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Please allow this letter to confirm our telephone
discussion of May 25, 1983 with regard to the * * *
[AFM policy].
* * * * * * *
With regard to your interest in increasing the unnamed
location and transit sub-limits from $10,000,000 to
$20,000,000, Allendale has requested to be provided
with the exposure data which creates this request.
Gene, as I indicated to you on the telephone, it was
Allendale's understanding that the present $10,000,000
limit provided was far more than sufficient. * * *
With regard to the transit limit, Allendale was under
the impression that there was no situation in which the
exposure approached anywhere near the $10,000,000 mark.
Both Allendale (AFM's parent) and Hall considered petitioner's
AFM policy limit of $10 million to be substantially more coverage
than necessary to insure against losses that petitioner's transit
operation exposed petitioner to. Petitioner chose not to
increase the limits on the AFM policy to $20 million, further
indicating to us that there was no realistic possibility that
petitioner or NUF/OPL would realize a loss in its excess value
activity. Because the AFM policy was in effect before, during,
and after the time when petitioner restructured its excess value
activity, we do not find any relationship between petitioner's
goal of protecting against catastrophic loss and the
restructuring of petitioner's excess value activity.47
47An endorsement was added to the Affiliated FM policy
effective Jan. 1, 1984, which referred to the Shippers Interest
contract. However, petitioner maintained the same level of
coverage and deductible of the Affiliated FM policy that existed
(continued...)
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