1. course introduction welcome! introductions icebreaker housekeeping agenda

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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 ManagementM-201 Facilities ManagementM-202 Association CommunicationM-203 Community LeadershipM-204 Community GovernanceM-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

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

ObjectiveIdentify 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

Risk control involves the following five techniques:1. Exposure avoidance2. Loss prevention3. Loss reduction4. Segregation of exposuresa.Duplicationb.Separation5. Contractual transfera. Legal and fiscal responsibility

Risk Financing

Risk Retention: Pay for Yourself

1. Current expensing2. Unfunded reserve

for loss3. Funded reserve for

loss4. 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 CoveragesPersonnel 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 Coverage1.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 SpecificationsCommercial 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 ProgramInsurance 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 Loss1.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 loss2. Analyze 3. Review alternative risk management

techniques 4. Assist board to select5. 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 300Alexandria, VA 22314

(888) 224-4321 (M-F, 9-6:30 ET)(703) 684-1581 (Fax)www.caionline.org

Thank You!

For participating in this course

For your support of CAI and the Professional Management Development Program