______________________________________________________________________ UNIVERSITY OF HAWAI‘I OFFICE OF THE VICE PRESIDENT FOR COMMUNITY COLLEGES MEMORANDUM October 6, 2006 TO: Vice Chancellors/Directors of Administrative Services Milton Higa Steven Nakasone Kenneth Kato Gary Nitta Mark Lane David Tamanaha Michael Leialoha SUBJECT: Risk Management In trying to gather information required in the “Guidelines for Standard III.D, Financial Resources Review,” I received the following from Kari Wilhelm, Director of Risk Management, addressing this issue. The best way to answer your question is to provide a narrative explaining both the State's insurance program and the University's risk management program because the community colleges are covered under both. The State of Hawaii Risk Management Office purchases property, general liability and crime insurance. It also provides self-insured "no-fault" auto coverage. The State's property insurance covers perils such as windstorm, flood, earthquake and terrorism. The State pays the deductible for the property insurance. All State agencies, including the University and all the community colleges are covered by these policies. The State has liability insurance that covers bodily injury and property damage, personal and advertising injury, products and completed operations, and employment practices. However, the State's liability coverage has a $4 million self-insured retention. If the University were to make a claim under this policy, the $4 million SIR would be the University's responsibility. The State will not pay the SIR on UH's behalf. Up until September 1, 2006, the University was self- insured from the $4 million SIR. The State's auto coverage provides the statutory requirements for automobiles. UH pays the State for this coverage for the fleet vehicles. Collision and 2327 DOLE ST REET • HONOLULU, HAW AI'I 96822 • TEL (808) 956 -6023 • FAX ( 808) 956 -3763 AN EQUAL OPPORTUNITY / AFFIRMATIVE ACTION INSTITUTION 2 comprehensive coverage may be purchased at an additional cost. UH purchases this extra coverage. All UH vehicles, including the vehicles assigned to the community colleges are covered by the State's auto policy. The State's policy will cover auto liability claims up to $20,000 or over $4 million. As with the general liability coverage, the University was self-insured for the gap between $20,000 and $4 million prior to September 1, 2006. The Risk Management Special Fund (HRS 304-6.2) was created in part, to address these self-insurance obligations. The RMSF is funded through assessments of all 10 UH campuses. The assessment is based upon the numbers of students, employees, autos and stadium/theater capacity at each campus. The goal is to have sufficient funds to meet all legal expenses, pay settlements and judgments, pay the premiums for systemwide insurance and to pay the SIR for the State's and University's policies. There is currently approximately $2.2 million in the RMSF. We have not yet assessed the campuses for FY 06-07. The RMSF is used for the benefit of all campuses. We do not have a separate fund for the community colleges alone. The goal is to have a $3 million reserve after 5 years (by 2008). We are on track to meet that goal. Effective September 1, 2006, the entire University (including all the community colleges) is covered by a general liability policy and an excess auto liability policy. The University purchased these policies from Lexington. The general liability policy covers the torts of University employees that occur within the course and scope of employment. It covers premises liability claims, failure to provide security, law enforcement liability, limited coverage for students involved in off-campus internships, and incidental medical malpractice at the health clinics. We have also purchased an excess auto liability policy. The policy limits for the GL coverage is $5 million, with a $50,000 self-insured retention. With this coverage plus the State's GL policy, UH has coverage up to $10 million. The limits on the excess auto insurance policy is also $5 million. The Office of Risk Management also purchases Educators Legal Liability, Employment Practices Liability and Directors and Officer coverage. These policies cover the entire University system, including all the community colleges. Educators Legal Liability covers claims such as failure to education, negligent instruction, defects in tenure process, improper academic guidance or counseling, FERPA violations or failure to grant due process. Employment Practices Liability covers all employees for claims such as harassment, employment related defamation, wrongful discipline, negligent evaluation, employment discrimination, wrongful termination, and civil rights violations. Directors & Officers liability covers any error, misstatement, misleading statement, act, omission, neglect or breach of duty by a director or officer of the University. The SIR for these policies is $250,000. The SIR is paid by the RMSF. 3 We are currently working with an actuary to determine whether any changes should be made to the assessment. Preliminarily, the actuary has confirmed that the current method of assessment is valid. The University does not have a written policy regarding the Risk Management Special Fund because I am still working on it. Please use this information to address the risk management questions.