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Alternative 13

2. Government restricts by contract and lcgislation the liability

of manufacturers to failure to manufacture vaccine according to

specifications. 2. Individual manufacturer purchases insurance to cover this retained

liability only when government successfully asserts failure to perform. Coverage estimated at $75 million can be layered - and

price can bc ncgotiated.

3. Industry offers to provide claim investigation service for third

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DAVID MATHEIS SECRETARY DEPARTIENT OF HEALTH EDICTION *JEL FARE

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The following modifications to the standard ISO policy will be made: 1. The definition of occurrence will be changed to provide that

occurrence means an innoculation of swine flu vaccine (as

defined) manufactured by a named insured. 2. A definition of swine flu vaccine will be provided. These two changes when read in the light of the insuring agreement will restrict the policy to innoculation of swine flu vaccine. 3. The named insureds shall be the four (4) manufacturers and the

policy will be endorsed to provide coverage for the employees

of the four (4) manufacturers.
4. The definitions of bodily injury and property damage will be

modified to delete the words "during the policy period."
These changes are necessary because the policy is intended
to provide coverage for bodily injury whenever occurring

arising from an innoculation during the policy period.
5. A separate provision will be added to restrict the policy to

occurrences (innoculations) within the policy period.
6. The limits of liability provisions will be deleted and the fol-

lowing substituted therefor: Regardless of the number of (1)
insureds under this policy, (2) persons or organizations who
sustain bodily injury or property damage, or (3) claims made
or suits brought on account of bodily injury or property dam-
age, the Company's liability is limited to loss in the amount
of fifty million dollars ($50,000,000) in the aggregate. Loss
shall include all sums paid as damages and all sums paid as
cost charges and expenses of defense, including both' allocated

expenses and unallocated expenses.
7. The premtum provision will be as follows;

The premium for this policy shall be the deposit premium plus
an amount equal to one hundred and twenty percent (120%) of
that portion of loss which includes sums paid as damages and
as allocated claim expense and one hundred percent (100%) of
sums paid as unallocated claim expense. However, in no event
shall such premium exceed $40,000,000. The deposit premium
is $2,000.000. The minimum premium is $2,000,000.
Additional premiums based on this formula shall be paid to the
iņsurers by the 20th of the month following the loss and claim

expense payments.
8. In the event premiums are not paid when due, this policy may

be cancelled by the insurers by giving 30 days cancellation
notice to the Insureds.

SWINE FI.U VACCINE PROGRAM

We are enclosing a proposal for Insurance to provide coverage for the four manufacturers. This proposal differs as you will note from any previous forms, and it has been drafted to provide the undeitiriters with a profit potential for exposing their limits of liability. The policy will be on a quota share subscription form with each underwriter signing for their percentage of participation. It is contemplated using the standard ISO policy

form with the attached modifications.

It is anticipated that many claims will be subject to subrogation against the government, relying upon the contract between HEW and the manufacturers delineating the responsibilities of each.

The rating formula is as follows:

$50,000,000 AGGREGATE LIMIT FOR THE PROGRAM
$2,000,000 DEPOSIT. PREMIU:

The premium for the policy is the deposit premium ($2,000,000.) plus an amount equal to 120% of that portion of loss which includes sums paid as damages and

as allocated claim expenses and 100% of sums paid as unallocated claim expenses.

The premium so determined is subject to a minimum of $2,000,000. and up to a maximum of $40,000,000.

SWINE FLU EXCESS

Each manufacturer will also require a policy in the amount of $50,000,000 aggregate limit, including losses and loss expenses, in excess of the primary $50,000,000 aggregate policy issued to the four manufacturers jointly.

This excess policy will apply only for liability which may remain with the manufacturer under the attached contract which each manufacturer has with HEW. The specifications for manufacturing and distribution of the product are established by the government and the government's action against any manufacturer can only be for reimbursement of losses which the government has paid to third parties arising out of a manufacturer's failure to comply with such specifications.

The premium for each of these individual policies will be a flat charge of $375,000. The policy will be on a quota share subscription form with each underwriter signing for their percentage of participation. We expect each underwriter will participate in these excess contracts as well as the primary program.

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