Insurance Community University Executive Liability 1  The webinar will begin shortly.  There is no audio at this time.  This presentation is being recorded for your viewing pleasure at a future date.  The attendance and proctor forms are available under ‘Materials’ in the Webinar’s Console to the right.  The PowerPoint presentation is also available under ‘Materials’.  You will receive the course number for your state near the end of class.  Use the ‘chat’ window for questions on the content.  100% Participation in Polling Questions is required to receive credit for this class. Even if you do not intend to receive credit, please participate in the polls.

Insurance Community University Welcome to your Insurance Community University All of you are currently on mute – Un-mute your own system – Telephone Option Select Telephone on your screen Dial in the PIN number so that your number becomes active – Microphone and/or Speaker Option You can use this option if you have a headset that you use with your computer Audio 2

Insurance Community University Participation & Chat Window You will receive information from the monitor via the ‘Chat’ window. –Please locate window in the control panel Q & A is welcomed during the presentation and at the end of the presentation You will find the question box on your control panel –Write your question in that box and send it to the presenter/organizer The presenter will take those questions in the order submitted 3

Insurance Community University DOI Requirements When you see a slide with the hand up symbol, touch the “hand” icon on your control panel – Click ONCE only If you do not raise your hand, the monitor will be in contact with you in the chat box If you are in a group, the designated proctor is responsible to make certain you are all in attendance at all times 4 = Hand is down

Insurance Community University Polling Throughout the class we will be conducting periodic polls We need 100% participation on the polls The polls are intended to check participation but also to create discussion topics throughout the presentation 5

Insurance Community University Forms To Complete for CE After class ends – Return attendance form – Proctors – return your form to address address is in chat window or in sent to you today 6

Insurance Community University DOI Requirements We will file your hours with the DOI after the completion of this webinar and we have received the attendance form. You have 48 hours to return the form You will be sent a Certificate of Attendance/Completion by . Please retain this for your records for five years. 7

Insurance Community University Internet Disruption If the presenter looses internet connection STAY ON THE LINE The administrators will communicate with you

Insurance Community University Internet Failure If the internet fails and all participants are kicked off line by Go To Training or other source then the seminar will be terminated You will receive instructions by as to how we will proceed This is a precautionary notice, only 9

Insurance Community University This class is being recorded Available in the University This course is approved for CE in CA Only

Insurance Community University Disclaimer Insurance forms and endorsements vary based on insurance company; changes in edition dates; regulations; court decisions; and state jurisdiction. This instructional materials provided by Insight is intended as a general guideline and any interpretations provided by the instructor or the creator(s) of this material do not modify or revise insurance policy language. In providing these materials, the authors assume neither liability nor responsibility to any person or business with respect to any loss that is alleged to be caused directly or indirectly as a result of the instructional materials provided. Copyright 2010 – 2013 All Rights Reserved 11

Insurance Community University Your Instructor Today Marjorie L. Segale, AFIS, CISC, RPLU, CIC, CRIS, ACSR, CISR Insurance Community Center, LLC Director of Education President: Segale Consulting

Insurance Community University What This Course Will Cover 1.Overview of Executive Liability 2.Overview of Directors and Officers 3.Employment Practices Liability 4.Fiduciary Liability 5.Employee Benefit Liability (EBL) 13

Insurance Community University Polling Question #1 14

Insurance Community University Overview of Executive Liability 15

Insurance Community University Executive Liability Basics Legal principles established by state and federal statutes as well as case law apply to persons that manage a business, its physical and human assets PartnershipLLCCorporationAssociation 16

Insurance Community University Executive Liability Basics Affected persons Partners Members Executive Officers Members of the board HR managers Supervisors 17

Insurance Community University Executive Liability Coverage Basics Coverage is provided by Directors and Officers Liability Insurance Employment Practices Liability Insurance Employee Benefit Liability Insurance Fiduciary Liability Insurance 18

Insurance Community University D & O Basics Covered in depth in D & O class material. Available in the University for downloading. 19

Insurance Community University D & O Coverage Basics Responds for financial loss caused by actions or inactions of persons responsible for running a company Covers personal assets of Ds & Os of a corporation or association Can cover personal assets of committee members (non-profits) Can cover personal assets of managers or managing members of a LLC Directors & Officers Liability (D & O) 20

Insurance Community University Partnership Liability Coverage Basics Responds for financial loss caused by actions or inactions of persons responsible for running a partnership Covers personal assets of partners Partnership Liability 21

Insurance Community University Employment Practices Liability Insurance (EPLI) Basics Covers business assets of the insured company Covers personal assets of officers, directors, partners, members, supervisors, managers and any other category of an insured person Responds for financial loss caused by actions or inactions of persons responsible for appropriate employer- employee relationships 22

Insurance Community University Employee Benefits Liability Coverage Basics Covers business assets of the insured company and personal assets of officers, directors, partners, members, supervisors, managers and any other category of an insured person Responds for financial loss caused by actions or inactions of persons responsible for administration of employee benefit programs 23

Insurance Community University Fiduciary Liability Coverage Basics Covers business assets of the insured company and personal assets of officers, directors, partners, members, supervisors, managers and any other category of an insured person Responds for financial loss caused by actions or inactions of persons responsible for providing, managing and administration of employee benefit programs 24

Insurance Community University Asset Risk and Protection Personal Liability Company can indemnify (state statutes) Insurance can indemnify 25

Insurance Community University Polling Question #2 26

Insurance Community University Insuring Agreement Sample Language 27

Insurance Community University EPLI Insuring Agreement The Company shall pay, on behalf of the Insureds, Loss on account of any Employment Claim first made against such Insured during the Policy Period or, if exercised, during the Extended Reporting Period, for Employment Practices Wrongful Acts, but only if such Employment Claim is reported to the Company in writing in the manner and within the time provided in Subsection 12 of this coverage section. 28

Insurance Community University EPLI Wrongful Act Wrongful Act means an Employment Practices Wrongful Act and, if Third Party Liability Coverage is purchased, a Third Party Wrongful Act. 29

Insurance Community University EPLI Wrongful Act Wrongful act means: Breach of Employment Contract, Employment Discrimination, Harassment, Retaliation, Workplace Tort, Wrongful Employment Decision or Termination committed, attempted, or allegedly committed or attempted by any Organization or by any Insured Person in his or her capacity as such. 30

Insurance Community University Policy Coverage Response Language responds for Named Peril listing of covered acts Can include third party coverage Discrimination and/or harassment of non-employees 31

Insurance Community University Definition of Loss Damages, including compensatory AND punitive, exemplary or multiplied damages Most favorable jurisdiction Front pay, back pay, claimant’s attorneys fees Judgments and settlements 32

Insurance Community University Definition of Loss Pre and post-judgment interestTaxes, fines or penalties imposed by law Where insurable by law Defense costs 33

Insurance Community University EBL Insuring Agreement a.We will pay those sums that the insured becomes legally obligated to pay as damages because of any act, error or omission, of the insured, or of any other person for whose acts the insured is legally liable, to which this insurance applies. 34

Insurance Community University Employee Benefit Liability Definition of Loss The act, error or omission, is negligently committed in the "administration" of your "employee benefit program“ 35

Insurance Community University EBLI Limit of Insurance Subject to the Aggregate Limit, the Each Employee Limit is the most we will pay for all damages sustained by any one "employee", including damages sustained by such "employee's" dependents and beneficiaries, as a result of: (1)An act, error or omission; or (2)A series of related acts, errors or omissions negligently committed in the "administration" of your "employee benefit program". 36

Insurance Community University EBLI Limit of Insurance However, the amount paid under this endorsement shall not exceed, and will be subject to, the limits and restrictions that apply to the payment of benefits in any plan included in the "employee benefit program". 37

Insurance Community University Policy Coverage Response Policy responds to negligent acts, errors or omissions in administration Limited to defined employee benefits plans Limited to pay ONLY the amount of benefit that would have been paid had the mistake in the administration of the benefits plan This leaves a significant gap in coverage Solved with Fiduciary Liability 38

Insurance Community University Fiduciary Liability Insuring Agreement The Company shall pay, on behalf of the Insureds, Loss on account of any Fiduciary Claim first made against the Insureds during the Policy Period, or, if exercised, during the Extended Reporting Period, for a Wrongful Act committed, attempted or allegedly committed or attempted before or during the Policy Period by such insureds, or by any person for whose Wrongful Acts the Insureds are legally responsible, but only if such Claim is reported to the Company in writing in the manner and within the time provided in Subsection 11 of this coverage section.. 39

Insurance Community University Fiduciary Claim means: A written demand for monetary damages or non-monetary relief A civil proceeding commenced by the service of a complaint or similar pleading A criminal proceeding commenced by a return of an indictment or information 40

Insurance Community University Fiduciary Claim means: A formal civil administrative or civil regulatory proceeding commenced by the filing of a notice of charges or similar document or by the entry of a formal investigative order or similar document A written notice of commencement of a fact-finding investigation by the U.S. Department of Labor, the U.S. Pension Benefit Guaranty Corporation, or any similar governmental authority. 41

Insurance Community University Fiduciary Liability Wrongful Act Any breach of the responsibilities, obligations or duties imposed by ERISA upon fiduciaries of the Sponsored Plan in their capacity as such fiduciaries; Any negligent act, error or omission in the Administration of any Plan committed, attempted, or allegedly committed or attempted by an Insured in the Insured’s capacity as such 42

Insurance Community University Fiduciary Liability Wrongful Act Any other matter claimed against an Insured solely by reason of the Insured’s service as a fiduciary of any Sponsored Plan. 43

Insurance Community University Policy Coverage Response 44 Responds for legal liability imposed upon an employer for their responsibility in providing a defined plan for their employees Includes imposition of liability under ERISA Can include the EBLI coverage section for liability arising out of negligence in administration of these plans

Insurance Community University Polling Question #3 45

Insurance Community University EPLI Exclusions Wage and Hour / FLSA exclusion – Current trend in EPLI litigation due to exempt v. non-exempt employee status – Some forms include very small amount of coverage for defense and damages – Significant risk exposure for today’s employers – A few forms still have sub-limit available 46

Insurance Community University Wage and Hour Exclusion Sample Language For any actual or alleged violation of the responsibilities, obligations or duties imposed by any federal, state, or local statutory law or common law anywhere in the world (including but not limited to the Fair Labor Standards Act) or amendments to or regulations promulgated under any such law that governs wage, hour and payroll policies and practices, except the Equal Pay Act (“Wage and Hour Laws”), including but not limited to: 47

Insurance Community University Wage and Hour Exclusion Sample Language (i) the calculation, timing or manner of payment of minimum wages, prevailing wage rates, overtime pay or other compensation alleged to be due and owing; (ii) the classification of any organization or person for wage and hour purposes; 48

Insurance Community University EPLI Exclusions Immigration exclusion – Becoming a more common action today – Look for an exception or a sub-limit for defense, damages or both Bodily injury – Look for exception for mental anguish, emotional distress, humiliation, etc. 49

Insurance Community University Bodily Injury Exclusion Sample Language For bodily injury, mental anguish, emotional distress, humiliation, sickness, disease or death of any person or damage to or destruction of any tangible property including loss of use thereof whether or not it is damaged or destroyed; provided that this Exclusion 4(h) shall not apply to mental anguish, emotional distress or humiliation resulting from any Wrongful Act; 50

Insurance Community University Who Is An Insured (or Should Be) EPLI Typically covers the employer, other subsidiary companies and all past, present, future full-time, part-time employees Temporary and leased employees Volunteers, interns Directors, officers, partners, members Shareholders Spouses and estate 51

Insurance Community University Who Is An Insured (or Should Be) EBL / Fiduciary EBL / Fiduciary Liability typically covers the employer and the Plan Should include Executive officers, directors, partners, managers – past, present, future Employees Full time, part time Volunteers In house legal counsel Plan trustee 52

Insurance Community University On All Policies Every policy contains a paragraph imposing responsibility on defined persons that must know and report the loss Some forms are extremely vague (an insured) and this needs to be reviewed and modified to specific persons If modification is not possible – you MUST disclose the obligations to the insured 53

Insurance Community University Polling Question #4 54

Insurance Community University Claims Made and Reported Forms Some forms also allow reporting during the extended reporting period Requires that the claim is first made to the insured during the policy AND the insurance company is notified during the SAME policy period This type of coverage form is prevalent today. 55

Insurance Community University Sample Language Except to such extent as may otherwise be provided herein, the coverage of this policy is limited to liability for only those claims that are first made against you and reported in writing to us during the policy period. 56

Insurance Community University Possible Coverage Gap Claim is reported to insured in one policy period Claim is reported to the insurance company in the next policy period No coverage – even if it is a renewal The basic extended reporting period does not always avoid this 57

Insurance Community University Basic Extended Reporting Period Example If we or the named insured shall cancel or elect not to renew this policy, you shall have the right following the effective date of such cancellation or nonrenewal to a period of sixty (60) days (herein referred to as the “Automatic Extended Reporting Period”) in which to give written notice to us of claims first made against you during the Automatic Extended Reporting Period for any wrongful act occurring prior to the end of the policy period and otherwise covered by this policy. 58

Insurance Community University Solutions Place coverage with a company using a claims made form rather than a claims made and reported form Modify coverage with incumbent insurance company If all else fails, notify the insured in writing – producer needs to meet with client and obtain acknowledgment in writing from client - annually 59

Insurance Community University Claim Always check the definition of claim – Will vary by policy – When is a claim a claim? When it is received by the insured? When it is filed against the insured? – Differing definitions when moving the account to another company could leave your client with no coverage 60

Insurance Community University Reporting Provisions Who has to know and who has to tell? – Always make sure that you narrow the definition of this responsible party to (example) executive officer of the Named Insured (or Parent Company) or risk manager – Leaving it as the ‘insured’ must notify means that anyone can find out about a claim and failure to report could remove coverage 61

Insurance Community University Pending & Prior Litigation Common exclusion Can create a gap in coverage if not handled properly Extremely important in claims made and reported forms 62

Insurance Community University P & P Exclusion Example “We shall not cover claims: N. first made against you prior to, or pending, as of the first inception date, or relating to the essential facts, circumstances or situation underlying such claim.” 63

Insurance Community University P & P Exclusion With Proper Exception (b) based upon, arising from or in consequence of any demand, suit, or other proceeding pending against, or order, decree or judgment entered for or against any Insured, on or prior to the applicable Pending or Prior Date set forth in Item 7 of the Declarations for this coverage section, or the same or substantially the same fact, circumstance or situation underlying or alleged therein; 64

Insurance Community University Summary 1.Every business client needs some form of business practices liability – D & O – Partnership Liability 2.Every business client with employees needs EPLI coverage 3.Every business client providing benefits to their employees needs Fiduciary Liability that includes EBLI 65

Insurance Community University Conclusion 4.All presentations are archived on the University homepage – just go to the tab labeled Webinar Archive 5.Check back often in both the Community and University for new items that are being added every week 66

Insurance Community University Upcoming Classes Upcoming University/Paid CE ClassesCyber Liability and the Personal Lines Account FREE to University Members $50.00/charge for non university members 10/10Manufacturers - Insurance Coverages that are Unique and Essential to Consider 10/15Voluntary Benefits 10/17Agricultural Equipment Breakdown 67 Join the University TODAY. Click Join University at the top of the bar Upcoming Community ClassesFREE to University Members $25.00/charge for non university members 10/22Cyber Liability and the Personal Lines Account