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EXHIBIT 10.34
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 Platinum Underwriters Reinsurance, Inc. and
Hannover
Ruchversicherungs AG. (collectively, the
"2004 State National Quota Share
Reinsurers") have entered into a Quota
Share Reinsurance Agreement dated as of
October 1, 2004 (the "2004 State National
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 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 (collectively and
individually, 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 Excess of Liability
Reinsurance Agreement. The contractual
assumption by the Reinsurer of these risks
in the 2004 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 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.
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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 2004 State
National Quota Share Reinsurers. 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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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
the 2004 Excess of Liability
Reinsurance Agreement, and that this
Agreement and the General Agent's authority
hereunder shall cease immediately upon
termination, for any reason, of this
Agreement or of the Reinsurance Agreements
(excepting only the General Agent's
responsibilities with regard to run-off 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 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 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.
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 $2,500,000 (ten million dollars);
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(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 maximum limits of liability for policies to be produced
pursuant to this Agreement are set forth in the Reinsurance
Agreements;
(e) 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;
(f) 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;
(g) the maximum term for any policy issued hereunder shall be
twelve
(12) months;
(h) 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;
(i) the excluded risks are those set forth in the 2004 Quota
Share
Reinsurance Agreement.
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 2004 State
National Quota Share Reinsurers 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 deposited in a
bank account separate and apart from all
other bank accounts of the General
Agent which reflects the ownership of the
account by the Company (the "Premium
Trust Account"). The Premium Trust Account
shall be comprised of an Operating
Fund and a Reserve Fund.
(a) All premiums collected by the General Agent shall be deposited
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, remittance
of
premiums in accordance with the Reinsurance Agreements, ceding fees
due
the Company and transfer of all funds contractually due in
accordance
with the Reinsurance Agreements to the Trust Account. 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.
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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
Premium Trust Account 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.
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 8 of the 2004
Quota Share Reinsurance Agreement.on all
subject collected net earned premiums
with such amounts to be paid to the General
Agent on all subject collected net
premiums produced under this Agreement. The
General Agent shall pay the Company
directly its ceding fee and the 2004 State
National Quota Share Reinsurers and
Reinsurer its premium as specified in the
Reinsurance Agreements, and the
amounts for assignments, assessments,
premium taxes, fines and penalties as
specified in the Reinsurance Agreements.
The General Agent shall allow the
Company return commission on return
premiums and policy fees at the same rates
as received by the General Agent.
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3.02 The General Agent's commission on
premiums ceded to the various Rei
