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3. DEFINITIONS APPLICATION/SCHEDULE, APPUCATION or SCHEDULE means your Excess Loss Reinsurance Coverage Application! Schedule and the Qualification of the Offer. Application to Us is subject to acceptance by Us, and if approved, "ill become a part of this Treaty. BENEFIT PLAN (Also called the Plan) means the welfare benefits you have agreed to provide under a plan of benefits for the Covered Units. These benefits are as defined in the written form of such Plan, which is in effect and on file with the Reinsurer as of the Effective Date of your coverage including any amendments to such Plan that are approved pursuant to the pro\isions of this Treaty. PLAN BENEFITS PAYMENT ON AN INCURRED AND PAID BASIS mean, for a Treaty Year, the total amount of benefits under the Plan to which Covered Units or Covered Persons become entitled under the Plan and are paid pursuant to the Plan, subject to any limitation of this Treaty. Such amount of benefits shall only include the Eligible Expense incurred by Covered Units or Covered Persons on or after the Effective Date and paid (1) within the Treaty Year, or (2) if provided in the Application, within the stated number of months after the expiration date of the current Treaty Year. PLAN BENEFIT PAYMENTS ON A PAID BASIS mean, for a Treaty Year, the total amount of benefits which are paid pursuant to the Plan for which Covered Units or Covered Persons or are entitled to under the Plan as of the effective date of this Treaty. Subject to any limitations of this Treaty, such amount of benefits shall include only the Eligible Expenses incurred by Covered Units or Covered Persons up to the limits stated on the Application and paid during the Treaty Year. Whether on an Incurred and Paid Basis or on a Paid Basis as set forth in the Application, such benefits shall not include: Deductibles, co-insurance amount any other expenses or claims which are not reimbursable under the terms of the Plan or expenses which are reimbursable from any other source; or expenses of litigations or administrative costs. An Eligible Expense will be considered to be incurred by the Plan for Covered Units or Covered Persons at the time the service, or the supply to which it relates, is provided. Drafts, checks and wire or other transfer of funds that are honored by the institution upon which the transfer has been drawn are counted as amounts paid. EXPERIMENTAL means medical practices, procedures, services or supplies which are considered experimental or investigational by ED.A. (Food and Drug, Administration) or AM.A. (American Medical Association) or the Department of Health and Human Services guidelines. The above will not be eligible for deductible accumulation or excess reimbursement under this Treaty. ELIGffiLE EXPENSES mean the charges which are covered and for which benefits are payable under the Plan. DATE OF ISSUE means the date of issuance of a claim check or draft because of Eligible Expenses provided that the check or draft has been placed in the U.S. Mail or other means of conveyance to the payee. It is presumed that checks or drafts placed in the mail are payable and "ill clear the bank account within a reasonable amount of time. The issue and placement of a draft or check in the mail is to be done in a standard and consistent manner in accord with the agreement that you have with your Administrator and your Administrator is presumed to be consistent in his daily operation. COVERED UNIT means an individual employee, an employee with dependents, or such other defined unit as shown by endorsement to this Treaty and which art covered under the Plan. NUMBER OF COVERED UNITS means the total number of Covered Units existing in anyone Treaty Month. The Number of CO'I.ered Units for the fIrst Treaty Month of the first Treaty Year is shown in the Application. The Number of Covered Units for subsequent Treaty Months and Treaty Years will be determined on a monthly basis in accordance with the definition of Covered Units and with the eligibility requirements of the Plan. COVERED PERSON means a Covered Unit, or, in the case of a dependent, a member of a Covered Unit. 4