HomeMy WebLinkAbout6/16/2004 - STAFF REPORTS (14) DATE: June 16, 2004
TO: City Council
FROM: Director of Human Resources
INSURANCE RENEWALS FOR THE CITY'S AIRPORT LIABILITY, AERO SQUADRON AIRCRAFT,
ALL-RISK PROPERTY, EARTHQUAKE/FLOOD (PRIMARY LEVEL), CRIME, BOILER &
MACHINERY, GENERAL LIABILITY, AND AUTO PHYSICAL DAMAGE (CALEASE) INSURANCE.
RECOMMENDATION:
It is recommended that the City Council adopt a Resolution approving the City's insurance renewals
effective July 1, 2004.
SUMMARY:
The City of Palm Springs contracted with Davis & Graeber Insurance Services, Inc., a California
Corporation, on October 1, 2001, to perform services as the City's Insurance Broker of Record and to
solicit insurance proposals from qualified carriers upon renewal of the City's policies. Davis & Graeber
has provided the City with July 1 renewal quotations and marketing summaries attached hereto. The
July 1, 2004, renewals reflect an overall 12% decrease over last year's premiums.
BACKGROUND:
Following is a summary of last year's premiums, and staff's recommendation for the July 1 renewals
(based on the lowest quoted price and coverage):
COVERAGE FROM DAVIS&GRAEBER Premium 7/1103 through 6/30/04 Premium 7/1/04 through 6/30/05
1) Quake/Flood
Primary Level $142,800 $128,110
Deductible 5%of Values/$50,000 Minimum 5%of Values/$50,000 Minimum
Limits $2,500,000 $2,500,000
2) All-Risk Property $149,791 $146,318
Loss Control Audit Fee $2,000 $2,000
Deductible $10,000 $10,000
Property Schedule $199,034,210 $208,239,694
3) Airport Liability $51,420 $50,412
Limits $50,000,000 $50,000,000
Deductible none $1,000
4) Boiler/Machinery $37,545 $9,500
Deductible $25,000/Cogen;$5,000/AII other $10,000
Limits $40.000,000 $40,000,000
5) Crime Insurance $3,971 $4,198
Employee Theft 510,000 Employee Theft$10,000
Deductible All other$1,000 All other$1,000
Limits $11000,000 $1,000,000
6) Aare Squadron/
Cessna 182P $4,905 $5,893
War Coverage option $918 $918
Deductible $500 $500
Limits $5,000,000 $5,000,000
7)General Liability $229,134 $202,416
Self-Insured Retention $300,000 $400,000
Limits $10,000,000 $10,000,000
8) Auto Physical Damage Program $20,610 $15,955
Deductible 88,354 798.878
CaLease schedule $5,388,354 $3,798,878
Total Premiums $640,176 $562,802
In comparison to last year, the recommended renewals reflect a 10% decrease in the
Earthquake/Flood premium (item number 1); a 15% decrease in the All-Risk Property premium (item
number 2); and a 300% decrease in the Boiler & Machinery premium (item number 4). All of the
recommended renewals came in with lower than anticipated budget projections with status quo
coverage limits.
Our broker provided two self-insured retention (SIR) options for the General Liability renewal (item
number 7). Option number 1 offers a SIR of $300,000 at a premium of $303,416. Option number 2
offers a SIR of $400,000 at a premium of$202,416. Staffs recommendation is to increase the City's
SIR to $400,000 and to renew the coverage at the $202,416 premium. This recommendation is based
on the fact that over the past six (6) years, the City has not had a known occurrence that has
exceeded $300,000.
The All-Risk Property renewal (item number 1 & 2) and the Boiler & Machinery renewal (item number
4) include Acts of Terrorism. There is a caveat to that inclusion: "If a government sponsored
alternative risk transfer vehicle is initiated," Affiliated FM has the right to remove the City's terrorism
coverage. In addition, the Public Entity Excess Liability renewal (item number 7) premium includes
terrorism coverage.
The Airport Liability quote (item number 3) provides for optional War & Terrorism Coverage. Staffs
recommendation for renewal, however, does not include the War & Terrorism Coverage option
because of the additional $37,500 in premium cost; and because of the excellent security that is in
place at the Palm Springs Airport. In addition, if the City were to purchase the War & Terrorism
Coverage, lost revenue resulting from terrorist attacks at another (non -owned) location would not
permit us to recover our losses under the terms of the policy, as a city-owned property loss is a
prerequisite for filing a claim for any revenue losses. As a result, the benefit of War & Terrorism
Coverage does not seem to warrant the premium increase to purchase this option.
Sufficient funds are available in the Risk Management insurance premium accounts: (5904) 48640
(General Liability Insurance), 48665 (Aircraft Liability), 48670 (Crime/Fidelity Insurance), 48675
(Airport Liability), and (5905) 48651 (CaLease Insurance), 48655 (Earthquake Insurance), 48692
(Boiler/Machinery Insurance), 48690 (Property Insurance).
It is staff's recommendation that the savings from these insurance renewals be retained in the Risk
Management Fund to cover contingencies in the fund's reserve requirements.
SUSAN E. MILLS, PHR _
Director of Human Resources
City Manager
Attachments: 1. Quotation Packet and Marketing Report from Davis & Graeber
2. Resolution
g
Insurance Proposal
for
City of Palm Springs
June 16, 2004
By
Ross B. Jones
Vice President Commercial Marketing
Davis & Graeber Insurance Services, Inc.
470 E. Highland Avenue
P.O. Box 750
Redlands, CA 92373
(909) 793-2373 J�
Property All Risk
Named Insured: City of Palm Springs
Policy Term: July 1, 2004 to July 1, 2005
Insurance Carrier: Affiliated FM Insurance Company (A+XV)Admitted
Coverage: All Risk, as defined and limited herein, on Real Property, Personal Property, Extra Expense,
Rental Income, Gross Earnings excluding Ordinary Payroll and including Extensions of
Coverage applying at the following locations on schedule with Company.
Limit: TIV $222,639,694 This Company's total limit will not exceed the respective Limits of Liability
shown elsewhere for coverage involved. However in no event will the limit exceed $225,000,000
as a result of any one loss, disaster or occurrence, regardless of the number of perils, coverages
or locations involved.
Sub-limit: Earth Movement: $2,500,000 Annual Aggregate
Flood: $2,500,000 Annual Aggregate
Off Premises Power: $1,000,000
Extra Expense: $2,000,000
Deductible: The following deductible amounts shall apply to each claim for loss or damage under this Policy in One
respective loss categories indicated:
1.Earth Movement: For each occurrence, this company will not be liable for loss or damage to insured property unless the amount
of the loss or damage exceeds 5% of the combined value of property at the location where loss or damage occurs, in accordance
with the valuation section of this policy and amoral business intemiption value as defined in the Business Interruption Endorsement
attached to this policy at the time such loss or damage at the location where loss occurs, subject to a minium deductible amount of
$50,000 per location, If coverage is provided for more than one location,this deductible percentage or minium deductible amount will
be calculated for and applied separately to each location.
2.$100,000 Flood(per occurrence for all coverages provided in this policy).
3.Off Premises Power Qualifying Period
In the event of loss or damage covered by this policy, no coverage is provided unless the period of interruption exceeds 24 hours
beginning from the time of loss. If the period of interruption exceeds 24 hours, the loss will be calculated from the original time of
loss, subject to the policy deductible.
4.$5,000Electronic data Processing,no coverage is provided unless the period of interruption exceeds 48 hours.
5.$10,000All Other Losses
Special Conditions: The following forms will be attached at policy issuance:
1.Excludes Crime,Boiler&Machinery and all third party liability coverages.
2.EQSL is included to policy limits,with a 1%deductible of value of property per location
3. Sewer Back-up included.Debris removal$5,000,000 or 25%of loss
4. EDP Equipment included under Personal Property(includes electrical/mechanical breakdown)
5.Newly acquired property(120 days)
Affiliated FM is available to assist the insured in completing recommendations for risk improvement developed as a result of
inspections on this account.For more details and assistance,the insured can contact Account Engineer Farrell Fatemi at 818-227-2289,
Annual Premium: $266,146.00 Terrorism additional premium: $8,282.00
Inspection Fee: $29000.00
Total Annual Premium: $2689146.00
$276,482.00 (With terrorism included) //A �,J
Breakdown of Premium:
Property Premium: $138,036.00
DIC & Flood$2,500,000 Primary $128,110.00
CITY OF PALM SPRINGS
PROPERTY COVERAGE QUOTATION
Affiliated FMInsurance Company
1.TERMS AND CONDITIONS:
A. Policy Term:
July 1,2004 to July 1,2005
B.NAMED INSURED:
City of Palm Springs, and its wholly or majority owned subsidiaries and any interest which may now exist or hereinafter be
created or acquired which are owned,controlled or operated by any one or more of those named insureds.
C.POLICY LIMIT:
This company's liability will not exceed the respective Limits of Liability shown elsewhere for the coverages involved.
However, in no event will the company's total limit exceed $208,239,694 as a result of any one loss, disaster or occurrence,
regardless of the number of perils, coverages or locations involved.
D.INSURANCE PROVIDED:
All risks, as defined and limited herein, on Real Property, Personal Property,Extra Expense,Rental Income, Gross Earnings
excluding Ordinary Payroll,and including Extensions of Coverage applying at the following locations:
As per schedule on file dated 05/24/2004.
E.SUB-LIMITS:
The following sub-limits will apply on a per occurrence basis and are inclusive of, not in addition to the above Bmit(s). The
annual aggregate limit of this company's liability for loss or damage caused by Earth Movement and Flood will not exceed the
annual aggregate limit as specified below in any one policy year.The policy year will begin at the inception date of this policy
and be concurrent with the anniversary dates of this policy.
1. $2,500,000 Earth Movement
2. $2,500,000 Flood
3. $1,000,000 Off Premises Power
4. $2,000,000 Extra Expense
5. $100,000 Acts of Terrorism(Annual aggregate limit in any one policy year)
F.EXTENSIONS OF COVERAGE SUB-LIMITS:
The following sub-limits will apply on a per occurrence basis and are inclusive of,not in addition to the above Bmit(s).
1. $100,000 Fire Fighting Materials and Expenses
2. $100,000 Professional Fees
3. $100,000 Expediting Expenses
4. $100,000 Trees,Shrubs,Plants and Lawns limit$1,000 per item
5. $250,000 Pavements and Roadways
6. $50,000 Land and Water Clean Up Expense
7. $50,000 Installation Floater
8. $500,000 Newly Acquired Property
9. $500,000 Unnamed Locations Coverage
10. $1,500,000 Fine Arts
It. $250,000 Accounts Receivable
12. $256,000 Valuable Papers and Records
13. $100,000 Electronic Data Processing,Data and Media
14. $5,000,000 Coverage A:Demolition&Increased Cost of Construction
Included in A: Coverage B: Demolition&Increased Cost of Construction
15. $500,000 Errors and Omissions
16. $100,000 Transit Coverage
17. $100,000 A.Non-Certified Act of Terrorism $100,000 B. Certified Act of Terrorism Coverage
Not Covered C.Terrorism Coverage for Locations Outside of the United States.
The above Extensions of Coverage Sub-limits will be the maximum payable for property damage and business interruption(if
applicable),or any combination thereof.
With respect to Items:
7.Installation Floater
S.Newly Acquired Property
9.Unnamed Locations, the specified sub-limit is the maximum amount payable in any one loss or occurrence and can not be
combined with any other limits or sub-limits in this policy.
With respect to Terrorism Coverage in Item 17.A and C each sub-limit will apply as an aggregate thrill during any one policy
year for Property Damage and Business Interruption (if provided) combined, and the Company's maximum liability for such
covelrage will not exceed such limit during the policy year regardless of the number of locations coverages or occurrences
involved. With respect to Terrorism Coverage in Item 17.B each sub-limit will apply per occurrence.Terrorism coverage in
Items 17. A and B applies only to locations within in the United States and it's territories. The applicable annual,aggregate
limit of liability will not exceed the following sub-limits in the aggregate during any policy year.
$100,000 for Unnamed Locations Coverage and Property Removed From Described Locations, for Property Damage
and Business Interruption.
$100,000 for Flood for Property Damage and Business Interruption combined when caused by or resulting from
Terrorism.
These Kinits shall not include the actual Cash Value portion of fire damage caused by Terrorism.
G.DEDUCTIBLE AMOUNT:
The following deductible amounts shall apply to each claim for loss or damage under this Policy in the respective loss
categories indicated:
1. Earth Movement: For each occurrence, this company will not be liable for loss or damage to insured property unless the
amount of the loss or damage exceeds 5% of the combined value of property at the location where loss or damage occurs, in
accordance with the valuation section of this policy and annual business interruption value as defined in the Business
Interruption Endorsement attached to this policy at the time such loss or damage at the location where loss occurs,subject to a
miniuni deductible amount of $50,000 per occurrence. If coverage is provided for more than one location, this deductible
percentage or minium deductible amount will be calculated for and applied separately to each location.
2.$100,000 Flood(per occurrence for all coverages provided in this policy).
3.Off Premises Power Qualifying Period
In the event of loss or damage covered by this policy, no coverage is provided unless the period of interruption exceeds 24
hours beginning from the time of loss. If the period of interruption exceeds 24 hours, the loss will be calculated from the
original time of loss,subject to the policy deductible.
4. $5,000 Electronic data Processing
5. $10,000 All Other Losses
H.SPECIAL TERMS AND CONDITIONS:
1.Vacancy Clause
Permission is given for the Insured to cease operations and for the following location(s) to remain vacant for more than 60
days, provided that the Insured maintains:
1)Fire protection; and
2)Watch and alarm service;
As existed prior to the discontinuance of normal operations.
As per schedule,if any.
2.Flood Exclusion
Coverage for the peril of flood, as provided by the Flood Endorsement attached to this policy, is excluded at any location
situated in:
1.Any flood zone or area designated by the Federal Emergency Management Agency(FEMA) as subject to a flood frequency
up to and including the 500 year frequency,or
2. Any flood zone or area for which FEMA has not yet determined the flood hazard frequency or has not yet classified or
designated as being in or out of a flood zone,or any area outside the United States.
The peril of flood is covered in an area protected by dams,levees,dikes,or walls which:
a.Protect such areas from at least the level of the 500 year flood,and have no such openings or flood gates, and
b.Were built by and are either maintained or inspected by the Army Corps of Engineers.
3.Library Books,Periodicals,and Rare Books
Section G., General Conditions, 14.Basic Valuation,of Form No.PRO AR 2100 is amended to include:
11.Library Books,Periodicals and Rare Books
a.Library Books and Periodicals will be valued at the lesser of:
1. The value designated for each book and periodical (including the cost of re-shelving and processing) as
shown in the declarations; or
2.The cost to repair or restore the article to the condition that existed immediately prior to the loss.
b.Rare Library books will be valued at the lesser of:
1. The cost to repair or restore the rare book on the schedule to the condition that existed immediately prior
to the loss.
2.The cost to replace the rare book; or
3. The value designated for the rare.book on the schedule of Rare Books on file with this company, if not
scheduled,the value designated for each rare book as shown in the declarations.
In case of loss or damage to an article that is part of a pair or set,this company will pay the full amount of the value of such
pair or set only if:
a.The damaged article cannot be repaired or restored to its condition before the loss; and
b.The Insured surrenders the remaining article or articles of the pair or set to the company.
4.Historical Replacement Cost Wording
With respect to buildings which are declared by a local,state or federal authority to be of historical significance or of historical
value, such rebuilding, repairing or replacement 'shall be with material, workmanship processes, technologies and designs
publicly available within the current marketplace and shall not include the cost of creating outdated, archaic or antiquated
materials,workmanship,processes,technologies or design.
5.Acts of Terrorism
This Policy covers insured physical loss or damage caused by or resulting from Terrorism.
In any action, suit or other proceedings where the Company alleges that physical loss or damage is limited by this Additional
Coverage,the burden of proving that such physical loss or damage is not limited by this Policy shall be upon the Insured.
Section H.,Definition,of Form No.PRO AR 2100,is amended to include:
Terrorism is defined as any act,including but not limited to the use of force or violence and/or the treat thereof,of any person
or group(s) of persons, whether acting alone or on behalf of or in connection with any organization(s) or government(s),
committed for political,religious,ideological or similar purposes including the intention to influence any government and/or to
put the public,or any section of the public,in fear.
It is understood and agreed that the financial impact from the physical loss or damage caused by terrorist acts cannot be
carried by the general insurance industry alone.In the spirit of assistance, this policy continues to provide through the Acts of
Terrorists Additional Coverage, a limited amount of coverage for terrorist acts.However, City of Palm Springs (the Insured),
agrees to allow Affiliated FM Insurance Company to remove terrorism coverage from the policy, no earlier than 30 days
following the availability of a government sponsored alternative risk transfer vehicle that covers acts of terrorism or the
anniversary date of this policy,whichever comes first.
1.Index of Forms:
The following forms are made part of this policy:
Title Form No. Edition
Declarations S-1 (7/02)
All Risk Property Coverage PRO AR 2100 (1/99)
Business Interruption fndomement Extra Expense PRG EE 2260 (1/99)
Busuue Imeauption.Endorsement Rental Income PRaRl2250 (1/99)
Business Interruption Endorsement //4
Gross Earnings Excluding Ordinary Payroll PRO GE 2210 (1/99)
Earth Movement Endorsement PRO EM 2300 (1/98)
Flood Endorsement PRO FL 2310 (1198)
Off Premises Power Endorsement PRO OPP 2320 (1/99)
California Amendatory Endorsement 6488 (6/00)
Application of Policy to Date and Time Recognition PRO DTR 2400 (11/00)
2.Special Quote Conditions:
a.Excludes Crime,Boiler&Machinery and all third party liability coverages. (Boiler&Machinery quote is available)
b.If Boiler&Machinery is quoted and not ordered,Affiliated FM will not provide Joint Loss Agreements.
c. Coinsurance does not apply subject to receipt dated/signed statement of values and BI worksheet from insured and
acceptance of reported values by the Company.
d.EQSL included to policy limit
e.Sewer back-up included
f.Debris removal$5,000,000 or 25%of loss,whichever is greater.
g.EDP Equipment included under Personal Property(Includes electrical/mechanical breakdown)
h.Newly acquired property(120 days)
This quote does not address any coverage items not mentioned above or not provided for in the specified coverage forms.
Airport Liability
Named Insured: City of Palm Springs
Palm Springs International Airport
and all other airport premises necessary and/or incidental to the
operations of the Named Insured.
Policy Term: July 1, 2004 to July 1,2005
Insurance Carrier: Ace USA/WEST Westchester Fire (A+IX) Admitted
Coverage: Special Airport Liability
Deductible: $1,000.00 Each Loss
Limits:
Bodil%lnlur#&Pwpe"Damage $50,000,000 CSL each aircral't/occutcence.and in the aggregate with
respect to-
Products/Completed Operations $50,000,000 aggregate
Personal/Advertising Injury $50,000,000 aggregate
Airport Premises $50,000,000
Ground Hangarkeepers $50,000,000 Any one occurrence/aircraft
Premises Medical $5,000/person/$25,000 Per occurrence
Independent Contractors $50,000,000
Incidental Control Tower Liability $50,000,000
Airshow Liability $1,000,000 primary excess of contractor $5,000,000 aggregate
Mobile Equipment on airport premises $50,000,000
Excess auto liability off airport premises $1,000,000/$50,000,OOOFire Legal LiabiliVO,000 each occurrence
Contractual Liability $50,000,000
Non Owned Aircraft Liability $50,000,000
Medical Malpractice Liability $50,000,000 aggregate
War and Associated Perils Excluded
Notice of Cancellation—90 days/10 for non payment
Contingent Liquor Liability $50,000,000
Additional Insureds as required Included
Excess Employers Liability $1,000,000 any one accident/ $50,000,000 occurrence
Date Exclusion&Limited Writeback Included
Passenger Misdirection Included
Goods, Merchandise &Baggage other than as bailee for hire - Included
Premium: $509412.
War & Terrorism Coverage: $37,500
Boiler & Machinery
Named Insured: City of Palm Springs
Policy Term: July 1, 2004 to July 1, 2005
Insurance Carrier: Travelers Indemnity Company (A+XV) Admitted
Limits: $40,000,000 Per Accident
$208,239,694 TIV
Sublimits: Ammonia Contamination: $250,000
Brands &Labels $250,000
Business Income: $8,000,000
(No coverage at Co-Gen Plants)
Spoilage: $250,000
Off Premises Service Interruption: $250,000
Ordinance or Law: $250,000
Newly Acquired Locations: $1,000,000 90 days
Error in Description: $1,000,000
Expediting Expense: $250,000
Extra Expense: Included with BI
Hazardous Substance: $250,000
"Media" $25,000
Water Damage: $250,000
Deductibles: $5,000 All Other Objects
$25,000 Co-Generation Plants
Business Income: 24 Hours
Extra Expense: 24 Hours
Spoilage: 10% of loss w/min $5,000
Off-Premises Service Interruption: 24 Hours
Ammonia Contamination: $5,000
Premium: $37,184.00 Annual
Alternate Quote: Affiliated FM Insurance Company
Terms & Conditions: Same as listed above
Deductibles: $10,000 All Objects & Co-Generation Plants
24 hours Time Element - Full Policy Limits
Premium: $9,500.00 Annual
, Crime Bond
Named Insured: City of palm Springs
Policy Term: July 1, 2004 to July 1, 2007
Insurance Carrier: Hartford Fire Insurance Company (A+IX) Admitted
Coverage Form: Crime Shield
Limits: Public Employee Dishonesty per Employee:
Limit Coverage Deductible
$1,000,000 Employee Theft $10,000
$100,000 Forgery $1,000
$300,000 Theft, Disappearance & Destruction
- In & Out$1,000
$50,000 Counterfeit Currency& Money Orders (No ded)
Premium: $ 4,198.00 Annual Payment
(3 - year fixed rate 2004 to 2007 )
Aircraft Liability
Named Insured: City of Palm Springs
Policy Term: July 1, 2004 to July 1, 2005
Insurance Carrier: Ace USA/WEST Westchester Fire (A+IX) Admitted
Coverages: 1974 Cessna 182P N47PS Hall $75,000
Deductible: hi Motion $500
Not In Motion $100
Limit of Liability:$5,000,000 Combined Single Limit
Territory: USA, Canada, Mexico, Excludes Alaska
Use: Business &Pleasure
Pilots: Any properly certified pilot approved by the Named Insured's Chief Pilot
Personal Injury: $5,000,0001 aggregate
Automatic Attachment of Newly Acquired Aircraft, Temporary Use of Substitute Aircraft
Spare Parts $10,000 Deductible: $250 each claim
Non-Owned Aircraft Liability $5,000,000
Damage to Non-Owned Hangars and Contents $15,000
Aviation Products Liability for sale of aircraft, aircraft parts,maintenance, fuel, oil, equipment & services
Independent Contractors Liability $5,000,000
Contractual Liability $5,000,000
Runway Foaming $5,000
Search&Rescue $5,000
Physical Damage to Non-Owned Aircraft $50,000 Deductible $1,000
Medical Payments $1,000/$4,000
Personal Effects/Baggage $1,000 each person
Notice of Cancellation 60 days Non-Payment 10 days
Date Exclusion&Writeback
Annual Premium: $5,893.00 without War or Terrorism coverage
War & Terr. Coverage: $918.00
$6,811 Total Annual with War & Terr. Coverage
u40
Public Entity Excess Liability
Named Insured: City of Palm Springs
Policy Term: July 1, 2004 to July 1, 2005
Insurance Carrier: Insurance Company of the State of Pennsylvania (A++XV) Admitted
Coverages: Special Excess Liability for Public Entities
Limits: $10,000,000 Products & Completed Operations Aggregate
$10,000,000 Errors & Omissions Liability Aggregate, other than Personal Injury
Offense Wrongful Acts
$10,000,000 Employee Benefit Liability Aggregate
$10,000,000 Any One Occurrence or Wrongful Act in Excess of Retained Limit
Deductibles: $300,000 SIR each Occurrence All other coverages.
$600,000 SIR each Employment Practices Liability.
Conditions: Act of Terrorism Retained Amount Endorsement including coverage for terrorism.
Time Element Pollution Endorsement
Premium Adjustment Endorsement
90 Days Notice of Cancellation, except for Non-Payment of Premium.
Subject to: Claims audit to be performed during the year.
Premium: $303,416. (Rate: Adjusted at a rate of$6.81 per capita based on a estimated
population of 44,526. Includes terrorism coverage charge of$3,004)
Alternate quote:
Terms & Conditions: Same as listed above: Ins Co State of Penn.
Deductibles: $400,000 SIR each Occurrence All other coverages.
$800,000 SIR each Employment Practices Liability.
Premium: $202,416.00 (Rate: Adjusted at a rate of$4.55 per capita based on a estimated
population of 44,526. Includes terrorism coverage charge of$2,004)
/14 / Y'
INSURANCE QUOTATION
CALIFORNIA AUTOMOBILE PHYSICAL
DAMAGE PROGRAM
Account Name: City of Palm Springs
Mailing Address: 3200 E. Tahquitz Canyon Way, Palm Springs, CA 92262
Policy Term: 7/1/04 to 7/l/05
Coverage/Limits/Deductible:
Coverage: Automobile/Mobile Equipment Physical Damage
Including Comprehensive and Collision
Limit(s): Values Reported $3,798,878
(Per Schedule on File)
Deductible: $10,000
Annual Premium: $155955
William Deeb
Relationship Manager
Aon Public Sector Alliance
213-630-3210
2004 July 15t Insurance Renewal Marketing Summary
Boiler and Machinery
1. St. Paul/Travelers - See attached renewal quotation.
2. Affiliated FM - See attached renewal quotation (this ultimately
would be combined with the All-Risk policy offered by Affiliated
FM).
Excess Liability
1. Insurance Co. of the State of Pennsylvania— See attached renewal
quotation.
2. Gulf—Did not quote, but would like a chance in 2005.
3. Axis- Pending
4. Landmark - Pending - would need to exclude all airport exposure.
5. Ace -Pending
6. American Re - Pending
7. Arch - Pending
8. TIG - Pending
9. Genesis - 1 million/2 million aggregate limit for $336,000 and 5
million limit for $519,000.
All Risk Property
1. Affiliated FM - See attached renewal quotation.
2. AIG - Highly Protected Risk Market.
3. Chubb - Cannot quote do to age and location of property.
4. Landmark - Does not want to compete against Affiliated FM.
5. Westchester - Pending
6. Arch - Pending
7. Travelers - Pending
8. Crum & Forster - Pending
9. St. Paul - Pending
10. Allianz— Does not want to compete against Affiliated FM.
* Pending means they could not provide a quote by the deadline. 11AX
Date: June 16, 2004
To: City Council
From: Director of Human Resources
INSURANCE RENEWAL FOR EXCESS COVERAGE FOR WORKERS'
COMPENSATION INSURANCE
RECOMMENDATION:
It is recommended that City Council adopt a Minute Order approving the City's Excess
coverage for Workers' Compensation Insurance Policy renewal effective July 1, 2004.
SUMMARY:
The City's Broker of Record did a comprehensive search for coverage in the market, and
found that purchasing excess workers' compensation insurance is still difficult at best. The
proposed renewal provides two options:
Option 1 is a $2,000,000 SIR (self-insured retention)for police and fire personnel, and
$1,000,000 SIR for all other personnel at a cost of$229,987.00.
Option 2 is a $1,000,000 SIR for all personnel at a cost of$333,867,42. Compared to
last year's premium, Option 1 is an increase in the SIR for police and fire from $1,000,000
to $2,000,000 with a decrease in premium of $7,113.24. Option 2 is the same coverage
with an increase in premium of$96,767.18.
BACKGROUND:
In marketing the Excess Workers' Compensation Insurance this year, the City's Broker of
Record, Ross Jones of Davis & Graeber, found that there has been an increase in
workers compensation claims across the industry from police and fire employees. These
increases in frequency and severity have caused the insurance market place to increase
the self insured retention (SIR) for safety employees or to increase premium to meet
underwriting criteria.
Since insurance is a conduit, what is paid out in losses has to be charged in premium in
the following years. The market is still recuperating from the losses in the investment
market, the hit the reinsurance market took as a result of 9/11, and the loss of carriers
that are willing to write excess workers compensation coverage. On a positive note,
workers compensation reform AB 899 effective July 19, 2004 provides for reductions in
workers compensation benefits. However such reductions are not going to be instant.
SUSAN E. MILLS
Director of Human Resources
APPR ED .��g ✓ �j
City Manager a.i ,®-
1-1�
// 417
Attachments: 1. Quotation and Marketing Summary
2. Minute Order
Excess Workers Compensation
Named Insured: City of Palm Springs
Policy Term: July 1, 2004 to July 1, 2005
Insurance Carrier: National Union Fire Insurance Co (A++XV) Admitted
OPTION # 1
Coverages: Specific Excess Workers Compensation
Limits: $15,000,000 Limit Each Accident& Disease
$1,000,000 Employers Liability Each Accident
$1,000,000 Retention Each Accident & Disease, Emp. Liab.
Conditions: Covered States: California
Coverage is subject to any state required endorsements,
plus 54361; AIGCS Claims Audit
Premium: $333,867.42 (Rate: Adjusted at a rate of$1.250 per $100 of payroll on
estimated payroll of$26,185,660.)
Terrorism: Included in premium
OPTION # 2
Coverages: Specific Excess Workers Compensation
Limits: $25,000,000 Limit Each Accident& Disease
$1,000,000 Employers Liability Each Accident
$2,000,000 Retention Each Accident & Disease, Emp Liab. - Police & Fire
$1,000,000 Retention Each Accident& Disease, Emp. Liab. All Others
Conditions: Covered States: California
Coverage is subject to any state required endorsements,
plus 54361; AIGCS Claims Audit
Premium: $229,987.00 (Rate: Adjusted at a rate of$.8592 per $100 of payroll on
estimated payroll of$26,185,660.)
Terrorism: Included in premium
Excess Workers Compensation
2004 July I" Insurance Renewal Marketing Summary
1. National Union —See attached renewal quotations.
2. Ace - $413,115 premium for Workers Compensation limit of$25,000,000 and
Employers Liability limit of$1,000,000 with $1,000,000 retention.
3. CNA- Cannot compete at this level.
4. Midwest Employers-Pending
5. American Re - Pending. Also indicated they are not competitive against National
Union.
6. Genesis - Not quoting Workers Compensation for July 1 business.
* Pending means they could not provide a quote by the May 21 2004 deadline.
The workers compensation reform AB 899 effective April 19, 2004 will begin to effect the costs of workers
compensation but those reductions are not going to be instant.
Key changes in the new law include the following:
• Reduced penalties for certain delays in providing benefits.
• Allows employers and insurers to contract with approved provider networks for treating work-related
injury and illness beginning January 1, 2005 and thus control treatment indefinitely. Employees may
seek second and third opinions from their choice of doctors within the network.An injured workerwho
is unsatisfied with network doctors" recommendations may appeal to an Independent Medical
Reviewer (IMR). If the IMR agrees with the injured worker, the injured worker may seek treatment
from a doctor of his or her own choosing, and the employer loses medical control.
• Specifies that employees may only pre-designate treating physicians if the employer offers a health
benefits plan.
• Limits temporary disability(TD)payments to 24 months from thefirst payment. Certain injuries have
extended TD periods of up to 240 weeks within five years from the date of injury.
• Encourages good faith reporting of fraud and protects the reporting party from civil liability.
• Promotes return-to-work programs hyproviding employers of fewerthan 50 employeeswith subsidies
for workplace modifications and special equipment.
• Provides incentives to employers of 50 or more employees who return disabled employees to work.
Allows a 15 percent reduction in permanent disability payments if an employer brings an employee
back to the same job, at the same pay, or accommodates him or her with a modified or alternative
job, as long as the job pays at least 85 percent of the previous job and lasts for at least 12 months.
Increases benefits by 15 percent when the employer fails to do so.
• Excludes most workers"compensation laws from penalty enforcement under SB 796, the""sue your
boss"" law signed by former Governor Gray Davis in 2003.
In marketing the excess workers compensation for 2004 we found there has been an increase in
workers compensation claims across the industry from police and fire employees. These increases
in frequency and severity have caused the insurance market place to increase the self insured
retention (SIR) for safety employees or to increase premium to meet underwriting criteria. The
renewal shows a quote for the$1,000,000 SIR and for an increase of police&fire SIR to$2,000,000
and a premium for each. It is easy to understand, since insurance is a conduit, what is paid out in
losses has to be charged in premium in the following years.
The most effective way to begin to see a reduction in premiums is through loss prevention. Years of
experience has shown the most effective loss prevention program must change employees attitudes.
RESOLUTION NO.
OF THE CITY COUNCIL OF THE CITY OF PALM
SPRINGS, CALIFORNIA, APPROVING INSURANCE
RENEWALS FOR THE CITY'S AIRPORT LIABILITY,
AERO SQUADRON AIRCRAFT, ALL-RISK PROPERTY,
EARTHQUAKE/FLOOD (PRIMARY LEVEL), CRIME,
BOILER & MACHINERY, GENERAL LIABILITY, AND
AUTO PHYSICAL DAMAGE (CALEASE).
WHEREAS the City's, Airport Liability, Aero Squadron Aircraft, All-Risk Property,
Earthquake/Flood (Primary Level), Crime, Boiler & Machinery, General Liability,
Auto Physical Damage (CaLease) coverages expire at midnight on June 30, 2004;
and
WHEREAS the City of Palm Springs contracted with Davis & Graeber Insurance
Services, Inc., a California Corporation, on October 1, 2001, to perform services as
the City's Insurance Broker of Record to solicit insurance proposals from qualified
carriers upon renewal of the City's policies; and
WHEREAS the City's Insurance Broker of Record has provided insurance
quotations for the City's Airport Liability, Aero Squadron Aircraft, All-Risk Property,
Earthquake/Flood (primary level), Crime, Boiler & Machinery, General Liability, and
Auto Physical Damage (CaLease);
NOW THEREFORE BE IT RESOLVED by the City Council of the City of Palm
Springs, approve the following insurance coverage renewals:
COVERAGE FROM DAVIS&GRAEBER Premium 7/1104 through 6/30105
1)Quake/Flood Primary Level Premium $128,110
Deductible 5%of Values/$50,000 Minimum
Limits $2,500,000
2)All-Risk Property Ins.Premium $146,318
Plus Loss Control Audit Fee $ 2,000
Deductible $10,000
Property Schedule/Limit of Coverage $208,239,694
3)Airport Liability Insurance Premium $ 50,412
Deductible $1,000
Limits $50,000,000
4)Boiler/Machinery Premium $9,500
Deductible $10,000
Limits $40,000,000
5)Crime Insurance Premium $4,198
Deductible Employee theft$10,000. All others$1,000
Limits $1,000,000
6)Aero Squadron Insurance Premium $6,811
Deductible $500
Limits $5,000,000 //rr
CONTINUED FROM DAVIS&GRAEBER Premium 711104 through 6/30/05
7)General Liability Premium $202,416
Self-Insured Retention $400,000
Limits $10,000,000
8)Auto Physical Damage Premium $15,955
Deductible
$10,000
CaLease Schedule/Limit of Coverage 3,798,878
ADOPTED this 161h day of June, 2004.
AYES:
NOES:
ABSENT:
ATTEST: CITY OF PALM SPRINGS, CALIFORNIA
By
City Clerk City Manager
REVIEWED & APPROVED AS TO FORM
MINUTE ORDER NO.
APPROVING THE CITY'S EXCESS
WORKERS' COMPENSATION
INSURANCE RENEWAL EFFECTIVE
JULY 1, 2004
I HEREBY CERTIFY that this Minute Order, approving the City's excess coverage for
workers' compensation insurance in the amount of$ effective July 1, 2004, to
June 30, 2005, was adopted by the City Council of the City of Palm Springs, California, in
a meeting thereof held on the 16`"day of June 2004.
PATRICIA A. SANDERS
City Clerk