HomeMy WebLinkAbout04.c. Fiscal Year 2018-19 Risk Management Annual Report Page 1 of 33
Item 4.c.
CENTRAL SAN
October 22, 2019
TO: FINANCE COMMITTEE
FROM: SHARI DEUTSCH, RISK MANAGEMENT ADMINISTRATOR
REVIEWED BY: PHILIP LEIBER, DIRECTOR OF FINANCE AND ADMINISTRATION
ROGER S. BAILEY, GENERAL MANAGER
SUBJECT: FISCAL YEAR 2018-19 RISK MANAGEMENT ANNUAL REPORT
Attached is the Fiscal Year 2018-19 Risk Management Annual Report.
ATTACHMENTS:
1. FY 2018-19 Risk Management Annual Report
October 22, 2019 Regular FINANCE Committee Meeting Agenda Packet- Page 131 of 168
Page 2 of 33
"ICENTRALSAN
Risk Management Division
Annual Report
Fiscal Year 2018-19
_ _- - —
-
October 22, 2019 Regular FINANCE Committee Meeting Agenda Packet- Page 132 of 168
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INTRODUCTION
I am pleased to present the Risk Management Division Fiscal Year (FY) 2018-19
Annual Report. Risk Management's purpose is to protect Central San from unexpected
loss or damage, and to minimize the impact of the adverse events that occur. This
requires Risk Management staff to be both proactive and maintain a constant state of
readiness. The following report details some of the ways we've met that challenge.
Risk Management also plays a role in helping Central San meet its strategic goals.
Each section of this report references the FY 2018-20 Strategic Plan goals that it
supports.
In addition to the items discussed in this report, Risk Management does a number of
things to protect Central San that aren't as apparent. Examples of these services
include pre-bid risk assessments of capital projects, insurance and indemnity reviews
for both capital and operational contracts, coordination with excess insurers for both
underwriting and claims management, evaluation of insurance and other risk financing
measures to manage the risks of new programs and services, and providing litigation
support to District Counsel as needed.
One additional accomplishment not covered in this report is Central San's development
of its strategic risk register. Our Executive Team did much of the work but Risk
Management and Internal Audit staff supported the effort. This register will be used to
develop a more formal Enterprise Risk Management (ERM) program. ERM establishes
a more systematic and organization-wide method to identify, evaluate and monitor risk.
Risk Management will coordinate implementation of the ERM program.
FY 2018-19 also marked the Division's first full year with the Risk Management
Specialist on board. Laci Kolc brought outside risk management experience to Central
San along with fresh eyes, which helped us to identify opportunities to enhance and
improve Division programs and services. However, our success will always depend on
our ongoing partnership with management and staff. These partnerships are essential
to help us identify new and emerging risks, to improve how Central San accepts and
transfers risk, and to control and reduce risks to our employees and our operations.
Thank you all for your continued support and commitment to these efforts.
Shari Deutsch
Risk Management Administrator
Risk Management Division Annual Report FY 2018-19 1
October 22, 2019 Regular FINANCE Committee Meeting Agenda Packet- Page 133 of 168
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Table of Contents
ExecutiveSummary ------------------------------------------------------------------------------------------------------------ 3
Insurance and Risk Financing --------------------------------------------------------------------------------------------5
Workers' Compensation Claims --------------------------------------------------------------------------------------- ?
LiabilityClaims ---------------------------------------------------------------------------------------------------------------------16
Other Risks and Exposures -------------------------------------------------------------------------------------------- 22
Security----------------------------------- -------------------------------------------------------------------------------------------- 25
EmergencyManagement--------------------------------------------------------------------------------------------------26
Total Cost of Risk 29
StrategicPlan Metrics---------------------------------------------------------------------------------------------------------31
Risk Management Division Annual Report FY 2018-19 2
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Executive Summary
Workers' Compensation: In FY 2018-19, the Workers Compensation Program incurred
ten medical-only claims, and one indemnity claim a compared to eight medical-only
claims and four indemnity claims in FY 2017-18. Other significant results include the
following:
• Central San's Experience Modifier, one factor used to calculate the Worker's
Compensation premium, remained well below the target of 1 .00 but increased
from .71 in FY 2017-18 to .74 in FY 2018-19;
• Strains and sprains remain the most common types of injuries that result in
Workers' Compensation claims;
• Slips, trips, and falls remain the most common causes of injury;
• Claims costs for injuries occurring in FY 2017-18 have developed more
significantly and much faster than claims history would suggest. This may affect
premium costs going forward.
Overflow Claims: Over time, Central San has seen a reduction in overflow claims from
a high of 27 in FY 2001-02 to a general rate of less than ten claims per year. In FY
2018-19 there were eight overflow claims as compared to four overflow claims in FY
2017-18. Both the number and total cost of these claims increased from the prior year,
yet the annual average cost per overflow claim was reduced to $19,443 from the
previous average of $25,639.
Number 11 9 4 8
Cost $185,948 $123,993 $102,557 $155,545
Average Cost $16,904 $13,777 $25,639 $19,443
Other Liability Claims: Claims in this category increased in both frequency and cost,
raising the average cost per claim from $968 to $4,254. This is discussed in more detail
later in this report.
Risk Management Division Annual Report FY 2018-19 3
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Property Losses: There was one small property loss this year costing $3,584.
The following table summarizes the cost of retained claims by type for FY 2017-18 and
FY 2018-19.
Claim Type Cost FY 2017-18 Cost FY 2018-19
Liability—Auto - $7,470
Liability - Overflows $102,557 $155,545
Liability— Plumbing $1,978 $3,134
Liability— Other $7,743 $38,205
Property $1,000 $3,584
Auto Physical Damage $3,855 $11,912
Security: Staff continued to work toward implementation of the Security Master Plan
and, with the assistance of the Security Committee, made several improvements to
security procedures and practices.
Emergency Management: Staff ensured all required plans and training requirements
were met but focused primarily on a major update to the Continuity of Operations Plan.
Staff expects this update to be completed by the end of 2019.
Total Cost of Risk: The Total Cost of Risk (TCOR) is a risk management industry
benchmark that allows an organization to evaluate the cost of its Risk Management
program over time. TCOR includes the cost of Central San's Safety program, as well as
Risk Management program administration, claims, and insurance premiums. This total
is reduced by any revenue accrued by the Self-Insurance Fund.
The TCOR for FY 2018-19 was $2,563,264, an increase of just under $14,000 from the
previous year.
Risk Management Division Annual Report FY 2018-19 4
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Insurance and Risk Financing
Goal 3: Be a Fiscally Sound and Effective Water Sector Utility
Liability Insurance Coverage
Central San purchases commercial liability insurance for Workers' Compensation,
Employers' Liability, Excess General Liability, Pollution Legal Liability, Employment
Practices Liability, and Fiduciary Liability.
Workers' Compensation: Central San participates in the California Sanitation Risk
Management Authority (CSRMA) Workers' Compensation insurance pool, a joint
powers authority comprised of over 50 sanitary districts within California. Risk
Management staff serves as Central San's representative on the Authority's Board of
Directors. Insurance Premium Cost - $475,000.
Excess General Liability: This policy covers claims in excess of Central San's $500,000
retention up to $15 million. Coverage includes defense and indemnification for inverse
condemnation. Insurance Premium Cost - $370,000.
Pollution Legal Liability: This policy covers claims and losses arising from the collection
and disposal of household hazardous waste. It applies only to the Household
Hazardous Waste Collection Facility and non-owned disposal sites. It does not cover
claims alleging pollution conditions arising from the operation or maintenance of the
collections system. Insurance Premium Cost - $68,000.
Employment Practices Liability: This is a gap policy that reduces the self-insured
retention for employment-related claims from $500,000 to $35,000 per occurrence. The
policy is limited to $500,000 in coverage as the Excess General Liability policy will
respond to claims that exceeds this amount. Insurance Premium Cost - $16,000.
Fiduciary Liability: This policy protects Central San from claims filed by participants in
District-maintained retirement and other post-employment benefit funds. Insurance
Premium Cost - $4,223.
Property Insurance Coverage
Central San purchases property insurance, and crime insurance.
Property Insurance: Central San is self-insured for damage to its property and facilities
up to $250,000 per occurrence. Insurance coverage for losses in excess of this
retention is purchased through the Alliant Property Insurance Program (APIP), a group
purchasing program administered by Alliant Insurance Services. The APIP policy
includes Boiler and Machinery coverage, and Cyber Liability coverage.
Risk Management Division Annual Report FY 2018-19 5
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This program now includes Identity Theft coverage for all Central San employees.
Insurance Premium Cost - $181,000.
Crime Insurance: This policy covers losses caused by employee theft, forgery or
alteration, funds transfer fraud and certain types of computer fraud. It does not cover
cyber-attacks or loss of data. Insurance Premium Cost - $1,900.
All Central San insurance policies renew on July 1 of each year.
Self Insurance Fund
Central San has self-insured most of its liability and some of its property risks since
July 1, 1986, when the Board approved the establishment of the Self-Insurance Fund
(SIF).
In 1994, the Government Accounting Standards Board issued Statement No. 10
(GASB-10) which established requirements on how public agencies must fund their self-
insured risks. To comply with GASB-10, Central San segregated reserves for certain
types of liability risks into a sub-fund that must be actuarially reviewed at least every two
years. The next actuarial study will begin in July 2020.
In 2014, the Board established a reserve policy to maintain reserves for losses covered
by excess liability insurance of at least three times the amount of Central San's self-
insured retention. With the current retention of $500,000, this reserve is $1.5 million.
Retained losses and claims expenses are paid from this fund during the year. The fund
is replenished annually after the Board adopts the Self Insurance Fund budget via
transfer from the Operations and Maintenance Fund.
The Board also wanted to reserve funds for catastrophic losses or emergency response
and sought to simplify reserving for all risks that do not require GASB-10 compliance by
consolidating other liability claim reserves and property loss reserves into a single fund.
In order to meet these goals, the balance of the SIF has been consolidated into a single
sub-fund with a $5 million reserve.
Other claims and program expenses are paid from this fund during the year. The fund
is replenished annually after the Board adopts the Self Insurance Fund budget via
transfer from the Operations and Maintenance Fund.
Risk Management Division Annual Report FY 2018-19 6
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Workers' Compensation Claims
Goal 3: Be a Fiscally Sound and Effective Water Sector Utility
Claim Types
Workers' Compensation claims are classified as either Medical Only (MO) or Indemnity
(IND) claims. MO claims are those where employees only need medical treatment to
cure or relieve their injuries. In these circumstances injured employees did not lose any
time from work and fully recovered.
IND claims are those where injured employees received ongoing medical treatment
and:
• were taken off work by their treating physician,
• were given permanent physical restrictions and/or,
• suffered some permanent disability or physical limitation as a result of their
injuries.
Summary of Recent Claims
The following table shows the distribution of Workers' Compensation claims for
FY 2018-19, and the two prior years. The Claim Count column indicates the number of
claims occurring during the year. The Claim Costs column shows the total cost of those
claims to date.
FY 2016-17 FY 2017-187
Claim Claim Claim Claim Claim Claim
Count Costs Count Costs Count Costs
Medical Only 12 $55,484 8 $17,259 10 $15,577
Indemnity 1 $21,837 4 $213,226 1 $24,393
Total 13 $92,418 12 $231,226 11 $39,970
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The following tables detail these totals by functional group.
Claims Frequency (number of claims filed per FY)
MO IND MO IND MO IND
FY 2016-17
ADM 1 - - - - 1
CSO 5 - 7 3 4 -
ENG 1 - 1 - 3 -
POD 4 1 - 1 3 -
Total 11 1 8 4 10 1
Claims Severity (incurred costs for all claims per FY)
MO IND MO IND MO IND
ADM $585 - - - - $24,393
CSO $5,719 - $76,719 $321,033 $6,020 -
ENG $45,520 - $107,777 - $2,001 -
POD $3,661 $21,837 - $154,045 1 $7,557 -
Total $55,484 $21,837 $184,496 $475,078 $15,577 $24,393
Note the unusually high cost of both MO and IND claims for FY 2017-18. This is the
result of rapid loss development just over the last 12 months. Incurred MO costs for
FY 2017-18 rose from $17,259 to $184,496 and incurred IND costs rose from $213,967
to $475,078 in just the last 12 months. Because such rapid loss development is
unusual for Central San's Workers' Compensation claims, staff has, and will continue to,
monitor these cases carefully.
Trends and Analysis
Since Central San has very few Workers' Compensation claims in any single year, it is
difficult to identify any trends with such a small data set. As a result, the following
analysis incorpates Workers' Compensation claims data from the last five years.
Risk Management Division Annual Report FY 2018-19 8
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Medical Only (MO) Claims: The chart below shows the total number and cost of MO
claims by functional group for the last five years. The following table shows the average
cost per MO claim for each group during that same period.
Medical Only Claims - Last 5 Years
$140,000 50
$120,000 —
43 45
40
$100,000 — 35
$80,000 30
25
$60,000
20
$40,000 15
10
$20,000
$3,521 5
$- 2 0
ADM CSO ENG POD
ENG includes HHWCF and Environmental Compliance
ADM CSO ENG POD
• $1,761 $2,706 $10,604 $862
Collection System Operations (CSO) has the highest number of MO claims (43) over
this period but also had relatively low average cost per MO claim. Overall, CSO has
more frequent, but generally less serious, injuries than other groups.
CSO is also the most active participant in Central San's Return to Work Program, which
is discussed later in this section. CSO's active participation allows their employees to
recover and to return to work faster, which improves recovery time and reduces the cost
of these claims.
Engineering has fewer claims (12) than CSO but its total MO claims cost was higher,
resulting in a noticeably higher average cost per claim than CSO. As noted earlier, a
small data set can skew the metrics we use. One Engineering claim involves ongoing
medical treatment far in excess of what would normally occur in the treatment of a MO
claim. Thanks to participation in our Return To Work program the injured employee has
not missed any work, thus keeping the claim in the MO column. This single event
skews the 5-year total cost for Engineering higher than the claims count would suggest.
Risk Management Division Annual Report FY 2018-19 9
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Indemnity (IND) Claims: The chart below shows the total number and cost of Indemnity
claims by functional group for the last five years. The costs include medical expenses
and other payments made by the program (i.e. temporary disability payments to
employees while off work). The following table shows the average cost per IND claim
for each group during that same period.
Indemnity Claims - Last 5 Years
$450,000 - 6
5
$400,000
5
$350,000 4
$300,000 4
$250,000
3
$200,000
$150,000 2
$100,000
1 1 1
$50,000
$ MR-1.�i 0
ADM CSO ENG POD
GroupADM CSO ENG POD
$24,393 $81,820 $26,660 $82,361
These results further illustrate the limitations of a small data set when looking for trends.
The single Administration (ADM) claim was relatively minor when compared to the
overall population of IND claims. During this same time, CSO had four claims
averaging over $80,000 each while POD had five IND claims at an average cost of over
$82,000 each.
When all IND claims over the last five years are consolidated, the average cost per
claim remains just above $72,000. In contrast, the consolidated average cost of a MO
claim over the last five years is just over $4,000.
Risk Management Division Annual Report FY 2018-19 10
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Cost Drivers
Even with a small data set, it is clear that IND claims are significantly more expensive
than MO claims, as shown in the following chart.
Average Incurred* Cost per Claim
Last 5 Years - Medical Only vs. Indemnity
$450,000
$400,000 $411,804
$350,000
$300,000 $327,279
$250,000
$200,000
$150,000
$100,000 $168,847
$50,000 $116,355
ADM -
CSO
ENG
POD
This illustrates the differential costs between MO and IND claims. Since IND claims are
so expensive, Risk Management and Safety staff work with Human Resources, injured
employees and their supervisors to reduce the amount of time employees lose from
work, to ensure ongoing and proper medical treatment is received, and to help
employees recover as soon as possible. In many cases, these efforts prevent MO
claims from becoming IND claims. Over the last five years, IND claims costs are over
sixteen times higher than MO claims costs.
Soft Costs: The above chart only shows the differential claims cost between MO and
IND claims. Since IND claims usually include time away from work, there are additional
costs associated with these injuries not captured by claims data. These include lost
productivity, overtime for other staff needed to fill in while an injured employee is off
work, paid time off work to attend medical appointments, and supplemental benefit
costs including salary continuation provided to augment temporary disability payments.
Expert opinions vary on the scope of these soft costs but estimates range from three to
five times the claims cost. Considering that indemnity claim costs for the last five years
exceeded $790,000, this equates to $2.3 million to $3.9 million in soft costs incurred by
Central San.
Risk Management Division Annual Report FY 2018-19 11
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Loss Control
As noted above, IND claims constitute the most severe injuries and are the primary cost
driver in Workers' Compensation. This is why Risk Management and Safety staff work
closely together to reduce both the risk and the frequency of injuries to employees, and
to reduce the cost of claims. Such loss control activities are addressed more fully in the
Safety Annual Report provided after the end of each calendar year. The following
charts provide an overview of the more severe IND claims by injury type, cause, and
affected body parts.
Most Common Types of Injury By Year
2018-19
2017-18
Pain
2016-17 ■Strain/Sprain
Irritation/Burn
2015-16 ■Cut/Bruise
2014-15
0 2 4 6 8 10
Strains and sprains remain the most common type of IND claim but the frequency of
these injuries decreased from 8 in FY 2017-18 to 3 in FY 2018-19.
Risk Management Division Annual Report FY 2018-19 12
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Selected IND Claims by Cause of Injury
Last 5 Yrs & Last 10 Yrs
Slip/Trip/Fall/Jump
Repetitive Motion
Pushing/Pulling
Lifing/Reaching
0 1 2 3 4 5 6 7 8
■Last 10 Yrs ■Last 5 Yrs
Repetitive Motion remains a frequent cause of IND claims over the last 10 years but
there has only been one such claim in the last five years. Lifting/Reaching and
Slip/Trip/Fall/Jump are now the most common causes of injury.
Selected IND Claims by Injured Body Part
Last 5 Yrs & Last 10 Yrs
Hands _
Shoulder
Knee
Back
0 2 4 6 8 10
■Last 10 Yrs ■Last 5 Yrs
As with the preceding charts, data from the last five years demonstrates some
improvement. While shoulder, back and knee injuries are still the most common IND
claims, the frequency of knee and shoulder claims has diminished significantly in recent
years. Of the four shoulder injuries in the last 10 years, only one occurred in the last
five years and only one of the three knee injuries occurred in the last five years.
Unfortunately, back injuries, especially lower back injuries, are on the rise. All four of
the back injuries occurring in the last five years occurred during FY 2017-18.
Risk Management Division Annual Report FY 2018-19 13
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Return to Work
In 2007, Risk Management implemented a Return to Work Program to facilitate
employees' recovery from work-related injuries and to help reduce the number and cost
of IND claims. In many cases, Central San's ability to provide temporary modified duty
(TMD) can prevent a MO claim from becoming an IND claim. This makes the Return to
Work Program an essential component of both employees' recovery and cost control.
The program incorporates use of the interactive process which is required for
compliance with the Fair Employment and Housing Act (FEHA) and the Americans with
Disabilities Act Amendments Act (ADAAA).
It is not easy to compare Return to Work metrics from year to year as each potential
TMD assignment is considered individually and depends on the nature of each
employee's physical restrictions, and Central San's ability to offer TMD within those
restrictions. In FY 2018-19, Central San provided TMD assignments to the one
employee who was allowed to return to some form of modified duty.
Experience Modification Factor (ExMod)
One of several factors used to calculate Central San's annual Workers' Compensation
premium is the Experience Modification factor (ExMod). CSRMA calculates each pool
member's ExMod by comparing its loss data from the three prior years with all
members' combined loss data for that same period. Each member's premium rate is
adjusted up or down to reflect its performance compared to the pool as a whole. This
calculation is adjusted each policy year.
Because the pool determines members' ExMod using a rolling three-year period of loss
data, no member is penalized for poor performance (higher than average claims
frequency or severity) in a single year indefinitely.
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Workers' Comp ExMod - Last 10 Years
1.20 —
1.00 7
0.90
0.80 0.74 0.74
0.60
0.56
0.40
0.20 -
0.00 - -
1�
2�09 2�1� 2�1� 212 213 2�1� 2�1� 216 2�1� 2�1$
As noted earlier, claims costs for FY 2017-18 have increased significantly and
comparatively quickly. Since these costs will be included in upcoming ExMod
calculations, staff anticipates higher ExMod increases in upcoming years.
Overall Performance
Central San's overall Workers' Compensation performance appears to be deteriorating
among the CSRMA membership pool. However, this is largely the result of an aberrant
experience during a single year of claims. As these claims resolve, the unexpected
increase in claims costs may abate.
Regardless of future ExMod impacts, staff continues to embrace Central San's
proactive approach to safety, our Risk Management staff remains focused on active
case management, and other staff, supervisors and managers will actively participate in
the Return To Work Program.
Risk Management Division Annual Report FY 2018-19 15
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Liability Claims
Goal 3: Be a Fiscally Sound and Effective Water Sector Utility
Claims Philosophy
Central San's focus on customer service informs it's claims management process.
Claimants are contacted immediately, their claims are investigated thoroughly, and
when damages are found to be Central San's responsibility, claims are settled promptly
and fairly. This approach has resulted in satisfied claimants and in reduced cost.
Liability Claim Types
We categorize self-insured liability claims into four types; Auto Liability, Plumbing
Reimbursements, Sanitary Sewer Overflows, and Other Liability claims. These claims
are all paid from the Self Insurance Fund and would be covered by Central San's
excess liability insurance if the losses exceeded the self-insured retention.
Claim costs include emergency response expenses, settlements, legal expenses and
reserves for open claims but does not include staff time to adjust and settle claims.
Auto Liability Claims
Auto Liability claims are those filed by third parties for damages caused by Central San
personnel while operating its vehicles. This includes claims for injuries to persons or
damage to others' property.
These claims do not include costs to repair or replace damaged Central San vehicles
from such events. Repairs to these vehicles are paid from a different Self-Insured
Fund.
The chart below shows the total number and cost of Auto Liability claims for each of
those years. There were two Auto Liability claims in FY 2018-19.
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Auto Liability Claims
$10,000 11
$9,000 $8,777 10
$8,000 9
$7,000 8
$6,000 7
$5,000 6
5
$4,000
4
$3,000 3
$2,000 2
$1,000 � . 1
$- 0
2014-15 2015-16 2016-17 2017-18 2018-19
Total Cost Number
NEWIFY 2 -15 FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19
Avg $ per $1,546 $4,388 $4,192 $0 $3,735
Plumbing Reimbursement Claims
Plumbing reimbursements are small claims usually made by homeowners after they
called a plumber for service only to learn that the problem was in Central San's main
sewer line. In most cases, CSO staff provide the homeowner with a claim form while
they are on scene. This facilitates a simple reimbursement process where Risk
Management receives the claim, confirms the call out and the findings, then processes
reasonable reimbursements.
Plumbing reimbursements do not include reimbursement requests arising out of an
overflow or any event where sewage escaped from the collection system. These
circumstances involve additional expenses and often include other property damage.
Claims arising from these situations are considered overflow claims, which are
discussed in the following section.
The chart below shows the total number and cost of plumbing reimbursement claims for
the last five years, followed by a table showing the average cost per plumbing
reimbursement claim for each of those years.
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Plumbing Reimbursements
$3,500 11
$3,134
10
$3,000
9
$2,500 8
7
$2,000 6
$1,500 5
4
$1,000 3
$500 2
1
$- 0
2014-15 2015-16 2016-17 2017-18 2018-19
Total Cost Number
FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19
$330 $379 $449 $495 $1,045
Sanitary Sewer Overflow Claims
Sanitary Sewer Overflow claims are filed by customers whose property is damaged by a
sewer overflow. CSO staff respond to the overflow and contact Risk Management when
they become aware of an overflow that causes property damage. This allows Risk
Management staff to:
respond immediately to begin coordination of emergency clean up and
remediation as needed;
provide for affected customers' immediate needs;
• work with the customers to define damages;
help customers prepare their claims; and
• settle the claims in a timely and reasonable manner.
This process has evolved into a partnership between CSO and Risk Management staff
that benefits both Central San and the customer.
The following chart shows the total number and cost of overflow claims for the last five
years, followed by a table showing the average cost per overflow claim for each year.
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Sanitary Sewer Overflow Claims
$200,000 11
$180,000 $185,948 10
$160,000 $155,545 9
$140,000 8
$120,000 7
$100,000 6
$80,000 . 5
4
$60,000 3
$40,000 2
$20,000 1
$ 0
2014-15 2015-16 2016-17 2017-18 2018-19
Total Cost Number
FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19
$9,450 $16,904 $13,777 $25,639 $19,443
Staff benchmarks sanitary sewer overflow claims costs against the average cost per
overflow claim incurred by the CSRMA general liability insurance pool. Although
Central San does not participate in this pool, it's loss data presents a relevant
benchmark for comparison. As of the last available data, CSRMA's average cost
exceeded $17,000 per overflow claim. Central San has outperfomed this benchmark
three of the last five years.
Thanks to the partnership with CSO and the ongoing support of management and the
Board, Risk Management staff often resolves sanitary sewer overflow claims at a lower
cost than that of Central San's peers.
While large overflow claims occur infrequently, they are not unlikely. Any overflow claim
can develop into a significant loss, even when addressed in a timely, thoughtful and
professional manner.
Other Liability Claims
Other liability claims include losses arising from Central San's operations that don't
readily fit in the preceding categories. Examples of these claims include damage to
homeowners' property caused by sewer cleaning activities, damages alleged to arise
from field work, damage to other utilities' infrastructure from maintenance or
construction activities and other claims where the damaged party believes Central San
caused their loss.
Risk Management Division Annual Report FY 2018-19 19
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All such claims are investigated and, if found to be Central San's responsibility, promptly
settled for reasonable amounts. Claims found not to be Central San's responsibility are
either denied or tendered to the at-fault party.
The chart below shows the total number and cost of other liability claims for the last five
years, followed by a table showing the average cost per claim for each year.
Other Liability Claims
$1,200,000 11
10
$1,000,000 9
8
$800,000
7
$600,000 6
5
$400,000 4
3
$200,000 2
. $38,205 1
$- 0
2014-15 2015-16 2016-17 2017-18 2018-19
Total Cost Number
FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19
', . -
$88,635 $1,085 $10,535 $968 $4,245
The average cost per claim for FY 2014-15 is skewed by the inclusion of Central San's
contribution toward a flood loss arising from construction activities. Absent that single
event, the average cost of claims for FY 2014-15 would only be $5,748.
Liability Claims Overall
The following chart ties together each of the liability claim types, showing the impact of
each type of claim compared to the others and displays a consolidated view of Central
San's overall liability losses.
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Page 23 of 33
Cost of Liability Claims - Last 5 Years
$1,200,000
$1,000,000
$800,000
$600,000
$400,000
$200,000
14/15 15/16 16/17 17/18 18/19
■AL ■GL ■PL ■SSO
From this perspective plumbing and auto liability claims comprise a very small portion of
Central San's claim costs. Overflow claims have a more noticeable impact but the
annual aggregate cost appears to be stable. Over time, Central San's largest losses
arise from other liability claims, often including litigated matters.
Risk Management Division Annual Report FY 2018-19 21
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Page 24 of 33
Other Risks and Exposures
Goal 3: Be a Fiscally Sound and Effective Water Sector Utility
Goal 5: Maintain a Reliable Infrastructure
Property Losses
Central San is self-insured for damage to its property and facilities up to $250,000 per
occurrence. Insurance coverage for losses in excess of this retention is purchased
through the Alliant Property Insurance Program (APIP), a group purchasing program
administered by Alliant Insurance Services. The APIP policy includes Boiler and
Machinery, and Cyber Liability coverage. There was one small property loss in
FY 2018-19.
Property Losses in Retained Layer
$250,000 $219,377 11
10
$200,000 9
8
$150,000 7
6
$100,000 5
4
$50,000 $27,129 2
2
1
$ 0
2014-15 2015-16 2016-17 2017-18 2018-19
Total Cost Number
Earthquake and Flood Risks
The APIP policy does not include coverage for damages arising out of flood or
earthquake. Risk Management staff periodically evaluate the cost of insuring these
risks through the commercial insurance market. This evaluation considers recent
hazard modeling results and Central San's implementation of mitigation projects that
reduce the potential impact of earthquake and flood damage against available
insurance coverage and pricing.
In March and June 2017, staff presented the Administration Committee with an analysis
of earthquake insurance pricing, and the results of FEMA's 2017 update to HAZUS, its
hazard model using multiple earthquake and flood scenarios. After some discussion,
the Committee decided against purchasing flood or earthquake insurance at that time.
Staff will continue to monitor hazard models and the insurance market and report back
to the Committee when more favorable options emerge.
Risk Management Division Annual Report FY 2018-19 22
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Page 25 of 33
As a result, Central San is essentially self-insured for flood and earthquake risks. To
finance this risk, the Board approved and funded a $5 million catastrophic loss fund
within the Self-Insurance Fund (SIF) to pay for emergency repairs after a natural
disaster. Central San has not suffered any catastrophic losses to date.
Auto Physical Damage
Central San is self-insured for Auto Physical Damage. Damage to other parties'
vehicles is insured by the Excess Liability policy, but the cost to repair or replace
Central San vehicles is not. If a Central San vehicle is damaged by a third party, the
SIF pays for repairs and Risk Management staff pursues cost recovery from the at-fault
party. When damage is caused by Central San staff, the SIF pays repair costs in
excess of $1,000. All vehicle repairs are coordinated through Central San's Vehicle
Shop.
The following chart shows the number and cost of Auto Physical Damage losses for the
last five years.
Self-Insured Auto Physical Damage
$14,000 11
$12,000 $11,912 10
9
$10,000 8
7
$8,000 6
$6,000 5
4
$4,000 3
$2,000 2
1
$- 0
2014-15 2015-16 2016-17 2017-18 2018-19
Total Cost Number
Four vehicles were damaged during FY 2018-19. One was caused by another party.
Risk Management staff filed a claim with the at-fault party's insurer and recovered the
full policy limit.
Household Hazardous Waste Claims
Central San purchases a separate Pollution Legal Liability insurance policy to cover
losses arising out of the collection and disposal of household hazardous waste. No
claims have been filed since the Household Hazardous Waste Collection Facility
opened in 1997.
Risk Management Division Annual Report FY 2018-19 23
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Page 26 of 33
Other Pollution Risks
Central San has chosen to self-insure pollution-related risks other than those arising
from providing the Household Hazardous Waste Facility. Coverage for such pollution
losses is either not available or extremely expensive. Claims costs arising from an
alleged pollution condition would be paid from the SIF's Catastrophic Loss Fund. No
pollution claims have been filed in the last five years.
Risk Management Division Annual Report FY 2018-19 24
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Page 27 of 33
Security
Goal 5: Maintain a Reliable Infrastructure
Strategy 3 — Protect District Personnel and Assets from Threats and Emergencies
Risk Management is responsible for the security of Central San's facilities. Day-to-day
security operations includes oversight of, and coordination with, the contracted security
guard company, issuance of badges and keys to staff and the maintenance and support
of the electronic security systems including security cameras, panic buttons, burglar
alarms and related software.
Risk Management staff partners with other work groups to accomplish a variety of tasks
and projects in order to secure Central San property, and protect its employees and the
public from security breaches.
Major security initiatives this year included:
• Hiring a consultant to assist in implementing recommendations from the Security
Master Plan
• Optimizing access control procedures to standardize practices and to reduce
processing time and paperwork
• Adding access control devices and replacing aging infrastructure throughout the
facilities.
The Information Technology Division has implemented software and tools to identify
and control unauthorized access to Central San's networks, and has developed an
education and training program to increase employee awareness and reporting of
potential threats.
Risk Management staff is also working on longer term projects including updates to
information security protocols, electronic security systems, and facility hardening
measures to protect employees and further restrict access to Central San facilities from
unauthorized parties.
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Page 28 of 33
Emergency Management
Goal 5: Maintain a Reliable Infrastructure
Strategy 3 — Protect District Personnel and Assets from Threats and Emergencies
Central San's Emergency Management Program is comprised of four elements that
work together to ensure a prompt and effective emergency response to disasters, to
make sure such response is properly documented for potential cost recovery, and to
make permanent repairs to damaged infrastructure as soon as practicable. These four
elements are discussed below.
Plan Development and Maintenance
Risk Management is responsible for developing, maintaining and continuously
improving the Emergency Operations Plan, Local Hazard Mitigation Plan, and the
Continuity of Operations Plan.
Emergency Operations Plan: The California Emergency Services Act requires all public
entities to prepare and maintain an Emergency Operations Plan (EOP) that complies
with the Standardized Emergency Management System (SEMS). Risk Management
released and the Board adopted a major EOP update in 2010 to reflect changes in the
Emergency Operations Center (EOC) staffing structure and to comply with the federal
National Incident Management System (NIMS).
Since then, Risk Management staff reviews the EOP at least annually and posts needed
updates to the intranet. Hard copies of the EOP are kept in the primary and backup
EOCs. Additional hard copies of the plan are stored in the emergency supplies cache.
Local Hazard Mitigation Plan: The Federal Emergency Management Agency (FEMA)
requires local governments to update their plans every five years as a prerequisite to
seek grants under the Hazard Mitigation Grant Program and the Pre-Disaster Mitigation
Program. Central San's first plan was adopted in 2011, and accepted by FEMA in
2012. FEMA acceptance is valid for five years. After that, an updated plan must be
submitted to maintain program compliance.
In keeping with its commitment to coordinate emergency planning and responses with
other agencies, Central San joined with 35 other agencies to prepare a multi-
jurisdictional update to the 2012 Local Hazard Mitigation Plan. Staff served on the
Steering Committee managing this process.
The Board adopted Central San's portion of the updated plan on March 1 , 2018. The
update was submitted to FEMA for review and was approved on April 19, 2018.
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Page 29 of 33
Continuity of Operations Plan: Staff has spent considerable time in FY 2018-19 working
on a major update to the Continuity of Operations Plan (COOP). Staff expects to
complete the update by the end of 2019.
Emergency Action Plan: The Emergency Action Plan (EAP) is required by the
California Divisiion of Occupational Safety and Health (CalOSHA) and details the
specific responsibilities and procedures to follow if Central San staff need to evacuate or
shelter in place. Since the EAP is part of the Safety Directive catalog, responsibility for
EAP maintenance, testing and exercises resides with the Safety Division in the
Operations Department.
Training and Exercises
During the year, Risk Management offers training classes and conducts exercises to
emergency response staff. Items marked with an asterisk (*) were funded through a
Bay Area Urban Area Security Initiative grant from Homeland Security.
EOC Activation Exercise 9/13/18
CSTI 4-day Earthquake Class * 8/27-30/18
ICS 300 6/11-13/19
Supplies and Equipment
Primary and Backup EOC: The Multi-Purpose Room is Central San's primary EOC.
The Crew Room at the CSO facility in Walnut Creek serves as Central San's backup
EOC. Both locations are designed as `warm' sites, meaning that all needed supplies
and equipment are stored on site, but must be set up before the EOC becomes
operational.
These facilities must be continuously stocked with the necessary supplies and
equipment to enable immediate set up and operation of the EOC. Risk Management
staff conducts inventory audits of each location to ensure that the necessary items were
available on site, secured as needed and maintained in an operable condition, including
replacement of any outdated or non-operational items. During these audits, staff also
tests the analog phones, satellite television service and the satellite internet service to
ensure continued operability.
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Page 30 of 33
Communications: Contra Costa and Alameda Counties are partners in the East Bay
Regional Communications System Authority (EBRCSA), a Joint Powers Authority (JPA)
that developed and maintains an interoperable radio communications infrastructure
using the P25 standard. Central San joined this group in FY 2014-15, and purchased
its first batch of radios in FY 2016-17. The Radio Unit of the County's Department of
Information Technology has programmed all the handheld and mobile radios and
installed the mobile radios in selected Collections System vehicles. Staff recently
purchased a second batch of radios to increase the number of radios pre-deployed for
use in an emergency.
Central San also maintains Handheld Amateur (HAM) radios at both the Walnut Creek
and Martinez campus.
Coordination with Other Agencies
As a single-service agency, Central San must coordinate its emergency response with
first responders in other local governments within its service area. All local
governments in the County report incidents, damage and resource requests to the
Operational Area EOC. The Operational Area EOC is housed at the Contra Costa
County Sheriff's Office of Emergency Services (OES). The County EOC analyzes and
forwards local status reports and unfilled resource requests to the regional, state and
federal emergency management coordinators.
Risk Management staff continues to serve on the Operational Area Council, a group of
emergency managers from within the County who meet quarterly to share information
and best practices, coordinate multi-agency drills and training opportunities, and
facilitate coordinated area emergency planning. The Council is sponsored by the
Contra Costa County Sheriff's OES.
As the Operational Area point of contact, County OES also works with state and federal
agencies to collaborate on projects of regional or national concern. Operational Area
Council members are encouraged to participate in these larger group meetings.
Central San is also a member of the California Water and Wastewater Agency
Response Network (CalWARN), which coordinates the distribution of members'
specialized equipment and trained personnel to other member agencies to help with
disaster and emergency response.
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Page 31 of 33
Total Cost of Risk
Goal 3: Be a Fiscally Sound and Effective Water Sector Utility
The Total Cost of Risk (TCOR) is a risk management industry benchmark that allows an
organization to evaluate the cost of its Risk Management program over time. TCOR
includes the cost of Central San's Safety program, as well as Risk Management
program administration, claims and insurance premiums. This total is reduced by any
revenue accrued by the Self-Insurance Fund.
The TCOR for FY 2018-19 was $2,563,264, an increase of less than $14,000 from the
preceding year.
The following chart shows Central San's TCOR for the last 10 years. The year with the
highest TCOR are shown in orange while the year with the lowest TCOR is shown in
green.
TCOR Totals and Trend*
$4,500,000 $4,243,881
$4,000,000
$3,500,000
$2,563,264
$3,000,000
$2,500,000 $2,355,733
$2,000,000
$1,500,000
$1,000,000
$500,000
$ - I I —:I []i. --I
-
ti� titi titi ti� ti� ti� ti(0 til ti0 tiC5
Totals have been adjusted for inflation
The FY 2010-11 and FY 2014-15 spikes in TCOR are the result of a few large liability
claims occurring in those years. However, in spite of these spikes, the TCOR trend is
stable.
TCOR is the sum of the five categories of expenses: personnel, insurance, claims, risk
management program costs and safety program costs. The following chart illustrates
costs by category for the last 10 years.
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Page 32 of 33
TCOR Categories by Fiscal Year
$4,500,000
$4,000,000
$3,500,000
$3,000,000
$2,500,000 -
$2,000,000
$1,500,000
$1,000,000
$500,000
Al
ti� titi ti� ti� ti� tih ti� til ti� ti�
■Personnel ■Insurance ■Claims ■RM Program 'Safety Expenses
Note 1: Chart does not include lost productivity or other soft costs arising from claims.
Note 2: TCOR segment totals have not been adjusted for inflation.
Totals for four of the five categories are determined at the end of each fiscal year.
However, claims costs includes reserves for any open claims occurring in specific fiscal
years. This may result in some fluctuation of the total claims costs over time as losses
develop or claims resolve favorably.
Risk Management Division Annual Report FY 2018-19 30
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Page 33 of 33
Strategic Plan Metrics
Central San's Strategic Plan includes six goals with associated strategies, initiatives and
metrics to track performance toward achieving these goals. Risk Management is
responsible for metrics under three of the goals. The tables below summarize Risk
Management's FY 2018-19 performance for the metrics associated with these goals.
Goal 1: Provide Exceptional Customer Service and Maintain an Excellent
Reputation in the Community
Strategy: Maintain a strong reputation in the community I
Metric' A &ear End Result
Continue participation in Provide Mutual Aid to sister agencies No requests ✓
CalWARN ,L^
Goal 3: Be a Fiscally Sound and Effective Water Sector Utility
Strategy: Evaluate and implement risk management practices to minimize loss.
Metric Succcess Measure -"Year End Result
Workers' Comp Experience Maintain ExMod at 1.0 or lower .74 ✓
Modifier (ExMod)
Provide Return to Work Provide Temporary Modified Duty to
Program at least 95% of employees injured 100% ✓
on the job
Manage the Cost of Overflow Average cost per claim
Claims < $25,000L I
$19,443 V/V/
Goal 5: Maintain a Reliable Infrastructure
Strategy: Enhance Capability to Mitigate, Prepare, Respond and Recover from
Emergencies
IF
Succcess Measure Year End Result
1pqr"� A hmlL- Ad h��
Ensure the currency of the Update the Emergency Operations Minor Update V/V/
Emergency Operations Plan Plan as needed
Evaluate and implement
security improvements to meet Implement the Security Master Plan Ongoing ✓
new or evolving threats
Risk Management Division Annual Report FY 2018-19 31
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