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Home My WebLink About05. Position Paper authorizing GM to renew excess liabilityCentral Contra Costa Sanitary District • ' BOARD OF DIRECTORS @R&Lgy POSITION PAPER Board Meeting Date: June 4, 2015 Subject: AUTHORIZE THE GENERAL MANAGER TO RENEW EXCESS LIABILITY AND PROPERTY INSURANCE POLICIES FOR FISCAL YEAR 2015 -16 Submitted By: Initiating Dept. /Div.: Shari Deutsch, Risk Management Administration, Risk Management Administrator REVIEWED AND RECOMMENDED FOR BOARD ACTION: D. Heath — Director of Administration Roger S. Bailey General Manager ISSUE: The District purchases commercial excess insurance to cover general and auto liability losses above its $1,000,000 self- insured retention. The District also purchases liability insurance policies to cover losses from pollution legal liability, employment practices, and claims for breach of fiduciary duties in administering employee benefit funds and a property insurance policy to protect against loss to District assets. All current insurance policies expire on June 30, 2015. Since the cost of the excess liability and property policies exceeds the General Manager's spending authority, renewal of these policies is usually approved by the Board. RECOMMENDATION: Authorize the General Manager to bind coverage for the following lines of insurance: Policy Type Carrier Retention Limit Excess Liability TBD $500,000 or $1,000,000 $15,000,000 Property PEPIP $250,000 Replacement Cost FINANCIAL IMPACTS: Staff has not yet received all quotes for either the excess liability or property insurance. As a result, the financial impacts can only be estimated at this time. If the District keeps its $1,000,000 self- insured retention, the renewal premium will be $255,000, an increase of 8.9 %. If the District reduces its retention to $500,000, staff estimates a $65,000 premium increase or up to $320,000. Staff has also budgeted for an increase of 15% to the property insurance premium. ALTERNATIVES /CONSIDERATIONS: Given the reduced number of Board meetings in June 2015, there is no option to delay or defer this. BACKGROUND: The District's favorable loss history was challenged this current fiscal year. One significant loss occurred in November 2014 that may ultimately exceed the District's self- insured retention, thus requiring notification to the incumbent excess C:\ Users \CGranzellaWppData \Local \Microsoft \Windows \Temporary Internet Files\ Content .Outlook \YTOD7IEQ \Insurance Renewal Position Paper 1516.doc Page 1 of 3 POSITION PAPER Board Meeting Date: June 4, 2015 subject: AUTHORIZE THE GENERAL MANAGER TO RENEW EXCESS LIABILITY AND PROPERTY INSURANCE POLICIES FOR FISCAL YEAR 2015 -16 carrier. Both the incumbent excess carrier and potential alternative markets have requested information about the claim as part of their underwriting process. As a result, staff is expecting a premium increase over last year's prices. The following table shows the expiring excess liability premium and staff's projections based on the District's current loss history. Year Retention /Limit Expiring Premium Renewal Premium % Change 2014 -15 $1 mil / $15 mil $234,000 $234,000 0 2015 -16 $1 mil / $15 mil $234,000 $255,000 8.9% 2015 -16 $.5 mil / $15 mil NA $320,000 +25.4% Staff recommends authorizing the General Manager to renew the excess liability coverage with a premium increase not to exceed $320,000. Other Insurance - Property: The District purchases property insurance through the California Sanitation Risk Management Authority ( CSRMA). CSRMA offers the coverage through a group purchase program of over 1,300 participating public entities and between 35 and 40 different insurance and reinsurance companies in any given year. Since Alliant has not yet received renewal quotes from all participating insurers, renewal pricing is not yet available. Most US property insurers have increased rates over the last few years to offset recent catastrophic loss costs (i. e. Hurricane Sandy etc.). With this in mind, staff has budgeted for a 15% increase in the expiring property insurance premium or up to $142,000 compared to the expiring premium of $123,000. Since there will not be time to reconsider if quotes come in higher than expected, staff recommends authorizing the General Manager to renew the property coverage through CSRMA's Public Entity Property Insurance Program (PEPIP) group program with a premium increase not to exceed $150,000. Other Insurance — Workers' Compensation: The District is a member of CSRMA's Workers' Compensation insurance pool. Renewal pricing for this coverage depends on the cost of the pool's excess insurance and individual members' experience modification factors. In 2009 -10 the District's experience modifier rose to .97 to reflect increases in both the frequency and severity of the District's Workers' Compensation claims over the preceding two years. Over time, the District's experience modifier has gone down. For the 2015 -16 renewal, the District's experience modifier is .64. Workers' Compensation premiums are calculated as a percentage of payroll. As payroll increases, Workers' Compensation premiums increase, even without an C:\ Users \CGranzella\AppData \Local \Microsoft \Windows \Temporary Internet Files \Content.Outlook \YTOD71 EQ \Insurance Renewal Position Paper 1516.doc Page 2 of 3 POSITION PAPER Board Meeting Date: June 4, 2015 Subject: AUTHORIZE THE GENERAL MANAGER TO RENEW EXCESS LIABILITY AND PROPERTY INSURANCE POLICIES FOR FISCAL YEAR 2015 -16 increase in the underlying rates. Since the District has filled a number of vacant positions in the current fiscal year, staff anticipates Workers' Compensation premium increases of around 10% over the expiring premium of $331,797. Renewal rates and any applicable dividends from prior years must be approved by the CSRMA Board of Directors before members receive final renewal premiums. As in the past, staff will report the final Workers' Compensation premium to the Finance Committee as soon as it becomes available. COMMITTEE RECOMMENDATION: The Finance Committee reviewed this item at the May 26, 2015 meeting and recommended authorizing the General Manager to renew the excess liability insurance for a premium not to exceed $320,000 and to renew property coverage with the PEPIP program at a premium not to exceed $150,000. RECOMMENDED BOARD ACTION: As recommended by the Finance Committee, authorize the General Manager to renew the excess liability insurance for a premium not to exceed $320,000 and to renew property coverage with the PEPIP program at a premium not to exceed $150,000. C:\ Users \CGranzella\AppData \Local \Microsoft \Windows \Temporary Internet Files \Content.Outlook \YTOD71 EQ \Insurance Renewal Position Paper 1516.doc Page 3 of 3