Document:

exv10w138

EXHIBIT
10.138

NUMBER 19980929LMIC

REINSURANCE AGREEMENT

          Reinsurance Agreement (“Agreement”), dated this 29th day of September, 1998 by and between
Liberty Mutual Insurance Company, a Massachusetts mutual insurance company (the “Reinsurer” or
“LMIC”), and Colorado Casualty Insurance Company, a Colorado corporation (the “Company” or “CCIC”).

WITNESSETH

          It is understood that the Company and the Reinsurer (hereinafter identified as the “parties”)
hereto wish to enter into a reinsurance arrangement through which the Company is to bear no
business, credit or insurance risk whatsoever (save the risk of the Reinsurer’s insolvency). The
Reinsurer shall hold the Company harmless and indemnify it for these risks. The sole consideration
provided by the Company, in exchange for the expense reimbursement set forth in Section 3 herein,
is to permit the Policies (as hereinafter defined) which are reinsured one hundred percent (100%)
under this Agreement to be issued in the name of the Company. All provisions of this Agreement
shall be interpreted so as to be in accord with this Preamble.

SECTION 1 — REINSURANCE OBLIGATION

          1.1 The Company agrees to cede to the Reinsurer, and the Reinsurer agrees to accept as quota
share reinsurance of the Company, one hundred percent (100%) of the Company’s ultimate net
liability under all policies, contracts, binders, or agreements (hereinafter collectively called
the “Policies”) issued or assumed during the term of this Agreement (as further described in
Sections 1.3 and 1.4) by the Company through agents appointed by Company.

          1.2 Business ceded hereunder shall include every original policy, rewrite, renewal or
extension (whether before or after the termination of this Agreement) required by statute or by
rule or regulation of any authority having competent jurisdiction, of any Policy of insurance
originally ceded hereunder by the Company to the Reinsurer.

          1.3 It is understood that the classes of business reinsured under this Agreement are deemed to
include only those policies issued by CCIC or assumed by CCIC under other reinsurance agreements.

 

 

          1.4 The Company has the right to place reinsurance (treaty or facultative) on the policies
covered under this Agreement. All such reinsurance placed on these policies by the Company shall
apply before this Agreement and inure to the benefit of the Reinsurer.

          1.5 All reinsurance under this Agreement shall be subject to the same rates, terms, conditions
and waivers, and to the same modifications and alterations as the respective Policies of the
Company.

SECTION 2 — TERM AND RUN-OFF CANCELLATION

          2.1 This Agreement shall take effect September 29,1998 as of 12:00:01 a.m., Mountain Standard
Time, provided that the closing of the purchase by LMIC of all of the capital stock of CCIC shall
have occurred prior to, or within twenty-four (24) hours after, the effectiveness of this
Agreement. This Agreement shall remain continuously in force until terminated in accordance with
Section 2.4.

          2.2 When this Agreement terminates for any reason, reinsurance hereunder shall continue to
apply to the Policies in force at the time and date of termination until expiration or cancellation
of such Policies. It is understood that any Policies with effective dates prior to the termination
but issued after the termination date are covered under the Agreement. Additionally, the
reinsurance hereunder shall continue to apply as to Policies which must be issued or renewed by the
Company, as a matter of state law or regulation or because an agent has not been timely canceled,
until the expiration dates on said Policies.

          2.3 Upon termination of this Agreement, the Reinsurer and the Company shall not be relieved of
or released from any obligation created by or under this Agreement in relation to payment,
expenses, reports, accounting or claims handling, relating to Policies under this Agreement
existing and in effect on the date of such termination. The parties hereto expressly covenant and
agree that they will cooperate with each other in the handling of all such run-off insurance
business until all Policies have expired either by cancellation or by terms of such Policies and
all outstanding losses and loss adjustment expenses have been settled. While by law and regulation
the Company recognize its primary obligations to its policyholders, the Reinsurer recognizes that
there shall be no added cost or involvement by the Company in servicing this run-off.

          2.4 This Agreement may be canceled at any time in accordance with the following terms and
conditions, provided that unilateral cancellation by the Reinsurer of previously ceded risks is
only permitted for non-payment of reinsurance considerations by the Company:

 

 

          (a) This Agreement may be canceled at any time by either party giving the other party and the
Colorado Commissioner of Insurance at least ninety (90) days’ advance written notice by certified
mail, return receipt requested, of such intent to cancel.

          (b) This Agreement may be canceled by giving 60 days’ written notice to the other party and to
the Colorado Commissioner of Insurance by any party hereto should Reinsurer or Company be declared
insolvent or be ordered into liquidation, conservatorship or rehabilitation by a court of competent
jurisdiction.

SECTION 3 — EXPENSE REIMBURSEMENT

          3.1 The amount of expense reimbursement granted to the Company per month shall be equal to the
amount of (i) any premium taxes due on Policies issued under this Agreement and (ii) agent
commissions paid and accrued on Policies issued under this Agreement.

          3.2 On or before the forty-eighth (48th) day following the end of each calendar quarter,
Reinsurer shall pay to Company the expense reimbursement described in Section 3.1 for all Policies
issued during the preceding calendar quarter. The Company shall be responsible for and shall make
direct payments of Agents’ Commissions to Agents.

SECTION 4 — LOSS SETTLEMENTS

          4.1 The Reinsurer shall assume one hundred percent (100%) of the risks covered by this
Agreement and shall be solely and directly liable for one hundred percent (100%) of all net losses,
judgments, settlements, and expenses (including, but not limited to, all legal fees and interest on
judgments) incurred in connection with the investigation, settlement or contesting of the validity
of claims or losses under the Policies reinsured under this Agreement. The Reinsurer has assumed,
and does hereby assume, sole responsibility, whether directly or through the Agents, for the
payment of the claims or losses under the Policies reinsured hereunder. In this connection, the
Reinsurer shall be reimbursed for one hundred percent (100%) of any net amounts received by the
Company as salvage or subrogation recovery.

          4.2 The Reinsurer hereby empowers the Company, in the Company’s discretion and under its
supervision, to appoint the Agents to accept notice of and investigate any claim arising under any
of the Policies and to pay, adjust, settle, resist, or compromise any such claim. All such loss
settlements, whether under strict policy conditions or by way of compromise, shall be

 

 

unconditionally binding upon the Reinsurer. However, should the Company be ordered or instructed by
any regulatory agency of competent jurisdiction to take any action or refrain from taking any
action with regard to any claim, then the Reinsurer shall be bound by and shall follow the order or
instructions of such regulatory agency as though the Reinsurer were the object of such order or
instruction.

          4.3 The Company shall notify the Reinsurer of any claim, suit, or action against the Company
under any of the Policies written pursuant to this Agreement within ten (10) days of actual
knowledge of said claim, suit, or action, and will promptly furnish to the Reinsurer or its
designated representative all summonses, citations, complaints, petitions, counterclaims, and other
pleadings and legal instruments served upon or delivered to the Company in connection therewith.
The Company hereby further empowers the Reinsurer to dispose of any salvage received as the result
of any loss settlement hereunder, to enforce (by the institution of suit for damages or otherwise)
any right of the Company against any person or organization for any loss under any of the Policies,
and to employ legal counsel when necessary. All sums received as a result of such authorized
actions by the Reinsurer shall be treated as current loss recoveries by the Company and the
Reinsurer. The Company further agrees to execute and deliver to the Reinsurer any and all legal
instruments necessary to implement the foregoing authorizations. Upon request, the Reinsurer shall
furnish to the Company any and all documents and correspondence relating to the subject matter
hereof. Drafts in payment of losses insured under the Company’s Policies shall be signed by the
Reinsurer or Company shall pay such drafts as drawn by the Reinsurer’s or Company’s Claims or Loss
Department or their appointed loss representatives. Notwithstanding Section 4.2 or any other
provision of this Agreement to the contrary, this Agreement shall not be construed or deemed to
create any direct right of action or privity of contract between the Company’s policyholders and
the Reinsurer.

          4.4 All records pertaining to claims arising under the Policies issued by the Company in
connection with this Agreement shall be retained by Company.

SECTION 5 — PREMIUM COLLECTION

          5.1 The Company shall have the sole responsibility for the collection of premiums from the
respective insureds on Policies written pursuant to this Agreement.

          5.2 The Company shall be liable for collection of balances from insureds and/or Agents, and
the Reinsurer’s liability hereunder shall not be reduced by the failure to collect any balances.

 

 

SECTION 6 — ERRORS AND OMISSIONS

     The Company shall not be prejudiced, in any way, by any error or omission with respect to its
performance under this Agreement, whether such error or omission is the result of clerical error,
accident, or oversight to cede to the Reinsurer any reinsurance properly attributed to the
Reinsurer’s share under the terms of this Agreement, erroneous cancellation, either partial or
total, of any cession hereunder, failure to report or erroneous reporting of any losses, or by any
other error or omission; provided, however, that the Company shall take such steps as are necessary
or appropriate to correct any such error or omission as soon as is practicable upon its actual
discovery by the Company.

SECTION 7 — INSPECTION OF RECORDS

     The books and records pertaining to liability and losses under this Agreement maintained by
either party hereto shall at all times be subject to the inspection by an authorized representative
of the other party. This provision shall survive the termination of this Agreement.

SECTION 8 — OTHER DUTIES OF THE REINSURER AND COMPANY

          8.1 In addition to the duties of the Company specifically expressed or implied herein, Company
shall be solely responsible for all of the administration of the insurance business subject to the
reinsurance under this Agreement and all of the costs of such administration, including, but not
limited to, costs of premium collection, costs of printing forms, underwriting, servicing,
settling, and payment of all claims and expenses.

          8.2 The Reinsurer and the Company shall perform their obligations under this Agreement in
compliance with law and all regulations or directives duly promulgated by the Colorado Division of
Insurance and the laws of the other applicable jurisdictions, and the Reinsurer shall cooperate
with the Company to the extent necessary to enable the Company to comply with such laws,
regulations and directives.

          8.3 The Company shall be responsible for the control of the Agents appointed by Company,
including the financial condition of such Agents.

          8.4 The Company hereby guarantees payment to the Reinsurer of any premium or other amounts due
the Reinsurer for Polices reinsured under this Agreement. The Company or is designated
representatives shall be solely

 

 

responsible for notifying the Agents of this Agreement and of any termination hereof, and for the
consequences of any failure to provide such notification.

          8.5 Consistent with the provisions of this Section, the Reinsurer hereby guarantees that the
Company shall receive the expense reimbursement provided by Section 3.1 hereof, irrespective of any
events, losses or developments occurring during the term of this Agreement. The Reinsurer’s
obligation with respect to payment of such expense reimbursement of the Company is not dependent
upon performance of the Agents, underwriting experience, loss experience or any other event
foreseen by the parties at the inception of this Agreement.

SECTION 9 — ASSESSMENTS OR ASSIGNMENTS

     The Reinsurer hereby assumes liability for any and all assessments and assignments (whether
before or after the termination of this Agreement) imposed as a result of Policies reinsured
hereunder levied or made by a guaranty fund, insolvency fund, plan, pool, association, or other
arrangement created by statute or regulation.

SECTION 10 — INSOLVENCY

     In the event of the insolvency of the Company (including any appointment of a receiver or
liquidator), this reinsurance shall be payable directly to the Company, or to its liquidator,
receiver, conservator or statutory successor on the basis of the liability of the Company without
diminution because of the insolvency of the Company or because the liquidator, receiver,
conservator or statutory successor of the Company has failed to pay all or a portion of any claim.
The liquidator, receiver, conservator or statutory successor of the Company shall give written
notice to the Reinsurer of the pendency of a claim against the Reinsurer or the Company indicating
the policy or bond reinsured and whether the claim could involve a possible liability on the part
of the Reinsurer within a reasonable time after such claim is filed in the conservation or
liquidation proceeding or in the receivership. During the pendency of such claim, the 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 that it may deem available to the Company or its liquidator,
receiver, conservator or statutory successor.

SECTION 11 — REGULATORY MATTERS

 

 

          11.1 It is the parties’ understanding that the Colorado Commissioner of Insurance views
premiums which are over ninety (90) days due (aged by item and effective date) from the Agent to
the Company as non-admitted assets. In confirmation of the liabilities assumed by the Reinsurer
under this Agreement, the Reinsurer hereby assumes one hundred (100%) of all liability and
responsibility for all premiums in the course of collection.

          11.2 The Reinsurer shall agree, at no cost to the Company, to take those actions (including,
but not limited to, modification in how funds are handled and how accounts are cleared and settled)
and agree to those arrangements necessary to ensure that the Company suffers no adverse impact
because of this Agreement and is in compliance with the laws of the State of Colorado and
regulations promulgated by any governmental entity thereof, including the Commissioner of
Insurance, insofar as this Agreement is concerned.

SECTION 12 — MISCELLANEOUS

     Notices. Any notices or other communications required or permitted hereunder shall be
deemed to have been duly given only when received by the party to whom such notice or communication
is addressed at the following addresses (or at such other address for a party as shall be specified
by like notice)

	 	 	 
	To Company:

	 	James Morey, President
	 

	 	Colorado Casualty Insurance Company
	 

	 	9800 South Meridian Boulevard
	 

	 	Englewood, CO 80155-3329
	 
	 	 
	To Reinsurer:

	 	Dennis J. Langwell
	 

	 	Vice President and Comptroller
	 

	 	Liberty Mutual Insurance Company
	 

	 	175 Berkeley Street
	 

	 	Boston, MA 02117-0140

     Gender and Number. All words or terms used in this Agreement, regardless of the number
or gender in which they are used, shall be deemed to include any other number and any other gender
as the context may require.

     Successors and Assigns. This Agreement shall be binding upon and shall inure to the
benefit of the respective successors and assigns of the parties hereto but shall not be assigned by
either of the parties without the prior written consent of the other.

     Waiver. The failure of any party at any time or times to require performance of any
provisions hereof shall in no manner affect such party’s right at

 

 

a later date to enforce the same. No waiver by either party of a condition or a breach of any term,
covenant, representation or warranty contained in this Agreement, whether by conduct or otherwise,
in any one or more instances, shall be deemed to be construed as a further or continuing waiver of
such condition, breach or waiver of any condition or of the breach of any other term, covenant,
representation or warranty of this Agreement.

     Attorneys’ Fees. If either party hereto becomes a party to litigation or any other
proceeding in connection with or related to this Agreement with the other party and prevails in
such litigation or proceeding, the other party will pay the cost and expenses relating to such
litigation or other proceeding including, without limitation, the attorneys’ fees and expenses of
investigation of the prevailing party.

     Counterparts. This Agreement may be executed in any number of counterparts with the
same effect as if the signatures to each counterpart were upon the same instrument.

     Entire Agreement. This Agreement sets forth the entire understanding of the Reinsurer
and the Company and supersedes all prior agreements, arrangements, and communications, whether oral
or written, between the Reinsurer and the Company with respect to the subject matter hereof; and
this Agreement shall not be modified or amended other than by written agreement of the Reinsurer
and the Company. Captions appearing in this Agreement are for convenience of reference only and
shall not be deemed to explain, limit or amplify the provisions hereof.

     Governing Law. This Agreement shall be governed by, construed in accordance with, the
laws of the State of Colorado.

     Venue and Jurisdiction. Company hereby irrevocably submits to the non-exclusive
jurisdiction of any county, state of federal court of general and competent jurisdiction located
within the counties of Douglas, Arapahoe or Denver, State of Colorado, with respect to any legal
action or proceeding arising out of or connected with this Agreement.

     Alternative Dispute Resolution. At the option of either party, any and all disputes or
controversies, whether of law or fact, of any nature whatsoever, arising from or respecting this
Agreement shall be decided by arbitration conducted in accordance with the rules and regulations of
the American Arbitration Association. The arbitrators shall be selected as follows: Reinsurer and
Company shall each select one independent, qualified arbitrator and the two arbitrators so selected
(the “Party Arbitrators”) shall choose the third arbitrator; provided that if the Party Arbitrators
are unable to select a third arbitrator within fifteen (15) business days from the date the second
Party Arbitrator is selected, the Colorado Commissioner of Insurance shall select the third
arbitrator. Arbitration shall take place in the Denver, Colorado metropolitan area.

 

 

     IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first set
forth above.

	 	 	 	 	 
	 	LIBERTY MUTUAL INSURANCE COMPANY

 	 
	 	By:  	/s/
 	 
	 	 	Its: Senior Vice President & CFO 	 
	 	 	 	 
	 
	 	COLORADO CASUALTY INSURANCE COMPANY

 	 
	 	By:  	/s/
 	 
	 	 	Its: Presidentexv10w139

Exhibit 10.139

PROPERTY & CASUALTY QUOTA SHARE

REINSURANCE AGREEMENT

(the “Agreement”)

entered into by and between

Albany Insurance Company

(the “Company”)

and

Atlas Assurance Company of America

(the “Reinsurer”)

WITNESSETH

     WHEREAS, the Company is an affiliate of the Reinsurer; and

     WHEREAS, the Reinsurer is a licensed insurer in all states of the United States and in the
District of Columbia; and

     WHEREAS, the Company wishes to effect reinsurance of all of its net retained insurance
liability in the Reinsurer and the Reinsurer wishes to accept such reinsurance.

     NOW THEREFORE, in consideration of the mutual covenants hereinafter contained and upon the
terms and conditions hereinafter set forth and payment by the Company of the premium in accordance
with the provisions of this Agreement, the Reinsurer does hereby agree to reinsure the Company for
100% of the liability herein provided.

 

 

ARTICLE I

BUSINESS REINSURED

A. Subject to the terms and conditions of this Agreement, the Company shall cede to the Reinsurer
and the Reinsurer shall accept from the Company a 100% quota share participation in the net
retained insurance liability of the Company on each and every risk insured under:

     1) all policies issued by the Company and attaching prior to 12:01 A.M., January 1, 1996
Eastern Standard Time (the “Effective Date”); and

     2) all new and renewal policies issued by the Company and attaching after the Effective Date.

B. The term “policies” as used herein means the Company’s binders, policies and contracts providing
insurance and reinsurance of every kind and class written by the Company. A policy written on an
installment premium, reporting form or continuous basis shall be considered renewed as of the end
of each annual period commencing with the inception date of the policy.

ARTICLE II

TERM AND CANCELLATION

A. This Agreement will apply to losses occurring on or after the Effective Date and to reported
losses and incurred but not reported losses as of the Effective Date. This Agreement is continuous
in nature and shall remain in effect until canceled at the end of any calendar year by either the
Company or the Reinsurer giving not less than 90 day’s prior written notice by Certified Mail to
the other party.

B. The Reinsurer will continue to participate in all insurance and reinsurance coming within the
terms of this Agreement granted or renewed by the Company from the date written notice of
cancellation is given to the other party until the effective date of cancellation, subject to the
following:

     1) The Company will have the option of taking back the unexpired liability as at the effective
date of cancellation or any time thereafter but no later than the first anniversary date of
cancellation by giving the Reinsurer thirty (30) day’s prior written notice of its intent to do so.

     2) The Reinsurer will return to the Company the unearned reinsurance premium applicable to the
unexpired liability as calculated on a monthly pro rata basis less the rate of commission allowed.

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C. In determining whether the requisite number of days notice has been given, the date of
cancellation shall be counted but the date of mailing shall not.

D. If any law or regulation of the Federal, State or Local government of the United States, or the
rulings of officials, having supervision over insurance companies, should render the undertaking of
this Agreement illegal as to risks located within the jurisdiction of such Authority, the Company
may upon written notice to the Reinsurer suspend, abrogate or amend this Agreement insofar as it
relates to risks located within such jurisdiction, to the extent necessary to comply with such law,
regulation or ruling. Such suspension, abrogation or amendment of a portion of this Agreement will
in no way affect any other portion thereof.

E. This Agreement may be altered or amended in any of its terms and. conditions by mutual consent
of the Company and the Reinsurer by endorsement or by an instrument in writing formally signed by
each party and attached to this Agreement.

ARTICLE III

TERRITORY

     This Agreement shall apply to risks attaching worldwide as respects losses occurring within
the territorial limits of the Company’s policies reinsured hereunder.

ARTICLE IV

DEFINITIONS

A. The term “net retained insurance liability” as used herein means the remaining portion of the
Company’s gross liability on each risk reinsured under this Agreement after deducting recoveries
from all reinsurance, other than the reinsurance provided hereunder and other than the reinsurance
provided for in Article IX.

B. The term “net premiums written” as used herein means gross premiums and additional premium less
return premiums and less premiums ceded on all reinsurance other than the reinsurance provided
hereunder and under Article IX.

C. The term “net expenses” as used herein shall mean underwriting expenses as reported in the
Company’s statutory quarterly and annual statements, plus policyholders’ dividends and agents’
balances, charged-off less finance and service charges not included in premium.

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ARTICLE V

LOSSES, LOSS ADJUSTMENT EXPENSES AND SALVAGES

A. The Company shall settle all loss claims under its policies and the Reinsurer shall pay to the
Company its pro rata share of such loss claims as payable by the Company.

B. The Reinsurer shall also bear its pro rata share of allocated and unallocated loss adjustment
expenses as reported in the Company’s statutory quarterly and annual statements.

C. The Reinsurer shall benefit pro rata in all salvages, discounts and other recoveries.

ARTICLE VI

REINSURANCE PREMIUM

A. The Company shall promptly pay to the Reinsurer, by transfer of cash, agents’ balances and
investments at statutory book value, an amount equal to the Company’s statutory reserves, as of the
Effective Date, for unearned premiums, loss and loss adjustment expenses and IBNR on the business
reinsured under Article I, A.1.

B. The Company shall pay to the Reinsurer 100% of the Company’s net premiums written during the
period this Agreement is in effect, less the ceding commission allowed in Article VII, in respect
of its net retained insurance liability on the business reinsured under Article I, A.2.

ARTICLE VII

COMMISSION

A. The Reinsurer shall allow a ceding commission to the Company on the premiums ceded under this
Agreement pursuant to Article VI, B in an amount equal to the Net Expenses of the Company as
defined in Article IV, C.

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ARTICLE VIII

REPORTS AND REMITTANCES

A. The Company will provide the Reinsurer with all necessary data respecting premiums and losses
within 30 days of the end of each quarter, on forms mutually acceptable to the Company and the
Reinsurer, necessary for the Reinsurer to prepare its quarterly and annual statutory statements.

B. The Company shall render a statement of account within 30 days after the end of each quarter,
summarizing the following information relating to reinsurance covered under this Agreement during
the quarter then ended:

     1) Statement of net premiums written;

     2) Statement of losses and loss expenses paid and salvages (including reinsurance) recovered;

     3) Account Current summarizing premiums, commissions, losses and loss expenses paid and
salvages recovered;

and the balance due either party, as indicated by the aforesaid Account Current, shall be remitted
to the other party within 45 days after the end of said quarter.

C. The Company shall promptly report to the Reinsurer any individual loss wherein the Reinsurer’s
share of such loss is $1,000,000 or more.

D. At the request of the Company, the Reinsurer shall transmit to the Company sufficient funds to
pay any loss within 7 days after an acceptable proof of loss is received by the Company. All such
cash calls paid by the Reinsurer during the quarterly period shall be deducted from the next
report.

E. At the request of the Reinsurer, the Company shall furnish to the Reinsurer in respect of
occurrences designated as catastrophes by the American Insurance Association the following
information:

     1) Preliminary estimate of amounts recoverable from the Reinsurer.

     2) Quarterly amount of losses and loss adjustment expenses paid, less salvages recovered.

     3) Amount of losses and loss adjustment expenses unpaid at the end of each quarter.

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ARTICLE IX

EXCESS OF LOSS REINSURANCE

     During currency of this Agreement the Company may subscribe to excess of loss reinsurance for
the joint benefit of the Company and the Reinsurer, recoveries under which shall inure to the
benefit of each party in proportion to its respective interest in the Company’s gross insurance
liability, and the Reinsurer shall bear its pro rata portion of the premiums paid by the Company
for such excess of loss reinsurance.

ARTICLE X

EXTRA CONTRACTUAL OBLIGATIONS

A. This Agreement shall protect the Company for any Extra Contractual Obligations, which constitute
those liabilities not covered under any other provision of this Agreement and which arise from the
handling of any claim on business covered hereunder. These include, but are not limited to, the
following: failure by the Company to settle within the policy limit, or by reason of alleged or
actual negligence, bad faith or fraud in rejecting an offer of settlement, or in the preparation of
the defense or in the trial of any action against its insured or reinsured or in the preparation or
prosecution of an appeal consequent upon such action. In no event shall coverage be provided to the
extent such coverage is not permitted under New York law.

B. The date on which any Extra Contractual Obligation is incurred by the Company shall be deemed to
be the date of the original occurrence giving rise to the loss. In no event shall coverage be
provided to the extent such coverage is not permitted under New York law.

ARTICLE XI

ACCESS TO RECORDS

     The Company shall place at the disposal of the Reinsurer at all reasonable times, and the
Reinsurer shall have the right to inspect, through its authorized representatives, during the
period of this Agreement and thereafter, all books, records and papers of the Company in connection
with this reinsurance hereunder or the subject matter thereof.

ARTICLE XII

ERRORS AND OMISSIONS

     Any inadvertent delay, omission or error 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, providing such omission or error is rectified as soon as possible after discovery.

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ARTICLE XIII

REINSURANCE FOLLOWS ORIGINAL POLICIES

     The Reinsurer’s share of the liabilities under this Agreement shall be subject in all respects
to the same interpretations, terms, rates, conditions, waivers, modifications, alterations and
cancellations as the respective policies of the Company, as it is the intent of this Agreement that
the Reinsurer shall, in every case to which this Agreement applies, except as otherwise
specifically provided, follow the fortunes of the Company; provided, however, that this
Article shall not be construed to expand the liability of the Reinsurer beyond what is specifically
assumed under this Agreement.

ARTICLE XIV

INSOLVENCY

A. In the event of the insolvency of the Company, reinsurance under this Agreement will be payable
by the Reinsurer directly to the Company or to its liquidator, receiver, or statutory successor
immediately upon demand, with reasonable provision for verification, on the basis of the liability
of the Company under contract or contracts reinsured without diminution because of the insolvency
of the Company or because such liquidator, receiver or statutory successor has failed to pay all or
part of any claim, except as provided by Section 4118(a) or 1114(c) of the New York Insurance Law,
or except:

1) where the Agreement specifically provides another payee of such reinsurance
in the event of the insolvency of the Company and

2) where the Reinsurer with the consent of the direct insured or insureds has assumed
such policy obligations of the Company as direct obligations of the Reinsurer to the
payees under such policies and in substitution for the obligations of the Company to
such payees. Then, and in that event only, the Company, with the prior approval of
the Superintendent of Insurance of the State of New York of the certificate of
assumption on New York risks, is entirely released from its obligation and the
Reinsurer shall pay any loss directly to payees under such policy.

B. It is agreed, however, that the liquidator or receive or statutory successor of the insolvent
Company will give written notice to the Reinsurer of the pendency of a claim against the insolvent
Company on the contract or contracts reinsured within a reasonable time after such claim is filed
in the insolvency proceeding and that during the pendency of such claim the 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
or receiver or statutory successor. The expense thus incurred by the Reinsurer will be chargeable,
subject to court approval, against the insolvent Company as part of

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the expense of liquidation to the extent of a proportionate share of the benefit which may accrue
to the Company solely as a result of the defense undertaken by the Reinsurer.

ARTICLE XV

OFFSET

     Each party hereto may offset any balances, whether on account of premiums or losses or
otherwise, due from such party to the other under this Agreement, provided however, that in the
event of the appointment of a statutory receiver or liquidator of either party, offsets shall only
be allowed in accordance with the provisions of Section 7427 of the New York Insurance Law.

ARTICLE XVI

ARBITRATION

A. Any dispute arising out of the interpretation, performance or breach of this Agreement,
including the formation or validity thereof, shall be submitted for decision to a panel of three
arbitrators. Notice requesting arbitration will be in writing and sent certified or registered
mail, return receipt requested.

B. One arbitrator shall be chosen by each party and the two arbitrators shall, before instituting
the hearing, choose an impartial third arbitrator who shall preside at the hearing. If either party
fails to appoint its arbitrator within thirty (30) days after being requested to do so by the other
party, the latter, after ten (10) days notice by certified or registered mail of its intention to
do so, may appoint the second arbitrator.

C. If the two arbitrators are unable to agree upon the third arbitrator with thirty (30) days of
their appointment, the third arbitrator shall be selected from a list of six individuals (three
named by each arbitrator) by a judge of the federal district court having jurisdiction over the
geographical area in which, the arbitration is to take place, or if the federal court declines to
act, the state court having general jurisdiction in such area.

D. All arbitrators shall be disinterested active or former executive officers of insurance or
reinsurance companies or Underwriters at Lloyd’s, London.

-8-

 

E. Within thirty (30) days after notice of appointment of all arbitrators, the panel shall meet and
determine timely periods for briefs, discovery procedures and schedules for hearings.

F. The panel shall be relieved of all judicial formality and shall not be bound by the strict rules
of procedure and evidence. Unless The panel agrees otherwise, arbitration shall take place in New
York City, but the venue may be changed when deemed by the panel to be in the best interest of the
arbitration proceeding. Insofar as the arbitration panel looks to substantive law, it shall
consider the law of the State of New York. The decision of any two arbitrators when rendered in
writing shall be final and binding. The panel is empowered to grant interim relief as it may deem
appropriate.

G. The panel shall make its decision considering the custom and practice of the applicable
insurance and reinsurance business as promptly as possible following the termination of the
hearings. Judgment upon the award may be entered in any court having jurisdiction thereof.

H. Each party shall bear the expense of its own arbitrator and shall jointly and equally bear with
the other part the cost of the third arbitrator. The remaining costs of the arbitration shall be
allocated by the panel. The panel may, at its discretion, award such further costs and expenses as
it considers appropriate, including but not limited to attorneys fees, to the extent permitted by
law.

ARTICLE XVII

ENTIRE CONTRACT This Agreement represents the entire agreement and understanding between
the parties and supercedes all prior reinsurance agreements, if any, between the parties. No other
oral or written agreements or contracts relating to the risks reinsured hereunder currently exist
and/or are contemplated between the parties. Nothing in this Agreement shall in any manner create
any obligations or establish any rights against the Reinsurer in favor of any third parties or any
persons not parties to this Agreement.

-9-

 

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

	 	 	 	 	 
	Signed in

this                      day of June           , 1996.

 	 	 
	By:  	
 /s/	 
	 	ALBANY INSURANCE COMPANY 	 	 
	 	 	 	 
	 
	Signed in 

this                     day of June           , 1996.

 	 	 
	By:  	
 /s/	 	 
	 	ATLAS ASSURANCE COMPANY OF AMERICA 	 
	 	 	 	 

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CANCELLATION ADDENDUM

TO

PROPERTY & CASUALTY QUOTA SHARE REINSURANCE AGREEMENT (the “Agreement”) entered into by and between
Liberty Insurance Underwriters Inc. (the “Company”) (formerly known as Albany Insurance Company)
and Atlas Assurance Company of America (“the “Reinsurer”), effective as of January 1, 1996.

Whereas Article II Section A of the Agreement provides that the Agreement shall remain in effect
until canceled at the end of any calendar year by either the Company or the Reinsurer giving not
less than 90 days prior written notice by certified mail to the other party; and

Whereas Article II, Section E of the Agreement provides that the Agreement may be altered or
amended in any of its terms and conditions by mutual consent of the Company and Reinsurer by
endorsement or by an instrument in writing formally signed by each party and attached to the
Agreement.

Now therefore the parties agree as follows:

The parties mutually agree that the Agreement is canceled at the end of the 1999 calendar year.
Each party mutually consents to waive the giving of not less than 90 days prior written notice by
certified mail to the other party.

IN WITNESS WHEREOF, the parties hereto have caused this Cancellation Addendum to be sighed by their
duly authorized representatives as of December 31, 1999.

	 	 	 	 	 
	LIBERTY INSURANCE UNDERWRITERS INC.

 	 	 
	By:  	/s/
 	 
	 	 	 	 
	 	 	 	 
	 
	ATLAS ASSURANCE COMPANY OF AMERICA

 	 	 
	By:  	/s/
 	 
	 	 	 	 
	 	 	 	 
	 

-11-

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