Welcome to Conservation Defense Insurance
Legal Structure Part II
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Committed Land Trust Discussion
Proposed
Conservation Defense Insurance Program
Legal Structure Part II
May 2011
Progress Since March
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Submitted three Foundation requests
$1 Million each
Meet with numerous potential funders
Filed all regulator applications
Met with IRS
Actuarial review underway
Organized the limited liability company
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Legal Structure Needs
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Simple and effective
Attractive to funders
Protects Alliance and land trusts
Integrates the insurance program and Alliance prevention
and risk management services
• Ensures stability through quality control and guidance by
the Alliance subsidiary
• Complies with all laws, regulations and accounting
standards
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Development Process
• Alliance convened volunteer team of prominent attorneys
– Philip Tabas, VP and General Counsel of TNC
– Andy Dana (MT) and Jessica Jay (CO)
• Conservation Insurance Pioneers and Authors
– Fred Rich and Ted Holt of Sullivan & Cromwell
• Evaluated alternative legal structures
• Recommended structure to the Alliance board
• We are grateful for their pro bono services to create the
conservation defense insurance program
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Legal Structure
LAND TRUST
OWNER MEMBERS
THE INSURANCE COMPANY
TERRAFIRMA RRG LLC
The Manager (ARMS)
THE LAND
TRUST
ALLIANCE,
INC.
(Massachusetts
not-for-profit
corporation)
ALLIANCE RISK
MANAGEMENT
SERVICES LLC
(Vermont LLC; Alliance sole
member)
(Vermont manager-managed not-for-profit LLC)
COMMERCIAL PROVIDER OF
CAPTIVE MANAGEMENT
SERVICES
CAPTIVE
MANAGEMENT
COMPANY
Legal Structure Details
• Owners: The land trusts insured by the RRG
• Corporate Status: a Vermont manager-managed not-for-profit
Limited Liability Company
• Tax Status: IRC § 501(n) charitable risk pool
• Regulatory Status: Risk Retention Group
• Governance: LLC Agreement and Members Committee
• Employees: None
• Services: On contract basis from the Alliance manager and from
private third party expert providers such as the captive manager
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Owners and Members
Terrafirma Risk Retention Group LLC
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Formed 4-18-11 by Land Trust Alliance
Exclusive purpose as a qualified charitable risk pool IRC § 501(n)
Owned and controlled by the participant § 501(c)(3) land trusts
Members must continuously meet the membership requirements
Managed under contract by a non-member Manager
Selected by the Members
Non-member manager is Alliance Risk Management Services LLC
(“ARMS”)
The Alliance is the sole and managing member of ARMS
ARMS is not the third party, commercial captive insurance manager
Manager has conservation expertise
Captive Manager has insurance expertise
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Roles
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The Members Committee similar to a board of directors
Responsible for overseeing Terrafirma
No directors, trustees or officers
Terrafirma contracts with ARMS for management
ARMS appointed by Members Committee
Staffed by Alliance
Terrafirma reimburses ARMS for its costs
ARMS performs non-administrative tasks and supervises
commercial providers and does risk management
ARMS can be replaced by a super majority of the Members
Terrafirma directly contracts with captive insurance manager
Captive manager handles financial and regulatory matters
Terrafirma contracts with other providers
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Involvement of the Members
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Members elect the Members Committee by region
Members have direct vote to demand a general meeting
Members vote on other fundamental organization matters
Members appoint and dismiss Manager by two-thirds vote
Members Committee supervises Manager and contractors
Members get annual report from the Members Committee
Annual meeting; Terrafirma will have at least 461 members
Members may call a meeting by a majority vote
Unanimous vote required to amend the Articles and other
Two-thirds vote to amend Operating Agreement and dissolution
Majority vote required for all other actions
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Members Committee Formalities
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All volunteer; Single term of three years
Mandatory year off after single three-year term
Only member land trust senior staff and board trustees/directors
Must be independent
Nine classes; one class for seven geographic regions
One class for the western at-large expert member
One class for the Vermont resident appointed
Initial Members Committee appointed by ARMS
Annual meeting required in Vermont for Members Committee
At least three times a year by telephone or web
ARMS convenes and chairs meetings, circulates agendas, etc.
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Elections
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Elected by Members in region (one Member, one vote)
Staggered elections, two Committee Members elected annually
Vacancies filled by Members Committee
All elections via secure online voting system only
10-day response period, system users affirm authority to vote
No quorum, candidate in each region with most votes wins
Members Committee nominates candidates
Includes representatives of all land trust size, type and location
Includes representatives accredited non-accredited land trusts
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Regions
• Pacific: AK, CA, HI, OR, WA 74 Land Trusts
• Mtns and Plains: AR, AZ, CO, IA, ID, KS, MO, MT ND, NE,
NM, NV, OK, SD, TX, UT, WY 72 Land Trusts
• Western: Combined Pacific and Mountains & Plains regions
• New England: CT, MA, NY 65 Land Trusts
• Lakes: IL, IN MI, MN,OH, WI 64 Land Trusts
• Northern NE: ME, NH, VT 62 Land Trusts
• Atlantic: DC, DE, MD, NJ, PA, RI, VA, WV 62 Land Trusts
• South: AL, Fl, GA, KY, LA, MS,NC,SC,TN 61 Land Trusts
• Vermont Resident: Statutory domicile requirement; appointed
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Claims Committee
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Claims decisions
Determination of claims
Claims triage
Case management
Approval of settlements and litigation decisions
Direction to National Coordinating Attorney
(ARMS staff)
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Claims Committee Formalities
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Members Committee members not eligible
Five year terms
Nominated by ARMS
Approved by Members Committee
Independence requirements
Volunteers will be experienced land trust practitioners
Practical skills and outlook
Four persons with expertise
NCA, ex officio
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Claims Committee Reporting
• Members Committee determine regular reporting
• Mandatory additional reporting for
– large, controversial or precedent setting claims
– regular updates
• At least annual reporting for
– in process and concluded matters
• At least annual trends and trajectory reporting
• Annual actuarial analysis
• Annual regulator reporting
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Possible Claims Process
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Establishing a form containing key information (TBD)
Delivery of copy of property file
Timing requirements and applicable statutes of limitation
Estimates of initial costs
Identity of contact person in the Member organization
Confirmation that Member still eligible
Other processes and information to be determined
Collaborative, team effort of all involved
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Standards
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To determine coverage
To determine claim management and options
Selection of local counsel
Fiscal management of claims
Communications and roles
Decision making
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Concerns & Comments
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Too complex?
Enough representation?
Equitable?
Transparent?
Too much work for land trusts?
Eligibility issues?
Other?
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Next Steps
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Finish raising the money
Obtain insurance regulator approval
Obtain IRS tax exempt status
Confirm land trust eligibility
Write application and policy forms
Land trust review
Alliance board vote
Mechanics of start up (lots of details here)
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