HomeMy WebLinkAboutItem 08 Risk Insurance Contract Renewal AGENDA ITEM SUMMARY Meeting Date: 6/7/2021
Meeting Type: Regular Meeting
Staff Contact/Dept.: Tom Mugleston/HR
Staff Phone No: 541-726-3724
Estimated Time: Consent Calendar
S P R I N G F I E L D
C I T Y C O U N C I L
Council Goals: Provide Financially
Responsible and
Innovative Government
Services
ITEM TITLE: RISK INSURANCE CONTRACT RENEWAL
ACTION
REQUESTED:
Adopt or reject the following motion:
Authorize the City Manager to Negotiate and Execute Agreements for Liability,
Property and Workers’ Compensation Coverage.
ISSUE
STATEMENT:
According to the City’s purchasing guidelines, City Council approval is required
for contracts in excess of $100,000.
ATTACHMENTS: 1. Council Briefing Memorandum
DISCUSSION/
FINANCIAL
IMPACT:
The City contracts for liability, property and workers’ compensation coverage on an
annual basis and seeks renewal bids in anticipation of the June 30 expirations. The
City’s risk insurance broker, Brown & Brown Northwest, is currently seeking
proposals for all lines of coverage. We propose that the insurance contracts be
negotiated and approved.
Liability and Property Insurance:
The City’s risk insurance broker, Brown & Brown Northwest, has received
preliminary proposal for property and liability lines of coverage from City County
Insurance Services (CIS). CIS is the only carrier who responded to our insurance
proposal at this time.
Due to several large police and jail claims in recent years, our General Liability
deductible will change from a $250k annual aggregate deductible to a $500k per
claim deductible for police and jail claims and a $100k per claim deductible on all
other City GL claims. As a result, GL premiums are anticipated to decrease but
potential claim cost exposure will increase.
Workers Compensation:
Effective 7/1/2021, the City of Springfield will change workers’ compensation
carriers to the State Accident Insurance Fund (SAIF). SAIF and CIS have entered
into a group/services agreement. SAIF will be the workers’ compensation carrier
for all claims that occur from 7/1/2021 forward. SAIF will provide coverage and
claims management services. CIS will continue to provide risk management, loss
control, return-to-work services, and online training.
Request:
We propose that the City Manager be given authority to negotiate and execute these
insurance contracts.
M E M O R A N D U M City of Springfield
Date: 6/7/2021
To: Nancy Newton COUNCIL
From: Tom Mugleston, Human Resources BRIEFING
Subject: Risk Insurance Contracts Renewal MEMORANDUM
ISSUE: According to the City’s purchasing guidelines, City Council approval is required for
contracts in excess of $100,000.
COUNCIL GOALS/MANDATE:
Provide Financially Responsible and Innovative Government Services
BACKGROUND:
The City contracts for liability, property and workers’ compensation coverage on an annual
basis. Many of our coverages such as workers’ compensation are mandated by law. Our risk
broker advises us on insurance plan design, deductibles and limits based on changes to our
potential exposures and trends in the insurance market. They then pursue insurance proposals
for all lines of coverage.
Coverage Overview - An overview of our major coverages can be found in table 1.
Table 1
Coverage Limit Deductible
General Liability (GL) $10M Per Occurrence
$30M Aggregate
$100,000 per claim (General)
$500,000 per claim (Police & Jail)
Cyber Liability $1M 5,000
Excess Crime $1M Included in GL
Auto Liability (AL) Included in GL limits Included in GL
Auto Physical Damage (APD) Per schedule $1,000
Property Per schedule (trended
value)
$10,000
Excess Earthquake $5M Included in Property
Excess Flood $5M Included in Property
Workers’ Comp (WC) $3M $1.2M
Plan Marketing. Brown & Brown Northwest, our risk insurance broker approached the market
and sought insurance proposals. We have received one preliminary property and liability
proposal on our lines of coverage from the City County Insurance Services (CIS) insurance pool
and are waiting on a proposal for worker’s compensation coverage from SAIF. The property
coverage market is hardening due to significant US natural disaster property losses. The General
Liability market is particularly hard due to policing claim losses and legal climate in the US.
General Liability. As stated above we only receive one GL proposal at this time primarily due
to unfavorable police and jail claim experience. The CIS pool has stipulated that in order to
continue coverage, our liability deductible for police and jail claims will increase from $250,000
to $500,000 per claim. Our deductible for all other liability claims will change from $50,000 to
$100,000 per claim.
Attachment 1, Page 1 of 2
Our only other option for GL coverage would be to pursue self-insurance with a $500,000 self-
insured retention and hire a third-party-administrator and legal staff to handle claims and
litigation. This would add significant cost and staffing and is not advised at this time.
Should the City see police and jail claims with the same frequency and severity as experience
during the last 10 years, we will either be dropped from coverage, or general liability claim costs
are anticipated to increase an average of $300,000 annually for the foreseeable future until our
loss ratio decreases to 60% or less. To put this in perspective, our current 10-year loss ratio is
226% (Loss ratio = claim costs / premiums)
Workers’ Compensation. We will be changing carriers from CIS to SAIF effective 7/1/2021
as a result of CIS ceasing to provide coverage.
CIS and SAIF have agreed to form an overarching servicing group, of which SAIF will perform
underwriting and claim adjusting and CIS will provide safety and health and return-to-work
(RTW) services. If approved by DCBS, SAIF would add a new discount (OGSERP) group
within the servicing group for cities and counties that meet the underwriting eligibility criteria.
We are waiting to find out if we will qualify.
As a result of this carrier change, our coverage will change from a self-insured paid-loss retro to
fully-insured guaranteed cost coverage. The two benefits to the City are 1) a reduction in the
maximum potential liability for claims going forward and 2) due to SAIF’s strong financial
position, SAIF premiums are anticipated to save at least $100K per year compared to combined
costs with CIS after open CIS claims close over the next few years.
Impact discussions are underway with the unions.
RECOMMENDED ACTION: Authorize the City Manager to negotiate and approve insurance
contracts for the 2021-2022 year.
Attachment 1, Page 2 of 2