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We also work in areas as diverse as trade credit, surety, political risk, and environmental risk transfer. And if you have employee benefit issues or need KEYMAN LIFE we would also be pleased to guide you in finding solutions.

If it involves risk we will help you find what is needed.


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Risk Mgmnt implications as China Widens Embargo on Rare Earth Minerals

Thursday, October 28th, 2010

For those of you following RM101 postings here’s a question for you. Based on the following NYTimesarticle dated last week, what industries and loss scenarios should those industries be protecting against given China’s actions to lock up rare earth minerals. Keep in mind one thing, while there are current attempts to mine commercial quantities of the minerals that fall into this class, China effectively controls the marketable quantities currently used in the world.

Meridian is a highly dynamic specialized insurance consulting group and broker with offices in Boston, MA, Newport, RI and Brookfield, CT.  We are a hard-driving group with an entrepreneurial spirit who will work tirelessly for clients.  We specialize in risk management and risk transfer issues for clients in the energy and sustainable business  arenas.  We belong to  IECA, Slow Money, the Sustainable Business Network and in the past year became a B Corp. For more on this read our blog on sustainable business practices.

Our Mission is simple.   We seek to help our clients make the best risk and risk transfer decisions possible.  We bring market-leading service to the most creative solutions in the risk management field to ensure that each Meridian client achieves their risk objectives.

“HONG KONG — China, which has been blocking shipments of crucial minerals to Japan for the last month, has now quietly halted some shipments of those materials to the United        States and Europe, three industry officials said this week.

The Chinese action, involving rare earth minerals that are crucial to manufacturing many advanced products, seems certain to further intensify already rising trade and currency tensions with the West. Until recently, China typically sought quick and quiet accommodations on trade issues. But the interruption in rare earth supplies is the latest sign from Beijing that Chinese leaders are willing to use their growing economic muscle.

“The embargo is expanding” beyond Japan, said one of the three rare earth industry officials, all of whom insisted on anonymity for fear of business retaliation by Chinese authorities.

They said Chinese customs officials imposed the broader restrictions on Monday morning, hours after a top Chinese official summoned international news media Sunday night to denounce United States trade actions.

China mines 95 percent of the world’s rare earth elements, which have broad commercial and military applications, and are vital to the manufacture of products as diverse as cellphones, large wind turbines and guided missiles. Any curtailment of Chinese supplies of rare earths is likely to be greeted with alarm in Western capitals, particularly because Western companies are believed to keep much smaller stockpiles of rare earths than Japanese companies.

China experts said on Tuesday that Beijing’s assertive stance on rare earths might also signal the ascendance of economic nationalists, noting that the Central Committee of the Communist Party convened over the weekend.

A few rare earth shipments to the West have been delayed by customs officials in recent weeks, said industry officials in China, Japan and the United States. But new restrictions on exports appear to have been imposed on Monday morning.

Industry executives said there had been no signal from Beijing of how long rare earth shipments intended for the West would be held by Chinese customs officials. A few shipments are still being allowed out of the country for reasons that remain unclear: a fourth rare earth industry official said on Wednesday that one of the 32 authorized rare earth exporters in China had been allowed to export one container of rare earths to the West on Tuesday and hoped to be allowed to ship another on Thursday.

China’s official stance remained unclear on Wednesday. In an apparent reference to a report on Tuesday in the official China Daily newspaper, the commerce ministry said the report, predicting a decline of up to 30 percent in rare earth export quotas next year, was “totally groundless and purely false,” and added that no decision had been made yet on future quotas.

Without mentioning whether customs officials were interfering with statements to the West this week, the statement also said that, “China will continue to export rare earth to the world, and at the same time, in order to conserve exhaustible resources and maintain sustainable development, China will also continue imposing relevant restrictions on the mining, manufacture and export of rare earths.”

Japan’s Kyodo news agency reported on Wednesday that an unidentified diplomatic source in Beijing had said that rare earth shipments to the United States and Europe were being held up by customs officials for tighter inspections, one of the explanations that customs officials have also given in blocking shipments to Japan for the past month. But John Clancy, the trade spokesman for the European Commission, said in a statement on Wednesday that, “at this time, we cannot confirm claims made by European industry officials in media reports of China blocking rare-earth shipments to the” European Union.

The signals of a tougher Chinese trade stance come after American trade officials announced on Friday that they would investigate whether China was violating World Trade Organization rules by subsidizing its clean energy exports and limiting clean energy imports. The inquiry includes whether China’s steady reductions in rare earth export quotas since 2005, along with steep export taxes on rare earths, are illegal attempts to force multinational companies to produce more of their high-technology goods in China.

Despite a widely confirmed suspension of rare earth shipments from China to Japan, now nearly a month old, Beijing has continued to deny that any embargo exists.

Industry executives and analysts have interpreted that official denial as a way to wield an undeclared trade weapon without creating a policy trail that could make it easier for other countries to bring a case against China at the World Trade Organization.

So far, China seems to be taking a similar approach in expanding the embargo to the West.

Wang Baodong, a spokesman for the Chinese Embassy in Washington, said on Tuesday that the Chinese government was putting new restrictions on the mining, processing and export of rare earths to protect the environment. But he said that China was not violating any W.T.O. rules in doing so and that it was not imposing an embargo or trying to use rare earths as a bargaining chip.

“With stricter export mechanism gradually in place, outbound shipments to other countries might understandably begin to feel the effect,” Mr. Wang said in an e-mail. “But I don’t see any link between China’s reasonable rare earth export control policy and the irrational U.S. decision of protectionist nature to investigate China’s clean energy industries.”

Nefeterius Akeli McPherson, a spokeswoman for the Office of the United States Trade Representative in Washington, said that American trade officials were looking into the matter, after a report of the Chinese customs restrictions was published on Tuesday afternoon on the Web site of The New York Times.

“We’ve seen the news report and are seeking more information in keeping with our recent announcement of an investigation into whether China’s actions and policies are consistent with W.T.O. rules.”

Jeremie Waterman, the China director of the United States Chamber of Commerce, said that he was still checking government and industry sources to learn the extent of a suspension of Chinese rare earth shipments. “If it’s true, it’s disturbing news to say the least,” he said.

Mr. Waterman said that rare earths were so important to advanced manufacturing that restrictions on their trade might need to be put on the agenda of the Group of 20 meeting of heads of state, scheduled next month in Seoul, South Korea.

The Chinese government office that oversees rare earth policy, which operated with considerable independence for many years, was moved early last year into the Ministry of Industry and Information Technology. That ministry, formed only two years ago to draft plans for global leadership in many industries, has emerged as a bastion of economic nationalism.

Despite their name, most rare earths are not particularly rare. But most of the industry has moved to mainland China over the last two decades because of lower costs and steeply rising demand there as clean energy industries have expanded rapidly.

Congress is considering legislation to provide loan guarantees for the re-establishment of rare earth mining and manufacturing in the United States. But new mines are likely to take three to five years to reach full production, according to industry executives, although existing uranium mines may be able to move faster by reprocessing previously mined material, which often contains rare earths.

China reduced in July its export quota for rare earths for the second half of the year by 72 percent. Exporters had only six weeks’ of quotas left when China imposed its unannounced embargo on shipments to Japan.

Hiroko Tabuchi contributed reporting from Tokyo.

A version of this article appeared in print on October 20, 2010, on page B1 of the New York edition

Professional Liability vs: General Liability

Monday, March 1st, 2010

In fields in which specialized education, training, industry certification and often codes of conduct exist, unique liability does exist and in our rapidly changing society even new areas may have expectations of expertise that effectively subject individuals and corporate entities to professional liability.  These liabilities are generally excluded from commerical general liability policies in modern practice.

In theory, the primary purpose of this exclusion is to acknowledge the specialized errors and omissions that can occur in this professional environment  and which, therefore, can be “better covered elsewhere.”  In practical terms this is because these errors or omissions rarely involve either third party bodily injury or 3rd party property damage (which is the primary loss coverage in a CGL policy)  but rather usually involve “wrongful acts” involving some form of quantifiable financial loss.

Perhaps not surprisingly a big element in such claims is the defense and costs involved.  But of course the issue goes very deep and you should be aware not all policy provisions are identical.  Just a few of the areas you need to be aware include:  the extent to which the insurer is required to defend you, what triggers the defense by your insurer depending on the type of proceedings defined as trigger events, what deductibles or self insured retentions are involved, who selects counsel, and what say you have in settlement.  Professional liability is a very specialized cover and if you need help wading through how to proceed with changes in your needs in this area please ask Meridian for assistance.

Meridian is a highly dynamic specialized insurance consulting group and broker with offices in Boston, MA, Newport, RI and Brookfield, CT. We specialize in risk management and risk transfer for companies interested in traditional and renewable energy, sustainable practice and private criminal justice. We are members of the Sustainable Business Network, Slow Money Alliance, International Energy Credit Association, Connecticut Maritime Association and American Correctional Association. Our Mission is simple.  We seek to help our clients make the best risk and risk transfer decisions possible.

We bring market-leading service to the most creative solutions in the risk management field to ensure that each Meridian client achieves their risk objectives.

101 Rules of Risk Management

Thursday, January 14th, 2010

These rules represent  good old fashioned common sense perspective on Risk Management for the global age. They come from Jim Gunther of Harvard Aimes Group – a group in CT who do recruiting purely in the RM world for corporations.  We trust you will find it compelling. Pay particular attention to the General rules as well as the final one of this long list.  If questions arise about your risk management program please give us a call.

Meridian is a highly dynamic specialized insurance consulting group and broker with offices in Boston, MA, Newport, RI and Brookfield, CT. We specialize in risk management and risk transfer for companies interested in energy, sustainable practice and private criminal justice. We are members of the Sustainable Business Network, Slow Money Alliance, International Energy Credit Association, Connecticut Maritime Association and American Correctional Association. Our Mission is simple.  We seek to help our clients make the best risk and risk transfer decisions possible.

We bring market-leading service to the most creative solutions in the risk management field to ensure that each Meridian client achieves their risk objectives.

“Note well that these are 101 Rules of Risk Management, not THE 101 Rules. They were pulled together by the late Tom Hallet when he was with the late Frank B. Hall and Company. Our thanks to Tom and the group of pioneer Risk Managers who collaborated in this effort.”  Jim Gunther  Principle Harvard Aimes Group


1. An organization’s risk management program must be tailored to its overall objectives and should change when those objectives change.

2. If you are in a “safe” business (relatively immune from depression bankruptcy, or shifts in product markets), your risk management program can be more “risky” and less costly.

3. Don’t risk more than you can afford to lose.

4. Don’t risk a lot for a little.

5. Consider the odds of an occurrence.

6. Have clearly defined objectives that are consistent with corporate objectives.

7. The Risk Management Department as a user of services should award business on the basis of ability to perform.

8. For any significant loss exposure, neither loss control nor loss financing alone is enough; control and financing must be combined right proportion.

Risk Identification and Measurement

9. Review financial statements to help identify and measure risks.

10. Use flow charts to identify sole source suppliers or other contingent business interruption exposures.

11. To more fully identify and assess risks, you must visit the plants and relate to operational people.

12. A reliable database is essential to estimate probability and severity.

13. Accurate and timely risk information reduces risk, in and of itself.

14. The risk manager should be involved in the purchase or design of any new operation to assure that there are no built-in risk management problems.

15. Be certain environmental risks are evaluated in mergers, acquisitions and joint ventures.

16. Select hazardous waste contractors on their risk control measures and their financial stability or insurance protection.

17. Look for incidental involvement in critical risk areas (i.e., aircraft and nuclear products, medical malpractice, engineering design, etc.). RISK CONTROL

18. Risk Control works. It is cost effective and helps control local operating costs.

19. The first (and incontrovertible) reason for risk control is preservation of life.

20. A Property Conservation program should be designed to protect corporate assets – NOT the underwriter.

21. Be mindful that key plants and sole source suppliers may need protection above and beyond normal H.P.R. requirements.

22. Use the risk control services of your broker and carrier as an extension of your corporate program. Don’t let them go off on a tangent.

23. Quality control should NOT be a substitute for a full product liability control program. Quality control only assures the product is made according to specifications, whether good or bad.

24. Most of the safety-related “standards” of governmental agencies should be considered as minimum requirements.

25. Duplicate and separately store valuable papers and back-up data processing media.

26. Avoid travel by multiple executives in a single aircraft.

Risk Financing

27. Risk Management should focus on two separate zones of risk relative to the maximum dollar loss the company can survive from a single occurrence:

a) below this level-optimize the use of insurance relative to current cost.

b) above this level-transfer risk (usually insurance) to maximum extent possible-cost effectiveness is not a criterion in this zone; SURVIVAL is.

28. An entity with an unlimited budget can benefit from adopting all risk management measures that have benefits to the entity with an expected present value greater than the expected present value of cost of those measures to that entity.

29. When, for budgetary or practical reasons, an entity must chose between mutually exclusive risk management measures, the entity should chose that measure which offers it the greater excess of benefits over costs, when both benefits and costs are expressed as expected present values.

30. Competitive bidding which causes market disruption should be avoided.

31. Never depend solely on someone else’s insurance.

32. Retrospective rating plans of more than one year hamper flexibility.

33. A tax advantage should be considered a “PLUS”-not a principal reason for a risk financing decision.

34. Risk taking presents an opportunity for economic gain.

Claims Management

35. The risk manager should be notified immediately (within 24 hours) of any major loss or potential loss.

36. Major liability claims should be reviewed for adequacy of investigation and accuracy of the reserve.

37. Be careful of local plant involvement in property and liability claims. Local personnel may be too defensive to properly review a major claim.

38. Request early advance payments on large Property and Business Interruption losses.

39. Secure several estimates or an appraisal of self-insured vehicle physical damage losses.

40. Aggressive claims subrogation (insured and self-insured) reduces costs.

41. A claim and disability management program directed toward getting the employee back to work as soon as possible can save money even though the employee cannot do all phases of the job.

42. Periodically audit claims reserves of insurers and T.P.A.’s.

43. The best claim is a closed claim.

Employee Benefits

44. The provisions and costs of Employee Benefit programs should be clearly and frequently communicated to employees.

45. When installing a new benefit plan, it is harder to reduce benefits than to improve them later on.

46. A poor employee benefit program can generate more employee relations problems than no plan at all.

47. Employee contributions, even small ones, can help you assess the real popularity of a benefit plan.

48. Know the benefit plans of the companies with whom you compete for labor.

49. Benefit consultants and brokers are not efficient replacements for in-house staff functions.

50. Collective bargaining of employee benefits should involve corporate benefit professionals.

51. Legislation and regulation are intensifying in the employee benefit field. Make your company’s opinions known to the government BEFORE legislation in enacted.


52. The ultimate cost of any pension plan is equal to the benefits paid, plus the cost of administration, less any investment earnings of the fund.

53. For the most part, different actuarial methods and/or assumptions may alter the incidence of cost, but seldom alter the ultimate level of cost.

54. Clearly identify your corporate objectives with respect to your Retirement program. Recognize that Retirement plans are long-term obligations that will span many political, economic, and social environments.

55. Recognize that retirement plans are long-term obligations that will span many political, economic and social environments.

56. Identify the nature and extent of pension liability prior to any acquisition or divestiture.

57. Establish formal investment objectives with respect to your pension funds that define risk, diversification, and absolute performance parameters.

58. Monitor the performance of your pension fund in the context of your investment objectives.

59. Identify and monitor your corporate exposure as a result of participation in any industry-wide Multi-Employer Pension Plans.


60. Multinational organizations should step up to their international risk management responsibilities.

61. Establish a worldwide risk and insurance management program; don’t rely totally on a Difference in Conditions approach.

62. A combination of admitted and non-admitted insurance usually provides the best overall international program.

63. Avoid the use of long-term insurance policies overseas.

64. Be sensitive to and don’t underestimate nationalism when implementing a worldwide risk management program.

65. Don’t ignore local objections to worldwide programs.


66. Establish a level of authority via a management policy statement.

67. Prepare and universally distribute a Corporate Risk Management Manual.

68. Set up realistic annual objectives with your brokers, underwriters and vendors and measure their accomplishments and results.

69. Verify the accuracy of all relevant information you receive.

70. Read every insurance policy carefully.

71. Keep program design simple.

72. Consolidate-where it makes sense to do so.

73. Develop record retention procedures.

74. Keep inter-company premium allocations confidential.

75. Establish administrative procedures in writing.


76. Insurance policy provisions should be uniform as to named insured, notice and cancellation clauses, territory, etc.

77. The “notice” provision in all insurance policies should be modified to mean notice to a specific individual.

78. Primary policies with annual aggregates should have policy periods that coincide with excess policies.

79. Joint loss agreements should be obtained from Fire and Boiler & Machinery insurers.

80. Add “drive other car” protection to your corporate auto insurance.

81. Eliminate coinsurance clauses.

82. Know the implications of and differences between “claims made” and “pay on behalf of” liability contracts.

83. Risks accepted under contracts are not necessarily covered under contractual liability contracts.

84. Add employees as insureds to liability contracts. Use discretionary language to avoid defending hostile persons.


85. All communication providing or requesting information should be expressed in clear, objective language, leaving no room for individual interpretation.

86. All communications and relationships should be conducted with due consideration to proprietary information.

87. Communicate effectively up and down and avoid management surprises.

88. Don’t TELL senior management anything-ask them, counsel them, and inform them.

89. Communicate in business language; avoid insurance jargon.

90. Obtain letters of intent or interpretations regarding agreements (coverage or administrative) which are outside of and/or in addition to actual insurance or service contracts. Never rely on verbal agreements.

91. The immediate supervisor to the risk management function should be educated in the principles of risk management.

92. Communicate every insurance exclusion and non-insurance implication to your management.

93. In competitive bidding situations, advise each competitor that the first bid is the only bid and stick to it.

94. Risk Managers should meet with underwriters rather than relying totally on others for market communications.


95. The Risk Manager (and his corporation) should avoid developing the reputation of a “shopper” or “market burner”. This reputation can be detrimental to the corporation’s best interests and the Risk Manager’s credibility.

96. Determine your personal level of risk aversion and temper intuitive judgments up or down accordingly.

97. Program design will always be a function of CURRENT practicalities tempered by management’s level of risk aversion.

98. Everyone is in business to make a fair profit.

99. Long term, good faith relationships are not obsolete.

100. Integrity is not out of style.

101. Common sense is still the single most important ingredient in risk management!”

“Credit Management at the Center of the Storm”

Monday, January 11th, 2010

From Adam Dupre CEO Ocean Intelligence Pte Ltd comes some wisdom on the current perils of counter-party risk in the bunker market.  In a credit market with historic volatility only just beginning to settle a bit and with credit insurance markets tighter than in recent memory voices of wisdom are particularly important.  Of course counter-party risk extends much further afield than the bunker markets. If you would like to discuss your needs please reach out to us.

Meridian is a highly dynamic specialized insurance consulting group and broker with offices in Boston, MA, Newport, RI and Brookfield, CT.  We are a hard-driving group with an entrepreneurial spirit who will work tirelessly for clients. We specialize in risk management and risk transfer for those in the energy markets.   We are members of the  International Energy Credit Association.  Our Mission is simple.  We seek to help our clients make the best risk and risk transfer decisions possible.

“Counter-party risk: in a recession it inevitably increases, and with it the importance of credit management.

That has been the topic of three recent conference presentations; in Oslo, Algeciras and Istanbul. I am beginning to feel a bit like a cracked record, but it really is an essential issue and one that deserves huge amounts of attention both from suppliers and buyers in the bunker markets.

Counter-party risk has, in many ways, actually surpassed price volatility as a matter of deepest concern to the market. If your debtors default enough times, your business is finished, and with relatively high prices and low margins, that may not be too many times for some players. What does it imply and what can be done?

One thing that was, not surprisingly, very clear at all three conferences was the anxiety caused by the current economic climate both from the suppliers side and the shipowners side, and the changes this is causing in the patter of relationships between the two sides. It is as if the onus has switched from traders doing everything possible to justify a sale, to the buyers now having virtually to demonstrate their creditworthiness. The supply side is sharply conscious that it is (and always has been) basically a cheap bank for the buyer side and it is beginning to look for some recognition of this. And trade finance for the supply side, though economic recovery may bring some easing here, has become more difficult and more expensive. Not only do you have to beware of default, but now late payment can become a serious issue for a supplier.

So we have a new situation here. Instead of cheap unsecured credit and relaxed payment terms, the supply side is tightening up – it has to! And it is paying even more attention than ever (is that possible?) to the analysis of real counter-party risk. Laying off credit risk to others has become expensive – the foresightful few who locked in their credit insurance premiums before the downturn hit will be relaxing by the pool (though their insurers probably won’t) – and for suppliers and traders making a tiny margin is not really a viable option.

That really leaves good due-diligence as the only viable option in assessing counter-party risk. But what does that mean in the context of the bunker market? Responding to this question, I took the specialist marine credit report as a paradigm, and also as an affordable proposition, because to assess counter-party risk, you need to know your customers pretty intimately – their habits, business manner, financial position, market prospects, management quality, experience and record in dealing with difficult markets and all the rest – what a good credit report gives you. Even with  customers you know (or think you know) well, if you are wise you will double check. Up to date credit reports can be an excellent way to clarify and update your picture of a customer, providing a detailed picture of its operations, market, operational and payment performance.

One of my Turkish colleagues used poetic Ottoman style to illustrate the point, saying that a good analyst, like a good cook, first ensures that he has the best ingredients (the best information) and then applies skills that should be honed over years of training and practice. A good credit report cannot be mass produced – too much haste can lead to mistaken judgements. That is a major reason why Ocean Intelligence does not demand more than three reports per day from its analysts. We may have to turn work away, but our reputation for quality is our most precious asset, and we are just not prepared to put it at risk by over producing.

As my colleague said: “Like in cooking you need to get the freshest ingredients (knowledge), separate the good from the bad (assess what is true and what is untrue in what we have been told by our market sources), and then use our expertise to combine the various ingredients of fact, rumour and direct experience into a suitable dish. As a cook uses different spices to bring out the true flavour of the dish, so the credit analyst combines, assesses and presents the ingredients of a report to present as accurate a picture and judgement as possible to the reader, with elements and judgements ranked according to importance to allow a clear credit decision to be made.”

Where credit insurance is too highly priced, tools that enable you to take the risk yourself become more valuable. Credit reports are an important part of the credit toolkit.

On the buyer side there is increasing pressure for transparency. At all three conferences, all speakers who touched on the matter of bunker trading directly pointed out the need for this element so hard for ship operators to work with. In a predominantly private and tradition-driven industry, changing the habits of lifetimes will not be easy, but it is certainly becoming more necessary.”

(follow more of Adam Dupre’s thoughts at Ocean Intelligence.  OI provides high quality intelligence and assessment for the marine industry’s most discerning participants.)

Private Companies need D&O coverage also

Tuesday, August 25th, 2009

Closely held private companies often wonder why they might ever need directors and officers liability coverage.  Unfortunately the typical scenario in which opinions change is when a company and its officers and/or directors find themselves facing mounting defense costs in such a case.  Better to examine the real exposure ahead of time we feel. Here is an article that that I think  may help to start the dialogue. Please feel free to contact us if you have questions or want to pursue coverage options.

Tom Bryant is a partner in Meridian Consulting. His 35 year work career began in a farming community in Alberta and encompasses years in the onshore/offshore oilfield industry, penitentiary and parole supervision of violent offenders in the Correctional Service of Canada, and more recently risk management for corporate clientele primarily in the energy industry.

Private Companies Need D&O Insurance, Too

By Shannon A. Graving and Thomas H. Bentz Jr.

Directors’ and officers’ policies aren’t just for public corporations. D&O protection can save

owners of a closely held business from bankruptcy in the event of a lawsuit against the company.

Owners of many private companies, particularly those that are closely held by relatives, believe they have no need for

directors’ and officers’ (D&O) insurance. Unfortunately, they may learn a costly lesson when they incur defense costs or,

worse, pay settlement amounts or judgments. Private companies may be subject to claims from a number of plaintiffs for a

variety of reasons.

When a family’s assets are tied up in a single company, uninsured loss is a serious concern. Consider this: When directors

and officers are sued, their first line of protection for their personal assets is indemnification from the company. When those

same directors and officers own the company, indemnification essentially comes from their own pockets. Depending on the

size of the claim and the depth of their pockets, a lack of insurance to reimburse the company could result in bankruptcy.

Therefore, private companies must have broad D&O insurance protection. In fact, you should think of it as a part of your

estate planning; otherwise, there may be little to pass on to the next generation.

Many plaintiffs, many causes of action

Most people think of shareholder suits when they think of D&O insurance claims. As discussed below, that is a risk, even for

private companies, but it is not the only one. Lawsuits may be brought by employees, competitors, customers, creditors,

investors, government agencies and vendors for such causes of action as fraud, unfair competition, interference with

prospective economic advantage, wrongful interference with a contract, infringement of trade secrets, breach of contract and

violations of various regulations.

The most common suits against private companies are employment practices liability claims. In its 2007 Directors and

Officers Liability Survey, Towers Perrin reported that 43% of all claims against private companies in 2007 were made by

employees. Many D&O insurance policies for private companies include employment practices liability insurance, which

covers claims from employees (including potential and former employees) alleging a myriad of wrongful acts, such as

discrimination, harassment and wrongful termination.

The next category of frequently filed claims consists of those by shareholders. Towers Perrin’s 2007 Directors and Officers

Liability Survey found that 32% of all claims against private companies in 2007 were made by shareholders. Directors and

officers at private companies owe the same fiduciary duties to their shareholders as do those who serve public companies.

Disputes may erupt even if shareholders are friends or relatives of the company’s directors and officers. Since private

companies may not follow the same rigorous procedures as their public counterparts and are more likely to contract with

affiliated businesses, there may be more room for questioning whether management complied with its fiduciary duties and

acted with due authority.

It is important to note that a company can be subject to securities laws on the federal and state level even if its shares are not

traded on an exchange or over the counter. Private companies are at risk for a number of securities-related claims, such as for

errors or omissions in private placement materials.

Transactional risks

Significant corporate transactions, such as a sale, acquisition, merger or initial public offering, increase the risk of a claim

dramatically. Some family members may believe the company should be sold for top dollar, while others may feel that the

value in keeping the family business exceeds the proposed purchase price. Whoever loses the argument may sue the company

and its directors for breach of the duty of care or loyalty.

Another possibility is that employees and third parties may disapprove of the deal and bring suit. A transaction can even

trigger the filing of latent claims. For instance, an employee who is the subject of harassment may take no action out of a

sense of loyalty to the company. Once the owners decide to sell, the employee may feel the company is no longer loyal in

return and decide to file suit.

In the case of an IPO, decisions and actions that may be the subject of claims are often made far in advance of the IPO

effective date. If a company is considering going public in the foreseeable future, it is particularly important that it purchase

D&O insurance immediately in order to provide coverage of all pre-IPO decisions and activities.

Obtaining broad coverage

Simply purchasing a D&O insurance policy is not enough. There are a number of steps you should take in order to obtain the

best protection for your assets.

1. Arm yourself with information.

your company. Do not just compare premiums. Each D&O insurance policy is unique, with its own virtues and flaws. Be sure

to ask for a comparison of key terms such as the insuring clauses, the definition of “claim” and the exclusions. Understand

what is covered. It may be helpful to pose possible claim scenarios and ask whether you would be covered. For instance,

what happens to your coverage if your company declares bankruptcy?

Once you have engaged a broker, he or she will obtain a number of premium quotes for

2. Request an independent expert review.

work with potential underwriters to obtain quotes and can advise on terms and conditions. However, you should also request

an independent review by an attorney who specializes in D&O insurance to ensure that the company’s program provides the

best coverage available. Such an attorney should be highly experienced — he or she should review dozens of policies each

year and advise on claims, not simply answer a few questions as an adjunct to his or her main practice.

An independent expert review should be requested annually. Market conditions change from year to year. In addition, new

policy forms may be available because of new insurers entering the market and existing insurers offering new policies and

endorsements. As a result, if your company renews its policies without the benefit of a fresh review, you most certainly will

not have the best protection or be able to obtain maximum value for your insurance dollars.

Your broker will be able to provide invaluable information about limits, will

3. Be vigilant about coverage.

comply with the notice and cooperation provisions in their policies. Providing notice is often not the first concern when there

is a lawsuit, but if your company does not provide prompt notice, you risk losing coverage. The same is true if your company

does not comply with the cooperation requirements. Whenever a claim is made, it is in your interest to ask if your D&O

insurance policies have been consulted, whether the applicable insurers have been notified and if someone is responsible for

complying with policy conditions.

Negotiating the best policy will not ensure payment of covered loss. Companies must also

The bottom line

There are multiple potential plaintiffs who may file claims against private companies for a variety of reasons. In order to

protect your assets, it is advisable to purchase D&O insurance. It is not enough to simply purchase any policy. You and your

company should take the steps described above. Otherwise, your family’s assets may be unnecessarily at risk.

This article appeared in “Family Business” Magazine, Winter 2009. Shannon A. Graving and Thomas H. Bentz Jr. are

attorneys at the law firm of Holland & Knight LLP. They specialize in D&O and management liability insurance, with a

focus on D&O policy negotiation and coverage counseling (



Safety and the reality of zero injuries

Friday, August 21st, 2009

I have worked since the 1970′s in settings as diverse as onshore and offshore oil exploration, the North Pacific commercial fishing industry, a steel mill, a slaughterhouse, farms and the outwardly innocuous ”office”  cube.  Each present their own hazards.

But typically I have found the actual risk of injury is not directly related to the risks that are present.  I have seen two companies perform essentially the same task over periods of time in extraordinarily adverse field situations but with very different results. The difference is always in attitudes.

Since oil platform doghouses across the nation often proudly display  evidence of injury free days in the 1,000′s and vastly “safer” offices I have worked in have had quite toxic attitudes and personnel with various ongoing health and safety problems, the issue is truly one of personal responsibility and corporate leadership.   I want to present today an article written recently in Workplace HR and Safety which I believe touches on the heart of the matter. I hope you enjoy it and I look forward to your comments.

Tom Bryant is a partner in Meridian Consulting . His 35 year work career began in a farming community in Alberta and encompasses years in the onshore/offshore oilfield industry, penitentiary and parole supervision of violent offenders in the Correctional Service of Canada, and more recently risk management for corporate clientele primarily in the energy industry.

Beyond Zero Injuries

How to Send Workers Home in Better Shape Than When They Came In?

By Matt Forck, CSP, JLW

A number of years ago, I attended a safety banquet for a utility company. The event was held to celebrate, with workers and their spouses, the fact that the group had worked the entire year without a lost workday case. During the event, a vice president took the podium to share a few words. “Your families let go of you each morning.” He began. “You belong to them, and we borrow you for eight hours of work. Your families expect and deserve to have you back at the end of each day, whole and healthy.”

The term zero injuries is becoming a more common trend or theme for industry. Many organizations have “target zero” or “zero is possible” posters pasted on break-room walls and on car and truck bumpers.

The Center for Disease Control and Prevention (CDC) considers safety improvements as “one of the greatest health achievements in the 20th century.” According to the CDC, the workplace today is, on average, nearly 40,000 lives a year safer compared to the 1930s. Yet, it could be argued that safety gains over the last half-decade have flattened. For example, the Bureau of Labor Statistics reported that fatalities were at a record low in 2003, with 5,575 workplace deaths; that number has slowly risen since the low point.

It begs the question: Have we reached a backstop called zero? If that is the case, in order to move us into the next level of safety performance, safety professionals and leaders across the country will ask what is beyond zero. If I can send my people home in the same shape as they arrived, can I return them better than they were when they arrived? Consider these steps to move beyond zero.

Start with a Firm Foundation
I believe it was Stephen Covey who said, “Systems are designed to produce the results they are currently producing. Organizations are systems. If you don’t like the results you are producing, change the system.”

First and foremost, we can’t move beyond zero until we are “near zero.” If your organization isn’t there, stop reading now and return to this article after sustained safety success is established.

Near zero is found in safety statistics, but those numbers are driven from the establishment of an effective safety system. These systems make the firm foundation of safety success and include; safety and hazard awareness programs, safety committee processes, accountability systems, senior leadership and engagement and recognition programs. Once those are in place, and you have measured success over time, you are ready to look beyond zero at the possibilities that exist.

Stretch and Flex Programs Build Self-Esteem

About 15 years ago, when I was an overhead electric lineman, I was reporting to a jobsite in Boonville, Mo. Reporting along side our line crew was a railroad crew. Before the rail crew began work, they were required to stretch and flex. During the exercises, they had about as much passion as a boy who was required to kiss his sister! Their heart was not in it.

Fast forward to last summer when I spent time with major construction companies. I was amazed and pleased to find that they had an aggressive stretch and flex program. They have dubbed their employees as “construction athletes.” Their workers understood the importance of such programs. In Boonville, as the old timers “made fun” of the rail crew, they also popped aspirin all day to help aching muscles and joints. Physical work is tough and can take a toll on the body over time.

Gut check: If we change our perspective to “beyond zero,” how does that change the view of stretching and flexing over time? How important is proper lifting, body positioning, micro stretch breaks and flex programs? We are only given one body and it is not to be “spent” at work. Instead, our bodies can be used to earn a living so that we may enjoy life after work. What’s beyond zero? I’m not sure, but I do know it begins when our collective work groups can touch their toes!

Combat Complacency with Energy
“A man was walking through town,” an old story begins, “and notices a friend on a bridge getting ready to jump. He quickly runs over and tells his friend not to jump. Come down, instead, and talk about the problem. So the friend did come down, they talked and two hours later they both jumped!”

What is arguably the number one danger in the workplace? The answer is complacency. It can hurt and even kill.

Here is a simple litmus test on organizational energy. Rate the following safety activities with “1” being very low energy and “10” as optimal energy:

____Your most recent safety meeting

____Your organization’s safety committee engagement

____Your last safety observation activity

____Your most recent job briefing

Unfortunately, if we are honest, most organizations are hovering around two or three on the scale. All too often, the work environment tends to be an energy hole, draining away personal energy and engagement. Commitment, feedback and compliance might be jumping off the bridge with this low energy.

Gut check: Would a higher level of energy help workplace safety? What results can you achieve with a higher level of enthusiasm and energy level? What are some tools that could be used to raise an organization’s energy levels? Can our people leave a jobsite physically tired yet emotionally energized? How would that wipe out workplace complacency?

Community Translates into Top Performers
“No one told us to take the fun out of work,” an anonymous quote reads. “We did that on our own.” In their ground breaking book, First Break All of the Rules—What the World’s Greatest Managers do Differently, authors Marcus Buckingham and Curt Coffman reached some interesting conclusions. They tackled more than 80,000 manager interviews from across the country and from diverse industries to determine that community plays a substantial role in employee performance.

Among other conclusions, they found the following workplace qualities in the organizations where performing employees worked: an environment where supervisors care for employees as people, development is encouraged, opinions count, praise is given often, there is commitment to quality and employees have a best friend at work.

To that end, is there a sense of community in your workplace? Do employees have friends? Does your organization care? What kind of feedback is given and how often? In the end, community is a place where we care and want to be present. What can we do to move our organizations toward community?

Gut check: Would feedback for safe work rules and safe work compliance be better or worse in a caring environment or in a “community?” What are five small actions your organization could begin doing tomorrow to encourage community?

“Don’t be afraid to give up the good,” said Kenny Rogers, singer and actor, “to go for the great!” After the safety system foundation is poured and our organizations are “near” zero, it is time to look beyond zero. It is appropriate to look at how we can return our people home “better” than they came to work.

In the end, work has mostly been viewed as a place where one “gives” life. However, why can’t we look beyond zero and view work as a place where we actually get life, grow and become a better person? Once strong programs are in place and the safety foundation is poured, if we begin to think beyond zero, amazing thoughts and results can happen.

Matt Forck, CSP, JLW, directs K-Crof Industries LLC, an organization specializing in safety keynote presentations, training and safety consulting services. For more information and safety resources, visit www.thesafetysoul.org or send an e-mail message to matt@thesafetysoul.org.

Meridian Consulting Group’s Risk Management Blog

Saturday, August 15th, 2009

Welcome to this brand new section of our new and improved website. Here we will begin to publish what we hope will be valuable information for our visitors as they navigate through the maze of all the risk management options  and providers out there on the Internet.

The content included here will include case studies, general information on risk management principles, insightful commentary on current political, judicial, legislative, and social events that could affect the risk environment in which our clients operate, along with links to relevant information regarding the current state of the risk management industry.