Insurance Landscape for JATCs

1. Insurance Landscape for JATCs May 21st, 2019 Maimuna Jallow Maria Ceballos Manager Marketing Senior Underwriter mjallow@Ullico.commceballos@Ullico.com

2. Insurance Landscape for JATCs Discussion Topics Your JATC insurance landscape and claim trends Fiduciary Liability Union Liability/Directors & Officers (D&O) Cyber Liability Risk control measures Key take-aways Q&A

3. Fiduciary Liability Insurance Protect the board and the fund from liability due to the acts or omissions of the trustees Covers the pension fund, its trustees, and its staff (past, present, and future)

4. Risk Management

5. Your JATC Insurance Landscape Failure to protect today’s leaders for everyday decision making in operating the training program can lead to high defense costs, damages, judgments or settlements: Breaches of fiduciary duty and prohibited transactions Exposure of failing to properly educate Allegations of workplace harassment Third-party discrimination Business decisions in managing the operations Commercial insurance protections Claims can be complex and are lengthy to settle resulting in significant defense costs

6. Your Fiduciary Horizon Fiduciary Insurance reimburses a benefit fund for losses caused by violations of ERISA Same duty to be prudent as other Funds Provides individual liability for Fund Trustees Administrative errors & omissions Regulatory claims from the IRS, DOL, DOJ

7. Your Fiduciary Horizon Evolving liabilities transform the Fiduciary policies to providing new coverages Fines and Penalties enhancements Choice of Counsel Duty to Defend Settlor exposures Investigatory Expense Endorsement Pre-claim, Interview coverage and expanded definitions

8. Fiduciary Liability Claim Examples Claim No. 1 Administrative Expenses A Department of Labor (DOL) investigation determined that administrative expenses paid by the Fund were excessive and that internal controls for credit card charges were inadequate. The trustees paid an average of $30/person for graduation expenses in connection with JATC graduation ceremonies. The DOL concluded that $7/person was reasonable. The DOL concluded the Trustees’ internal controls were inadequate because in a few instances credit card receipts were identified as expenses for training supplies and equipment, but lacked a description of the item, quantity, vendor, or purpose. Ullico paid $46,000 to settle the claim plus $30,000 in defense costs. Claim No. 2 DOL Claim Apprenticeship programs as exempt from filing an annual Form 5500 with the Department of Labor as long as the JATC sends a one-time notice to the DOL with information on the plan. The JATC must keep a record of the one-time notice. The JATC discovered that it did not send the on-time notice to the DOL when the Fund was established. To bring the Fund into compliance with the DOL requirement and to exempt the Fund from Form 5500 filings, the JATC completed a Delinquent Filer Voluntary Compliance Program submission to the DOL. The associated fee is $750.00. Ullico paid the $750 fee plus $600 in legal fees. http://www.dol.gov/ebsa/apprenticeshipplans.html

9. Union Liability for Training Funds Tailored Directors and Officers (D&O) policy for JATCs including Educator’s Liability Protects the training committee and leaders against claims common to operational exposures Provides reimbursement for indemnity, defense, settlement and appeals from claims arising out of those risks

10. Union Liability for Training Funds Who is covered: Fund, committees, designated subsidiaries/affiliates and individual insureds Individual insureds, past, present and future directors, trustees, officers, employees, board members, and committee members Policy can be amended to include contracted employees

11. JATC: Union Liability Overview What is covered: Any error or omission or breach of duty committed or alleged to have been committed by the entity or any Insured Person in the discharge of his or her duties solely in his or her capacity as an Insured Person for the entity. Employment Practices including Third Party Discrimination (Apprentices, Journeymen and students) EEOC, NLRB and similar charges are considered claims Educators’ Liability – Professional E&O Personal Injury and Publishers Liability

12. Union Liability for Training Funds Educator’s Liability Claims trending from dismissed students, not employers EEOC charges Employment Claims Frequent Claims Wrongful Termination/FLSA Violations Race Discrimination Training Fund’s Admission Procedure Gender Discrimination Discrimination in testing practices

13. Union Liability Claims Examples Claim No. 1 Gender/Gender Identity Discrimination Claimant is a transgender female who filed a Charge of Gender/Gender Identity Discrimination with the Equal Employment Opportunity Commission. Claimant applied to the Fund’s training program in 2013. Sometime in 2015, the training coordinator invited her to attend a (1) day orientation to receive additional information about the program, participate in a hands-on skills assessment, and be interviewed by a member of the program. When the claimant arrived at orientation, the training coordinator turned her away because she did not bring work boots required for the hands-on skills assessment. A program member signed the claimant up to attend another orientation session scheduled a few weeks later. When the program member talked to the claimant, he inquired about why she had a masculine name. When the claimant came back for the later orientation session, she brought work boots and took the hands-on skills assessment, but received a score of 58. The required passing score is 75%. Due to her score, the training coordinator did not allow the claimant to be interviewed by a training member. The claimant contends that other non-transgendered applicants who received less than a passing score were interviewed and admitted into the program. The claimant believes the Fund discriminated against her based on her gender and gender identity. The EEOC has not issued its Findings.

14. Union Liability Claims Examples Claim No. 2 Sexual Harassment A female training employee claims that her boss, the Training Fund Director, forced her into an office sexual relationship. He repeatedly told the claimant that she would only be allowed to keep her job if she went along. The claimant eventually complained about her boss and after an investigation, the Fund terminated him. Because we explored settlement early, the case settled for $27,000.00. We paid $3,000.00 in defense costs.

15. A JATC does not accept a female applicant into its program After learning that a vast majority of the incoming student class is male, she claims that her gender is the reason for the declination She claims she is unable to continue working at her job because the JATC refuses to educate her and files a lawsuit against the school, claiming sexual discrimination and failure to educate Your Educator’s Liability Claims A JATC graduate was negligent on a construction job, which caused lost time and money on the project As a result, the apprentice was terminated from the employer, due to his poor performance, despite failure to properly supervise The apprentice sued the JATC for failing to properly educate him

16. Cyber Liability Insurance • Trust funds have access and ownership of the personal information, such as social security numbers and home addresses, of their participants. • If this data is lost, most states mandate that the entity must respond in a timely manner by notifying potentially affected individuals, including regulators, and the press.

17. Why Cyber Insurance • To protect yourselves, Participants and members • The insurance is a Risk Trasfer tool and the ability to limit liability to your organizations • Not all policies are created equal- • Over 75 carriers • Only a handful has experience for your types of risks • Having a policy means having a pre negotiated partnership with privacy counsel and incident response vendors. • Giving you more value for your dollars and • A quick response time

18. Cyber Exposures

19. Cyber Policy as a Risk Management Tool • Expert resources help insure compliance, protects reputation (many policies include PR coverage), and ensures operational efficiencies • Hotline to call at data event • Provides credit monitoring to try and help mitigate future liability

20. What is a Data Breach? • Data breach is generally defined as an incident in which an individual name plus a Social Security number, Driver’s License number, medical record or financial record (credit/debit cards) included had been accessed. • This potentially becomes a risk because of exposure. This exposure can occur either electronically or in paper format.

21. Data Breach • Data Event: pre-breach term • Data Breach: incident in which sensitive, protected or confidential data has potentially been viewed, stolen or used by an individual unauthorized to do so. • Regulated by states, except healthcare breaches to HHS and most states • Identity Theft: after a Data Breach criminals use stolen data to make purchases

22. Data Breach What types of Data can be stolen?

23. Data Breaches Source: ITRC https://www.idtheftcenter.org

24. Forms of Data Breaches • Hacking (Most common) • Employee negligence • Physical Theft • Insider Theft • Data on the Move • Accidental Internet Exposure • Subcontractor/Third Party

25. Data Breach Examples • Hackers ransomware demand (police union) for $10,000 • Employee of a public pension fund posted an unencrypted file on a public website, compromising personal information for over 2,000 members • State retirement system sent unencrypted computer discs with personal information (44,000 members) to the health office; spent over $300,000 just to ensure that the information was not obtained by unauthorized users or that the information was not misused in any way • Scammers accessed retirement accounts - fraudulent loans worth $2.6 million • Criminals broke into a Health Fund office and stole back-up hard drive with personal information of 1,300 participants • Employee had unauthorized access to plan participant information requiring notices sent to 2,400 participants • 457 Deferred Compensation accounts of municipal employees breached and 58 accounts had money withdrawn

26. 2018 Cyber Liability Claim Trends • Total number of breaches reported in 2018 is down 23% from 2017. • There was a 126% increase in the number of records breached containing sensitive PII • Many of the reported incidents involved information compromised through a third party vendor • Exploitations of user names and passwords continues to be a target Remember – Target’s breach was a result of HVAC vendor!

27. Safety Tips and Risk Management • Cyber Security Policies • Templates available from NIST and ISO • Incident response plan • Business continuity plan • Acceptable use: Web Browsing/Social Media/Messaging • Personal devices usage • Passwords – length, complexity, etc. • Employee/consultant training – cyber security and policy sign-off • Contractors and Consultants – policies, procedures, insurance? The only safe computer data system that is truly secure is one which is switched off and unplugged!

28. Safety Tips and Risk Management • Organization Tips: • Use antivirus software • Install firewalls • Principle of “least privilege” • Conduct regular audits • Maintain backup information • Use Encryption • Multi-Factor Authentication • Be prepared for the Worst!

29. Safety Tips and Risk Management A fool and his password are soon parted. • Individual Tips: • Use secure connections • Password management • Email hygiene • Check your credit report regularly • Monitor your accounts • Be cautious when using unfamiliar ATM machines and credit card scanners, hold hand over ATM pin to avoid camera • Clean Desk - Print only when needed, and shred or lock up any documents, phones, USB drives

30. Key Take-Aways • Review fund’s risk management strategy • Follow claims trends • Determine if your fund has a Cyber Liability Insurance policyand review it with your broker to ensure: • Your fund is a named insured • First party breach response is covered • Cyber experts are readily available to you • Engage insurance broker and carrier early and often when a situation arises that may lead to a claim

31. Questions Maimuna Jallow, Manager Marketing Maria Ceballos, Senior Underwriter mjallow@ullico.commceballos@ullico.com202.962.8932 202.420.0233