1. Risk Management Program Presented by: Jeff Reese, ALCM, AU – Liberty Mutual Risk Control Services Our risk control service is advisory only. We assume no responsibility for management or control of customer safety activities nor implementation of recommended corrective measures. The illustrations, instructions and principles contained in the material are general in scope and, to the best of our knowledge, current at the time of publication. No attempt has been made to interpret any referenced codes, standards, or regulations. Please refer to the appropriate code-, standard-, or regulation-making authority for interpretation or clarification. Only your policy or contract can give actual terms, conditions and exclusions.

2. Liberty Mutual Insurance 2 Objectives

3. Liberty Mutual Insurance 3 Definition of Risk Uncertainty in regard to the positive or negative outcome of potential future events.

4. Liberty Mutual Insurance 4 Types of Risk

5. Liberty Mutual Insurance 5 Objectives

6. Liberty Mutual Insurance 6 Definition of Risk Management Uncertainty in regard to the positive or negative outcome of potential future events.

7. Liberty Mutual Insurance 7 Risk Manager – Should have a good understanding of Insurance Coverage Property Liability Auto Work Comp Flood Crime Builders Risk Business Income Inland Marine Employment Practices Employers Liability Liquor Liability Errors and Omissions Pollution Garage Keepers / Fiduciary Umbrella Key Employee Business Continuation Commercial Package Policy

8. Liberty Mutual Insurance 8 Insurance Basics  Insurance companies add “rate multipliers” to pure loss rates based on: –Exposures & Controls (Subjective) Hiring Practices, Management Commitment, Safety Program, Cooperation, Equipment Maintenance, Employee Training, Experience, Turnover, Type of Projects, etc. –The employer’s historical record of claims and safety performance (Objective) Loss Ratio, Frequency Ratio, Experience Modification, Etc. OSHA Violations, FMCSA SMS, Claims Records, etc. –Loss Ratio = Paid Losses / Premium –Frequency Ratio = # Claims / (Premium/1000)

9. Liberty Mutual Insurance 9 Experience Modification – Work Comp  Performance measure with direct impact. –NCCI –Based on employee classifications and not business classifications –Statistical loss rate per $100 of payroll –Measures your expected losses for that year as a baseline average. –Primary vs. Excess – Frequency to Severity –Uses the oldest 3 of the past 4 years –Medical Only – deduct 70% –Reserves Included Code Payroll EL EPL

10. Liberty Mutual Insurance 10 The Experience Modification  NCCI Experience Rating Plan Booklet  https://www.ncci.com/documents/abc_Exp_Ratin g.pdf

11. Liberty Mutual Insurance Days Off Grace Period for Work Comp

12. Liberty Mutual Insurance OSHA - Incident Rate www.bls.gov/iif/osheval.htm OSHA Violations and Fines http://www.osha.gov/pls/imis/establishment.html FMCSA CSA – SMS Results http://csa.fmcsa.dot.gov/default.aspx

13. Liberty Mutual Insurance But isn’t that why we have insurance? Indirect Costs Injured Employee Time Off Other Employees’ Time Supervisor’s Time Training A Replacement Worker Quality and Quantity of New Employee’ Work Efficiencies Morale Overtime Pay Equipment Repair / Replace/ Devalued Shut Down of Assembly Line Rental Expenses Clean Up Overhead Continues Product Damage Raw Material Damage Bad Press / Goodwill Compromised Deadlines Lawsuits & Court Time Fines & Deductibles Dropped by Carrier

14. Liberty Mutual Insurance 14 Resources / References Comparative Negligence – MT follows the 51% rule which is Modified Comparative Fault – If the plaintiff is 50% or less at fault they recover based on that %. If they are 51% or more at fault then they don’t recover anything. So if they are 10% at fault they recover 90%

15. Liberty Mutual Insurance 15 Punitive Damages Insurability Ex. Employers Liability Not allowed Insurable Allowed, but not insurable Insurability is questionable

16. Liberty Mutual Insurance Sources of Some Key Consensus Standards Among the more commonly used standards include- –ANSI (American National Standards Institute)ANSI Ex. OSHA references ANSI Z87.1 for eye and face protection Ex. Safety Yellow ANSI Z535.1 “most visually detectable” –NFPA (National Fire Protection Association)NFPA –ASTM (American Society for Testing and Materials)ASTM –ASME (American Society of Mechanical Engineers)ASME –ISO (International Organization of Standards)ISO –IEEE (Institute of Electrical & Electronics Engineers)IEEE –UL (Underwriters Laboratory)UL –SAE (Society of Automotive Engineers)SAE 16