HomeMy WebLinkAboutBICEP 2-19881
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LIABILITY RISK COVERAGE AGREEMENT
Dated as of October 1, 1988
among the
BIG INDEPENDENT CITIES EXCESS POOL JOINT POWERS AUTHORITY
and
THE CITIES OF HUNTINGTON BEACH,
OXNARD, POMONA, SAN BERNARDINO
AND SANTA ANA
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TABLE OF CONTENTS
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ARTICLE I
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DEFINITIONS AND EXHIBITS
15 SECTION 1.1
SECTION 1.2
17 SECTION 1.3
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Definitions and Rules of Construction ...... 5
Findings ................................... 10
Exhibits ................................... 10
ARTICLE II
SECTION 2.1
SECTION 2.2
REPRESENTATIONS, COVENANTS AND WARRANTIES
Representations, Covenants and Warranties
of the Participants ....................... 11
Representations, Covenants and Warranties
of the Authority .......................... 13
ARTICLE III
DEPOSIT OF MONEYS; COVERAGE; PAYI~ENT OF SETTLEMENTS;
PURCHASE OF COMMERCIAL INSURANCE
35 SECTION 3.1
SECTION 3.2
37 SECTION 3.3
SECTION 3.4
39 SECTION 3.5
Deposit of Moneys
Coverage
Payment of Costs of Issuance ...............
Payment of Settlements
Purchase of Commercial Insurance
or Reinsurance
Case Reserves and Loss Reserves ..........
41 SECTION 3.6
SECTION 4.1
ARTICLE IV
TERM OF AGREEMENT; PREMIUM
Term of Agreement; Termination of a
Participant's Obligations to Pay
Participation Premium ....................
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1 SECTION 4.2
SECTION 4.3
SECTION 4.4
SECTION 4.5
SECTION 4.6
SECTION 4.7
9 SECTION 4.8
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Budget and Appropriation of Premium
Payments ................................. 20
Obligation to Pay Premiums ................. 20
Premiums ................................... 21
Pure Premium Adjustments ................... 25
Special Pure Premium Adjustments ........... 27
Participants Making a Cash Deposit into
the Claims Payment Fund .................. 28
Credits for Withheld Refunds ............... 28
17 SECTION 5.1
19 SECTION 5.2
21 SECTION 5.3
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ARTICLE V
RESERVES RELEASED FROM THE
PLEDGE OF THE INDENTURE
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Receipt of Reserves Upon Discharge of
the Trust Indenture ...................... 29
Receipt of a Participant's Allocable
Share Upon Withdrawal or Expulsion ....... 29
Receipt of a Participant's Share of Debt
Service Reserve Fund Upon Prepayment ..... 30
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ARTICLE VI
SECTION 6.1
SECTION 6.2
SECTION 6.3
ADMISSION TO, WITHDRAWAL FROM AND EXPULSION
FROM THE POOLED SELF-INSUtlANCE PROGRAM
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SECTION 7.1
Conditions to Providing Coverage to a
New Participant .......................... 30
Conditions To Permitting Withdrawal of a
Participant from Coverage ................ 32
Conditions to Permitting Expulsion of a
Participant from Coverage ................ 34
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ARTICLE VII
ABATEMENT
Abatement of Participation Premium in
the Event of Failure to Pay Settlements
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1 ARTICLE VIII
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SECTION 8.1
7 SECTION 8.2
INDEMNIFICATION AND RELEASE OF AUTHORITY,
TRUSTEE AND PARTICIPANTS; DISCLAIMER
Release and Indemnification Covenants ...... 35
Disclaimer ................................. 35
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ARTICLE IX
ASSIGNMENT AND AMENDMENT
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SECTION 9.1 Assignment by the Authority ................ 35
15 SECTION 9.2 No Assignment by the Participants .......... 36
SECTION 9.3 Amendment .................................. 36
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19 ARTICLE X
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EVENTS OF DEFAULT AND REMEDIES
23 SECTION 10.1
SECTION 10.2
25 SECTION 10.3
SECTION 10.4
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SECTION 10.5
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SECTION 10.6
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Events of Default ......................... 38
Remedies on Default ....................... 39
No Remedy Exclusive ....................... 40
Agreement to Pay Attorneys' Fees and
Expenses ................................ 40
No Additional Waiver Implied by
One Waiver .............................. 40
Trustee and Owners to Exercise Rights ..... 40
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ARTICLE XI
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SECURITY FOR OR PREPAYMENT OF BASIC PREMIUM;
TERMINATION PREMIUM
SECTION 11.1
SECTION 11.2
SECTION 11.3
SECTION 11.4
SECTION 11.5
Deposit of Security for Basic Premium
by a Participant ......................... 41
Deposit of Security for Basic Premium or
Optional Prepayment by All Participants .. 42
Optional Redemption of Bonds. .............. 43
Termination Premium ........................ 43
Continuing Premium Obligations ............. 44
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SECTION
7 SECTION
SECTION
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SECTION
11 SECTION
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Exhibit
15 Exhibit
Exhibit
17 Exhibit
19 Exhibit
21 Exhibit
Exhibit
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25 Exhibit
Exhibit
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ARTICLE XII
MISCELLANEOUS
12.1 Notices .................................... 45
12.2 Binding Effect ............................. 45
12.3 Severability ............................... 45
12.4 Further Assurances and Corrective
Instruments .............................. 45
12.5 Execution in Counterparts .................. 45
12.6 Applicable Law .............................. 46
Paqe
A - Schedule of Basic Premium Payments ........... A-1
B - Allocable Proportion for Each Participant ... B-1
C - Initial Participation Premium ................ C-1
D - Special Pure Premium Adjustments and
Adjustment Proportions ..................... D-1
E - Participants Making a Cash Deposit Into
the Claims Payment Fund .................... E-1
F - Memorandum of Liability Coverage ............. F-1
G - Underwriting and Claims Administration
Standards and Liability Claims
Control Guidelines ......................... G-1
H - Form of Written Requisition .................. H-1
I - Notice Addresses ............................. I-1
Schedule A - Methodology for Calculating Total
Pure Premium ............................. SA-1
Schedule B - Formula for Calculating Pure Premium
Adjustment ............................... SB-1
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LIABILITY RISK COVERAGE AGREEMENT
THIS LIABILITY RISK COVERAGE AGREEMENT, dated as of
October 1, 1988, by and among the BIG INDEPENDENT CITIES EXCESS
POOL JOINT POWERS AUTHORITY, a joint exercise of powers agency
duly organized and existing under the laws of the State of
California, including, without limitation, Section 6500 et seq.
of the Government Code of the State of California, as provider
(the "Authority"), and the CITIES OF HUNTINGTON BEACH, OXNARD,
POMONA, SAN BERNARDINO AND SANTA ANA, CALIFORNIA, each a
municipal corporation duly organized and existing under the
Constitution and laws of said State, and, in the case of the
cities of Huntington Beach, Pomona, San Bernardino and
Santa Aha, the respective charters of such cities (each an
"Initial Participant" and collectively, the "Initial
Participants");
W I T N E S S E T H :
WHEREAS, each Participant is authorized by Part 6 of
Division 3.6 of Title 1, Section 990 et seq., of the California
Government Code (the "Act") to insure itself against tort or
inverse condemnation liability, to insure its employees against
injury resulting from an act or omission in the scope of his
employment and to insure against the costs of defending such
claims;
WHEREAS, pursuant to Section 990.4 of the Act each
Participant is authorized to provide insurance by
self-insurance which may be funded by appropriations and to
establish or maintain reserves for such purposes;
WHEREAS, pursuant to Section 990.6 of the Act, the cost to
each Participant of such self-insurance is a proper charge
against the Participant and therefore the governing board of
each Participant is authorized to pay premiums for Coverage in
an amount such governing board determines to be necessary to
provide such Coverage;
WHEREAS, pursuant to Section 990.8 of the Act, each
Participant is empowered to obtain Coverage through a joint
powers agreement with other local public entities, and such
pooling of self-insured claims and the risk sharing of losses
is not considered insurance subject to regulation under the
California Insurance Code:
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WHEREAS, the Authority is a joint powers agency of which
each Participant is a member;
WHEREAS, the Authority is authorized to exercise necessary
powers to implement the purposes of the Authority as
established by the Authority's Governing Board;
WHEREAS, the Authority has determined to assist each
Participant to obtain self-insurance for liability risks
through this Agreement;
WHEREAS, the city council of each Participant has
authorized the execution of this Agreement for the purpose of
providing Coverage for the Participant for the benefit of the
Participant's residents and taxpayers and for the health and
safety of the public who interact with the Participant;
WHEREAS, the Authority proposes to authorize the issuance,
sale and delivery, pursuant to the Trust Indenture described
herein, of Insurance Program Revenue Bonds (the "Bonds") in
order to initially fund reserves in an amount determined
sufficient to pay Settlements when due and to provide the
Coverage described in the terms set forth herein and in the
Memorandum of Liability Coverage attached hereto as Exhibit B
(the "Memorandum");
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WHEREAS, the Authority and the Participants have heretofore
conclusively determined following investigation that either
public entity liability insurance is not available to the
Participants from commercial insurers or from any other source
or that such insurance is not available at a commercially
reasonable cost;
WHEREAS, the Authority and the Participants have further
determined, based upon the advice of independent professional
insurance consultants familiar with the cyclical nature of the
reasonable availability of coverage in the commercial insurance
market, that it is uncertain when such liability insurance is
expected to become available at a commercially reasonable cost,
thereby in the interim exposing the Participants to
self-insuring from available revenues on a year-by-year basis
with the attendant risks of fiscal instability and ruinous
burdens on its citizens in the event of large liability claims
recoveries;
WHEREAS, the Authority and the Participants have further
determined that the periodic unwillingness of the commercial
insurance market to provide primary or excess public entity
liability insurance to local governments at reasonable rates
or, in certain cases as at present, at any rate, mandates that
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the Participants seek not only an immediate solution but also a
long-term permanent solution to this problem which will in
future years free them from exposure to the vagaries of
commercial insurance cycles;
WHEREAS, the Authority and the Participants, in
consultation with independent professional insurance
consultants, have formulated a joint risk-sharing insurance
program To be administered by the Authority to meet the public
entity liability insurance needs of the Participants which will
provide the following advantages, among others, to the
Participants:
(a) immediate funding of a claims payment fund (the
"Claims Payment Fund") through an initial deposit from the
proceeds of the sale of the Bonds for the dual purposes of
providing immediate protection from large claims loss and
facilitating eventual access to the commercial reinsurance
market,
(b) mutual agreement by the Participants to pay
annual premiums determined on both a prospective and a
retrospective basis calculated actuarially to spread and
moderate the cost of liability losses to each Participant,
(c) relief from the burden of paying premiums to
commercial insurers at levels reflecting the insurers~ high
costs of underwriting, administration and brokerage fees
since the Authority's costs will be limited to reasonable
administrative costs,
(d) relief from the commercial insurers~ rights under
excess liability policies to force claim settlements which
are payable primarily in each case from the Participant's
self-insurance funds, and
(e) access to the commercial reinsurance market in
future years when commercial reinsurance is available at
rates deemed favorable by the Participants.
WHEREAS, the Participants have further determined that the
Participation Premium to be paid in each year by each
Participant as provided for and upon the conditions set forth
in this Agreement will be payable only upon the condition of
the receipt of ~he consideration represented by the insurance
protection and services to be provided in such year under this
Agreement, but in the event that such protection and services
are so provided in any year such Participation Premium will be
a binding obligation of each Participant payable from legally
available moneys of each Participant;
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1 WHEREAS, the Participants have further determined that the
obtaining of the insurance protection and services provided for
3 under this Agreement is essential to the preservation and
fostering of the health, safety and property rights of the
5 citizens of each Participant and the lack of availability of
reasonable commercial public entity liability insurance to
local governments generally in the State and to the
Participants in particular constitute a public emergency;
WHEREAS, each Participant has heretofore determined that it
is necessary and in the interest of the citizens of each such
Participant to establish, through the issuance and sale of the
Bonds, and maintain through pro rata contributions of each
Participant a debt service reserve fund therefor, in order to
establish adequate reserves to permit the Bonds to be marketed
at the lowest possible interest rates;
WHEREAS, the cost of funding and maintaining such reserve
fund has been determined by each Participant to be more than
offset by the anticipated benefits and economies to be realized
by the pooling of risks and losses pursuant to this Agreement;
WHEREAS, Article 16, Section 6 of the Constitution of the
State of California, regarding lending of public credit or
funds, provides, in relevant part, that such Section "shall not
prohibit any county, city and county, city, township, or other
political corporation or subdivision of the State from joining
with other such agencies in providing for the payment of
workers' compensation, unemployment compensation, tort
liability, or public liability losses incurred by such
agencies, by entry into an insurance pooling arrangement under
a joint exercise of powers agreement, or by membership in such
publicly-owned nonprofit corporation or other public agency as
may be authorized by the Legislature";
WHEREAS, it is a matter for the city council of each
Participant to determine the amount of premiums which such
Participant shall pay for proper insurance coverage;
WHEREAS, each Participant has heretofore determined and
does hereby confirm that, in view of the foregoing facts and
circumstances, the premiums to be required hereunder are
reasonable and advantageous and to the public benefit of the
citizens of such Participant;
WHEREAS, the Participants have determined to implement a
risk sharing program, by means of execution of this Agreement,
prior to issuance of the Bonds;
NOW, THEREFORE, in consideration of the above premises and
of the mutual covenants hereinafter contained and for other
good and valuable consideration, the parties hereto agree as
follows:
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ARTICLE I
DEFINITIONS AND EXHIBITS
SECTION 1.1 Definitions and Rules of Construction. Unless
the context otherwise requires, the capitalized terms used
herein shall, for all purposes of this Agreement, have the
meanings specified in the Trust Indenture, dated as of the date
hereof (the "Indenture"), by and between
as Trustee thereunder, and
the Authority, together with any amendments thereof or
supplements thereto permitted to be made thereunder; and the
additional terms defined in this Section shall, for all
purposes of this Agreement, have the meanings herein
specified. Unless the context otherwise indicates, words
importing the singular number shall include the plural number
and vice versa. The terms "hereby", "hereof", "hereto",
"herein", "hereunder" and any similar terms, as used in this
Agreement, refer to this Agreement as a whole,
"Actuary" means a firm with at least one employee who is
both a Fellow of the Casualty Actuarial Society and a Member of
the American Academy of Actuaries, which firm is appointed by
the Authority with the approval of at least a majority of the
Authority's Governing Board.
"Adjustment Proportion" means, with respect to the Coverage
Periods ending on June 30, 1989, 1990 and 1991, in the event
that Special Pure Premium Adjustments are assessable against
any Participant with respect to any such Coverage Period
because the Pure Premium payable by such Participant is capped
at $1,250,000, the proportion used to determine Pure Premium
Adjustments with respect to such Coverage Period.
"Administrative Premium" means, with respect to each
Participant, such Participant's Pure Premium Proportion of all
administrative costs of the Authority relating to the Coverage
or the Bonds, as further set forth in Section 4.4(d) hereof.
"Allocable Proportion" means the percentages set forth in
Exhibit B of this Agreement.
"Authority" means the Big Independent Cities Excess Pool
Joint Powers Authority, a joint exercise of powers authority
duly organized and existing under the Constitution and the laws
of the State.
"Basic Premium" means, with respect to each Participant,
the payments set forth in Exhibit A hereto which correspond to
such Participant's Allocable Proportion of principal of
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1 (whether at maturity or upon mandatory sinking fund redemption)
and interest on the Bonds, as set forth in Section 4.4(b) of
3 this Agreement.
5 "Basic Premium Payment Date" means August 1 of each year
during the period in which Bonds are Outstanding; provided that
7 the first Basic Premium Payment Date shall be the date of
initial issuance and delivery of the Bonds.
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"Case Reserves" means amounts in the Claims Payment Fund
11 required to be designated as reserves for payment of
Settlements pursuant to Section 3~6 hereof in accordance with
13 prudent insurance practice and in accordance with the
recommendations of the Claims Review Committee of the Authority
15 and the annual report of the Qualified Claims Auditor. Case
Reserves will be determined by the Qualified Claims Auditor
17 annually, on or prior to February 1 of each year. Case
Reserves will be adjusted to reflect changed circumstances
19 subsequent to the year any Claim is filed and to reflect the
amount by which a Settlement exceeds reserves established for
21 any Claim; provided, however, that there shall be no Case
Reserves established for a Claim or any portion thereof within
23 a Participant's Self-Insured Retention, as described in
Exhibit F hereto, or which is covered by commercial insurance
25 or reinsurance pursuant to Section 3.5 hereof.
27 "Claim" means a demand against an Insured to recover for
losses or damages within or alleged to be within the scope of
29 the Memorandum.
31 "Claims Paymen~ Fund" means the Claims Payment Fund
established for The payment of Settlements pursuant to
33 Section 3.4 hereof. Nothing in this Agreement is intended to
prohibit the Authority from designating the Claims Payment Fund
35 as being comprised of separate claims payment funds for the
purposes of issuing and securing additional bonds issued by the
37 Authority and secured by premium payments of new Participants.
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"Code" means the Internal Revenue Code of 1986, as amended.
41 "Consumer Price Index" means The Consumer Price Index,
Urban Wage Earners and Clerical Workers, All Items, Base
43 1967=100, published by the Bureau of Labor Statistics, U.S.
Department of Labor, or if said Index is not available for the
45 United States, 5hen an available index for the geographical
area within The United States most similar to the entire United
47 States, published by said bureau or its successor, or if none,
by any other instrumentality of the United States or of the
49 State of California, in the order mentioned.
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1 "Coveraqe" means the insurance provided pursuant to and in
accordance with and on the terms set forth in this Agreement
3 and 5n the Memorandum attached as Exhibit F hereto, including,
but not limited to, rights to payment of Settlements from funds
5 on deposit in the Claims Payment Fund under the terms of this
Agreement.
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"Coverage Period" means each year for which a Participant
9 pays Participation Premium~ provided, however, that the first
Coverage Period shall be the period of 12:01 a.m. on October 1,
11 1988 ~krough July t, 1989 at 12:01 a.m. California time.
13 "Governinq Board" means members of the Board of Directors
of tke Authority; provided that only members representing
15 Part±cipan~s shall be entitled to vote on any action with
respect to the pooled self-insurance program of the
17 PartScipants established by this Agreement and any references
in this Agreement to a majority or specified percentage of the
19 Governing Board shall be deemed to mean a majority or specified
percentage of Participant Members of the Governing Board.
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"Insured", as used in the Memorandum, means a Participant
23 and any other insured described therein.
25 '~Loss Reserves" means the amounts in the Claims Payment
Fund required to be designated as reserves for payment of
27 SeTtlements pursuant to Section 3.6 hereof. Loss Reserves
shall include Case Reserves. Loss Reserves other than Case
29 Reserves are not required to be funded by any means other than
the paymen~ of Pure Premium and are not required to be
31 established at any time for Coverage in excess of $10,000,000
per occurrence.
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"Low Reserves Mode" means the occurrence and continuance of
35 one or more of the following events:
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(1) the sum of the amounts in the Claims Payment
Fund, the Debt Service Reserve Fund and any other funds
held by the Trustee which are available to pay principal of
and interest on the Bonds is less than the greater of (a)
$10,000,000 or (b) sixty percent (60%) of the outstanding
principal amount of the Bonds; or
(2) the total outstanding Case Reserves exceed 75% of
~he amounts Then on deposit in the Claims Payment Fund.
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"Memorandum" means the Memorandum of Liability Coverage set
forth in E~ibit F hereto.
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1 "Participation Premium" means, with respect to each
Participant, Administrative Premium, Basic Premium,
3 Supplemental Basic Premium and Pure Premium, payable by such
Participant on each Basic Premium Payment Date.
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"Payroll" means, with respect to a Participant, the
7 workers' compensation payroll of such Participant as most
recently reported to the State of California.
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"Participant" means each city which is a party to this
11 Agreement, as this Agreement may be amended from time to time.
13 "Pure Premium" means, with respect to each Participant, an
amount equal to the amount necessary to fund estimated Loss
15 Reserves required to be established to pay Settlements of the
Participants for a Coverage Period as determined according to
17 the methodology set forth in Section 4.4(e) of ~his Agreement.
19 "Pure Premium Adjustment" means, with respect to each
Participant, an amount payable by such Participant or
21 refundable to such Participant, based on the adjustments to
Case Reserves required by the report of the Qualified Claims
23 Auditor pursuant to Section 3.6 hereof reflecting events in
Coverage Periods preceding such report relating to Claims with
25 respect to preceding Coverage Periods, as set forth in
Section 4.5 of this Agreement. Pure Premium Adjustments shall
27 be deemed to include Special Pure Premium Adjustments for all
purposes of this Agreement except Section 4.5 hereof.
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"Pure Premium Proportion" means, with respect to any
Participant and with respect to any Coverage Period, the
percentage of Pure Premium required to be paid by such
Participant in such Coverage Period as compared to the Total
Pure Premium paid by all Participants in such Coverage Period.
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"Pure Premium Rate" means the rate for $1,000 of payroll of
a Participant for a specified Risk Sharing Pool determined as
provided in Section 4.4(e) hereof and the methodologies set
forth in Schedule A to this Agreement.
41 "Qualified Claims Auditor" means an individual or an
organization experienced in the handling of public entity
43 liability claims, appointed by the Authority with the approval
of a majority of the members of the Authority's Governing
45 Board, who shall be independent of any party who administers
Claims on behalf of the Authority throughout each Coverage
47 Period.
49 "Risk Sharinq Pool" means a specific layer of Coverage per
occurrence applicable to one or more Participants. Initially,
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1 there shall be two Risk Sharing Pools (i.e., from a
Participant's Self-Insured Retention to $5,000,000 and from
3 $5,000,000 to $25,000,000). The Authority may establish one or
more pools in subsequent Coverage Periods in compliance with
5 Secsion 9.3(b) hereof.
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"Settlement" means the settlement by the Authority or a
Participant, in accordance with the Memorandum, of a Claim
against such Participant, or the adjudication of such Claim
without further right of appeal. The amount of any Settlement
may include any costs or expenses deemed appropriate by the
Authority in connection ~herewith including Defense Costs as
described in the Memorandum.
"SDecial Pure Premium Adjustments" means the Special Pure
Premium Adjustments payable pursuant to Section 4.6 hereof.
"Supplemental Basic Premium" means, with respect to each
Participant, ten percent (10%) of the net Basic Premium payable
by such Participant on any Basic Premium Payment Date (after
credit to Basic Premium has been made pursuant to Section
4.4(b)(2) hereof).
"Term of the Aqreement" means the time during which this
Agreement is in effect, as provided in Section 4.1 of this
Agreement.
"Termination Premium" means the amount required to be paid
by a Participant to voluntarily terminate Coverage for a
Coverage Period and all future Coverage Periods, as set forth
in Sections 6.2 and 11.4 of this Agreement, or the amount
required to be paid to expel a Participant, as set forth in
Sections 6.3 and 11.4 hereof.
"Total Premium" or "Premium" means, with respect to each
Participant, the sum of the Participation Premium and Pure
Premium Adjustment payable by such Participant in any Coverage
Period.
"Total Pure Premium" means the total amount of Pure Premium
payable by all Participants in any Coverage Period determined
as provided in Section 4.4(e) hereof.
"Trustee" means Seattle-First National Bank, a national
banking association, or any successor thereof.
"Undesiqnated Reserves" means the amount in the Claims
Payment Fund in excess of the total amount that has been
designated as Loss Reserves pursuant to Section 3.6 hereof.
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(a) The recitals to this Agreement are true and
5 correct.
SECTION 1.2 Findings. Each Participant hereby finds and
determines that:
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(b) Public entity liability insurance in the amount
and scope described in the Memorandum is not commercially
available to such Participant in the private marketplace at
a commercially reasonable price.
(c) The Participation Premium shall be paid by each
Partioipant in consideration of the Coverage offered hereby
and by the Memorandum and the sharing of the risk of
liability for claims associated with the pooled
self-insurance program during each Coverage Period. The
parties hereto have agreed and determined that such
Participation Premium, together with any Pure Premium
Adjustments, represents the fair market value of the
Coverage. In making such determination, consideration has
been given to the initial costs of establishing the pooled
insurance program, the unavailability of commercial
liability insurance to such Participant and to other
Participants, ~he anticipated future costs of commercial
liability insurance should such insurance become available,
the obligations of Participants under this Agreement
(including the agreement to share the risk of costs imposed
by liability claims), the obligation of the Authority to
provide insurance services, the benefits resulting from the
funding of a pooled insurance program (including the
prospect of access to the commercial liability reinsurance
market) and the other benefits therefrom which will accrue
to such Participant and the general public.
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(d) Such Participant receives benefit from the
sharing of risk of costs imposed by liability claims under
the terms of this Agreement during each Coverage Period.
The assessment of Pure Premium and Pure Premium Adjustment
is the means by which such risk sharing is implemented.
The procedure established for the calculation, adjustment
and assessment of Pure Premium and Pure Premium Adjustment
is fair, just and reasonable as a means of implementing
such risk sharing.
45 SECTION 1.3
are attached to,
47 Agreement:
Exhibits. The following Exhibits and Schedule
and by reference made a part of, this
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Exhibit A: The schedule of Basic Premium to be paid
by each Participant to the Authority, showing the date and
amount of such payments.
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16Exhibit B: Allocable Proportion for Each Participant.
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Exhibit C: Initial Participation Premium.
Exhibit D: Initial Pure Premium Adjustment
Proportions for each Participant and Special Pure Premium
Adjustment Maximum Amounts.
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Exhibit E: Participants Making A Cash Deposit Into
the Claims Payment Fund.
Exhibit F: Memorandum of Liability Coverage.
Exhibit G: Underwriting and Claims Administration
Standards and Liability Claims Quality Control Guidelines.
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Exhibit H: Form of Requisition.
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Exhibit I: Notice Addresses.
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Schedule A: Methodology for Calculating Pure Premium
and Formula for Calculating Pure Premium Rates.
Schedule B: Formula for Calculating Pure Premium
Adjustments.
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ARTICLE II
REPRESENTATIONS, COVENANTS AND WARRANTIES
SECTION 2.1 Representations, Covenants and Warranties of
33 the Participants. Each Participant makes
representations, covenants and warranties
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the following
to the Authority.
(a) Due Orqanization and Existence. Such Participant
is a municipal corporation of the State, duly organized and
existing under the Constitution and laws of the State and,
in the case of each of the cities of Huntington Beach,
Pomona, Oxnard, San Bernardino and Santa Aha, its
respective city charter.
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(b) Authorization; Enforceability. The Constitution
the laws of the State and, in the case of the cities of
Huntington Beach, Pomona, Oxnard, San Bernardino and Santa
Aha, the respective city charter authorize such Participant
to enter into this Agreement and to enter into the
transactions contemplated by and to carry out its
obligations under all of the aforesaid agreements, and the
Participant has duly authorized and executed all of the
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aforesaid agreements. This Agreement constitutes the
legal, valid, binding and enforceable obligation of such
Participant in accordance with its terms, except to the
extent limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws or equitable
principles affecting the rights of creditors generally and
except as to the limitations on remedies against public
agencies generally.
(c) No Violations. Neither the execution and
delivery of this Agreement by such Participant, nor the
fulfillment of or compliance with the terms and conditions
hereof by such Participant, nor the consummation of the
transactions contemplated hereby by such Participant,
conflicts with or results in a breach of the terms,
conditions or provisions of any restriction or any
agreement or instrument to which such Participant is now a
party or by which such Participant is bound, or the charter
of such Participant, if applicable, or constitutes a
default under any of the foregoing.
(d) General Tax and Arbitraqe Covenant. Such
Participant hereby covenants that, notwithstanding any
other provision of this Agreement, it will make no use of
the proceeds of the Bonds or of any other amounts or
property regardless of the source or take any action or
refrain from taking any action that may cause the
obligations of the Participants under this Agreement or the
Bonds to be "arbitrage bonds" subject to federal income
taxation by reason of Section 148 of the Code.
In addition, such Participant covenants that it will
not make any use of the proceeds of the obligations
provided herein or in the Indenture or any other funds of
such Participant or take or omit to take any other action
that would cause income on the Bonds to be includable in
gross income of the owners thereof for federal income tax
purposes. To that end, so long as any Basic Premium is
unpaid and any Bond is outstanding, such Participant, with
respect to such proceeds and such other funds, will comply
with all requirements of Section 103 of the Code and all
related sections and all regulations of the United States
Department of the Treasury issued thereunder and under
Section 103 of the Internal Revenue Code of 1954, as
amended, to the extent that such requirements are, at the
time, applicable and in effect.
(e) Structurinq Settlements. Such Participant hereby
covenants to cooperate with the Authority in settling
Claims in excess of the Participant's Self-Insured
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Retention as described in Exhibit F hereto, and, in
particular, (i) to the extent such Participant has control
over any negotiation or structuring of a Settlement and
subject to the limitations in the Memorandum, not to effect
Settlement payment dates earlier than the date the Claims
Payment Fund has been or will be fully funded to cover Loss
Reserves established for the payment of such Claim, and
(ii) at any time during which the Low Reserves Mode is in
effect or when otherwise requested by the Authority, with
respect to any judgment (as defined in California
Government Code Section 970) in an amount of one million
dollars ($1,000,000) or more, assuming such amount exceeds
such Participant's Self Insured Retention, to petition the
court for payment of such judgment in installments pursuant
to the provisions of California Government Code Section
970.6.
(f) Compliance with Memorandum. Such Participant
hereby expressly covenants to comply with the terms and
conditions set forth in the Memorandum and with the
Underwriting and Claims Administration Standards and the
Liability Claims Quality Control Guidelines set forth in
Exhibit G hereto.
(g) Acknowledqment of Security Interest. Such
Participant hereby expressly acknowledges the security
interest of the Trustee on behalf of the Bond Owners in
moneys to be paid hereunder and held by the Trustee.
SECTION 2.2 Representations, Covenants and Warranties of
Authority. The Authority represents, covenants and
warrants to each Participant as follows.
(a) Recitals Correct.
are true and correct.
The recitals to this Agreement
(b) Due Orqanization and Existence; Enforceability.
The Authority is a joint exercise of powers authority duly
organized, existing and in good standing under and by
virtue of the laws of the State, authorized under the
Constitution and laws of the State to enter into this
Agreement and the Indenture: is possessed of full power to
provide self-insurance to consenting public entities; and
has duly authorized the execution and delivery of all of
the aforesaid agreements. This Agreement and the Indenture
constitute the legal, valid, binding and enforceable
obligations of the Authority in accordance with their
respective terms, except to the extent limited by
applicable bankruptcy, insolvency, reorganization,
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moratorium or similar laws or equitable principles
affecting the rights of creditors generally.
(c) No Encumbrances. The Authority will not pledge
any Premium or its other rights under this Agreement except
as provided under the terms of this Agreement and in the
Indenture.
(d) Equitable Exercise of Responsibilities. The
Authority will exercise all rights and responsibilities
hereunder reasonably and equitably for the benefit of all
Participants without preference or discrimination among
Participants.
(e) No Violations. Neither the execution and
delivery of this Agreement or the Indenture, nor the
fulfillment of or compliance with the terms and conditions
hereof or thereof, nor the consummation of the transactions
contemplated hereby or thereby, conflicts with or results
in a breach of the terms, conditions or provisions of the
Bylaws of the Authority or any restriction or any agreement
or instrument to which the Authority is now a party or by
which the Authority is bound, or constitutes a default
under any of the foregoing.
(f) General Tax and Arbitrage Covenant. The
Authority covenants that, notwithstanding any other
provision of this Agreement, it will make no use of the
proceeds of the Bonds or of any other amounts or property
regardless of the source or take any action or refrain from
taking any action that may cause the obligations of the
Participants under this Agreement or the Bonds to be
"arbitrage bonds" subject to federal income taxation by
reason of Section 148 the Code.
In addition, the Authority covenants that it will not
make any use of the proceeds of the obligations provided
herein or in the Bonds or any other funds of the
Participants or take or omit to take any other action that
would cause interest on the Bonds to be includable in gross
income of the owners thereof for federal income tax
purposes, To that end, so long as any Basic Premium is
unpaid or any Bond is outstanding, the Authority, with
respect to such proceeds and such other funds, will comply
with all requirements of Section 103 of the Code and all
related sections and all regulations of the United States
Department of the Treasury issued thereunder and under
Section 103 of the Internal Revenue Code of 1954, as
amended, to the extent that such requirements are, at the
time, applicable and in effect.
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(g) Structurinq Settlements. The Authority hereby
covenants, to the extent that it has control over any
negotiation or structuring of a Settlement, not to effect
Settlement payment dates of earlier than the date the
Claims Payment Fund has been or will be fully funded to
cover Loss Reserves established for the payment of such
Claim.
(h) Compliance with Memorandum. The Authority hereby
expressly covenants to comply with the terms and conditions
set forth in the Memorandum.
ARTICLE III
DEPOSIT OF MONEYS; COVERAGE; PAYMENT OF SETTLEMENTS;
PURCHASE OF COMMERCIAL INSURANCE
SECTION 3.1 Deposit of Moneys. On the Closing Date, the
Authority agrees to direct the Trustee to deposit the proceeds
of the Series 1988A Bonds in the following funds as set forth
in an amendment to this Agreement to be entered into prior to
the date of issuance of the Series 1988A Bonds: (1) the Claims
Payment Fund, (2) the Costs of Issuance Fund, (3) the Debt
Service Reserve Fund and (4) the Principal and Interest Fund.
All moneys held under the Indenture shall be invested in
accordance with the restrictions set forth in Article VIII
thereof and in the Letter of Instructions to the Trustee
attached thereto as Exhibit C.
SECTION 3.2 Coveraqe. The Authority hereby provides the
Coverage to each Participant, and each Participant hereby
agrees to accept the Coverage, upon the terms and conditions
set forth in this Agreement and the Memorandum.
SECTION 3.3 Payment of Costs of Issuance. Payment of
Costs of Issuance shall be made from the moneys deposited with
the Trustee in the Costs of Issuance Fund established in
Article IV of the Indenture which shall be disbursed in
accordance and upon compliance therewith.
SECTION 3.4 Payment of Settlements. The Authority shall
establish a Claims Payment Fund for the payment of
Settlements. Settlements shall be paid upon submission to the
Trustee of properly completed Requisitions executed by the
Authority requesting such payment in substantially the form
attached as Exhibit H to this Agreement from moneys in the
Claims Payment Fund held by the Trustee. Such Requisitions
will be submitted by the Authority to the Trustee in the
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chronological order that the Authority receives written notice
of Settlements. Requisitions shall be paid by the Trustee in
the sequential order received.
Payment of Settlements shall be made solely from any moneys
in the Claims Payment Fund, including Loss Reserves and
Undesiqnased Reserves as provided in Section 3.6 hereof. The
Authority shall not enter into a settlement agreement with
respect to a Claim unless the amount of the Settlement is
available in the Claims Payment Fund. All amounts paid from
tke Claims Payment Fund as Settlements or designated as Loss
Reserves shall be deemed to be paid or designated first from or
with respect to amounts originally deposited from Bond
proceeds, if at any time sufficient moneys are not on deposit
in the Claims Payment Fund to pay in full any Settlement upon
submission to the Trustee of a properly completed Requisition
as descriDed herein, such Requisition for Settlement payment
shall be paid in part to the extent of available moneys in the
Claims Payment Fund and the Trustee shall promptly upon the
occurrence of an event of abatement as described in Article VII
give no~ice of such insufficiency to the Authority, who shall
in turn give prompt notice to all Participants, that an event
of abatement, as described further in Article VII hereof, shall
have occurred.
In the event the Low Reserves Mode is in effect, the
Au~horisy will not enter into a settlement agreement with
respect to a Claim unless the amount of the Settlement has been
reserved as a Loss Reserve with respect to the Claim.
SECTION 3.5 Purchase of Commercial Insurance or
Reinsurance. The Authority may provide Coverage, or a portion
of Coverage, to the Participants by purchase of liability
insurance from a commercial insurer or reinsurer, upon the
approval of the Authority's Governing Board by at least a
majority vote. The Authority may use Undesignated Reserves to
purchase such commercial insurance or reinsurance; provided,
however, that the Authority may use Loss Reserves to purchase
such commercial insurance or reinsurance if the policy of
commercial insurance or reinsurance to be purchased covers the
Claims for which such Loss Reserves were established. In
either event, the Authority shall submit a Requisition to the
Trustee requesting a disbursement from the Claims Payment Fund,
a~taching evidence of existence of the insurance policy being
purchased and certifying that such amounts are to be used in
compliance with this Section. The Authority shall continue to
be cbl!qated to pay Settlements which are covered by such
commercial excess insurance or reinsurance, purchased for
coverage within the mandatory limits provided by the Authority,
from moneys in the Claims Payment Fund even in the event such
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1 commercial excess insurance or reinsurance, purchased for
coverage within the mandatory limits provided by the Authority,
3 fails to pay such Settlement or is insufficient for such
Settlement; provided that the Authority shall have no
5 obligation to pay Settlements which are covered by excess
insurance purchased by the Authority for a Participant on an
7 optional basis in excess of the mandatory limits provided by
the Authority. In an event of dispute between ~he Authority or
9 any Participant and any commercial excess insurer or reinsurer
as to payment of any Settlement, the failure in good faith to
11 pay such Settlement shall not result in abatement of any
Participant's obligation to make any Premium payments.
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In a Coverage Period for which the Authority has purchased
commercial insurance or reinsurance on behalf of each
Participant, each such Participan~ shall be obligated to pay
its Pure Premium Proportion of the costs of such insurance in
lieu of all or a portion of Pure Premium, in addition to
Administrative Premium, Basic Premium, Supplemental Basic
Premium and Pure Premium Adjustments. In subsequent Coverage
Periods no Participant shall have any obligation to pay and no
right to receive Pure Premium Adjustments with respect to any
Coverage for which The AuThority has purchased commercial
excess insurance or reinsurance on behalf of such Participant,
except such obligations or rights which may arise under such
commercial excess insurance or reinsurance; provided, however,
that, if such coverage is within the mandatory limits provided
by the Authority, in the event that a commercial insurer
providing excess insurance or reinsurance fails to pay a
Settlement within the scope of such excess insurance or
reinsurance coverage, the Participants shall be obligated to
pay Pure Premium Adjustments with respect to such excess
insurance or reinsurance coverage.
SECTION 3.6 Case Reserves and Loss Reserves. On or prior
to February 1 of each year, commencing February 1, 1989, the
Authority shall retain a Qualified Claims Auditor for the
purpose of submitting an annual report on or prior to such date
to the Authority and the Trustee setting forth (a) the amount
of Case Reserves necessary to be established with respect to
each Claim arising during the preceding full Coverage Period
and a breakdown of the amount of Case Reserves applicable to
each Risk Sharing Pool, and (b) any adjustments (whether upward
or downward) necessary to be made in the amount of each Case
Reserve previously established pursuant to this Section. In
determining the amount of Case Reserves necessary to be
established or adjusted as described above, the Qualified
Claims Auditor shall consider such facts and circumstances
occurring during the period covered by such report as it, in
its independent judg/nent, deems necessary in accordance with
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prudent insurance practice. Notwithstanding the foregoing, the
Qualified Claims Auditor shall take into account Settlements of
Claims in accordance with the criteria set forth in this
Section,
The Authority shall direct the Trustee to establish or
adjust Loss Reserves in the Claims Payment Fund. Loss Reserves
shall be initially established for each Coverage Period at the
time Participation Premium is due with respect to such Coverage
Period in accordance with the report prepared by an Actuary on
or before February 1 of each year. Adjustments in subsequent
Coverage Periods to Loss Reserves previously established shall
be based only upon establishment of and adjustments to Case
Reserves in accordance with the report of the Qualified Claims
Auditor described above. Such report of the Qualified Claims
Auditor shall be in a form such that Pure Premium AdjusEments
can be determined for each Participant, Coverage Period and
Risk Sharing Pool. The Authority may direct the Trustee to
establish Loss Reserves in excess of those designated in the
reports of the Actuary and Qualified Claims Auditor if the
Authority determines with the Qualified Claims Auditor the
existence of such facts and circumstances occurring during the
period covered by such report which deem it necessary to
establish excess reserves in accordance with prudent insurance
practice. Such annual adjustment shall be made on the
February 1 following receipt of the annual report of the
Qualified Claims Auditor. The parties acknowledge that under
certain circumstances it will be necessary to establish Case
Reserves in excess of the amounts then on deposit in the Claims
Payment Fund. In such event, such Case Reserves will
nevertheless be established as provided in this Section and
funded, through the payment of Pure Premium Adjustments, as
provided in Section 4.5 hereof. In the event that any such
adjustment to Loss Reserves results in the Low Reserves Mode
being in effect, the Authority shall provide prompt written
notice of such fact to the Participants and the Trustee.
Upon the Settlement of any Claim and the payment thereof
from amounts on deposit in the Claims Payment Fund such amounts
shall be deemed reduced in the following order of priority:
first, from Case Reserves established to pay such Claim;
second, from Loss Reserves other than Case Reserves; third,
from Undesignated Reserves; and fourth, from designated Case
Reserves established to pay Settlements of other Claims (pro
rata among such other Case Reserves on the basis of the
respective amounts of such Case Reserves).
Investment earnings retained in the Claims Payment Fund
shall be credited first to replenish designated Loss Reserves
which have previously been reduced to pay Settlements of other
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1 Claims, and then to Undesignated Reserves. Amounts designated
as Loss Reserves shall not be increased except as provided in
3 this Section.
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ARTICLE IV
7
TERM OF AGREEMENT;
9 PREMIUM
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SECTION 4.1 Term of Aqreement; Termination of a
PartlciDant's Obliqations to Pay Participation Premium. The
Term of this Agreement shall commence on the date of its
execution and shall, subject to the following paragraph, end on
June 30, 2008, unless the Indenture shall not have been
discharged by its terms by such date, in which case the Term of
this Agreement shall be extended until the Indenture shall be
discharged by its terms, unless terminated prior thereto in
accordance with the following paragraph.
Upon ~he final discharge of the Indenture, the availability
of Coverage with respect to Claims in subsequent Coverage
Periods provided by this Agreement shall terminate unless the
parties agree to extend the Term beyond such date. In the
even~ the parties agree to extend the term of Coverage, the
provisions of this Agreement relating to Coverage after such
date may be amended in any mutually agreeable fashion without
notice to or consent of any parties other than the parties to
this Agreement at that time.
FurTher, upon the final discharge of the Indenture, the
Trustee shall transfer any remaining moneys in the Claims
Payment Fund to the Authority to be held as a claims payment
fund pursuant to Section 5.1 hereof. The obligations of all
Participants to pay Pure Premium Adjustments and the rights to
receive Pure Premium Adjustment refunds with respect to Claims
within the scope of Coverage prior to discharge of the Trust
Agreement shall continue until all liability with respect to
such claims has been finally determined.
The obligation of any Participant to pay Participation
Premium and, except as provided below, Pure Premium Adjustments
under this Agreement will terminate upon the earliest of any of
the following events:
(a) upon termination of this Agreement the payment by
such Participant of all of its Basic Premium payments
specified in Exhibit A hereto, its Supplemental Basic
Premium, Administrative Premium and of all Pure Premium
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required to be paid by such Participant pursuant to
Section 4.4 hereof;
(b) withdrawal of such Participant from Coverage
pursuant to Section 6.2 hereof; and
(c) expulsion of such Participant from Coverage
pursuant to Section 6.3 hereof;
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~rovided, however, that none of the foregoing shall extinguish
11 (i) the obligations of such Participant to pay Pure Premium
Adjustments assessed with respect to Coverage Periods of such
13 Participant prior to such payment, withdrawal or expulsion or
(ii) the right to receive the benefits of such Coverage with
15 respect to Coverage Periods of such Participant prior to such
payment, withdrawal or expulsion, except as otherwise, provided
17 in this Agreement.
19 SECTION 4.2 Budqet and Appropriation of Premium Payments.
The Authority covenants to calculate and mail notice, no later
21 than April 15 of each year, to each Participant of the amount
of Total Premium to be payable by such Participant on the
23 following Basic Premium Payment Date during the Term of this
Agreement (based on an estimate of investment earnings to be
25 credited to the Basic Premium Payment Fund pursuant to Sections
3.03 and 6.03 of the IndenTure on the following June 15). Each
27 ParTicipant covenants to take such action as may be necessary
to include Total Premium payments payable hereunder in its
29 annual budget and to make the necessary annual appropriations
for all such Total Premium payments. During the Term of this
31 Agreement, each Participant will furnish to the Authority and
the Trustee prompt written evidence of such budget or
33 appropriation (which may be evidence of payment of such
amounts) in each such Coverage Period no later than August 1.
35 The covenants on the part of each Participant herein contained
shall be deemed to be and shall be construed to be duties
37 imposed by law and it shall be the duty of each and every
public official of each Participant to take such action and do
39 such things as are required by law in the performance of the
official duty of such officials to enable each Participant to
41 carry out and perform the covenants and agreements in this
Agreement agreed to be carried out and performed by such
43 Participant.
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SECTION 4.3 Obliqation to Pay Premiums.
47 (a) No Withholdinq. Subject to the provisions of
ArTicle VII hereof, notwithstanding any dispute between the
49 Aushority and a Participant, including a dispute as to the
scope or nature of Coverage provided by the Authority or the
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availability of amounts in the Claims Payment Fund to pay
Claims made against any Participant, or for any other reason
(other than the termination of the obligation to pay
Participation Premium pursuant to Section 4.1 hereof) each
Participant shall appropriate funds sufficient to pay and shall
make all Premium payments when due and shall not withhold any
Premium payments pending the final resolution of such dispute.
(b) Rate on Overdue Payments. In the event a Participant
fails to make any of the payments required in this Article, the
payment in default shall continue as an obligation of the
Participant until the amount in default shall have been fully
paid, and in addition to any remedies available with respect to
such default, the Participant agrees to pay the same with
interest thereon, at twelve percent (12%) per annum, but not to
exceed the highest rate permitted by law, from ~he date such
amount was originally payable.
(c) Pledqe to Bondowners. Pursuant to the Indenture, the
Authority will pledge its right to receive and collect all
Premium payments and prepayments (but not Administrative
Premium) or any rights or obligations with respect thereto and
Termination Premium payable with respect thereto to the Trustee
in trust for the benefit of the Bond Owners. The Authority
hereby directs each Participant, and each Participant hereby
agrees to pay to the Trustee a~ the Trustee~s principal
corporate trust office, or to the Trustee at such other place
as the Trustee shall direct in writing, all payments payable by
the Participant pursuant to this Section and Article XI hereof.
SECTION 4.4 Premiums.
(a) Participation Premium. The Participation Premium
payments due in any Coverage Period shall be made in
consideration for Coverage for such Coverage Period. The
entire amount of Participation Premium is due on the Basic
Premium Payment Date; provided, that with respect to the first
Coverage Period, Participation Premium shall be due on
October 25 (provided that Basic Premium shall be due on the
date of initial issuance and delivery of the Bonds) and shall
be payable in the respective amounts listed in Exhibit C hereto.
(b) Basic Premium.
(1) Time and Amount. Notwithstanding any provision
of this Agreement to the contrary, no provision of this
Agreement relating to Basic Premium shall be effective
prior to the Closing Date of the first Series of Bonds.
Subject to the provisions of Article XI hereof (regarding
prepayment of Basic Premium and payment of Termination
Premium), Section 6.2 hereof (regarding withdrawal),
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Section 6.3 hereof (regarding expulsion) and Section 7.1
hereof (regarding abatement) each Participant agrees to pay
to the Authority, its successors and assigns, as a portion
of its annual Participation Premium payment for the
Coverage, Basic Premium in the amounts specified in
Exhibit A, to be due and payable on the Basic Premium
Payment Date, which correspond to amounts sufficient in
both time and amount to pay when due such Participant's
Allocable Proportion of the annual principal of (whether at
maturity or by mandatory sinking fund redemption) and
interest on the Bonds.
(2) Credits. Notwithstanding the foregoing, any
amount held in a Participant's account of the Principal and
Interest Fund on any Basic Premium Payment Date (other than
amounts required for payment of pas~ due principa~ of or
interest on the Bonds not presented for payment) shall be
credited towards the Basic Premium of such Participant then
due and payable and no Basic Premium need be paid by a
Participant on any Basic Premium Payment Date if the
amounts then held in the Participant's account of the
Principal and Interest Fund are at least equal to the Basic
Premium then required to be paid.
(3) Effect of Prepayment. In the event that a
Participant prepays or provides for the payment of all of
its remaining Basic Premium pursuant to Article XI hereof
such Participant's obligations under this Agreement to pay
further Basic Premium shall thereupon cease and terminate.
(c) Supplemental Basic Premium.
(1) Time and Amount. Notwithstanding any provision
of this Agreement to the contrary, no provision of this
Agreement relating to Supplemental Basic Premium shall be
effective prior to the Closing Date of the first Series of
Bonds. Subject to the provisions of Article XI hereof
(regarding prepayment of Basic Premium and payment of
Termination Premium), Section 6.2 hereof (regarding
withdrawal), Section 6.3 hereof (regarding expulsion) and
Section 7.1 hereof (regarding abatement), each Participant
agrees to pay the Authority, its successors and assigns, as
a portion of its annual Participation Premium for Coverage,
Supplemental Basic Premium, to be due and payable on the
Basic Premium Payment Date.
(2) Credits. Notwithstanding the preceding sentence,
no Participant shall be obligated to pay Supplemental Basic
Premium in excess of its Allocable Proportion of the amount
by which the amount held in the Debt Service Reserve Fund
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is less than the Reserve Requirement on the April 15
immediately preceding the Basic Premium Payment Date.
(d) Administrative Premium. Each Participant shall pay to
the Authority as Administrative Premium such amounts as shall
be required for the payment of the Participant's Pure Premium
Proportion of all administrative costs of the Authority
relating to the Coverage or the Bonds, including without
limitation all expenses (including counsel fees but not
including Defense Costs as defined in the Memorandum),
compensation and indemnification of the Trustee under the
Indenture, taxes or fees of any sort whatsoever payable by the
Authority as a result of its undertaking of the transactions
contemplated herein or in ~he Indenture, fees of any Actuary,
Qualified Claims Auditor, auditors, accountants, insurance
brokers, or attorneys, and all other necessary administrative
costs of the Authority or charges required to be paid by it in
order to administer the self-insurance program described in
this Agreement, or to comply with the terms of the Bonds or of
the Indenture or to defend the Authority and its members
against any actions or suits or sums in connection herewith.
(e) Pure Premium. Pure Premium shall be calculated in the
following manner. With respect to each Coverage Period
commencing on or after July 1, 1989, the Authority shall retain
an Actuary to determine and prepare a report to be delivered to
the Authority and the Trustee by the February 1 preceding the
beginning of such Coverage Period. Such report shall set forth
the rates ("Pure Premium Rates") per $1000 of Payroll required
to fund the expected losses and allocated loss adjustment
expense for the layer of Coverage from each Participant's
Self-Insured Retention to $5 million per occurrence in the
first Risk Sharing Pool and from $5 million to $10 million per
occurrence for Participants in the second Risk Sharing Pool for
each of the next three Coverage Periods. Such Pure Premium
Rates shall be determined by the Actuary in such a manner that
the resulting Total Pure Premium shall be an estimate by the
Actuary of the amount of funds to be deposited in the Claims
Payment Fund such that the deposit, along with anticipated
investment income not allocable to the Principal and Interest
Fund (pursuant to Section 3.03 of the Indenture), equals the
expected value of all pooled losses up to $10 million per
occurrence arising out of events that took place during the
Coverage Period. Funding for expected losses above $10 million
will not be included in the Pure Premiums but will be funded by
Pure Premium Adjustments as Case Reserves are established for
Claims. The Actuary shall utilize the general methodologies
set forth in Schedule A to calculate Pure Premium Rates, using
such Actuary's best professional judgment, and shall certify
that such methodologies were used. The methodologies set forth
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in Schedule A for calculating Pure Premium may be amended other
than within the parameters stated therein only by unanimous
consent of the members of the Authority's Governing Board. The
Authority shall be obligated to assess the Total Pure Premium.
Notwithstanding the foregoing, the Pure Premium Rates
determined in any Coverage Period for the next three Coverage
Periods with respect to a given Risk Sharing Pool (and a given
Self-Insured Retention) shall be subject to the following
limitations on rate of increase: the increase per Coverage
Period of Pure Premium Rates from the first Coverage Period to
the second Coverage Period and from the second Coverage Period
to the third Coverage Period shall not exceed the greater of
fifteen percent (15%) per annum or the Consumer Price Index
percentage increase during the year preceding the date of the
determination; the increase of Pure Premium Rates from the
Coverage Period in which the Actuary makes such determination
to the first such Coverage Period is not subject to a
limitation on rate of increase.
Notwithstanding the foregoing, the Pure Premium for each of
the first three Coverage Periods shall not exceed $1,250,000
for any Participant. Amounts in excess of such limit shall be
assessable against such Participant as Special Pure Premium
Adjustments.
With respect to the Coverage Period commencing July 1, 1989
and all subsequent Coverage Periods, the Pure Premium payable
by each Participant shall be determined by multiplying its Pure
Premium Rates for each Risk Sharing Pool in which it is
participating by its Payroll divided by $1,000.
Notwithstanding the foregoing, the Pure Premium for any
Participant determined by application of such formula may be
changed upwards by up to twenty-five percent (25%) of the Pure
Premium to reflect loss history or any significant changes in
risk exposure, upon the direction and approval by a vote of
two-thirds of the Governing Board of the Authority, or, with
respect to changes of greater than twenty-five percent (25%),
with unanimous consent of the Governing Board. In no event
will Pure Premium be payable to establish Loss Reserves for
coverage in excess of $10,000,000 per occurrence.
Commencing with the Coverage Period commencing on July 1,
1989, the determination of Total Pure Premium, Pure Premium
Rate and Pure Premium payable in each Coverage Period by each
Participant shall be made no later than the April 15 preceding
such Coverage Period, commencing April 15, 1989.
As described above, prior to each Coverage Period the
Actuary shall determine Pure Premium Rates for each of the next
three Coverage Periods. Notwithstanding anything herein to the
contrary, the Pure Premium Rates determined for the second and
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third Coverage Periods in any Actuary's report shall be
superseded by Actuary reports covering such Coverage Periods
prepared in subsequent years, except with respect to
Participants who have given notice of withdrawal pursuant to
Section 6.2 hereof. With respect to a Participant which has
given notice of intent to withdraw: the Pure Premium Rates
applicable for the two remaining Coverage Periods prior to the
effective date of withdrawal shall be based upon the Pure
Premium Rates which were determined in the Coverage Period
preceding the Coverage Period in which such notice was given.
Absent computational error, the calculation of such Pure
Premium shall be final and conclusive of the amounts due and
owing under this subsection.
SECTION 4.5 Pure Premium Adjustments.
(a) Consideration. Pure Premium Adjustments due in any
Coverage Period shall be made in consideration for cont±nuation
of Coverage for prior Coverage Periods and for continued
eligibility to purchase Coverage for the current Coverage
Period.
(b) Time and Manner of Determination. On or prior to
February 1 of each year, commencing February 1, 1989, upon
receipt of the annual report of the Qualified Claims Auditor
pursuant to Section 3.6 hereof, the Authority shall determine
the amount of Case Reserves for all Claims of each Participant
to be established or adjusted with respect to all prior
Coverage Periods and for each Risk Sharing Pool as set forth in
the report of the Qualified Claims Auditor. On or prior to
February 1 of each year, commencing February 1, 1992, the
Authority shall determine, based upon the establishment or
adjustment of such Case Reserves, the Pure Premium Adjustment
for each Participant, which may be an assessment of additional
Pure Premium Adjustments or a refund of Pure Premium or Pure
Premium Adjustments paid in prior Coverage Periods. Pure
Premium Adjustments with respect to any subsequent Coverage
Period will be first determined during such Coverage Period and
be payable in the succeeding Coverage Period. Pure Premium
Adjustments shall be determined in accordance with Schedule B
hereto, which in general provides as follows:
(i) Pure Premium Adjustments with respect to any
Coverage Period are intended to provide a matching, over a
period not in excess of five years, of (a) the sum of
Settlements paid and outstanding Case Reserves required
with respect to such Coverage Period versus (b) the sum of
amounts paid as Pure Premium, paid or refunded as Pure
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1 Premium Adjustments and Special Pure Premium Adjustments and
certain investment earnings on amounts with respect to such
3 Coverage Period;
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(ii) the total Pure Premium Adjustment determined with
respect to any Participant in any Coverage Period shall be
equal to the sum of all Pure Premium Adjustments determined
with respect to Coverage Periods in which such Participant
participated in Coverage;
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(iii) the Pure Premium Adjustment determined with
respect to any Participant with respect to any Coverage
Period shall be based upon such Participant's Pure Premium
Proportion applicable for such prior Coverage Period;
investment earnings cn the Claims Payment Fund (not
transferred to the Basic Premium Payment Fund pursuant to
Section 3.03 of the Indenture) shall be allocated according
to the ratio of Pure Premium paid by such Participant in
all Coverage Periods to Pure Premium paid by all
Participants in all Coverage Periods;
(iv) notwithstanding subparagraph (iii) above, with
respect to any Coverage Period with respect to which
Special Pure Premium Adjustments may be assessed pursuant
to Section 4.6 hereof, Pure Premium Adjustments shall be
based on the Adjustment ProporTions set forth in Exhibit D
hereto instead of Pure Premium Proportions;
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(v) Pure Premium Adjustment refunds in any Coverage
Period will not in the aggregate exceed 50 percent of the
Pure Premium paid and Pure Premium Adjustment assessments
scheduled to be paid in such Coverage Period; for such
purpose the Pure Premium of a Participant which has
withdrawn pursuant to Section 6.2 hereof or has been
expelled pursuant to Section 6.3 hereof shall be deemed to
be the Pure Premium last paid by such Participant; and
(vi) Pure Premium Adjustment refunds with respect to
any Coverage Period shall not be made until after the
second Coverage Period following such Coverage Period.
Any conflict between this description and Schedule B
hereto shall be resolved by following the formula set forth
in Schedule B.
(c) Time of Payment. The Authority shall give prompt
47 written notice to the Trustee and each Participant of the
determination of Pure Premium Adjustments. Pure Premium
49 Adjustments shall be paid or refunded no later than the
August 1 next following their date of determination. Pure
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Premium Adjustments shall be deposited with, or requisitioned
by, the Authority and the Authority agrees to deposit such
amounts into or pay them from the Claims Payment Fund, as the
case may be.
(d) Low Reserves Mode. Notwithstanding the foregoing, if
on the date of determination of Pure Premium Adjustments the
Low Reserves Mode is in effect, (1) the Pure Premium
Adjustments will be determined according to Schedule B hereto
but without regard to the provisions of Schedule B hereto
providing for assessment of Risk Premium Adjustments over five
year periods and (2) any amounts of Pure Premium Adjustments
which would otherwise be refunded to Participants shall be
retained by the Authority in the Claims Payment Fund and no
refund of such amounts shall be made.
(e) Obliqations After Withdrawal of Expulsion. The
obligation of Participants to pay Pure Premium Adjustments
shall in no event be discharged by prepayment of Basic
Premiums. In the event of expulsion or withdrawal of a
Participant from Coverage, the obligation to pay Pure Premium
Adjustments of such Participant with respect to Coverage
Periods prior to expulsion or withdrawal shall not be
discharged and suck Pure Premium Adjustments shall be
determined as if Low Reserves Mode were in effect; provided
that such a Participant shall be deemed to have paid, and shall
not be obligated to pay, as Pure Premium Adjustments an amount
equal to the principal component of Basic Premium prepaid as
Termination Premium from a source other than such Participant's
Allocable Share of Undesignated Reserves.
SECTION 4.6 S~ecial Pure Premium Adjustments.
Notwithstanding Section 4.5 hereof
(a) Special Pure Premium Adjustments may be assessed
against certain Participants whose Pure Premium is capped as
set forth in Section 4.4 hereof in the amounts and with respect
to the Coverage Periods as set forth in or determined in
accordance with Exhibit D hereto;
(b) Special Pure Premium Adjustments with respect to any
Coverage Period will first be determined prior to February 1 of
such Coverage Period, commencing February 1, 1989, and shall be
paid no later than the following August 1, commencing August 1,
1989; the Maximum Special Pure Premium Adjustment (determined
in accordance with Exhibit D hereto) amount with respect to any
Coverage Period (expressed as a rate per $1,000 of payroll)
will be determined prior to the February 1 preceding such
Coverage Period;
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(c) Special Pure Premium Adjustments assessed in any
Coverage Period shall be assessed before any Participant is
assessed in such Coverage Period for Pure Premium Adjustments;
(d) the total Special Pure Premium Adjustment with respect
to any Coverage Period shall be the difference between (i) the
sum of Case Reserves required to be established with respect to
such Coverage Period and Settlements paid with respect to such
Coverage Period and (ii) the sum of Pure Premium and Special
Pure Premium Adjustments previously paid with respect to such
Coverage Period;
(e) if more than one Participant is subject to Special
Pure Premium Adjustments with respect to any Coverage Period,
the Special Pure Premium Adjustment with respect to any
Participant with respect to such Coverage Period shall be a
portion of the total Special Pure Premium Adjustment With
respect to such Coverage Period determined according to the
proportion of the total Special Pure Premium Adjustment to
which such Participant is subject with respect to such Coverage
Period as compared to the total Special Pure Premium Adjustment
to which all Participants are subject with respect to such
Coverage Period;
(f) refunds of Special Pure Premium Adjustment assessments
with respect to a Coverage Period shall be made only after all
Pure Premium Adjustments with respect to such Coverage Period
which are scheduled to be paid have been paid in full; and
(g) for all other purposes under this Agreement, Special
Pure Premium Adjustments shall be deemed to be Pure Premium
Adjustments.
SECTION 4.7 Participants Makinq a Cash Deposit into the
Claims Payment Fund. As a condition to eligibility to purchase
Coverage hereunder, each of the Participants listed in
Exhibit E hereto shall be required to make a cash deposit into
the Claims Payment Fund in the respective amount shown in
Exhibit E on or prior to the Closing Date, Notwithstanding any
provisien herein to the contrary:
(a) no such Participant shall be obligated to pay
Basic Premium or Supplemental Basic Premium; provided that
each such Participant shall be obligated to pay Pure
Premium, Administrative Premium and Pure Premium
Adjustments in the same manner as other Participants in
order to purchase Coverage; and
(b) such cash deposit shall be deemed to be a
prepayment of Basic Premium and shall be deemed to be Bond
proceeds.
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1 SECTION 4.8 Credits for Withheld Refunds. Amounts that
would be paid to Participants as Pure Premium Adjustment
3 refunds, but for the limitation on such refunds to no more than
fifty percent (50%) of the Pure Premium paid in a Coverage
5 Period, may be credited against the amounts to become due in
the succeeding Coverage Period as Pure Premium Adjustment and
7 Pure Premium, in that order, until fully allocated. No such
credit may be made against Basic Premium, Supplemental Basic
9 Premium or Administrative Premium.
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ARTICLE V
RESERVES RELEASED FROM THE
PLEDGE OF THE INDENTURE
17 SECTION 5.t Receipt of Reserves Upon Discharqe of the
Trust Indenture. All funds transferred by the Trustee to the
19 Authority upon discharge of the Indenture pursuant to
Section 3.04 of the Indenture will be held by the Authority as
21 a claims payment fund, to be applied to the payment of
Settlements of Claims within the scope of Coverage prior to the
23 termination of the Indenture, pursuant to the terms of this
Agreement. Upon termination of all obligations to pay Pure
25 Premium Adjustment and termination of this Agreement, the
Authority will distribute
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(a) all Pure Premium Adjustment refunds to the
Participants,
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(b) all Undesignated Reserves held by it, up to an
amount equal to deposits to the Claims Payment Fund from
Bond proceeds or cash deposits made by new Participants in
lieu of Bond proceeds, according to the Allocable
Proportion, and
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(c) the Allocable Share, as defined in Section 5.2
hereof, of each Participant which withdrew from or was
expelled from Coverage which has not been distributed to
such Participant pursuant to Section 5.2 hereof.
Allocable Proportion for such purpose shall be
proportionally adjusted to compensate nondefaulting
Participants in the event that amounts in the Claims Payment
45 Fund or Debt Service Reserve Fund have been applied to pay the
Basic Premium of any other defaulting Participant pursuant to
47 Sections 3.02 or 6.04 of the Indenture to the extent such
defaulting Participant has not ultimately repaid such amount.
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1 SECTION 5.2 Receipt of a Participant's Allocable Share
Upon Withdrawal or Expulsion. In connection with permitting
3 withdrawal of a Participant from Coverage pursuant to Section
6.2 hereof or ex?elling a Participant pursuant to Section 6.3
5 hereof, a portion of Undesignated Reserves shall at such time
be allocated to such Participant in accordance with Allocable
7 Proportion (as adjusted pursuant to Section 5.1 hereof). In
addition, a portion of the Debt Service Reserve Fund shall be
9 allocated to such Participant in accordance with Allocable
Proportion (as adjusted pursuant to Section 5.1 hereof). The
11 sum of such amounts allocated to such Participant shall be
applied first to the payment of Termination Premium pursuant to
13 Section 6.2 or Section 6.3 hereof. The Authority shall submit
a Requisition pursuant to Section 3.02 of the Indenture for the
15 amount of such portion in excess of such Termination Premium
and all other obligations due from such Participant under the
17 terms of this Agreement (its "Allocable Share"). The'Authority
will hold the Allocable Share of each such Participant and any
19 interest thereon in a segregated account for the benefit of
such Participant, subject only to assessment for Pure Premium
21 Adjustment assessed against such Participant. The Authority
will transfer to such Participant its Allocable Share, less
23 assessments for Pure Premium Adjustment, on the earliest
practicable date when such Participant is no longer subject to
25 assessment for any obligations under the terms of this
Agreement, i.e. when all Claims within the scope of Coverage
27 prior to withdrawal or expulsion of such Participant have been
finally determined and/or paid as Settlements.
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SECTION 5.3 Receipt of a Participant's Share of Debt
Service Reserve Fund Upon Prepayment. Upon any deposit of
security or any prepayment by any Participant pursuant to
Sections 11.1 or 11.3 of this Agreement, such Participant shall
receive its share of amounts on deposit in the Debt Service
Reserve Fund, determined using the ratio set forth in Section
5.1(b)(i) above.
39 ARTICLE VI
41 ADMISSION TO, WITHDRAWAL FROM AND EXPULSION FROM
THE POOLED SELF-INSURANCE PROGR~
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SECTION 6.1 Conditions to Providinq Coveraqe to a New
45 Participan_~. Commencing July 1, 1989~ the Authority may
provide Coverage to a new Participant which is not currently a
47 Participant under this Agreement, subject to the following
conditions:
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(a) such new Participant shall be a municipal
corporation in the State, or a joint powers authority
comprised of such municipal corporations, and a member
the Authority;
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(b) not later than the January 1 next preceding the
first Coverage Period for which the Authority provides
Coverage to such Participant, such new ParTicipant shall
have submitted a completed application for admission to the
Authority;
(c) not later than the February 15 next preceding the
first Coverage Period for which the Authority provides
Coverage to such Participant, such new Participant shall
have duly approved an amendment to this Agreement pursuant
to which it shall become subject to all of the terms of
this Agreement as a Participant;
(d) Coverage of such new Participant shall be
effective on the first day of the Coverage Period next
succeeding the date of execution of the amendments referred
to in paragraph (c) above;
(e) not later than the March 1 next preceding the
first Coverage Period for which the Participant provides
Coverage to such Participant, the Authority's Governing
Board shall have approved admission of such Participant;
(f) the Authority's Governing Board by at least
two-thirds' vote shall have consented to the amendment to
the Indenture and this Agreement permitting such new
Participant to become a Participant; provided that, prior
to July 1, 1991, such consent must be unanimous;
(g) the Authority and the Trustee shall have received
a report of an independent financial consultant that
providing such Coverage to such new Participant will not
adversely affect the credit or financial position of the
pooled self-insurance program due to the financial position
or credit standing of such new Participant;
(h) the Authority and the Trustee shall have received
an opinion of Bond Counsel that the amendments referred to
in paragraph (c) above are valid and binding against all of
the parties thereto and will not adversely affect the
tax-exempt status of interest paid on the Bonds;
(i) the Authority and the Trustee shall have received
a certificate from an Actuary that such admission of such
new Participant will not adversely affect the actuarial
soundness of the pooled self-insurance program; and
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(j) the Authority and the Trustee shall have received
an opinion of the insurance consultant-broker of record to
the Authority and the underwriting committee of the
Authority to the effect that providing Coverage to such new
Participant will not constitute a hazardous or unacceptable
loss exposure to the Authority.
The amendments to this Agreement and the Indenture
permitting such a new Participant to become a Participant shall
not reduce or diminish the Basic Premium or Supplemental Basic
Premium obligations of the existing Participants. Any new
Participant will be obligated to pay a mutually agreeable
portion of the total Administrative Premium and Pure Premium
payable on each Basic Premium Payment Date and will be assessed
Pure Premium Adjustments as provided in this Agreement, as
amended. Any such new Participant may be obligated to pay
amounts equivalent to Basic Premium or Supplemental Basic
Premium, or may be assessed an annual surcharge or fee or be
required to make a deposit into the Claims Payment Fund by the
Authority to participate in the self-insurance program. The
amendment to this Agreement may set forth a method by which the
new Participant shall be deemed to have paid Basic Premium for
purposes of determining amounts to be allocated or distributed
to it pursuan~ to Article V hereof.
Subject to the provisions of the Indenture, the Authority
may issue additional insurance program bonds on behalf of a new
Participant or Participants to finance a required deposit to
the Claims Payment Fund by such a new Participant or
Participants. To the extent permitted in the Indenture, such
additional insurance program bonds could be secured by Premium
paid by such new Participant or Participants and by amounts in
the Claims Payment Fund deemed to be derived from such Premium
payments and from the proceeds of such additional insurance
program bonds, but could not be secured by Premium paid by the
initial Participants under this Agreement or by amounts in the
Claims Payment Fund deemed to be derived from Premium payments
of the initial Participants or from the proceeds of the Bonds
issued on behalf of the Initial Participants. Notwithstanding
any provision of this Agreement to the contrary, this Agreement
may be amended to accomplish and reflect the issuance of such
additional insurance program bonds by the Authority. Such
amendments may include, but shall not be limited to, amendment
to references in this Agreement to the Indenture, the Bonds and
funds created under the Indenture to include, or refer to, as
appropriate, the indenture pursuant to which the additional
program bonds are issued, the additional program bonds and
funds created under such indenture.
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1 SECTION 6.2 Conditions to Permittinq Withdrawal of a
Participant from Coveraqe. Commencing July 1, 1991, the
3 Authority shall permit a Participant to withdraw from Coverage
under this Agreement, provided that the following are satisfied:
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(a) such Participant shall not be in default of any
7 of its obligations to pay Premium hereunder;
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(b) not later than the April 1 next preceding the
date which is two years prior to the effective date of such
withdrawal, such Participant shall have provided written
notice to the Authority of its intent to withdraw; provided
that, in the event that the Governing Board of the
Authority or the Participants, by less than unanimous
consent, agree to a revision of this Agreement which
materially alters the rights and obligations of the
Participants under the terms of this Agreement, including
admission of a new Participant or revision of the
methodology for determining Pure Premium Rates, a
Participant which did not consent to such amendment shall
be entitled to withdraw from Coverage by providing written
notice to the Authority of its intent to withdraw not later
than the April 1 next preceding the effective date of such
withdrawal, commencing July 1, 1991;
(c) such Participant shall have paid (or there shall
have been applied on its behalf certain moneys as described
in Section 5.2 hereof) the full amount of Termination
Premium pursuant to Section ll.4(a) hereof and all fees and
expenses incurred by the Authority as a result of complying
with the procedures for withdrawal required herein to the
Authority;
(d) such withdrawal from Coverage shall be effective
on the first day of a Coverage Period; and
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(e) such withdrawal shall not result in the number of
Participants becoming fewer than five; provided that, in
the event that deposit of security for Basic Premium or
optional prepayment by all Participants is provided for
pursuant to Section 11.2 hereof, a Participant may withdraw
regardless of the remaining nun~ber of Participants.
In no event shall withdrawal from Coverage release a
45 Participant from its obligation to pay damages resulting from
default under the terms of this Agreement which is not remedied
47 by payment of Termination Premium or from its obligation to pay
Pure Premium Adjustments with respect to Claims within the
49 scope of Coverage prior to such withdrawal. The Authority
shall continue to pay Settlements of Claims relating to the
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withdrawn Participant within the scope of Coverage prior to
withdrawal as provided herein and in the Indenture, unless the
Participant defaults in the payment of its continuing
obligations described in the preceding sentence, Notice to
withdraw shall be revocable by the Participant only with the
consent of the Authority.
SECTION 6.3 Conditions to Permittinq Expulsion of a
Participant from Coveraqe. The Authority may expel a
Participant from Coverage subject to the following conditions:
(a) such Participant shall be in default under this
Agreement;
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(b) not later than sixty (60) days next preceding the
effective date of such expulsion, the Authority's Governing
Board, by at least two-thirds vote, shall have approved
such expulsion by written notice filed with the Trustee and
written notice of such action shall have been given to the
Participant to be expelled;
(c) an amount equal to Termination Premium for such
Participant shall have been deposited in a special account
by the Trustee at the direction of the Authority, as
provided in Section 5.2 hereof from Undesignated Reserves
in the Claims Payment Fund, the Debt Service Reserve Fund
or from voluntary premium payments by Participants; and
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(d) such expulsion shall be effective sixty (60) days
after written notice shall have been given to the
Participant to be expelled; provided, however, that only
ten (10) days' written notice need be given to any
Participant in payment default.
35 In no event shall expulsion from Coverage release a
Participant of its obligation to pay damages resulting from
37 default under the terms of this Agreement which is not remedied
by payment of Termination Premium or from its obligation to pay
39 Pure Premium Adjustments with respect to Claims within the
scope of Coverage prior to such expulsion.
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43 ARTICLE VII
45 ABATEMENT
47 SECTION 7.1 Abatement of Participation Premium in the
Event of Failure to Pay Settlements. In the event that the
49 Authority fails, and such failure continues for a period of
sixty (60) days, to pay a Settlement of a Participant pursuant
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to the terms of this Agreement, other than by reason of good
faith dispute as to the scope of Coverage, the obligations of
all Participants to pay Participation Premium and Pure Premium
Adjustment hereunder shall automatically be abated in full.
The obligation of a Participant to pay Participation Premium
shall otherwise be discharged only as provided in Section 4.1.
This provision shall not be construed to bar any Participant
from making voluntary payments of any amounts of any premium
following an event of abatement~ On the occurrence of any
event causing abatement, all moneys on hand (i) in the Debt
Service Reserve Fund, the Redemption Fund and the Prepayment
Fund held by the Trustee shall be available for use by the
Trustee to make payments of principal of and interest on the
Bonds, (ii) in the Principal and Interest Fund held by the
Trustee, to the extent of the proportional amount represented
by the portion of the Coverage Period which had occurred prior
to the event causing abatement, shall be used as in (i) hereof,
and amounts in excess of such amount shall be transferred to
the Claims Payment Fund and shall be available to pay
Settlements.
ARTICLE VIII
INDEMNIFICATION AND RELEASE OF
AUTHORITY, TRUSTEE AND PARTICIPANTS; DISCLAIM_ER
SECTION 8.1 Release and Indemnification Covenants. Each
Participant shall and hereby agrees to indemnify and save the
Authority, the Trustee and all other Participants and their
respective officers harmless from and against all claims,
losses and damages, including legal fees and expenses, arising
out of (i) such Participant's breach or default in the
performance of any of its obligations under this Agreement or
(ii) such Participant's act or negligence or that of any of its
agents, contractors, servants, employees or licensees with
respect to the Coverage, but not including Claims. No
indemnification is made under this Section or elsewhere in this
Agreement for claims, losses or damages, including legal fees
and expenses arising out of the willful misconduct, negligence,
or breach of duty under this Agreement by the Authority,
Trustee, or any other Participant, or their respective
officers, agents, employees, successors or assigns.
SECTION 8.2 Disclaimer. THE AUTHORITY AND THE TRUSTEE
MAKE NO WARR3tNTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED,
AS TO THE ADEQUACY OF THE COVERAGE FOR THE NEEDS OF THE
PARTICIPANTS.
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ARTICLE IX
ASSIGNMENT AND AMENDMENT
SECTION 9.1 Assiqnment by the Authority. Certain of the
Authority~s rights under this Agreement, including the right to
receive and enforce payment of Premium (other than
Administrative Premium) to be paid by each Participant under
this Agreement, have been assigned to the Trustee, subject to
certain exceptions, pursuant to the Indenture. Except as
provided herein and in the Indenture, the Authority will not
assign this Agreement, its right to receive Basic Premium from
any Participant, or its duties and obligations hereunder to any
person, firm or corporation so as to impair or violate the
representations, covenants and warranties contained in Section
2.2; provided, however, that nothing in this Section shall
limit the right of the Authority to purchase commercial
insurance or reinsurance on behalf of the Participants pursuant
to Section 3.5 hereof. The Trustee shall be considered a third
party beneficiary under this Agreement in regard to the
enforcement of the Trustee's rights hereunder.
SECTION 9.2 No Assiqnment by the Participants.
Agreement may not be assigned by any Participant.
This
SECTION 9.3 Amendment. Except as provided below, this
Agreement may only be amended by a written instrument duly
authorized and executed by the Authority and all of the
Participants in accordance with Article X of the Indenture.
This Agreement, including the Exhibits and Schedules hereto,
may be amended, with the consent of two-thirds of the
Participants and two-thirds of the Governing Board of the
Authority without notice to or the consent of any of the Owners
of the Bonds and without complying with Article X of the
Indenture, in connection with (1) any provision of this
Agreement after the discharge of the Indenture, (2) any change
required or permitted to be made pursuant to Article VI hereof
upon the admission, withdrawal or expulsion of a Participant,
except as otherwise provided in Article VI or (3) any provision
of this Agreement relating to:
(a) the methodology and formulae for determination of
Total Pure Premium, Pure Premium, Pure Premium Rates,
Administrative Premium and Pure Premium Adjustments payable
by or to each Participant, including any changes to
Schedule A; provided that, prior to the Coverage Period
commencing July 1, 1991, any such amendment must be
approved by unanimous vote of the Participants; and further
provided that no such amendment shall reduce the level for
the establishment of Total Pure Premium or Pure Premium
Adjustments to less than that initially set forth herein;
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(b) Exhibit F and the scope and extent of Coverage as
provided in this Agreement and Exhibit G hereto; provided
that, prior to the Coverage Period commencing July 1, 1991,
any amendment which materially increases the types of
exposures included in Coverage must be approved by
unanimous vote of the Participants;
(c) a Participant's Allocable Share as provided in
Section 5.2 hereof; and
(d) commercial insurance pursuant to Section 3.5
hereof.
In addition, in the event Bonds are refunded pursuant to
Section 2.13 of the Indenture so that aggregate principal and
interest due on the refunding bonds on each Payment Date is
less than or equal to aggregate principal and interes% on such
Bonds and final maturity of the Bonds is not extended, this
Agreement may be amended by majority vote of the Governing Body
to correspondingly and proportionately reduce Basic Premium
payments of Participants without notice to or consent of any of
the owners of the Bonds and without complying with Article X of
the Indenture.
Ail amendments hereto other than amendments to be made
following the discharge of the Indenture and amendments
authorized by all of the Participants shall be effective only
as of the beginning of a Coverage Period and any such amendment
shall be further conditioned on the giving of notice by the
Authority of such proposed amendment to all non-consenting
Participants not later than the May 1 preceding the effective
date of such amendment. All amendments hereto other than
amendments to be made following the discharge of the Indenture
shall be further conditioned on the receipt by the Authority
and the Trustee of (i) an opinion of Bond Counsel to the effect
that such amendment does not affect the validity or
enforceability of this Agreement and does not adversely affect
the tax-exempt status of interest on the Bonds, and (ii) in the
case of any amendment to the methodology and formulae for
determination of Total Pure Premium, Pure Premium, Pure Premium
Rates or Pure Premium Adjustments, or any amendment affecting
the Coverage or any amendment to Sections 2.1(e), 2.2(g), 3.4,
3.5, 3.6 or Article VI hereof a certificate of an Actuary to
the effect that such amendment does not adversely affect the
actuarial soundness of the pooled self-insurance program.. All
costs and expenses incurred in connection with any amendment to
this Agreement shall be borne pro rata by the Participants.
Notwithstanding the foregoing, in the event that the number
of Participants is five or less and the amounts in the Claims
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1 Payment Fund and the Debt Service Reserve Fund are insufficient
to provide for deposit of security for Basic Premium or
3 optional prepayment of all Participants pursuant to
Section 11.2 hereof, this Agreement may be amended only with
5 the consent of all Participants.
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ARTICLE X
EVENTS OF DEFAULT AND.REMEDIES
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SECTION 10.1 Events of Default. The following shall be
13 "events of default" under this Agreement and the'terms "events
of default" and "default" shall mean, whenever they are used in
15 this Agreement with respect to a Participant, any one or more
of the following,events:
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(i) failure by such Participant to pay any Basic
Premium or Supplemental Basic Premium required to be paid
hereunder on the Basic Premium Payment Date;
(ii) failure by such Participant to observe and
perform any covenant, condition or agreement on its part to
be observed or performed herein or otherwise with respect
hereto, other than as referred to in clause (i) of this
Section, for a period of thirty (30) days after written
notice specifying such failure and requesting that it be
remedied has been given to such Participant by the
Authority, the Trustee or the Owners of not less than
twenty-five percent (25%) in aggregate principal amount of
Bonds Outstanding; provided, however, if the failure stated
in the notice cannot be corrected within the applicable
period, the Authority, the Trustee or such Owners, as the
case may be, shall not unreasonably withhold their consent
to an extension of such time if corrective action is
instituted by the Participant within the applicable period
and diligently pursued until the default is corrected; or
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(iii) the filing by such Participant of a case in
bankruptcy, or the subjection of any right or interest of
such Participant under this Agreement to any execution,
garniskment or attachment, or adjudication of such
Participant as a bankrupt, or assignment by such
Participant for the benefit of creditors, or the entry by
such Participant into an agreement of composition with
creditors, or the approval by a court of competent
jurisdiction of a petition applicable to the Participant in
any proceedings instituted under the provisions of the
federal bankruptcy code, as amended, or under any similar
act which may hereafter be enacted.
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Notwithstanding the foregoing, failure by a Participant to
comply with the Underwriting and Claims Administration
Standards (including the Liability Claims Quality Control
Guidelines) referred to in Exhibit G shall be an event of
default only after following the procedures described therein.
SECTION 10.2 Remedies on Default. Whenever any event of
default referred to in Section 10.1 hereof shall have happened
and be continuing, it shall be lawful for the Authority to
exercise any and all remedies available pursuant to law or
granted pursuant to this Agreement. Upon the occurrence of any
event of default with respect to the obligation to pay
Premiums, the Authority may and, upon an Event of Default
described in Section 10.1(i) or upon the written direction of
O%~ners of a majority in aggregate principal amount of Bonds
then outstanding, shall cancel all Coverage rights of the
defaulting Partidipant for the portion of the then-c~rrent
Coverage Period commencing with the event of default and ending
with its cure. Despite the cancellation of Coverage of a
defaulting Participant for a given Coverage Period, th~
Participant nonetheless agrees to pay to the Authority all
costs, losses and damages howsoever arising or occurring as a
result of such default and cancellation. No such cancellation
shall be or become effective by operation of law or otherwise,
unless and until the Authority shall have given at least sixty
(60) days, or in the case of an Event of Default described in
Section 10.1(i), at least ten (10) days~ written notice of such
cancellation to the Participant; no such cancellation shall be
effected by operation of law or acts of the parties hereto,
except in the manner herein expressly provided; and no such
cancellation shall terminate the obligation of the cancelled
Participant to pay Pure Premium Adjustments relating to
Coverage Periods prior to such cancellation or to pay Premium
for subsequent Coverage Periods for which Coverage is made
available to such defaulting Participant; provided, however,
that notwithstanding anything herein or in the Indenture to the
contrary, there shall be no right under any circumstances to
accelerate the Basic Premium or otherwise declare any Basic
Premium not then in default to be immediately due and payable.
In the event that the Authority elects to expel any
defaulting Participant, subject to the conditions described and
in the manner provided in Section 6.3 hereof, the Participant
nevertheless agrees to pay to the Authority all costs, losses
or damages howsoever arising or occurring as a result of such
default. No such expulsion shall be or become effective by
operation of law or otherwise, unless and until the Authority
shall have given at least sixty (60) days~ written notice, or
in the case of an Event of Default described in Section
10.1(i), at least ten (10) days' written notice of such
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expulsion to the Participant; no such expulsion shall be
effected either by operation of law or acts of the parties
hereto, except only in the manner herein expressly provided;
and no such expulsion shall terminate the obligation of the
expelled Participant to pay Pure Premium Adjustment relating to
Coverage Periods prior to such expulsion.
SECTION 10.3 No Remedy Exclusive. No remedy conferred
herein upon or reserved to the Authority is intended to be
exclusive and every such remedy shall be cumulative and shall
be in addition to every other remedy given under this Agreement
or now or hereafter existing at law or in equity, including,
but not limited to the right of any Owner by mandamus or other
suit or proceeding at law or in equity to enforce his rights
against the Participant and to compel the Participant to
perform and carry out its duties under this Agreement, subject
to Section 13.08-of the Indenture. No delay or omission to
exercise any right or power accruing upon any default shall
impair any such right or power or shall be construed to be a
waiver thereof, but any such right and power may be exercised
from time to time and as often as may be deemed expedient. In
order to entitle the Authority to exercise any remedy reserved
to it in this Article it shall not be necessary to give any
notice, other than such notice as may be required in this
Article or by law.
SECTION 10.4 Aqreement to Pay Attorneys' Fees and
Expenses. In the event any party to this Agreement should
default under any of the provisions hereof and the
nondefaulting parties should employ attorneys or incur other
expenses for the collection of moneys or the enforcement of
performance or observance of any obligation or agreement on the
part of the defaulting party contained her.ein, the defaulting
party agrees that it will on demand therefor pay to the
nondefaulting parties the reasonable fees of such attorneys and
such other expenses so incurred by the nondefaulting parties
awarded to the nondefaulting parties by a court of competent
jurisdiction.
SECTION 10.5 No Additional Waiver Implied by One Waiver.
In the event any agreement contained in this Agreement should
be breached by any party and thereafter waived by the other
parties, such waiver shall be limited to the particular breach
so waived and shall not b~ a waiver of any other breach
hereunder.
SECTION 10.6 Trustee and Owners to Exercise Riqhts.
Certain of the rights and remedies given to the Authority under~
this Article X have been assigned by the Authority to the
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1 Trustee under the Indenture.
exercised by the Trustee and
3 Indenture.
Such rights and remedies shall
the Owners as provided in the
be
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ARTICLE XI
SECURITY FOR OR PREPAYMENT OF BASIC PREMIUM;
TERMINATION PREMIUM
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SECTION 11.1 Deposit of Security for Basic Premium by a
Participant. Notwithstanding any other provision of this
Agreement, any Participant may on any date secure the payment
of all of its unpaid Basic Premium by an irrevocable deposit by
it with the Trustee of (i) an amount of cash which, together
with amounts on deposit in such Participant's Account. in the
Principal and Interest Fund which are not required to satisfy
the Rebate Requirement (as defined in Exhibit C to the
Indenture), is sufficient to pay all its unpaid Basic Premium
in accordance with the Basic Premium payment schedule set forth
in Exhibit A hereto, or by prepayment thereof pursuant to
Section 11.3 hereof, as the Participant shall instruct at the
time of said deposit, or (ii) Federal Securities together with
cash, if required, in such amount as will, in the opinion of an
independent certified public accountant, together with interest
to accrue thereon, and money then on deposit in such
Participant's Account of the Principal and interest Fund
together with interest thereon but net of any amounts which may
be required to satisfy the Rebate Requirement, be fully
sufficient to pay all unpaid Basic Premium on their respective
Basic Premium Payment Dates in accordance with Schedule A or by
prepayment thereof pursuant to Section 11.3 hereof, as the
Participant shall instruct at,the time of said deposit. Any
funds or Federal Securities so deposited shall be deposited by
the Trustee in such Participant's account of the Prepayment
Fund pursuant to the Indenture.
In the event of a deposit pursuant to this Section, all
Basic Premium obligations of such Participant under this
Agreement, and all security provided by this Agreement for said
obligations, shall cease and terminate, excepting only the
obligation of such Participant to make, or cause to be made,
payments of such Participant's Basic Premium from the deposit
made by the Participant pursuant to this Section. Any such
deposit shall be deemed to be and shall constitute a special
fund for the payment of'such Participant's Basic Premium in
accordance with the provisions of this Agreement.
49 Notwithstanding the foregoing, in the event the Participant
deposits cash or Federal Securities sufficient to pay all its
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unpaid Basic Premium to and including a specified redemption
date pursuant to Section 11.3 hereof, such deposit will not
secure the payment of all of suc5 Participant's Basic Premium
until proper notice'of redemption of Bonds (corresponding in
total amount to the Basic Premium being prepaid) shall have
been given in accordance with Article V of the Indenture,
except as provided below. In the event the Bonds are not by
their terms subject to redemption within the next succeeding
sixty (60) days, such deposit will not secure the payment of
all such Participant's Basic Premium until the Participant
shall have given the Trustee, in form satisfactory to the
Trustee, irrevocable instructions to give, as soon as
practicable, in the manner prescribed by Article V of the
Indenture, a notice to the owners of such Bonds that the
deposit described above has been made with the Trustee and that
a corresponding principal amount of Bonds are deemed to have
been paid in accordance with this Article and stating such
maturity or ~edemption date upon which moneys are to be
available for the payment of the principal of said Bonds or
redemption price, if applicable, of said Bonds.
In making any such deposit, the Participants shall comply
with all restrictions and provisions contained in the
No-Arbitrage Certificate signed by the Authority relating to
the Bonds.
SECTION 11.2 Deposit of Security for Basic Premium or
Optional Prepayment by All Participants. The Participants may
as a group, by at least two-thirds approval of all members of
the Governing Board of the Authority, secure the payment of all
remaining unpaid Basic Premium of all Participants in the
manner set forth in Section 11.1 hereof. In the event of a
deposit pursuant to this Section, all Basic Premium obligations
of the Participants under this Agreement, and all security
provided by this Agreement for said obligations, shall cease
and terminate, excepting only the obligation of the
Participants to make, or cause to be made, payments of Basic
Premium from the deposit made by the Participants pursuant to
this Section. Said deposit shall be deemed to be and shall
constitute a special fund for the payment of Basic Premium in
accordance with the provisions of this Agreement.
In making any such deposit, the Participants shall comply
with all restrictions and' provisions contained in the
No-Arbitrage Certificate signed by the Authority relating to
the Bonds.
The Participants may also, by at least two-thirds' vote of
the Governing Board of the Authority, exercise as a group the
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option to prepay Basic Premium of all Participants pursuant to
Section 11.3 hereof in the manner and upon the terms set forth
in such Section.
The Participants may uee Undesignated Reserves in the
Claims Payment Fund, moneys in the Debt Service Reserve Fund or
any other lawfully available moneys to deposit or prepay the
amounts described in this Section.
Notwithstanding the foregoing, in the event that the number
of Participants is five (5) or less, so that a Participant is
unable to withdraw pursuant to Section 6.3 hereof unless
deposit of security for Basic Premium or optional prepayment by
all Participants is provided for pursuant to this Section 11.2,
any Participant may cause the Authority to use any amounts in
the Claims Payment Fund and moneys in the Debt Service Reserve
Fund to deposit or prepay the amounts described in this Section.
Unless the Participants elect otherwise by vote of at least
a majority of the Participant members of the Governing Board of
the Authority, the pooled self-insurance program shall
terminate by virtue of such deposit or prepayment, except for
the obligations of each Participant to pay Pure Premium
Adjustments, as provided in Section 4.1 hereof.
SECTION 11.3 Optional Redemption of Bonds. Subject to the
terms and conditions of this Section, the Authority hereby
grants an option to each Participant to prepay in whole, the
unpaid principal amount of such Participant's Basic Premium, on
the dates specified below. Said option shall be exercised by a
Participant by giving written notice to the Trustee of the
exercise of such option at least forty-five (45) days prior to
the date of prepayment. Such~ option shall be exercised by .
depositing with said notice cash in an amount equal to the
corresponding outstanding principal of Bonds to be redeemed,
plus accrued interest on the principal amount to be prepaid to
the date of redemption, together with any Basic Premium then
due but unpaid, and said cash deposit shall be accompanied by
an amount equal to the amount expressed as a percentage of the
principal amount prepaid constituting a prepayment price which
is designated in an amendment to this Agreement entered into on
or prior to the date of issuance of the first Series of the
Bonds.
SECTION 11.4 Termination Premium.
(a) A Participant may withdraw from Coverage pursuant
to Section 6.2 hereof or be expelled from Coverage pursuan~
to Section 6.3 hereof when the full amount of Termination
Premium shall have been deemed to have been paid to the
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Authority. The Termination Premium for a Participant shall
be determined by the Authority in an amount equal to the
sum of the following at the time of such expulsion or
withdrawal: (i) the amount that would be required to (1)
secure the pa_xrment of such Participant's Basic Premium
pursuant to Section 11.1 hereof or (2) prepay such
Participant's Basic Premium pursuant to Section 11.3 hereof
on the next date on which such prepayment may be made, as
the case may be, (ii) an amount equal to such Participant's
Allocable Proportion of the amount, if any, by which the
amount in the Debt Service Reserve Fund is less than the
Reserve Re~diremen~ and (iii) an amount equal to all Pure
Premium AdjusTments scheduled to be paid by such
Participant. Termination Premium shall be paid from, to
the extent available: (x) such Participant's Allocable
Proportion of the Debt Service Reserve Fund, and its
Allocable Proportion of Undesignated Reserves in the Claims
Payment Fund not to exceed its Allocable Proportion of
deposits made to the Claims Payment Fund from Bond proceeds
or its cash deposit into the Claims Payment Fund in lieu of
Bond proceeds hereof and (y) in.the event of withdrawal,
from voluntary premium payments by the withdrawing
Participant and, in the event of expulsion, from voluntary
premium payments by other Participants. If Undesignated
Reserves are less than a withdrawing Participant's
Allocable Proportion of deposits made to the Claims Payment
Fund from Bond proceeds or its cash deposit into the Claims
Payment Fund, such withdrawing Participant shall receive a
credit to subsequent Pure Premium Adjustments in accordance
with Schedule B hereto.
(b) The Authority, at the direction of the Governing
Board of the Authority by, majority vote, will direct the
Trustee by written instruction to use the components of
Termination Premium described in clause (i) of the
preceding paragraph to either (i) make an irrevocable
deposit pursuant to Section 11.1 hereof or (ii) redeem a
corresponding principal amount of Bonds then redeemable.
The portion of Termination Premium not required for such
deposit or prepayment will be deposited in the Debt Service
Reserve Fund or the Claims Payment Fund, as the case may be.
43 SECTION 11.5 Continuinq Premium Obliqations. In the event
of irrevocable deposit by a Participant pursuant to Section
45 11.1 hereof or prepayment (except in connection with voluntary
withdrawal or expulsion) pursuant to Section 11.3 hereof, such
47 Participant shall remain liable in each Coverage Period to,pay~
SupplemenTal Basic Premium, Administrative Premium, Pure
49 Premium and Pure Premium Adjustment. In the event that an
irrevocable deposit or prepayment by all Participants pursuant
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to Section 11.2 hereof is made and the Participants elect to
continue The pooled self-insurance program, each Participant
shall remain liable in each Coverage Period to pay
Administrative Premium, Pure Premium and Pure Premium
Adjustment. In the event of payment of Termination Premium by
or on behalf of a Participant pursuant to Section 11.4 hereof,
such Participant shall remain liable to pay Pure Premium
Adjustment assessed with respect to Coverage Periods prior to
withdrawal or expulsion, as provided in this Agreement.
ARTICLE XII
MISCELLANEOUS
SECTION 12.1 Notices. Ail notices, certificates or other
communications hereunder shall be sufficiently given ~nd shall
be deemed to have been received five business days after
deposit in the United States mail in certified form, postage
prepaid, to the Participants, the Authority or the Trustee at
the addresses set forth in Exhibit I hereto. The Authority and
the Participants, by notice given hereunder, may designate
different addresses to which subsequen~ notices, certificates
or other communications will be senS.
SECTION 12.2 Binding Effect. This Agreement shall inure
to the benefit of and shall be binding upon the Authority and
the Participants and their respective successors and assigns.
SECTION 12.3 Severability. In the event any provision of
this Agreement shall be held invalid or unenforceable by a
court of competent jurisdiction, such holding shall not
invalidate or render unenforceable any other provision hereof.
SECTION 12.4 Further Assurances and Corrective
Instruments. The Authority and the Participants agree that
they will, from time to time, execute, acknowledge and deliver,
or cause to be executed, acknowledged and delivered, such
supplements hereto and such further instruments as may
reasonably be required for correcting any inadequate or
incorrect description of the Coverage hereby provided or
intended so to be or for carrying out the expressed intention
of this Agreement.
SECTION 12.5 Execution in Counterparts. This Agreement
may be executed in any number of counterparts, each df which-
shall be an original and all of which shall constitute but ~one ~
and the same instrument; provided that for purposes of ~
perfecting the pledge and assignment of certain rights under
this Agreement to the Trustee, the counterpart of this
Agreement delivered to the Trustee shall be deemed the original.
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1 SECTION 12.6 Applicable Law. This Agreement shall be
governed by and construed in accordance with the laws of the
3 State.
5 IN WITNESS WHEREOF, the Authority has caused this Agreement
to be executed in its name by its duly authorized officers; and
7 the Participants have caused this Agreement to be executed in
their respective names by their respective duly authorized
9 officers, as of the date first above written, and such
Agreement shall be effective from the date of execution shown
11 below.
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BIG INDEPENDENT CITIES EXCESS
POOL JOINT POWERS AUTHORITY
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CITY OF HUNTINGTON BEACH
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Approved as to form:
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CITY OF OXNARD
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By.
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form:
CITY OF POMONA
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By
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1 SECTION
governed by
3 State.
12.6 Applicable Law. This Agreement shall be
and construed in accordance with the laws of the
5 tN WITNESS WHEREOF, the Authority has caused this Agreement
to be executed in its name by its duly authorized officers; and
7 the Participants have caused this Agreement to be executed in
their respective names by their respective duly authorized
9 officers, as of the date first above written, and such
Agreement shall be effective from the date of execution shown
11 below.
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POOL JOINT POWERS AUTHORITY
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By.
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form:
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CITY OF HUNTINGTON BEACH
CITY~Q~ OXNARD
/88)
CITY OF OXNARD '
By.
Mayor
CITY OF POMONA
(9/30/88)
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1 SECTION 12.6 Applicable Law. This Agreement shall be
governed by and construed in accordance with the laws of the
3 State.
5 IN WITNESS WHEREOF, the Authority has caused this Agreement
to be executed in its name by its duly authorized officers; and
7 the Participants have caused this Agreement to be executed in
their respective names by their respective duly authorized
9 officers, as of the date first above written, and such
Agreement shall be effective from the date of execution shown
11 below.
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POOL JOINT POWERS AUTHORITY
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CITY OF HUNTINGTON BEACH
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Approved as to form:
CITY OF OXNARD
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CITY OF POMONA
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Approved as to form:
7
9 Approved as to form:
CITY OF SAN BERNAPJPINO
By
CITY OF S~.AI~,TA ANA
, Executive Director
~uniei ~. Young,~ayor
ATTEST:
~yce c. Cuy ~ -
~lerk of the Council ~'~/
47
2658002/2
1
Approved as to form:
3
7
9 Approved as to form:
11
CITY OF SAN BERNARDINO
CITY OF SANTA ANA
By
47
2658002/2
1
3
5
7
9
13
15
17
19
21
23
25
27
29
31
33
35
37
39
43
EXHIBIT A
SCHEDULE OF BASIC PREMIUM PAYMENTS*
Date Interest Principal
(Auqust 1) Com~onen~ Component
45 * The obligation to pay Basic Premium will nog arise and be
effective until the Closing Date of the first series' of Bonds.
47 No series of Bonds will be issued unless, on or prior to the
respective Closing Date, this Exhibit A is amended to insert a
49 sckedule of Basic Premium payments.
A-1
1
3
EXHIBIT B
ALLOCABLE PROPORTION FOR EACH
CITY OF HUNTINGTON BEACH
C2TY OF O~NARD
CITY OF POMONA
CZTY OF SAN BERNARDINO
CITY OF SANTA A~A
PARTICIPANT
%
1 EXHIBIT C
INITIAL PARTICIPATION PREMIUM
Adminis-
7 Pure trative
Premium Premium
9
CITY OF HUNTINGTON BEACH
11 CITY OF OXNARD
CITY OF POMONA
13 CITY OF SAN BERNARDINO
CITY OF SANTA ANA
15
TOTALS
17
Total
$ 432,180 $ 20,580 $ 452,760
316,050 15,050 331,100
297,570 14,170 311,740
432,180 20,580 452,760
622,020 29,620 651,640
$2,100,000 $100,000 .$2,200,000
C-1
5
7
9
13
15
17
19
21
EXHIBIT D
SPECIAL PURE PREMIUM ADJUSTMENTS
AND ADJUSTMENT PROPORTIONS
Special Pure Premium Adjustments may be assessed with
respect to the Coverage Periods ending on July 1, 1989, 1990
and 1991 to a Participant to the extent that such Participant's
Pure Premium paid in any such Coverage Periods is less than the
Pure Premium which would have been paid in such Coverage Period
had the Pure Premium not been capped at $1.25 million with
respect to each of such Coverage Periods as provided in
Schedule A.
The corresponding Adjustment Proportion for a given
Participant will be eq//al to the Pure Premium which would have
been paid by such Participant had Pure Premium not been capped
at $1.25 million divided by the total Pure Premium which would
have been paid by all Participants had Pure Premium not been
capped at $1.25 million.
D-1
1 EXHIBIT E
3
PARTICIPANTS MAKING A CASH DEPOSIT INTO THE CLAIMS PAYMENT FUND
5
7 None
E-1
· . EXHIBIT F
MASTER MEMORANDUM OF LIABILITY COVERAGE
FOR THE
BIG INDEPENDENT CITIES EXCESS POOL JOINT POWERS AUTHORITY
Throughout this AGREEMENT, words and phrases that appear capitalized have special
meaning. They are defined in Section II -- Definitions.
In consideration of payment of the premium, the Big Independent Cities Excess Pool Joint
Powers Authority, {BICEP) hereinafter known as the Authority agrees with the respective
member CITY of BICEP as follows:
SECTION I -- COVERAGES
The Authority will pay those sums on behalf of the CITY for ULTIMATE NET LOSS in excess
of the Retained Limit stated in Item 5 of the Declarations that the CITY becomes legally
obligated to pay as damages by reason of Liability imposed by law or Liability assumed by
contract because of:
A. BODILY INJURY or PROPERTY DAMAGE: and/or
B. PERSONAL INJURY: and/or
C. PUBLIC OFFICIALS ERRORS AND OMISSIONS
as those terms are herein defined and to which this AGREEMENT applies. Included in
Authority's obligation to pay are DEFENSE COSTS failing within the definition of COVERED
ULTIMATE NET LOSS. ~ ,
SECTION II -- DEFINITIONS
· A. AGREEMENT -- means the Memorandum of Liability Coverage for the Authority.
B. AIRCRAFT -- means a vehicle designed for the transport of persons or property
principally in the air.
C. AUTOMOBILE -- means a land motor vehicle, trailer or semi-trailer.
D. BODILY INJURY -- means bodiiy injury, sickness or disease sustained by a person,
including death resulting from any of these at any time.
E. CITY -- means the entity named in the Declarations, including any and all commis-
sions, agencies, districts, Authorities, councils (including the governing councils)
or similar entities coming under the CITY's direction or control or for which the
CITY's council members sit as the governing body.
BICEP 3/9/38 F- 1
CLAIM -- means a demand against an Insured (as defined in Section IV hereof) to
recover for losses or damages within or alleged to be within the scope of this
AGREEMENT.
COVERED INDIVIDUALS -- means persons who ;re past or,resent elected or ap-
pointed officials, employees or volunteers of the CITY whether or not compen-
sated, while acting for or on behalf of the CITY, including while acting on outside
committees, commissions, agencies, districts, authorities, councils, commissions
or boards at the direction of the CITY.
COVERED ULTIMATE NET LOSS -- means an amount by which ULTIMATE NET
LOSS not covered by other available Insurance or self-insurance exceeds the Re-
tained Limit stated in Item (S), of the Declaration, such amount not in any event
however to exceed the Limit of Liability stated in item (4) of the Declarations.
DEFENSECOSTS -- means fees and expenses incurred by the Authority or an In-
sured caused by and relating to the adjustment, investigation, defense or appeal of
a claim including attorney's fees, court costs and interest on judgements accruing
after entry of judgement all within the scope of coverage afforded by this agree-
ment. DEFENSE COSTS shall not include the office expense of the Authority or
any Insured nor expenses of a claims administrator engaged by any CITY or the
Authority, except CITY DEFENSE COSTS which will be reimbursed on an agreed
flat fee per day of service to CLAIM.
INVERSE CONDEMNATION -- means a claim by any one other that an Insured that
an Insured has taken or diminished the value of land through land use restrictions
on such land or use of adjacent land or air space by an Insured, or otherwise.
K. MEMORANDUM PERIOD -- means the period stated in Item (3) of the Declara-
tions.
NUCLEAR MATERIALS -- means source material, special nuclear material, or
byproduct material. Source Ma~[erial, Special NUCLEAR MATERIAL and Byproduct
Material have the meanings given to them by the Atomic Energy Act of 1954 or in
any law amendatory thereto. ; ;
M. OCCURRENCE -- means:
1. With respect to BODILY INJURY or PROPERTY DAMAGE: an accident or
event, including injurious or repeated exposure to substantially the same con-
ditions, which results, during the memorandum period, in BODILY INJURY or
PROPERTY DAMAGE neither expected nor intended from the standpoint of
the Insured.
2. With respect to PERSONAL INJURY and PUBLIC OFFICIALS ERRORS AND
OMMISSIONS respectively: an offense described in the definitions of those
terms in this section.
N. PERSONAL INJURY -- means injury caused by or arising out of one or more of the
following offenses:
1. False arrest, detention or imprisonment, or malicious prosactuion;
2. Wrongful entry or eviction or other invasion of the right of privale occupancy;
BICEP 3/9/88 F-2
3. Publication or utterance of material that slanders or libels a person or organiza'
lion or disparages a person's or organization's goods, products or services, or
oral or wri~en publication of material that violates a person's right of privacy;
and
4. Discrimination based upon race, religion, nationality, national origin, color,
creed, sex, sexual preference, age or employment;
5. Assault and battery.
POLLUTANTS -- means any solid, liquid, gaseous, or thermal irritant or contami-
nant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste.
Waste includes materials to be recycled, reconditioned or reclaimed. The term
POLLUTANTS as used herein is not defined to mean potable water or agricultural
water or water furnished to commercial users or water used for fire suppression.
PROPERTY DAMAGE -- means:
1. Physical injury to tangible property, including all resulting loss of use to that
property; or
2. Loss of use of tangible property that is not physically injured.
PUBLIC OFFICIALS ERRORS AND OMISSIONS -- means an offense consisting of
any actual or alleged misstatement or misleading statement or act or omission by
neglect or breach of duty including misfeasance, malfeasance, or nonfeasance by
COVERED INDIVIDUALS individually or collectively in the discharge of their duties
with the CI3-Y, or any matter claimed against them solely by reason of their being
or having been public officials.
ULTIMATE NET LOSS -- means the sum for which the Insured is liable either by ad-
judication or by compromise after making proper deduction for all recoveries and
salvages, and also includes DEFENSE COSTS.
SECTION III -- DEFENSE AND SETTLEMENT
The Authority shall have the right and duty to participate in the defense of any suit against an
Insured, where such suit is likely to involve a COVERED ULTIMATE NET LOSS even if any
allegations are groundless, false or fraudulent. After the amount of the CITY's Retained Limit
has been exhausted by payment of judgements, settlements and DEFENSE COSTS, the
Authority shall pay any excess within its Limit of Liability.:
The Authority shall at its own expense, have the right to participate in the investigation,
negotiation, settlement or defense of any CLAIM or suit against any Insured when the final.
in the opinion of the Authority, such claim may result in a COVERED ULTIMATE NET LOSS:
The Insured shall fully Cooperate in all matters pertaining to such claims or proceeding.
No CLAIM shall be settled for an amount in excess of the Insured's Retained Limit without
the prior consent of the Authority.
BICEP 3/9/88 ?-3
SECTION IV
RETAINED LIMIT -- THE AUTHORITIES LIMIT OF LIABILITY
The Authorities Liability as the result of any one OCCURRENCE shall be only the ULTIMATE
NET LOSS in excess of the CITY's Retained Limit as specified in Ite~ 5 of the Declarations;
and then for an amount not exceeding the amount specified in Item (4) of the Declarations.
For the purpose of determining the Authorities Limit of Liability and the CITY's Retained
Limit, all damages arising out of continous or repeated exposure to substantially the same
general conditions shall be considered as arising out of one OCCURRENCE.
SECTION V -- COVERAGE PERIOD AND TERRITORY
Each Insured shall have coverage for all BODILY INJURY. PROPERTY DAMAGE, PUBLIC
OFFICIALS ERRORS AND OMISSIONS and PERSONAL INJURY which occur anywhere in
the world during the MEMORANDUM PERIOD.
SECTION VI -- ENTITIES OR PERSONS INSURED
The Insureds covered by this agreement are:
A. The CITY;
B. COVERED INDIVIDUALS;
MYrrh respect to any AUTOMOBILE usage, Insured does not include:
Any person or organization, or any agent or employee thereof, operating an
AUTOMOBILE sales agency, commercial repair shop, commercial service sta-
tion, commercial storage garage or commercial public parking piece, with
respect to an OCCURRENCE arising out of the operation thereof. This does not
apply to publicly owned, ~perated, or publlcly owned and leased parking
garages or lots; or . .
The owner or any lessee, other than the CITY or COVERED INDIVIDUAL, of a
hired AUTOMOBILE or any agent or employee of such owner or lessee.
Ao
SECTION VII -- EXCLUSIONS
This AGREEMENT does not apply to:
1. Any claims arising ou~ of the contaminatlon o the environment by POLLUTANTS
introduced at anytime into or upon land, the atmosphere or any watercourse or
body of water or aquifer. This exclusion applies whether or not the contamination
is introduced into the environment intentionally or accidentally or gradually or
suddenly and whether or not the insured or any other person or organization is
responsible for the contamination. This exclusion does not apply, however, to
EODILY INJURY OR PROPERTY DAMAGE caused by heat, smoke or fumes from a
hostile fire. As used in this exclusion, a hostile fire means one which Decomes un-
controllable or breaks out where it was not intended to be.
B!C~P 2~9~88 F-4
Contamination includes any unclean, unsafe or unhealthful condition either actual
or potential, which arises out of the presence in the environment of any POLLU-
TANT, whether permanent or transient.
Environment includes land. bodies of water, underground water or water table or
aquifer, the atmosphere and any other natural feature of the earth, whether or not
altered, developed or cultivated.
Any loss, cost or expense arising out of any governmental directions or reduest
that the CITY test for, monitor, clean up, remove, contain, treat, detoxify or
neutralize POLLUTANTS.
Any CLAIM for past salary or wages due because of discrimination or because of
wrongful termination or violation of civil rights of any employee or official of the
CITY;
BODILY INJURY to:
a. An employee of the CITY arising out of and ir~ the course of employment by
the CITY; or
b. The spouse, child, parent, brother or sister of that employee as a conse-
quence of actions of the employee arising out of and in the course of his/her
employment by the CITY.
This exclusion applies whether the CITY may be liable as an employer or in any
other capacity, except with respect to Liability of others assumed under contract;
Any obligation for which the CiTY or any insurance company as its insurer may be
held liable under any workers' compensation or disability benefits law or any
similar law;
Liability arising out of the ownership or operation of any hospitat or airport;
BODILY INJURY or PROPERTY DAMAGE arising out of or in connection with the
operation of any hospital, clinic, or established health care facilities owned or
operated by the CITY due to~
1. The rendering of or failure to render
A. Medical, surgical, dental, X-ray or nursing service or treatment,
or the furnishing of food or beverages in connection therewith;
B. Any service or treatment conductive to health, or of a profes-
sional nature or;
C. Any cosmetic or tonsorial service or treatment.
2. The furnishing of or dispensing of drugs or medical, dental, or surgical sup-
plies or appliances.
This exclusion shall not apply, however, to BODILY INJURY or PROPERTY
DAMAGE arising out of the performance of occupational physical examinations.
paramedics services, emergency care, or T.B. testing clinics;
Liability arising our of the rupture, bursting, overflow, or release of water from any
dam(si, etc.
9. Fines· punitive damage, s, or damage multiples such as treble damages awardable
pursuant to statute; or other applicable law.
8{CEP 3/9/88 F-5
.B.
10. PROPERTY DAMAGE to:
a. Property owned by the Insured; or
b. Property rented to. leased or in the care, custody and control of the Insured
where it has assumed the Liability for damage to or destruction of such prop-
erty, unless the Insured would have been liable in the absence of such
assumption of Liability;
c. Watercraft exceeding 26 feet in length, in the CITY's care, custody or con-
troJ;
d. AIRCRAFT
Any Liability arising out of the ownership, operation, use or maintenance of any
AIRCRAFT;
12.
Any liability arising out of the operation of any transit authority, transit system, or
public t~ansportation system owned or operated by the Insured, except a transit
system operating over non-fixed route systems such as dial-a-ride, senior citizen
transpor[ation, or handicapped transportation; and
13.
Any Liability arising out of the failure to supply or provide an adequate supply of
gas, water or electricity when such failure is a result of the inadequacy of the In-
sured's facilities to supply or produce sufficient gas, water or electricity to meet
the reasonable demand.
14.
Any Liability arising out of, or in connection with the principles of eminent do-
main, condemnation proceedings or INVERSE CONDEMNATION by whatever
name called, and whether or not Liability accrues directly against the Insured by
virtue of any agreement entered into by or on behalf of the Insured.
This exclusion shall not apply to PROPERTY DAMAGE caused by the negligence
or other fault of the Insured even though a legal theory upon which a claimant
seeks recovery is the principle of INVERSE CONDEMNATION.
This agreement does not apply under Coverage C (PUBLIC OFFICIALS ERRORS AND
OMISSIONS):
1. BODILY INJURY;
2. PROPERTY DAMAGE;
3. PERSONAL INJURY;
Benefits payable under any employee benefit plan (whether the plan is negotia-
ted, or voluntarily established by the CITY or mandated by law because of unlaw-
ful discrimination;
5. Refund of taxes, fees or assessments;
BICEP 3/9/88 F-6
10.
Liability of a COVERED INDIVIDUAL (a) arising in whole or in part out of a
COVERED INDIVIDUAL'S obtaining remuneration or financial gain to which the
COVERED INDIVIDUAL was not legally entitled or (b) arising out of the willfull vio-
lation of any al~piicable law or other regulation committed.by, or with the know-
ledge or consent of any Insured.
To any Liability arising out of estimates of probable costs or cost estimates being
exceec~ed or faulty preparation of bid specifications or plans including architec-
tural plans;
Failure to perform, or breach of, a contractual obligation;
!.Jability ir'n0osed under the Employee Retirement Income Security Act of 1974
(ERISA), as may be amended from time to time.
Liability imposed under the Consolidated Omnibus Budget Reconciliation Act of
1985 (COBRA), as may be amended from time to time.
BICEP 319188 ~'-7
Co
SECTION VIII -- CONDITIONS
PREMIUM AND AUDIT
The premium designated in the Declaration as "Deposit Premium" is a deposit premium
only.
The Authority shall be permitted but not obligated to inspect the Insured's property and
ooerations at any reasonable time. Neither the lnsured's rights to make inspections nor
the making thereof nor any report thereon shall constitute an undertaking, on behalf of
or for the benefit of the Insured or others, to determine or warrant that such property or
operations are safe. The Authority may examine the Insured's books and records at any
reasonable time during the MEMORANDUM PERIOD and extensions thereof and within
three years after the final termination of this memorandum, as far as they relate to the
subject matter of this AGREEMENT.
DUTIES IN '['HE EVENT OF AN OCCURRENCE
CITY's duty in the event of an OCCURRENCE, claim or suit:
In the event of an OCCURRENCE reasonably likely to involve a COVERED ULTI-
MATE NET LOSS written notice containing particulars sufficient to identify the
entity and also reasonably obtainable information with respect to the time, place
and circumstances thereof, and the names and addresses of the entity(s) and of
available witnesses shall be given by or for the Insured to the Authority or any of
its authorized agents as soon as practicable.
If a claim is made or suit brought against the Insured, the Insured shall be obligated
upon demand to forward tO the Authority every demand, notice, summons or
other process received by the Insured or the Insured's representative.
The Insured shall cooperate with the Authority and upon its request assist in en-
forcing any right of contribution or indemnity against any person or organization
who may be liable to the Insured because of an OCCURRENCE with respect to
which coverage is afforded under this AGREEMENT: and the Insured shall attend
hearings and trials and assist in securing and giving evidence and obtaining the at-
tendance of witnesses. The Insured shall not, except at its own cost, voluntarily
make any payment, assume any. obligation or incur any expense which is likely to
result in a~ ULTIMATE NET LOSS that exceeds the Retained Limit stated in Item
(5) of the Declarations. In the event that the amount of ULTIMATE NET LOSS be-
comes certain either through final court judgement of agreement among the In-
sured, the claimant and the Authority shall then pay ~n behalf of the Insured the
COVERED ULTIMATE NET LOSS.
BANKRUPTCY AND INSOLVENCY PROVISION
Bankruptcy or insolvency of the CITY shall not relieve the Authority of any of its ob[iga.
tJons hereunder.
OTHER INSURANCE
if cc!lectible insurance or other coverages with any joint powers Authority or other self-
funCing mechanism is available to the Insured covering a loss also covered hereunder
(whether on a primary, excess or contingent basis), such contribution shall apply to-
wards the satisfaction of the Insured's Retained Limit. The coverage hereunder shall
contribute with, such other, insurance, provided that this clause does'not apply with
rest. eot to excess insurance purchased specifically to be in excess of this AGREEMENT.
~JCE. P 3/9/88 F-8
Eo
DURATION OF AN OCCURENCE
An OCCURRENCE with a duration of more than one coverage period shall be treated as
a single OCCURENCE arising during the coverage period when the OCCURRENCE
begins.
ENDORSEMENT CONDITIONS
Notice to any agent or knowledge possessed by any agent or by any person shall not ef-
fect a waiver or change in any part of this AGREEMENT or stop the Authority from
asserting any right under the terms of this memorandum, nor shall the terms of this
AGREEMENT be waived or changed, except by endorsement issued to form a part of
this memorandum.
ACTION AGAINST THE AUTHORITY
No actions shall lie against the Authority with respect to the coverages and related pro-
visions defined in this AGREEMENT unless, as a condition precedent thereto, there
shall have been full compliance with all the terms of this AGREEMENT, nor until the
amount of the Insured's obligations to pay ~hall have been finally determined either by
judgement against the Insured after actual trial or by written agreement of the Insured,
the claimant and the Authority. Any person or organization or the representative there-
of who has secured such iudgement or written agreement shall thereafter be entitled to
recovery under this AGREEMENT to the extent of the coverage afforded by this
AGREEMENT.
No person or entity shall have any right under this AGREEMENT to join the Authority as
a party to any action against the Covered Party to determine the Insured's Liability, nor
shall the Authority be impleaded by the Insured's or its legal representative.
SUBROGATION
The Authority shall be subrogated to the extent of any payment hereunder to all the tn-
sured's rights of recovery thereof, and the Insured shall do nothing after loss to pre-
judice such right and shall do ever~hing necessary to secure such right. Any amount so
recovered shall be apportioned as follows:
The expenses of all such recovery proceedings shall be paid before any reimburse-
ments are made for the highest layer of coverage. If there is no recovery in the pro-
ceedings conducted by the Authority, it shall bear the expense thereof.
2. The highest layer of coverage shall be reimbursed first and if there be sufficient re-
coveries then the next highest layer until all recoveries are used up..
ASSIGNMENT OF INTEREST
Assignment of interest under this memorandum shall not bind the Authority unless and
until its consent is endorsed hereon.
CROSS LIABILITY
In the event of ULTIMATE NET LOSS to one or more Insureds for which another Insured
is or may be held liable, then this policy shall cover such entity or person against whom"
claim is made or may be made, the same as if separate memorandums o! coverage had
been issued to each Insured, except that the Limits of Liability for ali such Insureds shall
not exceed the Limits of Liability set forth in the memorandum declarations.
9!CE? 3/9/88 ?-9
CANCELLATION
This AGREEMENT may be cancelled by the Authority in accordance with Article VI Sec-
tion 6.3 of the Liability Risk Coverage Agreement by receipted deJivery to the Insured
CiTY au the address shown in this AGREEMENT, w?itten notice stating when not lass
than sixty days thereafter such cancellation shall be effective,' provided that, if the in-
sured fails to d'~scharGe when due any of its obligations in connection with the payment
for this AGREEMENT or any installment thereof, extension or credit, this AGREEMENT
may be cancelled by the Authority in accordance with Ar[ic{e VI Section (~.3 of the
Liability R~sk Coverage Agreement, by receipted delivery to the Insured CITY at the ad-
dress shown in the AGREEMENT, written notice when not less than ten days thereafter
such cancellation shall be effective.
The time of surrender or the effective date and hour of cance{lation stated in the notice
shall become the end of the coverage period.
BiCEP 31918B f'- 10
BIG INDEPENDENT CITIES EXCESS POOL JOINT POWERS AUTHORITY
PUBLIC ENTITY LIABILITY
DECLARATION
CERTIFICATE NO.
This will certify that the following MEMBER is covered in accordance with the terms and con-
ditions of the Master Memorandum of Public Entity Liability Coverage by the BIG INDEPEN-
DENT CITIES EXCESS POOL JOINT POWERS AUTHORITY hereinafter calied BICEP.
1 ) MEMBER CITY:
2) MAILING ADDRESS:
3)
4)
MEMORANDUM PERIOD: FROM TO
at the address of the Member as stated herein.
12:01 A.M. Standard Time
LIMIT OF LIABILITY:
$
LESS MEMBER CITY'S RETAINED LIMIT AS ULTIMATE
NET LOSS as the result of any one OCCURRENCE
because of BODILY INJURY or PROPERTY DAMAGE or
PERSONAL INJURY or PUBLIC OFFICIALS ERRORS
AND OMMISSIONS. or any combination thereof during
the AGREEMENT PERIOD.
5) MEMBER CITY'S RETAINED LIMIT:
ULTIMATE NET LOSS as the result of any one OCCUR-
RENCE because of BODILY INJURY or PERSONAL
INJ~URY or PUBLIC OFFICIALS ERRORS AND OMMIS-
S1ONS. or any combination thereof during the AGREE-
MENT PERIOD.
6) CLAIMS ADJUSTING FIRM:
7] ANNUAL DEPOSIT PREMIUM:
8) Endorsements attached to ~olicy at inception:
Countersigned by
This Declarations and Coverage(s), with Stanclarcl Provisions and Endorsements, if any,
issued to/o~71 a part thereof, co'mpletes the above.numbered Agreement. ~
9ICEP 3/9/88 F-11
EXHIBIT G
BIG INDEPENDENT CITIES EXCESS POOL
LIABILITY RISK MANAGEMENT REQUIREMENTS
Each Participant shall maintain a full time risk management employee or other risk man-
agement professional or otherwise must be able to demonstrate a sound professionally
administered risk management program. If there is no risk manager then approval is
subject to unanimous consent of the membership. The person so designated witl serve
as liason for the Part[cipant to the Authority for all matters re~ating to risk management.
(Risk management means the process of identifying, evaluating, reducing, controlling,
translating and eliminating risks through various methods such as purchasing Insur-
ance, funding claims payments, legal defense of claims, controlling losses and claims
reserves.)
Each Participant shall maintain a loss preVention program, and shall consider and act
upon all recommendations of the Authority concerning the reduction of unsafe condi-
tions. {Loss prevention means developing techniques for changing or removing condi-
tions which would be likely to cause loss.)
Each Participant shall maintain records of ctaims which provide at a minimum, the
following information by fiscal year: number of claims (open and closed); amounts
paid; amounts reserved; and the total amount incurred (allocated expenses shall be in-
cluded). If losses are capped the potential excess amount provided for all ~osses incur-
red in excess of 50% of the Retained Limit or $ 500.00 whichever is less. Loss records
will be provided for the preceding five years.
Copies of records maintained shall be submitted to the Authority as directed by the
General Manager, Liability Risk Committee. Claims Review Committee or other duly
constituted committees.
4. The Participant shall use only qualified personnel to administer its Liability claims.
5. The Participant shall litigate suits using qualified defense counsel experienced in tort
Liability. Authority retains the right to associate with the defense counsel for cases like-
ly to exceed the Participant"s retained
'i'he Participant shall use. as guidelines, the Authoritie's Liat~ility Claims Audit Control
Guidelines and shall advise its claims administrator that these standards are to be utili-
zed in the Authoritie's Liability claims audits.
The Participant shall furnish to the Authority written notice as soon as practicable of
any potential or actual claims to recover losses or damages within or alleged to be with-
in the scope of the Memorandum in accordance with the following requirements:
A. A claim or occurrence which is, or is reserved at, an amount at least equal to. 50%
of the Participant's retained limit or $500,000 whichever is less;
A claim or occurrence which is the result of an incident involving potential joint
and several Liability, if reserved at 50% of the Participant's retained limit or
$ 500,000 whichever ~s less;
BICEP 3/9/8B G-I
C, A claim or occurrence which is the result of incidents involving paralysis, or brain
damage, dismemberment or death;
An occurrence which results in two or more claims from the same incident if
reserved in total at 50% of the Participant's retained limit or $500,000 which-
ever is less.
A claims administration audit utilizing the Authoritie's Liability Claims Quality Control
Guidelines shall be performed, at a minimum, of once every three years, or more often
at the sole discretion of the Authority, particularly if:
A. There is an unusual fluctuation or increase in the Participant's claims experience
or number of claims;
There is a change of Liability claims administration firms; or in-house claims/litiga-
tion management;
The Participant is a new Participant,
In most cases an audit will be performed on an "as needed" basis, but at least within
twelve months of the above-mentioned event(s).
The claims audit shall be performed by a firm selected by the Authority. Recommenda-
tions made in the claims audit shall be addressed by the Participant and a written re-
sponse outlining a program for corrective action shall be furnished to the Authority
within sixty days of receipt of the audit.
The Participant shall obtain an actuarial study performed by a Fellow of the Casualty
Actuarial Society (FCAS) once every three years, or more often if indicated. Based
upon the Actuarial recommendations, the Participant shall maintain reserves and make
funding contributions equal to or exceeding the 'Marginally Acceptable" ranges of the
actuarial report.
10. The Participant shall furnish an annual audited financial statement to the Authority.
NOTICES
The Authority shall furnish the Participant written notification of the Participant's
failure to meet any of the above-mentioned guidelines.
The Participant shall furnish a written response outlining a program for corrective ac-
tion. within thirty days of receipt of the Authoritie's notification, Extensions re. ay be
granted under extenuating circumstances, at the discretion of the Authority.
After approval by the Authority of the Participant's corrective program, the Participant
shall implement the approved program within sixty days. The Participant may request
an additional sixty days from the Authority.
BICEP 3/9/t38 (;-2
II.
SANCTIONS
Failure to comply with these guidelines and a failure to cure such noncompliance as
described in NOTICES Section 2 or 3 above (after notice as described in (1) above)
shall constitute an event of default in default accordance with the Liability Risk
Coverage Agreement.
LIABILITY CLA)MS QUALITY CONTROL GUIDELINES
CLAIMS INVESTIGATION
A. Factual investigation within thirty days of the Participant's knowledge of the
Claim, including statements from participants and witnesses. (Answer questions
who, what, where, when and why.)
B. Develop information regarding Liability issues, including immunities, comparative
negligence, joint tortfeasors, and joint and several Liability.
C. Begin to develop information on damages.
1. Property damage. ,
2. Nature and extent of injuries.
3. Medical costs.
4. Lost wages.
5. Other damages.
D. Obtain and review contracts that may be in effect relating to specific a~cidents.
1. Hold harmless indemnity agreements.
Additional insured requirements.
3. Other applicable insurance.
E. Obtain defective products and/or other evidence, and hold if at all possible, or at
least locate where it is being held.
Obtain product information for the file.
F. Utilize experts appropriately in cases.
G. Maintain membership in Claims Index Bureau.
1. Report all claims to the Claims Index Bureau.
2. Follow up on Claims Index Bureau information.
H. Arrange appraisals for damaged property.
I. Timely report to Authority and/or excess carrier.
TORT CLAIM REQUIREMENTS
All n~ices (pertaining to claims insufficiency, returning late claims, claims rejections,
etc.) shall be timely given in accordance with the relevant provisions of applicable law.
BICEP 3/9/88 (;-3
IlL
DOCUMENTATION
A. Reasonable reserves shall be established based upon facts known, within thirty
days of receipt of investigative report. Expenses shall be included.
B. File shall contain documentation necessary to support the decisions made with
respect to claims disposition.
C. Photos, diagrams, plans, contracts, medical and law enforcement reports, and
other relevant documents shall be deposited in the claims file in a timely fashion.
IV. CASE SETI'LEMENT FACTORS
A. Reasonable settlement considering value of damages, injury, and liability.
B. Timeliness of settlement.
C. Contributions from joint tortfeasors considered.
D. Documents evaluating and authorizing settlements.
E. Appropriate releases secured.
V. UTIGATED FILES
A. Defense attorney evaluation in file.
B. Proper follow-up for investigation requested by defense attorney.
C. Actions to monitor claim defense expenses.
D. Timely recommendations from defense firms re,larding settlements and trial
preparation.
E. Results and total expenses documented.
BICEP 3/9/88 (;-4
1 EXHIBIT H
3
FORM OF WRITTEN REQUISITION
5 [INSERT NAME AND ADDRESS OF TRUSTEE]
7 RE:
9
11
13
Disbursement from the Claims Payment Fund pursuant to
Section 3.02 of the Trust Indenture, dated as of
1, 1988 (the "Indenture"), by and between
, as Trustee (the "Trustee") and Big
Independent cities Excess Pool Joint Powers Authority,
joint exercise of powers authority organized under
California law (the "Authority'~)
15
17
19
21
23
25
27
29
31
33
35
37
39
41
43
45
47
49
REQUISITION NO.
You are hereby~ instructed to pay to th~ undersigned
Participant, or to at
$ as a Settlement from the Claims Payment Fund
as provided in Section 3.4 of the Liability Risk Coverage
Agreement dated as of 1, 1988, among the
Participants named therein and the Authority (the "Coverage
Agreement"). This amount has been ~..cu_~es' within the scope of
Coverage (as defined in the Coverage Agreement), has been
settled or finally adjudicated in accordance with the terms of
the Coverage Agreement and the Memorand'~m of Coverage appended
thereto and has not been the basis of any previous
disbursements.
Attached hereto is a certified copy of the
[settlement/judgment] and itemized list of costs and expenses
in connection with the Settlement.
[In the case of disbursement to pay a Pure Premium
Adjustment refund, the following form shall be used: You are
hereby instructed to pay to the Authority the amount of
$ to be paid to one or more of the Participants as
a Pure Premium Adjustment refund. Such amount has been
computed in accordance with Section 4.5 of the Liability Risk
Coverage Agreement dated as of 1~ 1988 among the
Participants named therein and the Authority and is properly
payable at this time.]
lin the case of withdrawal or expulsion of a Participant,
the following form shall be used: You are hereby instructed to
pay to the undersigned Authority the Allocable Share of
as Participant, as determined in accordance With
Section 5.2 of the Liability Risk Coverage Agreement dated as
of 1, 1988 among the Participants named therein
and the Authority, for safekeeping in a segregated account by
H-1
1
3
5
7
9
11
13
15
17
19
21
23
25
27
29
31
the Authority on behalf of the Participant, until the earliest
practicable date when it can be returned to the Participant,
all as described in such Agreement.]
[In the case of disbursement to pay for the purchase of
commercial insurance or reinsurance, the following form shall
be used: You are hereby instructed to pay
Attached hereto is a copy of evidence of such insurance
policy. The Authority certifies that all amounts disbursed
hereunder will be used in accordance with Section 3.5 of the
Coverage Agreement.]
lin the case of disbursement for the payments of amounts
due on an interest rate swap agreement .]
Very truly yours,
By
Participant Representative
RECEIPT ACKNOWLEDGED:
By_
Authority Representative
as Trustee
H-2
1 EXHIBIT I
NOTICE ADDRESSES
5
7
9
11
13
15
17
If to the
Authority:
If to the
ParTicipants:
CITY OF i~o~fINGTON BEACH
2000 Main Stree5
Huntington Beach, California 92648
P. O. Box 190
Huntington Beach, California 92648
Attention: Risk Manager
19
21
23
25
27
29
31
33
35
37
39
CITY OF OXNB_RD
305 West Third Street
Oxnard, California 93030
Attention: Risk Manager
CITY OF POMONA
505 So. Garey Avenue
Pomona, California 91766
P. O. Box 660
Pomona, California 91769
Attention: Risk Manager
CITY OF SAN BE~NB_RDINO
300 North "D" Street
San Bernardino, California 92418
Attention: Depusy City Administrator
CITY OF S~A B_~A
20 Civic Center Plaza
Santa Ana, California 92701
Attention: Risk Manager
I-1
SCHEDULE A
3
7
9
11
13
17
~ETHODOLOGY FOR CALCULATING TOTAL PURE PREMIUM
?he Actuary should consider the loss experience and
exposures of the Participants as well as the experience of
cther California cities, other public agencies, and other
risks, as appropriate. The Actuary should consider, as
appropriate, the experience of the great many claims for small
amounts, tke less frequent claims for large amounts, and the
highly infrequent claims for very large amounts.
The Actuary should estimate the frequency and average cost
of claims, unless it is more appropriate to deal directly with
~he loss rate itself. Additional analyses should be~considered
when appropriate.
19 In particular the Actuary should use models of the loss
process whenever doing so would improve the accuracy of the
21 result in a meaningful way.
23 The Actuary should clearly state the assumptions regarding
loss development, the trend in frequency of claims and the
25 average cost per claim, the payout of losses, ~he interest rate
to be earned on the Pure Premiums, and other appropriate
27 factors that underlie the calculations.
29 The Actuary should consider the impact of changes in the
claim environment, including, but not limited 5o, what the data
31 indicates about loss cost inflation; changes in the cost of
living (e.g., CPI); changes in the observed frequency of
33 claims; changes in litigation, rates; changes in court
precedents; changes in the legislative environment; and changes
35 in exposures or hazards.
37 The Actuary shall recommend a Total Pure Premium that meets
the criteria set forth in Article IV, Section 4.4(e) of this
39 Agreement.
SA-1
1
SCHEDULE B
3
FOrmULA FOR CALCULATING PURE PREMIUM ADJUSTMENT
5 STEP 1 Develop Data Inputs
7 A =
Case Reserves and Settlements paid to date.
9 B =
Pure Premium.
11 I =
13
T =
15
Z =
17
C =
19
21
Pure Premium Proportion or Adjustment Proportion
applicable pursuant to Section 4.5(B)).
Special Pure Premium Adjustments.
Pure Premium Adjustments.
Total investment income (including any profit or
under an interest rate swap agreement) for all
Coverage Periods on the Claims Payment Fund not
transferred to the Basic Premium Payment Fund.
(as
loss
23 x =
25
y=
27
p=
29
31
Axp =
33
a given Coverage Period; x' = the current and two
preceding Coverage Periods.
a given Participant.
a given risk sharing pool (e.g. SIR to $5,000,000;
5,000,000 to 25,000,000); provided that when all
Participant are in all pools, p = one pool.
Case Reserves and Settlements paid to date (A) for
given Coverage Period (x) for a given pool (p).
35 Bxyp =
37
Pure Premium (B) for a given Participant (y) for a
given Coverage Period (x) for a given pool (p); Byp is
the sum of Bxyp over all Coverage Periods.
39 Ixyp =
41
43
45
Typ =
47
49
Pure Premium Proportion or Adjustment Proportion (as
applicable pursuant to Section 4.5(B')), (I), for a
given Coverage Period (x) (which must be a Coverage
Period in which a given Participant participated in
the Program), for a given Participant (y), for a given
pool (p).
Special Pure Premium Adjustments collected,' refunded
or scheduled to be collected (T) for a given
Participant (y) for a given pool; Txyp means Typ
allocated to a given Coverage Period (x).
SB-1
1 Zyp=
3
5
Cy =
7
STEP 2
9
Pure Premium Adjustments collected, refunded or
scheduled to be collected (Z) for a given Participant
(y) for a given pool (p); Zxyp means Zyp allocated to
a given Coverage Period (x).
C times (the sum of By divided by the sum of B).
11 Adjustment Re_cfuired for a given Participant
Determine Incremental Increase in Amount of Pure Premium
(y).
13 Qsyp =
15
Incremental increase to Pure Premium Adjustment for
current Coverage Period (s) for a given pool (p) for
given Participant (y).
17 Dxyp =
19
21
Eyp =
25
Axp times (Ixyp); Dyp is equal to the sum of Dxyp for
all Coverage Periods; Dx'yp is equal to the sum of
Dxyp for the current and two preceding Coverage
Periods.
current Coverage Period.
(Dyp minus Dx'yp) minus (Byp minus Bx'yp plus Typ plus
Zyp minus Zx'yp plus Cy).
27 Ex'y]) =
29
31
If Dxyp is more than Bxyp_ plus Txyp plus Zxyp in any
of the current or two preceding Coverage Periods, then
Ex'yp is equal to the sum of Dxyp minus Bxyp minus
Txyp minus Zxyp for those years in which Dxyp is more
than Bxyp plus Txyp plus Zxyp.
33 TEST 1
35
If Eyp plus Ex'yp is greater than or equal to 0, then Qsyp
37 is equal to the sum of Eyp plus Ex'yp divided by five for next
five succeeding Coverage Periods (except as provided in
39 Sections 4.05(d) and 4.6 hereof).
41 TEST 2
43
45
47
If Eyp_ plus Ex'yp is less than or equal to 0, then Qsyp
equal to o. Skip to Test 2 of Step 3.
STEP 3
Calculate Pure Premium Adjustment for current Coverage
49 Period (s)
is
SB-2
1Rs_%-p = Pure Premium Adjustment (R) assessment for the current
Coverage Period (s) for a given pool (p), for a given
3 Participant (y). This equals the sum of Qyp for last
four Coverage Periods plus Qsyp.
Rsy = ?oual Pure Premium Adjustment to be levied for a given
7 Participan~ for the current Coverage Period.
9 T~_Si 1
11 if the sum of Rsyp for all pools for a given Participant is
mcre than or equal to zero, then Rsy is equal to the sum of
13 Rsyp for all pools for a given Participant.
15 T~_-ST 2
17 If E~rp_ plus Ex'yp was less than zero in Test 2 of Step 2,
above, then Rsy is equal to E~rp plus Ex'y? plus the sum of Qsyp
19 for The last four Coverage Periods, provided, as follows:
21
23
25
27
1)
The maximum Pure Premium Adjustment refund paid
in any Coverage Period shall not exceed 50% of
~he Pure Premium and Pure Premium Adjustment
assessments to be paid by the Participant in such
Coverage Period (or, with respect to withdrawn
Participants, the last Coverage Year of
participasion).
To the extent Eyp plus Ex'yp includes payment of
Special Pure Premium Adjustments (Ty-p), refunds
of such Special Pure Premium Adjustments shall be
further governed by Section 4.6.
29 2)
31
33
With respect to a Participant which has previously
35 withdrawn from the Program, a credit to or refund of Pure
Premium Adjustments will be provided in an amount equal to the
37 amount by which such Participant's Allocable Proportion of the
initial deposits from Bond proceeds (or its cash deposit) to
39 the Claims Payment Fund and Debt Service Reserve Fund exceeded
its Allocable Proportion of the UndesigDated Reserves in the
41 Claims Payment Fund and the Debt Service Reserve Fund at the
time of withdrawal. Such credit will be made on a pro rata
43 basis from ~he Pure Premium Adjustment assessment installments
as sckeduied at the time of withdrawal.
SB-3
CERTIFICATE NO.
ISSUE DATE (MMIDDIYY)
----.- I
CPEIA-GL2-132 CERTIFICATE OF COVERAGE 07/19/05
THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS
CSAC Excess UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AMEND. EXTEND OR ALTER
THE COVERAGE AFFORDED BELOW.
Insurance Authority
CIO DRIVER ALLIANT INSURANCE SERVICES, INC.
P.O. BOX 6450 COVERAGE
NEWPORT BEACH, CA 92658-6450 AFFORDED BY A - CSAC Excess Insurance Authority
LICENSE #OC36B61
PHONE (949) 756-0271/ FAX (949) 756-2713 COVERAGE B
AFFORDED BY -
CPEIA MEMBER: A- i'lSi -0'10 COVERAGE
BIG INDEPENDENT CITIES EXCESS POOL (BICEP) AFFORDED BY C -
AND ITS MEMBERS CITY OF SANTA ANA
ATTN: ROSA FLORES COVERAGE 0
AFFORDED BY -
20 CIVIC CENTER PLAZA, M-28, BOX 1988
SANTA ANA, CA 92702-1988 COVERAGE E
AFFORDED BY -
Coverages
THIS IS TO CERT!FY THAT THE MEMORANDUMS OF COVERAGE LISTED BE~OW HAVE BEEN ISSUED TO THE MEMBER NAMED
ABOVE FOR THE PERIOD INDICATED, NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR
OTHER DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAYBE ISSUED OR MAY PERTAIN. THE COVERAGE AFFORDED
BY THE MEMORANDUMS DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS, EXCLUSIONS, AND CONDITIONS OF SUCH
MEMORANDUMS.
CO TYPE OF COVERAGE MEMORANDUM COVERAGE EFFECTIVE COVERAGE EXPIRATION LIABILITY LIMITS
LTR NUMBER DATE (MM/DDIYY) DATE (MMIDDIYY)
~ Excess General Liability Member: Each Occurrence
A Excess Auto Liability CPEIA-03-GL2-17 07/01/05 07/01/16 Self-Insured
129 Excess Errors & Omissions Master: Retention $2.000,000
EIA-03-GL2-00
OTHER
Al
Description of Operations/LocationsNehicles/Speclalltems:
AS RESPECTS LICENSE AGREEMENT FOR USE OF PREMISES.
THE UNITED STATES OF AMERICA (DEPARTMENT OF THE NAVY) AND THE U. S. MARINE CORPS ARE ADDED AS ADDITIONAL
INSUREDS IN OPERATIONS OF THE POLICY HOLDER AT OR FORM THE PREMISES LICENSED FROM THE UNITED STATES.
APPROVU) i {) ~ e,
it/i.. '/ r //z_ - ...
-
, ..' ~,; ;~~Uation
Certificate Holder ~ 'tH'! \lll
,~c. ,. I SH91,J1.p ANY OF THE ABOVE DESCRIBED MEMORANDUMS BE CANCELLED BEFORE THE
i'<..\)I"l,-if1!( ; ~ "EXPIRATlC)N DATE THEREOF, THE ISSUING COMPANY WILL ENDEAVOR TO MAIL 30 DAYS WRITIEN
COMMANDING GENERAL NOTICE TO THE CERTIFICATE HOLDER NAMED TO THE LEFT. BUT FAILURE TO MAll SUCH NOTICE
, SHAll IMPOSE NO OBUGATION OR LIABILITY OF ANY KIND UPON THE COMPANY, ITS AGENTS OR
MARINE CORPS BASE REPRESENTATIVES
AUTHORIZED REPRESENTATIVE
CAMP PENDLETON, CA 92099 ~~-~-
C -=>
CSAC . EXCESS INSURANCE AUTHORITY
. .
ENDORSEMENT NO. U-1 Revised
CSAC EXCESS INSURANCE AUTHORITY
EXCESS LIABILITY
ADDITIONAL COVERED PARTY AMENDATORY ENDORSEMENT
It is agreed that the ''Covered Party, Covered Persons or Entities" section of the Memorandum is amended
to include the person or organization named on the certificate of coverage, but only with respect to liability
arising out of operations performed by or on behalf of the Member or such person or organization so
designated,
Coverage provided under this endorsement is limited to the lesser of the limits stated in Items 2A. and 28, of
the Declarations and the minimum limits required in the contract.
ADDITIONAL COVERED PARTY:
SEE CERTIFICATE ON FILE WITH THE AUTHORITY
AS RESPECTS:
SEE CERTIFICATE ON FILE WITH THE AUTHORITY
It is further agreed that nothing herein shall act to increase the Authority's limit of liability.
This endorsement is part of the Memorandum of Coverage and takes effect on the effective date of
the Memorandum of Coverage unless another effective date is shown below. All other terms and
conditions remain unchanged.
Effective Date:
Memorandum No.: EIA-03-GL2-00
Issued To:
ALL MEMBERS
Date:
Julv S. 2005
'[)' ',t," rORi\/1
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;lUi.! StItt ShG~Llj'
;'.1.;1.,11: City Attnrn,~\