SOLUTIONS FOR THE UNION WORKPLACE
SPECIALTY INSURANCE | INVESTMENTS
Lessons for Governmental Fund Trustees from the Financial Crisis
and How to Protect Yourself
Daniel AronowitzPresident, Ullico Casualty
Company
2 May 2011
NCPERS Annual Conference 2011
Introduction
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3 May 2011
NCPERS Annual Conference 2011
Lesson #1: Indemnification Gaps
• Governmental plan trustees often have two dangerous misconceptions:– That ERISA fiduciary standards do not apply
to them; and– That they are protected by sovereign
immunity• The reality:
– Governmental trustees are held to high fiduciary standards similar to the federal ERISA duties; and
– State law contains significant limits on indemnification protections for governmental fiduciaries
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4 May 2011
NCPERS Annual Conference 2011
Indemnification Gaps
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5 May 2011
NCPERS Annual Conference 2011
Lesson #2: You are a Target
• Governmental trustees are increasingly a target of fiduciary claims:– Imprudent investments, including real
estate and alternative investments– Breaches of fiduciary duty in selecting and
monitoring a service provider– Social investing– Insufficient funding– Dishonesty claims/Pay to Play
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6 May 2011
NCPERS Annual Conference 2011
You are a Target
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7 May 2011
NCPERS Annual Conference 2011
Lesson #3: Delegate Fiduciary Responsibility Whenever Possible
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8 May 2011
NCPERS Annual Conference 2011
Delegate Fiduciary Responsibility Whenever Possible
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9 May 2011
NCPERS Annual Conference 2011
Lesson #4: Lower Your Expectations
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10 May 2011
NCPERS Annual Conference 2011
Lesson #5: Due Diligence Matters
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11 May 2011
NCPERS Annual Conference 2011
Lesson #6: Don’t be a Turkey – Protect Yourself
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12 May 2011
NCPERS Annual Conference 2011
Purchase ComprehensiveFiduciary Liability Insurance
• Critical policy features:– Claims-Made Coverage – Do You Have Full
Prior Acts Coverage?– What is the Date of Your Prior and Pending
Litigation Exclusion?– Do You Have Coverage for Administration
ErrorsIn Addition to Fiduciary Duties?
– Do You Control Your Defense?– Do You Have the Right to Select Defense
Counsel?– Do You Have Severability of the Application
and Exclusions to Protect “Innocent” Trustees?
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13 May 2011
NCPERS Annual Conference 2011
• Critical policy features continued:– Do You Have to Pay a Claim Deductible Out
of Your Own Pocket? – When Will You Be Reimbursed?– How Much Insurance Should Your Fund Buy?– What Claims are Covered? DOL Audits?– How Can You Lock in Coverage for Potential
Claims?– What Penalty Coverage Do You Have? CAP;
502(c); HIPAA?– Does Your Policy Require a QPAM for Real
Estate Investments?
Purchase ComprehensiveFiduciary Liability Insurance
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14 May 2011
NCPERS Annual Conference 2011
Questions
Daniel AronowitzPresident
1625 Eye Street, NW
Washington, DC 20006
202.682.4992
John V. O’BrienVice President, Marketing
1625 Eye Street, NW
Washington, DC 20006
202.962.2980
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