NEW YORK LIQUIDATION BUREAU ON BEHALF OF THE LIQUIDATOR OF COSMOPOLITAN MUTUAL INSURANCE COMPANY AND UNION INDEMNITY INSURANCE COMPANY OF NEW YORK

Transcription

1 INVITATION FOR BID NEW YORK LIQUIDATION BUREAU ON BEHALF OF THE LIQUIDATOR OF COSMOPOLITAN MUTUAL INSURANCE COMPANY AND UNION INDEMNITY INSURANCE COMPANY OF NEW YORK Workers Compensation Insurance Assumption Agreement Bid Due Date: August 29, 2014 Bid Delivery Location and Additional Information: Kimara Patton Chief Compliance Officer New York Liquidation Bureau 110 William Street New York, New York 10038

2 INFORMATION FOR BID NEW YORK LIQUIDATION BUREAU ON BEHALF OF THE LIQUIDATOR OF COSMOPOLITAN MUTUAL INSURANCE COMPANY I. INTRODUCTION A. Background B. Purpose C. Claims Information D. Definitions E. Claims Files/Data Workers Compensation Insurance Assumption Agreement Table of Contents II. III. IV. BIDDER QUALIFICATIONS BIDDER REQUIREMENTS SCOPE OF SERVICES TO BE PROVIDED V. ADMINISTRATIVE SPECIFICATIONS A. Issuing Office B. Response Date C. Tentative Timetable D. Questions Regarding this IFB E. Bid Submission F. The Liquidator s Rights in Awarding the Policies G. Agreement Term H. Incurred Costs I. Disclosure of Proposal Contents J. News Releases K. Non-Endorsement VI. VII. VIII. AWARD PAYMENT METHOD AND FUNDING ATTACHMENTS A. Appendix A - Non Disclosure Form B. Appendix B - Assumption Agreements C. Appendix C - Bidder Quote Sheets D. Appendix D - Example of Required Pages of Bidders Annual Statement E. Appendix E - Post Transaction Reconciliation F. Appendix F - Third Party Administrator (TPA) Transition Schedule i

3 I. INTRODUCTION A. Background The New York Liquidation Bureau ( NYLB ) carries out the duties of the Superintendent of Financial Services of the State of New York ( Superintendent ) in his capacity as the liquidator of insolvent domestic insurance companies ( Domestic Estate ), under New York Insurance Law ( Insurance Law ) Article 74. For each Domestic Estate, the Superintendent is appointed liquidator by the Supreme Court of the State of New York. On the liquidator s behalf and subject to court oversight, the NYLB marshals and maximizes the assets and resolves the liabilities of the insurer in order to liquidate the Domestic Estate. Ultimately, the assets of the Domestic Estate are distributed to policyholders, claimants and creditors in accordance with statutory priorities. By court order, filed October 24, 1980, a liquidation proceeding was commenced for Cosmopolitan Mutual Insurance Company ( Cosmopolitan ) and the Superintendent was appointed the liquidator of Cosmopolitan. Similarly, by court order, filed July 16, 1985, a liquidation proceeding was commenced for Union Indemnity Insurance Company of New York ( Union ) and the Superintendent was appointed the liquidator of Union. (Hereafter, the term Liquidator refers to the Superintendent in his capacity as the liquidator of Cosmopolitan, Union or both, as the context requires.) Cosmopolitan and Union were licensed to provide multiple types of insurance, including workers compensation insurance. Workers compensation insurance includes the following benefits: weekly cash payments and the cost of full medical treatment, including rehabilitation, for covered employees who become disabled as a result of a disease or injury connected with their employment. Benefits may also be paid to qualified dependents of a worker who died as a result of a compensable injury or illness. Following the commencement of Cosmopolitan s and Union s liquidations, their insurance obligations under workers compensation policies in respect of which claimants were entitled to benefits under New York s workers compensation law ( New York Policies or New York Policy ) have been assumed by the New York Workers Compensation Security Fund (the WC Fund ). In order to ameliorate the impact of an authorized insurer s insolvency, the WC Fund is available to pay in respect of the New York Policy insurance obligations of an insolvent carrier. During the course of the liquidation of Cosmopolitan, the Liquidator has resolved nearly all of Cosmopolitan s workers compensation obligations. Approximately 100 New York Policy claims remain outstanding in the Cosmopolitan proceeding. Likewise, the Liquidator has resolved all but two of Union s New York Policy claims. In an effort to conclude the Cosmopolitan and Union liquidation proceedings and facilitate the distribution of the estate s remaining assets to its policyholders, claimants and other creditors, the NYLB is publishing this Invitation for Bid ( IFB ) and proposes to execute two workers compensation assumption agreements ( Assumption Agreements ). The intent of the Assumption Agreements are to allow Cosmopolitan and Union to satisfy their long-term New York Policies liabilities to their insureds by transferring these liabilities to a carrier authorized to provide workers compensation insurance in the State of New York. The Assumption Agreements will novate Cosmopolitan s and Union s New York Policies. From the effective

4 date of the Assumption Agreements, neither Cosmopolitan, Union, nor the WC Fund shall have any further liability under the New York Policies assumed. The execution and satisfaction of the obligations under the Assumption Agreements are subject to the approval of the courts which oversee Cosmopolitan s and Union s liquidation proceedings ( Supervising Court ). After a bid is accepted, subject to all terms of this IFB and the Assumption Agreements, the NYLB will prepare and submit to the Supervising Courts applications for the approval of the entry into and performance of the Assumption Agreements ( Court Approval ). The Court Approval is an unwaivable condition precedent to the Liquidator s obligation under the Assumption Agreements. B. Purpose The Liquidator desires to enter into an Assumption Agreement for each of Cosmopolitan and Union pursuant to which a workers compensation insurance carrier, authorized in New York, shall assume all New York Policies liabilities arising out of policies of insurance which are the obligation of each of Cosmopolitan and Union. C. Claims Information Cosmopolitan issued workers compensation insurance policies, the last of which ceased to be in-force as of January 1, Cosmopolitan issued 648 New York Policies. As of July 14, 2014, there are approximately 102 open claims. The following is a breakdown of the open claims: Total number of open indemnity cases: 102 Total number of medical cases only: 0 Total number of open employer liability cases: 0 The number of continuing payment cases (bi-weekly indemnity): 102 The number of closed cases: 546 The number of cases receiving Section 15-8 reimbursement: 24 The average monthly claims expenses for Cosmopolitan s claims for the last twelve months are approximately: GROSS Indemnity Payments $36,363 Medical Payments $2,976 Allocated Expenses $4,916 Union issued workers compensation insurance policies, the last of which ceased to be in-force as of August 17, Union issued 24 New York Policies. At the present time, there are approximately 2 open claims. 2

5 The following is a breakdown of the open claims: Total number of open indemnity cases: 2 Total number of medical cases only: 0 Total number of open employer liability cases: 0 The number of continuing payment cases (bi-weekly indemnity): 2 The number of closed cases: 22 The number of cases receiving Section 15-8 reimbursement: 1 The average monthly claims expenses for Union s claims for the last twelve months are approximately: GROSS Indemnity Payments $861 Medical Payments $29 Allocated Expenses $135 Loss runs, specific policies, as requested, and access to claims files regarding Cosmopolitan and Union will be supplied once the non-disclosure agreement (Appendix A) has been submitted to the NYLB. The New York Policies of Cosmopolitan and Union will be transferred on a gross basis, meaning that reinsurance available with respect to such New York Policies will not be transferred to the assuming carrier. D. Definitions The term Bidder in this IFB shall mean those companies who respond to this IFB. The term Carrier in this IFB shall mean the selected Bidder whose name and principal address appear on the proposal and signature page. The term Proposed Bidder in this IFB shall mean a company reviewing this IFB, which may or may not become a Bidder. E. Claims Files/Data All of the claims files are currently maintained by a third-party administrator ( TPA ). The current TPA utilizes a computerized system for claims information. The Carrier must incur the cost for all manual or electronic data conversion if an alternate TPA is to be used by the Carrier. Once the bid is awarded, a preliminary transfer schedule will be established. This will include the transfer of all relevant case materials in paper and electronic format. In addition, if the claims are to be transferred to the Carrier s TPA, the current TPA is required to manage the claims for 30 days post-transfer or as otherwise agreed. A transition schedule is attached as Appendix F. 3

6 II. BIDDER QUALIFICATIONS This IFB seeks to resolve the liabilities of Cosmopolitan and Union. All Bidders must submit a bid for each of the Cosmopolitan and Union New York Policies. To be eligible to bid on this contract, a Proposed Bidder must meet each of the following mandatory requirements: a. A Proposed Bidder must be the New York State Insurance Fund or an insurance company licensed to write workers compensation coverage in New York State and rated A minus or better by A.M. Best for the prior three years and continuing to provide such insurance; b. A Proposed Bidder must have been writing direct workers compensation business (primary and/or excess) in New York State (as shown in the Annual Statement, Statutory Page 14 for New York, line 16 and line 17.3) for the past three years; c. A Proposed Bidder has an RBC ratio of 200% or higher in the year prior to the release of this IFB. The RBC ratio is computed as the ratio of line 28 divided by line 29 as shown in the Annual Statement, Five-Year Historical Data; d. The sum of: i) the P r o p o s ed Bidder s net booked L&LAE reserves, as shown in the Annual Statement, Page 3, line 1 plus line 3 and ii) Cosmopolitan s nominal total liability as of December 31, 2013 of approximately $7.08 million for workers compensation is not more than 300% of the Proposed Bidder s surplus as of the most recent year end, as reflected in the Annual Statement, Page 3, line 37. Separately, the sum of: i) the Proposed Bidder s net booked L&LAE reserves, as shown in the Annual Statement, Page 3, line 1 plus line 3 and ii) Union s nominal total liability as of December 31, 2013 of approximately $415,000 for workers compensation is not more than 300% of the Proposed Bidder s surplus as of the most recent year end, as reflected in the Annual Statement, Page 3, line 37. In the event the Proposed Bidder does not meet this criteria for either of Cosmopolitan or Union, surplus as of the most recent year end may be increased through an additional capital contribution by the Proposed Bidder s parent company to meet this criteria prior to the execution of the Assumption Agreement; and e. A Proposed Bidder must execute a Non-Disclosure Agreement in the form of Appendix A hereto, prior to being provided access to the relevant claims material and data. III. BIDDER RESPONSIBILITIES In accordance with the Tentative Timetable set out in Part V.C. below, the Bidder must submit the following: a. a cover letter; 4

7 b. quotes in respect of Cosmopolitan and Union in the form set forth in the Bidder Quotes Sheets (see Appendix C). All quotes must have an expiration date of greater than 90 days from submission date; c. the following pages of the most recent Annual Statement submitted to DFS: i) Statutory Page 14 for New York; ii) Page 3; and iii) Page 17 - Five Year Historical Data (see Appendix D). Upon the NYLB s selection of the Carrier, the NYLB will notify the Carrier and the Carrier and the NYLB will make such alteration to the form of Assumption Agreements as are necessary to identify the Carrier and the premium amount (see Appendix B). As promptly as practicable after the execution of the Assumption Agreements, the NYLB will apply, by orders to show cause, to the Supervising Court for the Court Approval. As promptly as practicable, but not later than the dates set forth in the orders to show cause, the Carrier will provide notice of the orders to show cause to the entities whose New York Policies will be assumed. Within 60 days of the effective dates of the Assumption Agreements, the Carrier will perform a reconciliation with the TPA in order to reimburse the Liquidator for payments made by the TPA between the effective date of the Assumption Agreements and the Transition Date (defined in Appendix E). Payments for claims and other related expenses, including administration fees, will be reimbursed as described in the Post Transaction Reconciliation Sample (see Appendix E). The relevant dates for each Assumption Agreement may be different depending upon the dates on which the requisite approvals are received. IV. SCOPE OF SERVICES TO BE PROVIDED The terms and conditions of the Assumption Agreements are contained in Appendix B. All of the terms and conditions of this IFB must be strictly complied with and only minor variations with respect to the style of Appendix B, will be allowed. V. ADMINISTRATIVE SPECIFICATIONS A. Issuing Office The NYLB s representative, Kimara Patton, Chief Compliance Officer, is the sole point of contact at the NYLB for matters related to this IFB. All bids responding to this IFB must be submitted to: B. Response Date Kimara Patton Chief Compliance Officer New York Liquidation Bureau 110 William Street New York, NY Bids may be submitted in response to this IFB until 2:00pm on August 29, Faxed or 5

8 ed bids will not be accepted. Late and incomplete bids will not be considered. C. Tentative Timetable The NYLB reserves the right, in its sole discretion, to modify any event, time, or date in the IFB Calendar detailed below. The NYLB will notify all Bidders of any changes to the IFB Calendar. Event Date Time 1 Release of IFB July 15, :00 PM 2 Proposed Bidders submit a cover letter and financial information ASAP 3 NYLB releases all detailed claims data and permits access to TPA and claims upon receipt of Non- Disclosure Agreement ASAP 4 Written Questions Due From Bidders August 4, :00 PM 5 Official Response to Bidders Questions Due August 14, :00 PM 6 Bidder Submits Final Bidder Quote Sheet August 29, :00 PM 7 Selection of Carrier September 15, :00PM 8 Submission of Application for Court Approval ASAP 9 Reconciliation of Payments Within 60 days of Effective Date of Assumption Agreement D. Questions Regarding this IFB All questions regarding this IFB, supporting documentation or other matters related to this IFB must be submitted in writing to the NYLB at 110 William Street, New York, New York, to the attention of Kimara Patton, or via kpatton@nylb.org. Formal written questions must be received by 2:00 p.m. on August 4, This does not preclude ongoing specific claims related questions directed to Cosmopolitan/Union s TPA. 6

9 E. Bid Submission Bidders who wish to be considered must submit to the NYLB a complete bid in response to this IFB, in a sealed envelope which shall be clearly identified with the their name and the words NYLB Invitation to Bid Cosmopolitan/Union s Workers Compensation Claims. A complete bid shall contain the following: 1) Cover letter that includes documentation of Bidder s qualifications as set forth in Part II; 2) NAIC Property /Casualty Annual Statement Statutory Page 14 Business in the State of New York (Exhibit of Premiums and Losses); 3) NAIC Property/Casualty Annual Statement Five Year Historical Data; and 4) NAIC Property/Casualty Annual Statement Page 3 (Liabilities, Surplus and Other Funds), if applicable, parental guarantee and Parental NAIC Property/Casualty Annual Statement, page 3; and 5) Completed Bidder Quotes Sheets (Appendix C). See Appendix D for sample NAIC pages referenced above. If a Bidder has any suggestions or anticipated difficulty with any policy provisions, the Bidder must explicitly set forth those issues in its cover letter. The NYLB reserves the right to reject any or all issues raised by the Bidder and require full acceptance of the terms of this IFB. The NYLB may consider these issues when evaluating bids. The NYLB may negotiate issues raised by a Bidder but will not negotiate any issue with a selected Bidder if the issue was not raised in the cover letter. The cover letter must be submitted on the Bidders official business letterhead and must be signed by an authorized representative of the Bidder. The Bidder must appoint an official representative for its proposal. The cover letter must include the following: 1) Name and title of Bidder s official representative; 2) Name of Bidder; 3) Address; 4) Telephone number and address of Bidder s representative; and 5) A representation that the signatory to the cover letter is authorized to bind the Bidder to the Assumption Agreements. Bids must be submitted to the Liquidator s representative, Kimara Patton, by 2:00 PM on August 29, Faxed or ed bids will not be accepted. Late and incomplete bids will not be considered. 7

10 F. The NYLB s Rights in Awarding the Policies In accepting, evaluating and awarding the policy/contract resulting from this IFB, the NYLB, in its sole discretion, reserves the rights to: 1) Select the Bidder deemed most acceptable to the NYLB and whose bid represents the Best Value to the NYLB ( Best Value being the bid having the lowest price that meets the minimum specifications and requirements among responsible Bidders). 2) Disqualify a Bidder from receiving the award if such Bidder, or anyone in the Bidder s employ, has previously failed to perform satisfactorily in connection with public bidding or contracts. 3) Revise/amend any provision of this IFB, including evaluation instruments and process, by written notification to Bidders. 4) Reject any and all bids received as a result of this IFB. 5) Waive procedural technicalities in bids received, after prior notification to the Bidder, including the right to waive or modify minor irregularities in the bid or adjust/correct arithmetical errors. 6) Eliminate any mandatory requirement that is not met by all Bidders. 7) Begin negotiations with other Bidders responsive to this IFB, if the NYLB is not successful in negotiating an Assumption Agreement with the selected Bidder within a time frame acceptable to the NYLB. 8) Make inquiries using any means it chooses into the Bidder s background or statements made in the bid to determine the truth and accuracy of all statements made therein. 9) Consider late or non-conforming bid in the event that adequate compliant bids are not received. These specific reservations of rights shall not be construed as a waiver of any other rights of the NYLB in accepting, evaluating and awarding the Assumption Agreement resulting from this IFB. G. Incurred Costs The Liquidator is not liable for any cost incurred by Bidders prior to the selection of the winning bid and is not responsible for costs associated with responding to this IFB. The Carrier is responsible for all transition costs, including the cost to transfer the claims from the current TPA. H. Disclosure of Proposal Contents To the extent permitted by law, information, if any, provided by a Proposed Bidder or a Bidder 8

11 will not be disclosed to any party outside the NYLB or its consultants, except for purposes of evaluation, prior to approval of the resulting policy and the Supervising Court, if requested. All material submitted becomes the property of the NYLB and may be returned at the NYLB s sole discretion. The NYLB reserves the right to use any and all non-proprietary ideas presented in any response to this IFB. If a Bidder believes that any information in its proposal constitutes a trade secret and wishes such information not to be disclosed by the NYLB, the Bidder shall submit, with its cover letter, specifically identifying by page number, line, or other appropriate designation, that information which is alleged to be a trade secret and explaining in detail why such information constitutes a trade secret. Failure by a Bidder to submit such a letter with its bid identifying alleged trade secrets shall constitute a waiver by the Bidder of any rights it may have relating to the protection of trade secrets. In no event will the Liquidator consider Bidder information to be a trade secret if such information is not identified as proprietary by the Bidders and so designated in the bid, or if that information: 1) was known to the Liquidator or the New York State Department of Financial Services ( DFS ) before submission of such proposal; 2) properly became known to the Liquidator or DFS thereafter through other sources; or 3) is in the public domain. In connection with seeking the Court Approval, the NYLB will submit to the Supervising Court the Assumption Agreement executed by the Liquidator and selected Bidder. The NYLB will redact the amount of the premium to be paid in any publicly available document. The application for the Court Approval will be available to Cosmopolitan s and Union s insureds whose policies are to be assumed and for which open claims exist. By submitting a bid, the successful Bidder acknowledges and agrees that if it has identified information as a trade secret, the NYLB and the successful Bidder will endeavor to agree upon the nature of the information regarding the Assumption Agreement and the transaction that will accompany the request for the Court Approval. In the event that agreement is not reached in a reasonable period of time, as determined by the NYLB, the successful Bidder s bid is deemed withdrawn, the Liquidator shall be under no obligation to execute or perform the Assumption Agreements and the NYLB may proceed to select an alternate Bidder. J. News Releases No publicity or news releases pertaining to this procurement may be made without the prior written approval of the NYLB. K. Non-Endorsement By selecting a Bidder, neither the NYLB nor the Liquidator is endorsing or suggesting that the Bidder s services are the best or only solution for the requirements of the Cosmopolitan or Union estates. The Bidder agrees to make no reference to the NYLB or the Liquidator or this 9

12 procurement or resulting policy in any literature, promotional material, brochures, sales presentation or the like without the express prior written consent of the NYLB. VI. AWARD The NYLB expects to exercise its right to award the policy to one Bidder based on Best Value to the Cosmopolitan and Union estates individually. Best Value shall mean the bid having the lowest price that meets the minimum specifications and requirements of this IFB. All Bidders agree to fully cooperate with all requests for information and/or clarification of the assumptions used in developing the bid. Subsequent to the Bidder s notification of Court Approval, a closing date to execute the policy will be scheduled and coordinated with the NYLB. VII. PAYMENT METHOD AND FUNDING Payment will be provided in full by the Liquidator to the successful Bidder in accordance with the terms of the Assumption Agreement. 10

13 APPENDIX A: Non-Disclosure Agreement NON-DISCLOSURE AGREEMENT THIS AGREEMENT is between Benjamin M. Lawsky, Superintendent of Financial Services of the State of New York, in his capacity as liquidator ( Liquidator ) of Cosmopolitan Mutual insurance Company ( Cosmopolitan ) and Union Indemnity Insurance Company of New York ( Union ), by his agent, and ( Vendor ), having its principal place of business at. NOW THEREFORE, for and in consideration of the provision to Vendor of information in connection with an Invitation to Bid ( IFB ) for assumption agreements with novations ( Assumption Agreements ) with respect to Cosmopolitan and Union, Vendor agrees to the following: 1. The Vendor, its officers, agents, and employees shall treat all documents and information that is obtained from the Liquidator and/or the New York Liquidation Bureau ( NYLB ) as confidential information. Unauthorized disclosure of personal, confidential, and/or medical information may result in civil and/or criminal penalties under New York State and Federal laws. All individually identifiable information relating to any claimant, employer, or insurance carrier shall be held confidential and shall not be disclosed by the Vendor, its officers, agents and employees without the prior written approval of the Liquidator. The use of information obtained by the Vendor in the performance of its duties to the Liquidator shall be limited to purposes directly connected with such duties. The Vendor agrees that its officers, agents, and employees shall not disclose, show, or otherwise make available any portion of the materials or their contents to anyone other than its officers, agents, and employees in connection with the performance of its duties to the Liquidator. The Vendor shall advise the Liquidator of all requests made to the Vendor for information described in this Agreement within twenty-four (24) hours of receipt of such request. 2. Information (whether oral, visual, written, electronic or in any other form) of which Vendor becomes aware as the result of the performance of services for the Liquidator shall be deemed to be Confidential Information. Such Confidential Information shall be used by Vendor solely for the performance of the Assumption Agreements. Notwithstanding the foregoing, information which falls into any of the following categories shall not be considered Confidential Information: (a) (b) (c) (d) Information that is previously rightfully known to the Vendor without restriction on disclosure; Information that becomes, from no act or failure to act on the part of the Vendor, generally known in the relevant industry or is in the public domain; Information that is independently developed by Vendor without use of information of the Liquidator or the NYLB; and Vendor is required to disclose by law, regulation or order of a competent authority; provided, however, that Vendor shall give the Liquidator not less than fifteen business (15) days advance written notice of any such requirement in order that the Liquidator may seek a restraining order or similar equitable relief or protection which the Liquidator may deem necessary to protect the subject Information; and, if still required, such disclosure shall be permitted only to the extent required to comply therewith and Vendor shall request, upon disclosure, such authority to protect the confidentiality of such Information by protective order or similar restriction against further disclosure. 3. Except as specifically permitted in this Nondisclosure Agreement, Vendor shall not, at any time, in any fashion, form or manner, either directly, indirectly or accidentally, divulge, disclose, communicate or use, any Confidential Information received, obtained, acquired, directly, indirectly or accidentally, or developed relating to the IFB. 4. Vendor agrees that any Confidential Information received from the onset of its activities in connection with the IFB shall be provided only to those individuals having a need to know such Confidential Information. 5. Vendor shall not use the Confidential Information for any other commercial purposes, other than the IFB. 6. Vendor agrees to be bound by applicable Federal and State laws governing confidentiality and/or privacy of information. 7. Vendor agrees not to issue any press releases, give or make any presentations, or give to any print, electronic or other news media information regarding his/her employment without the advance written approval of the Liquidator. 8. Vendor shall access only those directories in the NYLB s computer information systems as are expressly made available to Vendor by the NYLB.

14 9. Vendor agrees to take no actions which intrude upon, disrupt or deny services to the NYLB s computer information systems, unless directed by the NYLB s Systems Administrator or his/her designee. 10. Vendor agrees that the legal status of Vendor is that of an independent contractor. 11. Vendor understands that if it or any of its employees breaches, or threatens to breach this Agreement, in addition to having the services terminated, the Liquidator shall have all equitable and legal rights (including the right to obtain injunctive relief) to prevent such breach and/or to be fully compensated (including reasonable attorneys fees) for losses or damages resulting from such breach awarded by a court of competent jurisdiction. Vendor acknowledges that compensation for damages may not be sufficient and that injunctive relief to prevent or limit any breach of confidentiality may be the only viable remedy to fully protect the confidential or proprietary information identified in this Agreement. 12. This Agreement shall terminate only upon the execution and performance by the Vendor of the Assumption Agreements with respect to Cosmopolitan covered by this IFB process. In the event the Vendor does enter into Assumption Agreements with the Liquidator or fails to perform either of such agreements, this Agreement shall not expire. IN WITNESS WHEREOF, Vendor has caused this Nondisclosure Agreement to be signed as of the date set forth below. Vendor Name: Signature Print Name: Title: Date:

15 APPENDIX B: ASSUMPTION AGREEMENT FORM - COSMOPOLITAN ASSUMPTION AGREEMENT by and between LIQUIDATOR OF COSMOPOLITAN MUTUAL INSURANCE COMPANY and INSURER

16 ASSUMPTION AGREEMENT THIS ASSUMPTION AGREEMENT (this "Agreement"), effective as of [ ], 2014, is made by and between Benjamin M. Lawsky, Superintendent of Financial Services of the State of New York, in his capacity as the court-appointed liquidator ( Liquidator ) of Cosmopolitan Mutual Insurance Company ("Transferring Company"), by his duly appointed agent, and [Insurer], a [ ] domiciled insurer, authorized to transact the business of workers compensation insurance in the State of New York ("Assuming Company"). WHEREAS, Transferring Company has been in a liquidation proceeding since October 24, 1980; and WHEREAS, the Liquidator was appointed by the Supreme Court of the State of New York and such court supervises (the Supervising Court ) the liquidation of the Transferring Company; and WHEREAS, the Liquidator is in the process of concluding the liquidation of Transferring Company; and WHEREAS, the Transferring Company provided workers compensation insurance and the payment obligation of the Transferring Company in respect of certain of such workers compensation insurance is eligible for payment from the New York Workers Compensation Security Fund due to the Transferring Company s insolvency; and WHEREAS, the Liquidator desires to novate to an operating insurance carrier all administration and payment obligations in respect of the Policies (defined below) provided by the Transferring Company; and WHEREAS, the Liquidator published an Invitation to Bid ( IFB ) pursuant to which the Liquidator sought to obtain bids from insurers authorized to transact the business of workers compensation insurance in the State of New York; and WHEREAS, the Assuming Company submitted a bid in response to the IFB and the Liquidator selected the Assuming Company s bid; and WHEREAS, Assuming Company has agreed to, as and from the Effective Date (defined below) of this Agreement, assume, by way of a novation, all of the administration and payment obligations of the Policies; NOW THEREFORE, in consideration of the mutual covenants and promises contained herein and upon the terms and conditions set forth herein, the parties hereto agree as follows: ARTICLE I. DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.1 The following terms shall have the respective meanings set forth below throughout the Agreement: 1

17 "Agreement" means this Assumption Agreement. "Assuming Company" shall have the meaning set forth in the introductory paragraph hereof. "Assumption Premium" shall have the meaning set forth in Article III hereof. "Business Day" means any day other than a Saturday, Sunday, a day on which banking institutions in the State of New York are permitted or obligated by law to be closed or a day on which the New York Stock Exchange is closed for trading. Claims means those extant claims for workers compensation benefits currently being administered by the Liquidator s third-party administrator and paid from the New York Workers Compensation Security Fund, each of which has been identified and the claim files have been made available to the Assuming Company. Court Approval shall have the meaning set forth in Section 2.2 hereof. Effective Date means the date on which the Liquidator delivers to the Assuming Company a copy of the Court Approval signed by the Supervising Court, or such other date as may be agreed to by the Liquidator and the Assuming Company. IFB shall have the meaning set forth in the introductory paragraphs hereof. "Novated Policies" shall have the meaning set forth in Section 2.2. "Policy" and "Policies" shall mean all policies, binders, slips and other agreements of insurance identified in Exhibit A attached hereto. "Policy Liabilities" shall mean the Claims and all un-extinguished liabilities and obligations, including without limitation loss and loss adjustment expenses, of Transferring Company arising out of the Policies. "Policyholders" means the entities insured under the Policies. Supervising Court shall have the meaning set forth in the introductory paragraphs hereof. "Transferring Company" shall have the meaning set forth in the introductory paragraphs hereof. Transition Date shall have the meaning set forth in Appendix E to the IFB. Section 1.2 mutatis mutandis. The terms and conditions of the IFB are incorporated herein by reference 2

18 ARTICLE II. ASSUMPTION Section 2.1 Assumption and Novation. On and after the date first set forth above, Transferring Company and Assuming Company shall take all commercially reasonably steps, as set forth in Section 2.2 below, to seek and obtain the novations of the Policies. On the Effective Date, Transferring Company hereby cedes to Assuming Company 100% of the Policy Liabilities and administrative and claim handling obligations associated with each Novated Policy, completely extinguishing Transferring Company's obligations for all Policy Liabilities arising under such Policy from the beginning of time. For each Novated Policy, Assuming Company accepts and assumes the Policy Liabilities subject to all defenses, setoffs and counterclaims to which Transferring Company would be entitled with respect to the Novated Policies. The parties hereto expressly agree that no such defenses, setoffs or counterclaims are waived by the execution of this Agreement or the consummation of the transactions contemplated by this Agreement and Assuming Company shall be fully subrogated to all such defenses, setoffs and counterclaims and entitled to the benefits thereof as if it were Transferring Company. Section 2.2 Novation Procedures. a) As promptly as practicable after the date first set forth above, (i) Assuming Company shall mail to each Policyholder an assumption letter, including a Certificate of Assumption, substantially in the form attached hereto as Exhibit B, and (ii) the Liquidator will apply to the Supervising Court by order to show cause, upon the notice provided by the Assuming Company, for an order approving the entry into and performance of this Agreement and ordering that each of the Policies shall be Novated Policies (the Court Approval ). The Liquidator and Assuming Company agree that a Policyholder shall remain a Policyholder of Transferring Company until the Effective Date. Upon the Effective Date all Policies shall be deemed to have been assumed by novation and shall be defined herein as "Novated Policies." On the Effective Date, Assuming Company shall be the successor to Transferring Company under the Novated Policies with respect to Policy Liabilities as if such Novated Policies had originally been issued by Assuming Company. Assuming Company shall be substituted in the place and stead of Transferring Company and each Policyholder under a Novated Policy shall disregard Transferring Company as a party thereto and treat Assuming Company as if it had originally issued the Policy. b) In the event that the Assuming Company intends to administer the Claims itself or have such responsibility transferred to a third-party administrator other than the thirdparty administrator currently utilized by the Liquidator, as promptly as practicable after the date first set forth above, Assuming Company and the Liquidator shall arrange for such transition in accordance with the procedures outlined in Appendix F of the IFB. Date: Section 2.3 Post-Novation Procedures. As promptly as practicable after the Effective 3

19 a) The Assuming Company shall provide notification to the Workers Compensation Board of the State of New York or any successor organization of the novation of the Novated Policies; b) The Assuming Company and the Liquidator shall arrange for and complete the reconciliation of amounts paid by the Transferring Company during the period between the Effective Date and the Transition Date in the manner described in the IFB and Appendix E thereto; and c) In the event that the Assuming Company intends to administer the Claims itself or have such responsibility transferred to a third-party administrator other than the thirdparty administrator currently utilized by the Liquidator, the Assuming Company and the Liquidator shall complete the transition in accordance with the procedures outlined in Appendix F of the IFB. Section 2.4 Non-Novated Policies. For the avoidance of doubt, the parties hereto expressly agree that nothing herein constitutes an assumption, whether by reinsurance or otherwise, by Assuming Company of any Policy Liabilities whatsoever in respect of any policies of the Transferring Company which are not Policies. ARTICLE III. PREMIUM As consideration for each novation occurring hereunder, the Liquidator shall within ten (10) Business Days of the Effective Date, cause the Transferring Company to pay by wire transfer of immediately available funds $[ ] (the "Assumption Premium"). The Assuming Company shall provide wire transfer instructions to the Liquidator at any time but in any event not later than two (2) Business Days after the Effective Date. ARTICLE IV. PREMIUMS; RECOVERIES With respect to all Novated Policies, Assuming Company shall be entitled to all premiums and other amounts received, if any, on or after the Effective Date. Such amounts shall be payable directly to Assuming Company. Transferring Company shall promptly pay to Assuming Company any premiums actually received by Transferring Company with respect to Novated Policies. ARTICLE V. ERRORS AND OMISSIONS Any inadvertent neglect, delay, error or omission made by either Transferring Company or Assuming Company in connection with this Agreement or any transaction hereunder shall not relieve the other party from any liability which would have attached to such party had such 4

20 neglect, delay, error or omission not occurred, provided that such neglect, delay, error or omission is rectified as soon as reasonably practicable after discovery. ARTICLE VI. DUTY OF COOPERATION Each party hereto shall cooperate fully with the other in all reasonable respects in order to accomplish the objectives of this Agreement. The duty of cooperation shall apply, but not be limited, to regulatory and litigation matters. Any reasonable out-of-pocket costs incurred by Transferring Company in providing such cooperation shall be reimbursed by Assuming Company. Notwithstanding the foregoing, the fulfillment by either party of its obligations under this Article VI shall not be a condition to the fulfillment by the other party of its obligations under this Agreement. ARTICLE VII. MISCELLANEOUS PROVISIONS Section 7.1 Headings. The headings in this Agreement are for reference only, and shall not affect the interpretation of this Agreement. Section 7.2 Exhibits. The Exhibits to this Agreement that are specifically referred to herein are a part of this Agreement as if fully set forth herein. All references herein to Articles, Sections, subsections, paragraphs, subparagraphs, clauses and Exhibits shall be deemed references to such parts of this Agreement, unless the context shall otherwise require. Section 7.3 Notices. Any notice required or permitted hereunder shall be in writing and shall be delivered personally (by courier or otherwise), sent by facsimile transmission or sent by certified, registered or express mail, postage prepaid. Any such notice shall be deemed given when so delivered personally or sent by facsimile transmission or, if mailed, three days after the date of deposit in the United States mails, or if sent by nationally recognized overnight courier, the Business Day following the date such notice was provided to such courier, as follows: If to Liquidator: Cosmopolitan Mutual Insurance Company, in liquidation c/o New York Liquidation Bureau 110 William Street New York, NY Attn.: General Counsel Tel.: Fax:

21 If to Assuming Company: Attn.: Tel.: Fax: Any party may, by notice given in accordance with this Section 7.3 to the other party, designate another address or person for receipt of notices hereunder. Section 7.4 Amendment. This Agreement may not be modified, changed, discharged or terminated, except by an instrument in writing signed by an authorized signatory of each of the parties hereto. Section 7.5 Counterparts. This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument. Section 7.6 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors (statutory or otherwise), permitted assigns and legal representatives; provided, that neither this Agreement, nor any right hereunder, may be assigned by either party (in whole or in part) without the prior written consent of the other party hereto and any unconsented assignment shall be void. Section 7.7 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF. Section 7.8 Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, Transferring Company and Assuming Company each directs that such court interpret and apply the remainder of this Agreement in the manner that it determines most closely effectuates their intent in entering into this Agreement, and in doing so particularly take into account the relative importance of the term, provision, covenant or restriction being held invalid, void or unenforceable. Section 7.9 Waiver. No consent or waiver, express or implied, by any party to or of any breach or default by any other party in the performance by such other party of its obligations hereunder shall be deemed or construed to be a consent or waiver to or of any other breach or default in the performance of obligations hereunder by such other party hereunder. Failure on the part of any party to complain of any act or failure to act of any other party or to declare any other party in default, irrespective of how long such failure continues, shall not constitute a waiver by such first party of any of its rights hereunder. 6

22 Section 7.10 Entire Agreement. This Agreement, including its Exhibits and Schedules, constitutes the entire agreement between the parties hereto relating to the subject matter hereof and supersede all prior and contemporaneous agreements, understandings, negotiations and discussions, whether oral or written, of the parties, and there are no general or specific warranties, representations or other agreements by or among the parties in connection with the entering into of this Agreement or the subject matter hereof, except as specifically set forth herein. Section 7.11 Negotiated Agreement. This Agreement has been negotiated by the parties and the fact that the initial and final draft shall have been prepared by either party will not give rise to any presumption for or against any party to this Agreement or be used in any respect or forum in the construction or interpretation of this Agreement or any of its provisions. Section 7.12 Capacity. This Agreement is being entered into by the Superintendent of Financial Services of the State of New York as Liquidator. Nothing herein shall impose any personal liability on the Liquidator or his employees, agents, attorneys, representatives, successors or assigns. Section 7.13 Authority. The individuals executing this Agreement, as either agent of the Liquidator or on behalf of the Assuming Company, each has the full legal right, power and authority to execute and deliver this Agreement. [REMAINDER OF THIS PAGE INTENTIONALLY BLANK] 7

23 IN WITNESS WHEREOF, Liquidator and Assuming Company have executed this Agreement on, BENJAMIN M. LAWSKY, SUPERINTENDENT OF FINANCIAL SERVICES OF THE STATE OF NEW YORK, IN HIS CAPACITY AS LIQUIDATOR OF COSMOPOLITAN MUTUAL INSURANCE COMPANY By: Name: Scott D. Fischer Title: Acting Special Deputy Superintendent, as Agent By: Name: Title: 8

24 Exhibit A List of Policies 9

25 Exhibit B, 2014 Policy Number Dear Policyholder: This notifies you of an agreement entered into between the Liquidator of Cosmopolitan Mutual Insurance Company ("Cosmopolitan") and (" ") on 2014 to facilitate the assumption of certain of Cosmopolitan s workers compensation policies by. Cosmopolitan has been in a liquidation proceeding since The Liquidator is attempting to conclude this proceeding. In order to do so, the Liquidator has agreed to transfer your workers compensation policy to. The agreement is subject to the approval of the New York State Supreme Court, New York County, overseeing the liquidation of Cosmopolitan (Index No /1980). Cosmopolitan s Liquidator has made an application to that court for the approval of the agreement. A copy of the application and the agreement are available at The application to the court has been made by an order to show cause. (The order to show cause is also available at That means that if you believe that the agreement should not be approved, you must submit a written objection to the Liquidator and the court, at the addresses included in the order to show cause, so that such objection is received by the Liquidator and the court not later than the date specified in that order to show cause. If the agreement is approved, Cosmopolitan will cease to be your insurer and will be your insurer for all purposes as if it had originally issued your policy. Simultaneously you will release all rights against Cosmopolitan. Your rights under the policy will remain unchanged. Only the identity of the insurer will change. A Certificate of Assumption, identifying your policy, is enclosed and should be attached to your policy. Useful Information. Cosmopolitan is insolvent and has been in a liquidation proceeding since is an insurer, authorized to transact the business of workers compensation insurance in the State of New York, and rated from for the last years. s financial information is available at its website at or by contacting the [Regulator] at [contact information]. s principal place of business is [insert address]. Effect of Transfer Upon the approval of the agreement and its completion, will be your insurer for all purposes and will have direct responsibility to you and the individuals receiving workers compensation benefits pursuant to your policy or policies from Cosmopolitan for the payment of all claims, losses and for all other policy obligations. Neither Cosmopolitan nor the New York Workers Compensation Security Fund will have any further obligations to you. 1

26 COSMOPOLITAN MUTUAL INSURANCE COMPANY, in liquidation CERTIFICATE OF ASSUMPTION [Policy Number] You are hereby notified that has assumed liability for your policy of insurance originally issued by Cosmopolitan Mutual Insurance Company. All references in the policy to Cosmopolitan are hereby changed to. has assumed all rights and duties under your policy. submitted to: All correspondence and inquiries such as policy changes and notices of claims should be This Certificate of Assumption forms a part of and should be attached to the insurance policy issued to you by Cosmopolitan Mutual Insurance Company. IN WITNESS WHEREOF, has caused this Certificate of Assumption to be duly signed and issued. Secretary President 2

27 APPENDIX B: ASSUMPTION AGREEMENT FORM - UNION ASSUMPTION AGREEMENT by and between LIQUIDATOR OF UNION INDEMNITY INSURANCE COMPANY OF NEW YORK and INSURER

28 ASSUMPTION AGREEMENT THIS ASSUMPTION AGREEMENT (this "Agreement"), effective as of [ ], 2014, is made by and between Benjamin M. Lawsky, Superintendent of Financial Services of the State of New York, in his capacity as the court-appointed liquidator ( Liquidator ) of Union Indemnity Insurance Company of New York ("Transferring Company"), by his duly appointed agent, and [Insurer], a [ ] domiciled insurer, authorized to transact the business of workers compensation insurance in the State of New York ("Assuming Company"). WHEREAS, Transferring Company has been in a liquidation proceeding since July 16, 1985; and WHEREAS, the Liquidator was appointed by the Supreme Court of the State of New York and such court supervises (the Supervising Court ) the liquidation of the Transferring Company; and WHEREAS, the Liquidator is in the process of concluding the liquidation of Transferring Company; and WHEREAS, the Transferring Company provided workers compensation insurance and the payment obligation of the Transferring Company in respect of certain of such workers compensation insurance is eligible for payment from the New York Workers Compensation Security Fund due to the Transferring Company s insolvency; and WHEREAS, the Liquidator desires to novate to an operating insurance carrier all administration and payment obligations in respect of the Policies (defined below) provided by the Transferring Company; and WHEREAS, the Liquidator published an Invitation to Bid ( IFB ) pursuant to which the Liquidator sought to obtain bids from insurers authorized to transact the business of workers compensation insurance in the State of New York; and WHEREAS, the Assuming Company submitted a bid in response to the IFB and the Liquidator selected the Assuming Company s bid; and WHEREAS, Assuming Company has agreed to, as and from the Effective Date (defined below) of this Agreement, assume, by way of a novation, all of the administration and payment obligations of the Policies; NOW THEREFORE, in consideration of the mutual covenants and promises contained herein and upon the terms and conditions set forth herein, the parties hereto agree as follows: 1