CLAIMS COMMITTEE COMPOSITION, PROCESS, AND …



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CLAIMS COMMITTEE PURPOSE and PROCEDURES

Purpose

The purpose of this policy is to set forth the composition and qualifications of the Claims Committee; describe the procedures for claims handling; and provide information regarding the obligation of the land trust members of Terrafirma Risk Retention Group LLC to report both actual and potential claims to the Claims Committee as set forth in the Policy.

Charge

Terrafirma provides a safety net from catastrophic legal expenses so that land trusts have the confidence and capability to uphold conservation in perpetuity. This will help to create favorable case law, avoid unfavorable case law, and protect the permanence of conserved land. The Claims Committee is responsible for evaluating, monitoring, approving and managing all of the members’ claims; and shall keep the Members Committee appropriately informed regarding significant claims.

Claims Committee

Membership

The Claims Committee consists of seven individuals experienced, as a group, in conservation and insurance matters. The Claims Committee manages the claims and legal strategy for Terrafirma. Official action of the Claims Committee requires a quorum of four members. Alliance Risk Management Services LLC (ARMS) shall provide the staff for the Claims Committee, and any subcommittees. ARMS staff shall be the Conservation Defense Director for the Land Trust Alliance or as otherwise specified in the Terrafirma Operating Agreement as the National Coordinating Attorney (“staff”).

Staff shall convene and facilitate all Claims Committee meetings, provide summaries of new claims with all relevant supporting information, take notes, manage data reporting, summarize trends, investigate all matters before the Claims Committee, implement action items identified by the Claims Committee, propose (subject to the Claims Committee’s approval) the rules and procedures for its activities and otherwise act as National Coordinating Attorney as specified in the Operating Agreement

Disposition of Claims

The Claims Committee has the right and responsibility, and is expected by the Members Committee, to determine the disposition of all insurance claims and to approve all settlements related to such insurance claims. If for any reason the Claims Committee cannot be convened or fails to act by such time as Terrafirma is required to respond to a claim, staff shall consult by any means available with those members of the Claims Committee that staff is able to reach and after consultation, staff may decide the disposition of the claim and shall report such disposition promptly to the Claims Committee.

Qualifications

As an aggregate, the Claims Committee shall have sufficient diversity so that its members have the following areas of experience:

1. Practical experience with land trusts and legal challenges to conservation easements

2. Understanding of state and local laws relating to conservation easements, real estate, and insurance

3. Insurance experience

o Insurance litigation

o Experience sitting on a claims committee and evaluating claims

o Insurance coverage

o Experience setting reserves for claims loss

o Customer service (sales, policies or underwriting)

4. Court room and legal strategy

5. Real estate litigation

6. Attorney management and cost control

Service to Land Trusts

Terrafirma’s policy is to:

1. Provide high quality claims management services in a professional manner;

2. Encourage timely and effective member claim reporting;

3. Maintain adequate claim loss and expense reserves; and

4. Provide an equitable member claims dispute resolution process.

Terrafirma wants these results from its claims procedures:

1. Prompt investigation, defense and when appropriate, settlement of claims;

2. Compliance with fair claims practices and applicable regulations;

3. Realistic claims reserves; and 

4. An equitable member claims dispute resolution process.

Procedure

Reporting

When a land trust first becomes aware of a claim it must give prompt written notice of the claim to Terrafirma as set forth in the Policy. The land trust shall include an authorization for Terrafirma to obtain pertinent records and other information. The land trust shall submit the following information, to the extent known:

1. The nature of and circumstances surrounding the claim, including how, when and where it took place;

2. The nature of the conservation rights at issue and an identification of all parcels of real property involved;

3. The names and addresses of all persons and organizations involved;

4. The date when anyone at the land trust first became aware of the claim and the manner in which they became aware;

5. Any actions the land trust took in any effort to avoid or mitigate the claim; and

6. All insurance carriers that may provide coverage for any part of the claim and all insurance policies that might be applicable to the claim.

Handling

Upon receipt of each claim, staff shall

1. acknowledge receipt to the member,

2. confirm the member’s eligibility to participate in Terrafirma, and assuming eligibility,

3. evaluate if the claim is covered by Terrafirma or any other insurance,

4. investigate and evaluate the member's claim,

5. establish an adequate loss reserve for the claim, and

6. work with the member to obtain all necessary background and supporting information in order to evaluate claim management.

The member shall cooperate fully in all claims management activities. If the member does not have a covered claim or is not eligible, staff shall communicate this information to the member promptly.  A member has the right to dispute the decision to deny coverage as set forth in the Policy.

Staff shall inform the Claims Committee of any claim. For covered claims by eligible members, staff shall provide available background information regarding the claim so that the Claims Committee may promptly determine the appropriate claims management with the member. The Claims Committee shall manage claims effectively, efficiently and in a timely manner. Staff shall advise the member of the defense arrangement after the Claims Committee has determined how to manage the claim.

For claims that are not covered, staff shall provide available background information along with an explanation as to why the claim is not covered. The Claims Committee shall review the information provided and confirm or reverse the determination that the claim is not covered.

Loss Reserves

Loss reserves are the estimate of the liability for claims that have not yet been paid or losses that are anticipated but have not yet occurred during a certain time frame. This amount usually also includes losses incurred but not yet reported, losses that are due but that have not been paid yet, and amounts that are not yet due. Staff is responsible for ensuring that reserves are adequate. Staff shall track and recommend to the Claims Committee a loss reserve for each covered claim.

The Claims Committee shall review each loss reserve and adjust it as necessary as the claim progresses to ensure that an adequate reserve is always in place. The Claims Committee shall analyze loss reserve trends and accuracy of loss reserves and report at least quarterly to the Members Committee. The Members Committee is responsible for deciding whether to change the coverage or premium structure in the event that Terrafirma incurs significant losses compared to its reserves. The Members Committee shall retain a qualified actuary to provide an annual loss reserve certification to assure the adequacy of loss reserves.

Early Resolution

Terrafirma provides early advice to assist dispute resolution and to avoid unnecessary litigation. Staff provides this assistance as a member benefit to land trusts and consults as necessary with the Claims Committee. Staff tracks all early resolution assistance it provides and reports quarterly to the Claims Committee and the Members Committee. If an early resolution is not possible and outside counsel is required, staff shall immediately advise the Claims Committee.

Small Claims

The Members Committee may designate a subcommittee of the Claims Committee to handle small claims under a dollar limit as specified by the Members Committee. The Claims Committee shall assign three of its members to the small claims subcommittee. A quorum of the subcommittee is two members. If a member of the subcommittee disagrees with the other members regarding how a claim should be handled, then the claim shall be referred to the full Claims Committee. Staff will evaluate all claims and decide initially whether to refer a claim to the Claims Committee or the subcommittee.

If the Claims Committee determines that a claim that has been assigned to it should be handled by the subcommittee, it may refer the claim to the subcommittee. Such referral may occur at any time. If the subcommittee determines that a claim that has been assigned to it should be reviewed by the full Claims Committee, it may refer the claim to the Claims Committee. Such referral may occur at any time, including after the appointment of counsel or the commencement of litigation, should events reveal that the claim is more complex or expensive than originally estimated. The subcommittee shall report regularly to the Claims Committee. Staff shall track and report in writing all small claims matters.

Precedent Setting Claims

The Claims Committee may appoint from time-to-time an oversight subcommittee of three Claims Committee members to manage a complex, expensive or potentially precedent-setting case. This subcommittee shall have the authority to make decisions and manage the case day-to-day within a budget limit established by the Claims Committee. The subcommittee shall report regularly to the Claims Committee and refer significant legal and financial decisions to the Claims Committee with its recommendation. If any member of the subcommittee disagrees with the others regarding how a claim should be handled, then the claim shall be referred to the full Claims Committee. The entire subcommittee must be present to act on any matter referred to it.

Information

Initially, staff and the member should provide all investigative evidence and information gathered to the Claims Committee first, and then outside counsel if assigned, to avoid duplication of effort. Outside Counsel should promptly advise the staff of all pertinent information obtained after assignment of the claim. Should additional investigation be necessary, staff shall determine how the task will be accomplished most efficiently and by whom. Communication must then continue with a constant view toward a timely and efficient resolution of the claim.

Terrafirma Counsel

ARMS has engaged the law firm of Downs, Rachlin & Martin to represent Terrafirma in all operational and governance matters, including but not limited to assistance with claims management. In addition to partners with expertise in captive insurance and tax, the law firm has experienced insurance litigators who can assist as requested with analysis and strategy with respect to claims management. The law firm will not be asked to represent land trusts with a claim, nor will it be asked to render a claims coverage opinion in the event of a coverage or management dispute between Terrafirma and a land trust member. The Claims Committee may elect to seek other counsel with captive insurance expertise to render such a coverage opinion. Staff will recommend and obtain any such coverage opinions as necessary. The Claims Committee may also obtain independent strategic advice from separate counsel to be engaged from time to time by staff, especially in precedent-setting cases.

Outside Counsel

Selection of Counsel

The Claims Committee shall be responsible for the selection and assignment of outside counsel in consultation with staff and the member insured land trust. Staff shall advise the member of counsel assignments after confirming representation with outside counsel. The Claims Committee may choose any qualified counsel to represent the member provided that counsel agrees with the fee schedule and is qualified to handle the claim, including outside counsel preferred by the member. The Claims Committee may authorize the engagement of adjusters, third-party investigators, attorneys, or other professionals as necessary.

Supervision of Counsel

Staff shall be responsible for monitoring the progress of all early assistance, claims, eligibility, coverage and litigation matters including attorney’s fees, of each claim and the performance of other service providers. Staff shall ensure that the Claims Committee develops a strategy for each claim with counsel and the member, and that there is good communication including quarterly conversations about claim status when appropriate. The Claims Committee shall be responsible for evaluating the general performance of outside counsel and staff on not less than an annual basis, and shall also be responsible for negotiating any contractual agreements or amendments with service providers as directed or authorized by the Members Committee. Staff shall be responsible for reviewing all statements for attorneys' fees and third-party bills submitted in connection with any claim. Staff shall document such periodic reviews. The Claims Committee shall have oversight of all staff activities.

Settlement

The efficient resolution of claims will depend upon the cooperation and assistance the member, the Claims Committee, staff and outside counsel extend to each other. The key to success in this process is full and prompt communication. All parties share the common goal of prompt, efficient and effective resolution of all claims. Terrafirma encourages an early exchange of views in order to identify pertinent issues and outline the most efficient and effective course available to resolve the claim and uphold conservation permanence. Even though independent judgment must be exercised by outside counsel and staff, the obligation to ensure the maintenance of open lines of communication is held equally by outside counsel, staff, the member and the Claims Committee, with all parties answerable ultimately to the Members Committee. Each party must be available to receive and exchange views whenever necessary.

The Claims Committee is responsible for initiating all reasonable actions needed to uphold conservation permanence and to control the cost of each claim presented. The Claims Committee shall negotiate and equitably settle claims as circumstances allow. This shall be done by direct communication with the member. The primary responsibility and authority for settlement remains with the Claims Committee. When any disagreement occurs between the members of the defense team that cannot be resolved, it is the mutual responsibility of the member, staff and defense counsel to communicate the issues to the Claims Committee for appropriate direction and final determination. The member and staff shall assist in investigation or information gathering as requested by outside counsel or the Claims Committee. As circumstances warrant, staff may be requested by counsel to negotiate with the appropriate parties.

Settlement of any pending claim or lawsuit may be authorized by the Claims Committee. Whenever the Claims Committee proposes to settle any pending claim or suit for an amount in excess of $10,000, the staff shall notify the member involved of the exact amount of the proposed settlement. If a member disagrees with the settlement amount or terms, that member, may notify the staff and exercise its rights set forth in the Policy.

Monitoring

Reporting

Staff shall maintain a Claims Log of all claims noting the parties, assigning a claim number, noting the loss year to which the claim has been assigned, noting any filing dates and the attorney to which the claim was assigned and the date of assignment, and noting the date and nature of any Reservation of Rights or Coverage Denial letters communicated to the member in addition to any other data tracking that staff deems prudent. Staff shall report to the Claims Committee at least once a month on all claims activity. In addition, staff shall provide the Members Committee with a quarterly claims report that provides a summary of all open claims and incurred losses. The Members Committee together with the Claims Committee periodically shall review the claims management policy. The Claims Committee shall determine the appropriate level of detail on reporting by staff. The Claims Committee and staff shall also monitor and report on emerging policy coverage and drafting issues to the Members Committee. The Claims Committee shall participate in the annual review of the standard insurance policy form, and assist with risk management education development.

Members Committee Role

The Members Committee as the elected representatives of the member land trusts makes the decisions on how or whether to proceed with an appeal of any case. The Members Committee reviews the potential loss for each claim as well as the expense of claims at least quarterly. Coverage issues and avoiding erosion of the rate structure are major areas of oversight for the Members Committee. Staff will report quarterly to the Members Committee.

Confidentiality and Privileged Information

All parties will act to preserve confidentiality in the claims process to the extent possible. No party will disclose confidential material to third parties except as required by law; provided, however, that each party may disclose confidential information as necessary to its attorneys, accountants, and other service providers to the extent such providers agree to keep such information confidential. All parties will act to preserve any privileged information provided to them. Terrafirma counsel may participate in discussions without jeopardizing privilege.

Conflicts

In the event a claim being reviewed or acted upon by the Claims Committee concerns a member that employs a person serving on the Claims Committee, or where the Claims Committee member serves on the member’s board, serves as the member’s outside counsel or other advisor, is related to the member’s staff, any board member or other insider or is a major donor to a member, such committee member shall not participate in such review or act upon the claim and shall recuse him or herself from all meetings and discussions regarding the claim. Following review and action on the claim, the member may return to the meeting.

Member Attendance

Any member may address the Claims Committee meeting to present a claim but must request time on the agenda beforehand and disclose all individuals who will attend. The member, and all individuals associated with the member, shall leave the meeting after presenting and discussing the claim with the Claims Committee. The Claims Committee shall not discuss any privileged material in the presence of any third party including a member not directly involved in such claim.

Evolution of Terrafirma

Since this is a new program, all members will be learning about risk management and costs as Terrafirma evolves and as it collects data. The coverage, pricing structure, eligibility, procedures and any other matters may be both reviewed and potentially modified periodically by the Members Committee.

CLAIM POLICY and PROCEDURES

Originally Adopted by Terrafirma Members Committee: ________, 2012

Amended by Terrafirma Members Committee:

Appendix 1

Role of Counsel

The attorney(s) representing Terrafirma and the Terrafirma member in a claim owe(s) the member the highest degree of professional care and good faith. Counsel shall abide by any applicable rules of professional responsibility and by the rules of the Bar to which counsel is admitted. Outside counsel shall take whatever measures are prudent or necessary to avoid or limit liability and to aid in the narrowing or avoidance of damages. Counsel shall ensure that it has no conflict of interest in representing Terrafirma or its member and shall endeavor to deliver to the staff acceptance or denial of the assignment, in writing, within 48 hours after receipt of the assignment.

Terrafirma expects prompt, efficient and effective handling of each case by counsel. Where appropriate, counsel shall endeavor to communicate with opposing counsel within fifteen business days of the claim assignment to discuss claim resolution. Counsel shall promptly convey this information to staff in writing. Email communication is acceptable. The member shall cooperate with counsel so that essential facts and discovery can be exchanged informally and promptly. Important evidence should be obtained promptly through the most efficient and cost-effective means possible. These guidelines notwithstanding, it is essential that the effort of counsel be in proportion to the seriousness of the matter in question and that counsel confers as needed with the staff and the Claims Committee to determine how to uphold conservation permanence and conclude each claim appropriately and promptly. Neither Terrafirma nor its members are well served by exorbitant costs or failure to uphold conservation permanence.

So as to reduce the amount of paper, counsel will only provide substantive information and copies of significant materials. They will not provide copies of cover letters, letters arranging meetings or depositions or blank copies of interrogatories, requests for production of documents or other discovery demands. Additionally, they will not provide answered interrogatories or documents produced unless they believe the information is significant to Terrafirma’s understanding and evaluation of the claim. In regard to depositions, they will not order any transcripts without a specific purpose such as supporting a motion for summary judgment or preparing for trial. They will, however, provide the Claims Committee with a summary of any deposition, which summary shall not exceed two pages.

All attorneys working on active claims shall provide quarterly written Claims Assessments (as prescribed by the Claims Committee), including legal fee budgets, to the staff, for each suit assigned to the attorney. The basis for evaluating claims shall be on a "most likely scenario" basis rather than a "worst possible scenario" basis. The budgets shall be based upon work anticipated prospectively to the expected conclusion of the claim. In addition to these quarterly reports, an updated Suit Assessment report shall be provided to the staff at least thirty (30) days before any trial is scheduled to begin.

Statements for legal services shall comply with the approved fee schedule in each engagement agreement with Terrafirma. Statements shall be submitted monthly and paid within thirty (30) days of receipt. Interim statements for expenses exceeding $500 may also be submitted and paid in like fashion. All statements shall be itemized in 1/10 of an hour increments, based upon contemporaneous time records. Terrafirma will not accept any block billings or minimum/standard billing charges. The date, description of the service rendered, time and fees charged per task and identity of the person providing the service (along with his/her hourly rate) shall be provided for each entry. Detailed documentation shall also be provided for out-of-pocket expenses and disbursements incurred on Terrafirma’s behalf, including expenses to engage consultants and expert witnesses as approved by the Claims Committee. Each statement will summarize, for each file, current period services provided and cumulative fees and expenses paid to date from the inception of the legal activities. A summary of each biller's work on the file shall also be provided.

Staff shall review all statements for services rendered and make inquiries on any questionable items to the attorney prior to payment authorization. All work shall be performed and billed at its appropriate level of legal complexity and skill level. Paralegal work, whether performed by a partner, associate, or paralegal, shall be billed as paralegal work. In addition, Terrafirma will only pay for tasks which are necessary for the claim. In addition to the limitations placed on billings listed above, Terrafirma shall not pay for services not ordered or not needed, for services not received, for depositions, engagements of experts, or legal research not authorized by the staff, or for services which are below specifications.

Last revised 5-8-12

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