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Home My WebLink About02-238 Resolution No. 02-328 RESOLUTION ACCEPTING THE PROPOSAL OF LUNDSTROM INSURANCE FOR LIMITED SELF-INSURANCE PROGRAM BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF ELGIN, ILLINOIS, that Olufemi Folarin, Interim City Manager, be and is hereby authorized and directed to accept the proposal on behalf of the City of Elgin of Lundstrom Insurance for the city' s limited self-insurance program for the period October 1, 2002 through September 30 , 2003 as follows : a. The St . Paul $50, 000/occurrence (SIR) for the property policy and $75, 000/occurrence (SIR) for general liability with $500, 000 "All Lines" aggregate SIR proposal for a total excess premium and claims administration cost of $698, 272 and $40 , 000 claims administration fee . b. The Safety National $500 , 000/occurrence (SIR) compensation proposal for a total excess premium cost of $46, 405 . c. The Custard Claims Management Services proposal for workers' compensation claims administration services for $3 , 000 administrative fee and $225 per claim fee . d. The AIG $3 , 000 , 000/occurrence and $3 , 000 , 000/aggregate with $10, 000/deductible for pollution liability coverage for $41, 441 . s/ Ed Schock Ed Schock, Mayor Presented: September 25, 2002 Adopted: September 25, 2002 Vote : Yeas : 6 Nays : 0 Attest : s/ Dolonna Mecum Dolonna Mecum, City Clerk . pF f�Ci C it of I t 1 N o. %') E L �� , �10 ,uu September 20, 2002 G un F �0 ' EFL►� or F$$I N rOP FINANCIALLY STABLE CITY GOVERNMENT EFFICIENT SERVICES, AND QUALIT Y INFRASTRUCTURE TO: Mayor and Members of the City Council FROM: Olufemi Folarin, Interim City Manager SUBJECT: 2002 - 2003 Insurance Policies PURPOSE The purpose of this memorandum is to provide the Mayor and members of the City Council with information to award a contract regarding the award of contracts for the City' s limited self- insurance program for the period October 1, 2002 through September 30, 2003 . BACKGROUND The City' s current limited self-insurance program, which expires September 30, 2002, includes workers compensation claims administration by Custard Claims Management Services, an excess worker' s liability policy with Safety National, a $5, 000, 000 pollution insurance policy through AIG, and liability/property insurance through St . Paul . These policies give the City total coverage limits of $9, 000, 000/occurrence and $15, 000, 000 of aggregate liability for most types of losses . Our self-insured retention, the dollar amount of claims/losses for which the City is responsible, is $500, 000, except for excess worker' s compensation, which has an SIR of $250, 000 . Last year when our insurance program was competitively bid, the City accepted a three year program with St . Paul Fire and Marine Insurance, through Lundstrom Insurance. This three year program guaranteed the type and scope of coverage the City would have for general liability and property insurance, but not the premium charges. The insurance market has hardened and prices rft have risen dramatically since the events of September 11, 2001, which put an enormous strain on the insurance industry' s 2002 - 2003 Insurance Policies ttei. September 20, 2002 Page 2 capacity (available money to pay claims) . Therefore, the City has seen increases in its premiums of up to forty four percent (44%) this year. Attached is a summary from St . Paul' s as well as an analysis by our insurance consultant, Risk Resources. Risk Resources states that while our increases are substantial, they are the best that are available in today' s insurance market . St . Paul is proposing $698, 272 for liability/property coverage and a $40, 000 claims administration fee . Last year we paid $504, 796 in property/liability premiums and a claims administration fee of $31, 500 . The . City' s contract for excess worker' s compensation insurance with AIG expired this year. Lundstrom' s solicited five carriers, including AIG. None of the carriers proposed our current self insured retention of $250, 000 ; rather they proposed $350, 000 or $500 , 000 . A comparison of the proposals is attached. One company, Gray Insurance Company, proposed "gap" coverage, which would lower our self insured retention to either r $350, 000 or $400, 000, for an additional premium. The most cost effective choice given our worker' s compensation loss history is Safety National' s proposal of $46, 405 with a self insured retention of $500, 000 . Last year, we paid $31, 950 with a self insured retention of $250, 000 . Our worker' s compensation third party administrator has proposed a renewal fee of $3 , 000 with no increase in the per claim administration fee ($225) . Last year' s fee of $19, 625 was to cover the transfer of active files from our former third party administrator, CCMSI, to our current administrator, Custard Claims Management . The City' s pollution coverage insurer, AIG, proposed a premium of $41, 441 for $3, 000, 000 coverage . This premium is an increase from last year' s premium of $36, 981 for the same coverage . GROUPS/INTERESTED PERSONS CONTACTED None . pik-, FINANCIAL IMPACT In 2002 , $577, 870 was budgeted for insurance premiums . There are sufficient funds ($188, 350) in the 2002 Risk Management Fund • 2002 - 2003 Insurance Policies September 20, 2002 Page 3 to cover the FY 2002 portion of the recommended insurance premiums ($174, 569) to St . Paul . There is currently $34, 069 in the pollution liability premium account . A budget transfer of $7, 372 shall be made to ensure there are sufficient funds to pay the recommended insurance premiums to AIG. There is currently $31, 950 in the excess worker' s compensation premium account . A budget transfer of $7, 083 shall be made to ensure there are sufficient funds to pay the recommended insurance premiums to Safety National . There are sufficient funds in the risk management professional services account to pay for insurance and worker' s compensation claims administration expenses for 2002 . Sufficient funds will need to be established as part of the 2003 Risk Management Fund' s budget for the next year' s expenses. e0 EGAL IMPACT None. ALTERNATIVES 1 . Accept the recommendations detailed below. 2 . Reject the recommendations and solicit other proposals for coverage. If this alternative is selected the City will be without coverage for a period of time. RECOMMENDATION The recommendation is that the City accept the following limited self-insurance coverages for the period October 1, 2002 through September 30, 2003 as follows : a. To accept St . Paul ' s renewal for a premium cost of $698, 272 and a $50, 000 claims administration fee. b. To award Safety National $500, 000 SIR worker' s compensation proposal for a total excess premium cost of $46, 405 . c. To accept the Custard Claims Management Services proposal for worker' s compensation claims administration services for a two year period for a $3 , 000 administrative fee and 2002 - 2003 Insurance Policies September 20, 2002 Page 4 per claim fees of $225 with options to renew at the City' s discretion. d. To accept AIG' s renewal of pollution liability insurance for a premium cost of $41, 441 . Respectfully submitted, �� SAS Olufe i F , olarin Interim City Manager GAC Attachments 'ow Gail Cohen El.in 9-13-02.doc �. Gail Cohen September 13,2002 City of Elgin Page 1 By E-Mail MEMORANDUM To: Gail Cohen City of Elgin From: Randy DeLopst Risk Resources Re: 2002-03 Property and Liability Insurance Renewal Proposals Date: September 13,2002 We have reviewed the various proposals received for your property and liability insurance coverages effective October 1, 2002. This memo will summarize our analysis and recommendations. Property and Liability Coverage Excluding Workers' Compensation and Pollution Liability St. Paul Insurance Companies offered a renewal proposal with an annual premium of $748,272. This includes St. Paul's claim handling service fee. This is an increase of 43.7%from 2001-02. This increase is in line with the premium increases we see other large accounts experiencing in this hard insurance market. The insurance market for municipalities has become harder than those conditions faced in 2001-02. In this hard insurance market, municipal insurance risks are not viewed as attractive by most insurance companies. Only a handful of insurance companies are willing to write municipal risks. We are seeing large property and liability insurance accounts such as you experience premium increases ranging from 50% to over 100%. Therefore, St. Paul's increase of 43.7% is better than average. St. Paul's 2001-02 proposal was the best received of several bids that were analyzed. The 2002-03 St. Paul renewal proposal is still superior to the 2001-02 proposals the City received from other insurance companies. While the St.Paul proposal is a substantial increase in cost from 2001-02,we believe it is the best that can be accomplished in today's tough insurance marketplace. Workers' Compensation Coverage The City is self-insured for Workers' Compensation claims and purchases Excess Stop e"` Loss insurance. Currently, the self-insured retention for this coverage is $250,000 per occurrence. Coverage is provided through Illinois National Insurance Company, an MG G'Q.ETRsc.y ofFJPVET copse .INlib. Gall Cohen'- El.in 9-13-02.doc Page 2 rialk Gail Cohen September 13,2002 City of Elgin Page 2 Company. Attached is a chart showing the major features of the proposals received. rifib* OcLENTsCk,MEkjgT1U,.I. .42** Gail Cohen Elgin 9-13-02 doc Page 3 Gail Cohen September 13,2002 City of Elgin Page 3 We recommend the Safety National proposal (Option #1) be accepted. Under this proposal, the self-insured retention will increase from $250,000 per occurrence to $500,000 per occurrence. Other proposals offering a lower retention were not acceptable for the following reasons: 1. The Gray Insurance Company insurance proposals both Option #1 and #3 were unacceptable because their Limit of Liability did not provide full coverage for the statutory benefits required under Illinois law. The limit of liability offered created a substantial uninsured exposure to the City. Also, these proposals excluded coverage for any loss caused by a terrorist act. 2. The Midwest Employers Options offered self-insured retentions of$350,000 and $400,000. In analyzing the City's loss experience from 1987 until the present, there were only three claims over $250,000. The additional premium to reduce the self-insured retention is not cost effective. The total additional premiums for either the $350,000 or $400,000 retention level were each in excess of $1,000,000. If the City had had these retention levels in place during the 1987-2002 time period, you would have recovered only $57,500 in benefits for the $350,000 retention and only$7,500 in benefits for the$400,000 retention. We recommend the City accept the Safety National(Option#1)proposal. Pollution Liability Coverage As of this time, we have not received the renewal terms for this coverage. The hard insurance market is causing both public sector and private sector accounts to seek competitive renewal proposals. This has resulted in a tremendous backlog in getting renewal proposals out for many insurance companies. Based upon our other clients' renewal experience regarding pollution coverage for this year, we do not expect the renewal premium increase will be more than the 44%increase seen from St. Paul. * * * If you have any questions regarding the above,please call. Best regards, Randy DeLopst Risk Resources RDeLopst @RiskResources.net 630-617-5710 Direct 630-617-5100 Main 630-617-5128 Fax RCD:cw GC tNTTCy odEgie ETIERy`EIp T1102 b[ Gail Cohen -2002-03 WC_Proposals.doc..,.:_.. ... ..,,.M _ _17,99 ,1,, r City of Elgin 2002-03 Excess Stop Loss Workers'Compensation Proposals MG 2001-02 Option#1 Option#2 Option#3 Option#4 Option#5 Option#6 Option#7 Option#8 Expiring Company AIG *Safety **The Gray **The Gray Employers Midwest Midwest Midwest AIG National Insurance Insurance Reinsurance Employers Employers Employers Co. Co. Estimated Payrolls $33,655,000 $35,973,017 $35,973,017 $35,973,017 $35,973,017 $35,973,017 $35,973,017 $35,973,017 $35,973,017 Retention $250,000 $500,000 $350,000 $400,000 $500,000 $350,000 $400,000 $500,000 $500,000 750,000 $750,000 Limit of Liability Statutory Statutory $150,000 $100,000 $25,000,000 Statutory Statutory $25,000,000 Statutory Employer Liability $1,000,000 $500,000 $150,000 $100,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 Financial Rating A++XV A VIII A VI A VI A++XV A X A X A X A++XV Rate/$100 .09 .129 .13344 .08201 .1845 .05719 .5121 .4225 .5560 Deposit Premium $30,290 $46,405 $48,000 $29,500 $66,365 $154,104 $137,990 $113,847 $200,000 • *Includes USL&H Coverage with a$600,000 Retention and Jones At Coverage with a$1,000,000 Retention. • **Terrorist Exclusion applies Gail Cohen -elgin proposal 2002.doc Page 1 - S IkJjc Sector Services sus FOR: The City of Elgin Effective Date: October 1,2002 to October 1,2003 PREPARED BY: Peter LaMonica,CIC—Territory Account Manager Marcy Neil,CPCU—Underwriting Manager PRESENTED BY Roger Lenart Lundstrom Insurance 645 Tollgate Road Elgin,IL 60123 and St.Paul Fire& Marine Insurance Company Public Sector Services Page 1 Gail Cohen-eloin proposal 2002.doc .. � .=,.ache 4 t ` > A$75,000 Self Insured Retention with a$500,000 Aggregate applies to Auto Liability,General Liability,Liquor Liability,Law Enforcement Liability,Public Entity Management Liability,Employee Benefits Liability and Healthcare Professionals Liability. A $50,000 Self Insured Retention applies to the Property,Equipment Breakdown and DIC. Property Insurance: Building and Contents $ 103,044 Equipment Breakdown $ 15,102 DIC Flood $ 8,913 Earthquake $ 8,913 Inland Marine: Computer $ 2,222 Contractor's Equipment $ 7,658 Miscellaneous Property $ 5,697 Fine Arts $ 140 Accounts Receivable $ 508 Valuable Papers $ 210 Transit $ 532 Crime $ 6,843 Automobile: Liability $ 76,978 Physical Damage $ 8,578 General Liability $ 178,452 Employee Benefits Included EMT/Nurses Professional Included Law Enforcement Liability $ 93,015 Public Entity Management Liability $ 63,780 Umbrella Liability $15,000,000 Limit $ 117,687 TOTAL $ 698,272 Page 4 Gail Cohen-&sin ro•osal 2002 doc Pa•e 5 For additional details and premiums applicable to the separate coverages,please refer to the appropriate proposal page. s 40/000 > Claims Service Fee for 10/01/02 to 10/01/03 $.541;111c0 The Loss Fund is at$85,000 with a replenishment point of$50,000. Page 5