Insurance & Risk Management 101

1. Insurance & Risk Management 101

2. Insurance & Risk Management 101 Presenters: Kymberlee Keefe, National Director of Elder Services, Aon Risk Services Judy Cangealose, Atlanta Healthcare Practice Leader, Aon Risk Services Panelists: Ed Croak, VP, Product Line Manager for Long Term Care, AIG Barbara Marschalk, Defense Attorney, Drew, Eckl and Farnham Eric Tysk, CFO, Family SeniorCare

3. What is Insurance? • The Transfer of Risk; The Sharing of a Loss; Contract Between Two Parties (the Insured and the Insurance Company) • Definition # 1 - A system to protect persons, groups, or businesses against the risks of financial loss by transferring the risks to a large group who agree to share the financial losses in exchange for premium payments. • Definition # 2 – A written contract between two parties providing a promise of reimbursement in the case of loss; purchased by people or companies so concerned about hazards that they have made prepayments to an insurance company for such protection.

4. Why Do Companies Buy Insurance? • Peace of mind • Asset protection • Balance sheet protection • Requirement of: • Lender • Regulatory • Lease • Contracts (landlords, vendors such as HMO’s, maintenance contracts, others, etc.)

5. What Does Insurance Do? • It indemnifies, or makes a person/company (insured) whole after a loss. • It does NOT put the insured in a BETTER position than they were before the loss! (That is called fraud.)

6. Am I Covered by My Facility’s Insurance Policy? • Employee injures back while transferring a resident to a wheelchair. Internal policy/procedure stated resident was to be transferred using a lift, but employee failed to use lift. • Workers’ Compensation is “no fault” insurance, which would cover this type of loss regardless of the “negligence” of the employee.

7. Am I Covered by My Facility’s Insurance Policy? • DON is named in a lawsuit along with the facility operator, brought by a family of a former resident, alleging negligent care and the ultimate death of the former resident. • The insurance that would typically apply to this type of loss would be Professional and General Liability Insurance carried by the operator.

8. Am I Covered by My Facility’s Insurance Policy? • As the facility Administrator, my purse was stolen from my office. It contained money, personal items and all of my private identification. • Theft of items from an employee or the company are typically covered under Crime Insurance, or for a smaller operator a Commercial Package Policy. This type of policy is meant to insure against theft or burglary of furniture, fixtures or other items, inside a business operation.

9. Am I Covered by My Facility’s Insurance Policy? • As the facility maintenance person, I am required to park in the back parking lot at the facility. My car is broken into while at work. • Theft from a vehicle, or damage to a vehicle would be covered by the insurance carried on the automobile, as automobile liability insurance follows the vehicle, not the person nor a business.

10. Am I Covered by My Facility’s Insurance Policy? • As the Activities Director of a facility, I was asked to use my personal vehicle to pick up some items for a party we were having for our residents. While driving to the store, I ran a light and hit another vehicle causing injury to myself, damage to my car, damage to the car of the other party, as well as sending two people from the other vehicle to the hospital. • Again, the rule of thumb is that the insurance follows the vehicle, so the Activities Director’s auto insurance would first respond to this loss.

11. Four Ways to Manage Risk • Avoiding the risk • Minimizing or reducing the negative effect of the risk • Transferring the risk • Accepting some or all of the consequences of the risk

12. Four Ways to Manage Risk • Avoidance – remove all possibility of loss – NOT realistic! • Examples: • To avoid automobile accidents, don’t drive • To avoid professional liability losses, don’t provide professional services • Reduction – minimize chance that a loss will occur. • Examples: • Wearing a bike helmet • Ensuring equipment is in good working order • Having appropriate equipment on hand • Risk Management Programs such as: Vehicle safety training; Lift and Transfer training; Needlestick and Infection Control prevention programs, etc.

13. Four Ways to Manage Risk • Transfer the Risk to Others • Example: • Buy an insurance policy with minimal or no deductibles, so you have a known cost of risk – premium only. • Contract the risk to another company that is either strong financially or insures against the risk, such as: • Pharmacy • Dietary • Laundry • Agency nursing

14. Four Ways to Manage Risk • Accepting some or all of the consequences of the risk • This involves accepting the losses that occur through: • Full self-insurance • High deductible/retention programs • Risk Retention Groups • Captives

15. What Insurance Policies are Typically Purchased by Health Care Facilities? • Workers’ Compensation & Employers’ Liability • Property Insurance (could include flood, wind and/or quake coverage) • General Liability Insurance • Professional Liability • Automobile Liability • Surety Bonds • Other financial protection products • Crime, Fiduciary, EPL, D&O, K&R

16. Workers’ Compensation & Employers’ Liability • Definition of Workers’ Compensation • #1 - Insurance coverage providing four types of benefits (medical care, income, rehabilitation, death) for employee job-related injuries or diseases as a matter of right, without regard to fault. • #2 - A schedule of benefits payable to an employee for an injury, disability, dismemberment or death, as a result of an occupational hazard. • Definition of Employers’ Liability • #1 – Insurance coverage which is a part of a workers’ compensation policy for situations in which an employee not covered under Workers’ Compensation laws could sue for injuries suffered under common law liability. • #2 Insurance coverage for which the employer is liable to a third party for damages claimed as a result of injury to an employee.

17. Workers’ Compensation & Employers’ Liability • History • Workers’ Compensation laws are designed to provide satisfactory means of handling occupational disabilities. • In the 19th century, as business enterprise expanded, the number of industrial accidents increased, as did personal injury lawsuits. Workers’ Compensation laws were developed in the 20th century in North America due to the economy becoming more industrial and less agricultural. This situation led to demand for legal provisions that were less harsh on disabled workers.

18. Workers’ Compensation & Employers’ Liability • History (continued) • In 1911 the first Workers’ Compensation laws were enacted in the US. Today each of the 50 states has a Workers’ Compensation law. Federal Workers’ Compensation laws have also been enacted. • Texas is the only state in the US that has what is called an “elective law”. This means that employers may accept or reject (opt out) the Workers’ Compensation Act. If they opt out, the employer loses the three common law defenses: • contributory negligence • assumption of risk • negligence of fellow employees

19. Workers’ Compensation & Employers’ Liability • Types of Benefits for Bodily Injury, Death or Disease • Medical Benefits – provided without limit in every state • Income Benefits – waiting period usually applies and varies by state • Rehabilitation Benefits – provided in all states • Death Benefits - provided in every state; two types of payments: • Burial allowance, and • Weekly income payments for surviving spouse and/or children

20. Workers’ Compensation Coverage • Premium is based upon job category, amount of payroll and experience ratings (loss history). • Second Injury Funds – Encourages employment of the previously injured/disabled worker.

21. Commercial Property Coverage • Definition: • Insurance coverage for an insured whose property is damaged or destroyed by a covered peril, unless specifically excluded in the policy. • In most commercial property policies, covered perils would include damage or destruction from: fire; lightening; vandalism; hail; sinkholes; civil commotion; damage from an aircraft or vehicle; sprinkler leakage; smoke; volcanic action; falling objects; accidental discharge of water; or weight of ice, sleet or snow. Some policies also cover flood; wind; quake, however these perils are often specifically excluded unless endorsed to the policy.

22. Commercial Property Coverage • Three Parts to the Coverage: • Building – the physical structure • Contents – the business property or the property inside building • Personal Property – property of others that may be inside the building • Are dentures, glasses, jewelry and belongings of residents and family members covered under a facility’s property policy?

23. Commercial Property Coverage • Business Interruption Coverage • Covers lost profits and ongoing fixed expenses during a full or partial business shut down caused by a covered property loss.

24. General Liability • Definition: • Insurance coverage for third parties (visitors, residents, vendors) who suffer bodily injury as a result of negligence on the part of the insured (facility operator). • Examples: • Slip and fall on a wet floor • Trip on a carpet that is torn • Pot hole in a parking lot • Explosion of an oxygen tank not properly stored or maintained

25. Healthcare Professional Liability Coverage • Definition: • Coverage for a professional’s acts, omissions, errors or mistakes which result in bodily injury or property damage to another party. The policy also provides for defense costs, legal fees, and court costs of the defendant, even if the suit is without foundation.

26. Business Automobile Liability Coverage • Definition: • Coverage for automobiles owned, leased, hired or borrowed by a business when a liability judgment arises out of the use of the automobile or the automobile is subject to damage or destruction.

27. Bonds • Surety Bond • Definition: a three party contract where one party agrees to make good the default or debt of another party. • Fidelity Bond • Definition: coverage that guarantees that the insurance company will pay the insured for money or other property lost because of a dishonest act of bonded employees.

28. Financial Protection Products • Crime Coverage - Coverage for the perils of burglary, theft and robbery. • Fiduciary Coverage - Covers the liability of a person who acts as a fiduciary (a position of trust) for his or her company’s Employee Benefit Plans. The Employee Retirement Income Security Act (ERISA) imposes fiduciary responsibilities upon the employers for the administration of such plans. A fiduciary can be held personally liable for shortages in the benefit plan's assets resulting from a breach of fiduciary duty, such as improper investment of funds.

29. Financial Protection Products • Employment Practices Liability Insurance (EPLI) - A form of liability insurance covering wrongful acts arising from the employment process. • The most frequent types of claims alleged under such policies include: wrongful termination, discrimination, and sexual harassment. These policies generally exclude coverage for large-scale company-wide layoffs.

30. Financial Protection Products • Directors & Officers Liability – Coverage when a director or officer of a company commits or is alleged to have committed a negligent act or omission, or misstatement or misleading statement. • Kidnap and Ransom Insurance – Coverage in the event that a covered employee is kidnapped. Provides coverage for ransom payments.

31. Certificate of Insurance (COI) • Evidence of coverage or proof of insurance • Provides information such as… • who is insured • insurance carrier name • limits of coverage • deductible or retention amounts • effective dates of coverage. • Who may need a COI: • Landlord • Vendor such as contracted cleaning company, HMOs, repair/service contractors (fire alarm companies, elevator companies)

32. Certificate of Insurance

33. Contact Information Kymberlee Keefe, National Director of Elder Services Aon Risk Services 3565 Piedmont Road, Building One, Suite 700 Atlanta, GA 30305 Office: 404-264-3154 Cell: 770-329-6205 Kymberlee_Keefe@asg.aon.com Judy Cangealose, Atlanta Healthcare Practice Leader Aon Risk Services 3565 Piedmont Road, Building One, Suite 700 Atlanta, GA 30305 Office: 404-264-3220 Cell: 404-731-6233 Judy_Cangealose@asg.aon.com