HomeMy WebLinkAbout1982-06-15; City Council; 7056; Renewal of excess liability insurnaceCITTOF CARLSBAD - AGENDA^BILL
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6/15/82
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TITLE:
RENEWAL OF EXCESS LIABILITY INSURANCE
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RECOMMENDED ACTION:
Approve Resolution No.y , authorizing the purchase of excess
liability insurance at an annual premium of $43,106.
ITEM EXPLANATION:
Presently the City purchases excess liability insurance over a
$100,000.00 self-insured retention up to a limit of $ 20 ,000 ,000. ;
This program provides the broadest available protection, including
Errors and Ommissions coverage. The annual premium for 1981-82
was $63 ,642 .
A survey of available markets indicates that the City's current
insurers, Canadian Indemnity Company and Protective National
continue to offer the broadest protection at the lowest premium.
Accordingly, renewal with these carriers is recommended. The
premium for 1982-83 will be $43,106 and will provide the same level
of insurance as in. 1981-82.
FISCAL IMPACT:
The Cit.y Broker has negotiated an annual renewal premium of $43,106
which represents a savings of .$20,536 over last year's costs. In
addition, this premium rate is guaranteed for an additional
three months through October 1, 1983. Funds are available in the
City's liability revolving fund to pay this premium.
EXHIBIT:
1. Resolution No.
2. Report on Liability Se 1 f -Insuranc e Program - EXHIBIT "A".
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RESOLUTION NO . 6908 • • .' ^'
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
CARLSBAD, CALIFORNIA, AUTHORIZING RENEWAL OF.THE
CITY'S LIABILITY INSURANCE
WHEREAS, the City, has established a seIf-insurance
program for liability insurance; and v
WHEREAS, the.City's Insurance Broker has received quotes
i . • • .
for liability insurance; and , .
'WHEREAS , upon evaluation o f the quotesforliability
insurance, the City desires to renew its insurance.
NOW, THEREFORE BE IT RESOLVED by the City Council of
Carlsbad, California- as follows: -
1. That the above recitations.are true and correct.
2. That "the Mayor- is hereby authorized to enter
*""' into an agre-ement for the renewal- of the City's
liability 'insurance with Canadian Indemnity Insurance
Company and Protective National Insurance Company.
PASSED, APPROVED AND ADOPTED at a regular meeting of the.
City Council on the 15th day^ of 1982 1982
bythefollowingvote, to wit:'
. rAYES: Council Msnfoers Casler, Lewis, Kulchin and Chick
: NOES: None •."',,..- . v . < ..-.'.
; ABSENT: None .
MARY H'. CASLER . , Mayor
ATTEST :
/ ••/? , _-^l
(AJ^J/^J^-O^ f^ - A Q 1A J JLs^fZASl-*- 1
ALETHA L. RAUTENKRANZ, City cTeTk
(SEAL)
EXHIBIT A •
June 9, 1982
TO : CITY MANAGER •
FROM: " RISK MANAGEMENT CONSULTANT
SUBJECT: CITY OF CARLSBAD LIABILITY SELF-
INSURANCE .PROGRAM - ' '
The City- is approaching" the end of the first year of its
liability self-insurance program, as approved by Council at its
.meet.ing o f. J une 16, 1981.
Self-insurance now extends to the first one hundred thousand
dollars of liability costs arising from any one occurence. The
program, of1, course-, only extends to claims which would previously
have1 been covered under a Liability insurance policy; i.e.,
claims based on negligence and arising from accidental causes.
.General litigation' against the City is handled separately by the
City Attorney. Excess insurance is purchased for costs exceeding
one hundred thousand . do 11 ar.s., up to a total of t.went y million •
dollars. This insurance also protects the City if by any chance
total costs arising in any one year exceed three hundred thousand
dollars. The firm of Carl Warren and Company has been retained
to handle the investigation and adjustment of claims within the
program..
COST SAVINGS '
Although final figures for this fiscal year are not yet available, we
can now project these with fair accuracy and a cash flow savings is
anticipated of over two hundred thousand dollars when compared with
the previous fiscal.year.- Cash flow savings, of course, reflect only
actual payments made during the' year, and not the ultimate costs
of the program and they can be summarized as follows:
; : . 1980/81 - 1981/82
Insurance Premiums $265,636 $63,642
Claim Payments 10,642 .- 4,500
Claim Administration '• .
Expenses -0- 6 , OOP.
TOTAL , ' $276,278 ' $74,142
EXHIBIT A
Page 2
If,we estimate the ultimate cost for both years, obviously these
savings are reduced, but they will be substantial. Based on current
projections, the City still has a liability of approximately twenty
thousand dollars for future deductible payments under insurance
purchased for the 1980/81 fiscal year. For the current .year our
claim ad.mi.nist rat or ' has es t imat ed future, liability on known claims,
projected to year end, at $65 ,000 . Even if we allow., a generous
thirty per cent additional amount for claims which-will be presented
as a result of accidents during this year, we -will still show a final
savings of approximately $137,000 plus interest earned on cash-flow
savings .as compared to the- 1980/81 fiscal year. ..';..
Premiums
Claim Payments • •'
Estimated Known Future
Liabilities
Estimated Unknown Future
Liabilities
Claim Administration
Expenses
TOTAL
1980/81
$265,636
10,642
20,000
-0-
-0-
$296 ,278
1981/82
$63 ,642
4,500
. 65,000
19,500
6,000
$158 ,642
FUNDING . .
.The City has been conservative in its approach to funding
liabilities under this program. The current goal is to establish
a five hundred thousand dollar balance to provide for known and
unknown incurred future costs . This balance will also provide a
cushion against the possibility of a catastrophic loss
y ear. ' '. ' •. •
in any one
As of July 1, 1-.98/2 it is .. ant ic ipat ed that the balance in this fund
will amount to' $318,037. .
EXHIBIT.A
Page 3
CURRENT EXPERIENCE AND FUTURE TRENDS -•.'.-
A major advantage of se1f-insurance is that it places control
over the settlement of claims in the hands of the City rather
than the insurance company. It also enables the City to maintain
accurate statistical records of the frequency, cause and cost'of
claims, information which was not available from the City's
insurers. This will prove invaluable in future years as a source
of input for the City's Safety and Loss P.revention Program.
A total of fifty individual claims is projected for this year
under the program, and, based on social trends and population
growth, we can anciticpate that this number will increase even
when offset by current loss prevention programs. •
Costs will also increase, although we will see a reduction of
twenty thousand dollars in excess insurance premiums for the
coming year.
We must remember that the financial success of„ the program this
year could have been seriously affected by one catastrophic
accident, and there is no guarantee that this will not happen in
future years. Nonetheless we are now on a firm financial basis,
and the savings affected this year are adequate to offset
substantial adverse experience.in the future.
DON JACK