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Exhibit 10.80
PROFESSIONAL LIABILITY INSURANCE
QUOTA SHARE CONTRACT
BETWEEN
PHILADELPHIA INSURANCE COMPANY
PHILADELPHIA INDEMNITY INSURANCE COMPANY
("PIC")
AND
CUMIS INSURANCE SOCIETY, INC.
("CUMIS")
EFFECTIVE: JULY 1, 2005
IN CONSIDERATION OF THE MUTUAL PROMISES AND OTHER GOOD AND
VALUABLE
CONSIDERATION, PIC and CUMIS agree as follows:
ARTICLE I. DEFINITIONS
Unless the context clearly requires otherwise:
A. "Allocated
Loss Expense" means costs and expenses incurred by PIC on its
Net
Retained Line and allocable to a specific claim or loss that
are
incurred by PIC in the investigation, appraisal, adjustment,
settlement,
litigation, defense or appeal of a specific claim, including court
costs
and
costs of supersedeas and appeal bonds expense, including a pro
rata
share of salaries and expenses of PIC employees and expenses of
PIC
officers who have been temporarily diverted from their normal and
customary
duties and assigned to the field adjustment of losses covered by
this
Contract, interest accrued after award or judgment and
pre-judgment
interest awarded against the insured, legal expenses and costs
incurred by
PIC
in connection with coverage questions and legal actions
connected
therewith, and legal costs and expenses associated with
Extra-Contractual
Obligations and Loss in Excess of Certificate Limits.
B. "Certificate"
or "Certificates" means a Professional Liability ("PL")
Contract issued or renewed by PIC during the Term of this
Contract
evidencing PL coverage and sold under the General Agent Agreement
("GA
Agreement") by and between CUNA Mutual Insurance Agency, Inc.
("CMIA") and
PIC.
C. "Contract
Year" means each separate twelve (12) month period from July 1,
2005
or any period of less than twelve (12) months subsequent
thereto
resulting from termination of this Contract.
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D.
"Extra-Contractual Obligations" means one hundred percent (100%) of
any
punitive, exemplary, compensatory or consequential damages for
which PIC is
liable, other than Loss in Excess of Certificate Limits as a result
of a
demand, claim or action by its insured, its insured's assignee or a
third
party claimant, on business covered hereunder. Such liabilities
shall be
those arising because of, but not limited to, the following:
failure to
settle within the policy limits, by reason of alleged or actual
negligence,
fraud, or bad faith in rejecting an offer of settlement, in the
preparation
of
the defense, in the trail of any action against the insured or
reinsured, or in the preparation or prosecution of an appeal
consequent
upon
such action or failure to pay a claim. There will be no
recovery
hereunder where the extra contractual obligation has been incurred
due to
fraud committed by a member of the board of directors or a
cooperate
officer of PIC, acting individually, collectively, or in collusion
with a
member of the board of directors, a corporate officer, or a partner
of any
other cooperation, partnership, or organization involved in the
defense or
settlement of a claim on behalf of PIC. An Extra-Contractual
Obligation
shall be deemed to have occurred on the same date as the Loss
covered or
alleged to be covered under a Certificate. Nothing in this Article
will be
constructed to create a separate or distinct Loss apart from the
original
covered Loss. Indemnification by CUMIS for Extra Contractual
Obligations
will
be considered primary and any Errors and Omissions policy purchased
by
PIC
will be considered excess.
E. "Gross Net
Premium" means direct premium written on Certificates less: (i)
direct brokerage Commissions, (ii) refunds and returns (but not
dividends)
on
Certificates and (iii) premiums paid or payable by PIC for all
other
facultative reinsurance coverage applicable to Certificates.
F. "Loss" means
the amount of loss or liability paid by PIC to or on behalf of
its
insured to a claimant(s) under a Certificate. Only loss in excess
of
any
collectable inuring other insurance or facultative reinsurance
shall be
included. Loss shall include losses incurred under a Certificate by
reason
of
the inability to apply or collect any other coverage from any
insurer or
reinsurer that has become due whether that inability arises from
insolvency
or
otherwise.
G. "Loss In
Excess of Certificate Limits" means one hundred percent (100%)
of
any
amount for which PIC is liable in excess of its Certificate limits,
but
otherwise within the terms of its Certificate as a result of a
demand,
claim or action by its insured or its insured's assignee or other
third
party to recover damages the insured is legally obligated to pay to
a third
party claimant. Payment by CUMIS for Loss in Excess of Certificate
Limits
will
be considered primary and any Errors and Omissions policy purchased
by
PIC
will be considered excess.
H. "Net Loss"
means that amount of Loss, Allocated Loss Expense, Extra
Contractual Obligations, and Loss in Excess of Certificate Limits
that PIC
has
paid or is obligated to pay on its Net Retained Line. Net Loss
shall
not
include any Loss excluded under Article III of this Contract.
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I. "Net Retained
Line" means that portion of any Net Loss that PIC has
retained net for its own account under a Certificate after
application of
all
facultative reinsurance and after deduction of all net salvage
and
subrogation recoveries actually made. All subrogation recoveries,
or
payments recovered or received subsequent to a Loss settlement
under this
Contract shall be applied as if recovered or received prior to
payment or
settlement, and all necessary adjustments shall be made by the
parties to
this Contract. Nothing
in this definition, however, shall be construed to
mean
that Net Loss is not recoverable from CUMIS until the ultimate
Net
Loss
of PIC has been absolutely ascertained.
ARTICLE II. COVERAGE
CUMIS shall be liable to and will indemnify PIC, for fifty percent
(50%) of
PIC's Net Loss on each Certificate.
ARTICLE III. EXCLUSIONS
A. The
Exclusions of this Contract shall be identical with those of
the
Certificates.
B. Any Loss
arising from Certificates issued or renewed with a coverage
period
inception date not during the Term of this Contract is not covered
by this
Contract.
Notwithstanding any other provisions of this Contract, CUMIS shall
have no
obligation or liability for any loss, expense, damage, fees, fine,
penalty or
other amount that arises from (i) the acts, errors, omissions, or
conduct of PIC
that arises or results from the general conduct or procedures
("procedures") of
PIC contrary to or inconsistent with applicable statutes,
regulations, insurance
department bulletins and attorney general opinions applicable to
the claims
function and claims practices applied in general or as those
procedures are or
were applied to a specific claim or claims, (ii) the failure of PIC
to obtain
and follow the advice and approval of CUMIS provided under Article
IX. or (iii))
fraudulent, criminal, negligent or tortuous acts of PIC except as
provided under
Extra-Contractual Obligations.
ARTICLE IV. PREMIUM
A. PREMIUM. PIC
shall cede to CUMIS fifty percent (50%) of the Gross Net
Premium arising from the Certificates including that developed
by
endorsement or audit on each Certificate less any premiums paid or
payable
for
facultative reinsurance that inures to the benefit of this
Contract.
B. PREMIUM
ADJUSTMENT. If any alteration is made in the terms of any
Certificate whereby the amount of the premium payable in respect
thereof is
affected, the premium shall be adjusted and any difference credited
to or
charged against CUMIS as the case may warrant. Upon cancellation of
any
Certificate, PIC and CUMIS shall be entitled to the proportionate
return of
premium.
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C. CANCELLATION
FEES. PIC and CUMIS will share equally in all cancellation of
fees
when permitted by law.
D. CEDING
COMMISSION. CUMIS shall allow PIC in the monthly accounts a
ceding
commission of fifteen percent (15%) of Gross Net Premium arising
from the
Certificates including that developed by endorsement or audit on
each
certificate ceded to CUMIS on the Certificates under this Contract.
On
return and refund premiums, PIC shall return and refund commissions
at the
rate
originally allowed thereon.
ARTICLE V. PAYMENT.
The
net balance due as reflected by the reports provided under Article
VII
and
Article IX of this Contract shall be payable by PIC within
forty-five
(45)
days of the end of the month or by CUMIS within forty-five (45)
days
after receipt of the reports under Article VII and Article IX,
as
applicable. A positive amount is a balance due CUMIS, a negative
amount is
a
balance due PIC.
All
amounts due either PIC or CUMIS, whether by reason of premium,
commission, Net Loss, or otherwise, under this Contract shall be
subject to
the
right of recoupment and offset and upon the exercise of the same,
only
the
net balance shall be due. All claims for such amounts whether or
not
fixed in amount at the time of the insolvency of any party to
this
Contract, arising from coverage placed in effect under this
Contract prior
to
the insolvency of any party to this Contract shall be deemed
pre-liquidation debts and subject to this Article.
Interest shall accrue on any balance unpaid within the timeframes
under
this
Article V at the rate of ten percent (10%) simple interest per
annum
calculated from the date payment is due.
ARTICLE VI. TERM AND TERMINATION
A. COMMENCEMENT.
This Contract incepts 12:01 A.M. Standard Time, July 1, 2005
and
shall terminate as of December 31, 2008 unless extended in writing
by
the
Parties. Not withstanding the foregoing, this Contract is subject
to
termination as of the end of December each year upon at least
ninety (90)
days
prior written notice by either party.
B. TERMINATION.
Upon termination of this Contract, coverage under this
Contract will remain in effect for all Certificates to which this
Contract
attached including those which are in-force on the termination date
until
their natural expiration. However, should any Certificate to which
this
Contract applies be extended, continued, or renewed due to
regulatory, or
other legal restrictions, this Contract shall automatically
provide
extended coverage until those Certificates expire or are
actually
terminated by PIC.
C. RUN-OFF. If
coverage under this Contract shall expire while a Loss covered
hereunder is in progress, subject to the other conditions of this
Contract,
CUMIS shall be responsible
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for
its proportionate share of the Loss as if the entire Loss had
occurred
during the time this Contract is in force provided the Loss
covered
hereunder is stated before the time of coverage expiration.
ARTICLE VII. PREMIUM AND CERTIFICATE REPORTS
A. PREMIUM
REPORTS. PIC shall throughout the term of this Contract and
thereafter, so long as either party hereto shall request until
all
liability on the Certificates has expired, report monthly as of the
end of
each
month and, in addition, as of the end of each calendar year the
following as the same pertain to activity on Certificates for and
from
inception through to the end of each applicable month, as specified
in
Appendix A.
B. CERTIFICATE
REPORTS. Reports under this Article VII shall be submitted by
PIC
to CUMIS within forty-five (45) days of the end of each month for
which
the
activity report is rendered and shall be substantially in the form
as
provided in Appendix A. In addition, PIC shall provide CUMIS with
such
additional reports and statistics with respect to the Certificates
as
reasonably requested by CUMIS.
ARTICLE VIII. CURRENCY AND TAXES
A. CURRENCY.
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.
Amounts
paid
or received by PIC 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 PIC.
B. APPOINTMENT.
In the event of PIC being involved in a Loss requiring payment
in
two currencies, the amount recoverable under this Contract shall
be
apportioned to the two currencies in the same proportion as the
amount of
Loss
in each currency bears to the total amount of Loss paid by PIC.
For
the
purposes of this Contract, where PIC should receive premium or pay
Loss
in
currencies other than United States currency, those premiums and
Loss
shall be converted into United States Dollars at the actual rates
of
exchange at which these premiums and Losses are entered on PIC's
books.
C. TAXES. In
consideration of the terms under which this Contract is issued,
PIC
undertakes not to claim any deduction of the premium hereon when
making
Canadian Tax returns or when making tax returns, other than Income
or
Profits Tax returns, to any State or Territory of the United States
of
America or to the District of Columbia.
ARTICLE IX. CLAIMS REPORTS & LOSS SETTLEMENTS
A. CLAIM
REPORTS. Reports under this Article IX shall be submitted by PIC
to
CUMIS within
forty-five (45) days of the end of each month for which the
activity report is requested and shall be substantially in the form
as
provided in Appendix A. In addition,
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PIC
shall provide CUMIS with such additional reports and statistics
with
respect to the Certificates as reasonably requested by CUMIS.
B. LOSS
SETTLEMENT. All claims and Loss shall be investigated, adjusted,
and
settled by PIC or its designee which settlements, judgments or
compromises
of
claims or Loss will be finally binding upon CUMIS without undue
interference of CUMIS, provided that in the event of a possible
claim
decision outside of mutually agreed parameters reduced to writing
by PIC
and
CUMIS, PIC shall first seek and obtain advice and approval of
CUMIS
before adjusting, settling, or denying the claim in whole or in
part.
C. ORIGINAL
CONDITIONS. CUMIS' liability to PIC, subject to the exclusions
and
the
terms and conditions of this Contract, shall attach simultaneously
with
that
of PIC and shall be subject in all respects to the same risks,
terms,
conditions, interpretations, waivers and the same
modifications,
alterations and cancellations as the respective insurances (or
reinsurances) of PIC, the true intent of this Contract being that
CUMIS
shall, in every case to which this Contract applies, follow the
settlements
and
the fortunes of PIC with respect to the Certificates.
D. RIGHT TO
ASSOCIATE. When so requested in writing, PIC shall afford CUMIS
or
its
representatives an opportunity to be associated with PIC, at
the
expense of CUMIS, in the defense of any claim, suit or proceeding
involving
this
reinsurance, and PIC and CUMIS shall cooperate in every respect in
the
defense of such claim, suit or proceeding.
E. ERRORS AND
OMISSIONS. Inadvertent delays, errors or omissions made by PIC
in
connection with this Contract shall not relieve CUMIS from any
liability
which would have attached had such delay, error or omission not
occurred,
provided always that such delay, error or omission shall be
rectified as
soon
as possible after discovery by PIC.
F. SUBROGATION
AND RECOVERIES. All salvages, recoveries, payments and
reversals or reductions of verdicts or judgments (net of the cost
of
obtaining such salvage, recovery, payment or reversal or reduction
of a
verdict or judgment) whether recovered, received or obtained prior
or
subsequent to a loss
settlement under this Contract, including amounts
recoverable under other reinsurance, shall be applied as if
recovered,
received or obtained prior to the aforesaid settlement and shall
be
deducted from the actual losses sustained to arrive at the amount
of the
Net
Loss. Nothing in this Article shall be construed to mean losses are
not
recoverable until the Net Loss has been finally ascertained.
CUMIS shall be subrogated, as respects any loss for which CUMIS
shall
actually pay or become liable, but only to the extent of the amount
of
payment by or the amount of liability to CUMIS, to all the rights
of PIC
against any person or other entity who may be legally responsible
for
damages as a result of said loss. Should PIC elect not to enforce
such
rights, CUMIS is hereby authorized and empowered to bring any
appropriate
action in the name of PIC or its policyholders, or otherwise to
enforce
such
rights. CUMIS shall promptly remit to PIC the amount of any
judgment
awarded in such an action in excess of the amount of payment by, or
the
amount of liability to, CUMIS hereunder.
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ARTICLE X. INSOLVENCY OF PIC
E. REINSURANCE
PAYABLE. In the event of the declared insolvency of PIC and the
appointment of a liquidator, receiver, conservator or statutory
successor,
this
reinsurance shall be payable immediately upon demand, with
reasonable
provision for verification, directly to PIC or to its liquidator,
receiver,
conservator or statutory successor on the basis of the liability of
PIC as
a
result of claims allowed against PIC by any court of competent
jurisdiction or any liquidator, receiver, conservator, or
statutory
successor having authority to allow such claims without diminution
because
of
the insolvency of PIC or because the liquidator, receiver,
conservator
or
statutory successor of PIC has failed to pay all or a portion of
any
claim. Payments by CUMIS as above set forth shall be made directly
to PIC
or
to its conserva
