Office of Business and Financial Services

1. UNIVERSITY OF ILLINOISFY2003 INSURANCE SUMMARY(Workers Compensation, Property, Public Liability, Board Legal, and Medical Professional) Office of Business and Financial Services

2. Insurance Program Summary • The University insures for risks via commercial insurance or a self-insurance trust fund (SITF) combined with commercial excess liability insurance (excess liability).

3. Organization of Risk Control and Self-Insurance Activities

4. Workers Compensation Program • Workers compensation covers lost wages and medical expenses for employees injured on the job and, if applicable, awards for permanent disabilities. • A state fund allocation covers employees paid from state funds. A SITF covers employees paid from non-state funds. The University charges non-state funds a percent of payroll to fund the SITF.

5. University Workers Compensation SITF Annual Cost Components

6. Property Insurance Program Property Insurance Coverage FY2003 • All buildings and permanent improvements are insured with varying levels of deductibles: • AFS Buildings $100K deductible applies to each loss ($500K for AFS buildings in Flood Zone A) • Academic Buildings $500K deductible applies to each loss • Academic buildings contents are not insured (i.e., equipment, computers, books, University owned artworks, etc.) • AFS building contents may be insured (i.e., equipment, computers, etc.) • Annual limit $1B • Terrorism annual limit $1M

7. University Property Insurance Annual Cost

8. Public Liability Program • Public Liability SITF and excess liability insurance covers bodily injuries related to slips and falls. • Public Liability Risk Management • The SITF pays the first dollar of a claim up to $500K • The excess liability insurance pays any claim cost above $500K up to $6.0M • The Board of Trustees would determine funding responsibility for claims above $6.0M

9. Board Legal Liability Program • Board Legal Liability SITF and excess liability insurance covers the Board and employees for claims alleging that the University has engaged in a wrongful act (i.e., Hiring discrimination, wrongful termination, sexual harassment, retaliation, misappropriation of ideas, etc.).

10. Board Legal Liability Risk Management • Board Legal Liability Risk Management • The SITF pays the first dollar of a claim up to $700K • The excess liability insurance pays any claim cost above $700K up to $5.0M* • The Board of Trustees would determine responsibility for claims above $5.0M * The total excess insurance liability limit for FY2003 is $5.0M.

11. University Public & Board Legal Liability SITF Annual Cost Components

12. Medical Professional Liability Program • Medical Professional SITF and excess liability insurance covers health care professional employees and students in health care profession training programs for medical professional liability claims and public liability claims of the hospital and clinics.

13. Medical Professional Liability Risk Management • The deductible for individual claims reported in FY2003 that occurred after FY2001 is $7.5M. • The SITF pays the first dollar of a claim up to the deductible • The excess liability pays after deductible* • The aggregate for claims reported in FY2003 that occurred after FY2001 is $20.0M. • The SITF pays up to the aggregate • The excess liability pays after the aggregate* * The total excess insurance liability limit (i.e., per occurrence and aggregate) for claims reported in FY2003 that occurred after FY2001 is $60.0M.

14. University Medical Professional Liability SITF Annual Cost Components

15. SITF Statement of Financial Positionat June 30, 2002

16. Factors Influencing University SITF Annual Costs • University costs • Estimated claims & legal costs • Excess liability insurance cost • Administrative costs • Offsets to University costs • Investment income • NPV of est. recovery from excess liability insurance • University Cost

17. The National Medical Professional Landscape

18. Observations & Conclusions • Actuarially, SITF is financially sound. • SITF facing increasing annual costs & will assume more risk because of: • increases in claim settlements and awards • increases in excess liability insurance cost • decreases in investment returns • insurers restricting capacity and limits • Hospital & MSP revenue is depressed because of payer mix & SITF costs are inflated because of Cook County settlement and award experience.

19. Recommendation for Revisions to the University Liability Self-Insurance Plan • The current plan limits coverage to $5.0M per occurrence. Prior to FY2003, the combination of the SITF and excess liability provided full medical professional coverage. Beginning in FY2003 the excess liability self-insured retention (i.e., the “deductible”) increased to $7.5M. This left a gap in coverage between $5.0M & $7.5M. It is recommended that the coverage under the SITF be extended to the full amount of the self-insured retention (i.e., the “deductible”) for medical professional coverage. • Clarify that the plan does not apply to: • an activity of a volunteer organization unless specified by written agreement with the University. • any obligation for which an employee may be held liable under any breach of contract claim or suit.

20. Recommendation for Revisions to the University Risk Management Program • Increase the settlement authority delegated to the Vice President for Administration from $100K to $250K. The Board of Trustees will continue to approve settlements over $250K which represent 85% of the total dollars paid. • Clarify that the self-insurance program will only fund liability claims.

21. Recommendation for Revisions to the University Risk Management Program • Strengthen the risk control language to emphasize the importance of this function. • Reflect current titles for University Administrators.