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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 has been organized as a "risk retention group" consisting exclusively of Alliance members which are land trusts that are tax-exempt organizations described in Section 501(c)(3) of the Internal Revenue Code and that are insured by Terrafirma ("Members").
A "risk retention group" is a mutual insurance arrangement permitted under the Risk Retention Act, under which similarly situated entities act together to form an insurance entity whose business is limited to insuring its members. Terrafirma is expected to qualify as a captive insurance company under Vermont law. To obtain a state license to operate as a risk retention group in Vermont, Terrafirma must retain 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 qualified as a tax-exempt organization described in Section 501(c)(3) of the Internal Revenue Code and also as a "charitable risk pool" under 501(n).
Terrafirma is a not-for-profit limited liability company organized in April 2011 under the State of Vermont Limited Liability Company Law. It is domiciled in Vermont. Pursuant to its LLC Agreement it is an LLC in which 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 also 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 $60 per conservation property, a land trust will receive 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 will receive higher limits and the option for a higher deductible and lower premium. Premium stability is a major goal, but, of course, the premiums ultimately will reflect actual loss experience, among other factors.
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 will be financially sustainable. The resulting program does not involve risk or exposure to the insured Members beyond their premiums and capital investment, has eligibility requirements that should make the insurance product available to most land trusts, large and small, and provides basic and supplemental coverage that should cover most of the conservation defense costs not covered by existing insurance products.
Terrafirma LLC Agreement specifies that the Alliance, acting through ARMS, will be responsible for providing specified loss prevention and risk management services to Terrafirma and its Members. These Specified Services to be provided through the Manager will be wholly or partly for the account of Terrafirma, while the balance of the Alliance"s National Conservation Defense Initiative will remain the responsibility of the Alliance. Included in the Specified Services are:
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.
Some of the Alliance"s National Conservation Defense Initiative costs - mainly those consisting of direct risk management and loss prevention support to Terrafirma and its Members "” will be reimbursed by Terrafirma to ARMS. The major part of such costs will continue to be borne by the Alliance itself and funded through grants and contributions to the Alliance.
More than 470 land trusts have executed and delivered to the Alliance written commitments to become Members of Terrafirma for at least three years. These early commitments cover over 18,000 properties comprising approximately 70% of the land trust holdings in America (other than those held by large organizations with the preference and capacity to self-insure). These initial commitments generate approximately $900,000 in annual premium revenues assuming an initial average premium of $50 per property, or $990,000 at a rate of $55 per property. The Members have also paid registration fees totaling over $200,000. The Alliance has used some of the fees to help fund the start-up expenses of Terrafirma. One hundred dollars of each registration fee is applied to fund the capital contribution required from each land trust Member.
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 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:
A land trust may insure its entire conservation easement 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 and fee-owned land. A land trust may also elect to cover its entire portfolio of conservation interests. Exceptions would be 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 to identify and decline to cover, prior to payment of any premium, specific easements, fee-owned land or covenants that excessively exceed the scope and purpose of the coverage. You can view the policy form. If Terrafirma does decline to cover a specific conservation interest, such action would not have any effect on the rest of the land trust"s portfolio. The Alliance anticipates that it would be a rare event. Any such denial would be accompanied by a detailed explanation and assistance 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 would be 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 would be 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:
Terrafirma's Claims Committee would be 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 will be $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 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 will be $500,000 per claim (which includes defense costs). There will be 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, land trusts with large insured portfolios will 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 would be paying much more in total premiums, the aggregate limit would be increased. For these land trusts, the aggregate cap would increase from $500,000 to $750,000 for land trusts with 250-399 easements or fee-owned land parcels insured, and $1 million for land trusts with 400 or more easements or fee-owned land parcels insured. The per unit base premium (exclusive of potential discounts) charged would be the same as for all other insureds and the per claim limit would remain at $500,000 per claim.
The underwriting standards would be higher for insureds that desire the higher aggregate limit. Accredited land trusts would automatically qualify for the higher aggregate provided they have the larger portfolios. Any other large portfolio land trust would have to attest that it has each of the following to qualify for the higher aggregate limit in addition to a large portfolio:
Terrafirma will endeavor to keep premiums and terms stable over many years 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 provides that a land trust can be released from its commitment if premiums increase by more than 2.5% a year over the first three years.
The first year basic premium will be $60 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 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 will be made for divisions of single conservation easements into separate ownership and for aggregation of fee preserves. If a land trust insured 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
- Each exercised division right under an insured conservation easement, trail easement or deed covenant at the time of each annual application is counted as a separate conservation easement with an additional $60 premium. If the divided parcel is not subject to an insured conservation easement, trail easement or deed covenant, then no additional premium is charged and no coverage provided.
- Separate easements that are fully and legally merged in one ownership would be 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.)
- 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.
- 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 will 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 and/or fee-owned land) is substantially less than for land trusts with smaller portfolios. It is equitable and customary for Terrafirmas 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 and/or fee-owned land parcels would 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 will not underwrite individual conservation easements, but will offer 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 would, therefore, receive an automatic $11 per insured unit discount.
For all non-accredited land trusts, each would have to attest to meeting all the following conditions to receive a $4 discount per insured unit:
Since the goals of Terrafirma exceed those of traditional insurance and include a strong commitment to education, prevention and good practices, Terrafirma would provide 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 would have to be obtained annually for a land trust to receive the discount in the following year.
Back-up Holder and Third-Party Enforcer Coverage
Terrafirma also offers coverage for back-up holders and third-party enforcers of conservation easements. Generally back-up holders and third-party enforcers are considered to be any other qualified holder with an expressly granted secondary, conditional or ancillary interest in a conservation easement. Any narrowness in this definition is not intended to exclude otherwise eligible land trusts with legally vested rights in conservation easements from applying for coverage. The following conditions apply:
Coverage for a Conservation Easement on Land Owned by Another Land Trust
Where one land trust holds a conservation easement on land owned exclusively by another land trust, Terrafirma offers two options:
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 set forth the composition and qualifications of the Claims Committee and provide information regarding the obligation 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.
Terrafirma’s insurance policies provide a safety net to help protect land trusts from potentially catastrophic legal expenses so that land trusts have the confidence and capability to uphold conservation rights in perpetuity. Terrafirma’s goals through its Conservation Defense Liability Insurance program is 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 seven 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 (“staff”).
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 shall have sufficient diversity so that its members have the following areas of experience:
Service to Land Trusts
Terrafirma’s policy is to:
Terrafirma wants these results from its claims procedures:
When a land trust first becomes aware of a claim it must give prompt written notice of the claim to Terrafirma using the on-line claims reporting forms developed by Terrafirma. The land trust shall include pertinent records or an authorization for Terrafirma to obtain pertinent records and other information from third parties, as may be necessary. The land trust shall submit the following information, to the extent known:
Upon receipt of each claim, staff shall, as may be appropriate
The member shall cooperate fully in all claims management activities. Coverage related discussions and materials shall be handled by Staff and the Claims Committee in a manner consistent with their confidential nature. If the member does not have a covered claim or is not eligible, staff shall communicate this information to the member promptly. A member has the right to dispute the decision to deny coverage as set forth in the Policy.
Staff shall inform the Claims Committee of any claim. For covered claims by eligible members, staff shall provide available background information regarding the claim so that the Claims Committee may promptly determine the appropriate claims management with the member. Staff shall 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 shall 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 provides this assistance as a member benefit to land trusts and consults 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, shall have 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 shall be responsible for the selection and assignment of outside counsel for defense or prosecution of Claims. Staffmay also authorize the engagement of adjusters, third-party investigators, additional attorneys, or other professionals as necessary.
The efficient resolution of claims will depend 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 will report quarterly to the Members Committee.
In the event a claim being reviewed or acted upon by the Claims Committee concerns a member that employs a person serving on the Claims Committee, or where the Claims Committee member serves on the 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 shall not participate in such review or act upon the claim and shall recuse him or herself from all meetings and discussions regarding the claim. Following review and action on the claim, the member may return to the meeting.
Any 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, shall 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 new program, all members will be learning about risk management and costs as Terrafirma evolves and as it collects data. The coverage, pricing structure, eligibility, procedures and any other matters may be both reviewed and potentially modified periodically by the Members Committee.
CLAIM POLICY and PROCEDURES
Originally Adopted by Terrafirma Claims Committee: September 2013
Amended by Terrafirma Claims Committee: Last revised 7-8-13