Property & Liability Coverage Property & Liability Coverage AssessmentAssessment

Presented by Helen Harper and Presented by Helen Harper and Monica PanaitMonica Panait

PrimexPrimex3 3

ObjectiveObjective

• Know your exposuresKnow your exposures

• Based on your exposures know what Based on your exposures know what coverages to requestcoverages to request

• Typical/appropriate limitsTypical/appropriate limits

• Statutory protection regarding Statutory protection regarding coveragecoverage

• Position yourself for the best buyPosition yourself for the best buy

Open DiscussionOpen Discussion

ConcernsConcerns

Specific questionsSpecific questions

Risk Management DefinedRisk 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 IdentificationRisk 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 ExposuresProperty Exposures

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

Property CoverageProperty 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 - Property Coverage - continuedcontinued

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 Case Study DiscussionDiscussion

Builder’s RiskBuilder’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 ExampleBuilder’s Risk Example

• ABC School District is building a new ABC School District is building a new middle school. They have selected an middle school. They have selected an architect, construction company and are architect, construction company and are getting ready to sign the AIA contract.getting ready to sign the AIA contract.

• If they sign the contract without If they sign the contract without amending it who is required to carry the amending it who is required to carry the coverage?coverage?

• Other disadvantages: waivers of Other disadvantages: waivers of subrogationsubrogation

Boiler and MachineryBoiler 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 InsuranceBusiness Income Insurance

It’s called a “time element” coverage It’s called a “time element” coverage because the severity of the loss is directly because the severity of the loss is directly related to how long it takes to restore the related to how long it takes to restore the propertyproperty

2 elements: - reduction in net income2 elements: - reduction in net income

- extra expenses - extra expenses

Extra ExpenseExtra Expense

Staying open after a loss pending repair Staying open after a loss pending repair or replacement of damaged propertyor replacement of damaged property

– Renting other premisesRenting other premises– Extra transportationExtra transportation– OvertimeOvertime– Shipping costsShipping costs– Expense incurred to minimize total lossExpense incurred to minimize total loss

Auto CoverageAuto Coverage

- Vehicles

- Buses (if you own the fleet)

- ACV

Losses incurred for:Losses incurred for:

Bodily Injury/Property DamageBodily Injury/Property Damage Physical damage to your owned vehiclePhysical damage to your owned vehicle

One of the schools in the district organizes One of the schools in the district organizes a field trip, however there’s no available a field trip, however there’s no available transportation in the district. One of the transportation in the district. One of the teachers rents a vehicle form Enterprise teachers rents a vehicle form Enterprise and while there she is asked if she’d like to and while there she is asked if she’d like to purchase insurance coverage?purchase insurance coverage?

She calls you for advice…She calls you for advice…

Also, should she rent a 15 passenger van Also, should she rent a 15 passenger van that would accommodate everybody?that would accommodate everybody?

Liability ExposuresLiability Exposures

- premises and operations- premises and operations

- employees- employees

- students- students

- volunteers- volunteers

- special education- special education

- use of your facilities- use of your facilities

- statutory- statutory

Liability CoverageLiability Coverage

- personal injury- personal injury

- property damage- property damage

- unfair employment practices- unfair employment practices

- employee benefit liability- employee benefit liability

- educators’ legal liability- educators’ legal liability

Liability Coverage - Liability Coverage - continuedcontinued

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

Unfair Employment PracticesUnfair Employment Practices

““Wrongful Acts” relating to the Wrongful Acts” relating to the rights and privileges of any rights and privileges of any employee resulting in:employee resulting in:

– Wrongful terminationWrongful termination– Wrongful disciplineWrongful discipline– Failure to employ or promoteFailure to employ or promote– Sexual harassmentSexual harassment– Unlawful discriminationUnlawful discrimination

EmployeeEmployee Benefits LiabilityBenefits Liability

““Wrongful Acts” of the Wrongful Acts” of the employer in the employer in the administration of their administration of their Employee Benefits ProgramEmployee Benefits Program

OrOr

Improper advice or other Improper advice or other errors and omissions in the errors and omissions in the administration of the administration of the employee benefit plansemployee benefit plans

EmployeeEmployee Benefits Liability - Benefits Liability - continuedcontinued

-Failing to enroll an employee in the Failing to enroll an employee in the health program; the employee has a health program; the employee has a medical condition and no coveragemedical condition and no coverage

-Advice regarding the stock marketAdvice regarding the stock market

Educators’ Legal LiabilityEducators’ Legal Liability Errors & Omissions (E&O)Errors & Omissions (E&O)

–Alleged “Wrongful Acts”Alleged “Wrongful Acts”

–Errors or omissionsErrors or omissions

What to look for :What to look for :defense costs for Special defense costs for Special Education hearings.Education hearings.

VolunteersVolunteers

Is their liability covered?Is their liability covered?

Is there any medical coverage Is there any medical coverage available?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 Do you background check long term volunteers? Or volunteers term volunteers? Or volunteers allowed to be one on one with allowed to be one on one with students?students?

Use of FacilitiesUse of Facilities

• Use of facilities procedures are helpfulUse of facilities procedures are helpful• Sign a Use of Facilities Agreement with the Sign a Use of Facilities Agreement with the

party using your facilities (involve legal party using your facilities (involve legal counsel)counsel)

• Request a Certificate of Coverage naming the Request a Certificate of Coverage naming the town/school as an Additional Insuredtown/school as an Additional Insured

• If the third party does not carry insurance If the third party does not carry insurance coverage consider TULIP coverage available coverage consider TULIP coverage available through Primex, orthrough Primex, or

• at least have the third party sign a release at least have the third party sign a release formform

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

Will they be covered by the school Will they be covered by the school district?district?

PTO/PTAsPTO/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 Are they acting as volunteers on behalf of the school or are they behalf of the school or are they organizing their own event(s)?organizing their own event(s)?

The PTA would like to help out with the The PTA would like to help out with the Harvest Festival. Are they covered under Harvest Festival. Are they covered under the school district’s coverage document?the school district’s coverage document?

A. YesA. Yes

B. NoB. No

C. It depends…C. It depends…

(Explain your answer)(Explain your answer)

Surety BondSurety Bond

Things to remember:Things to remember:

- who needs to be bonded - who needs to be bonded (treasurer, assistant treasurer)(treasurer, assistant treasurer)

- what is the limit required- what is the limit required

- reporting requirements- reporting requirements

CrimeCrime

- blanket bond (employee - blanket bond (employee dishonesty)dishonesty)

- forgery or alteration- forgery or alteration

- counterfeit papers- counterfeit papers

- computer fraud- computer fraud

- fund transfer fraud- fund transfer fraud

Limits, deductibles.Limits, deductibles.

Other services providedOther services provided

• Risk management services – are they Risk management services – are they included or are you charged for them included or are you charged for them separately?separately?

– Safety trainingsSafety trainings– Facility/playground inspectionsFacility/playground inspections– JLMC/Safety committee attendance and JLMC/Safety committee attendance and

guidanceguidance– Other consulting servicesOther consulting services

Pool vs Commercial InsurancePool vs Commercial Insurance

Coverage drafted specifically for public Coverage drafted specifically for public entities entities

Easy management of coverage Easy management of coverage documentsdocuments

Preserving statutory capsPreserving statutory caps

Risk managementRisk management

Closing ThoughtsClosing Thoughts

• Know your exposuresKnow your exposures

• Based on your exposures know what Based on your exposures know what coverages to requestcoverages to request

• Typical/appropriate limitsTypical/appropriate limits

• Statutory protection regarding Statutory protection regarding coveragecoverage

• Position yourself for the best buyPosition yourself for the best buy

Thank you!Thank you!

• A Charlotte, North Carolina man, having purchased a box of very rare and 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 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 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 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 claim against the insurance company. In his claim the man stated that the cigars were lost "in a series of small fires".were lost "in a series of small fires".

• The insurance company refused to pay, citing the obvious reason: that the man 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 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 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 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 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 guaranteed that it would insure them against fire, without defining what is considered to be "unacceptable fire," and was therefore obligated to pay the considered to be "unacceptable fire," and was therefore obligated to pay the claim. Rather than endure a lengthy and costly appeal process, the insurance 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 company accepted the ruling and paid $15,000 to the man for his loss of the rare cigars lost in the "fires".cigars lost in the "fires".

• Now for the best part. After the man cashed the check, the insurance company 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 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 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 of intentionally burning his insured property and was sentenced to 24 months in jail and a $24,000 fine.jail and a $24,000 fine.

Case study on slide 9