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Home My WebLink About6/20/2012 - STAFF REPORTS - 2.G. �O�p ALM S'04 u m Cq</FORN�P City Council Staff Report DATE: JUNE 20, 2012 Consent Agenda SUBJECT: APPROVE ANNUAL INSURANCE POLICY RENEWALS FOR THE CITY'S INSURANCE PORTFOLIO FOR FISCAL YEAR 2012-13 FROM: David H. Ready, City Manager BY: Douglas Holland, City Attorney SUMMARY The City is self-insured and annually purchases various lines of insurance coverage to minimize the adverse effects of accidental losses and claims against the City. This action would authorize the purchase of various lines of insurance for Fiscal Year 2012- 13. RECOMMENDATION: Adopt Resolution No. "A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PALM SPRINGS, CALIFORNIA, AUTHORIZING KEENAN & ASSOCIATES AS THE CITY'S BROKER OF RECORD, TO PURCHASE PROPERTY LIABILITY, EXCESS EARTHQUAKE/FLOOD LIABILITY (DIFFERENCE IN CONDITION), EXCESS LIABILITY, EXCESS WORKERS COMPENSATION, AIRPORT OWNERS AND OPERATORS LIABILITY, VILLAGE FEST LIABILITY, MULTI MEDIA LIABILITY, AIRCRAFT HULL LIABILITY, AND CRIME/FIDELITY LIABILITY INSURANCE POLICIES FROM VARIOUS CARRIERS FOR POLICY YEAR 2012-2013, EFFECTIVE JULY 1, 2012." STAFF ANALYSIS: The City is self insured for major risk programs such as property liability, excess earthquake/flood liability, general liability, auto liability and workers' compensation. In order to protect the assets of the City from potential loss, the City purchases various lines of insurance coverage for these risks. To assist in the purchase of various lines of insurance, the City entered into Agreement No. A5656 on April 30, 2008, with Keenan and Associates for professional insurance brokerage services. Keenan and Associates has solicited pricing on the City's insurance portfolio and has delivered pricing that, if approved, is $8,322 (-.8%) less than the current year while providing the same level of coverage and deductibles, with the exception of Property REM NO.— 7(2 _ City Council Staff Report June 20, 2012 -- Page 2 Annual Insurance Renewals Insurance. The following is a summary of last year's premiums, and staffs recommendation for the July 1 renewals for Fiscal Year 2012-13: COVERAGE: Premium FY 11-12 Premium FY 12-13 PROPERTY Premium $410,000 $380,000 Deductibles $250,000 for Earthquake $250,000 for Earthquake $100,000 Flood $100,000 Flood $10,000 all other Losses $10,000 all other Losses Limits $5M EQ/Flood ll `$5M EQ/Flood not included Terrodsm coverage included Terrorism coverage included Airport Runways$80M Airport Runways$80M DIC (Earthquake/Flood) Premiums $144,550(City+Airport) $154,772(City+Airport) Limits $5,000,000 $5,000,000 (excess of$5.OM) (excess of$5.OM) $286,881 (dedicated WWiP) $281,563(dedicated WWiP) $25,000,000 $25,000,000 COMPREHENSIVE EXCESS GENERA &AUTO LIABILITY Premium $129,600 $135,800 Self-Insured Retention $500,000 Employment $500,000 Employment Practices, Practices, $400,000, all other: $400,000,all other: Limits $10,000,000 $10,000,000 EXCESS WORKERS' COMP Premium $69,750 $86,431 SIR-Police&Fire $1,000,000 $1,000,000 SIR-allother employees $1,000,000 $1,000,000 Limits $50,000,000 per occurrence $50,000,000 per occurrence AIRPORT LIABILITY Premium $31,844 $26,432 Deductible $1,000 $1,000 Limits $50,000,000 $50,000,000 Terrorism covera a included Terrorism coverage included VILLAGE FEST Premium $12,213 $12,213 Deductibles $1,000 $1,000 Limits $1,000,000/$2,000,000 $1,000,000/$2,000,000 AGG/$2,000,000 AGG/$2,000,000 PROD/$100,000 PROD/$100,000 FIRE FIRE MULTI MEDIA Premium $7,899 $7,899 Deductibles $5,000 $5,000 Limits $1,000,000 $1,000,000 AIRCRAFT HULL Premium $3,733 $3,138 Deductible $75K hull,$100 In $75K hull,$100 In Limits Motion/$500 Static Motion/$500 Static $5,000,000 $5,000,000 Terrorism coverage included Terrorism coverage include CRIME/FIDELITY Premium $2,699 $2,599 Deductibles $10,000/$1,000 $10,000/$1,000 Lim- $1,000,000/$100,000/$300,000 otalPremiums T $1,099,169 $1,090,847 02 City Council Staff Report June 20, 2012 -- Page 3 Annual Insurance Renewals PROPERTY PROGRAM: Under the All Risk Property insurance program the quote of $380,000 from Affiliated FM Insurance Co., is for one comprehensive policy which does not include primary Earthquake/Flood coverage for the first $5 million as we have had previously. The current Airport runway coverage, wind and tree coverage and attractive supplemental coverage such as Terrorism and Builder's Risk, is still included. The premium is $30,000 less (-7.3%) than last year. Travelers, the previous provider, quoted the city $503,777, which is an increase of $93,777 (+23%) from last year, but with a reduced wind coverage limit of $500,000 (down from $1 M) and $1,000 per tree (down from $5K), but includes the first $5 million in primary Earthquake/Flood coverage. As a result of the recent wind damage claims filed by the city, Travelers submitted an uncompetitive renewal quote. Given that the property insurance market is hardening due to the $115 Billion of insured losses sustained by the industry last year (the 2nd worst year on record), our insurance broker and staff recommend that to control premium costs that we accept the Affiliated FM quote. DIFFERENCE IN CONDITION (DIC) PROGRAM: The City is self-insured and purchases various lines of insurance each year for additional protection to the Property Program above. Difference in Condition (additional flood and earthquake coverage) is almost always excluded from commercial property policies and may be purchased separately to enhance coverage. The DIC market has hardened due to the $115 Billion of insured losses sustained in the last year as result of catastrophic events such as the earthquake in Japan, the floods in the Midwest and tornadoes in the southern United States. The City's total insurable value (TIV) is approximately $440 million for FY 12-13. While it is highly unlikely that the City would have to replace every single facility in the event of an earthquake, facilities such as the Airport and Wastewater Treatment Plant are considered critical to the continued operations of the City. These two facilities alone have an estimated replacement cost of over $120 million. Three years ago Council authorized the purchase of Differences in Condition (DIC) insurance to augment its primary property earthquake/flood insurance policy to cover the Wastewater Treatment Plant, and all other City Buildings (including the Airport buildings). Staff is again recommending a separate dedicated stand-alone policy to cover the Wastewater Treatment Plant from the first dollar to $25 million for a total cost of $281,881 ($5,318 less than last year, or -1.8%) that would be paid in full by the wastewater enterprise account. Also, staff recommends $5 million excess of $5 million per occurrence/annual aggregate in coverage for all other City Buildings (including the Airport buildings) for a total cost of $154,772 ($10,222 more than last year, or +7%) and the cost would be shared by the City's General Fund and Airport enterprise account. 03 City Council Staff Report June 20, 2012 -- Page 4 Annual Insurance Renewals COMPREHENSIVE EXCESS GENERAL & AUTO LIABILITY PROGRAM: The premium cost quoted for Comprehensive Excess General & Auto Liability coverage of $135,800 from the incumbent Starr Indemnity is $6,200 more (+4.7%) than last year, and given the 10.45% premium decrease we received last year and the increase in litigation against public agencies due to the Joint & Several Liability law created by Prop 51 (aka "the deep pockets rule'), staff recommends this coverage at this favorable quote in today's insurance market. EXCESS WORKERS' COMPENSATION PROGRAM: Maintenance of Excess Workers' Compensation insurance is important to protect the City from the negative financial consequences of potential catastrophes involving multiple employee injuries or deaths from occurrences, such as major fires, police activities, terrorist attacks and earthquakes during working hours. The Workers' Compensation market is also hardening as medical inflation and adverse claims experience has resulted in an industry wide loss ratio and premiums that are now comparable to the all time highs of the early 2000's. The renewal for the same $50 million in coverage is $86,431 from Safety National, which is $16,681 (+23.9%) more than last year. AIRPORT PROGRAM: Airport Liability covers incidents such as injury to a person (ie: passenger slip and fall in terminal) or damage to a plane (ie: airport equipment hits a plane) that occur on the premises. Aircraft Hull Liability is specifically for the 1974 Cessna Aero Squadron plane, covering the property itself and our liability in the event of an accident. The combined cost of these two policies from ACE and Westchester is $29,570 which includes terrorism and war coverage, and is $6,008 (-16.9%) less than last year. MISCELLANEOUS Finally, for the Village Fast, Multi Media and Crime/Fidelity policies, Keenan's marketing efforts resulted in a combined premium of$22,711, and is $100 less than last year. FISCAL IMPACT: Total cost of recommended insurance to all funds for the fiscal year is $1,090,847, including all fees and taxes. Funds will be allocated in the respective FY 12-13 Risk Management Fund accounts accordingly, as well as the airport enterprise account and wastewater Fterprise account, as appropriate. Dougla Holland, City Attorney David H. Ready, CityddSPWer Attachments: Proposed Resolution 04 RESOLUTION NO. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PALM SPRINGS, CALIFORNIA AUTHORIZING KEENAN AND ASSOCIATES, AS THE CITY'S BROKER OF RECORD, TO PURCHASE PROPERTY LIABILITY, EXCESS EARTHQUAKE/FLOOD LIABILITY (DIFFERENCE IN CONDITION), EXCESS LIABILITY, EXCESS WORKERS COMPENSATION, AIRPORT OWNERS AND OPERATORS LIABILITY, VILLAGE FEST LIABILITY, MULTI MEDIA LIABILITY, AIRCRAFT HULL LIABILITY, AND CRIME/FIDELITY LIABILITY INSURANCE POLICIES FROM VARIOUS CARRIERS FOR POLICY YEAR 2012-2013, EFFECTIVE JULY 1, 2012. The City Council of the City of Palm Springs, California, finds: A. The City is self insured for major risk programs, such as property, general liability, auto liability and workers' compensation. B. The City annually purchases various lines of insurance coverage to minimize the adverse effects of accidental losses and claims against the City. C. The City is located in the vicinity of several known active and potentially active earthquake faults, including the San Andreas, the San Jacinto and the Elsinore faults. D. The topography of the City makes it prone to flooding, especially during times of heavy rainfall. E. The City purchases a primary earthquake and flood insurance policy. F. The City supplements its primary insurance policy with excess coverage to properly protect its public facilities from catastrophic loss from earthquake or flood. G. The City Council appoints a broker of record to purchase insurance policies for the City and the City's insurance broker has solicited ,proposals from various insurance companies for insurance coverage. NOW, THEREFORE, the City Council resolves: SECTION 1: The City Council of the City of Palm Springs, California authorizes Keenan & Associates, as the City's Broker of Record, to purchase the following insurance policies for Fiscal Year 2012-13: 05 Resolution No. Page 2 COVERAGE: Premium FY 12-13 PROPERTY Premium $380,000 Deductibles $250,000 for Earthquake $100,000 Flood $10,000 all other Losses Limits $5M EQ/Flood not included Terrorism coverage included Air on Runwa s$80M DIC (Earthquake/Flood) Premiums $154,772(City+Airport) Limits $5,000,000 (excess of$5.OM) $281,563(dedicated WWTP) $25,000,000 COMPREHENSIVE EXCESS GENERA &AUTO LIABILITY Premium $135,800 Self-Insured Retention $500,000 Employment Practices, $400,000,all other: Limits $10,000,000 EXCESS WORKERS'COMP Premium $86,431 SIR-Police&Fire $1,000,000 SIR-allother employees $1,000,000 Limits $50,000,000 per occurrence AIRPORT LIABILITY Premium $26,432 Deductible $1,000 Limits $50,000,000 Terrorism coverage included VILLAGE FEST Premium $12,213 Deductibles $1,000 Limits $1,000,000/ $2,000,000 AGG/$2,000 '000 PROD/$100, 000 FIRE MULTI MEDIA Premium $7,899 Deductibles $5,000 Limits $1,000,000 AIRCRAFT HULL Premium $3,138 Deductible $75K hull, Limits $100 In Motion/$500 Static $5,000,000 Terrorism 06 Resolution No. Page 3 coverage included CRIME/FIDELITY Premium $2,599 Deductibles $10,000/$1, Limits 000 $1,000,000/ $100,000/$3 00,000 Total Premiums $1,090,847 SECTION 2. The City Manager is hereby authorized to accordingly adjust the budget and allocate the insurance expense to the appropriate enterprise and other funds. SECTION 3. The City Manager is hereby authorized to execute any documents to effectuate such actions. ADOPTED THIS 20th DAY OF JUNE, 2012. David H. Ready, City Manager ATTEST: James Thompson, City Clerk CERTIFICATION STATE OF CALIFORNIA ) COUNTY OF RIVERSIDE ) ss. CITY OF PALM SPRINGS ) I, JAMES THOMPSON, City Clerk of the City of Palm Springs, hereby certify that Resolution No. is a full, true and correct copy as was duly adopted at a regular meeting of the City Council of the City of Palm Springs on June 20, 2012 by the following vote: AYES: NOES: ABSENT: ABSTAIN: James Thompson, City Clerk City of Palm Springs, California 07