LIABILITY POOL

LIABILITY POOL

PREMIUM ASSESSMENT FORMULA

FOR THE

PURMS JOINT SELF-INSURANCE AGREEMENT

Amended and restated as of March 30, 1995

Overview of Assessment Formulas for PURMS Risk Pools

The “Assessment Formulas” Sections of the PURMS Joint Self-Insurance Agreement (“SIA”) set forth the formulas for assessing the Members of each Risk Pool for the Operational Costs the Fund incurs in operating their respective Risk Pools, including without limitation, Coverage Payments (all Risk Pools), Defense Costs (Liability Pool), Property Claim Costs (Property Pool), Direct H&W Claims Costs and Shared H&W Costs (H&W Pool), and the Direct and Shared Administrative Expenses of all Risk Pools.

The Liability Pool is governed by two Assessment Formulas, one for General Assessments and one for Premium Assessments. The two current formulas for the Liability Pool are:

(a) The Liability General Assessment Formula (with Annual Assessment Limit) (SIA § VIII); and

(b) The Liability Premium Assessment Formula (with Added-Risk Pass Through, and without Annual Assessment Limit) (SIA § IX).

The Liability General Assessment Formula was first adopted by the Members of the Fund on December 20. 1976, has been amended from time to time, and was unanimously re-adopted on March 30, 1995. The Liability Premium Assessment Formula (with Added-Risk Pass Through and without Annual Assessment Limit) was unanimously re-adopted by the Board at its General Meeting on December 9, 1994, effective January 1, 1995.

The Property Pool is also governed by two Assessment Formulas, one for General Assessments and one for Premium Assessments. The two current formulas for the Property Pool are:

(a) The Property General Assessment Formula (with Annual Assessment Limit) (SIA § XII); and

(b) The Property Premium Assessment Formula (without Annual Assessment Limit) (SIA § XIII). The H&W Risk Pool is currently governed by one Assessment Formula entitled the H&W General Assessment Formula (SIA § XV).

The Property General Assessment and the Property Premium Assessment Formulas were unanimously adopted by the Members of the Fund effective February 27, 1997.

Assessments of Members of the H&W Pool are governed by a single Assessment Formula called the H&W General Assessment Formula. (SIA § XV). This Formula covers both the self-insured portion of the H&W Pool’s Operational Costs as well as the cost of Stop Loss Insurance. The H&W General Assessment Formula was unanimously adopted by the Members of the Fund on March 16, 2000, effective April 1, 2000, and was amended and restated and unanimously re-adopted by the Members as of December 7, 2001.

These Formulas, 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.

LIABILITY POOL PREMIUM ASSESSMENT FORMULA

1. Additional Definitions Liability Premium Assessment Formula. The definitions set forth in the "Definitions" Section of the SIA are applicable to the interpretation of the Fund's Assessment Formulas. The following additional definitions shall also be applicable:

1.1 Added-Risk Pass Through -- shall mean the portion of the Excess Carrier Premium specifically allocated by the Excess Carrier in its normal underwriting to one or more particularly identified risks of a Member's operations that are beyond the types of risks considered by the Excess Carrier in determining its basic premium.

1.2 Excess Carrier Premium -- shall mean the total premium being charged by an Excess Carrier for issuance of an Excess Liability Policy.

1.3 Excess Premium Base Amount -- shall mean the amount remaining after all Members' Added-Risk Pass Throughs are subtracted from the Excess Carrier Premium.

2. Statement of Premium Assessment Formula. The Premium Assessment Formula shall have the same three (3) components as the General Assessment Formula (eg. 10% Basic Per Capita; 20% Historical Claims Experience; and 70% Employee Hours Worked) and Members' Assessment Shares shall be calculated in the same manner as under the General Assessment Formula using the same basic information (see Formula for General Assessments, § VIII); provided, however, that:

(a) The Added-Risk Pass Throughs shall be applied in accordance with ¶ 3 below; and

(b) The "Employee Hours Worked," as calculated under § VIII, ¶ 5, for any Member(s) subject to the Added-Risk Pass Through, shall be reduced by the amount of the Member's Employee Hours Worked that are directly attributable to the underwriting risk that gave rise to the Added-Risk Pass Through. (For example, if a Member is subject to an Added-Risk Pass Through because of its operation of a dam, the Employee Hours Worked attributable to Employees operating the dam shall be subtracted from the Member's total Employee Hours Worked); and

1. Added-Risk Pass Through. The Added-Risk Pass Through, as applied in conjunction with the Premium Assessment Formula, is designed to "pass through" to a Member as part of its Premium Assessment Share any portions of the Excess Carrier Premium that an Excess Carrier has specifically allocated to that Member as part of the Excess Carrier's normal underwriting practices for the risks posed by the operations of that Member that are in addition to or different from the risks considered by the Carrier in determining its basic premium. While the most likely cause for an Added-Risk Pass Through may be a Member's ownership of a dam, the Added-Risk Pass Through is intended to apply any time an Excess Carrier has made a specific allocation of its Excess Carrier Premium to a Member, regardless of the nature of the risk.

The Added-Risk Pass Through applies to all insurance purchased by the Fund or by the Members through the Fund, including the Fund's Primary Excess Coverage (per § I., ¶ 14.1) any Supplemental Coverages acquired by the Fund (per § I., ¶ 14.3), and any Subgroup Policies. If the Excess Carrier makes no such specific allocations to particular Members, then there is no basis for applying the Added-Risk Pass Through, and therefore, there would be no deductions from the Excess Carrier Premium before the Premium Assessment Formula is applied. For example, if the Fund switches from an Excess Carrier that makes such allocations as would support application of the Added-Risk Pass Through to an Excess Carrier that does not, then the Added-Risk Pass Through would cease to apply.

Finally, in the event an Excess Carrier fails to provide the Fund with the information necessary to calculate the Members' Added-Risk Pass Throughs in sufficient time for the Fund to use it in making its Premium Assessments for the upcoming year, the Fund shall use the current year's Added-Risk Pass Through amounts in determining each Member's Premium Assessment Share for the upcoming year; provided, however, that if such information becomes available to the Fund prior to the time for determining Members' Premium Assessment Shares for the subsequent year, the Fund shall make the appropriate retroactive adjustments to the Premium Assessment Shares the Members actually paid by individually assessing any Member that underpaid and providing for a refund to those Members that overpaid.

2. Application of Premium Assessment Formula with Added-Risk Pass Through. First, the total of all Members' Added-Risk Pass Throughs shall be subtracted from the Excess Carrier Premium, resulting in an amount called the Excess Premium Base Amount. Second, the Premium Assessment Formula, applied with the adjustments provided for in ¶ 2 above, shall be applied to the Excess Premium Base Amount. Third, the Assessment Share of the Excess Premium Base Amount for each Member that has been allocated an Added-Risk Pass Through will be increased by the amount of its Added-Risk Pass Through to determine such Members' total Premium Assessment Share; the Premium Assessment Shares of those Members without Added-Risk Pass Throughs shall be equal to their Assessment Shares of the Excess Premium Base Amount.

Example: Using the same basic numbers that were used in the examples for Member A in connection with the General Assessment formula set forth in § VIII, ¶ 2, assume an Excess Carrier Premium of $700,000 and an Added-Risk Pass Through to Member A of $20,000, and further assume no other Members were subject to an Added-Risk Pass Through. The Excess Carrier Premium, less the total of Added-Risk Pass Throughs, yields an Excess Premium Base Amount of $680,000 ($700,000 - $20,000). Member A's Assessment Share of the Excess Premium Base Amount would be calculated as follows: (a) Basic Per Capita = $6,800 (10% x $680,000 ¸ 13 Fund Members); (b) Historical Claims Experience = $46,240 (20% x $680,000 x 34%); and (c) Employee Hours Worked = $33,320 (70% x $680,000 x 7%). Member A's Assessment Share of the Excess Premium Base Amount, therefore, is $86,360 ($6,800 + $46,240 + $33,320). Adding back Member A's $20,000 Added-Risk Pass Through yields a total Premium Assessment Share for Member A of $106,360.