AFFM » Topics » Article VIII - Loss in Excess of Policy Limits/Extra Contractual Obligations
This excerpt taken from the AFFM 10-K filed Mar 17, 2008.
Article VIII - Loss in Excess of Policy Limits/Extra Contractual Obligations
In the event the Company pays or is held liable to pay an amount of loss in excess of its policy limit, but otherwise within the terms of its policy (hereinafter
called loss in excess of policy limits) or any punitive, exemplary, compensatory or consequential damages, other than loss in excess of policy limits (hereinafter called extra contractual obligations) because of alleged or
actual bad faith, negligence or fraud on its part in rejecting an offer of settlement within policy limits, or in the preparation of the defense or in the trial of an action against its insured or reinsured or in the preparation or prosecution of an
appeal consequent upon such an action, or in otherwise handling a claim under a policy subject to this Contract, loss in excess of policy limits and/or extra contractual obligations shall be added to the Companys loss, if any, under the policy
involved, and the sum thereof (not exceeding, however, $1,000,000 each claim or $3,000,000 in the aggregate as respects each underwriting year) shall be subject to the provisions of the Retention and Limit Article. For the purposes of this Article,
all claims associated with a certified class action shall be deemed to constitute one claim. In no event shall coverage be provided for loss adjustment expense associated with loss in excess of policy limits and/or extra contractual obligations.
An extra contractual obligation shall be deemed to have occurred on the same date as the loss covered or alleged to be covered under the policy.
Notwithstanding anything stated herein, this Contract shall not apply to any loss in excess of policy limits or any extra contractual obligation incurred by the
Company as a result of any fraudulent and/or criminal act by any officer or director of the Company acting individually or collectively or in collusion with any individual or corporation or any other organization or party involved in the
presentation, defense or settlement of any claim covered hereunder.
Recoveries from any form of reinsurance which protects the Company against claims the subject matter of this Article shall inure to the benefit of this Contract.
If any provision of this Article shall be rendered illegal or unenforceable by the laws, regulations or public policy of any state, such provision shall be
considered void in such state, but this shall not affect the validity or enforceability of any other provision of this Contract or the enforceability of such provision in any other jurisdiction.
Savings Clause (Applicable only if the Subscribing Reinsurer is domiciled in the State of New York): In no event shall coverage be provided to the extent that
such coverage is not permitted under New York law.
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