RISC eNews

April 30, 2014
APRIL 30, 2014


Tom Dwyer, Rhode Island Interlocal Risk Management Trust President and Executive Director, retired April 30th after 22 years with The Trust. Tom has been an engaged and thoughtful member of NLC-RISC and NLC Mutual throughout the years. He served on both the NLC-RISC Board of Directors and NLC Mutual Board of Directors, as well as the NLC-RISC Conference Planning Committee.  Please join all of us in wishing Tom the very best in his retirement.

The RI Trust also announced the appointment of Ian C. Ridlon, Esq. as The Trust's new President and Executive Director.  Ian previously served as the Trust's General Counsel and Director of Legal Services since 2007.  Please join us in congratulating Ian on his new position. Additional information about each of these announcements can be found under Focus on Pool Personnel to the right.

Please join us in congratulating Michael Fann, Director of Loss Control at the TML Risk Management Pool (TN) for being recognized with the 2014 Distinguished Service Award from PRIMA.  Michael has served in risk management for many years and is extremely well-known and respected nationwide. Michael will receive his award at the National PRIMA Conference in Long Beach, CA this June.

The final conference program for the Trustees Conference next week May 8-9th in San Diego is now available.  You may access the program here.

NLC Federal Advocacy

Letter of Support for TRIA Renewal
NLC Federal Advocacy, 4/16/2014

NLC Federal Advocacy has delivered to the House Financial Services and Senate Banking Committee members a letter advocating that TRIA be renewed before its actual expiration date on December 31, 2014, in order to avoid negative impact on cities’ upcoming insurance renewals. The letter generated a follow-up call from Sen. Schumer’s office (one of the senators leading the renewal effort) and a request for a meeting. Federal Advocacy will also have meetings on the Hill with Committee members to make the case, and is preparing to engage members (state leagues and city officials) in key districts to help it do so. Federal Advocacy does not anticipate a “clean” extension to the program. It will work with NLC Mutual and NLC-RISC to connect with risk pool staff for assistance in analyzing and understanding the impact of any proposed changes.

Data Breach & Cyber Security

AIG Expands Cyber Coverage to Include Physical Risks from Cyber Events
Insurance Journal, 4/23/2014

AIG is expanding its cyber coverage to include risks of bodily injury and property damage arising from cyber attacks and security failures. This takes the coverage beyond the privacy breach, and is designed to work in concert with other coverages to address losses that might otherwise be excluded. Also included is access to a 24/7 hotline for support during data breaches. This is something for pools to keep in mind when configuring their cyber coverage offerings. In many cases this level of coverage may not be necessary, but if a pool’s member operates infrastructure or utilities that are vulnerable to cyber attack, the extent to which bodily injury and property damage are covered may be an issue for the pool to consider.

New Cyber Threats that Go Bump in the Night
CNN Money, 4/22/2014

Verizon’s 2014 cyber threats report identifies nine pressing security concerns for major companies. They make useful reading for pools, which have significant stores of data at risk and for pool members that, despite their small size, can be a treasure trove of data for hackers. The threats identified that are a potential concern for public entities are:

  • Web app attacks (phishing, malware, and simply guessing passwords)
  • Point of sale intrusions (can affect any public entity that takes credit cards from its citizens)
  • Insider misuse (including employees taking information from the system for their own personal use)
  • Crimeware (Other malicious theft of data through the use of malware)
  • Miscellaneous errors (such as sending an email with private information to the wrong recipient)
  • Physical theft or loss of devices or loss/improper discarding of paper records that include private information
  • Distributed denial of service attacks (probably less likely for small and medium sized public entities)

The full report is available as a link from the article.

South Carolina Data Security Efforts, Monitoring May Cost $27 Million
GoUpstate.com, 4/21/2014

Credit monitoring costs are a major portion of the cost of the South Carolina department of revenue data breach, even though it remains unclear that there were any resulting incidents of identity theft. The state of South Carolina may spend $27 million in the coming year to secure personal data in its systems and to provide a third year of credit monitoring for the victims of the data breach in its revenue department. The monitoring services alone will cost $6.5 million. Monitoring cost $8.5 million last year, and was the single largest expense in the cost of the initial response. Only three percent of those eligible have signed up for monitoring services so far.

Kentucky Enacts Data Breach Notification Statute
Mondaq, 4/17/2014

Kentucky has adopted a new data breach law, but it does not apply to Kentucky agencies, local governments or political subdivisions.

Beyond Data Breaches
Zurich Insurance Group, April 2014

The internet of the future is likely to be less resilient than today and more likely to initiate cascading failures. One concern is that as infrastructure and utilities are increasingly connected with the internet, cyber incidents may begin to affect machinery and processing capabilities that deliver services to citizens, not just computers and their data. Most pool members are small or medium sized entities, and for those organizations, the report offers the following five recommendations:

  • Provide application whitelisting (identifying applications that are acceptable)
  • Use standard secure system configurations
  • Patch application software within 48 hours
  • Patch system software within 48 hours
  • Reduce the number of users with administrative privileges
A link to the full report is available from this article.

Employment Practices

Sixth Circuit Delivers Knockout To EEOC In Another Background Check Case
Mondaq, 4/19/2014

The Sixth Circuit Court of Appeals has held that the EEOC is using a flawed methodology to argue that the use of background checks in employment decisions has a disparate impact on African American applicants. The court held that the methodology failed all of the Daubert factors used to determine the admissibility of expert testimony. The aspect of background checks under attack by the EEOC was the use of credit history. Interestingly, the EEOC uses credit history in its own hiring process. Pools may want to keep this in mind if they are defending claims against their members based on background checks.

Jury: Female boss sexually harassed deputy
Houston Chronicle, 3/24/2014

A male subordinate has been awarded $567,000 by a jury that found he was sexually harassed by his female boss, who among other behaviors admitted pulling her blouse over the heads of her male deputies. The boss was dropped from the lawsuit, leaving her county employer as the only defendant. The county defended on the basis that its human resources office was never notified about the behavior, but the judge accepted the plaintiff’s argument that he had complained to his supervisor.


Contractual Liability Insurance: The Mechanics and Requirements in Effecting Coverage
Property Casualty 360, 4/22/2014

This detailed primer on the workings of contractual liability clauses in general liability policies makes the following key points:

  • The insurer, claimant, indemnitor and indemnitee are separate parties and play different roles in the working of contractual liability coverage.
  • The standard ISO CGL coverage generally excludes contractual liability but then makes exceptions to that exclusion for the following:
    • Leases of premises
    • Sidetrack agreements (use of railroad property)
    • Easement or license agreements, with some exceptions including proximity to a railroad
    • Ordinance requirements to indemnify a municipality, except in connection to work for a municipality
    • Elevator maintenance agreements
    • Portions of a business contract under which the insured assumes tort liability of another party for bodily injury or property damage to a third person or organization
Each of these exceptions is discussed in detail.

Medicare Secondary Payer

Whistleblower Suits: Emerging Risk on MSP
Insurance Thought Leadership, 4/24/2014

A potentially major evolving exposure for pools is private citizen use of the Federal False Claims Act to file lawsuits for failure to send required data to the Centers for Medicare and Medicaid Services on judgments, settlements, awards and other payments. Private citizens have an incentive to file a lawsuit alleging fraud against the federal government because they are rewarded financially if the suit is successful. The federal government has the right to intervene and if it does so, it pays the costs of the litigation. The citizen can proceed without the federal government, but success is less likely. The three grounds for prosecutable FCA conduct are:

  • The submission of a false claim or record, or avoiding the filing of a required claim or record to the government
  • Deliberate ignorance of the truth or falsity of the information
  • Reckless disregard of the truth or falsity of the information submitted

Pools are Responsible Reporting Entities under the Medicare Secondary Payer Act, and as such are required to submit a large volume of information to CMS. Errors in this process may leave them vulnerable to a FCA claim. So may settlements. A personal injury attorney in New York has filed a claim against insurers and self-insureds alleging that they shifted MSP responsibility to the federal government by using general releases in settlements. The federal government declined to intervene in this action, so it is less likely to succeed, but its filing indicates that the community that files these actions is aware of the opportunities in the MSP environment.

Property & Casualty

Commercial Lines Rate Hikes Moderate Again; Large Accounts See Decrease
Property Casualty 360, 4/25/2014

The increase in commercial lines rates moderated in the first quarter of 2015 to 1.5%, as compared to 2.1% in the fourth quarter of 2013. Small accounts continued to see the largest increases, and their rates increased faster than they did in the fourth quarter of 2013. Rates for medium sized accounts increased less than they did in the fourth quarter of 2013, and rates for large accounts actually decreased slightly. The steepest increases were in D&O, employment practices liability and workers’ compensation. Commercial property rates were flat. The reduction in increases is attributed to low cat losses, higher premiums and improvement in the economy.

Record ‘Cat Bond’ Grows Again, Cuts Insurer’s Costs
Wall Street Journal, 4/24/2014

The state run insurer in Florida, Citizens Property Insurance, increased its CAT bond from $1.25 million to $1.5 million. Despite the increase the bond remains oversubscribed, demonstrating the demand by investors for higher yield, and putting pressure on pricing for traditional reinsurance policies.

Industry Wants Clarity on What Constitutes a Terrorist Event in TRIA Renewal
Property Casualty 360, 4/23/2014

The insurance industry is asking Congress to clarify what qualifies as a terrorist event under TRIA and to establish a 90-day window for making a determination. The concern stems from the federal government’s failure to identify whether the Boston Marathon bombing was a terrorist act. Concerns include whether nuclear, biological, chemical, radiation and cyber events can be classified as terrorist events. The lack of clarity can lead to manipulation of the insurance outcome based on the decision as to whether a particular event was a terrorist act. For example, insureds may have an incentive to take the position that an event was not a terrorist act to avoid triggering a terrorism exclusion in their policies.

Forecasters to Issue Special Maps, Warnings on Storm Surge
Insurance Journal, 4/17/2014

The National Hurricane Center is issuing new color-coded maps that will show how far storm surge will spread from the beach and how high the water will get. Storm surge maps will be posted on the NHC website when a hurricane or tropical storm watch is first issued for any part of the Gulf of Mexico or the East Coast and will be updated regularly. This may be a valuable loss control tool for pools whose members may be located in the path of a storm.

Why Hands Free Cell Phones are Not Safer
Insurance Journal, 4/15/2014

Pool loss control personnel may want to tell their members that the National Safety Council has concluded that operating a vehicle using a hands free cell phone is no safer than operating one while using a hand held cell phone. Use of this technology while driving member vehicles should be the exception and based on a clear need to do so.

Colorado State Predicts Below-Average Atlantic Hurricane Season
Property Casualty 360, 4/10/2014

Colorado State University predicts the quietest Atlantic hurricane season in five years. The University predicts nine named storms, with three of them becoming hurricanes and one becoming a major storm.

Workers' Compensation

Pill that combines morphine and oxycodone up for FDA approval
New York Daily News, 4/22/2014

The FDA is reviewing a request for approval of a new drug, Moxduo, which combines morphine and oxycodone. The manufacturer says it carries a lower risk of respiratory side effects than other opioids. Opponents note that the drug will be more easily abused than other products with which it is competing, as it is easy to crush and snort or inject. If the medication is approved by the FDA, it will add yet another worry for pools that are managing the consumption of opioids by their workers’ compensation claimants.

The Future of the U.S. Workers’ Compensation Insurance Sector Remains Murky Despite Good Pricing Momentum
S&P Capital IQ, 4/8/2014

S&P believes that the strong pricing trends in workers’ compensation will continue through 2015, but notes that there are several headwinds that may weaken underwriting performance and the financial strength of some commercial lines insurers. Improved pricing benefited underwriting results in in 2012, resulting in a combined ratio that fell to 110% from 117% in 2011 and 2010. S&P expects the combined ratio to remain at 108-110% in 2013-2014, short of its break-even ratio of 103 to 104%. The headwinds that may affect performance include:

  • Continued weakness in the US economy and high unemployment
  • Improved but still poor underwriting results
  • TRIPRA (TRIA) expiration
  • The Affordable Care Act

Additional details are provided about these variables in the report.

2013 Workers’ Compensation Drug Trend Report
Express Scripts, 4/8/2014

Express Scripts has analyzed the factors driving the pharmaceutical trend in workers’ compensation costs in 2013. The increase in cost of 9.5% for workers’ compensation claimants was driven by an 8.2% in the average cost of a prescription, Utilization accounted only for 1.1% of the increase. The average cost of compounded medications increased 29.8% per prescription. NSAIDS increased 19.4%, and antidepressants increased 10.6%. Additional highlights are:

  • 84% of narcotic spend is attributable to 20% of injured workers
  • Some states saw very large increases in the use of compounded medications from 2012 to 2013, including South Carolina, Pennsylvania, Florida, North Carolina, Virginia and Texas
Also discussed in the report are:
  • Physician dispensing
  • Network penetration and third party billers
  • Duration of therapy
  • Use of home delivery
  • Therapeutic mix
  • Acetaminophen overuse
  • State regulatory actions
  • Trends in pricing for workers’ compensation medications, with detailed information on various drug classes.

Other Topics of Interest

U.S. Communities Products and Solutions Support Risk Management
NLC Strategic Partnerships, 4/28/2014

U.S. Communities, the national purchasing cooperative sponsored by National League of Cities and 29 state municipal leagues, offers many products and solutions that may be of special interest to NLC-RISC property/casualty and workers’ compensation pools.

These products and solutions that support risk management practices are offered by nationally recognized suppliers at their best government pricing:

  • Safeware-Mallory supplies safety products and services to first responders and emergency response personnel. Products include protective clothing, tactical protection, respiratory protection, and communications equipment.
  • Cintasmeets city first aid needs with safety products, automated external defibrillators, first aid cabinets and extensive training solutions that range from classroom to online options with hundreds of courses.
  • ServiceWear Appareloffers premium uniform brands and reflective apparel.
  • Garland DBS offers comprehensive roofing services and materials to minimize rooftop damage, should disaster strike — including notification of first-responder contractors pre-qualified and licensed to work in your area.
  • BI Incorporated, the U.S. leader for electronic monitoring products and services, provides ankle-monitored active tracking/alcohol monitoring systems
  • TAPCO offers a wide variety of transportation and safety products, including work zone products, traffic control products, road markers and striping, and apparel and personal safety high visibility items and accessories.

NLC-RISC pools, as non-profit organizations or instrumentalities of government, may also purchase through US Communities for their own office and staffing needs – office supplies, furniture, computers, carpeting, and more.

U. S. Communities has no minimum purchase requirements and meets all state procurement requirements through competitively bid contracts by a lead public agency. Registration for U.S. Communities is fast, easy and free.

For additional information, contact Marc Shapiro at NLC or your U.S. Communities Regional Manager.

Affordable Care Act Could Have Modest Effect on Other Insurance Costs
Insurance Journal, 4/23/2014

The RAND Corporation has issued a new study concluding that automobile, workers’ compensation and general business liability insurance may experience small to medium cost deceases under the Affordable Care Act, while the cost of medical malpractice coverage may rise. Shifting of costs formerly paid in claims and litigated cases may reduce the costs of auto, workers comp and liability insurance, while the increase in the number of people seeing physicians may increase medical malpractice claims. A link to the full report is available in the article.

PRIMA Announces Development of Public Sector ISO 31000 Training
PRIMA, 4/21/2014

Pools may want to keep an eye on this opportunity. PRIMA has announced that it will use Public Entity Risk Institute funding to contract with Arthur J. Gallagher and RiskResults to develop a train-the-trainer program to teach the International Risk Management Standard, ISO 31000, to public entities. PRIMA says the training will be adjustable to all public sector types. PRIMA will identify trainers from experienced public sector risk managers and academic institutions, who will be taught the curriculum and commit to teaching it to public entities and higher education academic institutions throughout the U.S. The course will be launched in the late fall of 2014 and PRIMA will issue a formal call for trainers. If the training truly is adjustable to small and medium sized public entities, pools may be able to use it for the benefit of their members.

Marsh 2014 Terrorism Risk Insurance Report
Marsh, 4/21/2014

This Marsh report summarizes its current outlook regarding the reenactment of TRIPRA. Marsh believes that if TRIPRA is not renewed, there may be increased pricing and shrinking capacity for terrorism insurance. Among the key points are:

  • TRIPRA is expected to renew, with debate focusing on what changes may be made.
  • If TRIPRA is not renewed, workers’ compensation coverage may be difficult to obtain for employers in high profile industries, located in target cities, or with large concentrations of employees.
  • Some 2014 policies include sunset clauses for terrorism if TRIPRA is not renewed. One-third of property insurers are offering full-term terrorism coverage into 2015. Half of the property insurers won’t offer standalone terrorism coverage after TRIPRA’s scheduled expiration.

The executive summary is available publicly but readers must register for free and log in to read the full report. The full report discusses:

  • Pending legislation as of 4/10/2014
  • The impact of TRIPRA expiration on insurance by line of coverage
  • The impact of the Boston Marathon attack and implications of attacks not certified as terrorist events
  • Triggering by cyber terrorism
  • Terrorism insurance take-ups
  • Cost of terrorism property coverage
  • Terrorism reinsurance
  • International approaches – government pools
  • Potential approaches to terrorism insurance programs

HHS Releases New Software for Updating (But Not Replacing) HIPAA Security Assessment Rules
Mondaq, 4/17/2014

The Department of Health and Human Services has released a new free, downloadable tool to assist small and medium health care provider offices conduct security risk assessments. A link to the new tool is available as footnote number 1 in the article.

In This Issue

Pools in the Spotlight

Managing BYOD
The Bridge, Alaska Municipal League Joint Insurance Association, Inc., April 2014

AMJLIA has developed for its e-newsletter a succinct list of actions that its members can take to manage their risks of embracing “bring your own device” in the workplace. Among the suggestions are:

  • Determine ownership of the data on the device
  • Establish the right to audit devices and inform employees
  • Define the privacy expectations with employees, including the possibility of looking at personal information in the event of a security breach
  • Establish security protocols
  • Ensure that employees don’t use their devices to work in violation of Fair Labor Standards Act requirements

Focus on Pool Personnel

Trust Bids Fond Farewell to Long Time President & Executive Director Tom Dwyer ~ Introduces New Wellness Award in His Honor
Risky Business, Rhode Island Interlocal Risk Management Trust, Spring 2014

After more than 22 years of dedicated service as President and Executive Director, The Trust bids a fond farewell to Thomas E. Dwyer at the end of April. “I was most fortunate about 22 years ago to be given the chance to lead this organization, which was fledgling at the time being only six years old. But the core was strong, the concept absolutely unbeatable, and the support unceasing. Ever since my days as a Town Manager in Connecticut and Massachusetts, I have always believed in the undeniable power and efficacy of local government working together to achieve good things. To have had the opportunity to do that through The Trust has been a distinct privilege and pleasure,” said Tom. In his honor, The Trust introduced its Thomas E. Dwyer Distinguished Wellness Program Innovation Award which will recognize development of an innovative program that promotes wellness in the workplace.  Read more

Trust Appoints Ian Ridlon as New President and Executive Director
Risky Business, Rhode Island Interlocal Risk Management Trust, Spring 2014

Ian C. Ridlon, Esq. has been appointed as The Trust’s new President and Executive Director effective February 1, 2014. Ian had previously served as The Trust’s General Counsel and Director of Legal Services since 2007. “I can’t begin to express what an honor and privilege it is to be named the next President and Executive Director of this organization,” said Ian. “I remain committed to carrying on all the good work done by Tom (Dwyer) before me, as well as continuing to move The Trust forward for the benefit of its membership.”  Read more

Upcoming Events

2014 NLC--RISC Trustees Conference
May 8-9, 2014
Westin San Diego Gaslamp Quarter

Mid-States Loss Control Meeting
May 1-2, 2014
Sioux Falls, SD

Western Region Loss Control Meeting
July 7-9, 2014
Girdwood, AK

2014 NLC-RISC Staff Conference
October 20-22, 2014
St. Paul/Minneapolis, MN

2015 NLC-RISC Trustees Conference
May 7-9, 2015
Westin Savannah Harbor

Employment Opportunities in Pooling

Click on the job title below for more details about each position. Please visit NLC's Career Center for additional opportunities in local government.

Claims Supervisor
Gallagher Bassett Services, Inc. (working exclusively with the Georgia Interlocal Risk Management Agency)

Director of Member Services
VML Insurance Programs

Human Resource Senior Consultant
Citycounty Insurance Services

Law Enforcement-Human Resource Senior Consultant
Citycounty Insurance Services

Visit the NLC-RISC Web Page