FRESNO COUNTY EMPLOYEES RETIREMENT ASSOCIATION

Transcription

1 FRESNO COUNTY EMPLOYEES RETIREMENT ASSOCIATION Donald C. Kendig, CPA, Retirement Administrator BOARD AGENDA LETTER DATE: June 7, 2017 TO: FROM: Board of Retirement Donald C. Kendig, CPA Retirement Administrator Staff Contact: Elizabeth Avalos Executive Assistant SUBJECT: Approval to Bind Coverage for the Fiduciary Liability Insurance Program (FLIP) APPROVE Recommended Action(s) 1. Bind fiduciary insurance coverage with RLI with a $10,000,000 limit and request the County of Fresno to pay the premium required to obtain Waivers of Recourse for the each of the Trustees and the Administrator. Fiscal and Financial Impacts The fiscal and financial impacts are $125,100 for the covered period. Discussion Attached is the Primary Fiduciary Insurance proposal submitted by Alliant Insurance Services for the period July 1, 2017 through July 1, The quote represents coverage of $10,000,000 with retention (deductible) of $100,000. The Fiduciary Liability Insurance Program (FLIP) has remained unchanged from our current provider for primary coverage. RLI Insurance has quoted a renewal premium of $125,100 including waiver of recourse. The premium increase is due to the assets increasing 4.5% and funding ratio decreasing below 80%. In addition, the following coverage enhancements are now built into the policy form for no additional premium: Settlors Sublimit of $1,000,000 Amend Written Contract Exclusion Endorsement Amend Definition of Non Indemnifiable Loss Advancement of Covered Defense Expenses Endorsement Amend Pending or Prior Litigation Exclusion 6.c. additional 1111 H Street, Fresno, CA 93721, Tel Fax

2 Fiduciary Liability Insurance Program (FLIP) Page 2 As you may recall, FCERA is prohibited from purchasing the Waivers of Recourse for the trustees and Administrator under Government Code For the last ten years, FCERA has requested the Plan Sponsors to pay the premium to provide Waivers of Recourse for the Trustees and Administrator. Please note however that Waivers of Recourse protect the personal assets of the covered person from losses resulting from covered acts. If the Plan Sponsors decline to pay the premium, each Board member wishing to obtain a Waiver of Recourse would need to provide a personal check for the $10.00 premium, to a maximum of $100. Attachment(s) 1. Request from Ron Madsen and Administrative Response Background All policies are on a 'claims made' basis, which means that claims must be filed within the policy period in order to be covered by the insurance. Fiduciary insurance is not available on an 'occurrence basis'. Occurrence basis insurance would cover claims that were filed after the policy lapsed provided the incident that led to the claim occurred during the policy period. Multi year policies are not available for fiduciary liability insurance. We are not aware of any potential claims that have not been submitted to the current carrier. Any claims that arise from a previous year would be covered by RLI as far back as April 30, 2004.

3 INSURANCE COMPANY: FRESNO COUNTY EMPLOYEES RETIREMENT ASSOCIATION FIDUCIARY LIABILITY INSURANCE PROGRAM (FLIP) INSURANCE PROPOSAL PRESENT RLI Insurance Company PROPOSED RLI Insurance Company A.M. BEST S GUIDE RATING:* A+ (Superior), Financial Size Category: XI ($750 Million to $1 Billion), as of June 4, 2015 A+ (Superior), Financial Size Category: XI ($750 Million to $1 Billion), as of September 23, 2016 STANDARD & POOR S RATING:* A+ (Strong), pulled on May 26, 2016 A+ (Strong), pulled on May 3, 2017 CALIFORNIA STATUS: Admitted Admitted INSURED PLANS: Fresno County Employees Retirement Association and any benefit plan sponsored and administered solely thereby Fresno County Employees Retirement Association and any benefit plan sponsored and administered solely thereby COVERAGE TERM: July 1, 2016 to July 1, 2017 July 1, 2017 to July 1, 2018 CONTINUITY DATE: April 30, 2004 April 30, 2004 COVERAGE: Fiduciary Liability Claims-Made Form Form Number: GEF 100 (4/11) / GEF 101 (4/11) Fiduciary Liability Claims-Made Form Form Number: GEF 100 (4/11) / GEF 101 (4/11) LIMITS: $10,000,000 $ 500,000 $ 1,500,000 $ 1,500,000 $ 250,000 $ 250,000 $ 250,000 Aggregate Limit of Liability (including Defense Costs) Sublimit of Liability for (VCP) Voluntary Compliance Program Compliance Fees HIPAA Sublimit HITECH Sublimit Tax Penalty Sublimit Penalty Coverage (Health Care Reform Laws) Sublimit Section 502(c) Pension Protection Act $10,000,000 $ 500,000 $ 1,500,000 $ 1,500,000 $ 250,000 $ 250,000 $ 250,000 $ 1,000,000 Aggregate Limit of Liability (including Defense Costs) Sublimit of Liability for (VCP) Voluntary Compliance Program Compliance Fees HIPAA Sublimit HITECH Sublimit Tax Penalty Sublimit Penalty Coverage (Health Care Reform Laws) Sublimit Section 502(c) Pension Protection Act Settlor Sublimit RETENTION: $ 100,000 $ 0 *See last page for additional information Indemnifiable Non-Indemnifiable $ 100,000 $ 0 Indemnifiable Non-Indemnifiable Alliant Insurance Services, Inc Dove Street, Suite 200, Newport Beach CA Lic #0C Page 1 of 5

4 INSURANCE COMPANY: FRESNO COUNTY EMPLOYEES RETIREMENT ASSOCIATION FIDUCIARY LIABILITY INSURANCE PROGRAM (FLIP) INSURANCE PROPOSAL PRESENT RLI Insurance Company PROPOSED RLI Insurance Company PROGRAM HIGHLIGHTS: Definition of Loss to include Punitive, Exemplary, and Multiplied Damages (where insurable) with Most Favorable Venue wording. Definition of Insured Persons to include Employees of any Insured Plan. Non Cancellable by Insurer other than for Non Payment of Premium. Wrongful Act definition includes administrative duties; counseling employees, participants, and beneficiaries; handling of records; failure to comply with privacy provisions of HIPAA. Notice/Claim Reporting Provision notice required after General Council, Risk Manager or Trustee first learns of claim. No Libel or Slander exclusion Defense cost coverage for performance of managed care services with respect to selection of medical or health service providers. Final Adjudication wording for conduct exclusions. Employee Benefit Law defined to acknowledge Public Entity Risks not subject to ERISA Modified Consent to Settle Clause to 80%/20% Severability for all exclusions. Spousal Extension amended to include Domestic Partner Priority of Payments provision Severability of Application. Extended Reporting Period (Discovery Period) available for one to six years. Automatic Coverage for COBRA Violations Same as present Alliant Insurance Services, Inc Dove Street, Suite 200, Newport Beach CA Lic #0C Page 2 of 5

5 INSURANCE COMPANY: FRESNO COUNTY EMPLOYEES RETIREMENT ASSOCIATION FIDUCIARY LIABILITY INSURANCE PROGRAM (FLIP) INSURANCE PROPOSAL PRESENT RLI Insurance Company PROPOSED RLI Insurance Company ENDORSEMENTS & EXCLUSIONS (Including but not limited to): Failure to collect Contributions Exclusion Return of Contributions Exclusion Bodily Injury, Mental Anguish, Emotional Distress, Sickness, Disease or Death and Property Damage Exclusion Illegal Personal Profit Exclusion Discrimination Except for Employee Benefit Law Exclusion Known Prior Acts Exclusion Delete Pollution Exclusion Workers Compensation, Unemployment Insurance, Social Security or Disability Benefits Laws Exclusion Deliberate Fraudulent or Dishonest Acts Exclusion Governmental Immunity endorsement Amend Definition of Administration to include determining and calculating benefits Same as present except for: Settlors Sublimit of $1,000,000 Amend Written Contract Exclusion Amend Definition of Non-Indemnifiable Loss Advancement of Covered Defense Expenses Endorsement Amend Pending or Prior Litigation Exclusion 6.c. PREMIUM: $119,868 Annual Premium $125,100 Annual Premium WAIVER OF RECOURSE: $100 flat (included in premium above) $100 flat (included in premiums above) EXTENDED REPORTING PERIOD: 12 months for 100% of the annual premium 24 months for 175% of the annual premium 36 months for 200% of the annual premium 72 months upon request and carrier approval 12 months for 100% of the annual premium 24 months for 175% of the annual premium 36 months for 200% of the annual premium 72 months upon request and carrier approval QUOTE VALID UNTIL: No longer applicable July 1, 2017 CONDITIONS: No longer applicable Payment due within 15 days of binding 25% Minimum Earned Premium BINDING CONDITIONS: No longer applicable Written request to bind coverage Alliant Insurance Services, Inc Dove Street, Suite 200, Newport Beach CA Lic #0C Page 3 of 5

6 FRESNO COUNTY EMPLOYEES RETIREMENT ASSOCIATION FIDUCIARY LIABILITY INSURANCE PROGRAM (FLIP) INSURANCE PROPOSAL DATE PREPARED: May 11, 2017 BROKER: ALLIANT INSURANCE SERVICES, INC. Shawn Kraatz, First Vice President Mariana Salyer, CSAC EIA Program Specialist ALLIANT DISCLOSURE This proposal of insurance is provided as a matter of convenience and information only. All information included in this proposal, including but not limited to personal and real property values, locations, operations, products, data, automobile schedules, financial data and loss experience, is based on facts and representations supplied to Alliant Insurance Services, Inc. by you. This proposal does not reflect any independent study or investigation by Alliant Insurance Services, Inc. or its agents and employees. Please be advised that this proposal is also expressly conditioned on there being no material change in the risk between the date of this proposal and the inception date of the proposed policy (including the occurrence of any claim or notice of circumstances that may give rise to a claim under any policy which the policy being proposed is a renewal or replacement). In the event of such change of risk, the insurer may, at its sole discretion, modify, or withdraw this proposal whether or not this offer has already been accepted. This proposal is not confirmation of insurance and does not add to, extend, amend, change, or alter any coverage in any actual policy of insurance you may have. All existing policy terms, conditions, exclusions, and limitations apply. For specific information regarding your insurance coverage, please refer to the policy itself. Alliant Insurance Services, Inc. will not be liable for any claims arising from or related to information included in or omitted from this proposal of insurance Alliant embraces a policy of transparency with respect to its compensation from insurance transactions. Details on our compensation policy, including the types of income that Alliant may earn on a placement, are available on our website at For a copy of our policy or for any inquiries regarding compensation issues pertaining to your account you may also contact us at: Alliant Insurance Services, Inc., Attention: General Counsel, 701 B Street, 6th Floor, San Diego, CA Analyzing insurers' over-all performance and financial strength is a task that requires specialized skills and in-depth technical understanding of all aspects of insurance company finances and operations. Insurance brokerages such as Alliant Insurance typically rely upon rating agencies for this type of market analysis. Both A.M. Best and Standard and Poor's have been industry leaders in this area for many decades, utilizing a combination of quantitative and qualitative analysis of the information available in formulating their ratings. A.M. Best has an extensive database of nearly 6,000 Life/Health, Property Casualty and International companies. You can visit them at For additional information regarding insurer financial strength ratings visit Standard and Poor's website at Alliant Insurance Services, Inc Dove Street, Suite 200, Newport Beach CA Lic #0C Page 4 of 5

7 FRESNO COUNTY EMPLOYEES RETIREMENT ASSOCIATION FIDUCIARY LIABILITY INSURANCE PROGRAM (FLIP) INSURANCE PROPOSAL Our goal is to procure insurance for you with underwriters possessing the financial strength to perform. Alliant does not, however, guarantee the solvency of any underwriters with which insurance or reinsurance is placed and maintains no responsibility for any loss or damage arising from the financial failure or insolvency of any insurer. We encourage you to review the publicly available information collected to enable you to make an informed decision to accept or reject a particular underwriter. To learn more about companies doing business in your state, visit the Department of Insurance website for that state. THIS IS A CLAIMS MADE POLICY This claims-made policy contains a requirement stating that this policy applies only to any claim first made against the Insured and reported to the insurer during the policy period or applicable extended reporting period. Claims must be submitted to the insurer during the policy period, or applicable extended reporting period, as required pursuant to the Claims/Loss Notification Clause within the policy in order for coverage to apply. Late reporting or failure to report pursuant to the policy s requirements could result in a disclaimer of coverage by the insurer. CLAIMS REPORTING NOTICE Your policy will come with specific claim reporting requirements. Please make sure you understand these obligations. Contact your Alliant Service Team with any questions. NY REGULATION 194 DISCLOSURE Alliant Insurance Services, Inc. is an insurance producer licensed by the State of New York. Insurance producers are authorized by their license to confer with insurance purchasers about the benefits, terms and conditions of insurance contracts; to offer advice concerning the substantive benefits of particular insurance contracts; to sell insurance; and to obtain insurance for purchasers. The role of the producer in any particular transaction typically involves one or more of these activities. Compensation will be paid to the producer, based on the insurance contract the producer sells. Depending on the insurer(s) and insurance contract(s) the purchaser selects, compensation will be paid by the insurer(s) selling the insurance contract or by another third party. Such compensation may vary depending on a number of factors, including the insurance contract(s) and the insurer(s) the purchaser selects. In some cases, other factors such as the volume of business a producer provides to an insurer or the profitability of insurance contracts a producer provides to an insurer also may affect compensation. The insurance purchaser may obtain information about compensation expected to be received by the producer based in whole or in part on the sale of insurance to the purchaser, and (if applicable) compensation expected to be received based in whole or in part on any alternative quotes presented to the purchaser by the producer, by requesting such information from the producer. FATCA DISCLOSURE IMPORTANT NOTICE - The Foreign Account Tax Compliance Act (FATCA) requires the notification of certain financial accounts to the United States Internal Revenue Service. Aliant does not provide tax advice so please contact your tax consultant for your obligation regarding FATCA. Alliant Insurance Services, Inc Dove Street, Suite 200, Newport Beach CA Lic #0C Page 5 of 5

8 Governmental Plans Fiduciary Liability Policy Coverage: Governmental Plans Fiduciary Liability Insurer: Effective date of this endorsement: To be attached to and form part of Policy No.: Issued to: THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY. AmWINS AMENDATORY ENDORSEMENT I. AMEND DEFINITIONS It is hereby understood and agreed that Section 3., DEFINITIONS, of this Policy is amended as follows: A. Amend Definition of Administration The definition of Administration is deleted in its entirety and replaced with the following: Administration means: a. handling records, giving advice, counsel or interpretation to participants or beneficiaries regarding an Insured Plan; or b. affecting enrollment, termination, or cancellation of participants or beneficiaries under an Insured Plan; or c. complying with the privacy provision of HIPAA, or any similar statute, rule or regulation, regarding an Insured Plan; or d. any matter claimed against an Insured solely by reason of serving as an administrator of an Insured Plan; or e. determining and calculating benefits regarding an Insured Plan, including making determinations of eligibility, calculation of benefits or payment of benefits, including the alleged failure to make timely determinations of eligibility, calculation of benefits or payment of benefits; or f. supervising, reviewing, recommending or directing payment or denial of payment under an Insured Plan; or g. determining eligibility or coverage for or under any Insured Plan; or h. distributing or filing required notices or documents; or MNU-GEF-050 Page 1 of 13

9 i. complying with the notice provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). B. Amend Definition of Claim The definition of Claim is deleted in its entirety and replaced with the following: Claim means: a. a written demand for monetary, non-monetary or injunctive relief against any Insured; or b. a civil, criminal, arbitration, mediation or other alternative dispute resolution proceeding against any Insured commenced by the service of a complaint or similar pleading, the return of an indictment, information or similar document, or a written demand for arbitration, mediation or other alternative dispute resolution proceeding; or c. a formal civil administrative or civil regulatory proceeding against any Insured commenced by the filing of a notice of charges, or similar document, or by the entry of a formal investigative order or similar document; or d. a written notice of the commencement of a fact-finding investigation by the United States Department of Labor, the Pension Benefit Guaranty Corporation or similar governmental authority which is located outside the United States, including but not limited to, the Pensions Ombudsman appointed by the United Kingdom Secretary of State for Social Services or the United Kingdom Occupational Pensions Regulatory Authority; or e. a written request, demand, subpoena or other document from any federal, state, local or foreign law enforcement or governmental authority or self-regulatory body requesting an interview or testimony of an Insured Person or the production of documents in his or her possession pertaining to such Insured Person s capacity as a fiduciary, trustee or administrator of an Insured Plan, or as a director, officer or employee of the Named Insured, or pertaining to the Named Insured s or the Insured Plan s business activities; or f. an investigation of an Insured Person commenced by receipt of a written document, including but not limited to a subpoena, civil investigation demand, target letter, Wells Notice or search warrant; provided that the written document identifies the Insured Person as the target of an investigation; or g. a written request received by an Insured to toll or waive a statute of limitations relating to a potential Claim described in a. through f. above; h. a written notice of commencement of a Pre-Claim Investigation, if at the Insured s option, it is reported to the Insurer in writing during the Policy Period or Discovery Period. including any appeal thereof. Solely for purposes of coverage under Insuring Clause 2., Claim means a Voluntary Compliance Program initiated by or against an Insured. C. Amend Definition of Defense Expenses The definition of Defense Expenses is deleted in its entirety and replaced with the following: Defense Expenses means reasonable and necessary fees and expenses (including without limitation attorneys fees, experts fees and professional fees) incurred in the investigation, defense and/or appeal of a MNU-GEF-050 Page 2 of 13

10 Claim (including premiums for any appeal bond, attachment bond or similar bond arising out of a covered judgment) after notice of such Claim is given to the Insurer. Defense Expenses shall not include salaries, wages, overhead or benefit expenses of any trustee, director, officer or employee of any Insured Plan or other entity Insured. D. Amend Definition of Employee Benefit Law The definition of Employee Benefit Law is deleted in its entirety and replaced with the following: Employee Benefit Law means any applicable common, constitutional or statutory law or regulations thereunder of the United States, Canada, or any state or province thereof (including but not limited to the Federal Employees Retirement System Act of 1986, the Consolidated Omnibus Budget Reconciliation Act of 1985 ( COBRA ), HIPAA, the Mental Health Parity Act of 1996, the Newborns and Mothers Health Protection Act of 1996, the Women s Health and Cancer Rights Act of 1998, the Pension Protection Act of 2006, the Health Information Technology for Economic and Clinical Health Act of 2009, the Patient Protection and Affordable Care Act, the Health Care and Education Reconciliation Act of 2010, and Section 301 of the Labor Management Relations Act), setting forth the obligations, responsibilities, or duties imposed upon Fiduciaries of Insured Plans sponsored by public entities or governmental entities and to which the Insured Plan is subject. Employee Benefit Law shall not include any law concerning fair employment, workers compensation, unemployment insurance, Social Security, statutorily or administratively-mandated disability benefits or similar law. E. Amend Definition of Insured: The definition of Insured is deleted in its entirety and replaced with the following: a. the Insured Plan(s); b. the Insured Person(s); c. the Named Insured; and d. any other organization, plan or natural person listed in Item 6. of the Declarations for this Policy; provided Insured does not include any other governmental entity, agency or subdivision. F. Amend Definition of Insured Person: The definition of Insured Person is deleted in its entirety and replaced with the following: Insured Person, either in the singular or plural, means: a. any natural persons who were, now are, or shall become duly elected or appointed trustees (excluding bankruptcy trustees), settlors, directors, officers, general counsel, governors, general partners, management committee members, members of the board of managers, administrators, public officials, committee members or employees of the Named Insured, any Insured Plan, or the organization sponsoring or offering such Insured Plan, in his or her capacity as a Fiduciary or trustee of an Insured Plan or as a person performing Administration of an Insured Plan; b. any natural persons who were, now are, or shall become a holder of a title, position or capacity comparable or equivalent to a position described in a. above of the Named Insured or any Insured Plan in any jurisdiction outside of the United States of America, in his or her capacity as a Fiduciary, trustee or settlor of an Insured Plan or as a person performing Administration of an Insured Plan; and MNU-GEF-050 Page 3 of 13

11 c. any other natural person who was, now is, or shall become a Fiduciary of an Insured Plan, and is added by specific written endorsement to this Policy. In the event of the death, incapacity or bankruptcy of an Insured Person, any Claim against the estate, heirs, legal representatives or assigns of such Insured Person, or against a trust which holds assets contributed by such Insured Person identified above, for a Wrongful Act of such Insured Person will be deemed to be a Claim against such Insured Person. The Insurer s maximum aggregate liability for all Claims first made during the Policy Period against an Insured Person acting in the capacity of settlor shall be $, which is a sublimit that further limits and does not increase the Insurer s maximum liability under this Policy. G. Amend Definition of Loss The definition of Loss is deleted in its entirety and replaced with the following: Loss means damages, including but not limited to punitive, exemplary or multiple damages where insurable under applicable law, judgments (including pre and post-judgment interest on a covered judgment), settlements, and Defense Expenses which the Insureds are legally obligated to pay as a result of a covered Claim under Insuring Clause 1 (including the reasonable and necessary fees and expenses of an independent Fiduciary if such Fiduciary is retained as a necessary measure under Fiduciary standards to review a proposed settlement of a covered Claim). The law of the jurisdiction most favorable to the insurability of those punitive, exemplary or multiple damages shall control whether such damages are insurable, provided that such jurisdiction is where: a. those damages were awarded or imposed; b. any Wrongful Act occurred for which such damages were awarded or imposed; or c. the Insurer is incorporated or has its principal place of business. Loss under Insuring Clause 1. shall not include the following, other than covered Defense Expenses attributed thereto: (i) (ii) (iii) civil or criminal fines or penalties imposed by law, except (1) the five percent (5%) or less, or the twenty percent (20%) or less civil penalties imposed upon an Insured as a Fiduciary under Section 502(i) or 502(l), respectively, or Section 502(c) of the Employee Retirement Income Security Act of 1974 ( ERISA ) or any comparable civil penalty under any other Employee Benefit Law; (2) civil penalties imposed by the Pension Ombudsman appointed by the United Kingdom Secretary of State for Social Services or by the United Kingdom Occupational Pensions Regulatory Authority pursuant to the English Pension Scheme Act 1993, the English Pensions Act 1995, or rules or regulations promulgated thereunder; or (3) any civil money penalties imposed upon an Insured for violation of the privacy provisions of HIPAA; provided the Insurer s maximum aggregate liability for all such HIPAA civil money penalties on account of all Claims first made during the Policy Period or during the Discovery Period (if purchased) shall be $, which is a sublimit that further limits and does not increase the Insurer s maximum liability under this Policy; taxes; fees, costs or expenses to amend, restructure, administer or terminate an Insured Plan or any remedial fees, costs, expenses or other remedial payments; MNU-GEF-050 Page 4 of 13

12 (iv) (v) (vi) stock options; any amount for which an Insured is not financially liable or which is without legal recourse to the Insured; matters uninsurable under the law pursuant to which this Policy shall be construed, except as provided above. Solely for purposes of coverage under Insuring Clause 2., Loss means Compliance Fees. H. Amend Definition of Non-Indemnifiable Loss The definition of Non-Indemnifiable Loss is deleted in its entirety and replaced with the following: Non-Indemnifiable Loss means Loss incurred by an Insured Person for which the Named Insured or any governmental body, agency, or subdivision has neither indemnified nor is permitted or required to indemnify such Insured Person, or for which the Named Insured or any governmental body, agency, or subdivision is permitted or required to indemnify but does not do so by reason of financial impairment. The determination as to whether such Loss qualifies as a Non-Indemnifiable Loss shall be the responsibility of the Insured and shall be based upon applicable laws, rules, regulations (including Employment Benefit Law), contract, charter, by-laws, operating agreement or similar documents of the Insured or Insured Plan or by reason of financial impairment. If the Insured s office of general counsel determines that the Loss is non-indemnifiable and provides its analysis and copies of the applicable documents to the Insurer in order to substantiate the Insured s determination and the Insurer consents to such a determination, such consent not to be unreasonably withheld, then the Loss will be deemed to qualify as a Non-Indemnifiable Loss. I. Amend Definition of Wrongful Act The definition of Wrongful Act is deleted in its entirety and replaced with the following: Wrongful Act means: a. any actual or alleged breach of the responsibilities, obligations or duties imposed upon Fiduciaries of any Insured Plan by any Employee Benefit Law; b. any other matter claimed against an Insured Person solely because of his or her service as Fiduciary or trustee of any Insured Plan; c. any negligent act, error or omission solely in the Administration of any Insured Plan or Administered Plan; or d. any failure to comply with the provisions of HIPAA, the Health Information Technology for Economic and Clinical Health Act of 2009, the Patient Protection and Affordable Care Act, or the Health Care and Education Reconciliation Act of 2010 with respect to any Insured Plan or Administered Plan. e. any actual or alleged act, error or omission by an Insured in a settlor capacity with respect to an Insured Plan. II. AMEND EXCLUSIONS It is hereby understood and agreed that the EXCLUSIONS section of this Policy is amended as follows: MNU-GEF-050 Page 5 of 13

13 A. Amend Bodily Injury Exclusion Exclusion 5.a. is deleted in its entirety and replaced with the following: a. for bodily injury, sickness, disease, death, mental anguish or emotional distress of any person, or damage to or destruction of any tangible property, including the loss of use thereof; provided, however, that in connection with Claims made against any Insureds based solely on the performance of managed care services with respect to the selection of medical or health services providers or denial or delay of benefits, this Exclusion shall not apply to Defense Expenses incurred in the defense of such Claims. B. Amend Written Contract Exclusion Exclusion 5.b. is deleted in its entirety and replaced with the following: b. for liability of others assumed by the Insureds under any contract or agreement; however, this exclusion shall not apply: (i) to Defense Expenses; (ii) to the extent that liability would have attached to the Insured in the absence of such contract or agreement; or (iii) to the extent the liability was assumed in accordance with or under the Insured Plan s declaration of trust or equivalent document pursuant to which the Insured Plan was established. C. Amend Personal Profit Exclusion Exclusion 5.c. is deleted in its entirety and replaced with the following: c. for such Insured gaining in fact any personal profit, remuneration or financial advantage to which such Insured was not legally entitled; however, this Exclusion shall not apply unless a final nonappealable judgment in the underlying action or other final nonappealable adjudication in the underlying action establishes such illegal personal profit, remuneration, or financial advantage; or D. Amend Prior Notice Exclusion Exclusion 6.a. is deleted in its entirety and replaced with the following: a. any fact, circumstance, transaction, event or Wrongful Act which was the subject of any notice given and accepted under any prior policy for fiduciary liability or other similar insurance of which this Policy is a direct or indirect renewal or replacement; E. Delete Pollution Exclusion Exclusion 6.b. is deleted in its entirety. F. Pending or Prior Litigation Exclusion Exclusion 6.c. is deleted in its entirety and replaced with the following; c. any litigation or administrative or regulatory proceeding against any Insured of which the Insured had notice pending on or before the Prior or Pending Date set forth in Item 8. of the Declarations for this Policy, or any fact, circumstance, transaction, event or Wrongful Act underlying or alleged therein; G. Amend Fraud Exclusion Exclusion 6.f. is deleted in its entirety and replaced with the following: MNU-GEF-050 Page 6 of 13

14 f. any deliberately fraudulent or deliberately criminal act by such Insured; however, this Exclusion shall not apply unless a final nonappealable judgment in the underlying action or other final nonappealable adjudication in the underlying action adverse to such Insured establishes such a deliberately fraudulent or deliberately criminal act. H. Amend Exclusion Severability The following language at the end of the EXCLUSIONS Section of the Policy is deleted in its entirety: "To determine the applicability of the foregoing Exclusions: a. no Wrongful Act of any Insured Person will be imputed to any other Insured Person; and b. only Wrongful Acts of any past, present or future officer, director or trustee of any Insured Plan will be imputed to any Insured Plan." and replaced with the following: "To determine the applicability of the foregoing Exclusions: a. no Wrongful Act, knowledge or information of any Insured Person will be imputed to any other Insured Person; and b. only Wrongful Acts, knowledge or information of the Chief Executive Officer, General Counsel, Chief Financial Officer or functional equivalent of the Named Insured will be imputed to any Insured Plan." III. AMEND CONDITIONS It is hereby understood and agreed that the CONDITIONS Section of this Policy is amended as follows: A. Defense Coverage Section 9. Defense Coverage is deleted in its entirety and replaced with the following: 9. Defense Coverage The Insurer shall have the right and duty to defend any Claim covered under Insuring Clause 1. of this Policy, even if any of the allegations are groundless, false or fraudulent. The Insurer s duty to defend shall cease upon exhaustion of the Limit of Liability set forth in Item 3. of the Declarations. The Insured may, with the consent of the Insurer, such consent not to be unreasonably withheld, select defense counsel to defend any Claim covered by this Policy, provided such defense counsel agrees to abide by the litigation management guidelines and standard hourly rates established by the Insurer. The Insureds agree to provide the Insurer with all information, assistance and cooperation which the Insurer reasonably requests, including without limitation attendance at hearings and trials, assistance in effecting settlements, obtaining and giving evidence and obtaining the attendance of witnesses, copies of records, investigations and pleadings. In the event of a Claim the Insureds will do nothing that may prejudice the Insurer s position or its potential or actual rights of recovery. The Insurer may make any investigation it deems necessary. The failure of any Insured to provide information, assistance and cooperation as required in this paragraph shall not be imputed to, or impair the rights of, any other Insured. MNU-GEF-050 Page 7 of 13

15 The Insureds agree not to settle or offer to settle any Claim, incur any Defense Expenses or otherwise assume any contractual obligation or admit any liability with respect to any Claim without the Insurer s written consent, which shall not be unreasonably withheld. The Insurer shall not be liable for any settlement, Defense Expenses, assumed obligation or admission to which it has not consented. If, due to insolvency or any other reason, the Named Insured or an Insured Plan fails or refuses to advance, pay or indemnify covered Defense Expenses of an Insured Person within the applicable Retention, if any, then the Insurer shall advance on behalf of the Insured Person covered Defense Expenses on a current basis, but no later than sixty (60) days after the receipt by the Insurer of properly itemized and detailed Defense Expense invoices, until either (i) the Named Insured or Insured Plan has agreed to make such payments, or (ii) the Retention has been satisfied. In no event shall any such advancement by the Insurer relieve the Named Insured or any Insured Plan of any duty it may have to provide advancement, payment or indemnification to any Insured Person. The Insured Persons agree that such advancement amounts shall be repaid to the Insurer by the Insured Person severally according to their respective interests if and to the extent it is finally established that any such Insured Person shall not be entitled under the terms and conditions of this Policy to coverage for such Defense Expenses. Advancement, payment or indemnification of an Insured Person's Defense Expenses by the Named Insured or Insured Plan is deemed "failed" if it has been requested by an Insured Person in writing and has not been provided, agreed to be provided, or acknowledged as an obligation by the Named Insured or an Insured Plan within forty-five (45) days of such request; and advancement, payment or indemnification by the Named Insured or Insured Plan is deemed "refused" if the Named Insured or Insured Plan gives a written notice of the refusal to the Insured Person. Advancement, payment or indemnification of an Insured Person's Defense Expenses by the Named Insured or Insured Plan shall only be deemed "failed" or "refused" to the extent such advancement, payment or indemnification is not provided, agreed to be provided, or acknowledged by and collectible from the Named Insured or Insured Plan. Any payment or advancement by the Insurer within an applicable Retention shall apply toward the exhaustion of the Limits of Liability. Notwithstanding any of the foregoing, if all Insureds are able to dispose of all Claims which are subject to one Retention amount (as set forth in Item 4. of the Declarations) for an amount not exceeding such Retention amount (inclusive of Defense Expenses), then the Insurer s consent shall not be required for such disposition. The following are the approved maximum standard hourly rates: Partner: $265 Associate: $210 Paralegal: $105 B. Acquisition or Creation of Another Plan Section 11. Acquisition or Creation of Another Plan is deleted in its entirety and replaced with the following: 11. Acquisition or Creation of Another Plan If during the Policy Period the Named Insured creates or acquires a benefit plan or otherwise becomes a Fiduciary of or responsible for the Administration of any Insured Plan ("Event"), then coverage shall be afforded, subject to the terms and conditions of this Policy, from the date of the Event for such benefit plan or Insured Plan, but only for Wrongful Acts occurring after the Event. MNU-GEF-050 Page 8 of 13

16 If the total assets of the created or acquired benefit plan are more than ($ ) at the time of the Event, then as a condition precedent to the coverage afforded pursuant to this section: a. The Named Insured shall give written notice to the Insurer of the Event within ninety (90) days of such Event, together with such other information the Insurer may require; and b. The Named Insured shall pay any reasonable additional premium required by the Insurer. C. Discovery Period Section 15. Discovery Period is deleted in its entirety and replaced with the following: 15.Discovery Period If: a. the Named Insured cancels this Policy; or b. either the Insurer or the Named Insured refuses or declines to renew this Policy for any reason; and within thirty (30) days after the end of the Policy Period the Named Insured elects to purchase one of the following Discovery Periods by paying the additional premium shown below: Discovery Period One (1) Year Two (2) Years Three (3) Years Premium 100% of original premium 175% of original premium 200% of original premium then the coverage otherwise afforded by this Policy will be extended for the selected Discovery Period, but only for Wrongful Acts occurring before the end of the Policy Period. The Limit of Liability for such Discovery Period (if purchased) shall be part of, and not in addition to, the Limit of Liability for the Policy Period. Subject to all terms and conditions of this Section 15., the Insurer shall, upon request, provide the Named Insured with a quotation for a six (6) year Discovery Period. As a condition precedent to the right to exercise any such Discovery Period, the total premium for this Policy must have been paid in full. If a Discovery Period is purchased, the entire premium for such Discovery Period shall be deemed fully earned at its commencement. D. Representations; Severability Section 16. Representations; Severability is deleted in its entirety and replaced with the following: 16. Representations; Severability The Insureds represent that the particulars and statements contained in the Application are true, accurate and complete, and agree that this Policy is issued in reliance on the truth of those representations, and agree that such particulars and statements, which are deemed to be incorporated into and to constitute a part of this Policy, are the basis of this Policy. The Application shall be considered a separate Application for each Insured. In the event any of the particulars or statements in MNU-GEF-050 Page 9 of 13

17 the Application are untrue this Policy shall be void ab initio for any Claim based upon, arising out of, directly or indirectly resulting from, or in consequence of any matters which were not truthfully disclosed in the Application to the extent that such Claim is against: a. any Insured Person who knew the facts which were not truthfully disclosed in the Application; b. the Named Insured or Insured Plan if the Chief Executive Officer or Chief Financial Officer knew the facts which were not truthfully disclosed in the Application; whether or not such Insured Person or Chief Executive Officer or Chief Financial Officer knew the Application contained the untruthful disclosure. The Insurer shall not rescind or seek to rescind this Policy with respect to any Insured. E. Other Insurance Section 19. Other Insurance is deleted in its entirety and replaced with the following: 19. Other Insurance If any Loss is insured under any other valid and collectible fiduciary liability policy(ies), prior or current, then this Policy shall cover such Loss, subject to its limitations, conditions, provisions and other terms, only to the extent that the amount of such Loss is in excess of the amount of payment from such other insurance whether such other insurance is stated to be primary, contributory, excess, contingent or otherwise, unless such other insurance is written only as specific excess insurance over the Limits of Liability provided in this Policy. This Policy will not be subject to the terms of any other insurance. F. Investigation and Settlement Section 21. Investigation and Settlement is amended by deleting the last two paragraphs thereof and replacing them with the following: "b. eighty percent (80%) of any Loss, including Defense Expenses, in excess of the amount in paragraph a. above which is incurred on account of any such Claim, subject to the applicable Retention and available Limit of Liability under this Policy. The remaining (20%) of any Loss, including Defense Expenses, in excess of the amount referenced in paragraph a. above shall be borne by the Insured uninsured and at its own risk. G. Subrogation and Waiver of Recourse Section 22. Subrogation and Waiver of Recourse is deleted in its entirety and replaced with the following: 22. Subrogation and Waiver of Recourse In the event of any payment under this Policy, the Insurer shall be subrogated to the extent of such payment to all the Insureds rights of recovery. Unless required pursuant to Employee Benefit Law, in no event shall the Insurer exercise its rights of subrogation against an Insured unless Exclusion 5.c or Exclusion 6.f is triggered with respect to such Insured. If this Policy is purchased by the Insured Plan and if the Insurer pays Loss under this Policy, then the Insurer shall have a right of recovery for such Loss against any Insured other than an Insured Plan that caused or contributed to such Loss. However, if this Policy is purchased in whole or in part by an Insured other than an Insured Plan, the MNU-GEF-050 Page 10 of 13

18 Insurer shall have no right of recovery against an Insured. With respect to any Insured that ceases to be an Insured before or during the Policy Period, this waiver of recourse will continue to apply with respect to such Insured until the end of the Policy Period and in subsequent Policy Periods. The Insured shall execute and deliver all instruments and papers and do whatever else is necessary to secure and preserve such rights, including the execution of such documents necessary to enable the Insurer effectively to bring suit in the name of the Insured. IV. Coverage Extensions: It is hereby understood and agreed that the following coverage extensions will be added to the Policy: A. HITECH Penalty It is agreed that the exclusion in the definition of Loss for fines and penalties shall not apply to civil penalties for violations of the Health Information Technology for Economic and Clinical Health Act of 2009, as amended, provided the Insurer s maximum aggregate liability under this coverage section for all such penalties shall be $. Such amount is a sublimit which further limits and does not increase the Insurer s maximum aggregate limit of liability under this Policy. It is further agreed that no Retention will be applicable to this coverage extension. B. Penalty Coverage Health Care Reform Laws It is agreed that the exclusion in the definition of Loss for fines or penalties shall not apply to civil penalties for inadvertent violations of the Patient Protection and Affordable Care Act or the Health Care and Education Reconciliation Act of 2010, both as amended, provided the Insurer s maximum aggregate liability under this coverage section for all such penalties shall be $. Such amount does not apply to non-indemnified loss, HIPAA penalties or compliance fees, and is a sublimit which further limits and does not increase the Insurer s maximum aggregate liability under this Policy. It is further agreed that no Retention will be applicable to this coverage extension. C. 502(c) ERISA PENALTY COVERAGE WITH SUBLIMIT It is agreed that the definition of Loss is amended in part to include the civil penalties imposed on an Insured under Section 502(c) of ERISA as a result of a covered Claim(s). It is further agreed that solely with respect to the coverage provided by this endorsement, the maximum limit of the Insurers liability for all such civil penalties in the aggregate shall be $ ( Sublimit of Liability for 502(c) Civil Penalties ). This Sublimit of Liability for 502(c) Civil Penalties shall be part of and not in addition to the aggregate Limit of Liability stated in Item 3. of the Declarations and shall in no way serve to increase the Insurer s Limit of Liability as stated therein. Solely with respect to this endorsement, it is also agreed that the Insurer shall not be liable to make any payment for Loss in connection with any Claim made against an Insured alleging any Wrongful Act occurring prior to the Policy Period or the Discovery Period (if purchased) or after the end of the Policy Period. This endorsement only provides coverage for Wrongful Acts occurring during the Policy Period or the Discovery Period (if purchased) and otherwise covered by this coverage section. Loss arising out of the same or related Wrongful Act shall be deemed to arise from the first such same or related Wrongful Act. It is further agreed that solely with respect to this endorsement, the Insurer shall not be liable to make any payment for Loss in connection with any Claim(s), or any circumstance or situation that could give rise to a Claim, that the Insured knew of prior to the Policy Period or the Discovery Period (if purchased). MNU-GEF-050 Page 11 of 13

19 D. Tax Penalty ( 4975 IRC) It is agreed that the exclusion in the definition of Loss for fines or penalties shall not apply to the fifteen percent (15%) or less tax penalty imposed upon an Insured under Section 4975 of the Internal Revenue Code of 1986, as amended, for an inadvertent prohibited transaction, provided the Insurer s maximum aggregate liability under this Policy for all such tax penalties shall be $250,000. Such amount does not apply to non-indemnified loss, HIPAA penalties or compliance fees and is a sublimit which further limits and does not increase the Insurer s maximum aggregate liability under this Policy. It is further agreed that no retention will be applicable to this coverage extension. E. Benefit Overpayment Coverage It is agreed that the exclusions in the definition of Loss shall not include the amount of overpayment of a benefit by an Insured resulting from any negligent act, error or omission where such an overpayment would otherwise not be covered by the Insured Plan and cannot be recovered by the Insured Plan after reasonable effort. The Insurer s maximum aggregate liability under this Policy for all overpayments shall be $100,000, which is a sublimit, which further limits and does not increase the Insurer s maximum aggregate liability under this Policy. F. Defense Cost Allocation It is agreed that if in any Claim an Insured incurs both Defense Expenses covered under this Policy and defense costs not covered under this Policy, the Insurer shall pay one hundred percent (100%) of such otherwise not covered Defense Expenses. G. Settlor Capacity Solely with respect to coverage afforded by this endorsement, the Insurer shall not be liable to pay any Loss that constitutes benefits which allegedly should have been or would have been due under an Insured Plan but for an Insured Person's alleged wrongdoing in his or her settlor capacity. H. Disproven Allegation Protection In the event that an allegation which triggers potential coverage under this Policy is disproven, so that a Claim is outside the scope of coverage under this Policy, the Insurer shall not seek recovery of amounts that it has previously paid. Situations that would trigger this protection include, but are not limited to, when: a. an Insured Person of the Named Entity who was alleged to be a Fiduciary was not in fact a Fiduciary; b. an Insured Person s alleged breach of fiduciary duty was in fact a settlor act; c. an alleged Insured Plan was not an Insured Plan or was not a covered Insured Plan; or d. a Named Insured alleged to be the sponsor of an Insured Plan was not in fact the sponsor of such an Insured Plan. MNU-GEF-050 Page 12 of 13