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Risk management and the Baltimore connection.

IN AN EFFORT TO ADDRESS some of the pressing issues facing risk managers, the Central Pennsylvania, Chesapeake, Delaware Valley and Potomac chapters of RIMS combined forces for the First Mid-Atlantic Regional RIMS Conference, held in June in Baltimore, Maryland. "The conference focused on a number of topics of concern to risk managers," said Kenneth Gerrity, president of the Chesapeake Chapter and risk manager for Genstar Stone Products Co. in Hunt Valley, Maryland.

The developments taking shape at RIMS were also on the meeting's agenda. "Despite the sputtering economy, our Society is alive and well," said Suzanne Crager, past president of RIMS. "As RIMS' president last year, I was awed by our Society's potential to empower all of us, and our chosen discipline," she said. "Evidence of this can be seen in the success of the many regional conferences held throughout the United States and Canada."

However, Ms. Crager noted that many RIMS members hold the misconception that the New York RIMS office is somehow a "national" headquarters that sets policy independently of the membership. "Equating the Society's New York City office with an all-powerful directorate is a misnomer," she explained. "RIMS is all of us - chapters, board of directors, committees, executive council and staff. And although there is a RIMS office headquartered in New York where the executive director and staff are based, that office does not make policy for the Society- you do."

To meet the challenges that lie ahead, a strategic plan was developed by a special committee and adopted by the RIMS Board of Directors at last year's annual fall meeting, said Gene Ricci, executive director of RIMS. Mr. Ricci explained that the plan identifies eight objectives for the Society. "The first goal is to make RIMS the major consumer voice in commercial property/casualty insurance and risk management," he said. "This involves creating a risk management awareness campaign for the business community and the general public."

RIMS also plans to take an active role in environmental, health and safety issues. "This will be accomplished through the creation of two new RIMS committees, Environmental and Health & Safety," declared Mr. Ricci. RIMS is also developing a full range of international activities for the Society, strengthening risk management educational programs - including an expanded student involvement program - and supporting the growth of healthy chapters, he added. Other goals for the Society include providing services to groups inside and outside RIMS and developing value-added products and services that help the membership and generate revenue for the Society, Mr. Ricci said. "And the eighth goal, which is still under development, is to create new ways to educate risk managers about employee benefits."

Environmental Risks

ONE OF THE MOST crucial issues facing risk managers today is the need for disaster preparedness, particularly for events that result in emnronmental liabilities, said Eugene R. Anderson, partner in the law firm of Anderson Kill Olick & Oshinsky, P.C. "Every organization should expect a major disaster once every 30 years," said Mr. Anderson. "Risk managers must therefore be prepared for the big event that will affect them." However, these disasters, which include events such as multi-million dollar Superfund lawsuits and earthquakes, often find companies unprepared, noted Mr. Anderson, particularly when it comes to dealing with insurers.

Disasters come in two broad types, explained Mr. Anderson. The first includes "boom-type" accidents that, although typically short in duration, can cause widespread damage. Examples include catastrophes such as hurricanes, earthquakes, floods, mud slides and oil spills. The second type of disaster is "slow motion" incidents that result in gradually induced liabilities over time. These "slow motion" exposures emanate from causes such as asbestos property damage, bodily injury and repetitive stress injuries, reported Mr. Anderson.

Disaster preparation includes developing a contingency plan for "boom-type" disasters, said Mr. Anderson. This plan will typically include procedures such as a recovery timetable for business operations, composing a "loss estimate and priorities" chart, the use of hot sites or other alternative facilities to maintain business operations, stockpiling key business supplies, and establishing a clear communication network with important clients and the media.

Preparation for the "slow motion" type of disaster, however, principally involves loss control services. "Loss control is one of the basics of risk management," stated Mr. Anderson. Since loss control is one of the five services insurers provide for their policyholders - the other four being accident investigation, loss mitigation, defense and indemnity - Mr. Anderson stated: "Loss control allows a company to develop precautions against certain types of future risks."

Rules of Insurance

ONCE THESE DISASTER preparedness measures are in place, risk managers must then educate themselves about the rules of insurance, said Mr. Anderson. He explained that the livelihood of insurers depends on preparing for catastrophic events. Therefore, companies have much to learn from insurers. "To protect themselves, policyholders must know the rules of insurance."

When dealing with disasters, risk managers should first review all of their insurance policies to determine the extent of coverage. "The risk manager should approach insurance as a product that should provide the coverage it claims to," he said. "In many cases, this situation will extend to old policies."

Mr. Anderson stated that many courts have ruled that older standard-language liability policies provide coverage for certain types of environmental liabilities, and that a number of pre-1970 policies do not contain exclusions often found in later policies. "Every appellate court across the country that has talked about the regulatory history of the pollution exclusion in its opinion decides in favor of the policyholder," he stated. "And you should be aware that there have been six recent jury trials - policyholders against insurance companies on environmental insurance - that have been decided in favor of the policyholder."

In many cases, the risk manager can still obtain coverage for environmental exposures even if the policy originals or copies cannot be located, said Mr. Anderson. He recommended that the risk manager look for "secondary evidence" of coverage, which can include claims files, correspondence, management reports and corporate records, licenses, and umbrella and excess policy schedule records.

Risk managers must also be aware of the importance of giving insurers notice of claims, regardless of how insignificant the claim may seem, said Mr. Anderson. "Sometimes, the policyholder will decide not to give notice because it fears the premium will go up," he said. In regard to smaller claims, Mr. Anderson said that the decision not to give notice is often based on the premise that it is financially preferable to pay out smaller claims now than to pay higher premiums later. "In the past, there was a custom in the industry that delaying notice would not affect coverage," he said. However, since this custom no longer exists, Mr. Anderson warned that insurers will deny coverage if timely notice is not provided.

Mr. Anderson also advised risk managers not to rely solely on selfinsurance. Although many firms have self-insured retentions, companies should be sure they are never completely uninsured, or dependent upon fronting companies or programs with large retrospective premiums.
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Title Annotation:Risk and Insurance Management Society conference
Author:Christine, Brian
Publication:Risk Management
Date:Aug 1, 1993
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