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Michael McHugh Area Executive Vice President Arthur J. Gallagher Risk Management Services, Inc. Presented by: Presented at: Illinois ASBO 61 st Annual.

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Presentation on theme: "Michael McHugh Area Executive Vice President Arthur J. Gallagher Risk Management Services, Inc. Presented by: Presented at: Illinois ASBO 61 st Annual."— Presentation transcript:

1 Michael McHugh Area Executive Vice President Arthur J. Gallagher Risk Management Services, Inc. Presented by: Presented at: Illinois ASBO 61 st Annual Conference May 16, 2012

2 31+ Years Insurance and Brokerage Experience National Pooling Niche Principal National K-12 Principal- Arthur J. Gallagher Public Entity & Scholastic Division ASBO International Member Illinois ASBO Member for 25 years Experience working with over 575 districts on various risk & insurance topics

3 1. Define Risk Management 2. Explore basic components of a typical Risk Management Program

4 Risk Management covers all the processes involved in identifying, assessing and judging risks, assigning ownership, taking actions to mitigate or anticipate them, and monitoring and reviewing progress.

5 Planning for the negative consequences of any decision process or action by using whatever means feasible to control the chance of financial loss. Public Sector Risk Management Manual

6 Trying to stop losses from happening (through avoidance, risk control, loss control or loss prevention) Paying for the losses that do occur (through reduction, insurance or risk transfer)

7 Strategic Risk – strategic objectives and political, economic and global market conditions Financial Risk – currencies, interest rates, credit and liquidity risks Operational Risk – risks related to systems, processes, technology and people Compliance Risk – regulatory and legal Reputational Risk – damage to brand Hazard Risk – property, liability, workers comp

8 School Districts = Institutions of Learning Education of Students Athletics & Extracurricular Activities Employees & Volunteers Transportation Food Service/Cafeteria PTO/PTA/Booster Clubs Buildings/Contents including Materials and Mobile Equipment Playgrounds and Athletic Facilities Educational Foundations


10 1978 Insurance ProcurementInsurance Procurement Policy AdministrationPolicy Administration 1988 Risk FinancingRisk Financing Loss ControlLoss Control Organizational RM FocusOrganizational RM Focus Claims ManagementClaims Management Regulatory ComplianceRegulatory Compliance Public Safety RMPublic Safety RM Employee BenefitsEmployee Benefits 1998 Risk FinancingRisk Financing Cost AllocationCost Allocation Loss ControlLoss Control Contractual Risk TransferContractual Risk Transfer Claims/Litigation ManagementClaims/Litigation Management Outcome Orientation & BenchmarkingOutcome Orientation & Benchmarking Integrated Disability ManagementIntegrated Disability Management 2008 Chief Risk OfficerChief Risk Officer Enterprise Risk ManagementEnterprise Risk Management ConsultancyConsultancy Risk FinancingRisk Financing Multi-Jurisdictional IntegrationMulti-Jurisdictional Integration Loss ControlLoss Control Claims/Litigation ManagementClaims/Litigation Management Cost AllocationCost Allocation Bus./Government PartnershipsBus./Government Partnerships From PRIMA

11 Risk Avoid Sub- contract ExitControlPeoplePlant FinanceFund Insurance TransferContract


13 A contractual relationship that exists when one party (the insurer) for a consideration (premium) agrees to reimburse another party (the insured) for loss to a specified subject (the risk) caused by designated contingencies (hazards or perils).

14 Definition of Insured Needs to be broad so that it covers the following: District and its employees / student teachers Elected / appointed officials Sponsored / endorsed organizations Volunteers who do work at your direction on behalf of the District

15 Buildings Contents Inland Marine EDP Equipment EDP Extra Expense EDP Media AV Equipment Valuable Papers Fine Arts Musical Instruments Builders Risk Needed for new construction and renovations at your district Extra Expense Increased Cost of Construction / Demolition Coverage Auto Physical Damage

16 Employee Dishonesty Loss of Money - inside / outside premises Depositors Forgery Bonds i.e. working cash / treasurers / life safety

17 Fired / Unfired Pressure Vessels MEA coverage Refrigeration coverage Air Conditioning Units Extra Expense Water Damage Joint Loss Endorsement

18 Coverage for autos, trucks, bus fleet Auto Liability Auto Physical Damage Hired / Non-owned Coverage

19 Limits usually $1M per occurrence / $3M aggregate Fire Damage (Legal Liability) $500K limit Employee Benefits Liability - $1M Claims-Made coverage Broad form General Liability coverage form, which includes: Bodily Injury / Property Damage Personal Injury and Contractual coverage Sexual Abuse / Misconduct coverage Athletic Participation coverage

20 This is you, your boss, and your Board Get a broad definition of named insured Can be written on an occurrence basis or on a Claims-Made basis Make sure it covers: Employment Practices Liability – failure to employ/promote Discrimination Harassment Wrongful Termination / Discipline IDEA coverage Back Wages coverage Non-Monetary coverage Failure to grant tenure Retaliation (Including Lockouts) Wrongful demotion or negligent employee evaluation

21 Medical Indemnity Statutory Employers Liability Other States Endorsement Voluntary Compensation Endorsement

22 Provides $5M of coverage for ALL students in the district for ALL school sponsored and school supervised activities Covers 100% of any out of pocket cost incurred by parent/guardian for medical expenses In case of no primary medical insurance, becomes primary medical insurance for injured student Provides option for 24- hour coverage to be purchased by parent/guardian Reduces General Liability Premiums

23 Reduces litigation against district Reduces administrative burden on district administration Good-Will gesture towards community Reduces claim costs Easy for parents to get reimbursed

24 Pollution Liability Foreign Liability Special Events Professional Liability Nurses Educational Foundations Fiduciary Liability – including 403(b) exposure

25 Separate Board of Directors creates exposure Provides up to $5M for fiduciary liability arising out of funds managed by Foundation

26 Covers liability arising from trips overseas Provides coverage in case of bodily injury or property damage to a third party while traveling abroad VERY INEXPENSIVE COVERAGE

27 First Dollar Insurance Program Safety Dividend Program Large Deductible Retro-Plan All Lines Aggregate Stop Loss Specific Excess Insurance Placements by Line Rent-a- Captive Captive or Risk Purchasing Group Pure Self- Insurance Less Control Less Risk Greater Control Greater Risk

28 Stand Alone / Individual District Purchase Cooperative Purchasing Pools Risk Retention Groups Captives

29 Cooperative Purchasing Mission Eligible Members Size Lines of Coverage Program Structure Financial Condition Accessibility Governing Body Know the Groups Mindset!!!

30 Loss Control Activities Vendor Capabilities and Resources Claim Settlement Policy Member Requirements Financial Contractual


32 Michael McHugh - Area Executive Vice President Public Entity & Scholastic Division Arthur J. Gallagher Risk Management Services Direct: (630)


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