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Course Introduction Welcome!  Introductions  Icebreaker  Housekeeping  Agenda

Course Introduction  Housekeeping  Ground Rules –Be on time –Listen to and show respect for the opinions of others –No disruptive side-conversations –Cell Phone and PDAs off  Facilities  Breaks  Lunch  Parking Lot

Professional Management Development Program (PMDP)  M-100 Essentials of Community Association Management  M-201 Facilities Management  M-202 Association Communication  M-203 Community Leadership  M-204 Community Governance  M-205 Risk Management  M-206 Financial Management Course Introduction

Course Materials  Participant Guide –Lessons –Activities  Course Evaluation Forms  Course Exam  CD-ROM  M-205 Website  GAP: Risk Management Course Introduction

M-205 Website  Samples, articles, resources and much more

Focus of Course  Developing risk management awareness.  Developing the habit of thinking –beyond maintenance, beyond property –to include liability, net income, and personnel concerns, as well. Course Introduction

Importance of Course  Risk management—including a sound insurance program—is a key aspect of preserving and protecting an association’s assets.  It demonstrates management’s ability to manage both assets and crisis situations. Course Introduction

Speak as an association or a member  Just because you maintain something, doesn’t necessarily mean you own it or insure it.  Just because you insure something, doesn’t necessarily mean you own it or maintain it. Course Introduction

Examples:  In some homeowner associations, member owns the building, but the association maintains and insures it.  Condominium associations often insure unit interiors, which may include real property owned and maintained by members. Course Introduction

Module 1: Risk Management

Focus: How to apply the risk management process to community association  using property as the primary example of exposures to possible loss. Risk Management

Module Objectives  Conduct an initial inventory of an association’s current risk management situation.  Use appropriate resources to identify an association’s exposures to possible loss.  Recognize and respond to exposure to possible loss that requires immediate attention. Risk Management

Module Objectives  Analyze an association’s exposures to possible loss.  Identify roles in developing a risk management program.  Identify alternative risk management techniques. Risk Management

Why Risk Management Awareness?  Can’t take chance of your association suffering a loss  If a loss is perceived as an accident that couldn’t have been anticipated, you’re lucky.  If you anticipate and then prevent or prepare for an accidental loss, you’re perceived as valuable—not just lucky Risk Management

Lesson 1: Risk Inventory

Lesson Objective  Conduct an initial inventory of an association’s current risk management situation. Risk Inventory

Why is an initial inventory necessary?  Crisis  Claim Risk Inventory

Activity # 1: Conduct an Initial Inventory Purpose: To develop the ability to do an initial assessment of an association’s current risk management situation. Risk Inventory

Directions for working in groups. 1.Choose a leader. This person is responsible for helping the group move through the steps in an activity, keeping the group focused, and getting everyone involved. 2.Choose a timekeeper. This person is responsible for keeping the group posted on how much time it has left to complete an activity. 3.Choose a recorder when appropriate. This person is responsible for recording a summary of the group’s ideas – and presenting it to the rest of the class, when appropriate.

Lesson 2: Exposure to Loss

Lesson Objectives  Recognize and respond to exposure to possible loss that requires immediate attention.  Use appropriate resources to identify an association’s exposures to possible loss.  Analyze an association’s exposures to possible loss. Exposure to Loss

Ability to recognize depends on:  Managerial experience.  Risk management expertise.  Available time. Exposure to Loss

Insurance Terms Related to Exposure to Loss Exposure to Loss  Advertising Injury (Al)  Bodily Injury (BI)  Directors’ & Officers’ Liability (D&O)  Employment Practices Liability  Liability Exposure  Net Income Exposure  Personnel Exposure  Personal Injury (PI)  Property Damage (PD)  Property Exposure  Wrongful Acts

Types of Exposure to Loss:  property  net income  liability  personnel Exposure to Loss

Example of Exposure to Loss: An increase in expenses as a net income loss: Any expenses associated with another type of loss, such as legal expenses or the extra expenses to set up an office at another location if the current site is damaged. Exposure to Loss

Immediate Treatment  Delays  Deficiencies  Defects Exposure to Loss

Response time depends on:  Authorization  Resources  Schedule or timing Exposure to Loss

Activity #2: Exposure to Possible Loss that Require Immediate Attention Purpose: To develop the ability to recognize and respond to exposures to possible loss that requires immediate attention. Exposure to Loss

Lesson 3: Risk Management Roles

Objective Identify roles in developing a risk management program. Risk Management Roles

A manager is responsible for:  Planning,  Organizing,  Leading, and  Controlling Risk Management Process Risk Management Roles

A manager should…  Review exposures.  Communicate issues to the board.  Manage insurance program. Risk Management Roles

Community Association Insurance Agent:  Historically the agent represented the carrier and the broker represented the insured.  These distinctions don’t always hold today. Risk Management Roles

What an agent ought to …  Suggest insurance policy coverage.  Obtain premium quotations.  Arrange coverage placement.  Arrange premium financing.  Provide loss runs in a timely fashion. Risk Management Roles

Agent may assist with…  Reporting claims.  Identifying and analyzing exposures.  Valuation of exposures.  Compliance with legal requirements for insurance.  Development and implementation of disaster planning. Risk Management Roles

What an agent may do depends on…  Legal constraints under state statutes and licensure.  Contract with the insurance carrier.  Contract with the association, if any.  Knowledge of the community association. Risk Management Roles

Activity #3: Identify Insurance Agent Roles Purpose: To identify the roles of an insurance agent. Risk Management Roles

Agent should not …  Offer advice outside area of expertise.  Assume responsibility for association risk management and insurance program.  Become involved in internal association disputes.  Estimate damage.  Collect assessments.  Contact other insurance carriers or agents. Risk Management Roles

Lesson 4: Risk Management Techniques

Objective  Identify alternative risk management techniques. Risk Management Techniques

Next Steps  Analyze an association’s exposure to possible loss.  Review alternative risk management techniques. Risk Management Techniques

Risk Management Discussion  What’s the difference between loss frequency and loss severity?  What’s the difference between loss prevention and loss reduction? Risk Management Techniques

Contractual Transfer Risk Financing Risk Control

Risk control involves the following five techniques: 1. Exposure avoidance 2. Loss prevention 3. Loss reduction 4. Segregation of exposures a.Duplication b.Separation 5. Contractual transfer a.Legal and fiscal responsibility

Risk Financing Risk Retention: Pay for Yourself 1.Current expensing 2.Unfunded reserve for loss 3.Funded reserve for loss 4.Borrowing Risk Transfer: Find Someone Else to Pay 1.Transfer to a commercial insurer 2.Contractual transfer —Hold harmless and indemnification agreement

Activity #4: Applying Alternative Risk Management Techniques Purpose: To practice applying the risk management process to a specific exposure to loss. Risk Management Techniques

Select Appropriate Technique  Association Obligation  Association Need  Owner Expectation Risk Management Techniques

Examples  Obligation— The governing documents require the association to maintain certain coverage.  Need— Type and condition of association assets involve certain exposures to loss.  Owner expectations— May vary in terms of how high a deductible they think the association should assume. Risk Management Techniques

Activity #5: Risk Management Techniques for Exposure to Loss Purpose: To practice preparing a risk management report to a board of directors. Risk Management Techniques

Module Summary Focus: How to apply the risk management process to community association using property as the primary example of exposures to possible loss.

Module Summary Module Objectives  Conduct an initial inventory of an association’s current risk management situation.  Use appropriate resources to identify an association’s exposures to possible loss.  Recognize and respond to exposure to possible loss that requires immediate attention.

Module Summary Module Objectives  Analyze an association’s exposures to possible loss.  Identify roles in developing a risk management program.  Identify alternative risk management techniques.

Discussion Questions  Why is it important to inventory as association’s risk management situation?  What are some common exposures to loss for a community association? How might this differ by housing type—high-rise condominium vs. large-scale community?  What is the role of the board in developing a risk management program? A committee? Management? Residents?  Discuss some alternative risk management techniques? Explain how you might incorporate these techniques at your association.

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Module 2: Role of Insurance in Risk Management

Focus: Implement risk management techniques in the risk management process. Role of Insurance in Risk Management

Module Objectives  Identify important aspects of an association’s fact sheet  Identify important request for proposal terms  Identify and describe the various types of insurance coverage typically found in community association programs.  Identify bid specifications for a insurance proposal  Identify and define claim process terms.  Identify perils of an incorrect claim process. Role of Insurance in Risk Management

 The next step is to implement the risk management techniques selected by the board.  This transfer of risk financing begins with the development of an insurance request for proposal, including an association fact sheet and bid specifications. Role of Insurance in Risk Management

Lesson 1: RFP Terms and Fact Sheets

Lesson Objective  Identify important aspects of an association’s fact sheet.  Identify important request for proposal terms. RFP Terms and Fact Sheets

Activity #1: Discuss Insurance Terminology use in a RFP Purpose: To become familiar with the terms and concepts found in an insurance request for proposal for a community association. RFP Terms and Fact Sheets

Uses for an Association Fact Sheet  Helps manager identify and evaluate exposures to possible loss—a risk management control.  Demonstrates management’s ability to manage to the board, the agent, and the carrier.  Provides an inventory of the association’s real and personal property that can be used for other purposes.

Activity #2: Association Fact Sheet Purpose: To become familiar with the purpose and content of an association fact sheet for insurance coverage. RFP Terms and Fact Sheets

Lesson 2: Insurance Coverage and Bid Specifications

Lesson Objectives  Identify and describe the various types of insurance coverage typically found in community association programs.  Identify bid specifications for a insurance proposal. Insurance Coverage and Bid Specifications

Common Insurance Coverages for Community Associations  Property Coverages  Liability Coverages  Net Income Coverages  Personnel Coverages Insurance Coverage and Bid Specifications

Workers’ Compensation/ Employers’ Liability Insurance Workers’ Compensation 1.Does an association with no payroll need workers’ compensation insurance? Employers’ Liability 1.How is employers’ liability different from statutory workers’ compensation? 2.How is employers’ liability different than employment practices liability?

Four Basic Questions to Ask About Insurance Coverage 1.What or who is covered? 2.For what events are they covered? 3.For how much are they covered? 4.Are there any qualifications to coverage? Insurance Coverage and Bid Specifications

Sample Partial Bid Specifications  Commercial Package Policy  Continue Fidelity  Commercial General Liability (CGL)  Directors’ and Officers Liability (D&O)  Umbrella Liability Insurance Coverage and Bid Specifications

Activity #3: What to include in a Bid Specification for Insurance Purpose:  To become familiar with the most common provisions that appears in bid specifications for community association insurance.  To call attention to special provisions and issues this could be problematic for an association. Insurance Coverage and Bid Specifications

Bid Specifications  Property Insurance

Bid Specifications  Fidelity Insurance

Bid Specifications  Commercial General Liability (CGL) Insurance

Bid Specifications  Directors and Officers (D&O) Insurance

Bid Specifications  Umbrella Liability Insurance

Insurance Coverage and Bid Specifications Monitoring a Community's Insurance Program  Insurance is a contract.  People are expected to be familiar with the contracts that they enter into.  This holds for insurance.

Insurance Coverage and Bid Specifications Insurance contract should be reviewed:  When the association first obtains a policy.  When a change is made in the policy coverage during a term. When a policy is renewed.  When a loss occurs.

Insurance Coverage and Bid Specifications Parts of an Insurance Policy  Declaration Page  Forms  Endorsements  Optional Coverages  Common Policy Conditions  Glossaries

Insurance Coverage and Bid Specifications Insurance Folder  Assemble the insurance policies in the folder using the declaration pages as your guide  Use the declarations page as a “table of contents” to locate the separate forms included in a policy

Insurance Coverage and Bid Specifications  Think of an insurance policy as a reference document.  You don’t sit down and read it cover to cover as you would a book.  But you must be able to locate information in it—with or without your insurance agent’s help.

Activity #4: Organize an Insurance Folder Purpose: Small groups organize an insurance folder and locate major coverage provisions in an insurance policy Insurance Coverage and Bid Specifications

Lesson 3: Claims

Objectives  Identify and define claim process terms.  Identify perils of an incorrect claim process. Claims

How does your association insure:  On-Your-Own Association  Side-By-Side Association  Above-And-Below Association Claims

Does your list include all four types of exposure to loss?  Property  Net Income  Liability  Personnel Claims

Steps to Take When You Find Out About Any Potential Loss 1.Protect life and property from further damage. 2.Keep detailed and accurate records. 3.Always tell the truth. 4.Avoid saying anything that suggests the association or management is responsible for what happened. Claims

 Restrict records to a description of facts.  There are pros and cons to keeping records.  Their benefit is that they help recall and support your version of a situation.  They are a disadvantage if you have done something wrong—or failed to do what you should have done. Claims

How to Decide Whether to Report a Loss:  Property Loss  Employee Injury  Liability Loss Claims

Liability loss  An injured party’s prior condition is immaterial to the association’s liability for bodily injury—even though it may lead to greater injury and therefore greater liability.  If an allegedly injured party makes a claim against the association’s liability insurance directly to the insurance agent, the agent must report the claim to the carrier. Claims

How much to confer with agent:  Agent represents the carrier  May have to act on information you divulge  Vary in how they respond to privilege information  Know your agent  Explore issues in the abstract Claims

Self Insurance  If an association decides not to report an actual loss, it is deciding to retain financing of the loss—or to self-insure it.  Risk retention essentially is self- insurance. Claims

Sample Claims Report  Fact Section  Public Adjuster Claims

First Party/Third Party Coverage  When the association makes a claim under its own policy, it is a first-party claimant.  When the association makes a claim against another party’s liability insurance, it is a third-party claimant. Claims

1.Identify exposures to loss 2.Analyze 3.Review alternative risk management techniques 4.Assist board to select 5.Implement 6.Monitor and improve risk management program. Claims

Module Summary Focus: Implement Risk Management techniques in the Risk Management Process

Module Summary Module Objectives  Identify important aspects of an association’s fact sheet  Identify important request for proposal terms  Identify and describe the various types of insurance coverage typically found in community association programs.  Identify bid specifications for a insurance proposal  Identify and define claim process terms.  Identify perils of an incorrect claim process.

Discussion Questions  What are some important aspects of an association’s fact sheet and bid specifications?  Describe a time when you were involved in a claim process. What went well? What could have been improved upon?  Name and explain the differing types of insurance coverage for community associations.  Are there any types of coverage you believe your association needs? What can you do to start the process?  What are some potential perils of an incorrect claim process?  What is the most challenging aspect of risk management?  Describe a situation you are struggling with and ask the members of your class for advice.

Course Evaluation  Please be sure to fill out your course evaluations.  Your feedback is important to us.

Course Exam  50 questions  Multiple choice  Results will be mailed within 4-6 weeks, if not sooner  Good luck!

Contact CAI 225 Reinekers Lane, Suite 300 Alexandria, VA (888) (M-F, 9-6:30 ET) (703) (Fax)

Thank You!  For participating in this course  For your support of CAI and the Professional Management Development Program