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nsRKQ&RUEHWW2j0HDUD'LVWULFWsXGJH $UJXHG0DUFK 'HFLGHGDQG)LOHG0D\ $OOVWDWH,QV&RHWDOY7KULIW\ 1R 1R $OOVWDWH,QV&RHWDOY7KULIW\ 5HQW$&DU6\VWHPV,QFHWDO 5HQW$&DU6\VWHPV,QFHWDO %HIRUH&2/(DQG*,/0$1&LUFXLWsXGJHV$/'5,&+ $P([GRHVKDYHVWDQGLQJKRZHYHUWRVHHNDGHFODUDWLRQ 'LVWULFWsXGJH UHJDUGLQJ 7KULIW\jV GXW\ WR SURYLGH OLDELOLW\ LQVXUDQFH FRYHUDJHWR$EEDVIRUWKLUGSDUW\FODLPVDULVLQJRXWRIWKH BBBBBBBBBBBBBBBBB $XJXVWDFFLGHQW,WLVXQGLVSXWHGWKDW$EEDVjV LQVXUDQFHFRQWUDFWZLWK$P([SURYLGHVRQO\H[FHVVFRYHUDJH &2816(/ IRUYHKLFOHVQRWRZQHGE\$EEDVDQG7KULIW\DVRZQHURI WKH PLQLYDQ PXVW SURYLGH SULPDU\ LQVXUDQFH FRYHUDJH IRU $5*8('5D\PRQG:0RUJDQWL6RXWKILHOG0LFKLJDQ OLDELOLW\DULVLQJRXWRIWKHDFFLGHQWVHH6WDWH)DUP0XW$XWR IRU$SSHOODQW5LFKDUG%3ROLQJsU32/,1*0&*$: ,QV&R1:GDW+RZHYHU7KULIW\jVVWDWXWRU\ 32/,1* 7UR\ 0LFKLJDQ IRU $SSHOOHHV 21 %5,() GXW\ WR SURYLGH LQVXUDQFH FRYHUDJH H[WHQGV RQO\ WR WKH 5D\PRQG:0RUJDQWL6RXWKILHOG0LFKLJDQIRU$SSHOODQW DQGRU PLQLPXP DPRXQWV UHTXLUHG E\ 5LFKDUG%3ROLQJsU32/,1*0&*$: 32/,1*7UR\ 0&/$DQG6HH5\GHU5HQWDO7UXFN 0LFKLJDQIRU$SSHOOHHV ,QF1:GDW7KULIW\FRQFHGHVWKDWLWPXVWLQVXUH $EEDV XS WR WKHVH VWDWXWRULO\ UHTXLUHG PLQLPXP FRYHUDJH BBBBBBBBBBBBBBBBB OLPLWVEXWDUJXHVWKDWLWLVQRWUHTXLUHGWRSURYLGHFRYHUDJHWR 23,1,21 $EEDVEH\RQGWKRVHOLPLWV,QOLJKWRIWKH0LFKLJDQ&RXUWRI BBBBBBBBBBBBBBBBB $SSHDOjVKROGLQJLQ5\GHU5HQWDO7UXFNVHHLGZHDJUHHDV GRHV DW OHDVW RQH RWKHU IHGHUDO GLVWULFW FRXUW VHH &KXUFK 5*8<&2/(s5&LUFXLWsXGJH'HIHQGDQW$SSHOODQW 0XWXDO ,QV &R 86 'LVW /(;,6 DW 7KULIW\ 5HQW$&DU 6\VWHPV ,QF m7KULIW\l DSSHDOV WKH m$OWKRXJKDVWKHYHKLFOHRZQHU>WKHUHQWDOFRPSDQ\@ZDV GLVWULFW FRXUWjV JUDQW RI VXPPDU\ MXGJPHQW WR 3ODLQWLII OHJDOO\UHTXLUHGWRSXUFKDVHOLDELOLW\FRYHUDJHIRU>WKHOHVVHH@ $SSHOOHH $PHULFDQ ([SUHVV 3URSHUW\ DQG &DVXDOW\ XSWRWKHVWDWXWRU\PLQLPXPRILWKDGQR &RPSDQLHV m$P([l LQ WKLV GHFODUDWRU\ MXGJPHQW DFWLRQ REOLJDWLRQXQGHU0LFKLJDQODZWRSURYLGH>WKHOHVVHH@ZLWK EURXJKWWRGHWHUPLQHZKLFKLQVXUDQFHFRPSDQ\RUFRPSDQLHV LQVXUDQFH FRYHUDJH LQ H[FHVV RI WKHVH VWDWXWRU\ OLPLWVl VKRXOGSD\IRULQMXULHVVXVWDLQHGLQDQDFFLGHQWLQYROYLQJD $FFRUGLQJO\ZHILQGWKDWWKHGLVWULFWFRXUWHUUHGLQJUDQWLQJ PLQLYDQUHQWHGIURP7KULIW\)RUWKHUHDVRQVWKDWIROORZZH $P([j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sXGJH IRU WKH 1RUWKHUQ 'LVWULFW RI 2KLR VLWWLQJ E\ GHVLJQDWLRQ $OOVWDWH,QV&RHWDOY7KULIW\ 1R 1R $OOVWDWH,QV&RHWDOY7KULIW\ 5HQW$&DU6\VWHPV,QFHWDO 5HQW$&DU6\VWHPV,QFHWDO WKDQDQ\RWKHUDFWLRQ6HH$GXOW9LGHR$VVjQ)GDW DJUHHPHQW 5LVYL DQG $EEDV XVHG WKH PLQLYDQ WR WDNH D QXPEHURISHRSOHWRDZHGGLQJLQ7H[DV7KHQH[WGD\DW DSSUR[LPDWHO\DP$EEDVZDVGULYLQJZHVWERXQGRQ, :HILQGWKDW$P([KDVWKHFRQVWLWXWLRQDOVWDQGLQJWREULQJ LQ&XPEHUODQG&RXQW\,OOLQRLVZKHQKHORVWFRQWURORIWKH LWVGHFODUDWRU\MXGJPHQWDFWLRQLQIHGHUDOFRXUW2VWHQVLEO\ YHKLFOHFURVVHGWKHFHQWHUPHGLDQDQGVWUXFND)RUG $P([XUJHVXVWRDFFHSWDQLQFRUUHFWVWDWXWRU\FRQVWUXFWLRQ ([SORUHUWUDYHOLQJHDVWERXQG6\HGs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m$OOVWDWHl LQVXUHG 5LVYLjV SHUVRQDO sXGJPHQW $FW m,I WKH LQVXUHG KDG EURXJKW VXLW WR UHFRYHU YHKLFOHV DQG $P([ LQVXUHG $EEDVjV SHUVRQDO YHKLFOHV >IURPWKHLQVXUHU@WKHUHZRXOGKDYHEHHQQRTXHVWLRQWKDWWKH $EEDVjVLQVXUDQFHSROLF\ZLWK$P([VSHFLILFDOO\VWDWHGWKDW FRQWURYHUV\ZDVMXVWLFLDEOHLQQDWXUH>7@KHFKDUDFWHURI LWSURYLGHGH[FHVVFRYHUDJHIRUYHKLFOHVQRWRZQHGE\$EEDV WKH FRQWURYHUV\ DQG RI WKH LVVXH WR EH GHWHUPLQHG LV 7KH SROLF\UHDGm,QVXUDQFHDIIRUGHGXQGHUWKLVSDUWIRU D HVVHQWLDOO\WKHVDPHZKHWKHULWLVSUHVHQWHGE\WKHLQVXUHGRU YHKLFOH\RXGRQRWRZQLVH[FHVVRYHUDQ\RWKHUFROOHFWLEOH E\WKHLQVXUHUl$HWQD/LIH,QV&RY+DZRUWK86 DXWROLDELOLW\LQVXUDQFHl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jVGXW\WRSURYLGHLQVXUDQFHFRYHUDJHWR$EEDVEXW XQOLPLWHGLQDPRXQWDQGDGHFODUDWLRQWKDW7KULIW\KDVD UDWKHU GHDOV RQO\ ZLWK 7KULIW\jV YLFDULRXV WRUW OLDELOLW\ WR GXW\WRGHIHQG$EEDVZLWKUHVSHFWWRSHUVRQDOLQMXU\FODLPV FODLPDQWV LQMXUHG DV D UHVXOW RI WKH DFFLGHQW LQYROYLQJ DULVLQJ RXW RI WKH DFFLGHQW sXULVGLFWLRQ ZDV EDVHG RQ 7KULIW\jV PLQLYDQ 7KXV $P([jV FODLP IRU UHOLHI XQGHU FRPSOHWH GLYHUVLW\ RI FLWL]HQVKLS 7KH SDUWLHV ILOHG FURVV 0&/$ DSSHDUV WR UHVW RQ WKH OHJDO ULJKWV RU PRWLRQVIRUVXPPDU\MXGJPHQWDQGSUHVHQWHGRUDODUJXPHQWV LQWHUHVWV RI WKLUG SDUWLHV 6HH &R\QH )G DW WRWKHGLVWULFWFRXUWRQ$SULO,QDZULWWHQRSLQLRQ 0RUHRYHUZHKDYHKHOGLQDVLPLODUFRQWH[WWKDWSUXGHQWLDO DQG RUGHU LVVXHG 0D\ WKH GLVWULFW FRXUW JUDQWHG OLPLWDWLRQVRQRXUMXULVGLFWLRQFRXQVHODJDLQVWDOORZLQJWZR $OOVWDWHjVDQG$P([jVPRWLRQVEXWGHQLHG7KULIW\jVPRWLRQ LQVXUHUVKHUH$P([DQG7KULIW\WROLWLJDWHWKHLUUHVSHFWLYH 7KULIW\PRYHGIRUUHKHDULQJRQ0D\ZKLFKPRWLRQ GXWLHVWRLQVXUHWKHLUMRLQWLQVXUHGLQDYDFXXP6HH$OOVWDWH WKHGLVWULFWFRXUWGHQLHGLQDQRUGHULVVXHGsXQH ,QV&RY:D\QH&RXQW\)GWK&LU $FFRUGLQJO\ ZH ILQG WKDW XQGHU RXU SUXGHQWLDO VWDQGLQJ UXOHV$P([ODFNVVWDQGLQJWROLWLJDWHWKHHIIHFWRI0&/$ RQ7KULIW\jVWRUWOLDELOLW\ 7KULIW\ GRHV QRW DSSHDO WKH GLVWULFW FRXUWjV RSLQLRQ DQG RUGHU DV WR $OOVWDWH WKXV $OOVWDWH LV QRW D SDUW\ WR WKLV DSSHDO $OOVWDWH,QV&RHWDOY7KULIW\ 1R 1R $OOVWDWH,QV&RHWDOY7KULIW\ 5HQW$&DU6\VWHPV,QFHWDO 5HQW$&DU6\VWHPV,QFHWDO 2QDSSHDO7KULIW\DUJXHVWKDWWKHGLVWULFWFRXUWHUUHG %$P([jV6WDQGLQJWR6XH LQ UXOLQJ WKDW 7KULIW\ KDG D GXW\ WR SURYLGH XQOLPLWHG LQVXUDQFH FRYHUDJH WR $EEDV XQGHU 0LFKLJDQ ODZ DQG 7KULIW\QH[WDUJXHVWKDW$P([ODFNVVWDQGLQJWRVHHNWKH $P([ODFNHGVWDQGLQJWRVHHNWKHGHFODUDWRU\UHOLHIJUDQWHG GHFODUDWRU\UHOLHIJUDQWHGE\WKHGLVWULFWFRXUW6SHFLILFDOO\ E\WKHGLVWULFWFRXUWLQWKLVFDVH 7KULIW\FRQWHQGV WKDW$P([ODFNHGVWDQGLQJWROLWLJDWHWKH HIIHFW RI 0&/$ RQ 7KULIW\jV WRUW OLDELOLW\ ,,',6&866,21 EHFDXVH$P([GRHVQRWKDYHDSHUVRQDOVWDNHLQ7KULIW\jV OLDELOLW\WRWRUWFODLPDQWV :HUHYLHZGHQRYRWKHGLVWULFWFRXUWjVJUDQWRIVXPPDU\ MXGJPHQW6HH3UHVWLJH&DV&RY0LFK0XW,QV&R 7KH8QLWHG6WDWHV6XSUHPH&RXUWKDVVWDWHGWKDWVWDQGLQJ )G WK &LU 6XPPDU\ MXGJPHQW LV LVmWKHWKUHVKROGTXHVWLRQLQHYHU\IHGHUDOFDVHl:DUWKY DSSURSULDWHZKHUHWKHUHLVQRJHQXLQHLVVXHDVWRDQ\PDWHULDO 6HOGLQ860RUHRYHUDQ\LQTXLU\LQWR IDFWDQGWKHPRYLQJSDUW\LVHQWLWOHGWRMXGJPHQWDVDPDWWHU D OLWLJDQWjV VWDQGLQJ WR VXH LQYROYHV H[DPLQDWLRQ RI ERWK RIODZ6HH)(' 5 &,9 3F0DWVXVKLWD(OHF,QGXV&R FRQVWLWXWLRQDOOLPLWDWLRQVDQGSUXGHQWLDOUHVWULFWLRQV,G$V Y=HQLWK5DGLR&RUS86,QGLYHUVLW\ ZHUHFHQWO\H[SODLQHG FDVHVVXFKDVWKLVZHDSSO\VWDWHODZLQDFFRUGDQFHZLWKWKH FRQWUROOLQJ GHFLVLRQV RI WKH VWDWH VXSUHPH FRXUW 6HH 7RVDWLVI\$UWLFOH,,,jVVWDQGLQJUHTXLUHPHQWDSODLQWLII 3UHVWLJH&DV&R)GDWDSSO\LQJ0LFKLJDQODZ PXVWKDYHVXIIHUHGVRPHDFWXDORUWKUHDWHQHGLQMXU\GXH ,I WKH VWDWH VXSUHPH FRXUW KDV QRW \HW DGGUHVVHG WKH LVVXH WRWKHDOOHJHGLOOHJDOFRQGXFWRIWKHGHIHQGDQWWKHLQMXU\ SUHVHQWHG ZH PXVW SUHGLFW KRZ WKH FRXUW ZRXOG UXOH E\ PXVWEHmIDLUO\WUDFHDEOHlWRWKHFKDOOHQJHGDFWLRQDQG ORRNLQJ WR DOO WKH DYDLODEOH GDWD 6HH LG m5HOHYDQW GDWD WKHUH PXVW EH D VXEVWDQWLDO OLNHOLKRRG WKDW WKH UHOLHI LQFOXGH GHFLVLRQV RI WKH VWDWH DSSHOODWH FRXUWV DQG WKRVH UHTXHVWHGZLOOUHGUHVVRUSUHYHQWWKHSODLQWLIIjVLQMXU\ GHFLVLRQVVKRXOGQRWEHGLVUHJDUGHGXQOHVVZHDUHSUHVHQWHG ,QDGGLWLRQWRWKHFRQVWLWXWLRQDOUHTXLUHPHQWVDSODLQWLII ZLWKSHUVXDVLYHGDWDWKDWWKH0LFKLJDQ6XSUHPH&RXUWZRXOG PXVWDOVRVDWLVI\WKUHHSUXGHQWLDOVWDQGLQJUHVWULFWLRQV GHFLGHRWKHUZLVHl.LQJVOH\$VVRFY0ROO3ODVWL&UDIWHUV )LUVW D SODLQWLII PXVW mDVVHUW KLV RZQ OHJDO ULJKWV DQG ,QF)GWK&LU LQWHUHVWVDQGFDQQRWUHVWKLVFODLPWRUHOLHIRQWKHOHJDO ULJKWVRULQWHUHVWRIWKLUGSDUWLHVl6HFRQGDSODLQWLIIjV $'XW\WR3URYLGH,QVXUDQFH&RYHUDJHYV FODLPPXVWEHPRUHWKDQDmJHQHUDOL]HGJULHYDQFHlWKDW 9LFDULRXV7RUW/LDELOLW\ LVSHUYDVLYHO\VKDUHGE\DODUJHFODVVRIFLWL]HQV7KLUG LQVWDWXWRU\FDVHVWKHSODLQWLIIjVFODLPPXVWIDOOZLWKLQ 7KULIW\ILUVWFRQWHQGV WKDWWKHGLVWULFWFRXUWFRQIXVHGWKH WKH m]RQH RI LQWHUHVWVl UHJXODWHG E\ WKH VWDWXWH LQ LVVXHRI7KULIW\jVGXW\WRSURYLGHLQVXUDQFHFRYHUDJHXQGHU TXHVWLRQ 0LFKLJDQjV QRIDXOW LQVXUDQFH VWDWXWH ZLWK WKH LVVXH RI 7KULIW\jV YLFDULRXV WRUW OLDELOLW\ XQGHU 0LFKLJDQjV RZQHUjV &R\QHY$PHULFDQ7REDFFR&R)GWK&LU OLDELOLW\VWDWXWH FLWDWLRQVRPLWWHG,QRUGHUWRKDYHVWDQGLQJWROLWLJDWH DQ LVVXH LQ IHGHUDO FRXUW WKHUHIRUH WKH SODLQWLII PXVW GHPRQVWUDWH D SHUVRQDO VWDNH LQ WKH UHVROXWLRQ RI WKH FRQWURYHUV\6HH%DNHUY&DUU86 2Q DSSHDO WKH SDUWLHV GR QRW GLVSXWH WKH GLVWULFW FRXUWjV FRQFOXVLRQ ,QWKLVUHJDUGGHFODUDWRU\MXGJPHQWDFWLRQVDUHQRGLIIHUHQW WKDW WKH ODZ RI 0LFKLJDQ UDWKHU WKDQ WKDW RI ,OOLQRLV DSSOLHV WR WKLV FDVH $OOVWDWH,QV&RHWDOY7KULIW\ 1R 1R $OOVWDWH,QV&RHWDOY7KULIW\ 5HQW$&DU6\VWHPV,QFHWDO 5HQW$&DU6\VWHPV,QFHWDO FRYHUDJHLVXQOLPLWHGDQGWKDW7KULIW\KDVDGXW\WRGHIHQG 0LFKLJDQjVQRIDXOWLQVXUDQFHVWDWXWHUHTXLUHVWKDWPRWRU $EEDVLWVKROGLQJZDVLQHUURU YHKLFOH RZQHUV PDLQWDLQ LQVXUDQFH FRYHUDJH IRU OLDELOLW\ DULVLQJ RXW RI WKH XVH RI WKHLU YHKLFOHV 6HH 0,&+ &203 0RUHRYHU7KULIW\DUJXHVSHUVXDVLYHO\WKDWWKHGLVWULFWFRXUW /$:6 $11:HVW7KLVUHTXLUHPHQW PLVFRQVWUXHGWKHSKUDVHmQHJOLJHQWLQWKHOHDVLQJRIDPRWRU H[WHQGVWRFDUUHQWDOFRPSDQLHV6HH6WDWH)DUP0XW$XWR YHKLFOHl DV XVHG LQ 7KULIW\ DUJXHV WKDW WKH ,QV &R Y (QWHUSULVH /HDVLQJ &R 1:G SKUDVH ZDV QRW PHDQW WR UHIHU WR D FDU UHQWDO FRPSDQ\jV 0LFKKROGLQJWKDWFDUUHQWDOFRPSDQLHVPXVWSURYLGH FRQGXFWLQGUDIWLQJWKHWHUPVRIDUHQWDOFRQWUDFWEXWUDWKHU SULPDU\LQVXUDQFHFRYHUDJHIRUOLDELOLW\DULVLQJRXWRIWKHXVH ZDVLQWHQGHGWRUHIHUWRQHJOLJHQWFRQGXFWFDXVDOO\UHODWHGWR RI WKHLU YHKLFOHV SXUVXDQW WR 0&/$ WKHWRUWYLFWLPVjLQMXULHVVXFKDVWKHmQHJOLJHQWHQWUXVWPHQWl +RZHYHUFDUUHQWDOFRPSDQLHVDUHRQO\UHTXLUHGWRSURYLGH RIDQDXWRPRELOHWRDQXQVDIHGULYHU$FFRUGLQJWR7KULIW\ LQVXUDQFHFRYHUDJHHTXDOWRWKHVWDWXWRU\PLQLPXPFRYHUDJH WKHUHIRUHWKHFRPSDQ\jVIDLOXUHWRQRWLI\5LVYLDQG$EEDVRI DPRXQWVSUHVFULEHGE\0&/$DQG LWVOLPLWHGOLDELOLW\LQWKHUHQWDOFRQWUDFWGLGQRWDPRXQWWR 6HH5\GHU5HQWDO7UXFN,QFY$XWR2ZQHUV,QV&R,QF mQHJOLJHQFHl ZLWKLQ WKH PHDQLQJ RI EHFDXVH 1:G0LFK$SSm$VORQJDVWKH VXFKIDLOXUHGLGQRWFRQWULEXWHWRWKHDFFLGHQWLQTXHVWLRQ RZQHUSURYLGHVWKHSULPDU\LQVXUDQFHFRYHUDJHZLWKDSROLF\ OLPLW HTXDO WR RU DERYH WKH PLQLPXP DPRXQWV UHTXLUHG E\ :HEHOLHYHWKDW7KULIW\jVLQWHUSUHWDWLRQRILV 0&/$ WKHUH LV QR YLRODWLRQ RI FRUUHFWDVDPDWWHURI0LFKLJDQODZ6HHsRKQVRQY%REELHjV ODZl7KHVHVHFWLRQVSURYLGHIRUPLQLPXPVWDWXWRU\ 3DUW\ 6WRUH 1:G 0LFK $SS FRYHUDJHOLPLWVRIIRUERGLO\LQMXU\WRRUGHDWKRIRQH m>%@HIRUHWKHYLRODWLRQRIDQRUGLQDQFHUXOHRUUHJXODWLRQ SHUVRQLQDQ\RQHDFFLGHQWDQGIRUERGLO\LQMXU\WR PD\EHFRQVLGHUHGDVEHDULQJRQWKHTXHVWLRQRIQHJOLJHQFH RUGHDWKRIWZRRU PRUH SHUVRQVLQDQ\RQHDFFLGHQW6HH WKHFRXUWPXVWGHWHUPLQHWKDWWKHSXUSRVHRIWKHRUGLQDQFH 0&/$E ZDV WR SUHYHQW WKH W\SH RI LQMXU\ DQG KDUP VXIIHUHGl ,QGHHG ZH DUH QRW DORQH LQ FRQFOXGLQJ WKDW WKH SKUDVH $FDUUHQWDOFRPSDQ\jVOLDELOLW\LQWRUWIRUORVVFDXVHGE\D mQHJOLJHQWLQOHDVLQJlDVXVHGLQFDQQRWSRVVLEO\ OHVVHHGULYHULVVHWRXWLQ0LFKLJDQjVRZQHUjVOLDELOLW\VWDWXWH UHIHUWRWKHIDLOXUHWRFRPSO\ZLWKWKHQRWLFHUHTXLUHPHQWVRI 0&/$ 7KH 0LFKLJDQ OHJLVODWXUH HQDFWHG 6HH &KXUFK 0XW ,QV &R Y 6DYH$%XFN LQWRFUHDWHDFDXVHRIDFWLRQXQNQRZQDW 5HQWDO &R ,QF 1R FY 86 'LVW /(;,6 FRPPRQODZDJDLQVWRZQHUVRIPRWRUYHKLFOHVDULVLQJIURP DW :' 0LFK $XJ KROGLQJ WKDW WKHQHJOLJHQWRSHUDWLRQRIWKRVHYHKLFOHVE\DXWKRUL]HGXVHUV mQHJOLJHQWLQOHDVLQJlDVXVHGLQmPXVWUHIHUWR 6HH7UDYHOHUV,QVY8+DXORI0LFK1:G DFWLRQV ZKLFK ZRXOG KDYH PDGH WKH OHVVRU OLDEOH XQGHU 0LFK$SS7KHSXUSRVHRIWKHVWDWXWHLVWRSODFHWKH FRPPRQODZVXFKDVQHJOLJHQWHQWUXVWPHQWRUQHJOLJHQFH ULVN RI GDPDJH RU LQMXU\ RQ WKH YHKLFOH RZQHU ZKR KDV LQ IDLOLQJ WR SURYLGH WKH OHVVHH ZLWK D UHDVRQDEO\ VDIH XOWLPDWHFRQWURORYHUWKHYHKLFOH6HHLGDW,QWKH YHKLFOHl7KXVHYHQLIZHZHUHWRDJUHHZLWK$P([WKDWWKH OHJLVODWXUHDPHQGHGWROLPLWFDUUHQWDOFRPSDQLHVj TXHVWLRQ RI 7KULIW\jV YLFDULRXV WRUW OLDELOLW\ XQGHU LV VRPHKRZ UHOHYDQW WR WKLV FDVH ZH ZRXOG GLVDJUHH ZLWK $P([jV DQG WKH GLVWULFW FRXUWjV 0&/$ LV SDUW RI 0LFKLJDQjV PRWRU YHKLFOH FRGH LQWHUSUHWDWLRQRIWKDWVWDWXWH JRYHUQLQJ PRWRU YHKLFOH OLDELOLW\ SROLFLHV 0&/$ LV SDUW RI 0LFKLJDQjV LQVXUDQFH FRGH JRYHUQLQJ FDVXDOW\ LQVXUDQFH FRQWUDFWV IRU PRWRU YHKLFOH OLDELOLW\ $OOVWDWH,QV&RHWDOY7KULIW\ 1R 1R $OOVWDWH,QV&RHWDOY7KULIW\ 5HQW$&DU6\VWHPV,QFHWDO 5HQW$&DU6\VWHPV,QFHWDO OLDELOLW\ XQGHU WKH VWDWXWH 6XEVHFWLRQ RI WKH DPHQGHG XQGHU 0LFKLJDQjV QRIDXOW LQVXUDQFH VWDWXWH 0&/$ VWDWXWHSURYLGHV 7KHGLVWULFWFRXUWWKHQSURFHHGHGWRDQDO\]H 7KULIW\jVOLDELOLW\XQGHU0LFKLJDQjVRZQHUjVOLDELOLW\VWDWXWH 1RWZLWKVWDQGLQJVXEVHFWLRQDSHUVRQHQJDJHGLQ 0&/$7KHFRXUWIRXQGWKDW7KULIW\KDGEHHQ WKHEXVLQHVVRIOHDVLQJPRWRUYHKLFOHVZKRLVWKHOHVVRU mQHJOLJHQWLQOHDVLQJl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jVPRWLRQIRUVXPPDU\MXGJPHQW DJUHHPHQW RU E\ WKH OHVVHHjV VSRXVH IDWKHU PRWKHU EURWKHUVLVWHUVRQGDXJKWHURURWKHULPPHGLDWHIDPLO\ :H ILQG WKDW WKH GLVWULFW FRXUW HUURQHRXVO\ FRQIODWHG PHPEHU 8QOHVV WKH OHVVRU RU KLV RU KHU DJHQW ZDV 7KULIW\jV GXW\ WR SURYLGH LQVXUDQFH FRYHUDJH XQGHU QHJOLJHQWLQWKHOHDVLQJRIWKHPRWRUYHKLFOHWKHOHVVRUjV 0LFKLJDQjVQRIDXOWLQVXUDQFHVWDWXWHZLWK7KULIW\jVYLFDULRXV OLDELOLW\XQGHUWKLVVXEVHFWLRQLVOLPLWHGWR WRUWOLDELOLW\XQGHU0LFKLJDQjVRZQHUj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jVYLFDULRXVWRUWOLDELOLW\DVRZQHURIWKH 7KH GLVWULFW FRXUW ILUVW IRXQG WKDW 7KULIW\ KDG D GXW\ WR PLQLYDQXQGHU0&/$LVXQUHODWHGWRLWVGXW\WR SURYLGH SULPDU\ LQVXUDQFH FRYHUDJH IRU LWV UHQWDO YHKLFOHV SURYLGH LQVXUDQFH FRYHUDJH XQGHU 0&/$ 6HFWLRQFUHDWHVDFHLOLQJRQFDUUHQWDOFRPSDQLHVj WRUW OLDELOLW\ DULVLQJ RXW RI WKHLU FXVWRPHUVj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jV VSRXVH IDWKHU PRWKHU EURWKHU VLVWHU VRQ GDXJKWHU RU SURYLVLRQVGRQRWDGGUHVVWKHVDPHOHJDOREOLJDWLRQV7KXV RWKHU LPPHGLDWH IDPLO\ PHPEHU DQG WKDW WKH OHVVHH PD\ EH WRWKHH[WHQWWKHGLVWULFWFRXUWUHOLHGRQ0LFKLJDQjVRZQHUjV OLDEOH WR WKH OHVVRU XS WR DPRXQWV SURYLGHG IRU LQ VXEVHFWLRQ OLDELOLW\ VWDWXWH LQ KROGLQJ WKDW 7KULIW\jV OLDELOLW\ LQVXUDQFH DQG WR DQ LQMXUHG SHUVRQ IRU DPRXQWV DZDUGHG LQ H[FHVV RI WKH PD[LPXP DPRXQWV SURYLGHG IRU LQ VXEVHFWLRQ