This page contains details on governance, claims, and policy information. For more answers to frequently asked questions on these matters and more, please see the FAQ page.
Terrafirma insures member land trusts for the legal costs of defending conservation lands and easements and provides information to those land trusts with respect to loss control and risk management.
Terrafirma is organized as a "risk retention group" consisting exclusively of Alliance member land trusts, all of which are tax-exempt organizations described in Section 501(c)(3) of the Internal Revenue Code ("Members").
A "risk retention group" is a mutual insurance arrangement under which similarly situated entities act together to form an insurance entity whose business is limited to insuring its members. In Vermont, which is where Terrafirma is domiciled, risk retention groups must be formed and operate in accordance with the Risk Retention Act. To maintain its state license to operate as a risk retention group in Vermont, Terrafirma retains several professional advisors, including a third party professional captive manager ("Captive Manager"). In Vermont and other jurisdictions, most day-to-day ministerial and administrative functions of a captive insurance company or risk-retention group are performed by commercial service providers located in that jurisdiction functioning as Captive Managers.
Terrafirma qualifies as a tax-exempt organization described in Section 501(c)(3) of the Internal Revenue Code and also as a "charitable risk pool" under Section 501(n).
Terrafirma is a not-for-profit limited liability company organized in April 2011 under the State of Vermont Limited Liability Company Law. Pursuant to its LLC Agreement, the Members have designated a person not a Member to be the Manager of the LLC, authorized to act in its name and manage the business of Terrafirma on behalf of the Members. Alliance Risk Management Services LLC ("ARMS"), a Vermont limited liability company of which the Land Trust Alliance is the sole owner and member, is the "Manager" of Terrafirma.
Instead of a Board of Managers, the Members in the LLC Agreement established a Members Committee to represent their interests. In order to assure broad representation of the land trust community in America, the LLC Agreement provides for the election of the Members Committee by region, and also requires nominations on a basis reasonably designed to include on the Members Committee representatives of national, regional (State) and local land trusts and a mix of accredited and non-accredited land trusts.
Membership in the risk retention group consists exclusively of Land Trust Alliance members, all of which are tax exempt land trusts. Because all Members are entities that have been determined by the Internal Revenue Service to be tax-exempt organizations described in Section 501(c)(3) of the Internal Revenue Code, Terrafirma has been approved as a "charitable risk pool" within the meaning of Section 501(n) of the Internal Revenue Code and is a tax-exempt organization described in Section 501(c)(3) of the Internal Revenue Code. Terrafirma also has a captive insurance license under Vermont law.
For a basic initial annual premium of $63 per conservation property, a land trust Member receives coverage with a deductible of $5,000, a single-loss limit of $500,000 and a limit on all Claims in a single year of $500,000. Land trusts insuring large amounts of conserved land receive a higher aggregate limit, described below under Limits.
Terrafirma is the result of years of debate and discussion by the land trust community, a survey of past conservation defense experience and costs, and a comprehensive feasibility study by Betterley Risk Consultants, Inc. The Alliance created a steering committee of insurance and legal experts to guide the design of the program. Their work has been guided by the twin goals of satisfying land trust needs and building a program that is financially sustainable. The resulting program does not involve risk or exposure to the insured Members beyond their premiums and capital investment and has eligibility requirements that should make the insurance product available to most land trusts, large and small, with coverage for most of the conservation defense costs not covered by existing insurance products.
· Pooling of conservation defense risk through insurance is far more efficient than requiring each individual land trust to maintain sufficient individual reserves, and is the only solution for the many smaller land trusts which could not hope to acquire and maintain such reserves.
· No commercial insurance product is available because the universe of potential customers and potential profit is too small for existing insurers to justify entry into a new line of business.
· All land trusts are affected by ineffective defense of specific cases and/or individual adverse court decisions, and thus collective action is appropriate to address conservation defense.
· The land trust community, acting through the Alliance, established a vigorous conservation defense initiative that helps land trusts manage these risks and prevent these types of losses. The Alliance’s National Conservation Defense Initiative provided the loss prevention services required by Terrafirma.
The Terrafirma LLC Agreement specifies that the Alliance, acting through ARMS, is responsible for providing specified loss prevention and risk management services to Terrafirma and its Members. These specified services provided through the Manager are wholly or partly for the account of Terrafirma, while the balance of the Alliance’s National Conservation Defense Initiative remains the responsibility of the Alliance. Included in the specified services are:
· The services of a national coordinating attorney for Terrafirma who oversees the selection of counsel and management of cases where costs are covered by Terrafirma and participates with land trusts and their counsel in decisions regarding settlement, appeal and the like. The National Coordinating Attorney also convenes and serves as an ex officio member of the Claims Committee with authority to make decisions regarding insurance Claims.
· Management of Conservation Defense Center resources, including resources specifically required by Member land trusts, attorney location services for Member land trusts, special programs for attorneys eligible to act on cases covered by Terrafirma and special training at Rally for all those involved in Terrafirma and covered Claims.
· The coordinating services of the senior staff member of ARMS, the Alliance staff director responsible for the Alliance’s National Conservation Defense Initiative. That person, with other staff provided from time to time to ARMS, performs all other services required by Terrafirma that are not being performed under contract by the Captive Manager.
As noted above, the Alliance may from time to time decide to deploy the financial and other resources of the Conservation Defense Fund in support of a proceeding covered by Terrafirma, but is under no obligation to do so. When so deployed, such funding would be for the account of the Alliance and would not be reimbursed by Terrafirma.
Coverage includes risks not covered by the general liability, commissioners and officers and title insurance that is otherwise available. Coverage includes defense and enforcement of conservation easements and the costs of litigation initiated by a Member land trust or other in the case of trespass on conserved land. Coverage is solely for litigation, mediation, negotiation and other dispute resolution expenses, and not for damages or the cost of corrective work on the ground. Coverage includes:
· Defense against litigation regarding conservation easements/deed restrictions and fee-owned land;
· Enforcement of legal rights by conservation easement/deed restriction holders and fee-land owners when those respective rights are violated;
· Fees for alternative dispute resolution, such as mediation fees, court filing fees, negotiation fees and the like for both defense and enforcement coverage, as well as fees for outside experts and associated out-of-pocket expenses for these experts; and
· Any appeals up to the policy limits.
A land trust may insure its entire conservation easement/deed restriction portfolio or its entire fee-owned land portfolio or both, but may not select individual properties or easements for coverage. Covenants contained in a deed conveying real estate that are vested in and enforceable by an insured, as well as trail easements, are eligible for coverage. A land trust may elect not to cover all trail easements or all deed covenants in its portfolio separately from its conservation easements/deed restrictions and fee-owned land. Exceptions are available for land held for resale without retaining a conservation easement or restrictions (trade land) and for certain co-holder situations. Land conservation easements that have historic value and/or historic buildings are covered, but historic facade easements are not.
The policy form contains the standard insurance clause that allows Terrafirma, prior to payment of any premium, to identify and decline to cover specific easements, fee-owned land or covenants that excessively exceed the scope and purpose of the coverage. If Terrafirma does decline to cover a specific conservation interest, there would be no effect on the rest of the land trust’s portfolio. It would be a rare event and it has not occurred to date. Any such denial would be accompanied by a detailed explanation and assistance for the land trust to possibly address the concerns so as to obtain coverage. Once an eligible land trust pays a premium for a conservation interest, then coverage is insured unless the land trust did not meet the eligibility criteria.
If a land trust recovers fees or other costs or is awarded any other monetary damages of any kind in a case covered by Terrafirma, then any such proceeds are divided between Terrafirma and the land trust based on their actual costs. Typically the deductible is re-paid to the insured land trust first, and anything above that (up to the amount of the Claim paid out) is paid to Terrafirma. Then any remaining award is paid to the land trust.
The overall philosophy is to keep Terrafirma simple and focused exclusively on matters directly related to defense and enforcement of conservation easements and fee-owned land. Therefore, the following matters are excluded from coverage:
· Condemnation and actions arising out of condemnation (eminent domain);
· Any government enforcement action against a land trust for an alleged violation of statute, regulations, common law (including, if applicable, any fiduciary or other obligations under state law, if any) or other codes (land trust defense or enforcement of a conservation easement on land owned by a government entity is covered);
· Any and all Internal Revenue Service audits, investigations or other inquires of any type for both landowners and land trusts;
· All tax-related matters (although challenges to the validity of a conservation easement itself by the landowner are covered);
· Criminal matters;
· Actual damages or corrective work undertaken on the ground;
· Business disputes not directly related to the defense or enforcement of a conservation easement or fee-owned land;
· Historic facade easements (land conservation easements that have historic value and/or historic buildings are covered);
· Anything covered by general liability insurance (which is required for eligibility for Terrafirma; any conflicts are managed on a case-by-case basis);
· Any other Claim covered by other commercial insurance such as directors and officers or liability insurance (any conflicts are be managed on a case-by-case basis);
· Certain back-up holder positions (see "Other Coverages");
· Any services provided by government attorneys or other staff;
· Pending or prior litigation;
· Pre-existing known violations, disputes or trespass;
· Acts, proposed acts or failure to act on land not protected by the insured easement or land not owned in fee by the insured (third-party trespass on conserved or fee-owned land is covered);
· Affirmative rights in a conservation easement, covenants or trail easement, such as a right of first refusal, option to purchase, mowing rights or active land management, except as undertaken in defense or enforcement of a conservation easement, deed covenant or trail easement (this Exclusion does not apply to land owned in fee by a land trust or to the affirmative right of public access for recreation or education contained in a conservation easement, trail easement or deed covenant);
· Trespass by the land trust or other willful or grossly negligent acts or omissions;
· Court costs and any other costs related to a court action by the insured seeking to extinguish or amend any insured conservation interests; and any third-party challenges to the validity of any easement amendment, termination or partial termination, provided, however, that once an easement has been amended or partially terminated, the policy would cover challenges to the easement itself;
· Disputes between an insured and an uninsured private land trust not a government entity, disputes among trustees, or trustees and staff of an insured, among co-holders or a primary and a back-up holder, or between an insured easement holder and insured fee-land owner whether under one or multiple policies; and
· Staff costs and related expenses for staff or volunteers.
The policy form has 35 exclusions and governs the legal application of all of the exclusions.
Terrafirma's Claims Committee is the arbiter of any disputes regarding whether the facts and circumstances of a potential Claim fall within any exclusion.
Basic Deductibles and Limits
The basic deductible is $5,000 per Claim regardless of policy limits. A pro bono attorney arrangement may be credited toward the deductible with approval of the Claims Committee. Certain fees may also be credited toward meeting the deductible. For example, if a Member land trust uses outside counsel or other experts in its efforts to voluntarily resolve a dispute, the Claims Committee may determine that those fees are deductible.
The basic maximum limit is $500,000 per Claim (which includes defense costs). There is an additional maximum aggregate limit of $500,000 total for all Claims in the policy year the Claim occurred (the limit of the total amount of Claims made by one organization in one policy year if more than one Claim is made in the policy year). As described below, Member land trusts with large insured portfolios benefit from higher limits.
Limits for Larger Land Trusts
As a matter of equity for the holders of large portfolios (250 or more insured units) who pay much more in total premiums, the aggregate limit is increased. For these land trusts, the aggregate cap increases from $500,000 to $750,000 for land trusts with 250-399 parcels insured, and $1 million for land trusts with 400 or more land parcels insured. The per unit base premium (exclusive of potential discounts) charged is the same as for all other insureds and the per Claim limit remains at $500,000 per Claim.
Terrafirma endeavors to keep premiums and terms stable by building strong capitalization and retained earnings, investing in loss prevention, promoting good practices, providing pragmatic Claims management, and controlling costs of service providers. The Commitment Letter received from prospective initial Members of Terrafirma provided that a land trust could be released from its commitment if premiums increased by more than 2.5% a year over the first three years. In Terrafirma’s seven years of operation, there has been only one premium increase of $3 per parcel, or 5% of the total premium.
The basic premium is $63 per year per conservation easement or fee-owned land unit (with certain discounts as described below). The premium is calculated on the number of conservation easements or deeds of fee land that a Member land trust holds regardless of the number of parcels that comprise any one conservation easement or deed of fee land. Certain exceptions to this general rule are made for divisions of single conservation easements into separate ownership and for aggregation of fee preserves. If a land trust insures its trail easements or deed covenants, those are also charged one premium per year per deed.
See special counting rules below for divided easements, reserves assembled from many deeds, and multiple easements owned by the same owner.
COUNTING CONSERVATION PROPERTIES FOR PREMIUM PAYMENT
1. Each exercised division right under an insured conservation easement, deed restriction, trail easement or deed covenant at the time of each annual application is counted as a separate parcel with an additional premium. If the divided parcel is not subject to an insured conservation easement, deed restriction, trail easement or deed covenant, then no additional premium is charged and no coverage provided.
2. Separate easements that are fully and legally merged in one ownership are treated as one easement. (Please note that though a property may be described as containing several legal parcels, or taxable parcels, or assessed parcels if conserved under one easement then the property would be treated as one complete parcel.)
3. Fee-owned reserves comprised of multiple parcels may be treated as one insured unit with one annual premium payment rather than the multiple premiums for units acquired under separate deeds, but only if both of the following conditions are met without exception:
a. Each deeded parcel must be owned in its entirety and exclusively by the same entity.
b. The collection of parcels must form in the aggregate a contiguous, compact conservation reserve operated as a single unit.
4. Multiple conservation easements may be treated as one insured unit with one annual premium payment rather than the multiple premiums for multiple conservation easements, but only if all the following conditions are met without exception:
a. Each conservation easement is held by the same land trust or the same set of co-holders.
b. Each underlying parcel must be owned in its entirety and exclusively by the same landowner.
c. The land covered by the conservation easements must be contiguous.
d. Each conservation easement is substantively identical in terms of restrictions and permitted uses. (Land trusts may be asked to provide copies of the conservation easements they wish to be treated as one unit.)
If the property and the easement have been subdivided but is in identical ownership it is still treated as one conservation easement.
The unit cost to issue and administer a policy to a land trust with a portfolio of 250 or more insured units (conservation easements/deed restrictions and/or fee-owned land) is substantially less than for land trusts with smaller portfolios. It is equitable and customary for Terrafirma to share the benefits of these savings with those insureds with larger portfolios. Therefore, land trusts with a total insured portfolio of 250 conservation easements, deed restrictions and/or fee-owned land parcels receive a volume discount of $3 per insured unit in addition to other discounts for which the land trust may qualify.
Underwriting and Other Discounts
Terrafirma does not underwrite individual conservation easements, but offers discounts based on the overall quality of a land trust’s practices. The Alliance believes that accredited land trusts as a group are a good risk and have had their practices scrutinized. See "Land Trusts and Easements - Land Trusts - Accreditation" below. While any land trust may be subject to legal challenges, including frivolous lawsuits, good practices are more likely to prevent unnecessary litigation. Accredited land trusts, therefore, receive an automatic $11 per insured unit discount.
For all non-accredited land trusts, each has to attest to meeting all the following conditions to receive a $4 “Best Practices” discount per insured unit:
· Currently every transaction is reviewed and approved by a qualified attorney prior to closing.
· Has and follows a written policy on violation resolution.
· Has and follows a written conflict of interest policy.
· Has and follows written criteria for selecting land and easement projects consistent with its mission.
· Evaluates its capacity to perform its perpetual stewardship responsibilities for each project.
Since the goals of Terrafirma exceed those of traditional insurance and include a strong commitment to education, prevention and good practices, Terrafirma provides an additional discount of $1 per insured unit to any land trust for attendance at an approved risk prevention seminar or other education program approved by the Manager and held at Rally or at regional conferences or electronically in the year prior to the application period. Continuing conservation education must be obtained annually for a land trust to receive the discount in the following year.
Coverage for a Conservation Easement on Land Owned by Another Land Trust
Where one land trust holds a conservation easement/deed restriction on land owned exclusively by another land trust, Terrafirma offers two options:
· The conservation easement holder may choose to not insure those conservation easements if the fee holder is eligible for Terrafirma.
· The conservation easement holder may obtain coverage on land owned exclusively by another land trust, with the coverage depending on whether the fee holder is eligible for Terrafirma. No discounts are available for this coverage.
This coverage would be solely for third-party disputes. If both the conservation-easement holder and fee owner have coverage on the same land, then they cannot combine their policy limits in the same case. If the two insureds have different policy limits, then the higher limit would apply. Both insureds must agree to joint representation and delegate one of the insureds to be the lead representative in the Claim.
These Claims procedures describe some of the obligations of the land trust Members of Terrafirma Risk Retention Group LLC to report both actual and potential Claims to the Claims Committee as set forth in the policy form.
Terrafirma’s insurance policies provide a safety net to help protect Members from potentially catastrophic legal expenses so that they have the confidence and capability to uphold conservation rights in perpetuity. Terrafirma’s goals through its Conservation Defense Liability Insurance program are to help create favorable case law, avoid unfavorable case law, and protect the permanence of legal restrictions governing conserved land. Terrafirma’s Claims Committee is responsible for evaluating, monitoring, approving and managing Member Claims and keeping the Members Committee appropriately informed regarding significant Claims and trends.
The Claims Committee consists of eight individuals experienced, as a group, in conservation and insurance matters. The Claims Committee manages the Claims and legal strategy for Terrafirma. Alliance Risk Management Services LLC (ARMS) provides staffing for the work of the Claims Committee and any subcommittees. ARMS staff also serves as the Conservation Defense Director for the Land Trust Alliance or as otherwise specified in the Terrafirma Operating Agreement as the National Coordinating Attorney.
Disposition of Claims
The Claims Committee has the right and responsibility, and is expected by the Members Committee, to determine the disposition of all insurance Claims and to approve all settlements related to such insurance Claims.
As an aggregate, the Claims Committee members have the following areas of experience:
1. Practical experience with land trusts and legal challenges to conservation easements
2. Understanding of state and local laws relating to conservation easements, real estate, and insurance
3. Insurance experience
a. Insurance litigation
b. Experience sitting on a Claims committee and evaluating Claims
c. Insurance coverage
d. Experience setting reserves for Claims loss
e. Customer service (sales, policies or underwriting)
4. Court room and legal strategy
5. Real estate litigation
6. Attorney management and cost control
Service to Land Trusts
Terrafirma’s policy is to:
1. Provide Claims management services in a professional manner;
2. Encourage timely and effective Member Claim reporting;
3. Maintain adequate Claim loss and expense reserves; and
4. Provide an equitable Member Claims dispute resolution process.
Terrafirma strives for these results from its Claims procedures:
1. Prompt investigation, defense and settlement of covered Claims;
2. Fair Claims resolution procedures; and
3. Realistic Claims reserves.
When a Member land trust first becomes aware of a Claim it must give prompt written notice of the Claim to Terrafirma using the online Claims reporting forms. The Member must include pertinent records or an authorization for Terrafirma to obtain pertinent records and other information from third parties, as may be necessary. The Member also must submit the following information, to the extent known:
1. The nature of and circumstances surrounding the Claim, including how, when and where it took place;
2. The nature of the conservation rights at issue and an identification of all parcels of real property involved;
3. The names and addresses of all persons and organizations involved;
4. The date anyone at the land trust first became aware of the Claim and the manner in which they became aware;
5. Any actions the land trust took in any effort to avoid or mitigate the Claim; and
6. All insurance carriers that may provide coverage for any part of the Claim and all insurance policies that might be applicable to the Claim.
Upon receipt of each Claim, ARMS staff will, as may be appropriate:
1. acknowledge receipt to the land trust,
2. confirm the land trust’s eligibility to participate in Terrafirma, and assuming eligibility,
3. evaluate if the Claim is covered by the policy,
4. inform the Member of coverage issues and reserve rights,
5. investigate and evaluate the Claim, and
6. work with the Member to obtain all necessary background and supporting information in order to evaluate Claim management.
The Member must cooperate fully in all Claims management activities. Coverage related discussions and materials are handled by ARMS staff and the Claims Committee in a manner consistent with their confidential nature. If the land trust does not have a covered Claim or is not eligible, staff communicate this information promptly following a decision by the Claims Committee. A land trust has the right to dispute the decision to deny coverage as set forth in the policy form.
Staff inform the Claims Committee of any Claim. For covered Claims by eligible Member trusts, staff provide available background information regarding the Claim so that the Claims Committee may promptly determine the appropriate Claims management with the Member. Staff advise the Member of the defense arrangement after the Claims Committee has determined how to manage the Claim. Where coverage issues are present, Terrafirma may require a non-waiver agreement before proceeding with the defense.
For Claims that are not covered, in whole or part, staff provide available background information along with an explanation as to why the Claim is not covered.
Terrafirma provides early advice to assist with dispute resolution and to avoid unnecessary litigation. Staff provide this assistance as a Member benefit to land trusts and consult as necessary with the Claims Committee.
The Members Committee may designate a subcommittee of the Claims Committee to handle small Claims under a dollar limit as specified by the Members Committee. If so, it is the job of the Claims Committee staff to evaluate Claims and decide initially whether to refer a Claim to the Claims Committee or the subcommittee.
Complex or Precedent Setting Claims
The Claims Committee may also appoint an oversight subcommittee to manage complex, expensive or potentially precedent-setting cases or Claims. This subcommittee, if and when formed, has the authority to make decisions and manage such cases and Claims day-to-day.
Staff and the Member must provide all investigative evidence and information gathered about any potential or actual Claim to the Claims Committee first, then outside counsel if assigned, to avoid duplication of effort. Outside counsel should promptly advise the staff of all pertinent information obtained after assignment of the Claim. Should additional investigation be necessary, staff shall determine how the task will be accomplished most efficiently and by whom. Communication must then continue with a constant view toward a timely and efficient resolution of the Claim.
The law firm of Downs, Rachlin Martin PLLC represents Terrafirma in operational and governance matters and assists with Claims management. The Claims Committee may elect to seek other counsel as well.
Selection of Counsel
Staff are responsible for the selection and assignment of outside counsel for defense or prosecution of Claims. Staff may also authorize the engagement of adjusters, third-party investigators, additional attorneys, or other professionals as necessary.
The efficient resolution of Claims depends upon the cooperation and assistance the Member, the Claims Committee, staff and outside counsel extend to each other. The key to success in this process is full and prompt communication. All parties share the common goal of prompt, efficient and effective resolution of all Claims. Terrafirma encourages an early exchange of views in order to identify pertinent issues and outline the most efficient and effective course available to resolve the Claim and uphold conservation permanence. Even though independent judgment must be exercised by outside counsel and staff, the obligation to ensure the maintenance of open lines of communication is held equally by outside counsel, staff, the Member and the Claims Committee, with all parties answerable ultimately to the Members Committee. Each party must be available to receive and exchange views whenever necessary.
The Members Committee, as the elected representatives of the Member land trusts, makes the decisions on how or whether to proceed with an appeal of any case. The Members Committee reviews the potential loss for each Claim as well as the expense of Claims at least quarterly. Coverage issues and avoiding erosion of the rate structure are major areas of oversight for the Members Committee. Staff report at least quarterly to the Members Committee.
In the event a Claim being reviewed or acted upon by the Claims Committee concerns a land trust Member that employs a person serving on the Claims Committee, or where the Claims Committee member serves on the land trust Member’s board, serves as the Member’s outside counsel or other advisor, is related to the Member’s staff, any board member or other insider or is a major donor to a Member, such committee member does not participate in review of the Claim or act upon the Claim and must recuse himself or herself from all meetings and discussions regarding the Claim. Following review and action on the Claim, the Claims Committee member may return to the meeting.
Any land trust Member may address the Claims Committee meeting to present a Claim but must request time on the agenda beforehand and disclose all individuals who will attend. The Member, and all individuals associated with the Member, must leave the meeting after presenting and discussing the Claim with the Claims Committee. However, all communications concerning issues of coverage must be in writing.
Evolution of Terrafirma
Since this is a relatively new program, all Members will be learning about risk management and costs as Terrafirma evolves and as it collects data. The Members Committee periodically reviews and potentially may modify coverage, pricing structure, eligibility, procedures and any other matters.
CLAIM POLICY and PROCEDURES
Originally Adopted by Terrafirma Claims Committee: September 2013
Amended by Terrafirma Claims Committee: Last revised 7-8-13
Updated on: 10-4-19