Document:

exv10w176

EXHIBIT
10.176

WORKERS’ COMPENSATION CLASH EXCESS OF LOSS

REINSURANCE CONTRACT

No. 2000290

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

2007 Workers’ Compensation Clash 
Excess of Loss
Contract — January 1, 2007

CAS0700003

 

 

WORKERS’ COMPENSATION CLASH EXCESS OF LOSS REINSURANCE — CONTRACT No. 2000290

	 	 	 	 	 	 	 
	ARTICLE	 	CONTENTS	 	PAGE	 
	I	 	BUSINESS COVERED
	 	 	1	 
	II	 	EFFECTIVE DATE AND TERMINATION
	 	 	3	 
	III	 	TERRITORY
	 	 	4	 
	IV	 	LIMIT AND RETENTION
	 	 	4	 
	V	 	WARRANTIES
	 	 	5	 
	VI	 	ULTIMATE NET LOSS
	 	 	5	 
	VII	 	LOSS IN EXCESS OF POLICY LIMITS
	 	 	6	 
	VIII	 	EXTRA CONTRACTUAL OBLIGATIONS
	 	 	6	 
	IX	 	EXCLUSIONS
	 	 	7	 
	X	 	SPECIAL ACCEPTANCES
	 	 	12	 
	XI	 	LOSS OCCURRENCE
	 	 	12	 
	XII	 	REINSURANCE PREMIUM
	 	 	14	 
	XIII	 	REPORTS AND REMITTANCES
	 	 	14	 
	XIV	 	LOSS ADJUSTMENTS AND SETTLEMENTS
	 	 	15	 
	XV	 	SALVAGE AMD SUBROGATION
	 	 	15	 
	XVI	 	FEDERAL TERRORISM EXCESS RECOVERY CLAUSE
	 	 	16	 
	XVII	 	ACCESS TO RECORDS
	 	 	16	 
	XVIII	 	DIVIDENDS AND TAXES
	 	 	17	 
	XIX	 	FEDERAL EXCISE TAX
	 	 	17	 
	XX	 	GOVERNING LAW
	 	 	18	 
	XXI	 	CURRENCY
	 	 	18	 
	XXII	 	OFFSET
	 	 	18	 
	XXIII	 	ERRORS OR OMISSIONS
	 	 	18	 
	XXIV	 	INSOLVENCY
	 	 	18	 
	XXV	 	MEDIATION
	 	 	19	 
	XXVI	 	ARBITRATION
	 	 	20	 
	XXVII	 	SPECIAL CONDITIONS
	 	 	23	 
	XXVIII	 	COMMUTATION
	 	 	25	 
	XXIX	 	THIRD PARTIES
	 	 	26	 
	XXX	 	UNAUTHORIZED REINSURENCE
	 	 	26	 
	XXXI	 	SERVICE OF SUIT
	 	 	28	 
	XXXII	 	CONFIDENTIALITY CLAUSE
	 	 	28	 
	XXXIII	 	AMENDMENTS
	 	 	30	 
	XXXIV	 	SEVERABILITY
	 	 	30	 
	XXXV	 	INTEREST PENALTY
	 	 	30	 
	XXXVI	 	ASSIGNMENT
	 	 	31	 
	XXXVII	 	ENTIRE AGREEMENT
	 	 	31	 

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. N.M.A. 1590

NUCLEAR INCIDENT EXCLUSION CLAUSE — LIABILITY — REINSURANCE — CANADA. N.M.A. 1979

NUCLEAR INCIDENT EXCLUSION CLAUSE — REINSURANCE — NO. 4.

2007 Workers’ Compensation Clash

Excess of Loss Contract — January 1, 2007

 

 

WORKERS’ COMPENSATION CLASH EXCESS OF LOSS

REINSURANCE CONTRACT

No. 2000290

(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.	 	The Subscribing Reinsurer shall indemnify the Company on an excess of loss basis in respect
of the Ultimate Net Loss paid or to be paid by the Company and the Legal Entities (as defined
below) as a result of losses occurring or claims made during the term of the Contract for
Policies in force as of January 1, 2007, and new and renewal Policies becoming effective on
or after said date, subject to the terms and conditions contained herein.

	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 the following Annual
Statement Lines of Business and Classes of Insurance 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,

National Insurance Association, Indianapolis, Indiana,

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Contract — January 1, 2007

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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)

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,

Bridgefield Employers Insurance Company, Lakeland, Florida

Bridgefield Casualty Insurance Company, Lakeland, Florida

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 IX -Exclusions of this Contract.

	 	 	 

	NAIC 

CODE:

	 	LINES OF BUSINESS:
	03

	 	Farmowners (Section II only)
	04

	 	Homeowners (Section II only)
	05.2

	 	Commercial Multiple Peril (Section II only)
	16

	 	Workers Compensation
	17

	 	Other Liability, excluding Umbrella
	18

	 	Products Liability
	19.1, 19.2

	 	Private Passenger Automobile Liability
	19.3, 19.4

	 	Commercial Automobile Liability
	21

	 	Automobile Physical Damage (Auto Physical Damage Collision, only)

Coverage is provided, as respects the Profit Centers’ Underwriting Guidelines as follows:

	 	1.	 	Automobile Liability includes; Bodily Injury Liability, Property Damage
Liability, Medical Payments, Uninsured Motorists, Underinsured Motorists,
No-Fault Coverage and Auto Physical Damage Collision.
	 
	 	2.	 	Other Liability including Professional Liability, Bodily Injury Liability, Property
Damage Liability, Personal and Advertising Injury Liability and Medical Payments Coverage
when written as part of a Commercial or Personal Package Policy or on a monoline basis.
However, Advertising Injury Liability shall only apply to this Agreement when written as
part of a Commercial Package Policy or a Commercial General Liability Coverage Form.

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Contract — January 1, 2007

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	 	3.	 	Workers Compensation and Employers Liability.
	 
	 	4.	 	Clash of multiple Policies involved in the same occurrence.

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. Subject to Article XXVII — Special
Conditions below, this Contract may be terminated at the close of any calendar year by either
party giving to the other 90 days prior written notice by certified mail of its intention to
do so.

	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:
	 
	 	 	 	“Claims Made” shall be understood to mean losses arising under Policies in which the
date when the claim is made determines under which Policy the loss is collectible. Such
losses are covered hereunder irrespective of the date on which the loss occurs provided
that the date the claim is made falls within the period of this Contract.
	 
	 	 	 	For the purposes of the foregoing, the date a claim is first made shall be the date
applicable to the entire loss and the Subscribing Reinsurer shall be liable for its
proportion of the entire loss irrespective of the expiry date of the Contract, provided
that such date falls within the period of this Contract.
	 
	 	 	 	In the event of a Loss Occurrence arising hereunder which involves Policies (or sections
thereof) which respond on both a losses occurring and Claims Made basis, the date of the
Loss Occurrence will be deemed to be the earlier of the dates, namely the date of the
occurrence of the loss.

	C.	 	In the event of termination of this Contract, the Company shall have the option of continuing
or terminating the liability in force at the date of termination as set forth below. The
Company may exercise such option provided written notice of the Company’s election is given by
certified mail to the Subscribing Reinsurer prior to the date of termination. If the Company
does not choose to exercise its option prior to the date of termination, such option shall
revert to the Subscribing Reinsurer.

	 	1.a.	 	As respects Policies written on an occurrence basis:
	 
	 	 	 	Upon termination of this Contract, all Policies covered hereunder and in force at the
date of termination of this Contract shall continue until their natural expiry,
cancellation or next anniversary of such business, whichever first occurs; but in no
case shall this reinsurance be extended for longer than one year, plus odd time not
exceeding 18 months in all, after the termination date.
	 
	 	1.b.	 	As respects Policies written on a claims made basis:
	 
	 	 	 	Upon termination of this Contract, the Subscribing Reinsurer shall continue to be liable
for claims received or recorded by the Company or by the insured with respect to
Policies in force

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Contract — January 1, 2007

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	 	 	 	at the date of termination for the full original policy period until the natural
expiry, cancellation or next anniversary of such Policies, not to exceed one year,
whichever comes first. However, if the Company or a Legal Entity, as applicable, has
provided an Extended Reporting Period within one year after the date of termination on
Policies in force at the date of termination or if the Extended Reporting Period is in
force at the date of termination, the Subscribing Reinsurer shall continue to be liable
for such extended reporting period.
	 
	 	2.a. 	 	As respects Policies written on an occurrence basis:
	 
	 	 	 	Upon termination of this Contract, the Subscribing Reinsurer shall be liable for losses
occurring prior to the date of termination; however, the Subscribing Reinsurer shall
have no liability for losses occurring subsequent to the termination of this Contract.
	 
	 	2.b. 	 	As respects Policies written on a claims made basis:
	 
	 	 	 	Upon termination of this Contract, the Subscribing Reinsurer shall not be liable for
claims received or recorded by the Company or a Legal Entity, as applicable, or insured
after the effective date of termination unless such claim is received and recorded by
the Company or a Legal Entity, as applicable, or the insured during an Extended
Reporting Endorsement Period in force at the date of termination.

ARTICLE III — TERRITORY

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

ARTICLE IV — LIMIT AND RETENTION

	A.	 	The Company shall retain the first $5,000,000 of Ultimate Net Loss as respects any one Loss
Occurrence. The Subscribing Reinsurer shall then be liable for the amount by which the
Ultimate Net Loss exceeds the Company’s retention of $5,000,000 but the Subscribing Reinsurer
shall never exceed $5,000,000 any one Loss Occurrence.

	B.	 	Notwithstanding any other provisions of this Contract, the Company shall retain all Ultimate
Net Loss otherwise recoverable from the Subscribing Reinsurer under this Contract until the
Company has retained Ultimate Net Loss otherwise recoverable from the Subscribing Reinsurer
under this Contract equal to $5,000,000 for the current calendar year.

	C.	 	Notwithstanding the foregoing, the Subscribing Reinsurer’s liability arising out of an Act of
Terrorism shall be limited to $5,000,000 in the aggregate.

	D.	 	The Company’s retention and the Subscribing Reinsurer’s limit of liability for each Loss
Occurrence, shall apply irrespective of the number of Policies affected or number of hazards
in one Policy and regardless of the number of Lines of Business involved.

	E.	 	An “Act of Terrorism” for purposes of this Contract shall mean:

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Contract — January 1, 2007

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	 	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)
intimidating, 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.

	F.	 	Reinsurance of the Company’s retention, set forth in each Exhibit, shall not be deducted
in arriving at the Ultimate Net Loss herein,

ARTICLE V — WARRANTIES

Notwithstanding any other provision of this Contract, the maximum amount included in the Ultimate
Net Loss under this Contract shall be:

	1.	 	$5,000,000 each Life as respects for Workers’ Compensation business

ARTICLE VI — ULTIMATE NET LOSS

The term “Ultimate Net Loss” as used in this Contract shall mean: (1) all amounts paid or due and
payable by the Company or a Legal Entity in the investigation, appraisal, adjustment, settlement,
litigation, defense or appeal, or payment of claims or judgments arising from each and every Loss
Occurrence for which the Company or a Legal Entity is or may be found liable under the Policies,
less salvages and subrogation recoveries and amounts recovered or recoverable under pooling
agreements or other reinsurances, whether collectible or not. “Ultimate Net Loss” includes, but is
not limited to, the following paid or due and payable amounts: loss adjustment expenses, defense
costs, court costs, supersedeas and appeal bond costs, Post or Prejudgment Interest and Delayed
Damages, Attorneys’ Fees and Expenses, Claim-Specific Declaratory Judgment Expenses, a pro rata
share of salaries and expenses of the Company’s or its affiliates’ field employees according to
the time occupied in adjusting, defending, and settling such loss, and expenses of all of the
Company’s or its affiliates’ officers and employees incurred in connection with the loss; (except
that salaries of officers and employees engaged in general management and located in the home
office of the Company or its affiliates and any office expense of the Company or its affiliates
shall not be included), and all other costs of investigation or litigation, and (2) Extra
Contractual Obligations (as defined in the Extra Contractual Obligations Article), and (3) Loss in
excess of original Policy limits (as described in the Loss in Excess of Original Policy Limits
Article).

“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.

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.

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Contract — January 1, 2007

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“Post or Prejudgment Interest or Delayed Damages” shall mean interest or 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 whether or not made part of the settlement, verdict,
award, or judgment.

Nothing in this Article shall be construed to mean that losses under this Contract are not
recoverable until the Ultimate Net Loss has been ascertained. In the event a verdict or judgment
is reduced by an appeal or a settlement subsequent to the entry of the judgment, thereby resulting
in an ultimate saving on such verdict or judgment, or in the event a judgment is reversed
outright, the loss adjustment expense incurred in securing such final reduction or reversal shall
be prorated between the Reinsurers and the Company in the proportion that each benefits from such
reduction or reversal, and the expenses incurred up to the time of the original verdict or
judgment shall be added to the Ultimate Net Loss. In the event there is no reduction or reversal
of a verdict or judgment, the loss adjustment expense incurred in attempting to secure such
reduction or reversal shall be added to the Ultimate Net Loss.

ARTICLE VII — LOSS IN EXCESS OF POLICY LIMITS

This Contract shall protect the Company within the limits hereof, for 90% of 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.

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.

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 shall be deemed, in all circumstances, to be the date of the original occurrence,
accident, casualty, disaster, Loss Occurrence or loss, as selected by the Company.

ARTICLE VIII — EXTRA CONTRACTUAL OBLIGATIONS

This Contract shall protect the Company within the limits hereof for 90% of Extra Contractual
Obligations. “Extra Contractual Obligations” are defined as those liabilities not covered under
any other provision of this Contract, which arise from the handling of any claim on business
covered hereunder, such liabilities arising because of, but not limited to, the following:
failure by the Company, 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.

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.

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Contract — January 1, 2007

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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 IX — 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 participant, or indirectly by way of reinsurance or
assessments; provided this exclusion shall not apply to Automobile liability 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. N.M.A. 1590
	 
	 	b.	 	Nuclear Incident Exclusion Clause — Liability — Reinsurance — Canada N.M.A. 1979
	 
	 	c.	 	Nuclear Incident Exclusion Clause — Reinsurance — No. 4.

	 	8.	 	Personal or Commercial Umbrella risks.

	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.

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Contract — January 1, 2007

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	 	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 Centers’ Underwriting Guidelines
	 
	 	7.	 	Advertisers’, Broadcasters’ and Telecasters’ Liability as respects Personal Injury
Liability except as provided for under the Profit Centers’ 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.	 	THE FOLLOWING RISKS AS RESPECTS AUTOMOBILE LIABILITY AND AUTOMOBILE COLLISION

	 	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 Insurance Services
Organization’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 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
Centers’ 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.

	D.	 	THE FOLLOWING AS RESPECTS LIABILITY OTHER THAN AUTOMOBILE

	 	1.	 	Liability as respects Products and Completed Operations:

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

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

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	 	(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)	 	and 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.

	 	2.	 	All railway operations except Railroad Protective Liability coverage as respects jobs which
do not involve track work or service disruptions.

	 	3.	 	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.

	 	4.	 	Public assembly exposure in excess of 5,000 except for schools and colleges.
	 
	 	5.	 	Gas or electric companies.

	 	6.	 	Subaqueous operations.
	 
	 	7.	 	Mining and quarrying operations, if blasting is involved

	 	8.	 	Demolition of buildings or structures in excess of three stories or 50 feet in height
	 
	 	9.	 	Shoring, underpinning or moving of buildings or structures.

	 	10.	 	Manufacture, sale, rental, lease or repair of scaffolds. This exclusion shall not apply to
incidental exposure on construction risks.

	 	11.	 	Construction of bridges unless the span is less than 75 feet between pillars, and tunnels or
dams.

	 	12.	 	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.

2007 Workers’ Compensation Clash 
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	 	13.	 	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 Centers’
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.
	 
	 	14.	 	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, plumbing and electrical services.
	 
	 	15.	 	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.
	 
	 	16.	 	Municipalities except for those with a population less than 100,000.

	E.	 	THE FOLLOWING RISKS AS RESPECTS WORKERS COMPENSATION AND EMPLOYERS LIABILITY

	 	1.	 	For all Profit Centers other than Liberty Northwest Profit center, operations
under the jurisdiction of the U.S. Longshoremen’s and Harbor Workers’ Act, the Jones Act
and the Maritime Employers Liability Act except when written as incidental coverages as
defined in the Profit Centers’ Underwriting Guidelines
	 
	 	2.	 	For the Liberty Northwest Profit Center, operations under the jurisdiction of the
Jones Act and the Maritime Employers Liability Act except when written as incidental
coverages as defined in their Underwriting Guidelines.
	 
	 	3.	 	Operation of docks or wharves, other than small marinas or pleasure docks.
	 
	 	4.	 	The manufacturing, mining, refining, processing, distribution,
installation, removal or encapsulment of asbestos.
	 
	 	5.	 	Risks involving known exposure to asbestos.
	 
	 	6.	 	All railway operations except sidetrack agreements.
	 
	 	7.	 	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.
	 
	 	8.	 	Subaqueous operations.
	 
	 	9.	 	Mining and quarrying operations, if blasting is involved
	 
	 	10.	 	Demolition of buildings or structures in excess of three stories or 50 feet in height.
	 
	 	11.	 	Shoring, underpinning or moving of buildings or structures.
	 
	 	12.	 	Manufacture, sale, rental, lease, erection or repair of scaffolds. This exclusion
shall not apply to incidental exposure on construction risks.

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	 	13.	 	Construction of bridges unless the span is less than 75 feet between pillars, and
tunnels or dams.
	 
	 	14.	 	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.

	 	15.	 	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 coverages as defined in the Profit
Centers’ Underwriting Guidelines. 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, plumbing and electrical services.
	 
	 	16.	 	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, plumbing and electrical services.
	 
	 	17.	 	Ownership, maintenance or use or entrustment of any airport or 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 except as
respects corporate owned aircraft up to six passengers.
	 
	 	18.	 	Municipalities, except for those with a population less than 100,000.

	F.	 	THE FOLLOWING RISKS AS RESPECTS TERRORISM
	 
	 	 	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.
	 
	G.	 	The Company and the Subscribing Reinsurer have agreed on the Profit Centers’ Underwriting
Guidelines, as respects Policies covered under this Agreement. The Company shall advise the
Subscribing Reinsurer of any change in such Underwriting Guidelines.
	 
	H.	 	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

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	 	 	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 X — 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

	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 XI — 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 of operations, events, or occurrences arising out of operations at one specific
site and which cannot be attributed to any single one of such operations, events or
occurrences, but rather to the cumulative effect of the same. In assessing each and every
Loss Occurrence within the foregoing definition, it is understood and agreed that:

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

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	 	2.	 	The Company may elect the date on which the period of not exceeding 12
consecutive months shall be deemed to have commenced.
	 
	 	In the event that the series of operations, events or occurrences extend over a period longer
than 12 consecutive months, then each consecutive period of 12 months, the first of which
commences on the date elected under 2. above, shall form the basis of claim under this
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.

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

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.

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ARTICLE XII — REINSURANCE PREMIUM

	A. 	 	The Company shall pay to the Subscribing Reinsurer a rate of 095% of the Subject Earned
Premium for the Business Covered hereunder, as stated in Paragraph D. of Article I — Business
Covered.

	B. 	 	The term “ 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.

	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. 	 	The term “Subject Earned Premium” shall mean the Earned Premium times the rates noted below.

	 	 	 	 	 
	ASLOB	 	Percentage
	Homeowners
	 	 	0	%
	Farmowners
	 	 	0	%
	Commercial Multiple Peril (liability)
	 	 	0	%
	Workers Compensation
	 	 	100	%
	Other Liability, excluding Umbrella
	 	 	0	%
	Products Liability
	 	 	0	%
	Private Passenger & Commercial Auto Liability
	 	 	0	%
	Private Passenger & Commercial Auto Physical Damage
	 	 	0	%

	E. 	 	Each claim reduces the amount of indemnity from the time the loss occurred by the sum paid.
Any amount exhausted is reinstated form the time the Loss Occurrence begins. Reinstatement
will be provided as follows: One at 25%, one at 50% and two at 100% 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 XIII — 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	 
	$1,842,400
	 	$	2,303,000	 	 	$	575,750	 

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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 paid, being furnished by the
Company.

ARTICLE XIV — 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 and conditions of the
original policies and within the terms and conditions 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 for an amount in excess of 50% of its retention.

ARTICLE XV — 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 XVI — 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
definitions section 102(5) of TRIA.

ARTICLE XVII — ACCESS TO RECORDS

Except as otherwise provided in this Article, the 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

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the Subscribing Reinsurer to seek discovery of relevant information in an arbitration proceeding
pursuant to the Arbitration Article of this Contract.

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 nondisclosure 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 Subscribing Reinsurer 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 XVIII — 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 XIX — 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

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that the exempt status adequately satisfies the demands of the U.S. Internal Revenue Agency and/or
other applicable U.S. government authority.

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 XX — 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 XXI — 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 XXII — 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 under this Contract, 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 XXIII — 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 and provided no liability shall be
imposed on either party greater than would have attached hereunder had such delay, error or
omission not occurred.

ARTICLE XXIV — 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 XXV — 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 XXVI — ARBITRATION

	A.	 	Disputes to be Arbitrated. As a condition precedent to any right of legal
action hereunder 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,

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	 	 	 	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 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.

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	I.	 	Option to Litigate. Notwithstanding the foregoing provisions of this Article, to the
extent that the Company has demanded payment of a total amount of at least twenty million dollars
($20,000,000) or the currency equivalent thereof from any Subscribing Reinsurer or from the
Reinsurers, the Company reserves the right to initiate litigation to resolve any disputes
arising from such demand.

	J.	 	Survival of Article. This Article shall survive the termination or expiration of this
Contract.

ARTICLE XXVII — 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

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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,
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 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.

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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.

ARTICLE XXVIII — COMMUTATION

Eighty-four months after the expiration of this Contract, the Company and any Subscribing
Reinsurer may agree to commute any and/or all claims, both reported and unreported for the
Contract Year and not finally settled which are likely to result in a claim under this Contract.
In that case, the Company and the Subscribing Reinsurer shall attempt to reach settlement by
mutual agreement. The Worker’s Compensation commutation value shall be calculated in accordance
with the following criteria:

	 	A.	 	Mortality assumptions shall be calculated from the latest available United
States Census tables as follows:
	 
	 	 	 	Survivor Benefits — Total female or male, whichever applies;
	 
	 	 	 	Disability Benefits — Total population.
	 
	 	 	 	The mortality assumptions should reflect:

	 	1.	 	The mortality improvement since the most recent U.S. Census tables,
	 
	 	2.	 	The life impairment of the injured worker (using the
expectation from the Society of Actuaries’ Study.)

	 	B.	 	Remarriage expectations shall be in accordance with the assumptions used in the
National Council on Compensation Insurance in its statistical tables, adjusted for the
gender of the survivor.
	 
	 	C.	 	For all future medical costs, projected cash payments shall be based
upon the Company’s evaluation of long term medical care and rehabilitation
requirements, using the average annual Medical Consumer Price Index (CPI) escalation
rate of the past 20 years using the most recently published tables, going back 20
years.
	 
	 	D.	 	For all future indemnity costs, projected cash payments shall be calculated
based upon the average historical actual cost of living adjustment (COLA) over the past
10-20 years, however many years available up to 20 years, up through the most recent
published data which is available from the State/Federal governing body over Workers
Compensation whichever may apply.
	 
	 	E.	 	The annual interest discount percentage shall be the yield of a Treasury Bill
maturing 10 years from the commutation date.
	 
	 	F.	 	The commutation value shall be the amount of cash payments made and/or that the
parties estimate shall be made above the attachment point of this Contract pursuant to
A. through E. of this Article, subject to the per occurrence limits on an undiscounted
basis. The amount of cash payments made and/or estimated shall then be discounted by
applying the percentage as defined in item E above to the expected loss payout pattern
above the attachment point.

If agreement as outlined above cannot be reached, the effort can be postponed or abandoned.
Alternately, if mutually agreed, the Company and the Subscribing Reinsurer may mutually agree to
appoint

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an actuary or appraiser to investigate, determine and capitalize such claims or claims. If both
parties agree with the determination of the actuary or appraiser, the Subscribing Reinsurer shall
pay its proportion of the amount so determined to be the capitalized value of such claim or claims.

If the parties, as outlined in the paragraphs above, fail to agree, they may abandon the effort or
they may agree to settle any difference using a panel of three actuaries, one to be chosen by each
party and the third by the two so chosen. If either party refuses or neglects to appoint an actuary
within 30 days, the other party may appoint two actuaries. If the two actuaries fail to agree on
the selection of a third actuary within 30 days of their appointment, each of them shall name two,
of whom the other shall decline one and the decision shall be made by drawing lots All the
actuaries shall be regularly engaged in the valuation of Workers Compensation claims and shall be
Fellows of the Casualty Actuarial Society or of the American Academy of Actuaries. None of the
actuaries shall be under the control of either party to this Contract.

Each party shall submit its case to its actuary within 30 days of the appointment of the third
actuary The decision in writing of any two actuaries, when filed with the parties hereto, shall be
final and binding on both parties. The expense of the actuaries and of the commutation shall be
equally divided between the two parties. Said commutation shall take place in Boston,
Massachusetts, unless some other place is mutually agreed upon by the Company and the Subscribing
Reinsurer.

By mutual agreement the Company or Subscribing Reinsurer shall have the option not to commute any
single loss, should the claimant not be medically stable (no Life Care Plan performed) or should
the claimant be subject to ongoing structured settlement negotiations. Under such circumstances,
the Subscribing Reinsurer shall continue to carry an appropriate reserve on its books and/or pay
any loss and/or expense recoverable under this Contract until such time as an agreement to commute
is reached or until the claim is paid and settled.

ARTICLE XXIX — 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 XXX — 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

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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 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.

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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 XXXI — 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 honor an Arbitration award 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.

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 XXXII — 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

2007 Workers’ Compensation Clash 
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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 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 premises without the express permission of Company.

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.

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Page 29 of 43

 

ARTICLE XXXIII — 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 XXXIV — 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 XXXV — 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
	 
	 	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.

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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 $1,000 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 XXXVI — 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 XXXVII — 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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Page 31 of 43

 

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. 

America First Lloyd’s Insurance Co. 

Peerless Insurance Co.
	 	AK, LA, OK, TX

AK, LA, OK, TX

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*

Peerless Indemnity Insurance Co. 

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

(Multi-State Business **)

(Multi-State Business **)
	 
	 	 	 	 
	Colorado Casualty:

	 	Colorado Casualty Insurance Co.

Golden Eagle Insurance Corp.

One Beacon Insurance Co. Cession to
Peerless Insurance Co.
	 	AZ, CO, NM, NV, WY, UT

AZ, CO, NM, NV, WY, UT

AZ, CO, NM, NV, WY, UT
	 
	 	 	 	 
	 

	 	Wausau/Business Solutions Group*

Peerless Indemnity Insurance Co. 

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

(Multi-State Business**)

(Multi-State Business**)
	 
	 	 	 	 
	Golden Eagle Insurance:

	 	Golden Eagle Insurance Corp.

One Beacon Insurance Co. Cession to
Peerless Insurance Co.

Peerless Insurance Co.
	 	CA

CA

CA
	 
	 	 	 	 
	 

	 	Wausau/Business Solutions Group*

Peerless Indemnity Insurance Co. 

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

(Multi-State Business**)

(Multi-State Business**)
	 
	 	 	 	 
	Hawkeye-Security Insurance:

	 	Hawkeye-Security Insurance Co.

Consolidated Insurance Co. 

Indiana Insurance Co. 

One Beacon Insurance Co. 
Cession to
Peerless Insurance Co.

Peerless Insurance Co. 

The Midwestern Indemnity Co
	 	IA, KS, MN, MO, NE, ND,

SD, Wl

IA, KS, MN, MO, NE, ND,

SD, Wl

IA, KS, MN, MO, NE, ND,

SD, Wl

IA, KS, MN, MO, NE, ND,

SD, Wl

IA, KS, MN, MO, NE, ND,

SD, Wl

IA, KS, MN, MO, NE, ND,

SD, Wl

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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*

Peerless Indemnity Insurance Co. 

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

(Multi-State Business**)

(Multi-State Business**)
	 
	 	 	 	 
	Indiana Insurance:

	 	Indiana Insurance Co.

Consolidated Insurance Co.

Mid-American Fire and Casualty Co.

One Beacon Insurance Co. Cession to
Peerless Insurance Co.

Peerless Insurance Co.

The Midwestern Indemnity Co.

Globe American Casualty Co.

National Insurance Association
Wausau/Business Solutions Group*

Peerless Indemnity Insurance Co.

The Netherlands Insurance Co.
	 	IL, IN, KY, Ml, OH, TN

IL, IN, KY, Ml, OH, TN

IL, IN, KY, Ml, OH, TN

IL, IN, KY, Ml, OH, TN

IL, IN, KY, Ml, OH, TN

IL, IN, KY, Ml, OH, TN

All States

All States

(Multi-State Business**)

(Multi-State Business**)

(Multi-State Business**)
	 
	 	 	 	 
	Liberty Northwest Insurance:

	 	Liberty Northwest Insurance Corp.
	 	All States
	 

	 	North Pacific Insurance Company
Oregon Automobile Insurance Co.
Wausau/Business Solutions Group*
	 	All States

All States

(Multi-State Business**)
	 
	 	 	 	 
	Montgomery Insurance:

	 	Montgomery Mutual Insurance Co. 

Colorado Casualty Insurance Co.

Excelsior Insurance Co.

One Beacon Insurance Co. Cession to
Peerless Insurance Co.

Peerless Insurance Co.

The Midwestern Indemnity Co. 

Wausau/Business Solutions Group*

Peerless Indemnity Insurance Co.

The Netherlands Insurance Co.
	 	AL, DC, DE, FL, GA, MD,

MS, NC, SC, VA, WV

AL, DC, DE, FL, GA, MD,

MS, NC, SC, VA, WV

AL, DC, DE, FL, GA, MD,

MS, NC, SC, VA, WV

AL, DC, DE, FL, GA, MD,

MS, NC, SC, VA, WV

AL, DC, DE, FL, GA, MD,

MS, NC, SC, VA, WV

AL, DC, DE, FL, GA, MD,

MS, NC, SC, VA, WV

(Multi-State Business**)

(Multi-State Business**)

(Multi-State Business**)
	 
	 	 	 	 
	Peerless Insurance:

	 	Peerless Insurance Co.

Excelsior Insurance Co.
	 	CT, MA, ME, NH, NJ, NY,

PA, RI, VT

CT, MA, ME, NH, NJ, NY,

PA, RI, VT

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Page 33 of 43

 

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. 

One Beacon Insurance Co. Cessions to
Peerless Insurance Co.

Liberty Mutual Mid-Atlantic Insurance Co. 

Wausau/Business Solutions Group*

Peerless Indemnity Insurance Co.

The Netherlands Insurance Co.

	 	CT, MA, ME, NH, NJ, NY,
PA, RI, VT
CT, MA, ME, NH, NJ, NY,
PA, RI, VT
For business classified as
LMAM and produced by this
Profit Center only

(Multi-State Business**)

(Multi-State Business**)

(Multi-State Business**)
	 
	 	 	 	 
	Summit:

	 	Bridgefield Casualty Insurance Co.

Bridgefield Employers Insurance Co.

Wausau/Business Solutions Group*
	 	All states, for WC and
Employers Liability
business,
classified as LMAM and
produced by this Profit
Center
only

(Multi-State Business **)
	 
	 	 	 	 
	Wausau Insurance:

(including Business 

Solutions Group)

	 	Employers Insurance Co. of Wausau

Wausau General Insurance Co. 

Wausau Underwriters Insurance Co.

Wausau Business Insurance Co.

Liberty County Mutual Insurance Co. 

Liberty Mutual Insurance Co.

Liberty Mutual Fire Insurance Co.

LM Insurance Corp.

Liberty Insurance Corp.

The First Liberty Insurance Corp.
	 	All states, for business
classified as LMAM and
produced by this Profit
Center
only, excluding business
classified as Multi-State
business

 

			
	*	 	Wausau/Business Solutions Group consists 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 Co. 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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Page 34 of 43

 

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	 	 	BEAU FOUR 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	 	 	GLAXOSMITHKLINE

	 	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):

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Contract — January 1, 2007

Page 38 of 43

 

     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

 2007 Workers’ Compensation Clash 
Excess of Loss
Contract — January 1, 2007

Page 39 of 43

 

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.

2007 Workers’ Compensation Clash 
Excess of Loss
Contract — January 1, 2007

Page 40 of 43

 

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;
	 
	 	(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

2007 Workers’ Compensation Clash 
Excess of Loss
Contract — January 1, 2007

Page 41 of 43

 

	 	(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.

2007 Workers’ Compensation Clash 
Excess of Loss
Contract — January 1, 2007

Page 42 of 43

 

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.

2007 Workers’ Compensation Clash 
Excess of Loss
Contract — January 1, 2007

Page 43 of 43

 

INTEREST AND LIABILITIES AGREEMENT

(hereinafter referred to as the “Agreement”)

to the

WORKERS’ COMPENSATION CLASH EXCESS OF LOSS

REINSURANCE CONTRACT

No. 2000290

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 Workers’ Compensation Clash Excess of Loss Reinsurance
Contract No. 2000290 effective 12:01 a.m., Local Standard Time, January 1, 2007, to which this
Agreement is attached hereto shall be 80%.

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.

Workers’ Compensation Clash

Excess of Loss Reinsurance Contract

January 1, 2007

Interest & Liabilities Agreement

Page 1 of 2

 

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 20th day of August, 2007.

	 	 	 

	ATTEST:

	 	PEERLESS INSURANCE COMPANY
	 
	 	 
	/s/ Douglas Benedict

	 	/s/ Nancy C. Callender
	 

	 	 
	Signature

	 	Signature
	 
	Douglas Benedict

	 	Nancy C. Callender
	 

	 	 
	Name

	 	Name
	 
	Vice President and Chief Actuary

	 	Asst. Vice President-Reinsurance Mgmt.
	 

	 	 
	Title

	 	Title

And in Boston, Massachusetts this 13th day of September, 2007.

	 	 	 

	ATTEST:

	 	LIBERTY MUTUAL INSURANCE COMPANY
	 
	 	 
	/s/ John C. MacLean Jr.

	 	/s/ Elaine Caprio Brady
	 

	 	 
	Signature

	 	Signature
	 
	John C. MacLean Jr.

	 	Elaine Caprio Brady
	 

	 	 
	Name

	 	Name
	 
	Director-Ceded Reinsurance

	 	Vice President
	 

	 	 
	Title

	 	Title

Workers’ Compensation Clash

Excess of Loss Reinsurance Contract

January 1, 2007

Interest & Liabilities Agreement

Page 2 of 2exv10w177

EXHIBIT
10.177

CASUALTY EXCESS OF LOSS

REINSURANCE CONTRACT

No. SummitCX2007

EFFECTIVE JANUARY 1, 2007

between

BRIDGEFIELD CASUALTY INSURANCE COMPANY

BRIDGEFIELD EMPLOYERS INSURANCE COMPANY

Lakeland, Florida

(hereinafter referred to as the “Company”)

and

PEERLESS INSURANCE COMPANY

Keene, New Hampshire

(hereinafter referred to as the “Subscribing Reinsurer”)

2007 Summit Casualty Excess Contract

 

 

CASUALTY EXCESS OF LOSS REINSURANCE CONTRACT No. SummitCX2007

	 	 	 	 	 	 	 
	ARTICLE	 	CONTENTS	 	PAGE
	I

	 	BUSINESS COVERED
	 	 	1	 
	II

	 	EFFECTIVE DATE AND TERMINATION
	 	 	1	 
	III

	 	TERRITORY
	 	 	2	 
	IV

	 	LIMIT AND RETENTION
	 	 	2	 
	V

	 	WARRANTIES
	 	 	2	 
	VI

	 	ULTIMATE NET LOSS
	 	 	2	 
	VII

	 	LOSS IN EXCESS OF POLICY LIMITS
	 	 	3	 
	VIII

	 	EXTRA CONTRACTUAL OBLIGATIONS
	 	 	3	 
	IX

	 	EXCLUSIONS
	 	 	4	 
	X

	 	SPECIAL ACCEPTANCES
	 	 	7	 
	XI

	 	LOSS OCCURRENCE
	 	 	7	 
	XII

	 	REINSURANCE PREMIUM
	 	 	8	 
	XIII

	 	REPORTS AND REMITTANCES
	 	 	8	 
	XIV

	 	LOSS ADJUSTMENTS AND SETTLEMENTS
	 	 	9	 
	XV

	 	SALVAGE AND SUBROGATION
	 	 	9	 
	XVI

	 	FEDERAL TERRORISM EXCESS RECOVERY CLAUSE
	 	 	10	 
	XVII

	 	ACCESS TO RECORDS
	 	 	10	 
	XVIII

	 	DIVIDENDS AND TAXES
	 	 	11	 
	XIX

	 	FEDERAL EXCISE TAX
	 	 	11	 
	XX

	 	GOVERNING LAW
	 	 	12	 
	XXI

	 	CURRENCY
	 	 	12	 
	XXII

	 	OFFSET
	 	 	12	 
	XXIII

	 	ERRORS OR OMISSIONS
	 	 	12	 
	XXIV

	 	INSOLVENCY
	 	 	12	 
	XXV

	 	MEDIATION
	 	 	13	 
	XXVI

	 	ARBITRATION
	 	 	14	 
	XXVII

	 	SPECIAL CONDITIONS
	 	 	16	 
	XXVIII

	 	THIRD PARTIES
	 	 	19	 
	XXIX

	 	UNAUTHORIZED REINSURENCE
	 	 	19	 
	XXX

	 	SERVICE OF SUIT
	 	 	21	 
	XXXI

	 	CONFIDENTIALITY CLAUSE
	 	 	21	 
	XXXII

	 	AMENDMENTS
	 	 	22	 
	XXXIII

	 	SEVERABILITY
	 	 	23	 
	XXXIV

	 	INTEREST PENALTY
	 	 	23	 
	XXXV

	 	ASSIGNMENT
	 	 	24	 
	XXXVI

	 	ENTIRE AGREEMENT
	 	 	24	 

ATTACHMENTS:

EXHIBIT A
— FIRST EXCESS OF LOSS

EXHIBIT B — SECOND EXCESS OF LOSS

EXHIBIT C — THIRD EXCESS OF LOSS

EXHIBIT D — FOURTH EXCESS OF LOSS

2007 Summit Casualty Excess Contract

 

 

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.

2007 Summit Casualty Excess Contract

 

 

CASUALTY EXCESS OF LOSS

REINSURANCE CONTRACT

No. SummitCX2007

(hereinafter referred to as the “Contract”)

between

BRIDGEFIELD CASUALTY INSURANCE COMPANY

BRIDGEFIELD EMPLOYERS INSURANCE COMPANY

Lakeland, Florida

(hereinafter referred to as the “Company”)

and

PEERLESS INSURANCE COMPANY

Keene, New Hampshire

(hereinafter referred to as the “Subscribing Reinsurer”)

ARTICLE I — BUSINESS COVERED

	A.	 	The Subscribing Reinsurer shall indemnify the Company on an excess of loss basis in respect
of the Ultimate Net Loss as a result of losses occurring during the term of the Contract for
Policies in force as of January 1, 2007, and new and renewal Policies becoming effective on
or after said date, subject to the terms and conditions contained herein.
	 
	B.	 	This 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 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 Workers Compensation
and Employers Liability business written by the Company for business classified as Summit
Profit Center, as defined in Appendix A — Definition of Profit Center, except as may be
excluded under Article IX — Exclusions of this Contract.

ARTICLE II — EFFECTIVE DATE AND TERMINATION

	A.	 	This Contract shall become effective with respect to losses occurring on or after 12:01
a.m., Local Standard Time, January 1, 2007, and shall remain in full force until terminated
at 12:00 a.m., Local Standard Time, January 1, 2008.
	 
	B.	 	Upon termination of this Contract, the Subscribing Reinsurer shall be liable for the losses
occurring prior to the date of termination; however, the Subscribing Reinsurer shall have no
liability for losses occurring subsequent to the termination of this Contract.

					
	 	 	 	 	 
	 
	 	Page 1 of 45
	 	2007 Summit Casualty Excess Contract

 

 

	C.	 	If this Contract shall expire or terminate while a loss covered hereunder is in progress, it
is agreed that, subject to the other conditions of this Contract, the Subscribing Reinsurer
shall indemnify the Company as if the entire loss had occurred during the time this Contract
is in force provided the loss covered hereunder started before the date of termination.

ARTICLE III — TERRITORY (LM-02200-2005.06.02-A)

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

ARTICLE IV — LIMIT AND RETENTION

	A.	 	The limits and retentions provided under this Contract are as set forth in the attached
Exhibits attached hereto and made a part of this Contract.
	 
	B.	 	The Company’s retention and the Subscribing Reinsurer’s limit of liability for each Loss
Occurrence, set forth in Section I of the Exhibits attached hereto and made part of this
Contract, shall apply irrespective of the number of Policies affected or number of hazards in
one Policy.
	 
	C.	 	Reinsurance of the Company’s retention, set forth in each Exhibit, shall not be deducted in
arriving at the Company’s Ultimate Net Loss herein.

ARTICLE V — WARRANTIES

Notwithstanding any other provision of this Contract, the maximum amount included in the Ultimate
Net Loss under this Contract shall be:

	1.	 	$5,000,000 each Life as respects Workers’ Compensation business;
	 
	2.	 	$2,000,000 Employers Liability coverage limit each Policy.

ARTICLE VI — ULTIMATE NET LOSS

The term “Ultimate Net Loss” as used in this Contract shall mean: (1) all amounts paid or due and
payable by the Company in the investigation, appraisal, adjustment, settlement, litigation,
defense or appeal, or payment of claims or judgments arising from each and every loss occurrence
for which the Company is or may be found liable under the Policies, less salvages and subrogation
recoveries and amounts recovered or recoverable under pooling agreements or other reinsurances,
whether collectible or not. “Ultimate Net Loss” includes, but is not limited to, the following
paid or due and payable amounts: loss adjustment expenses, defense costs, court costs, supersedeas
and appeal bond costs, Post or Prejudgment Interest and Delayed Damages, Attorneys Fees and
Expenses, Claim-Specific Declaratory Judgment Expenses, a pro rata share of salaries and expenses
of the Company’s or its affiliates field employees according to the time occupied in adjusting,
defending, and settling such loss, and expenses of all of the Company’s or its affiliates officers
and employees incurred in connection with the loss; (except that salaries of officers and
employees engaged in general management and located in the home office of the Company or its
affiliates and any office expense of the Company or its affiliates shall not be included), and all
other costs of investigation or litigation, and (2) Extra Contractual Obligations (as defined in
the Extra Contractual Obligations Article), and (3) Loss in excess of original Policy limits (as
described in the Loss in Excess of Original Policy Limits Article).

“Claim-Specific Declaratory Judgment Expenses” shall be defined as fees and expenses incurred in
actions brought to determine whether the Company has a defense and/or indemnification obligation
for

					
	 	 	 	 	 
	 
	 	Page 2 of 45
	 	2007 Summit Casualty Excess Contract

 

 

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.

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 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 or its affiliates and salaries and expenses of their other employees.

“Post or Prejudgment Interest or Delayed Damages” shall mean interest or 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 whether or not made part of the settlement, verdict,
award, or judgment.

Nothing in this Article shall be construed to mean that losses under this Contract are not
recoverable until the Ultimate Net Loss has been ascertained. In the event a verdict or judgment
is reduced by an appeal or a settlement subsequent to the entry of the judgment, thereby resulting
in an ultimate saving on such verdict or judgment, or in the event a judgment is reversed
outright, the loss adjustment expense incurred in securing such final reduction or reversal shall
be prorated between the Reinsurers and the Company in the proportion that each benefits from such
reduction or reversal, and the expenses incurred up to the time of the original verdict or
judgment shall be added to the Ultimate Net Loss. In the event there is no reduction or reversal
of a verdict or judgment, the loss adjustment expense incurred in attempting to secure such
reduction or reversal shall be added to the Ultimate Net Loss.

ARTICLE VII — LOSS IN EXCESS OF POLICY LIMITS (LM-01600-2005.08.24-A)

This Contract shall protect the Company within the limits hereof, for 90% of 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 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.

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 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.

With regard to excess of Policy limits, the word “Loss” shall mean any amounts for which the
Company 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 shall be deemed, in all circumstances, to be the date of the original Occurrence,
accident, casualty, disaster, loss occurrence or loss, as selected by the Company.

ARTICLE VIII — EXTRA CONTRACTUAL OBLIGATIONS (LM-00900-2006.09.28-A)

This Contract shall protect the Company within the limits hereof for 90% of Extra Contractual
Obligations. “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,

					
	 	 	 	 	 
	 
	 	Page 3 of 45
	 	2007 Summit Casualty Excess Contract

 

 

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 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 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 providing of or failure to
provide any loss control or loss prevention services in connection with a Policy hereunder.

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

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

ARTICLE IX — 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 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 as per 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 Contract:

	 	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.

					
	 	 	 	 	 
	 
	 	Page 4 of 45
	 	2007 Summit Casualty Excess Contract

 

 

	 	8.	 	Any actual or alleged liability whatsoever for any claim or claims in respect of
loss or losses directly or indirectly arising out of, resulting from or in consequence
of, or in any way involving asbestos, or any materials containing asbestos in whatever
form or quantity.

	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.	 	THE FOLLOWING RISKS AS RESPECTS WORKERS COMPENSATION AND EMPLOYERS LIABILITY

	 	1.	 	Operations under the jurisdiction of the U.S. Longshoremen’s and Harbor Workers’
Act, the Jones Act and the Maritime Employers Liability Act except when written as
incidental coverages as defined in the Profit Center’s Underwriting Guidelines
	 
	 	2.	 	Operation of docks or wharves, other than small marinas or pleasure docks.
	 
	 	3.	 	The manufacturing, mining, refining, processing, distribution, installation, removal
or encapsulment of asbestos.
	 
	 	4.	 	Risks involving known exposure to asbestos.
	 
	 	5.	 	All railway operations except sidetrack agreements.

					
	 	 	 	 	 
	 
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	 	6.	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.
	 
	 	7.	Subaqueous operations.
	 
	 	8.	Mining and quarrying operations, if blasting is involved
	 
	 	9.	Demolition of buildings or structures in excess of three stories or 50 feet in height.
	 
	 	10.	Shoring, underpinning or moving of buildings or structures.
	 
	 	11.	Manufacture, sale, rental, lease, erection or repair of scaffolds. This exclusion
shall not apply to incidental exposure on construction risks.
	 
	 	12.	Construction of bridges unless the span is less than 75 feet between pillars, and
tunnels or dams.
	 
	 	13.	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.
	 
	 	14.	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 coverages as defined in the Profit Center’s
Underwriting Guidelines. 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.
	 
	 	15.	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 and water hauling, plumbing and
electrical services.
	 
	 	16.	Ownership, maintenance or use or entrustment of any airport or 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 except as respects
all owned, leased or chartered aircraft up to six passengers.
	 
	 	17.	Municipalities, except for those with a population less than 100,000.

	F.	 	THE FOLLOWING RISKS AS RESPECTS TERRORISM

					
	 	 	 	 	 
	 
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	 	 	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.
	 
	G.	 	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.
	 
	H.	 	In the event the Company 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 X — 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 XI — LOSS OCCURRENCE

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 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 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;

					
	 	 	 	 	 
	 
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	 	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.

ARTICLE XII — REINSURANCE PREMIUM

The rates set forth in Section 4 of the attached Exhibits, shall be applied to the Subject Earned
Premium for the Business Covered hereunder, as stated in Paragraph D. of Article I — Business
Covered.

	A.	 	The term “ 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.
	 
	B.	 	The term “Net Premiums Written” shall mean gross premiums written less returns, allowances
and reinsurances which inure to the benefit of the Subscribing Reinsurer.
	 
	C.	 	The term “Subject Earned Premium” shall mean the Earned Premium times the rates noted below.

	 	 	 	 	 
	ASLOB	 	Percentage
	Workers Compensation including
Employers Liability
	 	 	100	%

ARTICLE XIII — 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
	Layer	 	Deposit	 	Minimum	 	Deposit
	Exhibit A
	 	$	6,549,000	 	 	$	5,239,200	 	 	$	1,637,250	 
	Exhibit B
	 	$	5,432,000	 	 	$	4,345,600	 	 	$	1,358,000	 
	Exhibit C
	 	$	2,488,000	 	 	$	1,990,400	 	 	$	622,000	 
	Exhibit D
	 	$	1,487,000	 	 	$	1,189,600	 	 	$	371,750	 

					
	 	 	 	 	 
	 
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	 	 	Payment by the Subscribing Reinsurer of its portion of Loss and Loss Adjustment Expenses paid
by the Company 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 XIV — LOSS ADJUSTMENT AND SETTLEMENT (LM-01500-2006.09.07-A)

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 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 judgment, may be beneficial or expedient
to the Company and the Subscribing Reinsurer. The Company 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, 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.

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

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

ARTICLE XV — SALVAGE AND SUBROGATION (LM-01800-2006.09.12-A)

The Subscribing Reinsurer 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 Subscribing Reinsurer agree to waive such rights in the settlement of a
disputed claim, or the Company and Subscribing Reinsurer agree to the contrary, the Company shall
enforce the right to salvage and/or subrogation and shall prosecute all claims arising out of such
right. Should the Company refuse or neglect to enforce this right, the Subscribing Reinsurer is
hereby empowered and authorized to institute appropriate action in the name of the Company.

Amounts recovered from salvage and/or subrogation shall always be used to reimburse the excess
Subscribing Reinsurer (and the Company, should it carry a portion of excess coverage net) in the
reverse order of participation in the loss before being used in any way to reimburse the Company
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 XVI — FEDERAL TERRORISM EXCESS RECOVERY CLAUSE (LM-01100-2006.04.14-A)

Any loss reimbursement the Company receives from the United States Government under the
Terrorism Risk Insurance Act of 2002 and the Terrorism Risk Insurance Extension Act of 2005
(“TRIA”) 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 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, 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 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 XVII — 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 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 XVIII — DIVIDENDS AND TAXES (LM-00600-2005.06.02-A)

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 XIX — FEDERAL EXCISE TAX (LM-01000-2005.08.24-A)

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 XX — GOVERNING LAW (LM-01200-2005.06.02-A)

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 XXI — CURRENCY (LM-00500-2005.08.09)

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
XXII — OFFSET (LM-01700-2005.06.02-A)

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 XXIII — ERRORS AND OMISSIONS (LM-00800-2005.06.02-A)

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 XXIV — INSOLVENCY (LM-01300-2005.08.24-A)

(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.

ARTICLE XXV — MEDIATION (LM-03000-2005.12.20-A)

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 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.

					
	 	 	 	 	 
	 
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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 XXVI — ARBITRATION (LM-00200-2006.10.25-A)

	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 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

					
	 	 	 	 	 
	 
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	 	 	 	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 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.

					
	 	 	 	 	 
	 
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	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.

ARTICLE XXVII — SPECIAL CONDITIONS (LM-02100-2006.09.29-A)

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

					
	 	 	 	 	 
	 
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	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,
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 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

					
	 	 	 	 	 
	 
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	 	 	 	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 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.

If the Company elects to terminate this Contract, the Company shall have the option to commute the
Subscribing Reinsurer’s liability for loss(es), whether reported or unreported, comprising the sum
total of the present value of the ceded: (1) case reserves and allocated loss adjustment expense,
(2) projected ultimate losses, (3) any unearned premium reserve, and (4) undiscounted outstanding
paid claims (hereinafter the “Commutation Losses”), on Policies covered by this Contract as of the
effective date of termination.

	 	A.	 	The Company shall submit a statement of valuation showing the elements considered
reasonable to establish the Commutation Losses, and the Subscribing Reinsurer shall pay
the amount requested. In the event the Company and the Subscribing Reinsurer cannot
agree on the statement of valuation of the Subscribing Reinsurer’s liability under such
Policies, either party may request in writing that the differences be settled by a
panel of three actuaries. Each party shall appoint an actuary to assess such liability
within fifteen (15) days after receipt of the written request for commutation. Upon
such

					
	 	 	 	 	 
	 
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	 	 	 	appointment, the two actuaries shall appoint a third actuary. If the two actuaries
fail to agree on the third actuary within thirty (30) days of their appointment, each
of them shall nominate three individuals, of whom the other shall decline two, and the
final decision shall be made by drawing lots. The actuaries shall then investigate and
capitalize such Commutation Loss(es) within thirty (30) days. As used herein,
“capitalize” shall mean to determine the present value of Commutation Losses, without
regard to the Subscribing Reinsurer’s ability to pay such losses. The panel shall meet
in Boston, Massachusetts, unless the Company and Subscribing Reinsurer agree
otherwise.
	 
	 	B.	 	All actuaries shall be disinterested in the outcome of the commutation and shall
be Fellows of the Society of Actuaries/Fellows of the Casualty Actuarial Society.
Except as stated below, the expense of the actuaries and of the commutation shall be
equally divided between the parties of the commutation.
	 
	 	C.	 	The decision in writing of the actuaries, when filed with the parties hereto,
shall be final and binding, except that if the Company does not agree with the
capitalized value of the Commutation Loss(es), the Company shall have no obligation to
commute. In the event the Company does not agree with the capitalized value of the
Commutation Loss(es) and does not move forward with commutation, the expense of the
actuaries including reasonable expense of the actuary appointed by the Subscribing
Reinsurer will be paid by the Company. If the Contract is commuted, payment by the
Subscribing Reinsurer to the Company or any other third party mutually agreed upon by
the Subscribing Reinsurer and the Company shall constitute a complete and final release
of the Subscribing Reinsurer in respect to its liability under this Contract.

Termination under the terms of this Article can be made after the date of expiration of this
Contract.

ARTICLE XXVIII — THIRD PARTIES (LM-02700-2005.09.27-A)

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 XXIX — UNAUTHORIZED REINSURANCE (LM-02501-2006.10.26-A)

(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

					
	 	 	 	 	 
	 
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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 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 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 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

					
	 	 	 	 	 
	 
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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 XXX — SERVICE OF SUIT (LM-01900-2005.08.24-A)

(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.

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 XXXI — 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

					
	 	 	 	 	 
	 
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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 its 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 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 premises without the express permission of Company.

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 XXXII — 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.

					
	 	 	 	 	 
	 
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ARTICLE XXXIII — SEVERABILITY (LM-02000-2005.06.02-A)

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 XXXIV — INTEREST PENALTY (LM-01400-2005.08.24-A)

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
	 
	 	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.

					
	 	 	 	 	 
	 
	 	Page 23 of 45
	 	2007 Summit Casualty Excess Contract

 

 

ARTICLE XXXV — ASSIGNMENT (LM-00300-2005.08.24-A)

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 XXXVI — ENTIRE AGREEMENT (LM-00701-2005.08.24-A)

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.

					
	 	 	 	 	 
	 
	 	Page 24 of 45
	 	2007 Summit Casualty Excess Contract

 

 

EXHIBIT A

FIRST EXCESS OF LOSS

IS ATTACHED TO AND

FORMS PART OF

REINSURANCE CONTRACT No. SummitCX2007

					
	 	 	 	 	 
	Exhibit A
	 	Page 25 of 45
	 	2007 Summit Casualty Excess Contract

 

 

EXHIBIT A — FIRST EXCESS OF LOSS

	 	 	 	 	 
	SECTION	 	SUBJECT	 	PAGE
	1

	 	LIMIT AND RETENTION
	 	A-1
	 
	 	 	 	 
	2

	 	REINSTATEMENT
	 	A-1
	 
	 	 	 	 
	3

	 	REINSURANCE PREMIUM
	 	A-1

					
	 	 	 	 	 
	Exhibit A
	 	Page 26 of 45
	 	2007 Summit Casualty Excess Contract

 

 

EXHIBIT
A —  FIRST EXCESS OF LOSS (ACCOUNTING CODE No. SummitCX2007)

SECTION 1 — LIMIT AND RETENTION (amounts shown are in terms of Ultimate Net Loss)

The Company shall retain the first $2,000,000 of ultimate net loss as respects any one loss
occurrence. The Subscribing Reinsurer shall then be liable for the amount by which the Companies’
ultimate net loss exceeds the Company’s retention of $2,000,000 but the liability of the
Subscribing Reinsurer shall never exceed $1,000,000 any one loss occurrence [you have a
multi-cedent issue].

It is understood and agreed that the limit and retention described above applies to both
Bridgefield Casualty Insurance Company and Bridgefield Employers Insurance Company. Any loss
occurrence affecting each of them shall be combined with respect to the application of the limit
and retention set forth herein. The limit, retention and reinsurance recovery will be allocated in
the same ratio that the Ultimate Net Loss from each bears to the total Ultimate Net Loss of the
Company.

SECTION 2 — REINSTATEMENT

	A.	 	It is understood and agreed that each claim hereunder reduces the amount of indemnity from
the time of occurrence of the loss by the sum paid, but any amount so exhausted is hereby
reinstated from the time the Loss Occurrence commences without payment of additional premium.
For purposes of calculating reinstatement premium, the reinsurance premium shall be
multiplied by the ratio that each of the Bridgefield Casualty Insurance Company and
Bridgefield Employers Insurance Company’s reinsurance recovery bears to the total reinsurance
recovery of the Company.
	 
	B.	 	Notwithstanding the foregoing, the Subscribing Reinsurer’s liability for losses arising out
of an act of Terrorism shall be limited to only $1,000,000 in the aggregate for all states,
any one calendar year.
	 
	C.	 	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, 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 declared pursuant to the Terrorism Risk Insurance Act of 2002 shall also be
considered an “Act of Terrorism” for purposes of this Contract.

SECTION 3 — REINSURANCE PREMIUM

	 	 	 	 	 
	 	 	Rate applied to
	Profit Center	 	Subject Earned Premium
	Summit
	 	 	0.837	%
	 
	 	 	 	 
	Total Subject Premium to the Layer:
	 	$	782,820,000	 
	Estimated Ceded Premium Due:
	 	$	6,549,000	 

					
	 	 	 	 	 
	Exhibit A-1
	 	Page 27 of 45
	 	2007 Summit Casualty Excess Contract

 

 

EXHIBIT B

FIRST EXCESS OF LOSS

IS ATTACHED TO AND

FORMS PART OF

REINSURANCE CONTRACT No. SummitCX2007

					
	 	 	 	 	 
	Exhibit B
	 	Page 28 of 45
	 	2007 Summit Casualty Excess Contract

 

 

EXHIBIT B — SECOND EXCESS OF LOSS

	 	 	 	 	 
	SECTION	 	SUBJECT	 	PAGE
	1

	 	LIMIT AND RETENTION
	 	B-1
	 
	 	 	 	 
	2

	 	REINSTATEMENT
	 	B-1
	 
	 	 	 	 
	3

	 	REINSURANCE PREMIUM
	 	B-1

					
	 	 	 	 	 
	Exhibit B
	 	Page 29 of 45
	 	2007 Summit Casualty Excess Contract

 

 

EXHIBIT B — SECOND EXCESS OF LOSS (ACCOUNTING CODE No. SummitCX2007)

SECTION
1 — LIMIT AND RETENTION (amounts shown are in terms of Ultimate Net Loss)

The Company shall retain the first $3,000,000 of ultimate net loss as respects any one loss
occurrence. The Subscribing Reinsurer shall then be liable for the amount by which the Companies’
ultimate net loss exceeds the Company’s retention of $3,000,000 but the liability of the
Subscribing Reinsurer shall never exceed $2,000,000 any one loss occurrence.

It is understood and agreed that the limit and retention described above applies to both
Bridgefield Casualty Insurance Company and Bridgefield Employers Insurance Company. Any loss
occurrence affecting each of them shall be combined with respect to the application of the limit
and retention set forth herein. The limit, retention and reinsurance recovery will be allocated in
the same ratio that the Ultimate Net Loss from each bears to the total Ultimate Net Loss of the
Company.

SECTION 2 — REINSTATEMENT

	A.	 	It is understood and agreed that each claim hereunder reduces the amount of indemnity from
the time of occurrence of the loss by the sum paid, but any amount so exhausted is hereby
reinstated from the time the Loss Occurrence commences without payment of additional premium.
For purposes of calculating reinstatement premium, the reinsurance premium shall be
multiplied by the ratio that each of the Bridgefield Casualty Insurance Company and
Bridgefield Employers Insurance Company’s reinsurance recovery bears to the total reinsurance
recovery of the Company.
	 
	B.	 	Notwithstanding the foregoing, the Subscribing Reinsurer’s liability for losses arising out
of an act of Terrorism shall be limited to only $2,000,000 in the aggregate for all states,
any one calendar year.
	 
	C.	 	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, 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 declared pursuant to the Terrorism Risk Insurance Act of 2002 shall also be
considered an “Act of Terrorism” for purposes of this Contract.

SECTION 3 — REINSURANCE PREMIUM

	 	 	 	 	 
	 	 	Rate applied to
	Profit Center	 	Subject Earned Premium
	Summit
	 	 	0.694	%
	 
	 	 	 	 
	Total Subject Premium to the Layer:
	 	$	782,820,000	 
	Estimated Ceded Premium Due:
	 	$	5,432,000	 

					
	 	 	 	 	 
	Exhibit B-1
	 	Page 30 of 45
	 	2007 Summit Casualty Excess Contract

 

 

EXHIBIT C

THIRD EXCESS OF LOSS

IS ATTACHED TO AND

FORMS PART OF

REINSURANCE CONTRACT No. SummitCX2007

					
	 	 	 	 	 
	Exhibit C
	 	Page 31 of 45
	 	2007 Summit Casualty Excess Contract

 

 

EXHIBIT C — THIRD EXCESS OF LOSS

	 	 	 	 	 
	SECTION	 	SUBJECT	 	PAGE
	1

	 	LIMIT AND RETENTION
	 	C-1
	 
	 	 	 	 
	2

	 	REINSTATEMENT
	 	C-1
	 
	 	 	 	 
	3

	 	REINSURANCE PREMIUM
	 	C-1

					
	 	 	 	 	 
	Exhibit C
	 	Page 32 of 45
	 	2007 Summit Casualty Excess Contract

 

 

EXHIBIT C — THIRD EXCESS OF LOSS (ACCOUNTING CODE No. SummitCX2007)

SECTION 1 — LIMIT AND RETENTION (amounts shown are in terms of Ultimate Net Loss)

The Company shall retain the first $5,000,000 of ultimate net loss as respects any one loss
occurrence. The Subscribing Reinsurer shall then be liable for the amount by which the Companies’
ultimate net loss exceeds the Company’s retention of $5,000,000 but the liability of the
Subscribing Reinsurer shall never exceed $5,000,000 any one loss occurrence.

It is understood and agreed that the limit and retention described above applies to both
Bridgefield Casualty Insurance Company and Bridgefield Employers Insurance Company. Any loss
occurrence affecting each of them shall be combined with respect to the application of the limit
and retention set forth herein. The limit, retention and reinsurance recovery will be allocated in
the same ratio that the Ultimate Net Loss from each bears to the total Ultimate Net Loss of the
Company.

SECTION 2 — REINSTATEMENT

	A.	 	It is understood and agreed that each claim hereunder reduces
the amount of indemnity from the time of occurrence of the loss by the sum paid, but any amount so exhausted is hereby
reinstated from the time the Loss Occurrence commences hereon. Three such reinstatements
shall be provided under this Exhibit. For purposes of calculating reinstatement premium, the
reinsurance premium shall be multiplied by the ratio that each of the Bridgefield Casualty
Insurance Company and Bridgefield Employers Insurance Company’s reinsurance recovery bears to
the total reinsurance recovery of the Company.
	 
	B.	 	The first and the second reinstatement shall be provided without payment of an additional
premium. The third reinstatement shall be provided for an additional premium calculated at
pro rata of the annual premium hereon, being pro rata only as to the limit of liability of
this Exhibit so reinstated and 100% as to the annual premium.
	 
	C.	 	Notwithstanding the foregoing, the Subscribing Reinsurer’s liability for losses arising out
of an act of Terrorism shall be limited to only $5,000,000 in the aggregate for all states,
any one calendar year.
	 
	D.	 	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, 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 declared pursuant to the Terrorism Risk Insurance Act of 2002 shall also
be considered an “Act of Terrorism” for purposes of this Contract.

SECTION 3 — REINSURANCE PREMIUM

	 	 	 	 	 
	 	 	Rate applied to
	Profit Center	 	Subject Earned Premium
	Summit
	 	 	0.318	%
	Total Subject Premium to the Layer:
	 	$	782,820,000	 
	Estimated
Ceded Premium Due:
	 	$	2,488,000	 

					
	 	 	 	 	 
	Exhibit C-1
	 	Page 33 of 45
	 	2007 Summit Casualty Excess Contract

 

 

EXHIBIT D

FOURTH EXCESS OF LOSS

IS ATTACHED TO AND

FORMS PART OF

REINSURANCE AGREEMENT NO. SummitCX2007

					
	 	 	 	 	 
	Exhibit D
	 	Page 33 of 45
	 	2007 Summit Casualty Excess Contract

 

 

EXHIBIT D — FOURTH EXCESS OF LOSS

	 	 	 	 	 
	SECTION	 	SUBJECT	 	PAGE
	1

	 	LIMIT AND RETENTION
	 	D-1
	 
	 	 	 	 
	2

	 	REINSTATEMENT
	 	D-1
	 
	 	 	 	 
	3

	 	REINSURANCE PREMIUM
	 	D-1

					
	 	 	 	 	 
	Exhibit D
	 	Page 34 of 45
	 	2007 Summit Casualty Excess Contract

 

 

EXHIBIT
D — FOURTH EXCESS OF LOSS (ACCOUNTING CODE No. SummitCX2007)

SECTION 1 — LIMIT AND RETENTION (amounts shown are in terms of Ultimate Net Loss)

The Company shall retain the first $10,000,000 of ultimate net loss as respects any one loss
occurrence. The Subscribing Reinsurer shall then be liable for the amount by which the Companies’
ultimate net loss exceeds the Company’s retention of $10,000,000 but the liability of the
Subscribing Reinsurer shall never exceed $15,000,000 any one loss occurrence.

It is understood and agreed that the limit and retention described above applies to both
Bridgefield Casualty Insurance Company and Bridgefield Employers Insurance Company. Any loss
occurrence affecting each of them shall be combined with respect to the application of the limit
and retention set forth herein. The limit, retention and reinsurance recovery will be allocated in
the same ratio that the Ultimate Net Loss from each bears to the total Ultimate Net Loss of the
Company.

SECTION 2 — REINSTATEMENT

	A.	 	It is understood and agreed that each claim hereunder reduces the amount of indemnity from
the time of occurrence of the loss by the sum paid, but any amount so exhausted is hereby
reinstated from the time the Loss Occurrence commences hereon. One such reinstatement shall
be provided under this Exhibit for an additional premium calculated at pro rata of the annual
premium hereon, being pro rata only as to the limit of liability of this Exhibit so
reinstated and 100% as to the annual premium. For purposes of calculating reinstatement
premium, the reinsurance premium shall be multiplied by the ratio that each of the
Bridgefield Casualty Insurance Company and Bridgefield Employers Insurance Company’s
reinsurance recovery bears to the total reinsurance recovery of the Company.
	 
	B.	 	Notwithstanding the foregoing, the Subscribing Reinsurer’s liability for losses arising out
of an act of Terrorism shall be limited to only $5,000,000 in the aggregate for all states,
any one calendar year.
	 
	C.	 	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, 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 declared pursuant to the Terrorism Risk Insurance Act of 2002 shall also be
considered an “Act of Terrorism” for purposes of this Contract.

SECTION 3 — REINSURANCE PREMIUM

	 	 	 	 	 
	 	 	Rate applied to
	Profit Center	 	Subject Earned Premium
	Summit
	 	 	0.190	%
	Total Subject Premium to the Layer:
	 	$	782,820,000	 
	Estimated
Ceded Premium Due:
	 	$	1,487,000	 

					
	 	 	 	 	 
	Exhibit D-1
	 	Page 35 of 45
	 	2007 Summit Casualty Excess Contract

 

 

Appendix A

Definition of Profit Centers:

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

	 	 	 	 	 
	 	 	 	 	Business Produced
	 	 	 	 	By Agents Resident
	Profit Center	 	Legal Entities Used By Profit Center	 	in the Following State
	Summit:

	 	Bridgefield Casualty Insurance Co.

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

					
	 	 	 	 	 
	Appendix A
	 	Page 36 of 45
	 	2007 Summit Casualty Excess Contract

 

 

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

	 	DAINIPPON 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

					
	 	 	 	 	 
	Appendix B
	 	Page 37 of 45
	 	2007 Summit Casualty Excess Contract

 

 

	 	 	 	 	 
	#	 	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

	 	SCHE RING-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

					
	 	 	 	 	 
	Appendix B
	 	Page 38 of 45
	 	2007 Summit Casualty Excess Contract

 

 

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.

					
	 	 	 	 	 
	 
	 	Page 39 of 45
	 	2007 Summit Casualty Excess Contract

 

 

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):
	 
	 	 	BROAD EXCLUSION PROVISION*

					
	 	 	 	 	 
	N.M.A. 1590
	 	Page 40 of 45
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	 	 	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
	 
	 	 	 	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

					
	 	 	 	 	 
	N.M.A. 1590
	 	Page 41 of 45
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	 	(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
	 	Page 42 of 45
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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 43 of 45
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	 	(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 44 of 45
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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 45 of 45
	 	2007 Summit Casualty Excess Contract

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