Preview | Casualty Excess of Loss Reinsurance Agreement |

TABLE OF CONTENTS


ARTICLE		PAGE

1	Purview of the Agreement		1

2	Parties to the Agreement		1

3	Commencement and Termination		2

4	Special Termination		3

5	Reinsuring Clause		4

6	Liability of the Reinsurer		5

7	Net Retained Lines		5

8	Exclusions		5

9	Company Policy Limits		13

10	Definitions		14

11	Special Acceptances		16

12	Self-Insured Obligations		16

13	Other Reinsurance		17

14	Recoveries		17

15	Territory		18

16	Excess of Policy Limits		18

17	Extra Contractual Obligations		19

18	Reinsurance Premium		20

Treaty No. 63-2422-1//2/3/4/5


Article 1		Purview of the AGREEMENT

A. As a condition precedent to the REINSURER?s obligations under this AGREEMENT and in consideration of the payment of the premium by the COMPANY to the REINSURER, the COMPANY shall cede to the REINSURER and the REINSURER shall accept as reinsurance from the COMPANY all business described in this AGREEMENT. The REINSURER hereby reinsures the COMPANY to the extent and upon the terms and conditions and subject to the exceptions, exclusions and limitations hereinafter set forth.

B. This AGREEMENT is comprised of general articles and may also contain exhibits initially or subsequently made a part of this AGREEMENT. The terms of the general articles and of the exhibits shall determine the rights and obligations of the parties. The terms of the general articles shall apply to each exhibit unless specifically amended therein. In the event of termination of all the exhibits made a part of this AGREEMENT, the general articles shall automatically terminate when the liability of the REINSURER under said exhibits ceases.


Article 2		Parties to the AGREEMENT

A. This AGREEMENT is solely between the COMPANY and the REINSURER. Performance of the respective obligations of each party under this AGREEMENT shall be rendered solely to the other party. However, if the COMPANY becomes insolvent, the liability of the REINSURER shall be modified to the extent set forth in the Article entitled ?Insolvency.? In no instance shall any insured of the COMPANY, any claimant against an insured of the COMPANY, third parties or any parties not party to this AGREEMENT have any rights under this AGREEMENT. It is further understood that any references to third parties not specifically named as parties to this AGREEMENT, which may or may not have separate contractual agreements with the parties of this AGREEMENT in order to satisfy the performance of the obligations of each named party under this AGREEMENT, are merely references for the sake of clarity and are not intended and should not be construed as the naming of such parties as a party to this AGREEMENT.

B. When more than one COMPANY is named as a party to this AGREEMENT, the first COMPANY named shall be the agent of the other companies as to all matters pertaining to this AGREEMENT. All payments made to the agent shall be deemed to be paid to the other companies.

C. The liability assumed by the REINSURER and all other benefits accruing to the COMPANY as provided in this AGREEMENT or any

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amendments thereof, shall apply to the companies comprising the COMPANY as a group and not separately to each of the companies. Any payments by the REINSURER to any of the companies comprising the COMPANY shall discharge the REINSURER?s liability under this AGREEMENT.

D. In addition to the COMPANY as defined in the AGREEMENT, including parties identified in the COMPANY designation on the title page of this AGREEMENT, any companies acquired, managed or controlled which would cede business under this AGREEMENT shall be included in the definition of COMPANY by endorsement as a party to this AGREEMENT subject to acceptance by the REINSURER.


Article 3		Commencement and Termination

A. This AGREEMENT shall apply to new and renewal policies of the COMPANY becoming effective at and after 12:01 A.M., Standard Time, January 1, 1996 and to policies of the COMPANY in force at 12:01 A.M., Standard Time, January 1, 1996 with respect to claims or losses resulting from occurrences taking place at and after the aforesaid time and date.

B. This AGREEMENT may be terminated as of 12:00 Midnight, Standard Time, December 31, 1996 or any December 31st thereafter by either party sending to the other 90 days advance notice of such termination by registered or certified mail to its principal office. The non-cancelling party shall have the option to elect either run-off or cut-off termination.

C. Upon termination of this AGREEMENT on a cut-off basis, the REINSURER shall not be liable for claims or losses resulting from occurrences taking place after the effective time and date of termination.

D. Upon termination of this AGREEMENT on a run-off basis, the liability of the REINSURER with respect to claims or losses resulting from occurrences taking place after the effective time and date of termination on policies in force at the time and date of termination shall continue until the expiration, cancellation, or next anniversary date, not to exceed one year, of each such policy of the COMPANY, whichever occurs first. As of the date of termination, the premium rate, as set forth in the Exhibits attached hereto, shall be applied to the COMPANY?s Direct Subject Casualty Unearned Premium Reserve corresponding to the runoff period, and the balance due either party shall be paid as specified in said Exhibits.

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Article 4		Special Termination

Should at any time the REINSURER or the COMPANY as regards to the applicability of each condition to each or both of the respective parties:

	1.		Default in payment due under the terms of this AGREEMENT;

	2.		Cause an intentional material breach of any term or condition of this AGREEMENT;

	3.		Cease writing new or renewal business and/or withdraw from the business of insurance;

	4.		Effect a reduction in the net retained liability without the consent of the other party;

	5.		Reduce paid-in capital for any reason whatsoever;

	6.		Change its existing ownership, management or financial operating structure by:

	a.		selling all or substantially all of its assets

	b.		effecting a change in ownership of 10% or more of its stock

	c.		effecting a pertinent change in management

	d.		amalgamating with or having its shares purchased by any other company, corporation, individual or individuals altering the control of its existing ownership and/or management;

	7.		Have its financial condition impaired by a reduction in policyholder?s surplus of 25% or more in any 12-month or less period from the inception date of this AGREEMENT;

	8.		File a petition for bankruptcy or have proceedings instituted or filed against them by any insurance regulatory authority for insolvency, receivership, liquidation, rehabilitation, conservation, or dissolution;

this AGREEMENT may be terminated by either party sending to the other by registered or certified mail to its principal office, notice stating the time and date when, not less than 30 days after the date of mailing of such notice, termination shall be effective. Upon termination of this AGREEMENT under the conditions set forth in this article, the REINSURER shall not be liable for losses occurring on or after the effective time and date of termination. The REINSURER shall return to the COMPANY the reinsurance premium unearned, if any, calculated on the pro rata basis, for the coverage period elapsed.

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Article 5		Reinsuring Clause

The REINSURER agrees to indemnify the COMPANY in accordance with the terms and conditions of this AGREEMENT for liability which the COMPANY has become legally obligated to pay and which is covered under its policies, as hereinafter defined, categorized as Casualty Business and specifically classified in the COMPANY?s Annual Statement as:

	1.		Private Passenger Automobile Liability including

			Bodily Injury Liability Property Damage Liability Uninsured and Underinsured Motorists Liability Medical Payments Personal Injury Protection, Property Protection Insurance, and other ?No Fault? coverages written in compliance with the ?No fault? laws of any state howsoever deemed Automobile Physical Damage Collision Coverage Death, Disability or Dismemberment Benefits

	2.		Commercial Automobile Liability including

			Bodily Injury Liability Property Damage Liability Uninsured and Underinsured Motorists Liability Medical Payments Personal Injury Protection, Property Protection Insurance, and other ?No Fault? coverages written in compliance with the ?No fault? laws of any state howsoever deemed Automobile Physical Damage Collision Coverage

	3.		Personal Lines Other Liability including the liability portion (Section II) of Homeowners and Mobile Homeowners policies for the following coverages:

			Bodily Injury Liability Property Damage Liability Personal Injury Liability Medical Payments

	4.		Commercial Lines Other Liability including General Liability, Comprehensive General Liability, liability portion

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			(Section ll) of Commercial Multi-Peril policies for the following coverages:

			Bodily Injury Liability Property Damage Liability Personal Injury Liability Medical Payments Advertising Injury Liability Fire Legal Liability

	5.		Workers? Compensation and Employers? Liability


Article 6		Liability of the REINSURER

The REINSURER?s limit of liability for this AGREEMENT shall be as set forth in the Exhibit(s) attached hereto and forming a part hereof.


Article 7		Net Retained Lines

This AGREEMENT applies only to that portion of any insurance covered by this AGREEMENT which the COMPANY retains net for its own account, and in calculating the amount of any loss hereunder and also in computing the amount in excess of which this AGREEMENT attaches, only loss or losses in respect of that portion of any insurance which the COMPANY retains net for its own account shall be included. It being understood and agreed that 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 reinsurers, whether specific or general, any amounts which may have become due from them, whether such inability arises from the insolvency of such other reinsurers or otherwise.


Article 8		Exclusions

This AGREEMENT shall not cover nor apply to:

A. General

	1.		All reinsurance assumed by the COMPANY howsoever styled or classified;

	2.		Any liability of the COMPANY arising from its participation or membership, whether voluntary or involuntary, in any insolvency fund including any guarantee fund, association,

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			pool, plan or other facility which provides for the assessment of, payment by, or assumption by the COMPANY of a part or the whole of any claim, debt, charge, fee or other obligations of an insurer, or its successors or assigns, which has been declared insolvent by any authority having jurisdiction;

	3.		Any loss or liability accruing to the COMPANY from any insurance written by or through any pools, associations including any so-called joint underwriting association, syndicates, exchanges, plans, funds or other facility directly as a member, subscriber or participant or indirectly by way of any reinsurance or assessments either voluntarily or as required under any statutes or regulations; however, this exclusion shall not apply to business assigned to the COMPANY under mandatory Assigned Risk Plans but only when the business subject to such assignment falls within the business covered by this AGREEMENT and subject to the maximum policy limits stipulated in the Article entitled ?Company Policy Limits;?

	4.		Nuclear incident per the Nuclear Incident Exclusion Clause ? Liability ? Reinsurance (U.S.A.) attached hereto;

	5.		Financial Guarantees or Financial insurance (including residual value or similar types of coverage), insolvency and credit business;

	6.		Business written with a deductible or in excess of a self insured amount of more than $10,000 or business written to apply specifically in excess over underlying insurance including any aggregate excess of loss policies (stop loss insurance);

	7.		Policies written on a co-indemnity basis with another insurer, reinsurer or other entity including the insured; however, this does not apply to the standard co-insurance provisions of a policy;

	8.		Any loss or damage which is occasioned by war, invasion, hostilities, acts of foreign enemies, civil war, rebellion, insurrection, miliary or usurped power, or martial law or confiscation by order of any government or public authority, as excluded under a standard policy containing a standard war exclusion clause;

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	9.		Policies covering liability of any insurer or reinsurer for its errors and/or omissions in the negotiation, settlement, or defense of claims or any error and/or omission in dealings with its policyholders in any other business matters;

	10.		Environmental Impairment Liability insurance;

	11.		Any loss or liability arising out of inhalation, ingestion or exposure to toxic substances including but not limited to asbestos, dioxin and polychlorinated biphenols or goods, products or structures containing such substances as a result of premises operations or completed operations involving the use, manufacture, transportation, storage, repair, installation, removal or disposal of such substances, goods, products or structures either specifically as the intent of such operation or as incidental to any other operations;

	12.		Liability arising out of pollution, as per the attached Pollution Exclusion Clause;

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	Reinsurance Agreement		NO. 63-2422-1/2/3/4/5

			CASUALTY EXCESS OF LOSS REINSURANCE AGREEMENT (hereinafter referred to as the ?AGREEMENT?)

			entered into by and between

			LEBANON MUTUAL INSURANCE COMPANY Cleona, Pennsylvania (hereinafter referred to as the ?COMPANY?)

			and

			MUNICH AMERICAN REINSURANCE COMPANY New York, New York (hereinafter referred to as the ?REINSURER?)

			Effective: January 1, 1996

			Term: Continuous


ARTICLE		PAGE

19	Reports and Remittances		20

20	Management of Claims and Losses		21

21	Inspection of Records		22

22	Errors and Omissions		22

23	Reserves and Taxes		22

24	Offset		22

25	Currency		23

26	Arbitration		23

27	Insolvency		24


ATTACHMENTS:		? Exhibits A through E
		? Nuclear Incident Exclusion Clause -Liability - Reinsurance (U.S.A.)
		? Pollution Exclusion Clause