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EXHIBIT 10.33
GENERAL AGENCY AGREEMENT
THIS GENERAL AGENCY AGREEMENT (this "Agreement") is made and
entered
into as of October 1, 2004, by and among
STATE NATIONAL INSURANCE COMPANY, INC.,
an insurance company organized under the
laws of the State of Texas ("Company"),
TOWER INSURANCE COMPANY OF NEW YORK, an
insurance company organized under the
laws of the State of New York
("Reinsurer"), and TOWER RISK MANAGEMENT CORP., a
company organized under the laws of the
State of New York ("General Agent");
W I T N E S S E T H:
THAT, in consideration of the mutual covenants hereinafter
contained
and upon the terms and conditions
hereinbelow set forth, the parties hereto
agree as follows:
PREAMBLE
The Company and THE HARTFORD STEAM BOILER INSPECTION AND
INSURANCE
COMPANY (the "Quota Share Reinsurer") have
entered into a Quota Share
Reinsurance Agreement dated as of October
1, 2004 (the "2004 State National
Equipment Breakdown Quota Share Reinsurance
Agreement"), and the Company,
General Agent and Reinsurer have entered
into an Excess of Liability Reinsurance
Agreement dated as of October 1, 2004 (the
"2004 Equipment Breakdown Excess of
Liability Reinsurance Agreement"), true and
complete copies of which are
attached hereto as Exhibits A and B
respectively, and fully incorporated herein
by this reference (the 2004 State National
Equipment Breakdown Quota Share
Reinsurance Agreement and the 2004
Equipment Breakdown Excess of Liability
Reinsurance Agreement shall be referred to
collectively as the "Reinsurance
Agreements"), which Reinsurance Agreements
require the appointment of the
General Agent to perform certain specified
acts on behalf of the Company and
the respective reinsurers as set forth in
the Reinsurance Agreements.
The General Agent desires to perform the
functions and duties necessary under
the Reinsurance Agreements. It is therefore
mutually agreed by the parties that
the General Agent will perform all
functions necessary for the production,
service and management of policies issued
under the Reinsurance Agreements in
accordance with the terms and conditions
set forth therein and herein. To the
extent that there is any conflict between
the terms of this Agreement and the
Reinsurance Agreements, the Reinsurance
Agreements shall govern. Notwithstanding
any provisions to the contrary contained
elsewhere herein or in any other
document, it is expressly understood that
the execution and delivery of this
Agreement and the Company's performance
hereunder shall not under any
circumstances be interpreted to affect,
weaken or modify the Reinsurer's
obligation to indemnify and hold the
Company harmless from and against the
business, credit and insurance risks as set
forth in the 2004 Equipment
Breakdown Excess of Liability Reinsurance
Agreement. The contractual assumption
by the Reinsurer of these risks in the 2004
Equipment Breakdown Excess of
Liability Reinsurance Agreement is a
condition precedent to the Company's
entering into this Agreement with the
General Agent.
ARTICLE I
APPOINTMENT AND DUTIES
1.01 The Company, at the direction of the
Reinsurer, hereby appoints the General
Agent as its managing general agent for the
purpose of producing and handling
the business, which is the subject of the
Reinsurance Agreements, issued or
renewed on or after the effective date of
this Agreement. The Company, at the
request of the Reinsurer, hereby grants
authority to the General
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State National Equipment Breakdown - MGA Agreement
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Agent to solicit, accept and receive
applications for such classes of coverage
as are specified in the Reinsurance
Agreements; to secure, at its own expense,
reasonable underwriting information through
reporting agencies or other
appropriate sources relating to each risk
insured; to issue, renew and
countersign policies, certificates,
endorsements and binders which the Company
may, from time to time, authorize to be
issued, delivered, renewed and
countersigned; and to collect and receipt
for the premiums thereon and therefor.
1.02 All activities of the General Agent
pursuant to this Agreement shall be in
strict compliance with the terms of the
Reinsurance Agreements and all rules,
regulations and instructions of the
Company, including, but not limited to, all
rules, instructions and specifications
included in the Company's rate manuals,
rate brochures and rate schedules.
1.03 The Company, at the Reinsurer's
request, further authorizes the General
Agent to perform all acts and duties under
policies of insurance issued by the
Company as would otherwise be performed by
the Company, including, but not
limited to, properly sending and/or
receiving reports and notices and remitting
and/or receiving monies due from or to the
Company, and adjusting and paying
losses or other claims. The Company grants
to the General Agent the authority to
settle claims on behalf of the Company.
However, the maximum dollar amount of
such authority per claim shall not exceed
$100,000. For claims settlement in
excess of $100,000, the General Agent may
only settle such claims with prior
approval of the Company and the Quota Share
Reinsurer. The Company retains final
authority to determine any disputes
relating to claims settlement and setting of
loss reserves. In performing each of the
acts mentioned above, the General Agent
shall be under the direct supervision and
control of the Reinsurer, and the
Reinsurer shall be solely responsible for
the acts of the General Agent. While
there are acts of the General Agent which
may be required by applicable law to
be performed on behalf of the Company, the
Reinsurer shall remain ultimately
responsible for such acts and will
indemnify and hold the Company completely
harmless for any damage, cost, liability,
expense and/or loss (including
attorneys' fees and expenses) incurred by
the Company as respects such acts of
the General Agent. The General Agent must
send to the Company a report, as soon
as it becomes known, that a claim (i)
involves a coverage dispute; (ii)
involves a demand in excess of policy
limits; (iii) alleges bad faith; (iv)
exceeds General Agent's claims settlement
authority; (v) is open for more than
six months; or (vi) alleges a violation of
any applicable unfair practices and
unfair competition statutes. The Company
may suspend or terminate the settlement
authority of the General Agent during the
pendency of any dispute regarding any
event of default by the General Agent.
1.04 Claims handling shall be accomplished
by the General Agent through its
designated representative ("Claims
Administrator"), which designation is subject
to the Company's and Reinsurer's continuing
approval. The agreement between the
General Agent and the Claims Administrator
shall be subject to the approval of
the Reinsurer and the Company and shall not
be inconsistent with the terms and
conditions of this Agreement. Payment to
the Claims Administrator shall be made
by the General Agent, on behalf of the
Company, directly to the Claims
Administrator. The Claims Administrator
shall accept notice of and investigate
any claim arising under any of the
Policies, and pay, adjust, settle, resist, or
compromise any such claim, unless the
Company specifically directs to the
contrary with respect to any individual
claim. All such loss settlements,
whether under strict policy conditions or
by way of compromise, shall be
unconditionally binding upon the Company
and the Reinsurer. However, should the
Company be ordered or instructed by the
Texas Department of Insurance or any
other regulatory agency of competent
jurisdiction to take any action or refrain
from taking any action with regard to any
claim, the Reinsurer and the General
Agent shall be bound by and shall follow
the order or instructions of such
regulatory agency as though the General
Agent were the object of such order or
instruction. The General Agent will
exercise the authority granted hereunder in
good faith and toward the end of paying any
and all valid claims. The General
Agent is authorized to have claims adjusted
through independent claims
adjusters, subject to the supervision of
the Reinsurer. The selection of
independent claims adjusters shall be
subject to prior written approval of the
Reinsurer and Company. Such independent
claims adjusters are not the agents of
the Company and the Company shall be held
harmless and indemnified by the
Reinsurer for any liability, claim, demand,
expense and/or cost of whatever kind
or character as a result of, related to or
connected with any action or inaction
of such claims adjusters.
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State National Equipment Breakdown - MGA Agreement
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1.05 The Company shall not be responsible
for the General Agent's expenses and
costs, including, but not limited to,
salaries, bonuses, rentals, transportation
facilities, clerk hire, solicitors' fees,
postage, advertising, exchange,
personal license fees, adjustment by the
General Agent of losses under policies
issued by the General Agent, or any other
agency expenses whatsoever. The
General Agent's sole compensation shall be
the amounts payable to the General
Agent in Article III of this Agreement.
1.06 The General Agent understands and
agrees that it has no power or authority
granted to it by the Company independent of
this Agreement and the 2004
Equipment Breakdown Excess of Liability
Reinsurance Agreement, and that this
Agreement and the General Agent's authority
hereunder shall cease immediately
upon the termination, for any reason, of
this Agreement or any of the
Reinsurance Agreements (excepting only the
General Agent's responsibilities with
regard to runoff and other matters as set
forth herein or in the Reinsurance
Agreements).
1.07 The General Agent shall not have the
power to accept or bind risk other
than as set forth herein, as set forth in
the 2004 Equipment Breakdown Excess of
Liability Reinsurance Agreement or as may
be subsequently authorized by the
Company and Reinsurer in writing. The
General Agent may not bind or cede
reinsurance or retrocession on behalf of
the Company, may not commit the Company
to participation in insurance or
reinsurance syndicates, and may not commit the
Company to a claim settlement with a
reinsurer without the prior written
approval of the Company. If such prior
written approval is given, the General
Agent shall forward promptly a report to
the Company concerning such transaction
and/or payment. The Company hereby
authorizes the General Agent to collect
payments for losses and loss adjustment
expenses from a reinsurer. The General
Agent shall send a report to the Company
concerning such transactions promptly.
1.08 The General Agent acknowledges that,
with respect to any state in which
business is permitted to be written under
the Reinsurance Agreements, this
Agreement shall not become effective until
the General Agent is first duly
appointed by the Company with the
applicable regulatory authority. The General
Agent agrees that any producing agent
receiving commission pursuant to this
Agreement shall first be duly registered by
the Company and said appointment on
file with any applicable state insurance
department. The General Agent further
agrees to be responsible for the payment of
any penalty assessed to the Company
for any violation by the General Agent or
any producing agent or broker
registered by the General Agent pursuant to
the provisions of Article IV hereof
of any license or appointment provision of
the Texas Insurance Code, or other
applicable state statutes, and the rules
and regulations promulgated thereunder.
If the General Agent fails to pay such
penalty, the Reinsurer shall in
accordance with the 2004 Equipment
Breakdown Excess of Liability Reinsurance
Agreement pay it immediately upon written
notification by the Company of the
General Agent's failure to pay such
penalty.
1.09 It is understood that the Reinsurer
has acknowledged that the Company shall
not be required to monitor the General
Agent's compliance with the terms of
either the Reinsurance Agreements or this
Agreement and the Reinsurer shall be
responsible for monitoring the General
Agent's compliance with the Reinsurance
Agreements and this Agreement.
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National Equipment Breakdown - MGA Agreement
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1.10 The authority and limitations of the
General Agent to issue policies are as
follows:
(a) The maximum annual premium volume the General Agent may
produce
under this Agreement is $5,000,000;
(b) The basis of the rates charged are as provided in the
Company's
rate manuals, rate brochures and rate schedules which the General
Agent
shall follow, and the General Agent shall not decrease rates or
increase discounts without the prior approval of the Company
and
Reinsurer;
(c) The only classes of business the General Agent is authorized
to
produce and handle under this Agreement are the classes of
business
specified in the Reinsurance Agreements;
(d) The General Agent may issue policies under this Agreement only
to
insured residents in the states in which business is permitted to
be
produced under the Reinsurance Agreements; but this limitation
shall
not apply to losses if said policies provide coverage outside
the
aforesaid territorial limit;
(e) The General Agent shall only cancel policies as set forth in
the
policy form for the policies produced hereunder or as otherwise
permitted by applicable law;
(f) The maximum term for any policy issued hereunder shall be
twelve
(12) months;
(g) The General Agent shall employ all reasonable and
appropriate
measures to control and keep a record of the issuance of the
Company's
insurance policies hereunder, including, but not limited to,
keeping
records of policy numbers issued and maintaining policy
inventories;
(h) The excluded risks are those set forth in the 2004 State
National
Equipment Breakdown Quota Share Reinsurance Agreement.
(i) The maximum limits of liability for policies to be produced are
as
follows:
Equipment Breakdown - $10,000,000 (one million dollars) per
occurrence;
The above limit applies to the Equipment Breakdown coverage as
part
of Commercial Property and Business Owners policies only.
In underwriting policies, the General Agent
shall follow the underwriting
guidelines developed by the General Agent,
the Reinsurer and the Company, and
these guidelines are herein incorporated by
reference.
ARTICLE II
PREMIUMS
2.01 It is expressly agreed and understood
that all premiums collected by the
General Agent are collected on behalf of
the Company; that such premiums are the
property of the Company, the Quota Share
Reinsurer and the Reinsurer as their
respective interests may appear pursuant to
the Reinsurance Agreements, less
such commissions and fees as are due the
General Agent as specified herein. All
premiums on policies issued hereunder shall
be collected within seventy-five
(75) days of the effective date of the
policy or the General Agent shall cancel
such policy. All premiums collected by the
General Agent on the business
produced under the Reinsurance Agreements
shall be held in trust by the General
Agent in a fiduciary capacity on behalf of
the Company and shall be deposited
immediately in a segregated trust account
that is maintained separate and apart
from all other bank accounts of the General
Agent and which reflects the
ownership of the account by the Company
(the "Operating Fund"). The General
Agent shall not commingle any funds
deposited in the Operating Fund with its
general assets. The General Agent shall
have no legal or beneficial right, title
or interest in the Operating Fund. The
General Agent is responsible for full
compliance with all applicable laws,
regulations, rules and requirements
regarding fiduciary trust accounts.
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State National Equipment Breakdown - MGA Agreement
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(a) All premiums collected by the General Agent shall be
deposited
immediately in the Operating Fund. The only disbursements from
the
Operating Fund shall be the payment of claims, claims expenses,
return
premiums, commission due the General Agent as authorized herein,
Ceding
Fee (as defined in Article 3.02 of this Agreement) due the Company
and
remittances in accordance with Article 9, Claims and Article 13
Reports
and Remittances of the 2004 State National Equipment Breakdown
Quota
Share Reinsurance Agreement. Within ten (10) days after the end of
each
month, the General Agent will furnish an accounting of the cash
transactions reported in the Operating Fund. Such accounting
will
include: (i) a summary of premiums, net of cancellations and
returns,
deposited in the account; (ii) losses and loss adjustment
expenses
paid, net of any salvage and subrogation; (iii) commissions paid
or
received; (iv) interest or other investment income received; (v)
any
bank charges deducted; (vi) Ceding Fees and premium taxes paid;
(vii)
detail of all such other amounts that increased or decreased
the
reported cash balance in a level of detail sufficient to enable
the
Company to meet its Statutory financial reporting requirements;
and
(viii) copies of bank statements and of the reconciliation of same
to
the reported financial amounts.
(b) The General Agent, via an investment manager, shall have the
power
to direct the investment of the funds held in the Operating Fund.
The
General Agent shall satisfy any financial obligation of the Company
to
the Quota Share Reinsurer by remitting funds deposited in the
Operating
Fund to such Quota Share Reinsurer. In addition, any interest
earned on
funds deposited in the Operating Fund shall inure to the benefit of
the
General Agent. The Operating Fund shall be established so that
the
Company will receive on a monthly basis a detailed report on
all
investment
transactions, copied on all executed trade tickets, and
receive monthly account reporting directly from the Custodian so
that
all disbursements and transactions can be reconciled.
(c) The bank costs incurred for the Operating Fund shall be
deducted
from interest income earned on the Operating Fund balance. The
General
Agent shall be responsible for any bank costs that exceed the
interest
income earned on the Operating Fund.
The General Agent shall not make personal
use of any funds in this account. The
commissions payable to the General Agent
are debts due to the General Agent by
the Reinsurer and the privilege herein
granted of deducting commissions from
said premiums should not be taken as a
waiver by the Company of its exclusive
ownership rights of premiums as provided
herein. Should any dispute arise
between the Company, the Reinsurer and/or
the General Agent regarding payment of
premium, the General Agent shall remit
immediately all money and property,
without deductions for commissions, to the
Operating Fund with full reservation
of any and all rights reserved by the
parties.
2.02 The General Agent shall furnish to the
Company and the Reinsurer all
necessary premium and loss data (in a form
acceptable to the Reinsurer and the
Company) no later than thirty (30) days
following the end of the month during
which the business is written or losses are
incurred to enable the Company to
record statistics required by statutes,
regulation or upon call by authorities
having competent jurisdiction. Such data
shall include, but is not limited to,
premiums written and unearned premium. Said
data shall be segregated by lines of
insurance and location of risk.
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National Equipment Breakdown - MGA Agreement
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2.03 The keeping of an account with the
General Agent on the Company's books as
a creditor and debtor account is declared a
record memorandum of business
transacted and neither such keeping of an
account, nor alteration in commission
rate, nor failure to enforce prompt
remittance or compromise or settlement or
declaration of balance of account, shall be
held to waive assertion of the trust
relation as to premiums collected by the
General Agent.
2.04 The General Agent shall be liable for
the payment of all premiums upon all
policies of insurance written through the
General Agent or any sub-agents of the
General Agent.
2.05 The General Agent shall remit to the
Reinsurer, or Company as applicable,
any funds of or due to the Company under
this Agreement at the earlier of the
following: (1) forty-five (45) days from
the end of the month in which premium
is recorded; or (2) forty-five (45) days
from the end of the month in which the
coverage under this Agreement became
effective.
2.06 The General Agent shall hold all funds
of or due the Company in a fiduciary
capacity.
ARTICLE III
COMPENSATION TO THE GENERAL AGENT
3.01 In partial consideration for the
services rendered hereunder and under the
Reinsurance Agreements, the General Agent
is entitled to the commission payable
by the Reinsurer as specified herein. In
addition, the Company shall allow the
General Agent a provisional commission as
specified in Article 12, of the 2004
State National Equipment Breakdown Quota
Share Reinsurance Agreement less 1.0%
(one point zero percent) on all subject
collected net written premiums, as
defined in the 2004 State National
Equipment Breakdown Quota Share Reinsurance
Agreement with such amounts to be paid to
the General Agent on all subject
collected net written premiums produced
under this Agreement. The Company
shall not pay the General Agent any
commission amounts in respect of net written
premiums, which are not received by the
Company. The General Agent shall assume
the credit risk associated with the
underlying insureds and shall pay to the
Company a Ceding Fee in respect of the net
written premiums whether collected
or not by the General Agent.
3.02 The General Agent shall pay direct to
the Company 7.0% (seven point zero
percent) of all net written premiums
produced under this agreement ("Ceding
Fee"), and to the Quota Share Reinsurer and
2004 Equipment Breakdown Excess of
Liability Reinsurer their premiums, as
specified in the respective Reinsurance
Agreements, and the amounts for
assignments, assessments, premium taxes, fines
and penalties as specified in such
Reinsurance Agreements. This above Ceding Fee
due the Company shall not be reduced by any
payments due by the General Agent to
third parties except for return net written
premiums. The General Agent shall
allow the Company to return commission on
return net written premiums and policy
fees at the same
