or otherwise applied to the human body or any part thereof for cleansing, beautifying,
promoting attractiveness, or altering the appearance, and

(2) articles intended for use as a component of any such article; except that such
term shall not include soap, and

(3) other cosmetic within the meaning of Section 201(i) of the Federal Food, Drug and
Cosmetic Act (21 U.S.C. 321(i)).

	 	(iii)	 	Herbicides, insecticides or pesticides, except as respects risks involved
in a farming operation.

	 	b.	 	The manufacture or importing of motorized or self-propelled vehicles and equipment.
	 
	 	c.	 	The manufacture, sale, distribution, handling, servicing or maintenance of
aircraft, aerospacecraft, missiles, satellites or any component or components thereof.

	 	8.	 	All railway operations except Railroad Protective Liability coverage as respects jobs which
do not involve track work or service disruptions.
	 
	 	9.	 	Amusement parks, carnivals or circuses, except county or country fairs, incidental family
fun centers, ice or roller skating rinks, miniature golf courses and excursions to camps or
parks.
	 
	 	10.	 	Public assembly exposure in excess of 5,000 except for schools and colleges.
	 
	 	11.	 	Gas or electric companies.
	 
	 	12.	 	Subaqueous operations.

					
	 	 	 	 	 
	 
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	 	13.	 	Mining and quarrying operations, if blasting is involved
	 
	 	14.	 	Demolition of buildings or structures in excess of three stories or 50 feet in height
	 
	 	15.	 	Shoring, underpinning or moving of buildings or structures.
	 
	 	16.	 	Manufacture, sale, rental, lease or repair of scaffolds. This exclusion shall not
apply to incidental exposure on construction risks.
	 
	 	17.	 	Construction of bridges unless the span is less than 75 feet between pillars, and
tunnels or dams.

	18.	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.

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.

	 	19.	 	Manufacture, production, refining, storage, wholesale distribution or transportation
of natural or artificial fuel gas, butane, propane or liquefied petroleum gases or
gasoline, except when written as incidental coverage, as defined in the Profit Center’s
Underwriting Guidelines, or when operations are within a 500 mile radius. This exclusion
is not to apply to the construction and maintenance of such exposures which shall
include, but not be limited to, landscaping, road construction, excavation and water
hauling, plumbing and electrical services.
	 
	 	20.	 	Onshore and offshore gas and oil drilling operations. This exclusion is not to apply
to the construction and maintenance of such exposures which shall include, but not be
limited to, landscaping, road construction, excavation, water hauling, plumbing and
electrical services.
	 
	 	21.	 	Ownership, maintenance, use or entrustment of any aircraft, owned, operated, rented
or loaned including fueling, or any device or machine intended for and/or aiding in the
achievement of atmospheric flight, projection or orbit, to the extent excluded in the
original Policies and endorsements.
	 
	 	22.	 	Municipalities except for those with a population less than 100,000.

	D.	 	Terrorism losses arising from Airports, Bridges, Government Buildings, Nuclear Facilities,
Office Buildings over 25 stories, Security Services, Stadiums and Tunnels, Nuclear,
Biological and Chemical exposures, Explosive Manufacturing risks, Fertilizer mixing plants,
Railroads, Amusement/Theme parks with greater than 5,000 person capacity, Distribution and
manufacturing of weapons/munitions.

					
	 	 	 	 	 
	 
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	E.	 	The Company and the Subscribing Reinsurer have agreed on the
Profit Center’s’ Underwriting Guidelines, as respects Policies covered under this Agreement. The Company shall advise the
Subscribing Reinsurer of any change in such Underwriting Guidelines.
	 
	F.	 	In the event the Company or a Legal Entity is inadvertently bound on any risk which is
excluded under this Agreement, 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 45 days thereafter or for the period required by statutes, and shall then cease
unless within such period, the Company has received from the Subscribing Reinsurer written
notice of its approval of such risk.

ARTICLE IX — SPECIAL ACCEPTANCES

	A.	 	Risks which are beyond the terms, conditions or limitations of this Contract submitted to
each Subscribing Reinsurer identified on the attached Interests and Liabilities Agreement for
special acceptance hereunder. Upon receipt of approval from all Subscribing Reinsurers, such
acceptance shall bind each Subscribing Reinsurer for its respective share in the interests
and liabilities of said risk. A Subscribing Reinsurer’s failure to respond within 2 full
business days shall be deemed approval of a risk submitted for special acceptance.
	 
	B.	 	When a risk is specially accepted, such risk shall be covered under the terms and conditions
of this Contract, except as such terms shall be modified by such acceptance. Premiums and
losses derived from any special acceptance shall be included with other data for rating
purposes of this Contract. Once a risk has been accepted under the provisions of this
Article, it will automatically be included at renewal unless there have been material changes
to the risk, in which case the risk will be resubmitted.

ARTICLE X — 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, disaster, casualty or happening or series of
accidents, disasters, casualties or happenings arising out of or following the same cause or a
series of similar causes. 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 cause or series of similar causes, 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 cause or series of similar causes.
	 
	C.	 	As respects Property Damage Liability (other than Automobile and Products), Loss Occurrence
shall also, subject to provisions 1. and 2. below, be understood to mean loss or losses
caused by a series

					
	 	 	 	 	 
	 
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	 	 	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
	 
	 	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
Contract.
	 
	D.	 	As respects those Policies which provide aggregate limits of liability, the total of all
individual losses occurring during any one Policy year which proceed from or are traceable to
the same cause or a series of similar causes.
	 
	E.	 	As respects an occupational or other disease or cumulative injury under Workers Compensation
and Employers Liability, each case of an employee contracting any disease for which the
Company or a Legal Entity may be liable shall be considered a separate and distinct
occurrence and the date of each occurrence shall be deemed to be as follows:

	 	1.	 	If the case is compensable under the Workers Compensation Law or any Occupational
Disease Compensation Act, the date of the beginning of the disability for which
compensation is payable;
	 
	 	2.	 	If the case is not compensable under the Workers Compensation Law or any
Occupational Disease Compensation Act, the date of the disability due to said disease
actually began;
	 
	 	3.	 	Where claim is made after employment has ceased, then the date of the cessation of
employment shall be deemed to be the date of disability;
	 
	 	4.	 	Notwithstanding the foregoing, in the incidence of a sudden catastrophic event not
exceeding 24 hours in duration including traumatic injury or death, all losses to all
employers shall be deemed a Loss Occurrence.

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
a Legal Entity, or the insured, during the term of this Contract arising out of or following
the same cause or series of similar causes.

	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 a Legal Entity or
the insured, whichever comes first, 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 a Legal Entity or the insured during an Extended Reporting Period, the date
of occurrence shall be deemed to be the last day of the policy period.

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

	A.	 	In the event 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 XI — REINSURANCE PREMIUM

	A.	 	The Company shall pay to the Subscribing Reinsurer a rate of 3.106% times the Subject Earned
Premium for all Policies classified as Commercial Lines Umbrella by the Company and the Legal
Entities.
	 
	B.	 	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 a monthly pro rata basis, for Policies classified by
the Company and the Legal Entities as Commercial Lines Umbrella.
	 
	C.	 	The term “Net Premiums Written” shall mean gross premiums written less returns, allowances
and reinsurances which inure to the benefit of the Subscribing Reinsurer.
	 
	D.	 	Each claim reduces the amount of indemnity from the time the loss occurred by the sum paid.
Any amount exhausted is reinstated from the time the Loss Occurrence begins. Reinstatements
will be provided as follows: one at twenty-five percent, one at fifty percent and two at one
hundred percent of the original premium. The additional premium will be calculated pro rata of
the annual premium, as to the fraction of the limit of liability reinstated and 100% as to the
term.

	ARTICLE XII — REPORTS AND REMITTANCES

	A.	 	The Company shall furnish the Subscribing 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 Contract.
	 
	B.	 	Quarterly Deposit Premiums equal to 1⁄4 of the 100% of Annual Deposit Premium will be remitted
on January 15, May 15, August 15 and November 15, according to the schedule below. The Company
shall submit finalized accounts to the Subscribing Reinsurer on February 15, of the subsequent
year, summarizing the actual subject earned premium for the previous Contract Year. The
difference between the deposit premium and the actual subject earned premium will be settled
to/from the Company within 15 days of February 15. However, in no event shall the annual
adjusted premium
	 
	 	 	be less than the Annual Minimum Premium for each layer, set forth below:

	 	 	 	 	 	 	 	 	 
	Annual	 	Annual	 	Quarterly
	Minimum	 	Deposit	 	Deposit
	$4,160,000
	 	$	5,200,000	 	 	$	1,300,000	 

					
	 	 	 	 	 
	 
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	C.	 	Payment by the Subscribing Reinsurer of its portion of Loss and Loss Adjustment Expenses
paid by the Company or a Legal Entity shall be made by the Subscribing Reinsurer to the
Company immediately upon reasonable evidence of the amount due or to be due, being furnished
by the Company.

ARTICLE XIII — LOSS ADJUSTMENT AND SETTLEMENT

The Company shall give notice, as soon as practicable, to the Subscribing Reinsurer of any claim
that it has reason to believe could involve this Contract. The Company shall keep the Subscribing
Reinsurer informed of significant developments likely to affect the cost of any claim or claims
hereunder.

The Company or a Legal Entity may commence, continue, defend, settle, or withdraw from actions,
suits, or prosecutions and, generally, do all such things relating to any claim or loss in which
the Subscribing Reinsurer is interested as, in the Company’s or a Legal Entity’s judgment, may be
beneficial or expedient to the Company and the Subscribing Reinsurer. The Company and the Legal
Entities shall be the sole judge as to what claims are covered under their Policies. All of the
Ultimate Net Loss (and loss occurrences), as well as all loss settlements made and judgments paid
by the Company or a Legal Entity, provided they are within the terms of this Contract either under
the strict conditions of the Policies or by way of compromise, shall be unconditionally binding
upon the Subscribing Reinsurer, who agrees to pay all amounts for which they are liable
immediately upon reasonable evidence of the amount due being furnished to the Subscribing
Reinsurer by the Company. The true intent of this Contract is that the Subscribing Reinsurer
shall, in every case to which this Contract applies, follow the settlements of the Company and the
Legal Entities.

The Company shall advise the Subscribing Reinsurer of all claims which:

	 	1.	 	Are reserved by the Company or a Legal Entity for an amount in excess of 50% of its
retention.

ARTICLE XIV — SALVAGE AND SUBROGATION

The Reinsurers shall be credited with their share of salvage and/or subrogation in respect of
claims and settlements under this Contract, less their share of recovery expense. Unless the
Company and the Reinsurers agree to waive such rights in the settlement of a disputed claim, or
the Company and Reinsurers agree to the contrary, the Company and the Legal Entities shall enforce
the right to salvage and/or subrogation and shall prosecute all claims arising out of such right.
Should the Company or the Legal Entities refuse or neglect to enforce this right, the Reinsurers
are hereby empowered and authorized to institute appropriate action in the name of the Company or
the Legal Entities, as applicable.

Amounts recovered from salvage and/or subrogation shall always be used to reimburse the excess
Reinsurers (and the Company, should it carry a portion of excess coverage net) in the reverse order
of their participation in the loss before being used in any way to reimburse the Company or a Legal
Entity for its primary loss. If the amount recovered exceeds the recovery expense, the recovery
expense shall be borne by each party in proportion to its benefit from the recovery. If the
recovery expense exceeds the amount recovered, the amount recovered (if any) shall be applied to
the reimbursement of recovery

expense and the remaining expense, as well as any originally incurred loss expense, shall be added
to the Ultimate Net Loss. If no amount is recovered from salvage and/or subrogation, the expense
incurred in attempting such recovery shall be deemed loss expense and shall be added to the
Ultimate Net Loss.

					
	 	 	 	 	 
	 
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ARTICLE XV — FEDERAL TERRORISM EXCESS RECOVERY CLAUSE

Any loss reimbursement the Company receives from the United States Government under the
Terrorism Risk Insurance Act of 2002 (“TRIA”) as amended by the Terrorism Risk Insurance Extension
Act of 2005 (TRIEA) as a result of loss occurrences commencing during the term of this Contract
shall apply as follows:

Except as provided below, any loss reimbursement under TRIA/TRIEA shall inure solely to the
benefit of the Company and shall be entirely disregarded in applying all of the provisions of this
Contract.

If one or more loss occurrences commencing during the term of this Contract result(s) in
reinsurance recoveries to the Company under this Contract and reimbursement under TRIA/TRIEA, and
such amounts, together with any other reinsurance recoveries to the Company for said loss
occurrence(s), exceed the total amount of “Insured Losses” to the Company, any amount in excess
thereof shall be held by the Company. The Company shall then reimburse the Subscribing Reinsurer a
portion of such excess recovery in an amount equal to the proportion that the Subscribing
Reinsurer’s payment under this Contract bears to the total treaty reinsurance recoveries to the
Company for Insured Losses for said loss occurrence(s). Provided, however, that in no event shall
such reimbursement exceed the amount paid by the Subscribing Reinsurer to the Company under this
Contract.

For purposes hereof, if a loss reimbursement received by the Company under TRIA/TRIEA is based on
the Company’s Insured Losses in more than one loss occurrence and neither the Secretary of the
Treasury nor his delegatee specifies the amount of loss allocable to each respective loss
occurrence, the reimbursement shall be pro-rated in the proportion that the Company’s Insured
Losses in each loss occurrence bears to the Company’s total Insured Losses resulting from all loss
occurrences to which the reimbursement applies.

For purposes of this Article, “Insured Loss (es)” shall have the same meaning as set forth in
Section 102(5) of TRIA.

ARTICLE XVI — ACCESS TO RECORDS

Except as otherwise provided in this Article, Subscribing Reinsurer, or its duly authorized
representative, may upon reasonable prior written notice to the Company, at the Subscribing
Reinsurer’s own expense, examine at the offices of the Company or its affiliates, during normal
office hours, the Company’s or the Legal Entities’ Policy, accounting, underwriting, or claim
records and files, or any such additional relevant records and files, as they exist in the
Company’s or its affiliates’ possession or reasonable control, relating to business ceded under
this Contract. The Subscribing Reinsurer’s notice shall reasonably describe the nature of the
inspection that it wishes to conduct, the persons conducting the inspection and upon notice of
available files from the Company, the files that it wishes to review. Subject to the limitations
expressed in this Article, this right of inspection shall survive termination or expiration of
this Contract and shall continue as long as either Party has any rights or obligations under this
Contract.

The Company reserves the right to deny the Subscribing Reinsurer access to records or files
concerning any particular claim(s) if the Subscribing Reinsurer has not disputed liability for
payment of such claim(s), and payment of such claim(s) is more than ninety (90) days overdue
according to the Company’s records. The Company shall, however, prior to an arbitration demand that
may be instituted by either party, continue to respond to reasonable specific requests for
information and questions raised by the Subscribing Reinsurer concerning such claims; and nothing
in this Article shall restrict the right or ability of the Subscribing Reinsurer to seek discovery
of relevant information in an arbitration proceeding pursuant to the Arbitration Article of this
Contract.

					
	 	 	 	 	 
	 
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As a condition precedent to access to records under this Article, the Subscribing Reinsurer, its
personnel and any authorized third party representative of the Subscribing Reinsurer shall agree to
the provisions of the Confidentiality Article of this Contract.

The Company reserves the right to withhold any documents from the Subscribing Reinsurer (a)
concerning Trade Secrets of the Company or its affiliates, (b) subject to the terms of a third
party non-disclosure agreement with the Company or its affiliates requiring third party consent to
disclosure, (c) subject to the Work Product Privilege or Attorney-Client Privilege or (d)
concerning individual private information that as a matter of law cannot be disclosed by the
Company or its affiliates (hereinafter referred to in the Contract as “Privileged Documents”). The
Company shall reasonably try to exempt the Reinsurers from any third party non-disclosure
agreement or obtain consent from the third party to disclose to the Subscribing Reinsurer.

Notwithstanding the foregoing, the Company shall permit and not object to the Subscribing
Reinsurer’s access to Privileged Documents in connection with the underlying claim reinsured
hereunder following final settlement or final adjudication of the case or cases involving such
claim, with prejudice against all claimants, and all parties to such adjudications; provided that
the Company may defer release of such Privileged Documents if there are subrogation, contribution,
or other third party actions with respect to that claim or case, which might jeopardize the
Company’s or its affiliates’ defense by release of such Privileged Documents. In the event that
the Company shall seek to defer release of such Privileged Documents, it will in consultation with
the Subscribing Reinsurer take other steps as reasonably necessary to provide the Subscribing
Reinsurer with the information it reasonably requires to indemnify the Company without causing a
loss of such privileges. The Subscribing Reinsurer, however, shall not have access to Privileged
Documents relating to any dispute between the Company and the Subscribing Reinsurer.

For purposes of this Article, “Trade Secrets” shall have the meaning provided in Section 1839 of
the United States Economic Espionage Act of 1996. “Attorney-Client Privilege” shall mean
communications of a confidential nature between a) the Company or its affiliates, or anyone
retained or in the control of the Company or its affiliates, or their in-house or outside legal
counsel, or anyone in the control of such legal counsel, and b) any in-house or outside legal
counsel which relate to legal advice being sought by the Company or its affiliates and/or which
contains legal advice being provided to the Company or its affiliates. “Work Product Privilege”
shall mean communications, written materials and tangible things prepared by or for in-house or
outside counsel, or prepared by or for the Company or its affiliates, in anticipation of or in
connection with litigation, arbitration, or other dispute resolution proceedings.

ARTICLE XVII — DIVIDENDS AND TAXES

In consideration of the terms of this Contract, the Company shall not claim any deduction in
respect of any amount paid as dividends or as reinsurance premium when making tax returns, other
than income or profits tax returns to any State or to the District of Columbia.

ARTICLE XVIII — FEDERAL EXCISE TAX

This Article is applicable to any Subscribing Reinsurer who is domiciled outside of the United
States of America, except for any Subscribing Reinsurer exempt from Federal Excise Tax. A
Subscribing Reinsurer that claims exempt status from Federal Excise Tax shall provide to the
Company, upon its request, proof that the exempt status adequately satisfies the demands of the
U.S. Internal Revenue Agency and/or other applicable U.S. government authority.

					
	 	 	 	 	 
	 
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Each Subscribing Reinsurer shall allow the applicable percentage of the premium payable hereon
(as imposed under Section 4371 of the Internal Revenue Code) for the purpose of paying Federal
Excise Tax to the extent such premium is subject to such tax.

In the event of any return of premium, the Subscribing Reinsurer shall deduct the aforesaid
percentage from the return premium payable hereon and the Company or its agent shall recover such
tax from the United States Government.

ARTICLE XIX — GOVERNING LAW

The validity and interpretation of this Contract shall be governed by and construed in accordance
with the law of the State of New Hampshire.

ARTICLE XX — CURRENCY

Whenever a reference to a monetary currency appears in this Contract, it shall be construed to
mean United States Dollars (“USD”). However, in those cases where the Policies are issued by the
Company using Canadian Dollars (“CAD”), it shall mean Canadian Dollars. All payments made by
either party shall be made in United States Dollars except that payments made involving Policies
issued using Canadian Dollars shall be made in Canadian Dollars. All amounts paid or received by
the Company in any other currency shall be converted into United States Dollars at the rate of
exchange on the date at which it is entered on the books of the Company.

ARTICLE XXI — OFFSET

Each party to this Contract together with their successors or assigns shall have and may exercise,
at any time, the right to offset any balance(s) due the other (or, if more than one, any other).
Such offset may include balances due under this Contract, and any other contracts between the
parties, whether such balances arises from premium, losses, or otherwise, and regardless of the
capacity of any party, whether as assuming and/or ceding insurer, under the various reinsurance
contracts involved, provided however, that in the event of insolvency of a party hereto, offsets
shall only be allowed in accordance with the provisions of the applicable law, statute, or
regulation governing such offset.

ARTICLE XXII — ERRORS AND OMISSIONS

Any inadvertent delay, omission, or error in complying with the terms and conditions of this
Contract shall not be held to relieve either party hereto from any liability, which would attach
to it hereunder if such delay, omission, or error had not been made, provided such delay,
omission, or error is rectified upon discovery.

ARTICLE XXIII — INSOLVENCY

(If more than one reinsured company is referenced within the definition of “Company” in the
Preamble to this Contract, this Article shall apply severally to each such company. Further, this
Article and the laws of the domiciliary state shall apply in the event of the insolvency of any
company intended to be covered hereunder. In the event of a conflict between any provision of this
Article and the laws of the domiciliary state of any company intended to be covered hereunder, that
domiciliary state’s laws shall prevail.)

					
	 	 	 	 	 
	 
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In the event of the insolvency of the Company, reinsurance under this Contract shall be payable on
demand, with reasonable provision for verification, on the basis of claims allowed against the
insolvent Company by any court of competent jurisdiction or by any liquidator, receiver,
conservator, or statutory successor of the Company having authority to allow such claims, without
diminution because of such insolvency or because such liquidator, receiver, conservator, or
statutory successor has failed to pay all or a portion of any claims. Such payments by the
Subscribing Reinsurer shall be made directly to the Company or its liquidator, receiver,
conservator, or statutory successor, except to the extent Section 4118(a) of the New York
Insurance Law applies, or except (a) where the Contract specifically provides another payee of
such reinsurance in the event of the insolvency of the Company, or (b) where the Subscribing
Reinsurer with the consent of the direct insured or insureds has assumed such Policy obligations
of the Company as direct obligations of the Subscribing Reinsurer to the payees under such
Policies and in substitution for the obligations of the Company to such payees.

It is agreed, however, that the liquidator, receiver, conservator, or statutory successor of the
insolvent Company shall give written notice to the Subscribing Reinsurer of the pendency of a
claim against the insolvent Company on the Policy or Policies reinsured within a reasonable time
after such claim is filed in the insolvency proceeding and that during the pendency of such claim
the Subscribing Reinsurer may investigate such claim and interpose, at its own expense, in the
proceeding where such claim is to be adjudicated, any defense or defenses which it may deem
available to the Company or its liquidator, receiver, conservator, or statutory successor. The
expense thus incurred by the Subscribing 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 Subscribing Reinsurer.

Where two or more Reinsurers are involved in the same claim and a majority in interest elects to
interpose defense to such claim, the expense shall be apportioned in accordance with the terms of
this Contract as though such expense had been incurred by the insolvent Company.

With respect to California Workers Compensation loss (es), it is agreed that in the event of any
delinquency proceeding, receivership, or insolvency of the Company and/or the failure of the
Subscribing Reinsurer, for any reason, to make payments under this Contract, the Insurance
Commissioner of California may, upon 30-days notice, draw upon any sums from the deposit made by
the Subscribing Reinsurer in accordance with the provisions of sections 11691 — 11703 of the
California Insurance Code.

ARTICLE XXIV — MEDIATION

In the event of any dispute or difference of opinion arising out of or relating to this Contract,
including but not limited to the formation, interpretation, performance or breach of this Contract,
whether such dispute arises before or after the expiration of this Contract, the Company and the
Subscribing Reinsurer may mutually agree in writing that, prior to or at any time during an
arbitration proceeding, they will submit such dispute or difference of opinion to non-binding
mediation which will be held at a location mutually agreed by the parties. The parties agree that
any non-binding mediation conducted during any stage of an arbitration process shall be conducted
concurrently with such arbitration process, and that the arbitration process or proceedings shall
not be stayed unless both the Company and the Subscribing Reinsurer otherwise agree.

Each party shall submit a list of not more than four (4) potential mediators to the other party
within the fourteen (14) days of reaching such mutual agreement. The two parties shall then agree
on the appointment on one (1) mediator from the combined lists within seven (7) days. The mediator
shall be a neutral, impartial third party, without past employment or directorial relationships
with the parties to the

					
	 	 	 	 	 
	 
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mediation. Such mediator shall make full disclosure of all past partisan relationships with either
the Company or Subscribing Reinsurer to the parties within seven (7) days of his or her
notification that he or she has been selected as a Mediator.

If the Company and the Subscribing Reinsurer cannot agree on a mediator within twenty-one (21)
days from the date of a mutual agreement to mediate, then arbitration proceedings may commence in
accordance with the Arbitration Article.

The mediator will schedule an initial mediation session within thirty (30) days of his or her
appointment and will be responsible for the formulation of an agenda to be distributed to the
parties involved in the mediation not less than five (5) days before the mediation commences.

The mediator will not have the power of enforcement of any agreement between the parties nor will
the mediator have any right to assess any damages, including punitive damages, to either party
participating in the mediation.

If, in the opinion of the mediator, the parties cannot resolve the dispute or difference of
opinion, arbitration proceedings may commence in accordance with the Arbitration Article. In any
event, the mediation shall conclude within sixty (60) days of its referral to the mediator. Should
the mediation not be resolved in sixty (60) days, then arbitration proceedings may commence in
accordance with the Arbitration Article.

Each party shall bear the expense of its own representatives and shall jointly and equally bear
with the other party the expenses of the mediator and the place of mediation.

ARTICLE XXV — ARBITRATION

	 	A.	 	Disputes to be Arbitrated. With the exception of any dispute resolution
procedures that are otherwise contained in this Contract, any and all disputes between the
Company and any Subscribing Reinsurer or Reinsurers (“Party” individually or “Parties”
collectively) arising out of, relating to, or concerning this Contract, whether sounding
in contract or tort and whether arising during or after this Contract’s formation, or its
termination, including disputes as to whether the Contract was validly formed or is
voidable, shall be submitted to the decision of an arbitration panel (“Panel”). The Panel
shall consist of an umpire and two party-appointed arbitrators unless a Party meets the
requirements of Paragraph C of this Article and demands arbitration pursuant thereto, in
which case the Panel would consist of an umpire only.
	 
	 	B.	 	Procedures. Except as provided herein, any arbitration shall be based upon the Procedures for
the resolution of U.S. Insurance and Reinsurance Disputes, Regular Panel Version, dated
April 2004 (the “Procedures”), developed by the Insurance and Reinsurance Dispute Resolution
Task Force, subject to the following modifications:

	 	1.	 	Qualifications of the arbitrators and umpires shall be in accordance with
Alternative section 6.2 of the Procedures.
	 
	 	2.	 	The Parties hereby designate the umpire list maintained by ARIAS (U.S.) as the
list to be used in the event that section 6.7(a) of the Procedures is invoked.
	 
	 	3.	 	Unless otherwise mutually agreed, the members of the Panel shall be impartial and
disinterested. The members of the Panel may not be: (1) in the control of any Party or
its parent, affiliate, or agent, (2) a former director or officer of any Party or its
parent, affiliate, or agent, or (3) a likely witness in the arbitration. The requirement
of impartiality means that all members of the Panel shall have the same obligation to
approach the Panel’s

	 	 	 	 	 

	 

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	 	 	 	duties and decisions with fairness and without consideration for the fact that Panel
members may have been appointed by one of the Parties. The requirement of impartiality
does not mean that any arbitrator can have no previous knowledge of or experience with
respect to issues involved in the dispute or disputes.
	 
	 	4.	 	The first sentence of Section 10.4 of the Procedures shall be replaced by the
following sentence: “The Panel shall require that each Party submit concise written
statements of position, including summaries of the facts and evidence a Party intends to
present, discussion of the applicable law and the basis for the requested Award or
denial of relief sought.”
	 
	 	5.	 	Once the Panel has been constituted, no Party (or anyone acting for a Party) shall
have any communications concerning the arbitration or any of the issues before the Panel
with any member of the Panel that is not also disclosed to all other Parties and all
members of the Panel. Each Panel member shall have a continuing duty to disclose
promptly to all Parties and all Panel members any violation of this prohibition and the
specifics of any improper communications that occurred. This prohibition shall remain in
place until all challenges to any arbitration awards and decisions have been either
waived or finally concluded.
	 
	 	6.	 	Section 11.1 of the Procedures shall be replaced by the following provision: “The
Parties may propound discovery seeking disclosure of such information and/or documents
relevant to the dispute or necessary for the proper resolution of the dispute.”
	 
	 	7.	 	Position statements may be amended at any reasonable time, but not later than the
close of discovery without a showing to the Panel that the amending Party could not
reasonably have raised the new claim or issue at an earlier time.
	 
	 	8.	 	The Panel shall hold an evidentiary hearing, if one is necessary, within one year
of the arbitration demand, unless the Parties otherwise agree. Should a Party seek a
reasonable extension to this time frame for good cause shown, the other Party’s
agreement shall not be unreasonably withheld.
	 
	 	9.	 	To the extent permitted by the law, the Panel shall have the authority to issue
subpoenas and other orders to enforce its decisions.
	 
	 	10.	 	The Panel may award reasonable attorneys’ fees and arbitration costs to the
prevailing Party, as determined by the Panel.
	 
	 	11.	 	Section 14.3 of the Procedures shall be replaced by the following provision: “The
Panel shall make a decision and issue an award with regard to the terms expressed in
this Contract, and the custom and practice of the property and casualty insurance and
reinsurance business. The Panel shall not be obligated to follow the strict rules of law
and evidence.”

	 	C.	 	Alternative Streamlined Procedures. Notwithstanding the foregoing provisions of this
Article, the
Alternative Streamlined Procedures set forth in section 16 of the Procedures, as modified by
sections B3, B4, and B9 through B11 of this Article, shall apply in the event that, in a
consolidated proceeding or otherwise, the Party initiating arbitration is seeking payment of
a total amount that is

	 	 	 	 	 

	 

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	 	 	 	no greater than one million dollars ($1,000,000), or the currency equivalent thereof.
Sections 16.1, 16.2, 16.3 and the second sentence of section 16.4 of the Alternative
Streamlined Procedures shall not apply. The Parties agree to comply with section 6.7 of the
Procedures to appoint a single umpire, and hereby designate the umpire list maintained by
ARIAS (U.S.) as the list to be used in section 6.7(a).
	 
	 	D.	 	Hearing Location. The hearing shall be held in Boston, Massachusetts, unless the
Parties mutually agree to a different location.
	 
	 	E.	 	Confirmation. Either Party may apply to a court of competent jurisdiction for an
order confirming any award of the Panel; a judgment of that court shall thereupon be entered
on any award. If such an order is issued, the Party against whom confirmation is sought shall
pay the attorneys’ fees incurred of the Party who applied for the confirmation order and all
court costs of any such proceeding.
	 
	 	F.	 	Equitable Relief from a Court of Law. Nothing herein shall be construed to prevent
any participating Party from applying to a court of competent jurisdiction to issue a
restraining order or other equitable relief to maintain the “status quo” of the Parties
participating in the arbitration pending the decision and award by the Panel.
	 
	 	G.	 	Consolidated Proceedings.

	 	1.	 	Same contract, single Subscribing Reinsurer. Both the Company and any single
Subscribing Reinsurer on this Contract have the right to combine any and all disputes
between them that concern this Contract (including any renewal of this Contract or any
contract for which this Contract is a renewal) into a single arbitration proceeding
before a single Panel, except that the standard for determining whether a Party may add
a new issue, claim, or dispute to an arbitration proceeding shall be the standard for
amending a Position statement, as set forth in Paragraph B7 of this Article.
	 
	 	2.	 	Multiple contracts, single Subscribing Reinsurer. The Company has the right to
combine any and all disputes between the Company and a single Subscribing Reinsurer
into a single arbitration proceeding before a single Panel where such disputes involve
this Contract and any additional contracts between the two Parties, except that the
standard for determining whether a Party may add a new issue, claim, or dispute to an
arbitration proceeding shall be the standard for amending a Position statement, as set
forth in Paragraph B7 of this Article.
	 
	 	3.	 	Same contract, multiple Reinsurers. At the Company’s option, if more than one
Subscribing Reinsurer is involved in arbitration relating to this Contract, where there
are common questions of law or fact and a possibility of conflicting awards or
inconsistent results, all such Reinsurers shall constitute and act as one Party for
purposes of this Article and communications shall be made by the Company to each of the
Reinsurers constituting the one Party; provided, however, that the Reinsurers shall
have the right to assert several, rather than joint defenses or claims, and to be
represented by separate counsel. This provision shall not change the liability of each
of the Reinsurers under the terms of this Contract from several to joint.

	 	H.	 	Choice of Law. The law set forth in the Governing Law Article shall apply to this
Arbitration Article. In addition, to the extent the Panel (or the umpire in an Alternative Streamlined Procedure)
looks to applicable law, such Panel or umpire shall apply the law as set forth in the
Governing Law Article of this Contract.
	 
	 	I.	 	Survival of Article. This Article shall survive the termination or expiration of this
Contract.

	 	 	 	 	 
	 

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ARTICLE XXVI — SPECIAL CONDITIONS

This Article applies only in the event that:

	 	A.	 	A State Insurance Department or other legal authority orders the Subscribing
Reinsurer to cease writing business or has imposed upon it any other restrictions on or
conditions relating to the Subscribing Reinsurer’s license or conduct of business in
any jurisdiction; or
	 
	 	B.	 	The Subscribing Reinsurer has become insolvent or has been placed into
liquidation or receivership (whether voluntary or involuntary), or there have been
instituted against it proceedings for the appointment of a receiver, liquidator,
rehabilitator, conservator, trustee in bankruptcy, or other agent known by whatever
name, to take possession of its assets or control of its operations; or
	 
	 	C.	 	The Subscribing Reinsurer’s policyholders’ surplus has been reduced by 25% of
the amount of surplus at the inception of this Contract; or
	 
	 	D.	 	The Subscribing Reinsurer has become merged with, acquired, or controlled by any
company, corporation, or individual(s) not controlling the Subscribing Reinsurer’s
operations at the inception of this Contract; or
	 
	 	E.	 	The Subscribing Reinsurer’s A.M. Best Rating has been assigned or downgraded
below A- or Standard and Poor’s Rating has been assigned or downgraded below A-; or
	 
	 	F.	 	The Subscribing Reinsurer fails to maintain its surplus at a level of at least
200% of the Subscribing Reinsurer’s Risk-Based Capital; or
	 
	 	G.	 	The Subscribing Reinsurer announces intentions to cease underwriting operations; or
	 
	 	H.	 	The Subscribing Reinsurer voluntarily ceases underwriting operations; or
	 
	 	I.	 	The Subscribing Reinsurer has reinsured its entire liability under this Contract, or has
entered into a novation extinguishing its entire liability under this Contract without
the Company’s prior written consent.

If one or more of the above-stated circumstances occur, the Company shall provide the Subscribing
Reinsurer with a written statement of the Subscribing Reinsurer’s share of all paid recoverables,
case reserves, loss adjustment expenses, incurred but not reported losses, reserves for unearned
premium, and ceding commissions due under this Contract (collectively “Obligations”). Within
fifteen (15) days of the Subscribing Reinsurer’s receipt of such statement, the Subscribing
Reinsurer agrees to fund all Obligations by clean, irrevocable, and unconditional Letters of Credit
payable exclusively to the Company and issued by a bank acceptable to the Company. At the Company’s
request, the Subscribing Reinsurer shall agree to provide separate Letters of Credit for any
distinct legal entities within the Company covered under this Contract. Such Letters of Credit
shall be issued for a period of not less than one year, and shall be automatically extended for one
year from their dates of expiration or any future expiration dates, unless sixty (60) days prior to
any expiration date the issuing bank shall notify the Company by certified mail that the issuing
bank elects not to extend any Letter of Credit for any additional period.

The Subscribing Reinsurer and Company agree that the Letters of Credit provided by the
Subscribing Reinsurer, pursuant to the provisions of this Contract, may be drawn upon at any
time, notwithstanding any other provision of this Contract, and be utilized by the Company or any
successor, by operation of law, of the Company, including without limitation, any liquidator,
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the Company, without diminution because of the insolvency of the Company or the Subscribing
Reinsurer for one or more of the following purposes:

	 	A.	 	To pay or reimburse the Company for:

	 	1.	 	The Subscribing Reinsurer’s share under this Contract of premiums
returned, but not yet recovered from the Subscribing Reinsurer, to the owners of
Policies reinsured under this Contract due to cancellations of such Policies;
and
	 
	 	2.	 	The Subscribing Reinsurer’s share, under this Contract, of
surrenders and benefits or liabilities paid by the Company, but not yet
recovered from the Subscribing Reinsurer, under the terms and provisions of the
Policies reinsured under this Contract; and
	 
	 	3.	 	Any other amounts necessary to secure the credit or reduction from
liability for reinsurance taken by the Company.

	 	B.	 	Where the Letters of Credit will expire without renewal or be reduced or
replaced by Letters of Credit for a reduced amount and where the Subscribing
Reinsurer’s entire obligations under this Contract remain unliquidated and
undischarged ten (10) days prior to the termination date, to withdraw amounts equal to
the Subscribing Reinsurer’s share of the liabilities, to the extent that the
liabilities have not yet been funded by the Subscribing Reinsurer and exceed the
amount of any reduced or replacement Letters of Credit, and deposit those amounts in a
separate account in the name of the Company in a qualified U.S. financial institution
apart from its general assets, in trust for such uses and purposes as specified above
as may remain after withdrawal and for any period after the termination date.

At annual intervals, or at the Company’s option, on a quarterly basis, the Company shall prepare
an adjusted statement of the Subscribing Reinsurer’s Obligations, for the sole purpose of amending
the Letters of Credit, in the following manner:

	 	A.	 	If the statement shows that the Subscribing Reinsurer’s Obligations exceed the
balance of credit as of the statement date, the Subscribing Reinsurer shall, within
fifteen (15) days after receipt of notice of such excess, secure delivery to the
Company of an amendment to the Letters of Credit increasing the amount of credit by the
amount of such difference.
	 
	 	B.	 	If, however, the statement shows that the Subscribing Reinsurer’s Obligations
are less than the balance of credit as of the statement date, the Company shall, within
fifteen (15) days after receipt of written request from the Subscribing Reinsurer,
release such excess credit by agreeing to secure an amendment to the Letters of Credit
reducing the amount of credit available by the amount of such excess credit.

If the Subscribing Reinsurer fails to fund such Obligations by Letters of Credit as described
above, the Company may terminate this Contract at any time by the giving of thirty (30) days prior
written notice to the Subscribing Reinsurer.

The coverage afforded by this Contract shall cease as of the date of termination and the
Subscribing Reinsurer shall return the unearned premium, if any. If coverage hereunder terminates
while a claim covered by this Contract is in progress, the Subscribing Reinsurer shall be liable
subject to all other conditions hereof for its proportion of the entire claim, provided that the
event giving rise to the claim started before such termination.

	 	 	 	 	 

	 

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ARTICLE XXVII — THIRD PARTIES

This Contract shall not be deemed to give any right or remedy to any third party whatsoever unless
said right or remedy is specifically granted to such third party by the terms of this Contract.

ARTICLE XXVIII — UNAUTHORIZED REINSURANCE

(Applies only to a Subscribing Reinsurer who at the inception of the Contract or at any time
thereafter does not qualify for full credit with any insurance regulatory authority having
jurisdiction over the Company’s reserves.)

As regards Policies or bonds issued coming within the scope of this Contract, the Company agrees
that when it shall file with the insurance regulatory authority or set up on its books reserves
for unearned premium and losses covered hereunder which it shall be required by law to set up, it
will forward to the Subscribing Reinsurer a statement showing the proportion of such reserves
which is applicable to the Subscribing Reinsurer. The Subscribing Reinsurer hereby agrees to fund
such reserves in respect of unearned premium, known outstanding losses that have been reported to
the Subscribing Reinsurer and allocated loss adjustment expense relating thereto, losses and
allocated loss adjustment expense paid by the Company or the Legal Entities but not recovered from
the Subscribing Reinsurer, plus reserves for losses incurred but not reported as determined by the
Company, as shown in the statement prepared by the Company (hereinafter referred to as “
Subscribing Reinsurer Obligations”) by Letters of Credit unless the method of funding is
determined by applicable law, statute, or regulation.,

The Subscribing Reinsurer agrees to apply for and secure timely delivery to the Company of clean,
irrevocable, and unconditional Letters of Credit issued by a bank that is a qualified U.S.
financial institution and containing provisions acceptable to the insurance regulatory authorities
having jurisdiction over the Company’s reserves in an amount equal to the Subscribing Reinsurer’s
proportion of said reserves. At the Company’s request, the Subscribing Reinsurer will agree to
provide separate Letters of Credit for any Legal Entities and the Company covered under this
Contract. Such Letters of Credit shall be issued for a period of not less than one year, and shall
be automatically extended for one year from their date of expiration or any future expiration date
unless 60 days prior to any expiration date the issuing bank shall notify the Company by certified
mail that the issuing bank elects not to consider the Letters of Credit extended for any
additional period.

The Subscribing Reinsurer and Company agree that the Letters of Credit provided by the Subscribing
Reinsurer pursuant to the provisions of this Contract may be drawn upon at any time,
notwithstanding any other provision of this Contract, and be utilized by the Company or any
successor, by operation of law, of the Company, including without limitation, any liquidator,
rehabilitator, receiver, or conservator of the Company, without diminution because of the
insolvency of the Company or the Subscribing Reinsurer for one or more of the following purposes:

	 	A.	 	To reimburse the Company for the Subscribing Reinsurer’s share of premiums
returned to the owners of Policies reinsured under this Contract because of
cancellations of the Policies;
	 
	 	B.	 	To reimburse the Company for the Subscribing Reinsurer’s share of surrenders and
benefits or losses paid by the Company under provisions of the Policies reinsured under
this Contract;
	 
	 	C.	 	To fund an account with the Company in an amount, at least, equal to the deduction
for reinsurance ceded from the Company liabilities for Policies ceded under this
Contract. The account shall include, but not be limited to, amounts for Policy reserves,
claims and

	 	 	 	 	 

	 

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	 	 	 	losses incurred (including losses incurred but not reported), loss adjustment
expenses, and unearned premium reserves; and
	 
	 	D.	 	To pay any other amounts the Company claims are due under this Contract.

The issuing bank shall have no responsibility whatsoever in connection with the propriety of
withdrawals made by the Company or the disposition of funds withdrawn, except to ensure that
withdrawals are made only upon the order of properly authorized representatives of the Company.

At annual intervals, or at the Company’s option, on a quarterly basis, the Company shall prepare a
specific statement of the Subscribing Reinsurer’s Obligations, for the sole purpose of amending
the Letters of Credit, in the following manner:

	 	A.	 	If the statement shows that the Subscribing Reinsurer’s Obligations exceed the
balance of credit as of the statement date, the Subscribing Reinsurer shall, within 30
days after receipt of notice of such excess, secure delivery to the Company of an
amendment to the Letters of Credit increasing the amount of credit by the amount of such
difference.
	 
	 	B.	 	If, however, the statement shows that the Subscribing Reinsurer’s Obligations are
less than the balance of credit as of the statement date, the Company shall, within 30
days after receipt of written request from the Subscribing Reinsurer, release such
excess credit by agreeing to secure an amendment to the Letters of Credit reducing the
amount of credit available by the amount of such excess credit.

Any and all disputes between the Company and any Subscribing Reinsurer or Reinsurers (“Party”,
individually, or “Parties”, collectively) arising out of, relating to, or concerning this Article
shall be resolved pursuant to the ARIAS-U.S. Newer Arbitrator Program. Unless the Parties otherwise
agree, the ARIAS Newer Arbitrator Program expedited proceeding with a single Newer Arbitrator shall
be used to resolve any such disputes.

ARTICLE XXIX — SERVICE OF SUIT

(This article applies to unauthorized Reinsurers and to Reinsurers who are domiciled outside the
United States of America.)

This Service of Suit Article will not be read to conflict with or override the obligations of the
parties to arbitrate their disputes as provided for in the Arbitration Article. This Article is
intended as an aid to compelling arbitration or enforcing such arbitration or arbitral award, not
as an alternative to the Arbitration Article for resolving disputes arising out of this Contract.

In the event of the failure of the Subscribing Reinsurer to pay any amount claimed to be due
hereunder, the Subscribing Reinsurer, at the request of the Company, will submit to the
jurisdiction of a Court of competent jurisdiction within the United States. Nothing in this Article
constitutes or should be understood to constitute a waiver of the Subscribing Reinsurer’s right to
commence an action in any Court of competent jurisdiction in the United States, to remove an action
to a United States District Court, or to seek a transfer of a case to another Court as permitted by
the laws of the United States or of any state in the United States. The Subscribing Reinsurer, once
the appropriate Court is selected, whether such court is the one originally chosen by the Company
and accepted by the Subscribing Reinsurer or is determined by removal, transfer, or otherwise, as
provided for above, will comply with all requirements necessary to give said Court jurisdiction
and, in any suit instituted against any of them upon this Contract, will abide by the final
decision of such Court or of any Appellate Court in the event of an appeal.

	 	 	 	 	 

	 

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Service of process in such suit may be made upon: Mendes & Mount, LLP, 750 Seventh Avenue, New
York, NY 10019-6829.)

The above-named are authorized and directed to accept service of process on behalf of the
Subscribing Reinsurer in any such suit. Further, pursuant to any statute of any state, territory,
or district of the United States that makes provision therefore, the Subscribing Reinsurer hereby
designates the Superintendent, Commissioner, or Director of Insurance, or other officer specified
for that purpose in the statute, or their successor(s) in office, as their true and lawful
attorney upon whom may be served any lawful process in any action, suit, or proceedings instituted
by or on behalf of the Company or any beneficiary hereunder arising out of this Contract, and
hereby designate the above-named as the person to whom the said officer is authorized to mail such
process or a true copy thereof.

ARTICLE XXX — CONFIDENTIALITY CLAUSE

Confidential Information. The submission materials, and any Policy, financial,
underwriting, accounting, and claims information, data statements, representations, and other
materials provided by the Company and received by the Subscribing Reinsurer in the course of an
audit, inspection, or otherwise, represent confidential or proprietary information (“Confidential
Information”). This Confidential Information is intended for the sole use of the Subscribing
Reinsurer (and its retrocessionaires, respective auditors, accountants, and legal counsel) as may
be necessary in analyzing and/or accepting a participation in and/or executing its
responsibilities under or related to this Contract. Subscribing Reinsurer acknowledges and agrees
that with respect to any review of Confidential Information by Subscribing Reinsurer, and/or
discussion of Confidential Information, Company does not waive and does not intend to waive any
available privilege or protection. The review of Confidential Information by Subscribing Reinsurer
and/or discussion of Confidential Information with Company shall not destroy, waive, or otherwise
impair the proprietary and/or protected status of any Confidential Information or any information
revealed in such discussion with Company personnel, whether reviewed by and/or discussed with
Subscribing Reinsurer intentionally or inadvertently, nor does the review of the Confidential
Information and/or discussion of Confidential Information with Company constitute an estoppel or
waiver of Company’s rights to assert the attorney-client or work-product privileges, or any other
applicable privilege or protection, over certain documents contained in the Company files and/or
certain information.

The Company and Subscribing Reinsurer agree that no confidentiality obligations will apply to
Confidential Information to the extent such Confidential Information: (1) is or becomes available
to the public, other than as a result of impermissible disclosure by the Subscribing Reinsurer,
(2) was or became available lawfully to Subscribing Reinsurer from a source, other than Company,
its affiliates or their personnel, that is not subject to a confidentiality obligation, (3) was
developed independently by Subscribing Reinsurer prior to disclosure by Company, its affiliates or
their personnel, as demonstrated by Subscribing Reinsurer’s records, or (4) is required to be
disclosed by law, regulation, court, or regulatory agency action.

Subscribing Reinsurer agrees to preserve all confidentiality and privilege pertaining to all
Confidential Information provided by Company and all knowledge and information gained through its
review of Confidential Information or discussions with Company’s or its affiliates’ personnel.
Subscribing Reinsurer further agrees not to disclose any such Confidential Information to any other
person or entity except as such disclosure may be necessary to its retrocessionaires, accountants,
attorneys, auditors, actuaries or third party catastrophe modelers or as otherwise required by law.
Subscribing Reinsurer agrees that no Confidential Information is to be copied and/or removed from
Company’s or its affiliates’ premises without the express permission of Company.

	 	 	 	 	 

	 

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Non-Public Personally Identifiable Information. Additionally, any disclosure of non-public
personally identifiable information shall comply with all state and federal statutes and
regulations governing the disclosure of non-public personally identifiable information.
“Non-public personally identifiable information” is financial or medical information of or
concerning a private person which either has been obtained from sources which are not available to
the general public or obtained from the person who is the subject and which information is
included in data files exchanged by the parties hereto. For the purposes hereof, the terms shall
include data elements such as names and addresses of individuals. Disclosing or using this
information for any purpose beyond the scope of this Contract, or beyond the exceptions set forth
above, is expressly forbidden without the prior consent of the Company.

Third-Party Demand. Should Subscribing Reinsurer receive a third-party demand pursuant to
subpoena, summons, or court or governmental order, to disclose Confidential Information (including
Non-public personally identifiable information) that has been provided by the Company, the
Subscribing Reinsurer shall make commercially reasonable efforts to notify the Company promptly
upon receipt of the demand and prior to disclosure of the Confidential Information and provide the
Company a reasonable opportunity to object to the disclosure. If the Company timely objects to the
release of the Confidential Information, the Subscribing Reinsurer will comply with the reasonable
requests of the Company in connection with the Company’s efforts to resist release of the
Confidential Information. The Company shall bear the cost of resisting the release of the
Confidential Information.

Survival. The parties agree that the obligations contained in this Article shall survive
the expiration or termination of this Contract.

ARTICLE XXXI — AMENDMENTS

This Contract 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 Contract
and binding on the parties hereto.

ARTICLE XXXII — SEVERABILITY

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

ARTICLE XXXIII — INTEREST PENALTY

The interest amounts provided for in this Article shall apply to the Subscribing Reinsurer or to
the Company in the following circumstances:

	 	A.	 	If a loss payment owed by the Subscribing Reinsurer to the Company is not
received within 45 calendar days following the date of presentation to the
Subscribing Reinsurer of information necessary to approve payment of the claim,
and/or
	 
	 	B.	 	If any premium payment owed by the Company to the Subscribing Reinsurer is not
received within 45 calendar days following the date on which payment is due, and/or
	 
	 	C.	 	If any premium adjustment, agreed by either Party to the other, is not
received within 150 calendar days following the expiry or anniversary of this
Contract, and/or

	 	 	 	 	 

	 

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	 	D.	 	If any return of premiums, commissions, profit sharing, or any amounts not provided in
paragraphs A, B, and C above, are not received in accordance with the date specified
in this Contract or if no date is specified, within 90 calendar days following the
date the debtor Party received the billing.

Failure by
the Subscribing Reinsurer or Company to comply with their respective payment obligations
within the time periods as herein provided shall, as of that date, be subject to an interest
payment computed by multiplying the amount due by a variable rate consisting of the U.S. Prime Rate
as published in the Eastern Edition of The Wall Street Journal on the first day of the
calendar month in which the amount became past due, plus 2%. The variable rate shall be adjusted
monthly thereafter to equal the U.S. Prime Rate as published in the Eastern Edition of The Wall
Street Journal on the first day of each successive month during which the amount due remains
unpaid, plus 2%. The product shall then be multiplied by 1/365 for each day after the due date that
the amount due and the interest amount remain unpaid. Any interest that occurs pursuant to this
Article shall be calculated by the Party to which it is owed.

The validity of any claim or payment may be contested under the provisions of this Contract. If
the debtor Party prevails in an arbitration or any other proceeding with respect to the amounts
in dispute, there shall be no interest penalty due. If the creditor Party wholly or partially
prevails on any of the amounts in dispute, the interest penalty shall be awarded as outlined
above. Such interest penalty shall be calculated from the date the monies were due and owing to
the date of resolution of the arbitration or proceeding, and shall be payable as of the date of
resolution of the arbitration or proceeding.

If a Subscribing Reinsurer advances the entire or partial payment of any claim it is contesting,
and wholly or partially prevails in the contest, the Company shall promptly return the
applicable amount of such payment. The arbitrator(s) hearing such dispute shall determine if
interest shall be added to the amount returned by the Company.

Any interest owing pursuant to this Article may be waived by the Party to which it is owed.
Further, any interest calculated pursuant to this Article that is $100 or less shall be waived.
Any waiver of any interest pursuant to this paragraph, however, shall not affect the waiving
Party’s right to claim and/or pursue interest for any other failure by the other Party to make
payment when due under this Article.

ARTICLE XXXIV — ASSIGNMENT

This Contract shall be binding upon and inure to the benefit of the Company and the Subscribing
Reinsurer and their respective successors and assigns provided, however, that this Contract may
not be assigned by either the Company or the Subscribing Reinsurer without the prior written
consent of the other. In the event of any assignment, the assignor shall remain liable.

ARTICLE XXXV — ENTIRE AGREEMENT

This Contract shall constitute the entire agreement between the Company and the Subscribing
Reinsurer with respect to the subject matter of this Contract and shall supersede all prior
understandings, negotiations and discussions, whether oral or written, by or between the Company
and the Subscribing Reinsurer relating to the subject matter hereof. There are no general or
specific warranties, representations or other agreements by or among the Company and the
Subscribing Reinsurer in connection with entering into this Contract except as specifically set
forth in this Contract. Notwithstanding the foregoing, this contract may be amended or modified
only by a writing signed by both the Company and the Subscribing Reinsurer.

	 	 	 	 	 

	 

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Appendix A

Definition of Profit Centers:

For purposes of Article I or any Articles, wherever the word Profit Centers is used, the Profit
Centers are defined to include the following Profit Centers of Liberty Mutual Agency Market (LMAM).

	 	 	 	 	 
	 	 	 	 	Business Produced
	 	 	 	 	By Agents Resident
	Profit Center	 	Legal Entities Used By Profit Center	 	in the Following State
	America First Insurance:
	 	America First Insurance Co.	 	AK, LA, OK, TX
	 
	 	America First Lloyd’s Insurance Co.	 	AK, LA, OK, TX
	 
	 	Peerless Insurance Co.	 	AK, LA, OK, TX
	 
	 	 	 	 
	 
	 	Liberty County Mutual Insurance Co.	 	For business classified as LMAM and produced by this Profit Center only
	 
	 	 	 	 
	 
	 	Wausau/Business Solutions Group*	 	(Multi-State Business **)
	 
	 	Peerless Indemnity Insurance Co.	 	(Multi-State Business **)
	 
	 	The Netherlands Insurance Co.	 	(Multi-State Business **)
	 
	 	 	 	 
	Colorado Casualty:
	 	Colorado Casualty Insurance Co.	 	AZ, CO, NM, NV, WY, UT
	 
	 	Golden Eagle Insurance Corp.	 	AZ, CO, NM, NV, WY, UT
	 
	 	One Beacon Insurance Co. Cession to	 	AZ, CO, NM, NV, WY, UT
	 
	 	Peerless Insurance Co.	 	 
	 
	 	 	 	 
	 
	 	Wausau/Business Solutions Group*	 	(Multi-State Business**)
	 
	 	Peerless Indemnity Insurance Co.	 	(Multi-State Business**)
	 
	 	The Netherlands Insurance Co.	 	(Multi-State Business**)
	 
	 	 	 	 
	Golden Eagle Insurance:
	 	Golden Eagle Insurance Corp.	 	CA
	 
	 	One Beacon Insurance Co. Cession to

Peerless Insurance Co.	 	CA
	 
	 	Peerless Insurance Co.	 	CA
	 
	 	 	 	 
	 
	 	Wausau/Business Solutions Group*	 	(Multi-State Business**)
	 
	 	Peerless Indemnity Insurance Co.	 	(Multi-State Business**)
	 
	 	The Netherlands Insurance Co.	 	(Multi-State Business**)
	 
	 	 	 	 
	Hawkeye-Security Insurance:
	 	Hawkeye-Security Insurance Co.	 	IA, KS, MN, MO, NE, ND, SD, WI
	 
	 	Consolidated Insurance Co.	 	IA, KS, MN, MO, NE, ND, SD, WI
	 
	 	Indiana Insurance Co.	 	IA, KS, MN, MO, NE, ND, SD, WI
	 
	 	 	 	 
	 
	 	One Beacon Insurance Co. Cession to
Peerless Insurance Co.	 	IA, KS, MN, MO, NE, ND, SD, WI
	 
	 	Peerless Insurance Co.	 	IA, KS, MN, MO, NE, ND, SD, WI
	 
	 	The Midwestern Indemnity Co	 	IA, KS, MN, MO, NE, ND, SD, WI

	 	 	 	 	 
	 
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Definition of Profit Centers Continued;

	 	 	 	 	 
	 	 	 	 	Business Produced
	 	 	 	 	By Agents Resident
	Profit Center	 	Legal Entities Used By Profit Center	 	in the Following States
	Hawkeye-Security Continued:

	 	 	 	 
	 

	 	Wausau/Business Solutions Group*
	 	(Multi-State Business**)
	 

	 	Peerless Indemnity Insurance Co.
	 	(Multi-State Business**)
	 

	 	The Netherlands Insurance Co.
	 	(Multi-State Business**)
	 
	 	 	 	 
	Indiana Insurance:

	 	Indiana Insurance Co.
	 	IL, IN, KY, MI, OH, TN
	 

	 	Consolidated Insurance Co.
	 	IL, IN, KY, MI, OH, TN
	 

	 	Mid-American Fire and Casualty Co.
	 	IL, IN, KY, MI, OH, TN
	 

	 	One Beacon Insurance Co. Cession to	 	 
	 

	 	Peerless Insurance Co.
	 	IL, IN, KY, MI, OH, TN
	 

	 	Peerless Insurance Co.
	 	IL, IN, KY, MI, OH, TN
	 

	 	The Midwestern Indemnity Co.
	 	IL, IN, KY, MI, OH, TN
	 
	 	 	 	 
	 

	 	Globe American Casualty Co.
	 	All States
	 

	 	National Insurance Association
	 	All States
	 
	 	 	 	 
	 

	 	Wausau/Business Solutions Group*
	 	(Multi-State Business**)
	 

	 	Peerless Indemnity Insurance Co.
	 	(Multi-State Business**)
	 

	 	The Netherlands Insurance Co.
	 	(Multi-State Business**)
	 
	 	 	 	 
	Liberty Northwest Insurance:

	 	Liberty Northwest Insurance Corp.
	 	All States
	 

	 	North Pacific Insurance Company
	 	All States
	 

	 	Oregon Automobile Insurance Co.
	 	All States
	 
	 

	 	Wausau/Business Solutions Group*
	 	(Multi-State Business**)
	 
	 	 	 	 
	Montgomery Insurance:

	 	Montgomery Mutual Insurance Co.
	 	AL, DC, DE, FL, GA, MD, MS, NC, SC, VA, WV
	 

	 	Colorado Casualty Insurance Co.
	 	AL, DC, DE, FL, GA, MD, MS, NC, SC, VA, WV
	 

	 	Excelsior Insurance Co.
	 	AL, DC, DE, FL, GA, MD, MS, NC, SC, VA, WV
	 

	 	One Beacon Insurance Co. Cession to
Peerless Insurance Co.
	 	AL, DC, DE, FL, GA, MD, MS, NC, SC, VA, WV
	 

	 	Peerless Insurance Co.
	 	AL, DC, DE, FL, GA, MD, MS, NC, SC, VA, WV
	 

	 	The Midwestern Indemnity Co.
	 	AL, DC, DE, FL, GA, MD, MS, NC, SC, VA, WV
	 
	 	 	 	 
	 

	 	Wausau/Business Solutions Group*
	 	(Multi-State Business**)
	 

	 	Peerless Indemnity Insurance Co.
	 	(Multi-State Business**)
	 

	 	The Netherlands Insurance Co.
	 	(Multi-State Business**)
	 
	 	 	 	 
	Peerless Insurance:

	 	Peerless Insurance Co.
	 	CT, MA, ME, NH, NJ, NY, PA, RI, VT
	 

	 	Excelsior Insurance Co.
	 	CT, MA, ME, NH, NJ, NY, PA, RI, VT

	 	 	 	 	 

	 

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Definition of Profit Centers Continued;

	 	 	 	 	 
	 	 	 	 	Business Produced
	 	 	 	 	By Agents Resident
	Profit Center	 	Legal Entities Used By Profit Center	 	in the Following States
	Peerless Insurance Continued:

	 	Indiana Insurance Co.
	 	CT, MA, ME, NH, NJ, NY, PA, RI, VT
	 
	 	 	 	 
	 

	 	One Beacon Insurance Co. Cessions to	 	 
	 

	 	Peerless Insurance Co.
	 	CT, MA, ME, NH, NJ, NY, PA, RI, VT
	 
	 	 	 	 
	 

	 	Liberty Mutual Mid-Atlantic
Insurance Co.
	 	For business classified as
LMAM and produced by this Profit
Center only
	 
	 	 	 	 
	 

	 	Wausau/Business Solutions Group*
	 	(Multi-State Business**)
	 

	 	Peerless Indemnity Insurance Co.
	 	(Multi-State Business**)
	 

	 	The Netherlands Insurance Co.
	 	(Multi-State Business**)
	 
	 	 	 	 
	Summit:

	 	Bridgefield Casualty Insurance Co.
	 	All states, for WC and
	 

	 	Bridgefield Employers Insurance Co.
	 	Employers Liability business,
classified as LMAM and produced
by this Profit Center only
	 
	 	 	 	 
	 

	 	Wausau/Business Solutions Group*
	 	(Multi-State Business **)
	 
	 	 	 	 
	Wausau Insurance:

	 	Employers Insurance Co. of Wausau
	 	All states, for business
	(including Business

	 	Wausau General Insurance Co.
	 	classified as LMAM and
	Solutions Group)

	 	Wausau Underwriters Insurance Co.
	 	produced by this Profit Center
	 

	 	Wausau Business Insurance Co.
	 	only
	 

	 	Liberty Mutual Insurance Co.	 	 
	 

	 	Liberty Mutual Fire Insurance Co.	 	 
	 

	 	LM Insurance Corp.	 	 
	 

	 	Liberty Insurance Corp.	 	 
	 

	 	The First Liberty Insurance Corp.	 	 

 

			
	*	 	Wausau/Business Solutions Group consists of the legal entities of: Liberty Mutual
Insurance Co., Liberty Mutual Fire Insurance Co., LM Insurance Corp., Liberty Insurance Corp.,
The First Liberty Insurance Corp., Liberty County Mutual Insurance Co., Employers Insurance
Company of Wausau, Wausau General Insurance Co., Wausau Underwriters Insurance Co. and Wausau
Business Insurance Co.
	 
	**	 	Agent responsible for the risk resides in the Profit Center but the risk is located in
multiple states both in and outside of states assigned to the Profit Center.

	 	 	 	 	 

	 

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Appendix B

	 	 	 

	Pharmaceutical / medical risks
	 	(Version 2005-Apr)

	 	 	 	 	 
	#	 	Company Name	 	Headquarter location
	1
	 	ABBOTT LABORATORIES	 	USA
	2
	 	AKZO NOBEL	 	Netherlands
	3
	 	ALLERGAN	 	USA
	4
	 	ALPHARMA	 	USA
	5
	 	ALTANAAG	 	Germany
	6
	 	AMGEN	 	USA
	7
	 	ASTELLAS	 	Japan
	8
	 	ASTRAZENECA	 	UK
	9
	 	BARR LABORATORIES	 	USA
	10
	 	BAXTER INTERNATIONAL	 	USA
	11
	 	BAYER	 	Germany
	12
	 	BEAUFOUR IPSEN	 	France
	13
	 	BIOGEN	 	USA
	14
	 	BIOMET	 	USA
	15
	 	BOEHRINGER INGELHEIM	 	Germany
	16
	 	BOSTON SCIENTIFIC CORPORATION	 	USA
	17
	 	BRISTOL-MYERS SQUIBB	 	USA
	18
	 	CHIRON	 	USA
	19
	 	CSL	 	Australia
	20
	 	DAIICHI PHARMACEUTICAL	 	Japan
	21
	 	DAI NIPPON PHARMACEUTICAL	 	Japan
	22
	 	EDWARDS LIFESCIENCES	 	USA
	23
	 	EISAI	 	Japan
	24
	 	ELAN	 	Ireland
	25
	 	FOREST LABORATORIES	 	USA
	26
	 	GENENTECH	 	USA
	27
	 	GENERAL ELECTRIC Healthcare	 	USA
	28
	 	GENZYME	 	USA
	29
	 	GLAXOSMITH KLINE	 	UK
	30
	 	GUIDANT	 	USA
	31
	 	HOSPIRA	 	USA
	32
	 	IVAX	 	USA
	33
	 	JOHNSON & JOHNSON	 	USA
	34
	 	KING PHARMACEUTICALS	 	USA
	35
	 	KYOWA HAKKO KOGYO	 	Japan
	36
	 	LABORATOIRE SERVIER	 	France
	37
	 	LILLY (ELI)	 	USA
	38
	 	LUNDBECK	 	Denmark
	39
	 	MEDIMMUNE	 	USA
	40
	 	MEDTRONIC	 	USA
	41
	 	MERCK & CO	 	USA
	42
	 	MERCK KGAA	 	Germany
	43
	 	MINNESOTA MINING & MANUFACTURING	 	USA
	44
	 	MYLAN LABORATORIES	 	USA
	45
	 	NOVARTIS	 	Switzerland
	46
	 	NOVO NORDISK	 	Denmark
	47
	 	OTSUKA PHARMACEUTICAL	 	Japan
	48
	 	PFIZER	 	USA
	49
	 	PLIVA	 	Croatia
	50
	 	PROCTER & GAMBLE	 	USA

	 	 	 	 	 

	 
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	#	 	Company Name	 	Headquarter location
	51
	 	PURDUE FREDERICK / PRA Holding	 	USA
	52
	 	ROCHE	 	Switzerland
	53
	 	SANKYO	 	Japan
	54
	 	SANOFI-AVENTIS	 	France
	55
	 	SCHERING AG	 	Germany
	56
	 	SCHERING-PLOUGH	 	USA
	57
	 	SCHWARZ PHARMA	 	Germany
	58
	 	SERONO	 	Switzerland
	59
	 	SHIONOGI	 	Japan
	60
	 	SHIRE PHARMACEUTICALS	 	UK
	61
	 	SMITH & NEPHEW	 	UK
	62
	 	SOLVAY	 	Belgium
	63
	 	ST. JUDE MEDICAL	 	USA
	64
	 	STRYKER	 	USA
	65
	 	SUMITOMO PHARMACEUTICALS	 	Japan
	66
	 	SYNTHES-STRATEC	 	Switzerland
	67
	 	TAKEDA	 	Japan
	68
	 	TANABE	 	Japan
	69
	 	TAP Pharmaceutical Products	 	USA
	70
	 	TEVA PHARMACEUTICAL	 	Israel
	71
	 	TYCO Healthcare	 	USA
	72
	 	UCB	 	Belgium
	73
	 	WATSON PHARMACEUTICAL	 	USA
	74
	 	WYETH	 	USA
	75
	 	ZIMMER	 	USA

	 	 	 	 	 

	 
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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 contract within the various attachments to the reinsurance
contract, the term shall be understood to mean Agreement or Contract or Policy or whatever
other term is used to designate the attached reinsurance contract.
	 
	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.

INSOLVENCY FUNDS EXCLUSION CLAUSE

This Contract excludes all liability of the Company arising by Agreement, 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.

	 	 	 	 	 

	 

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	 	 	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

	 	(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, Agreementual Liability, Elevator Liability, Owners or
Agreementors (including railroad) Protective Liability, Manufacturers and Agreementors
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):

	 	 	 	 	 

	N.M.A 1590
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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
	 
	 	(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 question 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 threat.

	IV.	 	As used in this endorsement:

“hazardous properties” include radioactive, toxic or explosive properties; “nuclear
material” means source material, special nuclear material or byproduct material;
“source material,” “special nuclear material,” and “byproduct material” have the
meanings given them in the Atomic Energy Act of 1954 or in any law amendatory thereof;
“spent fuel” means any fuel element or fuel component, solid or liquid, which has been
used or exposed to radiation in a nuclear reactor; “waste” means any waste material
(1) containing byproduct material other than the tailings or wastes produced by the
extraction or concentration of uranium or thorium from any ore processed for its
source material

	 	 	 	 	 
	N.M.A 1590
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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
	 
	 	(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.

	 	 	 	 	 

	N.M.A 1590
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	 	 	NUCLEAR INCIDENT EXCLUSION CLAUSE — LIABILITY — REINSURANCE — CANADA

N.M.A. 1979
	 
	1.	 	This Contract 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 Contract 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 1984, 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 Contract 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 1984, shall be deemed to include, from their inception
dates and thereafter, the following provision:
	 
	 	 	Broad Exclusion Provision —
	 
	 	 	It is agreed that this Policy does not apply:

	 	(a)	 	to liability imposed by or arising under the Nuclear Liability Act; 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 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;

	 	 	 	 	 

	N.M.A.1979
	 	Page 37 of 39	 	Commercial Umbrella Excess of
	 
	 	 	 	Loss Reinsurance Contract
	 
	 	 	 	January 1, 2007

 

 

	 	(ii)	 	the furnishing of 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 that the Atomic Energy Control Board may, by regulation, designate as being
prescribed substances capable of releasing atomic energy, or as being requisite for the
production, use or application of atomic energy;
	 
	(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.

	 	 	 	 	 

	N.M.A.1979
	 	Page 38 of 39	 	Commercial Umbrella Excess of
	 
	 	 	 	Loss Reinsurance Contract
	 
	 	 	 	January 1, 2007

 

 

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.

	 	 	 	 	 
	 
	 	Page 39 of 39	 	Commercial Umbrella Excess of
	 
	 	 	 	Loss Reinsurance Contract
	 
	 	 	 	January 1, 2007

 

 

INTEREST AND LIABILITIES AGREEMENT

(hereinafter referred to as the “Agreement”)

to the

COMMERCIAL UMBRELLA EXCESS OF LOSS

REINSURANCE CONTRACT

No. 2000310

between

PEERLESS INSURANCE COMPANY

Keene, New Hampshire

(hereinafter referred to as the “Company”)

and

LIBERTY MUTUAL INSURANCE COMPANY

Boston, Massachusetts

(hereinafter referred to as the “Subscribing Reinsurer”)

It is hereby agreed by and between the Company on the one part and the Subscribing Reinsurer on
the other part that the Subscribing Reinsurer’s share in the interests and liabilities of the
Reinsurers as set forth in the attached Commercial Umbrella Excess of Loss Reinsurance Contract
No. 2000310 effective 12:01 a.m., Local Standard Time, January 1, 2007, to which this Agreement is
attached hereto shall be 30%.

The share of the Subscribing Reinsurer in the interests and liabilities of all reinsurers
participating in said Contract shall be separate and apart from the shares of such other reinsurers
to the said Contract. The interests and liabilities of the Subscribing Reinsurer shall not be joint
with those of the other reinsurers and in no event shall the Subscribing Reinsurer participate in
the interests and liabilities of the other Reinsurers participating in said Contract.

	 	 	 	 	 

	 

	 	Page 1 of 2
	 	Commercial Umbrella Excess
of Loss 
	 

	 	 	 	Reinsurance Contract — January 1, 2007
	 

	 	 	 	Interest & Liabilities
Agreement 

 

 

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

In Keene,
New Hampshire, this 15th day of August, 2007.

	 	 	 

	ATTEST:
	 	PEERLESS INSURANCE COMPANY
	 
	 	 
	/s/
	 	/s/ Nancy C. Callender
	 
	 	 
	Signature
	 	Signature
	 
	 	 
	 
	 	Nancy C. Callender
	 
	 	 
	Name
	 	Name
	 
	 	 
	Assistant Secretary
	 	Assistant Vice President-Reinsurance Mgmt.
	 
	 	 
	Title
	 	Title

And in Boston, Massachusetts this 19th day of September, 2007.

	 	 	 

	ATTEST:
	 	LIBERTY MUTUAL INSURANCE COMPANY
	 
	 	 
	/s/
John C. Maclean Jr.
	 	/s/
	 
	 	 
	Signature
	 	Signature
	 
	 	 
	John
C. Maclean Jr.
	 	 
	 
	 	 
	Name
	 	Name
	 
	 	 
	Director-Ceded Reinsurance
	 	Vice President
	 
	 	 
	Title
	 	Title

	 	 	 	 	 

	 
	 	Page 2 of 2
	 	Commercial Umbrella Excess
of Loss 
	 
	 	 	 	Reinsurance Contract — January 1, 2007
	 
	 	 	 	Interest & Liabilities
Agreementexv10w179

EXHIBIT
10.179

LIBERTY MUTUAL INSURANCE COMPANY

LIBERTY MUTUAL FIRE INSURANCE COMPANY

WORKMEN’S COMPENSATION AND GENERAL LIABILITY

EIGHTH EXCESS OF LOSS REINSURANCE CONTRACT

Effective: December 18, 1974

 

 

WORKMEN’S COMPENSATION AND GENERAL LIABILITY

EIGHTH EXCESS OF LOSS REINSURANCE CONTRACT

issued to

LIBERTY MUTUAL INSURANCE COMPANY

LIBERTY MUTUAL FIRE INSURANCE COMPANY

BOSTON, MASSACHUSETTS

(hereinafter referred to as the “Company”)

by

AMERICAN UNION INSURANCE COMPANY OF NEW YORK

INDIANAPOLIS, INDIANA

(hereinafter referred to, with others, as the “Reinsurer”)

Under the terms of this Contract the above
Reinsurer agrees to assume

a 15.00% share

of the Liability described in the attached Contract, including Exhibits A and B, and,
as consideration, the Reinsurer shall receive a 15.00% share of the premium named
therein.

 

 

LIBERTY MUTUAL INSURANCE COMPANY

LIBERTY MUTUAL FIRE INSURANCE COMPANY

WORKMEN’S COMPENSATION AND GENERAL LIABILITY

EIGHTH EXCESS OF LOSS REINSURANCE CONTRACT

PREAMBLE

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

ARTICLE 1 — EXHIBITS COVERED

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

Exhibit “A” Excess of Loss Reinsurance of General Liability.

Exhibit “B” Excess of Loss Reinsurance of Workmen’s Compensation.

ARTICLE 2 — RETENTION BY COMPANY

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

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

ARTICLE 3 — REINSURANCE PREMIUM

	 	(a)	 	The Reinsurer’s premium for the reinsurance provided under this Contract shall
be a flat annual premium of $20,000 for the combined Eighth Excess of Loss layers
provided for under Exhibits “A” and “B”.
	 
	 	(b)	 	The Reinsurer’s annual premium as provided above shall be payable to the
Reinsurers in advance by January 10th of each year.
	 
	 	(c)	 	In addition to the premium stated above, additional premiums shall be paid
under the following circumstances;

 

-2-

	 	 	 	In the event that the Company insured through pools or assigned risk plans risks of the
character described in sub-divisions 3, 4 and 5 of paragraph B of Section 4 of Exhibit
“B”, additional premium, if any, shall be determined upon submission of underwriting
data to the Reinsurers. As soon as practicable after such time as the fact of insurance
of an occupation, employment or risk listed in Paragraph B of Section 4 of Exhibit “B”
is disclosed to the Company, the Company shall notify the Reinsurers and will provide
sufficient underwriting data so as to permit the application of the commensurate
reinsurance rate or premium from inception of such hazardous risk.
	 
	 	 	 	It is understood that failure on the part of the Company to comply with this
requirement due to oversight or error shall not prejudice the reinsurance
provided by this Contract. The Company shall, however, as soon as such oversight
or error comes to its attention, take prompt steps to contact the Reinsurers and
proceed to the correction of the oversight or error as provided in this Contract.

ARTICLE 4 — SUBROGATION

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

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

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

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

 

-3-

ARTICLE 5 — TAX CLAUSE

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

ARTICLE 6 — PAYMENTS UNDER THIS CONTRACT

All payments under this Contract by either party hereto shall be made in New York or
Boston in United States currency.

ARTICLE 7 — ACCESS TO COMPANY’S RECORDS

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

ARTICLE 8 — INSOLVENCY CLAUSE

The reinsurance provided by this Contract shall be payable by the Reinsurers directly to the
Company or to its liquidator, receiver or statutory successor on the basis of the liability of the
Company under the contracts reinsured without diminution because of the insolvency of the Company.
In the event of the insolvency of the Company, the liquidator or receiver or statutory successor of
the Company shall give written notice of the pendency of each claim against the Company on a policy
or bond reinsured within a reasonable time after such claim is filed in the insolvency proceeding;
and during the pendency of such claim, the Reinsurers may investigate such claim and interpose, at
their own expense, in the proceeding where such claim is to be adjudicated any defense or defenses
which it may deem available to the Company, its liquidator or receiver or statutory successor. The
expense thus incurred by the Reinsurers shall be chargeable, subject to court approval, against the
Company as part of the expense of liquidation to the extent of such proportionate share of the
benefit as shall accrue to the Company solely as a result of the defense undertaken by the
Reinsurers. This reinsurance shall be payable as hereinbefore in this paragraph provided except as
otherwise provided by Section 315 (relating to Fidelity and Surety Risks) of the Insurance Law of
New York or except (a) where the contract specifically provides another payee of such reinsurance
in the event of the insolvency of the Company and (b) where the Reinsurers with the consent of the
direct insured or insureds have assumed such policy obligations of the Reinsurers to the payees
under such policies and in substitution for the obligations of the Company to such payees.

ARTICLE 9 — ARBITRATION

In the event of any dispute or difference of opinion, arising with respect to this Contract, it is
hereby agreed that such dispute or difference of opinion shall be submitted to arbitration, under
Massachusetts General Law (Ter. Ed.), Chapter 251, one arbiter to be chosen by the Company, one by
the Reinsurers, and

 

-4-

a third arbiter to be chosen by the two arbiters before they enter upon arbitration. The arbiters
are relieved of all judicial formalities and may abstain from following strict rules of evidence.
The award of a majority of the arbiters shall be reported to the Superior Court, County of Suffolk,
Commonwealth of Massachusetts, within one year after the submission or within such further time as
the court may allow, and final judgement thereon shall be binding upon both parties. Each party
shall bear the expense of its own arbiter and shall jointly and equally bear with the other the
expenses of the third arbiter and of the arbitration. Any such arbitration shall take place at
Boston, Massachusetts, unless some other location is mutually agreed upon.

ARTICLE 10 — OFFSET CLAUSE

Each party hereto shall have, and may exercise at any time and from time to time, the right to
offset any balance or balances, whether on account of premiums or on account of losses or
otherwise, due from such party to the other (or, if more than one, any other) party hereto under
this Contract or under any other reinsurance agreement heretofore or hereafter entered into by and
between them, and may offset the same against any balance or balances due or to become due to the
former from the latter under the same or any other reinsurance agreement between them; and the
party asserting the right of offset shall have and may exercise such right whether the balance or
balances due or to become due to such party from the other are on account of premiums or on account
of losses or otherwise and regardless of the capacity, whether as assuming insurer or as ceding
insurer, in which each party acted under the agreement or, if more than one, the different
agreements involved.

ARTICLE 11 — LOSS RESERVES

(Applies only to those Reinsurers who do not qualify for credit by any State or any other
governmental authority having jurisdiction over the Company’s loss reserves.)

As regards policies or bonds issued by the Company coming within the scope of this Agreement, the
Company agrees that when it shall file with the Insurance Department or set up on its books
reserves for losses which it shall be required to set up by law it will forward to the Reinsurers a
statement showing the proportion of such loss reserves which is applicable to them. The Reinsurers
hereby agree that they will apply for and secure delivery to the Company a clean irrevocable Letter
of Credit issued by any bank in the United States acceptable to the governmental authority having
jurisdiction over the Company’s loss reserves in an amount equal to Reinsurers’ proportion of said
loss reserves.

The Company agrees to use and apply any amounts which it may draw upon such credit for the
following purposes only:

	 	(a)	 	To pay the Reinsurers’ share or to reimburse the Company for the Reinsurers’ share of any
liability for loss reinsured by this Agreement.
	 
	 	(b)	 	To make refund of any sum which is in excess of the actual amount required to pay
Reinsurers’ share of any liability reinsured by this Agreement.

 

-5-

	 	 	 	 	 

ARTICLE 12 — COMMENCEMENT AND TERMINATION

This Contract applies only to accidents or occurrences happening during its effective period. This
Contract is effective at midnight, December 18, 1974 Standard Time at Boston, Massachusetts and
shall remain in force continuously unless terminated at midnight on any subsequent December 31 by
either party giving the other at least three months prior notice of cancellation. Otherwise, this
Contract may be cancelled only by mutual consent, or if required by law or by administrative order.

ARTICLE 13 — REINSURANCE INTERMEDIARY DESIGNATION

Holborn Agency Corporation is hereby recognized as the broker negotiating this Contract, All
communications relating to this Contract transmitted by the Company to Holborn Agency Corporation
at its business address in New York, New York shall be deemed to have been transmitted to the
Reinsurer.

ARTICLE 14 — INTERPRETATION

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

IN WITNESS WHEREOF the parties hereto have caused this Contract to be executed in duplicate this
7th day of April 1975, in Indianapolis, Indiana

	 	 	 	 	 
	 	AMERICAN UNION INSURANCE COMPANY OF
NEW YORK

 	 
	 	BY:  	/s/ 	 
	 	 	TITLE: 	 	 
	 	 	 	 
	 

and in Boston, Massachusetts this 28th day of February, 1975

	 	 	 	 	 
	 	LIBERTY MUTUAL INSURANCE COMPANY

 	 
	 	/s/ 	 
	 	Vice President 	 
	 	 	 
	 
	 	LIBERTY MUTUAL FIRE INSURANCE COMPANY

 	 
	 	/s/ 	 
	 	Assistant Secretary 	 
	 	 	 

JNGjr/z — 1/27/75

 

 

	 	 	 	 	 

EXHIBIT A

EXCESS OF LOSS REINSURANCE OF GENERAL LIABILITY

SECTION 1 — COVERAGE

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

Workmen’s Compensation and Employers’ liability insurance, but this exclusion shall not
apply to Workmen’s Compensation or Employers’ Liability coverage given under public
liability policies written by the Company.

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

Infidelity of employees and/or partners

Unfaithful performance of duties by employees and/or partners

Loss of property in transit

Forgery or alteration of negotiable or other paper

Burglary, robbery, theft, false pretenses or fraud

Mysterious disappearance or misplacement of property

Loss of property from safe deposit boxes or other depositories

Damage to or destruction of money or securities

Counterfeiting of currency or securities

Motor Vehicle Physical Damage Insurance, but this exclusion shall not apply to motor vehicle
property damage liability insurance.

Credit Insurance and/or Financial Guarantee.

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

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

Livestock
Mortality Insurance.

 

-2-

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

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

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

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

Excess of Loss Reinsurance Contracts.

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

SECTION 2 — LIMIT OF LIABILITY

The Reinsurer shall be liable for ultimate net loss in excess of the sum of:

	 	(a)	 	$20,500,000 of ultimate net loss each and every accident or occurrence in
respect of business the subject matter of this Exhibit, and
	 
	 	(b)	 	$1,000,000 in the aggregate each calendar year of ultimate net loss the excess of
$750,000 each accident or occurrence in respect of business the subject matter of the
Company’s First Excess Workmen’s Compensation Reinsurance Contract and/or First Excess
General Excess Reinsurance Contract (it being agreed that such $1,000,000 aggregate
shall apply, in each calendar year, in order by date of accident or occurrence which,
with respect to disease including death resulting therefrom, shall be deemed to be the
date assigned to the first claim of a series of claims in a calendar year)

subject to a limit of $10,000,000 on account of each and every accident or occurrence.

 

-3-

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

For purposes of this Exhibit it is agreed, that the Company’s limit of liability under any and all
policies of accident insurances covering any one individual shall be considered as not exceeding
$100,000. Subject to this agreement and subject to the limits set forth in this Section 2 it is
agreed that the Company is reinsured hereunder for the excess of the amounts set forth in this
Section 2 of ultimate net loss any one accident, or series of accidents arising out of one event
involving more than one person covered under such policies issued by the Company.

SECTION 3 — ULTIMATE NET LOSS

The term “Ultimate Net Loss” as used in this Exhibit shall mean the amount actually paid by the
Company (including loss adjustment expenses, attorneys’ fees and other costs of investigation or
litigation) in settlement or payment of claims or judgements arising from each and every loss for
which the Company is or may be found liable under its contracts of insurance or reinsurance, less
salvage and subrogation recoveries and amounts recovered or recoverable under pooling agreements or
other reinsurances; provided, however, that in the event of the insolvency of the Company,
“Ultimate Net Loss” shall mean the amount of loss (including loss adjustment expenses, attorneys’
fees and other costs of investigation or litigation) which the Company has incurred or for which it
is liable, and payment by the Reinsurers shall be made to the liquidator, receiver or statutory
successor of the Company in accordance with the provisions of Article 8 of this Contract. Salaries
and expenses of employees of the Company shall not be included in ascertaining ultimate net loss.
Nothing in this paragraph shall be construed to limit the ultimate net loss of the Company in the
event of a judgement against the Company in excess of the limits of the Company’s liability as
stated in its policies concerned, subject always to the limit of this Contract. It is further
agreed that amounts recoverable under the following reinsurances shall be disregarded in
ascertaining ultimate net loss:

	 	1.	 	Any reinsurance providing a retention below $750,000 but only as regards the
difference between the retention under such reinsurance and $750,000.
	 
	 	2.	 	The reinsurance provided in the Company’s underlying layers of excess
reinsurance as respects the subject matter of this Exhibit plus $1,000,000 in the
aggregate each calendar year of ultimate net loss the excess of $750,000 each accident
or occurrence in respect of business the subject matter of this Exhibit and/or Exhibit
B.

 

-4-

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

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

	 	A.	 	Products Public Liability (Excluding Completed Operations)
	 
	 	 	 	All injury or damage caused to persons or property by any manufactured, prepared
or acquired lot of goods or products.
	 
	 	B.	 	Fidelity and Forgery
	 
	 	 	 	All losses resulting from any fraudulent or dishonest act or omission or series thereof
on the part of any one person or of several persons acting in collusion (whether
employees or not) and irrespective of the number of the Company’s obligations involved;
provided, that in the case of any loss involving two or more persons acting in
collusion, losses resulting from separate acts or omissions on the part of each such
person shall be included as part of such loss.

	 	1.	 	It is agreed that each and every loss occurring prior to midnight on
the date of termination of this Contract and discovered not later than three years
after such termination (excluding only any loss which occurred wholly prior to
midnight, December 18, 1974) shall be recoverable under this Contract.
	 
	 	2.	 	It is further agreed that each and every loss resulting from a
series of acts or omissions, some prior to and some subsequent to midnight,
December 18, 1974, shall be regarded as a loss wholly under this Contract.

	 	C.	 	Liability Insurance Written Subject to an Aggregate Limit
	 
	 	 	 	As respects each and every liability insurance policy issued by the Company which
contains one or more aggregate limits of liability on a policy year basis, and as
respects each such aggregate limit under each policy, the aggregate amount of all
losses occurring during one policy year. Where the Company issues more than one such
policy to the same policyholder such policies shall together be treated as though they
were one policy. Losses under such policies shall for the purposes of this Reinsurance
Contract be deemed to have occurred in the calendar year in which the inception date of
the policy falls, except that as respects such policies issued for a period in excess
of twelve months, losses for the first twelve month period shall be deemed to have
occurred in the calendar year in which the inception date of the policy falls and
losses for each succeeding twelve month period or part thereof shall be deemed to have
occurred in the calendar year in which the anniversary date of the policy starting such
period falls.

 

-5-

	 	D.	 	All other classes or risks covered hereunder (including completed operations), all
injuries to persons and all loss of, injury to or destruction of property resulting
from each accident or loss, or from each series of accidents or losses proximately
arising out of or following on any one cause or event.

SECTION 5 — CLAIMS AGAINST REINSURERS

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

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

It is agreed that if the Company so requests, the Reinsurers will handle at the Company’s expense,
investigation, loss adjustment and litigation outside the United States and Canada on claims or
losses under the Company’s obligations covered hereunder. Any expenses so incurred shall be
included in calculating the Company’s ultimate net loss as provided in Section 3 hereof.

This Exhibit A is attached to and forms part of the Workmen’s Compensation and General
Liability Eighth Excess of Loss Reinsurance Contract issued to LIBERTY MUTUAL INSURANCE
COMPANY and LIBERTY MUTUAL FIRE INSURANCE COMPANY.

JNGjr/z — 1/27/75

 

 

EXHIBIT B

EXCESS OF LOSS REINSURANCE OF WORKMEN’S COMPENSATION

SECTION 1 — COVERAGE

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

SECTION 2 — LIMITS OF LIABILITY

The Reinsurers shall be liable for ultimate net loss in excess of the sum of:

	 	(a)	 	$20,500,000 of ultimate net loss each and every accident or occurrence in respect of
business the subject matter of this Exhibit, and
	 
	 	(b)	 	$1,000,000 in the aggregate each calendar year of ultimate net loss the excess of
$750,000 each accident or occurrence in respect of business the subject matter of the
Company’s First Excess Workmen’s Compensation Reinsurance Contract and/or First Excess
General Excess Reinsurance Contract (it being agreed that such $1,000,000 aggregate
shall apply, in each calendar year, in order by date of accident or occurrence which,
with respect to disease including death resulting therefrom, shall be deemed to be the
date assigned to the first claim of a series of claims in a calendar year)

subject to a limit of $10,000,000 on account of each and every accident or occurrence.

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

SECTION 3 — ULTIMATE NET LOSS

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

 

-2-

Company in accordance with the provisions of Article 8 of this Contract. Expenses for salaried
employees of the Company incurred in litigation and the investigation or adjustment of claims or
suits and subrogation expense referred to in Article 4 shall be disregarded in ascertaining
ultimate net loss. Nothing in this paragraph shall be construed to limit the ultimate net loss of
the Company in the event of a judgement against the Company in excess of the limits of the
Company’s liability as stated in its policies concerned, subject always to the limit of this
Contract. It is further agreed that amounts recoverable under the following reinsurances shall be
disregarded in ascertaining ultimate net loss.

	 	1.	 	Any reinsurance providing a retention below $750,000 but only as regards the difference
between the retention under such reinsurance and $750,000.
	 
	 	2.	 	The reinsurance provided in the Company’s underlying layers of excess reinsurance as
respects the subject matter of this Exhibit plus $1,000,000 in the aggregate each calendar
year of ultimate net loss the excess of $750,000 each accident or occurrence in respect of
business the subject matter of this Exhibit and/or Exhibit A, and, as regards “Special Group
Risks” as defined in the Company’s First Excess Workmen’s Compensation reinsurance contract,
$2,250,000 (plus a further indeterminate amount not to exceed $1,000,000 in any calendar
year) the excess of $250,000 in respect
of each and every accident or occurrence.

SECTION 4 — EXCLUSIONS

This Exhibit does not apply:

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

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

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

	 	C.	 	To any accident or occurrence as to which the Company is entitled to recover the
full amount of the loss under an insurance policy written on a cost-plus plan, that is
to say, a plan which provides for the payment

 

-3-

	 	 	 	of the full amount of all losses, however great, by the policyholder. This exclusion does
not apply to bar recovery from the Reinsurers with respect to accidents or occurrences under
retrospectively-rated policies.

SECTION 5 — DEFINITIONS

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

	 	A.	 	“Policies”. Policies, contracts, endorsements or binders, including but not limited to
those by which the Company undertakes to offer and pay “voluntary compensation” benefits,
those by which the Company undertakes to make payments to augment compensation benefits,
those by which the Company affords reinsurance or excess insurance to Workmen’s Compensation
or Employers’ Liability risks and those by which the Company undertakes to participate in
voluntary or statutory Pools or assigned-risk plans.
	 
	 	B.	 	“Explosive Substance”. Any substance manufactured for the express purpose of
exploding as differentiated from commodities used industrially and which are only
incidentally explosive — such as gasoline, celluloid, fuel gases and dyestuffs.
	 
	 	C.	 	“Accident or Occurrence”. Any one accident or occurrence or, if a series of accidents or
occurrences arising out of one event, such series of accidents or occurrences provided,
however, that with respect to disease, including death resulting therefrom, the terms
“accident or occurrence” and “series of accidents or occurrences” shall mean the claim or
series of claims for which the Company may be liable, on account of diseases or deaths
resulting therefrom, assigned by the Company to each calendar year of coverage under any one
policy or renewals thereof. In making such assignments the Company will be bound by the
following principles:

	 	1.	 	If liability is placed solely upon the employer or insurer as of the date
the claimant’s disability commences or becomes manifest and that date is within a
period of coverage under an applicable policy issued by the Company, the claim is
to be assigned to the calendar year of such date;
	 
	 	2.	 	If assignment is not made on the basis stated in the preceding subparagraph the
claim is to be assigned to the calendar year of the date of the claimant’s last
injurious exposure during a period of coverage under an applicable policy issued by the
Company.
	 
	 	 	 	It is also agreed that disease cases which are not chargeable to this Contract
under the above principals and which are not chargeable to a previous reinsurance
contract shall be charged to this Contract and be treated as an accident occurring
during 1975.

 

-4-

	 	 	 	Notwithstanding anything to the contrary above set forth it is agreed that as to
any policyholder to whom the Company issues disease coverage which is in effect
for only 12 consecutive months or less all of the Company’s losses on accout of
disease claims will be charged for the purpose of this reinsurance to the calendar
year which includes the date the Company’s disease coverage became effective.
	 
	 	 	 	Notwithstanding the foregoing, where a policyholder requests that it be issued two
or more policies in circumstances where applicable manual rules permit the
issuance of a single policy, such policies shall be regarded as a single policy
for purposes of assigning disease claims to calendar year coverage.

SECTION 6 — NOTICE TO REINSURERS

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

SECTION 7 — PAYMENT BY THE COMPANY

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

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

SECTION 8 — CLAIMS AGAINST REINSURERS

The Company shall, within 12 months after it has paid any amount of ultimate net loss for which the
Reinsurers may be liable under this Exhibit, submit to the Reinsurers a definite claim for such
amount. If any subsequent losses shall be paid by the Company on account of the same accident or
occurrence, additional claims hereunder shall be similarly made from time to time. Losses shall be
due and payable by the Reinsurers within 15 days after claim hereunder is proved.

All salvages, recoveries and payments recovered or received subsequent to a loss settlement under
this Exhibit shall be applied as if recovered or received prior to the said settlement and all
necessary adjustments shall be made by the parties hereto.

 

 

-5-

SECTION 9 — COMMUTATION

	 	A.	 	At any time subsequent to two years after the date of notice to the Reinsurers of an
accident or occurrence which may involve this Exhibit, representatives of the parties
shall, at the request of either of them, meet in Boston, Massachusetts, for the purpose of
appraising the Reinsurers’ ultimate liability to the Company under this Exhibit on account
of the claims resulting from such accident or occurrence. The value of the Company’s
incurred losses from such claims shall be calculated as of
a date certain not more than 45 days after the date the appraisal begins. In such
calculation, the value of each case as of, such date shall be determined with the discount
figured at 2 1/2% per annum and by the use of the latest available remarriage, survivorship,
and mortality tables to determine probabities of remarriage and normal life expectancies.
	 
	 	B.	 	If the parties agree as to the amount of the Reinsurers’ ultimate liability to the
Company on account of the claims resulting from such accident or occurrence, the Reinsurers
shall, on or before the date as of which the claims were valued, redeem their liability
hereunder by the payment of such amount to the Company.
	 
	 	C.	 	If the parties cannot, at such first appraisal, reach an agreement as to the amount of
the Reinsurers’ ultimate liability to the Company on account of such accident or occurrence,
settlement hereunder shall be deferred for one year, when a second appraisal of the amount
due the Company from the Reinsurers shall be made in accordance with the provisions of
Paragraph A of this Section. If the parties then agree as to the amount of the Reinsurers’
ultimate liability to the Company on account of such accident or occurrence, settlement
shall be made as outlined in Paragraph B of this Section.
	 
	 	D.	 	If the parties do not reach an agreement as a result of the second appraisal, settlement
hereunder shall be deferred for another year, at the end of which a third and last such
appraisal of the Reinsurers’ ultimate liability to the Company shall be made. If, as a
result of such appraisal, the parties agree on the amount of the Reinsurers’ ultimate
liability to the Company, settlement will be made as provided in Paragraph B of this
Section. If they do not reach an agreement as a result of such third appraisal, the amount
of the Reinsurers’ liability to the Company on account of such accident or occurrence shall
promptly be determined by arbitration, in accordance with Article 9 of the Contract. The
arbitrators in determining the value of the claims against the Company on account of such
accident or occurrence, shall follow the provisions of Paragraph A of this Section. The
amount, if any, determined by the arbitration to be due the Company from the Reinsurers
shall be paid in the manner provided in Paragraph B of this Section.

This Exhibit B is attached to and forms part of the Workmen’s Compensation and General
Liability Eighth Excess of Loss Reinsurance Contract issued to LIBERTY MUTUAL INSURANCE
COMPANY and LIBERTY MUTUAL FIRE INSURANCE COMPANY.

JNGjr/z — 1/27/75

 

 

NUCLEAR INCIDENT EXCLUSION CLAUSE — LIABILITY — REINSURANCE

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

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

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

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

 

 

-2-

	(3)	 	Except for those classes of policies specified in clause II of paragraph (2) and
without in any way restricting the operation of paragraph (1) of this Clause, it is
understood and agreed that for all purposes of this Agreement the original liability
policies of the Reassured (new, renewal and replacement) affording the following coverages:
	 
	 	 	Owners, Landlords and Tenants Liability, Contractual Liability, Elevator Liability,
Owners or Contractors (including railroad) Protective Liability, Manufacturers and
Contractors Liability, Product Liability, Professional and Malpractice Liability,
Storekeepers Liability, Garage Liability, Automobile Liability (including
Massachusetts Motor Vehicle or Garage Liability)
	 
	 	 	shall be deemed to include, with respect to such coverages, from the time specified in
Clause V of this paragraph (3), the following provision (specified as the Broad Exclusion
Provision):
	 
	 	 	Broad Exclusion Provision.
	 
	 	 	It is agreed that the policy does not apply;

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

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

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

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

 

 

-3-

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

	 	IV.	 	As used in this endorsement:
	 
	 	 	 	“hazardous properties” include radioactive, toxic or explosive properties; “nuclear
material” means source material, special nuclear material or byproduct material; “source
material”, “special nuclear material”, and “byproduct material” have the meanings given them
in the Atomic Energy Act of 1954 or in any law amendatory thereof; “spent fuel” means any
fuel element or fuel component, solid or liquid, which has been used or exposed to radiation
in a nuclear reactor; “waste” means any waste material (1) containing byproduct material 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 fissonable material;
	 
	 	 	 	With respect to injury to or destruction of property, the word “injury” or “destruction”
includes all forms of radioactive contamination of property.

 

 

-4-

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

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

	 	 	 	provided this paragraph (3) shall not be applicable to

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

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

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

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

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

 

 

NUCLEAR INCIDENT EXCLUSION CLAUSE — PHYSICAL DAMAGE — REINSURANCE

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

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

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

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

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

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

 

 

-2-

	5.	 	It is understood and agreed that this Clause shall not extend to risks using radioactive
isotopes in any form where the nuclear exposure is not considered by the Reassured to be the
primary hazard. 
	 
	6.	 	The term “special nuclear material” shall have the meaning given it in the Atomic Energy
Act of 1954 or by any law amendatory thereof.
	 
	7.	 	Reassured to be sole Judge of what constitutes:

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

	 	 	NOTE:
	 
	 	 	Without in any way restricting the operation of paragraph (1) hereof, it is understood and
agreed that

	 	(a)	 	all policies issued by the Reassured on or before December 31, 1957 shall be
free from the application of the other provisions of this Clause until expiry date or
December 31, 1960 whichever first occurs whereupon all the provisions of this Clause
shall apply,
	 
	 	(b)	 	with respect to any risk located in Canada policies issued by the Reassured on
or before December 31, 1958 shall be free from the application of the other provisions
of this Clause until expiry date or December 31, 1960 whichever first occurs whereupon
all the provisions of this Clause shall apply.

 

 

ENDORSEMENT NO.1

to

AMERICAN UNION INSURANCE COMPANY OF NEW YORK’S

WORKMEN’S COMPENSATION AND GENERAL LIABILITY

EIGHTH EXCESS OF LOSS REINSURANCE CONTRACT

issued to

LIBERTY MUTUAL INSURANCE COMPANY

and

LIBERTY MUTUAL FIRE INSURANCE COMPANY

Both of BOSTON, MASSACHUSETTS

     It is understood and agreed that this Contract, which became effective December 18, 1974, is
cancelled and replaced as of midnight, December 31, 1975. The Reinsurer shall continue to remain
liable for all loss occurrences prior to the effective date of termination.

     All other terms and conditions remain unchanged.

IN WITNESS HEREOF the American Union Insurance Company of New York, Indianapolis, Indiana has set
its signature.

Signed in Indianapolis, Indiana this 31st day of May, 1977.

	 	 	 	 	 
	 	AMERICAN UNION INSURANCE COMPANY OF NEW YORK

 	 
	 	BY:  	/s/ 	 
	 	 	TITLE: ASST. SECRETARY 	 
	 	 	 	 
	 

and in Boston, Massachusetts this 18th day of August, 1977.

	 	 	 	 	 
	 	LIBERTY MUTUAL INSURANCE COMPANY

 	 
	 	/s/ 	 
	 	VICE PRESIDENT 	 
	 	 	 
	 
	 	LIBERTY MUTUAL FIRE INSURANCE COMPANY

 	 
	 	/s/ 	 
	 	ASSISTANT SECRETARY 	 
	 	 	 
	 

JNGjr/jb 4/4/77

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