Management Liability and Related Coverages. Bill Reilley, CPCU, ARM Vice President, FINPRO

Transcription

1 Management Liability and Related Coverages Bill Reilley, CPCU, ARM Vice President, FINPRO

2 Management Liability ( FINPRO ) Products Portfolio Management Liability/Directors & Officers Liability ( D&O ) Employment Practices Liability ( EPLI ) Professional Liability/Errors and Omissions ( E&O ) Fiduciary Liability ( PTL Pension Trust Liability) Crime/Fidelity Kidnap & Ransom ( K&R )/ Special Accident 2

3 Agenda Claims Made issues: Past Acts Pending/Prior Litigation Warranty Statements/applications Major Coverages included: Management/Public Officials/D&O Liability: Elements of coverage: - Declarations Page - Definitions - Exclusions Claims/Factors that drive premium Employment Practices Liability ( EPL ) Elements of coverage: - Declarations Page - Definitions - Exclusions Claims/Factors that drive premium Additional coverages to consider Key coverage issues Showcasing Your Risk & Obtaining an Optimal Renewal 3

4 Claims Made Coverage Issues Elements of Continuity: Past Acts coverage & Retroactive Dates Pending or Prior Litigation exclusions Warranties Claim Made vs. Claims Made & Reported 4

5 Management/Public Officials Liability Declarations Page significant items: Preamble Claims Made or Claims Made and Reported Limits Shared or separate for Public Officials Liability coverage grant vs. EPL Deductible/Retention Split or the same for both Extended Reporting Period terms ( ERP or Discovery Period Retroactive Date?? 5

6 Management/Public Officials Liability Important Definitions: A Wrongful Act may include an actual or alleged: Breach of Duty Neglect Misstatement Misleading Statement Error Omission; or Act of an Insured in carrying out duties to the Named Insured 6

7 Management/Public Officials Liability Important Definitions (continued): Insured should include: All persons who were, are now or shall become lawfully elected or appointed officials or employees Commissions, boards etc. operated by or under the jurisdiction of the Named Insured Volunteers acting on behalf of Service to outside tax exempt entities Claim: A Civil proceeding against an Insured Administrative/Regulatory Proceedings should be included 7

8 Management/Public Officials Liability Exclusions of Note (Ace & AIG made it to U ): Professional Services: - Medical - Law Enforcement - Engineering Bodily Injury/Property Damage including failure to supervise Failure to maintain insurance Pollution Liability ERISA/Employee Benefits 8

9 Management/Public Officials Liability Exclusions (continued): Inverse condemnation Insured vs. Insured (EPL exception) Breach of Contract need wording that provides coverage if the liability would have existed absent the contract Personal Profit not legally entitled to* Fraud, dishonesty/criminal acts* * Severability?? 9

10 Management/Public Officials Liability Severability: Regarding the exclusions found in the policy Regarding the information provided in the application 10

11 Management/Public Officials Liability Factors that Drive Your Premium

12 Management/Public Officials Underwriting Factors Underwriting Litigation History most significant Traffic: Number of flights Type of traffic Financial Details Amount of Revenues & Expenses generated Recent growth Industry / Class of Business Trends in the marketplace Governance Strength / Longevity of Executive Management & Board Operations Who is in charge? Board Policies 12

13 Claimant Distribution For Public Companies (Source: Tillinghast Towers Perrin D&O 2005 Survey) 5% 28% Employees Competitors Government 51% 9% 5% 2% Customers & Clients Shareholders Other 3rd Party 13

14 Claimant Distribution for Private Companies (Source: Tillinghast Towers Perrin D&O 2005 Survey) 16% 13% 49% 6% 16% Employees Customers, Clients, Consumer Groups Competitors, Suppliers, & Other Contractors Other 3rd Parties Shareholders 14

15 Claimant Distribution for Nonprofit Companies (Source: Tillinghast Towers Perrin D&O 2005 Survey) 4% 3%2% 2% 1% 88% Employees Competitors Government Customers & Clients Shareholders Other 3rd Party Negligence? Failure to provide adequate services? Mismanagement of funds? Failure to protect the public trust? Employment Related? 15

16 FINPRO Humor The Lighter Side (Source: Wall Street Journal) Remember no sobbing. It makes them jittery. Profits may appear larger than they actually are. Ms. Ryan, send me in a scapegoat. I didn t say you cheated. I said there was the appearance of wrongdoing. We need someone to address the stockholders. Whose ego is intact enough to do that? The upside is a huge cash windfall for the firm. The downside is that Haskins could go to jail. I can live with that. 16

17 Employment Practices Liability Declarations Page significant items: Preamble Claims Made or Claims Made and Reported Cafeteria Style policies assure EPL is designated Limits Shared or separate for Public Officials Liability coverage grant vs. EPL Retroactive Date? Note Claim Reporting provisions/address of Insurer s Claims Department 17

18 Employment Practices Liability Important Definitions: A Wrongful Act/Wrongful employment Practice may include any actual or alleged: Wrongful termination/dismissal Harassment including sexual Discrimination Wrongful discipline Failure to promote/career opportunity deprivation Failure to employ Retaliation ( whistleblower claims) Employment related misrepresentation 18

19 Employment Practices Liability Important Definitions (continued): Insured should include: All persons who were, are now or shall become lawfully elected or appointed officials or employees (note: not just board members and management level) Volunteers acting on behalf of A Claim is usually broadly defined and usually includes: A written demand for monetary damages or other redress An administrative proceeding EEOC & OCRC Notices A lawsuit A demand for arbitration or an alternative dispute resolution Broader policies include allegations that the insured harassed or discriminated against a non-employee of the insured (third party claims) 19

20 Employment Practices Liability Exclusions of Note: Intentional Acts? Claims brought prior to the inception of coverage Obligations pursuant to workers compensation, disability benefits, unemployment compensation, etc. should be an exception for retaliation (whistleblowing) Costs related to modifying buildings to comply with ADA or similar laws Violations of various legislation: ERISA, FLSA, NLRA, WARN Act, etc. again, retaliation should be covered 20

21 Employment Practices Liability Factors that Drive Your Premium

22 Employment Practices Liability Underwriting Number of Employees Union/Non Union Exempt/Non Exempt Layoffs Planned Reductions in Force Releases of Liability Claim history most significant Policies and procedures Employee handbook Annual review process Consistency in enforcing State Exposure Texas, Michigan, Mississippi, California Compliance with CA

23 EPL Claims Environment EEOC Charge Statistics ,005 Claims brought in % 17% 17% 12% 11% 1% 6% 20% Age Disability Equal Pay National Origin Race Religion Retaliation Sex / Gender * The data are compiled by the Office of Research, Information, and Planning from EEOC's Charge Data System - quarterly reconciled Data Summary Reports. * The total of individual percentages may not always sum to 100% due to rounding. 23

24 EPL Claims Environment EEOC Issues - Charge Statistics The following chart represents the total number of charge receipts filed and resolved under all statutes enforced by EEOC (Title VII, ADA, ADEA, and EPA). # of Suits Filed 100,000 Monetary Benefits ($ in millions) $ ,000 80,000 $ ,000 $ ,000 50,000 $ ,000 30,000 $ ,000 $ , $0.0 Source: All C harges F ile d 72,302 87,942 91,189 87,529 77,990 80,680 79,591 77,444 79,896 80,840 84, Monetary Benefits $ $ $ $ $ $ $ $ $ $ $ * The data are compiled by the Office of Research, Information, and Planning from EEOC's Charge Data System - quarterly reconciled Data Summary Reports. * EEOC began enforcing the Americans with Disabilities Act on July 26,

25 EPL Claims Environment EEOC Issues - Litigation Statistics # of Suits Filed 600 Monetary Benefits ($ in millions) $ $160.0 $140.0 $ $100.0 $80.0 $ $40.0 $ $0.0 All Suits Filed Monetary Benefits $71.1 $36.4 $39.5 $18.9 $50.8 $114. $95.5 $98.4 $49.8 $51.2 $ Source: 25

26 EPL Hot Topics Sexual harassment against men is a growing problem - more male-on-male harassment. Harassment claims filed by men with the EEOC have grown from 9% of all charges in 1992 to 15% in Skin color discrimination is on the rise (i.e., a subset of race discrimination - dark skin versus light skin African Americans) 1994 there were 413 charges versus 2003 there were 1,555 charges (276% increase). EEOC recently launched a program to reduce Teenager Harassment at work (campaign to educate younger workers on their rights). There has been a marked increase in claims brought by teenagers in industries which employ many young workers and where turnover is high such as restaurants, retailers, etc. FMLA-related claims are on the rise - eligibility questions and whether time taken is properly documented. Hiring of undocumented workers has lead to multiple class actions by employees and legal immigrants against companies alleging their intent to depress wages. Transsexual workers are now gaining protection from discrimination (Gender Identity), particularly in CA. 26

27 Possible Additional Coverages for Consideration Fiduciary Liability Insurance ERISA related coverage Includes administration of all benefit plans Specific Errors & Omissions coverage - Address gaps created by exclusions Law enforcement exposures includes bodily injury coverage Medical exposures Design/engineering exposures Employed lawyers Crime/fidelity coverage often included within a package policy Kidnap & Ransom coverage 27

28 Key Coverage Issues to Consider

29 Following are Some Key Coverage Issues Coordination with other lines of coverage: e.g., General Liability and Law Enforcement Liability Continuity of coverage: retro date issues Consideration when Changing Insurers: a real moment of truth Claims Made vs. Claims Made and Reported : know notification of Claims requirements to avoid timeliness issues Severability of the Application & Endorsements: Knowledge imputation to innocent insureds this kind of limiting language can be amended to varying degrees depends on the Insurer Defense issues: Selection of defense counsel Defense costs included within limit of liability or separate? Claim Settlements: Hammer clause?? 29

30 Key Coverage issues (continued) Punitive Damages: Request most favorable venue wording Exclusions: Avoid exclusions negatively impacting coverage for vicarious liability (e.g. broad contractual liability exclusions) Limit of Liability: Shared or separate? EPL Claim notification relief: Defense costs reporting threshold? Bordereaux? EPL Third Party Coverage Extension: Check availability EPL Sensitivity Training Incentives: Chubb, for instance, will provide reimbursement up to 10% of the policy premium for ½ of training expenses 30

31 FINPRO Coverages: Renewal Process thoughts Achieving an Optimal Result..

32 Anticipate the Underwriter s Concerns.Be Proactive Meet early with your broker/agent and formulate a renewal strategy Discuss and disclose any issues that you believe may hinder a positive renewal result including exposure changes since the last renewal You and your broker/agent may decide to market the coverage, or you may choose to focus on your incumbent relationship. Many factors will go into this decision. Submit applications & accompanying information well in advance of your renewal date (at least 60 days prior) If warranted, meet with underwriters and /or Insurer s claims handlers Don t spin areas of concern, but be Forthright and Candid personal meetings are meant to communicate culture and integrity Highlight and underscore areas of Improvement and Excellence (e.g. revised discrimination policies or improved employee handbook) 32

33 Anticipate the Underwriter s Concerns.Be Proactive (continued) Ask your broker/agent to provide appropriate options for you to consider: Limits, deductibles, coverage enhancements (e.g. defense costs within or in addition to the policy limits) so that a truly informed decision can be reached Assure that your broker/agent has reviewed the policy terms and conditions and is requesting enhancements to the coverage that are currently available in the marketplace. Discuss the various EPL loss mitigation / prevention tools that are available (usually free of charge) by various insurers Provide Carrier with full particulars on claims and assure they have been reported pursuant to policy requirements. If use of particular law firms is important, submit information to your broker prior to the renewal. Overall: Don t be afraid to ask for coverage enhancements. This is a relatively soft market and now is the time to secure improvements along with lower premiums 33

34 Thank You! Conclusion