Critical Issues In Independent School Risk Management and Insurance

1. Critical Issues In Independent School Risk Management and Insurance CAIS Trustee/Head Conference, January 26, 2008 Presented by Bolton & Company—Ron Wanglin, CIC, Chairman of the Board andCheryl McDowell, ARM, CSRM, CISR, Vice President, Education Practice Group

2. Understanding Risk • Inherent in what schools do • Unavoidable no matter how much risk management you employ

3. Academics Arts Athletics Co-curricular Ethics/Character Safety and Security Services Financial Legal Personnel Fundraising Communications Understanding Risks

4. Transportation Foreign Travel Athletics/P.E. Swimming Equestrian Gymnastics Camps Outdoor Education Survival Programs Counseling Playgrounds Dormitories Cafeterias Science labs Arts facilities Technical shops (drama, woodworking, etc.) Security Schools are Risky Businesses

5. Fire Flood Earthquake Hurricane Tornado Theft Auto accidents Trips/falls Death Dismemberment Apparent Risks

6. Less Obvious Risks • Independent Contractors • Employee use of school equipment or facilities • Leased Equipment • Pollution

7. Risk Management Responses • Avoidance • Prevention • Reduction • Transfer • Assumption

8. Risk Management Methods • Insurance • Education • Safety Procedures • Supervision • Elimination of hazards • Proper Maintenance • Proper planning of activities • Use expert advice as needed • VIGILANCE

9. Risk Management and Leadership • Begins at the Board Level Risk Management and Leadership “There is no way a board can establish sufficient policies and procedures in order to eliminate all risk and resulting law suits. But a school can manage risk to keep litigation to a minimum. The board’s role is to ensure that the appropriate institutional and operational policies—such as personnel, student activities and behavior, crisis management, and financial management—are in place and that the school is following those policies and the resulting procedures every day in a consistent, fair manner”. “…..the best protection against a suit is an active board of trustees that exercises its governance role with great care.” NAIS Trustee Handbook

10. Risk Management and Leadership • Begins at the Board Level (Cont.) • Policies & Procedures • Funding for staffing, maintenance and repairs • Annual reporting requirement on update of risk management programs

11. The Independent School Board of Trustees Whereas, The Board of Trustees reaffirms that the development and implementation of a disaster preparedness plan and disaster recovery plan is essential to creating the optimal environment to safeguard the students, families, faculty, staff and visitors against illness and injury, and Whereas, The Board of Trustees recognizes the need to develop s sound business continuation plan to respond to disasters and other catastrophic events to secure the financial stability and security of the school over the long term, Therefore Be It Resolved, That the Board of Trustees hereby directs the school leadership to develop and implement the above plans using all reasonable means and resources, both internal and external, by January 1, 2007, and all such plans will be reviewed not less than annually to determine their appropriateness to meet the current and future needs of the school.

12. Risk Management and Leadership • Continues with Administration • Establishes Safety/Operational Risk Management Committees • Provides Guidelines • Models responsible behavior • Promotes safety

13. To insure or not? Fiduciary responsibility requires board consideration • What liability limits to pick • Purchase catastrophic property coverage such as Earthquake, Wind or Flood? • Purchase Loss of Business Income & Extra Expense coverage (loss of tuition) • Use of benchmarking

14. When we decide to insure What are the issues, gaps and pitfalls?

15. United Educators • Educators Legal Liability • Includes: • - Trustee Liability • Employment Practices • Liability • Professional Liability • Sometimes Employee Benefit Liability

16. Hartford

17. Philadelphia Insurance • Trustee Liability (D&O) • Employment Practices Liability • Other coverages: • - Fiduciary Liability • - Workplace Violence • Internet Liability

18. Philadelphia

19. Some other carriers Trustee Liability (D&O) • Employment Practices Liability • Educators Legal Liability (Professional Liability)

20. Excess over: General Employee Benefit Workers’ comp Auto Employer’s Educators Legal* Trustee* Employment Practices* Umbrella/Excess

21. What does this mean? • Understand the structure of your policies to avoid coverage gaps • You can’t just shop for the lowest price. Know what you are buying and make and informed educated decision!

22. Sexual Abuse & Molestation • Be cautious! • Often sub-limited • No Umbrella coverage • Includes Sexual Harassment? • Know your coverage territory!!!!

23. Coverage Territory Domestic: U.S., Canada, their territories and possessions Foreign: Worldwide, except U.S., Canada, their territories and possessions

24. Foreign Liability • Often excludes Sexual Abuse & Molestation • May exclude Sexual Harassment • Usually excludes injury or property damage to “participants”: • General Liability • Auto Liability

25. Foreign Liability • Add back coverage for Sexual Abuse and Molestation? • Add exclusion for law suits brought in the U.S.!!!

26. Issues To Address for All Liability Policies • Risk Measurement • Does school have an exposure, and if so, how is it managed? • “Occurrence” or “Claims Made” Form • Limits of Liability Carried • Exclusions • Understand exposures of excluded areas

27. Common Liability Exclusions • Sexual Abuse & Molestation • Athletic participation • White water rafting • Scuba diving • Equestrian • Trampoline/rebounding devices • Corporal punishment • Contact sports • Sports camps

28. Property Insurance Pitfalls • Business Income/Extra Expense • Maximum down time? • Retain employees-continue payroll? What do your faculty contracts say? • How long to regain your students? • Tuition refund policy? • Rental Income • Co-Insurance/Agreed Value • Building Ordinance (Increased Cost of Construction and Demolition) • Replacement cost

29. Property Insurance Pitfalls Catastrophic perils: • Earthquake • Earthquake Sprinkler Leakage • Wind (Hurricane, Tornado, etc.) • Flood

30. Fiduciary, Employee Benefit Liability & ERISA Bonds • Pension Plans • Defined Contribution Plans—403(b) or 401(k) • HIPAA • COBRA • Group Health & Welfare Plans

31. Fiduciary Liability Remember- Personal assets are at risk!

32. Employee Benefit Liability Errors and Omissions Coverage for the administration of the employee benefits plans • Cobra • Medical Plan eligibility

33. ERISA Bonds The Employee Retirement Income Securities Act (ERISA) of 1974 requires that a Fidelity Bond be in place in the amount of 10% of the plan assets up to a maximum of $500,000, if there is an employer contribution to the 403(b) or 401(k).

34. Claims Reporting • Schools are sensitive to negative publicity • Often seek outside counsel first • Policy may require reporting of any known incident that may give rise to a claim • Failure to report could negate coverage

35. Legal Environment Stay informed of what is happening and document, document, document! Employment related examples: • Retaliation claims • Workers Compensation related • 132a wrongful termination • ADA/FEHA and other similar laws

36. Insurance Broker Selection • Knows industry • Knows how schools operate • Represents variety of high-rated companies • Knowledgable staff handling all coverages and serves as claims intermediary • One broker or several???

37. Critical Issues In Independent School Insurance Bolton & Company Cheryl McDowell, ARM, CSRM, CISR Vice President, Education Practice Group Direct: 626-535-1428 Toll free: CA 800-439-9337 Out of State 888-700-1444 cmcdowell@boltonco.com