Risk Transfer

1
Risk Transfer

• Contracts

2
Why Execute a Contract?

• Gives more ownership to entity performing the
  service
• Sets the terms and conditions of collaboration
• Protect Cornell assets
• Allows you to transfer the risk to the party
  responsible for exposure.

3
Contract Risk Review

• Identification of the risk that the contractor is
  assuming in the contract.
• Identification of the risks that Cornell is
  assuming in the contract.
• Evaluation of the appropriateness of the risk
  assumptions.

4
Contract Risk Review

• Evaluation of Cornells risk management
  techniques for those risks that we are assuming.
• Evaluation of the contractor risk management
  techniques for those risks that the they are
  assuming.
• Evaluation of the insurance and indemnification
  sections of the contract.

5
Contract Risk review

• Review of your contractor's insurance coverage
  and collection of certificates of insurance.
• Quantification of the risk to each organization.
• Communication of the outcome.

6
Guidelines for Contracts

• No Contract-No work.
• Know the terms and conditions of the contract and
  follow them.
• The "liability and risk" should follow "the
  responsibility" and "the activity" being
  performed.

7
Guidelines Continued

• Always conduct a pre-contract review,
  pre-screening of contractors, and a contract risk
  review.
• Never execute an agreement unless you have the
  transaction authority to do so.
• When choosing a contractor, make sure you
  evaluate all contractors using the same criteria.

8
High Risk Transaction
A V O I D R I S K
Organization assumes the risk of contractor
Unacceptable Transactions
No insurance, no transfer of risk
Gray area
Full indemnification by contractor
with questionable ability to pay claim
C O N T R O L R I S K
Full indemnification by contractor with
resources to pay claim
Contractor has Ins. Cornell gets additional
named insured status
Preferred Transactions

Cornell's Risk, Cornell has Ins.
Low Risk
High Risk Activity
9
Cautions

• Uneven bargaining power.
• Faulty risk review or no risk review done.
• Lack of organizational teamwork.

10
Whats in a Name?

• Indemnification
• Hold Harmless
• Release

11
Good, Better, Best, Great Job!

• Sole Negligence
• Negligence
• Acts, errors or omissions
• Arising out of or in any way related to

12
So You Want Insurance

• What types of insurance should I ask for?
• What limits should be required?
• What proof of coverage do I need?
• What this I hear about status?
• What should I do about their property?
• What about my property?

13
Liability Coverage
FY 2005-06
Coverage St. Paul
Coverage Federal Insurance Co..
Coverage National Surety
Coverage United Educators
Coverage 500,000 Self Insured Retention
14
Property Coverage
FY 2005-06
Coverage 2.6 Billion
FM Global Insurance Company
Coverage 500,000 Maximum Self Retention
15
Liability Basics

• Occurrence vs. Claims Made
• Aggregate limits
• Additional insured, additional named insured, or
  certificate holder

16
Contractor Insurance Requirements

• General Liability-1,000,000
• Auto- 1,000,000
• Workers Compensation- Statutory Limits

17
High risk activities

• Comprehensive General Liability- 5,000,000.
• Bus travel- 5,000,000
• Use of Aircraft- 5,000,000 minimum

18
Problems

• Certificate of Insurance
• Copy of Policy
• Special Exposures
• Requirement to insure risks not covered.
• Self Insurance
• Waiver of subrogation

19
Problems

• Separate limits
• Primary Insurance requirement
• Deductible provisions
• Special, incidental or consequential damages
• Patent issues
• Cross liability

20
Problems

• Insurance company size
• Insurance company quality
• Licensed to do business
• Professional liability requirements
• Faulty risk transfer-Government partners

21
Contractor Examples

• HGH lawsuits
• The disappearance
• Springtime temperatures of 300 below zero

22
Questions and Answers