HomeMy WebLinkAbout2012-06-26; City Council; 20949; Purchase of Liability Insurance Through Alliant Insurance Service IncCITY OF CARLSBAD - AGENDA BILL
20.949 AB#
MTG. 6/26/12
DEPT. FIN
PURCHASE OF LIABILITY COVERAGE
THROUGH ALLIANT INSURANCE
SERVICES, INC.
13
DEPT. DIRECTOR ^Zj/^.
CITY ATTORNEY
CITY MANAGER 4^
RECOMMENDED ACTION:
Approval of Resolution No. 2012-153 . approving the purchase of liability insurance through
Alliant Insurance Services, Inc.
ITEM EXPLANATION:
The City participates in the Alliant Insurance Services, Inc. joint purchase program known as
CAMEL (California Municipal Excess Liability) or ANML (Alliant National Municipal Liability)
depending on the group of cities marketed, for liability coverage.
The carrier for the joint purchase program declined to provide a quote this year. As a result,
Alliant marketed the City individually and negotiated coverage for 2012-13 with Houston
Casualty, an A+ XIV A.M. Best rated non-admitted carrier. The coverage limit is $10,000,000,
as in the current policy. The coverage is similar to the existing policy with some exceptions,
including an aggregate limit of $10,000,000 each for public officials errors and omissions,
employment practices and employee benefit liability, the right of the carrier to approve defense
counsel, and no reimbursement of 50 percent of defense costs within the SIR (up to a
maximum of $250,000) if an employment practices claim is defended successfully. The
premium is $340,000, an increase of 43.9 percent over last year, with a self-insured retention
(SIR) of $3,000,000. Surplus line taxes and fees of 3.25 percent result in a total cost of
$351,050. The other carriers interested in providing coverage offered $5,000,000 of coverage
only or require a higher SIR and do not offer an adequate policy form.
The City's SIR has been $500,000 for over 20 years. However, as a result of market conditions
as well as increased litigation and settlement costs over the years, and losses piercing this
retention level in recent years, this SIR represents a higher risk to insurance carriers and is not
available at this time. According to Alliant, insurance carriers sustained higher than expected
losses in 2011. During that year losses totaled $344.5 billion; of that $100 billion in catastrophic
losses were unanticipated. In addition, Alliant reports that the industry return on investment
was down to 3.5 percent and "the realization that higher returns could be many years away is
leaving undenA/riters with smaller margins for error and driving more conservative terms and
pricing."
Benefits of self-insuring at a higher level include the ability to continue significant control over
the claims-handling and settlement process, and the likelihood of greater stability of premiums.
DEPARTMENT CONTACT: Erin K. Letsch, (760) 602-2470, Erin.Letsch@carlsbadca.gov
FOR CITY CLERKS USE ONLY.
COUNCIL ACTION: APPROVED CONTINUED TO DATE SPECIFIC •
DENIED • CONTINUED TO DATE UNKNOWN •
CONTINUED • RETURNED TO STAFF •
WITHDRAWN • OTHER-SEE MINUTES •
AMENDED •
Page 2
Although excess liability premiums may still fluctuate with the market, a higher self-insured
retention generally means greater year-to-year stability since the insurance market makes up a
smaller percentage of the total cost of risk. However, higher losses are less frequent and more
difficult to predict, so higher levels of self-insurance can result in greater year-to-year variance
in actual versus expected costs which can complicate the budgeting process. Budgets are
prepared months in advance, making accurate estimates of future losses difficult. As a result,
staff plans to seek actuary services in 2012-13 to develop actuarially-based funding of the
Liability Fund.
Negotiations with carriers are continuing. As a result, staff recommends authority to purchase
liability insurance as similar to existing coverage as possible, at a price not to exceed $351,050
and with a self-insured retention not to exceed $3,000,000.
FISCAL IMPACT:
This premium will be paid with funds from the 2012-13 Liability Fund. The Carlsbad Municipal
Water District is also an insured under this coverage and contributes to the premium through
the budget process.
ENVIRONMENTAL IMPACT:
None.
EXHIBITS:
1. Resolution No 2012-153
1
1
2
3
4
6
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
EXHIBIT 1
RESOLUTION NQ. ZQIZ-m
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
CARLSBAD, CALIFORNIA, APPROVING THE PURCHASE
OF LIABILITY INSURANCE THROUGH ALLIANT
INSURANCE SERVICES. INC.
WHEREAS, the City desires to purchase its insurance through Alliant Insurance
Services, Inc.;
WHEREAS, Alliant Insurance Services, Inc. has negotiated a renewal of liability
coverage from Houston Casualty for a premium of $340,000 plus 3.25 percent surplus
line taxes and fees;
WHEREAS, Alliant Insurance Services, Inc. is continuing to negotiate coverage on
the City's behalf;
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of
Carlsbad, California, as follows that:
1. The above recitations are true and con-ect.
2. That the purchase of liability coverage through Alliant Insurance Services,
Inc. for a policy from Houston Casualty, or for a policy from an alternative
carrier providing coverage as similar to existing coverage as possible (as
recommended by Alliant Insurance Services, Inc. and approved by the Risk
Manager), with a self-insured retention of $3,000,000 or less, effective July 1,
2012 to June 30, 2013 is hereby approved and the Finance Director is
authorized to issue a warrant not to exceed $351,050 for the payment of the
premium and surplus line taxes and fees to Alliant Insurance Services, Inc.
///
///
///
PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council
of the City of Carlsbad on the 26^^ day of June, 2012, by the following vote to wit:
AYES:
NOES:
Council Members Hall, Kulchin, Blackburn, Douglas and Packard.
None.
ABSENT: None.
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
NE M. WOOD, City Clerk
(SEAL)
^ ^7 Oj^^