Document:

exv10w38

 

Exhibit 10.38

REINSURANCE AGREEMENT

This Reinsurance Agreement (“Agreement”) is entered into as of the Effective Date as defined herein
below. Its parties are:

NORTH POINTE INSURANCE COMPANY

(“Company”)

and

MIDFIELD INSURANCE COMPANY

(“Reinsurer”)

Background

     Company is a property and casualty insurance company licensed in various states. Reinsurer is
a pure captive insurance company licensed in Washington DC. Company desires to cede and Reinsurer
desires to assume certain of its liabilities under insurance coverages written under the Subject
Business as further described below.

     NOW, THEREFORE, in consideration of this Agreement’s terms, the parties agree:

Terms

	1.	 	Business Covered
	 
	 	 	The Reinsurer shall indemnify the Company in respect of the liability that may accrue to the
Company as a result of loss or losses under Policies classified by the Company as Fire,
Allied Lines, Inland Marine, Commercial Multiple Peril (Section I only) and Businessowners
(including Business Interruption), Automobile Physical Damage (excluding Collision and
Theft), property sections of Renters’, Dwelling Fire, Contents, Scheduled and Unscheduled
Personal Property, Adjacent Structure and Additional Living Expense, in force at the
inception of this Agreement, or written or renewed during the term of this Agreement by or
on behalf of the Company, subject to the terms and conditions herein contained
(collectively, “Subject Business”).
	 
	2.	 	Account Basis
	 
	 	 	Attaching Basis.
	 
	3.	 	Retention and Limit

	 	A.	 	The Reinsurer shall be liable in respect of each Loss Occurrence for the
Ultimate Net Loss over and above the initial Ultimate Net Loss retention as set forth
in the schedule below, subject to a limit of liability to the Reinsurer for each such
Loss Occurrence, and subject further to a limit of liability for all Loss Occurrences
commencing during the term of this Agreement, as set forth below:

1

 

	 	 	 	 	 
	RETENTION AND LIMITS SCHEDULE
	 	 	 
	Company’s Retention	 	Reinsurer’s Limit of Liability
	 
	Ultimate Net Loss in 

Respect of Each Loss 

Occurrence
	 	Ultimate Net Loss in

Respect of Each Loss

Occurrence
	 	Ultimate Net Loss in

Respect of All Loss

Occurrences During

the Term of this

Agreement
	 
	$4,000,000
	 	$4,000,000
	 	$8,000,000

	 	B.	 	The Reinsurer shall not be liable under this Agreement unless two or more risks
are involved in the same Loss Occurrence. The Company shall be sole judge of what
constitutes one risk for all purposes of this Agreement.
	 
	 	C.	 	The Company shall be permitted to carry other reinsurance, recoveries under
which shall inure to the benefit of this Agreement.

	4.	 	Commencement
	 
	 	 	This Agreement shall take effect on September 1, 2006 (the “Effective Date”), and shall
cover all losses occurring under the Policies during this Agreement’s term.
	 
	5.	 	Definitions

	 	5.1	 	“Gross Written Premium” means the gross premiums for the Subject Business
written by Company, less cancellations and return premiums.
	 
	 	5.2	 	“Loss” means any loss on an insurance policy covered under the Subject
Business, and will follow the coverage provided by that insurance policy.
	 
	 	 	 	“Loss Occurrence” with regard to property Losses, means the sum of all individual
losses directly occasioned by any one disaster, accident or loss or series of
disasters, accidents or losses arising out of one event which occurs within the area
of one state of the United States or province of Canada and states or provinces
contiguous thereto and to one another. However, the duration and extent of anyone
Loss Occurrence shall be limited to all individual Losses sustained by the Company
occurring during any period of 168 consecutive hours arising out of and directly
occasioned by the same event, except that the term Loss Occurrence shall be further
defined as follows:
	 
	 	 	 	As regards windstorm, hail, tornado, hurricane, cyclone, including ensuing collapse
and water damage, all individual losses sustained by the Company occurring during
any period of 72 consecutive hours arising out of and directly occasioned by the
same event. However, the event need not be limited to one state or province or
states or provinces contiguous thereto.

2

 

	 	 	 	As regards riot, riot attending a strike, civil commotion, vandalism and malicious
mischief, all individual losses sustained by the Company occurring during any period
of 72 consecutive hours arising out of and directly occasioned by the same event.
However, the event need not be limited to one municipality, county, state, or
province or municipalities, counties, states or provinces contiguous thereto, within
the United States or Canada. The maximum duration of 72 consecutive hours may be
extended in respect of individual losses which occur beyond such 72 consecutive
hours during the continued occupation of an insured’s premises by strikers, provided
such occupation commences during the aforesaid period.
	 
	 	 	 	As regards earthquake (the epicenter of which need not necessarily be within the
territorial confines referred to in the first paragraph of this definition) and fire
following directly occasioned by the earthquake, only those individual fire losses
that commence during the period of 168 consecutive hours may be included in the
Company’s Loss Occurrence.
	 
	 	 	 	As regards “freeze,” only individual losses directly occasioned by collapse,
breakage of glass and water damage (caused by bursting frozen pipes and tanks) may
be included in the Company’s Loss Occurrence.
	 
	 	 	 	For all Loss Occurrences the Company may choose the date and time when any such
period of consecutive hours commences provided that it is not earlier than the date
and time of the occurrence of the first recorded individual loss sustained by the
Company arising out of that disaster, accident or loss and provided that only one
such period of 168 consecutive hours shall apply with respect to one event, except
for those Loss Occurrences referred to in (a) and (b) above, where only one such
period of 72 consecutive hours shall apply with respect to one event, regardless of
the duration of the event.
	 
	 	 	 	No individual losses occasioned by an event that would be covered by 72 hours
clauses may be included in any “Loss Occurrence” claimed under the 168 hours
provision.
	 
	 	 	 	“Loss Occurrence” with regard to casualty Losses means any accident or occurrence or
series of accidents or occurrences arising out of anyone event and happening within
the term and scope of this Agreement. Without limiting the generality of the
foregoing, the term Loss Occurrence shall be held to include:
	 
	 	 	 	As respects Products Bodily Injury and Products Property Damage Liability, injuries
to all persons and all damage to property of others occurring during a Policy Period
and proceeding from or traceable to the same causative agency shall be deemed to
arise out of one Loss Occurrence, and the date of such Loss Occurrence shall be
deemed to be the commencing date of the Policy Period. For the purpose of this
provision, each annual period of a Policy that continues in force for more than one
year shall be deemed to be a separate Policy Period.
	 
	 	 	 	As respects Bodily Injury Liability (other than Automobile and Products), said term
shall also be understood to mean, as regards each original assured, injuries to

3

 

	 	 	 	one or more than one person resulting from infection, contagion, poisoning, or
contamination proceeding from or traceable to the same causative agency.
	 
	 	 	 	As respects Property Damage Liability (other than Automobile and Products), said
term shall also, subject to provisions (a) and (b) below, be understood to mean loss
or losses caused by a series of operations, events, or occurrences arising out of
operations at one specific site and which cannot be attributed to any single one of
such operations, events or occurrences, but rather to the cumulative effect of the
same. In assessing each and every Loss Occurrence within the foregoing definition,
it is understood and agreed that:

	 	a.	 	the series of operations, events or occurrences shall not
extend over a period longer than 12 consecutive months; and
	 
	 	b.	 	the Company may elect the date on which the period of not
exceeding 12 consecutive months shall be deemed to have commenced.

	 	 	 	In the event that the series of operations, events or occurrences extend over a
period, longer than 12 consecutive months, then each consecutive period of 12
months, the first of which commences on the date elected under b. above, shall form
the basis of claim under this Agreement.
	 
	 	 	 	With regard to those Policies that provide aggregate limits of liability the total
of all individual losses occurring during any one Policy year that proceed from or
are traceable to the same causative agency.
	 
	 	5.3	 	Ultimate Net Loss

	 	(a)	 	The term “Ultimate Net Loss” shall mean the actual sum paid by
the Company in settlement of losses or liability after making deductions for
all recoveries, including subrogation, salvages, and claims upon other
reinsurances, whether collectible or not, which inure to the benefit of the
Reinsurer under this Agreement, and shall include Loss Adjustment Expenses
incurred by the Company, Extra Contractual Obligations and Excess of Original
Policy Limits, provided, however, that in the event of the insolvency of the
Company, Ultimate Net Loss shall mean the amount of loss and Loss Adjustment
Expenses for which the Company is liable, and payment by the Reinsurer shall be
made to the liquidator, receiver, conservator or statutory successor of the
Company in accordance with the provisions of Section 18 of this Agreement.
	 
	 	(b)	 	The term “Loss Adjustment Expenses” shall mean all expenses
incurred by the Company in connection with the investigation, settlement,
defense or litigation of any claim or loss covered by the Policies reinsured
under this Agreement, including Declaratory Judgment Expenses and Prejudgment
Interest, but shall exclude the salaries and expenses of Company employees,
office expenses, and other overhead expenses.

4

 

	 	(c)	 	The term “Declaratory Judgment Expenses” shall mean all legal
expenses, incurred in the representation of the Company in litigation brought
to determine the Company’s defense and/or indemnification obligations.
	 
	 	(d)	 	All recoveries, salvages or payments 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 to the loss settlement shall be made by the parties hereto.
	 
	 	(e)	 	Nothing in this Section shall be construed to mean that losses
are not recoverable hereunder until the Ultimate Net Loss of the Company has
been ascertained.

	 	5.4	 	“Insurance Policy or Policy” means all insurance policies and other Agreements
of insurance entered into between an insured and Company covering the insurance
obligations of the Subject Business.
	 
	 	5.5	 	“Prejudgment Interest or Delayed Damages” means interest or damages added to a
settlement, verdict, award, or judgment based on the amount of time prior to the
settlement, verdict, award, or judgment whether or not made part of the settlement,
verdict, award, or judgment.
	 
	 	5.6	 	An “Act of Terrorism” for purposes of this Agreement shall mean:
	 
	 	 	 	Any actual or threatened violent act or act harmful to human life, tangible or
intangible property or infrastructure directed towards or having the effect of (a)
influencing or protesting against any de jure or de facto government or policy
thereof, (b) intimidating, coercing or putting in fear a civilian population or
section thereof for the purpose of establishing or advancing a specific ideological,
religious or political system of thought, perpetrated by a specific individual or
group directly or indirectly through agents acting on behalf of said individual or
group or (c) retaliating against any country for direct or vicarious support by that
country of any other government or political system.
	 
	 	 	 	Any act declared pursuant to the Terrorism Risk Insurance Act of 2002 (and any
amendments thereto) shall also be considered an “Act of Terrorism” for purposes of
this Agreement.

	6.	 	Term and Termination

	 	6.1	 	This Agreement’s initial term expires on June 30, 2007 . It shall
automatically renew for successive one-year terms unless terminated at the end of each
term by either party upon 30 days’ advance written notice to the other party.
	 
	 	6.2	 	Reinsurer’s obligation to insure and pay its liabilities will continue if this
Agreement terminates. Notwithstanding the termination of this Agreement, its
provisions shall continue to apply to all Policies in force at the termination so that
each party’s obligations under this Agreement will be fully performed. However,

5

 

	 	 	 	upon termination, Reinsurer shall have no obligation to reinsure Company with
respect to Policies not yet entered into by Company.

	7.	 	Territory
	 
	 	 	This Agreement’s territorial limits will be Company’s Subject Business as written in the
United States.
	 
	8.	 	Original Conditions
	 
	 	 	All Policies under this Agreement will be subject to the same rates, terms, clauses,
conditions, waivers, alterations, modifications, and interpretations, and cancellations as
the respective Policies. Reinsurer shall follow the fortunes of the Company with respect to
Subject Business.
	 
	9.	 	Extra Contractual Obligations

	 	9.1	 	“Extra Contractual Obligations” are those liabilities not covered under any
other provision of this Agreement and includes 100% of any punitive, exemplary,
compensatory or consequential damages, including associated litigation expenses, paid
or payable by Company as a result of an action against Company by its insured, its
insured’s assignee or a third party claimant, which action alleges negligence or bad
faith on the part of Company in handling a claim or loss under a policy subject to this
Agreement. Liabilities will include losses incurred by Company on Subject Business
arising from any financial or credit risk, as defined below, and liabilities arising
from the handling of any claim or loss on the Subject Business covered by this
Agreement. The term “financial or credit risk” shall mean any Loss (or Allocated Loss
Adjustment Expenses) incurred by Company (or advanced by Company to protect Company’s
own interests, as determined in Company’s sole discretion) on Subject Business arising
as a result of:

	 	(a)	 	Loss, damages, or associated litigation expenses which should
have been recoverable under a self-insured retention or a deductible, within
the limit of any Insurance Policy.
	 
	 	(b)	 	Loss, damages or associated litigation expenses for which
Company is entitled to contribution or indemnity pursuant to the retentions, if
any, scheduled or provided for in any Insurance Policy.

	 	 	 	The date on which Company incurs an Extra Contractual Obligation will be deemed, in
all circumstances, to be the date of the original loss.

	 	9.2	 	“Extra Contractual Obligations” does not include liabilities incurred solely
due to the willful misconduct or the fraud of Company’s directors or officers acting
individually or collectively or in collusion with any individual or other person
involved in the presentation, defense or settlement of any claim or loss covered under
this Agreement.

6

 

	10.	 	Excess of Original Policy Limits
	 
	 	 	This Agreement will protect Company, within its limits, 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.
	 
	11.	 	Reinsurance Premium Rate
	 
	 	 	Company will pay to Reinsurer a premium for the reinsurance provided under this Agreement
(including coverage for Reinsurer’s Liability for all Loss Occurrences during the term of
the Agreement) at 22.5% rate-on-line for the initial term, and for each subsequent renewal
term. Company or Reinsurer may offset any balance whether on an account premium,
commission, claims or losses, adjustments, expenses, salvage or any other amounts that are
due from party to the other, however, such offsets are permitted only with respect to
obligations arising under this Agreement.
	 
	 	 	This agreement provides no guarantee of profit, directly, or indirectly, from the Reinsurer
to the Company or from the Company to the Reinsurer.
	 
	12.	 	Reports and Remittances
	 
	 	 	On a monthly basis, Company or its designee will prepare a monthly accounting to Reinsurer
as follows:

	 	(1)	 	Gross Written Premium accounted for during the billing period (and those
adjustments provided for in this Agreement,
	 
	 	(2)	 	Assumed Premium, less
	 
	 	(3)	 	Net Liability for the billing period, plus
	 
	 	(4)	 	Subrogation, salvage, or other recoveries received by Company during the
billing period, and
	 
	 	(5)	 	Payment of losses.

7

 

	 	 	Company will remit any balance due in favor of Reinsurer with the monthly accounting.
Reinsurer will pay any balance due Company within seven days from the date the report is
provided by Company without delay for payment of losses and claims obligations incurred
under this agreement. All settlements between Company and Reinsurer shall be made in cash
or cash equivalents. In addition to the reports required above, Company and Reinsurer will
furnish each other such other information as may be reasonably required by the other party
for such party’s quarterly and annual statements and internal records.

	13.	 	Management of Claims and Losses
	 
	 	 	Company will investigate and settle or defend all claims and losses. When requested by
Reinsurer, Company will permit Reinsurer, at Reinsurer’s expense, to be associated with
Company in the settlement, defense, or control of any claim, loss, or legal proceeding. All
payments of claims or losses, including ex gratia payments, shall be unconditionally binding
on Reinsurer.
	 
	14.	 	Currency
	 
	 	 	All dollar amounts in this Agreement are expressed in terms of United States dollars.
	 
	15.	 	Salvage and Subrogation
	 
	 	 	Reinsurer shall be subrogated to the rights of Company to the extent of its loss payments to
Company. Company agrees to enforce its rights of salvage and subrogation whenever it
determines it is cost effective to do so. Reinsurer will be credited with salvage and
subrogation, net of any recovery expense, in respect of claims and settlements under this
Agreement. If the recovery expense exceeds the amount recovered, the amount recovered (if
any) shall be applied to the reimbursement of recovery expense and the remaining expense
shall be borne by Reinsurer as Allocated Loss Adjustment Expenses.
	 
	16.	 	Inspection of Records
	 
	 	 	Company and Reinsurer will allow the other party to inspect, audit and copy, at any
reasonable time and after reasonable notice, the records of the other party pertaining to
the Subject Business insured under this Agreement.
	 
	17.	 	Arbitration
	 
	 	 	Any unresolved difference of opinion between Company and Reinsurer arising out of this
Agreement will be submitted to arbitration. The American Arbitration Association (“AAA”)
will administer the arbitration pursuant to its Commercial Rules, but subject to this
Article’s terms. Three arbitrators will decide the arbitration. Each party will choose one
arbitrator. If either party refuses or neglects to appoint an arbitrator within 30 days of
the filing of the claim of arbitration, the AAA may appoint the arbitrator. The first two
chosen arbitrators will together choose the third arbitrator within 10 days of being
appointed. If those two arbitrators are unable to do so, the parties or their attorneys may
request the AAA to appoint the third neutral arbitrator. Company and Reinsurer shall be
notified of the identity of the third arbitrator. Before the commencement of hearings, each
arbitrator will take an oath of impartiality. The arbitrators will be financially

8

 

	 	 	disinterested and impartial. All three arbitrators shall be present or former officers of property or
casualty insurance or reinsurance companies or Underwriters at Lloyd’s of London, not at any
time under the control or management of either party to this Agreement.
	 
	 	 	The party requesting arbitration (“Claimant”) will submit its brief to the arbitrators
within 30 days after notice of the selection of the third arbitrator. Upon receipt of the
Claimant’s brief, the other party (“Respondent”) will have 30 days to file a reply brief.
On receipt of the Respondent’s brief, the Claimant shall have 20 days to file a rebuttal
brief. Respondent shall have 20 days from the receipt of Claimant’s rebuttal brief to file
its rebuttal brief. The arbitrators may extend the time for filing of briefs at the request
of either party.
	 
	 	 	The arbitrators will preside over a hearing as set forth in the AAA’s Commercial Rules, and
will allow the parties to examine and cross-examine witnesses. The arbitrators will be
relieved from judicial formalities, including adherence to the rules of evidence. In
addition to considering the rules of law and the customs and practices of the insurance and
reinsurance business, the arbitrators will make their decision with a view to effecting this
Agreement’s intent. The arbitrators shall make their decision within 60 days following the
termination of the hearings unless the parties consent to an extension. The decision of the
majority shall be final and binding upon the parties. Each party shall bear the expense of
its arbitrator and shall jointly and equally share with the other the expenses of the third
arbitrator and of the arbitration. The arbitration shall take place in Metropolitan
Detroit, Michigan. Judgment upon the award rendered by the arbitrators may be entered in
any court having jurisdiction of the dispute.
	 
	 	 	This Section will survive this Agreement’s termination.
	 
	18.	 	Insolvency of Company
	 
	 	 	The Company’s insolvency will not effect the Reinsurer’s obligations under this Agreement.
In such a case, payment under this Agreement would be made to Company or its liquidator,
receiver or statutory successor.
	 
	 	 	If the Company enters insolvency proceedings, the Company’s liquidator, receiver or
statutory successor will give written notice to Reinsurer of the pendency of a claim against
Company on the policy or policies reinsured within a reasonable time after the claim is
filed in the insolvency proceeding. While any such claim is pending, Reinsurer may
investigate the claim and interpose, at its own expense, in the proceeding where the claim
is to be adjudicated, any defense or defenses that it may deem available to Company or its
liquidator or receiver or statutory successor. The expense thus incurred by Reinsurer will
be chargeable, subject to court approval, against Company as part of the expense of
liquidation or otherwise as an administrative cost of the insolvency proceedings to the
extent of a proportionate share of the benefits which may accrue to Company solely as a
result of the defense so undertaken by Reinsurer.
	 
	 	 	Should Company go into liquidation or should a receiver be appointed, Reinsurer shall be
entitled to deduct from any sums which may be or may become due to Company under this
Reinsurance Agreement, any sums which are due to Reinsurer by Company under 

9

 

	 	 	this Agreement and which are payable at a fixed or stated date, as well as any other sums due to
Reinsurer which are permitted to be offset under applicable law.
	 
	19.	 	Excise Taxes
	 
	 	 	Reinsurer will allow for the purpose of paying the Federal Excise Tax, the applicable
percentage of the premium payable hereon to the extent such premium is subject to the
Federal Excise Tax.
	 
	 	 	In the event of return premium due under this Agreement, Reinsurer will deduct the
applicable percentage from the amount of the return; Company or its agent is responsible for
recovering the tax from the U.S. Government.
	 
	20.	 	Miscellaneous

	 	20.1	 	Michigan law governs this Agreement.
	 
	 	20.2	 	This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original but which together shall constitute one and the same instrument.
	 
	 	20.3	 	This Agreement will be automatically modified to conform to any law or
governmental regulation having application to or jurisdiction over its parties or
subject matter, without prior notice.
	 
	 	20.4	 	This Agreement has been negotiated by the parties and the fact that the initial
and final draft shall have been prepared by one party or the other will not give rise
to any presumption for or against any party to this Agreement or be used in any form in
the construction or interpretation of this Agreement or any of its provisions.
	 
	 	20.5	 	This Agreement, together with such amendments as may from time to time be
executed in writing by the parties, constitutes the entire agreement between the
parties relating to its subject matter. There exists no other written or oral
understandings, agreements or assurances with respect to these matters except as are
set forth in this Agreement. Unless expressly stated, this Agreement confers no rights
on any person or business entity that is not a party.
	 
	 	20.6	 	The parties intent this Agreement to both bind and benefit them and their
respective successors. Neither this Agreement nor any rights or obligations under this
Agreement may be assigned or delegated by either party without the prior written
consent of the other.
	 
	 	20.7	 	There is no privity between Company’s insureds and Reinsurer. Reinsurer’s
liability is only to indemnify Company. This Agreement is not for the benefit of any
insured under any policy of insurance or any other third party.
	 
	 	20.8	 	No error or inadvertent omission on the part of one party shall relieve the
other party of liability pursuant to this Agreement, provided that any such errors
and/or omissions are rectified as soon after discovery as feasible.

10

 

	 	20.9	 	By executing this Agreement, each party reaffirms to the other than it is
undertaking the Agreement in utmost good faith.

	 	 	 	 	 	 	 	 	 
	NORTH POINTE INSURANCE COMPANY	 	MIDFIELD INSURANCE COMPANY	 	 
	Company	 	Reinsurer	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	 	 	By:	 	 	 	 
	 

	 	 
 
	 	 	 	 
 
	 	 
	 
	 	 	 	 	 	 	 	 
	Title:

	 	 	 	Title:	 	 	 	 
	 

	 	 
 
	 	 	 	 
 
	 	 

11exv10w39

 

Exhibit 10.39

REINSURANCE AGREEMENT

This Reinsurance Agreement (“Agreement”) is entered into as of the Effective Date as defined herein
below. Its parties are:

NORTH POINTE INSURANCE COMPANY

(“Company”)

and

MIDFIELD INSURANCE COMPANY

(“Reinsurer”)

Background

     Company is a property and casualty insurance company licensed in various states. Reinsurer is
a pure captive insurance company licensed in Washington DC. Company desires to cede to Reinsurer,
and Reinsurer desires to assume from Company certain commercial property and casualty insurance
business as further described below.

     NOW, THEREFORE, in consideration of this Agreement’s terms, the parties agree:

Terms

	1.	 	Liability Of Reinsurer

	 	1.1	 	(i) Company will cede and Reinsurer will assume 100% of the Net Liability in
the $250,000 in excess of $250,000 layer (the “Property Cession”) arising under or as a
result of all commercial property insurance policies written by the Company and (ii)
Company will cede and Reinsurer will assume 100% of the Net Liability in the $350,000
in excess of $250,000 layer (the “Casualty Cession”) arising under or as a result of
all commercial casualty insurance policies written by the Company (the insurance
business covered under the Property Cession and Casualty Cession shall be collectively
referred to as “Subject Business”). All such insurance policies issued under the
Subject Business shall be called the “Policies”. Reinsurer’s liability with respect to
each Loss under this Agreement will commence obligatorily and simultaneously with that
of the Company, subject to this Agreement’s terms.
	 
	 	1.2	 	Company shall retain the first $250,000 of the Net Liability of the commercial
property insurance and shall retain the first $250,000 of the Net Liability of the
commercial casualty insurance as respects each risk in any one Loss. The Reinsurer
shall then be liable for 100% of the amount by which the Company’s Net Liability
(including Loss, Allocated Loss Adjustment Expenses, and Extra Contractual Obligations)
exceeds the Company’s retention of $250,000 for the commercial property insurance
business, or $250,000 for the commercial casualty insurance business, but the liability
of Reinsurer shall never 

 

 

	 	 	 	exceed $250,000 for each risk of any one Loss of the property insurance business and shall never exceed $350,000 for the casualty insurance business,
nor shall the Reinsurer’s liability from all risks in each Loss Occurrence for commercial property insurance
business exceed $750,000, nor shall the Reinsurer’s liability from all risks in each
Loss Occurrence for commercial casualty business exceed $1,050,000. However, as
respects all Acts of Terrorism, the Reinsurer shall never be liable for more than
$250,000 in any calendar year.
	 
	 	1.3	 	The Company’s retention and the Reinsurer’s limit of liability for each Loss
and Loss Occurrence, set forth in Section 1.2 above, shall apply irrespective of the
number of Policies affected or number of hazards in one Policy, and regardless of the
number of classes or types of insurance involved.

	2.	 	Commencement
	 
	 	 	This Agreement shall take effect on January 1, 2007 (the “Effective Date”), and shall cover
all Losses Occurrences on or after the Effective Date and during this Agreement’s term.

	3.	 	Definitions

	 	3.1	 	“Gross Written Premium” means the gross premiums for the Subject Business
written by Company less cancellations and return premiums.
	 
	 	3.2	 	“Loss” means any loss on an insurance policy covered under the Subject
Business, and will follow the coverage provided by that insurance policy.
	 
	 	 	 	“Loss Occurrence” with regard to property Losses, means the sum of all individual
losses directly occasioned by any one disaster, accident or loss or series of
disasters, accidents or losses arising out of one event which occurs within the area
of one state of the United States or province of Canada and states or provinces
contiguous thereto and to one another. However, the duration and extent of anyone
Loss Occurrence shall be limited to all individual Losses sustained by the Company
occurring during any period of 168 consecutive hours arising out of and directly
occasioned by the same event, except that the term Loss Occurrence shall be further
defined as follows:
	 
	 	 	 	As regards windstorm, hail, tornado, hurricane, cyclone, including ensuing collapse
and water damage, all individual losses sustained by the Company occurring during
any period of 72 consecutive hours arising out of and directly occasioned by the
same event. However, the event need not be limited to one state or province or
states or provinces contiguous thereto.
	 
	 	 	 	As regards riot, riot attending a strike, civil commotion, vandalism and malicious
mischief, all individual losses sustained by the Company occurring during any period
of 72 consecutive hours arising out of and directly occasioned by the same event.
However, the event need not be limited to one municipality, county, state, or
province or municipalities, counties, states or provinces contiguous thereto, within
the United States or Canada. The maximum duration of 72 consecutive 

2

 

	 	 	 	hours may be extended in respect of individual losses which occur beyond such
72 consecutive hours during the continued occupation of an insured’s premises by
strikers, provided such occupation commences during the aforesaid period.
	 
	 	 	 	As regards earthquake (the epicenter of which need not necessarily be within the
territorial confines referred to in the first paragraph of this definition) and fire
following directly occasioned by the earthquake, only those individual fire losses
that commence during the period of 168 consecutive hours may be included in the
Company’s Loss Occurrence.
	 
	 	 	 	As regards “freeze,” only individual losses directly occasioned by collapse,
breakage of glass and water damage (caused by bursting frozen pipes and tanks) may
be included in the Company’s Loss Occurrence.
	 
	 	 	 	For all Loss Occurrences the Company may choose the date and time when any such
period of consecutive hours commences provided that it is not earlier than the date
and time of the occurrence of the first recorded individual loss sustained by the
Company arising out of that disaster, accident or loss and provided that only one
such period of 168 consecutive hours shall apply with respect to one event, except
for those Loss Occurrences referred to in (a) and (b) above, where only one such
period of 72 consecutive hours shall apply with respect to one event, regardless of
the duration of the event.
	 
	 	 	 	No individual losses occasioned by an event that would be covered by 72 hours
clauses may be included in any “Loss Occurrence” claimed under the 168 hours
provision.
	 
	 	 	 	“Loss Occurrence” with regard to casualty Losses means any accident or occurrence or
series of accidents or occurrences arising out of anyone event and happening within
the term and scope of this Agreement. Without limiting the generality of the
foregoing, the term Loss Occurrence shall be held to include:
	 
	 	 	 	As respects Products Bodily Injury and Products Property Damage Liability, injuries
to all persons and all damage to property of others occurring during a Policy Period
and proceeding from or traceable to the same causative agency shall be deemed to
arise out of one Loss Occurrence, and the date of such Loss Occurrence shall be
deemed to be the commencing date of the Policy Period. For the purpose of this
provision, each annual period of a Policy that continues in force for more than one
year shall be deemed to be a separate Policy Period.
	 
	 	 	 	As respects Bodily Injury Liability (other than Automobile and Products), said term
shall also be understood to mean, as regards each original assured, injuries to one
or more than one person resulting from infection, contagion, poisoning, or
contamination proceeding from or traceable to the same causative agency.
	 
	 	 	 	As respects Property Damage Liability (other than Automobile and Products), said
term shall also, subject to provisions (a) and (b) below, be understood to mean loss
or losses caused by a series of operations, events, or occurrences arising out 

3

 

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

	 	a.	 	the series of operations, events or occurrences shall not
extend over a period longer than 12 consecutive months; and
	 
	 	b.	 	the Company may elect the date on which the period of not
exceeding 12 consecutive months shall be deemed to have commenced.

	 	 	 	In the event that the series of operations, events or occurrences extend over a
period, longer than 12 consecutive months, then each consecutive period of 12
months, the first of which commences on the date elected under b. above, shall form
the basis of claim under this Agreement.
	 
	 	 	 	With regard to those Policies that provide aggregate limits of liability the total
of all individual losses occurring during any one Policy year that proceed from or
are traceable to the same causative agency.

	3.3	 	“Net Liability” means all Loss and Allocated Loss Adjustment Expenses payments
made by or on behalf of Company, or that the Company is liable for, in settlement of
claims or losses, payment of benefits, or in satisfaction of judgments or awards
(including interest where added to the judgment), and including any “Extra Contractual
Obligations.” Nothing in this definition will be construed to mean that Net Liability
is not recoverable by Company until salvage, subrogation, and other potential
recoveries are ascertained.
	 
	3.4	 	“Insurance Policy or Policy” means all insurance policies and other contracts
of insurance entered into between an insured and Company covering the insurance
obligations of the Subject Business.
	 
	3.5	 	“Allocated Loss Adjustment Expenses” means the expenses directly allocated to a
particular claim including, but not limited to all governmental administrative agency,
alternative dispute resolution, arbitration, court costs, fees, and expenses; fees,
costs and expenses for legal services, whether by outside or our staff counsel;
photographic costs, materials, and labor; experts’ fees or costs; cost of copies of
documents or records; cost of depositions and court reporters or recorded statements
and similar fees; medical cost containment expenses; all costs and expenses incurred in
connection with a declaratory judgment action; cost of autopsies; cost of medical
examinations of a claimant to determine insured’s liability, or the degree of
permanency or length of disability; and all other compensation, fees, costs and
expenses chargeable to the investigation or defense of a claim or the investigation or
prosecution of fraud or criminal conduct involving a claim. “Allocated loss adjustment
expenses” do not include any compensation for independent or staff claim adjusters
involved in the normal handling of a claim to determine the cause or extent of
responsibility for the injury or disease, or any expenses required by law to be treated
as a loss payment.

4

 

	3.6	 	“Prejudgment Interest or Delayed Damages” means interest or damages added to a
settlement, verdict, award, or judgment based on the amount of time prior to
the settlement, verdict, award, or judgment whether or not made part of the
settlement, verdict, award, or judgment.
	 
	3.7	 	An “Act of Terrorism” for purposes of this Agreement shall mean:
	 
	 	 	Any actual or threatened violent act or act harmful to human life, tangible or
intangible property or infrastructure directed towards or having the effect of (a)
influencing or protesting against any de jure or de facto government or policy
thereof, (b) intimidating, coercing or putting in fear a civilian population or
section thereof for the purpose of establishing or advancing a specific ideological,
religious or political system of thought, perpetrated by a specific individual or
group directly or indirectly through agents acting on behalf of said individual or
group or (c) retaliating against any country for direct or vicarious support by that
country of any other government or political system.
	 
	 	 	Any act declared pursuant to the Terrorism Risk Insurance Act of 2002 (and any
amendments thereto) shall also be considered an “Act of Terrorism” for purposes of
this Agreement.

	4.	 	Term and Termination

	 	4.1	 	This Agreement’s initial term expires on the one-year anniversary of its
Effective Date. It shall automatically renew for successive one-year terms unless
terminated by either party.
	 
	 	4.2	 	Reinsurer’s obligation to insure and pay 100% of the Net Liability of each
Property Cession and Casualty Cession will continue if this Agreement terminates.
Notwithstanding the termination of this Agreement, its provisions shall continue to
apply to all Property Cessions and Casualty Cessions in force at the termination so
that each party’s obligations under this Agreement will be fully performed. However,
upon termination, Reinsurer shall have no obligation to reinsure Company with respect
to Policies not yet entered into by Company.

	5.	 	Territory

	 	 	This Agreement’s territorial limits will be Company’s Subject Business as written in the
United States.

	6.	 	Original Conditions

	 	All Property Cessions and Casualty Cessions under this Agreement will be subject to the same
rates, terms, clauses, conditions, waivers, alterations, modifications, and interpretations,
and cancellations as the respective Policies. Reinsurer shall follow the fortunes of the
Company with respect to Subject Business.

5

 

	7.	 	Extra Contractual Obligations

	 	7.1	 	“Extra Contractual Obligations” are those liabilities not covered under any
other provision of this Agreement and includes 100% of any punitive, exemplary,
compensatory or consequential damages, including associated litigation expenses, paid
or payable by Company as a result of an action against Company by its insured, its
insured’s assignee or a third party claimant, which action alleges negligence or bad
faith on the part of Company in handling a claim or loss under a policy subject to this
Agreement. Liabilities will include losses incurred by Company on Subject Business
arising from any financial or credit risk, as defined below, and liabilities arising
from the handling of any claim or loss on the Subject Business covered by this
Agreement. The term “financial or credit risk” shall mean any Loss (or Allocated Loss
Adjustment Expenses) incurred by Company (or advanced by Company to protect Company’s
own interests, as determined in Company’s sole discretion) on Subject Business arising
as a result of:

	 	(a)	 	Loss, damages, or associated litigation expenses which should
have been recoverable under a self-insured retention or a deductible, within
the limit of any Insurance Policy.
	 
	 	(b)	 	Loss, damages or associated litigation expenses for which
Company is entitled to contribution or indemnity pursuant to the retentions, if
any, scheduled or provided for in any Insurance Policy.
	 
	 	The date on which Company incurs an Extra Contractual Obligation will be deemed, in
all circumstances, to be the date of the original loss.

	 	7.2	 	“Extra Contractual Obligations” does not include liabilities incurred solely
due to the willful misconduct or the fraud of Company’s directors or officers acting
individually or collectively or in collusion with any individual or other person
involved in the presentation, defense or settlement of any claim or loss covered under
this Agreement.

	8.	 	Excess of Original Policy Limits
	 
	 	 	This Agreement will protect Company, within its limits, 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.

6

 

	 	 	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.

	9.	 	Reinsurance Premium Rate
	 
	 	 	Company will pay to Reinsurer a premium for the reinsurance provided under this Agreement at
a rate of 5% of Company’s Gross Written Premium for the commercial property insurance
business and at a rate of 7.5% of the Company’s Gross Written Premium for the commercial
casualty insurance business, subject to any other reimbursement obligations of Reinsurer
pursuant to the terms of this Agreement. Company or Reinsurer may offset any balance
whether on an account premium, commission, claims or losses, adjustments, expenses, salvage
or any other amounts that are due from party to the other, however, such offsets are
permitted only with respect to obligations arising under this Agreement.
	 
	 	 	This agreement provides no guarantee of profit, directly, or indirectly, from the Reinsurer
to the Company or from the Company to the Reinsurer.
	 
	10.	 	Reports and Remittances
	 
	 	 	On a monthly basis, Company or its designee will prepare a monthly accounting to Reinsurer
as follows:

	 	(1)	 	Gross Written Premium for the commercial property insurance business and for
the commercial casualty insurance business accounted for during the billing period (and
those adjustments provided for in this Agreement),
	 
	 	(2)	 	Assumed Premium, less
	 
	 	(3)	 	Net Liability for the billing period, plus
	 
	 	(4)	 	Subrogation, salvage, or other recoveries received by Company during the
billing period, and
	 
	 	(5)	 	Payment of losses.
	 
	 	 	 	Company will remit any balance due in favor of Reinsurer with the monthly
accounting. Reinsurer will pay any balance due Company within seven days from the
date the report is provided by Company without delay for payment of losses and
claims obligations incurred under this agreement. All settlements between Company
and Reinsurer shall be made in cash or cash equivalents. In addition to the reports
required above, Company and Reinsurer will furnish each other such other information
as may be reasonably required by the other party for such party’s quarterly and
annual statements and internal records.

7

 

	11.	 	Management of Claims and Losses
	 
	 	 	Company will investigate and settle or defend all claims and losses. When requested by
Reinsurer, Company will permit Reinsurer, at Reinsurer’s expense, to be associated with
Company in the settlement, defense, or control of any claim, loss, or legal proceeding. All
payments of claims or losses, including ex gratia payments, shall be unconditionally binding
on Reinsurer.
	 
	12.	 	Currency
	 
	 	 	All dollar amounts in this Agreement are expressed in terms of United States dollars.
	 
	13.	 	Salvage and Subrogation
	 
	 	 	Reinsurer shall be subrogated to the rights of Company to the extent of its loss payments to
Company. Company agrees to enforce its rights of salvage and subrogation whenever it
determines it is cost effective to do so. Reinsurer will be credited with salvage and
subrogation, net of any recovery expense, in respect of claims and settlements under this
Agreement. If the recovery expense exceeds the amount recovered, the amount recovered (if
any) shall be applied to the reimbursement of recovery expense and the remaining expense
shall be borne by Reinsurer as Allocated Loss Adjustment Expenses.
	 
	14.	 	Inspection of Records
	 
	 	 	Company and Reinsurer will allow the other party to inspect, audit and copy, at any
reasonable time and after reasonable notice, the records of the other party pertaining to
the Subject Business insured under this Agreement.
	 
	15.	 	Arbitration
	 
	 	 	Any unresolved difference of opinion between Company and Reinsurer arising out of this
Agreement will be submitted to arbitration. The American Arbitration Association (“AAA”)
will administer the arbitration pursuant to its Commercial Rules, but subject to this
Article’s terms. Three arbitrators will decide the arbitration. Each party will choose one
arbitrator. If either party refuses or neglects to appoint an arbitrator within 30 days of
the filing of the claim of arbitration, the AAA may appoint the arbitrator. The first two
chosen arbitrators will together choose the third arbitrator within 10 days of being
appointed. If those two arbitrators are unable to do so, the parties or their attorneys may
request the AAA to appoint the third neutral arbitrator. Company and Reinsurer shall be
notified of the identity of the third arbitrator. Before the commencement of hearings, each
arbitrator will take an oath of impartiality. The arbitrators will be financially
disinterested and impartial. All three arbitrators shall be present or former officers of
property or casualty insurance or reinsurance companies or Underwriters at Lloyd’s of
London, not at any time under the control or management of either party to this Agreement.

8

 

	 	 	The party requesting arbitration (“Claimant”) will submit its brief to the arbitrators
within 30 days after notice of the selection of the third arbitrator. Upon receipt of the
Claimant’s brief, the other party (“Respondent”) will have 30 days to file a reply brief.
On receipt of the Respondent’s brief, the Claimant shall have 20 days to file a rebuttal
brief. Respondent shall have 20 days from the receipt of Claimant’s rebuttal brief to file
its rebuttal brief. The arbitrators may extend the time for filing of briefs at the request
of either party.
	 
	 	 	The arbitrators will preside over a hearing as set forth in the AAA’s Commercial Rules, and
will allow the parties to examine and cross-examine witnesses. The arbitrators will be
relieved from judicial formalities, including adherence to the rules of evidence. In
addition to considering the rules of law and the customs and practices of the insurance and
reinsurance business, the arbitrators will make their decision with a view to effecting this
Agreement’s intent. The arbitrators shall make their decision within 60 days following the
termination of the hearings unless the parties consent to an extension. The decision of the
majority shall be final and binding upon the parties. Each party shall bear the expense of
its arbitrator and shall jointly and equally share with the other the expenses of the third
arbitrator and of the arbitration. The arbitration shall take place in Metropolitan
Detroit, Michigan. Judgment upon the award rendered by the arbitrators may be entered in
any court having jurisdiction of the dispute.
	 
	 	 	This Section will survive this Agreement’s termination.
	 
	16.	 	Insolvency of Company
	 
	 	 	The Company’s insolvency will not effect the Reinsurer’s obligations under this Agreement.
In such a case, payment under this Agreement would be made to Company or its liquidator,
receiver or statutory successor.
	 
	 	 	If the Company enters insolvency proceedings, the Company’s liquidator, receiver or
statutory successor will give written notice to Reinsurer of the pendency of a claim against
Company on the policy or policies reinsured within a reasonable time after the claim is
filed in the insolvency proceeding. While any such claim is pending, Reinsurer may
investigate the claim and interpose, at its own expense, in the proceeding where the claim
is to be adjudicated, any defense or defenses that it may deem available to Company or its
liquidator or receiver or statutory successor. The expense thus incurred by Reinsurer will
be chargeable, subject to court approval, against Company as part of the expense of
liquidation or otherwise as an administrative cost of the insolvency proceedings to the
extent of a proportionate share of the benefits which may accrue to Company solely as a
result of the defense so undertaken by Reinsurer.
	 
	 	 	Should Company go into liquidation or should a receiver be appointed, Reinsurer shall be
entitled to deduct from any sums which may be or may become due to Company under this
Reinsurance Agreement, any sums which are due to Reinsurer by Company under this Agreement
and which are payable at a fixed or stated date, as well as any other sums due to Reinsurer
which are permitted to be offset under applicable law.

9

 

	17.	 	Excise Taxes
	 
	 	 	Reinsurer will allow for the purpose of paying the Federal Excise Tax, the applicable
percentage of the premium payable hereon to the extent such premium is subject to the
Federal Excise Tax.
	 
	 	 	In the event of return premium due under this Agreement, Reinsurer will deduct the
applicable percentage from the amount of the return; Company or its agent is responsible for
recovering the tax from the U.S. Government.
	 
	18.	 	Miscellaneous

	 	18.1	 	Michigan law governs this Agreement.
	 
	 	18.2	 	This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original but which together shall constitute one and the same instrument.
	 
	 	18.3	 	This Agreement will be automatically modified to conform to any law or
governmental regulation having application to or jurisdiction over its parties or
subject matter, without prior notice.
	 
	 	18.4	 	This Agreement has been negotiated by the parties and the fact that the initial
and final draft shall have been prepared by one party or the other will not give rise
to any presumption for or against any party to this Agreement or be used in any form in
the construction or interpretation of this Agreement or any of its provisions.
	 
	 	18.5	 	This Agreement, together with such amendments as may from time to time be
executed in writing by the parties, constitutes the entire agreement between the
parties relating to its subject matter. There exists no other written or oral
understandings, agreements or assurances with respect to these matters except as are
set forth in this Agreement. Unless expressly stated, this Agreement confers no rights
on any person or business entity that is not a party.
	 
	 	18.6	 	The parties intent this Agreement to both bind and benefit them and their
respective successors. Neither this Agreement nor any rights or obligations under this
Agreement may be assigned or delegated by either party without the prior written
consent of the other.
	 
	 	18.7	 	There is no privity between Company’s insureds and Reinsurer. Reinsurer’s
liability is only to indemnify Company. This Agreement is not for the benefit of any
insured under any policy of insurance or any other third party.

10

 

	 	18.8	 	No error or inadvertent omission on the part of one party shall relieve the
other party of liability pursuant to this Agreement, provided that any such errors
and/or omissions are rectified as soon after discovery as feasible.
	 
	 	18.9	 	By executing this Agreement, each party reaffirms to the other than it is
undertaking the Agreement in utmost good faith.

IN WITNESS HEREOF, the parties hereto have caused this Reinsurance Agreement to be executed this
the 16th day of May, in the year of 2006.

	 	 	 	 	 	 	 
	NORTH POINTE INSURANCE	 	MIDFIELD INSURANCE COMPANY
	COMPANY	 	Reinsurer
	Company	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	By:

	 	 	 	By:	 	 
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	Title:

	 	 	 	Title:	 	 
	 

	 	 
	 	 	 	 

11

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00120-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00120-of-00352.parquet"}]]