HomeMy WebLinkAboutAgenda Statement 1978/06/13 Item 08afiat.}~~~'u~ ~~ ~S,"'/t L.F 3~'6~ ~tl~
C I TY OF CHULA V I STA ~y ~° ,
COUNCIL AGENDA STATEMENT Item No. sa
For meeting of h/i~/~R
ITEM TITLE Resolution ~~~~ Awarding Public Liability Insurance Coverage
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SUBMITTED BY City Manager
ITEM EXPLANATION (4/5TH'S VOTE REQUIRED YES NO X )
The City's public liability insurance policy expires midnight, .June 19, 1978. The current
primary insurance is underwritten by the Admiral Insurance Company et al for the first
$1,000,000 of coverage, and a group of other insurors carry the excess coverage from
$1,000,000 to $10,000,000, at a total annual cost to the City of $180,082. For the pre-
mium, the City has been insured, as indicated, up to $10,000,000, with the City responsible
for the first $100,000 in any one occurrence, coupled with a $400,000 stop loss provision.
As indicated in the attached communication prepared by the Director of Finance, renewal
quotations have been obtained that provide for optional coverage under four alternative
plans. In each of the options it has been recommended by our insurance brokers, Creaser
& Price, and we agree with that recommendation, that payment of a premium for the stop loss
provision should be discontinued. This recommendation is sound in that the stop loss
aggregate amount is four times the self-insured retention amount that the City selects.
Staff is unanimous in its opinion that our self-insured retention should be increased at
least to $250,000, which would mean that the stop loss aggregate would be $1,000,000.
The Finance Director has recommended that we select Option No. 2, which would provide for
the $250,000 self-insured retention. His reasons for that recommendation are contained
in the attached June 13, 1978 memorandum directed to this office.
My staff and I believe that the City Council should seriously consider becoming self-
insured for no less than $500,000 (double that recommended by the Finance Director), or
the $750,000 retention. By selecting the $750,000 option, we would save $46,080 over the
$250,000 option. The difference between the $500,000 and $750,000 retention would repre-
sent a savings of $20,480.
Notwithstanding the opinion offered by Mr. Gordon Beamer, Risk Management Consultant last
year, and Mr. Grant's conclusion that the City's financial capability does not permit a
tXh11 Ji 1 I J con i nue on upp ementa
Agreement Resolution X Ordinance Plat Notification List
Other X-Memo ENVIRONMENTAL DOCUMENT: Attached Submitted on
FINANCIAL IMPACT
Adequate funds have been provided in the proposed 1978-79 budget.
STAFF RECOMMENDATION
Adopt Resolution providing for award of public liability insurance, with a $750,000
self-insured retention
BOARD/COMMISSION RECOMMENDATION
COUNCIL ACTION
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Item No. 8a
For meeting of 6/13/78
Supplemental Page 2
greater retention than $250,000, the following factors should be evaluated before re-
jecting the higher retention:
1. The City's total incurred losses in policy year 1976-77 were
$64,598.99.
2. The City's incurred losses from June 19, 1977 to date have been
$32,929.42, consisting of actual settlements totaling $4,141.73 and
$27,787.69 set aside for possible payouts on potential claims.
3. As near as we are able to determine, the largest loss the City has
experienced in its 67 years of incorporation is $25,000.
4. If the City became self-insured up to $750,000 per occurrence,
the difference in premium cost from that budgeted would represent
$113,472. With the $158,620 currently carried or budgeted in the
public liability insurance fund, this would give us a total of
$272,092 liability reserve.
While this amount represents only slightly more than a third of
a single $750,000 occurrence, it is reasonable to assume that any
successful claim of this magnitude would involve lengthy litigation
and, even if the City were not successful, we would have considerable
time in which to provide for payment of the award. Additionally,
it cannot be assumed that any large award would have to be paid in
one lump sum.
While the City, in assuming a larger self-insured retention, certainly is accepting a
greater risk, savings in premium cost would enable us to build the public liability
reserve at a much faster pace and eventually provide the City the opportunity of
going completely self-insured.
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IT IS HEF..~,BY ~ti~QL'ESTED by the unciersi_~;r.ec? that the follo~~~in~
item, ~~rith the unanir~~ous consent of the City Council of the City of
Chula Vista, be cor:~icered anc? acted upon by.~ tine Cour:cil pursuant
to the provisions of Sec.2.04.090 of the Chula Vista City Cocie.
Resolution -Awarding Public Liability Insurance Coverage to
Admiral Insurance Company
Unanimo s Consent f
signat~r/es
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City Council, as indicated by the following
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CA-301
D~PAR7M€N7AL CORRFSPCNU~NCE
DATE:
TO:
VIA:
June 13, 1978
Lane F. Cole, City Manager
Eugene R. Asmus, Assistant City Manager
FROM:~,~~ Gordon K. Grant, Director of Finance
~4~:~EitIEQ
C€TY MANAGER
C~EULA VISTA, CA
~~. JUN 1 ~ 197 P.~
SUBJECT: Public Liability Insurance Quotations Evaluation
We have just received our renewal quotations for the City`s public liability
insurance, which expires June 19, 1978. The attached schedule summarizes
the four options available to the City depending on the amount of self-
insured retention the City is willing to assume.
The self-insured retentions range from the present $100,000 in our current
policy to $750,000. Our current policy also has a stop-loss or aggregate of
$400,000, which our insurance brokers, Creaser and Price, do not feel is
worth the extra price of $9,090 at this time.
In reviewing the four options available, I would recommend Option No. 2.
This option increases our self-insured retention to $250,000 which is 2 1/2
times greater than our present limit and does not provide any stop-loss
feature which we have in our current policy.
Our public liability trust fund has an estimated balance of $108,620 on
July 1, 1978, and our insurance budget provides for an additional $50,000
to be transferred to this fund making a total reserve balance of $158,620
for the fiscal year 1978-79. This balance would be $91,380 short of financing
the first claim that reached the recommended retention of $250,000.
Our May 31, 1978 experience report on liability insurance indicates incurred
losses of $64,598.99 for the policy year 1976-77, and incurred losses of
$32,929.42 for 1977-78. This, in my opinion, reflects better than average
experience since the City has gone self-insured. I do feel, however, that
Option 2 reaches the City's maximum financial capability and that exceeding
this amount would not be wise.
My opinion is shared by the Risk Management Consultant, Mr. Gordon Reamer,
who was retained last year to evaluate our liability insurance bids. He
stated in his letter of June 13, 1977, that based upon his analysis of
our budget and financial statements, the City has a self-insured capacity
of between $200,000 and $250,000 per year for any self-insured losses.
If Option No. 2 is selected, the City will realize a budget savings of
$67,392.
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