Your JATC Doesn t Have Coverage For That Claim!

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1 Insights on recent legal developments and trends affecting Joint Apprenticeship Training Programs Volume , July In This Issue Your JATC Doesn t Have Coverage For That Claim! Financial Literacy for Apprentices Reminder Your JATC Doesn t Have Coverage For That Claim! No trustee or coordinator ever wants to hear those words from his or her insurance agent. Unfortunately, insurance coverage for apprenticeship programs is complex and misunderstood by many insurance agents. It is recommended to employ an insurance agent knowledgeable about coverage specific to your program and to meet with your insurance agent on an annual basis to discuss applicable policies, policy limits, and new trends. Below is information on the most common applicable coverages for an apprenticeship program. Coverage Unique To ERISA Funds Since a jointly managed apprenticeship program is a trust fund subject to the Employee Retirement Income Security Act (ERISA), ERISA requires the fund to carry an ERISA employee dishonesty bond on every person who handles funds or other property for the JATC. This helps protect the fund from risk of loss due to fraud or dishonesty on the part of persons handling funds. ERISA requires the persons to be bonded for at least 10% of the amount of funds handled, subject to a minimum bond amount of $1,000 per plan with a maximum bond amount of $500,000. The JATC must require any service providers handling funds or other property for the Fund to obtain a bond. While not required by ERISA, it is recommended the trustees obtain a fiduciary liability insurance policy that protects the personal assets of plan trustees due to allegations of breach of fiduciary duties under the plan arising under ERISA and the Department of Labor. The fiduciary responsibility law is ever-evolving causing the standard fiduciary liability insurance policy for employee benefit plans to regularly change to accomodate modern risks. The best policies now cover voluntary compliance programs, settlor and other nonfiduciary claims, pre-claim investigation coverage to reimburse for the expense of an attorney to represent the plan during a DOL investigation, cyber liability and regulatory penalties that were not previously covered by insurance. Some JATC Programs are also considering adding coordinators or other employees that may be deemed a fiduciary under ERISA to the fiduciary liability policy. The fiduciary liability policy will provide coverage for the trustees with respect to claims made against them individually for a nominal additional charge, called a 1

2 waiver of recourse premium. Each trustee will be responsible for paying the waiver of recourse premium and the Fund may not pay such premium out of plan assets. Coverage to consider: - ERISA Employee Dishonesty Bond - Fiduciary Liability - Educators Liability - Employment Practices Liability - Student Accident - Cyber Liability - Extra Coverage for Volunteer Projects - General Liability - Workers Compensation - Commercial Auto - Directors & Officers - Business Interruption A fiduciary liability policy is not an off-the-shelf product. Trustees should carefully evaluate and understand the scope of coverages in addition to the premium costs. Coverage Unique to Apprenticeship Programs Certain coverages are unique to the apprenticeship program that trustees may not be familiar with when acting on behalf of his or her company, union or as a trustee on another trust fund. The following is a list and description of these unique coverages: Educators liability coverage provides protection if an apprentice were to bring a failure to educate claim. For example, if an apprentice becomes a journeyperson and negligently performs on the job two years after graduating from the program, the individual may claim the individual was never taught how to perform the task properly or the instructor misinformed the individual on how to properly perform the task in the apprenticeship program. This is an area that is starting to see more claims. Some insurance companies that offer fiduciary liability insurance are adding this coverage as an attachment to the fiduciary liability policy. Employment practices liability coverage is available to defend claims and legal liability involving sexual harassment, wrongful termination and discrimination fom employees of the training program. However, apprenticeship programs are seeing more and more claims arise from apprentices bringing sexual harassment, wrongful termination from the program and discrimination claims. Speak with your insurance agent regarding ways you can add an endorsement to the employment practices liability to cover similar claims coming from apprentices in the program. Student accident insurance provides insurance for apprentices and trainees while attending class and while traveling to and from classes. This policy may be viewed as being similar to an employer s workmens compensation coverage and provides certain coverage limits to apprentices injured during training. In many cases, apprentices are laid off from their employers to attend class at the apprenticeship program and the employer s workmens compensation may not cover any injuries suffered by the apprentice at the training center. The JATC program may offer student accident insurance for the apprentices to provide set coverage amounts to an injured apprentice. If a JATC has this coverage, it will likely reduce claims and liability rates that would otherwise arise under its general liability coverage. The coverage premium per apprentice is fairly reasonable and some JATC programs even request reimbursement for the premium from each apprentice. Cyber liability insurance coverage is becoming more prevalent due to the spike in the number of data breaches of personal information [think of Target, Anthem and Sony]. As more and more data begins to be stored on computers, especially personally identifiable information and protected health information, the potential for data hacking increases. Cyber liability coverage may be applicable if a JATC keeps significant personal information [social security numbers, medical information] on apprentices or trainees on the JATC computer system or if the JATC uses its website to obtain personal information from apprentices or trainees. Historically, cyber liability policies were expensive to obtain but the premiums have been going down over the last few years. 2

3 The JATC program may also want to verify whether Extra Coverage for Volunteer Projects may be needed if the JATC uses apprentices or trainees to travel for volunteer projects. Group travel accident coverage, student accident or worker s compensation could also provide coverage for these claims. Other General Coverage Considerations Depending on the set-up of the apprenticeship program, some or all of the following general policies may be applicable: General liability may cover bodily injury, property damage, products and operations, non-owned auto liability, tenants legal liability and personal injury. This coverage may also cover accidents injuring apprentices and purchasing Student Accident Insurance will likely limit exposure under the general liability policy. Excess/umbrella liability can be added to general liability to provide higher liability limits. Workers compensation insurance provides coverage for injured employees of the JATC. Commercial auto provides coverage for vehicles owned by the JATC. If no vehicles are owned by the JATC, the JATC should inquire into coverage for rental vehicles if the JATC rents vehicles for training or while attending conferences or competitions. Directors and officers coverage is not the same as fiduciary liability coverage discussed above. This coverage provides protection for the trustees and officers of the fund for decision making apart from duties of the trustees under the Department of Labor and ERISA. Business interruption coverage is applicable to pay for loss of earnings or income, rent and other expenses incurred to continue operations at another location if the JATC business operations are interrupted, curtailed or suspended. The Role of the Broker While a plan s legal counsel can provide guidance on prudently vetting plan vendors, legal counsel is unlikely to have the particular knowledge about the carriers in the marketplace and recent trends in policy features for each type of insurance policy. Instead, the trustees should use one or more insurance brokers who have the expertise to help trustees: - Identify plan risks - Determine whether and what type of insurance coverages and policies can be used to transfer any risks that cannot be eliminated or mitigated - Identify the appropriate insurance carriers. The broker should make and explain recommendations, bind and process the policies, answer questions and assist in the reporting of claims. The broker may also be able to secure appropriate levels of coverage and negotiate or modify terms of insurance agreements. The broker should meet with trustees at least annually to review policies, recent trends and policy limits. Having a broker that is knowledgeable about the unique risk, claims, and policies available to a JATC program is crucial. 3

4 Financial Literacy for Apprentices Every conference focusing on apprenticeship programs mentions the importance of apprenticeship training funds adding financial education for apprentices to their curriculum. Apprenticeship and training fund instructors, coordinators and trustees are in a unique place to assist apprentices early in their lives to make a positive difference in developing their financial literacy. Speak to your retirement benefit plans to request workshops for apprentices on financial literacy and retirement planning. Typically, the investment consultants for the retirement plans are more than willing to provide education. Providing financial education is not an express fiduciary duty required of the trustees for the program, however, it is an important way to help young apprentices and their families understand financial literacy, their retirement benefit options, and health and welfare benefits. Teaching the apprentices about their benefit options and financial literacy helps the apprentice maintain pride as a craftsperson. Determine The Topics To Cover Programs may begin adding financial and benefit education to the curriculum, making sessions available to apprentices and their families, or even making tools available for apprentices and their families to access. There are several topics that may be covered including getting out of debt, personal budgeting, saving for retirement, investing, shopping for insurance, etc. Deciding what topics to choose may be done by surveying apprentices about what they want to learn. Know Your Audience It is encouraged to evaluate the audience to determine if there is a pool of young apprentices just starting in the trade or older workers trying to improve skills. These audiences will likely have different needs. For many young apprentices, they are just being introduced to defined benefit and defined contribution pension plans. It is essential to get the spouse involved in financial education. Many times, the spouse is more receptive to acquiring more financial education and understanding benefits provided to the apprentice. If there are young children, it is recommended to have accommodations for child care and entertainment when providing financial education for the apprentice and spouse. Otherwise, parents either divide assignments or choose not to come at all. A family-friendly environment is key. Tools Available A training fund is likely able to arrange workshops on financial literacy and retirement planning by tapping into current plan providers for the benefits provided to the apprentices, such as the investment consultant for the retirement plans. Apprenticeship programs are encouraged to reach out to retirement plan service providers to determine appropriate workshops that may be available and to schedule time for the workshops to be performed. During the workshops, apprenticeship programs may also want to fit in education regarding all benefits available to 4

5 apprentices, such as health plan benefits, short term disability, life insurance, accidental death benefits, etc. There are several resources available on the internet that an apprenticeship program may want to make available to apprentices. For instance, the International Foundation of Employee Benefit Plans recently released a new resource titled Retirement 101 to engage and educate workers in their retirement benefits. A link to this resource may be located at: Reminder If you know of any trustees, coordinators, directors or instructors that may be interested in receiving the JATC Bulletin on a quarterly basis, please contact Jennifer Germaine at jennifer@drpjlaw.com or to get the individual added to the distribution list. Disclosure The information in this Bulletin is intended for general information purposes only. It does not constitute legal advice. The reader should consult with knowledgeable legal counsel to determine how applicable laws apply to specific facts and situations. No attorney-client relationship has been or will be formed by any communication(s) to, from or with this JATC Bulletin. This JATC Bulletin is based on the most current information at the time it is written. Since it is possible that laws or other circumstances may have changed since publication, please call to discuss any action you may be considering as a result of reading this Bulletin. 5