ELECTED OFFICIALS
INSURANCE ORIENTATION
KENNETH J. HEINZ
J. PATRICK CHASSAING
PETER DUNNE
August 22, 2013
WHAT IS SO SPECIAL ABOUT PUBLIC ENTITY
INSURANCE AND RISK MANAGEMENT?
The Distinctive Legal Status of Public Entities and Elected Officials.
The Distinctive Exposures for Missouri Public Entities and Elected Officials.
The Inherent Risks Associated with Providing Public Services.
The Distinctive Legal Status of Public Entities
And Elected Officials, Employees and Volunteers
SOVEREIGN IMMUNITY
Applies to Entity but not to individuals
2013 Sovereign Immunity Caps are:
$ 398,638 Per Person
$ 2,657,587 Per Occurrence
The Distinctive Exposures for MO Public Entities
General liability for premises and operations, employment practices activities,
ownership and use of automobiles, law enforcement activities, medical
malpractice, public officials’ errors and omissions allegations, property losses,
public buildings and structures, public transportation, security, special events,
human resources, contracts, recreational facilities and services,
streets/roads/bridges, sidewalks, utilities, bidding and other administrative
procedures, elections, acts of governance, issuing licenses and permits, managing
public funds, planning and zoning, volunteers, vandalism, mutual aid agreements
JUST TO NAME A FEW !!!
The Inherent Risks Associated with Providing Public
Services
Unavoidable High Severity/Frequency Risks
Scope of Public Sector Services
Public Scrutiny
Geography
Lack of Control
WHAT IS RISK AND RISK MANAGEMENT?
“Risk” is defined in insurance as the chance of a loss
“Risk Management” is the way entity officials identify risks,
select and implement ways to address those risks in an organized and
coordinated fashion, and then monitors for the positive results.
IDENTIFYING A LOSS EXPOSURE
A loss exposure is the possibility of loss,
financial or otherwise, whether or not a loss
actually takes place.
Sources of Risk for Public Entities
PHYSICAL ENVIRONMENT: weather, acts of God
LEGAL ENVIRONMENT:
federal, state and local laws, legal precedents
OPERATIONAL ENVIRONMENT: day-to-day activities
POLITICAL ENVIRONMENT: legislative activity, elections
SOCIAL ENVIRONMENT:
cultural composition of community, social attitudes
ECONOMIC ENVIRONMENT: market trends, interest rates
COGNITIVE ENVIRONMENT: absence of information, attitude of individuals toward risk
Examples
Legal Environment Source of Risk:
Federal laws
ADA requirements Non-Compliance Discrimination Lawsuit
Physical Environment Source of Risk:
El Nino Heavy Rains/Thunderstorms Water Over Road Vehicle Loss
Economic Source of Risk:
Operational Source of Risk:
TYPES OF LOSS FOR PUBLIC ENTITIES
Property Losses
Additional Expenses
Loss of Income
Workers Compensation
Liability to Others
SOURCES OF LEGAL LIABILITY
PREMISES
OPERATIONS
CONTRACTUAL
AUTOMOBILE
SELECT TECHNIQUE(S) TO MANAGE EXPOSURE
AVOIDANCE
REDUCTION
CONTROL
TRANSFER
BUYING INSURANCE
Purchasing insurance is choice between small known loss (premium payments
and deductibles) to offset potential unknown large loss.
Purchasing insurance transfers some risk of financial loss but does not
transfer responsibility to prevent or control loss exposures.
IT IS IMPORTANT TO KNOW WHAT YOU BUY WITH YOUR INSURANCE DOLLAR
AND WHY THAT EXPENSE IS IN THE BEST OVERALL INTERESTS OF YOUR
ENTITY TO ADEQUATELY PROTECT ITS ASSETS.
HOW TO READ AND REVIEW AN INSURANCE
POLICY
Declarations Page
Insuring Agreements
Definitions
Exclusions, Extensions, Conditions
Endorsements
Schedules
Declarations Page
Key information about insured and a very
broad summary of what is in the policy
Check for accuracy:
Correct Legal Name of Insured
Correct Mailing Address of Insured
Policy Dates
Coverages Provided w/Limits and Deductibles
List of Forms Attached and Made Part of Policy
INSURING AGREEMENT(S)
MEMORANDUM OF COVERAGE
What the Insurer Pays
Limit(s) of Liability
Who is a Covered Party
Exclusions, Extensions, Conditions
Definitions
KEY TERMS
Definitions: If word is in quotation marks in insuring agreement, it is defined
in the policy document. DEFINITIONS CAN RESTRICT, LIMIT
OR EXCLUDE COVERAGE.
Exclusions: Sometimes more important to know what is excluded than what
is included.
Extensions: May be hidden in exclusions.
Conditions: Insurance is a contract and there are conditions for both parties
that are part of the contract. Failure to meet your conditions
can void or restrict coverage.
PROPERTY COVERAGE
Real Property, Business Personal Property, Contractors and Other Mobile Equipment,
Earthquake and Flood, Equipment Breakdown, and many ancillary coverages,
Covered Perils: fire, lightning, explosion, windstorm or hail, smoke, aircraft, vehicle,
riot/civil commotion, vandalism, sprinkler leakage, sinkhole collapse, volcanic
action, falling objects, weight of snow, ice or sleet, water damage.
Valuation very important:
100% Replacement Cost (no depreciation) 15% Margin Clause
Actual Cash Value (depreciated for age and obsolescence)
Time Element
LIABILITY COVERAGES
Sovereign Immunity/Personal Liability
Legal Liability:
Duty of Care Obligation
Negligence In Duty of Care
Must Be Bodily Injury and/or Property Damage
BI/PD Must Be Direct Result of Negligence in Duty of Care
Who is Insured: The legal entity.
Any past, present, future elected/appointed officials acting within
the scope of their duties.
Employees and Authorized Volunteers.
LIABILITY COVERAGES
General Liability: Protects against claims for bodily injury and/or property damages
from a third party.
Public Officials Errors and Omissions Liability: Covers defense costs for claims
alleging negligent action or inaction, mistake, misstatement,
error, negligence, inadvertence, or omission by a covered party
in the discharge of an official’s or employee’s duties.
Employment Practices Liability: Covers employment-related losses such as
discrimination, harassment, wrongful termination, retaliation,
and other workplace torts.
LIABILITY COVERAGES
Law Enforcement Liability: Coverage includes jail premises and operations. Covers
lawfully elected, appointed or employed officer and includes
discrimination, violation of civil rights, sexual harassment,
reserve officers, bike patrols, animal control, and canine officers,
Automobile Liability: Covers bodily injury and property damage claims from a
third party alleging negligent operation of a motor vehicle.
Automobile Physical Damage: Covers physical damage to your scheduled vehicle.
Optional Coverages: Employee Benefits Liability, Auto Medical Payments, Incidental
Medical Malpractice, Garage Keepers Liability
CLAIMS MANAGEMENT
The Entity Should:
Report occurrences and claims promptly.
Not make commitments to pay.
Send all information available but do not delay reporting by waiting on
police reports or estimates.
Provide a specific date of loss on claim forms.
Protect property from additional damage and protect undamaged property
from becoming damaged.
If summons is served, mark the date, time and person received from and forward it promptly
to the Insurer. Make sure insurer acknowledges that it will defend and have a lawyer enter
their appearance by return date on summons.
WHY RISK MANAGEMENT?
Avoid personal liability for yourself and legal liability for your entity.
Reduce future liability costs
Avoid payment of deductibles
Avoid adverse publicity
Stay focused on the city’s business as opposed to defending yourself in court.