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Petitioner must have drawn the same conclusion. Through the
AFM policy, petitioner was able to cover its liability for up to
$10 million for any single occurrence in return for premiums of
$86,820.46 This amount of premium is less than one-tenth the
amount petitioner agreed to pay NUF to be a "front" in the
restructuring of the excess value activity. NUF and OPL were not
liable for losses attributable to a single occurrence, to the
extent such losses were between $25,000 and $10 million.
Petitioner, in turn, was not dependent upon NUF and OPL for
single-occurrence catastrophic losses above the deductible of
$25,000 and under $10 million but would have been able to procure
coverage for such liability in excess of $10 million for a
relatively nominal premium.
Petitioner had a conservative, risk-averse insurance
philosophy and sought to have sufficient coverage to protect its
assets from a catastrophe. In 1983, petitioner considered
raising the $10 million AFM policy limit to $20 million. In a
letter dated May 26, 1983, sent by Mr. Edmund Mihich, of Hall, to
Mr. Johnson and Mr. Eugene Schoenleber of petitioner's insurance
department, Mr. Mihich wrote:
45(...continued)
for lost and damaged shipments were to exceed EVC revenue that it
had given up.
46This AFM coverage excludes liabilities of up to $25,000
per occurrence.
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