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HomeMy WebLinkAboutMinutes - Minutes - Risk Management and Worker's Compensation Trust Board - Meeting Date: 5/15/2019MINUTES RISK MANAGEMENT TRUST FUND BOARD CITY HALL HUMAN RESOURCES TRAINING ROOM 5850 W. GLENDALE AVE. GLENDALE, ARIZONA 85301 MAY 15, 2019 10:26 A.M. 1. CALL TO ORDER Chair Deardorff called the meeting to order at 10:26 AM. 2. ROLL CALL Present: Gary Deardorff, Chair Yvonne Knaack, Board Member Ray Malnar, Board Member Raymond Johnson, Board Member 3. CITIZEN COMMENTS No citizens were present. 4. APPROVAL OF THE MINUTES a. Risk Management Trust Fund Board Minutes of April 10, 2019. Motioned by Board Member Ray Malnar, seconded by Board Member Raymond Johnson to approve the April 10, 2019 Board Minutes as written. AYE: Chair Gary Deardorff Board Member Ray Malnar Board Member Raymond Johnson Other: Board Member Yvonne Knaack (ABSENT) Passed 5. AUTHORIZATION TO RENEW FISCAL YEAR (FY) 2019/2020 PROPERTY AND LIABILITY INSURANCE/EXCESS INSURANCE PRGRAMS City of Glendale Ordinance, Chapter 2, Administration, Article 5. Financial Affairs, Division 5. Risk Management Trust Fund, Section 2-207 provides that "The city risk manager, acting for the city manager, is authorized to enter into, on behalf of the city, any appropriate commercial insurance, alternative risk financing and surety bonding contracts to provide such risk insurance as determined to be in the best interests of the city". Staff has worked with our broker, Alliant Insurance Services on the renewals. Alliant has been placing insurance for cities for over 26 years. Their placements include all lines of coverage placed through a proprietary group purchase program for public entities across the United States. Placement is underwritten and priced on a group basis without sharing the risks of the entire group. Alliant obtained quotations for excess or commercial insurance as follows: property coverage including auto physical damage, cyber, boiler and machinery, pollution and builder's risk cyber enhancement and excess excess liability coverage including automobile, general, errors and omissions, employment practices, employee benefits pollution enhancement (underground storage tanks) airport commercial insurance crime insurance fiduciary liability (deferred compensation committee) special liability insurance policy (SLIP) for Glendale Regional Public Safety Training Center (GRPSTC) public officials' bond for risk management and workers' compensation trust fund board Attached is the Renewal Projections Spreadsheet that lists each type of coverage, the expiring costs and the estimated renewal projections for FY 2019/20. The total projected not to exceed cost for the coverage's listed above is $1,485,664 versus $1,281,446, an increase of $203,218. The increase in premium from last year is due primarily to the property market hardening, capacity for property insurance going away and the City's large loss experience; the excess liability market is seeing increases for public entities if they have police and fire operations. Property Program The property policy provides coverage for damage to city assets up to $1,000,000,000 with varying deductibles. The city's total insured property values are $838,341,320. The values increased by 4.46% due to inflation for cost of construction. Our "all risk" deductible on property is $100,000, except for flood which is $500,000, automobile physical damage is $25,000 and unscheduled property (tunnels, bridges, dam's roads, streets, sidewalks, traffic signals, etc.) is $500,000. The property policy also includes coverage for boiler and machinery, cyber (information security & privacy), and pollution. Alliant is heavily marketing the program. They obtained an indication of the renewal premium from the incumbent, Alliant Property Insurance Program (APIP). The not to exceed premium from the incumbent carrier is $570,377 compared to $434,068. This is a 31.40% increase over last year or $136,310. The property rate for $100 of property values is .068 compared to last year's rate at .054. Staff is recommending approval of the not to exceed amount of $570,377. In addition to the property market hardening and capacity going away, we have had several large property losses. See the 2019 Property Renewal Year over Year Spreadsheet that is attached. Our five-year account loss ratio is 113%. APIP is negotiating with the carriers that participate in providing the insurance for the program. APIP has indicated that they will be adding new exclusions for business interruption coverage for lost tax revenue in the event of a covered loss, unless the values are reported on the property schedule and an exclusion for using Perfluorooctanoic Acid (PFOA is a chemical used in waste water treatment). We are analyzing these exclusions to determine what impact, if any, they will have on the City. We will not know the full extent of the coverage being provided until the negotiations with the carriers has been completed. Alliant has also marketed to eight (8) other property carriers. See the attached Marketing Report. All declined to provide quotes, except two carriers. Alliant is waiting for proposals from Travelers and Allianz. Alliant will continue to market the program and bring us the best proposal. Staff obtained a separate pollution policy that enhances the property coverage and provides for pollution liability for first -party claims arising out of a pollution condition with limits of $2,000,000 per pollution condition and $2,000,000 Aggregate, with a $1,000,000 storage tank sublimit. The coverage includes above and underground storage tanks, seepage and contamination, cost of clean-up for pollution and mold for NEW conditions found. The insurance complies with ADEQ financial requirements for insuring the City's underground and above ground storage tanks. The estimated not to exceed premium is $22,947 compared to $21,855 last FY. Alliant is marketing this program as the current carrier, Chubb (Illinois Union) will not be providing the coverage. Alliant has marketed the program to Ironshore and Allianz, see the attached Marketing Report. Alliant received an indication from Allianz and is waiting for the proposal from Ironshore. For cyber exposures, the property coverage includes cyber liability. There is coverage for information security and privacy liability, regulatory defense and penalties, website media content liability, cyber extortion loss, data protection loss and business interruption with separate $2,000,000 aggregate limits. Privacy notification costs have a sublimit up to $1,000,000 and PCI Fines and Penalties up to $100,000. The coverage is subject to a $25,000,000 cyber program aggregate for all insured's in the pool and for all claims made against the policy. One large loss or multiple losses in one year by the pooling group could use up the total aggregate. The City has a $100,000 deductible. For the above policy we asked for a quote to enhance the property cyber liability for notification costs that are not subject to the $25,000,000 program aggregate, provides a lower deductible and no monetary cap for credit monitoring and call center services. The firm quote is same as expiring at $22,801. The deductible is reduced from $100,000 per occurrence to kick in after 100 individuals have been notified. The average cost of notification is approximately $295. The deductible would be reduced to approximately $29,500. This enhancement provides up to 250,000 per person notification services. Staff also requested a quote to increase the $2,000,000 limit with an additional $3,000,000 for a total of $5,000,000 in limits. The firm quote is the same as expiring at $25,946. We asked Alliant to obtain a quote for an additional $5,000,000 in limits which would provide us with a total of $10,000,000. The cost for the additional limits is $44,376. We recommend purchasing the additional limits if there is budget available to do so after all final quotes have been received. The city purchases crime insurance which provides protection for the city's money and securities up to $10,000,000 in limits with a $50,000 per occurrence deductible. The premium was slightly down this year. The total firm premium is $28,011 versus $28,588 for the prior FY. The city purchases a fiduciary liability policy which covers the Deferred Compensation Plan Committee with $5,000,000 limits with a $5,000 deductible. This premium is expected to remain flat and is estimated at the expired cost, $12,562. City Ordinance requires a public employee blanket bond to cover the Risk Management and Workers' Compensation Trust Fund board. The policy provides a $10,000 limit. The policy cost, $180, is expected to remain the same as the expiring policy. The total not to exceed premium for the Property Program as listed above is $682,824. If there are budgeted funds available for increasing the cyber limit, the additional cost is $44,376 and the total Property Program cost would be $727,200. Liability Program The city's excess liability insurance provides coverage on an occurrence basis up to a $50,000,000 limit with a $1,000,000 self-insured retention (SIR). This means that the first $1,000,000 of each occurrence is for the City to pay. The carriers are Safety National who provides the first layer of coverage up to $10,000,000 with Navigators Specialty Insurance providing the second layer up to $15,000,000, Hallmark Specialty Insurance Company providing the third layer up to $25,000,000 and Arch Insurance Company providing the fourth layer up to $15,000,000. The premium for all four layers is $788,130 versus $721,335 last year. Alliant has marketed to other carriers, see the attached Marketing Spreadsheet. So far, no other proposals have been received. Alliant will continue working with the carriers to obtain further quotes. The city purchases a separate airport owners and operator's general liability policy with $20,000,000 in limits on an occurrence basis including bodily injury and property damage liability, products and completed operations, personal injury and advertising injury, hangar keepers, non -owned aircraft liability, and fire damage liability. This policy is needed to provide coverage for the airport operations hazards which are not covered in the excess liability policy. There is no self-insured retention and no deductible. This is the last year of the 3 -year rate guarantee. The premium is $8,995 including Terrorism coverage. The city purchases a small liability policy to protect the Glendale Regional Public Safety Training Center (GRPSTC) with $2,000,000 in limits with a $5,000 deductible. This facility partners with five public entities (City of Surprise, City of Peoria, City of Avondale and Maricopa County Community College District) who use and share the costs based upon their agreements with the City. The total cost sharing of all other entities does not exceed 25% of the facility costs. Since this facility is used by all partners and the costs shared, we recommend continuing to purchase this separate insurance policy. The policy does not renew until 9/29/2019. The estimated premium is $5,898, compared to $5,362 for last FY. The total premium for the Liability Program is $803,023 compared to $748,392 last FY. The total not to exceed premium cost of all coverages included above for FY 2019/2020 is $1,485,664 compared to $1,281,446 last FY. The premiums are paid from the Risk Management Trust Fund. The amount being recommended is included in the budget that was presented to City Council April 30, 2019. We expect to receive all firm final quotes by mid -to end of June to complete the July 1, 2019 renewal. Motioned by Board Member Yvonne Knaack, seconded by Board Member Raymond Johnson to recommend City Council approve Fiscal Year 2019/2020 Insurance/Excess Insurance Program not to exceed $1,485,664. AYE: Chair Gary Deardorff Board Member Yvonne Knaack Board Member Ray Malnar Board Member Raymond Johnson Passed 6. NEXT MEETING The next regular meeting of the Risk Management Trust Fund Board will be held Mid to End September 2019, in the Human Resources Training Room of City Hall, located at 5850 W. Glendale Ave, Glendale, Arizona, 85301. 7. ADJOURNMENT Motioned by Board Member Ray Malnar, seconded by Board Member Raymond Johnson to adjourn the meeting. AYE: Chair Gary Deardorff Board Member Yvonne Knaack Board Member Ray Malnar Board Member Raymond Johnson Passed The Risk Management Trust Fund Board meeting minutes of May 15, 2019 were submitted and approved this 13 day of November, 2019. /s/Dianne Shoemake Dianne Shoemake Recording Secretary