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CLAIMS RESOLUTION

CLAIMS RESOLUTION

RULES AND PROCEDURES

FOR THE

PURMS JOINT SELF-INSURANCE AGREEMENT

Amended and Restated as of March 30, 1995

TABLE OF CONTENTS

                                                                                                                                                    

1.     Members' Duties. 1

1.1.      Duty to Report Incidents and Claims. 1

1.2.      Cooperation. 1

2.     Determination of Coverage. 1

2.1.      Procedures. 2

2.2.      Reservation of Rights re Coverage. 2

2.3.      Methods for Resolving Reservation and Determining Coverage. 2

3.     Member Participation in Litigation. 2

3.1.      Appointment of Representative to Administrative Committee. 2

3.1.1.       Claims Involving Single Member and/or its Employees. 2

3.1.2.       Multi-Member Claims. 3

3.1.3.       Restrictions on Representative Participation in "Reservation of Rights" or "Conflict of Interest" Situations. 3

3.1.4.       Limited Rights of Insured Agents/Volunteers. 3

3.2.      Qualification of Representative. 3

4.     Selection of Defense Counsel 3

4.1.      Selection by Administrative Committee. 3

4.2.      Member's Right to Veto First Attorney Selected. 4

4.2.1.       Initial Selection of Defense Counsel and Veto. 4

4.2.2.       Selection of Defense Counsel After Veto. 4

4.3.      Attorneys Retained by Members. 4

4.4.      Selection of Attorneys re Multi-Member Claims. 5

5.     Defense of Claims. 5

5.1.      General Defense Provisions. 5

5.1.1.       Members' and Employees' Right to Defense. 5

5.1.2.       Handling of Claims. 5

5.2.      Defense under Reservation of Rights. 5

5.2.1.       Repayment of Defense Costs/Security. 5

5.2.2.       Reservation re Coverage Qualifications for Employees and Insured Agents/Volunteers. 6

5.2.2.1.        Employee. 6

5.2.2.2.        Insured Agents/Volunteers. 6

5.2.3.       Apportionment of Defense Costs Between Covered and Non-Covered Claims. 6

5.2.4.       Resolution of Disputes Regarding Defense Costs. 7

5.3.      Defense of Multi-Member Claims. 7

5.3.1.       Non-Conditional Defense of Group by Common Counsel 7

5.3.2.       Defense Under Reservation of Rights. 7

5.3.2.1.        Common Defense Issues/Common Counsel 7

5.3.2.2.        Conflicts of Interest/Separate Counsel 7

6.     Settlements. 7

6.1.      Authority and Approval of Administrative Committee. 7

6.2.      Requirement of a Colorable Claim of Liability. 7

6.3.      Member Settlement Ceiling. 8

6.4.      Apportionment of Settlement Between Covered and Non-Covered Claims. 8

6.5.      Rights and Procedures When Member Rejects Settlement 8

7.     Payment of Coverage. 8

7.1.      Fund's Discretion re "Pay on Behalf of" or "Indemnity" Coverage. 8

7.2.      Fund's Right of Subrogation/Loss of Coverage by Member Waiver 9

7.3.      Multi-Member Claims. 9

7.3.1.       Payment of Coverage Where the Amount of Coverage is Sufficient to Pay all Incurred Liabilities. 9

7.3.2.       Apportionment of Limited Coverage Monies. 9

7.3.2.1.        Where the Amount of the Incurred Liability of Each Member/Employee involved in the Covered Claim has Been Established in Legal Proceedings. 9

7.3.2.2.        Where the Amount of Each Member's/Employee's Incurred Liability has not Been Established. 9

7.3.2.3.        Coverage for "De Minimis" Settlement Premium in Multi-Member Pollution Liability Claim.. 10

7.4.      Coverage Payments in Reservation of Rights Situations. 10

7.4.1.       Payment upon Resolution of Reservation/Establishment of Coverage. 10

7.4.1.1.        Through Legal Proceedings involving the Covered Claim.. 10

7.4.1.2.        Through Suit Against Excess Carrier 10

7.4.1.3.        Through Fund/Member Settlement or by Administrative Committee Determination. 11

7.5.      Conditional Payment of Coverage. 11

 


CLAIMS RESOLUTION

RULES AND PROCEDURES

FOR THE

PURMS JOINT SELF-INSURANCE AGREEMENT

Amended and Restated as of March 30, 1995

Overview of Claims Resolution Rules and Procedures

The Claims Resolution Rules and Procedures Section (“Claims Resolution Section”) of the PURMS Joint Self-Insurance Agreement (“SIA”) governs the handling of Liability Claims asserted against Members of the Fund and their Employees, Insured Agents and Insured Volunteers. While the primary focus of the Claims Resolution Section is issues and procedures relating to Liability Claims, to the extent permitted by the language and not inconsistent in the context, the Claims Resolution Section also governs the handling of Property and H&W Claims.

The Claims Resolution Section was unanimously adopted by the Members of the Fund on March 30, 1995. These Claims Resolution Rules and Procedures, as amended from time to time pursuant to § I, ¶ 5.2, are specifically incorporated into the Interlocal Agreement and shall be deemed a part of that Agreement as if fully set forth therein.  Unless specifically indicated otherwise, use of the term "Employee" in the Claims Resolution section of the SIA shall include "Insured Agents" and "Insured Volunteers."

CLAIMS RESOLUTION RULES AND PROCEDURES

1.               Members' Duties.

1.1.          Duty to Report Incidents and Claims.  Members and their Employees shall immediately inform the Administrator of any Incidents they become aware of and for which the Fund may provide Coverage if such Incident has caused either (1) Personal Injury or (2) Property Damage, or other compensable loss, and there is a reasonable possibility that a Liability Claim will be asserted.  In addition, Members and their Employees shall immediately inform the Administrator of any Claims actually asserted against them, including Claims in an amount within a Member's discretion to settle under the Member Settlement Ceiling, and Claims for an amount less than the Deductible provided for in § III, ¶ 2.3.  The Fund shall not be required to defend or pay any judgment or settlement arising from any Incident or Claim to the extent the Fund is prejudiced by the failure of a Member or Employee to immediately report such Incident or Claim.

1.2.          Cooperation.  All Members and Employees shall cooperate with the Administrative Committee, the Administrator and Fund Counsel in the handling of Covered Claims and, upon request, shall reasonably assist in making settlements and in the conduct of suits, including, but not limited to, producing documents, attending depositions, hearings and trials and assisting in securing and giving evidence and obtaining the attendance of witnesses.

2.               Determination of Coverage.

2.1.          Procedures.  Upon receipt of a written request for Coverage of a Claim, the Administrator shall cause a preliminary investigation to be conducted and determine whether Coverage is provided under the SIA.  The Administrator, with the advice of General Counsel, shall submit any questions the Administrator has regarding whether there is Coverage for a Claim to the Administrative Committee for decision.  When­ever  a Claim is submitted by or on behalf of an Employee or an Insured Agent or Insured Volunteer, the Adminis­trative Committee shall also specifically determine whether the actions of the Employee, Insured Agent or Insured Volunteer giving rise to the Claim satisfy the Coverage Qualifications which are preconditions to Coverage by the Fund for such Insureds under § III, ¶ 2.4; § IV, ¶ 2.4 and § VI, ¶ 2.1.  The Administrative Committee, if reasonably possible, shall make its Coverage Determination within thirty  (30) days from the date the Claim was submitted, or provide the Member/Employee involved with written notice of the Committee's extension of its Coverage Determination to a future specified date, stating the reasons therefor.  The Adminis­trator shall ensure that the Member or Employee is promptly informed of the Committee's Coverage Determination in writing, stating the basis for any denial or limitation on Coverage and referring specifically to the Appeal Procedures contained in § I, ¶ 19.2 and in Op. Rules, § I, ¶ 19.

2.2.          Reservation of Rights re Coverage.  If the Administrative Committee determines that there are unanswered legal or factual issues regarding whether the Fund provides Coverage for the Claim asserted, the Fund may defend the Member and/or Employee involved under a Reservation by so providing in the Coverage Determination. Under a Reservation, the Fund is proceeding with Defense of the Claim while reserving the right to terminate the Fund's Defense, to seek reimbursement of the Defense Costs it has paid, if any, and to deny Coverage at any time.

2.3.          Methods for Resolving Reservation and Determining Coverage.  Any Reservation asserted by the Fund may be resolved and Coverage determined by the methods set forth in ¶ 7.4.1 below. 

3.               Member Participation in Litigation

3.1.          Appointment of Representative to Administrative Committee.

3.1.1.     Claims Involving Single Member and/or its Employees.  At any time following submission to the Fund of a Claim made against a Member or one or more of its Employees, or both, the Member shall have the right to appoint one Representative to the Adminis­trative Committee for purposes of participating in the discussions and voting on issues relating to the Claim, including the initial selection of an attorney to represent the Member or its Employee, and all other issues relating to the progress, settlement, or trial of any lawsuit, but excluding those issues relating to Defense or Coverage for the Claim; provided, however, that any Member whose Employee is an appointed regular member of the Administrative Committee shall not have the right to appoint an additional Representative to the Administrative Committee.  An Administrative Committee member may vote on all issues before the Committee, even if they relate to a Claim asserted against the Fund Member that employs the Committee member.  If any Administrative Committee vote in which a Representative participates results in a tied vote, the Chairperson of the Operations Committee shall be entitled to vote to break the tie.

3.1.2.     Multi-Member Claims.  In the case of a Claim against multiple Members or their Employees, or both, each Member shall have the right to appoint one Representative to the Administrative Committee for all of the purposes identified in ¶ 3.1.1 above; provided, however, that all Members involved in the Claim shall, in combination and through their respective Representatives, have a common single vote in connection with each Administrative Committee decision relating to the Claim, except with respect to issues relating to Defense or Coverage for the Claim where they shall have no vote; and provided, further, that such single vote shall be exercised by the majority vote of those Members involved in the Claim; and provided, further, that in the event of a tied vote among such Members, the decision of the members of the Administrative Committee shall control.  Alternatively, all Members involved in the Claim may appoint a single Representative on behalf of all of them to participate in Administrative Committee discussions and decisions relating to the Claim and to exercise the group's vote. The Administrative Committee shall have the discretion to determine how and when meetings involving Representatives are convened to discuss matters relating to the common Claim, including conducting discussions by telephone conference among the Representatives and the Administrative Committee.

3.1.3.     Restrictions on Representative Participation in "Reservation of Rights" or "Conflict of Interest" Situations.  When the Fund defends under a Reservation, when there is a conflict of interest among Members and/or Employees in a Multi-Member Claim, or when the Administrative Committee determines that strict confidentiality with respect to a particular subject is in the best interests of the Fund, the Committee shall have the discretion to discuss and decide issues relating to those subjects outside the presence of any appointed Representatives.  

3.1.4.     Limited Rights of Insured Agents/Volunteers.  Neither Insured Agents nor Insured Volunteers involved in a Claim shall have a right to appoint a Representative to the Administrative Committee for any purpose; provided, however, that such Insured Agents/Volunteers shall have the right, upon written request with reasonable notice, to meet with the Administrative Committee to discuss matters pertinent to the Claim in which they are involved.

3.2.          Qualification of Representative.  The person appointed as a Representa­tive to the Administrative Committee by a Member pursuant to this section must be either an Employee of the Member or an attorney.  If the Member appoints an attorney as its Representative, the Member shall be responsible for the attorney's fees and costs. 

4.               Selection of Defense Counsel.

4.1.          Selection by Administrative Committee.  With respect to all Covered Claims for which the Administrative Committee determines that an attorney should be hired, the Administrative Committee shall select an attorney to represent the Member and/or its Employee, and shall notify the Member in writing of the identity of the attorney selected.

4.2.          Member's Right to Veto First Attorney Selected

4.2.1.     Initial Selection of Defense Counsel and Veto.  If for any reason a Member is dissatisfied with the attorney selected by the Administrative Committee to defend a Covered Claim asserted against the Member or against the Member and one or more of its Employees, the Member may exercise its one-time right to veto the first attorney selected by so notifying the Adminis­trative Committee within three (3) days of the date the Member receives written notice of the identity of the attorney selected; provided however: that this right of veto may be exercised only by the Member (or group of Members, in a Multi-Member Claim) and only once for each Occurrence, Wrongful Act, Accident or Pollution Release giving rise to a Covered Claim; that any Employee involved in the Claim shall be bound by the Member's decision whether to exercise the veto; and, that the Member's Employee shall not have this right of veto, even if the Claim is asserted solely against the Employee.  The Administrative Committee shall be prohibited from retaining the attorney vetoed by the Member, without the Member's approval. 

4.2.2.     Selection of Defense Counsel After Veto.  Once a Member has exercised its veto, the Administrative Committee shall then select a second attorney to represent the Member or the Member and its Employee. The Member may not object to the second attorney appointed by the Administrative Committee; provided, however, that any Member or any Employee against whom a Covered Claim is asserted may at any time unilaterally terminate representation by the attorney selected by the Fund and retain the attorney of its choice by waiving in writing any right to Defense and Coverage by the Fund under the SIA for the Claim involved;  and provided further, that the Member's waiver of its right to Defense and Coverage by the Fund shall bind any of its Employees involved in the Claim whose right to Defense and Coverage from the Fund shall be similarly terminated, unless an actual conflict of interest exists between the Member and its Employee, in which event the Employee shall be entitled to Defense by the Fund, unless the Member has indemnified the Employee or has an "indemnification upon request" policy in place.  In a Multi-Member Claim, whether the right to veto the first attorney selected will be exercised shall be decided by the majority vote of the Members involved in the Claim, and in the event of a tied vote among such Members, the decision of the Administrative Committee shall control.

4.3.          Attorneys Retained by Members   No Member or Employee shall retain an attorney to handle any Covered Claim without the prior written authorization of the Administrative Committee.  If any Member or Employee retains an attorney to handle a Claim in violation of this subsection, regardless of whether the Fund is prejudiced thereby, the Fund shall not be obligated to provide Defense or Coverage for such Claim; provided, however, that the Fund may, in the Administrative Committee's discretion, provide Coverage and pay the Defense Costs for such Claim to the extent such Defense Costs were incurred after the Administrative Committee's written approval of the Member's choice of Defense Counsel; and provided further, that this subsection shall not be construed to prohibit a Member or Employee from retaining an attorney: (a) to take whatever action is reasonably necessary in an emergency situation to avoid the entry of an order of default or other summary relief against the Member or Employee (although the Member shall provide the Administrator with notice thereof as soon as is reasonably possible), or (b) to monitor the progress of any Claim at the Member's or Employee's sole expense.  With respect to Claims for an amount which is specified by the Claimant to be less than or equal to the Member Settlement Ceiling, if the Member retains an attorney to handle the Claim without first obtaining the approval of the Administrator, the Fund's obligation to pay any settlement or judgment arising from the Claim, including Defense Costs, shall be the amount of the Member Settlement Ceiling.

4.4.          Selection of Attorneys re Multi-Member Claims.  The provisions regarding the selection of Defense Counsel for Multi-Member Claims contained in ¶ 5.3 herein shall be considered in connection with this ¶ 4.

5.               Defense of Claims.

5.1.          General Defense Provisions. 

5.1.1.     Members' and Employees' Right to Defense.  The Fund shall have the right and duty to defend any suit against a Member or Employee based upon a Covered Claim.  The Administrator, subject to the direction of the Administrative Committee, shall arrange to provide for investigation and Defense of Covered Claims, provided, however, that the Fund shall not be obligated to pay for Defense Costs for any Covered Claim after the Fund has paid its full Coverage Limit, except as provided in § III, ¶ 2.2; § IV, ¶ 2.2; § V, ¶ 2.2 and § VI, ¶ 2.1.

5.1.2.     Handling of Claims.  Subject to any limitations that may be imposed by the Board by Majority Vote, the Administrative Committee shall have authority over all aspects of processing and handling Covered Claims made against a Member or an Employee, including without limitation, investi­gating such Claims, retaining an attorney to represent the Member or Employee, authorizing expenditures related to dis­covery or the hiring of experts, and approving any settlement.

5.2.          Defense under Reservation of Rights.  If the Administrative Committee determines that there are unresolved factual or legal questions regarding whether the Fund provides Coverage for a Claim, the Fund may proceed under a Reservation, providing Defense for a Member or Employee while reserving the right to deny Coverage or discontinue Defense of the Claim at any time. 

5.2.1.     Repayment of Defense Costs/Security.  If the Fund defends an Employee under a Reservation, the Administrative Committee, in its discretion, may, as a condition precedent to providing such Defense, require that the Employee execute a written undertaking to repay his/her Defense Costs and pledge security therefore in an amount determined by the Administrative Committee to be reasonably necessary to secure such repayment in the event it is later determined that the Fund does not provide Coverage for the Claim; provided, however, that a Member shall not be required to provide security for repayment of Defense Costs incurred in connection with a Claim against the Member.  A Member may guarantee such repayment on its Employee's behalf which shall satisfy any security requirement established by the Administrative Committee.  If a Member guarantees such repayment, and if it is ultimately determined that the Member's Employee was not entitled to Defense by the Fund, the Member shall reimburse the Fund for the Employee's Defense Costs and shall solely bear the risk of recovering such payments from its Employee.  Notwithstanding the foregoing, and regardless of whether the Employee or the Member, on the Employee's behalf, has provided any security requested, the Administrative Committee may withdraw the Fund's Defense and demand reimbursement for the Defense Costs it has advanced at any time it determines from its own investigation or otherwise that the Fund does not provide Coverage for the Claim asserted.

5.2.2.     Reservation re Coverage Qualifications for Employees and Insured Agents/Volunteers. 

5.2.2.1.          Employee.  With respect to an Employee, in addition to other possible grounds therefore, the Fund may, in its sole discretion, deny Coverage and Defense, or defend under a Reservation, if it appears that the Employee cannot satisfy the applicable Coverage Qualifications set forth in § III, ¶ 2.4; § IV, ¶ 2.4; and § VI, ¶ 2.1.

5.2.2.2.          Insured Agents/Volunteers.  With respect to Insured Agents or Insured Volunteers, in addition to other possible grounds therefore, the Fund may, in its sole discretion, deny Coverage and Defense, or defend under a Reservation, if it appears that the Insured Agent/Volunteer cannot satisfy the applicable Coverage Qualifications set forth in § III, ¶ 2.4; § IV, ¶ 2.4, and § VI, ¶ 2.1.  If the Member has indemnified the Insured Agent/Volunteer for Defense Costs relating to the Claim under circumstances where the Fund is asserting a Reservation because one or more of these Coverage Qualifications is not satisfied, and if this results in creating a conflict of interest between the Insured Agent/Volunteer and the Member which requires separate counsel for each, it shall be the Member's obligation initially to pay for the Insured Agent's/Volunteer's defense, subject to reimbursement by the Fund of the reasonable Defense Costs incurred by the Member if Coverage for the Claim against the Insured Agent/Volunteer is ultimately established.

5.2.3.     Apportionment of Defense Costs Between Covered and Non-Covered Claims.  If the Fund defends a Claim under a Reservation because it appears that some but not all claims, causes of action or legal theories asserted fall within the Fund's Coverage, the Fund shall only be obligated to pay for the ongoing Defense Costs relating to the Covered Claims; provided, however, that the Fund, in its discretion, may advance Defense Costs for the potentially non-covered portions of any Claim in accordance with ¶ 5.2.1.  The Administrator shall ensure that Defense Counsel properly allocates Defense Costs on each billing between Covered Claims and those claims, causes of action or legal theories for which it appears there is no Coverage, as designated by the Administrative Committee.

5.2.4.     Resolution of Disputes Regarding Defense Costs.  If the Coverage question and/or the validity of the Fund's Reservation is not resolved by the legal proceedings relating to Defense of the Claim (e.g., if the Claim was resolved by settlement), the Administrative Committee shall determine whether the Fund provides Coverage for all the claims, causes of action and/or legal theories asserted, and if not, what portion of the Defense Costs are the Member's or Employee's responsibility.

5.3.          Defense of Multi-Member Claims.

5.3.1.     Non-Conditional Defense of Group by Common Counsel.  All Members and Employees involved in a Multi-Member Claim shall be deemed to have common Defense interests when there do not appear to be any actual conflicts of interest among such Members/Employees.  Under such circumstances, the Fund may retain a single common Defense Counsel to defend all Members/Employees involved.

5.3.2.     Defense Under Reservation of Rights.  The Fund may defend under a Reservation as to some or all of the causes of action or legal theories asserted against one or more Members/Employees or as to some but not all Members/Employees involved in the Claim, or in other combinations.

5.3.2.1.          Common Defense Issues/Common Counsel.  Regardless of the nature or scope of the Reservation the Fund has asserted as to some or all of the Claims of the Members/Employees involved in a Multi-Member Claim, the Fund may defend with a single, common Defense Counsel so long as there are no actual conflicts of interest among such Members/Employees.

5.3.2.2.          Conflicts of Interest/Separate Counsel.  When there is an actual conflict of interest among some or all the Members/Employees involved in the Multi-Member Claim, the Fund shall provide separate Defense Counsel for each Member/Employee or group thereof whose interests are in common and are in conflict with one or more of the others.

6.               Settlements.

6.1.          Authority and Approval of Administrative Committee.  Except as may be established otherwise by the Board on a claim-by claim basis pursuant to § I, ¶ 6.2.12 and ¶ 9.2(c) and Op. Rules, § I, ¶ 9.4.3(e), the Administrative Committee shall have the authority to direct the negotiations and authorize settlement of any and all Covered Claims.  If there is insufficient time to contact all members of the Administrative Committee for a vote upon a proposed settlement, any two of the three voting members of the Administrative Committee contacted, which for this purpose includes the Chair of the Operations Committee, shall have authority to approve the settlement.

6.2.          Requirement of a Colorable Claim of Liability.  The Administrative Committee shall not have the authority to provide Coverage for or approve settlement of a Covered Claim unless, based on a reasonable investigation of the facts and applicable law, it appears to the Administrative Committee that it is a Colorable Claim of Liability against the Member or Employee; provided, however, that a finding of a Colorable Claim of Liability shall not be required if the Executive Committee determines by majority vote that providing Coverage for the settlement is in the best interests of the Fund.

6.3.          Member Settlement Ceiling.  Notwithstanding ¶ 1.1 above, the Fund shall reimburse a Member that settles or pays a Claim for the amount paid by the Member up to the Member Settlement Ceiling, regardless of whether the Member has first reported the Claim to the Fund; provided, however, that the Claim was a Covered Claim and that the Administrative Committee determines that it was a Colorable Claim of Liability; and provided further, that the Fund shall not pay more than the amount of the Member Settlement Ceiling for a Member's/Employee's Incurred Liability and Defense Costs unless the selection of any Defense Counsel retained by the Member was pre-approved by the Administrator in accordance with ¶ 4.3.  The initial Member Settlement Ceiling shall be $1,500, less the amount of the applicable Deductible, which must be paid by the Member; provided, however, that the Board may increase or decrease the Member Settlement Ceiling from time to time by Super-Majority Vote, and any such change shall thereafter be reflected in an amendment attached to this Agreement and in revised Operational Rules.  

6.4.          Apportionment of Settlement Between Covered and Non-Covered Claims.  In the settlement of any Claim involving both Covered and non-Covered Claims, the settlement proceeds to be paid to the Claimant shall be allocated between such Claims; provided, however, that the Fund shall not be bound by such allocation in paying its Coverage to or for the Member unless such allocation was previously approved by the Administrative Committee prior to such settlement.

6.5.          Rights and Procedures When Member Rejects Settlement.  If the Administrative Committee elects to make any settlement offer or to accept a settlement offer made by the Claimant, the Member against which the Claim is asserted may, in writing, direct the Administrative Committee not to make or accept the settlement offer.  In such event, the Fund shall be released from any obligation to continue Defense of or to provide Coverage for the Claim, and the Member involved shall be responsible for all Defense Costs incurred thereafter and the amount of any subsequent judgment or settlement arising from the Claim; provided, however, that the Fund shall reimburse the Member for any Defense Costs incurred or any judgment or settlement paid by the Member to resolve the Claim, so long as it is a Covered Claim, up to the amount of the settlement offer which the Member directed the Administrative Committee not to make or accept. If, in a Multi-Member Claim, there is disagreement among the Members involved whether the Administrative Committee should make or accept the contemplated settlement offer, the decision of a majority of such Members shall control and be binding upon all such Members.  Employees may invoke the provisions of this subsection, but only with respect to Claims made solely against them.  With respect to Claims against both a Member and its Employee, the Member's decision on this subject controls.

7.               Payment of Coverage.

7.1.          Fund's Discretion re "Pay on Behalf of" or "Indemnity" Coverage.  The basic coverage provided by the Fund is "pay on behalf of" coverage which obligates the Fund to pay on a Covered Claim once the Member's or Employee's obligation to pay has become an Incurred Liability; provided, however, that the Board may, by Super-Majority Vote, elect to provide "indemnity" coverage under which the Fund would reimburse the Member or Employee only after such Member/Employee has paid the Covered Claim in full. 

7.2.          Fund's Right of Subrogation/Loss of Coverage by Member Waiver.  The Fund shall have Subrogation Rights, to the fullest extent permitted by law, succeeding to the rights of any Member or Employee on whose behalf the Fund has paid a Covered Claim to seek a recovery therefore from any person or entity that is potentially liable for contributing to the Occurrence, Wrongful Act, Accident or Pollution Release that gave rise to the Covered Claim. The Member's and/or Employee's rights against such potentially liable Third Parties in connection with the Covered Claim shall be deemed automatically and legally transferred to the Fund upon the Member's or Employee's acceptance of the benefit of the Fund's Coverage Payment for the Covered Claim; provided, that in addition, such Members and Employees shall execute assignments and any other documents necessary to effectuate the Fund's Subrogation Rights; and, provided further, that a Member's/Employee's preservation of the Fund's Subrogation Rights shall constitute a condition precedent to the Fund's Coverage obligation, and if any acts or omissions of a Member or its Employee occurring after the Occurrence, Wrongful Act, Accident or Pollution Release result in a waiver of all or a portion of what would otherwise have been the Fund's Subrogation Rights, the Fund shall have no obligation to provide Coverage for the Covered Claim to the extent the Fund was prejudiced thereby.

7.3.          Multi-Member Claims. 

7.3.1.     Payment of Coverage Where the Amount of Coverage is Sufficient to Pay all Incurred Liabilities.  The Fund shall pay the Incurred Liability for a Covered Claim for each Member and Employee involved in the Claim in full, so long as the Coverage provided by the Fund is in an amount sufficient to do so for all Members and Employees involved in the Covered Claim.

7.3.2.     Apportionment of Limited Coverage Monies.

7.3.2.1.          Where the Amount of the Incurred Liability of Each Member/Employee involved in the Covered Claim has Been Established in Legal Proceedings.  Where the amount of Coverage provided by the Fund is not sufficient to pay the Incurred Liability established through legal proceedings of all Members/Employees involved in the Multi-Member Claim, the Fund shall apportion its Coverage monies based on each Member's/Employee's relative percentage of the total amount of the Incurred Liabilities of all Members/Employees involved in the Claim.

7.3.2.2.          Where the Amount of Each Member's/Employee's Incurred Liability has not Been Established.  Where the Multi-Member Claim was resolved for an amount in excess of the amount of Coverage provided by the Fund and under circumstances where the amount of Incurred Liability of each Member/Employee was not established, the Coverage monies available shall be apportioned based on each Member's/Employee's relative percentage of the Liability Exposure to the Covered Claim, as determined by the Administrative Committee.  The Administrative Committee shall make this determination based on the most objective method reasonably available.  For example, in a Multi-Member Claim involving Pollution Liability, the most "objective" method reasonably available may be the amount of pollution (e.g., KVA) each Member delivered to a contaminated site.  This might be determined by an agreement among such Members and other Potentially Responsible Parties, or in the absence of such an agreement, by the Administrative Committee's investigation, or otherwise.

7.3.2.3.          Coverage for "De Minimis" Settlement Premium in Multi-Member Pollution Liability Claim.  The Fund will provide Coverage for and will pay the De Minimis Premium portion of a Member's settlement of a Pollution Claim; provided, however, that it must appear to the Administrative Committee, based upon its evaluation of the Liability Exposure of all Members involved in the Claim and given estimates of Remediation Costs at the time of settlement, that the Coverage provided by the Fund for the Claim will be able to: (a) Pay the total amount of Incurred Liabilities of all Members involved in the Claim; and (b) Pay the additional amounts of the De Minimis Premiums for all Members that qualify for De Minimis settlement and desire to resolve the Claim as against them by entering into such settlements.  Any Member for which the Fund advances Coverage Payments for De Minimis Premiums prior to establishment of the amounts of Incurred Liability of all other Members involved in the Claim shall remain liable to the Fund to repay all or a portion thereof in order to equalize the proportions each Member receives of the Fund's limited Coverage for the Incurred Liability of all Members.

7.4.          Coverage Payments in Reservation of Rights Situations.

7.4.1.     Payment upon Resolution of Reservation/Establishment of Coverage.  The Fund shall not be required to pay its Coverage monies to or on behalf of a Member or Employee because of a Covered Claim, notwithstanding the existence of such Member's or Employee's Incurred Liability, unless and until the Fund's Reservation has been resolved and Coverage has been established. Coverage may be determined by the following methods:

7.4.1.1.          Through Legal Proceedings involving the Covered Claim.  If, in the course of legal proceedings involving the Covered Claim, the Administrative Committee determines that orders or judgments have been entered that resolve the legal or factual issues that gave rise to the Reservation, the Administrative Committee shall so notify the Member or Employee involved that the Reservation has been withdrawn and explain the effect thereof on the Member's/Employee's Coverage.

7.4.1.2.          Through Suit Against Excess Carrier.  Where the total Liability Exposure to the Covered Claim exceeds the amount of the Fund's Coverage, the Fund and the Member or Employee under Reservation may agree that the unresolved legal or factual issues that gave rise to the Reservation be determined through the prosecution of Coverage Litigation against the Fund's Excess Carriers (or Subgroup Carriers, where applicable), and that all parties shall be bound by the facts and law established by such legal proceeding in making the Coverage Determination.  In such event, the Board may elect to make a Conditional Coverage Payment in accordance with ¶ 7.5 herein. 

7.4.1.3.          Through Fund/Member Settlement or by Administrative Committee Determination.  The Reservation may be resolved pursuant to an agreement between the Fund and the Member/Employee under the Reservation by which the amount of the Fund's Defense and Coverage obligations are liquidated and paid to the Member or Employee to the extent that has not already occurred through prior advances.  In the absence of such a settlement or resolution of the Reservation by another means, the Administrative Committee, after meeting with the Member or Employee involved, shall decide whether the Fund provides Coverage for all or a portion of the Covered Claim, and if so, in what amount.

7.5.          Conditional Payment of Coverage.  The Board may, by Super-Majority Vote, authorize payment of Coverage monies to a Member for a Covered Claim, notwithstanding the existence of a Reservation by the Fund or other circumstances which have prevented or failed to trigger the Fund's obligation to pay its Coverage, with such terms of repayment and security as the Board deems appropriate under the circumstances.