Public Risk March 2017 by Moire Marketing Partners

PUBLISHED BY THE PUBLIC RISK MANAGEMENT ASSOCIATION MARCH 2017

TOP 10 THINGS TO KNOW

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ALSO IN THIS ISSUE

GOVERNMENTAL FIDUCIARY LIABILITY INSURANCE: Protecting Trustees

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PREVENTING COST SURPRISES WHEN MANAGING UNCOMMON INJURIES PAGE 15

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PRIMA 2 017

BITCO Insurance Companies1 Old Republic Aerospace2

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MARCH 2017 | Volume 33, No. 3 | www.primacentral.org

CONTENTS

The Public Risk Management Association promotes effective risk management in the public interest as an essential component of public administration.

PRESIDENT Terri L. Evans Risk Manager City of Kingsport Kingsport, TN PAST PRESIDENT Dean R. Coughenour, ARM Risk Manager City of Flagstaff Flagstaff, AZ PRESIDENT-ELECT Amy J. Larson, Esq. Risk and Litigation Manager City of Bloomington Bloomington, MN DIRECTORS Brenda Cogdell, AIS, AIC, SPHR Risk Manager, Human Resources City of Manassas Manassas, VA

Office Ergonomics:

TOP 10 THINGS TO KNOW

Scott J. Kramer, MBA, ARM City/County Director of Risk Mgmt Montgomery County Commission Montgomery, AL Jani J. Jennings, ARM Insurance & Safety Coordinator City of Bellevue Bellevue, NE Scott Moss, MPA, CPCU, ARM, ARM-E, ALCM P/C Director Oregon Public Entity Excess Pool Salem, OR Lori J. Gray Risk Manager County of Prince William Woodbridge, VA Donna Capria, CRM, CIC, AINS Risk & Insurance Coordinator WaterOne of Johnson County Lenexa, KS

By Gene Kay, MS, CPE

NON-VOTING DIRECTOR Marshall Davies, PhD Executive Director Public Risk Management Association Alexandria, VA EDITOR Jennifer Ackerman, CAE Deputy Executive Director 703.253.1267 • jackerman@primacentral.org ADVERTISING Jennifer Ackerman, CAE 703.253.1267 • jackerman@primacentral.org

Governmental Fiduciary Liability Insurance: PROTECTING TRUSTEES By Daniel Aronowitz

IN EVERY ISSUE

Preventing Cost Surprises When Managing Uncommon Injuries By Laura Gorman, R.N.

| 4 NEWS BRIEFS | 19 ADVERTISER INDEX

Public Risk is published 10 times per year by the Public Risk Management Association, 700 S. Washington St., #218, Alexandria, VA 22314 tel: 703.528.7701 • fax: 703.739.0200 email: info@primacentral.org • Web site: www.primacentral.org Opinions and ideas expressed are not necessarily representative of the policies of PRIMA. Subscription rate: $140 per year. Back issue copies for members available for $7 each ($13 each for non-PRIMA members). All back issues are subject to availability. Apply to the editor for permission to reprint any part of the magazine. POSTMASTER: Send address changes to PRIMA, 700 S. Washington St., #218, Alexandria, VA 22314. Copyright 2017 Public Risk Management Association

MARCH 2017 | PUBLIC RISK

Further your public sector risk management education without leaving the office! This Webinar series features top presenters delivering risk knowledge to your desktop!

PRIMA’S 2017 RISK MANAGEMENT

WEBINAR SERIES PRIMA WEBINARS ARE FREE FOR MEMBERS! Visit www.primacentral.org today to register for individual Webinars or for the entire program!

M A RC H 2 2 | 1 2 : 0 0 P M – 1 : 3 0 P M E ST PROHIBITED SEXUAL HARASSMENT SPEAKERS: John D. Aspland, Jr., Esq., Managing Partner, FitzGerald Morris Baker Firth, P.C. Asish A. Nelluvely, Esq., Associate Attorney, FitzGerald Morris Baker Firth, P.C. DESCRIPTION: Sexual harassment is a form of discrimination that violates Title VII of the Civil Rights Act of 1964. This presentation will explore the different types of sexual harassment claims that may arise, employer liability and best practices to prevent sexual harassment from occurring. AT T E N D E E TA K E AWAYS :  Quid pro quo sexual harassment claims, where an employment decision is based upon the submission of the employee to sexual harassment, is prohibited under Title VII.  Hostile-environment sexual harassment claims, where sexual harassment makes the workplace environment intimidating, hostile, or offensive, is prohibited under Title VII.  Employer is liable if it knew or should have known about the harassment unless the employer took immediate corrective action.  Employers are prohibited from retaliating against employees who file complaints.

For more information, or to register, visit primacentral.org/webinars.

MESSAGE FROM PRIMA PRESIDENT TERRI L . EVANS

Arizona, Here We Come!

e are about three months away from PRIMA’s premier educational offering: the Annual Conference! This year’s conference will be held June 4–7, 2017, in Phoenix, Arizona. Early bird registration saves $100 and ends on April 1, so be sure you are registered. Also this year, our hotel rates are phenomenal—$145 a night (plus tax)— coupled with the early-bird registration discount are great selling points to your entity in tax dollars saved! The conference features a wide variety of educational programs from which to choose, covering drones, enterprise risk management, opioid abuse, ADA, whistleblowing, jail operations, risk financing tools, police brutality claims, reputational risk, cyber risk, social media and kids, and many, many more. Training modules are varied as well, from 30-minute “cram sessions” to 2.5 hour in-depth workshops. There are also three general sessions with vibrant speakers covering today’s management issues. The variety of training and modes of dissemination ensure your needs are met and you gain the knowledge and insight necessary to return home, ready to face the challenges with renewed vigor. There are magnificent vendors and sponsors who will be in the PRIMA trade show, from TPAs to insurers, safety suppliers to benefits consultants, risk information system suppliers to property valuation companies, emergency management to training—we’ve got you covered. You will also have plenty of time to visit with them, find out about their products, and discover services that could benefit your entity.

At PRIMA, we are here for one another.

Together, we develop new inroads to help our entities grow and prosper. Together, we forge

new solutions to ongoing problems. Together, we are stronger. Together, we are PRIMA.

Networking is one of the greatest PRIMA benefits, and the Annual Conference has participants from all over the United States, Canada and the UK. Ideas can be shared at the Sunday Golf Tournament, hosted by the Arizona PRIMA Chapter and touted as a tourney to remember, and at the Sunday evening welcome reception. There are several networking occasions in the trade show, a fantastically fun Tuesday evening event and opportunities to meet up with new and old friends throughout the conference. It’s wonderful to be with our peers, sharing triumphs and adversities, thoughts and issues, getting new ideas and sharing what has worked for us.

At PRIMA, we are here for one another. Together, we develop new inroads to help our entities grow and prosper. Together, we forge new solutions to ongoing problems. Together, we are stronger. Together, we are PRIMA.

Terri L. Evans 2016–2017 PRIMA President Risk Manager City of Kingsport, Tenn.

That sense of camaraderie, the knowledge that we all face similar obstacles, and the companionship of public risk managers is what makes our organization second to none. A quick log-in to the PRIMA online community will show you how willing we are to ask and answer questions, share documents and best practices, and help one another with issues as they arise.

MARCH 2017 | PUBLIC RISK

NEWS BRIEFS

NEWS Briefs

THE TEN BEHAVIORS OF STRONG PERSONAL LEADERSHIP Since writing the first edition of The Next Level in 2006, I’ve coached, spoken with, and observed thousands of leaders in action, said author Scott Elbin in Government Executive. Many of them have been good leaders. Some have been great leaders. The great ones have one big thing in common. They don’t just lead at their best; they live at their best. They understand that to lead others effectively, they first have to lead themselves effectively. Great leaders practice and exhibit strong personal leadership. They endeavor to live at their best so they can lead at their best. Their lives are structured for continuous improvement. Here are the 10 behaviors of personal leadership that I’ve seen the great ones practice: Self reflection. Great leaders take the time to identify and articulate how they are at their best and then organize their life so they consistently show up with those qualities. They use their understanding of how they are at their best as a reference point to regularly, often daily, stop and reflect on where they’re hitting the mark, where they’re not and making one or two adjustments to get back or stay on track. Self awareness. Great leaders are aware and intentional. They tune into what’s going on around them and notice the physical, mental, and emotional reactions they’re having to what’s going on around them. Based on that awareness, they are then intentional about what they’re going to do or not do next. Throughout the day, they ask themselves two guiding questions: What am I trying to do? How do I need to show up to make that happen? Self care. Great leaders understand that they perform at their best when they take care of their

PUBLIC RISK | MARCH 2017

health and well being. They move throughout the day. They are intentional about eating moderate amounts of healthy food. They get at least seven hours of sleep at night. By doing all of that they put themselves in position to better manage their stress and hit the sweet spot between their fight or flight and rest and digest responses.

It’s wave after wave. Great leaders recognize and leverage the bardo, a Tibetan word that means the space between the waves, to shift gears. Between one conversation and the next, they take a few moments to breathe deeply, clear their mind from the last thing and visualize what they’re trying to do next and how they need to show up to do it.

Continuous learning. Great leaders never stop learning. They challenge their own assumptions by asking why, seeking fresh sources of input, asking for feedback on their performance and going out of their way to experience and understand the lives of others.

Focus. Great leaders focus on who or what is in front of them. They are aware of the things that could distract them and are intentional about removing those things from their environment. They have smartphone free zones. They hold meetings in places that enable them and others to focus. They set themselves and others up for success by creating space to focus.

Listening. Great leaders listen. They ask openended questions and pay attention to the answers. They listen to gather the ideas and perspective needed to solve problems collaboratively. They don’t stop there, though. They move beyond transactional listening and regularly practice transformational listening. They often listen with no other agenda than to deepen their connection with someone else. Operating rhythm. Great leaders know and leverage their operating rhythm. They know what times of the day and the week are the best fit for getting particular things done and then they schedule it. If they know their best thinking and creative work comes early in the day, they keep their first hour or two clear of meetings. They pay attention to when they need breaks and change things up to get them. If they know that they’re energized by meeting and working with other people, they try to schedule their time so that those meetings can help them power through their day. Gear shifting. Great leaders know how to quickly shift gears. Their calendars are usually racked and stacked with meetings and any given day can skip across dozens of topics and settings.

Clarity of purpose. Great leaders know what they’re in it for. They have developed a clear answer to the question, “Why am I here? On this earth, in this life for the limited amount of time that I have here, why am I here?” Their answer to that question informs what they do each day and how they do it. Gratitude. Great leaders are grateful. They recognize, acknowledge the good things in their life. They understand that even on days when it feels like everything is going wrong, there is always something that’s going right. They build on that to create positive outcomes for themselves and the people they love and lead. As a leader you control the weather. However you show up is predictive of how the people you lead will show up. To lead at your best, live at your best. That starts with personal leadership. What’s working for you in your personal leadership? What do you need to adjust? Which of the ten behaviors of strong personal leadership holds the most potential for you?

WANT FREE COMMUNITY COLLEGE? LIVE IN SAN FRANCISCO A California city will soon offer free tuition to City College of San Francisco students who qualify as residents.

THE WORLD’S LARGEST EARTHQUAKE DETECTION NETWORK IS POCKET SIZED Citizens around the world now have the opportunity to be part of one of the newest scientific developments in earthquake research using only their smart phones.

Mayor Ed Lee reportedly announced that San Francisco will be the first in the nation to make City College free to all students, regardless of income, according to an ABC 7 report.

Since its launch in February last year, the University of California Berkeley’s MyShake application has garnered close to 250,000 downloads. It has made great strides in collecting earthquake data from across the planet.

“To California residents who are living in San Francisco, your community college is now free,” Lee said, according to ABC 7.

“It truly is global,” Berkeley Seismological Laboratory Director Richard Allen said. “This is by far the largest, global seismic network there is.”

Students, whether they are part-time or full-time, must live in the city of San Francisco for at least a year to qualify and receive the free tuition, ABC 7 reports.

The app harnesses accelerometers, or measurements of acceleration, of modern smart phones. Most mobile devices can provide a 95 percent rate of accuracy in detecting an earthquake over everyday movements in the device, Allen added.

The city will reportedly guarantee over $5 million per year to City College to cover tuition costs for residents. The funds will come from an increase in real estate transfer tax for commercial and residential properties. The funding is expected to go into effect next fall, according to ABC 7. However, homeowners who sell their homes valued at $5 million and up will have to pay more, according to the report.

“It’s shockingly accurate,” he said, citing that smart phones can record waveforms related to earthquakes of 2.5 magnitude, which would often go unnoticed by an individual. The application, and its unique algorithm for monitoring a phone’s accelerometer for seismic activity, was developed jointly between the university and the Deutsche Telekom Silicon Valley Innovation Center.

“Making City College free is going to provide greater opportunities for more San Franciscans to enter into the middle class and more San Franciscans to stay in the middle class if they currently are,” San Francisco Supervisor Jane Kim told ABC 7.

The long-term objective of the project is not only to gather seismic data for research, but also to provide better hazard warnings to the public, Allen said.

Funding will also provide $250 a semester to full-time, $100 a semester to part-time, low-income students who receive a “statefunded fee waiver,” according to the San Francisco Chronicle. The site states it’s not clear how many students will benefit.

Within 24 hours of its launch last year, the number of downloads neared 50,000. Since then, the application’s use has expanded and notification systems were added for users in December.

Officials hope the school will see a boost in enrollment and more state funding, according to the Chronicle.

When an earthquake occurs, the users’ phones send the information back to a central server for analysis. The use of smart phone seismometers has already proved useful to the researchers, who are just beginning to scratch the surface of the data they’ve collected. Allen said there are typically 100 to 150 locations in static seismic networks they could have gotten data from in the past. However, with an expanding global network of portable seismometers, data can now be collected from more remote regions of the world. For example, Allen said areas like Nepal do not offer a lot of data in terms of seismometers, but there are thousands of smart phone users in the region. The application could provide a better look at the physics and processes related to the region’s quakes in the future. “We’re just getting a start at looking at the earthquake rupture process and trying to answer some of these fundamental questions,” Allen said. “In terms of the application, we want to start providing people with an ever more rapid alert. The goal is to get faster and faster and provide people with [warning time].”

“This project has been an overwhelming success,” he said.

Users can determine what kind of data notifications they want to receive based on location and by magnitude. “Right now, about 10,000 phones contribute data to our archive each day,” Allen said.

MARCH 2017 | PUBLIC RISK

PUBLIC RISK | MARCH 2017

OFFICE ERGONOMICS: TOP 10 THINGS TO KNOW

BY GENE KAY, MS, CPE

hile musculoskeletal-related injuries are most often associated with workers performing rigorous tasks in industries like construction, mining, oil and gas and manufacturing, the truth is, it’s also a common and costly problem for employees who spend long periods of time sitting in office or laboratory work environments. That’s why ergonomics—the practice of fitting a job to a person—is an important aspect of every safety program, in every setting, since even minor worker discomforts can lead to serious and costly injuries if left uncorrected.

In many cases, poor ergonomics is revealed or expressed as muscular fatigue, discomfort, decreased productivity, absenteeism, or injury, all of which can take a significant toll on workers and business. While training is a proven strategy to alleviate most of the physical stresses related to poor job fits, it is often overlooked in the office setting due to misconceptions about the risks employees face, concerns about its effectiveness and an inability to justify costs. The good news is that the ROI on ergonomics does add up and there are a lot of great resources available to companies of all sizes and budgets. Below we examine the top facts employers need to know about office ergonomics and factors

that can help them create an effective training program for your employees.

 ERGONOMICS AFFECTS EVERYONE

Ergonomics-related injuries, including musculoskeletal disorders (MSDs) and cumulative trauma disorders (CTDs), affect employees in nearly every industry. According to OSHA and the Bureau of Labor Statistics (BLS), work related MSDs are among the most frequently reported causes of lost or restricted time, accounting for 33 percent of all worker injury and illness cases. In many offices, improper monitor positions and rigid sitting postures lead to neck and back pain, eye strain and other common MSDs, including carpal tunnel syndrome, trigger finger, tendinitis and ganglion cysts. Awkward and static posture, repetition, minimal rest, force, vibration and cold are also contributing risk factors in office ergonomics issues.

 MSDS ARE JUST THE TIP OF THE ICEBERG

In some cases, injuries caused by poor ergonomics go beyond just MSDs. Sedentary

MARCH 2017 | PUBLIC RISK

OFFICE ERGONOMICS: TOP 10 THINGS TO KNOW

behaviors and static postures—where people sit for long periods of time without ergonomistrecommended stretches and movement—can even result in metabolic syndrome, a cluster of conditions that includes increased blood pressure, high blood sugar, excess body fat around the waist and abnormal cholesterol or triglyceride levels. Occurring together, these conditions increase an employees’ risk of heart disease, stroke and diabetes.

 MSDS AND OTHER ERGONOMICS-RELATED INJURIES ARE COSTLY

Poor ergonomics takes a significant toll on business and workers, resulting in both direct costs for medical expenses and workers compensation and indirect costs such as lost time, decreased productivity and replacement workers. While even one ergonomics-related injury is estimated to cost between $60,000 and $82,000 per case, the Institute of Medicine estimates the total economic burden to companies resulting from workplace MSDs— including both the loss of work and compensation costs—to be as high as $54 billion annually.

 ERGONOMICS TRAINING WORKS

Fortunately, studies have shown significant gains in productivity and employee job satisfaction with the introduction of an effective office ergonomics assessment and training program that works to fit the job to the employee. The Washington State Department of Labor & Industries and the Puget Sound Human Factors and Ergonomics Society analyzed 250 studies in which an ergonomics program was introduced and discovered that, on average, ergonomic interventions lowered workplace MSDs by 61 percent.

 ONE SIZE DOES NOT FIT ALL Today’s workplaces have become increasingly more complex, technologically advanced and decentralized. As a result, a one-sizefits-all approach to deploying critical safety information is no longer enough. Traditional ergonomics training performed by a specialist who visits facilities for live, one-on-one coaching is a common approach, but can be ineffective and expensive for companies with a large staff or multiple locations. On the other hand, web-based ergonomics training reaches more employees at a fraction of the cost of live

PUBLIC RISK | MARCH 2017

coaching programs, with bite-sized courses that workers can more easily complete on their own time schedules at their desks.

 RISK IDENTIFICATION IS KEY

Effective ergonomics training begins with a comprehensive assessment of the problems and issues that exist so employees have a better idea of what they need to work on the most. If you think of an office ergonomics assessment as a onetime event that gets completed once a specialist goes onsite, an in-person session with a professional ergonomists could be a good choice. However, if you think of an assessment as one part of an ongoing business improvement process to track and monitor trends over time, a web-based assessment and training system will be a better fit for your organization.

 KEEP IT SHORT, SIMPLE AND ACCESSIBLE

Like you, employees are busy, so don’t overload them with facts, figures and advice all at once. Training works best when it’s kept high-level and to the point, with concise information and direction that helps employees properly position their posture and workstations to what fits best. This is where online training programs are key, offering modular training courses that help employees better retain the information and allowing them to more easily fit sessions into their busy schedules.

 THE ERGONOMIC WORKSTATION IS IMPORTANT TOO

Adjustable, sit-to-stand workstations are an ideal, yet expensive option for many companies. However, there are still many slight desk modifications that can have a huge impact on improving desk ergonomics. Monitor placement that relaxes the eyes and keeps the neck comfortably neutral is key, as is mouse positioning and seating posture. Employees that sit for long periods of time are encouraged to take frequent breaks to stand and walk around during the day. Furthermore, exercise balls used for chairs—thought to make users more fit by increasing stability—should be avoided since they actually cause a range of poor ergonomics issues by co-contracting muscles, encouraging slouching and putting pressure on sensitive areas.

 DOCUMENTATION IS A MUST Documentation and metrics create a strong

foundation for a successful ergonomics program and any continuous improvement process. “If you can’t measure it, you can’t improve it” is a mantra for today’s business world and “if you don’t continually improve, you won’t be sustainable” is another. Documentation—which can seem like drudgery if it’s not at least partially automated—is very important to any sustainable ergonomics process. A good online ergonomics training program should provide tools to help you track, measure and document all aspects of the ergonomics process.

 TRAINING IS NEVER COMPLETE Like all training, ergonomics should not be viewed as a one and done occurrence but instead as part of a continuous improvement strategy. Its human nature to fall back into familiar routines, even those that might cause us harm. Employees should revisit their ergonomics training regularly to ensure they’ve retained the information needed to continue to work towards better ergonomics. Furthermore, whenever an employee starts a new job or enters a new workstation, it’s important to once again fit the job to the worker with additional ergonomics training. Another case for web-based ergonomics training is that it should provide employees with gentle reminders and self-corrective advice specific to their ergonomic issue and furniture types. In addition to lowering the risk of worker injury and the inflicted costs to business, good ergonomics also produces less tangible value by improving engagement and increasing employee responsibility and accountability of their workstations. With improved comfort also comes increased productivity, which when combined with reduced injury rates and worker cost claims, provides a significant ROI. Employing an effective ergonomics program doesn’t have to be difficult or expensive. Today’s safety professionals have more options than ever when it comes to selecting a training method that works best for their employee needs. Don’t let overlooked ergonomics-related issues develop into serious and expensive safety concerns. Ergonomics training is an easy and effective way to ensure workers are doing their jobs most comfortably, efficiently and, most of all, safely. Gene Kay, MS, CPE, is the director of ergonomics at VelocityEHS.

PRIMA’S 2017 ANNUAL CONFERENCE JUNE 4–7, 2017 // PHOENIX, AZ

REGISTRATION NOW OPEN! EARLY BIRD DISCOUNT ENDS APRIL 1

Managing risk in our cities, counties, schools, states

and tribal nations presents unique challenges and PRIMA’s Annual Conference is the only conference dedicated to YOU: public sector risk management professionals. Join more than 1,000 of your public risk management colleagues, leaders and experts for an exceptional learning and networking opportunity in Phoenix.

Governmental Fiduciary Liability Insurance: PROTECTING TRUSTEES BY DANIEL ARONOWITZ

PUBLIC RISK | MARCH 2017

N LAST DECADE, the cities of San Diego and Detroit both experienced high-profile insolvencies. Citizens demanded answers and

the unfunded liabilities of the respective pension plans represented glaring financial losses. The San Diego City Attorney sued the

trustees of the San Diego Employee Retirement System (SDCERS) for violating California conflict of interest laws. Likewise, a class

action was filed against the trustees of the Detroit pension plans

forÂ allegedly causing the funding gap with imprudent investments.

The trustees of SDCERS asked the city to defend and indemnify them from liability, but the city declined discretionary indemnification. These trustees, who included city employees required to serve on the pension board, were faced with defending a $2 billion lawsuit with their own money and had to sue the city to seek indemnification. By contrast, the trustees of the Detroit pension plans received a quality defense from one of the best law firms in Michigan. The Detroit trustees did not have to spend a single dollar of their own money. Why did the Detroit trustees receive a city-provided defense, whereas the San Diego trustees had to sue the city for several years of uncertainty to obtain a defense? The difference

was the fiduciary liability insurance purchased by the Detroit plans. Indeed, the San Diego and Detroit ordeals demonstrate the limits of governmental indemnification, and why public risk managers should consider protecting their trustee fiduciaries with fiduciary insurance coverage.

FIDUCIARY LIABILITY EXPOSURE

Governmental trustees often believe that they have no fiduciary exposure because the federal Employee Retirement Income Security Acts (ERISA) does not apply to governmental benefit plans. It is true that section 4(b)(1) of ERISA excludes governmental plans from coverage under Title I of ERISA.1 But even though ERISA does not apply, nearly every state derives its fiduciary standard of care from ERISA or the common law from which ERISA itself was derived. Virtually every state has adopted the bedrock fiduciary standard from ERISA and the Internal Revenue Code that fiduciaries may be held personally liable for losses to a plan resulting from a fiduciary breach, and may be required to restore to the plan any profits that result from their use of plan assets. Applicable state and common fiduciary law require all contributions to state retirement systems to be held for the

MARCH 2017 | PUBLIC RISK

GOVERNMENTAL FIDUCIARY LIABILIT Y INSURANCE: PROTECTING TRUSTEES

exclusive benefit of plan beneficiaries, and cannot be used for, or diverted to, purposes other than the exclusive benefit of plan benefit beneficiaries. Fiduciaries of employee benefit plans have this duty of undivided loyalty to the plan, its participants and their beneficiaries. Under the exclusive benefit rule, trustees of governmental plans must act in a manner that benefits only the participants and beneficiaries of the plan, defrays the reasonable expenses of administering the plan, and avoids unnecessary costs. And further like ERISA, nearly every state has some version of the “prudent person” standard, requiring a fiduciary to act with the care, skill, prudence and diligence under the circumstances that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims. Like the duty of loyalty, the prudence laws that apply to governmental plans are nearly identical to the high ERISA fiduciary standard applied to private plans.

THE LIMITS OF GOVERNMENTAL INDEMNIFICATION

Facing this personal fiduciary liability, trustees of employee benefit plans expect to be immune from liability or indemnified by the governmental entity for which they are serving or volunteering their time. But the San Diego crisis teaches that governmental trustees cannot rely on governmental immunity or indemnification when they are sued. Indemnification is never foolproof. In fact, the San Diego lawsuits stemming from the city’s bankruptcy reminds us that indemnification has many discretionary limits that place volunteer trustees in potential jeopardy when something goes wrong. Sovereign immunity is the legal principal that the sovereign or government is immune from lawsuits or other legal actions except when it consents to them. Most states provide sovereign immunity for actions by governmental agents, including trustees who sit on public

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benefit plans. But there are limits to sovereign immunity protection. Many states, for example, protect fiduciaries only for acts made in good faith; sovereign immunity will not apply for acts considered willful, wanton, reckless, malicious, grossly negligent or in bad faith. Yet other states have broad immunity statutes that have been limited by the courts. Similarly, many states have indemnification provisions that are designed to protect governmental employees when they are accused of wrongdoing. But like the sovereign immunity statutes discussed above, these indemnification provisions typically have significant limitations and are subject to several levels of discretion. Similar to the law of sovereign immunity, the most common limitation restricts indemnification to official actions taken in “good faith.” This standard retains personal liability for “bad faith, willful, wanton or fraudulent misconduct or intentionally tortious conduct.” Both the San Diego and Detroit lawsuits alleged bad faith and intentional acts potentially outside the scope of the indemnification statute. Consequently, indemnification can be lost at the initial pleading stage, long before innocence or guilt can be adjudicated. Most states further require the act in question to have been taken “in the scope of employment” or “to further the purposes for which the board was established.” And many states limit indemnification to members of the board of trustees and do not extend liability protection to other officers, agents or employees. In other states, the indemnification is at the discretion of the governing board of the plan, or delegated to the attorney general or other outside decision maker to decide. Moreover, most states have not resolved the question as to who makes the decision to indemnify, through what process, and subject to what review. Who determines whether the act was taken in good faith can vary from the board of trustees, the attorney general, or the courts. Needless to say, each of these decision-makers creates risk of potential uncertainty to a trustee or governmental employee needing indemnification. Finally, most state indemnification statutes do not address the full scope of indemnification. This silence creates uncertainty as to whether

defense costs, judgments, penalties and other expenses are covered. Uncertainty also exists as to when defense and other expenses will be paid or reimbursed.

INCREASE IN CLAIMS AGAINST GOVERNMENTAL PLANS

Public fund trustees are increasingly a target of breach of fiduciary duty claims as municipalities and states face funding issues across the country. Indeed, many plans have changed retirement and health benefits for government employees. These changes heighten the prospect that participants will sue plans and their trustees for breach of fiduciary duty. Public fund trustees are also a target of breach of fiduciary duty claims involving imprudent investments or failure to properly manage investments; insufficient funding; reduction of benefits or increase in contributions; denial or improper calculation of benefits; selection or monitoring of service providers; self-dealing or conflict of interests; dishonesty and pay-to-play schemes; failure to collect contributions; administrative

THE KEY FEATURES OF GOVERNMENTAL FIDUCIARY LIABILITY INSURANCE

A fiduciary liability insurance policy is a contract designed to protect trustees against claims alleging breach of their fiduciary duties to the plan, or alleging they committed an error in the administration of the plan. The policy provides two important basic benefits, defense and indemnity: (1) the policy generally pays for the cost of defending trustees accused of violating their duties to the benefit fund; and (2) the policy also indemnifies trustees for their alleged violations of duty and negligent administrative acts or omissions in the event of a settlement or judgment of liability. Many modern fiduciary policies now expand to cover voluntary compliance programs to correct plan mistakes with the Internal Revenue Service and other regulatory agencies to maintain non-profit status, as well as HIPAA and other regulatory penalties. The key coverage issue is whether the governmental fiduciary policy restricts coverage for claims in which sovereign immunity or indemnification could apply. Labeled different

ways, several leading policies restrict coverage for “government-defended claims.” These limitation provisions provide that the policy will not provide a defense or indemnity if the governmental plan sponsor is required or permitted to provide indemnification. The San Diego example demonstrates the problem with these provisions. In the lawsuit brought by the San Diego City Attorney, the city council asked the City Attorney—the very plaintiff who brought the lawsuit—whether indemnification was proper. The City Attorney opined on the public record that indemnification was discretionary, and the city council ultimately had insufficient votes to rule in favor of a defense. The coverage under an insurance policy with a government-defended restriction could limit coverage when indemnification is discretionary. Risk managers should seek transparency on this critical coverage issue, which is often not clearly disclosed by insurance companies.

The San Diego and Detroit experiences demonstrate the fiduciary liability exposure of governmental trustees. Governmental trustees are typically held to an ERISA-like standard of care, but cannot fully rely on sovereign immunity or governmental indemnification because of many gaps in the protection. Consequently, the best and only reliable way to protect against personal liability is through the purchase of fiduciary liability insurance. Daniel Aronowitz is the managing principal of Euclid Specialty Managers. FOOTNOTE 1 Section 3(32) of ERISA defines governmental plans as any “plan established or maintained for its employees by the government or any state or political subdivision thereof, or by any agency or instrumentality or any of the foregoing.”

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MARCH 2017 | PUBLIC RISK

Everyone else is doing it. Why aren’t you?

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PREVENTING

COST SURPRISES WHEN MANAGING

UNCOMMON INJURIES BY LAURA GORMAN, R.N.

MARCH 2017 | PUBLIC RISK

PREVENTING COST SURPRISES WHEN MANAGING UNCOMMON INJURIES

HEN THE PROCESS OF CLAIMS MANAGEMENT IS INTERRUPTED BY AN UNCOMMON INJURY, moving the claim forward can prove challenging as risk managers and claims professionals try to figure out the best course of action.

Multiple questions arise when an uncommon injury presents itself. For example: Is this a workers’ compensation injury? How much or how little of the problem is compensable? How do I find a provider for a service that’s not in network? And when I find them, can they manage a workers’ compensation injury and the paperwork associated with it? How do I know if the provider is qualified? And since this service is not on the fee schedule, how do I know how much it should cost? Four uncommon injuries deserve close attention for special management: vision, dental, hearing and those requiring a medical specialist. It’s important for risk managers to be on the lookout for these rare injuries because these claims can spiral out of control, increasing costs and causing significant delays in treatment. Because these problems may be complicated by conditions that occur due to aging, factors in compensability must also be examined.

UNUSUAL CLAIM TYPE #1: VISION

When a claimant has an eye injury it isn’t difficult to recognize the need for an ophthalmologist as the necessary provider. The difficulty often comes, however, when a claimant has lost or broken glasses without an injury to the eye. The optical center, where someone would normally go to get their eyes tested and purchase a new set of glasses, often

wants claimants to pay out-of-pocket for services and seek reimbursement, as the optical center isn’t equipped procedurally to handle workers’ compensation related claims. When a claimant needs replacement eyewear, the eyeglass prescription is often outdated. Legally and ethically, the optometrist/optical center may not be able to just “replace” the broken or damaged eyeglasses without a current examination and updated prescription. The process is made much more difficult because typically these providers are unfamiliar with or not equipped to handle workers’ compensation injury claims. They do not know the paperwork, the process or how to document what is required to comply with workers’ compensation guidelines. The optometrist is able to do an examination and provide a prescription for corrective eyewear, but he or she cannot make a determination about compensability or causality. If the case indicates documentation for eyewear being related to an injury, this determination should be done by a medical doctor such as an ophthalmologist, not an optometrist.

PUBLIC RISK | MARCH 2017

UNUSUAL CLAIM TYPE #2: DENTAL

Another unusual type of claim that can prove costly is a claim involving dental trauma. From finding a dentist to understanding the terms and paperwork to managing the costs, all aspects of this type of claim can make for a slow and confusing process. First, finding a dentist willing to take an injury claim can be a difficult task. It is also problematic if a claimant goes to his or her own dentist or alternatively, the employer finds a dentist. Most people handling claims have very little dental experience and use their own dental history or that of their family as a frame of reference. Just because a family member chipped a tooth and it only needed a little bonding, does not mean that same treatment is appropriate for an injured worker, who may need a different treatment plan altogether. Another caveat about claims involving dental trauma is that general dentistry involves treating a patient’s entire mouth. But in workers’ compensation, payers may only be responsible for conditions related to the claimant’s injury. Even when a dentist is selected for the injured worker to see, many risk managers have no way to know the provider’s track record with workers’ compensation claims. Fortunately, specialized dental networks now exist along

With these four types of uncommon claims, risk managers must pay special attention so as to avoid these unpredictable cost and complication surprises down the line. Yes, the average claims professional may be extremely proficient at handling the majority of claims that come across his or her desk, but it’s this small percentage of unusual claims that can bring the claim to a stop, leading to exponential costs and prolonged delays in care.

with dental referral management companies, which can provide high quality service and efficient scheduling of appointments in order to move the claim forward. There is no avoiding the cost of dental treatment today. It is expensive and timeconsuming, but the outcomes are well worth it. Today’s dentist will recommend treatment that is more advanced, longer lasting and often more expensive, but offers much better functionality.

UNUSUAL CLAIM TYPE #3: HEARING

Hearing claims can be complex as well. Hearing loss can be related to many other causes such as aging, use of certain medications, and medical conditions unrelated to a workplace injury. If there is an accident with immediate hearing loss or trauma, it is easy to know it needs to be seen and it likely is a result of the injury. The difficulty is with a claim that alleges hearing loss over time or after the employee has left the company or position. A hearing loss claim can be expensive and often will require care over a lifetime if found to be compensable. Risk managers must make sure injured workers receive the appropriate care, from the appropriate healthcare provider, in order to ensure optimal outcomes and reduce unnecessary costs.

CASE IN POINT: CLINICAL OVERSIGHT AND PROACTIVE MANAGEMENT OF DENTAL INJURY CLAIM LEADS TO FASTER RECOVERY FOR INJURED INDUSTRIAL WORKER A woman in her late 40’s was hit by a valve at an industrial workplace, knocking her two front teeth out. The next day, the claims adjuster was referred to a dentist within a specialty network and a day later, the claimant was able to get a comprehensive oral evaluation with the specialty network’s dentist. Because this dentist was familiar with workers’ compensation claims, he observed the overall condition of the claimant’s mouth and sent the proper documentation notes to the specialty network’s clinical team. The paperwork was reviewed by nurses, dental hygienists, dentists and other dental specialists, identifying special conditions related to the case, including periodontal disease and inadequate bone to support implants, which would have been the best option. However, the claimant’s dental history made this a high-risk procedure. As a result of the proactive communication between the clinical team, specialists and the dentist familiar with workers’ compensation claims, they were able to develop a more appropriate, conservative and reliable treatment plan. When managing a dental claim, clinical oversight and expertise is crucial from the beginning of the case so that the injured worker can receive the appropriate care at the appropriate time, while the clinical team and dentist work together to make sure the documentation is all in order and can help move the claim towards resolution and recovery.

MARCH 2017 | PUBLIC RISK

PREVENTING COST SURPRISES WHEN MANAGING UNCOMMON INJURIES

The first provider an injured worker should see for a hearing issue is a medical doctor. The physician can gather a thorough history and perform a physical examination and testing in order to determine the cause of the hearing loss (i.e. exposure at the job, aging or other factors). If the hearing loss is determined to be work related and can be improved with the use of hearing aids, another provider will often be used for this service. The claimant will typically have testing done by an audiologist who will also ask questions regarding lifestyle, assisting with determination of the best type of hearing aid. The hearing aid industry has advanced tremendously over the past several years; with the use of the latest digital technology, the hearing aid is very effective for injured workers with hearing issues. It is important for risk managers and claims professionals to recognize the types of workers

and jobs where noise exposure is a reality and to assure protective hearing gear is not only available but is required, properly fitted and used. These precautions will minimize the exposure to noise related hearing loss. When evaluating workplace environments, it’s critical that all OSHA requirements regarding use of hearing protection be adhered to in order to prevent hearing issues at a later date.

UNUSUAL CLAIM TYPE #4: MEDICAL SPECIALISTS

To risk management professionals, there is a group of providers commonly seen for work injuries such as orthopedic specialists, neurologists and physical therapists. There are also medical specialties that are not commonly used in injury claims, including but not limited to urologists, cardiologists and obstetricians/ gynecologists. These specialists do not typically see injured workers but when they do, it can be a challenge to get paperwork filled out timely

and correctly, secure follow up visits and get the claimant back to work. Often these providers are unfamiliar with terms like “modified duty,” impairment ratings or other phrases used daily in the workers’ compensation world so it’s crucial to keep the lines of communication open in order to make sure the claim is handled appropriately. With these four types of uncommon claims, risk managers must pay special attention so as to avoid these unpredictable cost and complication surprises down the line. Yes, the average claims professional may be extremely proficient at handling the majority of claims that come across his or her desk, but it’s this small percentage of unusual claims that can bring the claim to a stop, leading to exponential costs and prolonged delays in care. Laura Gorman, RN is vice president of Clinical Sales, Dental + Doctor Program at One Call Care Management.

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PUBLIC RISK | MARCH 2017

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MARCH 2017 | PUBLIC RISK

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