Managing General Agency Agreement

Exhibit 10.17

MANAGING GENERAL AGENCY AGREEMENT

This Agreement is entered into between American Physicians Insurance Company, a Texas Insurance Company (hereinafter called " Company" ) and American Physicians Insurance Agency, Inc., a Texas corporation (hereinafter called " Managing Agent" ). The effective date of this Agreement is April 1, 2007.

RECITALS

WHEREAS , the Company has been engaged in the business of insuring medical professional liability risks for physicians, surgeons and ancillary medical personnel since 1976; and WHEREAS , the Company previously engaged in the insurance business as a reciprocal exchange; and WHEREAS , all management and day-to day services for the Company were performed by a corporate attorney-in-fact from 1976 until the Company was converted from a reciprocal exchange to a stock insurance company; and

WHEREAS , the Managing Agent has an existing Managing General Agency Agreement with the Company; and

WHEREAS, the corporate attorney-in-fact for the Company was an entity that is affiliated with Managing Agent; and

WHEREAS , the Company has recently converted to a stock insurance company and the parties desire to replace both the existing Management Agreement with the attorney-in-fact and the existing Managing General Agency Agreement with this Agreement; and

WHEREAS , in order to provide continuity of business for the converted Company and its policyholders as well as maintaining responsibilities for performing insurance service functions, the Company believes it is desirable to appoint the Managing Agent to continue to provide management and agency functions for the Company; and

WHEREAS , the Managing Agent desires to continue to provide management, day-to day services such as marketing, appointment and supervision of agents, sales and distribution, underwriting, claims handling, risk management, policy administration, and other administrative services for the Company;

NOW, THEREFORE , in consideration of the mutual covenants and agreements made and given herein, and for other valuable consideration, receipt of which is hereby acknowledged, the parties hereto mutually agree as follows:

SECTION 1: AGENCY APPOINTMENT AND AUTHORITY

1.1. Appointment . The Company hereby appoints the Managing Agent as its exclusive Managing Agent to perform the duties set forth herein. Managing Agent is vested with full authority to accomplish, effect and execute such duties upon the terms and conditions set forth below.

1.2. Acceptance of Appointment . The Managing Agent hereby accepts the above appointment and agrees to perform its duties under this Agreement to the best of its ability, knowledge, skill and judgment,

1.3. Duties and Responsibilities of the Managing Agent . The Managing Agent is authorized to perform the following activities for Company:

a. Underwriting : Provide all underwriting services such as the development of the underwriting guidelines, evaluation of risk and issuance of binders, policies and endorsements of the Company (" Policies" ). The Managing Agent will work directly with the Medical Director of the Company and premium rates will be approved by the Company. The lines of insurance include medical professional liability insurance in Texas and other jurisdictions where the Company is licensed. The maximum premium volume, limits of liability, exclusions, territorial limitations, policy cancellation provisions, and maximum policy period shall be part of underwriting that shall be approved by the Company after consultation with API Advisory, LLC.

b. Marketing and Sales Material : Create marketing and sales promotional material relating to the business for the Company. The Company shall have the right to review and approve, in writing, all consumer material relating to the Policies prior to the Managing Agent printing the material. The Managing Agent shall be responsible for all costs associated with printing and distribution of consumer material. Managing Agent shall be responsible for the solicitation and evaluation of applications for coverage in compliance with underwriting guidelines acceptable to the Company. c. Accounting and Reporting : Provide the required accounting and reporting services for the Company including annual reports to the Texas Department of Insurance and other regulatory agencies. Managing Agent shall, not less than monthly, submit an account report to the Company which includes a statement of written, earned, and unearned premiums, loss and loss expenses paid and outstanding, losses incurred but not reported and any management fees. The Managing Agent may satisfy its reporting requirement by confirming the insurer' s rending of such account received by or confirmed to the insurer not later than 60 days from the close of the month for which business is reported. Managing Agent shall keep the account on file for at least five years and shall make the account available to the Commissioner of Insurance (the " Commissioner" ) for review. Managing Agent shall maintain records for each insurer for which it does business separately and maintain records for at least five years or until the completion of a financial examination by the insurance department of the state in which the insurer is domiciled, whichever is longer.

d. Billings : Bill, collect and remit to the Company all premiums for Policies issued under the terms of the Company' s financing arrangements. Managing Agent shall transmit return premiums, maintain the necessary records to support each transaction and regularly submit reports to the Company in accordance with the accounting and records


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guidelines specified by the Company. Managing Agent shall remit funds due to the Company not later than 30 days from the end of the month in which the coverage is issued.

e. Commissions : Be entitled to retain out of premiums collected the commissions paid to Agents by the Managing General Agent specified in Appendix I Commissions.

f. Policy Cancellation : Cause cancellation or non-renewal of Policies on any risk bound by the Managing Agent for nonpayment of premium or other causes as the Managing Agent may deem to be in the interests of the Company, or as directed by the Company in accordance which the laws of the applicable jurisdiction.

g. Agents : Accept proposals of insurance from other agents, brokers or other solicitors.

h. Select and Appoint Agents : Select and appoint all producing agents for Company. If applicable law requires agents to be appointed by the Company, the Company agrees to extend its appointment to such agents for purposes of producing business for the Company. In addition, Managing Agent shall monitor and enforce full compliance of all agents with all laws, regulations, rules and other legal requirements applicable to activities of agents. The Managing Agent agrees that it shall be responsible for ensuring compliance by agents. At the Company' s request, the Managing Agent will terminate any agent appointed by the Company.

i. Special Services : Provide directly, or through appropriate representatives, special services as may be required for or by individual risks. Subject to applicable laws, the Managing Agent may charge a fee for such services and the Company will be responsible for reimbursing the Managing Agent for such services. j. Residual Market Assessments : Determine applicability to the business of the Company of any legally-mandated residual market or other special assessment fund, including, but not limited to, state guaranty funds. If applicable, the Managing Agent shall determine premium surcharges, collect funds from the insureds, and regularly remit all such funds directly to the catastrophe or other special assessment fund and shall send the Company a report detailing premium surcharge calculations and indicating amounts payable to the applicable state(s). k. Credit Extensions : Be fully responsible for the amount of the premium due to the Company on risks or Policies written or bound under this Agreement in which the Managing Agent has extended payment options, whether or not Managing Agent has collected the premium from the insureds or policyholders and/or their authorized representatives, unless non-payment of premium is the result of any act or omission of the Company.

l. Governmental Contacts : Notify the Company as soon as reasonably practicable, and in any event within ten (10) business days, in writing, of all contacts and correspondence received from insurance regulatory and other governmental authorities


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by Managing Agent or agents directly or indirectly involving Company and forward promptly upon receipt all summonses, complaints, subpoenas or other court documents and cooperate fully with Company in making any responses.

m. Claims Administration : Manage all aspects of the insurance claims originating from Policies, perform all claims administration for the Company and regularly submit reports on claims administration to the Company. This authority shall include, without limitations: (1) handling all submitted claims according to the requirements of any appropriate legislative and regulatory authority; accepting and reviewing all submitted claims and loss reports; determining coverage for, administering, adjusting, settling, resisting or otherwise handling all submitted claims and losses in accordance with the authority granted by Company; administering, adjusting, settling, resisting, or otherwise handling all submitted claims and losses in accordance with Company' s specific written instructions, as may be amended in writing from time to time; filing any reports, maintaining licenses and any other authorizations necessary or required by law to carry out Managing Agent' s obligations and duties under this Agreement; establishing and maintaining claim and/or loss files for all submitted claims and losses, which shall be available at no additional charge to Company or Company' s designee, for review or audit at reasonable intervals and with reasonable prior notice by Company or Company' s designated auditor. In the event of a dispute, Company shall have final authority over disputes concerning claims settlement and setting of loss reserves.

(2) Managing Agent shall make available for review with reasonable prior notice by Company all, financial, operational, historical and procedural records pertaining to claims; retain and store files for each claim in accordance with the period of time, location and format required by applicable law and any File Retention and Destruction Policy set forth by the Company. If electronic claim files are used, the Managing Agent must submit transmissions on a weekly basis. (3) Company and Managing Agent agree that Managing Agent shall have authority to make payments and settlements according to the terms of this Agreement and without Company' s prior approval up to the limits set forth below. Managing Agent agrees to obtain approval of the President of the Company before making payments or settlements based on the lesser of (i) 1% of the Company' s surplus as of December 31 of the last completed calendar year, or (ii) $250,000.

(4) Managing Agent shall promptly report to the President of the Company any claim that involves a coverage dispute, a demand in excess of policy limits; or allegations of bad faith, violations of the Deceptive Trade Practices Act, or violations of the Insurance Code, Chapter 541.


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n. Staff : Maintain a staff of competent and trained personnel, supplies and equipment for the purpose of performing its duties under this Agreement and shall promote and safeguard the best interest of the Company and perform all acts reasonably necessary to insure the efficient and proper conduct of the services covered by this Agreement.

o. Compliance : Use best efforts to observe and comply, and cause any designee(s) to observe and comply, with all applicable laws and regulations relating to the services and insurance business covered by this Agreement.

p. Material Changes in Managing Agent. Managing Agent shall notify the Company in writing within 30 days if there is a change in ownership of 10% or more of the outstanding stock of the Managing Agent, any principal officer of the Managing Agent, or any director of the Managing Agent.

SECTION 2: LIMITATIONS ON MANAGING AGENT AUTHORITY 2.1. Compliance with Underwriting Guidelines . The Managing Agent shall not accept proposals or bind the Company for insurance on risks not included in the types of insurance specified on risks deemed unacceptable pursuant to the Company' s underwriting guidelines.

2.2. Special Acceptance . If the Managing Agent believes a risk should be considered even though it is not a risk described in Section 2.1 above, the Managing Agent will submit such an application to the Company President or Medical Director for approval.

2.3. Legal Proceedings . The Managing Agent shall not institute legal proceedings on behalf of the Company except (a) for collection of premium, (b) litigation of insured claims or (c) as otherwise agreed in writing by the Company and the Managing Agent.

2.4. Reinsurance . The Company shall retain sole authorization for the placing of reinsurance on all business subject to this Agreement. The Managing Agent may not bind reinsurance or retrocession on behalf of the Company and may not commit the Company to participation in insurance or reinsurance syndicates. Managing Agent shall not cede reinsurance on behalf of the insurer to a reinsurer that would not qualify for reinsurance credit under Article 5.75-1 of the Insurance Code and the rules ...