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Uel Risk Mgmt Bus Ins Pres July 13 2010 Final


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50,000 foot overview on areas of business insurance and risk that business leaders should consider as they grow their business.

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Uel Risk Mgmt Bus Ins Pres July 13 2010 Final

  1. 1. UEL Lunch Forum “Risk Management and Business Insurance for the Company Life Cycle” Presented by Todd Ellingson, Dan Hanson, Bjorn Honda RJF Agencies, Inc. July 13, 2010
  2. 2. Agenda <ul><li>Introductions </li></ul><ul><li>Risk Management 101 </li></ul><ul><li>Management Liability </li></ul><ul><li>Cyber Liability, IP, E&O </li></ul><ul><li>Wrap up and Questions </li></ul>
  3. 3. Today’s Presentation <ul><li>50,000 Foot Level, but give you a taste… </li></ul><ul><li>Focus on your business life cycle. </li></ul><ul><li>Minimum expectation of your broker: </li></ul><ul><ul><li>The right coverage at the best price </li></ul></ul><ul><li>Bottom line: how to best protect your company and your company’s balance sheet. </li></ul><ul><li>Insurance is just one aspect of risk management. </li></ul>
  4. 4. Running from Risk
  5. 5. Risk Management <ul><li>A process of making and implementing decisions that will minimize adverse effects of accidental and business losses on an organization. </li></ul>
  6. 6. Basic Tenants of Risk Management <ul><li>Don’t retain more than you can afford to lose </li></ul><ul><li>Don’t risk a lot for a little </li></ul><ul><li>Consider the probabilities </li></ul><ul><li>Don’t treat insurance as a substitute for controlling losses </li></ul>
  7. 7. <ul><li>Natural Disasters (property) </li></ul><ul><ul><li>Flood, fire, tornado – business interruption </li></ul></ul><ul><li>Liability </li></ul><ul><ul><li>Product recall, public image (Tylenol) </li></ul></ul><ul><li>Personnel </li></ul><ul><ul><li>Key person, fatalities </li></ul></ul><ul><li>Income </li></ul><ul><ul><li>Lawsuits, uninsured losses, uncontrolled losses </li></ul></ul>What could kill a company?
  8. 8. <ul><li>Identify and analyze exposures that may interfere with an organization’s basic objectives </li></ul><ul><li>Examine feasible alternative techniques for dealing with those exposures </li></ul><ul><li>Select the best risk management technique(s) </li></ul><ul><li>Implement risk management techniques </li></ul><ul><li>Evaluate results to ensure the program remains effective </li></ul>Mitigating Risk – Five Step Process
  9. 9. Risk Avoidance <ul><li>President Calvin Coolidge was so fiscally conservative that he only hit short golf shots to avoid losing any golf balls. </li></ul>
  10. 10. <ul><li>But if you can’t avoid risk… </li></ul><ul><li>Methods of Risk Transfer </li></ul><ul><ul><li>Insurance Transfer </li></ul></ul><ul><ul><li>Non-insurance Transfer </li></ul></ul>Risk Transfer
  11. 11. Contractual Risk Transfer <ul><li>Two common types of transfer: </li></ul><ul><ul><li>Commercial Insurance </li></ul></ul><ul><ul><ul><li>Insurance purchased from an insurance company (i.e., Purchasing Product Liability Insurance through Travelers) </li></ul></ul></ul><ul><ul><li>Non-Insurance Transfer </li></ul></ul><ul><ul><ul><li>Hold Harmless - One party agrees to pay for specified types and amounts of losses on behalf of a second party </li></ul></ul></ul><ul><ul><ul><li>Indemnity Agreement – One Party agrees to reimburse a second party for losses already paid </li></ul></ul></ul>
  12. 12. Risk Management Disciplines <ul><ul><li>P&C Insurance </li></ul></ul><ul><ul><li>Employee Benefits </li></ul></ul><ul><ul><li>Health Management </li></ul></ul><ul><ul><li>Human Resources </li></ul></ul><ul><ul><li>Management Liability </li></ul></ul><ul><ul><li>Financial Services </li></ul></ul><ul><ul><li>Safety / Loss Control </li></ul></ul><ul><ul><li>Claims Management </li></ul></ul>
  13. 13. Property & Casualty (P&C) <ul><li>Property and GL – Business Owner’s Policy (BOP) </li></ul><ul><li>Work Comp </li></ul><ul><li>Auto </li></ul><ul><li>Umbrella </li></ul><ul><li>Product liability (clinical trials for some of you) </li></ul><ul><li>Business Income and Supply Chain </li></ul><ul><li>Global risks and exposures </li></ul>
  14. 14. Employee Benefits…as you grow <ul><li>Medical: only need two people </li></ul><ul><li>Dental </li></ul><ul><li>LTD </li></ul><ul><li>Life </li></ul>
  15. 15. Directors & Officers and Employment Practices Liability Insurance Management Liability Insurance
  16. 16. Today’s Discussion <ul><li>Basic overview of Directors & Officers, Employment Practices, and Fiduciary Liability insurance </li></ul><ul><li>Who and What is Covered? </li></ul><ul><li>Why buy? </li></ul><ul><li>Timing </li></ul>
  17. 17. Directors & Officers (D&O) Liability Insurance <ul><li>Who is Covered? </li></ul><ul><ul><li>Directors and Officers </li></ul></ul><ul><ul><li>Employees </li></ul></ul><ul><ul><li>Organization </li></ul></ul><ul><ul><li>Spouses, Estates, Heir, Legal Representatives </li></ul></ul>
  18. 18. D&O Insurance <ul><li>What is Covered? </li></ul><ul><ul><li>Lawsuits that arise out of Wrongful Acts committed or allegedly committed by the Insureds described in the preceding slide </li></ul></ul><ul><ul><li>Indemnification </li></ul></ul>
  19. 19. Employment Practices Liability (EPL) Insurance <ul><li>Who is Covered? </li></ul><ul><ul><li>Directors and Officers </li></ul></ul><ul><ul><li>Employees: full-time, part-time, leased, temporary, seasonal </li></ul></ul><ul><ul><li>Independent Contractors </li></ul></ul><ul><ul><li>Organization </li></ul></ul>
  20. 20. <ul><li>What is Covered? </li></ul><ul><ul><ul><li>Wrongful Termination, Discharge or Dismissal </li></ul></ul></ul><ul><ul><ul><li>Harassment </li></ul></ul></ul><ul><ul><ul><li>Discrimination </li></ul></ul></ul><ul><ul><ul><li>Retaliation </li></ul></ul></ul><ul><ul><ul><li>Employment Related Misrepresentation </li></ul></ul></ul><ul><ul><ul><li>Wrongful Employment Decision </li></ul></ul></ul><ul><ul><ul><li>Employment Related Libel, Slander, Defamation </li></ul></ul></ul>EPL Insurance
  21. 21. Fiduciary Liability Insurance <ul><li>Who is Covered? </li></ul><ul><ul><li>Directors and Officers </li></ul></ul><ul><ul><li>Employees </li></ul></ul><ul><ul><li>Trustees </li></ul></ul><ul><ul><li>Organization </li></ul></ul><ul><ul><li>Sponsored Plans </li></ul></ul>
  22. 22. Fiduciary Liability Insurance <ul><li>What is Covered? </li></ul><ul><ul><li>Breaches of ERISA (Employee Retirement Income Security Act of 1974) </li></ul></ul><ul><ul><li>Administrative Errors and Omissions </li></ul></ul>
  23. 23. D&O, EPL, Fiduciary Insurance <ul><li>What is Covered? </li></ul><ul><ul><li>Defense Costs (Attorney’s fees) </li></ul></ul><ul><ul><li>Indemnity (Damages, Judgments, Settlements) </li></ul></ul>
  24. 24. Why Buy and Timing? <ul><li>Typical Considerations: </li></ul><ul><ul><li>Balance Sheet protection </li></ul></ul><ul><ul><li>Personal Asset protection </li></ul></ul><ul><ul><li>Raising money </li></ul></ul><ul><ul><li>Outside Investor dictate </li></ul></ul><ul><ul><li>Attract Board members </li></ul></ul>
  25. 25. Why Buy and Timing ? <ul><li>Typical Considerations: </li></ul><ul><ul><li>Sophistication of practices </li></ul></ul><ul><ul><li>Availability of resources </li></ul></ul><ul><ul><li>Growth of company </li></ul></ul><ul><ul><li>Future transactions </li></ul></ul>
  26. 26. Final Three Topics <ul><li>Network Security </li></ul><ul><li>Intellectual Property </li></ul><ul><li>E&O Insurance </li></ul>
  27. 27. Network Security/IP/E&O <ul><li>Specialized coverage's </li></ul><ul><li>Tailored to fit your exposures </li></ul><ul><li>Claims made; retro inception meaning timing of coverage must be prior to Wrongful Act occurring </li></ul>
  28. 28. Cyber/Network Security Liability <ul><li>Relatively new line of coverage, little standardization </li></ul><ul><li>Third Party </li></ul><ul><ul><li>Failure to protect confidential data </li></ul></ul><ul><ul><ul><li>Theft of Information, or credit card #’s </li></ul></ul></ul><ul><ul><li>Failure to protect systems (denial of service) </li></ul></ul><ul><li>First Party </li></ul><ul><ul><li>Notification/Credit Monitoring </li></ul></ul><ul><ul><li>Crisis Management </li></ul></ul><ul><ul><li>Business Interruption </li></ul></ul>
  29. 29. Network Security Liability <ul><li>Who Typically Buys: </li></ul><ul><li>Health Care </li></ul><ul><li>Retail </li></ul><ul><li>Financial Institutions </li></ul><ul><li>Who Should: </li></ul><ul><li>Everyone </li></ul>
  30. 30. Intellectual Property <ul><li>What is Intellectual Property? </li></ul><ul><li>Patents </li></ul><ul><li>Trademarks </li></ul><ul><li>Copyrights </li></ul><ul><li>Trade Secrets </li></ul><ul><li>Any product a company makes, uses, sells, offers for sale, or imports in commerce. </li></ul><ul><li>Any service a company offers. </li></ul>
  31. 31. Intellectual Property <ul><li>Abatement Insurance </li></ul><ul><li>Reimburses the Litigation Expenses to enforce intellectual property against alleged infringers </li></ul><ul><li>Defense Insurance </li></ul><ul><li>This policy reimburses the litigation expenses to defend against charges of Intellectual Property infringement (Patent trolls) </li></ul>
  32. 32. Professional Liability/Errors and Omissions Protection for a Claim arising from a Wrongful Act, or alleged Wrongful Act in the performance of Professional Service provided to others.
  33. 33. Professional Liability <ul><li>Key policy concepts: </li></ul><ul><li>Description of Professional Services </li></ul><ul><li>Exclusions </li></ul><ul><li>Claims made during policy period, and extended reporting period for Wrongful Acts occurring after the retroactive date (Timing is key) </li></ul>
  34. 34. Summary <ul><li>Effective risk management goes beyond insurance </li></ul><ul><li>Imperative to protect your balance sheet, people, and the viability of company </li></ul><ul><li>Different risk management and insurance needs depending on the development stage of your company </li></ul><ul><li>Utilize appropriate Management Liability strategies </li></ul><ul><li>Specialized insurance vehicles to protect your company, your IP, your employees, and your D’s and O’s </li></ul><ul><li>Work with a broker that provides expertise, counsel, and risk management…not just insurance </li></ul>
  35. 35. Contact Information <ul><li>Todd Ellingson </li></ul><ul><li>LifeScience and Technology Consultant </li></ul><ul><li>763.746.8515 </li></ul><ul><li>[email_address] </li></ul><ul><li>Dan Hanson </li></ul><ul><li>Director </li></ul><ul><li>Management Liability Group </li></ul><ul><li>763.548.8599 </li></ul><ul><li>[email_address] </li></ul><ul><li>Bjorn T. Honda </li></ul><ul><li>Executive Vice President & Partner </li></ul><ul><li>Management Liability Group </li></ul><ul><li>763.746.8507 </li></ul><ul><li>[email_address] </li></ul>