Document:

Exhibit 10y

EXHIBIT
10(y)

SETTLEMENT
AGREEMENT AND GENERAL RELEASE

 

THIS 
SETTLEMENT AGREEMENT AND GENERAL RELEASE is made and entered into by and between
G. Edward Combs (hereinafter collectively referred to as "Combs"), and 21st
CENTURY INSURANCE GROUP, and the agents, employees, divisions, subsidiaries and
related companies of 21st CENTURY INSURANCE GROUP (hereinafter collectively
referred to as the "Company").

 

WHEREAS,
Combs is voluntarily resigning his employment with the Company effective
December 31, 2004; and

 

WHEREAS,
Combs and the Company desire to fully and finally settle all matters and
differences between them, including, but not limited to, all matters and
differences arising out of Combs’ employment with the Company, his resignation
from the Company, and any and all administrative complaints or lawsuits which
have been or may be filed by Combs against the Company; and

 

WHEREAS,
Combs hereby represents to the Company that he has discussed all aspects of any
claims, causes of action, or rights he may have against the Company, and this
Settlement Agreement and General Release, with his legal counsel, if any, to the
fullest extent he deems appropriate and necessary, that he has been fully
advised by his legal counsel as to his rights to the fullest extent he deems
appropriate and necessary, that he understands that he may be waiving
significant legal rights or claims by signing this Agreement, and that he enters
into this Settlement Agreement and General Release with a full and complete
understanding of its terms; and

 

WHEREAS,
all parties hereto represent and agree that this Settlement Agreement and
General Release is the result of negotiation between the parties concerning its
terms; and

 

WHEREAS,
the Company has a legitimate right and interest to prevent unauthorized and
impermissible disclosure of its trade secrets, confidential and proprietary
information;

 

NOW,
THEREFORE, in consideration of the premises and mutual promises herein
contained, it is agreed as follows:

 

Initial
/s/
GEC______

Page 1
of
9

Date
12/8/2004_____

 

	 	
      (1)
	
      NON
      - ADMISSION OF LIABILITY

 

This
Settlement Agreement and General Release shall not in any way be construed as an
admission by the Company of any liability or wrongful conduct whatsoever, or as
an admission by the Company of any acts of discrimination or wrongful conduct
whatsoever against Combs, or against any other persons, and the Company
specifically disclaims any liability to, wrongful conduct toward, or
discrimination against Combs, or against any other persons, on the part of
itself, its employees, its agents, its divisions, or its related companies or
their employees or agents.

	 	
      (2)
	
      RESIGNATION
      BY COMBS AND NO RE-EMPLOYMENT BY THE
COMPANY

Combs
irrevocably agrees that effective December 31, 2004, he will voluntarily resign
from active employment with the Company and as an officer of the Company and
officer or director with each of its subsidiaries.

 

Combs
further agrees that he will not at any time hereafter apply for or seek
employment with the Company or any of its subsidiaries. In the event that such
an application is filed by Combs, he agrees that the Company shall have the
absolute right to reject, or to refuse to process, that application, without
recourse by him.

	 	
      (3)
	
      AVAILABILITY
      OF COMBS IN PENDING OR FUTURE
LITIGATION

Combs
agrees that he will make himself available to the Company and its counsel in
connection with any pending or future litigation or administrative proceeding
where his knowledge and truthful testimony may be required. Combs further agrees
that he shall be entitled to no other moneys, compensation or consideration,
except those as set forth in paragraph “5” hereof entitled “Consideration by the
Company”, except that if he incurs out-of-pocket expenses in conjunction with
providing such assistance, knowledge or testimony, he will be reimbursed for
such out-of-pocket expenses. Combs will be given reasonable notice of such need
for his availability, which must also take into account that he may be engaged
in other employment.

 

Initial
/s/
GEC______

Page 2
of
9

Date
12/8/2004_____

 

	 	
      (4)
	
      NONDISCLOSURE
      AND NONINTERFERENCE

 

Combs
agrees that he shall not now nor in the future engage in any unfair competition
prohibited under California law with respect to the Company, shall not disclose
to third parties any of the Company's confidential or proprietary information,
and including and in connection therewith agrees that he shall not now nor in
the future violate any provision of the California Uniform Trade Secrets Act,
California Civil Code §§ 3426 et seq. or for a
period of 18 months following the date hereof, engage in any solicitation of the
Company's employees. The
Company agrees to use its best efforts to cease using Combs’ name in any
advertising materials mailed or published 30 days after the effective date of
this Agreement.

	 	
      (5)
	
      CONSIDERATION
      BY THE COMPANY

 

The
Company agrees that when it receives the original of this Settlement Agreement
and General Release executed by Combs, and when the waiting periods specified in
paragraphs 12 and 13 below have expired, the Company will:

	 	
      (a)
	
      Pay
      Combs the equivalent of fourteen months’ salary ($385,000) in a lump sum
      payment.

	 	 	 

	 	
      (b)
	
      Pay
      Combs a cash bonus of $272,250 for his 2004
performance.

	 	 	 

	 	
      (c)
	
      Vest
      Combs’ currently unvested 58,510 stock options (granted February 26, 2003)
      as of the effective date of his
termination.

	 	 	 

	 	
      (d)
	
      Vest
      Combs’ remaining 3,000 shares of Restricted Stock at
      termination.

	 	 	 

	 	
      (e)
	
      Pay
      Combs his accrued, vested, but unused vacation
pay.

	 	 	 

	 	
      (f)
	
      Provide
      Combs with COBRA medical coverage consistent with his current coverage for
      18 months following termination, to be paid for by the
      Company.

	 	 	 

	 	
      (g)
	
      Provide
      Combs with six months of outplacement services with a professional
      outplacement firm.

	 	 	 

	 	
      (h)
	
      Give
      Combs his laptop computer, docking station and printer (after removal of
      company information and software).

Initial
/s/
GEC______

Page 3
of
9

Date
12/8/2004_____

	 	
      (6)
	
      NO
      OTHER FILINGS

 

Combs
represents that he has not filed nor will he file any charges or complaints
against the Company with either the United States Equal Employment Opportunity
Commission or the State of California Department of Fair Employment and Housing,
or any other local, state, or federal agency (except for Workers Compensation
and unemployment claims, which are not released pursuant to Section 10 below),
and that if any of these agencies assumes jurisdiction of any complaint or
charge against the Company on behalf of Combs, based upon Combs’ employment with
the Company or his resignation from the Company, or any other matter concerning
or pertaining to Combs, and the Company, Combs will immediately request said
agency to withdraw from the matter.

 

Combs
also covenants and represents that he shall have no right whatsoever to file any
lawsuit nor institute any other legal proceedings of any type whatsoever against
the Company based upon or arising out of or during Combs’ employment with the
Company, or any other matter pertaining to Combs and the Company based upon
facts, acts, or omissions occurring prior to the date of the signing of this
Agreement by Combs.

	 	
      (7)
	
      RETURN
      OF COMPANY PROPERTY

Combs
agrees that he will return to the Company all Company property, with the
exception of those items listed in 5(h), including Company documents in his
possession, including documents stored electronically on any media.

	 	
      (8)
	
      CONFIDENTIALITY

Combs
represents and agrees that he will keep the terms of this Settlement Agreement
and General Release completely confidential, and that he will not hereafter
disclose any information concerning the contents of this settlement to anyone,
specifically including, but by no means limited to, any past, present, or
prospective employee or applicant for employment of the Company or to any
representative of any media, except for his legal and tax advisors and immediate
family, whom he will inform of the terms of this confidentiality provision and
their obligations to comply with it. Combs understands that the Company may
disclose this Settlement Agreement and General Release to its auditors,
regulators, or as otherwise required by law or regulation.

 

Initial
/s/
GEC______

Page 4
of
9

Date
12/8/2004_____

 

	 	
      (9)
	
      FULL
      AND INDEPENDENT KNOWLEDGE

 

Combs
represents and agrees that he has thoroughly discussed all aspects of this
Settlement Agreement and General Release with his legal counsel, if any, to the
fullest extent he deems appropriate and necessary, that his legal counsel, if
any, has fully explained to Combs as to his legal rights and that he may be
waiving significant legal rights by signing this Settlement Agreement and
General Release, that he has carefully read and fully understands all of the
provisions of this Settlement Agreement and General Release, and that he is
voluntarily entering into this Settlement Agreement and General
Release.

	 	
      (10)
	
      COMPLETE
      RELEASE

 

Combs
does hereby, and for his heirs, representatives, successors, and assigns,
release, acquit, and forever discharge the Company and the Company's owners,
stockholders, predecessors, successors, assigns, agents, directors, officers,
employees, representatives, attorneys, subsidiaries, affiliates (and agents,
directors, officers, employees, representatives and attorneys of such
subsidiaries and affiliates) and all persons acting by, through, under or in
concert with any of them, from any and all charges, complaints, claims,
liabilities, obligations, promises, agreements, controversies, costs, losses,
debts, expenses, damages, actions, causes of action, suits, rights, and demands,
of any nature whatsoever, known or unknown, suspected or unsuspected, from the
beginning of time to the date of execution hereof (hereinafter "Claim" or
"Claims"). This release of Claims includes a release of any rights or claims
Combs may have under the Age Discrimination in Employment Act of 1967, as
amended, which prohibits age discrimination in employment; Title VII of the
Civil Rights Act of 1964, which prohibits discrimination on the basis of race,
color, religion, creed, national origin or sex; the Equal Pay Act, which
prohibits paying men and women unequal pay for equal work; or any other local,
state, or federal law or regulation, including, but not limited to, such local,
state, or federal law or regulation prohibiting employment discrimination. This
release of Claims also includes a release by Combs of any claims for wrongful
termination of employment, intentional or negligent infliction of emotional
distress, fraud, or any other claims based upon any local, state, or federal
common law, statute, or other basis for liability, except for claims under the
California Workers Compensation Act, the California Unemployment Insurance
Compensation Act, the Occupational Safety and Health Act, Social Security, the
Employee Retirement Income Security Act, and other claims which cannot be waived
as a matter of law or public policy.

 

Initial
/s/
GEC______

Page 5
of
9

Date
12/8/2004_____

 

	 	
      (11)
	
      UNKNOWN
      CLAIMS

Combs
expressly waives and relinquishes all rights and benefits afforded by Section
1542 of the Civil Code of the State of California, and does so understanding and
acknowledging the significance and consequence of such specific waiver of
Section 1542. Section 1542 of the Civil Code of the State of California states
as follows:

 

"A
general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by his must have materially affected his settlement with the
debtor."

 

Thus,
notwithstanding the provisions of Section 1542, and for the purposes of
implementing a full and complete release and discharge of the Company, and the
Company's owners, stockholders, predecessors, successors, assigns, agents,
directors, officers, employees, representatives, attorneys, subsidiaries,
affiliates (and agents, directors, officers, employees, representatives and
attorneys of such subsidiaries and affiliates), and all persons acting by,
through, or in concert with any of them, Combs expressly acknowledges that this
Settlement Agreement and General Release is intended to include in its effect,
without limitation, all Claims which Combs does not know or suspect to exist in
his favor at the time of execution hereof, and that the settlement agreed upon
contemplates the extinguishment of any such Claim or Claims.

	 	
      (12)
	
      PERIOD
      FOR REVIEW AND CONSIDERATION OF
AGREEMENT

Combs
understands and acknowledges that he has been given a period of twenty-one (21)
days to review and consider this Agreement before signing it. Combs further
understands and acknowledges that he may use as much of this twenty-one (21) day
period as he wishes prior to signing this Agreement.

 

Initial
/s/
GEC______

Page 6
of
9

Date
12/8/2004_____

 

	 	
      (13)
	
      COMBS’
      RIGHT TO REVOKE AGREEMENT

 

Combs
acknowledges and represents that he understands that he may revoke this
Agreement within seven (7) days of his signing it. Revocation can be made by
delivering a written notice of revocation to Richard A. Andre, Senior Vice
President of Human Resources, 21st Century Insurance Group, 6301 Owensmouth
Avenue, Woodland Hills, California 91367. For this revocation to be effective,
written notice must be received by Richard A. Andre no later than the close of
business on the seventh day after Combs signs this Agreement otherwise, Combs
agrees to provide written notice to Richard A. Andre after the expiration of the
revocation period of this Agreement that he has elected not to revoke. If Combs
revokes this Agreement, no part of this Agreement shall be effective or
enforceable for any purpose, and Combs will not be entitled to receive any of
the benefits described in paragraph 5 entitled "Consideration by the
Company."

	 	
      (14)
	
      NO
      REPRESENTATIONS

Combs
acknowledges that, except as expressly set forth herein, no representations of
any kind or character have been made to his by the Company, or by any of its
agents, employees, representatives, or attorneys to induce the execution of this
Settlement Agreement and General Release.

	 	
      (15)
	
      OWNERSHIP
      OF CLAIMS

Combs
represents and agrees that he has not heretofore assigned or transferred, or
purported to have assigned or transferred, to any person whomsoever, any Claim
or any portion thereof or interest therein, and Combs agrees to indemnify,
defend, and hold harmless the Company and all others persons released herein,
against any and all Claims, based on, arising out of, or in connection with any
such transfer or assignment or purported transfer or assignment, of any Claims,
or any portion thereof or interest therein.

 

Initial
/s/
GEC______

Page 7
of
9

Date
12/8/2004_____

	 	
      (16)
	
      SUCCESSORS

 

This
Settlement Agreement and General Release shall be binding upon Combs and his
heirs, representatives, successors and assigns, and shall inure to the benefit
of the Company, and the Company's owners, stockholders, predecessors,
successors, assigns, agents, directors, officers, employees, representatives,
attorneys, subsidiaries, affiliates (and agents, directors, officers, employees,
representatives and attorneys of such subsidiaries and affiliates), and all
persons acting by, through, under or in concert with any of them, and to their
heirs, representatives, successors, and assigns.

	 	
      (17)
	
      MISCELLANEOUS

	 	
      (a)
	
      This
      Settlement Agreement and General Release shall in all respects be
      interpreted, enforced and governed under the laws of the State of
      California. The language of all parts of this Settlement Agreement and
      General Release shall in all cases be construed as a whole, according to
      its fair meaning, and not strictly for or against any of the
      parties.

	 	 	 

	 	
      (b)
	
      In
      the event of a breach of this Agreement by Combs, the Company may
      immediately terminate payment of any consideration otherwise due to Combs
      under Paragraph 5 of this Agreement without further obligation. Such
      remedy is in addition to any other remedies that the Company may assert
      against Combs as a result of a breach of this Agreement by
      Combs.

	 	 	 

	 	
      (c)
	
      Should
      any provision of this Settlement Agreement and General Release be declared
      or determined by any Court to be illegal or invalid, the validity of the
      remaining parts, terms, or provisions shall not be affected thereby and
      said illegal or invalid part, term, or provision shall be deemed not to be
      a part of this settlement Agreement and General
Release.

	 	 	 

	 	
      (d)
	
      As
      used in this Settlement Agreement and General Release, the masculine,
      feminine or neuter gender and the singular or plural number, shall be
      deemed to include the others whenever the context so indicates or
      requires.

 

 
Page 8
of
9

 

 

	 	
      (e)
	
      This
      Settlement Agreement and General Release sets forth the sole and entire
      agreement between the parties hereto and there are no other agreements,
      whether oral, written, express or implied, not set forth in this
      Settlement Agreement and General Release. This Settlement Agreement and
      General Release fully supersedes any and all prior agreements or
      understandings between the parties hereto pertaining to the subject matter
      hereof, including but not limited to the Retention Agreement executed
      April 4, 2003. Notwithstanding the foregoing, all Indemnity Agreements
      entered into between Combs and the Company, and its subsidiaries, shall
      continue in full force and effect according to their
  terms.

PLEASE
READ CAREFULLY. THIS SETTLEMENT AGREEMENT AND GENERAL RELEASE INCLUDES A RELEASE
OF ALL KNOWN AND UNKNOWN CLAIMS.

	
      Executed
      at Woodland Hills, California,

      this
      8th day of December, 2004

       

      /s/
      G. Edward Combs
	 	
      Executed
      at Woodland Hills, California,

      this
      8th day of December, 2004.

       

      /s/
      Richard A. Andre

	
      G.
      EDWARD COMBS
	 	
      RICHARD
      A. ANDRE

      Senior
      Vice President, Human Resources

      21st
      Century Insurance Group

 
Page 9
of
9Exhibit 10z

EXHIBIT
10(z)

EXECUTIVE
MEDICAL REIMBURSEMENT PLAN

RIDER
to

SUMMARY
PLAN DESCRIPTION

21st
CENTURY INSURANCE COMPANY agrees to provide the benefits of this Executive
Medical Reimbursement Plan (“Supplement Plan”). All other provisions of the
Prudent Buyer Plan Summary Plan Description which are not inconsistent with this
Supplement Plan are incorporated in and made a part hereof by this reference.
This Supplement Plan becomes effective at 12:01 a.m., Pacific Standard Time on
January 1, 2004.

The
italicized
terms
appearing on this Supplement Plan are defined in the DEFINITIONS section of your
Prudent Buyer Plan Summary Plan Description.

ELIGIBLE
STATUS

	
      1.
	
      Employees.
      Executives of 21st CENTURY INSURANCE COMPANY, whose coverage under this
      Supplement Plan is agreed to by 21st CENTURY INSURANCE COMPANY (the
      plan
      administrator).

	2. 	Dependents. Dependents
      of
      employees
      as
      set forth above are eligible, provided they meet the requirements for
      dependents
      as
      set forth in the Prudent Buyer Plan Summary Plan
Description.

All other
provisions and requirements of HOW COVERAGE BEGINS AND ENDS section of your
Prudent Buyer Plan Summary Plan Description apply to this Executive Medical
Reimbursement Plan.

Page
1

YOUR
EXECUTIVE MEDICAL BENEFITS

The
benefits described below are provided for the services and supplies listed in
YOUR EXECUTIVE MEDICAL BENEFITS: MEDICAL CARE THAT IS COVERED below, up to the
Executive Medical Benefit Maximum. Benefits payable under this Supplement Plan
will not include amounts paid under your Prudent Buyer Plan.

You
are not required to pay any deductible or co-payment for these
benefits.

EXECUTIVE
MEDICAL BENEFIT MAXIMUM

The
Executive Medical Benefit Maximum payable under this Supplement Plan is limited
to $5,000
per
family per calendar
year.

CONDITIONS
OF COVERAGE

The
following conditions of coverage must be met for expense incurred for services
or supplies to be covered.

	
      1.
	
      You
      must incur this expense while you are covered under these Executive
      Medical Reimbursement Plan benefits. Expense is incurred on the date you
      receive the service or supply for which the charge is
  made.

	2.	The
      expense must be for a medical service or supply included in YOUR EXECUTIVE
      MEDICAL BENEFITS: MEDICAL CARE THAT IS COVERED.

	
      3.
	
      The
      expense must not be for a medical service or supply listed in YOUR
      EXECUTIVE MEDICAL BENEFITS: MEDICAL CARE THAT IS NOT COVERED. If the
      service or supply is partially excluded, then only that portion which is
      not excluded will be considered covered,

	
      4.
	
      Any
      services received must be those which are regularly provided and billed by
      the provider. In addition, those services must be consistent with the
      illness, injury, degree of disability and your medical needs. Benefits are
      provided only for the number of days required to treat your illness or
      injury,

	5.	All
      services and supplies must be ordered by a physician.

Page
2

 

MEDICAL
CARE THAT IS COVERED

Subject
to the Executive Medical Benefit Maximum, the requirements set forth under YOUR
EXECUTIVE MEDICAL BENEFITS: CONDITIONS OF COVERAGE and the exclusions or
limitations listed under YOUR EXECUTIVE MEDICAL BENEFITS: MEDICAL CARE THAT IS
NOT COVERED, the plan
will
provide benefits for the following services and supplies:

Plan
Payment. Expense
incurred for medical services and supplies otherwise covered under your Prudent
Buyer Plan, but for which no payment was made because such expense was applied
to: (1) a calendar year or other deductible amount; (2) your Co-Payment; (3) the
Medical Benefit Maximums; or (4) the non-contracting
hospital penalty.

Non-Participating
Providers. Expense
incurred for other medical services and supplies provided by a non--participating
provider which was
not payable under your Prudent Buyer Plan solely because the charges are in
excess of the reasonable
charge or in
excess of the customary
and reasonable charge.

Convalescent
Care.
Services and supplies provided while confined in the convalescent wing of a
hospital.

Reconstructive
Surgery.
Reconstructive surgery performed to correct deformities caused by congenital or
developmental abnormalities, illness, or injury for the purpose of improving
bodily function or symptomatology or creating a normal appearance.

Ambulance. Expense
incurred for ambulance services, limited to a maximum payment of $1,000 per
trip.

If you
have an emergency
medical
condition that requires an emergency response, please call the “911” emergency
response system if you are in an area where the system is established and
operating.

Dental
Care.
Orthodontics, and other dental services and supplies to the extent that benefits
are not payable under the base
medical plan. This
includes general anesthesia and associated facility charges when your clinical
status or underlying medical condition requires that dental procedures be
rendered in a hospital
or
ambulatory surgical center, to the extent such services are covered under your
base
medical plan.

Infertility.
Services and supplies for the diagnosis and treatment of infertility.

Page
3

Nicotine
Dependency. Smoking
cessation programs or treatment of nicotine or tobacco use.

Routine
Physical Examinations. Routine
physical examinations, including breast and pelvic examinations and pap
smears.

Prostate
Cancer Screening. Services
and supplies provided in connection with routine tests to detect prostate
cancer.

Weight
Reduction. Services
for weight reduction or treatment of obesity.

Cervical
Cancer Screening. Services
and supplies provided in connection with a routine test to detect cervical
cancer (i.e.,
pap
smear).

Vision
Care. Eye
examinations, eyeglasses and contact lenses.

Contraceptives.
Services
and supplies provided in connection with the following methods of
contraception:

	
      *
	
      Injectable
      drugs and implants for birth control, administered in a physician’s
      office,
      if medically
      necessary. 

	
      *
	
      Intrauterine
      contraceptive devices (IUD5) and diaphragms, dispensed by a physician
      if
      medically
      necessary.

	
      *
	
      Professional
      services of a physician
      in
      connection with the prescribing, fitting, and insertion of intrauterine
      contraceptive devices or diaphragms.

If your
physician
determines
that none of these contraceptive methods are appropriate for you based on your
medical or personal history, coverage will be provided for another prescription
contraceptive method that is approved by the Food and Drug Administration (FDA)
and prescribed by your physician.

Eye
Surgery for Refractive Defects. Eye
surgery for the purpose of correcting refractive defects of the eye such as
nearsightedness (myopia) and/or astigmatism.

Hearing
Care. Hearing
examinations and hearing aids.

Page
4

MEDICAL
CARE THAT IS NOT COVERED

Benefits
payable under this Supplement Plan will not include amounts paid under your
Prudent Buyer Plan. In addition, no payment will be made under this Supplement
Plan for expenses incurred for, or in connection with, any of the items below.
(The titles given to these exclusions and limitations are for ease of reference
only, they are not meant to be an integral part of the exclusions and
limitations and do not modify their meaning.)

Not
Medically Necessary. Services
or supplies that are not medically
necessary, as
defined, unless the service
or supply is specifically listed under YOUR EXECUTIVE MEDICAL BENEFITS: MEDICAL
CARE THAT IS COVERED.

Transportation.
Expense incurred for transportation, except as specifically stated in the
“Ambulance” provision of YOUR EXECUTIVE MEDICAL BENEFITS:  MEDICAL
CARE THAT IS COVERED. Mileage reimbursement Charges incurred in the purchase of,
or the modification, a motor vehicle.

Health
Coverage Costs. The cost
for group or individual insurance, or any other coverage plan. This includes
insured and uninsured plans.

Capital
Improvement. Expense
incurred in the purchase, installation or building of any device, equipment or
facility which is a capital improvement of property.

Experimental
or Investigative. Any experimental
or
investigative
procedure or
medication, unless the service or supply is specifically listed under YOUR
EXECUTIVE MEDICAL BENEFITS: MEDICAL CARE THAT IS COVERED.

Self-Inflicted.
Illness
or injury
that is self-inflicted.

Crime
or Nuclear Energy. Conditions that
result from: (1) your
commission of or attempt to commit a
felony;
or (2) any release of nuclear energy, whether or not the result of war, when
government funds are available for treatment of illness or injury arising from
such release of nuclear energy.

Not
Covered. Services
received before your effective
date or during
an inpatient stay
that
began on or before your effective
date. Services
received after your coverage ends, except as specifically stated under EXTENSION
OF BENEFITS of your Prudent Buyer Plan Summary Plan
Description.

Page
5

 

Excess
Amounts. Any
amounts in excess
of the Executive Medical Benefit Maximum.

Work-Related.
Work-related
conditions if benefits are recovered or can be recovered, either by
adjudication, settlement or otherwise, under any workers’ compensation,
employer’s liability law or occupational disease law, even if you do not claim
those benefits.

If there
is a dispute or substantial uncertainty as to whether benefits may be recovered
for those conditions pursuant to workers’ compensation, benefits will be
provided subject to the right of recovery and reimbursement under California
Labor Code Section 4903, and as described in REIMBURSEMENT FOR ACTS OF THIRD
PARTIES.

Government
Treatment. Any
services provided by a local, state, or federal government agency, except when
payment under this Supplement Plan is expressly required by federal or state
law.

Services
of Relatives.
Professional services received from a person who lives in your home or who is
related to you by blood or marriage.

Voluntary
Payment. Services
for which you have no legal obligation to pay, or for which no charge would be
made in the absence of insurance coverage or other health plan coverage, except
services received at a non-governmental charitable research hospital.
Such a
hospital
must meet
the following guidelines:

1. It
must be internationally known as being devoted mainly to medical
research;

2. At
least 10% of its
yearly budget must be spent on research not directly related to patient
care;

3. At
least one-third of its gross income must come from donations or grants other
than gifts or payments for patient care;

4. It
must accept patients who are unable to pay; and

5.
Two-thirds of its patients must have conditions directly related to the
hospital’s
research.

Not
Specifically Listed.
Services not specifically listed in this Supplement Plan as covered
services.

Page
6

 

Private
Contracts. Services
or supplies provided pursuant to a private contract between the beneficiary
and a
provider, for which reimbursement under the Medicare program is prohibited, as
specified in Section 1802 (42 U.S.C. 1395a) of Title XVIII of the Social
Security Act.

Inpatient
Diagnostic Tests. Inpatient
room and board charges in connection with a hospital
stay primarily
for diagnostic tests which could have been performed safely on an outpatient
basis.

Mental
or Nervous Disorders. Mental
or nervous disorders or
substance abuse, including rehabilitative care in relation to these conditions,
except as specifically stated in the “Mental or Nervous Disorders or Substance
Abuse” provision of the MEDICAL
CARE THAT IS COVERED section in your Prudent Buyer Plan Summary Plan
Description.

Dental
Services or Supplies.
Cosmetic dental surgery or other dental services for
beautification.

Optometric
Services or Supplies. Eye
exercises including orthoptics.

Cosmetic
Surgery. Cosmetic
surgery or other services solely for beautification or to improve appearance.
This exclusion does not apply to reconstructive surgery to restore a bodily
function, or to correct a deformity caused by injury. Cosmetic surgery does not
become reconstructive surgery because of psychological or psychiatric
reasons.

Sex
Transformation. Procedures
or treatments to change characteristics of the body to those of the opposite
sex.

Orthopedic
Supplies. Orthopedic
shoes (except when joined to braces) or shoe inserts.

Air
Conditioners. Air
purifiers, air conditioners, or humidifiers.

Custodial
Care or Rest Cures. Inpatient
room and board charges in connection with a hospital
stay primarily
for environmental change, physical therapy or treatment of chronic pain.
Custodial
care, rest
cures, or any services rendered by a rest home, a home for the aged, a nursing
home or any similar facility, except when provided by a hospice, or as
specifically stated in this Supplement Plan in the “Convalescent Care” provision
of YOUR EXECUTIVE MEDICAL BENEFITS: MEDICAL CARE THAT IS COVERED.

 

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7

Exercise
Equipment.
Exercise equipment, or any charges for activities, instrumentalities, or
facilities normally intended or used for developing or maintaining physical
fitness, including, but not limited to, charges from a physical fitness
instructor, health club or gym, even if ordered by a physician.

Chronic
Pain. Inpatient
room and board charges in connection with a hospital
stay primarily
for treatment of chronic pain.

Personal
Items. Any
supplies for comfort, hygiene or beautification.

Education
or Counseling.
Educational services, or nutritional counseling, except as specifically provided
or arranged by Blue Cross or a diabetes education program, as described in your
Prudent Buyer Plan Summary Plan Description. Food supplements.

Telephone
and Facsimile Machine Consultations.
Consultations provided by telephone or facsimile machine.

Acupressure
or Massage.
Acupressure or massage to control pain, treat illness or promote health by
applying pressure to one or more specific areas of the body based on dermatoses
or acupuncture points.

Outpatient
Drugs and Medications. Any non-prescription,
over-the-counter patent or proprietary drug or medicine. Cosmetics, dietary
supplements, health or beauty aids.

Contraceptive
Devices. Contraceptive
devices prescribed for birth control except as specifically stated in the
“Contraceptives” provision in MEDICAL CARE THAT IS COVERED.

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8

REIMBURSEMENT
FOR ACTS OF THIRD PARTIES

No
payment will be made under this Supplement Plan for expenses incurred for or in
connection with any illness, injury, or condition for which a third party may be
liable or legally responsible by reason of negligence, an intentional act or
breach of any legal obligation - However, the plan will provide the benefits of
this Supplement Plan subject to the following:

	
      1.
	
      The
      plan
      administrator will
      automatically have a lien, to the extent of benefits provided, upon
      any recovery,
      whether by settlement, judgment or otherwise, that you receive from the
      third party, the third party’s insurer, or the third party’s guarantor.
      The lien will be in the amount of benefits paid by the claims
      administrator under
      this Supplement Plan for the treatment of the illness, disease, injury or
      condition for which the third party is
liable.

	
      2.
	
      You
      must advise the claims
      administrator in
      writing, within 60 days of filing a claim against the third party and take
      necessary action, furnish such information and assistance, and execute
      such papers as the claims
      administrator may
      require to facilitate enforcement of the plan
      administrators rights.
      You must not take action which may prejudice the rights or interest of the
      plan
      administrator under
      your Supplement Plan. Failure to give such notice to the claims
      administrator or
      cooperate with the claims
      administrator, or
      actions that prejudice the rights or interests of the claims
      administrator will
      be a material breach of this Supplement Plan and will result in your being
      personally responsible for reimbursing the plan
    administrator.

	
      3.
	
      The
      plan
      administrator will
      be entitled to collect its lien even if the amount you or anyone recovered
      for you (or your estate, parent or legal guardian) from or for account of
      such third party as compensation for the injury, illness or condition is
      less than the actual loss you suffered.

IMPORTANT: YOU
MAY NOT BE ABLE TO CLAIM DEDUCTIONS OR TAKE TAX CREDIT ON YOUR FEDERAL AND STATE
INCOME TAX FORMS FOR EXPENSES REIMBURSED UNDER THIS
PLAN.

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9

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