Exhibit 10.45
ADMINISTRATIVE SERVICES AGREEMENT
by and between
UNION FIDELITY LIFE INSURANCE COMPANY
and
GE GROUP LIFE ASSURANCE COMPANY
Effective as of [ ], 2004
TABLE
OF CONTENTS
ADMINISTRATIVE SERVICES
AGREEMENT
This ADMINISTRATIVE SERVICES
AGREEMENT (this “Agreement”), effective as of [ ], 2004 (the “Effective Date”), is entered
into by and between GE GROUP LIFE ASSURANCE COMPANY, an insurance company
organized under the laws of the State of Connecticut (the “Administrator”), and
UNION FIDELITY LIFE INSURANCE COMPANY, an insurance company organized under the
laws of the State of Illinois (the “Company”).
RECITALS:
WHEREAS, the Company wishes
to appoint the Administrator to provide administrative services with respect to certain insurance policies
and contracts issued, assumed, reinsured or administered by the Company, and
the Administrator desires to provide such administrative services; and
WHEREAS, this Agreement is
entered into in connection with an intercompany reorganization among the
Company, the Administrator and certain of their Affiliates;
NOW, THEREFORE, in
consideration of the covenants and agreements set forth herein, the parties
hereto agree as follows:
DEFINITIONS
Section
1.1. Definitions. As used in this Agreement, the following
terms shall have the following meanings (definitions are applicable to both the
singular and the plural forms of each term defined in this Article):
“Administrative Services”
shall have the meaning specified in Article II.
“Administrator” shall
have the meaning specified in the first paragraph of this Agreement.
“Affiliate” means any
other Person that directly or indirectly controls, is controlled by, or is
under common control with, the first Person.
“Control” (including the terms, “controlled by” and “under
common control with”) means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
credit arrangement, as trustee or executor, or otherwise.
“Agreement” shall
have the meaning specified in the first paragraph of this Agreement.
“Allocated Loss
Adjustment Expenses” means all costs, fees and expenses incurred by the
Company or its Affiliates in the investigation, adjustment, settlement or
defense of all claims or the monitoring, preservation or enforcement of rights,
interests or benefits arising out of or relating to the Insurance Contracts
(excluding office expenses and salaries of officials of the
Company or its Affiliates or any other administrative or overhead
expenses of the Company or of its Affiliates), and court costs, and interest on
any judgment or award. Allocated Loss
Adjustment Expenses shall also include expenses associated with an action by
any entity for declaratory judgment filed in connection with the Insurance
Contracts.
“Applicable Law”
means any federal, state, local or foreign law (including common law), statute,
ordinance, rule, regulation, order, writ, injunction, judgment, permit,
governmental agreement or decree applicable to a Person or any of such Person’s
subsidiaries, properties, assets, or to such Person’s officers, directors,
managing directors, employees or agents in their capacity as such.
“Business Day” means
any day other than a Saturday, Sunday or other day on which commercial banks in
the States of Illinois or Connecticut are required or authorized by law to be
closed.
“Claims Settlement
Account” shall have the meaning specified in Section 4.2(a).
“Code” means the
Internal Revenue Code of 1986, as amended.
“CPR” shall have the
meaning specified in Section 15.3.
“CPR Arbitration Rules”
shall have the meaning specified in Section 15.4(a).
“Damage” or “Damages”
shall have the meaning set forth in Section 13.1(a).
“Direct Claim” shall
have the meaning specified in Section 13.3.
“Direct Expenses”
shall have the meaning specified in Article XII.
“Dispute” shall have
the meaning specified in Section 15.1(a).
“Effective Date”
shall have the meaning specified in the first paragraph of this Agreement.
“Expense Allowance”
shall have the meaning specified in Article XII.
“Force Majeure” means
any acts or omissions of any civil or military authority, acts of God, acts or
omissions of the Company, fires, strikes or other labor disturbances, equipment
failures, fluctuations or non-availability of electrical power, heat, light,
air conditioning or telecommunications equipment, or any other act, omission or
occurrence beyond the Administrator’s reasonable control, irrespective of
whether similar to the foregoing enumerated acts, omissions or occurrences.
“GAAP” means U.S.
generally accepted accounting principles consistently applied.
“Governmental Authority”
means any foreign or national government, any state or other political
subdivision thereof, and any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.
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“Indemnified Party”
shall have the meaning specified in Section 13.2(a).
“Indemnifying Party”
shall have the meaning specified in Section 13.2(a).
“Initial Notice”
shall have the meaning specified in Section 15.2.
“Insurance Contracts”
means collectively the group and individual insurance policies or contracts
directly issued by the Company (direct policies) or reinsured by the Company
(reinsured policies), or administered by the Company (administered policies),
any of which are in effect or which have incurred or open claims on the
Effective Date, including renewals of any non-cancelable or guaranteed
renewable policies or contracts, which were administered by the Administrator
prior to the Effective Date. The
Insurance Contracts include those identified in Schedule A.
“Loss” or “Losses”
means the amount of liability paid or payable by the Company with respect to
claims, losses, liabilities, damages, deficiencies, costs or expenses,
including without limitation, any settlements or compromises or disputed
claims, arising under the Insurance Contracts.
“Minimum Claims
Settlement Amount” shall have the meaning specified in Section 4.2(b).
“Overhead Expenses” shall have the meaning specified in Article
XII.
“Person” means any
natural person, firm, limited liability company, general partnership, limited
partnership, joint venture, association, corporation, trust, Governmental Authority
or other entity.
“Response” shall have
the meaning specified in Section 15.2.
“Service Costs” shall have the meaning specified in Article
XII.
“Subcontractor” shall
have the meaning specified in Section 3.3.
“Tax” means all
taxes, charges, fees, levies or other assessments, including, without
limitation, any net income tax or franchise tax based on net income, any
alternative or add-on minimum taxes, any gross income, gross receipts, premium,
sales, use, ad valorem, value added, transfer, profits, license, payroll,
employment, withholding, excise, severance, stamp, occupation, property,
environmental or windfall profit tax, custom duty or other tax, governmental
fee or other like assessment.
“Termination Date”
means the effective date of any termination of this Agreement as provided in
Article XIV.
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AUTHORITY
Section
2.1. Appointment. The Company hereby appoints the
Administrator, and the Administrator hereby accepts appointment, to provide as
an independent contractor of the Company, from and after the Effective Date,
all of the administrative services with respect to the Insurance Contracts that
the Administrator is providing to the Company as of the Effective Date,
including those set forth in this Agreement (the “Administrative Services”),
all on the terms as set forth in this Agreement. In providing the Administrative Services, the Administrator (or
the Subcontractor) shall handle all matters, including but not limited to the
billing and collection of premiums and reinsurance premiums, the defense,
adjustment, settlement and payment of all claims arising under the Insurance
Contracts, as more fully described below, and any other required business
support services provided to the Company as of the Effective Date. Notwithstanding any other provision of this
Agreement to the contrary, the Company shall have the right to direct the
Administrator to perform any action necessary relating to the Insurance
Contracts or the policyholder and claim servicing thereof to comply with
Applicable Law, or to cease performing any action that constitutes a violation
of Applicable Law.
Section
2.2. Denial of Claims
and Litigation. (a) The
Administrator agrees that it will provide prompt notice to the Company of its
intention to deny a claim or terminate benefits with respect to any Insurance
Contract in the form and manner specified in writing by the Company (which
writing by the Company shall be in accordance with Section 16.2), along with
copies of all reports of investigation with respect thereto. The Administrator shall thereafter not deny
such claim or terminate such benefits without the approval of the Company, provided
that the Administrator may deny such claim or terminate such benefits without
the approval of the Company if the Company fails to respond or fails to respond
within a reasonable time period such as to allow the Administrator to act as
required by any Applicable Law.
(b) The Administrator agrees that it will provide prompt
notice to the Company of any litigation arising with respect to an Insurance
Contract of which it becomes aware, along with copies of all pleadings with
respect thereto. The Company shall have
the right, at its own expense, to participate jointly with the Administrator in
the investigation, adjustment or defense of such litigation and may, upon
written notice to the Company, assume the defense thereof with counsel selected
by the Company. If the Company assumes
such defense, the Administrator shall have the right, at its own expense, to participate jointly with the Company in
the defense thereof.
Section
2.3. Service Managers. The Administrator and the Company will each
designate a services account manager (respectively, the “Administrator Services
Manager” and the “Company Services Manager” and collectively, the “Services
Managers”) who will be directly responsible for coordinating and managing the
Administrative Services and other obligations of the parties hereunder. The Administrator Services Manager will have
authority to act on the Administrator’s behalf with respect to the
Administrative Services and the Administrator’s obligations hereunder. The Company Services Manager shall have the
authority to act on the Company’s behalf with respect to the Administrative
Services and the Company’s obligations hereunder. The Services Managers shall cooperate in good faith to establish
the
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manner and timing for providing such
information. Notwithstanding the
provisions of Section 16.2, any requests for consent, consent or approval or
other notice may be made in writing as between the Services Managers if the
Service Managers agree in advance that the provisions of Section 16.2 do not
apply to such request, consent or approval or other notice. Either party, from time to time, may
designate a replacement Service Manager for the existing Service Manager,
giving notice in accordance with Section 16.2.
STANDARD FOR SERVICES; FACILITIES; SUBCONTRACTING
Section
3.1. Standard for
Services. The Administrator shall
provide the Administrative Services in good faith and with the care, skill,
prudence and diligence of a person experienced in providing such services. The Administrator shall provide the
Administrative Services (i) in accordance with the terms of the Insurance
Contracts, (ii) in accordance with the applicable terms of this Agreement,
(iii) in compliance with Applicable Law and, subject to the foregoing, (iv) in
the same manner as it conducts its own business not subject to this Agreement
and (v) in accordance with the Administrator’s administrative performance
standards in effect on the date hereof, with such revisions to such standards
as are no less favorable to the Company than the Administrator’s standards in
effect on the date hereof.
Notwithstanding the foregoing, the parties may, from time to time,
mutually develop specific and/or different standards for providing such
Administrative Services with respect to the Insurance Contracts.
Section
3.2. Facilities and
Personnel. The Administrator shall
at all times maintain sufficient facilities and trained personnel of the kind
necessary to perform its obligations under this Agreement in accordance with
the performance standards set forth herein.
Section
3.3. Subcontracting. The Administrator may subcontract for the
performance of any Administrative Service or Services to (i) any properly
licensed affiliated or unaffiliated third party administrator or (ii) any
properly licensed Affiliate insurance company or (iii) any other Person (in
connection with activities not requiring a license) with the prior written
consent of the Company, such consent not to be unreasonably withheld (in each
case, the “Subcontractor”); provided, that, notwithstanding any other provision
of this Section 3.3, the Administrator may continue to use any subcontractor
utilized by the Administrator in connection with the Insurance Contracts on the
Effective Date; and provided, further, that no such
subcontracting shall relieve the Administrator from any of its obligations or
liabilities hereunder, and the Administrator shall remain responsible for all
obligations or liabilities of such Subcontractor with regards to the providing
of such Administrative Service or Services as if provided by the Administrator.
Section
3.4. Consultation and
Direction. From time to time, as is
commercially reasonable, the Administrator may seek direction from the Company,
including the Company Service Manager, in connection with the Administrative
Services. The Company, including the
Company Services Manager, may provide such direction, at the Company’s sole
discretion.
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ARTICLE IV
CLAIMS
HANDLING
The Administrative Services
with respect to claims and claims for benefits including claims outstanding on
the Effective Date, shall include the following:
Section
4.1. Claim
Administration Services. The
Administrator shall acknowledge, consider, review, investigate, deny, settle,
pay or otherwise dispose of each claim and claim for benefits reported under
each Insurance Contract (each, a “Claim” and collectively the “Claims”).
Section
4.2. Claims Settlement
Account. (a) On the Effective Date, the Company shall
establish a separate fiduciary bank account (the “Claims Settlement Account”)
in its own name for the payment of Claims and shall authorize two signatories
who shall be employed by the Administrator and approved by the Company in
writing to issue checks in the name of the Company. The Company shall fund such account for payment of Claims in
accordance with the provisions of Section 4.2(b). The Claims Settlement Account shall be the property of the
Company and any interest earned on the Claims Settlement Account shall belong
to the Company. The Claims Settlement
Account shall be administered by the Administrator in a fiduciary capacity and
shall be used solely by the Administrator to make payments of Claims in
accordance with the terms of this Agreement.
(b) The Company shall fund the Claims Settlement Account on or
before the fifth (5th) day of each month in amounts agreed by the Company and
the Administrator from time to time in amounts sufficient to provide funds to
the Administrator for the payment of Claims during the next thirty (30) days,
or such other amount as may be mutually agreed by the parties (each minimum
funding amount as agreed from time to time shall be referred to as a “Minimum
Claims Settlement Amount”). In
addition, the Company shall deposit to the Claims Settlement Account such
additional amounts as may be required to keep the balance of such account above
zero at all times.
(c) The Administrator shall keep true and complete records, in
accordance with Applicable Law and its record management practices in effect
from time to time for the Administrator’s insurance business not covered by
this Agreement, clearly recording the deposits in and withdrawals from the
Claims Settlement Account, including records relating to the payment of Claims
from the Claim Settlement Account. The
Administrator will make available to the Company or its designated
representative, or shall furnish to the Company or its designated
representative, upon request of the Company or its designated representative,
copies of all such records. All copies
furnished in the ordinary course of business shall be furnished by the
Administrator at the Administrator’s cost, which shall be included in the
Expense Allowance. Any extraordinary
costs reasonably incurred by the Administrator in response to requests from the
Company shall be reimbursed by the Company.
(d) Within thirty (30) days after each calendar month (or more
frequently as mutually agreed by the parties), the Administrator shall render a
complete accounting to the Company detailing all transactions with respect to
the Claims Settlement Account, in such form as agreed by the parties.
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(e) The parties agree to deliver to the depository bank such
depository resolutions, signature cards,
and other documents as may be requested of them in order to use such
accounts at the depository bank in accordance with the provisions of this
Section 4.2.
(f) Upon a termination of this Agreement pursuant to Article
XIV, the Company shall close the Claims Settlement Account and any closing
balance therein shall be the property of the Company. The Administrator’s claims payment authority under this Agreement
shall terminate immediately upon termination of this Agreement pursuant to
Article XIV. Upon termination of its
authority to pay claims, the Administrator shall promptly return to the Company
all unused check stock held by it in connection with this Agreement.
BILLINGS AND COLLECTIONS
Section
5.1. Billing and
Collection Services. (a) The Administrator shall assume all responsibility
for billing and collecting premiums and reinsurance premiums and other amounts
payable with respect to the Insurance Contracts. The risk of loss, theft or destruction of premiums and such other
amounts with respect to the Insurance Contracts shall be borne solely by the
Company. The Administrator shall hold
any premiums, deposits or other amounts collected with respect to the Insurance
Contracts in a fiduciary capacity for the benefit of the Company.
(b) The Administrator shall promptly, but in no event later
than three (3) Business Days after receipt, deposit such premiums, reinsurance
premiums, or other amounts in the Claims Settlement Account. The Administrator may not commingle, and
shall not permit any commingling of, any funds deposited in the Claims
Settlement Account with any other funds.
UNDERWRITING
Section
6.1. Underwriting
Services. Subject to Section 6.2,
the Administrator shall perform all necessary underwriting with respect to the
renewal of the Insurance Contracts, if any.
Section
6.2. Underwriting
Guidelines. All insurance
underwriting services provided by the Administrator pursuant to this Agreement
with respect to the Insurance Contracts shall be in accordance with any written
underwriting guidelines and criteria provided to the Administrator by the
Company.
CERTAIN ACTIONS BY COMPANY
Section
7.1. Filings. The Company shall prepare and timely file
any filings required to be made with any Governmental Authority that relate to
the Company generally and not just to the Insurance Contracts, including
filings with guaranty associations and filings and premium tax
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returns with taxing authorities. The Administrator shall, in a timely fashion
in light of the dates such filings by the Company are required, provide to the
Company all information in the possession of the Administrator with respect to
the Insurance Contracts that may be reasonably required for the Company to
prepare such filings and tax returns.
The parties shall cooperate in good faith to establish the manner and
timing for providing such information.
REGULATORY MATTERS AND AUDIT REPORTING
Section
8.1. Regulatory
Compliance and Reporting. The
Administrator shall provide to the Company such information with respect to the
Insurance Contracts as is required to satisfy all current and future
informational reporting, prior approval and any other requirements imposed by
any Governmental Authority. Upon the
reasonable request of the Company, the Administrator shall timely prepare such
reports and summaries, including statistical summaries, as are necessary or
useful to satisfy any requirements imposed by a Governmental Authority upon the
Company with respect to the Insurance Contracts. In addition, the Administrator, upon the reasonable request of
the Company shall promptly provide to the Company copies of all existing
records relating to the Insurance Contracts (including, with respect to records
maintained in machine readable form, hard copies) that are necessary to satisfy
such requirements. All copies of
records furnished in the ordinary course of business shall be furnished by the
Administrator at the Administrator’s cost.
Any extraordinary costs reasonably incurred by the Administrator in
response to requests from the Company shall be reimbursed by the Company. Among other responsibilities:
(i) The
Administrator shall promptly prepare and furnish to Governmental Authorities
all reports and related summaries (including, without limitation, statistical
summaries), certificates of compliance and other reports required or requested
by a Governmental Authority.
(ii) The
Administrator shall assist the Company and cooperate with the Company in doing
all things necessary, proper or advisable, in the most expeditious manner
practicable in connection with any and all market conduct or other Governmental
Authority examinations relating to the Insurance Contracts.
Section
8.2. Reporting and
Accounting. The Administrator shall
assume the reporting and accounting obligations set forth below:
(i) As soon as
practicable but not more than forty (40) days after the end of each calendar
quarter that this Agreement is in effect (or more frequently as mutually agreed
by the parties), the Administrator shall timely provide to the Company reports
and summaries of transactions (and, upon request of the Company, detailed
supporting records) related to the Insurance Contracts as may be reasonably
required for use in connection with the preparation of the Company’s statutory
and GAAP financial statements, tax returns and other required financial reports
and to comply with the
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requirements of the
regulatory authorities having jurisdiction over the Company, including all
premium written and earned and all Losses and Allocated Loss Adjustment
Expenses reserved, paid, and outstanding.
The parties shall cooperate in good faith to establish the manner for
the providing of such reports.
(ii) The
Administrator shall timely provide to the Company reports or summaries (and,
upon the request of the Company, detailed supporting records therefor) related
to the payment of commissions under the Insurance Contracts.
(iii) As soon as
practicable but not more than forty (40) days after the end of each calendar
quarter that this Agreement is in effect (or more frequently as mutually agreed
by the parties), the Administrator shall report to the Company the amount of
statutory reserves that the Company is required to maintain in connection with
the Insurance Contracts as of the quarter end.
(iv) The
Administrator shall timely provide notice to the Company of any changes in the
reserve methodology used by the Administrator in calculating statutory reserves
for the Insurance Contracts.
Section
8.3. Additional Reports
and Updates. For so long as this
Agreement remains in effect, each party shall periodically furnish to the other
such other reports and information as may be reasonably required by such other
party for regulatory, tax or similar purposes and reasonably available to it.
BOOKS AND RECORDS
The Administrator shall
maintain accurate and complete books, records,
files and accounts of all transactions and matters with respect to the
Insurance Contracts and the administration thereof in accordance with
(i) Applicable Law, and (ii) its record management practices in
effect from time to time for the Administrator’s insurance business not covered
by this Agreement. The books and
records must be maintained for the term of this Agreement or for as long
thereafter as any rights or obligations of any party survives or the
Administrator reasonably needs access to such records for regulatory, tax or
similar purposes. The Administrator
shall maintain the confidentiality of such books and records, including
compliance with Article XI. All such
books and records pertaining to an Insurance Contract shall be the property of
the Company and shall be made available to the Company, its auditors or other
designees, and regulatory agencies, during normal business hours and at any
other time on reasonable notice, for review, audit, inspection, examination and
reproduction.
The parties to this
Agreement and their designated representatives may upon reasonable notice
inspect, at the offices of the Administrator or the Company where such records
are located, the papers and any and all other books or documents of the
Administrator or the Company reasonably relating to this Agreement, including
the Insurance Contracts, and shall
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have
access to appropriate employees and representatives of the other party, in each
case during normal business hours for such period as this Agreement is in
effect or for as long thereafter as any rights or obligations of any party
survives or the Administrator or the Company reasonably need access to such
records for regulatory, tax or similar purposes. The information obtained shall be used only for purposes relating
to the transactions contemplated under this Agreement.
COOPERATION
Each party hereto shall
cooperate fully with the other in all reasonable respects in order to
accomplish the objectives of this Agreement including making available to each
their respective officers and employees for interviews and meetings with
Governmental Authorities and furnishing any additional assistance, information
and documents as may be reasonably requested by a party from time to time.
PRIVACY REQUIREMENTS
In providing the
Administrative Services provided for under this Agreement, and in connection
with maintaining, administering, handling and transferring the data of the
policyholders and other recipients of benefits under the Insurance Contracts,
the Administrator shall, and shall cause its Affiliates and any permitted
Subcontractors to, comply with all confidentiality and security obligations
applicable to them, in connection with the collection, use, disclosure,
maintenance and transmission of personal, private, health or financial
information about individual policyholders or benefit recipients, including the
provisions of privacy policies under which such information was gathered, those
laws currently in place and which may become effective during the term of this
Agreement, including the Gramm-Leach-Bliley Act, the Health Insurance
Portability and Accountability Act of 1996 and any other Applicable Laws. The Administrator shall entitle the Company
and its agents and representatives, the Commissioner of Health and Human
Services and such other Governmental Authorities to the extent required by
Applicable Law, to audit the Administrator’s compliance herewith. The Administrator shall also enable
individual subjects of personally identifiable information, upon request from
such individuals, to review and correct information maintained by the
Administrator about them, and to restrict use of such information. The Administrator shall promptly report to
the Company any violation of this provision of which the Administrator becomes
aware. Unless required by Applicable
Law, the Administrator shall not during the term of this Agreement, modify the
privacy policies under which information utilized by the Administrator in
administering the Insurance Contracts is gathered, without the Company’s prior
written consent, which consent shall not be unreasonably withheld. The parties hereto agree to comply with the
terms of the Business Associate Addendum attached as Schedule B hereto.
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CONSIDERATION
FOR ADMINISTRATIVE SERVICES
As reimbursement for
expenses incurred by the Administrator in the providing the Administrative
Services with respect to the Insurance Contracts, the Company shall pay to the
Administrator with respect to each calendar month ending after the Effective
Date, an expense allowance (the “Expense Allowance”). The Expense Allowance shall be: (i) the actual incurred cost of
providing the Administrative Services based on the allocated portion of compensation
and benefits of the associates providing such services calculated annually in
advance (and pro rated) in accordance with Schedule C (the “Service Costs”);
(ii) a proportionate share of overhead related to such Administrative Services
(the “Overhead Expenses”); and (iii) all third party expenses incurred in
connection with the provision of such Administrative Services, including
without limitation all categories of services contracted with third parties as
of the Effective Date, such as legal and claim investigation, but excluding services
for which Service Costs and Overhead Expenses are charged (the “Direct
Expenses”). Such Expense Allowance
shall be determined as set forth in Schedule C. The procedures for the billing and payment of the Expense
Allowance are set forth in Schedule C.
Additionally, the Administrator shall be reimbursed for any unforeseen
costs arising from a change in Applicable Law, with the parties mutually
agreeing to the payment of such costs in advance of their being incurred by the
Administrator. The Administrator shall
also be reimbursed for any incurred Direct Expenses for any category of
services not contracted with third parties as of the Effective Date but
contracted for thereafter, provided that the Company consents to the
Administrator entering into third party contracts for such category of
services.
INDEMNIFICATION
Section
13.1. Indemnification. (a)
For any indemnification under this Article XIII, a party with the
obligation to indemnify shall have the right to cure any underlying cause of
Damage and/or to mitigate such Damage.
As used in this Article XIII, “Damage” and/or “Damages” shall mean
losses, liabilities, costs, claims, causes of action, demands, settlements,
damages including compensatory, extra contractual and punitive damages, fines,
penalties and expenses (including reasonable attorneys’ fees and expenses).
(b) The Administrator agrees to indemnify and hold harmless
the Company and any of its directors, officers, employees, agents,
representatives and affiliates (and the directors, officers, employees, agents
and representatives of such affiliates) from any and all Damages arising out of
or caused by any actual or alleged: (i) fraud, theft or embezzlement by
directors, officers, employees, agents, subcontractors, successors or assigns
of the Administrator during the term of this Agreement; (ii) failure, either
intentional or unintentional, of the Administrator to properly perform the
services or take the actions required by this Agreement, including the failure
to properly process, evaluate and pay claims or to comply with disbursement
requests in accordance with the terms of this Agreement; (iii) acts of gross
negligence or willful misconduct committed by directors, officers, employees,
agents, subcontractors, successors or assigns of the Administrator during the
term of this Agreement; or
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(iv) failure of the Administrator to comply
with Applicable Laws, rules and regulations during the term of this Agreement.
(c) The Company agrees to indemnify and hold harmless the
Administrator and any of its directors, officers, employees, agents,
representatives and affiliates (and the directors, officers, employees, agents
and representatives of such affiliates) from any and all Damages arising out of
or caused by any actual or alleged: (i)
fraud, theft or embezzlement by directors, officers, employees, agents,
successors or assigns of the Company during the term of this Agreement; (ii)
acts of negligence or willful misconduct committed by directors, officers,
employees, agents, successors or assigns of the Company during the term of this
Agreement; or (iii) failure of the Company to comply with Applicable Laws,
rules and regulations during the term of this Agreement other than any failure
on the part of the Company caused by the action or inaction of the
Administrator, including when acting in the name or on behalf of the Company,
whether or not in compliance with the terms of this Agreement.
Section
13.2. Indemnification
Procedures. (a) In order for a party (the “Indemnified
Party”) to be entitled to any indemnification provided for under this Agreement
in respect of, arising out of or involving a claim or demand made by, or an
action, proceeding or investigation instituted by, any Person not a party to
this Agreement (a “Third Party Claim”), such Indemnified Party must notify the
other party (the “Indemnifying Party”) in writing, and in reasonable detail, of
the Third Party Claim within ten (10) Business Days after such Indemnified Party
learns of the Third Party Claim; provided, however, that failure
to give such notification shall not affect the indemnification provided
hereunder except to the extent the Indemnifying Party shall have been actually
prejudiced as a result of such failure (except that the Indemnifying Party
shall not be liable for any expenses incurred during the period in which the
Indemnified Party failed to give such notice).
Thereafter, the Indemnified Party shall deliver to the Indemnifying
Party, within five (5) Business Days after the Indemnified Party’s receipt
thereof, copies of all notices and documents (including court papers) received
by the Indemnified Party relating to the Third Party Claim.
(b) If a Third Party Claim is made against an Indemnified
Party, the Indemnifying Party will be entitled to participate in the defense
thereof and, if it so chooses, to assume the defense thereof with counsel
selected by the Indemnifying Party. If
the Indemnifying Party assumes such defense, the Indemnified Party shall have
the right to participate in the defense thereof and to employ counsel, at its
own expense, separate from the counsel employed by the Indemnifying Party. If the Indemnifying Party chooses to defend
or prosecute any Third Party Claim, all of the parties hereto shall cooperate
in the defense or prosecution thereof.
Such cooperation shall include the retention and (upon the Indemnifying
Party’s request) the provision to the Indemnifying Party of records and information
which are reasonably relevant to such Third Party Claim, and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. Whether or not the Indemnifying Party shall have assumed the
defense of a Third Party Claim, the Indemnifying Party shall have no liability
with respect to any compromise or settlement of such claims effected without
its written consent (such consent not to be unreasonably withheld); the
Indemnifying Party shall not admit any liability with respect to, or settle,
compromise or discharge, such Third Party Claim without the Indemnified Party’s
prior written consent (which consent shall not be unreasonably withheld or
delayed) unless (A) there is no finding or admission of any violation of
12
law or any violation of the rights of any Person and
no effect on any other claims that may be made against the Indemnified Party,
or (B) the sole relief provided is monetary damages that are paid in full by
the Indemnifying Party and a full and complete release is provided to the
Indemnified Party.
(c) The provisions of this Article XIII shall survive the
termination of this Agreement. The
indemnity provided in Sections 13.1(b) and 13.1(c) shall be the sole and
exclusive remedy of the Indemnified Party against the Indemnifying Party at law
or equity for any matter covered by such Sections.
(d) The amount of any Damages or other liability for which
indemnification is provided under this Agreement shall be (i) increased to take
account of any Tax cost incurred (grossed up for such increase) by the
Indemnified Party arising from the receipt of indemnity payments hereunder and
(ii) reduced to take account of any Tax benefit realized by the Indemnified
Party arising from the incurrence or payment of any such damages or other
liability. Such Tax cost or Tax
benefit, as the case may be, shall be computed for any year using the maximum
current U.S. federal corporate income tax rate as provided in Section 11 of the
Code or a successor section of the Code.
Section
13.3. Procedures for Direct
Claims. In the event any
Indemnified Party shall have a claim for indemnity against any Indemnifying
Party that does not involve a Third Party Claim (a “Direct Claim”), the Indemnified
Party shall promptly deliver notice of such claim to the Indemnifying
Party. Such notice referred to in the
preceding sentence shall state the relevant facts and include therewith
relevant documents and a statement in reasonable detail as to the basis for the
indemnification sought. The failure by
any Indemnified Party so to notify the Indemnifying Party in a timely manner
shall not be deemed a waiver of the Indemnified Party’s right to
indemnification with respect to any claim made pursuant to this Section 13.3,
other than to the extent that such failure actually prejudices the Indemnifying
Party.
Section
13.4. Limited Liability. Notwithstanding the provisions of Article
XIII, the Administrator and its Subsidiaries and Affiliates and their respective
directors, officers or employees (or any of the heirs, executors, successors or
assigns of any of the foregoing) (each, a “Service Provider”) shall have
no liability to the Company or its Subsidiaries and Affiliates in excess of
$900,000 in the aggregate annually (as measured from the Effective Date or the
most recent anniversary of the Effective Date, whichever is later), for any and
all claims in contract, tort or otherwise for or in connection with any breach
of its obligations under this Agreement; provided, however, that such
limitation on liability shall not extend to or otherwise limit any liabilities
that result directly from such Service Provider’s gross negligence or willful
misconduct; provided further that the Company shall be entitled
to indemnification only to the extent that the aggregate amount of such claims
annually (as measured from the Effective Date or the most recent anniversary of
the Effective Date, whichever is later) exceeds $25,000 (other than to the
extent that such claims arise from the gross negligence or willful misconduct
of the Administrator); provided further if the Company, including
the Service Manager, provides direction to the Administrator pursuant to
Section 3.4, the Company shall not be entitled to indemnification (and the
Administrator shall have no liability) to the extent the Damage arises from the
Administrator following such direction.
13
DURATION; TERMINATION
Section
14.1. Duration. This Agreement shall commence on the
Effective Date and continue for two (2) years (the “Term”), unless terminated
earlier pursuant to the terms of this Agreement. This Agreement shall automatically renew for one year terms (each
a “Renewal Term”). The Company shall have
the right to terminate this Agreement at the end of the Term or a Renewal Term,
upon providing the Administrator with written notice of such termination not
less than ninety (90) days prior to the end of the Term or the applicable
Renewal Term. The Company shall bear
all transition costs associated with the expiration of this Agreement and an
assumption of the administration of the Insurance Contracts by the Company at
the end of the term of this Agreement.
Section
14.2. Termination. (a)
This Agreement will terminate in its entirety on the earlier of:
(i) the date the
Company’s liability under all of the Insurance Contracts is terminated in
accordance with the terms thereof; or
(ii) a termination
pursuant to Sections 14.2(b), (c), (d) or (e).
(b) The Company shall have the right, upon written notice to
the Administrator, to terminate this Agreement and assume from the
Administrator, the administration of the Insurance Contracts upon the
occurrence of any of the following events:
(i) A voluntary or
involuntary proceeding is commenced in any jurisdiction by or against the
Administrator for the purpose of conserving, rehabilitating or liquidating the
Administrator;
(ii) There is a
material breach by the Administrator of any material term or condition of this
Agreement that is not cured by the Administrator within thirty (30) days after
receipt of written notice from the Company of such breach or act (provided that
the Company shall not have the right to terminate this Agreement (A) for so
long as the Administrator is making a good faith effort to cure such breach,
not to exceed an additional one hundred eighty (180) days or (B) during the
pendency of any dispute resolution proceedings as set forth in Article XV
regarding an alleged material breach); or
(iii) The
Administrator is unable to perform the services required under this Agreement
for a period of thirty (30) consecutive days for any reason other than as a
result of a Force Majeure, it being understood that nothing in this Section
14.2(b)(iii) shall relieve the Administrator from its administrative
responsibilities under this Agreement.
(c) The Administrator shall have the right, upon written
notice to the Company, to terminate this Agreement upon the occurrence of any
of the following events:
14
(i) A voluntary or
involuntary proceeding is commenced in any jurisdiction by or against the
Company for the purpose of conserving, rehabilitating or liquidating the
Company; or
(ii) There is a
material breach by the Company of any material term or condition of this
Agreement that is not cured by the Company within thirty (30) days after
receipt of written notice from the Administrator of such breach or act
(provided that the Administrator shall not have the right to terminate this
Agreement (A) for so long as the Company is making a good faith effort to cure
such breach, not to exceed an additional one hundred eighty (180) days or (B)
during the pendency of any dispute resolution proceedings as set forth in Article
XV regarding an alleged material breach).
(d) This Agreement may be terminated at any time upon the
mutual written consent of the parties hereto, which writing shall state the
effective date of termination.
(e) This Agreement may be terminated if the Company elects not
to seek a Renewal Term in accordance with Section 14.1.
(f) The Administrator shall bear all transition costs
associated with the assumption of the administration of the Insurance Contracts
pursuant to Section 14.2(b). The
Company shall bear all transition costs associated with the assumption of the
administration of the Insurance Contracts pursuant to Section 14.2(c).
Section
14.3. Transfer of Books and
Records. In the event that this
Agreement is terminated, the Administrator shall cooperate fully in the
transfer of services and the books and records maintained by the Administrator
pursuant to this Agreement (or, where appropriate, copies thereof) to the
third-party administrator or to the Company, so that such third-party
administrator or the Company, as the case may be, will be able to perform the
services required under this Agreement without interruption following
termination of this Agreement.
DISPUTE RESOLUTION
Section
15.1. General Provisions. (a) Any dispute, controversy or
claim arising out of or relating to this Agreement or the validity,
interpretation, breach or termination thereof (a “Dispute”), shall be resolved
in accordance with the procedures set forth in this Article XV, which shall be
the sole and exclusive procedures for the resolution of any such Dispute unless
otherwise specified below.
(b) Commencing with the request contemplated by Section 15.2,
all communications between the parties or their representatives in connection
with the attempted resolution of any Dispute, including any mediator’s
evaluation referred to in Section 15.3, shall be deemed to have been delivered
in furtherance of a Dispute settlement and shall be exempt from discovery and
production, and shall not be admissible in evidence for any reason (whether
15
as an admission or
otherwise), in any arbitral or other proceeding for the resolution of the
Dispute.
(c) In connection with any Dispute, the parties expressly
waive and forego any right to (i) punitive, exemplary, statutorily-enhanced or
similar damages in excess of compensatory damages (provided that any such
liability with respect to a Third Party Claim (as defined in the Master
Agreement) shall be considered direct damages), and (ii) trial by jury.
(d) The specific procedures set forth below, including but not
limited to the time limits referenced therein, may be modified by agreement of
the parties in writing.
(e) All applicable statutes of limitations and defenses based
upon the passage of time shall be tolled while the procedures specified in this
Article XV are pending. The parties
will take such action, if any, required to effectuate such tolling.
Section
15.2. Consideration by
Senior Executives. If a Dispute is
not resolved in the normal course of business at the operational level, the
parties shall attempt in good faith to resolve such Dispute by negotiation
between executives who hold, at a minimum, the office of President and CEO of
the respective business entities involved in such Dispute. Either party may initiate the executive
negotiation process by providing a written notice to the other (the “Initial
Notice”). Fifteen (15) days after
delivery of the Initial Notice, the receiving party shall submit to the other a
written response (the “Response”). The
Initial Notice and the Response shall include (i) a statement of the Dispute
and of each party’s position, and (ii) the name and title of the executive who
will represent that party and of any other person who will accompany the
executive. Such executives will meet in
person or by telephone within thirty (30) days of the date of the Initial
Notice to seek a resolution of the Dispute.
Section 15.3. Mediation. If a Dispute is not resolved by negotiation
as provided in Section 15.2 within forty-five (45) days from the delivery of
the Initial Notice, then either party may submit the Dispute for resolution by
mediation pursuant to the CPR Institute for Dispute Resolution (the “CPR”)
Model Mediation Procedure as then in effect. The parties will select a mediator from the CPR Panels of
Distinguished Neutrals, but such mediator must have prior U.S. reinsurance
experience either as a lawyer or as a present or former officer or management
employee of a reinsurance company, but not of the Company, or the
Administrator, or any of their respective affiliates. Either party at commencement of the mediation may ask the
mediator to provide an evaluation of the Dispute and the parties’ relative
positions.
Section
15.4. Arbitration. (a) If a Dispute is not resolved
by mediation as provided in Section 15.3 within thirty (30) days of the
selection of a mediator (unless the mediator chooses to withdraw sooner),
either party may submit the Dispute to be finally resolved by arbitration
pursuant to the CPR Rules for Non-Administered Arbitration as then in effect
(the “CPR Arbitration Rules”). The
parties consent to a single, consolidated arbitration for all known Disputes
existing at the time of the arbitration and for which arbitration is permitted.
(b) The neutral organization for purposes of the CPR
Arbitration Rules will be the CPR. The arbitral tribunal shall be composed of
three arbitrators who are each experienced in the U.S. reinsurance business, of
whom each party shall appoint one in accordance with the
16
“screened” appointment
procedure provided in Rule 5.4 of the CPR Arbitration Rules. The non-party appointed arbitrator must have
prior U.S. reinsurance experience as a present or former officer or management
employee of a reinsurance company, but not of the Company, or the
Administrator, or any of their respective affiliates. The arbitration shall be conducted in New York City. Each party shall be permitted to present its
case, witnesses and evidence, if any, in the presence of the other party. A written transcript of the proceedings
shall be made and furnished to the parties.
The arbitrators shall determine the Dispute in accordance with the law
of Illinois, without giving effect to any conflict of law rules or other rules
that might render such law inapplicable or unavailable, and shall apply this
Agreement according to its terms, provided that the provisions relating to
arbitration shall be governed by the Federal Arbitration Act, 9 U.S.C.
§§ 1 et seq. The arbitral tribunal
shall endeavor to render its award or order resulting from any arbitration
within forty-five (45) days following the termination of the arbitration
proceedings.
(c) The parties agree to be bound by any award or order
resulting from any arbitration conducted hereunder and further agree that
judgment on any award or order resulting from an arbitration conducted under
this Section 15.4 may be entered and enforced in any court having jurisdiction
thereof.
(d) Except as expressly permitted by this Agreement, no party
will commence or voluntarily participate in any court action or proceeding
concerning a Dispute, except (i) for enforcement as contemplated by Section
15.4(c) above, (ii) to restrict or vacate an arbitral decision based on the
grounds specified under applicable law, or (iii) for interim relief as provided
in paragraph (e) below. For purposes of
the foregoing the parties hereto submit to the non-exclusive jurisdiction of
the courts of the State of New York.
(e) In addition to the authority otherwise conferred on the
arbitral tribunal, the tribunal shall have the authority to make such orders
for interim relief, including injunctive relief, as it may deem just and
equitable. Notwithstanding paragraph
(d) above, each party acknowledges that in the event of any actual or
threatened breach of certain of the provisions of this Agreement, the remedy at
law would not be adequate, and therefore injunctive or other interim relief may
be sought immediately to restrain such breach.
If the tribunal shall not have been appointed, either party may seek
interim relief from a court having jurisdiction if the award to which the
applicant may be entitled may be rendered ineffectual without such interim
relief. Upon appointment of the tribunal following any grant of interim relief
by a court, the tribunal may affirm or disaffirm such relief, and the parties
will seek modification or rescission of the court action as necessary to accord
with the tribunal’s decision.
(f) Each party will bear its own attorneys fees and costs
incurred in connection with the resolution of any Dispute in accordance with
this Article XV.
17
MISCELLANEOUS PROVISIONS
Section
16.1. Headings and
Schedules. Headings used herein are
not a part of this Agreement and shall not affect the terms hereof. The attached Schedules are a part of this
Agreement.
Section 16.2. Notices. All
notices, requests, demands and other communications under this Agreement must
be in writing and will be deemed to have been duly given or made as
follows: (a) if sent by registered or
certified mail in the United States return receipt requested, upon receipt; (b)
if sent by reputable overnight air courier, two business days after mailing;
(c) if sent by facsimile transmission, with a copy mailed on the same day in
the manner provided in (a) or (b) above, when transmitted and receipt is
confirmed by telephone; or (d) if otherwise actually personally delivered, when
delivered, and shall be delivered as follows:
If to the Administrator:
[ ]
[ ]
[ ]
Facsimile: [
]
Attention: [ ]
With a copy to:
[ ]
[ ]
[ ]
Facsimile: [
]
Attention: [ ]
If to the Company:
Union Fidelity Life Insurance Company
200 North Martingale Road
Shaumburg, IL 60173-2096
Facsimile: (847) 330-3404
Attention: Chief Financial Officer
With a copy to:
Union Fidelity Life Insurance Company
200 North Martingale Road
Shaumburg, IL 60173-2096
Facsimile: (847) 605-3044
Attention: General Counsel
18
or to such other address or
to such other Person as either party may have last designated by notice to the
other party.
Section
16.3. Successors and
Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors, permitted assigns and legal representatives. Neither this Agreement, nor any right or
obligation hereunder, may be assigned by any party without the prior written
consent of the other party hereto. Any assignment in violation of this Section 16.3 shall be
void and shall have no force and effect.
Section
16.4. Execution in
Counterpart. This Agreement may be
executed by the parties hereto in any number of counterparts, and by each of
the parties hereto in separate counterparts, each of which counterparts, when
so executed and delivered, shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
Section
16.5. Currency. Whenever the word “Dollars” or the “$” sign
appear in this Agreement, they shall be construed to mean United States
Dollars, and all transactions under this Agreement shall be in United States
Dollars.
Section
16.6. Amendments. This Agreement may not be changed, altered
or modified unless the same shall be in writing executed by the Company and the
Administrator. Notwithstanding the
immediately preceding sentence, the effectiveness of any amendment to this
Agreement is conditioned upon approval of the Connecticut Department of
Insurance and the Illinois Department of Insurance, if required, and any such
other Governmental Authority whose prior approval is required by Applicable
Law.
Section
16.7. Governing Law. This
Agreement will be construed, performed and enforced in accordance with the laws
of the State of Illinois without
giving effect to its principles or rules of conflict of laws thereof to the
extent such principles or rules would require or permit the application of the
laws of another jurisdiction.
Section
16.8. Entire Agreement;
Severability. (a) This Agreement constitutes the entire
agreement between the parties hereto relating to the subject matter hereof and
supersedes all prior and contemporaneous agreements, understandings,
statements, representations and warranties, negotiations and discussions,
whether oral or written, of the parties and there are no general or specific
warranties, representations or other agreements by or among the parties in
connection with the entering into of this Agreement or the subject matter
hereof except as specifically set forth or contemplated herein.
(b) If any provision of this Agreement is held to be void or
unenforceable, in whole or in part, (i) such holding or provision shall
not affect the validity and enforceability of the remainder of this Agreement,
including any other provision, paragraph or subparagraph, and (ii) the
parties agree to attempt in good faith to reform such void, unenforceable or
violative provision to the extent necessary to render such provision enforceable
and to carry out its original intent.
Section
16.9. No Waiver;
Preservation of Remedies. No
consent or waiver, express or implied, by any party to or of any breach or
default by any other party in the performance by such other party of its
obligations hereunder shall be deemed or construed to be a consent or
19
waiver to or of any other breach or default in the
performance of obligations hereunder by such other party hereunder. Failure on the part of any party to complain
of any act or failure to act of any other party or to declare any other party
in default, irrespective of how long such failure continues, shall not
constitute a waiver by such first party of any of its rights hereunder. The
rights and remedies provided are cumulative and are not exclusive of any rights
or remedies that any party may otherwise have at law or equity.
Section
16.10. Third Party Beneficiary. Nothing in this Agreement will confer any
rights upon any Person that is not a party or a successor or permitted assignee
of a party to this Agreement.
Section
16.11. Negotiated Agreement. This Agreement has been negotiated by the
parties and the fact that the initial and final draft will have been prepared
by either party or an intermediary will not give rise to any presumption for or
against any party to this Agreement or be used in any respect or forum in the
construction or interpretation of this Agreement or any of its provisions.
Section
16.12. Tax Exception to Any
Confidentiality. Notwithstanding
anything to the contrary set forth herein or in any other agreement to which
the parties hereto are parties or by which they are bound, any obligations of
confidentiality contained herein and therein, as they relate to the transactions,
shall not apply to the federal tax structure or federal tax treatment of the
transactions, and each party hereto (and any employee, representative, or agent
of any party hereto) may disclose to any and all persons, without limitation of
any kind, the federal tax structure and federal tax treatment of the
transactions. The preceding sentence is
intended to cause the transactions to be treated as not having been offered
under conditions of confidentiality for purposes of Section 1.6011-4(b)(3) (or
any successor provision) of the Treasury Regulations promulgated under Section
6011 of the Internal Revenue Code of 1986, as amended, and shall be construed
in a manner consistent with such purpose.
In addition, each party hereto acknowledges that it has no proprietary
or exclusive rights to the federal tax structure of the transactions or any
federal tax matter or federal tax idea related to the transactions.
Section
16.13. Errors and Omissions. If any delay, omission, error or failure to
pay amounts due or to perform any other act required by this Agreement is
unintentional and caused by misunderstanding or oversight, the Company and the
Administrator will adjust the situation to what it would have been had the
misunderstanding or oversight not occurred.
The party first discovering such misunderstanding or oversight, or an
act resulting from such misunderstanding or oversight, will notify the other
party in writing promptly upon discovery thereof, and the parties shall act to
correct such misunderstanding or oversight within twenty (20) Business Days of
such other party’s receipt of such notice.
However, this Section shall not be construed as a waiver by either party
of its right to enforce strictly the terms of this Agreement.
Section
16.14. Interpretation. Wherever the words “include,” “includes” or
“including” are used in this Agreement, they shall be deemed to be followed by
the words “without limitation.”
Section
16.15. Survival. Articles XI, XIII, XV and XVI shall survive
the termination of this Agreement.
20
IN WITNESS WHEREOF, the
Company and the Administrator have executed this Agreement as of the date first
above written.
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UNION
FIDELITY LIFE INSURANCE COMPANY
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By:
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Name:
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Title:
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GE
GROUP LIFE ASSURANCE COMPANY
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By:
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Name:
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Title:
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21
SCHEDULE A
INSURANCE
CONTRACTS
Insurance Contracts include:
1. All individual and group insurance contracts underwritten or formerly
administered by the Company through its Worksite Service Group at the Company’s
offices in Trevose, Pennsylvania and Fort Washington Pennsylvania and for which
administration was transferred to the Administrator at its offices in Enfield,
Connecticut and Greenfield, Massachusetts prior to or contemporaneous with the
execution of this Agreement; and
2. Those reinsurance agreements identified
below:
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Ceding Company/Pool
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Product Line
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Assuming Company
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Effective Date and Renewal
Date
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AARG I
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Special Risk
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CICA
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12/01/74
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AARG II
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Special Risk
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CICA
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09/01/79
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AARG III
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Special Risk
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CICA
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04/01/82
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London Market Excess
(LMX)
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Special Risk
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CICA
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01/01/94
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NOMAD
(AARG)
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Special Risk
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CICA —> UFLIC1
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07/01/90
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CAN
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Special Risk
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CICA —> UFLIC
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11/01/94
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GroupAmerica,
Trans-General, Highmark —> American United Life
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LTD
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CICA —> UFLIC
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07/15/94
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CICA
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All Group, Direct and
Assumed
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UFLIC
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04/01/96
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Union Central
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Texas Occupational
Accident
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CICA
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11/01/94
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CICA
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Texas Occupational
Accident
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Union Central
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11/01/94
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CICA
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Texas Occupational
Accident
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AARG/SARF
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11/01/94
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CICA
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Student Accident
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M&G —> Swiss Re
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08/01/97
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CICA
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Student Accident
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M&G —> Swiss Re
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08/15/97
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CICA
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Student Accident
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Swiss Re
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08/01/98
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UFLIC and GEGLAC
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LTD
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General & Cologne Re
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01/01/00
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CICA
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LTD
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NA Re —> Swiss Re
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10/01/90
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1 An arrow ("-->") indicates the
company to which the particular reinsurance agreements were ceded or
retroceded.
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Ceding Company/Pool
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Product Line
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Assuming Company
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Effective Date and Renewal
Date
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CICA
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LTD
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NA Re —> Swiss Re
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03/01/90
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CICA
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LTD
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Gen Re —> Life Re —>
Swiss Re
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11/01/86
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CICA —> UFLIC
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Life
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NA Re —> Swiss Re
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01/01/89
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UFLIC
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Vol Life
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Swiss Re
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01/01/97
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CICA —> UFLIC
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AD&D
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NA Re —> Swiss Re
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01/01/89
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UFLIC
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Vol AD&D
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Swiss Re
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01/01/97
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CICA
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All Group
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NA Re —> Swiss Re
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01/01/91
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CICA
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Life
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Gen Re —> Life Re —>
Swiss Re
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11/01/77
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CICA
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AD&D
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Gen Re —> Life Re —>
Swiss Re
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01/01/80
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CICA
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Life
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Gen Re —> Life Re —>
Swiss Re
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10/01/79
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UFLIC
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LTD
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ReliaStar —> ING Re
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01/01/97
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ASSUMED LTD AGREEMENTS:
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American Bankers Life
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LTD
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CICA
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10/01/83
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Reliance Standard Life
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LTD
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CICA
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11/01/92
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First Reliance Standard
Life
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LTD (NY)
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CICA
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10/01/93
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Life of Virginia
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LTD
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CICA
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04/01/87
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Life of Virginia
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LTD (MET)
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CICA
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04/01/87
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Gulf Life —> Alta Life
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LTD
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CICA
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10/01/76
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Community Life
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LTD
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CICA
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05/01/79
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Educators Mutual Life
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LTD
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CICA
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Capitol Life, Idea Life
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LTD
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CICA
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Corporate Life, American
Guardian —> Jefferson Pilot
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LTD
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SCHEDULE B
BUSINESS
ASSOCIATE ADDENDUM
I. Purpose.
In
order to disclose certain information to Administrator (for purpose of this
Addendum, the “Provider”) under this Addendum, some of which may constitute
Protected Health Information (defined below), the Company (for purposes of this
Addendum, the “Recipient”) and Provider mutually agree to comply with the terms
of this Addendum for the purpose of satisfying the requirements of the Health
Insurance Portability and Accountability Act of 1996 (“HIPAA”) and its
implementing privacy regulations at 45 C.F.R. Parts 160-164 (“HIPAA Privacy
Rule”). These provisions shall apply
to Provider to the extent that Provider is considered a “Business Associate”
under the HIPAA Privacy Rule and all references in this section to Business
Associates shall refer to Provider.
Capitalized terms not otherwise defined herein shall have the meaning
assigned in the Agreement.
Notwithstanding anything else to the contrary in the Agreement, in the
event of a conflict between this Addendum and the Agreement, the terms of this
Addendum shall prevail.
II. Permitted Uses and Disclosures.
A. Business Associate agrees to use or disclose Protected
Health Information (“PHI”) that it creates for or receives from Recipient or
its Subsidiaries only as follows. The
capitalized term “Protected Health Information or PHI” has the meaning set
forth in 45 Code of Federal Regulations Section 164.501, as amended from time
to time. Generally, this term means
individually identifiable health information including, without limitation, all
information, data and materials, including without limitation, demographic,
medical and financial information, that relates to the past, present, or future
physical or mental health or condition of an individual; the provision of
health care to an individual; or the past present, or future payment for the
provision of health care to an individual; and that identifies the individual
or with respect to which there is a reasonable basis to believe the information
can be used to identify the individual.
This definition shall include any demographic information concerning
members and participants in, and applicants for, Recipient’s or its
Subsidiaries’ health benefit plans. All
other terms used in this Addendum shall have the meanings set forth in the
applicable definitions under the HIPAA Privacy Rule.
B. Functions and Activities on Company’s Behalf. Business Associate is permitted to use and
disclose PHI it creates for or receives from Recipient or its Subsidiaries only
for the purposes described in this Addendum or the Agreement that are not
inconsistent with the provisions of this Addendum, or as required by law, or
following receipt of prior written approval from whichever of the Recipient or
its Subsidiary for which the relevant PHI was created or from which the
relevant PHI was received. In addition
to these specific requirements below, Business Associate may use or disclose
PHI only in a manner that would not violate the HIPAA Privacy Rule if done by
the Recipient or its Subsidiaries.
C. Business Associate’s Operations. Business Associate is permitted by this
Agreement to use PHI it creates for or receives from Recipient or its
Subsidiaries: (i) if such use
is
reasonably necessary for Business Associate’s proper management and
administration; and (ii) as reasonably necessary to carry out Business
Associate’s legal responsibilities.
Business Associate is permitted to disclose PHI it creates for or
receives from Recipient or its Subsidiaries for the purposes identified in this
Section only if the following conditions are met:
(1) The disclosure is required by law; or
(2) The disclosure is reasonably necessary to
Business Associate’s proper management and administration, and Business
Associate obtains reasonable assurances in writing from any person or
organization to which Business Associate will disclose such PHI that the person
or organization will:
a. Hold such PHI as confidential and
use or further disclose it only for the purpose for which Business Associate
disclosed it to the person or organization or as required by law; and
b. Notify Business Associate (who will
in turn promptly notify whichever of the Recipient or its Subsidiary for which
the relevant PHI was created or from which the relevant PHI was received) of
any instance of which the person or organization becomes aware in which the
confidentiality of such PHI was breached.
D. Minimum Necessary Standard. In performing the functions and activities
on Recipient’s or its Subsidiaries’ behalf pursuant to the Agreement, Business
Associate agrees to use, disclose or request only the minimum necessary PHI to
accomplish the purpose of the use, disclosure or request. Business Associate must have in place
policies and procedures that limit the PHI disclosed to meet this minimum
necessary standard.
E. Prohibition on Unauthorized Use
or Disclosure. Business
Associate will neither use nor disclose PHI it creates or receives for or from
Recipient, its Subsidiaries, or from another business associate of Recipient or
its Subsidiaries, except as permitted or required by this Addendum or the
Agreement that are not inconsistent with the provisions of this Addendum, or as
required by law, or following receipt of prior written approval from whichever
of the Recipient or its Subsidiary for which the relevant PHI was created or
from which the relevant PHI was received.
F. De-identification of Information.
Business Associate agrees
neither to de-identify PHI it creates for or receives from Recipient or its
Subsidiaries or from another business associate of Recipient or its
Subsidiaries, nor use or disclose such de-identified PHI, unless such
de-identification is expressly permitted under the terms and conditions of this
Addendum or the Agreement and related to Recipient’s or its Subsidiaries’
activities for purposes of “treatment”, “payment” or “health care operations”,
as those terms are defined under the HIPAA Privacy Rule. De-identification of PHI, other than as
expressly permitted under the terms and conditions of the Addendum for Business
Associate to perform services for Recipient or its Subsidiaries, is not a
permitted use of PHI under this Addendum.
Business Associate further agrees that it will not create a “Limited
Data Set” as defined by the HIPAA Privacy Rule using PHI it creates or
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receives,
or receives from another business associate of Recipient or its Subsidiaries,
nor use or disclose such Limited Data Set unless: (i) such creation, use or disclosure
is expressly permitted under the terms and conditions of this Addendum or the
Agreement that are not inconsistent with the provisions of this Addendum; and
such creation, use or disclosure is for services provided by Business Associate
that relate to Recipient’s or its Subsidiaries’ activities for purposes of
“treatment”, “payment” or “health care operations”, as those terms are defined
under the HIPAA Privacy Rule.
G. Information Safeguards. Business Associate will
develop, document, implement, maintain and use appropriate administrative,
technical and physical safeguards to preserve the integrity and confidentiality
of and to prevent non-permitted use or disclosure of PHI created for or
received from Recipient or its Subsidiaries.
These safeguards must be appropriate to the size and complexity of
Business Associate’s operations and the nature and scope of its
activities. Business Associate agrees
that these safeguards will meet any applicable requirements set forth by the
U.S. Department of Health and Human Services, including (as of the effective
date or as of the compliance date, whichever is applicable) any requirements
set forth in the final HIPAA security regulations. Business Associate agrees to mitigate, to the extent practicable,
any harmful effect that is known to Business Associate resulting from a use or
disclosure of PHI by Business Associate in violation of the requirements of
this Addendum.
III. Conducting Standard Transactions. In the course of performing services for
Recipient or its Subsidiaries, to the extent that Business Associate will
conduct Standard Transactions for or on behalf of Recipient or its
Subsidiaries, Business Associate will comply, and will require any
subcontractor or agent involved with the conduct of such Standard Transactions
to comply, with each applicable requirement of 45 C.F.R. Part 162. “Standard Transaction(s)” shall mean a
transaction that complies with the standards set forth at 45 C.F.R. parts 160
and 162. Further, Business Associate
will not enter into, or permit its subcontractors or agents to enter into, any
trading partner agreement in connection with the conduct of Standard
Transactions for or on behalf of the Recipient or its Subsidiaries that:
a. Changes the
definition, data condition, or use of a data element or segment in a Standard
Transaction;
b. Adds any data
element or segment to the maximum defined data set;
c. Uses any code
or data element that is marked “not used” in the Standard Transaction’s
implementation specification or is not in the Standard Transaction’s
implementation specification; or
d. Changes the
meaning or intent of the Standard Transaction’s implementation specification.
IV. Sub-Contractors,
Agents or Other Representatives. Business
Associate will require any of its subcontractors, agents or other
representatives to which Business Associate is permitted by this Addendum or
the Agreement (or is otherwise given Recipient’s or the relevant Subsidiary’s
prior written approval) to disclose any of the PHI Business Associate creates
or receives for or from Recipient or its Subsidiaries, to provide reasonable
assurances in writing that subcontractor
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or
agent will comply with the same restrictions and conditions that apply to the
Business Associate under the terms and conditions of this Addendum with respect
to such PHI.
V. Protected Health Information
Access, Amendment and Disclosure Accounting.
A. Access.
Business Associate will promptly upon Recipient’s or its Subsidiary’s
request make available to Recipient, its Subsidiary, or, at Recipient’s or such
Subsidiary’s direction, to the individual (or the individual’s personal
representative) for inspection and obtaining copies any PHI about the
individual which Business Associate created for or received from Recipient or its
Subsidiary and that is in Business Associate’s custody or control, so that
Recipient or its Subsidiary may meet its access obligations under 45 Code of
Federal Regulations § 164.524.
B. Amendment. Upon Recipient’s or its Subsidiary’s request
Business Associate will promptly amend or permit Recipient or its Subsidiary
access to amend any portion of the PHI which Business Associate created for or
received from Recipient or its Subsidiary, and incorporate any amendments to
such PHI, so that Recipient or its Subsidiary may meet its amendment
obligations under 45 Code of Federal Regulations § 164.526.
C. Disclosure Accounting. So that Recipient or its Subsidiaries may
meet their disclosure accounting obligations under 45 Code of Federal
Regulations § 164.528:
1. Disclosure Tracking. Business
Associate will record for each disclosure, not excepted from disclosure
accounting under Section V.C.2 below, that Business Associate makes to
Recipient or its Subsidiaries of PHI that Business Associate creates for or receives
from Recipient or its Subsidiaries, (i) the disclosure date, (ii) the name and
member or other policy identification number of the person about whom the
disclosure is made, (iii) the name and (if known) address of the person or
entity to whom Business Associate made the disclosure, (iv) a brief description
of the PHI disclosed, and (v) a brief statement of the purpose of the
disclosure (items i-v, collectively, the “disclosure information”). For repetitive disclosures Business
Associate makes to the same person or entity (including Recipient or its
Subsidiaries) for a single purpose, Business Associate may provide a) the
disclosure information for the first of these repetitive disclosures, (b) the
frequency, periodicity or number of these repetitive disclosures and (c) the
date of the last of these repetitive disclosures. Business Associate will make this disclosure information
available to Recipient or its Subsidiaries promptly upon Recipient’s or its
Subsidiaries’ request.
2. Exceptions from Disclosure
Tracking. Business Associate need
not record disclosure information or otherwise account for disclosures of PHI
that this Addendum or Recipient or the relevant Subsidiary in writing permits
or requires (i) for the purpose of Recipient’s or its Subsidiaries’ treatment
activities, payment activities, or health care operations, (ii) to the
individual who is the subject of the PHI disclosed or to that individual’s
personal representative; (iii) to persons involved in that individual’s health
care or payment for health care; (iv) for notification for disaster relief
purposes, (v) for national security or intelligence purposes, (vi) to law
enforcement officials or correctional institutions regarding inmates; or (vii)
pursuant to an authorization; (viii) for disclosures of certain PHI made as
part of a Limited
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Data Set; (ix) for certain incidental disclosures that may occur where
reasonable safeguards have been implemented; and (x) for disclosures prior to
April 14, 2003.
3. Disclosure Tracking Time Periods. Business Associate must have available for
Recipient and its Subsidiaries the disclosure information required by this
section for the 6 years preceding Recipient’s or its Subsidiaries’ request for
the disclosure information (except Business Associate need have no disclosure
information for disclosures occurring before April 14, 2003).
VI. Additional Business Associate
Provisions.
A. Reporting of Breach of Privacy Obligations. Business Associate will provide written
notice to whichever of the Recipient or its Subsidiary for which the relevant
PHI was created or from which the relevant PHI was received of any use or
disclosure of PHI that is neither permitted by this Addendum nor given prior
written approval by Recipient or the relevant Subsidiary promptly after
Business Associate learns of such non-permitted use or disclosure. Business Associate’s report will at least:
(i) Identify the
nature of the non-permitted use or disclosure;
(ii) Identify the
PHI used or disclosed;
(iii) Identify who
made the non-permitted use or received the non-permitted disclosure;
(iv) Identify what
corrective action Business Associate took or will take to prevent further
non-permitted uses or disclosures;
(v) Identify what
Business Associate did or will do to mitigate any deleterious effect of the
non-permitted use or disclosure; and
(vi) Provide such
other information, including a written report, as Recipient or the relevant
Subsidiary may reasonably request.
B. Amendment. Upon the effective date of any
final regulation or amendment to final regulations promulgated by the U.S.
Department of Health and Human Services with respect to PHI, including, but not
limited to the HIPAA privacy and security regulations, this Addendum and the
Agreement will automatically be amended so that the obligations they impose on
Business Associate remain in compliance with these regulations.
In addition, to the extent
that new state or federal law requires changes to Business Associate’s
obligations under this Addendum, this Addendum shall automatically be amended
to include such additional obligations, upon notice by Recipient or its
Subsidiaries to Business Associate of such obligations. Business Associate’s continued performance
of services under the Agreement shall be deemed acceptance of these additional
obligations.
C. Audit and Review of Policies and
Procedures. Business
Associate agrees to provide, upon Recipient request, access to and copies of
any policies and procedures developed
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or
utilized by Business Associate regarding the protection of PHI. Business Associate agrees to provide, upon
Recipient’s request, access to Business Associate’s internal practices, books,
and records, as they relate to Business Associate’s services, duties and
obligations set forth in this Addendum and the Agreement(s) under which
Business Associate provides services and/or products to or on behalf of
Recipient or its Subsidiaries, for purposes of Recipient’s or its Subsidiaries’
review of such internal practices, books, and records.
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SCHEDULE C
EXPENSE
ALLOWANCE FOR ADMINISTRATIVE SERVICES
1. Calculation for 2004.
The Service
Costs and Overhead Expenses combined for calendar year 2004 are projected to be
$66,667 per month, and will be paid by Company at that rate, subject to
paragraph 1(d) below of this Schedule C. Direct Expenses for 2004 are expected to be $200,000.
(a) Service
Costs. Service Costs for 2004 were
projected based on time studies during the fourth Quarter of 2003 for functions
that directly support the ongoing servicing of the business. Examples of these
functions include but are not limited to Claims Management, Actuarial
Valuation, Finance, Legal and all other functions necessary and appropriate for
the administration of the Insurance Contracts.
(b) Overhead
Expenses. Overhead Expenses,
including all overhead related to relevant business and corporate functions,
are and will be allocated to all product lines. Corporate functions that are not associated with those product
lines, such as business development, marketing, and sales are excluded. Expenses for the remaining business and
corporate support functions are totaled and then allocated to the product lines
based on reserves.
(c) Direct
Expenses. Direct Expenses will be
billed directly to Company at cost.
(d) True-up
Procedure. At the time of the
preparation of the Annual Study for 2005 (as set forth below in paragraph 2(a)
of this Schedule C), a similar study shall be prepared for 2004 (the “2004
Study”) and submitted to the Company in accordance with paragraph 2(a) of this
Schedule C. The Company shall pay or be
credited for, as the case may be, any differential between (i) the combined
Service Costs and Overhead Expenses from $66,667 per month for the period from
the Effective Date of this Agreement until December 31, 2004 and (ii) the
combined Service Costs and Overhead Expenses identified in the 2004 Study for
the period from the Effective Date of this Agreement until December 31, 2004.
2. Methodology For Subsequent Years.
(a) Service
Costs and Annual Expenses. Service
Costs and Overhead Expenses will be adjusted for the year beginning January 1,
2005 and every year thereafter during the term of the Agreement based on an
annual cost/time study (the “Annual Study”).
The first Annual Study will be provided within sixty (60) days prior to
January 1, 2005 and prior to the beginning of every calendar year thereafter
during the term of this Agreement. The
Administrator shall prepare and deliver to the Company the Annual Study setting
forth the projected Service Costs and Overhead Expenses for the next calendar
year, together with all supporting data used in preparing the Annual Study and
work papers, in reasonable detail, setting forth the determination of such
projected Service Costs and Overhead Expenses for the next calendar year. Following the delivery of the Annual Study,
the Administrator shall (a) provide to the Company copies of such additional
work papers and other documents relating to its preparation of the Annual Study
as the Company or its designated representative may reasonably request,
including,
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without limitation, claims files and practices; and
(b) cooperate with, and make its personnel and facilities reasonably available
to, the Company and the Company’s designated representative for the purpose of
providing such other information as the Company or the Company’s designated
representative may reasonably request concerning Annual Study documents and the
calculation of the projected Service Costs and Overhead Expenses. The Company
shall pay the projected Service Costs and Overhead Expenses set forth in the
Annual Study for the applicable calendar year (on a monthly basis as set forth
herein), provided that in the event that the Company disputes the amount
of the projected Service Costs and Overhead Expenses set forth in the Annual
Study, then the dispute shall be resolved in accordance with Article XV of this
Agreement.
(b) Direct
Expenses. Direct Expenses will continue to be billed directly to the
Company at cost.
3. Invoicing and Payments:
(a) Invoices.
The Administrator shall submit an invoice to the Company on a monthly
basis for the Services Costs and Overhead Expenses relating to the
Administrative Services provided during the prior month. The Administrator shall include the
information and prepare the invoice in the form as reasonably requested by the
Company and agreed to by the Administrator.
The Administrator shall submit to the Company, whether on a monthly
basis or otherwise, an invoice for the Direct Expenses relating to the Administrative
Services, together with copies of receipts and other verification agreed to by
the parties, as the Administrator receives invoices for those Direct Expenses.
(b) Payments.
All payments, due and payable by the Company to the Administrator, will
be made within seventy-five (75) days of the Company’s receipt of an invoice
applicable to such payments (“Payment Date”).
The Company shall use its good faith efforts to provide the
Administrator as promptly as practicable with the details of any objection it
may have to any invoice, but any failure to provide such details shall not
foreclose the Company’s right to dispute such invoice. The Company shall pay the part of any
invoiced amount that is not in dispute by the Payment Date.
(c) Method
of Payment. The method of payment
shall be by electronic fund transfer to the Administrator’s designated bank
account or such other manner as agreed upon by the parties.
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