Risk Finance

What is Risk Management?

Risk Management is the process of making and carrying out decisions that will minimize the adverse effects of accidental losses upon The University of Texas System Institutions.

What is the Risk Management decision making process?

The Risk Management decision making process consists of 5 steps:

1. Identifying and analyzing loss exposures
2. Examining alternative Risk Management techniques
3. Selecting the appropriate technique
4. Implementing the technique
5. Monitoring the results

Loss prevention, spreading risk, contractual transfer and insurance are all examples of Risk Management techniques.

What is a claim?

A claim is a demand for payment. How much or how little the amount of the claim depends on the specifics of the incident such as the severity of the injuries and physical damages and the method in which the claim is handled. How we manage the process of handling claims is vital to controlling costs.

What is Subrogation?

Subrogation is the substitution of one person in the place of another with respect to a lawful claim, demand or right against a third party, so that the substituted party succeeds to the rights of the other, or "stands in the shoes of the other" with respect to the claim against the third party.

When does Subrogation occur?

When an insurance company covers a loss that is not the fault of the insured, the carrier may pursue the carrier representing the at-fault party to recover payments made to the carriers insured.

Insurance companies can only subrogate other parties if their customer is less than 50% at fault for an incident. Texas has adopted the doctrine of modified comparative negligence for tort claims. 

If the person bringing the claim is judged to be greater than 50% responsible for the injury, he may not recover any damages at all. If his percentage of responsibility is judged to be 50% or less, the claimant’s recovery is diminished in proportion to this percentage (Texas Civil Practice & Remedies Code § 33.001-33.017).

What is a tort?

A tort is a civil wrong. There are 3 commonly encountered torts: negligent torts, intentional torts, and strict liability.

A negligent tort results from a failure to exercise ordinary reasonable care towards a person to whom a duty is owed. If a farmer began burning debris and the fire spread to the neighbor’s property and caused damages, the farmer would be negligent for failing to exercise reasonable care.

An intentional tort is done with purpose and design to injure a person or property. An example of an intentional tort is when a person purposefully vandalizes someone’s property.

Strict Liability torts involve liability for damages without the necessity of proving fault or negligence.  An example of Strict Liability would be when a person using dynamite to remove rock caused damage to our property.  The fact that dynamite was used and is considered inherently dangerous imposes Strict Liability on the user.

What is Vicarious Liability?

An individual may be directly liable for their own acts or vicariously liable for the acts or omissions of another.  In other words, liability can be imputed to another party.  This may also be known as the principle/agent concept.  An example would include employer/employee relationships or business partners.

In Texas, state agencies are presumed not to be liable for the torts of their employees or officials unless the Legislature has given permission to sue either by express permission or by statute.

The only statute that gives a plaintiff permission to sue the state in a tort action for money damages is the Texas Tort Claims Act (the Act).

The Act allows claimants to pursue only certain types of tort claims.  Even when a claim appears to generally fall under the provisions of the Act, any failure to comply with the Act may result in a claim being invalid. Claims that are covered by the Act are subject to limitations on recoverable damages. Not only does the Act apply to The University of Texas Institutions as an entity, it also has provisions which provide some protection for individual Institution employees.

What type of coverage is provided by the Equipment Policy?

The equipment insurance policy pays for direct physical loss or damage to scheduled miscellaneous articles caused by or resulting from a peril not otherwise excluded. The intent of the equipment policy is to supplement coverage provided by the Comprehensive Property Protection Plan (CPPP). 

What type of property is the Equipment Policy intended to cover?

The list includes, but is not limited to the following: audio/visual equipment, computer equipment, copy machines, medical equipment, scientific equipment, and telephone equipment.   

What type of property is NOT covered by the Equipment Policy?

The list includes, but is not limited to the following: accounts, bills, deeds, valuable papers; aircraft, motor vehicles, trailers, semi-trailers or motorized watercraft; jewelry, watches, furs, bullion, precious metals, stones or gems, stamps or coins; money, notes, securities; property towed by aircraft.

What about Antiques?

The policy is not intended to cover antiques. Antiques should be covered under the Systemwide Fine Arts Policy. 

What about Furniture and Fixtures?

The Office of Risk Management discourages the use of the Equipment Policy to cover Furniture and Fixtures unless required by a lease agreement. Most of The University of Texas System Institutions rely on the Comprehensive Property Protection Plan (CPPP) to cover their furniture and fixtures.

What is considered Furniture and Fixtures?

Examples are desks, tables, desktop items, chairs, shelves, wall hangings, modular furniture, carpets, certain office equipment, lamps and other lighting fixtures. 

What about Musical Instruments?

If needed, musical instruments can be covered under the Equipment Policy but at an agreed value.

Will the Equipment Policy cover equipment loaned to students, faculty, or other entities?

If the equipment is scheduled, the policy will cover items loaned to others. A preferred option is to make the other party responsible for the equipment coverage and require a certificate of insurance from them with The University of Texas listed as a loss payee.

Will the Equipment Policy cover equipment loaned to University of Texas from another entity?

If the equipment is scheduled, the policy will cover items loaned to the University of Texas.

What is the valuation basis on the Equipment Policy?

The policy is written on a replacement cost basis on all scheduled items, except for Actual Cash Value on furniture and fixtures, and agreed value on Musical Instruments.

What is the difference between Actual Cash Value and Replacement Cost?

Actual Cash Value is the cost to repair or replace with material of like kind and quality less deterioration, depreciation, obsolescence and depletion. Replacement Cost is the cost to repair or replace the covered value of the schedule item with like kind and quality for the same use. If the item is not repaired or replaced, the company will only pay on an Actual Cash Value basis.

What is the difference between the Equipment Policy and the Comprehensive Property Protection Plan?

The intent of the equipment policy is to supplement coverage provided by the Comprehensive Property Protection Plan (CPPP).  Although the equipment policy has a higher premium rate, it offers substantially lower per occurrence deductibles.  In addition, the equipment policy also provides broader coverage than the CPPP, such as broader coverage while equipment is in transit; waterborne coverage; coverage for certain types of mechanical breakdown, and coverage to property loaned to others.  Also the equipment policy provides worldwide coverage whereas the CPPP is limited to the United States, the District of Columbia, the US Virgin Islands and Puerto Rico.

Are we required to purchase Equipment Coverage? 

Property insurance may be required by a lease agreement, a provision of funding for a grant, or may be required by another entity that loans equipment to one of The University of Texas System Institutions.  You have the option of either insuring the property under the Comprehensive Property Protection Plan (CPPP) or the Systemwide Equipment Policy based on your preference for deductible, pricing, and coverage issues described above.

Other than the above, can we pick and choose what equipment we purchase coverage for?

Absolutely!  This is a business decision that is up to the University of Texas System Institution to decide. 

Who can I contact if I have coverage questions?

The University of Texas System - Office of Risk Management - Risk Finance
Eric Agnew
Phone: 512.499.4305

Benny VandenAvond
Phone: 512.499.4298

What is SharePoint?

SharePoint is a virtual online database that can be used to upload, view, and retrieve documents online. The University of Texas System (the UT System) Office of Risk Management (ORM) utilizes SharePoint to distribute key documents, including systemwide insurance policies, with the Risk Management Advisory Committee (RMAC) contacts.

If you are an RMAC contact or other authorized user of SharePoint and do not know your password, please contact the UT System Office of Technology and Information Services (OTIS) at 512.499.HELP (4357) to have your password reset. All other inquiries regarding SharePoint can be directed to the UT System ORM.

For more information regarding Insurance Policies on SharePoint, refer to the SharePoint section.

Who should I contact for more information?

For more information, refer to Risk Finance Responsibilities.