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Home My WebLink About6/18/2003 - STAFF REPORTS (31) Date: June 18, 2003 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, 2003. SUMMARY: The proposed renewal is for a $1,000,000 SIR (self-insured retention) for a cost of $273,360. The July 1, 2003, renewal reflects an increase over last year's premium of $213,814.00 and an increase in the SIR from $500,000 to $1,000,000. The City's Broker of Record did a comprehensive search for coverage in the market, and found that purchasing excess workers' compensation insurance is difficult at best. BACKGROUND: In marketing the Excess Workers' Compensation Insurance this year, the City's Broker of Record, Ross Jones of Davis & Graeber, ran into several issues that contributed to the increased costs in this coverage: 1. Since open rating went into effect, most Workers' Compensation Insurance companies have been attempting to increase their market share, thereby writing business for less than what they were paying out in losses in the investment market. Since the stock market has been down for two years, there has been no income from their investments. As a result, insurance carriers are increasing premiums to cover their losses. 2. The 9/11 losses hit the reinsurance market hard. Employers Re, our current carrier, was one of the companies who paid out about $3 billion in the WTC loss. All reinsurance companies have increased their cost of excess insurance, as well as increasing the self retention levels (SIR), so that they can position themselves in a higher layer and reduce their loss exposure. Employers Re notified the City of their non-renewal status several weeks ago. They are no longer writing workers' compensation coverage in California. 3. Some Excess Workers' Compensation markets have backed off and are only willing to write accounts that have payrolls of$200,000,000 or more. 4. The Workers' Compensation industry is now reporting losses that are approaching catastrophic levels. These include ergonomic issues, industrial diseases, and some new stress claims. The excess markets are taking a very conservative position because these claims show potential catastrophic payments in both lifetime medical and indemnity benefits. 5. As previously reported in June 2001, seven major workers' compensation insurance carriers went into Receivership, and many others are no longer writing workers' compensation coverage which has drastically impacted workers' compensation insurance premiums. SUSAN E. MILLS Director of Human Resources APPROVED:--—="' City Manager ATTACHMENTS: 1. Quotation and Marketing Summary 2. Minute Order JUN-13-2003 FRI 02:56 PH DAVIS & GRAEBER INS FAX NO. 9097986983 P. 02 JUN 13 2003 2:30 PM FR 3105664754 3103664754 TO S19097886883 F'a61 PARTNERS SPECIALTY �� (V- 62 INSURANCE SERVICES,LLC, R U O T E' P 21868 A 'age 1 of 1 5/13/2003 TO: Davis&Graeber Insurance Services ATTN: Ross B.Jones FAX N; ($)9)799-f gbzI FROM: Lynn Kelly Renewal of,:0610054 Account Manager far Marc Roller E=;pims=711I2.003 We are pleased to offer the following quotation for your review: INSURED; Clty of Palm Sprint P?OUCY PERIOD: 7111200,A tc T I/2004 3200 E.Tahquitz Palm Springs,CA 92263 INSURER: ACE American Insurance Company Admitted COVERAOM Workers Compensation and Employers Liability LIMITS: Workers Compensation: $26,000,000 Employers Liability; $1,000,000 each acoldenV$1.000,000 each employee for disease DEDUCTIBLE: SIR for WC and EL Combined: $1,000,000 each accidentleaoh employee for disease CONDITIONS: Coverages as per ACE Specific Excess Workers:Compensation and Employers Liability Pulley endoised to Include ALAE Inside the SIR. Premium is due in full at inception. Audit; quote Is minimum and deposit with upward adjustment only. TPA: Colon and Lee, Policy responds on an Indemnification basis. See attached notification for Terrorism provision. Optional quote with SIR for WC and EL Combined: $1,500,000 each acdclentleach employee for flit ease using rate of.8654 per$100 payroll and premium of$225,390+CIGA of$4,507XO. Pp"luM: $ 289,618.00 M&D RATE: 1.0352 por$100 pay:^oll estimated at$26,045,7''d CIGA Fee 51392.36 Total $ 27$,010.36 COMMISSION: 0,00% This quotation Is valid for 30 days. 25% Minimum Earned Premium in the event of cancellatiam IMPORTANT:COVERAGE 13 NOT BOUND.This coverage is suhject to the terms and eonditionn of the rtpnciFed insurance company forms currently in use including any listed amendatmy endorsements,Should a change In Insurance company be Involved,terms and conditions may varyfrom those currently In farce.A copy of tit+, Norm 4n be used Is available upon ropluest.THE COVERAGE DESCRWED IN THM QUOTATION MAY'NOT GONf(D M TO THE TCRMS AND CONDITIONS REQUESTED.In order to bind the coverage a request must be reccived in w6ting. 2450 Coicrado Avenue,Suite 200 Santa Monica,CA 90404 Phonic (310) 586-4700 Fax: (310)e86.4750 License#OD40510 JUN-13-2003 FRI 02:56 PH DAVIS & GRAEBER INS FAX NO. 9097986983 P. 0? JUN 13 200S 2:31 PM FIR 3105864754 3105864754 TO 919057986983 13, 02 ace use pcltc Numbev nk f'91Sp�,icneclat Groan POLICYHOLDER DISCLOSURE: NOTICE OF TERRORISM INSURANCE COVERAGE You should be aware that under the Terrorism Rlsk insurance Act of 2002 ('The F"er)effective NoYmmber 26, 2002, s)ny losses caused by certified acts of terrorism under your existing coverage may tie pnrtielly reimbursed by the Unil6,d Sta°es under a formula established by federal law(applicability is subject to the terms and conditions of each individu 91 policy). TIN Act was specifically daslgned to address the ability of businesses and individuals to obtain property anca czsuelty insurance for terrorism and to protect consumers by addressing market disruptions and ensure the continued aNallabi:ity of terrorism coverage. Under the terms of The Act, you may now have the right to purchase insurance Coverage for iCsses arising out of acts of terrorism, as defined to Section 102(1) of the Act: The term "act of terrorlsm" Means any act that is oertl'iert by Me Secretary of the Treasury, In concurrence with the secretary of State, and the Attorney General of the United Statos—to be an act of terrorism; 19 be a violent act or an act that is drangerous to human life, proparty; or in'Trasfurteture; to have resulted in damage within the United States, or outside the United States in the case of an air carrier or vowel or 0e premisas of a United States mission; and to have been committed by an individual or individuals acting on behW of any foreign person or foreign interest,as part of an effort to coerce the civlllan population of the United States or to influen,e the policy or affect the conduct of the United States Government by coercion. Responsibility for Compensation under The Act Is shared between insurance companies covered by The Acl and the United States, Under the formula set forth in The Act,the United states pays 99%Elf covered terrorism losses exceeding the statutorily established deductible,which is paid by the insurance company proviOncg the coverage. We are providing you wlih the terrorism coverage required by The Act, We,have not established a separate prlce for Phis cover'agA,however the portion of your annual premium that is reasonably attributable to such a3verage is:J Fi2_2, Noticc Penn.3b(New/Reriewal) ** TQTAL PACF.02 *K MINUTE ORDER NO. APPROVING THE CITY'S EXCESS WORKERS' COMPENSATION INSURANCE RENEWAL EFFECTIVE JULY 1, 2003. ------------- I HEREBY CERTIFY that this Minute Order, approving THE City's excess coverage for Workers' Compensation Insurance Policy effective July 1, 2003, was adopted by the City Council of the City of Palm Springs, California, in a meeting thereof held on the 1811' day of 2001 PATRICIA A. SANDERS City Clerk