STRIMA 2010 Annual Conference “Foreign Exposures” September 2010 Jean Demchak Global Public Entity & Education Practice Leader, Marsh
Session Objectives n n n Better understand the business and legal risks associated with expansion into the global market Describe some of the problems that can arise with international contracts and agreements Identify the most critically needed tools to help risk managers identify and mitigate international exposures 2
MYTHS OR A NEW REALITY SHOW? n n State governments have no exposure to foreign liability The University System has complete control over their foreign exposures Given the economic conditions in the U. S. , a State Risk Manager’s priorities over the next 10 years will be focused solely on their State Global relations aren’t a priority for US State Governments 3
STRIMA MEMBER SURVEY 2009 n n n 73% of STRIMA members include University & College System as clientele 53% of STRIMA members provide Workers’ Compensation for University Employees Other coverages provided for University – 2 states provide student health coverage – 2 states provide athletics and college benefits – 1 state provides Foreign WC and liability exposures – 1 state provides fidelity bond coverage – 1 state provides coverage for International Students 4
State Government Foreign Exposures? n Contractual agreements n Employee travel n First responders n Border States – Employee travel – Security n Shared program with non-U. S. governments n Lack of insurance to protect State n Centralized function? 5
Trends in Study Abroad n College and University President’s Increase Emphasis on Internationalization – Serving more Students with Less Resources n n Study Abroad is more popular than ever among students International travel a critical component of higher education n Short term programs on the increase n Move to the Developing World n Inconsistent academic, support and safety standards 6
11 -Year National Growth in Study Abroad 150% increase in the last decade 14. 6% 13. 9% 10. 6% 7. 4% 4. 4% 8. 5% 9. 6% 7. 7% 8. 5% 8. 2% 8. 5% SOURCE: Open Doors, Institute of International Education, 2009. http: //opendoors. iienetwork. org Copyright 2010, IES Abroad. All rights reserved. 7
New Trends Affecting Risk n n Aggressive growth Expansion into developing world where risk types & levels differ n More ad hoc trips n Shorter durations of trips n n n More faculty led programs, often with less infrastructure Varied approaches to crisis management, drills, training of faculty and staff among providers Uneven approaches to health and safety among programs 8
Current Destinations* * Institute of International Education 2008 9
Legislative Support n NAFSA Panel’s goal triple students studying abroad – Lincoln Fellowship Program o o Stipends / funding for students o n Increase number of students to 1, 000 Top priority destination: developing countries Global economic downturn with high unemployment leads to increase in crime (e. g. , Spain at nearly 20% unemployment; Argentina, etc. ) 10
Developing Concerns n Kidnappings are common: – Significant income stratification – Internal political conflict – Corrupt government n n Al Qaeda’s Global Network of Networks – Africa, Middle East, Central Asia, Southeast Asia Terrorism (e. g. , Mumbai, London, Madrid, U. S. ) 11
Risk Issues n Crime – Pick-pocketing – Petty theft – Assault – Robbery – Sexual assault – Murder n Substandard health care n Inexperienced traveler n Communication 12
Risk Issues n n Cultural and religious issues (e. g. , discrimination and harassment, hate crimes) Differing laws and legal standards – Caning – Longer-than-expected prison terms – Execution for certain offenses – Arrests and imprisonment n Kidnapping n Civil unrest 13
International Travel Incidents n Transportation n Bodily Injury (non-traffic i. e. drowning, etc. ) n Sexual Misconduct n Natural disasters (tsunamis, earthquakes, etc. ) n Health concerns: – H 1 N 1 which is now in 190+ countries at pandemic levels – HIV: 30 Million died in Africa alone – Mental health issues 14
Incidents and Claims n Koobi Fora Field Station, Kenya – Vehicle upset n Merida, Mexico – Sexual Assault – Rohypnol – Alcohol n n n Valencia, Spain – Knifing Assault, Improper Admission of Participant Haifa, Israel – FX Spine, Rock Climbing Madrid, Spain – Sleep Walking, Fall 3 rd floor, Alcohol, No HIV Blood Supply Testing Protocols New Delhi, India – Severe Illness after Fumigation Shanghai, China – Students present when US Bombed Chinese Embassy, Increased Anti American sentiments 15
LEGAL CLIMATE 16
Elements of Negligence n Careless performance of a legal duty that causes harm n Failing to act reasonably when there is a duty to do so n Conduct below the established legal norm for protecting others 17
Know The Legal Climate n Is it the same away from campus as on campus? – Tort Theory – Contracts – Federal Regulations and Legislation n n How is the legal climate different when outside of the U. S. borders? Increased litigiousness in American society in general – few legal precedents – Web site headline: “Travel Abroad, Sue at Home” 18
Legal Responsibilities n Three areas of law that may affect study abroad liability risks: 1. Tort Liability: claims which involve negligence such as failure to protect others from a reasonable risk of harm o in international study cases, institutions have a legal “duty of care” for participants 19
Legal Responsibilities n Continued: – 2. Contract Law: documented relationships between participants & program. Any written agreement determines responsibility and right of involved parties. o All representations by program sponsor may be considered by court, including: program brochures, catalogs & posters Neiswand v. Cornell (1988) ¯ Cornell U unintentionally guaranteed a student’s safety in writing and was later held responsible for student’s injury 20
Legal Responsibilities n Continued: – 3. Federal regulations and legislation: US government has adopted a variety of laws & policies affecting higher education, which may affect international education. They include standards on: o o Title IX (Earlham College & E. Michigan cases) Campus Security -- Clery Act (Crime Reporting) ADA (Disabilities) Clear communications re reality of circumstances FERPA (Student Records) 21
In-country legal advice is essential n Guidance is needed on: – How to register – Specific HR practices – Insurance requirements – Tax Law – Local legal contact for emergency 22
It’s a Complex Legal Arena: Some Relevant U. S. Laws n n n Americans with Disabilities Act of 1990 (ADA), 42 USC §§ 12101 12213. Title IX of the Education Amendments of 1972, 20 USC §§ 1681 to 1688. Jeanne Clery Disclosure of Campus Security Policy and Campus Crime Statistics Act (Clery Act), 20 USC § 1092(f). Foreign Corrupt Practices Act of 1977 (FCPA), 15 USC § 78 a. Family Educational Rights and Privacy Act of 1974 (FERPA), 20 USC § 1232 g. 23
Counter-intuitive Foreign Laws/ Unexpected Penalties for Crime Abroad n China: Foreigners have been executed for drug offenses. n Japan: In most drug cases, suspects are detained n Ecuador: The accused is often incarcerated awaiting trial and Sentences for distributing non authorized Christian literature may range from three to five years imprisonment. Sexual assault can be punishable by life in prison. incommunicado, barred from receiving visitors or corresponding with anyone other than a lawyer or consular officer (no family or university contact). sentencing. In serious cases, bail is not an option. Food is often insufficient and prisoners must pay for adequate nutrition. Copyright 2010, IES Abroad. All rights reserved. 24
DEFENSE BASE ACT 25
State Government and University as a Global Business n n n The commercialization of university research, technology, engineering, agriculture has drawn an increased number of contracts originating with various branches of the US Government. When this revenue source takes this work outside of the United States, you may have an obligation to purchase Defense Base Act insurance. Even if a contract does not specify this requirement, it’s important to understand when this is required. 26
When is Defense Base Act Coverage Required > Work on any military, air, or naval base acquired after January 1, > > n 1940, by the United States from any foreign government; or Work on any lands occupied or used by the U. S. for military or naval purposes outside of the U. S. * Work on public work contracts through any U. S. government agency to be performed outside of the U. S. * Work on contracts approved and funded by the U. S. under the Foreign Assistance Act, which, among other things, provides for cash sale of military equipment, materials and services to its allies, if the contract is performed outside of the U. S. * Work for U. S. employers providing welfare or similar services outside of the U. S. * for the benefit of the Armed Services (i. e. USO) If any one of the above criteria is met, all employees engaged in such employment, regardless of nationality, are covered under the Act. 27
An Extension of the Longshore Harborworkers Compensation Act (LHWCA) n As DBA extends the provisions of the LHWCA, employees of U. S. government contractors working overseas are assured protection of a law that is uniformly administered, providing uniform benefits, regardless of: – The state in which the employee was hired – The state in which the employee maintained residence – The local law of the country in which the employee works n LHWCA and DBA are rarely amended federal statutes – Unlike LHWCA, there is no minimum compensation rate under the DBA. 28
“Public Work” n n Defined in the DBA Covers work related to national defense, war activities, or a public “use of the US or its allies” n Not limited to construction projects n Includes service contracts/subcontracts n Differs from grants which are not covered by the DBA 29
Examples of DBA Exposures n n n Design and fabricate five blade cascade into the existing wind tunnel facility; instrument static pressure taps, perform measurements, analyze and provide pressure distribution data for CFD prediction. Contract for this work is for the Army, performed in Mexico. Seed research contract with the Department of Agriculture, performed in South America. Energy Systems Laboratory: Fan Testing for the Dept of Energy, performed in Taiwan and Canada. 30
Examples of DBA Exposures n n n Contract with NIH to perform specific Infectious Disease research and associated clinical trials in various African countries. Deliver traffic accident avoidance class in Malta a subcontract to a prime contract with the Army. Assist the Beijing Transportation Research Center with technical assistance regarding traffic congestion measures. 31
RISK MANAGEMENT AND RISK TRANSFER 32
Mitigating Risk n n Transfer risk via contracts (e. g. , by contracting with third party providers) and via insurance International HR Practices may differ: – Insurance requirements – Pension benefits – Worker’s Compensation – Death benefits 33
Crisis Management: How best to respond n n Have a detailed crisis management plan – Keep it simple – Dovetail with existing institutional plan Train on the Plan: All employees traveling abroad or faculty/staff taking students abroad, plus students (each term) Drills: Drill every program every term Utilize Technology (e. g. , required cell phones, use text messaging to communicate). 34
Crisis Action Plan for Overseas Programs n n Protocol for Response to crisis – Foreign Crisis Management Team (UCMT) – Coordinated and comprehensive response – Communication with On Site Coordinator – Community Relations and Media Contact – Commitment of Resources – Insurance Final Authority – State Risk Manager – Executive VP for Academic Affairs 35
Some Recent Incidents Requiring Crisis Management Team Mobilization n Earthquake in New Zealand, September, 2010 n Earthquake in Chile, February 2010 n Health Related Death of a Student, October 2009 n H 1 N 1, May 2009 n Mumbai Attacks, November 2008 n Delhi Bombings, September 2008 n Bacterial Meningitis Cases, London, March 2008 n Glasgow Bombings, June 2007 n London Bombings , July 2005 n Madrid Bombings , March 2004 n Avian Flu – December 2003 n SARS Crisis – November 2002 to July 2003 36
Local Response n n n Each site (destination) abroad should have its own Local Contingency Plan that addresses known local risks. Built In Redundancy (e. g. , primary and secondary meeting locations, means of communication, & backups for employees/faculty/staff) – Safe haven may not mean US Embassy Required Post Mortems After Each Crisis 37
Role of the International Oversight Committee n Historical focus on health, safety and security n Evaluate information presented by responsible party n n n Restrict or suspend international travel to countries/regions with heightened health, safety and/or security concerns Grant exemptions to decision to restrict or suspend travel due to special circumstances Manage/respond to critical incidents abroad, including decisions on emergency evacuations and emergency policies and protocols 38
Progressive Role of the Risk Manager n Initiate and implement institution forums and activities on key risk topics n Expand the role of the International Oversight Committee n Strategic vs. transactional involvement n n Focus discussion on both upside (opportunity) and downside (protection) risks Facilitator and Leader 39
Guidance for University Administrators n Students – Receive the relevant information – Receive the necessary assistance – Understand their responsibilities n Institution/Employer – Comply with statutes/legislation/regulations – Minimize institutional liability o Policies/Procedures o Crisis Plan 40
Responsibility to Students n Include parents n Full disclosure of risks – Cultural differences, crime n Evaluation of fitness of students – Medical exam – Health insurance – Maturity – Mental health concerns n Participation forms/waivers n Maintain veto power n Orientation – home campus, on-site, interim 41
Policies and Procedures n n Designate a Travel Abroad Administrator Review contractual language with collaborators and/or participants n Evaluate extraterritoriality of US Legislation n Adopt a Code of Conduct for employees/students n Manage transportation risks n Review housing policies n Communication 42
Insurance Issues n Analyze Institutional insurance (domestic and local country) to verify coverage in foreign jurisdictions – Workers compensation o Defense Base Act WC effective 8/1/06 Mandatory coverage required to be carried by US government for any US entity contracting with the US government on work taking place in foreign lands – Automobile liability – Health coverage 43
Insurance issues n Other insurance issues – Foreign travel accident, medical evacuation and repatriation coverage o civil unrest – Employee / Student health insurance – Locally mandated insurance – Special Risk 44
Coverage Design: Primary Limits n n n Auto Liability $1, 000 primary General Liability including Abuse & Molestation $1, 000* Workers’ Compensation & Employer’s Liability $1, 000* n Repatriation $100, 000 $250, 000 n Kidnap & Ransom $1, 000 $10, 000 n War & Terrorism – Included in coverage limits n Travel Accident & Sickness – Your call 45
Country of China – Insurance Environment n Mandatory coverage – Automobile Liability (placed with agent/broker) – Social Security (compulsory by SS Bureau) – Workers Compensation (compulsory by WC Bureau) Labour Law requirement o Non residents working temporarily for a non registered US firm are not subject to the provisions of the local WC act o Labour dispute arbitration system in China o State Fund has no recourse against employer – Provisions exist for extra territorial coverage under insurance coverage or official law o 46
Country of China – Insurance Environment continued n Legal Liability – Laws by which members of the public may seek indemnity for bodily injury and death or damage to their property: – General Principles of the Civil Law of PRC – Consumer Protection Law – Law of Products Quality – Contract Law, etc. n n General Liability (third party) – Limits recommended for American Enterprises: o At least US$1 M (RMB 8 M) Claims – courts / judges are inclined to liberal awards 47
Other Considerations n Coverage options (include international 24 -hour global and multilingual network for Medical Evacuation & Repatriation) – International SOS Company, Philadelphia, www. internationalsos. com/company/ (product demonstration page) – HTH Worldwide, Radnor, PA -- www. hthworldwide. com/ o o International health program and online health & security information New policy for health insurance foreign students in U. S. 48
Other Considerations (continued) – Medex Assistance, www. medexassist. com/scholastic. cfm o Emergency medical evacuation o Medically supervised return o Repatriation of mortal remains o Travel assistance for dependent children o Travel assistance for companion if member is hospitalized when travelling – Universal Travel Protection --www. utravelpro. com/ o o Menu approach New Terrorism options 49
An Ounce of Prevention n Early planning is key n Management review of operations or future plans n Full evaluation of risks required n n Disclosure of risks to employees, participants and interested parties Informed decision-makers 50
Resources n n n “Perspective” The Campus Legal Monthly “International Study Abroad Programs: A Critical Legal Planning Session” by Gary M. Rhodes, Ph. D. , USC Overseas Security Advisory Council (OSAC) www. ds osac. org/ National Association of College & University Attorneys (NACUA) www. nacua. org The Chronicle of Higher Education www. chronicle. com National Association of International Studies (NAFSA) www. nafsa. org – 56 TH Annual Conference, Baltimore, May 23 28, 2004 n “Safety is an Important Part of Studying Abroad”, Mike Halligan, U of Utah, Campus Firewatch, February 2004, www. campusfirewatch. com 51
Resources n U. S. State Department http: //travel. state. gov/index. html or for student access http: //travel. state. gov/studentinfo. html – Bureau of Consular Affairs – Overseas Citizens Services Tips for Students – Overseas Security Advisory Council – Travel Safety for Student: Press Release – Travel Warnings – Services and Info for American Citizens Abroad – How Consular Officers Can Help in An Emergency – Important Telephone Numbers – Links to US Embassies and Consulates Worldwide – Bureau of Educational and Cultural Affairs – Country Reports on Human Rights Practices 52
Resources n n The U. S. Centers for Disease Control and Prevention www. cdc. gov/travel American Council on Education (ACE)/The International Initiatives www. acenet. edu n Institute of International Education www. iie. org n US Peace Corps SAFETI Adaptation of Peace Corps Resources n International Student www. internationalstudent. com n Study Abroad www. studyabroad. com n n Center for Global Education/University of Southern California www. usc. edu/globaled University Risk Management & Insurance Association www. urmia. org 53
Jean Demchak Managing Director Marsh Global Public Entity and Education Practice (860) 723 5635 jean. demchak@marsh. com
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