gallagher healthcare insurance services emerging liability issues for healthcare executives medical...

Gallagher Healthcare Insurance Services

Emerging Liability Issues Emerging Liability Issues for Healthcare Executivesfor Healthcare Executives

Medical Professional Liability SymposiumMedical Professional Liability SymposiumMarch 11 – 12, 2003March 11 – 12, 2003

Chicago, ILChicago, ILModerator: James M. Fasone, ARMModerator: James M. Fasone, ARM

Senior Vice PresidentSenior Vice President

Emerging Liability Issues Emerging Liability Issues for Healthcare Executivesfor Healthcare Executives

Medical Professional Liability SymposiumMedical Professional Liability SymposiumMarch 11 – 12, 2003March 11 – 12, 2003

Chicago, ILChicago, ILModerator: James M. Fasone, ARMModerator: James M. Fasone, ARM

Senior Vice PresidentSenior Vice President

Healthcare Executive LiabilityHealthcare Executive LiabilityHealthcare Executive LiabilityHealthcare Executive Liability

Healthcare Executive LiabilityHealthcare Executive Liability

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DISTINGUISHED PANELISTSDISTINGUISHED PANELISTSDISTINGUISHED PANELISTSDISTINGUISHED PANELISTS

Susan Huntington, PA, JD, Senior Vice President Chubb Specialty Insurance

Susan Huntington, PA, JD, Senior Vice President Chubb Specialty Insurance

Robert K. Neiman, Esq., Partner, Litigation Sachnoff & Weaver

Robert K. Neiman, Esq., Partner, Litigation Sachnoff & Weaver

Michael Flanagan, Managing Director, Technology & Finance- Silicon Insurance

Michael Flanagan, Managing Director, Technology & Finance- Silicon Insurance


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Existing Executive / Board Challenges Existing Executive / Board Challenges

New Executive / Board Challenges New Executive / Board Challenges

New Liability ExposuresNew Liability Exposures

Corporate Compliance PlansCorporate Compliance Plans

Defending Employment LitigationDefending Employment Litigation

Corporate GovernanceCorporate Governance

HIPPAHIPPA

Cyberliability / Information SecurityCyberliability / Information Security

Existing Executive / Board Challenges Existing Executive / Board Challenges

New Executive / Board Challenges New Executive / Board Challenges

New Liability ExposuresNew Liability Exposures


Defending Employment LitigationDefending Employment Litigation

Corporate GovernanceCorporate Governance

HIPPAHIPPA

Cyberliability / Information SecurityCyberliability / Information Security

AGENDA


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Existing Executive/Board Existing Executive/Board ChallengesChallenges


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Employment LiabilityEmployment Liability Employment LiabilityEmployment Liability

Class Action LitigationClass Action Litigation

Wage/Hour LitigationWage/Hour Litigation

Physician/Staff Member LawsuitsPhysician/Staff Member Lawsuits

Unionization/Labor IssuesUnionization/Labor Issues

Class Action LitigationClass Action Litigation

Wage/Hour LitigationWage/Hour Litigation

Physician/Staff Member LawsuitsPhysician/Staff Member Lawsuits

Unionization/Labor IssuesUnionization/Labor Issues


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Financial ChallengesFinancial Challenges Financial ChallengesFinancial Challenges

Sources of RevenueSources of Revenue

Strategic Alliances/PartnershipsStrategic Alliances/Partnerships

Solvency or Cash Flow IssuesSolvency or Cash Flow Issues

Sources of RevenueSources of Revenue

Strategic Alliances/PartnershipsStrategic Alliances/Partnerships

Solvency or Cash Flow IssuesSolvency or Cash Flow Issues


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Fraud and Abuse ExposuresFraud and Abuse Exposures Fraud and Abuse ExposuresFraud and Abuse Exposures

Legacy exposureLegacy exposure

New ventures or revenue sourcesNew ventures or revenue sources

Corporate DutiesCorporate Duties

Legacy exposureLegacy exposure

New ventures or revenue sourcesNew ventures or revenue sources

Corporate DutiesCorporate Duties


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New Executive/Board ChallengesNew Executive/Board Challenges


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Selecting/Retaining Board MembersSelecting/Retaining Board Members Selecting/Retaining Board MembersSelecting/Retaining Board Members

McKinsey & Company recently surveyed nearly McKinsey & Company recently surveyed nearly

2000 directors and found that 25 percent had 2000 directors and found that 25 percent had

declined or left a board seat in the past year due declined or left a board seat in the past year due

to concerns about legal liability.to concerns about legal liability.

- USA Today, 7/31/02 “Boards Demand - USA Today, 7/31/02 “Boards Demand

More More Time, Vigilance, Accountability Time, Vigilance, Accountability

McKinsey & Company recently surveyed nearly McKinsey & Company recently surveyed nearly

2000 directors and found that 25 percent had 2000 directors and found that 25 percent had

declined or left a board seat in the past year due declined or left a board seat in the past year due

to concerns about legal liability.to concerns about legal liability.

- USA Today, 7/31/02 “Boards Demand - USA Today, 7/31/02 “Boards Demand

More More Time, Vigilance, Accountability Time, Vigilance, Accountability


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Impact of EnronImpact of Enron

Need for Independence / No Potential Need for Independence / No Potential Conflict of Interest Conflict of Interest

Insurance Coverage Available or Insurance Coverage Available or AdequateAdequate

Impact of EnronImpact of Enron

Need for Independence / No Potential Need for Independence / No Potential Conflict of Interest Conflict of Interest

Insurance Coverage Available or Insurance Coverage Available or AdequateAdequate


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“ “ President Bush said today that he is ready to send President Bush said today that he is ready to send

corporate CEOs to prison and to the tough ones. You corporate CEOs to prison and to the tough ones. You

know, the ones that only have nine golf holes and not know, the ones that only have nine golf holes and not

the full eighteen.”- Jay Lenothe full eighteen.”- Jay Leno

“ “ President Bush said today that he is ready to send President Bush said today that he is ready to send

corporate CEOs to prison and to the tough ones. You corporate CEOs to prison and to the tough ones. You

know, the ones that only have nine golf holes and not know, the ones that only have nine golf holes and not

the full eighteen.”- Jay Lenothe full eighteen.”- Jay Leno


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Risk Transfer AvailabilityRisk Transfer AvailabilityRisk Transfer AvailabilityRisk Transfer Availability

MoldMold

Small Pox VaccinesSmall Pox Vaccines

TerrorismTerrorism

HIPAAHIPAA

CybersecurityCybersecurity

MoldMold

Small Pox VaccinesSmall Pox Vaccines

TerrorismTerrorism

HIPAAHIPAA

CybersecurityCybersecurity


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The biggest concern for entrepreneurs The biggest concern for entrepreneurs and small business enterprises the paand small business enterprises the past st three months is insurance- both its cost three months is insurance- both its cost and its availabilityand its availability..

- - National Federation of Independent BusinessNational Federation of Independent Business

The biggest concern for entrepreneurs The biggest concern for entrepreneurs and small business enterprises the paand small business enterprises the past st three months is insurance- both its cost three months is insurance- both its cost and its availabilityand its availability..

- - National Federation of Independent BusinessNational Federation of Independent Business


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Carrier SolvencyCarrier Solvency Issues IssuesCarrier SolvencyCarrier Solvency Issues Issues

Price Shopping Has Its ConsequencesPrice Shopping Has Its Consequences

Potential D&O ExposuresPotential D&O Exposures

Contractual Issues - MalpracticeContractual Issues - Malpractice

Price Shopping Has Its ConsequencesPrice Shopping Has Its Consequences

Potential D&O ExposuresPotential D&O Exposures

Contractual Issues - MalpracticeContractual Issues - Malpractice


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“ “ We do not deal much in facts when we are contemplating We do not deal much in facts when we are contemplating ourselves.” – Mark Twainourselves.” – Mark Twain


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Committee MeetingsCommittee Meetings

Implementation of Compliance ObjectivesImplementation of Compliance Objectives

Outside/Independent Audit IssuesOutside/Independent Audit Issues

Investigation of Compliance IssuesInvestigation of Compliance Issues


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Defending Employment Defending Employment LitigationLitigation

Harassment & Discrimination Policies and Harassment & Discrimination Policies and ProceduresProcedures

Employee Training/EducationEmployee Training/Education

Proper Investigation of Employment MattersProper Investigation of Employment Matters

Board Accessibility to HRBoard Accessibility to HR


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Corporate Governance and Corporate Governance and Director ScrutinyDirector Scrutiny

“ “ Why have intelligent and decent directors failed so Why have intelligent and decent directors failed so miserably? The answer lies not in inadequate laws- it’s miserably? The answer lies not in inadequate laws- it’s always been clear that directors are obligated to represent always been clear that directors are obligated to represent the interests of shareholders- but rather what I’d call the interests of shareholders- but rather what I’d call “boardroom atmosphere.”“boardroom atmosphere.”

- Warren Buffet: 2003 Letter to Shareholders- Warren Buffet: 2003 Letter to Shareholders


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Back to Basics: D/O Fiduciary Duties Back to Basics: D/O Fiduciary Duties

Due Diligence in Executive HiringDue Diligence in Executive Hiring

Independence of Third PartiesIndependence of Third Parties

Outside Auditor ScrutinyOutside Auditor Scrutiny

Executive/Board Open Door PolicyExecutive/Board Open Door Policy


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“ “ The current cry is for “independent” directors. It is certainly The current cry is for “independent” directors. It is certainly true that it is desirable to have directors who think and true that it is desirable to have directors who think and speak independently- but they must also be business-speak independently- but they must also be business-savvy, interested and shareholder oriented”.savvy, interested and shareholder oriented”.

- Warren Buffet; 1993 Letter to Shareholders- Warren Buffet; 1993 Letter to Shareholders


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HIPPA LegislationHIPPA Legislation

HIPPA Policy and TrainingHIPPA Policy and Training

HIPPA Compliance OfficerHIPPA Compliance Officer

Appropriate Business AgreementsAppropriate Business Agreements

Firewall ProtectionFirewall Protection


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How do you protect yourself How do you protect yourself against a digital Pearl Harbor?against a digital Pearl Harbor?

How do you protect yourself How do you protect yourself against a digital Pearl Harbor?against a digital Pearl Harbor?

21st Century Cyber Perils21st Century Cyber Perils


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1. Virus

2. Theft of Intellectual Property

3. Security

4. Privacy

5. Piracy

6. Downstream Liability

1. Virus

2. Theft of Intellectual Property

3. Security

4. Privacy

5. Piracy

6. Downstream Liability

21st Century Cyber Perils21st Century Cyber Perils


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Equation:

Threat x Vulnerability x Cost = Total Risk

Net Result:

Cyber Exposure & Limits Analysis

Equation:

Threat x Vulnerability x Cost = Total Risk

Net Result:

Cyber Exposure & Limits Analysis

QUALITATIVE ANALYSIS“Secret Sauce”

QUALITATIVE ANALYSIS“Secret Sauce”


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Exposure Analysis Market Capitalization 1.06 Billion

Annual Revenue 919 Million

On-line Revenue 103 Million

Intangible Assets 47 Million

Patents 185

Employees 4,757

I.T. Employees 200

Exposure Analysis Market Capitalization 1.06 Billion

Annual Revenue 919 Million

On-line Revenue 103 Million

Intangible Assets 47 Million

Patents 185

Employees 4,757

I.T. Employees 200

Sample Risk Quantification Factorsfor Healthcare Institution

Sample Risk Quantification Factorsfor Healthcare Institution


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Risk Control Network Size 4,376 Machines

Websites 50

Subsidiaries 23

I.T. Investment (00-01) $120 Million

I.T. Security Investment $5 Million

I.T. Security Employees 3

Software Applications Microsoft

Risk Control Network Size 4,376 Machines

Websites 50

Subsidiaries 23

I.T. Investment (00-01) $120 Million

I.T. Security Investment $5 Million

I.T. Security Employees 3

Software Applications Microsoft

Sample Risk Quantification Factors for Healthcare Institution



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Loss Quantification Virus Incidents

5,000

Hacking Incidents 50

Hacking Incidents Resulting In Financial Loss 21

hacking Incidents Resulting In Brand Value Loss 10

Intellectual Property Theft Incidents 65

Historical Benchmarking of Limits$50mm

Loss Quantification Virus Incidents

5,000

Hacking Incidents 50

Hacking Incidents Resulting In Financial Loss 21

hacking Incidents Resulting In Brand Value Loss 10

Intellectual Property Theft Incidents 65

Historical Benchmarking of Limits$50mm




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3 LEVELS OF VENDOR PROTECTION

Industry Best Practices (ISO17799 Certification)

Contractual Risk Transfer

Creation of MSN Network Insurance Product

3 LEVELS OF VENDOR PROTECTION

Industry Best Practices (ISO17799 Certification)

Contractual Risk Transfer

Creation of MSN Network Insurance Product

360o CyberRisk Management360o CyberRisk Management


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INFRINGEMENT AWARDSExcess of $1 Million

INFRINGEMENT AWARDSExcess of $1 Million

1975 1980 1985 1990 1995 2000

5

10

15

20

25

30

Year

Millions


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QUESTIONS & ANSWERSQUESTIONS & ANSWERS

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