strima 2010 annual conference “foreign exposures” september 2010 jean demchak global public...
TRANSCRIPT
STRIMA 2010 Annual Conference
“Foreign Exposures”
September 2010
Jean Demchak
Global Public Entity & Education Practice Leader, Marsh
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Session Objectives
Better understand the business and legal risks associated with expansion into the global market
Describe some of the problems that can arise with international contracts and agreements
Identify the most critically needed tools to help risk managers identify and mitigate international exposures
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MYTHS OR A NEW REALITY SHOW?
State governments have no exposure to foreign liability
The University System has complete control over their foreign exposures
Given the economic conditions in the U.S., a State Risk Manager’s priorities over the next 10 years will be focused solely on their State
Global relations aren’t a priority for US State Governments
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STRIMA MEMBER SURVEY 2009
73% of STRIMA members include University & College System as clientele
53% of STRIMA members provide Workers’ Compensation for University Employees
Other coverages provided for University
– 2 states provide student health coverage
– 2 states provide athletics and college benefits
– 1 state provides Foreign WC and liability exposures
– 1 state provides fidelity bond coverage
– 1 state provides coverage for International Students
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State Government Foreign Exposures?
Contractual agreements
Employee travel
First responders
Border States – Employee travel
– Security
Shared program with non-U.S. governments Lack of insurance to protect State
Centralized function?
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Trends in Study Abroad
College and University President’s Increase Emphasis on Internationalization– Serving more Students with Less Resources
Study Abroad is more popular than ever among students
International travel a critical component of higher education
Short term programs on the increase
Move to the Developing World
Inconsistent academic, support and safety standards
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11-Year National Growth in Study Abroad
SOURCE: Open Doors, Institute of International Education, 2009. http://opendoors.iienetwork.orgCopyright 2010, IES Abroad. All rights reserved.
150% increase in the last decade
14.6% 13.9% 10.6% 7.4% 4.4% 8.5% 9.6% 7.7% 8.5% 8.2% 8.5%
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New Trends Affecting Risk
Aggressive growth Expansion into developing world where risk types & levels
differ More ad hoc trips Shorter durations of trips
More faculty led programs, often with less infrastructure
Varied approaches to crisis management, drills, training of faculty and staff among providers
Uneven approaches to health and safety among programs
9* Institute of International Education - 2008
Middle East1.0%
Oceania4.8%
Multiple regions4.7%
Africa4.8%
Asia10.6%
Europe63.1%
Latin America14.4%
North America
5.8%
Current Destinations*
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Legislative Support
NAFSA Panel’s goal triple students studying abroad
– Lincoln Fellowship Program
Increase number of students to 1,000,000
Stipends / funding for students
Top priority destination: developing countries
Global economic downturn with high unemployment leads to increase in crime (e.g., Spain at nearly 20% unemployment; Argentina, etc.)
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Developing Concerns
Kidnappings are common:
– Significant income stratification
– Internal political conflict
– Corrupt government
Al Qaeda’s Global Network of Networks
– Africa, Middle East, Central Asia, Southeast Asia
Terrorism (e.g., Mumbai, London, Madrid, U.S.)
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Risk Issues
Crime – Pick-pocketing
– Petty theft
– Assault
– Robbery
– Sexual assault
– Murder
Substandard health care
Inexperienced traveler
Communication
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Risk Issues
Cultural and religious issues (e.g., discrimination and harassment, hate crimes)
Differing laws and legal standards
– Caning
– Longer-than-expected prison terms
– Execution for certain offenses
– Arrests and imprisonment
Kidnapping
Civil unrest
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International Travel Incidents
Transportation
Bodily Injury (non-traffic i.e. drowning, etc.)
Sexual Misconduct
Natural disasters (tsunamis, earthquakes, etc.)
Health concerns:
– H1N1 which is now in 190+ countries at pandemic levels
– HIV: 30 Million died in Africa alone
– Mental health issues
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Incidents and Claims
Koobi Fora Field Station, Kenya – Vehicle upset
Merida, Mexico – Sexual Assault – Rohypnol – Alcohol
Valencia, Spain – Knifing Assault, Improper Admission of Participant
Haifa, Israel – FX Spine, Rock Climbing
Madrid, Spain – Sleep Walking, Fall 3rd floor, Alcohol, No HIV Blood Supply Testing Protocols
New Delhi, India – Severe Illness after Fumigation
Shanghai, China – Students present when US Bombed Chinese Embassy, Increased Anti-American sentiments
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LEGAL CLIMATE
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Elements of Negligence
Careless performance of a legal duty that causes harm
Failing to act reasonably when there is a duty to do so
Conduct below the established legal norm for protecting others
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Know The Legal Climate
Is it the same away from campus as on campus?– Tort Theory– Contracts– Federal Regulations and Legislation
How is the legal climate different when outside of the U.S. borders?
Increased litigiousness in American society in general– few legal precedents
– Web site headline: “Travel Abroad, Sue at Home”
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Legal Responsibilities
Three areas of law that may affect study abroad liability risks:
1. Tort Liability: claims which involve negligence such as failure to protect others from a reasonable risk of harm
in international study cases, institutions have a legal “duty of care” for participants
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Legal Responsibilities
Continued:
– 2. Contract Law: documented relationships between participants & program. Any written agreement determines responsibility and right of involved parties.
All representations by program sponsor may be considered by court, including:
program brochures, catalogs & posters
Neiswand v. Cornell (1988)¯ Cornell U unintentionally guaranteed a student’s
safety in writing and was later held responsible for student’s injury
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Legal Responsibilities
Continued:
– 3. Federal regulations and legislation: US government has adopted a variety of laws & policies affecting higher education, which may affect international education. They include standards on:
Title IX (Earlham College & E. Michigan cases) Campus Security -- Clery Act (Crime Reporting) ADA (Disabilities)
Clear communications re reality of circumstances FERPA (Student Records)
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In-country legal advice is essential
Guidance is needed on:– How to register
– Specific HR practices
– Insurance requirements
– Tax Law
– Local legal contact for emergency
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It’s a Complex Legal Arena: Some Relevant U.S. Laws
Americans with Disabilities Act of 1990 (ADA), 42 USC §§ 12101-12213.
Title IX of the Education Amendments of 1972, 20 USC §§ 1681 to 1688.
Jeanne Clery Disclosure of Campus Security Policy and Campus Crime Statistics Act (Clery Act), 20 USC § 1092(f).
Foreign Corrupt Practices Act of 1977 (FCPA), 15 USC § 78a.
Family Educational Rights and Privacy Act of 1974 (FERPA), 20 USC § 1232g.
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Counter-intuitive Foreign Laws/ Unexpected Penalties for Crime Abroad
China: Foreigners have been executed for drug offenses. Sentences for distributing non-authorized Christian literature may range from three to five years imprisonment. Sexual assault can be punishable by life in prison.
Japan: In most drug cases, suspects are detained incommunicado, barred from receiving visitors or corresponding with anyone other than a lawyer or consular officer (no family or university contact).
Ecuador: The accused is often incarcerated awaiting trial and sentencing. In serious cases, bail is not an option. Food is often insufficient and prisoners must pay for adequate nutrition.Copyright 2010, IES Abroad. All rights reserved.
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DEFENSE BASE ACT
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State Government and University as a Global Business
The commercialization of university research, technology, engineering, agriculture has drawn an increased number of contracts originating with various branches of the US Government.
When this revenue source takes this work outside of the United States, you may have an obligation to purchase Defense Base Act insurance.
Even if a contract does not specify this requirement, it’s important to understand when this is required.
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When is Defense Base Act Coverage Required
> Work on any military, air, or naval base acquired after January 1, 1940, by the United States from any foreign government; or
> Work on any lands occupied or used by the U.S. for military or naval purposes outside of the U.S.*
> Work on public work contracts through any U.S. government agency to be performed outside of the U.S.*
> Work on contracts approved and funded by the U.S. under the Foreign Assistance Act, which, among other things, provides for cash sale of military equipment, materials and services to its allies, if the contract is performed outside of the U.S.*
> Work for U.S. employers providing welfare or similar services outside of the U.S.* for the benefit of the Armed Services (i.e. USO)
If any one of the above criteria is met, all employees engaged in such employment, regardless of nationality, are covered under the Act.
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An Extension of the Longshore Harborworkers Compensation Act (LHWCA)
As DBA extends the provisions of the LHWCA, employees of U.S. government contractors working overseas are assured protection of a law that is uniformly administered, providing uniform benefits, regardless of:– The state in which the employee was hired– The state in which the employee maintained residence– The local law of the country in which the employee works
LHWCA and DBA are rarely amended federal statutes– Unlike LHWCA, there is no minimum compensation rate
under the DBA.
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“Public Work”
Defined in the DBA
Covers work related to national defense, war activities, or a public “use of the US or its allies”
Not limited to construction projects
Includes service contracts/subcontracts
Differs from grants which are not covered by the DBA
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Examples of DBA Exposures
Design and fabricate five-blade cascade into the existing wind tunnel facility; instrument static pressure taps, perform measurements, analyze and provide pressure distribution data for CFD prediction. Contract for this work is for the Army, performed in Mexico.
Seed research contract with the Department of Agriculture, performed in South America.
Energy Systems Laboratory: Fan Testing for the Dept of Energy, performed in Taiwan and Canada.
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Examples of DBA Exposures
Contract with NIH to perform specific Infectious Disease research and associated clinical trials in various African countries.
Deliver traffic accident avoidance class in Malta - a subcontract to a prime contract with the Army.
Assist the Beijing Transportation Research Center with technical assistance regarding traffic congestion measures.
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RISK MANAGEMENT
AND
RISK TRANSFER
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Mitigating Risk
Transfer risk via contracts (e.g., by contracting with third party providers) and via insurance
International HR Practices may differ:– Insurance requirements
– Pension benefits
– Worker’s Compensation
– Death benefits
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Crisis Management: How best to respond
Have a detailed crisis management plan – Keep it simple– Dovetail with existing institutional plan
Train on the Plan: All employees traveling abroad or faculty/staff taking students abroad, plus students (each term)
Drills: Drill every program every term
Utilize Technology (e.g., required cell phones, use text messaging to communicate).
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Crisis Action Plan for Overseas Programs
Protocol for Response to crisis– Foreign Crisis Management Team (UCMT)– Coordinated and comprehensive response– Communication with On Site Coordinator– Community Relations and Media Contact– Commitment of Resources – Insurance
Final Authority– State Risk Manager– Executive VP for Academic Affairs
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Some Recent Incidents Requiring Crisis Management Team Mobilization
Earthquake in New Zealand, September, 2010
Earthquake in Chile, February 2010
Health Related Death of a Student, October 2009
H1N1, May 2009
Mumbai Attacks, November 2008
Delhi Bombings, September 2008
Bacterial Meningitis Cases, London, March 2008
Glasgow Bombings, June 2007
London Bombings , July 2005
Madrid Bombings , March 2004
Avian Flu – December 2003
SARS Crisis – November 2002 to July 2003
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Local Response
Each site (destination) abroad should have its own Local Contingency Plan that addresses known local risks.
Built-In Redundancy (e.g., primary and secondary meeting locations, means of communication, & backups for employees/faculty/staff)
– Safe haven may not mean US Embassy
Required Post Mortems After Each Crisis
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Role of the International Oversight Committee
Historical focus on health, safety and security
Evaluate information presented by responsible party
Restrict or suspend international travel to countries/regions with heightened health, safety and/or security concerns
Grant exemptions to decision to restrict or suspend travel due to special circumstances
Manage/respond to critical incidents abroad, including decisions on emergency evacuations and emergency policies and protocols
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Progressive Role of the Risk Manager
Initiate and implement institution forums and activities on key risk topics
Expand the role of the International Oversight Committee
Strategic vs. transactional involvement
Focus discussion on both upside (opportunity) and downside (protection) risks
Facilitator and Leader
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Guidance for University Administrators
Students
– Receive the relevant information
– Receive the necessary assistance
– Understand their responsibilities
Institution/Employer
– Comply with statutes/legislation/regulations
– Minimize institutional liability Policies/Procedures Crisis Plan
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Responsibility to Students
Include parents
Full disclosure of risks– Cultural differences, crime
Evaluation of fitness of students– Medical exam
– Health insurance
– Maturity
– Mental health concerns
Participation forms/waivers
Maintain veto power
Orientation – home campus, on-site, interim
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Policies and Procedures
Designate a Travel Abroad Administrator
Review contractual language with collaborators and/or participants
Evaluate extraterritoriality of US Legislation
Adopt a Code of Conduct for employees/students
Manage transportation risks
Review housing policies
Communication
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Insurance Issues
Analyze Institutional insurance (domestic and local country) to verify coverage in foreign jurisdictions
– Workers compensation Defense Base Act WC effective 8/1/06
Mandatory coverage required to be carried by US government for any US entity contracting with the US government on work taking place in foreign lands
– Automobile liability
– Health coverage
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Insurance issues
Other insurance issues
– Foreign travel accident, medical evacuation and repatriation coverage
civil unrest
– Employee / Student health insurance
– Locally mandated insurance
– Special Risk
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Coverage Design: Primary Limits
Auto Liability - $1,000,000 primary
General Liability including Abuse & Molestation - $1,000,000*
Workers’ Compensation & Employer’s Liability - $1,000,000*
Repatriation - $100,000 - $250,000
Kidnap & Ransom - $1,000,000 - $10,000,000
War & Terrorism – Included in coverage limits
Travel Accident & Sickness – Your call
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Country of China – Insurance Environment
Mandatory coverage
– Automobile Liability (placed with agent/broker)
– Social Security (compulsory by SS Bureau)
– Workers Compensation (compulsory by WC Bureau) Labour Law requirement Non-residents working temporarily for a non-registered US firm
are not subject to the provisions of the local WC act Labour dispute arbitration system in China State Fund has no recourse against employer
– Provisions exist for extra-territorial coverage under insurance coverage or official law
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Country of China – Insurance Environment continued
Legal Liability – Laws by which members of the public may seek indemnity for bodily injury and death or damage to their property:
– General Principles of the Civil Law of PRC
– Consumer Protection Law
– Law of Products Quality
– Contract Law, etc.
General Liability (third party)
– Limits recommended for American Enterprises: At least US$1M (RMB 8M)
Claims – courts / judges are inclined to liberal awards
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Other Considerations
Coverage options (include international 24-hour global and multilingual network for Medical Evacuation & Repatriation)
– International SOS Company, Philadelphia, www.internationalsos.com/company/ (product demonstration page)
– HTH Worldwide, Radnor, PA -- www.hthworldwide.com/ International health program and online health & security information New policy for health insurance for foreign students in U.S.
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Other Considerations (continued)
– Medex Assistance, www.medexassist.com/scholastic.cfm Emergency medical evacuation Medically supervised return Repatriation of mortal remains Travel assistance for dependent children Travel assistance for companion if member is hospitalized when travelling
– Universal Travel Protection --www.utravelpro.com/ Menu approach New Terrorism options
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An Ounce of Prevention
Early planning is key
Management review of operations or future plans
Full evaluation of risks required
Disclosure of risks to employees, participants and interested parties
Informed decision-makers
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Resources
“Perspective” The Campus Legal Monthly
“International Study Abroad Programs: A Critical Legal Planning Session” by Gary M. Rhodes, Ph.D., USC
Overseas Security Advisory Council (OSAC) -- www.ds-osac.org/
National Association of College & University Attorneys (NACUA) - www.nacua.org
The Chronicle of Higher Education - www.chronicle.com
National Association of International Studies (NAFSA) - www.nafsa.org– 56TH Annual Conference, Baltimore, May 23-28, 2004
“Safety is an Important Part of Studying Abroad”, Mike Halligan, U of Utah, Campus Firewatch, February 2004, www.campusfirewatch.com
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Resources
U.S. State Department -- http://travel.state.gov/index.html or for student access -- http://travel.state.gov/studentinfo.html – Bureau of Consular Affairs
– Overseas Citizens Services Tips for Students
– Overseas Security Advisory Council
– Travel Safety for Student: Press Release
– Travel Warnings
– Services and Info for American Citizens Abroad
– How Consular Officers Can Help in An Emergency
– Important Telephone Numbers
– Links to US Embassies and Consulates Worldwide
– Bureau of Educational and Cultural Affairs
– Country Reports on Human Rights Practices
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Resources
The U.S. Centers for Disease Control and Prevention - www.cdc.gov/travel
American Council on Education (ACE)/The International Initiatives - www.acenet.edu
Institute of International Education - www.iie.org
US Peace Corps - SAFETI Adaptation of Peace Corps Resources
International Student - www.internationalstudent.com
Study Abroad - www.studyabroad.com
Center for Global Education/University of Southern California - www.usc.edu/globaled
University Risk Management & Insurance Association www.urmia.org
Jean Demchak
Managing Director
Marsh Global Public Entity and Education Practice
(860) 723-5635