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NAVREF INSURANCE PROGRAM

• General Guidance
• Insurance Products
  • Professional Liability/Directors and Officers Insurance
  • Fidelity Bond
  • Workers Compensation
  • Business Property Insurance
  • General Liability Insurance
  • Umbrella Insurance
  • Medical Malpractice
  • Event Cancellation and Interruption
• Additional resources for insurance information
• Guidance on terrorism coverage
• Guidance on non-owned vehicles

NAVREF offers a group insurance program to leverage the purchasing power of its members in order to obtain high quality insurance products at the best possible price. Policies specifically tailored to meet NAVREF members’ insurance needs are provided through an individual broker.

Some exposures may be covered by the Federal Tort Claims Act (FTCA) as a result of the VA-affiliated nonprofit research corporations’ (NPCs) unique relationship with VA. However, as private, independent entities, the NPCs still have exposures that are best protected by purchasing insurance. Detailed discussion of the FTCA and guidance regarding medical malpractice coverage.

NAVREF receives no compensation from the insurance program. Its only interest is helping members identify the best possible products at an advantageous price. However, the more members purchase a single product from a single broker and insurance company, the better the chances of negotiating better terms for every member. We encourage members to consider using the brokers identified below as they weigh various options.

Contact Information:

broker:	Riggs, Counselman, Michaels & Downes, Inc. (RCMD)    - merged with JZA in 2007
agent:	Matthew J. Kahn, Client Manager
direct: toll-free:	301-664-9487 or 240-482-1713 800-283-1851
email:	mkahn@rcmd.com
mailing address:	Riggs, Counselman, Michaels & Downes, Inc. 7735 Old Georgetown Road, Suite 920 Bethesda, MD 20814
web site:	www.rcmd.com

If you would like to transfer to RCMD administration of insurance policies you are currently holding, you will need to send the insurance company a short "broker of record" letter. Sample letters and addresses.

The best insurance against adverse incidents is a strong program of risk management. This includes ensuring a safe working place, making sure staff are well-trained in all aspects of their jobs, implementing and following a system of internal controls, dealing with problems promptly, and constantly monitoring the organization’s activities to make sure it is not exposing itself and its employees to unnecessary risks. But no system is perfect. Adverse incidents do occur in spite of the best systems of risk management and insurance is necessary to protect individuals and the organization against events that could have financial consequences. Individuals working with the VA-affiliated nonprofit research corporations are generally aware that the federal government self-insures according to regulations or statutes such as the Federal Tort Claims Act. However, private sector organizations like the NPCs must purchase insurance products to acquire the same protection.

NAVREF recommends that all members carefully assess their own exposures and identify insurance products to meet their particular requirements. The brokers identified above are available to assist members with this process. Members also are encouraged to obtain legal advice. At a minimum, NAVREF recommends that all NPCs carry a professional liability package that includes directors and officers liability (D&O), and fidelity bond insurance. In addition, most organizations with employees are required by law to carry workers compensation insurance. These and other products to consider are listed below with brief descriptions.

Professional Liability/Directors and Officers Insurance policies combine the features of traditional directors and officers liability coverage (primarily intended to insure against employment practices suits) with errors, omissions and negligence coverage. This type of insurance is intended to protect both the organization and individuals associated with the organization from legal costs and judgments resulting from alleged improper employment practices as well as errors, omissions and negligence in the conduct of the organization’s business.

Some states have laws designed to provide nonprofit organizations, their board members, staff and volunteers with limited immunity from liability. In most cases, professional liability coverage is still a good idea.

• State coverage often has limits lower than a suit is likely to cost and may not cover all risks.
• Conversely, some states require that nonprofits self-insure up to a specified level of insurance coverage and will pay only for legal costs or judgments that exceed that amount.
• Generally, state programs cover only judgments, not the cost of defense. As a result, insurance is required to cover legal costs. A recent survey indicated that the average cost to an organization to defend an employment practices case is $111,000.

If your NPC is in a state that offers some immunity to nonprofit organizations (call your state Chamber of Commerce or state association of nonprofits to find out), NAVREF recommends that you consult Ms. Hughes-Creech and/or a local attorney with expertise in insurance law to determine what coverage may be needed.

NPCs should ensure that the list of named insureds is modified to include all “persons working on programs administered by the organization while acting on behalf of the organization at the direction of any employee, officer or the board of directors.” This covers any person working on approved foundation projects.  Because of the unique relationship of NPCs with principal investigators, they generally do not fit into the categories of insureds commonly named in insurance policies - officers, directors, employees and volunteers.

Expected main features:

• Covers wrongful acts including:
  • Negligent acts, breach of duty, errors, omissions, misstatement or misleading statement
  • Infringement of copyright or trademark, or unauthorized use of title
  • Plagiarism, piracy or misappropriation of ideas
  • Publication or utterance of libel, slander or other defamatory remark or disparaging material or remark
  • Invasion or infringement of the right of privacy
  • Contractual liability and breach of contract
• Excludes:
  • Medical professional malpractice
  • Y2K disruptions or damage
• "Claims Made" policy (covers only claims made during the period the policy is in effect)
• Deductible: $2,500 - $5,000
• Covered employment practice claims include:
  • Dismissal, discharge or termination
  • Employment related misrepresentation
  • Failure to employ or promote
  • Deprivation of career opportunity
  • Discipline
  • Granting or refusing tenure or promotion
  • Employee policies and procedures
  • Sexual and workplace harassment
  • Discrimination
• Defense costs included in limit of liability (choose a limit high enough to cover the legal costs as well as potential judgment costs)
• “Insureds” include "any past, present or future director, officer, employee, volunteer, board member or committee member as well as persons working on programs administered by the association” while “acting on behalf of the association at the direction of any employee, officer or the board of directors.”
• Insurer has duty to defend (insurer pays for or provides attorney).
• Estimated cost: Coverage is generally available with premiums starting at $1,500 with limits from $1 million to $5 million.

Click here to download an application.

Fidelity Bond: A good system of internal controls (click here for tips on internal controls) is an organization’s best protection against employee theft or fraud. However, a determined employee may be able to find a way around even the best system of internal controls. A fidelity bond is an inexpensive way to protect an employer against losses resulting from fraudulent or dishonest acts by employees. The amount that can be recovered depends on the limits of the coverages provided by the bond.

Organizations need fidelity bonds for several reasons:

• Some government funding sources require that grant and contract recipients obtain a fidelity bond. Increasingly, private sector funding sources are also requiring proof of insurance.
• Organizations that offer employees 403(b) and 401(k) retirement plans are legally required to have ERISA insurance that covers a percentage of the plan’s assets.
• Prudence dictates that it is a good idea to have a fidelity bond. Imagine having to explain to investigators that an employee embezzled $100,000 and the money to pay their technicians is gone.

The amount of insurance that your NPC needs depends on your total assets, your level of internal controls, how much money any single employee can access, the total number of employees, and the requirements of your funding sources. Ms. Hughes-Creech can help you assess the level of coverage you need.

NAVREF suggests that members consider the Crime Plus policy offered by Travelers Property Casualty.

Main Features:

• Coverage for various types of theft can be covered in one policy up to the same limit or separately scheduled:
  • Employee dishonesty
  • Forgery or alterations
  • Computer fraud and electronic funds transfer fraud
• Broad definition of employees includes employees that are leased, non-compensated, terminated (up to 60 days) and those employees that handle employee benefit plans
• Covers ERISA plans automatically

Click here to download an application for a policy with limits of $1 million or less.

Click here to download an application for a policy with limits of more than $1 million.

Advice on internal controls.

Guidance on what to do if you suspect employee embezzlement.

Workers Compensation insurance covers the medical bills for employees injured in the course of their employment and provides reimbursement for lost wages. Workers compensation also protects employees who contract a disease on the job. Employer liability is also covered in workers compensation policies to protect the employer against cases of common law negligence that result in worker injuries.

Workers compensation laws vary from state to state. Claims are adjudicated on an individual basis and the amounts collected can vary depending on the circumstances of the injury and state laws. In every state except Texas, most private sector employers must carry workers compensation coverage. And even in Texas, an employer can be sued for major legal damages so it is a good idea to know what your state requirements are and then insure against the major risks even if it means exceeding the legally required minimum.

In applying for workers compensation, you will be asked to group your employees in pre-determined job categories. The cost of coverage will be determined by each category’s rate and your payroll cost. It is important that you characterize your employees’ jobs correctly even if it means higher premiums. A claim may be denied for an incorrectly categorized employee and your NPC may be liable for the costs of treatment and lost wages. The good news is that if a large employer develops a history of low or no claims, its workers compensation rates may decline over time according to the state’s eligibility rating schedule.

The industry trend is to package workers compensation with other business coverages under a Businessowners Package Policy. This may include business property, general liability, business automobile, workers compensation and umbrella liability insurance.

The following states require that workers compensation be purchased directly from the state: Ohio, Washington, West Virginia, North Dakota and Wyoming. For NPCs in all other states, workers compensation coverage is available from insurance providers, usually as a component of a Businessowners Package Policy.

Other Coverages NAVREF Members May Consider

Business Property Insurance: Provides broad coverage for equipment, including computer hardware and software, and furniture owned by the organization up to a specified limit. Property coverage is written on a “special causes of loss” basis. This means that all types of losses are covered unless they are specifically excluded. You must read your policy to determine exactly which causes are excluded. However, typical exclusions include:

• Ordinance or law (regulating the construction use or repair of property or requiring that a property be torn down)
• Earth movement (earthquake, landslide) other than sinkhole collapse
• Volcanic eruption, explosion or effusion
• Government action¾seizure or destruction of property
• Nuclear hazard¾nuclear reaction, radiation or radioactive contamination
• Power failure¾utility service failure
• War and military action
• Water¾flood, surface water, waves, tides, tidal waves, mudslide, overflow of any body of water, or their spray, whether driven by wind or not. Also excludes backup from sewers or drains, underground water pressing, flowing or seeping through foundations, floors, doors, windows or other surfaces.
• Pollution
• Wear & Tear

Again, you must read your policy as the exclusions vary from one policy to another.

Property insurance is usually provided on a “replacement cost” basis. As a result, you may be asked to submit an inventory of replacement values for office furniture and fixtures, office equipment, computers and peripherals, laboratory equipment, refrigeration systems, etc.

General Liability Insurance: Provides legal liability coverage for bodily injury, property damage, personal injury or advertising injury. Some medical expense coverage is included as well as legal liability for loss caused by a fire emanating from your property. Liability coverage is also provided for automobiles owned by or rented by employees and driven on NPC business. Physical damage coverage for rented cars may be purchased on a separate policy. General liability insurance does not cover medical malpractice claims.

Umbrella Insurance: Provides inexpensive increased limits for general liability, auto liability and employers liability.

Medical Malpractice Insurance: In 2003 Congress completed action on legislation that provides NPC employees with Federal Tort Claims Act (FTCA) coverage against personal liability to the same extent as federal employees.  Section 7464A of the NPC authorizing statute provides that, subject to certification by the Attorney General, NPC employees will be covered by the FTCA if they meet all three of the following conditions:

1.      Have a departmental appointment, with or without compensation;

2.       Are directly or indirectly involved or engaged in VA approved research or education; and

3.       Perform such duties under the supervision of VA personnel.

NAVREF has updated its background information and guidance on FTCA coverage for NPC employees found at http://www.navref.org/library/ftca_white_paper.htm This includes a recommendation that NPCs 1) carefully evaluate all employees to assess whether they meet the above criteria; 2) make any necessary adjustments in their working conditions; and 3) ensure that NPC nurses and other health care professionals continue to have private insurance. Such coverage provides reasonably priced back up protection and access to legal advice should the Attorney General determine that an employee does not qualify for FTCA coverage. Whether NPC-salaried physicians should have more expensive private coverage is a decision that should be based on the circumstances of each individual’s NPC employment.

Coverage for nurses, pharmacists and other health professionals is available at a reasonable price from McGinnis, Seabury & Smith, the same firm that provides liability coverage for the American Nurses Association and a number of allied health professional organizations. Individuals applying for coverage do not have to be a member of a professional organization in order to obtain coverage. However, they must be licensed in the state where they work because the coverage is provided only for work the employee is licensed by the state to perform.

Coverage is provided for whatever work the employee is registered, licensed or certified to perform within the state and which is within the scope of work of the occupation for which the individual is registered, licensed or certified. Please note that if an NPC wishes to insure an employee who has no official credentials, the employee will have to obtain a state registration, license or certification even though this may not be a prerequisite for working in a VA facility.

Vendor:

McGinnis, Seabury & Smith: Chicago -  800-621-3008, ext. 45105 (Liability Department)

Sample premiums:

Nurse -
premium:	$89 per year	coverage:	$1 million per incident up to $3 million per year
	$104 per year		$2 million per incident up to $4 million per year
Phlebotomist -
premium:	$87 per year	coverage:	$1 million per incident up to $3 million per year
	$102 per year		$2 million per incident up to $4 million per year
Pharmacist -
Premium:		coverage:
	$151 per year		$1 million per incident up to $3 million per year
	$177 per year		$2 million per incident up to $4 million per year

Provide the agent with the status of the employee (employed or self-employed) and his/her occupation. The agent will send the appropriate brochure and application. Request one application per employee. McGinnis, Seabury & Smith does not provide coverage for doctors or dentists.

Coverage for the NPC.  If an NPC is sued in conjunction with a suit alleging medical malpractice by one of its employees, the NPC may incur costs to defend itself, even if ultimately the suit is dismissed or VA is judged to be responsible. The AIG D&O/Professional Liability package discussed above provides coverage for suits alleging negligent acts, breach of duty, errors, omissions, misstatement or misleading statement. It is not intended to cover organizations against medical malpractice. 

To provide NPCs with entity coverage against medical malpractice suits, NAVREF previously recommended a special Chubb policy called "Health Care Consultant Professional Liability Insurance."  However, Chubb later sold this policy to another company and after subsequent review, NAVREF concluded that it could no longer recommend it for NAVREF members.  Until further notice, NAVREF is unable to recommend a policy providing NPCs with vicarious liability coverage for suits alleging research subjects' bodily injury.  NPCs interested in such coverage are encouraged to contact the NAVREF office before making purchase decisions.

• Click here for Companies that offer Medical Malpractice Insurance - By State

Event Cancellation and Interruption Coverage

NPCs that administer meetings and conferences can incur substantial financial liability when they sign contracts for hotel rooms, meeting space and food and beverage services.  Event cancellation and interruption coverage protects the organization from financial losses caused by fire, destruction of the site, strikes, non-appearance of speakers, adverse weather and power failures.  Any insured occurrence that causes you a partial loss due to reduced attendance, or that forces you to cancel, postpone, curtail, or abandon your meeting is covered.

Reasonably priced, comprehensive event coverage for single or multiple meetings can be obtained from the broker's identified above.  

Click here for more details of the "Showstoppers" policy.

Click here for an application.

For a glossary of insurance terms and other references, including issues to consider when purchasing insurance. Focused mostly on personal insurance, but still useful.
www.Ambest.com/guide/index.html

General information about insurance. Good section on workers compensation.
Insure.Com – The Insurance Consumer Guide
www.insure.com/business/workerscomp/basics.html

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last updated: 01/31/08

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