Document:

Exhibit 10.38

 

JARDINE SAYER

& Company,
Inc.

 

WORKERS
COMPENSATION AND EMPLOYERS LIABILITY

STATUTORY EXCESS OF LOSS REINSURANCE AGREEMENT

P-104/99

 

EFFECTIVE:
JANUARY 1, 1999

 

Pinnacle
Assurance Corporation,

AmComp Preferred Insurance Company,

Thomas Jefferson Insurance Company,

AmComp Insurance Company

 

A member
of the Jardine Lloyd Thompson Group plc

 

 

WORKERS’
COMPENSATION AND EMPLOYERS LIABILITY

STATUTORY EXCESS OF LOSS REINSURANCE AGREEMENT

P-104/99

EFFECTIVE:
January 1, 1999

 

TABLE OF CONTENTS

 

	
  ARTICLE

  	
   

  	
  SUBJECT

  	
   

  	
  Page

  
	
  I

  	
   

  	
  BUSINESS COVERED

  	
   

  	
  1

  
	
  II

  	
   

  	
  TERM

  	
   

  	
  1

  
	
  III

  	
   

  	
  TERRITORY

  	
   

  	
  2

  
	
  IV

  	
   

  	
  EXCLUSIONS

  	
   

  	
  2

  
	
  V

  	
   

  	
  SPECIAL ACCEPTANCE

  	
   

  	
  4

  
	
  VI

  	
   

  	
  NET RETAINED LINES

  	
   

  	
  6

  
	
  VII

  	
   

  	
  OTHER REINSURANCE

  	
   

  	
  6

  
	
  VIII

  	
   

  	
  DEFINITIONS

  	
   

  	
  6

  
	
  IX

  	
   

  	
  LIMIT AND RETENTION

  	
   

  	
  8

  
	
  X

  	
   

  	
  RATE AND PREMIUM

  	
   

  	
  8

  
	
  XI

  	
   

  	
  EXTRA CONTRACTUAL
  OBLIGATIONS

  	
   

  	
  9

  
	
  XII

  	
   

  	
  EXCESS OF POLICY LIMITS

  	
   

  	
  9

  
	
  XIII

  	
   

  	
  OFFSET

  	
   

  	
  10

  
	
  XIV

  	
   

  	
  CURRENCY

  	
   

  	
  10

  
	
  XV

  	
   

  	
  ERRORS AND OMISSIONS

  	
   

  	
  10

  
	
  XVI

  	
   

  	
  TAXES

  	
   

  	
  11

  
	
  XVII

  	
   

  	
  INSPECTION

  	
   

  	
  11

  
	
  XVIII

  	
   

  	
  SERVICE OF SUIT

  	
   

  	
  11

  
	
  XIX

  	
   

  	
  INSOLVENCY

  	
   

  	
  12

  
	
  XX

  	
   

  	
  ARBITRATION

  	
   

  	
  13

  
	
  XXI

  	
   

  	
  SALVAGE AND SUBROGATION

  	
   

  	
  14

  
	
  XXII

  	
   

  	
  COMMUTATION

  	
   

  	
  14

  
	
  XXIII

  	
   

  	
  INTERMEDIARY

  	
   

  	
  16

  
	
  XXIV

  	
   

  	
  PARTICIPATION

  	
   

  	
  16

  
	
   

  	
   

  	
  SIGNATURE

  	
   

  	
  17

  

 

ATTACHMENT:

 

•                  NUCLEAR INCIDENT EXCLUSION CLAUSE – LIABILITY – USA -
NMA –1590

 

 

WORKERS’
COMPENSATION AND EMPLOYERS LIABILITY

STATUTORY EXCESS OF LOSS REINSURANCE AGREEMENT

P-104/99

(hereinafter referred to as the “Agreement”)

 

This Agreement is made and entered into by and between
Pinnacle Assurance Corporation, AmComp Preferred Insurance Company, Thomas
Jefferson Insurance Company, AmComp Insurance Company, other member companies
of the AmComp Insurance Group, North Palm Beach, Florida, and certain quota
share Reinsurers (hereinafter collectively referred to as the “Company”) of the
one part and Continental Casualty Company (hereinafter referred to as the “Reinsurer”)
of the other part.

 

This Agreement replaces the fully executed WORKERS’
COMPENSATION AND EMPLOYERS LIABILITY STATUTORY EXCESS OF LOSS REINSURANCE
AGREEMENT - P-104/99, effective January 1, 1999.

 

ARTICLE I

 

BUSINESS COVERED

 

This Agreement is to indemnify the Company in respect
of the net excess liability as herein provided and specified which may accrue
to the Company as a result of any loss or losses which may occur during the
term of this Agreement in respect of in-force, new and renewal Policies issued
by or through Florida Administrative Services and/or Pinnacle Administrators,
Inc. on behalf of the Company, and classified by the Company as Workers’
Compensation and Employers’ Liability, including liability under U.S.
Longshoremen’s and Harbor Worker’s Compensation or similar acts of federal or
state law or common law on business underwritten by the Company.

 

ARTICLE II

 

TERM

 

This Agreement shall be effective for a period of
thirty-six months from 12:01 A.M., Standard Time (as defined in the Company’s
policies) January 1, 1999 to 12:01 A.M., Standard Time, January 1, 2002, on
in-force, new and renewal policies. The first accounting period shall be from
January 1, 1999 to January 1, 2000. The second accounting period shall be from
January 1, 2000 to January 1, 2001. The third accounting period shall be from
January 1, 2001 to January 1, 2002.

 

Upon expiration of this Agreement, coverage will
terminate on a “cut-off” basis. The Reinsurer shall not be liable for losses
occurring subsequent to the expiration date of this Agreement and no return
premium shall be due to the Company.

 

1

 

However, upon expiration of this Agreement, the Company
may elect to purchase continuing coverage on a “run-off” basis, in which case
the Reinsurer shall remain liable for losses occurring on all Policies in force
as of the expiration of this Agreement until the termination or next
anniversary of such Policies, whichever occurs first.

 

“Run-off” coverage shall apply for a period of twelve
(12) months from the expiration of this Agreement plus odd time, if any, not to
exceed eighteen (18) months in all. The premium applicable to the “run-off”
period shall be the unearned premium reserve for policies in force as of the
expiration of this Agreement, payable in accordance with PREMIUM and REPORTS
AND REMITTANCES Articles of this Agreement.

 

Notwithstanding the foregoing, either party to this
Agreement shall have the right to cancel this Agreement immediately by giving
written notice to the other party by registered mail in the event that the
other party:

 

1
..                                  Suffers a reduction of policyholder surplus of 50% or
greater during the term of the Agreement; or

 

2.                                     Is declared insolvent, put in liquidation, or
restricted as to underwriting by any competent regulatory authority or court of
competent jurisdiction.

 

Immediate Termination shall apply on a “cut-off” basis
only.

 

ARTICLE III

 

TERRITORY

 

The territorial scope of this Agreement will cover that
of the Company’s policies, but is limited to policies issued to employers with
employees operating in the states of Florida, Alabama, Georgia, Illinois,
Indiana, Kentucky, Wisconsin, Tennessee, South Carolina and Ohio, but this
limitation will not apply to losses if the Company’s policies provide coverage
outside the aforesaid territorial limits.

 

Effective August 1, 1999, additional states are added,
as follows: Colorado, Mississippi, Missouri, Oklahoma, New Mexico, North
Carolina, Texas, Virginia, West Virginia, Louisiana, Arkansas and Arizona.

 

ARTICLE IV

 

EXCLUSIONS

 

This Agreement does not apply to and specifically
excludes the following:

 

A.                                   All reinsurance assumed by the Company; however, local
agency reinsurance accepted in the normal course of business will not be
excluded hereunder and inter-company pooling arrangements will not be excluded
hereunder.

 

2

 

B.                                     All liability of the Company arising by contract,
operation of law, or otherwise, from its participation or membership, whether
voluntary or involuntary, in any insolvency fund.

 

“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 the Company 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.

 

C.                                     Loss or liability excluded by the Nuclear Incident
Exclusion Clause-Liability-Reinsurance U.S. as attached.

 

D.                                    Manufacturing, production and refining of petroleum and
its products.

 

E.                                      Professional sports teams.

 

F.                                      Operations where the governing classification are
railroad class codes.

 

G.                                     Offshore drilling.

 

H.                                    Tunneling operations involving tunnels over 100 feet in
length (auguring shall not be considered tunneling).

 

I.                                         Wrecking or demolition of buildings, structures or
vessels, but not to exclude the wrecking or demolition of buildings not
exceeding five stories in height.

 

J.                                        Financial Guarantee.

 

K.                                    Loss or liability arising from any participation in any
Pools, Associations and Syndicates.

 

L.                                      The manufacturing, storage, or transportation of
fireworks, ammunition, nitroglycerin, or other explosive devices.

 

M.                                 No reinsurance indemnity will be afforded under this
Agreement for:

 

(1)                                  Operations in which asbestos contracting related
classifications of 5472 or 5473 or Asbestos Goods Manufacturing classification
of 1852 are appropriately assigned.

 

(2)                                  Operations involving the installation or removal of
asbestos material, but not to exclude the incidental exposure to asbestos
material which may occur in the normal operations including, but not limited
to, plumbing, carpentry, other building contractors or subcontractors and
retail or wholesale distributors.

 

3

 

N.                                    All risks involving exposure to the following
substances:

 

(1)                                  dioxin

 

(2)                                  polychlorinated byphenlyls.

 

Effective January 1, 2000, the
following classes of business shall be excluded: 

 

O.                                    Maritime Business.

 

P.                                      FELA Business.

 

If the Company is inadvertently bound or is unknowingly
exposed (due to error, automatic provisions of policy coverage, or as imposed
by law) on a risk otherwise excluded herein, such risk shall be covered until
the Company receives knowledge thereof, and pending cancellation of such risk,
for a period of ten days in addition to the time permitted for cancellation in
the original policy, such total not exceeding 70 days in all.

 

ARTICLE V

 

SPECIAL
ACCEPTANCE

 

Effective January 1, 1999

 

The Company may submit to the Wexford Underwriting
Managers, Inc., on behalf of the Reinsurer for special acceptance hereunder business
not covered by this Agreement. If said business is accepted by Wexford
Underwriting Managers, Inc., it shall be subject to the terms of this
Agreement, except as such terms are modified by such acceptance.

 

All individual waiver of Subrogation need to be
referred to Wexford Underwriting Managers Inc. prior to issuing.

 

The following additional Classifications are to be
submitted to Wexford Underwriting Managers, Inc. for approval prior to quoting
to determine if exposures pose more than an incidental hazard.

 

A.                                   Any account with manual Premium of $500,000 or more.

B.                                     Any account with an Experience Modification of 1.75 or
higher and premium of $100,000 or higher.

C.                                     Any account with more than incidental USL&H or
maritime exposure. Incidental is defined for the purposes of this Agreement as
not having more than twenty percent (20%) of the Insured’s overall workers’
compensation payroll (excluding clerical) assigned to this type of exposure.

 

4

 

In addition, all accounts that have the following NCCI
Code Classifications shall be referred to Wexford Underwriting Managers, Inc.
prior to quoting:

 

	
  CODE

  	
   

  	
  CLASSIFICATION

  
	
   

  	
   

  	
   

  
	
  1164/1165

  	
   

  	
  Mining Risks

  
	
  2702

  	
   

  	
  Logging and Lumbering

  
	
  5551

  	
   

  	
  Roofing (all kinds)

  
	
  7219

  	
   

  	
  Trucking: other than local as a
  primary code.

  
	
  7720

  	
   

  	
  Police/Detective Agencies.

  
	
  8350

  	
   

  	
  Gas Dealers – LPG

  
	
  7538

  	
   

  	
  Electric Light or Power Line
  Construction.

  

 

Effective January 1, 2000

 

The following additional Classifications are to be
submitted to Wexford Underwriting Managers, Inc. for approval prior to quoting
to determine if exposures pose more than an incidental hazard.

 

A.                                   All Aircraft.

B.                                     Any account with manual Premium of $300,000 or more.

C.                                     Any account with an Experience Modification of 1.50 or
higher and premium of $100,000 or higher.

D.                                    Any account with more than incidental USL&H
exposure. Incidental is defined, for the purposes of this Agreement, as not
having more than ten percent (10%) of the Insured’s overall workers’
compensation payroll (excluding clerical) assigned to this type of exposure.

E.                                      All Hazard Group IV business.

F.                                      NCCI D&E and OD Accounts.

G.                                     Trucking, other than local with greater than 200 mile
radius. 

H.                                    All Firefighters.

I.                                       Accounts with Structural Iron/Steel erection.

 

In addition, all accounts that have the following NCCI
Code Classifications shall be referred to Wexford Underwriting Managers, Inc.
prior to quoting:

 

	
  CODE

  	
   

  	
  CLASSIFICATION

  
	
   

  	
   

  	
   

  
	
  1164/1165

  	
   

  	
  Mining Risks

  
	
  2702

  	
   

  	
  Logging and Lumbering

  
	
  5551

  	
   

  	
  Roofing (all kinds)

  
	
  7720

  	
   

  	
  Police/Detective Agencies.

  
	
  8350

  	
   

  	
  Gas Dealers – LPG

  
	
  7538

  	
   

  	
  Electric Light or Power Line
  Construction.

  

 

It is further agreed that, effective January 1, 2000,
the Waiver of Subrogation referral is removed from the Referral List.

 

5

 

ARTICLE VI

 

NET RETAINED
LINES

 

This Agreement applies only to that portion of any
Policy which the Company retains net for its own account, and in calculating
the amount of any Loss hereunder and also in computing the amount or amounts in
excess of which this Agreement attaches, only Loss or Losses in respect of that
portion of any Policy which the Company retains net for its own account shall
be included. The amount of the Reinsurer’s liability hereunder in respect of
any Loss or Losses shall not be increased by reason of the inability of the
Company to collect from any other Reinsurer any amounts which may have become
due from them, whether such inability arises from the insolvency of such other
Reinsurer or otherwise.

 

ARTICLE VII

 

OTHER REINSURANCE

 

The Company is permitted to have other treaty
reinsurance. The premium for any such reinsurance that inures to the benefit of
this Agreement may be deducted from the Gross Subject Premium hereunder.
Additionally, the Company may purchase facultative reinsurance on any subject
risk it deems advisable, and the premium for that portion of the Company’s
policy reinsured elsewhere will be deducted from the Gross Subject Premium
hereunder.

 

ARTICLE VIII

 

DEFINITIONS

 

“Ultimate Net Loss” as used in this Agreement will mean
the amount on any settlement including Extra Contractual Obligations and Excess
of Policy Limits awards, or judgment paid by the Company or for which the
Company becomes liable to pay; such loss to include expenses of investigation,
litigation and interest (including interest accrued prior to final judgment if
included as part of loss on reinsured policies) after deduction of all
salvages, subrogations, discounts, and recoveries received by the Company, and
inuring reinsurance whether recovered or not. Loss will include loss expense
arising from the settlement of claims. Recoveries from the Company’s underlying
reinsurance agreements will not be deducted when establishing ultimate net loss
hereunder.

 

All salvages, recoveries, or reinsurance received
subsequent to any loss settlement hereunder will be applied as if received
prior to the settlement, and all necessary adjustments will be made by the
parties hereto. Nothing in this definition, however, should be construed to
mean that losses under this Agreement are not recoverable until the Company’s
ultimate net loss has been ascertained.

 

6

 

“Loss expense” as used in this Agreement will mean all
expenses incurred by the Company in the investigation appraisal, adjustment,
litigation and/or defense of claims under policies reinsured hereunder,
including court costs and interest accrued prior to final judgment if included
as part of loss expenses on reinsured policies, interest accrued after final
judgment, legal expenses and cost incurred in connection with coverage
questions and legal actions connected thereto arising under reinsured policies
but excluding internal office expenses (except staff nurses) , salaries, per
diem, and other remuneration of regular Company employees. However, in the
event a verdict or judgment is reduced by an appeal or a settlement, subsequent
to the entry of the judgment resulting in an ultimate saving on such verdict or
judgment or a settlement is reversed outright, the loss expense incurred in
securing such final reduction or reversal shall be prorated between the
Reinsurer and the Company in the proportion that each benefits from such
reduction or reversal, and the expenses incurred up to the time of the original
verdict or judgment shall be a) prorated in proportion to each party’s interest
in such verdict or judgment, or b) added to the Company’s loss when the terms
and conditions of the Company’s original policies reinsured hereunder include
loss expense as part of the policy limit.

 

“Direct Earned Premium” as used in this Agreement is
defined as the earned portion of the premium for inforce, new and renewal
Policies ceded to this Agreement adjusted for experience modification,
discounts, credits, surcharges, expense constants and deductible credits, plus
or minus premium arising from audit adjustments, minus cancellation and return
premium, minus premiums paid for facultative reinsurance which inures to the
benefit of this Agreement.

 

“Occurrence” as used in this Agreement unless otherwise
defined in the policies reinsured hereunder will mean each and every accident,
disaster, occurrence or casualty, or series of accidents, disasters,
occurrences or casualties arising out of one event. Occupational disease shall
be deemed to take place on the date upon which the employee is last exposed at
work to conditions allegedly causing such occupational disease.

 

“Agreement Year” as used in this Agreement will mean
the period of 12 consecutive months commencing with the inception of this
Agreement and each anniversary thereof that this Agreement remains in effect
including run-off or short term cancellation.

 

The term “Policy” shall mean any oral or written
binder, policy, or contract of insurance or reinsurance issued, accepted or
held covered provisionally or otherwise, by or on behalf of the Company.

 

7

 

ARTICLE IX

 

LIMIT AND
RETENTION

 

1 .                                    The Company shall retain for its own account and be
liable for the first $250,000 of Ultimate Net Loss resulting from each and
every Loss Occurrence that commences on or after the effective date of this
Agreement.

 

2.                                       The Reinsurer will then indemnify the Company for the
amount of Ultimate Net Loss in excess of $250,000, but the limit of liability
to the Reinsurer will not exceed Statutory limits for Workers’ Compensation or
$1,000,000 for Employers Liability of Ultimate Net Loss resulting from each and
every Loss Occurrence that commences on or after the effective date of this
Agreement.

 

ARTICLE X

 

RATE AND
PREMIUM

 

A.                                   The Company will pay the Reinsurer 2.00% of the Direct
Earned Premium on all in force, new and renewal policies written for the period
January 1, 1999 to January 1, 2000, and 3.0% of the Direct Earned Premium on
all in force, new and renewal policies written on and after January 1, 2000.
The Company will be subject to the following premium for each of the Agreement
Years:

 

	
   

  	
   

  	
  Minimum

  	
   

  	
  Deposit Premium

  	
   

  
	
  January 1, 1999 Agreement Year

  	
   

  	
  $

  	
  1,600,000

  	
   

  	
  $

  	
  2,000,000

  	
   

  
	
  January 1, 2000 Agreement Year

  	
   

  	
  $

  	
  2,592,000

  	
   

  	
  $

  	
  3,240,000

  	
   

  
	
  January 1, 2001 Agreement year

  	
   

  	
  $

  	
  3,360,000

  	
   

  	
  $

  	
  4,200,000

  	
   

  

 

The Deposit Premium is payable in
equal quarterly installments on January 31st, April 30th,
July 31st and October 31st of each Agreement year.

 

B.                                     Annually, within ninety days of the end of each
Agreement Year, the Company will report Direct Earned Premium earned during the
Agreement Year, apply a treaty rate as reflected above to such Direct Earned
Premium to determine the developed reinsurance premium, and remit to the
Reinsurer the difference between the developed reinsurance premium and the
Deposit Premium, if any.

 

C.                                     As respects each Agreement Year, if the developed
reinsurance premium calculated in Paragraph B. is less than the Minimum Premium,
the Reinsurer will refund the difference within thirty days of its receipt of
the Company’s report, subject to the minimum reinsurance premium for each
Agreement Year.

 

8

 

ARTICLE XI

 

EXTRA CONTRACTUAL
OBLIGATIONS

 

This Agreement will extend to cover any losses arising
from claims related extra contractual obligations.

 

This Agreement shall protect the Company, within the
limits hereof, where the loss includes any Extra Contractual Obligations.
Eighty percent (80%) of the amount of any Extra Contractual Obligations shall
be added to the Ultimate Net Loss which is covered under the provisions of this
Agreement and the sum thereof shall be considered one loss subject to the
provisions of this Agreement.

 

“Extra Contractual Obligations” are defined as those
liabilities not covered under any other provision of this Agreement and 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 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
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.

 

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 loss from which the Extra Contractual Obligation arises.

 

However, this Article shall not apply where the loss
has been incurred due to fraud by 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 XII

 

EXCESS OF POLICY
LIMITS

 

This Agreement will extend to cover any losses arising
from claims related excess limits liability.

 

This Agreement shall protect the Company, within the
limits hereof, in connection with Ultimate Net Loss in excess of the limit of
its original policy for which the Company may be legally liable to pay on
business covered hereunder, where loss in excess of the limit has been incurred
because of, but not limited to, its failure to settle within the original
policy limit by reason of alleged or actual negligence, fraud or bad faith 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.

 

Eighty percent (80%) of the amount of any excess of
original policy limits shall be added to the Ultimate Net Loss which is covered
under the provisions of this Agreement.

 

9

 

However, this Article shall not apply where the loss
has been incurred due to fraud by 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.

 

For the purpose of this Article, 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.

 

ARTICLE XIII

 

OFFSET

 

Each party hereto shall have, and may exercise at any
time and from time to time, the right to offset any balances, whether on
account of premiums or on account of losses or otherwise, due from such party
to the other party hereto under this Agreement and the prior year’s Agreement
effective September 1, 1998 and may offset the same against any balance or
balances due to the former from the latter. The party asserting the right of
offset shall have and may exercise such right whether the balance or balances
due to such party from the other are on account of premiums or on account of
losses or otherwise and regardless of the capacity, whether as Company or as
Reinsurer, in which each party acted under this Agreement, provided, however,
that in the event of the insolvency of a party hereto, offsets shall only be
allowed in accordance with relevant statutes.

 

ARTICLE XIV

 

CURRENCY

 

All of the provisions of this Agreement involving
dollar amounts are expressed in terms of United States dollars and all premium
and loss payments hereunder shall be made in United States dollars.

 

ARTICLE XV

 

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, provided such
delay, omission or error is promptly rectified upon discovery.

 

10

 

ARTICLE XVI

 

TAXES

 

The Company will pay all taxes of premiums reported to
the Reinsurer on this Agreement.

 

ARTICLE XVII

 

INSPECTION

 

At all reasonable times at its regular place of
business, the Company shall place at the disposal of the Reinsurer and the
Reinsurer shall have the right to inspect, examine, audit, and verify through
its authorized representatives, all books, records, and papers of the Company
in connection with any reinsurance hereunder, or claims in connections
herewith.

 

The Reinsurer, at its own expense, will have the right
to make copies or extracts of any books, records, and papers.

 

ARTICLE XVIII

 

SERVICE OF SUIT

 

(This Clause is only applicable to unauthorized
Reinsurers, or to the Reinsurers who are domiciled outside the United States of
America.)

 

It is agreed that in the event of the failure of the
Reinsurer to pay any amount claimed to be due hereunder, the Reinsurer, at the
request of the Company, will submit to the jurisdiction of any Florida State
Court and will comply with all requirements necessary to give such Court
jurisdiction, and all matters arising hereunder shall be determined in
accordance with the law of the State of Florida and practice of such Court.
Nothing in this Clause constitutes or should be understood to constitute a
waiver of the Reinsurer’s rights to commence an action in any Court of
competent jurisdiction in the United States, to remove an action to a United
States District Court, or to seek a transfer of a case to another Court as
permitted by the laws of the United States or of any State in the United
States.

 

It is further agreed that service of process in such
suit may be made upon Harris, Kukaey, Helgesen, P.A., or an agreed-upon
attorney, and that in any suit instituted, the Reinsurer will abide by the
final decision of such Court or of any Appellate Court in the event of an
appeal.

 

The above named are authorized and directed to accept
service of process on behalf of the Reinsurer in any such suit and/or upon the
request of the Company to give a written undertaking to the Company that they
will enter a general appearance upon the Reinsurer’s’ behalf in the event such
a suit shall be instituted.

 

11

 

Further, pursuant to any statute of any State,
Territory or District of the United States which makes provision therefor, the
Reinsurer hereby designates the Superintendent, Commissioner or the Director of
Insurance or other officer specified for that purpose in the statute, or his
successor or successors in office, as his true and lawful attorney upon whom
may be served any lawful process in any action, suit or proceeding instituted
by or on behalf of the Company or any beneficiary hereunder arising out of this
Agreement, and hereby designates the above-named as the firm to whom the said
officer is authorized to mail such process or a true copy thereof.

 

ARTICLE XIX

 

INSOLVENCY

 

In the event of the insolvency of the Company, 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.

 

It is agreed, however, that the liquidator, receiver,
conservator or statutory successor of the Company shall give written notice to
the Reinsurer of the pendency of any claim against the Company indicating the
policy or bond reinsured, which claim would 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 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 that it may deem available to the Company
or its liquidator, receiver, conservator or statutory successor. The expense
thus incurred by the Reinsurer shall be chargeable, subject to the approval of
the court, against the Company as part of the expense of conservation or
liquidation to the extent of a pro rata share of the benefit which may accrue
to the Company solely as a result of the defense undertaken by the Reinsurer.

 

It is further understood and agreed that, in the event
of the insolvency of the Company, the reinsurance under this Agreement shall be
payable directly by the Reinsurer to the Company or to its liquidator,
receiver, conservator or statutory successor, except as provided by the
applicable reinsurance regulation 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 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.

 

12

 

ARTICLE XX

 

ARBITRATION

 

As a condition precedent to any right of action
hereunder, any dispute arising out of or related to the interpretation of this
Agreement whether arising before or after termination, not otherwise resolved
by the parties, shall be submitted to the decision of a board of arbitration
composed of three arbitrators, meeting in North Palm Beach, Florida unless
otherwise agreed.

 

The members of the board of arbitration shall be active
or retired, disinterested officials of insurance or reinsurance companies or
Lloyd’s of London Underwriters, or members of any Exchange formed for the
purpose of writing insurance or reinsurance. Each party shall appoint its
arbitrator, and the two arbitrators shall choose a third arbitrator before
instituting the hearing. If the respondent fails to appoint its arbitrator
within four weeks after being requested to do so by the claimant the claimant
shall also appoint the second arbitrator. If the two arbitrators fail to agree
upon the appointment of a third arbitrator within four weeks after their
nominations, each of them shall name three, of whom the other shall decline
two, and the decision shall be made by drawing lots.

 

The claimant shall submit its initial briefs within 20
days from the appointment of the third arbitrator. The respondent shall submit
its brief within 20 days thereafter, and the claimant may submit a reply brief
within 10 days after filing of respondent’s initial brief.

 

The board shall make its decision with due regard to
the custom and usage of the insurance and reinsurance business and with a view
to effecting the intent of this Agreement. The board is relieved from following
strict rules of law; however, insofar as the board looks to substantive law, it
shall consider the law of the state of Florida. The board shall issue its
decision in writing based upon a hearing in which evidence may be introduced
without following strict rules of evidence but in which cross-examination and
rebuttal shall be allowed. The board shall make its decision within 60 days
following the termination of the hearings unless the parties consent to an
extension. The majority decision of the board shall be final and binding upon
all parties to the proceeding. Judgment may be entered upon the award of the
board in any court having jurisdiction thereof.

 

13

 

Each party shall bear the expense of its own arbitrator
and shall jointly and equally bear with the other party the expense of the
third arbitrator . The remaining costs of the arbitration proceedings shall be
allocated by the board. The board is prohibited from awarding punitive,
exemplary and/or treble damages of whatever nature in connection with any
arbitration proceeding concerning this Agreement.

 

ARTICLE XXI

 

SALVAGE AND
SUBROGATION

 

The Reinsurer shall be subrogated, as respects any loss
for which the Reinsurer shall actually pay or become liable, but only to the
extent of the amount of payment by, or the amount of liability to, the
Reinsurer, to all the rights of the Company against any person or other entity
who may be legally responsible in damages for said loss. The Company hereby
agrees to enforce such rights, but in case the Company shall refuse or neglect
to do so, the Reinsurer is hereby authorized and empowered to bring any
appropriate action in the name of the Company or its policyholders, or
otherwise to enforce such rights.

 

Any recoveries, salvages or reimbursements applying to
risks covered under this Agreement shall always be used to reimburse the excess
carriers (from the last to the first, beginning with the carrier of the last
excess), according to their participation, before being used in any way to
reimburse the Company for its primary loss, inclusive of original deductibles
where applicable.

 

All salvages, recoveries or reimbursements, after
deduction of loss adjustment expense applicable thereto, recovered or received
subsequent to a loss settlement under this Agreement shall be applied as if
recovered or received prior to the aforesaid settlement, and all necessary
adjustments shall be made by the parties hereto, provided always, that nothing
in this Article shall be construed to mean that losses under this Agreement are
not recoverable until the Company’s ultimate net loss has been ascertained.

 

ARTICLE XXII

 

COMMUTATION

 

The Company and the Reinsurer may commute outstanding
case reserves only by mutual consent. The Company shall submit a statement to
the Reinsurer listing payments and case reserves in respect of all incurred
losses reported to the Company subject to this Agreement. The statement shall
form the basis of an agreed value for such case reserves. The net present value
of case reserves contained therein shall be determined by employing one or more
of the following alternatives:

 

A.                                   Calculation based on the following criteria:

 

1.                                       In respect of all “index linked” benefits, annuity
values shall be calculated based upon annual discount of 0%, and an annual
escalation of 0%.

 

14

 

2.                                       In respect of all un-indexed benefits, annuity values
shall be calculated based upon annual discount of 4%.

 

3.                                       In respect of all future medical costs, annuity
calculation shall be based upon the Company’s evaluation of long term medical
care and rehabilitation requirements, using an annual discount of 0% and an
annual escalation of 0%.

 

4.                                       Where applicable, survivor’s life expectancy as well as
remarriage probability shall be reflected in the calculation by employing
tables recommended by a mutually acceptable actuarial consultant.

 

B.                                     Any other method of calculating the agreed net present
value of one or more case reserves, as mutually agreed between the Company and
the Reinsurer.

 

Such calculation, if and when agreed by the Company and
the Reinsurer, shall be considered the final and agreed value of all commuted
case reserves subject to this Agreement and the resulting payment by the
Reinsurer shall be accepted by the Company in full settlement of the Reinsurer’s
liability for all such commuted case reserves.

 

If agreement cannot be reached, the effort will be
abandoned or, alternatively, if the Reinsurer and the Company agree to do so,
then the Company shall mutually appoint an independent actuary who shall
investigate, determine, and capitalize the net present value of any such
unsettled claims. The cost of any independent actuary shall be shared on an
equal basis by the Reinsurer and the Company.

 

In the event the Reinsurer and the Company cannot reach
an agreement on an independent actuary but agree to arbitration of the net
present value of outstanding losses, then each party shall appoint an actuary.
If either party refuses or neglects to appoint an actuary within 30 days after
settlement cannot be reached, the arbitration will be abandoned. The two chosen
actuaries shall then select a third actuary. If the two actuaries fail to agree
on the selection of a third actuary within 30 days after their appointment,
each of them shall name three individuals, of whom the other shall decline two,
and the decision shall be made by drawing lots.

 

All actuaries, selected by drawing lots, shall be
regularly engaged in the valuation of Workers’ Compensation claims and shall be
disinterested in the outcome of the commutation and shall be a Fellow of
Society of Actuaries/Fellow of the Casualty Actuarial Society or an Associate
of Society of Actuaries/Associate of Casualty Actuarial Society. The decision
in writing of any two actuaries, when filed with the parties hereto, will be
final and binding on both parties. The expenses of the actuaries and of the
commutation shall be equally divided between the two parties.

 

Any payment by the Reinsurer under this Article shall
constitute a complete release of the Reinsurer for their liability under the
excess layer(s) commuted as respects such claim.

 

15

 

ARTICLE XXIII

 

INTERMEDIARY

 

Jardine Sayer & Company, Inc., is hereby recognized
as the Intermediary negotiating this Agreement for all business hereunder. All
communications, including notices, premiums, return premiums, commissions,
taxes, losses, loss adjustment expenses, salvages and loss settlements relating
thereto shall be transmitted to the Reinsurer or the Company through Jardine
Sayer & Company, Inc., P.O. Box 6400, Lawrenceville, New Jersey 08648-0400.
Payments made by the Company to the Intermediary shall be deemed to constitute
payment to the Reinsurer. Payments by the Reinsurer to the Intermediary shall
be deemed only to constitute payment to the Company to the extent that such
payments are actually received by the Company.

 

ARTICLE XXIV

 

PARTICIPATION

 

WORKERS’ COMPENSATION AND EMPLOYERS LIABILITY STATUTORY
EXCESS OF LOSS REINSURANCE AGREEMENT EFFECTIVE: January 1, 1999. This Agreement
obligates the Reinsurer for the proportion shown below of the interests and
liabilities set forth under this Agreement.

 

IN WITNESS WHEREOF, the parties hereto, by their
authorized representatives, have executed this Agreement as of the following
dates.

 

In New York, this 15 day of June, 2000.

 

	
  100.0% Reinsurer: Continental
  Casualty Company

  

 

	
  /s/ [ILLEGIBLE]

  	
   

  
	
  Vice President

  	
   

  
	
  Title

  

 

In North Palm Beach, this 14 day of September, 2000.

 

PINNACLE ASSURANCE CORPORATION

AMCOMP PREFERRED INSURANCE COMPANY

THOMAS JEFFERSON INSURANCE COMPANY

AMCOMP INSURANCE COMPANY

 

 

	
  /s/ Donald Johnson

  	
   

  
	
  CFO

  	
   

  
	
  Title

  

 

16

 

JARDINE SAYER

& Company,
Inc.

 

NUCLEAR INCIDENT
EXCLUSION CLAUSE - LIABILITY - REINSURANCE - U.S.A.

 

I.                                         This reinsurance does not cover any loss or liability
accruing to the Reassured as a member of, or subscriber to, any association of
insurers or reinsurers formed for the purpose of covering nuclear energy risks
or as a direct or indirect reinsurer of any such member, subscriber or
association.

 

II.                                     Without in any way restricting the operation of
paragraph (I) of this Clause it is understood and agreed that for all purposes
of this reinsurance all the original policies of the Reassured (new, renewal
and replacement) of the classes specified in Clause B in this paragraph (II)
shall be deemed to include the following provision (specified as the Limited
Exclusion Provision):

 

LIMITED EXCLUSION PROVISION*

 

A.           It is agreed
that the policy does not apply under any liability coverage, to:

injury,
sickness, disease, death or destruction, bodily injury or property damage with respect to which an insured under the policy is
also an insured under a nuclear energy liability policy issued by Nuclear
Energy Liability Insurance Association, Mutual Atomic Energy Liability
Underwriters or Nuclear Insurance Association of Canada, or would be an insured
under any such policy but for its termination upon exhaustion of its limit of
liability.

 

B.             Family
Automobile Policies (liability only), Special Automobile Policies (private
passenger automobiles, liability only), Farmers Comprehensive Personal
Liability Policies (liability only), Comprehensive Personal Liability Policies
(liability only) or policies of a similar nature; and the liability portion of
combination forms related to the four classes of policies stated above, such as
the Comprehensive Dwelling Policy and the applicable types of Homeowners
Policies.

 

C.             The
inception dates and thereafter of all original policies as described in II
above, whether new, renewal or replacement, being policies which either

 

1.                                       become effective on or after May 1st, 1960, or

 

2.                                       become effective before that date and contain the
Limited Exclusion Provision set out above:

 

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

 

III.                                 Except for those classes of policies specified in
Clause B of paragraph (II) and without in any way restricting the operation of
paragraph (I) of this Clause, it is understood and agreed that for all purposes
of this reinsurance the original liability policies of the Reassured (new,
renewal and replacement) affording the following coverages:

 

1

 

Owners, Landlords and Tenants
Liability, Contractual Liability, Elevator Liability, Owners or Contractors
(including railroad) Protective Liability, Manufacturers and Contractors
Liability, Product Liability, Professional and Malpractice Liability,
Storekeepers Liability, Garage Liability, Automobile Liability (including
Massachusetts Motor Vehicle or Garage Liability) shall be deemed to include,
with respect to such coverages, from the time specified in Clause E of this
paragraph (III), the following provision (specified as Broad Exclusion
Provision):

 

BROAD EXCLUSION PROVISION*

 

It is agreed that the policy does not apply:

 

A.           Under any
Liability Coverage, to: injury, sickness, disease, death or destruction,
bodily injury or property damage

 

1.                                       with respect to which an insured under the policy is
also an insured under a nuclear energy liability policy issued by Nuclear
Energy Liability Insurance Association, Mutual Atomic Energy Liability
Underwriters or Nuclear Insurance Association of Canada, or would be an insured
under any such policy but for its termination upon exhaustion of its limit of
liability; or

 

2.                                       resulting from hazardous properties of nuclear material
and with respect to which (1) any person or organization is required to
maintain financial protection pursuant to the Atomic Energy Act of 1954, or any
law amendatory thereof, or (2) the insured is, or had this policy not been
issued would be, entitled to indemnity from the United States of America, or
any agency thereof, under any Agreement entered into by the United States of
America, or agency thereof, with any person or organization.

 

B.             Under any
Medical Payments Coverage, or under any Supplementary Payments Provision,
relating to:

 

immediate
medical or surgical relief first aid, 

 

to expenses incurred with respect to:

 

bodily
injury, sickness, disease or death bodily injury

resulting from the hazardous
properties of nuclear material, and arising out of the operation of a nuclear
facility by any person or organization.

 

C.             Under any
Liability Coverage, to: injury, sickness, disease, death or destruction,
bodily injury or property damage resulting from the hazardous properties of
nuclear material, if:

 

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

 

2

 

2.                                       the nuclear material is contained in spent fuel or
waste at any time possessed, handled, used, processed, stored, transported or
disposed of by or on behalf of an insured; or

 

3.                                       the injury, sickness, disease, death or destruction,
bodily injury or property damage arises out of the furnishing by an insured of
services, materials, parts or equipment in connection with the planning,
construction, maintenance, operation or use of any nuclear facility, but if
such facility is located within the United States of America, its territories
or possessions or Canada, this exclusion (3) applies only to:

 

injury to
or destruction of property at such nuclear facility property damage to such nuclear facility and any
property thereat.

 

D.            As used in
this endorsement:

 

“hazardous properties” include
radioactive, toxic or explosive properties; “nuclear material” means source
material, special nuclear material or by-product material; “source material”, “special
nuclear material”, and “by-product material”, have the meanings given them in
the Atomic Energy Act of 1954 or in any law amendatory thereof; “spent fuel”
means any fuel element or fuel component, solid or liquid, which has been used
or exposed to radiation in a nuclear reactor; “waste” means any waste material
(1) containing by-product material and (2) resulting from the operation by any
person or organization of any nuclear facility included within the definition
of nuclear facility under paragraph (1) or (2) thereof; “nuclear facility”
means

 

(1)                                  any nuclear reactor,

 

(2)                                  any equipment or device designed or used for (1)
separating the isotopes of uranium or plutonium, (2) processing or utilizing
spent fuel, or (3) handling, processing or packaging waste,

 

(3)                                  any equipment or device used for the processing,
fabricating or alloying of special nuclear material if at any time the total
amount of such material in the custody of the insured at the premises where
such equipment or device is located consists of or contains more than
Twenty-Five (25) grams of plutonium or uranium 233 or any combination thereof,
or more than Two Hundred Fifty (250) grams of uranium 235,

 

(4)                                  any structure, basin, excavation, premises or place
prepared or used for the storage or disposal of waste, and includes the site on
which any of the foregoing is located, all operations conducted on such site
and all premises used for such operations; “nuclear reactor” means any
apparatus designed or used to sustain nuclear fission in a self-supporting
chain reaction or to contain a critical mass of fissionable material;

 

3

 

With
respect to injury to or destruction of Property, the word “injury” or “destruction”,
“property damage” includes all forms of radioactive contamination of property.
Includes all forms of radioactive contamination of property.

 

E .           The inception
dates and thereafter of all original policies affording coverages specified in
this paragraph (III), whether new, renewal or replacement, being policies which
become effective on or after May 1st, 1960, provided this paragraph (III) shall
not be applicable to:

 

1.                                       Garage and Automobile Policies issued by the Reassured
on New York risks, or

 

2.                                       statuary liability insurance required under Chapter 90,
General Laws of Massachusetts, until 90 days following approval of the Broad
Exclusion Provision by the Governmental Authority having jurisdiction thereof.

 

IV.                                 Without in any way restricting the operation of
paragraph (I) of this Clause, it is understood and agreed that paragraphs (II)
and (III) above are not applicable to original liability policies of the
Reassured in Canada and that with respect to such policies this Clause shall be
deemed to include the Nuclear Energy Liability Exclusion Provisions adopted by
the Canadian Underwriters’ Association or the Independent Insurance Conference
of Canada.

 

NOTES:                                                     The words underlined in the Limited Exclusion Provision
and in the Broad Exclusion Provision shall apply only in relation to original
liability policies which include a Limited Exclusion Provision or a Broad
Exclusion Provision containing those words.

 

“Reassured”
                         shall be understood to mean “Reassured”, “Company”, “Reinsured”
or whatever other term is used in the attached reinsurance agreement to
designate the reinsured Company or Companies.

 

“Reinsurance”
               shall be understood to mean “Reinsurance”, “Contract”, “Agreement”,
“Policy” or whatever other term is used to designate the attached reinsurance
document.

 

4Exhibit 10.39

 

	
   

  	
   

  	
  Swiss Re

  
	
   

  	
   

  	
  

  

 

 

WORKERS’
COMPENSATION AND EMPLOYERS LIABILITY

QUOTA SHARE REINSURANCE AGREEMENT

 

between

 

AMCOMP
ASSURANCE COMPANY and/or

AMCOMP PREFERRED INSURANCE COMPANY and/or PINNACLE ASSURANCE CORPORATION

and/or THOMAS JEFFERSON INSURANCE COMPANY

and/or other insurance companies owned by

AmCOMP,
INCORPORATED

North
Palm Beach, Florida

and

SWISS REINSURANCE AMERICA CORPORATION

Armonk,
New York

 

 

WORKERS’
COMPENSATION AND EMPLOYERS LIABILITY

QUOTA SHARE REINSURANCE AGREEMENT

 

Table of Contents

 

	
  ARTICLE

  	
   

  	
  TITLE

  	
   

  	
  PAGE

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  I

  	
   

  	
  BUSINESS
  COVERED

  	
   

  	
  1

  
	
  II

  	
   

  	
  TERM

  	
   

  	
  1

  
	
  III

  	
   

  	
  TERRITORY

  	
   

  	
  2

  
	
  IV

  	
   

  	
  EXCLUSIONS

  	
   

  	
  2

  
	
  V

  	
   

  	
  FULL
  REINSURANCE CLAUSE

  	
   

  	
  5

  
	
  VI

  	
   

  	
  OTHER
  REINSURANCE

  	
   

  	
  5

  
	
  VII

  	
   

  	
  DEFINITIONS

  	
   

  	
  5

  
	
  VIII

  	
   

  	
  RETENTION
  AND CESSION

  	
   

  	
  6

  
	
  IX

  	
   

  	
  PREMIUM
  AND COMMISSION

  	
   

  	
  7

  
	
  X

  	
   

  	
  ACCOUNTS
  AND SETTLEMENTS

  	
   

  	
  7

  
	
  XI

  	
   

  	
  OFFSET

  	
   

  	
  8

  
	
  XII

  	
   

  	
  RESERVES

  	
   

  	
  8

  
	
  XIII

  	
   

  	
  CURRENCY

  	
   

  	
  9

  
	
  XIV

  	
   

  	
  ACCESS
  TO RECORDS

  	
   

  	
  9

  
	
  XV

  	
   

  	
  ERRORS
  AND OMISSIONS

  	
   

  	
  10

  
	
  XVI

  	
   

  	
  TAXES

  	
   

  	
  10

  
	
  XVII

  	
   

  	
  ARBITRATION

  	
   

  	
  10

  
	
  XVIII

  	
   

  	
  SALVAGE
  AND SUBROGATION

  	
   

  	
  11

  
	
  XIX

  	
   

  	
  SERVICE
  OF SUIT

  	
   

  	
  11

  
	
  XX

  	
   

  	
  INSOLVENCY

  	
   

  	
  12

  
	
  XXI

  	
   

  	
  INSOLVENCY
  FUNDS EXCLUSION

  	
   

  	
  12

  
	
  XXII

  	
   

  	
  EXTRA
  CONTRACTUAL OBLIGATIONS

  	
   

  	
  13

  
	
  XXIII

  	
   

  	
  EXCESS
  OF POLICY LIMITS

  	
   

  	
  13

  
	
  XXIV

  	
   

  	
  SERVICING
  CLAUSE

  	
   

  	
  13

  
	
  XXV

  	
   

  	
  PARTICIPATION

  	
   

  	
  14

  
	
   

  	
   

  	
  SIGNATURES

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ATTACHMENTS:

  	
  SCHEDULE
  X-A

  	
   

  	
   

  
	
   

  	
  POLLUTION EXCLUSION CLAUSE

  	
   

  	
   

  
	
   

  	
  NUCLEAR INCIDENT EXCLUSION
  CLAUSE – REINSURANCE - USA

  	
   

  	
   

  
	
   

  	
  NUCLEAR INCIDENT EXCLUSION
  CLAUSE – REINSURANCE - CANADA

  	
   

  	
   

  
	
   

  	
  NUCLEAR INCIDENT EXCLUSION
  CLAUSE – REINSURANCE NO. 4

  	
   

  	
   

  
						

 

 

WORKERS’
COMPENSATION AND EMPLOYERS LIABILITY

QUOTA SHARE REINSURANCE AGREEMENT

(hereinafter referred to as the “Agreement”)

between

AMCOMP ASSURANCE COMPANY and/or

AMCOMP PREFERRED INSURANCE COMPANY and/or

PINNACLE ASSURANCE CORPORATION and/or

THOMAS JEFFERSON INSURANCE COMPANY

and/or other insurance companies owned by

AmCOMP,
INCORPORATED

North
Palm Beach, Florida

(hereinafter referred to as the “Company”)

and

SWISS REINSURANCE AMERICA CORPORATION

Armonk,
New York

(hereinafter referred to as the “Reinsurer”)

 

 

ARTICLE I

BUSINESS COVERED

 

The Company obliges itself to cede and the Reinsurer
obliges itself to accept proportional Loss and Loss Adjustment Expense as
described in Article VIII and proportional premium as described in Article IX
in respect of Policies inforce, written or renewed during the Term of this Agreement
issued by Florida Administrative Services and/or Pinnacle Administrators, Inc.
on behalf of the Company or other issuing carriers under executed underwriting
management agreement(s) on behalf of the Company and classified by the Company
as Statutory Workers’ Compensation and Employers’ Liability insurance.

 

ARTICLE II

 

TERM

 

A.    This Agreement shall
be effective at 12:01 A.M. Eastern Daylight Time on January 1, 2000 in respect
of Policies

then in force as well as new and renewal Policies accepted thereafter and shall
remain in force until canceled.

 

B.    The Company or the
Reinsurer may cancel this Agreement by giving the other party ninety (90) days
prior written notice by registered mail to be effective December 31, 2000 or
any December 31 thereafter. The Company shall continue to underwrite and accept
new and renewal Policies during the period between the notice and effective
date of termination.

 

 

1

 

C.    In the event of
termination of this Agreement, at the Company’s option:

 

l.      Run-off
termination. The Reinsurer shall
remain liable in respect of all Policies then in force at the effective date of
termination until the termination or next anniversary of such Policies,
whichever occurs first, following the effective date of termination, provided
that the run-off period will not exceed twelve (12) months from the effective
date of termination plus odd time, if any, not to exceed eighteen (18) months
in all; or

 

2.     Cut-off
termination. The Company shall relieve
the Reinsurer of all liability hereunder for Losses and Loss Adjustment
Expenses arising from an Occurrence subsequent to the effective date of
termination. If the Company elects cut-off termination, the Reinsurer shall
refund to the Company the Gross Net Unearned Premium applicable to the
unexpired liability on Policies in force minus the commission allowed by the
Reinsurer.

 

D.    Article II-B
notwithstanding, either party to this Agreement shall have the right to cancel
this Agreement immediately by giving written notice to the other party by
registered mail in the event that the other party:

 

1.     Suffers a reduction
of policyholder surplus of 50% or greater during any Treaty Year; or

 

2.     Is declared
insolvent, put in liquidation, or restricted as to underwriting by any
competent regulatory authority or court of competent jurisdiction.

 

Termination pursuant to Article II-D
does not alter the Company’s or its successor’s rights under Article II-C.

 

 Immediate Termination shall
apply on a “cut-off” basis only.

 

ARTICLE III

 

TERRITORY

 

This Agreement applies within the territorial limits of
the Company’s policies. 

 

ARTICLE IV

 

 

EXCLUSIONS

 

THIS AGREEMENT DOES NOT COVER:

 

A.            THE FOLLOWING GENERAL CATEGORIES:

 

1.             Ex-gratia
payments unless agreed in advance by the Reinsurer.

 

2.             Risks
subject to a deductible excess of $25,000, or a self-insured retention excess
of $25,000.

 

3.             Loss or
damage caused directly or indirectly by: (a) enemy attack by armed forces
including action taken by military, naval or air forces in resisting an actual
or an immediately impending enemy attack; (b) invasion; (c) insurrection; (d)
rebellion; (e) revolution; (f) intervention; (g) civil war; and (h) usurped power.

 

2

 

4.             Reinsurance
assumed by the Company unless agreed in advance by the Reinsurer. This
exclusion shall not apply to fronted business assumed by the Company provided
that it is agreed in advance by the Reinsurer. This exclusion is intended to
only apply on a portfolio basis.

 

5.             Business
derived from any Pool, Association, including Joint Underwriting Association,
Syndicate, Exchange, Plan, Fund or other facility directly as a member,
subscriber or participant, or indirectly by way of reinsurance or assessments;
provided this exclusion shall not apply to Workers Compensation assigned risks
which may be currently or subsequently covered hereunder.

 

6.             Pollution
Liability as per the attached Pollution Liability Exclusion Clause -
Reinsurance.

 

7.             Insolvency
Funds, as per Article XXI of this Agreement.

 

8.             Nuclear
Incident Exclusion Clauses which are attached and made part of this Agreement:

 

	
   

  	
   

  	
  a.

  	
  Nuclear Incident Exclusion Clause -
  Liability - Reinsurance - U.S.A.

  
	
   

  	
   

  	
  b.

  	
  Nuclear Incident Exclusion Clause -
  Liability - Reinsurance - Canada.

  
	
   

  	
   

  	
  c.

  	
  Nuclear Incident Exclusion Clause -
  Reinsurance - No. 4.

  

 

B.            THE FOLLOWING RISKS AS RESPECTS WORKERS COMPENSATION
AND EMPLOYERS LIABILITY:

 

	
  1.

  	
   

  	
  a.

  	
  Operations employing the process of
  nuclear fission or fusion or handling of radioactive material, which
  operations include but are not limited to:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  (i)

  	
  the use of nuclear reactors such as
  atomic piles, particle accelerators or generators, or

  
	
   

  	
   

  	
   

  	
  (ii)

  	
  the use, handling or transportation
  of radioactive materials, or

  
	
   

  	
   

  	
   

  	
  (iii)

  	
  the use, handling or transportation
  of any weapon of war or explosive device employing nuclear fission or fusion.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  b.

  	
  The preceding exclusions (i), (ii)
  and (iii) do not apply to:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  (i)

  	
  the exclusive use of particle
  accelerators incidental to ordinary industrial or educational research
  pursuits, or

  
	
   

  	
   

  	
   

  	
  (ii)

  	
  the exclusive use, handling or
  transportation of radioisotopes for medical or industrial use, or

  
	
   

  	
   

  	
   

  	
  (iii)

  	
  radium or radium compounds.

  

 

2.             Operations
under the jurisdiction of the U.S. Longshoremen’s and Harbor Workers’ Act, the
Jones Act and the Maritime Employers Liability Act, except for incidental
exposures.

 

3.             Operation of
docks or wharves.

 

4.             The
manufacturing, mining, refining, processing, distribution, installation,
removal or encapsulment of asbestos.

 

5.             Risks
involving known exposure to the following substances:

 

a. dioxin.

b. polychlorinated biphenols.

c. asbestos.

 

3

 

6.             All railway
operations except sidetrack agreements.

 

7.             Amusement
parks, carnivals or circuses.

 

8.             Subaqueous
operations.

 

9.             Underground
mining; however, this exclusion shall not be construed to apply to open
pit-quarrying or “surface mining” operations.

 

10.           Blasting
operations.

 

11.           Demolition of
buildings or structures in excess of five stories.

 

12.           Manufacture,
sale, rental, lease, erection or repair of scaffolds. 

 

13.           Construction
of tunnels or dams.

 

	
  14.

  	
   

  	
  a.

  	
  Manufacturers or importers of
  fireworks, fuses, or any substance, as defined and noted below, intended for
  use as an explosive.

  
	
   

  	
   

  	
  b.

  	
  Loading of fireworks, fuses, or any
  explosive substance defined below into containers for use as explosive
  objects, propellant charges or detonation devices and the storage thereof.

  
	
   

  	
   

  	
  c.

  	
  Manufacturers or importers of any
  product in which fireworks, fuses, or any explosive substance defined below
  is an ingredient.

  
	
   

  	
   

  	
  d.

  	
  Handling, storage, transportation or
  use of fireworks, fuses, or any explosive substance defined below.

  

 

NOTE: An explosive substance is
defined as any substance manufactured for the express purpose of exploding as
differentiated from commodities used industrially and which are only
incidentally explosive.

 

15.           Manufacture,
production, refining, storage of natural or artificial fuel, gas, butane,
propane or liquefied petroleum gasses or gasoline.

 

16.           Onshore and
offshore gas and oil drilling operations.

 

17.           Ownership,
maintenance or use of any airport or aircraft, including fueling, or any device
or machine intended for and/or aiding in the achievement of atmospheric flight,
projection or orbit, except for incidental exposures.

 

18.           Municipal law
enforcement organizations and municipal fire fighting organizations.

 

C.            Those
exclusions set forth in Item 2, 12 & 18. of Section B. of this agreement,
shall not apply if the exposure is incidental to the regular operations of the
insured covered hereunder.

 

D.            In the event
the Company is inadvertently bound on any risk that is excluded under Items 2.
and 6. through 18. Of Section B. of this Article, the reinsurance provided under
this Agreement shall apply to such risk until discovery by the Company within
its Home Office of the existence of such risk and for 30 days thereafter, and
shall then cease unless within the 30 day period, the Company has received from
the Reinsurer written notice of its approval of such risk.

 

4

 

ARTICLE V

 

FULL REINSURANCE CLAUSE

 

A.            All amounts
ceded hereunder shall be subject to the same gross rates and to the same
conditions and modifications of the Company’s policies, and the Reinsurer shall
pay losses as may be paid thereon and shall follow the settlements of the
Company subject to the limits, terms, and conditions of this Agreement.

 

ARTICLE VI

 

OTHER REINSURANCE

 

A.            The Company
shall deduct three and one half per cent (3.50%) of Gross Subject Unearned
and/or Written Premium for Excess Reinsurance in respect of limits and/or
exposures in excess of two hundred and fifty thousand dollars ($250,000) each
and every occurrence.

 

B.            The Company
may also purchase facultative reinsurance within limits and/or exposures of two
hundred and fifty thousand ($250,000) and deduct such premiums in addition to
the excess deduction as referenced in Article VI-A, recoveries under which
shall inure to the benefit of this Agreement.

 

C.            In open
rating states, the Company shall calculate the subject premium to this
Agreement after deduction of overlying facultative pricing, grossed up 15% to
accommodate the Company’s variable costs to produce this business. Said
business to be placed with effective dates on or after March 31, 2000. The
Reinsurer shall receive first right of refusal to accommodate the Company’s
facultative requirement; however, the Company shall not be required to place
this business with the Reinsurer.

 

D.            The Company
may at its own expense purchase underlying excess reinsurance (on a finite risk
or funded basis, an indemnity basis, or any combination thereof) in respect of
the Company’s retained portion of the Net Retained Liability, recoveries under
which would be ignored for the purposes of determining the Company’s portion of
Net Retained Liability. The Company shall advise the Reinsurer accordingly in
advance of any such coverages purchased.

 

ARTICLE VII

 

DEFINITIONS

 

“Gross Ceded Premium” means the Reinsurer’s share of
Gross Subject Unearned Premium plus Gross Subject Written Premium.

 

“Gross Net Earned Premium” means Gross Net Unearned
Premium at the beginning of the Treaty Year plus Gross Net Written Premium
during the Treaty Year minus Gross Net Unearned Premium at the end of the
Treaty Year.

 

“Gross Net Unearned Premium” means Gross Subject
Unearned Premium minus deductions allowed pursuant to Article VI.

 

“Gross Net Written Premium” means Gross Subject Written
Premium minus deductions allowed pursuant to Article VI.

 

“Gross Subject Earned Premium” means Gross Subject
Unearned Premium at the beginning of a Treaty Year plus Gross Subject Written
Premium during a Treaty Year minus Gross Subject Unearned Premium at the end of
a Treaty

 

5

 

Year. In the event of cut-off termination, there will
be a deduction of Gross Subject Unearned Premium returned by the Reinsurer to
the Company.

 

“Gross Subject Unearned Premium” means the direct and
assumed premium reserve for unexpired liability established in the Company’s
statutory balance sheets.

 

“Gross Subject Written Premium” means gross premium
accounted as written by the Company in respect of business ceded hereunder,
plus or minus premiums arising from audit adjustments or retrospective rating
adjustments, minus cancellations and return premiums.

 

“Loss” means payments and reserves established by the
Company as a result of claims under its Policies with dates of loss occurrence
within the Treaty Year.

 

“Loss Adjustment Expense” means all costs and expenses
allocable to specific claims that are incurred by the Company in the
adjustment, evaluation, investigation, defense, litigation, settlement, and/or
appeal of specific claims, including (a) courts costs and costs of supersedaes
and appeal bonds, (b) interest accrued after award or judgment and pre-judgment
interest awarded against the insured, and (c) legal expenses and costs incurred
by the Company in connection with coverage questions and legal actions
connected thereto. Loss Adjustment Expenses do not include salaries and
expenses of Company officers and staff adjusters with the exception of staff
nurses, whose cost the Company will bill to specific cases on a time and
expense basis.

 

“Loss Ratio” means ceded Loss and Loss Adjustment
Expense divided by ceded Gross Net Earned Premium.

 

“Net Retained Liability” means Loss and Loss Adjustment
Expense retained by the Company after deduction of Excess Reinsurance and
salvage and subrogation recoveries, provided that the Company’s Net Retained
Liability shall for the purposes of this Agreement be deemed not to exceed the
amount displayed in Article VI-A each and every Occurrence.

 

“Occurrence” means each and every event or series of
events that gives rise to a loss payable under the Company’s policies.

 

“Policy” means contracts of insurance or reinsurance
including without limitation oral and written binders pursuant to the terns and
conditions of which the Company is obliged to pay Losses and/or Loss Adjustment
Expense.

 

“Policy dividends” mean dividends declared and paid by
the Company during the term of each Treaty Year of this Agreement.

 

“Treaty Year” means the period from inception through
the first date of termination and, thereafter, each calendar year.

 

ARTICLE VIII

 

RETENTION AND CESSION

 

A.            Retention. The Company will retain net and unreinsured, except as
provided in Article VI (D), sixty-five percent (65.0%) of Losses and Loss
Adjustment Expense up to but not exceeding sixty-five percent (65.0%) of two
hundred and fifty thousand dollars ($250,000) each and every occurrence plus
one hundred percent (100.0%) of Losses and Loss Adjustment Expense greater than
two hundred and fifty thousand dollars ($250,000) each and every occurrence.

 

B.            Loss Ratio
Corridor and Loss Ratio Cap.

 

6

 

1.     It is understood
that as respects recoveries under this Agreement the Reinsurer shall never pay
during any one Treaty Year a Loss Ratio greater than seventy two percent
(72.0%) after the application of the provisions of Article VIII-B.2.

 

2.     If the ceded Loss
Ratio for any Treaty Year (including run-off, if applicable) exceeds sixty per
cent (60.0%), the Company will retain Loss and Loss Adjustment Expense for
which the Reinsurer would otherwise be liable (but for this Loss Corridor
provision) equal to three and one half per cent (3.50%) of ceded Gross Net
Earned Premium. The Reinsurer will resume responsibility for Losses and Loss
Adjustment Expenses if the ceded Loss Ratio exceeds sixty-three and one half
per cent (63.5%).

 

C.            Cession. The Company will cede and the Reinsurer will accept
thirty-five percent (35.0%) of Losses and Loss Adjustment Expense up to but not
exceeding thirty-five percent (35.0%) of two hundred and fifty thousand dollars
($250,000) each and every occurrence.

 

D.            Policy
Dividends. The Company will be responsible for all Policy Dividends allocated earned
and paid during a Treaty Year.

 

E.             Adjustment. The Company may adjust its Retention and Cession on a
run-off or cut-off basis, provided that (a) the Retention must be not greater
than ninety per cent (90.0%) or less than sixty percent (60%) and (b) the
Company may adjust the Retention only once during each Treaty Year. The Company
may adjust its Retention and Cession only within thirty days of April 1, July 1
or October 1. However, adjustment at October 1 is subject to review and
approval by the Reinsurer.

 

ARTICLE IX

 

PREMIUM AND COMMISSION

 

A.            Subject to
adjustment as displayed in Article VIII (E), the Company shall cede thirty five
percent (35.0%) of its Gross Net Unearned Premium at the inception of this
Agreement plus thirty five percent (35.0%) of its Gross Net Written Premium in
respect of new and renewal Policies accepted during the Term of this Agreement.

 

B.            The Reinsurer
shall allow the Company to deduct a ceding commission of forty six percent
(46%) of the Company’s Gross Ceded Premium.

 

ARTICLE X

 

ACCOUNTS AND SETTLEMENTS

 

Monthly within sixty (60) days of the end of each
calendar month, the Company will submit accounts in accordance with Schedule X-A annexed
hereto.

 

(** Incoming UPR cession shall be due and payable on
March 31, 2000. Sixty (60) days after the end of the first treaty month. )

 

A.            Simultaneously
with its submission of accounts, the Company will remit any balance it owes the
Reinsurer.

 

B.            The Reinsurer
shall remit any balance it owes the Company within thirty (30) days of its
receipt of the Company’s monthly account.

 

C.            Quarterly
within seventy-five (75) days of the end of each calendar quarter, the Company
and the Reinsurer shall exchange statutory financial statements filed with
their respective state regulatory authorities.

 

7

 

ARTICLE XI

 

OFFSET

 

Each party hereto shall have, and may exercise at any
time and from time to time, the right to offset any balances, whether on
account of premiums or on account of losses or otherwise, due from such party
to the other party hereto under this Agreement and may offset the same against
any balance or balances due or to become due to the former from the latter
under the same Agreement between them; and the party asserting the right of
offset shall have and may exercise such right whether the balance or balances
due or to become due to such party from the other are on account of premiums or
on account of losses or otherwise and regardless of the capacity, whether as
Company or as Reinsurer, in which each party acted under this Agreement,
provided, however, that in the event of the insolvency of a party hereto, offsets
shall only be allowed in accordance with relevant statutes.

 

ARTICLE XII

 

RESERVES

 

(This Article applies to Reinsurer: (a) which do not
qualify for credit by any state or any other governmental authority having
jurisdiction over the Company’s affairs; or (b) whose rating by A.M. Best drops
below “A”.)

 

A.            As regards
all business coming within the scope of this Agreement, the Reinsurer agree
that, if the Company so requests, the Reinsurer shall fund its share of the
Company’s ceded Unearned Premium and Outstanding Loss and Loss Adjustment
Expense Reserves including incurred but not reported loss reserves by:

 

1.     Clean, unconditional
and irrevocable Letter of Credit issued by any bank acceptable to the state or
other governmental authority having jurisdiction in this matter, and/or

 

2.     Acceptable escrow
accounts for the benefit of the Company, and/or

 

3.     Cash advances, if,
without such funding, a penalty would accrue to the Company on any financial
statement it is required to file with any insurance regulatory authorities.

 

B.            With regard
to funding in whole or in part by Letter of Credit, it is agreed that each such
Letter of Credit will be issued for a term of not less than one year and will
include a so-called “evergreen” clause which automatically extends the term for
at least one additional year at each expiration date unless thirty (30) days
prior to any expiration date, the issuing bank notifies the Company by
certified mail it elects not to consider the Letter of Credit renewed or
extended for any additional period.

 

C.            The Company
and the Reinsurer further agree, notwithstanding anything to the contrary in
this Agreement, that said Letter of Credit may be drawn upon by the Company or
its successors in interest at any time, without diminution because of the
insolvency of the Company or the Reinsurer, but only for one or more of the
following purposes:

 

1.      To reimburse itself
for the Reinsurer share of the Unearned Premium paid under this Agreement,
and/or

 

2.      To reimburse itself
for the Reinsurer’ share of the Unearned Premium returned or returnable to
insured upon cancellation of Policies covered under this Agreement, and/or

 

3.      To pay the
Reinsurer’ share or to reimburse the Company for the Reinsurer’ share of any
liability for loss reinsured by this Agreement, which is due to the Company and
has not been otherwise paid by the Reinsurer, and/or

 

8

 

4.      To refund to the
Reinsurer of any sum which is in excess of the actual amounts required to pay
the Reinsurer’ obligations under 1, 2, and 3 above.

 

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

 

E.             At annual
intervals or more frequently as determined by the Company, but never more
frequently than quarterly, the Company shall prepare a specific statement, for
the sole purpose of amending the Letter of Credit, and/or the escrow accounts
and/or the Reinsurer’ cash advances, of the Reinsurer’ share of any
obligations. If the statement shows that the Reinsurer’ share of obligations
exceeds the balance of funding as of the statement date, the Reinsurer shall,
within thirty (30) days after receipt of notice of such excess, secure delivery
to the Company of an amendment of the Letter of Credit increasing the amount of
credit by the amount of such difference and/or increase the balances of the
escrow accounts and/or make additional cash advances to eliminate the
difference. If, however, the statement shows that the Reinsurer’ share of
obligations is less than the balance of funding as of the statement date, the
Company shall, within thirty (30) days after receipt of written request from
the Reinsurer, release such excess funding by agreeing to secure an amendment
to the Letter of Credit reducing the amount of credit available and/or
returning excess amounts from escrow accounts and/or cash advances.

 

F.             The rights
and obligations of the Company and the Reinsurer, as set forth in this Article,
shall not be diminished in any manner whatsoever by the insolvency of any party
hereto.

 

ARTICLE XIII

 

CURRENCY

 

All of the provisions of this Agreement involving
dollar amounts are expressed in terms of United States dollars and all premium
and loss payments hereunder shall be made in United States dollars.

 

ARTICLE XIV

 

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, all books, records, or papers
of the Company in connection with any reinsurance hereunder, or claims in
connection herewith.

 

ARTICLE XV

 

ERRORS AND OMISSIONS

 

Any inadvertent neglect, delay, omission or error shall
not be held to relieve the Reinsurer from any liability which would attach to
it hereunder if such neglect, delay, omission or error had not been made,
provided the Company rectifies such neglect, delay, omission, or error upon
discovery.

 

9

 

ARTICLE XVI

 

TAXES

 

The Company will pay all taxes of premiums reported to
the Reinsurer on this Agreement. 

 

ARTICLE XVII

 

ARBITRATION

 

As a condition precedent to any right of action
hereunder, any dispute arising out of this Agreement, whether arising before or
after termination, shall be submitted to the decision of a board of arbitration
composed of two arbitrators and an umpire, meeting in North Palm Beach, Florida
unless otherwise agreed.

 

The members of the board of arbitration shall be active
or retired disinterested officials of insurance or reinsurance companies. Each
party shall appoint its arbitrator, and the two arbitrators shall choose an
umpire before instituting the hearing. If the respondent fails to appoint its
arbitrator within four weeks after being requested to do so by the claimant,
the latter shall also appoint the second arbitrator. If the two arbitrators
fail to agree upon the appointment of an umpire within four weeks after their
nominations, each of them shall name three, of whom the other shall decline
two, and the decision shall be made by drawing lots.

 

The claimant shall submit its initial brief within twenty
(20) days from appointment of the umpire. The respondent shall submit its brief
within twenty (20) days thereafter, and the claimant may submit a reply brief
within ten (10) days after filing of the respondent’s brief.

 

The board shall make its decision with regard to the
custom and usage of the insurance and reinsurance business. The board shall
issue its decision in writing based upon a hearing in which evidence may be
introduced without following strict rules of evidence but in which
cross-examination and rebuttal shall be allowed. The board shall make its
decision within sixty (60) days following the termination of the hearings
unless the parties consent to an extension. The majority decision of the board
shall be final and binding upon all parties to the proceeding. Judgment may be
entered upon the award of the board in any court having jurisdiction thereof.

 

If more than one Reinsurer is involved in the same
dispute, all such Reinsurer shall constitute and act as one party for purposes
of this clause, and communications shall be made by the Company to each of the
Reinsurer constituting the one party, provided that nothing therein shall
impair the rights of such Reinsurer to assert several, rather than joint,
defenses or claims, nor be construed as changing the liability of the Reinsurer
under the terms of this Agreement from several to joint.

 

Each party shall bear the expense of its own arbitrator
and shall jointly and equally bear with the other party the expense of the
umpire. The remaining costs of the arbitration proceedings shall be allocated
by the board.

 

It is agreed that the jurisdiction of the arbitrators
to make or render any decision or award shall be limited by the limit of
liability expressly hereinbefore set forth, and that the arbitrators shall have
no jurisdiction to make any decision or render any award exceeding such
expressly stated limit of liability of the Reinsurer.

 

ARTICLE XVIII

 

SALVAGE AND SUBROGATION

 

The Reinsurer shall be credited with its proportionate
share of salvage or subrogation recoveries (i.e., reimbursement obtained or
recovery made by the Company, less the actual cost, excluding salaries of
officials and employees of the

 

10

 

Company, of obtaining such reimbursement or making such
recovery) on account of claims and settlements involving reinsurance hereunder.

 

ARTICLE XIX

 

SERVICE OF SUIT

 

(This Clause is only applicable to unauthorized
Reinsurer, or to the Reinsurer who are domiciled outside the United States of
America.)

 

It is agreed that in the event of the failure of the
Reinsurer to pay any amount claimed to be due hereunder, the Reinsurer, at the
request of the Company, will submit to the jurisdiction of any Florida State
Court and will comply with all requirements necessary to give such Court
jurisdiction, and all matters arising hereunder shall be determined in
accordance with the law of the State of Florida and practice of such Court.
Nothing in this Clause constitutes or should be understood to constitute a waiver
of the Reinsurer’ rights to commence an action in any Court of competent
jurisdiction in the United States, to remove an action to a United States
District Court, or to seek a transfer of a case to another Court as permitted
by the laws of the United States or of any State in the United States.

 

It is further agreed that service of process in such
suit may be made upon Harris, Kukaey, Helgesen, P.A., or an agreed-upon
attorney, and that in any suit instituted, the Reinsurer will abide by the
final decision of such Court or of any Appellate Court in the event of an
appeal.

 

The above named are authorized and directed to accept
service of process on behalf of the Reinsurer in any such suit and/or upon the
request of the Company to give a written undertaking to the Company that they
will enter a general appearance upon the Reinsurer’ behalf in the event such a
suit shall be instituted.

 

Further, pursuant to any statute of any State,
Territory or District of the United States which makes provision therefor, the
Reinsurer hereby designates the Superintendent, Commissioner or the Director of
Insurance or other officer specified for that purpose in the statute, or his
successor or successors in office, as his true and lawful attorney upon whom
may be served any lawful process in any action, suit or proceeding instituted
by or on behalf of the Company or any beneficiary hereunder arising out of this
Agreement, and hereby designates the above-named as the firm to whom the said
officer is authorized to mail such process or a true copy thereof.

 

 

ARTICLE XX

 

INSOLVENCY

 

In the event of the insolvency of the Company, 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. It is agreed, however,
that the liquidator, receiver, conservator or statutory successor of the
Company shall give written notice to the Reinsurer of the pendency of any claim
against the Company indicating the policy or bond reinsured, which claim would
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 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 that it may deem
available

 

11

 

to the Company or its liquidator, receiver, conservator
or statutory successor. The expense thus incurred by the Reinsurer shall be
chargeable, subject to the approval of the court, against the Company as part
of the expense of conservation or liquidation to the extent of a pro rata share
of the benefit which may accrue to the Company solely as a result of the
defense undertaken by the Reinsurer.

 

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

 

It is further understood and agreed that, in the event
of the insolvency of the Company, the reinsurance under this Agreement shall be
payable directly by the Reinsurer to the Company or to its liquidator,
receiver, conservator or statutory successor, except as provided by the
applicable reinsurance regulation 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 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.

 

ARTICLE XXI

 

INSOLVENCY FUNDS EXCLUSION

 

This Agreement excludes all liability of the Company
arising, by contract, operation of law, or otherwise, from its participation or
membership, whether voluntary or involuntary, in any insolvency fund. “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 the Company of
part or all of any claim, debt, charge, fee, or other obligation of any
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.

 

ARTICLE XXII

 

EXTRA CONTRACTUAL OBLIGATIONS

 

This Agreement shall protect the Company for any Extra
Contractual Obligations within the limits hereof. The term “Extra Contractual
Obligations” is defined as those liabilities not covered under any other
provision of this Agreement and 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 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 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.

 

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 disaster and/or casualty.

 

12

 

However, this Article shall not apply where the loss
has been incurred due to fraud by 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 XXIII

 

EXCESS OF POLICY LIMITS

 

This Agreement shall protect the Company, within the
limits hereof, in connection with loss in excess of the limit of its original
policy, such loss in excess of the limit having been incurred because of
failure by it 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 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.

 

However, this Article shall not apply where the loss
has been incurred due to fraud by 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.

 

For the purpose of this Article, 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.

 

ARTICLE XXIV

 

SERVICING CLAUSE

 

The parties to this Agreement hereby recognize that
Jardine Sayer & Company, Inc., (“Jardine”) P.O. Box 6400,
Lawrenceville, New Jersey 08648-0400, will provide certain ongoing
services with respect this Agreement. Communications including notices,
statements, premiums, return premiums, commissions, taxes, losses, loss
adjustment expense, salvages and loss settlements shall be submitted to the
Company or the Reinsurer through Jardine; provided, however, that this Clause
shall not preclude the Company and the Reinsurer from communicating directly on
matters relating to this Agreement. The parties to this Agreement further
recognize that the provision of services by Jardine shall in no way be
construed as providing Jardine with the authority to negotiate on behalf of the
Reinsurer nor shall Jardine receive any remuneration from the Reinsurer for
providing such services. Payments made by the Company to Jardine shall
constitute payment to the Reinsurer to the extent of such payments. Payments
made by the Reinsurer to Jardine shall only constitute payment to the Company
to the extent that such payments are actually received by the Company.

 

ARTICLE XXV

 

PARTICIPATION

 

WORKERS’ COMPENSATION AND EMPLOYERS LIABILITY QUOTA
SHARE REINSURANCE AGREEMENT EFFECTIVE: January 1, 2000.

 

100.0%

 

This Agreement obligates the Reinsurer for the
proportion shown below of the interests and liabilities set forth under this
Agreement.

 

IN WITNESS WHEREOF, the parties hereto, by their
authorized representatives, have executed this Agreement as of the following
dates.

 

13

 

Executed
in North Palm Beach, Florida, this 29th day of September, 2000.

 

	
  ATTEST:

  	
  AmCOMP ASSURANCE CORPORATION

  AmCOMP PREFERRED INSURANCE COMPANY and/or

  PINNACLE ASSURANCE CORPORATION and/or 

  THOMAS JEFFERSON INSURANCE COMPANY and/or

  Other insurance companies owned by 

  AmCOMP INCORPORATED

  
	
   

  	
   

  
	
  /s/ Jean Buckert

  	
   

  	
  /s/ Donald Johnson

  	
   

  
	
   

  	
   

  
				

And
in Atlanta,  Georgia, this 27th
day of September, 2000. 

 

	
  ATTEST: 

  	
  SWISS REINSURANCE AMERICA
  CORPORATION

  
	
   

  	
   

  
	
  /s/ Jeff D. Rubin

  	
   

  	
  /s/ [ILLEGIBLE]

  	
   

  
				

 

14

 

POLLUTION
EXCLUSION CLAUSE - GENERAL LIABILITY - REINSURANCE

 

A.            This reinsurance excludes all loss and/or liability
accruing to the reinsured company as a result of:

 

1.             bodily
injury or property damage arising out of the actual, alleged or threatened
discharge, dispersal, release or escape of pollutants: 

 

a.             at
or from premises owned, rented or occupied by a named insured;

 

b.             at or from
any site or location used by or for a named insured or others for the handling,
storage, disposal, processing or treatment of waste;

 

c.             which are at
any time transported, handled, stored, treated, disposed of, or processed as
waste by or for a named insured or any person or organization for whom a named
insured may be legally responsible; or

 

d.             at or from
any site or location on which a named insured or any Agreementors or
subAgreementors working directly or indirectly on behalf of a named insured are
performing operations:

 

(i)            if the
pollutants are brought on or to the site or location in connection with such
operations; or

 

(ii)           if the
operations are to test for, monitor, clean up, remove, contain, treat, detoxify
or neutralize the pollutants;

 

2.             any
governmental direction or request that a named insured test for, monitor, clean
up, remove, contain, treat, detoxify or neutralize pollutants.

 

B.            Subparagraphs
A(1)(a) and A(1)(d)(i) above do not apply to bodily injury or property damage
caused by heat, smoke or fumes from a hostile fire.

 

C.            “Hostile fire”
means a fire which becomes uncontrollable or breaks out from where it was
intended to be.

 

D.           “Pollutants”
means any solid, liquid, gaseous or thermal irritant or contaminant, including
smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes
material to be recycled, reconditioned or reclaimed.

 

1

 

NUCLEAR INCIDENT
EXCLUSION CLAUSE - LIABILITY - REINSURANCE - U.S.A.

 

I.              This
reinsurance does not cover any loss or liability accruing to the Reassured as a
member of, or subscriber to, any association of insurers or reinsurers formed
for the purpose of covering nuclear energy risks or as a direct or indirect
reinsurer of any such member, subscriber or association.

 

II.            Without in
any way restricting the operation of paragraph (I) of this Clause it is
understood and agreed that for all purposes of this reinsurance all the
original policies of the Reassured (new, renewal and replacement) of the classes
specified in Clause B in this paragraph (II) shall be deemed to include the
following provision (specified as the Limited Exclusion Provision):

 

LIMITED EXCLUSION PROVISION*

 

A.            It is agreed
that the policy does not apply under any liability coverage, to:

injury, sickness, disease, death or destruction, bodily injury or property
damage with respect to which an insured under the policy is also an insured
under a nuclear energy liability policy issued by Nuclear Energy Liability
Insurance Association, Mutual Atomic Energy Liability Underwriters or Nuclear
Insurance Association of Canada, or would be an insured under any such policy
but for its termination upon exhaustion of its limit of liability.

 

B.            Family
Automobile Policies (liability only), Special Automobile Policies (private
passenger automobiles, liability only), Farmers Comprehensive Personal
Liability Policies (liability only), Comprehensive Personal Liability Policies
(liability only) or policies of a similar nature; and the liability portion of combination
forms related to the four classes of policies stated above, such as the
Comprehensive Dwelling Policy and the applicable types of Homeowners Policies.

 

C.            The inception
dates and thereafter of all original policies as described in II above, whether
new, renewal or replacement, being policies which either

 

1.             become
effective on or after May 1st, 1960, or

 

2.             become
effective before that date and contain the Limited Exclusion Provision set out
above:

 

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

 

III.           Except for
those classes of policies specified in Clause B of paragraph (II) and without
in any way restricting the operation of paragraph (I) of this Clause, it is
understood and agreed that for all purposes of this reinsurance the original
liability policies of the Reassured (new, renewal and replacement) affording
the following coverages:

 

Owners, Landlords and Tenants
Liability, Contractual Liability, Elevator Liability, Owners or Contractors
(including railroad) Protective Liability, Manufacturers and Contractors
Liability, Product Liability, Professional and Malpractice Liability,
Storekeepers Liability, Garage Liability, Automobile Liability (including
Massachusetts Motor Vehicle or Garage Liability) shall be deemed to include,
with respect to such coverages, from the time specified in Clause E of this
paragraph (III), the following provision (specified as Broad Exclusion
Provision):

 

 

BROAD EXCLUSION PROVISION*

 

It is agreed that the policy does not apply:

 

A.            Under any
Liability Coverage, to:  injury,
sickness, disease, death or destruction, bodily injury or  property
damage

 

1.             with respect to which an insured under the policy is
also an insured under a nuclear energy liability policy issued by Nuclear Energy
Liability Insurance Association, Mutual Atomic Energy Liability Underwriters or
Nuclear Insurance Association of Canada, or would be an insured under any such
policy but for its termination upon exhaustion of its limit of liability; or

 

2.             resulting
from hazardous properties of nuclear material and with respect to which (1) any
person or organization is required to maintain financial protection pursuant to
the Atomic Energy Act of 1954, or any law amendatory thereof, or (2) the
insured is, or had this policy not been issued would be, entitled to indemnity
from the United States of America, or any agency thereof, under any Agreement
entered into by the United States of America, or agency thereof, with any
person or organization.

 

B.            Under any
Medical Payments Coverage, or under any Supplementary Payments Provision,
relating to:

 

immediate
medical or surgical relief first aid,

to expenses incurred with respect to:

bodily injury, sickness, disease or death bodily injury

resulting from the hazardous properties of nuclear material, and arising out of
the operation of a nuclear facility by any person or organization.

 

C.            Under any
Liability Coverage, to: injury, sickness, disease, death or destruction,
bodily injury or  property damage resulting from the hazardous
properties of nuclear material, if:

 

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

2.             the nuclear
material is contained in spent fuel or waste at any time possessed, handled,
used, processed, stored, transported or disposed of by or on behalf of an
insured; or

3.             the injury,
sickness, disease, death or destruction, bodily injury or property damage
arises out of the furnishing by an insured of services, materials, parts or
equipment in connection with the planning, construction, maintenance, operation
or use of any nuclear facility, but if such facility is located within the
United States of America, its territories or possessions or Canada, this exclusion
(3) applies only to:

 

injury to
or destruction of property at such nuclear facility property damage to such nuclear facility and any
property thereat.

 

D.            As used in
this endorsement:

 

“hazardous properties” include
radioactive, toxic or explosive properties; “nuclear material” means source
material, special nuclear material or by-product material; “source material”, “special
nuclear material”, and “by-product material”, have the meanings given them in
the Atomic Energy Act of 1954 or in any law amendatory thereof; “spent fuel”
means any fuel element or fuel component, solid or liquid, which has been used
or exposed to radiation in a nuclear reactor; “waste” means any waste material
(1) containing by-product material and (2) resulting from the operation by any
person or organization of any nuclear facility included within the definition
of nuclear facility under paragraph (1) or (2) thereof; “nuclear facility”
means

 

 

(1)           any nuclear
reactor,

(2)           any equipment
or device designed or used for (1) separating the isotopes of uranium or
plutonium, (2) processing or utilizing spent fuel, or (3) handling, processing
or packaging waste,

(3)           any equipment
or device used for the processing, fabricating or alloying of special nuclear
material if at any time the total amount of such material in the custody of the
insured at the premises where such equipment or device is located consists of
or contains more than Twenty-Five (25) grams of plutonium or uranium 233 or any
combination thereof, or more than Two Hundred Fifty (250) grams of uranium 235,

(4)           any structure,
basin, excavation, premises or place prepared or used for the storage or
disposal of waste, and includes the site on which any of the foregoing is
located, all operations conducted on such site and all premises used for such
operations; “nuclear reactor” means any apparatus designed or used to sustain
nuclear fission in a self-supporting chain reaction or to contain a critical
mass of fissionable material;

 

With respect to injury to or
destruction of property, the word “injury” or “destruction”, “property damage” includes all forms of radioactive contamination of
property.  Includes all forms of radioactive contamination of property.

 

E.             The
inception dates and thereafter of all original policies affording coverages
specified in this paragraph (III), whether new, renewal or replacement, being
policies which become effective on or after May 1st, 1960, provided this
paragraph (III) shall not be applicable to:

 

1.             Garage and
Automobile Policies issued by the Reassured on New York risks, or

2.             statuary
liability insurance required under Chapter 90, General Laws of Massachusetts,
until 90 days following approval of the Broad Exclusion Provision by the
Governmental Authority having jurisdiction thereof.

 

IV.           Without in any
way restricting the operation of paragraph (I) of this Clause, it is understood
and agreed that paragraphs (II) and (III) above are not applicable to original
liability policies of the Reassured in Canada and that with respect to such
policies this Clause shall be deemed to include the Nuclear Energy Liability
Exclusion Provisions adopted by the Canadian Underwriters’ Association or the
Independent Insurance Conference of Canada.

 

NOTES:                  The words underlined in the
Limited Exclusion Provision and in the Broad Exclusion Provision shall apply
only in relation to original liability policies which include a Limited
Exclusion Provision or a Broad Exclusion Provision containing those words.

 

“Reassured”         shall be understood to mean “Reassured”,
“Company”, “Reinsured” or whatever other term is used in the attached
reinsurance agreement to designate the reinsured Company or Companies.

 

“Reinsurance”      shall be understood to mean “Reinsurance”,
“Contract”, “Agreement”, “Policy” or whatever other term is used to designate
the attached reinsurance document.

 

 

for any scientific, medical,
agricultural, commercial or industrial purpose) used, distributed, handled or
sold by an Insured.

 

D.            As used in
this Policy:

 

l.              The term “nuclear
energy hazard” means the radioactive, toxic, explosive or other hazardous
properties of radioactive material;

 

2.             The term “radioactive
material” means uranium, thorium, plutonium, neptunium, their respective
derivatives and compounds, radioactive isotopes of other elements and any other
substances that the Atomic Energy Control Board may, by regulation, designate
as being prescribed substances capable of releasing atomic energy, or as being
requisite for the production, use or application of atomic energy;

 

3.             The term “nuclear
facility” means:

 

(a)           any apparatus
designed or used to sustain nuclear fission in a self-supporting chain reaction
or to contain a critical mass of plutonium, thorium and uranium or any one or
more of them;

(b)           any equipment
or device designed or used for (i) separating the isotopes of plutonium,
thorium and uranium or any one or more of the, (ii) processing or utilizing
spent fuel, or (iii) handling, processing or packaging waste;

(c)           any equipment
or device used for the processing, fabricating or alloying of plutonium,
thorium or uranium enriched in the isotope uranium 233 or in the isotope
uranium 235, or any one or more of them if at any time the total amount of such
material in the custody of the Insured at the premises where such equipment or
device is located consists of or contains more than 25 grams of plutonium or
uranium 233 or any combination thereof, or more than 250 grams of uranium 235;

(d)           any structure,
basin, excavation, premises or place prepared or used for the storage or
disposal of waste radioactive material; and includes the site on which any of
the foregoing is located, together with all operations conducted thereon and
all premises used for such operations.

 

4.             The term “fissionable
substance” means any prescribed substance that is, or from which can be
obtained, a substance capable of releasing atomic energy by nuclear fission.

 

5.             With respect
to property, loss of use of such property shall be deemed to be property
damage.

 

NOTES:                  Wherever
used herein the terms:

 

“Reassured”         shall be understood
to mean “Reassured”, “Company”, “Reinsured” or whatever other term is used in
the attached reinsurance agreement to designate the reinsured Company or
Companies.

 

“Reinsurance”      shall be understood
to mean “Reinsurance”, “Contract”, “Agreement”, “Policy” or whatever other term
is used to designate the attached reinsurance document.

 

 

NUCLEAR INCIDENT
EXCLUSION CLAUSE - REINSURANCE NO. 4

 

1.             This
Reinsurance does not cover any loss or liability accruing to the Reassured as a
member of, or subscriber to, any association of insurers or reinsurers formed
for the purpose of covering nuclear energy risks or as a direct or indirect
reinsurer of any such member, subscriber or association.

 

2.             Without in
any way restricting the operations of Nuclear Incident Exclusion Clauses, -
Liability, - Physical Damage, - Boiler and Machinery and paragraph (1) of this
clause, it is understood and agreed that for all purposes of the reinsurance
assumed by the Reinsurer from the Reinsured, all original insurance policies or
contracts of the Reinsured (new, renewal and replacement) shall be deemed to
include the applicable existing Nuclear Clause and/or Nuclear Exclusion(s) in
effect at the time and any subsequent revisions thereto a agreed upon and
approved by the Insurance Industry and/or a qualified Advisory or Rating
Bureau.

 

1

 

Schedule X-A

 

Monthly account statement

 

	
  1.

  	
   

  	
  Gross Subject Unearned Premium at
  inception

  	
   

  	
  per statutory statement of Company

  
	
  2.

  	
   

  	
  Excess limits and inuring
  reinsurance deduction

  	
   

  	
  (1) x 0.035

  
	
  3.

  	
   

  	
  Gross Net Unearned Premium at
  inception

  	
   

  	
  (1) - (2)

  
	
  4.

  	
   

  	
  Gross Subject Written Premium

  	
   

  	
  As reported by the Company

  
	
  5.

  	
   

  	
  Excess limits and inuring
  reinsurance deduction

  	
   

  	
  (4) x 0.035

  
	
  6.

  	
   

  	
  Gross Net Written Premium

  	
   

  	
  (4) - (5)

  
	
  7.

  	
   

  	
  Gross Net Ceded Premium

  	
   

  	
  [(3) + (6)] x 0.35

  
	
  8.

  	
   

  	
  Ceding Commission

  	
   

  	
  [(1) + (4)] x 0.46 x 0.35

  
	
  9.

  	
   

  	
  Net ceded premium

  	
   

  	
  (7) - (8)

  
	
  10.

  	
   

  	
  Paid Losses and Loss Adjustment
  Expenses

  	
   

  	
  As reported by the Company

  
	
  11. 

  	
   

  	
  Net balance

  	
   

  	
  (9) - (10)

  

 

Overlying
facultative reinsurance placements

 

Format to be agreed with Reinsurer.

 

Memo items

 

	
  1.

  	
   

  	
  Gross Subject Unearned Premium end
  of period

  
	
  2.

  	
   

  	
  Outstanding Case Loss Reserves

  
	
  3.

  	
   

  	
  Outstanding Case Loss Adjustment
  Expense Reserve

  
	
  4.

  	
   

  	
  Bulk and IBNR Reserves

  

 

Large claims list

 

List of
claims with reported ultimate loss greater than fifty thousand dollars
($50,000)

 

 

NUCLEAR INCIDENT
EXCLUSION CLAUSE - LIABILITY - REINSURANCE - CANADA

 

I.              This
Reinsurance does not cover any loss or liability accruing to the Reassured as a
member of, or subscriber to, any association of insurers or reinsurers formed
for the purpose of covering nuclear energy risks or as a direct or indirect
reinsurer of any such member, subscriber or association.

 

II.            Without in
any way restricting the operation of paragraph I of this Clause it is agreed
that for all purposes of this Reinsurance all the original liability contracts
of the Reassured, whether new, renewal or replacement, of the following
classes, namely,

Personal Liability

Farmers’ Liability

Storekeepers’ Liability

which become effective on or after
31st December 1984, shall be deemed to include, from their inception dates and
thereafter, the following provision:

 

Limited Exclusion Provision.

 

This policy does not apply to bodily
injury or property damage with respect to which the Insured is also insured
under a contract of nuclear energy liability insurance (whether the Insured is
unnamed in such contract and whether or not it is legally enforceable by the
Insured) issued by the Nuclear Insurance Association of Canada or any other
group or pool of insurers or would be an Insured under any such policy but for
its termination upon exhaustion of its limits of liability.

 

With respect to property, loss of use
of such property shall be deemed to be property damage.

 

III.           Without in any
way restricting the operation of paragraph I of this clause it is agreed that
for all purposes of this Reinsurance all the original liability contracts of
the Reassured, whether new, renewal or replacement, of any class whatsoever
(other than Personal Liability, Farmers’ Liability, Storekeepers’ Liability or
Automobile Liability contracts), which become effective on or after 31st
December 1984, shall be deemed to include, from their inception dates and
thereafter, the following provision:

 

Broad Exclusion Provision

 

It is agreed that this Policy does not
apply:

 

A.            to liability
imposed by or arising under the Nuclear Liability Act; nor

B.            to bodily
injury or property damage with respect to which an Insured under this Policy is
also insured under a contract of nuclear energy liability insurance (whether
the Insured is unnamed in such contract and whether or not it is legally
enforceable by the Insured) issued by the Nuclear Insurance Association of Canada
or any other insurer or group or pool of insurers or would be an Insured under
any such policy but for its termination upon exhaustion of its limit of
liability; nor

C.            to bodily
injury or property damage resulting directly or indirectly from the nuclear
energy hazard arising from:

1.             the
ownership, maintenance, operation or use of a nuclear facility by or on behalf
of an Insured;

2.             the
furnishing by an Insured of services, materials, parts or equipment in
connection with the planning, construction, maintenance, operation or use of
any nuclear facility; and

3.             the
possession, consumption, use, handling, disposal or transportation of
fissionable substances, or of other radioactive material (except radioactive
isotopes, away from a nuclear facility, which have reached the final stage of
fabrication so as to be usable

 

 

ADDENDUM
NO. 1

to the

 

WORKERS’
COMPENSATION AND EMPLOYERS LIABILITY

QUOTA SHARE REINSURANCE AGREEMENT

(hereinafter referred to as the “Agreement”)

 

between

 

AMCOMP
ASSURANCE COMPANY and/or

AMCOMP PREFERRED INSURANCE COMPANY and/or

other insuance companies owned by

AMCOMP, INCORPORATED

North Palm Beach, Florida

(hereinafter referred to as the “Company”)

 

and

 

SWISS
REINSURANCE AMERICA CORPORATION

Armonk, New York

(hereinafter referred to as the “Reinsurer”)

 

It is understood and agreed by the parties hereto that,
effective 12:01 a.m., Eastern Standard Time, January 1, 2001, this Agreement is
cancelled on a run-off basis in accordance with Article II - Term, Paragraph C.
section 1.

 

ALL OTHER TERMS AND CONDITIONS REMAIN THE SAME.

 

1

 

IN WITNESS WHEREOF, the parties hereto, by their
authorized representatives, have executed this Addendum as of the following
dates.

 

 

Executed in North Palm Beach, Florida, this 12 day of September, 2001.

 

	
  ATTEST:

  	
   

  	
  AMCOMP ASSURANCE CORPORATION

  
	
   

  	
   

  	
  AMCOMP PREFERRED INSURANCE COMPANY

  
	
   

  	
   

  	
  and/or

  
	
   

  	
   

  	
  other insurance companies owned by

  
	
   

  	
   

  	
  AMCOMP INCORPORATED

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Jean Buckert

  	
   

  	
  BY:

  	
   

  	
  /s/ Donald Johnson

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  TITLE:

  	
  CFO

  
						

 

 

And in
Atlanta, Georgia, this 17 day of April, 2001.

 

	
  ATTEST:

  	
   

  	
  SWISS REINSURANCE AMERICA
  CORPORATION

  

 

 

	
  /s/ Jeff D. Rubin

  	
   

  	
  BY:

  	
   

  	
  /s/ [ILLEGIBLE]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  TITLE:

  	
  Member of Senior Management

  

 

2

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