Risk Management Essentials

10 Key Areas to Address for Managing Public Entity Risk Exposures

Cover of 10 Risk Management Essentials document

The risk management essentials are the 10 areas that generate the most questions and concerns from MCIT members. Each of the risk management essentials includes a variety of concerns with which members should make themselves aware. Additional resources to assist in understanding risks and how to manage them are provided. 

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1. Automobile Coverage

MCIT’s automobile coverage includes permissive use, meaning coverage applies for any driver allowed to use a member’s scheduled vehicle for an appropriate work purpose. Officials, employees and volunteers driving personal vehicles for a member’s business need to be aware that their personal auto policy responds first to any claim. MCIT coverage could respond on an excess basis if the primary liability limits are exhausted. Keep auto schedules current: add new vehicles and delete sold or traded vehicles.

Recommended Auto Coverage Resources

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2. Property Coverage

Scheduled buildings, contents and property in the open (PIO) are covered for replacement cost. MCIT arranges professional appraisals of buildings greater than $100,000 every five years. Members supply all other building, contents and PIO replacement cost values. Contents is best valued via an inventory. Pictures or video of contents items smooths the claims process. Property must be scheduled for coverage to apply. Members are responsible to keep schedules current. The coverage limit is the lesser of the actual cost to repair or replace covered property or 125 percent of the scheduled value.

Builder’s risk coverage applies to new construction, remodeling and additions. The limit is $750,000 per occurrence. Tax-forfeited property, if added to the property schedule, is covered for actual cash value. MCIT does not automatically add or delete schedule items.

Recommended Property Coverage Resources

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3. Inland Marine Coverage

Inland marine is portable, movable property, including contractors equipment (heavy construction machinery), miscellaneous personal property (items in trunks of squad cars or trailer, drones, boats, ATVs). Members provide estimates of physically depreciated value (the actual cash value) for contractors equipment and miscellaneous personal property annually.

Drones are unmanned aerial vehicles including attached equipment and related ground equipment. Coverage is via the drone endorsement. Drones must be owned, scheduled and operated by an employee in compliance with FAA regulations for coverage to apply. Coverage extends to any member department.

The inland marine coverage limit is the lesser of the actual cost to repair or replace covered property or 125 percent of the scheduled value.

Recommended Inland Marine Coverage Resources

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4. Electronic Data Processing Coverage

Electronic data processing coverage is enhanced coverage as part of inland marine for computer-related items. Members need to maintain a single inventory, showing current replacement cost value. MCIT uses the inventory as the basis for the member’s blanket limit of coverage, which changes whenever a member provides an updated inventory.

One inventory of all EDP items is due to MCIT by the end of April annually. Members can update their EDP inventory with additions and deletions at any time. There is no coverage for loss to EDP property acquired more than 60 days prior to the date of the EDP inventory submitted to MCIT, but not included on the inventory.

Recommended Electronic Data Processing Coverage Resources

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5. Data Security

Securing private data is a significant responsibility for local governments. Maintaining data security in the face of real threats, such as hackers, activists and employee errors, is a challenge for everyone in the organization. It is best to have a robust data security program and response plan established before an incident occurs. Now is the time to assess how strong your programs and plans are before an attack or data compromise happens.

MCIT’s “Essentials of Data Security for Public Entities” publication is designed to spur discussion about the risks a member organization faces, focusing on data privacy, physical security, contracts, passwords and social engineering, among others.

Cyber suite coverage provides expertise and addresses expenses due to data compromise, computer attack and electronic media events. Coverage is for first-party expenses from data compromise and computer attack response, such as forensic information technology, legal review, public relations, regulatory or payment card industry fines and penalties, data restoration, data re-creation, system restoration, loss of business, misdirected payment fraud, computer fraud and cyber-extortion. Third-party coverage is provided for data compromise, network security and electronic media liability settlement and defense costs.

All cyber suite claims must be reported within 60 days. Members agree to a pre-notification consultation with HSB (coverage provider) prior to notification of affected individuals.

Recommended Data Security Resources

Contract signing

6. Contracts

Members deal with many legal agreements. Risks vary by the type of contract or work. Members should carefully consider the coverages and limits they require of others in contracts and should carefully review coverages and limits required of the member to ensure obligations match their existing coverage. Members should not agree to coverage or limits they do not have. Members should ensure the hold harmless language protects them from the contract’s other party’s negligence. Assumed liability is usually not covered.

Recommended Contracts Resources

ACORD certificate of insurance form

7. Certificates of Insurance

Members should require all vendors and independent contractors to provide valid certificates of insurance as part of the engagement process. Coverages and limits indicated must meet or exceed those required in the contract. Certificates should show the member as an additional insured, and members should obtain a copy of the additional insured endorsement.

Recommended Certificates of Insurance Resource

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8. Volunteers

Authorized volunteers when acting under your direction and control are considered covered parties under MCIT’s liability coverage. These volunteers are also covered parties while driving member-owned vehicles on the member’s behalf.

Generally, volunteers are not protected by workers’ compensation coverage if they are injured. However, Minnesota statute defines law enforcement assistance organization volunteers, registered emergency management and Medical Reserve Corps volunteers as employees, thus protecting them with workers’ compensation coverage. Keep track of these volunteer hours to report to MCIT for workers’ compensation coverage.

Recommended Volunteers Resources

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9. Claims Reporting

MCIT recommends reporting claims and incidents as soon as possible. There is no penalty for reporting incidents that do not become claims. Prompt reporting is crucial to successful claim management. Timely incident analysis can be an early indicator of areas of potential safety improvement opportunities. All claims are reported via the MCIT member portal.

Recommended Claim Reporting Resource

 Collage of MCIT resources: Bulletin, EAP poster, training brochure, coverage review booklet  

10. MCIT Resources