Document:

exv10w150

EXHIBIT
10.150

QUOTA SHARE

REINSURANCE AGREEMENT

EFFECTIVE APRIL 1, 2006

between

EMPLOYERS INSURANCE COMPANY OF WAUSAU

Wausau, Wisconsin

(hereinafter referred to as the “Company”)

(for business classified as Business Solutions Group Multistate, only)

and

PEERLESS INSURANCE COMPANY

Keene, New Hampshire

(hereinafter referred to as the “Subscribing Reinsurer”)

MUL06WAU01

 

 

QUOTA SHARE REINSURANCE AGREEMENT

	 	 	 	 	 	 	 
	ARTICLE	 	CONTENTS	 	PAGE	 
	 
	 	PREAMBLE	 	 	1	 
	I
	 	CLASSES OF BUSINESS REINSURED	 	 	1	 
	II
	 	EFFECTIVE DATE AND TERMINATION	 	 	1	 
	III
	 	TERRITORY	 	 	2	 
	IV
	 	EXCLUSIONS	 	 	2	 
	V
	 	RETENTION AND LIMIT	 	 	2	 
	VI
	 	LOSS IN EXCESS OF POLICY LIMITS	 	 	2	 
	VII
	 	EXTRA CONTRACTUAL OBLIGATIONS	 	 	3	 
	VIII
	 	LOSS ADJUSTMENT AND SETTLEMENT	 	 	3	 
	IX
	 	SALVAGE AND SUBROGATION	 	 	3	 
	X
	 	SPECIAL CONDITIONS	 	 	4	 
	XI
	 	REPORTS AND REMITTANCES	 	 	5	 
	XII
	 	PREMIUM AND CEDING COMMISSION	 	 	5	 
	XIII
	 	OFFSET	 	 	5	 
	XIV
	 	ACCESS TO RECORDS	 	 	5	 
	XV
	 	ERRORS OR OMISSIONS	 	 	6	 
	XVI
	 	CURRENCY	 	 	6	 
	XVII
	 	DIVIDENDS AND TAXES	 	 	6	 
	XVIII
	 	FEDERAL EXCISE TAX	 	 	7	 
	XIX
	 	INSOLVENCY	 	 	7	 
	XX
	 	ARBITRATION	 	 	8	 
	XXI
	 	AMENDMENTS	 	 	10	 
	XXII
	 	ENTIRE AGREEMENT	 	 	10	 
	XXIII
	 	CONFIDENTIALITY CLAUSE	 	 	10	 

ATTACHMENTS:

EXHIBIT A — ASSIGNMENT CODES

EXHIBIT B — INSOLVENCY FUNDS EXCLUSION CLAUSE

EXHIBIT C — POOLS, ASSOCIATIONS AND SYNDICATES EXCLUSION CLAUSE

 

 

QUOTA SHARE

REINSURANCE CONTRACT

Between

EMPLOYERS INSURANCE COMPANY OF WAUSAU

Wausau, Wisconsin

(hereinafter referred to as the “Company”)

(for business classified as Business Solutions Group Multistate, only)

and

PEERLESS INSURANCE COMPANY

Keene, New Hampshire

(hereinafter referred to as the “Subscribing Reinsurer”)

This reinsurance contract (“Contract”) is entered into between the Company with its principal place
of business at Wausau, Wisconsin, writing Classes of Business Reinsured as defined in Article I
below, and the Subscribing Reinsurer with its principal place of business at Keene, New Hampshire.

ARTICLE I — CLASSES OF BUSINESS REINSURED

	A.	 	By this Contract the Company obligates itself to cede to the Subscribing Reinsurer and the
Subscribing Reinsurer obligates itself to accept quota share reinsurance of the Company’s net
liability under policies, contracts and binders of insurance (hereinafter called “Policies”)
having an effective date during the term of this Contract, written by the Company or an
affiliate of the Company and reinsured, directly or indirectly, by the Company, for Policies
classified by the Company as Business Solutions Group Multi-State business, with assigned
codes as shown in Exhibit A.

	B.	 	“Net liability” as used herein is defined as the Company’s gross liability remaining after
cessions, if any, to other pro rata and excess of loss reinsurers.

	D.	 	The liability of the Subscribing Reinsurer with respect to each cession hereunder shall
commence obligatorily and simultaneously with that of the Company, subject to the
terms, conditions and limitations hereinafter set forth.

ARTICLE II — EFFECTIVE DATE AND TERMINATION

	A.	 	This Contract shall become effective on 12:01 AM Eastern Standard Time, April 1, 2006, for
new and renewal policies effective on or after that date.

	B.	 	Either party may terminate this Contract at the end of any calendar quarter by giving the
other party not less than 90 days prior written notice by certified mail or other receipt
acknowledged method.

	C.	 	Unless the Company elects to reassume the ceded unearned premium in force on the effective
date of termination, and so notifies the Subscribing Reinsurer prior to or as promptly as
possible after the effective date of termination, reinsurance hereunder on business in force
on the effective date of termination shall remain in full force and effect until expiration,
cancellation or next premium anniversary of such business, whichever first occurs, but in no
event beyond 18 months following the effective date of termination.

					
	 	 	 	 	 
	 
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ARTICLE III — TERRITORY

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

ARTICLE IV — EXCLUSIONS

THIS AGREEMENT DOES NOT COVER:

	A.	 	THE FOLLOWING GENERAL CATEGORIES

	 	1.	 	Policies not authorized as multi-state business on Exhibit A.
	 
	 	2.	 	Reinsurance assumed by the Company, except intercompany reinsurance.
	 
	 	3.	 	Ex-gratia payments.
	 
	 	4.	 	Loss or damage occasioned by war, invasion, revolution, bombardment, hostilities,
acts of foreign enemies, civil war, rebellion, insurrection, military or usurped power,
martial law, or confiscation by order of any government or public authority, but not
excluding loss or damage which would be covered under a standard form of Policy
containing a standard war exclusion clause.
	 
	 	5.	 	Insolvency Funds as per the attached Insolvency Funds Exclusion Clause, which is
made part of this Agreement.
	 
	 	6.	 	Pool, Syndicate and Association business as per the attached Pools, Associations
and Syndicates Exclusion Clause, which is made part of this Agreement.

ARTICLE V — RETENTION AND LIMIT

As respects business subject to this Contract the Company shall cede to the Subscribing Reinsurer
and the Subscribing Reinsurer agrees to accept 100% of the Company’s net liability.

ARTICLE VI — LOSS IN EXCESS OF POLICY LIMITS

This Agreement shall protect the Company within the limits hereof, for 100% 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, its affiliates 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 or an affiliate would have been contractually liable to pay had it not been for the limit
of the original Policy. The date on which any Loss in excess of the original Policy limit is
incurred by the Company or an affiliate 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.

					
	 	 	 	 	 
	 
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ARTICLE VII — EXTRA CONTRACTUAL OBLIGATIONS

This Agreement shall protect the Company within the limits hereof for 100% of Extra
Contractual Obligations. “Extra Contractual Obligations” are defined as those liabilities not
covered under any other provision of this Agreement, 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, its affiliates 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 by the Company or an affiliate
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 VIII — LOSS ADJUSTMENT AND SETTLEMENT

The Company shall give notice, according to the Reports & Remittances Article, to the
Subscribing Reinsurer of any claim that it has reason to believe could involve this
Agreement. 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 its affiliates 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 its affiliates’ judgment, may
be beneficial or expedient to the Company; its affiliates and the Subscribing Reinsurer. The
Company shall be the sole judge as to what claims are covered under its Policies. All of the
Company’s Ultimate Net Loss (and loss occurrences), as well as all loss settlements made and
judgments paid by the Company or its affiliates, provided they are within the terms of this
Agreement 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 it
is liable immediately upon reasonable evidence of the amount due being furnished to the Subscribing
Reinsurer by the Company. The true intent of this Agreement is that the Subscribing Reinsurer
shall, in every case to which this Agreement applies, follow the settlements of the Company and its
affiliates.

ARTICLE IX — SALVAGE AND SUBROGATION

The Subscribing Reinsurer shall be credited with its share of salvage and/or subrogation in
respect of claims and settlements under this Agreement, less its share of recovery expense.
Unless the Company and the Subscribing Reinsurer agree to the contrary, the Company or its
affiliates shall enforce the right to salvage and/or subrogation and shall prosecute all claims
arising out of such right. Should the Company or its affiliates 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 or its affiliates, as applicable.

Amounts recovered from salvage and/or subrogation shall always be used to reimburse the excess
Subscribing 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 its affiliates for their 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

					
	 	 	 	 	 
	 
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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.

ARTICLE X — SPECIAL CONDITIONS

The Company may terminate this Agreement at any time by the giving of 30 days prior notice in
writing to the Subscribing Reinsurer upon the happening of any one of the following circumstances:

	A.	 	A State Insurance Department or other legal authority orders the Subscribing Reinsurer to cease
writing business; 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 Agreement; 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 Agreement; 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-.

The coverage afforded by this Agreement 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 Agreement 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 Agreement, 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 Agreement 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 15 days after receipt of
the written request for commutation. Upon such appointment, the two actuaries shall appoint a
third actuary. If the two actuaries fail to agree on the third actuary within 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 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

					
	 	 	 	 	 
	 
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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 Agreement 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
Agreement.

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

ARTICLE XI — REPORTS AND REMITTANCES

	A.	 	Within 30 days after the end of each calendar month, the Company shall report to
the Subscribing Reinsurer:

	 	1.	 	Ceded net written premium for the quarter;
	 
	 	2.	 	Unearned premium on policies ceded in the quarter;
	 
	 	3.	 	Ceded losses and less adjustment expense paid during the quarter.

The positive balance of (1) less (3) shall be remitted by the Company with its
report. Any balance shown to be due the Company shall be remitted by the Subscribing
Reinsurer as promptly as possible after receipt and verification of the Company’s
report.

	B.	 	Annually, the Company shall furnish the Subscribing Reinsurer with such information as
the Subscribing Reinsurer may require to complete its Annual Convention Statement.

ARTICLE XII — PREMIUM AND CEDING COMMISSION

The premiums payable to the Subscribing Reinsurer shall be calculated at the same gross rates and
on the same basis as the premiums received by the Company or its affiliates on the original
Policies.

ARTICLE XIII — OFFSET

Each party to this Agreement together with their successors or assigns shall have and may exercise,
at anytime, 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 Agreement, and any other agreements 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
agreements involved, provided however, that in the event of insolvency of a party hereto, offsets
shall only be allowed in accordance with the provisions of the applicable law, statute, or
regulation governing such offset.

ARTICLE XIV — 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, during normal office hours, the
Company’s or its affiliates’ 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 Agreement. 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 Agreement and shall continue as
long as either Party has any rights or obligations under this Agreement.

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
Agreement.

					
	 	 	 	 	 
	 
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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 Agreement.

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 Agreement 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
contain 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 XV — ERRORS OR OMISSIONS

Any inadvertent delay, omission, or error in complying with the terms and conditions of this
Agreement 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 XVI — CURRENCY

Whenever a reference to a monetary currency appears in this Agreement, It shall be construed to
mean United States Dollars (“USD”). However, in those cases where the Policies are issued 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.

ARTICLE XVII — DIVIDENDS AND TAXES

In consideration of the terms of this Agreement, 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.

					
	 	 	 	 	 
	 
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ARTICLE XVIII — FEDERAL EXCISE TAX

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

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

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

ARTICLE XIX — INSOLVENCY

(If more than one reinsured company is referenced within the definition of “Company” in the
Preamble to this Agreement, 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.)

In the event of the insolvency of the Company, reinsurance under this Agreement 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 Agreement 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 Subscribing 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 Agreement as though such expense had been incurred by the insolvent Company.

					
	 	 	 	 	 
	 
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ARTICLE XX — ARBITRATION

	A.	 	Disputes to be Arbitrated. With the exception of any dispute resolution procedures
regarding commutation that are otherwise contained in this Agreement and any mutual agreement
to initially mediate any dispute pursuant to the Mediation Article, 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 Agreement, whether
sounding in contract or tort and whether arising during or after this Agreement’s formation,
or after its termination, including disputes as to whether the Agreement 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 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.

					
	 	 	 	 	 
	 
	 	Quota Share Reinsurance Agreement — Wausau
	 	8

 

 

	 	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
Agreement, 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 first 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 agreement, single Subscribing Reinsurer. Both the Company and any single
Subscribing Reinsurer on this Agreement have the right to combine any and all disputes
between them that concern this Agreement (including any renewal of this Agreement or any
agreement for which this Agreement 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 agreements, 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
Agreement and any additional agreements 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 agreement, multiple Subscribing Reinsurers. At the Company’s option, if more
than one Subscribing Reinsurer is involved in arbitration relating to this Agreement,
where there are common questions of law or fact and a possibility of conflicting awards
or inconsistent results, all such Subscribing 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 Subscribing Reinsurers constituting the one Party; provided, however, that
the Subscribing 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 Subscribing Reinsurers under the terms of this
Agreement from several to joint.

					
	 	 	 	 	 
	 
	 	Quota Share Reinsurance Agreement — Wausau
	 	9

 

 

	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 Agreement.

	I.	 	Survival of Article. This Article shall survive the termination or expiration of
this Agreement.

ARTICLE XXI — AMENDMENTS

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

ARTICLE XXII —  ENTIRE AGREEMENT

This Agreement shall constitute the entire agreement between the Company and the Subscribing
Reinsurer with respect to the subject matter of this Agreement and shall supersede all prior
understandings, negotiations and discussions, whether oral or written, by or between the Company
and the Subscribing Reinsurer with respect 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 Agreement except as specifically set
forth in this Agreement. Notwithstanding the foregoing, this Agreement may be amended or modified
only by a writing signed by both the Company and the Subscribing Reinsurer.

ARTICLE XXIII — 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 Agreement. Subscribing Reinsurer acknowledges and agrees that with respect
to any review of Confidential Information by Subscribing Reinsurer, and/or discussion of
Confidential Information, Company does not waive and does not intend to waive any available
privilege or protection. The review of Confidential Information by Subscribing Reinsurer and/or
discussion of Confidential Information with Company shall not destroy, waive, or otherwise impair
the proprietary and/or protected status of any Confidential Information or any information revealed
in such discussion with Company personnel, whether reviewed by and/or discussed with Subscribing
Reinsurer intentionally or inadvertently, nor does the review of the Confidential Information
and/or discussion of Confidential Information with Company constitute an estoppel or waiver of
Company’s rights to assert the attorney-client or work-product privileges, or any other applicable
privilege or protection, over certain documents contained in the Company files and/or certain
information.

The Company and Subscribing Reinsurer agree that no confidentiality obligations will apply to
Confidential Information to the extent such Confidential Information: (1) is or becomes available
to the public, other than as a result of impermissible disclosure by the Subscribing Reinsurer, (2)
was or became available lawfully to Subscribing Reinsurer from a source, other than Company or its
personnel, that is not subject to a confidentiality obligation, (3) was developed independently by
Subscribing Reinsurer prior to disclosure by Company or its 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 cat modelers or as otherwise required by law. Subscribing
Reinsurer agrees that no Confidential Information

					
	 	 	 	 	 
	 
	 	Quota Share Reinsurance Agreement — Wausau
	 	10

 

 

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 Agreement, 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 or its affiliates a reasonable opportunity to object to the disclosure. If the Company or
its affiliates timely object 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
or its affiliates’ 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 Agreement.

					
	 	 	 	 	 
	 
	 	Quota Share Reinsurance Agreement — Wausau
	 	11

 

 

In Witness Whereof, the parties hereto by their duly authorized representatives have executed
this Contract at:

Boston, Massachusetts this 18th day of September.

	 	 	 	 	 
	 	EMPLOYERS INSURANCE COMPANY OF WAUSAU

 	 
	 	By:  	/s/ Robert C. Andrews
 	 
	 	Its: 	Vice President	 
	 	 	 	 
	 

and at Keene, New Hampshire this 18th day of September, 2006.

	 	 	 	 	 
	 	PEERLESS INSURANCE COMPANY

 	 
	 	By:  	/s/ Nancy C. Callender
 	 
	 	Its: 	AVP — Risk Management 
	 	 	 	 
	 

Quota Share Reinsurance Agreement — Wausau

 

 

EXHIBIT A — Business Solutions Group Profit Center

Assigned Codes For Business Solutions Group Multi-State Business Written

	 	 	 	 	 	 	 	 	 
	BGI Code	 	BGI Name	 	Abbrev. Name	 	LOI
	3070

	 	Peerless — Wausau Multistate
	 	PWM
	 	 	0097	 
	3071

	 	Indiana — Wausau Multistate
	 	IWM
	 	 	0097	 
	3072

	 	Golden Eagle — Wausau Multistate
	 	GWM
	 	 	0097	 
	3073

	 	Montgomery — Wausau Multistate
	 	MWM
	 	 	0097	 
	3074

	 	Summit — Wausau Multistate
	 	SWM
	 	 	0097	 
	3075

	 	Colorado Casualty — Wausau Multistate
	 	CWM
	 	 	0097	 
	3076

	 	Hawkeye — Wausau Multistate
	 	HWM
	 	 	0097	 
	3077

	 	America First — Wausau Multistate
	 	AWM
	 	 	0097	 
	3078

	 	LNW — Wausau Multistate
	 	LWM
	 	 	0097	 

Quota Share Reinsurance Agreement — Wausau

 

 

EXHIBIT B

INSOLVENCY FUNDS EXCLUSION CLAUSE

This Agreement excludes all liability of the Company or its affiliates arising by contract,
operation of law, or otherwise from its participation or membership, whether voluntary or
involuntary, in any insolvency fund or from reimbursement of any person for any such liability.
“Insolvency fund” includes any guaranty fund, insolvency fund, plan, pool, association, fund or
other arrangement, howsoever denominated, established or governed, which provides for any
assessment of or payment or assumption by any person of part or all of any claim, debt,
charge, fee, or other obligation of an insurer, or its successors or assigns, which has been
declared by any competent authority to be insolvent or which is otherwise deemed unable to
meet any claim, debt, charge, fee or other obligation in whole or in part.

Quota Share Reinsurance Agreement — Wausau

 

 

EXHIBIT C

     POOLS, ASSOCIATIONS AND SYNDICATES EXCLUSION CLAUSE

SECTION A

Excluding:

	(a)	 	All Business derived directly or indirectly from any Pool, Association or Syndicate which
maintains its own reinsurance facilities.

	(b)	 	Any Pool or Scheme (whether voluntary or mandatory) formed after March 1, 1968, for the
purpose of insuring Property whether on a country-wide basis or in respect of designated
areas. This Exclusion shall not apply to so-called Automobile Insurance Plans or other Pools
formed to provide coverage for Automobile Physical Damage.

SECTION B

It is agreed that business, written by the Company or its affiliates for the same perils, which is
known at the time to be insured by or in excess of underlying amounts placed in the following
Pools, Associations or Syndicates, whether by way of insurance or reinsurance is excluded
hereunder:

Industrial Risk Insurers (successor to Factory Insurance Association and Oil Insurance
Association); Associated Factory Mutuals; Improved Risk Mutuals.

Any Pool, Association or Syndicate formed for the purpose of writing Oil, Gas or PetroChemical
Plants and/or Oil or Gas Drilling Rigs.

United States Aircraft Insurance Group, Canadian Aircraft Insurance Group, Associated Aviation
Underwriters, American Aviation Underwriters.

SECTION B does not apply:

	(a)	 	Where the Total Insured Value over all interests of the risk in question is less than
$500,000,000.

	(b)	 	To interests traditionally underwritten as Inland Marine or Stock and/or Contents written on
a Blanket basis.

	(c)	 	To Contingent Business Interruption, except when the Company is aware that the key location
is known at the time to be insured in any Pool, Association or Syndicate named above.

	(d)	 	To risks as follows: Offices, Hotels, Apartments, Hospitals, Educational Establishments,
Public Utilities (other than Railroad Schedules) and Builders Risks on the classes of risks
specified in this subsection (d) only.

Quota Share Reinsurance Agreement — Wausauexv10w151

EXHIBIT
10.151

WAUSAU

UMBRELLA QUOTA SHARE

REINSURANCE CONTRACT

NO. RAMWA06UQS

EFFECTIVE: JANUARY 1, 2006 — CONTINUOUS

Between

WAUSAU INSURANCE COMPANIES

And

PEERLESS INSURANCE COMPANY

			
	 	 	 
	Effective: January 1, 2006

RAMWA06UQS
	 	DOC: May 23, 2006

UMB06WAU01

 

 

WAUSAU UMBRELLA

QUOTA SHARE REINSURANCE CONTRACT

NO. RAMWA06UQS

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	Article	 	 	 	Page	 
	 
	 	 	 	 	 	 
	 
	 	Preamble	 	 	1	 
	1
	 	Business Reinsured	 	 	1	 
	2
	 	Cover	 	 	2	 
	3
	 	Term and Cancellation	 	 	2	 
	4
	 	Territory	 	 	3	 
	5
	 	Exclusions	 	 	3	 
	6
	 	Special Acceptances	 	 	11	 
	7
	 	Accounts and Remittances	 	 	11	 
	8
	 	Reinsurance Premium	 	 	13	 
	9
	 	Ceding Commission	 	 	13	 
	10
	 	Definitions	 	 	13	 
	11
	 	Original Conditions	 	 	16	 
	12
	 	Loss Adjustment and Settlement	 	 	16	 
	13
	 	Loss in Excess of Original Policy Limits And Extra Contractual Obligations	 	 	16	 
	14
	 	Salvage and Subrogation	 	 	17	 
	15
	 	Dividends and Taxes	 	 	18	 
	16
	 	Federal Excise Tax	 	 	18	 
	17
	 	Offset	 	 	18	 
	18
	 	Errors and Omissions	 	 	19	 
	19
	 	Access to Records	 	 	19	 
	20
	 	Arbitration	 	 	20	 
	21
	 	Insolvency	 	 	24	 
	22
	 	Other Reinsurance	 	 	25	 
	23
	 	Honorable Undertaking	 	 	25	 
	24
	 	Confidentiality	 	 	25	 
	25
	 	Currency	 	 	27	 
	26
	 	Federal Terrorism Excess Recovery Clause	 	 	27	 
	27
	 	Governing Law	 	 	28	 
	28
	 	Severability	 	 	28	 
	29
	 	Assignment	 	 	28	 
	30
	 	Special Conditions	 	 	28	 
	31
	 	Interest Penalty	 	 	30	 
	32
	 	Entire Agreement	 	 	31	 
	 
	 	Company Signing Block	 	 	32	 

			
	 	 	 
	Effective: January 1, 2006

RAMWA06UQS
	i 	DOC: May 23, 2006

 

 

WAUSAU UMBRELLA

QUOTA SHARE REINSURANCE CONTRACT

NO. RAMWA06UQS

(hereinafter referred to as the “Contract”)

between

EMPLOYERS INSURANCE COMPANY OF WAUSAU, a Wisconsin corporation,

and/or

WAUSAU GENERAL INSURANCE COMPANY, a Wisconsin corporation,

and/or

WAUSAU UNDERWRITERS INSURANCE COMPANY, a Wisconsin corporation,

and/or

WAUSAU BUSINESS INSURANCE COMPANY, a Wisconsin corporation,

and/or 

any other companies that are now or may hereafter become

Members of the Group of

WAUSAU INSURANCE COMPANIES

2000 Westwood Drive P.O. Box 8017

Wausau, Wisconsin 54402-8017

(hereinafter individually and collectively referred to as the “Company”)

And

PEERLESS INSURANCE COMPANY

62 Maple Avenue

Keene, NH 03431

THE REINSURER(S) subscribing to the INTERESTS AND LIABILITIES

AGREEMENT(S) forming part of this Contract

(hereinafter individually referred to as “Subscribing Reinsurer”

and collectively referred to as “Reinsurers”)

ARTICLE 1

BUSINESS REINSURED

This Contract is to share with the Subscribing Reinsurer the interests and liabilities of the
Company under all Policies classified by the Company as Commercial Umbrella and Follow-Form Excess
Liability Policies underwritten by the Wausau Underwriting Department and

					
	 	 	 	 	 
	Effective: January 1, 2006

RAMWA06UQS
	 	1
	 	DOC: May 23, 2006

 

 

written or renewed by or on behalf of the Company during the term of this Contract, subject
to the terms and conditions herein contained, provided such insurance is written under Policy Form
XU0001, Edition Date 04 03, and subsequent edition dates agreed upon and on file with the
Subscribing Reinsurer.

ARTICLE 2

COVER

The Company shall cede to the Subscribing Reinsurer(s) a 50% quota share of Net Loss of up to
$10,000,000 each occurrence/$10,000,000 aggregate (where applicable) excess of Underlying
Insurance as respects Policies ceded hereunder.

In addition to Net Loss, the Company shall cede to the Subscribing Reinsurer its 50% proportionate
share of Adjustment Expense, even if there is no Net Loss payment.

In addition to Net Loss, Adjustment Expense, and Claim-Specific Declaratory Judgment Expenses
incurred by the Company shall be apportioned between the Company and the Subscribing Reinsurer in
proportion to their respective interests as finally determined, subject to a maximum of 50% of
$10,000,000 for any individual declaratory judgment action, and 50% of $10,000,000 for all
occurrences taking place under all Policies becoming effective during an Underwriting Year. In the
event there is no loss other than Claim-Specific Declaratory Judgment Expense with respect to any
claim hereunder, such expense will be covered by this Contract.

The Company shall cede to the Subscribing Reinsurer losses in excess of Policy limits and extra
contractual obligations. The liability of the Subscribing Reinsurer for loss in excess of Policy
limits and extra contractual obligations combined in any one occurrence under any one Policy shall
not exceed a limit of liability of the Subscribing Reinsurer equal to the lesser of: 50% of
$10,000,000; or 50% of the each occurrence Policy limit. Further, the liability of the Subscribing
Reinsurer for loss in excess of Policy limits and extra contractual obligations combined arising
out of all occurrences taking place under all Policies becoming effective during any one
Underwriting Year shall not exceed a limit of liability of the Subscribing Reinsurer equal to 50%
of $20,000,000.

It is understood and agreed that the Company shall be allowed to purchase facultative reinsurance,
recoveries under which would inure to the benefit of this Contract.

ARTICLE 3

TERM AND CANCELLATION

This Contract shall apply to new and renewal Policies of the Company becoming effective at and
after 12:01 a.m. Central Standard Time on January 1, 2006, with respect to:

					
	 	 	 	 	 
	Effective: January 1, 2006

RAMWA06UQS
	 	2
	 	DOC: May 23, 2006

 

 

	 	A.	 	Claims and losses resulting from actual or alleged occurrences under
coverages written on an occurrence basis; and
	 
	 	B.	 	Claims first made against the insured under such Policies under coverages
written on a claims-made basis, provided that the occurrence which results in each such
claim takes place on or after the retroactive date indicated in each such Policy;

And shall remain in full force and effect until terminated.

This Contract may be canceled effective January 1, 2007, or any January 1 thereafter, by either
party giving at least 90 days prior notice by certified mail to the other party. During any such
period of notice the Subscribing Reinsurer will remain bound by the terms of this Contract.

Upon termination of this Contract, the Subscribing Reinsurer will continue to cover all Policies
coming within the scope of this Contract, until the natural expiration of such Policies. Policy
periods are deemed not to exceed 12 months plus odd time, not to exceed 18 months in all. As
respects coverages written on a claims-made basis, the claim must first be made against the insured
before such expiration, cancellation, or next anniversary date. However, if the Company provides an
extended reporting period within one year after termination date of this Contract on any
claims-made coverage which is in force at such termination date or if an extended reporting period
is in force at the time and date of termination, the Subscribing Reinsurer shall continue to be
liable for claims first made against the insured during such extended reporting period. Upon
termination, the Company, at its option, may elect to terminate the Subscribing Reinsurer’s
liability for all losses occurring subsequent to termination. The Subscribing Reinsurer will return
to the Company a portfolio representing the unearned premium reserve under this Contract
appropriate to the mode of termination.

ARTICLE 4

TERRITORY

The territorial limits of this contract shall be identical with those of the Company’s Policies.

ARTICLE 5

EXCLUSIONS

This Contract does not cover:

	 	A.	 	Reinsurance assumed by the Company other than reinsurance of Commercial Umbrella
business assumed from affiliated companies;

					
	 	 	 	 	 
	Effective: January 1, 2006

RAMWA06UQS
	 	3
	 	DOC: May 23, 2006

 

 

	 	B.	 	Nuclear incident per the Nuclear Incident Exclusion Clause  —  Liability -
Reinsurance attached hereto;
	 
	 	C.	 	“Self-insurance” or “self-insured obligations”, howsoever styled, of the Company,
its affiliates or subsidiaries, or any insurance wherein the Company, its affiliates
or subsidiaries, are named as the insured party, either alone or jointly with some
other party, notwithstanding that no legal liability may arise in respect thereof by
reason of the fact that the Company, its affiliates or subsidiaries, may not be
obligated by law to pay a claim to itself, its affiliates or subsidiaries;
	 
	 	D.	 	Any loss or liability accruing to the Company directly or indirectly from any
insurance written by or through any pool or association including pools and
associations in which membership by the Company is required under any statutes or
regulations;
	 
	 	E.	 	Any liability of the Company arising from its participation or membership in any
insolvency fund;
	 
	 	F.	 	Any loss or damage which is occasioned by war, invasion, hostilities, acts of
foreign enemies, civil war, rebellion, insurrection, military or usurped power, or
martial law or confiscation by order of any government or public authority; however,
this exclusion shall not apply to any Commercial Umbrella policy which contains a war
exclusion;
	 
	 	G.	 	Business written on a co-indemnity basis not controlled by the Company;
	 
	 	H.	 	Any Commercial Umbrella policy written for a period of more than 12 months, not
to exclude, however, policy periods of 12 months plus odd time provided that the
total policy period does not exceed 18 months;
	 
	 	I.	 	Any Commercial Umbrella policy written on a master policy basis or through a
managing general agent or managing general underwriter;
	 
	 	J.	 	Any of the following coverages:

	 	1.	 	Asbestos Liability, being liability for loss, damage, costs or
expenses arising out of, resulting from, caused by, or contributed to by
asbestos, exposure to asbestos, use of asbestos, or responding to asbestos;
however, this exclusion does not apply to any Commercial Umbrella policy which
contains the Company’s asbestos exclusion;
	 
	 	2.	 	Directors and Officers Liability;
	 
	 	3.	 	Employment Practices Liability;

					
	 	 	 	 	 
	Effective: January 1, 2006

RAMWA06UQS
	 	4
	 	DOC: May 23, 2006

 

 

	 	4.	 	Environmental Impairment Liability;
	 
	 	5.	 	Lead Liability (being liability for loss, damage, costs or
expenses arising out of, resulting from, caused by, or contributed to by
the toxic or pathogenic properties of lead, lead compounds or lead
contained in any materials) as respects any of the exposures listed
below; however, this exclusion shall not apply to any Commercial
Umbrella policy which contains the Company’s lead exclusion. Nor shall
this exclusion apply to any risk located in a jurisdiction which has not
approved the Company’s lead exclusion or where other regulatory
constraints prohibit the Company from implementing such exclusion.

	 	a.	 	Habitational premises (whether owned or rented) constructed prior to 1980;
	 
	 	b.	 	Child care facilities or private schools;
	 
	 	c.	 	Paint manufacturers;
	 
	 	d.	 	Municipalities;
	 
	 	e.	 	Public schools;

	 	6.	 	Liquor Law Liability; however this exclusion shall not apply
to host liquor liability, nor to any insured with annual liquor receipts
less than or equal to 40% of total annual receipts;
	 
	 	7.	 	Medical Malpractice Liability;
	 
	 	8.	 	Pollution Liability. However, this exclusion does not apply
to any risk located in a jurisdiction which has not approved the
pollution exclusions or where other regulatory constraints prohibit the
Company from implementing such exclusions. This exclusion also does
not apply to exceptions as outlined in Section VI —
Exclusions, Paragraph A.l.c under the Wausau Excess/Umbrella Policy.;
	 
	 	9.	 	Products Recall, Products Integrity, or Products Impairment Liability;
	 
	 	10.	 	Professional Liability and/or Errors and Omissions; however,
this exclusion shall not apply to barbers, beauticians, opticians,
hearing aid specialists, and printers, nor to employee benefits
liability;
	 
	 	11.	 	Uninsured/Underinsured Motorists coverage in all states
where an exclusion of the coverage is permitted by law; however, this
exclusion shall not apply if the Commercial Umbrella policy contains the

					
	 	 	 	 	 
	Effective: January 1, 2006

RAMWA06UQS
	 	5
	 	DOC: May 23, 2006

 

 

Company’s uninsured/ underinsured motorists exclusion and if the
Company has obtained a properly executed Commercial Umbrella Policy
Uninsured/Underinsured Motorists coverage rejection form where this
requirement must be met in order to exclude coverage;

	K.	 	Any Commercial Umbrella coverage as respects any of the following:

	 	1.	 	Aircraft, satellite and spacecraft ownership, maintenance,
use or entrustment to others, including crop dusting; airports and
launch sites as respects flight and ground operations; however, this
exclusion shall not apply to aircraft chartered with crew if such
exposure was not known to the Company at policy inception;
	 
	 	2.	 	Aircraft, satellite and spacecraft (including the component
parts thereof) manufacture, importation, sales, or distribution;

	 	3.	a. 	 	 Amusement parks and devices; carnivals and circuses; convention
and exhibition centers; professional sports organizations; zoos;
casinos; and racetracks;

	 	b.	 	Sports or other entertainment events; any theater,
hall, arena, grandstand or stadium which has a seating capacity in
excess of 1,000;

	 	4.	 	Animal feed and seed manufacturing (including blending,
mixing, repackaging and relabeling), importation, or wholesale
distribution;
	 
	 	5.	 	Blood banks;
	 
	 	6.	 	Boiler inspection, installation, repair and sealing, as
respects industrial boilers;
	 
	 	7.	 	Bridges, tunnels, dams or reservoirs;
	 
	 	8.	 	Camps, child care facilities and private schools;
however, this exclusion shall not apply if the Commercial Umbrella
policy contains the Company’s child molestation exclusion;
	 
	 	9.	 	Car and truck rental and leasing; however, this exclusion
shall not apply to substitute vehicles provided by new car dealers;
	 
	 	10.	 	Chemical manufacturing (including blending, mixing,
repackaging and relabeling), importing, or wholesale distribution. For
purposes of this exclusion, the term “chemical” shall include
agricultural chemicals, fertilizers, herbicides and pesticides;

					
	 	 	 	 	 
	Effective: January 1, 2006

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	 	11.	 	Commercial grain elevators and grain storage;
	 
	 	12.	 	Computer and peripheral computer equipment manufacturing
or importation;
	 
	 	13.	 	Cosmetic, hair, and skin product manufacturing, importation,
blending, mixing, repackaging, or relabeling;
	 
	 	14.	 	Drilling, pile driving, moving up or shoring of buildings,
coffer dam or caisson work;
	 
	 	15.	 	Elevator installation, erection or repair;
	 
	 	16.	 	Employee leasing services, temporary employment
agencies, or professional employment organizations;
	 
	 	17.	 	Ethical and non-ethical drugs, dietary aids and supplements,
and bodybuilding enhancements, with respect to the
manufacture, (including blending, mixing, repackaging and
relabeling), or importation thereof; and the wholesale distribution of
ethical drugs;
	 
	 	18.	 	Explosives, caps, primers, detonators, ammunitions,
fuses, arms, magnesium, ammonium nitrate, fireworks, nitroglycerine,
celluloid, pyroxylin or explosive substances intended for use as an
explosive, with respect to the manufacture or importation, packing,
handling, storage, transportation or use thereof;
	 
	 	19.	 	Exterior insulation and finishing systems (EIFS) or
synthetic stucco manufacturing, importation, or installation;
	 
	 	20.	 	Fumigating and exterminating operations;
	 
	 	21.	 	Hazardous material handlers and haulers. For purposes of
this exclusion, “hazardous materials” shall mean bulk gases (except for
liquefied petroleum gas and liquefied natural gas),
corrosives, hazardous waste, and radioactive materials;
	 
	 	22.	 	Heater, furnace, heavy machinery and equipment, home power
tool, and oil drilling equipment manufacturing or importation;
	 
	 	23.	 	Invasive medical product and medical diagnostic
equipment manufacturing or importation;
	 
	 	24.	 	Latex product manufacturing or importation;

					
	 	 	 	 	 
	Effective: January 1, 2006

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	 	25.	 	Lead smelters or recyclers;
	 
	 	26.	 	Logging;
	 
	 	27.	 	Long term care, including but not limited to, nursing homes,
assisted living facilities, home health care and adult day care;
	 
	 	28.	 	All mining and quarrying operations;
	 
	 	29.	 	Motorized vehicle manufacturing, or critical
component parts manufacturing; such as, steering, brakes, or airbags;
	 
	 	30.	 	Navigation, towing, repair, storage, conversion, cleaning,
demolition, wrecking, uprighting, or salvage of any commercial vessel or
oil rig; ship building and boat manufacturing; ship repair yards; dry
docks; stevedoring; and marinas;
	 
	 	31.	 	Off-shore and subaqueous work;
	 
	 	32.	 	Oil or gas pipelines, wells, or drilling operations;
	 
	 	33.	 	Playground equipment manufacturing, importation,
construction or installation unless approved by Home Office Underwriting
Services;
	 
	 	34.	 	Public utilities or private companies providing water, gas
or electricity; gas or utility works, or gas lease operators;
	 
	 	35.	 	Railroads or railroad contractors;
	 
	 	36.	 	Residential contractors or residential developers with
respect to operations in Arizona, California, Colorado, Hawaii, Nevada,
South Carolina, Utah and Washington;
	 
	 	37.	 	Sporting goods and toy manufacturing or importation;
	 
	 	38.	 	State or governmental agencies or political subdivisions,
including school districts and school boards, with respect to
Commercial Umbrella policies issued thereto;
	 
	 	39.	 	Storage, production, handling, refinement, distribution, or
transmission of natural or artificial fuels; however, this exclusion
shall not apply to the retail sales of gasoline and diesel fuels nor to
the wholesale distribution and retail sales of home heating oil;

					
	 	 	 	 	 
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	 	40.	 	Tire manufacturing, importation, recapping, or retreading;
	 
	 	41.	 	Tobacco related product manufacturing, importation, or
wholesale distribution; however, as respects the wholesale distribution
of tobacco products only, this exclusion shall not apply if the
Commercial Umbrella policy contains the Company’s tobacco health
hazard exclusion, provided the Company has submitted the exclusion to
the Subscribing Reinsurer and received the Subscribing Reinsurer’s prior
approval;
	 
	 	42.	 	Underground storage tank manufacturing, importation,
construction, installation, or removal;
	 
	 	43.	 	Underground work, including tunneling, shaft sinking and
subway construction; and excavation contractors;
	 
	 	44.	 	Vehicle racing, demolition contests, or stunting activities,
including the practice and preparation therefor;
	 
	 	45.	 	Waste treatment, storage or disposal facilities; containment
ponds; dumps or dumpsites; landfills; leaching fields; surface
impoundments; waste lagoons; or waste sites;
	 
	 	46.	 	Wire rope or cable manufacturing or importation;
	 
	 	47.	 	Wrap-up or owner or contractor controlled insurance programs;

	L.	 	Any Commercial Umbrella coverage as respects any of the following classes of
risk:

	 	1.	 	Colleges and universities with an enrollment of 5,000 or
more full time students;
	 
	 	2.	 	Commercial delivery services, except when incidental to
the total operations of the insured;
	 
	 	3.	 	Financial institutions;
	 
	 	4.	 	Food and beverage processors, importers, and
wholesale distributors with annual gross receipts in excess of
$25,000,000;
	 
	 	5.	 	Hospitals and medical and scientific laboratories;
	 
	 	6.	 	Hotels located in buildings more than 25 stories in height;

					
	 	 	 	 	 
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	 	7.	 	Media, broadcasting, and telecommunications companies with
annual gross receipts in excess of $25,000,000;
	 
	 	8.	 	Real estate owners or management firms with respect to
buildings more than 25 stories in height;
	 
	 	9.	 	Security firms;
	 
	 	10.	 	Shopping malls more than 500,000 square feet in area; and
	 
	 	11.	 	Stock and commodity exchanges;

     However, this exclusion (L) shall not apply to:

	 	1.	 	A Commercial Umbrella policy which contains the
terrorism exclusion set forth in ISO Exclusion of Certified Acts of
Terrorism and Other Nuclear, Biological or Chemical Acts of Terrorism
Endorsement, or the terrorism exclusion set forth in ISO Exclusion of
Certified Acts of Terrorism and Other Acts of Terrorism Endorsement,
or a substitute Company terrorism exclusion, provided that the
Company has obtained a properly executed Commercial Umbrella Policy
Terrorism coverage rejection form; or
	 
	 	2.	 	Any of the above classes of risk which has been
submitted to the Subscribing Reinsurer for a special acceptance,
accepted by the Subscribing Reinsurer, and written in
accordance with the Terrorism Underwriting Guidelines agreed
upon between the Company and the Subscribing Reinsurer;

	M.	 	Automobile liability coverage relating to the ownership, maintenance, use,
or entrustment to others of:

	 	1.	 	Commercial automobiles, as defined in the ISO manuals,
which customarily operate beyond a 200 mile radius;
	 
	 	2.	 	Emergency vehicles, including police and fire department vehicles;
	 
	 	3.	 	Public automobiles as defined in the ISO manuals;
however, this exclusion shall not apply to courtesy buses or vans
run by hotels.

If the Company provides insurance for an insured with respect to any exposures listed in exclusion
(K)(3)(b), (K)(6), (K)(13), (K)(14), (K)(15), (K)(20), (K)(22), (K)(26), (K)(28), (K)(33), (K)(37),
(K)(43), or (K)(46), and if such exposures constitute only a minor and incidental part of the total
exposures of the insured, such exclusion(s) shall not apply.

					
	 	 	 	 	 
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If the Company provides insurance for an insured with respect to the ownership, maintenance,
or use of the vehicles listed in exclusion (M)(l) or (M)(2), and if such ownership, maintenance,
or use constitutes only a minor and incidental part of the ownership, maintenance, or use of all
vehicles of the insured, such exclusion(s) shall not apply.

If the Company is bound as of policy inception, without the knowledge of and contrary to the
instructions of the Company’s supervisory underwriting personnel, on any business falling within
the scope of one or more of the exclusions set forth in exclusions (K) through (M) above, these
exclusions shall be suspended with respect to such business until 60 days after the effective date
of the first such policy of the insured reinsured hereunder.

If an insured during the term of its policy, without the knowledge of the Company, develops
exposures falling within the scope of one or more of the exclusions set forth in exclusions (K)
through (M) above, these exclusions shall be suspended with respect to such exposures until 30
days after an underwriting supervisor of the Company acquires knowledge thereof, but in no event
past the policy’s expiration date.

ARTICLE 6

SPECIAL ACCEPTANCES

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

ARTICLE 7

ACCOUNTS AND REMITTANCES

	A.	 	Bordereau Reports and Reinsurance Premium
	 
	 	 	Within 25 days after the close of each calendar quarter, the Company shall render to the
Subscribing Reinsurer a bordereau report giving details of each policy reinsured hereunder
and issued during the quarter and the reinsurance premium thereon, summarizing the
reinsurance premium; and the amount due the Subscribing Reinsurer shall be remitted within 25
days after the close of the quarter.
	 
	 	 	Within 25 days after the close of each calendar quarter, the Company shall also render to the
Subscribing Reinsurer a report of the reinsurance premium unearned as of the close of the
quarter.

					
	 	 	 	 	 
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	B.	 	Claims and Losses
	 
	 	 	The Company shall report as soon as practicable to the Subscribing Reinsurer:

	 	1.	 	If the Company is providing the umbrella’s underlying insurance as
respects all underlying policies other than Employers’ Liability, any claim or
loss for which the Company has created a loss reserve equal to or greater than
$900,000 on the underlying policy;
	 
	 	2.	 	If the Company is not providing the umbrella’s underlying insurance, any
occurrence, claim or loss reported by the insured to the Company under the
Policy;

The Company shall advise the Subscribing Reinsurer of the estimated amounts of Net Loss,
Adjustment Expense, and any Loss in Excess of Policy Limits and Extra Contractual Obligations
in connection with each such claim or loss and of any subsequent changes in such estimates.

Promptly upon receipt of a definitive statement of the amounts of Net Loss, Adjustment
Expense, and any Loss in Excess of Policy Limits and Extra Contractual Obligations from the
Company, but within no more than 25 days after receipt of such statement, the Subscribing
Reinsurer shall pay to the Company the Subscribing Reinsurer’s portion of such amounts. The
Company shall report to the Subscribing Reinsurer any subsequent changes in such amounts and
the difference due either party because of such changes shall be remitted promptly, but within
no more than 25 days after receipt of such report.

	C.	 	Company Forms, Rules and Rates
	 
	 	 	The Company, if requested will furnish the Subscribing Reinsurer with the materials listed
below and shall inform the Subscribing Reinsurer when making any material or substantial
changes therein:

	 	1.	 	Specimen copies of the Company’s umbrella and underlying Policies and
all special endorsements used in conjunction with them;
	 
	 	2.	 	A copy of the Company’s umbrella underwriting rules and rates.

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

					
	 	 	 	 	 
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     All reinsurance premium reports required under this Contract may be sent to:

Liberty Agency Markets

Reinsurance Accounting Department

Weston, MA

ARTICLE 8

REINSURANCE PREMIUM

The Company shall pay to the Subscribing Reinsurer 50% of the Company’s Gross Net Written Premium
Income for Policy limits up to and including $10,000,000 each occurrence/$10,000,000 aggregate
(where applicable.)

ARTICLE 9

CEDING COMMISSION

A flat 27.0% of the Gross Net Written Premium Income ceded to this Contract.

ARTICLE 10

DEFINITIONS

	1.	 	Underwriting Year: The term “Underwriting Year” as used in this Contract shall mean those
Policies with inception, renewal or anniversary dates during each 12 month period commencing
with each January 1st, and all premium attributable to, and all loss arising out of such
Policies from such inception, renewal or anniversary date until expiration, cancellation, or
next anniversary, whichever occurs first, will be ascribed to the Underwriting Year.
	 
	2.	 	Policy: The term “Policy” as used in this Contract shall mean any binder, policy, or
contract of insurance or reinsurance issued, accepted or held, covered provisionally or
otherwise, by or on behalf of the Company for commercial umbrella business.
	 
	4.	 	Company Retention: This term shall mean the amount the Company shall retain for its own
account, subject to facultative reinsurance; however, this requirement shall be satisfied if this
amount is retained by the Company or its affiliated companies under common management or common
ownership.
	 
	5.	 	Net Loss: The term “Net Loss” as used in this Contract shall mean: all amounts paid by the
Company in the settlement of claims or judgments arising from each and every loss, loss occurrence,
or Occurrence for which the Company is or may be found liable under the

					
	 	 	 	 	 
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	 	 	Policies, less salvages and subrogation recoveries and amounts recovered or recoverable
under pooling agreements or other reinsurances, whether collectible or not.
	 
	6.	 	Adjustment Expense: “Adjustment Expense” shall mean expenditures by the Company within the
terms of its Policies, allocated to an individual claim or loss, and made in connection with the
disposition of a claim, loss or legal proceeding, including investigation, negotiation and legal
expenses; court costs, statutory penalties, including Attorneys’ Fees and Expenses and Post
Judgment and Prejudgment Interest or Delayed Damages, defined below.
	 
	7.	 	Claim-Specific Declaratory Judgment Expenses: “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 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, loss occurrence, or Occurrence (if any) giving rise to the action, unless
otherwise provided for within this Contract.
	 
	8.	 	Attorneys’ Fees and Expenses: “Attorneys’ Fees and Expenses” as used above, shall mean the
fees and expenses of attorneys, including but not limited to the fees and expenses of the
Company’s 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 and/or defending the Company in coverage litigation. 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 salaries and expenses of its other employees.
	 
	9.	 	Post Judgment or Prejudgment Interest or Delayed Damages: “Post Judgment 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.
	 
	10.	 	Underlying Insurance: This term shall mean the primary insurance that the Company maintains,
including but not limited to the following coverages and minimum limits:

	 	 	 	 	 	 	 	 	 

	(a)

	 	General Liability under
	 	$	2,000,000	 	 	General Aggregate Limit
	 

	 	Commercial General Liability
	 	$	2,000,000	 	 	Products — Completed
	 

	 	Policies and Commercial
	 	 	 	 	 	Operations Aggregate Limit
	 

	 	Package Policies
	 	$	1,000,000	 	 	Personal & Advertising
	 

	 	(ISO Ed. 1986 and subsequent)
	 	 	 	 	 	Injury Limit
	 

	 	 	 	$	1,000,000	 	 	Each Occurrence Limit
	 
	(b)	 	Comprehensive Automobile	 	      Combined Single Limit:
	 

	 	Liability including Hired
and Non-Owned Auto Coverage
	 	$	1,000,000	 	 	each accident

					
	 	 	 	 	 
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	(c)

	 	Garage Liability	 	 	 	 	 	 
	 

	 	(1) Garage Operations — Covered Autos
	 	$	1,000,000	 	 	each accident
	 

	 	(2) Garage Operations —
       Other than Covered Autos
	 	$

$	1,000,000

3,000,000	 	 	each accident

aggregate
	 
	(d)

	 	Uninsured/Underinsured

Motorists Coverage (where

required by state law)
	 	$	1,000,000	 	 	each accident
	 
	(e)

	 	Employers’ Liability (Part Two
of Workers’ Compensation
policies)	 	 	 	 	 	 
	 

	 	(1) Bodily Injury by Accident
	 	$	100,000	 	 	each accident
	 

	 	(2) Bodily Injury by Disease
	 	$	500,000	 	 	policy limit each
	 

	 	(3) Bodily Injury by Disease
	 	$	100,000	 	 	employee
	 
	(f)

	 	Liquor Liability
	 	$

$	1,000,000

1,000,000	 	 	each common cause

aggregate
	 
	(g)

	 	Professional Liability

(eligible classes)
	 	$

$	1,000,000

1,000,000	 	 	each claim

aggregate

	11.	 	Gross Net Written Premium Income: This term shall mean the Company’s gross premiums for
Policies effective during the term of this Contract, less any cancellation and return premiums
and less any premiums paid by the Company for reinsurance(s) in which the recoveries would
inure to the benefit of the Subscribing Reinsurer.
	 
	12.	 	Terrorism: An act of terrorism means any activity that (1) involves a violent act of the
unlawful use of force or any unlawful act dangerous to human life, tangible or intangible
property or infrastructure, or threat thereof; and (2) appears to be intended to (i)
intimidate of coerce a civilian population, or any segment thereof, or (ii) disrupt any
segment of the economy of a government de jure or de facto, state or country; or (iii)
overthrow, influence, or affect the conduct or policy of any government de jure or de facto by
intimidation or coercion; or (iv) affect the conduct of a government de jure or de facto by
mass destruction, assassination, kidnapping or hostage-taking.
	 
	 	 	For the purpose of this Contract, terrorism also shall mean all actual or alleged losses,
liabilities, damages, injuries, defense costs, costs or expenses directly or indirectly
arising out of, contributed by, caused by, resulting from or in connection with any action
taken in controlling, preventing, suppressing, retaliating against, or responding to (1),
and/or (2) above.

					
	 	 	 	 	 
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ARTICLE 11

ORIGINAL CONDITIONS

All insurances falling under this Contract shall be subject to the same terms, rates, conditions,
and waivers, and to the same modifications, alterations, and cancellations as the respective
Policies of the Company (except that in the event of the insolvency of the Company the provisions
of the INSOLVENCY ARTICLE of this Contract shall apply) and the Subscribing Reinsurer shall be
credited with its exact proportion of the original Gross Net Written Premium Income received by
the Company.

ARTICLE 12

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. Inadvertent omission in giving the
aforementioned notice shall in no way affect the obligation of the Subscribing Reinsurer under this
Contract, provided the Company informs the Subscribing Reinsurer of such omission promptly upon
discovery. 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 its Policies. All of the Company’s Net Loss, Adjustment Expense, and/or
Claim-Specific Declaratory Judgment Expenses paid by the Company, provided they are within the
terms of this Contract either under the strict conditions of the Company’s Policies or by way of
compromise, shall be unconditionally binding upon the Subscribing Reinsurer, who agrees to pay all
amounts for which they may be liable immediately upon reasonable evidence of the amount due or to
be 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 and the fortunes of the Company.

ARTICLE 13

LOSS IN EXCESS OF ORIGINAL POLICY LIMITS AND EXTRA CONTRACTUAL OBLIGATIONS

This Contract shall protect the Company for any Loss in excess of the Company’s 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 of the Company or of the third-party claims administrator

					
	 	 	 	 	 
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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.

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 Company’s 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.

This Contract shall protect the Company for 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 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 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.

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 or Extra Contractual Obligations 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 14

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 Reinsurers agree to the contrary, the Company shall enforce its 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 Reinsurers are hereby empowered and authorized to institute
appropriate action in the name of the Company.

Amounts recovered from salvage and/or subrogation and the expense of any salvage and/or
subrogation proceedings brought by the Company or the Reinsurers to enforce such rights shall be
apportioned between the Company and the Reinsurers in the ratio of their respective interests in
the total salvage and/or subrogation recovery, and shall be in addition to the limits hereon. In
the event there is a failure to obtain a salvage and/or subrogation recovery, the expense of the
proceedings shall be apportioned between the Company and the Reinsurers in the ratio of their
respective interests in the total loss.

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

The Company shall have the right, before the happening of the loss, to waive its right of
subrogation as to that loss.

ARTICLE 15

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 16

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 Reinsuer 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 an/or other applicable 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 17

OFFSET

Each party to this Contract together with their successors or assigns shall have and may exercise,
at any time, the right to offset any balance(s) due the other (or, if more than one, any other.)
Such offset may include balances due under this Contract, and any other contracts between the
parties, whether such balances arise 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

					
	 	 	 	 	 
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	RAMWA06UQS
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shall only be allowed in accordance with the provisions of the applicable law, statute, or
regulation governing such offset.

ARTICLE 18

ERRORS AND OMISSIONS

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

ARTICLE 19

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, 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 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.

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, (b) subject to the terms of a third party non-disclosure
agreement with the Company 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 (hereinafter referred to

					
	 	 	 	 	 
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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 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 anyone retained or in the
control of the Company, or its 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 and/or which contains legal advice being provided to the Company. “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, in anticipation of or in
connection with litigation, arbitration, or other dispute resolution proceedings.

ARTICLE 20

ARBITRATION

A. Disputes to be Arbitrated. With the exception of any dispute resolution procedures
regarding commutation 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 after 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

					
	 	 	 	 	 
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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
section
6.2 of the Procedures, except that other professionals who have worked for at
least 10 years for an insurer or reinsurer shall also be qualified to serve as an
arbitrator or umpire.
	 
	 	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 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.

					
	 	 	 	 	 
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	 	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 five hundred thousand dollars ($500,000), 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.

					
	 	 	 	 	 
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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.

	 	a.	 	Either the Company or any single Subscribing Reinsurer has the
right to
combine any and all disputes between the Company and such single
Subscribing Reinsurer into one arbitration proceeding before a single Panel
where such disputes involve this Contract and any additional contracts
between the two Parties.
	 
	 	b.	 	Notwithstanding the foregoing, subject in each instance to the
mutual
agreement of the Parties, new issues, claims, or disputes maybe added to such
existing arbitration proceeding.

	 	3.	 	Same contract, multiple Reinsurers. At the Company’s option, if more than one
Subscribing Reinsurer is involved in arbitration relating to this Contract, where
there are common questions of law or fact and a possibility of conflicting awards
or inconsistent results, all such Reinsurers shall constitute and act as one Party
for
purposes of this Article and communications shall be made by the Company to
each of the Reinsurers constituting the one Party; provided, however, that the
Reinsurers shall have the right to assert several, rather than joint defenses or
claims, and to be represented by separate counsel. This provision shall not
change the liability of each of the Reinsurers under the terms of this Contract
from several to joint.

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

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

					
	 	 	 	 	 
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ARTICLE 21

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.)

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.

					
	 	 	 	 	 
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ARTICLE 22

OTHER REINSURANCE

The Company is permitted to have other treaty reinsurance, and the premium for any such
reinsurance that inures to the benefit of this Contract will not be included within Gross Net
Written Premium. The Company may also purchase facultative reinsurance on any Policy it deems
advisable, and the premium for any such reinsurance that inures to the benefit of this Contract
will not be included within Gross Net Written Premium.

ARTICLE 23

HONORABLE UNDERTAKING

This Contract shall be construed as an honorable undertaking between the parties hereto not to be
defeated by technical legal constructions, it being the intention of this Contract that the
fortunes of the Subscribing Reinsurer shall follow the fortunes of the Company. Nothing herein
shall in any manner create any obligations or establish any rights against the Subscribing
Reinsurer in favor of any third parties or any persons not parties to this Reinsurance Contract.

ARTICLE 24

CONFIDENTIALITY

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

					
	 	 	 	 	 
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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 or its
personnel, that is not subject to a confidentiality obligation, (3) was developed independently by
Subscribing Reinsurer prior to disclosure by Company or its 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 cat 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 termination of this Contract.

					
	 	 	 	 	 
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ARTICLE 25

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 26

FEDERAL TERRORISM EXCESS RECOVERY CLAUSE

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 insured under Policies becoming effective 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 occurrence(s) 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.

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

ARTICLE 27

GOVERNING LAW

The validity and interpretation of this Contract shall be governed by and construed in accordance
with the law of the state of Wisconsin.

ARTICLE 28

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 29

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 30

SPECIAL CONDITIONS

The Company may terminate this Contract at any time by the giving of 30 days prior notice in
writing to the Subscribing Reinsurer upon the happening of any one of the following circumstances:

	 	A.	 	A State Insurance Department or other legal authority orders the Subscribing
Reinsurer to cease writing business; 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

					
	 	 	 	 	 
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	 		 	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 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-.

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 15 days after receipt of the written
request for commutation. Upon such appointment, the two actuaries shall appoint a
third actuary. If the two actuaries fail to agree on the third actuary within 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 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 30 days, unless the Company and
Subscribing Reinsurer agree otherwise.

					
	 	 	 	 	 
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	 	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 31

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.

					
	 	 	 	 	 
	Effective: January 1, 2006
	 	 	 	DOC: May 23, 2006
	RAMWA06UQS
	 	30	 	 

 

 

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

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

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

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

ARTICLE 32

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. 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.

					
	 	 	 	 	 
	Effective: January 1, 2006
	 	 	 	DOC: May 23, 2006
	RAMWA06UQS
	 	31	 	 

 

 

The Company accepts the terms and conditions of this Contract by signing below. The
Subscribing Reinsurer accepts the terms and conditions of this Contract by signing the Interests
and Liabilities Agreement that attaches to and forms part of this Contract.

IN WITNESS WHEREOF, the Company has caused this Contract to be executed by its duly authorized
representative(s) this 13th day of June, in the year of 2006.

EMPLOYERS INSURANCE COMPANY OF WAUSAU

WAUSAU GENERAL INSURANCE COMPANY

WAUSAU UNDERWRITERS INSURANCE COMPANY

WAUSAU BUSINESS INSURANCE COMPANY

	 	 	 	 	 	 	 	 	 	 	 

	By:

	 	/s/ Robert C. Andrews
	 	 	 	Attest:
	 	/s/ Wade R. Hunnewell
	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 

	 	Robert C. Andrews
	 	 	 	 	 	Wade R. Hunnewell	 	 
	 

	 	Vice President of Reinsurance
	 	 	 	 	 	Director of Ceded Reinsurance	 	 

WAUSAU UMBRELLA QUOTA SHARE REINSURANCE CONTRACT

NO. RAMWA06UQS

					
	 	 	 	 	 
	Effective: January 1, 2006
	 	 	 	DOC: May 23, 2006
	RAMWA06UQS
	 	32

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