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HomeMy WebLinkAbout1982-06-15; City Council; 7056; Renewal of excess liability insurnaceCITTOF CARLSBAD - AGENDA^BILL AB#_J7o6-L> MTG. DEPT. 6/15/82 CM. TITLE: RENEWAL OF EXCESS LIABILITY INSURANCE DPPT. HD . /Y } CITY ATTYV^O CITY MGFW.5^ QloJ> O CEQ_ Q_ g o Oz3 OO 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". 1 I 2 3 4 5 6 7 8 10 11 12 13 '15 .16 17 18 19 20 22 23 24 25 26 27 28 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