By Laverne Wingfield & Tina Fletcher
Joint Apprenticeship Training Committees (JATCs) and Joint Apprenticeship Training Funds (JATFs) embody the true value of union labor; they produce highly skilled and safe workers.
However, training funds frequently have fewer resources, such as assets and staff, than their affiliated pension or health and welfare funds and must operate entire schools and programs with these fewer resources.
As ERISA funds, JATFs have fiduciary liability exposures, and as schools, they also have operational exposures. This article details the insurance coverages JATC leaders and trustees should review with their insurance brokers to ensure the correct coverage is in place.
These coverages include:
JATF trustees, like other multiemployer fund trustees, have the duty to be prudent and act in the best interest of participants. A fiduciary ‘errors and omissions’ insurance policy reimburses a benefit fund for losses caused by violations of ERISA. This policy provides individual liability for fund trustees. It covers administrative errors and omissions, and includes coverage from claims made by regulatory bodies such as the IRS and Department of Labor (DOL).
Since liabilities for multiemployer trustees are evolving, insurance carriers are enhancing coverage to reflect these new exposures. One such enhancement includes coverage for investigatory expense endorsement (also known as pre-claim, GAP coverage, and interview coverage). The investigatory expense endorsement extends coverage for reasonable expenses before a Wrongful Act is ever determined.
The coverage encourages the insured to utilize an attorney early to try to mitigate a loss while the investigatory body is requesting documents and interviewing individuals. Many carriers limit the investigatory bodies covered by this insurance to the DOL and the Pension Benefit Guarantee Corporation (PBGC). It is important to make sure this coverage extends to other agencies that can investigate and bring charges, such as the IRS and SEC.
In addition to Investigatory expense coverage, JATF Trustees should make sure policies extend to settlor or non-fiduciary responsibilities, as they have responsibility to make sure plan documents and other policies are up to date and meet ERISA guidelines.
Regulatory bodies continue to impose new penalties, so look for a carrier that provides a blanket ‘fines and penalties’ coverage for these circumstances. Other policy features to examine include coverage for surcharges, final and non-appealable adjudication requirements, choice of counsel, and duty to defend. Note that the most common fiduciary claims arise out of governmental agency audits, which can trigger claims for excessive expenditures, expenses that do not benefit the participant, failure to produce requested documentation (such as the 5500 exemption form), and prohibited transactions.
It is important to make certain your fiduciary policy extends to past, present and future trustees. This policy will continue to extend coverage for past trustees even after they have moved on from the Fund.
|The DOL, in a routine audit of a JATF, determines that the fund supplied alcohol for its program graduates at a graduation dinner, which is in violation of DOL guidelines. The DOL fines the JATF for the error.|
|A training fund is delinquent in filing its Form 990 to the IRS and must pay penalties.|
The Union Liability policy, which is a tailored D&O policy, protects training committees and leaders against common operational exposures. It also provides reimbursement for indemnity, defense, settlement and appeals from claims arising out of those risks. It allows leaders and instructors to confidently perform their duties without worrying about personal exposure.
A Union Liability policy protects the training fund and its committees. It also protects individual insureds, which includes past, present and future directors, trustees, officers, employees, board members and committee members. The policy can be extended to individuals designated by and serving the entity, such as contracted employees.
The policy covers errors or omissions, or breaches of duty, committed or alleged to have been committed by the entity or any insured person in the discharge of his or her duties solely in his or her capacity as an insured person for the entity. The scope of coverage includes employment practices, such as third-party discrimination. Charges brought by EEOC, NLRB and similar bodies are also considered claims. An important endorsement on this policy covers educator’s liability, which covers the risk that JATCs face when their graduates use the education they acquired in the workforce.
The most common claims are discrimination claims brought by participants, including potential candidates who are not allowed into the program.
|D&O coverage would apply if a JATC does not accept a female applicant into its program, and she files a lawsuit claiming that her gender is the reason for the declination.|
|Graduates of a JATC make mistakes during a construction job, which delays the project. The general contractor experiences the loss of subsequent business opportunities from the project developer. As a result, the contractor files a lawsuit against the JATC, alleging that it failed to properly educate its graduates.|
JATCs have access to and ownership of the personal information, such as social security numbers and home addresses, of their students. If this data is lost, most states mandate that the entity must respond in a timely manner by notifying potentially affected individuals, regulators, and the media.
A cyber liability policy includes coverage for such losses as:
|The director of a JATC sells old campus furniture, not realizing that student forms were still filed in a cabinet. These forms include the names, addresses, and social security numbers of previous students.|
|An administrator for a large training fund loses his laptop while traveling for an educational conference. He had kept records of the fund’s participants on the hard drive of the laptop. Although there is no evidence that anyone has accessed the records, the fund must respond.|
JATCs should consider these other important coverages:
Ullico Casualty Group, Inc.
Ms. Fletcher oversees the daily activities of Ullico’s professional liability insurance department, which includes supervising underwriters and monitoring both renewal and new business policies.
Ullico Casualty Group, Inc.
Laverne Wingfield is a seasoned insurance claims professional with more than two decades of experience managing and adjusting a wide range of exposures. Ms. Wingfield has worked on all aspects of claims adjudication and risk management for both the Fiduciary and Union Liability lines.
|JATC leaders can take practical steps to mitigate their risk. Review this checklist with your insurance representative to ensure you’re protected:|
|Review the DOL’s Field Assistance Bulletin No. 2012-01 when developing expense policies.|
|Make sure recruitment and participant policies incorporate the requirements under 29 CFR 30.3.|
|Verify that your Fund maintains a fidelity (ERISA) bond in the appropriate amount.|
|Obtain an annual audit and maintain a trust agreement reflecting the Taft-Hartley requirements.|
|Verify that your Fund files Form 990 with the IRS annually. Repeated failure to file can lead to loss of tax exempt status. 501(c)(3) Funds should possess an IRS exemption letter.|
|Code section 501(c) imposes non-discrimination requirements that are relevant for maintaining tax exempt status; make sure your policies and procedures follow federal and state laws relating to not only hiring but selecting apprentices.|
|ERISA one-time filing exception which exempts Training Funds from filing 5500; make sure you have the exception form available for auditors (Names changes require that the Fund refile this one-time exception).|
|Determine if your Fund leases space from a party-in-interest and identify the exemption that applies.|
|Review existing policies and procedures and adopt new policies or fill in the gaps based on today’s risk:
|Create employee handbooks, anti-harassment/discrimination policies and train managers on these policies|