Property & Liability Coverage Assessment Presented by Helen Harper and Monica Panait Primex 3

Objective Know your exposuresKnow your exposures Based on your exposures know what coverages to requestBased on your exposures know what coverages to request Typical/appropriate limitsTypical/appropriate limits Statutory protection regarding coverageStatutory protection regarding coverage Position yourself for the best buyPosition yourself for the best buy

Open Discussion Concerns Specific questions

Risk Management Defined The process of protecting an organization’s assets through exposure identification and analysis, controlling exposures, financing losses with external and internal funds, and the implementation and monitoring of a risk management program.

Risk Identification The process of identifying and examining exposures of an organization Exposures: property, liability, human resources, net income Methods of identification: checklists, physical inspection, coverage review, contract review, policy review, loss data review, etc.

Property Exposures - -Buildings and contents - -Mobile equipment - -Builder’s Risk projects - -Boiler and Machinery - -Fine Arts - -Etc.

Property Coverage - -Special form – covers risk of direct physical loss, subject to exclusions, terms and conditions provided by the coverage documents, therefore the burden of proof lies with the entity providing coverage - -Replacement Cost on buildings and contents - -Actual Cash Value (ACV) for mobile equipment - -Appraisals provided for buildings - -Know what you are required to schedule in order to be covered - -Flood and earthquake – is an endorsement needed?

Property Coverage - continued Other issues: - -Your entity might be required to name another party as a loss payee (i.e. a mortgagee, a lender, etc.) - -Newly acquired property – do you have automatic coverage? - -Off premises property - -Vacant buildings - -Deductibles – what is your deductible (may help budgeting)

Case Study Discussion

Builder’s Risk - -New buildings - -Renovations - -Additions - -AIA contract is not drafted in your favor - -Determine if it’s beneficial to carry the coverage or have the contractor carry it

Builder’s Risk Example ABC School District is building a new middle school. They have selected an architect, construction company and are getting ready to sign the AIA contract.ABC School District is building a new middle school. They have selected an architect, construction company and are getting ready to sign the AIA contract. If they sign the contract without amending it who is required to carry the coverage?If they sign the contract without amending it who is required to carry the coverage? Other disadvantages: waivers of subrogationOther disadvantages: waivers of subrogation

Boiler and Machinery - -Loss due to accidents to boilers, pressure vessels, machinery, electrical or refrigeration equipment - -Advantage: - -inspections catch majority of maintenance issues before they become a problem

Business Income Insurance It’s called a “time element” coverage because the severity of the loss is directly related to how long it takes to restore the property 2 elements: - reduction in net income - extra expenses - extra expenses

Extra Expense Staying open after a loss pending repair or replacement of damaged property –Renting other premises –Extra transportation –Overtime –Shipping costs –Expense incurred to minimize total loss

Auto Coverage - -Vehicles - -Buses (if you own the fleet) - -ACV Losses incurred for:  Bodily Injury/Property Damage  Physical damage to your owned vehicle

One of the schools in the district organizes a field trip, however there’s no available transportation in the district. One of the teachers rents a vehicle form Enterprise and while there she is asked if she’d like to purchase insurance coverage? She calls you for advice… Also, should she rent a 15 passenger van that would accommodate everybody?

Liability Exposures - premises and operations - employees - students - volunteers - special education - use of your facilities - statutory

Liability Coverage - personal injury - property damage - unfair employment practices - employee benefit liability - educators’ legal liability

Liability Coverage - continued Who is covered? Staff? Board? Your entity might be required to name another party as an additional insured (i.e. use of facilities, leases, etc.) Limits Deductibles Occurrence or claims-made Statutory caps (preserve the limits established by RSA 507 – B:4 I)

The school nurse purchases her malpractice policy from State Farm. The policy limits are $1,000,000 per occurrence and $2,000,000 annual aggregate. She’s asking you if her limits are high enough? Should she purchase higher limits? Is she going to be reimbursed by the school?

Unfair Employment Practices “Wrongful Acts” relating to the rights and privileges of any employee resulting in: –Wrongful termination –Wrongful discipline –Failure to employ or promote –Sexual harassment –Unlawful discrimination

Employee Benefits Liability “Wrongful Acts” of the employer in the administration of their Employee Benefits Program Or Improper advice or other errors and omissions in the administration of the employee benefit plans

Employee Benefits Liability - continued -Failing to enroll an employee in the health program; the employee has a medical condition and no coverage -Advice regarding the stock market

Educators’ Legal Liability Errors & Omissions (E&O) –Alleged “Wrongful Acts” –Errors or omissions What to look for : defense costs for Special Education hearings.

Volunteers Is their liability covered? Is their liability covered? Is there any medical coverage available? Is there any medical coverage available? Do you keep track of volunteers? Do you keep track of volunteers? Do they sign a release form? Do they sign a release form? Do you background check long term volunteers? Or volunteers allowed to be one on one with students? Do you background check long term volunteers? Or volunteers allowed to be one on one with students?

Use of Facilities Use of facilities procedures are helpfulUse of facilities procedures are helpful Sign a Use of Facilities Agreement with the party using your facilities (involve legal counsel)Sign a Use of Facilities Agreement with the party using your facilities (involve legal counsel) Request a Certificate of Coverage naming the town/school as an Additional InsuredRequest a Certificate of Coverage naming the town/school as an Additional Insured If the third party does not carry insurance coverage consider TULIP coverage available through Primex, orIf the third party does not carry insurance coverage consider TULIP coverage available through Primex, or at least have the third party sign a release format least have the third party sign a release form

The local book club would like to use the school district’s facilities for a book sale. They don’t have insurance coverage, but they offer to donate all the money raised for the playground at the elementary school that needs to be replaced. Will they be covered by the school district?

PTO/PTAs Do they carry their own coverage? Do they carry their own coverage? Do they know they need coverage? Do they know they need coverage? Are they acting as volunteers on behalf of the school or are they organizing their own event(s)? Are they acting as volunteers on behalf of the school or are they organizing their own event(s)?

The PTA would like to help out with the Harvest Festival. Are they covered under the school district’s coverage document? A. Yes B. No C. It depends… (Explain your answer)

Surety Bonds 3 parties:3 parties: – The surety (a pool or an insurance company) –The obligee (i.e. the State of NH) –The principal (The School District) The surety guarantees to the obligee that the principal will perform as promised or fulfill an obligation

Surety Bond Things to remember: - who needs to be bonded (treasurer, assistant treasurer) - what is the limit required - reporting requirements

Crime - blanket bond (employee dishonesty) - blanket bond (employee dishonesty) - forgery or alteration - forgery or alteration - counterfeit papers - counterfeit papers - computer fraud - computer fraud - fund transfer fraud - fund transfer fraud Limits, deductibles.

Other services provided Risk management services – are they included or are you charged for them separately?Risk management services – are they included or are you charged for them separately? –Safety trainings –Facility/playground inspections –JLMC/Safety committee attendance and guidance –Other consulting services

Pool vs Commercial Insurance Coverage drafted specifically for public entities Easy management of coverage documents Preserving statutory caps Risk management

Closing Thoughts Know your exposuresKnow your exposures Based on your exposures know what coverages to requestBased on your exposures know what coverages to request Typical/appropriate limitsTypical/appropriate limits Statutory protection regarding coverageStatutory protection regarding coverage Position yourself for the best buyPosition yourself for the best buy

Thank you!

A Charlotte, North Carolina man, having purchased a box of very rare and expensive cigars, then insured them against fire among other things. Within a month, having smoked his entire stockpile of these fine cigars and without yet having made his first premium payment on the insurance policy, the man filed a claim against the insurance company. In his claim the man stated that the cigars were lost "in a series of small fires".A Charlotte, North Carolina man, having purchased a box of very rare and expensive cigars, then insured them against fire among other things. Within a month, having smoked his entire stockpile of these fine cigars and without yet having made his first premium payment on the insurance policy, the man filed a claim against the insurance company. In his claim the man stated that the cigars were lost "in a series of small fires". The insurance company refused to pay, citing the obvious reason: that the man had consumed the cigars in normal fashion. The man sued and won! In delivering the ruling, the judge agreed with the insurance company that the claim was frivolous. The judge stated that - nevertheless - the man held a policy with the company in which it had warranted that the cigars were insurable and also guaranteed that it would insure them against fire, without defining what is considered to be "unacceptable fire," and was therefore obligated to pay the claim. Rather than endure a lengthy and costly appeal process, the insurance company accepted the ruling and paid $15,000 to the man for his loss of the rare cigars lost in the "fires".The insurance company refused to pay, citing the obvious reason: that the man had consumed the cigars in normal fashion. The man sued and won! In delivering the ruling, the judge agreed with the insurance company that the claim was frivolous. The judge stated that - nevertheless - the man held a policy with the company in which it had warranted that the cigars were insurable and also guaranteed that it would insure them against fire, without defining what is considered to be "unacceptable fire," and was therefore obligated to pay the claim. Rather than endure a lengthy and costly appeal process, the insurance company accepted the ruling and paid $15,000 to the man for his loss of the rare cigars lost in the "fires". Now for the best part. After the man cashed the check, the insurance company had him arrested on 24 counts of ARSON! With his own insurance claim and testimony from the previous case being used against him, the man was convicted of intentionally burning his insured property and was sentenced to 24 months in jail and a $24,000 fine.Now for the best part. After the man cashed the check, the insurance company had him arrested on 24 counts of ARSON! With his own insurance claim and testimony from the previous case being used against him, the man was convicted of intentionally burning his insured property and was sentenced to 24 months in jail and a $24,000 fine. Case study on slide 9