1. Presented by: Michael McHugh Area Executive Vice President Arthur J. Gallagher Risk Management Services, Inc. Wednesday - May 19, 2010 1:00 p.m. – Arnold Palmer Room

2.  30 Years Insurance and Brokerage Experience  National Pooling Niche Principal  National K-12 Principal- Arthur J. Gallagher Public Entity & Scholastic Division  ASBO International Member  Illinois ASBO Member for 23 years  Experience working with over 550 districts on various risk & insurance topics

3. 1. Define Risk Management 2. Explore basic components of a typical Risk Management Program 3. Review Property, Casualty & Specialty Coverages

4. Planning for the negative consequences of any decision process or action by using whatever means feasible to control the chance of financial loss. Public Sector Risk Management Manual

5.  Trying to stop losses from happening (through avoidance, risk control, loss control or loss prevention)  Paying for the losses that do occur (through reduction, insurance or risk transfer)

6.  School Districts = “Institutions of Learning”  Education of Students  Athletics & Extracurricular Activities  Employees & Volunteers  Transportation  Food Service/Cafeteria  PTO/PTA/Booster Groups  Buildings/Contents including Materials and Mobile Equipment  Playgrounds and Athletic Facilities  Educational Foundations

8. A contractual relationship that exists when one party (the insurer) for a consideration (premium) agrees to reimburse another party (the insured) for loss to a specified subject (the risk) caused by designated contingencies (hazards or perils).

9.  Definition of Insured  Needs to be broad so that it covers the following:  District and its employees / student teachers  Elected / appointed officials  Sponsored / endorsed organizations  Volunteers who do work at your direction on behalf of the District

10.  Buildings  Contents  Inland Marine  EDP Equipment  EDP Extra Expense  EDP Media  AV Equipment  Valuable Papers  Fine Arts  Musical Instruments  Builder’s Risk  Needed for new construction and renovations at your district  Extra Expense  Increased Cost of Construction / Demolition Coverage  Auto Physical Damage

11.  Employee Dishonesty  Loss of Money - inside / outside premises  Depositor’s Forgery  Bonds  i.e. working cash / treasurer’s / life safety

12.  Fired / Unfired Pressure Vessels  MEA coverage  Refrigeration coverage  Air Conditioning Units  Extra Expense  Water Damage  Joint Loss Endorsement

13.  Comprehensive General Liability/ Employee Benefits Liability  School Board Legal Liability Coverage  Workers’ Compensation  Umbrella Liability

14.  Limits usually $1M per occurrence / $3M aggregate  Fire Damage (Legal Liability) $500K limit  Employee Benefits Liability  $1M Claims-Made coverage  Broad form General Liability coverage form, which includes:  Bodily Injury / Property Damage  Personal Injury and Contractual coverage  Sexual Abuse / Misconduct coverage  Athletic Participation coverage

15.  Coverage for autos, trucks, bus fleet  Auto Liability  Auto Physical Damage  Hired / Non-owned Coverage  Limit $1,000,000

16.  This is you, your boss, and your Board  Get a broad definition of named insured  Can be written on an “occurrence” basis or on a “Claims-Made” basis  Make sure it covers  Employment Practices Liability  Discrimination  Harassment  Wrongful Termination  IDEA coverage  Back Wages coverage  Non-Monetary coverage  Front Wages Coverage

17. What is it? Provides Excess Liability Coverage over the General Liability, Auto Liability, School Board Legal Liability And Workers’ Compensation coverages Minimum Limit: $10,000,000 Ideal Limit:$25,000,000 or higher

18. Why? $60,000,000 – pending Illinois case for alleged sexual abuse by a teacher vs. a student $27,300,000 – 2005 Illinois verdict (1995 claim). Fox River Grove bus/train accident – 7 student fatalities and 21 students injured. $16,200,000 District responsibility; $11,100,000 other entities $19,000,000 – 2007 Illinois verdict (2003 claim). 9 year old was helping move a television set on a cart when it fell striking the boy’s head resulting in brain injury $13,150,000 – 2007 Ohio verdict (2006 claim). Lab experiment exploded and burned student over 46% of her body. $12,500,000 – 2005 Illinois verdict (1999 claim). High School football player injured when he was tackled into a fencepost. Quadriplegic. $9,587,000 – 2008 Illinois verdict (2005 claim). School Bus driver ran over pedestrian. Quadriplegic

19.  Medical  Indemnity  Statutory  Employers’ Liability  Other States Endorsement  Voluntary Compensation Endorsement

20.  Student Accident Program  Pollution Liability  Foreign Liability  Special Events  Professional Liability  Nurses  Educational Foundations  Fiduciary Liability – 403(b) exposure

21.  Provides $5M of coverage for ALL students in the district for all school sponsored activities  Covers 100% of any out of pocket cost incurred by parent/guardian for medical expenses  In case of no primary medical insurance, becomes primary medical insurance for injured student  Provides option for 24 hour coverage to be purchased by parent/guardian  Reduces General Liability Premiums

22.  Reduces litigation against district  Reduces administrative burden on district administration  Good will gesture towards community  Reduces claim costs  Easy for parents to get reimbursed

23.  Separate Board of Directors creates exposure  Provides up to $5M for fiduciary liability arising out of funds managed by Foundation

24.  Covers liability arising from trips overseas  Provides coverage in case of bodily injury or property damage to a third party while traveling abroad  VERY INEXPENSIVE COVERAGE

25. Michael McHugh - Area Executive Vice President Public Entity & Scholastic Division Arthur J. Gallagher Risk Mgmt Services Voice: (630) 285-4373 Email: michael_mchugh@ajg.com