Pool board and staff E&O or D&O coverage

January 2011

An AGRiP member pool has a potential liability loss exposure related to an exclusion in a coverage document. This potential liability loss exposure places the pool employees and its Trustees at risk of loss. The AGRiP member asked how other public entity risk and benefit pools provide liability coverage related to E&O and/or D&O coverage for the pool’s governing board and employees.

A survey sample universe of pools was selected from public entity risk and benefit pools that have achieved RECOGNITION under the voluntary AGRiP Advisory Standards.

Advisory Standard “V-J” was selected to ascertain how public entity risk and benefit pools provided coverage for the pool’s liability exposures.

Advisory Standard V-J is written as follows:

The pool insures or self-insurers its administrative and operational risks, including errors and omissions, general and auto liability, workers’ compensation, property, employee fidelity and fiduciary liability.

Public entity risk and benefit pools in this survey insure or self-insure their liability risk. The following table denotes the pools in the survey and how coverage is provided to the pool for its liability loss exposure.

Compilation of How Public Entity Risk and Benefit Pools Provide Coverage for the Pool's Liability Risk Exposures (other than Workers Comp)
Pool Name / Coverage For Liability Risk Exposure is Self Insured / Coverage For Liability Risk Exposure is Purchased From An Entity Other Than The Pool
Texas Association of School Boards / Yes / No
Pennsylvania Counties Risk Pool / No / Yes
Miami Valley Risk Management Association (Ohio) / Yes / No
City County Insurance Services Trust (Oregon) / Yes / No
Public Agency Compensation Trust (Nevada) / No / Yes
Alaska Municipal League Joint Insurance Association / No / Yes
Intergovernmental Risk Management Agency (Illinois) / Yes / No
Delaware Valley Insurance Trust (Pennsylvania) / No / Yes
Missouri Intergovernmental Risk Management Association / Yes / Yes*
New Hampshire School Health Care Coalition / No / Yes
Ohio Transit Risk Pool / Yes / No
* Missouri Intergovernmental Risk Management Association purchases D&O coverage

With regard to pools that purchase E&O/D&O coverage additional information is as follows:

Pennsylvania Counties Risk Pool purchases D & O insurance and fidelity coverage for the Board from Brokers Risk in Chicago. The survey respondent commented, “They have a very good program which ties the association’s coverage to the insurance pools.”

Public Agency Compensation Trust purchases a Trustees E & O policy from Lloyds. The survey respondent commented, “PACT has no staff of its own. Executive Director (contract pool administrator) purchases a business owner’s liability, fiduciary bond, D & O, E & O and EPLI policies from various insurance companies.”

Alaska Municipal League Joint Insurance Association purchases E&O and D&O coverage from RSUI to a $5MM limit. The survey respondent commented, “AMLJIA is not allowed to pool its own coverage with that of its membership. The Board of Trustees separately purchases traditional commercial insurance for all coverages listed above.”

Delaware Valley Insurance Trust purchases E&O/D&O coverage. The survey respondent commented, “We transfer the E&O / D&O risk. Coverage is with Lloyds, placed through our broker, Porter & Curtis and Brokers’ Risk Placement of Chicago.”

Missouri Intergovernmental Risk Management Association purchases a D&O policy. The survey respondent commented, “A Director’s and Officer’s Liability policy is also purchased to cover the administration.”

New Hampshire School Health Care Coalition purchases liability coverage. The survey respondent commented, “Trustees Errors & Omissions Insurance for Self Insured $2M/$2M per Claim/Policy Aggregate (includes coverage for employee acts of errors and omissions)” is obtained via Brokers' Risk Placement Service. Brokers' Risk Placement Service is a managing general underwriter, reinsurance intermediary, and surplus lines broker.

With regard to pools that self insure E&O/D&O coverage additional information is as follows:

Texas Association of School Boards self insures liability loss exposures. The survey respondent commented, “The Fund has no employees and contracts its administration. The Fund does self-insure its own E&O risks. We decided to self-insure by becoming a member of our own liability program and thus the pool is covered by the Fund’s reinsurance policy with Genesis. The SIR is $1 million, and we buy increased limits of $5 million. This arrangement has worked very well for us as it allows us to control our own defense strategy and select our own attorneys, which was important.”

Miami Valley Risk Management Association self insures liability loss exposures. The survey respondent commented, “MVRMA, as a corporate entity, including its agents, officers and employees, is a named insured under all insurance policies. We self-insure for $500,000 and purchase reinsurance as follows: (1) GEM $1.5 M xcs $500K and (2) GenRe $8M xcs $2M. Thus, our total limits are $10M. The reinsurance agreements cover the pool as well as it members and follow form with our MOC.”

City County Insurance Services Trust self insures liability loss exposures. The survey respondent commented, “We self-insure E&O/D&O through CIS' own membership in our Property/Casualty Trust -- specifically, through provisions of the Liability coverage document. We've debated purchasing separate coverage for the Board over the years, and keep comingback to the fact that it's an expense for the Trust either way, and that it's not unreasonable to cover our Board like any other elected/appointed governing body participating in the Trust.”

Intergovernmental Risk Management Agency self insures liability loss exposures. The survey respondent commented, “IRMA staff, Pool officers, Members of the Board of Directors and Committee Members are all provided with coverages in the same manner as all Pool Members.”

Ohio Transit Risk Pool self insures liability loss exposures. The survey respondent commented,

“Ohio Transit Risk Pool as a separate legal entity, is fully covered under all coverages placed by the pool. This includes Property, GL, E&O, D&O, Auto Liability, Employee Benefits Liability, Crime and any other coverage. OTRP operates in a reinsurance environment and as such manuscripts our own coverage documents. OTRP itself, it's officers, directors, employees, board members, volunteers, etc. are covered just like a memberunder our coverage document.”

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