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HomeMy WebLinkAbout06/28/1988 TENTATIVE AGENDA ADJ. REG. SESSION SHAKOPEE, MINNESOTA JUNE 28, 1988 Mayor Lebens presiding 11 Roll Call at 4:00 p.m. 21 Meeting with the City's insurance Claims adjusters 3] 1988/89 Insurance - bring memo received at June 21st Council meeting 4] Other business: a) b) 5] Adjourn to Wednesday, June 29, 1988 at 7:00 p.m. John K. Anderson City Administrator [Council may not meet between 6:00 p.m. and 8:00 p.m. on the day of an Election] r r - 3 Memo To: John K. Anderson, City Administrator From: Gregg Voxland, Finance Director Re: 1988/89 Insurance Date: June 13, 1988 Introduction Most of the City's insurance policies expire on June 30, 1988. Council needs to act on the renewal quotations before June 30, 1988. Background Attachment A provides some background information on the League of Minnesota Cities Insurance Trust (LMCIT). Shakopee has participated in this program for several years and I am pleased with the program. Attachment B is a summary of new coverages provided by LMCIT. All the changes are important but the most interesting ones are numbers 1-5 and 11. Attachment C provides detail on the premiums quoted. A comparative recap is shown below and included are the City, HEA, Community Recreation and S.P.U.C. League 1988/89 1987/88 Property $ 23,289 $ 26,417 Equipment (inland marine) 4,619 4,620 Liability 79,661 67,673 Auto Liability 23,033 22,434 Auto Physical Damage 10,796 11,210 Crime 270 270 $141,668 $132,982 Transamerica Public Officials Blanket Bond (League @ $1,463 for 88/89) 787 787 Hartford - Steam Boiler 6,925 6,723 Public Officials Errors & Omissions International Surplus Lines (E & 0) 8,189 5,534 IMCIT (Extend Reporting $8,508) 12,109 16,820 Tudor Co. 16,250 Umbrella Liability - IMCIT 27,106 37,379 IMCIT Pollution Coverage 2,788 N/A Inverse Condemnation* 1,991 N/A *must have IMCIT E & 0 Staff recommendation is to renew for 1988/89 the comparable package for what the City had for 1987/88 with the following changes: A.) Add Pollution coverage to general liability package at a cost of $2,788. We currently have no pollution coverage. This change would cover accidental, above ground, short term pollution such as a herbicide spill or leaking transformer oil from an accident. E.) Change from International Surplus Lines to LMCIT for Public Officials Errors 6 Omissions (E 5 0).coverage. The premium does increase from $8,189 to $12,019 but the LMCIT is a better policy with broader coverage. I24CIT provides its own defense in most cases as opposed to the City providing its own defense and then claiming reimbursement from the carrier. The City can also then pick-up the inverse condemnation coverage for the general liability police at a cost of $1,991. This provides coverage for damages awarded when someone loses the use of their property due to the enforcement of a zoning ordinance or land use regulation. The premium for LMCIT E 5 0 coverage dropped from $16,820 to $12,019 (quotation) . I think the City should move more of it's coverages under LMCIT because of coordinated coverages, stability and better coverages. I feel at some point we will have to switch because of cost from International Surplus Lines or their dropping out of the business or some other reason and this is an appropriate time to change. However, changing companies does involve a cost. Once a policy expires or is dropped, that company does not cover any more claims that may surface. To provide coverage for those new claims, the City buys an extended reporting period. Internationals period is one year for $8,189. LMCIT will go back 1 to 5 years with a cost of $4,159 to $8,508. Rod Kress, Ass't. City Attorney is comfortable with changing to LMCIT with the 5 year extension. A draw back to changing to IMCIT is that the limit is $600,000 (matches general liability policy and state statute) versus $1,000,000 for Intl. Surplus Lines. The deductible would also increase from $2,500 to $5,000. Last year Council decided to droptheumbrella liability policy primarily because of the cost. S.P.U.C. wanted to keep the umbrella policy but did not want to pay the whole premium. The cost to purchase the LMCIT umbrella for 1988/89 is $27,106 for $1,000,000 coverage and $62,789 for $5,000,000 coverage. The umbrella would not cover E 6: 0 or sexual abuse claims. Alternatives 1.) Seek other quotations. 2. ) Renew comparable coverages. ($157,569) 3.) Renew comparable coverages but change E 6. 0 to LMCIT ($174,686) and add pollution and inverse condemnation coverages. 4.) Add umbrella coverage ($27,106) Recommendation Alternative No. 3. Action Requested Move to renew the general property/liability insurance with the League of Minnesota Cities Insurance Trust (LICIT) for $141,668, renew the Transamerica Public Officials Blanket Bond for $787, renew the Hartford steam boiler policy for $6,925, to add the pollution coverage to LICIT for $2,788, purchase Public Officials Errors and Omissions coverage from LMCIT for $12,019 plus the extended reported period for $8,508 and adding the inverse condemnation endorsement for $1,991. GV:mmr A LEMN 183 UniversityAve.East St.Paul,MN 55101.2526 League of Minnesota Cities (612)227.5600(FAX:221.0986) LEAGUE OF MINNESOTA CITIES INSURANCE TRUST PROPERTY AND LIABILITY PROGRAM The League of Minnesota Cities Insurance Trust (LMCIT) property and liability program is a joint self-insurance plan designed and administered by North Star Risk Services and operated through local insurance agents. Over 700 cities are now members. HOW IT WORKS - Eachcitypays a premium to LMCIT, which in turn pays the local agent's commission and pays an administrative fee to North Star Risk Services. LMCIT also buys reinsurance to protect against catastrophic losses. The remaining funds are used to pay claims. An annual review of reserves by an actuary helps assure that LMCIT remains financially strong. WHAT DOES IT COVER? The basic LMCIT program provides property coverage up to a $500,000 limit. If the city's property values exceed $500,000, additional coverage is available through a special arrangement with Travelers. Automotive physical damage and liability, and comprehensive general liability are provided, with a combined single limit of $600,000. Public officials errors and omissions and umbrella coverage are ' available as options. In 1986, LMCIT completely revised the liability coverage document, clarifying and simplifying the language and adapting the coverage more closely to cities' needs. The liability coverage (except auto liability) is on a claims-made basis. The program administrator can help the local agent place airport, bond, - liquor liability, boiler and machinery, or other specialty coverages. LMCIT also can customize deductibles to the individual city's .situation. An ^annual aggregate- deductible approach is available, under which the - city retains responsibility for a specified total dollar amount of claims per year. This approach lets a city gain much of the benefit of retaining risk while still limiting the city's maximum exposure. CLAIMS LMCIT contracts with GAB for claims adjusting services through its offices around the state. GAB works closely with North Star and LMCIT to assure efficient and uniform claims handling. LMCIT employs its own attorneys, who defend many liability claims and assist outside counsel in defending others. This reduces LMCIT's defense costs substantially. ADVANTAGES OF THE PROGRAM Stability LMCIT's purpose is to provide coverage for cities. Unlike a private carrier who may or may not continue to write city coverage, and who may or may not charge a reasonable price, LMCIT will continue to provide covarage at a cost directly related to the actual loss experience as long as cities continue to support LMCIT. City Control LMCIT is governed by a Board of Trustees, who are city officials appointed by the League's Board of Directors. Non-profit structure Any surplus funds not needed for losses and expenses remain in LMCIT's account. The only things LMCIT can do with this money are to return it to the participants or to retain it as a reserve to help further reduce future premiums. Either way a direct savings to cities results. - Investment income The funds which LMCIT holds to pay claims are invested, and the investment income accrues to the benefit of the program. This additional income further reduces the cost to cities. REINSURANCE Reinsurance is provided by a consortium of several reinsurance companies: Signet, Constitution State, United Republic, Pennsylvania Manufacturers Assn. , and Aneco. For property coverage, the reinsurance pays on each occurrence any loss exceeding- $200,000, up to the $500, 000 limit. For liability coverage, the reinsurance pays on each occurrence any losses in excess of $250,000 up to the $600,000 coverage limit. LMCIT NEW COVERAGE SUMMARY Various changes to the coverage format in forms have been made to the Comprehensive Municipal Coverage provided by LMCIT. Efforts have been made to tailor the coverages to meet the character and requirements of municipal operations . Further, changes have been made in the coverage documents to provide coverage in conformance with Minnesota municipalities ' statutory obligations. Comprehensive Municipal Coverage has been drafted into six sections to include I. Coverage, II. Who is Covered, III. Limits of, Coverage, IV. Definitions, V. Supplementary Payments, and VI. Common Conditions. The coverage parts consist of General Liability, Medical Pay- ments, Personal Injury, Errors and Omissions, and Automobile Liability. These. coverages are formatted into single coverage agreement with Common Definitions and Conditions. With respect to the coverages provided, the most noteable- change in the coverage agreement is that General Liability and Personal - Injury are now included on a claims made basis . Certain other modifications to coverage have been made as follows: 1. The aggregate limits with respect to the coverage provided by LMCIT have been eliminated with the exception of an aggregate limit on Products Liability and Medical Payments. 2 . With respect to the claim made coverages, the cost for the city to buy an extended reporting period beyond the normal termination of the policy is fixed in the coverage agreement so that the city can be aware at any time of the - - cost of purchasing extended reporting coverage. This allows the city the equivalent of occurrence coverage should they choose to purchase the option thus eliminating the major argument against claims made coverage. . 3 . The Fellow Employee Exclusion has been removed from the General Liability and Automobile coverage parts wherein coverage is now provided to. an employee of the city should claim be made against that person by a fellow employee. 4. The general Liability coverage part has been broadened to provide the city and its employees coverage for theuse of reasonable force to protect persons or property. Further, the Personal Injury coverage part has been broadened to cover the city and its employees with respect to assault or battery committed for the purpose of protecting persons or property or, incidental to an arrest. 5. The Professional Services Exclusion to the Liability coverage part has been modified wherein only the profes- sional services provided by an attorney, architect, medical doctor, dentist, nurse, or pharmacist is excluded. There- fore, other professional services such as those of an accountant, engineer, paramedic, etc. , are not excluded by the Professional Services Exclusion. 6. Although LMCIT has consistently taken the position that - its coverages previously did not extend to Punitive Damages, that position has been clarified in the current coverage agreement with a specific exclusion to the Liability coverage parts relating to Punitive Damages. 7 . The Medical Payments Coverage has been modified to apply only to Bodily Injury arising out of a condition in the Covered Premises. Covered Premises has been defined to mean those premises which the city ownes or rents which do not include streets, sidewalks, or boulevards that do not abut publically-owned buildingsorpublically-owned parking lots. 6. The Errors . and Omissions Coverage has been rather extensively broadened by including coverage for Bodily Injury, Property Damage and Personal Injury which was previously excluded. Coverages for these damages are provided to the extent that no other coverage is available under the other coverage parts or under any other appicable coverage or .insurance policy. The Errors and Omissions coverage part has been broadened to specificaly cover a violation of or deprivation of rights, priveledges or immunities secured by the Constitution. 9. The coverage provided under the Errors and Omissions coverage parthasalso been framed around the .statutory -obligation of a city to defend claims against its employees and to exlude those claims for indemnification of its employees where the city is statutorily prohibited from doing same. - 10. The Errors and Omissions Coverage, whileexluding contractual obligations, has been modified to provide coverage with respect to employment contract obligations except for wages . or benefits owing. - 11. Under the Automobile Liability coverage part, coverage has been specifically provided with respect to fire fighters in the use of any automobile while being used in the per- _ formance of a fire fighter' s official duties. 12. The Coverage Contract has been modified with respect to _ Joint Powerswhich now mustbe specifically named -in the Declarations in the same fashion that any joint venture of the city is required to be named. 2 This is not a complete listing of the various changes that have been made, however, this listing does respresent the major changes. Effort has been made to incorporate a number of coverages pre- - _ viously provided by endorsement into the main body of the coverage . contract. Additionally, effort has been made to clarify certain language previously found in the various coverage agreements. 3 apesius Agency, Inc YOUR INDEPENDENT INSURANCE AGENTS P.O. Box 97, First National Bank Bldg.,Shakopee, MN 55379 Tel.(612)445-1922 CITY OF SHAKOPEE 129 East First Avenue Shakopee, Minnesota 55379 INSURANCE COVERAGE OUTLINE INTRODUCTION The following pages have been prepared as a simplified resume of your Insurance Program. For your convenience, we have identi- fied your present types of coverage- However, it should be clearly understood that nothing in this resume is intended to interpret or in anyway supersede the policy conditions. From time to time in the course of your business operations, you may sign leases, contracts and other agreements which transfer serious financial obligations to you. We suggest that you have your attorney and CPA review these so that you might let us know what changes are necessary in your insurance program in order to "properly treat these exposures. Although we will cooperate with you to keep this program up-to- date, changes will occur in your Insurance Program. After it 's preparation, this resume cannot be considered current at any given time. It should never be used in the place of the policies to which it refers. Existing coverage should only be determined from the actual policy forms. - Prepared by - Capesius Agency, Inc. 129 S. Holmes Street Shakopee, Minnesota 55379 apesins Agency, Inc YOUR INDEPENDENT INSURANCE AGENTS P.O. Box 97, First National Bank Bldg.,Shakopee,MN 55379 Tel.(612)445-1922 CITY OF SHAKOPEE 129 East First Avenue Shakopee, Minnesota 55379 LEAGUE OF MINNESOTA CITIES INSURANCE TRUST Policy Period: 6-30-88/89 PROPERTY LIMIT COVERAGE VALUATION DEDUCTIBLE Blanket Buildings & Replacement Contents - *$9, 618, 700 All Risk Cost $1 ,000 Extra Expense - 40/80/100 City Hall $20,000 All Risk --- --- Police Department $20, 000 All Risk --- --- Utility Office $30, 000 All Risk --- --- * Agreed Amount Coverage 90% Values TOTAL ANNUAL PROPERTY PREMIUM: $23 ,289 VALUABLE PAPERS LIMIT $570, 000 Looated: City Hall - $550, 000 Police Department - $10, 000 Utility Office - $10, 000 All Risk - $250 Deductible CITY OF SHAKOPEE -2- CONTRACTORS EOUIMENT (see attached schedule) $238,500 Per schedule on file w/LMCIT $1 ,000 Deductible All Risk MISCELLANEOUS EQUIPMENT (see attached schedule) LIMIT $452, 187 $250 Deductible All Risk TOTAL ANNUAL VALUABLE PAPERS & EQUIPMENT PREMIUM: $4 , 619 MONEY & SECURITIES CITY HALL UTILITY OFFICE Loss Inside Premises $5, 000 $7 , 000 Loss Outside Premises $5,000 $7 , 000 $250 Deductible TOTAL ANNUAL MONEY & SECURITIES PREMIUM: $270 CITY OF SHAKOPEE -3- COMPREHENSIVE MUNICIPAL LIABILITY Limits of Liability: $ 600, 000 Each Occurrence Limit $ 600, 000 Products/Completed Operations Aggregate Limit $ 50, 000 Fire Damage Limit $ 11000 Medical Expense Limit $ 10, 000 Medical Expense Aggregate Occurrence Limit $250-Property Damage Deductible (Per Claim) CLAIMS MADE COVERAGE - Retroactive Date - 6-30-87 EMPLOYEE BENEFIT LIABILITY Limit of Liability $600, 000 Any One Occurrence $600, 000 Aggregate CLAIMS MADE COVERAGE - Retroactive Date - 6-30-87 TOTAL ANNUAL GENERAL LIABILITY LIABILITY PREMIUM: $79 , 661 AUTOMOBILE LIABILITY & PHYSICAL DAMAGE Limit of Liability: $ 600, 000 Bodily Injury & Property Damage - Combined Single Limit Coverages: - Personal Injury Protection - Basic - Uninsured Motorist & - Underinsured Motorist - $600, 000 - Comprehensive - Per Schedule on File w/LMCIT* - Collision - Per Schedule on File w/LMCIT* - Hired & Non-Owned Automobile Liability - "Fellow Employee" Coverage Vehicles - (see attached Schedule) *Comprehensive Deductible $250 *Collision Deductible $500 TOTAL ANNUAL AUTOMOBILE PREMIUM: $33,829 TOTAL ANNUAL LMCIT PREMIUM $141 , 668 CITY OF SHAKOPEE -q- PUBLIC OFFICIALS BLANKET BOND TRANSAMERICA INSURANCE COMPANY Policy Period 6-30-88/89 Faithful Performance Blanket Position Bond: $50 , 000 Including Depositors Forgery Excluding Treasurer of Tax Collector ANNUAL PREMIUM: $787 LeA9ae 'el 'q413 BOILER & MACHINERY HARTFORD STEAM BOILER Policy Period 6-30-88/89 Limit Per Accident $1 , 000,000 Comprehensive Coverage including Repair & Replacement Location & Objects Schedule Per Policy Deductible $500 except Transormers over 9000 KVA ANNUAL PREMIUM: $6, 925 PUBLIC OFFICIALS LIABILITY INSURANCE OPTIONS: CITY OF SHAKOPEE A) LMCIT ERRORS 8 OMISSION'S COVERAGE Limit of Liability: $600, 000 CLAIMS MADE COVERAGE - Exculding Prior Acts Deductible - $5, 000 - Total Annual Premium - $12, 019 PRIOR ACTS COVERATE OPTION 1 Year 34.68 or $ 4, 159 2 Years 52. 18 or $ 6, 262 3 Years 60.38 or $ 7, 247 4 Years 65.98 or $ 7, 921 5 Years 70. 88 or $ 8,508 B) PUBLIC OFFICIALS LIABILITY INTERNATIONAL SURPLUS LINES INSURANCE COMPANY Policy Period 6-30-88/89 Limits of Liability: $1 ,000 , 000 Each Loss and Aggregate for Each Policy Year Rentention $ 2,500 Each Loss Conditions: Asbestos Exclusion Pollution Exclusion Claims Renewal Exclusion Discovery Clause: 90 Days at 658 Additional Premium or 12 Months at 1008 Additional Premium THIS PROPOSED INSURANCE COVERAGE IS BEING QUOTED TO YOU UNDER THE MINESOTA SURPLUS LINES INSURANCE ACT. THE INSURER IS AN ELIGIBLE SURPLUS LINES INSURER, BUT IS NOT OTHERWISE LICENSED BY THE STATE OF MINNESOTA. IN CASE OF INSOLVENCY OF THE INSURER AFTER YOU PRUCHASE THE PROPOSED INSURANCE COVERAGE, PAYMENT OF CLAIMS IS NOT GUARANTEED. ANNUAL PREMIUM: $7,950 + $238.50 SURPLUS LINES TAX CITY OF SHAKOPEE -6- C) TUDOR INSURANCE COMPANY Policy Period 6-30-88/89 Limits of Liability: $1 , 000,000 Each Loss and Aggregate Rentention $ 5, 000 Each Loss ANNUAL PREMIUM: $16 ,250 CITY OF SHAKOPEE OPTIONS FOR CONSIDERATION UMBRELLA - LMCIT Limits of Liability: $1 , 000,000 Each Occurrence $1 , 000, 000 Aggregate $ 10, 000 Retained Limit Excluding Coverage for Law Enforcement Liability & Public Officials Liability & Child Molestation TOTAL ANNUAL PREMIUM: POLLUTION LIABILITY Limits of Liability $600,000 Each Occurrence $600, 000 Annual Aggregate See Attachment for scope of coverage TOTAL ANNUAL PREMIUM: $2, 788 INVERSE CONDEMNATION LIABILITY Limits of Liability $600, 000 Each Occurrence $600, 000 Annual Aggregate See Attachement for scope of coverage 15$ "Coinsurance" This Coverage is only available in conjunction with LMCIT E & O Coverage TOTAL ANNUAL PREMIUM: $1 ,991 JOINT POWERS BOARDS OR JOINT VENTURES LMCIT requires that any Joint Power Boards of Joint Ventures must be listed and named on the policy specifically