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AB# 18,380
MTG. 12-13-05
DEPT. RM
CITY OF CARLSBAD -AGENDA BILL
TITLE:
CITY COUNCIL POLICY - INSURANCE
REQWMENTS
RECOMMENDED ACTION:
Adopt Resolution No. 2005-369 approving City Council Policy No. , rescinding prior
resolutions, and authorizing the City Manager to adopt requirements, specifications and guidelines to
implement and supplement the policy.
70
ITEM EXPLANATION:
Insurance is the principal financial means to implement the hold harmless agreement required of most
businesses with which the City does business. It is an invaluable tool to protect the City from liability
costs. It is also a complex tool. Insurance does not lend itself to one size fits all requirements easily,
and the cost and terms vary significantly depending on the type of coverage and the state of the
industry.
The last time the City’s insurance standards were modified was by resolution in 1991. Since that time
the insurance market has hardened; insurance is more expensive and some coverage terms have
become more restrictive. The evaluation of insurance needs, review of insurance documents, and
steps necessary to ensure appropriate coverage is in place has become a complex and lengthy process.
Staff has seen an increase in requests for flexibility in requirements, the need for additional resources
to help staff evaluate risk and coverage issues, and the need for greater efficiency in the
administration and management of these issues. In response to these conditions and in keeping with
Council’s goal of process improvement, staff is recommending the attached Council Policy and the
development of additional requirements and guidelines by the City Manager to supplement this policy
and improve the process.
This policy changes the existing insurance standards in the following ways:
1. Insurance carriers are acceptable under the following conditions: . For a carrier admitted in California, a minimum Best’s Rating of A- and a financial size of
$50-$100 million (currently class VII). This is a higher standard for a company’s financial
strength than the current requirement of $10-$25 million (class V).
based on the appropriateness of a financial size that is greater today than in 1991, as well as a
recommendation for a higher rating from the City’s liability coverage broker, Driver-Alliant.
It is consistent with the minimum Best’s rating required by many other agencies, and more
than half of the carriers rated by Best’s can meet this standard.
The higher rating is
. For a non-admitted carrier, or surplus lines carrier, a minimum Best’s rating of A:X will be
acceptable rather than the current process of requiring an affidavit from a broker listing three
admitted carriers contacted that have refused to provide coverage. The higher rating is to
provide some means of additional assurance of a carrier’s stability since non-admitted carriers
do not participate in the California Insurance Guarantee Fund (a state fund providing limited
coverage in the event of insurer insolvency).
PAGE 2 OF AGENDA BILL NO. 191 380
2. The Risk Manager may allow a carrier not meeting the criteria above if circumstances and risk
factors justify a lower standard. This replaces the current process requiring City Manager and City
Attorney approval and providing the option to contract with an insurance consultant for an opinion of
the carrier’s ability to insure a risk at the expense of the insured. This current process can be time
consuming and expensive.
3. Coverage must be in a form acceptable to the Risk Manager. This requirement is in response to
the increasingly restrictive terms added to additional insured endorsements.
4. The “any auto” coverage requirement in auto policies is eliminated. This is in recognition of the
fact that some contractors have coverage that is specific to the vehicles used in the course of their
work, and this coverage is not necessary for all contractors. This coverage issue can be addressed in
more detail in the requirements, specifications and guidelines that are recommended to be developed
by the City Manager.
To reduce bureaucracy and enhance efficiency, and thereby improve service to the public, staff
recommends that Council adopt the attached Council Policy setting standards for insurance
companies providing coverage required of those businesses with which the City does business,
authorize the City Manager to adopt additional written requirements and guidelines to implement the
policy and improve the processes surrounding insurance, and rescind resolutions 91-403,90-96, 89-
387, 81-08 and any others in conflict with the recommended resolution.
Finally, the proposed Council Policy will apply to CMWD as well. This is consistent with Article 1,
Section 1.1 of the CMWD Administrative Code, which states that except as prohibited by law,
operations of the District will be governed by adopted policies and procedures of the City of
Carlsbad.
FISCAL IMPACT:
The cost of insurance for contractors and therefore the cost of contracts for the City should be reduced
in cases where requirements are tailored to loss exposure and certain types of insurance are no longer
required. In addition, there will be a savings of time and improved efficiency in processing contracts,
as the number of requests for waivers of requirements should be reduced.
EXHIBITS:
1. City Council Resolution No. 2005369
DEPARTMENT CONTACT: Erin Letsch, (760) 602-2470, email elets@ci.carlsbad.ca.us
H:\WORD\lnsurance\Agenda Bill - Council Policy on Insurance 1 .doc
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RESOLUTION NO. 2005-369
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
CARSLBAD, CALIFORNIA, APPROVING CITY COUNCIL
POLICY NO. 70 REGARDING INSURANCE STANDARDS
WHEREAS, the City requires contractors, builders, subdividers and other persons doing
business with the City to obtain various types and amounts of insurance or bonds; and
WHEREAS, it is necessary to ensure that the insurance and surety companies selected by
those persons meet certain financial and performance standards; and
WHEREAS, a Council policy establishing standards for insurance from contractors,
builders, subdividers and other persons doing business with the City, along with insurance
requirements, specifications and guidelines adopted by the City Manager to supplement and
implement the Council policy will enhance the efficiency of processing insurance matters.
NOW, THEREFORE, BE IT HEREBY RESOLVED by the City Council of the City of
Carlsbad, California, as follows:
1. That the above recitations are true and correct.
2. That City Council Policy No. 70 is adopted as shown on Attachment “A” to this
resolution.
3. That City Council Resolutions 91-403,90-96, 89-387, 81-08 and any other resolutions
in conflict are rescinded.
4. That the City Manager is authorized to adopt written insurance requirements,
specifications and guidelines to implement and supplement the Policy and enhance the efficiency
of processing insurance matters.
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I
PASSED, APPROVED AND ADOPTED at Regular Meeting of the City Council of the
City of Carlsbad on the 13 th day of December , 2005, by the following vote:
AYES: Council Members Lewis, Hall, Kulchin, Packard, Sigafoose
NOES: None
ABSENT: None
ATTEST:
H:\WORD\InsuranceWesolution Council Policy on Insurance.doc
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ATTACHMENT A
Page 1 of2
CITY OF CARLSBAD Policy No. 70
Date Issued - 12/13/2005
Effective Date 12/13/2005 1 COUNCIL POLICY STATEMENT 1 Cancellation Date 1 Supersedes No.
General Subject: Administration
Specific Subject: Insurance Requirements
Copies to: City Council, City Manager, City Attorney, Department Heads and Division Heads,
Employee Bulletin Boards, Press, File
BACKGROUND: Insurance is the principal financial means to implement the hold harmless agreement
required of most businesses with which the City does business. It is an invaluable tool to protect the City
from liability costs. It is also a complex tool. Insurance does not lend itself to one size fits all requirements
easily, and the cost and terms vary significantly depending on the type of coverage and the state of the
industry.
The last time the City’s insurance standards were modified was by resolution in 1991. Since that time, the
insurance market has hardened; insurance is more expensive, and some coverage terms have become more
restrictive. The evaluation of insurance needs, review of insurance documents, and steps necessary to ensure
appropriate coverage is in place has become a complex and lengthy process. Staff has seen an increase in
requests for flexibility in requirements, the need for additional resources to help staff tailor requirements to
loss exposures, evaluate risk and coverage issues, review insurance documents for compliance with
requirements, and the need for greater efficiency in the administration and management of these issues.
PURPOSE: This Council policy establishes standards for insurance companies providing coverage required
of those with which the City does business, and will be supplemented by additional insurance requirements,
specifications and guidelines adopted by the City Manager to implement this policy and improve the
processing of insurance matters. These supplementary insurance provisions are to help staff (1) review loss
exposures, (2) identify the need for specialized coverage in unique situations, (3) apply certain requirements
specific to individual coverages, (4) review insurance documents for adequacy of coverage, and (5)
implement the Council policy and the supplementary provisions efficiently.
Page 2 of 2
CITY OF CARLSBAD
COUNCIL POLICY STATEMENT
Policy No. 70 Date Issued 12/13/2005
Effective Date 12/13/2005
Cancellation Date
Supersedes No.
General Subject: Administration
Specific Subject: Insurance Requirements
Copies to: City Council, City Manager, City Attorney, Department Heads and Division Heads,
Employee Bulletin Boards, Press, File
POLICY: It is the policy of the City Council that contractors, builders, subdividers and other persons doing
business with the City are required to obtain various types and amounts of insurance or bonds, and the
insurance and surety companies must meet certain standards.
The City Manager shall adopt written insurance requirements, specifications and guidelines to implement the
following parameters of this Council policy and improve the insurance review and approval process:
1. Except as expressly provided by law or bid specifications to the contrary, insurance or surety
companies securing or insuring any obligation or risk under an insurance policy or surety bond of
which the City is a beneficiary or an additional insured shall meet the following minimum standards:
a. The company shall be admitted to conduct the business of insurance in the State of California.
The City may accept a surplus line carrier on the California List of Eligible Surplus Line
Insurers (LESLI). Any surplus line carrier must meet the rating requirements for a surplus
line carrier included in Paragraph b below.
b. The admitted company shall have a rating in the latest “Best’s Rating Guide” of “A-” or better
and a financial size of $50-100 million (currently class VII) or better. The surplus line
company shall have a rating of “A:X” or better.
2. The Risk Manager may allow a carrier not meeting the criteria above if circumstances and risk
factors justify a lower standard.
3. Contractors, builders, subdividers and other persons doing business with the City who are required to
provide insurance shall provide coverage in a form and in an amount acceptable to the Risk Manager.
3. Administration of this policy will be as directed in a written Administrative Order by the City
Manager.
H:\WORD\Insurance\Council Policy Statement 1nsurance.doc