Document:

Exhibit 10.42

 

Catastrophe Workers’ Compensation

Reinsurance Contract

Effective: January 1, 2002

 

issued to

 

AmCOMP Preferred Insurance Company

North Palm Beach,
Florida

AmCOMP Assurance
Corporation

North Palm Beach,
Florida

and

any and all
insurance companies which are now or

hereafter come under the same ownership or management as the AmCOMP Group

North Palm Beach, Florida

 

	
  

  	
   

  
	
  BENFIELD BLANCH

  	
   

  

 

 

 

Catastrophe Workers’ Compensation

Reinsurance
Contract

Effective: January 1, 2002

 

issued to

 

AmCOMP Preferred Insurance Company

North Palm Beach,
Florida

AmCOMP Assurance
Corporation

North Palm Beach,
Florida

and

any and all
insurance companies which are now or

hereafter come under the same ownership or management as the AmCOMP Group

North Palm Beach, Florida

 

First Catastrophe Workers’ Compensation Reinsurance

 

	
  Reinsurers

  	
   

  	
  Participations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  American Re-Insurance Company, A Delaware
  Corporation

  	
   

  	
  10.0

  	
  %

  
	
  Arch Reinsurance Limited

  	
   

  	
  10.0

  	
   

  
	
  Everest Reinsurance Company

  	
   

  	
  20.0

  	
   

  
	
  Folksamerica Reinsurance Company

  	
   

  	
  10.0

  	
   

  
	
  Swiss Re
  Underwriters Agency, Inc. (for Swiss Reinsurance America Corporation)

  	
   

  	
  15.0

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Through Benfield Greig Limited

  	
   

  	
   

  	
   

  
	
  Lloyd’s Underwriters Per Signing Schedule(s)

  	
   

  	
  35.0

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  100.0

  	
  %

  

 

Second Catastrophe Workers’ Compensation Reinsurance

 

	
  Reinsurers

  	
   

  	
  Participations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Arch Reinsurance Limited

  	
   

  	
  20.0

  	
  %

  
	
  Gerling Global Reinsurance Corporation of America

  	
   

  	
  8.0

  	
   

  
	
  Liberty Mutual Insurance Company

  	
   

  	
  2.0

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Through Benfield Greig Limited

  	
   

  	
   

  	
   

  
	
  Lloyd’s Underwriters Per Signing Schedule(s)

  	
   

  	
  70.0

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  100.0

  	
  %

  

 

 

 

Table of Contents

 

	
  Article

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  I

  	
   

  	
  Classes of Business Reinsured

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  II

  	
   

  	
  Commencement and Termination

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  III

  	
   

  	
  Territory (BRMA 51A)

  	
  2

  
	
   

  	
   

  	
   

  	
   

  
	
  IV

  	
   

  	
  Exclusions

  	
  2

  
	
   

  	
   

  	
   

  	
   

  
	
  V

  	
   

  	
  Retention and Limit

  	
  6

  
	
   

  	
   

  	
   

  	
   

  
	
  VI

  	
   

  	
  Reinstatement

  	
  6

  
	
   

  	
   

  	
   

  	
   

  
	
  VII

  	
   

  	
  Definitions

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
  VIII

  	
   

  	
  Other Reinsurance

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
  IX

  	
   

  	
  Claims

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
  X

  	
   

  	
  Commutation

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  XI

  	
   

  	
  Subrogation

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  XII

  	
   

  	
  Premium

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
  XIII

  	
   

  	
  Late Payments

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
  XIV

  	
   

  	
  Offset

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
  XV

  	
   

  	
  Access to Records (BRMA 1D)

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
  XVI

  	
   

  	
  Liability of the Reinsurer

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
  XVII

  	
   

  	
  Net Retained Lines (BRMA 32E)

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
  XVIII

  	
   

  	
  Errors and Omissions

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
  XIX

  	
   

  	
  Taxes (BRMA 50B)

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
  XX

  	
   

  	
  Unauthorized Reinsurers

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
  XXI

  	
   

  	
  Insolvency

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  XXII

  	
   

  	
  Arbitration (BRMA 6J)

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  XXIII

  	
   

  	
  Service of Suit (BRMA 49C)

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
  XXIV

  	
   

  	
  Agency Agreement

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  XXV

  	
   

  	
  Intermediary (BRMA 23A)

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Schedule A

  	
   

  

 

 

 

Catastrophe Workers’ Compensation

Reinsurance Contract

Effective: January 1, 2002

 

issued to

 

AmCOMP Preferred Insurance Company

North Palm Beach,
Florida

AmCOMP Assurance
Corporation

North Palm Beach,
Florida

and

any and all
insurance companies which are now or hereafter come under the same ownership or
management as the 

AmCOMP Group

North Palm Beach,
Florida

(hereinafter
referred to collectively as the “Company”)

 

by

 

The Subscribing
Reinsurer(s) Executing the

Interests and Liabilities Agreement(s)

Attached Hereto

(hereinafter referred to as the “Reinsurer”)

 

Article
I - Classes of Business Reinsured

 

By this Contract the Reinsurer agrees to reinsure the
excess liability which may accrue to the Company under its policies, contracts
and binders of insurance or reinsurance (hereinafter called “policies”) issued
or renewed on or after the effective date hereof, and classified by the Company
as Workers’ Compensation and Employers Liability business, subject to the
terms, conditions and limitations set forth herein and in Schedule A attached
to and forming part of this Contract.

 

Article
II - Commencement and Termination

 

A.    This Contract shall become effective on
January 1, 2002, with respect to losses arising out of occurrences commencing
on or after that date, and shall continue in force thereafter until terminated.

 

B.    Either party may terminate this Contract at
the end of any contract year by giving the other party not less than 90 days
prior notice by certified mail.

 

1

 

C.    Unless the Company elects that the Reinsurer
have no liability for losses arising out of occurrences commencing after the
effective date of termination, and so notifies the Reinsurer prior to or within
72 hours
after the effective date of termination, reinsurance hereunder on business in
force on the effective date of termination shall remain in full force and
effect until expiration, cancellation or next premium anniversary of such
business, whichever first occurs, but in no event beyond 12 months, plus odd
time (not to exceed 18 months in all), following the effective date of
termination.

 

D.    Notwithstanding the provisions above, in the
event that any policy subject to this Contract is required by statute,
regulation or by order of an insurance department to be continued in force, the
Reinsurer agrees to extend reinsurance coverage hereunder with respect to such
policy until such policy may be canceled or non-renewed by the Company.

 

E.     Seven years after the termination of this
Contract (or after the end of the runoff period, if applicable), the Company
shall advise the Reinsurer of any outstanding claims and/or occurrences (each
hereinafter referred to as a “claim”) arising during the term hereof, which
have not been finally settled and which may cause a recovery under this
Contract, and no liability shall attach hereunder for any claim not reported to
the Reinsurer within this seven year period.

 

F.     “Contract year” as used herein shall mean
the period from January 1, 2002 through December 31, 2002, and each subsequent
12-month period thereafter that this Contract continues in force.

 

Article
III - Territory (BRMA 51A)

 

The territorial limits of
this Contract shall be identical with those of the Company’s policies.

 

Article IV - Exclusions

 

A.    This Contract does not apply to and
specifically excludes the following:

 

1.     Reinsurance assumed by the Company under
obligatory reinsurance agreements, except:

 

a.     Agency reinsurance where the policies
involved are to be reunderwritten in accordance with the underwriting standards
of the Company and reissued as Company policies at the next anniversary or
expiration date;

 

b.     Intercompany reinsurance between any of the
reinsured companies under this Contract.

 

2.     Ex-gratia payments.

 

2

 

3.     Risks subject to a deductible in excess of
$25,000, or a self-insured retention excess of $25,000, unless such deductible
or self-insured retention is otherwise mandated by statute or regulatory
authority.

 

4.     Nuclear risks as defined in the “Nuclear
Incident Exclusion Clause - Liability - Reinsurance (U.S.A.)” and the “Nuclear
Incident Exclusion Clause - Liability - Reinsurance (Canada)” and loss or
liability defined in the “Nuclear Incident Exclusion Clause - Reinsurance - No.
4” attached to and forming part of this Contract.

 

5.     Pollution liability coverages excluded
under the provisions of the “Pollution Exclusion Clause - General Liability - Reinsurance (BRMA 39C)” attached to and
forming part of this Contract.

 

6.     Liability as a member, subscriber or
reinsurer of any Pool, Syndicate or Association, but this exclusion shall not
apply to Assigned Risk Plans or similar state-mandated plans.

 

7      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, however 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.

 

8.     Any claim caused or contributed to by war,
perpetrated by an official, employee or agent of a foreign state acting for or
on behalf of such state.

 

9.     Operation under the jurisdiction of the
U.S. Longshore and Harbor Workers’ Compensation Act, the Jones Act and the
Maritime Employers Liability Act, except for incidental exposures (i.e., 10% or
less of the insured’s payroll).

 

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

 

a.     The use of nuclear reactors such as atomic
piles, particle accelerators or generators, or

 

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

 

However, subparagraphs a
and b above shall not apply to:

 

3

 

i.      The exclusive use of particle accelerators
incidental to ordinary industrial or education research pursuits, or

 

ii.     The exclusive use, handling or
transportation of radioisotopes for medical or industrial use, or to radium or
radium compounds.

 

11.   Operation of docks or wharves as related to
port authorities.

 

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

 

13.   Risks involving known exposure to the
following substances:

 

a.     Dioxin,

 

b.     Polychlorinated biphenols,

 

c.     Asbestos.

 

14.   All railway operations except sidetrack
agreements.

 

15.   Amusement parks, carnivals or circuses. This
exclusion shall not include miniature golf courses or driving range operations.

 

16.   Subaquaeous operations.

 

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

 

18.   Blasting operations.

 

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

 

20.   Shoring, underpinning or moving of buildings
or structures.

 

21.   Erection or repair of scaffolds if 10.0% or
more of the insured’s annual remuneration is attributed to NCCI Class Code
9529.

 

22.   Construction of tunnels or dams.

 

23.   Fireworks, fuses, or any explosive substance
(as defined below) as follows:

 

a.     Manufacturers or importers of such items.

 

4

 

b.     Loading of such items 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 such items are an ingredient.

 

d.     Handling, storage, transportation or use of
such items.

 

“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.

 

24.   Onshore and offshore gas and oil drilling
operations.

 

25.   Operations where principal business includes
the use of any owned or unowned aircraft, or any device or machine intended for
and/or aiding in the achievement of atmospheric flight, projection or orbit,
for flight, and/or the ownership or operation of any airport. This exclusion
shall not apply where exposure is incidental (i.e., constitutes 10.0% or less
of the insured’s payroll) to the principal business operations and the aircraft
contains eight seats or fewer.

 

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

 

27.   Logging or forestry operations.

 

28.   Professional employment organizations
(PEO’s).

 

29.   Operations where the principal business of
the risk is manufacturing, production, distribution, refining or storage of
natural or artificial fuel, gas, butane, propane, liquefied petroleum gases or
gasoline. This exclusion shall not apply to any risk whose principal business
operations are any of the following:

 

a.     Retail gasoline service station, either
full or self service;

 

b.     Convenience store with gasoline sales with
its petroleum gas and/or storage tanks located below ground;

 

c.     Any risk with a known incidental gasoline
or diesel fuel storage and/or transportation exposure. For purposes of this
exclusion, “incidental” will be defined as less than or equal to a total for
any and all tanks at a covered location of no more than 1,000 gallons for
propane and 10,000 gallons for gasoline or diesel fuel.

 

30.   Loss or liability arising out of an
occurrence of terrorism as defined herein.

 

B.    In the event the Company is inadvertently
bound on any risk which is excluded under subparagraph 9 or subparagraphs 14
through 29 of paragraph A above, the reinsurance provided under this Contract
shall apply on such risk until discovery by the Company of the existence of
such risk and for 30 days thereafter, or unless otherwise mandated by statute
or regulatory authority. Coverage shall cease after such time, unless the
Company has received from the Reinsurer written notice of its approval of such
risk within 30 days.

 

5

C.    Notwithstanding the foregoing, any
reinsurance falling within the scope of one or more of the exclusions set forth
above that is specially accepted by the Reinsurer from the Company shall be
covered under this Contract and subject to all of the terms and conditions
hereof, except as such terms are modified by the special acceptance.

 

Article
V - Retention and Limit

 

A.    As respects each excess layer of reinsurance
coverage provided by this Contract, the Company shall retain and be liable for
the first amount of ultimate net loss, shown as “Company’s Retention” for that
excess layer in Schedule A attached hereto, arising out of each loss
occurrence. The Reinsurer shall then be liable, as respects each excess layer,
for the amount by which such ultimate net loss exceeds the Company’s applicable
retention, but the liability of the Reinsurer under each excess layer shall not
exceed the amount, shown as “Reinsurer’s Per Occurrence Limit” for that excess
layer in Schedule A attached hereto, as respects any one loss occurrence.

 

B.    The maximum policy limit as respects
Employers Liability policies subject hereto shall be $1,000,000 or so deemed,
unless otherwise mandated by statute or regulation.

 

C.    The Company’s ultimate net loss, for the
purpose of this Contract, shall be deemed to be a maximum of $5,000,000 any one
life.

 

Article
VI - Reinstatement

 

A.    In the event all or any portion of the
reinsurance under any excess layer of reinsurance coverage provided by this
Contract is exhausted by loss, the amount so exhausted shall be reinstated
immediately from the time the loss occurrence commences hereon. For each amount
so reinstated the Company agrees to pay additional premium equal to the product
of the following:

 

1.     The percentage of the occurrence limit for
the excess layer reinstated (based on the loss paid by the Reinsurer under that
excess layer); times

 

2.     The earned reinsurance premium for the
excess layer reinstated for the contract year (exclusive of reinstatement
premium).

 

B.    Whenever the Company requests payment by the
Reinsurer of any loss under any excess layer hereunder, the Company shall
submit a statement to the Reinsurer of reinstatement premium due the Reinsurer
for that excess layer. If the earned reinsurance premium for any excess layer
for the contract year has not been finally determined as of the date of any
such statement, the calculation of reinstatement premium due for that excess
layer shall be based on the annual deposit premium for that excess layer and
shall be readjusted when the earned

 

6

 

reinsurance premium for
that excess layer for the contract year has been finally determined. Any
reinstatement premium shown to be due the Reinsurer for any excess layer as
reflected by any such statement (less prior payments, if any, for that excess
layer) shall be payable by the Company concurrently with payment by the
Reinsurer of the requested loss for that excess layer. Any return reinstatement
premium shown to be due the Company shall be remitted by the Reinsurer as
promptly as possible after receipt and verification of the Company’s statement.

 

C.    Notwithstanding anything stated herein, the
liability of the Reinsurer under any excess layer of reinsurance coverage
provided by this Contract shall not exceed either of the following:

 

1.     The amount, shown as “Reinsurer’s Per
Occurrence Limit” for that excess layer in Schedule A attached hereto, as
respects loss or losses arising out of any one loss occurrence; or

 

2.     The amount, shown as “Reinsurer’s Annual
Limit” for that excess layer in Schedule A attached hereto, in all during any
one contract year.

 

Article VII - Definitions

 

A.    “Ultimate net loss” as used herein is
defined as the sum or sums (including loss in excess of policy limits, extra
contractual obligations and any loss adjustment expense, as hereinafter
defined) paid or payable by the Company in settlement of claims and in
satisfaction of judgments rendered on account of such claims, after deduction
of all recoveries from subrogation, all recoveries and all claims on inuring
insurance or reinsurance, whether collectible or not. Nothing herein shall be
construed to mean that losses under this Contract are not recoverable until the
Company’s ultimate net loss has been ascertained.

 

B.    “Loss in excess of policy limits” and “extra
contractual obligations” as used herein shall be defined as follows:

 

I.      “Loss in excess of policy limits” shall
mean 90.0% of any amount paid or payable by the Company in excess of its policy
limits, but otherwise within the terms of its policy, such loss in excess of
the Company’s policy limits having been incurred because of, but not limited
to, failure by the Company to settle within the policy limits or by reason of
the Company’s 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 an
action against its insured or reinsured or in the preparation or prosecution of
an appeal consequent upon such an action.

 

2.     “Extra contractual obligations” shall mean
90.0% of any punitive, exemplary, compensatory or consequential damages paid or
payable by the Company, not covered by any other provision of this Contract and
which arise from the handling of any claim on business subject to this Contract,
such liabilities arising because of, but not limited

 

7

 

to, failure by the
Company to settle within the policy limits or by reason of the Company’s
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 an action
against its insured or reinsured or in the preparation or prosecution of an
appeal consequent upon such an action. An extra contractual obligation shall be
deemed, in all circumstances, to have occurred on the same date as the loss
covered or alleged to be covered under the policy.

 

Notwithstanding anything
stated herein, this Contract shall not apply to any loss in excess of policy
limits or any extra contractual obligation incurred by the Company as a result
of any fraudulent and/or criminal act by any officer or director of the Company
acting individually or collectively or in collusion with any individual or
corporation or any other organization or parry involved in the presentation,
defense or settlement of any claim covered hereunder.

 

C.    “Occurrence” as used herein is defined as an
accident or occurrence or a series of accidents or occurrences arising out of
or caused by one event, whether involving one or more of the Company’s
policies, except that:

 

1.     As respects workers’ compensation policies,
each occupational or industrial disease or cumulative injury case contracted by
an employee of an insured shall be deemed to have been caused by a separate
occurrence commencing on:

 

a.     The date of disability for which
compensation is payable if the case is compensable under the Workers’
Compensation Law;

 

b.     The date disability due to the disease
actually began if the case is not compensable under the Workers’ Compensation
Law; or

 

c.     The date of cessation of employment if
claim is made after employment has ceased.

 

2.     Notwithstanding the provisions of
subparagraph 1 above, as respects losses resulting from occupational disease
and cumulative trauma suffered by employees of an insured for which the
employer is liable as a result of a sudden and accidental event not exceeding
48 hours in duration, all such losses shall be considered one occurrence and
may be combined with losses not classified as occupational disease or
cumulative trauma which arise out of the same event and the combination of such
losses shall be considered as one occurrence within the meaning hereof.

 

3.     Notwithstanding the foregoing, the
following shall apply to occurrences involving natural disasters:

 

a.     An occurrence shall be limited to damage,
injury or loss arising out of a natural disaster during any continuous 168 hour
period.

 

8

 

b.     The Company may choose the date and time
when such 168 hour period commences and if the occurrence is of greater
duration than 168 hours, the Company may divide such occurrence into two or
more occurrences, provided no two periods overlap and provided no period
commences earlier than the date and time of the first loss to the Company in
such occurrence.

 

c.     “Natural disaster” shall mean loss caused
by the perils of tornado, cyclone, windstorm, hurricane and hail arising from
the same atmospheric disturbance; earthquake, including ensuing fire,
landslide, mudslide, flood, tidal wave; volcanic eruptions; flood; tides; tidal
wave; landslide/mudslide; and meteors.

 

D.    “Occupational or Industrial Disease” shall
mean any abnormal condition that fulfills all of the following conditions:

 

1.     It is not traceable to a definite
compensable accident occurring during the employee’s present or past
employment; and

 

2.     It has been caused by exposure to a disease
producing agent or agents present in the workers’ occupational environment; and

 

3.     It has resulted in a disability or death.

 

E.     “Cumulative Injury” is any injury that
fulfills all of the following conditions:

 

1.     It is not traceable to a definite
compensable accident occurring during the employee’s present or past
employment; and

 

2.     It has occurred from, and has been aggravated
by, a repetitive employment-related activity; and

 

3.     It has resulted in a disability or death.

 

F.     “Loss adjustment expense” as used herein
shall mean expenses assignable to the investigation, appraisal, adjustment,
settlement, litigation, defense and/or appeal of specific claims, regardless of
how such expenses are classified for statutory reporting purposes. Loss
adjustment expense shall include, but not be limited to, interest on judgments,
expenses of outside adjusters and claims-specific declaratory judgment expenses
or other legal expenses and costs incurred in connection with coverage
questions and legal actions connected thereto, but shall not include office
expenses or salaries of the Company’s regular employees other than medical
management personnel whose cost the Company will bill to specific cases on a
time and expense basis.

 

G.    “Terrorism” as used herein shall mean
activities against persons, organizations or property of any nature:

 

9

 

1.     That involve the following or preparation
for the following:

 

a.     Use or threat of force or violence; or

 

b.     Commission or threat of a dangerous act; or

 

c.     Commission of threat of an act that
interferes with or disrupts an electronic communication, information or
mechanical system; and

 

2.     When one or both of the following
applies:

 

a.     The effect is to intimidate or coerce a
government or the civilian population or any segment thereof, or to disrupt any
segment of the economy; or

 

b.     It appears that the intent is to intimidate
or coerce a government, or to further political, ideological, religious, social
or economic objectives or to express (or to express opposition to) a philosophy
or ideology.

 

Article
VIII - Other Reinsurance

 

A.    The Company shall be permitted to carry
facultative reinsurance, recoveries under which shall inure to the benefit of
this Contract.

 

B.    The Company shall be permitted to carry
underlying excess of loss reinsurance and quota share reinsurance, recoveries
under which shall inure solely to the benefit of the Company and be entirely
disregarded in applying all of the provisions of this Contract.

 

Article IX - Claims

 

A.    Whenever a claim is reserved by the Company
for an amount greater than $5,000,000 hereunder and/or whenever a claim appears
likely to result in a claim under this Contract, the Company shall notify the
Reinsurer. Further, the Company shall notify the Reinsurer whenever a claim
involves a fatality, amputation, spinal cord damage, brain damage, blindness,
extensive burns or multiple fractures, regardless of liability, if the policy
limits or statutory benefits applicable to the claim are greater than the
Company’s retention hereunder. The Reinsurer shall have the right to
participate, at its own expense, in the defense of any claim or suit or
proceeding involving this reinsurance.

 

B.    All claim settlements made by the Company,
provided they are within the terms of this Contract, shall be binding upon the
Reinsurer, and the Reinsurer agrees to pay all amounts for which it may be
liable upon receipt of reasonable evidence of the amount paid by the Company.

 

10

 

Article X - Commutation

 

A.    Either the Company or the Reinsurer may
request commutation of that portion of any excess loss hereunder represented by
any outstanding claim or claims after seven years from the date of an
occurrence. If both parties desire to commute a claim or claims, then within 60
days after such agreement, the Company shall submit a statement of valuation of
the outstanding claim or claims showing the elements considered reasonable to
establish the ultimate net loss and the Reinsurer shall pay the amount
requested. Commutation of loss will be calculated on the present value of the
loss within the applicable layer of coverage.

 

B.    If agreement, as outlined in the paragraph
above, cannot be reached, the effort can be abandoned or, alternately, the
Company and the Reinsurer may mutually appoint an actuary or appraiser to
investigate, determine and capitalize such claim or claims. If both parties
then agree, the Reinsurer shall pay its proportion of the amount so determined
to be the capitalized value of such claim or claims.

 

C.    If the parties, as outlined in the
paragraphs above, fail to agree, they may abandon the effort or they may agree
to settle any difference using a panel of three actuaries, one to be chosen by
each party and the third by the two so chosen. If either party refuses or
neglects to appoint an actuary within 60 days, the other party may appoint two
actuaries. If the two actuaries fail to agree on the selection of a third
actuary within 60 days of their appointment, each of them shall name two, of
whom the other shall decline one and the decision shall be made by drawing
lots. All the actuaries shall be regularly engaged in the valuation of Workers’
Compensation claims and shall be Fellows of the Casualty Actuarial Society or
Members of the American Academy of Actuaries. None of the actuaries shall be
under the control of either party to this Contract.

 

D.    Each party shall submit its case to its
actuary within 60 days of the appointment of the third actuary. The decision in
writing of any two actuaries, when filed with the parties hereto, shall be
final and binding on both parties. The expense of the actuaries and of the
commutation shall be equally divided between the two parties. Said commutation
shall take place in North Palm Beach, Florida, unless some other place is
mutually agreed upon by the Company and the Reinsurer.

 

Article XI - Subrogation

 

The Reinsurer shall be credited with recoveries from
subrogation (i.e., reimbursement obtained or recovery made by the Company, less
the actual cost, excluding salaries of officials and employees of the Company
and sums paid to attorneys as retainer, of obtaining such reimbursement or
making such recovery) on account of claims and settlements involving
reinsurance hereunder. Recoveries therefrom shall always be used to reimburse
the excess carriers in the reverse order of their priority according to their
participation before being used in

 

11

 

any way to reimburse the Company for its primary loss.
The Company hereby agrees to enforce its rights to subrogation relating to any
loss, a part of which loss was sustained by the Reinsurer, and to prosecute all
claims arising out of such rights.

 

Article XII - Premium

 

A.    As premium for each excess layer of
reinsurance coverage provided by this Contract, the Company shall pay the
Reinsurer the greater of the following for each contract year:

 

1.     The amount (or pro rata portion thereof if
this Contract is terminated prior to the end of any contract year), shown as
“Annual Minimum Premium” for that excess layer in Schedule A attached hereto;
or

 

2.     The percentage, shown as “Premium Rate” for that
excess layer in Schedule A attached hereto, of the Company’s net earned premium
for the contract year.

 

B.    The Company shall pay the Reinsurer an
annual deposit premium for each excess layer of the amount, shown as “Annual
Deposit Premium” for that excess layer in Schedule A attached hereto, in four
equal installments of the amount, shown as “Quarterly Deposit Premium” for that
excess layer in Schedule A attached hereto, on January 1, April 1, July 1 and
October 1 of each contract year. However, no deposit premium installments shall
be due after the effective date of termination.

 

C.    Within 60 days following the end of each
contract year and within 60 days following the 12-month period thereafter, the
Company shall provide a report to the Reinsurer setting forth the premium due
hereunder for each excess layer for the contract year, computed in accordance
with paragraph A, and any additional premium due the Reinsurer or return
premium due the Company for each such excess layer shall be remitted promptly.

 

D.    In the event this Contract is terminated on
a “runoff” basis, the Company shall pay the Reinsurer premium for the “runoff”
period as respects each excess layer equal to the percentage, shown as “Premium
Rate” for that excess layer in Schedule A attached hereto, of the Company’s
unearned premium applicable to subject business in force on the effective date
of termination, payable in four equal installments on the first day of each
three-month period during the runoff period.

 

E.     “Net earned premium” as used herein is
defined as the Company’s gross earned premium for the classes of business
subject to this Contract, adjusted for experience modification, discounts,
credits, surcharges, expense constants and deductible credits, plus or minus
the Reinsurer’s pro rata share of any premium arising from audit adjustments,
minus cancellation and return premium, minus premiums paid for facultative
reinsurance which inures to the benefit of this Contract.

 

12

 

Article XIII - Late Payments

 

A.    The provisions of this Article shall not be
implemented unless specifically invoked, in writing, by one of the parties to
this Contract.

 

B.    In the event any premium, loss or other
payment due either party is not received by the intermediary named Article XXV
(hereinafter referred to as the “Intermediary”) by the payment due date, the
party to whom payment is due may, by notifying the Intermediary in writing,
require the debtor party to pay, and the debtor party agrees to pay, an
interest penalty on the amount past due calculated for each such payment on the
last business day of each month as follows:

 

1.     The number of full days which have expired
since the due date or the last monthly calculation, whichever the lesser, times

 

2.     l/365ths of the six-month United States Treasury Bill
rate as quoted in The Wall Street Journal on the first business day of the
month for which the calculation is made; times

 

3.     The amount past due, including accrued
interest.

 

It is agreed that interest
shall accumulate until payment of the original amount due plus interest
penalties have been received by the Intermediary.

 

C.    The establishment of the due date shall, for
purposes of this Article, be determined as follows:

 

1.     As respects the payment of routine deposits
and premiums due the Reinsurer, the due date shall be as provided for in the
applicable section of this Contract. In the event a due date is not
specifically stated for a given payment, it shall be deemed due 30 days after
the date of transmittal by the Intermediary of the initial billing for each
such payment.

 

2.     Any claim or loss payment due the Company
hereunder shall be deemed due 30 business days after the proof of loss or
demand for payment is transmitted to the Reinsurer. If such loss or claim
payment is not received within the 30 days, interest will accrue on the payment
or amount overdue in accordance with paragraph B above, from the date the proof
of loss or demand for payment was transmitted to the Reinsurer.

 

3.     As respects any payment, adjustment or
return due either party not otherwise provided for in subparagraphs 1 and 2 above, the due date shall be as provided
for in the applicable section of this Contract. In the event a due date is not
specifically stated for a given payment, it shall be deemed due 30 business
days following transmittal of written notification that the provisions of this
Article have been invoked.

 

13

 

For
purposes of interest calculations only, amounts due hereunder shall be deemed
paid upon receipt by the Intermediary.

 

D.    Nothing herein shall be construed as
limiting or prohibiting a subscribing reinsurer from contesting the validity of
any claim, or from participating in the defense of any claim or suit, or
prohibiting either party from contesting the validity of any payment or from
initiating any arbitration or other proceeding in accordance with the
provisions of this Contract. If the debtor party prevails in an arbitration or
other proceeding, then any interest penalties due hereunder on the amount in
dispute shall be null and void. If the debtor party loses in such proceeding,
then the interest penalty on the amount determined to be due hereunder shall be
calculated in accordance with the provisions set forth above unless otherwise
determined by such proceedings. If a debtor party advances payment of any
amount it is contesting, and proves to be correct in its contestation, either
in whole or in part, the other party shall reimburse the debtor party for any
such excess payment made plus interest on the excess amount calculated in
accordance with this Article.

 

E.     Interest penalties arising out of the
application of this Article that are $50,000 or less from any party shall be
waived unless there is a pattern of late payments consisting of three or more
items over the course of any 12-month period.

 

Article XIV - Offset

 

The Company and the Reinsurer may offset any balance
or amount due from one party to the other under this Contract or any other contract
heretofore or hereafter entered into between the Company and the Reinsurer,
whether acting as assuming reinsurer or ceding company. This provision shall
not be affected by the insolvency of either party to this Contract.

 

Article
XV - Access to Records (BRMA 1D)

 

The Reinsurer or its designated representatives shall
have access at any reasonable time to all records of the Company which pertain
in any way to this reinsurance.

 

Article
XVI - Liability of the Reinsurer

 

A.    The liability of the Reinsurer shall follow
that of the Company in every case and be subject in all respects to all the
general and specific stipulations, clauses, waivers and modifications of the
Company’s policies and any endorsements thereon. However, in no event shall
this be construed in any way to provide coverage outside the terms and
conditions set forth in this Contract.

 

14

 

B.    Nothing herein shall in any manner create
any obligations or establish any rights against the Reinsurer in favor of any
third party or any persons not parties to this Contract.

 

Article XVII - Net Retained Lines
(BRMA 32E)

 

A.    This Contract applies only to that portion
of any policy which the Company retains net for its own account (prior to
deduction of any underlying reinsurance specifically permitted in this
Contract), and in calculating the amount of any loss hereunder and also in
computing the amount or amounts in excess of which this Contract 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.

 

B.    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(s), whether
specific or general, any amounts which may have become due from such
reinsurer(s), whether such inability arises from the insolvency of such other
reinsurer(s) or otherwise.

 

Article XVIII - Errors and
Omissions

 

Except as provided in paragraph E of Article II,
inadvertent delays, errors or omissions made in connection with this Contract
or any transaction hereunder shall not relieve either party from any liability
which would have attached had such delay, error or omission not occurred,
provided always that such error or omission is rectified as soon as possible
after discovery.

 

Article XIX - Taxes (BRMA 50B)

 

In consideration of the terms under which this
Contract is issued, the Company will not claim a deduction in respect of the premium
hereon when making tax returns, other than income or profits tax returns, to
any state or territory of the United States of America or the District of
Columbia.

 

Article XX - Unauthorized
Reinsurers

 

A.    If the Reinsurer is unauthorized in any
state of the United States of America or the District of Columbia, the
Reinsurer agrees to fund its share of the Company’s ceded outstanding loss and
loss adjustment expense reserves (including incurred but not reported loss
reserves) by:

 

1.     Clean, irrevocable and unconditional
letters of credit issued and confirmed, if confirmation is required by the
insurance regulatory authorities involved, by a bank or

 

15

 

banks meeting the NAIC
Securities Valuation Office credit standards for issuers of letters of credit
and acceptable to said insurance regulatory authorities; and/or

 

2.     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 the insurance regulatory authorities involved. The Reinsurer, at
its sole option, may fund in other than cash if its method and form of funding
are acceptable to the insurance regulatory authorities involved.

 

B.    With regard to funding in whole or in part
by letters of credit, it is agreed that each letter of credit will be in a form
acceptable to insurance regulatory authorities involved, will be issued for a
term of at least one year and will include an “evergreen clause,” which
automatically extends the term for at least one additional year at each
expiration date unless written notice of non-renewal is given to the Company
not less than 30 days prior to said expiration date. The Company and the Reinsurer
further agree, notwithstanding anything to the contrary in this Contract, that
said letters 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’s
share of losses and/or loss adjustment expense paid under the terms of policies
reinsured hereunder, unless paid in cash by the Reinsurer;

 

2.     To reimburse itself for the Reinsurer’s
share of any other amounts claimed to be due hereunder, unless paid in cash by
the Reinsurer;

 

3.     To fund a cash account in an amount equal
to the Reinsurer’s share of any ceded outstanding loss and loss adjustment
expense reserves (including incurred but not reported loss reserves) funded by
means of a letter of credit which is under non-renewal notice, if said letter
of credit has not been renewed or replaced by the Reinsurer 10 days prior to
its expiration date;

 

4.     To refund to the Reinsurer any sum in
excess of the actual amount required to fund the Reinsurer’s share of the
Company’s ceded outstanding loss and loss adjustment expense reserves
(including incurred but not reported loss reserves), if so requested by the
Reinsurer.

 

In the event the amount
drawn by the Company on any letter of credit is in excess of the actual amount
required for B(l) or B(3), or in the case of B(2), the actual amount determined
to be due, the Company shall promptly return to the Reinsurer the excess amount
so drawn.

 

16

 

Article XXI - Insolvency

 

A.    In the event of the insolvency of one or
more of the reinsured companies, 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 a 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.

 

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

 

C.    It is further understood and agreed that, in
the event of the insolvency of one or more of the reinsured companies, the
reinsurance under this Contract shall be payable directly by the Reinsurer to
the company or to its liquidator, receiver or statutory successor, except as
provided by Section 4118(a) of the New York Insurance Law or except (1) where
this Contract specifically provides another payee of such reinsurance in the event
of the insolvency of the company or (2) where the Reinsurer with the
consent of the direct insured or insureds has assumed such policy obligations
of the company as direct obligations of the Reinsurer to the payees under such
policies and in substitution for the obligations of the company to such payees.

 

Article XXII - Arbitration (BRMA 6J)

 

A.    As a condition precedent to any right of
action hereunder, in the event of any dispute or difference of opinion
hereafter arising with respect to this Contract, it is hereby mutually agreed
that such dispute or difference of opinion shall be submitted to arbitration.
One Arbiter shall be chosen by the Company, the other by the Reinsurer, and an
Umpire shall be chosen by the two Arbiters before they enter upon arbitration,
all of whom shall be active or retired disinterested executive officers of
insurance or reinsurance companies or Lloyd’s London Underwriters. In the event
that either party should fail to choose an Arbiter within

 

17

 

30 days following a
written request by the other party to do so, the requesting party may choose
two Arbiters who shall in turn choose an Umpire before entering upon
arbitration. If the two Arbiters fail to agree upon the selection of an Umpire
within 30 days following their appointment, each Arbiter shall nominate three
candidates within 10 days thereafter, two of whom the other shall decline, and
the decision shall be made by drawing lots.

 

B.    Each party shall present its case to the Arbiters
within 30 days following the date of appointment of the Umpire. The Arbiters
shall consider this Contract as an honorable engagement rather than merely as a
legal obligation and they are relieved of all judicial formalities and may
abstain from following the strict rules of law. The decision of the Arbiters
shall be final and binding on both parties; but failing to agree, they shall
call in the Umpire and the decision of the majority shall be final and binding
upon both parties. Judgment upon the final decision of the Arbiters may be
entered in any court of competent jurisdiction.

 

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

 

D.    Each party shall bear the expense of its own
Arbiter, and shall jointly and equally bear with the other the expense of the
Umpire and of the arbitration. In the event that the two Arbiters are chosen by
one party, as above provided, the expense of the Arbiters, the Umpire and the
arbitration shall be equally divided between the two parties.

 

E.     Any arbitration proceedings shall take
place at a location mutually agreed upon by the parties to this Contract, but
notwithstanding the location of the arbitration, all proceedings pursuant
hereto shall be governed by the law of the state in which the Company has its
principal office.

 

Article
XXIII - Service of Suit (BRMA 49C)

 

(Applicable if the Reinsurer is not domiciled in the
United States of America, and/or is not authorized in any State, Territory or
District of the United States where authorization is required by insurance
regulatory authorities)

 

A.    It is agreed that in the event the Reinsurer
fails to pay any amount claimed to be due hereunder, the Reinsurer, at the
request of the Company, will submit to the jurisdiction of a court of competent
jurisdiction within the United States. Nothing in this Article constitutes or
should be understood to constitute a waiver of the Reinsurer’s rights to
commence an action in any court of competent jurisdiction in the United States,
to remove an action to a

 

18

 

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.

 

B.    Further, pursuant to any statute of any
state, territory or district of the United States which makes provision
therefor, the Reinsurer hereby designates the party named in its Interests and
Liabilities Agreement, or if no party is named therein, the Superintendent,
Commissioner or Director of Insurance or other officer specified for that
purpose in the statute, or his successor or successors in office, as its 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 Contract.

 

Article XXIV - Agency Agreement

 

If more than one reinsured company is named as a party
to this Contract, the first named company shall be deemed the agent of the
other reinsured companies (subject to the provisions of Article XXI) for
purposes of sending or receiving notices required by the terms and conditions
of this Contract, and for purposes of remitting or receiving any monies due any
party.

 

Article XXV - Intermediary (BRMA
23A)

 

Benfield Blanch Inc. is hereby recognized as the
Intermediary negotiating this Contract for all business hereunder. All
communications (including but not limited to notices, statements, premium,
return premium, commissions, taxes, losses, loss adjustment expense, salvages
and loss settlements) relating thereto shall be transmitted to the Company or
the Reinsurer through Benfield Blanch Inc., 3600 West 80th Street, Minneapolis,
Minnesota 55431. Payments 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 to constitute payment to the Company only to the extent that
such payments are actually received by the Company.

 

In Witness Whereof,
the Company by its duly authorized representative has executed this
Contract as of the date undermentioned at:

 

 

North Palm Beach, Florida this 28th day of May in the year 2002.

 

	
   

  	
  /s/ Debra Cerre Ruedisili, President

  
	
   

  	
  AmComp Preferred Insurance Company (for and on
  behalf of the “Company”)

  

 

19

 

Schedule A

 

Catastrophe Workers’ Compensation

Reinsurance Contract

Effective: January 1, 2002

 

issued to

 

AmCOMP Preferred Insurance Company

North Palm Beach, Florida

AmCOMP Assurance Corporation

North Palm Beach, Florida

and

any and all insurance companies which are now or

hereafter come under the same ownership or management as the

AmCOMP Group

North Palm Beach, Florida

 

	
   

  	
   

  	
  First

  Excess

  	
   

  	
  Second

  Excess

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Company’s Retention

  	
   

  	
  $

  	
  10,000,000

  	
   

  	
  $

  	
  20,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Reinsurer’s Per
  Occurrence Limit

  	
   

  	
  $

  	
  10,000,000

  	
   

  	
  $

  	
  30,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Reinsurer’s Annual
  Limit 

  	
   

  	
  $

  	
  20,000,000

  	
   

  	
  $

  	
  60,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Annual Minimum Premium 

  	
   

  	
  $

  	
  911,250

  	
   

  	
  $

  	
  1,112,940

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Premium Rate

  	
   

  	
  0.750

  	
  %

  	
  0.916

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Annual Deposit Premium

  	
   

  	
  $

  	
  1,012,500

  	
   

  	
  $

  	
  1,236,600

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Quarterly Deposit
  Premium

  	
   

  	
  $

  	
  253,125

  	
   

  	
  $

  	
  309,150

  	
   

  
												

 

The figures listed above
for each excess layer shall apply to each Subscribing Reinsurer in the
percentage share for that excess layer as expressed in its Interests and
Liabilities Agreement attached hereto.

 

1

 

U.S.A.

 

NUCLEAR INCIDENT EXCLUSION CLAUSE
- LIABILITY - REINSURANCE

(Approved by Lloyd’s
Underwriters’ Fire and Non-Marine Association)

 

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

 

(2)   Without in any way restricting the operation
of paragraph (1) of this Clause it is understood and agreed that for
purposes of this reinsurance all the original policies of the Reassured (new,
renewal and replacement) of the classes specific Clause II of this paragraph (2) from
the time specified in Clause II in this paragraph (2) shall be deemed to
include following provision (specified as the Limited Exclusion Provision):

 

Limited Exclusion Provision.*

 

I.      It is
agreed that the policy does not apply under any liability coverage,

to    (injury, sickness,
disease, death or destruction    with
respect to which an insured under the

       (bodily injury or property damage

policy is also an insured under a nuclear energy liability policy issued by
Nuclear Energy Liability [ILLEGIBLE] Association, Mutual Atomic Energy
Liability Underwriters or Nuclear Insurance Association of Canada, or
[ILLEGIBLE] be an insured under any such policy but for its termination upon
exhaustion of its limit of liability.

 

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

 

III.   The
inception dates and thereafter of all original policies as described in II
above, whether new, [ILLEGIBLE] replacement, being policies which either

(a)    become
effective on or after 1st May, 1960, or

(b)    become
effective before that date and contain the Limited Exclusion Provision set out
above;

provided this paragraph (2) shall not be applicable to Family Automobile
Policies. Special Automobile [ILLEGIBLE] or policies or combination policies of
a similar nature, issued by the Reassured on New York risks, until 90
[ILLEGIBLE] following approval of the Limited Exclusion Provision by the
Governmental Authority having [ILLEGIBLE] thereof.

 

(3)   Except for those classes of policies
specified in Clause II of paragraph (2) and without in any way restricting
operation of paragraph (1) of this Clause, it is understood and agreed
that for all purposes of this reinsurance the [ILLEGIBLE] 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 ([ILLEGIBLE-railroad) 
Protective  Liability,  Manufacturers and  Contractors 
Liability,  Product  Liability, 
Professional Malpractice Liability, Storekeepers Liability, Garage Liability,
Automobile Liability (including Massachusetts M Vehicle or Garage Liability)

 

shall be deemed to
include, with respect to such coverages, from the time specified in Clause V of
this paragraph (3). following provision (specified as the Broad Exclusion
Provision):

 

Broad
Exclusion
Provision.*

 

It is agreed that
the policy does no: apply:

 

	
   

  	
   

  	
  I.

  	
   

  	
  Under any Liability
  Coverage to

  	
  (injury,
  sickness, disease, death or destruction

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  (bodily injury or
  property damage

  

 

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

 

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

 

2

 

II.    Under any
Medical Payments Coverage, or under any Supplementary Payments Provision

relating to    (immediate
medical or surgical relief   to
expenses incurred with respect

                    (first
aid,

to  (bodily injury, sickness,
disease or death   resulting
from the hazardous properties of

     (bodily injury

nuclear material and arising out of the operation of a nuclear facility by any
person or organization.

 

III.   Under any
Liability Coverage to   (injury,
sickness, disease, death or destruction

                                                       (bodily
injury or property damage

resulting from the hazardous properties of nuclear material, if

 

(a)   the nuclear
material (I) is at any nuclear facility owned by, or operated by or on behalf
of, an [ILLEGIBLE]

(2) has been discharged or dispersed therefrom;

 

(b)   the nuclear
material is contained in spent fuel or waste at any time possessed, handled,
used, [ILLEGIBLE] stored, transported or disposed of by or on behalf of an
insured; or

 

(c)   the    (injury, sickness, disease, death or destruction arises
out of the furnishing by an insured

         (bodily injury or
property damage

of services, materials, parts or equipment in connection with the planning,
construction, [ILLEGIBLE] operation or use of any nuclear facility, but if such
facility is located within the United States of [ILLEGIBLE] its territories, or
possessions or Canada, this exclusion (c) applies

only to    (injury to or
destruction of property at such nuclear facility

               (property
damage to such nuclear facility and any property thereat.

 

IV.   As used in this endorsement:

 

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

 

(a)   any nuclear
reactor,

 

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

 

(c)   any
equipment or device used for the processing, fabricating or alloying of special
nuclear material if at time the total amount of such material in the custody of
the insured at the premises where such [ILLEGIBLE] device is located consists
of or contains more than 25 grams of plutonium or uranium 233 or combination
thereof, or more than 250 grams of uranium 235,

 

(d)   any structure, basin, excavation, premises or
place prepared or used for the storage or disposal of waste, and includes the
site on which any of the foregoing is located, all operations conducted on such
site [ILLEGIBLE] premises used for such operations; “nuclear reactor” means any
apparatus designed or used to sustain [ILLEGIBLE] 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,

 

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

 

(i)    Garage
and Automobile Policies issued by the Reassured on New York risks, or

(ii)   statutory liability insurance
required under Chapter 90, General Laws of Massachusetts, until 90

following approval of the Broad Exclusion Provision by the Governmental
Authority having jurisdiction there

 

(4)  Without
in any way restricting the operation of paragraph (1) of this Clause, it
is understood and agreed paragraphs (2) and (3) above are not
applicable to original liability policies of the Reassured in Canada and that
with [ILLEGIBLE] such policies this Clause shall be deemed to include the
Nuclear Energy Liability Exclusion Provisions adopted by the [ILLEGIBLE]
Underwriters’ Association of the Independent Insurance Conference of Canada.

 

*NOTE.
The words printed in italics in the Limited Exclusion Provision and in the
Broad Exclusion Provision shall apply in relation to original liability
policies which include a Limited Exclusion Provision or a Broad Exclusion
Provision [ILLEGIBLE]
words.

 

3

 

NUCLEAR INCIDENT EXCLUSION CLAUSE -
LIABILITY - REINSURANCE

CANADA

 

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

 

2.     Without
in any way restricting the operation of paragraph 1 of this clause it is agreed
that for all purposes of Agreement all the original liability contracts of the
Reinsured, whether new, renewal or replacement, of the follow 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 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 [ILLEGIBLE] under a contract of nuclear energy liability insurance
(whether the Insured is named in such contract or not whether or not it is
legally enforceable by the Insured) issued by the Nuclear Insurance Association
of [ILLEGIBLE] or any other group or pool of insurers or would be an Insured
under any such policy but for its termination [ILLEGIBLE] exhaustion of its
limit of liability.

 

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

 

5.     Without in
any way restricting the operation of paragraph 1 of this clause it is agreed
that for all purposes of Agreement all the original liability contracts of the
Reinsured, whether new, renewal or replacement, of any [ILLEGIBLE] whatsoever
(other than Personal Liability, Farmers Liability, Storekeepers Liability or
Automobile [ILLEGIBLE] contracts), which become effective on or after 31st December 1984,
shall be deemed to include, from their [ILLEGIBLE] 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; or

 

(b)   to bodily
injury or property damage with respect to which an Insured under this Policy is
also [ILLEGIBLE] under a contract of nuclear energy liability insurance
(whether the Insured is named in such contract or and whether or not it is
legally enforceable by the Insured) issued by the Nuclear Insurance Association
Canada or any other insurer or group or pool of insurers or would be an Insured
under any such policy for its termination upon exhaustion of its limit of
liability; or

 

(c)   to bodily injury
or property damage resulting directly or indirectly from the nuclear energy
hazard [ILLEGIBLE] 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 planning, construction, maintenance, operation or use of any
nuclear facility; and

 

4

 

(3)   The
possession, consumption, use, handling, disposal or transportation of
fissionable substance; of other radioactive material (except radioactive
isotopes, away from a nuclear facility, which [ILLEGIBLE] reached the final
stage of fabrication so as to be useable for any scientific, medical,
[ILLEGIBLE] commercial or industrial purpose) used, distributed, handled or
sold by an Insured.

 

used in this Policy:

 

(I)    The term
“nuclear energy hazard” means the radioactive, toxic, explosive or other hazard
properties of radioactive material;

 

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

 

(III) The term
“nuclear facility” means:

 

(a)   any
apparatus designed or used to sustain nuclear fission in a self-supporting
chain reaction 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, [ILLEGIBLE] and uranium or any one or more of them,
(ii) processing or utilizing spent fuel, or handling, processing or
packaging waste;

 

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

 

(d)   any
structure, basin, excavation, premises or place prepared or used for the
storage or [ILLEGIBLE] of waste radioactive material;

 

and includes the
site on which any of the foregoing is located, together with all [ILLEGIBLE]
conducted thereon and all premises used for such operations.

 

(IV) The term
“fissionable substance” means any prescribed substance that is, or from which
[ILLEGIBLE] obtained, a substance capable of releasing atomic energy by nuclear
fission.

 

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

 

5

 

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 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 Clause No. 1B - Liability,
No. 2 - Physical Damage, No. 3 - Boiler and Machinery and paragraph
(1) of this clause, it is understood and agreed that for all purposes as
respects the reinsurance assumed by the Reinsurer from the Reassured, all
original insurance policies or contracts of the Reassured (new, renewal and
replacement) shall be deemed to include the applicable existing Nuclear Clause
and/or Nuclear Exclusion Clause(s) in effect at the time and any subsequent
revisions thereto as agreed upon and approved by the Insurance Industry and/or
a qualified Advisory or Rating Bureau.

 

6

 

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 contractors or
subcontractors 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(l)(a) and A(l)(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.

 

7Exhibit 10.43

 

 

 

Excess
Workers’ Compensation

Reinsurance
Contract

Effective:
January 1, 2003

 

issued to

 

AmCOMP Preferred
Insurance Company

North Palm Beach, Florida

AmCOMP Assurance
Corporation

North Palm Beach, Florida

and

any and all insurance
companies which are now or

hereafter come under the
same ownership or management as the

AmCOMP Group

North Palm Beach, Florida

 

 

 

BENFIELD BLANCH

 

 

Table of
Contents

 

	
  Article

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  I

  	
   

  	
  Classes of Business
  Reinsured

  	
  1

  
	
  II

  	
   

  	
  Commencement and
  Termination

  	
  1

  
	
  III

  	
   

  	
  Special Termination

  	
  2

  
	
  IV

  	
   

  	
  Territory (BRMA 51A)

  	
  3

  
	
  V

  	
   

  	
  Exclusions

  	
  3

  
	
  VI

  	
   

  	
  Retention and Limit

  	
  7

  
	
  VII

  	
   

  	
  Reinstatement

  	
  8

  
	
  VIII

  	
   

  	
  Definitions

  	
  9

  
	
  IX

  	
   

  	
  Other Reinsurance

  	
  12

  
	
  X

  	
   

  	
  Federal Terrorism
  Excess Recovery

  	
  12

  
	
  XI

  	
   

  	
  Reports to Reinsurers

  	
  12

  
	
  XII

  	
   

  	
  Subrogation

  	
  13

  
	
  XIII

  	
   

  	
  Premium

  	
  13

  
	
  XIV

  	
   

  	
  Commission

  	
  14

  
	
  XV

  	
   

  	
  Late Payments

  	
  14

  
	
  XVI

  	
   

  	
  Offset and Security

  	
  16

  
	
  XVII

  	
   

  	
  Access to Records (BRMA
  1D)

  	
  16

  
	
  XVIII

  	
   

  	
  Liability of the
  Reinsurer

  	
  17

  
	
  XIX

  	
   

  	
  Net Retained Lines
  (BRMA 32E)

  	
  17

  
	
  XX

  	
   

  	
  Errors and Omissions
  (BRMA 14F)

  	
  17

  
	
  XXI

  	
   

  	
  Currency (BRMA 12A)

  	
  17

  
	
  XXII

  	
   

  	
  Taxes (BRMA 50B)

  	
  18

  
	
  XXIII

  	
   

  	
  Federal Excise Tax
  (BRMA 17A)

  	
  18

  
	
  XXIV

  	
   

  	
  Unauthorized Reinsurers

  	
  18

  
	
  XXV

  	
   

  	
  Insolvency

  	
  20

  
	
  XXVI

  	
   

  	
  Arbitration

  	
  21

  
	
  XXVII

  	
   

  	
  Service of Suit (BRMA
  49C)

  	
  22

  
	
  XXVIII

  	
   

  	
  Material Changes

  	
  22

  
	
  XXIX

  	
   

  	
  Agency Agreement

  	
  23

  
	
  XXX

  	
   

  	
  Intermediary (BRMA 23A)

  	
  23

  
	
   

  	
   

  	
  Schedule A

  	
   

  

 

 

Excess
Workers’ Compensation

Reinsurance
Contract

Effective:
January 1, 2003

 

issued to

 

AmCOMP Preferred Insurance Company

North Palm Beach, Florida

AmCOMP Assurance Corporation

North Palm Beach, Florida

and

any and all insurance companies which are now or

hereafter come under the same ownership or management as the

AmCOMP Group

North Palm Beach, Florida

(hereinafter referred to
collectively as the “Company”)

 

by

 

The Subscribing Reinsurer(s) Executing the

Interests and Liabilities Agreement(s)

Attached Hereto

(hereinafter referred to as the “Reinsurer”)

 

Article I
- Classes of Business Reinsured

 

By this Contract
the Reinsurer agrees to reinsure the excess liability which may accrue to the
Company under its policies, contracts and binders of insurance or reinsurance
(hereinafter called “policies”) in force at the effective date hereof or issued
or renewed on or after that date, and classified by the Company as Workers’
Compensation and Employers Liability business, subject to the terms, conditions
and limitations set forth herein and in Schedule A attached to and forming
part of this Contract.

 

Article II
- Commencement and Termination

 

A.    This
Contract shall become effective at 12:01 a.m., Eastern Standard Time,
January 1, 2003, with respect to losses arising out of occurrences
commencing on or after that date, and shall continue in force thereafter until
terminated.

 

B.     Either
party may terminate this Contract on any December 31 by giving the other
party not less than 90 days prior notice by certified mail.

 

1

 

C.     Unless the
Company elects to reassume the unearned reinsurance premium in force on the
effective date of termination, and so notifies the Reinsurer prior to or within
72 hours after the effective date of termination, reinsurance hereunder on
business in force on the effective date of termination shall remain in full
force and effect until expiration, cancellation or next premium anniversary of
such business, whichever first occurs, but in no event beyond 12 months, plus
odd time (not to exceed 18 months in all), following the effective date of
termination.

 

D.     Notwithstanding
the provisions above, in the event that any policy subject to this Contract is
required by statute, regulation or by order of an insurance department to be
continued in force, the Reinsurer agrees to extend reinsurance coverage
hereunder following the termination of this Contract with respect to such
policy until the first date that the Company may lawfully non-renew, cancel or
terminate such policy, whether or not the Company actually does non-renew,
cancel or terminate such policy.

 

E.     “Contract
year” as used herein shall mean the period from January 1, 2003 through
December 31, 2003, and each subsequent 12-month period thereafter that
this Contract continues in force. If this Contract is terminated, the final
contract year shall be the period from the beginning of the then current
contract year through the effective date of termination if this Contract is on
a “cutoff” basis or through the end of the “runoff” period if this Contract is
terminated on a “runoff” basis.

 

Article III
- Special Termination

 

A.    Notwithstanding
the provisions of paragraph B of Article II, either party may terminate
this Contract at any time by giving 30 days prior written notice in the event
any of the following circumstances occur (if terminated by either party, said
termination shall be on a “runoff” basis unless the Company elects to have such
termination on a “cutoff” basis):

 

1.     The other
party’s surplus at the beginning of any contract year has been reduced by more
than 25.0% of the amount of surplus 12 months prior to that date; or

 

2.     The other
party’s policyholders’ surplus at any time during any contract year has been
reduced by more than 25.0% of the amount of surplus at the date of the other
party’s most recent financial statement filed with regulatory authorities and
available to the public as of the beginning of the contract year; or

 

3.     The other
party has become merged with, acquired by or controlled by any other company,
corporation or individual(s) not controlling said party’s operations
previously; or

 

4.     The
purchase or sale of 51.0% or more of the Company or its portfolio; or

 

2

 

5.    The State
Insurance Department or other legal authority in the other party’s state of
domicile has ordered the other party to cease writing business; or

 

6.    The other
party has become insolvent or has been placed into liquidation or receivership
(whether voluntary or involuntary) or proceedings have been instituted against
the other party for the appointment of a receiver, liquidator, rehabilitator,
conservator or trustee in bankruptcy, or other agent known by whatever name, to
take possession of its assets or control of its operations; or

 

7.     The other
party has ceased writing new and renewal business; or

 

8.     The
Company fails to pay reinsurance premiums in accordance with the Contract; or

 

9.     There is a
material change in any two of the Company’s three senior officers (i.e., the
Chief Executive Officer, the President, or the Chief Financial Officer).

 

B.     Notwithstanding
the provisions of paragraph B of Article II, the Company may terminate a
Subscribing Reinsurer’s percentage share in this Contract with 30 days prior
written notice to the Subscribing Reinsurer in the event the Subscribing Reinsurer’s A.M.
Best’s rating has been assigned or downgraded below A- and/or Standard and
Poor’s rating has been assigned or downgraded below BBB+.

 

Article IV
- Territory (BRMA 51A)

 

The territorial
limits of this Contract shall be identical with those of the Company’s
policies.

 

Article V
- Exclusions

 

A.    This
Contract does not apply to and specifically excludes the following:

 

1.    Reinsurance
assumed by the Company under obligatory reinsurance agreements, except:

 

a.      Agency
reinsurance where the policies involved are to be reunderwritten in accordance
with the underwriting standards of the Company and reissued as Company policies
at the next anniversary or expiration date;

 

b.      Intercompany
reinsurance between any of the reinsured companies under this Contract.

 

2.     Ex-gratia
payments.

 

3

 

3.     Risks
subject to a deductible in excess of $25,000, or a self-insured retention
excess of $25,000, unless such deductible or self-insured retention is
otherwise mandated by statute or regulatory authority.

 

4.     Nuclear
risks as defined in the “Nuclear Incident Exclusion Clause - Liability -
Reinsurance (U.S.A.)” and the “Nuclear Incident Exclusion Clause - Liability -
Reinsurance (Canada)” and loss or liability defined in the “Nuclear Incident
Exclusion Clause - Reinsurance - No. 4” attached to and forming part of
this Contract.

 

5.     Pollution
liability coverages excluded under the provisions of the “Pollution Exclusion
Clause - General Liability - Reinsurance (BRMA 39C)” attached to and forming
part of this Contract.

 

6.     Liability
as a member, subscriber or reinsurer of any Pool, Syndicate or Association, but
this exclusion shall not apply to Assigned Risk Plans or similar state-mandated
plans.

 

7.     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, however 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.

 

8.     Loss or
liability as excluded in the “War Risk Exclusion Clause (Reinsurance)” attached
to and forming part of this Contract.

 

9.     Operation
under the jurisdiction of the U.S. Longshore and Harbor Workers’ Compensation
Act, the Jones Act and the Maritime Employers Liability Act, except for
incidental exposures (i.e., 10% or less of the insured’s payroll).

 

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

 

a.      The use
of nuclear reactors such as atomic piles, particle accelerators or
generators; or

 

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

 

However,
subparagraphs a and b above shall not apply to:

 

4

 

i.     The
exclusive use of particle accelerators incidental to ordinary industrial
or education research pursuits, or

 

ii.      The
exclusive use, handling or transportation of radioisotopes for medical or
industrial use, or to radium or radium compounds.

 

11.     Operation
of docks or wharves as related to port authorities.

 

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

 

13.     Risks
involving known exposure to the following substances:

 

a.      Dioxin;

 

b.      Polychlorinated
biphenols;

 

c.      Asbestos.

 

14.     All
railway operations except sidetrack agreements.

 

15.     Amusement
parks, carnivals or circuses. This exclusion shall not apply to miniature golf
courses or driving range operations.

 

16.     Subaquaeous
operations.

 

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

 

18.     Blasting
operations.

 

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

 

20.     Shoring,
underpinning or moving of buildings or structures.

 

21.     Erection
or repair of scaffolds if 10.0% or more of the insured’s annual remuneration is
attributed to NCCI Class Code 9529.

 

22.     Construction
of tunnels or dams.

 

23.     Fireworks,
fuses, or any explosive substance (as defined below) as follows:

 

a.      Manufacturers
or importers of such items;

 

5

 

b.      Loading
of such items 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 such items are an ingredient;

 

d.      Handling,
storage, transportation or use of such items.

 

“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.

 

24.     Onshore
and offshore gas and oil drilling operations.

 

25.     Operations
where principal business includes the use of any owned or unowned aircraft, or
any device or machine intended for and/or aiding in the achievement of
atmospheric flight, projection or orbit, for flight, and/or the ownership or
operation of any airport. This exclusion shall not apply where exposure is
incidental (i.e., constitutes 10.0% or less of the insured’s payroll) to the
principal business operations and the aircraft contains eight seats or fewer.

 

26.     Municipal
law enforcement organizations and municipal fire fighting organizations,
whether professional or voluntary.

 

27.     Logging
or forestry operations.

 

28.     Professional
employment organizations (PEO’s).

 

29.     Professional
sports teams.

 

30.     Operations
where the principal business of the risk is manufacturing, production,
distribution, refining or storage of natural or artificial fuel, gas, butane,
propane, liquefied petroleum gases or gasoline. This exclusion shall not apply
to any risk whose principal business operations are any of the following:

 

a.      Retail
gasoline service station, either full or self service, or retail gasoline
marina;

 

b.      Convenience
store with gasoline sales with its petroleum gas and/or storage tanks located
below ground.

 

31.     Acts of terrorism,
as defined in paragraph G of Article VIII, that involve the following or
preparation of the following:

 

a.      The use,
release or escape of nuclear materials, or that directly or indirectly result
in nuclear reaction or radiation or radioactive contamination; or

 

6

 

b.      That are
carried out by means of the dispersal or application of pathogenic or poisonous
biological or chemical materials and it appears that one purpose of the act of
terrorism was to release such materials.

 

B.     In the
event the Company is inadvertently bound on any risk which is excluded under
subparagraph 9 or subparagraphs 14 through 30 of paragraph A above, the
reinsurance provided under this Contract shall apply on such risk until discovery
by the Company of the existence of such risk and for 30 days thereafter, or
unless otherwise mandated by statute or regulatory authority. Coverage shall
cease after such time, unless the Company has received from the Reinsurer
written notice of its approval of such risk within 30 days.

 

C.     Notwithstanding
the foregoing, any reinsurance falling within the scope of one or more of the
exclusions set forth above that is specially accepted by the Reinsurer from the
Company shall be covered under this Contract and subject to all of the terms
and conditions hereof, except as such terms are modified by the special
acceptance, subject to the provisions of paragraph D below. In the event a
reinsurer becomes a party to this Contract subsequent to one or more special
acceptances hereunder, the new reinsurer shall automatically accept such
special acceptance(s) as being covered hereunder.

 

Article VI
- Retention and Limit

 

A.     As
respects all losses subject hereto except losses arising out of an occurrence
of an act of terrorism, as respects each excess layer of reinsurance coverage
provided by this Contract, the Company shall retain and be liable for the first
amount of ultimate net loss (whether involving any one or any combination of
the classes of business covered hereunder, regardless of the number of policies
under which such loss is payable or the number of different interests insured),
shown as “Company’s Retention” for that excess layer in Schedule A
attached hereto, arising out of each occurrence. The Reinsurer shall then be
liable, as respects each excess layer, for the amount by which such ultimate
net loss exceeds the Company’s retention, but the liability of the Reinsurer
shall not exceed the amount, shown as “Reinsurer’s Per Occurrence Limit” for
that excess layer in Schedule A attached hereto, as respects any one
occurrence.

 

B.     As
respects losses arising out of an occurrence of an act of terrorism, as
respects each excess layer of reinsurance coverage provided hereunder, the
Company shall retain and be liable for the first amount of ultimate net loss,
shown as “Company’s Retention” for that excess layer in Schedule A
attached hereto, arising out of each occurrence. The Reinsurer shall then be
liable, as respects each excess layer, for the amount by which such ultimate
net loss exceeds the Company’s retention, but the liability of the Reinsurer
shall not exceed the amount shown as “Reinsurer’s Terrorism Per Occurrence
Limit” for that excess layer in Schedule A attached hereto as respects any
one occurrence of an act of terrorism, nor shall it exceed the amount shown as
“Reinsurer’s Contract Year Terrorism Limit” for that excess layer in
Schedule A attached hereto as respects loss or losses arising out of all
occurrences of acts of terrorism during any one contract year.

 

7

 

C.     The
Company deems that the maximum Employers Liability policy limit subject hereto
shall not exceed $1,000,000 for policies issued in Texas and Illinois, or
$2,000,000 for all other policies. Policy limits in excess of the permissible
amounts may be submitted by special acceptance to the Reinsurer for coverage
hereunder, subject to the provisions of paragraphs C and D of Article V.

 

Article VII - Reinstatement

 

A.    In the
event all or any portion of the reinsurance under any excess layer of
reinsurance coverage provided by paragraph A of Article VI of this
Contract is exhausted by loss, the amount so exhausted shall be reinstated
immediately from the time the occurrence commences hereon.

 

1.     As
respects each amount so reinstated under the first and second excess layers,
the Company shall pay no additional premium.

 

2.     As
respects each amount so reinstated under the third excess layer, the Company
agrees to pay additional premium equal to the product of the following:

 

a.      The
percentage of the occurrence limit for the excess layer reinstated (based on
the loss paid by the Reinsurer under that excess layer); times

 

b.      The
earned reinsurance premium for the excess layer reinstated for the contract
year (exclusive of reinstatement premium).

 

B.     Whenever
the Company requests payment by the Reinsurer of any loss under the third
excess layer hereunder, the Company shall submit a statement to the Reinsurer
of reinstatement premium due the Reinsurer for that excess layer. If the earned
reinsurance premium for the third excess layer for the contract year has not
been finally determined as of the date of any such statement, the calculation
of reinstatement premium due for that excess layer shall be based on the annual
deposit premium for that excess layer and shall be readjusted when the earned
reinsurance premium for that excess layer for the contract year has been
finally determined. Any reinstatement premium shown to be due the Reinsurer for
the third excess layer as reflected by any such statement (less prior payments,
if any, for that excess layer) shall be payable by the Company concurrently
with payment by the Reinsurer of the requested loss for that excess layer. Any
return reinstatement premium shown to be due the Company shall be remitted by
the Reinsurer as promptly as possible after receipt and verification of the
Company’s statement.

 

C.     Notwithstanding
anything stated herein, the liability of the Reinsurer under the third excess
layer of reinsurance coverage provided by paragraph A of Article VI of
this Contract shall not exceed $5,000,000 as respects loss or losses arising
out of any one occurrence, nor shall it exceed $15,000,000 in all during any
one contract year.

 

8

Article VIII - Definitions

 

A.    “Ultimate
net loss” as used herein is defined as the sum or sums (including loss in
excess of policy limits, extra contractual obligations and any loss adjustment
expense, as hereinafter defined) paid or payable by the Company in settlement
of claims and in satisfaction of judgments rendered on account of such claims,
after deduction of all recoveries from subrogation, all recoveries, and all
claims on inuring insurance or reinsurance, whether collectible or not. Nothing
herein shall be construed to mean that losses under this Contract are not
recoverable until the Company’s ultimate net loss has been ascertained.

 

B.     “Loss in
excess of policy limits” and “extra contractual obligations” as used herein
shall be defined as follows:

 

1.     “Loss in
excess of policy limits” shall mean 90.0% of any amount paid or payable by the
Company in excess of its policy limits, but otherwise within the terms of its
policy, such loss in excess of the Company’s policy limits having been incurred
because of, but not limited to, failure by the Company to settle within the
policy limits or by reason of the Company’s 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 an action against its insured or reinsured or in the
preparation or prosecution of an appeal consequent upon such an action.

 

2.     “Extra
contractual obligations” shall mean 90.0% of any punitive, exemplary,
compensatory or consequential damages paid or payable by the Company, not
covered by any other provision of this Contract and which arise from the
handling of any claim on business subject to this Contract, such liabilities
arising because of, but not limited to, failure by the Company to settle within
the policy limits or by reason of the Company’s 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 an action against its insured or reinsured or in
the preparation or prosecution of an appeal consequent upon such an action. An
extra contractual obligation shall be deemed, in all circumstances, to have
occurred on the same date as the loss covered or alleged to be covered under
the policy.

 

Notwithstanding
anything stated herein, this Contract shall not apply to any loss in excess of
policy limits or any extra contractual obligation incurred by the Company as a
result of any fraudulent and/or criminal act by any officer or director 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.

 

If
any provision of this paragraph B shall be rendered illegal or unenforceable by
the laws, regulations or public policy of any state, such provision shall be
considered void in such

 

9

 

state, but this
shall not affect the validity or enforceability of any other provision of this
Contract or the enforceability of such provision in any other jurisdiction.

 

C. “Occurrence” as used herein is defined as an
accident or occurrence or a series of accidents or occurrences arising out of
or caused by one event, whether involving one or more of the Company’s
policies, except that:

 

1.     As
respects Workers’ Compensation policies, each occupational or industrial
disease or cumulative injury case contracted by an employee of an insured shall
be deemed to have been caused by a separate occurrence commencing on:

 

a.      The date
of disability for which compensation is payable if the case is compensable
under the Workers’ Compensation Law;

 

b.      The date
disability due to the disease actually began if the case is not compensable
under the Workers’ Compensation Law; or

 

c.      The date
of cessation of employment if claim is made after employment has ceased.

 

2.     Notwithstanding
the provisions of subparagraph 1 above, as respects losses resulting from
occupational disease and cumulative trauma suffered by employees of an insured
for which the employer is liable as a result of a sudden and accidental event
not exceeding 48 hours in duration, all such losses shall be considered one
occurrence and may be combined with losses not classified as occupational
disease or cumulative trauma which arise out of the same event and the
combination of such losses shall be considered as one occurrence within the
meaning hereof.

 

3.     Notwithstanding
the foregoing, the following shall apply to occurrences involving natural disasters:

 

a.      An
occurrence shall be limited to damage, injury or loss arising out of a natural
disaster during any continuous 168 hour period.

 

b.      The
Company may choose the date and time when such 168 hour period commences and if
the occurrence is of greater duration than 168 hours, the Company may divide
such occurrence into two or more occurrences, provided no two periods overlap
and provided no period commences earlier than the date and time of the first
loss to the Company in such occurrence.

 

c.      “Natural
disaster” shall mean loss caused by the perils of tornado, cyclone, windstorm,
hurricane and hail arising from the same atmospheric disturbance; earthquake,
including ensuing fire, landslide, mudslide, flood, tidal wave; volcanic
eruptions; flood; tides; tidal wave; landslide/mudslide; and meteors.

 

10

 

D.     “Occupational
or industrial disease” shall mean any abnormal condition that fulfills all of
the following conditions:

 

1.     It is not
traceable to a definite compensable accident occurring during the employee’s
present or past employment; and

 

2.     It has
been caused by exposure to a disease producing agent or agents present in the
workers’ occupational environment; and

 

3.     It has
resulted in a disability or death.

 

E      “Cumulative
injury” is any injury that fulfills all of the following conditions:

 

1.     It is not
traceable to a definite compensable accident occurring during the employee’s
present or past employment; and

 

2.     It has
occurred from, and has been aggravated by, a repetitive employment-related
activity; and

 

3.     It has
resulted in a disability or death.

 

F.      “Loss
adjustment expense” as used herein shall mean expenses assignable to the
investigation, appraisal, adjustment, settlement, litigation, defense and/or
appeal of specific claims, regardless of how such expenses are classified for
statutory reporting purposes. Loss adjustment expense shall include, but not be
limited to, interest on judgments, expenses of outside adjusters and
claim-specific declaratory judgment expenses or other legal expenses and costs
incurred in connection with coverage questions and legal actions connected
thereto, but shall not include office expenses or salaries of the Company’s
regular employees other than medical management personnel whose cost the
Company will bill to specific cases on a time and expense basis.

 

G.     “Act of
terrorism” as used herein shall include all loss, cost or expense, including
fire following, related directly or indirectly from either:

 

1.     Any act of
any person or persons either acting on behalf of or in connection with any
organization or group with activities directed towards overthrowing,
intimidating, coercing or influencing of any government de jure or de facto or of its populous or its economic, political or
social systems, by force, violence, weapons of mass destruction, the
destruction, disruption or subversion of communication and information system
infrastructures and/or its content thereof, or sabotage, and/or threat
therefrom; or

 

2.     An act of
terrorism that is certified by the Secretary of Treasury, in concurrence with
the Secretary of State and the Attorney General of the United States.

 

11

 

Notwithstanding
the above, in the event a loss occurs on business subject hereunder which
arises out of an act of workplace violence and is not consistent with the
provisions of subparagraphs I and 2 above, such loss shall be covered
hereunder, subject to the provisions of Article V and all other provisions
of this Contract and not considered an act of terrorism. Further, any
occurrence which is not or can not be determined, classified or certified as
per subparagraphs 1 and 2 above shall be covered hereunder and not considered
an act of terrorism.

 

Article IX
- Other Reinsurance

 

A.    The Company
shall be permitted to carry facultative reinsurance, recoveries under which
shall inure to the benefit of this Contract.

 

B.     The
Company shall be permitted to carry underlying quota share reinsurance and
underlying excess reinsurance, recoveries under which shall inure solely to the
benefit of the Company and be entirely disregarded in applying all of the
provisions of this Contract.

 

Article X
- Federal Terrorism Excess Recovery

 

A,    Any loss
reimbursement the Company receives from the United States Government under the
Terrorism Risk Insurance Act of 2002 (the “Terrorism Act”) as a result of
occurrences commencing during each contract year shall inure to the benefit of
this Contract in the proportion that the Company’s insured losses (as defined
in the Terrorism Act) in that occurrence under policies reinsured under this
Contract bear to the Company’s total insured losses in that occurrence.

 

B.     If a loss
reimbursement received by the Company under the Terrorism Act is based on the
Company’s insured losses in more than one occurrence and the United States
Government does not designate the amount allocable to each occurrence, the
reimbursement shall be prorated in the proportion that the Company’s insured
losses in each occurrence bear to the Company’s total insured losses arising
out of all occurrences to which the recovery applies.

 

Article XI
- Reports to Reinsurers

 

A.    Whenever a
claim or settlement by the Company hereunder is for an amount greater than
$500,000 and/or whenever a claim appears likely to result in a claim under this
Contract, the Company shall notify the Reinsurer. Further, the Company shall
notify the Reinsurer whenever a claim involves a fatality, amputation, spinal
cord damage, brain damage, blindness, extensive burns or multiple fractures,
regardless of liability, including all subsequent developments. The Reinsurer
shall have the right to participate, at its own expense, in the defense of any
claim or suit or proceeding involving this reinsurance.

 

12

 

B.     All claim
settlements made by the Company, provided they are within the terms of this
Contract, shall be binding upon the Reinsurer, and the Reinsurer agrees to pay
all amounts for which it may be liable upon receipt of reasonable evidence of
the amount paid by the Company.

 

Article XII
- Subrogation

 

The Reinsurer
shall be credited with recoveries from subrogation (i.e., reimbursement
obtained or recovery made by the Company, less the actual cost, excluding
salaries of officials and employees of the Company and sums paid to attorneys
as retainer, of obtaining such reimbursement or making such recovery) on
account of claims and settlements involving reinsurance hereunder. Recoveries
therefrom shall always be used to reimburse the excess carriers in the reverse
order of their priority according to their participation before being used in
any way to reimburse the Company for its primary loss. The Company hereby
agrees to enforce its rights to subrogation relating to any loss, a part of
which loss was sustained by the Reinsurer, and to prosecute all claims arising
out of such rights.

 

Article XIII
- Premium

 

A.    As promptly
as possible after the effective date of this Contract, the Company shall remit
the Reinsurer’s share of the unearned premium (less commission thereon) for
each excess layer of reinsurance coverage provided by this Contract applicable
to subject business in force on the effective date of this Contract.

 

B.     As premium
for each excess layer of reinsurance coverage provided by this Contract, the
Company shall pay the Reinsurer the greater of the following for each contract
year:

 

1.     The amount
(or pro rata portion thereof if this Contract is terminated prior to the end of
any 12-month contract year in accordance with the provisions of
Article III), shown as “Annual Gross Minimum Premium” for that excess
layer in Schedule A attached hereto; or

 

2.     The
percentage, shown as “Gross Premium Rate” for that excess layer in
Schedule A attached hereto, of the Company’s net written premium for the
contract year.

 

C.     The
Company shall pay the Reinsurer an annual deposit premium for each excess layer
of the amount, shown as “Annual Gross Deposit Premium” for that excess layer in
Schedule A attached hereto, in four equal installments of the amount,
shown as “Quarterly Gross Deposit Premium” for that excess layer in
Schedule A attached hereto, on January 1, April 1, July 1
and October 1 of each contract year. However, no deposit premium installments
shall be due after the effective date of termination.

 

13

 

 

D.     Within 60
days following the end of each contract year and within 60 days following the
12-month period thereafter, the Company shall provide a report to the Reinsurer
setting forth the premium due hereunder for each excess layer for the contract
year, computed in accordance with paragraph A, and any additional premium due
the Reinsurer or return premium due the Company for each such excess layer
shall be remitted simultaneously. If the premium so computed for any excess
layer is less than the previously paid, but more than the minimum premium, for
that excess layer, the balance shall be returned by the Reinsurer to the
Company within 30 days of the report.

 

E.     “Net written
premium” as used herein is defined as the Company’s gross written premium for
the classes of business subject to this Contract, adjusted for experience
modification, discounts, credits, surcharges, expense constants and deductible
credits, plus or minus the Reinsurer’s pro rata share of any premium arising
from audit adjustments, minus cancellation and return premium, minus premiums
paid for facultative reinsurance which inures to the benefit of this Contract.

 

Article XIV - Commission

 

A.    The Reinsurer
shall allow the Company a 35.0% commission on all premiums ceded to the
Reinsurer hereunder. The Company shall allow the Reinsurer return commission on
return deposit premiums at the same rate.

 

B.     It is
expressly agreed that the ceding commission allowed the Company includes
provision for all dividends, commissions, taxes, assessments, and all other
expenses of whatever nature, except loss adjustment expense.

 

Article XV
- Late Payments

 

A.    The
provisions of this Article shall not be implemented unless specifically
invoked, in writing, by one of the parties to this Contract.

 

B.     In the
event any premium, loss or other payment due either party is not received by
the intermediary named Article XXX (hereinafter referred to as the
“Intermediary”) by the payment due date, the party to whom payment is due may,
by notifying the Intermediary in writing, require the debtor party to pay, and
the debtor party agrees to pay, an interest penalty on the amount past due
calculated for each such payment on the last business day of each month as
follows:

 

1.     The number
of full days which have expired since the due date or the last monthly
calculation, whichever the lesser, times

 

2.     l/365ths
of the six-month United States Treasury Bill rate as quoted in The Wall Street Journal on the first
business day of the month for which the calculation is made; times

 

14

 

3.     The amount
past due, including accrued interest.

 

It is
agreed that interest shall accumulate until payment of the original amount due
plus interest penalties have been received by the Intermediary.

 

C.               The establishment of the due date shall,
for purposes of this Article, be determined as follows:

 

1.    As respects
the payment of routine deposits and premiums due the Reinsurer, the due date
shall be as provided for in the applicable section of this Contract. In
the event a due date is not specifically stated for a given payment, it shall
be deemed due 30 days after the date of transmittal by the Intermediary of the
initial billing for each such payment.

 

2.    Any claim
or loss payment due the Company hereunder shall be deemed due 30 business days
after the proof of loss or demand for payment is transmitted to the Reinsurer.
If such loss or claim payment is not received within the 30 days, interest will
accrue on the payment or amount overdue in accordance with paragraph B above,
from (the date the proof of loss or demand for payment was transmitted to the
Reinsurer.

 

3.    As respects
any payment, adjustment or return due either party not otherwise provided for
in subparagraphs 1 and 2 above, the due date shall be as provided for in the
applicable section of this Contract. In the event a due date is not
specifically stated for a given payment, it shall be deemed due 30 business
days following transmittal of written notification that the provisions of this
Article have been invoked.

 

For
purposes of interest calculations only, amounts due hereunder shall be deemed
paid upon receipt by the Intermediary.

 

D.    Nothing
herein shall be construed as limiting or prohibiting a subscribing reinsurer
from contesting the validity of any claim, or from participating in the defense
of any claim or suit, or prohibiting either party from contesting the validity
of any payment or from initiating any arbitration or other proceeding in
accordance with the provisions of this Contract. If the debtor party prevails
in an arbitration or other proceeding, then any interest penalties due
hereunder on the amount in dispute shall be null and void. If the debtor party
loses in such proceeding, then the interest penalty on the amount determined to
be due hereunder shall be calculated in accordance with the provisions set
forth above unless otherwise determined by such proceedings. If a debtor party
advances payment of any amount it is contesting, and proves to be correct in
its contestation, either in whole or in part, the other party shall reimburse
the debtor party for any such excess payment made plus interest on the excess
amount calculated in accordance with this Article.

 

15

 

E.     Interest
penalties arising out of the application of this Article that are $50,000
or less from any party shall be waived unless there is a pattern of late
payments consisting of three or more items over the course of any 12-month
period.

 

Article XVI - Offset and Security

 

A.    Each party
hereto has the right, which may be exercised at any time, to offset any
amounts, whether on account of premiums or losses or otherwise, due from such party
to another party under this Contract or any other reinsurance contract
heretofore or hereafter entered into between them, against any amounts, whether
on account of premiums or losses or otherwise due from the latter party to the
former party. The party asserting the right of offset may exercise this right,
whether as assuming or ceding insurer or in both roles in the relevant
agreement or agreements.

 

B.     Each party
hereby assigns and pledges to the other party (or to each other party, if more
than one) all of its rights under this Contract to receive premium or loss
payments at any time from such other party (“collateral”), to secure its
premium or loss obligations to such other party at any time under this Contract
and any other reinsurance agreement heretofore or hereafter entered into by and
between them (“secured obligations”). If at any time a party is in default
under any secured obligation or shall be subject to any liquidation,
rehabilitation, reorganization or conservation proceeding, each other party
shall be entitled in its discretion, to apply, or to withhold for the purpose
of applying in due course, any collateral assigned and pledged to it by the
former party and otherwise to realize upon such collateral as security for such
secured obligations.

 

C.     The
security interest described herein, and the term “collateral,” shall apply to
all payments and other proceeds in respect of the rights assigned and pledged.
A party’s security interest in collateral shall be deemed evidenced only by the
counterpart of this Contract delivered to such party.

 

D.     Each right
under this Article is a separate and independent right, exercisable,
without notice or demand, alone or together with other rights, in the sole
election of the party entitled thereto, and no waiver, delay, or failure to
exercise, in respect of any right, shall constitute a waiver of any other
right. The provisions of this Article shall survive any cancellation or
other termination of this Contract.

 

E.     In the
event of the insolvency of a party hereto, offsets shall only be allowed in
accordance with the laws of the insolvent party’s state of domicile.

 

Article XVII - Access to Records (BRMA 1D)

 

The Reinsurer or its
designated representatives shall have access at any reasonable time to all records
of the Company which pertain in any way to this reinsurance.

 

16

 

Article XVIII - Liability of the
Reinsurer

 

A.    The
liability of the Reinsurer shall follow that of the Company in every case and
be subject in all respects to all the general and specific stipulations,
clauses, waivers and modifications of the Company’s policies and any
endorsements thereon. However, in no event shall this be construed in any way
to provide coverage outside the terms and conditions set forth in this
Contract.

 

B.     Nothing
herein shall in any manner create any obligations or establish any rights
against the Reinsurer in favor of any third party or any persons not parties to
this Contract.

 

Article XIX - Net Retained Lines
(BRMA 32E)

 

A.    This
Contract applies only to that portion of any policy which the Company retains
net for its own account (prior to deduction of any underlying reinsurance
specifically permitted in this Contract), and in calculating the amount of any
loss hereunder and also in computing the amount or amounts in excess of which
this Contract 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.

 

B.     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(s), whether specific or general, any amounts which may have
become due from such reinsurer(s), whether such inability arises from the
insolvency of such other reinsurer(s) or otherwise.

 

Article XX - Errors and Omissions (BRMA 14F)

 

Inadvertent
delays, errors or omissions made in connection with this Contract or any
transaction hereunder shall not relieve either party from any liability which
would have attached had such delay, error or omission not occurred, provided always
that such error or omission is rectified as soon as possible after discovery.

 

Article XXI - Currency (BRMA
12A)

 

A.    Whenever
the word “Dollars” or the “$” sign appears in this Contract, they shall be
construed to mean United States Dollars and all transactions under this
Contract shall be in United States Dollars.

 

17

 

B.     Amounts
paid or received by the Company in any other currency shall be converted to
United States Dollars at the rate of exchange at the date such transaction is
entered on the books of the Company.

 

Article XXII - Taxes (BRMA 50B)

 

In consideration
of the terms under which this Contract is issued, the Company will not claim a
deduction in respect of the premium hereon when making tax returns, other than
income or profits tax returns, to any state or territory of the United States
of America or the District of Columbia.

 

Article XXIII - Federal Excise
Tax (BRMA 17A)

 

(Applicable to
those reinsurers, excepting Underwriters at Lloyd’s London and other reinsurers
exempt from Federal Excise Tax, who are domiciled outside the United States of
America.)

 

A.    The
Reinsurer has agreed to allow for the purpose of paying the Federal Excise Tax
the applicable percentage of the premium payable hereon (as imposed under
Section 4371 of the Internal Revenue Code) to the extent such premium is
subject to the Federal Excise Tax.

 

B.     In the
event of any return of premium becoming due hereunder the Reinsurer will deduct
the applicable percentage from the return premium payable hereon and the
Company or its agent should take steps to recover the tax from the United
States Government.

 

Article XXIV - Unauthorized
Reinsurers

 

(Applies only to a
reinsurer who does not qualify for full credit with any insurance regulatory
authority having jurisdiction over the Company’s reserves, or which is or
becomes rated “B++” or lower by A.M. Best or rated BBB or lower by
Standard & Poor’s)

 

A.    As regards
policies or bonds issued by the Company coming within the scope of this
Contract, the Company agrees that when it shall file with the insurance
regulatory authority or set up on its books reserves for unearned premiums
(includes deposit premiums paid in excess of ceded premium earned by the
Reinsurer) and losses covered hereunder which it shall be required by law to
set up, it will forward to the Reinsurer a statement showing the proportion of
such reserves which is applicable to the Reinsurer. The Reinsurer hereby agrees
to fund such reserves in respect of ceded unearned premiums and known
outstanding losses that have been reported to the Reinsurer and allocated loss
adjustment expense relating thereto, losses and allocated loss adjustment
expense paid by the Company but not recovered from the Reinsurer, plus reserves
for losses and allocated loss adjustment expenses incurred but not reported, as
shown in the statement prepared by the Company (hereinafter referred to as “Reinsurer’s
Obligations”) by funds withheld, cash advances or a

 

18

 

Letter
of Credit. The Reinsurer shall have the option of determining the method of funding
provided it is acceptable to the insurance regulatory authorities having
jurisdiction over the Company’s reserves.

 

B.     When
funding by a Letter of Credit, the Reinsurer agrees to apply for and secure
timely delivery to the Company of a clean, irrevocable and unconditional Letter
of Credit issued by a bank meeting the NAIC Securities Valuation Office credit
standards for issuers of Letters of Credit and containing provisions acceptable
to the insurance regulatory authorities having jurisdiction over the Company’s
reserves in an amount equal to the Reinsurer’s proportion of said reserves.
Such Letter of Credit shall be issued for a period of not less than one year,
and shall contain an “evergreen” clause, which automatically extends the term
for one year from its date of expiration or any future expiration date unless
30 days (60 days where required by insurance regulatory authorities) prior to
any expiration date the issuing bank shall notify the Company by certified or
registered mail that the issuing bank elects not to consider the Letter of
Credit extended for any additional period.

 

C.     The
Reinsurer and Company agree that the Letters of Credit provided by the
Reinsurer pursuant to the provisions of this Contract may be drawn upon at any
time, notwithstanding any other provision of this Contract, and be utilized by
the Company or any successor, by operation of law, of the Company including,
without limitation, any liquidator, rehabilitator, receiver or conservator of
the Company for the following purposes, unless otherwise provided for in a
separate Trust Agreement:

 

1.     To
reimburse the Company for the Reinsurer’s Obligations, the payment of which is
due under the terms of this Contract and which has not been otherwise paid;

 

2.     To make
refund of any sum which is in excess of the actual amount required to pay the
Reinsurer’s Obligations under this Contract, if so requested by the Reinsurer;

 

3.     To fund an
account with the Company for the Reinsurer’s Obligations. Such cash deposit
shall be held in an interest bearing account separate from the Company’s other
assets, and interest thereon not in excess of the prime rate shall accrue to
the benefit of the Reinsurer;

 

4.     To pay the
Reinsurer’s share of any other amounts the Company claims are due under this
Contract.

 

In
the event the amount drawn by the Company on any Letter of Credit is in excess
of the actual amount required for subparagraphs 1 or 3, or in the case of
subparagraph 4, the actual amount determined to be due, the Company shall
promptly return to the Reinsurer the excess amount so drawn. All of the
foregoing shall be applied without diminution because of insolvency on the part
of the Company or the Reinsurer.

 

D.     The
issuing bank shall have no responsibility whatsoever in connection with the
propriety of withdrawals made by the Company or the disposition of funds
withdrawn, except to ensure

 

19

 

that
withdrawals are made only upon the order of properly authorized representatives
of the Company.

 

E.     At
quarterly intervals and as an estimated basis 45 days prior to each
December 31, or more frequently as agreed but never more frequently than
quarterly, the Company shall prepare a specific statement of the Reinsurer’s
Obligations, for the sole purpose of amending the Letter of Credit, in the
following manner:

 

1.     If the
statement shows that the Reinsurer’s Obligations exceed the balance of credit
as of the statement date, the Reinsurer shall, within 30 days after receipt of
notice of such excess, secure delivery to the Company of an amendment to the Letter
of Credit increasing the amount of credit by the amount of such difference.

 

2.     If,
however, the statement shows that the Reinsurer’s Obligations are less than the
balance of credit as of the statement date, the Company shall, within 30 days
after receipt of written request from the Reinsurer, release such excess credit
by agreeing to secure an amendment to the Letter of Credit reducing the amount
of credit available by the amount of such excess credit.

 

Article XXV - Insolvency

 

A.    In the
event of the insolvency of one or more of the reinsured companies, 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 a 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.

 

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

 

20

 

C.     It is
further understood and agreed that, in the event of the insolvency of one or
more of the reinsured companies, the reinsurance under this Contract shall be
payable directly by the Reinsurer to the company or to its liquidator, receiver
or statutory successor, except as provided by Section 4118(a) of the
New York Insurance Law or except (1) where this Contract specifically
provides another payee of such reinsurance in the event of the insolvency of
the company or (2) where the Reinsurer with the consent of the direct
insured or insureds has assumed such policy obligations of the company as
direct obligations of the Reinsurer to the payees under such policies and in
substitution for the obligations of the company to such payees.

 

Article XXVI - Arbitration

 

A.    As a
condition precedent to any right of action hereunder, in the event of any
dispute or difference of opinion hereafter arising with respect to this
Contract, it is hereby mutually agreed that such dispute or difference of
opinion shall be submitted to arbitration. One Arbiter shall be chosen by the
Company, the other by the Reinsurer, and an Umpire shall be chosen by the two
Arbiters before they enter upon arbitration, all of whom shall be active or
retired disinterested executive officers of insurance or reinsurance companies
or Lloyd’s London Underwriters. In the event that either party should fail to
choose an Arbiter within 30 days following a written request by the other
party to do so, the requesting party may choose two Arbiters who shall in turn
choose an Umpire before entering upon arbitration. If the two Arbiters fail to
agree upon the selection of an Umpire within 30 days following their
appointment, the Umpire shall be appointed in accordance with the procedures of
the American Arbitration Association.

 

B.     Each party
shall present its case to the Arbiters within 30 days following the date of
appointment of the Umpire. The Arbiters shall consider this Contract as an
honorable engagement rather than merely as a legal obligation and they are
relieved of all judicial formalities and may abstain from following the strict
rules of law. The decision of the Arbiters shall be final and binding on
both parties; but failing to agree, they shall call in the Umpire and the
decision of the majority shall be final and binding upon both parties. Judgment
upon the final decision of the Arbiters may be entered in any court of
competent jurisdiction.

 

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

 

D.    Each party
shall bear the expense of its own Arbiter, and shall jointly and equally bear
with the other the expense of the Umpire and of the arbitration. In the event
that the two Arbiters

 

21

 

are chosen by one
party, as above provided, the expense of the Arbiters, the Umpire and the
arbitration shall be equally divided between the two parties.

 

E.     Any
arbitration proceedings shall take place at a location mutually agreed upon by
the parties to this Contract, but notwithstanding the location of the
arbitration, all proceedings pursuant hereto shall be governed by the law of
the state in which the Company has its principal office.

 

Article XXVII - Service of Suit (BRMA 49C)

 

(Applicable if the
Reinsurer is not domiciled in the United States of America, and/or is not
authorized in any State, Territory or District of the United States where
authorization is required by insurance regulatory authorities)

 

A.    It is
agreed that in the event the Reinsurer fails to pay any amount claimed to be
due hereunder, the Reinsurer, at the request of the Company, will submit to the
jurisdiction of a court of competent jurisdiction within the United States.
Nothing in this Article constitutes or should be understood to constitute
a waiver of the 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.

 

B.     Further,
pursuant to any statute of any state, territory or district of the United
States which makes provision therefor, the Reinsurer hereby designates the
party named in its Interests and Liabilities Agreement, or if no party is named
therein, the Superintendent, Commissioner or Director of Insurance or other
officer specified for that purpose in the statute, or his successor or
successors in office, as its 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 Contract.

 

Article XXVIII - Material Changes

 

A.    It is
understood that no material changes in business practices will take place
during the term of this Contract that would significantly change the
underwriting results of the subject business without prior approval by the Lead
Reinsurers (i.e., American Re-Insurance Company, A Delaware Corporation and GE
Reinsurance Corporation) including, but not limited to, claims handling and/or
settlement, and business mix (i.e., hazard group, and class of insureds). If a
material change in the Company’s business practices is to occur during the
period, the Reinsurer shall be allowed to negotiate changes in the contractual
terms of the Contract retroactively to remedy the change.

 

22

 

B.     It is
further agreed that the Company will furnish statutory quarterly and annual
financial statements to the Reinsurer at the same time these reports are filed
with regulatory authorities.

 

Article XXIX - Agency Agreement

 

If more than one
reinsured company is named as a party to this Contract, the first named company
shall be deemed the agent of the other reinsured companies (subject to the
provisions of Article XXI) for purposes of sending or receiving notices
required by the terms and conditions of this Contract, and for purposes of
remitting or receiving any monies due any party.

 

Article XXX - Intermediary (BRMA 23A)

 

Benfield Blanch
Inc. is hereby recognized as the Intermediary negotiating this Contract for all
business hereunder. All communications (including but not limited to notices,
statements, premium, return premium, commissions, taxes, losses, loss
adjustment expense, salvages and loss settlements) relating thereto shall be
transmitted to the Company or the Reinsurer through Benfield Blanch Inc., 3600
West 80th Street, Minneapolis, Minnesota 55431. Payments 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 to constitute payment to
the Company only to the extent that such payments are actually received by the
Company.

 

In
Witness Whereof,
the Company by its duly authorized representative has executed this Contract as
of the date undermentioned at:

 

North Palm Beach, Florida, this 18th day of September in the year 2003

 

	
   

  	
  /s/ Dennis F. Plante

  
	
   

  	
  AmCOMP Preferred
  Insurance Company

  
	
   

  	
  AmCOMP Assurance
  Corporation

  
	
   

  	
  any and all insurance
  companies which are now or hereafter come

  
	
   

  	
  under the same
  ownership or management as the AmCOMP Group

  

 

23

 

 

Schedule A

 

Excess Workers’ Compensation

Reinsurance Contract

Effective: January 1, 2003

 

issued to

 

AmCOMP Preferred Insurance Company

North Palm Beach, Florida

AmCOMP Assurance Corporation

North Palm Beach, Florida

and

any and all insurance companies which are now or

hereafter come under the same ownership or management as the

AmCOMP Group

North Palm Beach, Florida

 

	
   

  	
   

  	
  First

  Excess

  	
   

  	
  Second

  Excess

  	
   

  	
  Third

  Excess

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Company’s
  Retention

  	
   

  	
  $

  	
  1,000,000

  	
   

  	
  $

  	
  2,000,000

  	
   

  	
  $

  	
  5,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Reinsurer’s Per

  Occurrence Limit

  	
   

  	
  $

  	
  1,000,000

  	
   

  	
  $

  	
  3,000,000

  	
   

  	
  $

  	
  5,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Reinsurer’s Terrorism Per

  Occurrence Limit

  	
   

  	
  $

  	
  1,000,000

  	
   

  	
  $

  	
  3,000,000

  	
   

  	
  $

  	
  5,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Reinsurer’s Contract Year

  Terrorism Limit

  	
   

  	
  $

  	
  1,000,000

  	
   

  	
  $

  	
  3,000,000

  	
   

  	
  $

  	
  5,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Annual Gross Minimum Premium

  	
   

  	
  $

  	
  7,617,600

  	
   

  	
  $

  	
  5,464,800

  	
   

  	
  $

  	
  1,876,800

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Gross Premium Rate

  	
   

  	
  4.14

  	
  %

  	
  2.97

  	
  %

  	
  1.02

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Annual Gross Deposit Premium

  	
   

  	
  $

  	
  9,522,000

  	
   

  	
  $

  	
  6,831,000

  	
   

  	
  $

  	
  2,346,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Quarterly Gross Deposit Premium

  	
   

  	
  $

  	
  2,380,500

  	
   

  	
  $

  	
  1,707,750

  	
   

  	
  $

  	
  586,500

  	
   

  

 

The figures listed above
for each excess layer shall apply to each Subscribing Reinsurer in the
percentage share for that excess layer as expressed in its Interests and
Liabilities Agreement attached hereto.

 

 

U.S.A

 

NUCLEAR INCIDENT EXCLUSION
CLAUSE-LIABILITY-REINSURANCE

(Approved by Lloyd’s Underwriters’
Non-Marine Association)

 

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

 

(2)            Without in any way restricting the
operation of paragraph (1) of this Clause it is understood and agreed that for
all purposes of this reinsurance all the original policies of the Reassured
(new, renewal and replacement) of the classes specified in Clause II of this
paragraph (2) from the time specified in Clause III in this paragraph
(2) shall be deemed to include the following provision (specified as the
Limited Exclusion Provision).

 

Limited
Exclusion Provision:

 

I.                 It is agreed that the policy does not apply under any
liability coverage,

to:   {injury,
sickness, disease, death or destruction

{bodily injury or
property damage

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

 

II.             Family Automobile Policies (liability only), Special
Automobile Policies (private passenger automobiles, liability only), Farmers
Comprehensive Personal 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.

 

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

 

(a)   become effective on or after 1st May, 1960,
or

 

(b)   become effective before that date and contain
the Limited Exclusion Provision set out above;

 

provided this
paragraph (2) shall not be applicable to Family Automobile Policies,
Special Automobile Policies, or policies or combination policies of a similar
nature, issued by the Reassured on New York risks, until 90 days following
approval of the Limited Exclusion Provision by the Governmental Authority
having jurisdiction thereof.

 

(3)            Except for those classes of policies
specified in Clause II of paragraph (2) and without in any way restricting
the operation of paragraph (1) of this Clause, it is understood and agreed
that for all purposes of this reinsurance the original liability policies of
the Reassured (new, renewal and replacement) affording the following coverages:

 

Owners,
Landlords and Tenants Liability, 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 V of this paragraph (3), the following provision (specified as the
Broad Exclusion Provision):

 

Broad
Exclusion Provision.*

 

It is agreed that the
policy does not apply:

 

I.                 Under any Liability Coverage, to {injury, sickness, disease, death or destruction

{bodily injury or
property damage

 

(a)          with respect to which an insured under
the policy is also an insured under 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;

 

1

 

or

 

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

 

II.             Under any Medical Payments Coverage, or
under any Supplementary Payments Provision relating

to             {immediate medical or
surgical relief,

{first aid,

to expenses
incurred with respect to   {bodily injury, sickness, disease or death

{bodily injury

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

 

III.         Under any Liability Coverage, to {injury, sickness, disease, death or destruction

{bodily injury or property damage

resulting from the
hazardous properties of nuclear material, if

 

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

 

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

 

(c)          the 
{injury, sickness, disease, death or
destruction

{bodily injury or
property damage

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

{property damage
to such nuclear facility and any property thereat.

 

IV.         As used in this endorsement:

 

“hazardous
properties”
include, radioactive, toxic or explosive properties; “nuclear
material” means source material, special nuclear material or
byproduct material; “source material,”
“special nuclear material,” and “byproduct material” have the meanings given them in the
Atomic Energy Act of 1954 or in any law amendatory thereof; “spent fuel” means any fuel element or fuel component, solid
or liquid, which has been used or exposed to radiation in a nuclear reactor, “waste” means any waste material (1) containing 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 (a) or (b) thereof; “nuclear
facility” means

 

(a)   any nuclear reactor,

 

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

 

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

 

(d)   any structure, basin, excavation, premises or
place prepared or used for the storage or disposal of waste,

 

and
includes the site on which any of the foregoing is located, all operations
conducted on such site and all premises used for such operations; “nuclear reactor” means any apparatus designed or used to
sustain nuclear fission in a self-supporting chain reaction or to contain a
critical mass of fissionable material;

 

{With respect to injury to or destruction of property, the
word “injury” or “destruction,”

{“property
damage” includes all forms of radioactive contamination of property,

{includes all forms of radioactive contamination of
property.

 

2

 

V.                  The inception dates and thereafter of all
original policies affording coverages specified in this paragraph (3), whether
new, renewal or replacement, being policies which become effective on or after
1st May, 1960, provided this paragraph (3) shall not be applicable to

 

(i)             Garage and Automobile Policies issued by
the Reassured on New York risks.

 

or

 

(ii)          statutory liability insurance required
under Chapter 90, General Laws of Massachusetts, 

 

until
90 days following approval of the Broad Exclusion Provision by the Governmental
Authority having jurisdiction thereof.

 

(4)             Without in any way restricting the
operation of paragraph (1) of this Clause, it is understood and agreed that
paragraphs (2) and (3) above are not applicable to original liability
policies of the Reassured in Canada and that with respect to such policies this
Clause shall be deemed to include the Nuclear Energy Liability Exclusion
Provisions adopted by the Canadian Underwriters’ Association or the Independent
Insurance Conference of Canada.

 

*NOTE.                             The words printed in italics 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.

 

3

 

NUCLEAR INCIDENT EXCLUSION CLAUSE - LIABILITY - REINSURANCE -
CANADA

 

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

 

2.               Without in any way restricting the
operation of paragraph 1 of this clause it is agreed that for all purposes of
this Agreement all the original liability contracts of the Reinsured, whether
new, renewal or replacement, of the following classes, namely,

 

Personal
Liability.

Farmers’
Liability.

Storekeepers’
Liability.

 

which
become effective on or after 31st December 1992, shall be deemed to
include, from their inception dates and thereafter, the following provision:-

 

Limited
Exclusion Provision.

 

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

 

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

 

3.               Without in any way restricting the
operation of paragraph 1 of this clause it is agreed that for all purposes of
this Agreement all the original liability contracts of the Reinsured, 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 1992, 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 from
any nuclear liability act, law or statute or any law amendatory thereof; 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:

 

(i)                                     the ownership, maintenance, operation or
use of a nuclear facility by or on behalf of an Insured;

 

(ii)                                  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

 

(iii)                               the possession, consumption, use, handling, disposal
or transportation of fissionable substances, or of other radioactive material
(except radioactive isotopes, away from a nuclear facility, which have reached
the final stage of fabrication so as to be usable for any scientific, medical,
agricultural, commercial or industrial purpose) used, distributed, handled or
sold by an Insured.

 

1

 

As used in this
Policy:

 

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

 

2.               The term “radioactive material” means
uranium, thorium, plutonium, neptunium, their respective derivatives and
compounds, radioactive isotopes of other elements and any other substances
which may be designated by or pursuant to any law, act or statute, or law
amendatory thereof as being prescribed substances capable of releasing atomic
energy, or as being requisite for the production, use or application of atomic
energy;

 

3.               The term “nuclear facility” means:

 

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

 

(b)         any equipment or device designed or used
for (i) separating the isotopes of plutonium, thorium and uranium or any
one or more of them, (ii) processing or utilising 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.

 

2

 

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 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 Clause No. 1B - Liability,
No. 2 - Physical Damage, No. 3 - Boiler and Machinery and paragraph
(1) of this clause, it is understood and agreed that for all purposes as
respects the reinsurance assumed by the Reinsurer from the Reassured, all
original insurance policies or contracts of the Reassured (new, renewal and
replacement) shall be deemed to include the applicable existing Nuclear Clause
and/or Nuclear Exclusion Clause(s) in effect at the time and any subsequent
revisions thereto as agreed upon and approved by the Insurance Industry and/or
a qualified Advisory or Rating Bureau.

 

 

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 contractors or subcontractors 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.

 

 

WAR RISK EXCLUSION CLAUSE
(REINSURANCE)

 

As regards
interests which at time of loss or damage are on shore, no liability shall
attach hereto in respect of any loss or damage which is occasioned by war,
invasion, hostilities, acts of foreign enemies, civil war, rebellion,
insurrection, military or usurped power, or martial law or confiscation by
order of any government or public authority.

 

Nevertheless, this clause
shall not be construed to apply to loss or damage occasioned by riots, strikes,
civil commotion, vandalism, malicious damage, including acts committed by
agents of any government, party or faction engaged in war, hostilities or other
warlike operation, provided such agents are acting secretly and not in
connection with any operations of military or naval armed forces in the country
where the interests insured are situated.

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