Risk Report

risk report with Henriott Group, Inc.

Idea go

January 2012

Workplace and Risk Management topics aimed at business owners, managers and other organizational leaders.

“Risk is like fire: If controlled it will help you; if uncontrolled it will rise up and destroy you.”

~ Theodore Roosevelt

Management Malpractice Continued…..

Our Risk Report In Review

Henriott News & Updates

Discussing the 3rd leg of the Management Malpractice Stool…..

Fiduciary Liability.

Looking back on 2011 and what’s to come in 2012!

More on our new blog series, C’Mon Man!

rd

Liability:

The 3 Leg of the Management Malpractice Stool

David Castillo

Fiduciary

Another quick survey to start this month’s edition of the Risk Report…it’ll be easy, I promise! Does your company provide or offer to employees any of the following: Defined benefit plans, defined contribution plans, health and welfare plans, excess benefit (or top hat) plans, employee stock ownership plans, dental, vision or disability plans…..

Need I go on?

If your company provides employees with these sorts of retirement or healthcare benefits, anyone involved in the management of those plans takes on tremendous responsibility that puts their personal assets at risk if they’re sued.

Under the Employee Retirement Income Security Act of 1974 (ERISA), people who oversee benefit plans – called fiduciaries – owe numerous duties to the plans’ participants/beneficiaries.

Fiduciaries can be held personally liable for errors and omissions in administering plans or for any breach in their ERISA fiduciary duties. However, many people aren’t even aware of their fiduciary status and duties – or the costly court cases they could encounter. And no, just because you hire an investment firm, record keeper or TPA, does not remove your fiduciary liability!

Recent statistics show that the frequency of claims has risen significantly beginning in the late 1990’s and continuing to present time, not helped at all by cases like Enron and other well known examples of egregious errors in the management of benefit plans that had real impact on plan participants. Although most errors and omissions that occur are due to honest mistakes, lawsuits do not make this distinction. Other relevant statistics reveal more Fiduciary claims today than EPLI/Sexual Harassment claims, the average claim cost is over $900k and the cost to defend is over $350k. According to one study, over half of all ERISA cases are disposed in favor of plaintiffs during preliminary and substantive stages of litigation. Granted, these stats are typically from large cases, so divide those numbers by whatever you feel is appropriate and you still get a big number!

Sometimes it helps to have a couple quick real life claim examples to help paint the picture, so here you go:

Sujin

1. A health plan sponsor allegedly did not monitor the performance of its third-party administrator (TPA) and retained the company despite its inadequate performance. LOSS = $230K 2. The administrator of a savings and profit sharing plan allegedly failed to notify participants who reached age 60 that they had an option to transfer any or all of their regular balances to a participant contribution account. LOSS = $100k So what do you do to protect yourself from these claims? A couple things come to mind: 1. Understand all you can about ERISA’s fiduciary requirements to ensure you’re in compliance and 2. Make sure you have Fiduciary Liability insurance to protect the assets of you, your plan managers and your company.

Keep in mind these final comments as you consider or review your Fiduciary Liability coverage needs:

sscreations

1. Neither a General Liability policy, a D&O Insurance policy, nor Fidelity Bonds fully cover Fiduciary Liability…so if you’re assuming you’re covered elsewhere…well, you know what happens when we assume!

2. Fiduciary Liability coverage is typically not expensive, depending on the number, complexity and size of the benefit plans offered by the company. For most insureds, a $1 million limit is easily obtained for less than $5,000, often much less. In fact, minimum premiums for companies with relatively small exposures in this area start around $1,000.

3. Key policy provisions that you want to look for in a Trustee and Fiduciary policy include, among others: a. Broad definitions of insured persons, covered plans, wrongful acts and claims b. Options to buy separate limits for defense costs c. Duty to defend d. Generous settlement provisions (“hammer clause”) e. Coverage for punitive damages f. Deductible waiver provisions That concludes our Management Malpractice series for the time being, but don’t hesitate to call us if you have questions or concerns regarding Directors and Officers, Employment Practices or Trustee and Fiduciary Liability! 

Risk Report…

Looking back on 2011 and on to 2012 graur codrin

We hope you’ve enjoyed the first year of our Risk Report and found the topics to be relevant and worthwhile for your business. We started with an overview of Risk Management vs.

Insurance, discussed the growing exposure related to Cyber Liability, touched briefly on the Experience Modification Factor, a key metric in your work comp program, had a very brief intro to the topic of Crime and then finished off with our series on Management Malpractice.

We started the Risk Report in May and published a total of 5 reports during 2011. With so many more topics to cover, we expect to issue a report monthly in 2012, covering such topics as an organization’s Total Cost of Risk, a look at the Indirect Cost of Claims, more info on Workers Compensation and the mod factor, risk transfer, business interruption and more! So stay tuned and we also take special requests, so let us know if there’s a topic of interest you’d like to see featured in an upcoming Risk Report!

The Latest …

Henriott News & Updates Message from Rick Davis, President & COO Check out our website blog series for real-life claims or lawsuits that we hear about in our work and make us sit back and say….C’Mon Man…Really?! The latest entry involves a California pet health insurance company that gives an annual award for the strangest claim of the year. Finalists include a pug that ate 100 rocks while boarding at a vet’s office and a Chihuahua that sustained injuries when it was lifted off the ground by a great horned owl! Ouch!

C’Mon Man….see you next month!

For other C’Mon Man blogs, past Risk Reports and more, visit our website at www.henriott.com.

Henriott Group’s Milestone Risk Management program is aimed at helping your company lower it’s Total Cost of Risk. Talk to your Henriott professional for more information about this proprietary process.

Client Focused. Results Driven.