and/or trial of any claim, suit, or proceeding which, in the sole opinion of the Company, involves or appears reasonably likely to involve coverage under this policy. If the Company elects to so participate, the insured and any underlying insurer will fully cooperate with the Company.

## VI. DEFINITIONS

* **Company:** means the insurer designated on the Declarations.
* **Claim Expense:** means the costs of the investigation, adjustment, appraisals, and defense of a covered claim, suit or proceeding.
* **Ultimate Net Loss:** means the total amount that the insured is legally obligated to pay as damages for a covered claim, suit or proceeding either by adjudication or a settlement to which the Company agrees in writing. Ultimate Net Loss includes deductions for recoveries and salvages which have been or will be paid. Ultimate Net Loss does not include office costs, expenses, or salaries of the insured or the Company.
* **Ultimate Net Loss also includes Claim Expense incurred with respect to claims covered under this policy. If, however, with respect to any covered claim, suit, or proceeding all Underlying Insurance and all co-insuring policies in this layer provide that Claim Expenses paid under their respective policies are in addition to that policy's limit of liability, it is agreed that any Claim Expense paid under this policy with respect to such claim, suit, or proceeding shall be in addition to this policy's limit of liability, subject to the following:**
    * In the event that the amount of the loss sustained by the insured with respect to any claim, suit, or proceeding is in excess of the insurance afforded by the Underlying Insurance for such loss, the Company shall pay, in addition to the limits of liability applicable to such loss under this policy, a pro rata share of the Claim Expense sustained or incurred by the insured with respect to such claim, suit, or proceeding in the proportion that the amount of loss covered by this policy bears to the total Ultimate Net Loss.
* **Underlying Insurance:** means all policies of insurance and issuing insurers thereon underlying this policy, the total underlying limits of liability of which is specified in Item 5(b) of the Declarations. Underlying Insurance includes the Underlying Policy.
* **Underlying Policy:** means the policy of insurance specified in Item 5(a) of the Declarations.

## VII. EXCLUSIONS

Excluded from Ultimate Net Loss that may be insured under this policy are any claims, suits, or proceedings for, based upon, arising from, attributable to, related to, or in any way connected with, in whole or in part, directly or indirectly:

A. any personal injury, bodily injury, or property damage arising directly or indirectly out of or in connection with the discharge, dispersal, release, escape, or seepage of oil, petroleum substances or derivatives (including any oil, refuse, or oil mixed with wastes), smoke, vapors, soot, fumes, acid, alkalis, toxic chemicals, liquids, gases, waste materials, or other irritants, contaminants, or pollutants into or upon land, the atmosphere, or any watercourse, body of water,