Resolution No. 8242S
1 RESOLUTION NO. 8242
2
3 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
VERNON APPROVING PARTICIPATION IN THE WORKERS'
4 COMPENSATION PROGRAM OF THE INDEPENDENT CITIES RISK
MANAGEMENT AUTHORITY
5
6 WHEREAS, the City of Vernon is a member in good standing of
7 the Independent Cities Risk Management Authority ("ICRMA"), a Joint
8 Powers Authority, that provides risk management programs of insurance
9 to protect its members from the effect of unexpected losses and to
10 provide excess insurance and other services, including risk management,
11 loss prevention, claims adjustment, insurance brokerage, legal and
12 other services related to its purpose; and
13 WHEREAS, the ICRMA has established a Workers' Compensation
14 Program ("Program") through which member cities, including the City of
15 Vernon, may secure workers' compensation coverage; and
16 WHEREAS, the ICRMA offers various self -insured retentions
17 (SIRs) and coverage limits as determined by its Governing Board; and
18 WHEREAS, the City has received and reviewed a copy of the
19 Program Bylaws, Memorandum of Coverage, and other related documents;
20 and
21 WHEREAS, it is expressly understood that a commitment by a
22 participant in the Program must be for a period of no less than three
23 (3) full program years; and
24 WHEREAS, it appears to be in the best interest of the City
25 that it participate in the Program; and
26 . WHEREAS, the City's participation in the Program requires it
27 to voluntarily revoke its current self -insured certificate and request
28 an affiliate self -insured certificate under ICRMA's master
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certificate; and
WHEREAS, by letter dated June 25, 2003, Bruce V.
Malkenhorst, City Administrator/City Clerk, has recommended that the
City approve participation in the Program of the ICRMA.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF VERNON AS FOLLOWS:
SECTION 1: The City Council of the City of Vernon hereby
finds and determines that the recitals contained hereinabove are true
and correct.
SECTION 2: The City Council of the City of Vernon hereby
elects to join and remain a member of the Program for a period of not
less than three (3) full Program years, provided the minimum
participation requirements in the Program are met.
SECTION 3: The City Council of the City of Vernon hereby
requests that, commencing on July 1, 2003, of the Program period, the
City's industrial injury or illness claims be covered by the Program.
SECTION 4: The City Council of the City of Vernon hereby
approves the Program Bylaws and Memorandum of Coverage, a copy of
which are attached hereto as Exhibit "A" and made a part hereof, and
other related documents.
SECTION 5: The City Council hereby authorizes and directs
the City Administrator, or his designee, to act on the City's behalf
in all matters pertaining to said Program. The City Administrator, or
his designee, is authorized and empowered to execute in the name of
the City of Vernon all necessary documents as may be required to bind
the City to the terms and covenants of the Program.
SECTION 6: The City shall maintain an Affiliate Certificate
of Consent to Self -Insure for workers' compensation liabilities from
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the Director of Industrial Relations, State of California, and shall
immediately advise the ICRMA if there is any revocation or change in
said Certificate.
SECTION 7: The City Council of the City of Vernon hereby
directs the City Clerk, or his designee, to send a certified copy of
this Resolution to:
Independent Cities Risk Management Authority
Attn. Tom Payne, Bickmore Risk Services
5777 W. Century Blvd., Suite 665
Los Angeles, CA 90045
SECTION 8: The City Clerk of the City of Vernon shall
certify to the passage of this resolution, and thereupon and
thereafter the same shall be in full force and effect.
APPROVED AND ADOPTED this 2nd day of July, 2003.
ATTEST:
BRUCE V. MALKENHORST, City Clerk
LEONIS�dC..�MALB G Ma or
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{ 4
STATE OF CALIFORNIA )
ss
COUNTY OF LOS ANGELES )
I, BRUCE V. MALKENHORST, City Clerk of the City of Vernon, do
hereby certify that the foregoing Resolution, being Resolution No.
8242, was duly adopted by the City Council of the City of Vernon at a
regular meeting of the City Council duly held on Wednesday, July 2,
2003, and thereafter was duly signed by the Mayor of the City of
Vernon.
BRUCE V. MALKENHORST, City erk
(SEAL)
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EXHIBIT
INDEPENDENT CITIES
RISK MANAGEMENT AUTHORITY
BYLAWS
FOR THE
WORKERS' COMPENSATION PROGRAM
INDEPENDENT CITIES
RISK MANAGEMENT AUTHORITY
BYLAWS
FOR THE
WORKERS' COMPENSATION PROGRAM
TABLE OF CONTENTS
ARTICLE1:_GENERAL............................................................. :............................................... 1
A. AUTHORITY....................................................................................I
B. PURPOSE....................................................................................................1
C. PARTICIPATION...............................................................................................................1
D. GOVERNANCE.............................................................................................2
E. GOALS AND OBJECTIVES.............................................................................................. 2
ARTICLE II: PROGRAM ELEMENTS....................................................................................3
A.
PROGRAM YEARS .....................
3
B.
RETAINED LIMITS..........................................................................................................
3
C.
DEPOSIT PREMIUMS ............................................................. ..............................................3
D.
DIVIDEND AND ASSESSMENTS................................................................
5
E.
EXCESS COVERAGE_ :::_ �:.�:::::::_�• ��.::::......::. ... _ .....6
ARTICLE III: ADMINISTRATION...........................................................................................7
A. GOVERNING BOARD...................................................................................................... 7
B. --COMMITTEES ....�................................. 7
C. GENERAL MANAGER..................................................................................................... 7
D. WORKERS' COMPENSATION PROGRAM MANAGER'S DUTIES.. .......... 8
ARTICLE IV: CLAIMS ADMINISTRATION.........................................................................10
A. CLAIMS PROCEDURES MANUAL................................................................................10
B. CLAIMS AUDIT............................................................10
C. CLAIM SETTLEMENT AUTHORITY............................................................................10
D. DISPUTES BETWEEN PARTICIPANTS_ AND GENERAL_ MANAGER_ OR WORKERS'
COMPENSATION PROGRAM MANAGER, OR COMMITTEE 11
ARTICLE V: PARTICIPATION..............................................................................................12
A.ELIGIBILITY AND AND_APPLICATION. _,._.::....:.•..:...:..::� :.... �•�� :.....:::::::..-�.• .� :_ _�-� ._ ::::__l2
B. PARTICIPANTS' DUTIES...................................................................................I ...........12
C. TERN 1NATION...............................................................................................................13
ARTICLE VI: TERMINATION AND DISSOLUTION...........................................................15
ARTICLE VII: AMENDMENTS.............................................................................................16
INDEPENDENT CITIES RISK MANAGEMENT AUTHORITY
BYLAWS
FOR THE
WORKERS' COMPENSATION PROGRAM (WCP)
ARTICLE I: GENERAL
A. AUTHORITY
l . The Workers' Compensation Program (WCP) Bylaws of the Independent Cities Risk
Management Authority (Authority), shall be treated as one of the Authority's
governing documents. However, any conflict between the WCP Bylaws, the
Authority's Joint Exercise of Powers Agreement (Agreement), or the WCP
Memorandum of Coverage (MOC) shall be determined in favor of the Agreement or
the MOC.
2. The WCP Bylaws are intended to be the primary source of information, contain the
rules and regulations, and serve as the operational guide for the conduct of the WCP.
3 The WCP has been organized under authority granted by, and shall be conducted in
accordance with, the laws of the State of California; regulations prescribed by the
Department of Industrial Relations (DIR) and the State of California Audit Unit; and
the accreditation standards set forth by the California Association of Joint Powers
Authorities (CAJPA).
B. PURPOSE
The Authority, as a part of its overall objectives, has designed the WCP to provide for the
varied needs of its member cities in the area of workers' compensation liability.
C. PARTICIPATION
l . All member cities of the Authority may become a participant (Participant) in the WCP,
and are encouraged to do so. However, the terms and conditions which may be
imposed on a member city which desires to join the WCP may be different, depending
upon payroll, number of employees, the size of the city, its loss record, and other
pertinent information.
2. The Authority, as determined by the actuary and approved by the Authority's
Governing Board (Board), may determine a minimum participation level which must
be met prior to its effective date.
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ICRMA Bylaws for the Workers' Compensation Program (WCP)
GB Approved 11.19.02
D. GOVERNANCE
Each member city's appointed primary representative, one alternate, and one substitute
alternate representative to the governance of ICRMA, shall be the representative for the
WCP. The member city will be entitled to one vote on all issues or decisions that involve the
WCP. It is expected, but not mandatory, that the primary representative from each member
city will be the individual designated as the member city's appointee to the Board and that the
alternate representative(s) will be the individual(s) designated as the member city's alternate
representative on the Board.
E. GOALS AND OBJECTIVES
The Authority offers its member Cities this WCP designed to provide coverage for
the liabilities imposed by the workers' compensation laws of California as well as
those imposed by common law upon employers.
2. The WCP shall provide workers' compensation coverage for the Participants utilizing
an optimum mix of risk retention and risk transfer. The WCP shall provide various
levels of retentions for the Participants, provide a risk sharing pool for losses above
individual retention levels up to the Authority's Self -Insured Retention (SIR), and
obtain excess coverage for the amount of the loss which exceeds the Authority's SIR.
Additionally, the WCP shall provide for the sharing of operating costs and payment
of the excess coverage by charging all Participants their share of such costs.
Although the WCP is provided to the Participants under those terms and conditions
which prevail at the time of the Participant's joining the WCP, the Board shall have
the right to alter, from time to time, the terms and conditions of the excess coverage
and the pooled underlying coverage in response to the needs and abilities of the WCP
and the participating cities, as well as in response to availability of coverage from
outside sources.
4. The Authority offers participation in a risk sharing pool, covering losses of
Participants in accordance with the Agreement adopted by the member Cities. The
assets of the pooled program shall be maintained at all times as the assets of the
Participants collectively. The assets may be disbursed only pursuant to the provisions
of these Bylaws, and no Participant shall have an individual right to exercise control
over said assets except as provided in the Agreement.
5. The WCP will provide coverage for injuries and illnesses to the Participants'
employees under the terms and conditions set forth in the MOC. In addition to the
coverage provided by the MOC, the Authority may purchase excess insurance or
reinsurance. The amount of coverage to be pooled and/or purchased is at the
discretion of the Board.
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ICRMA Bylaws for the Workers' Compensation Program (WCP)
GB Approved 11.19.02
ARTICLE II: PROGRAM ELEMENTS
A. PROGRAM YEARS
A program year is defined by the term of the coverage period, generally a period of
12 months. Except for the originating program year which will run from program
inception through June 30, 2004, the WCP will have program years which begin at
12:01 a.m. on July l and end at midnight on the following June 30.
2. Each program year shall be accounted for separately. The income and expenses of
each program year shall be accounted for separately from any other program years'
income or expenses.
3. A program year shall not be closed until such time that the Board authorizes closure,
being convinced that known claims for the year are all closed and the probability of
further claims being discovered is minimal. Any closed years, however, may be
reopened if deemed necessary and approved by the Board.
B. RETAINED LIMITS
The WCP shall annually establish the limit of coverage for the pool. The underlying coverage
of the WCP shall provide Participant's retained limits of $350,000, $500,000, $750,000, and
$1,000,000 per occurrence, or other limits which may be modified by resolution. The
Participants may annually select their retained limit as approved. The amount of each loss,
including expenses, which is less than the retained limit chosen by the applicable Participant,
shall be paid by the Participant.
C. DEPOSIT PREMIUMS
Annually, each Participant shall pay a deposit premium to the Authority for each
program year. Such Deposit Premiums shall consist of the amount needed to cover
excess insurance or reinsurance premiums (if any), administrative expenses and
actuarially -determined losses, plus a margin for added confidence as determined by
the Board.
2. The deposit premium shall be initially calculated for each Participant by taking the
Participant's expected annual payroll, as determined by the Federal W-3 form
provided by each Participant, multiplied by the Board adopted rate per $100 of
payroll. After the end of the program year, adjustments from expected to actual
payroll shall be made. Debit adjustments shall be billed to the Participant, and credit
adjustments will apply to next year's billings. An annual audit of a Participant's
payroll may be conducted by the Authority.
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ICRMA Bylaws for the Workers' Compensation Program (WCP)
• GB Approved 11.19.02
3. The deposit premium shall also include:
(a). All volunteers declared or otherwise required to be covered. The value of the
volunteers' service shall be based upon a flat rate per volunteer; and
(b). all other persons engaged in work that could make the Authority liable under
Part One (workers' compensation insurance) of the MOC. If the Participant
does not have payroll records for these persons, the contract price
remuneration for their services and materials may be used as the premium
basis. This paragraph will not apply if the Participant gives the Authority
proof that the employers of these persons lawfully secured their workers'
compensation obligations.
4. EXPERIENCE MODIFICATION
Each Participant shall be evaluated each year for an experience modification
adjustment that shall be applied to the deposit premium, in accordance with the
following calculations. Such modification adjustment may be adjusted periodically:
(a). The exposure base is a measurement of the relative size of each member city.
The most readily available information to use as an exposure base is payroll;
(b). A component (applied as a % weighted factor, determined annually) of the
experience modification adjustment shall include the actual loss experience of
the individual Participant as it relates to the average loss experience of the
group as a whole. The criteria which shall be used is the relationship of actual
average loss experience over the period being rated as it relates to the average
payroll for the same period. Such loss experience shall consider seven years
of loss experience with a one year lag from the current program year.. The
experience modification calculation will be done only once at the initial
deposit premium stage and the same experience modification calculation will
be used when determining the final premium; and
(c). To mitigate the impact of catastrophic exposures that could skew the
experience modification calculation, the loss experience calculation shall only
use losses in the total incurred range of $50,000 to $350,000. Any losses
greater than $350,000 in total incurred costs will be reduced to $350,000
unless otherwise modified by resolution by the Governing Board.
An additional component of the experience modification calculation shall be the
relative risk factors of payroll classifications (safety, public works, other) with a %
weighted factor.
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ICRMA Bylaws for the Workers' Compensation Program (WCP)
GB Approved 11.19.02
D. DIVIDEND AND ASSESSMENTS
(a). Five years after the end of the program year, the first dividend calculation shall
be performed. Each year thereafter there shall be an additional dividend
calculation made until such time as the program year is closed. Any dividends
available to be declared and returned to the Participants will be at the
discretion of the Board.
(b). Calculation
i. Dividends are available to be declared only at such time as the WCP
has equity, with liabilities actuarially stated undiscounted at a 80%
confidence level. The calculated amount shall represent the maximum
dividend available to be declared.
ii. This amount shall be reduced if the two succeeding years (after the
fifth program year reaches eligibility) have negative equity, with
liabilities actuarially stated at an expected confidence level.
iii. Each Participant's share of any refunds shall be allocated based upon
the method in which they were collected, beginning with the oldest
program year. However, until the last claim of a program year has
been paid and the program year has been closed, the program year
must maintain sufficient funds to satisfy the 80% confidence level
undiscounted requirement.
2. ASSESSMENTS
(1) Assessments may be levied for the risk sharing layer of any program year(s),
as recommended by the Finance Committee and approved by the Board, on
the Participant at such time that an actuary finds that the assets of the WCP,
as a whole, do not meet the expected undiscounted losses of the WCP. Each
Participant's share of the assessment shall be allocated based upon the deposit
premiums collected for the risk sharing layer of each respective program year
being assessed. If such assessment is not sufficient to relieve the pool of its
actuarial determined deficit in the year of the assessment, such assessment
shall be levied each subsequent year until the actuarial deficit is relieved. The
timing of payment shall be determined by the Board at time of assessment.
(2) Equity, from the risk sharing layer, may be exchanged between eligible
program years if sufficient funds are available. The transfer of equity will be
performed such that the individual Participant's share of equity is separately
applied so as to maintain the integrity of each Participant's balance.
ICRMA Bylaws for the Workers' Compensation Program (WCP)
GB Approved 11.19.02
E. EXCESS COVERAGE
1. The Board shall ensure that each program year is provided with excess workers'
compensation coverage for the Participants. It is the intent and purpose of the
Authority to continue to provide such coverage to the Participants, provided that such
coverage can be obtained, and the coverage is not unreasonably priced. This coverage
may be obtained from an insurance company, by participating in another pool
established under the Government Code as a joint powers authority, or offered
through another WCP pooling procedure. If the coverage is purchased from an
insurance company, such insurance company shall have an A.M. Best Rating
Classification of A- or better and an A.M. Best Financial Rating of VII or better or
their equivalents.
2. The Authority, through the WCP, shall provide, where economically practical, at least
$10,000,000 of total combined limits. Total combined limits is the maximum this
WCP will pay for each injury or illness, regardless of whether the liability arises from
Workers' Compensation Laws, Employer's Liability, or a combination of these.
3. Premiums for such coverages shall be paid by the WCP from the proceeds received
as deposit premiums from the Participants.
4. The Board may, from time to time, alter excess coverage based on insurance market
conditions, available alternatives, costs, and other factors. The Board shall place
excess coverage with the two competing objectives of security and minimizing costs
to the WCP as a whole.
ICRMA Bylaws for the Workers' Compensation Program (WCP)
GB Approved 11.19.02
ARTICLE III: ADMINISTRATION
A. GOVERNING BOARD
l . Discussion of developments and performance of the WCP may occur as part of any
scheduled Board meeting.
2. The Board retains unto itself the authority as consistent with the Agreement.
3. The Board shall have the responsibility and authority to carry out and perform all
other functions, and make all decisions affecting the WCP, provided that such
functions and decisions are consistent with the powers of the Authority and are not
in conflict with the Agreement, the Bylaws, or the MOC.
B. COMMITTEES
The Board may establish a committee to oversee certain responsibilities delegated to the
Board. The committee may be a newly -created committee or the responsibilities may be
assigned to an existing committee.
C. GENERAL MANAGER
The General Manager shall be responsible for:
l . The overall operation of the WCP;
2. Monitoring the status of the WCP and its operations, the development of losses, the
program's administrative and operational costs, service companies' performance, and
brokers' performance;
3. Assisting the Board in selecting brokers, actuaries, auditors, and other service
companies;
4. Promoting the programs to prospective new Participants;
5. Preparing, distributing, and maintaining all records of the WCP, including its Bylaws
and MOC as these may be amended from time to time; and
6. Preparing Certificates of Coverage and Waivers of Subrogation as may be required
by the Participants in the WCP.
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ICRMA Bylaws for the Workers' Compensation Program (WCP)
GB Approved 11.19.02
D. WORKERS' COMPENSATION PROGRAM MANAGER'S DUTIES
The Workers' Compensation Program Manager (WCPM), unless otherwise modified by
resolution, shall:
1. Generally, oversee all workers' compensation claims administration and management
and report to the General Manager;
2. Develop for Board approval of performance standards third party administrators;
3. Maintain files on all claims reported to the Authority;
4. Recommend to the Board the setting of reserves for those cases that are likely to
penetrate to pooled funds;
5. Upon the reporting of each claim that has an expectation of exceeding the minimum
incurred loss threshold set by the Board, review said claim for the Authority and
report said claims to the Board at the next scheduled meeting;
6. Review the progress of all reported claims for the Authority and, if directed by the
Board, propose reserve changes, and/or take control and assume settlement authority
for the claim;
7. Recommend claim settlements to the Board for approval;
8. Annually, prepare a detailed report on the WCP, showing the activity by program year
and the cumulative activity of all years, including number of claims, losses which have
been incurred by each Participant, and the losses which have been shared through
pooling;
9. Assist the Participants in training their personnel in the correct procedures for timely
and accurately reporting claims;
10. As required, provide advice and assistance to Participants;
11. Periodically review third party claims administrator's claims files. The review should
include the new indemnity claims reported, claims currently open and reported twelve
months prior, and those claims for which a Participant has requested a specific review;
(a). Provide guidance to the claims adjuster on the management of problem or
complex claims;
(b). Advise, where needed, on the selection of legal representation in anticipation
of litigation;
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ICRMA Bylaws for the Workers' Compensation Program (WCP)
GB Approved 11.19.02
(c). Monitor and evaluate the effectiveness of the defense firms and the
management of the litigation;
(d). Monitor and evaluate the effectiveness of medical treatment as respects claims
costs, especially those involving complex medical issues;
(e). Evaluate, where needed, recommendations for settlement of claims;
(f). Mediate differences, if any, between the claims adjuster and a Participant; and
(g). Review the performance of the claims adjusters' personnel assigned to the
Authority's account with special emphasis in the handling of "open claims."
9
ICRMA Bylaws for the Workers' Compensation Program (WCP)
GB Approved 11.19.02
ARTICLE IV: CLAIMS ADMINISTRATION
A. CLAIMS PROCEDURES MANUAL
1. A Workers' Compensation Claims Procedures Manual (Manual) including reporting
procedures, forms, and other vital information shall be adopted by the Board and
provided to all Participants.
2. All Participants shall be held accountable for understanding and abiding by the
procedures stated in the manual, as well as any changes thereto.
B. CLAIMS AUDIT
1. At least once every two years, the adequacy of claims adjusting for both the Authority
and the Participants shall be examined by an independent auditor who specializes in
claims auditing.
2. The Board shall approve the claims auditor. The costs of such claims audit shall be
paid by the Authority.
3. The claims audit report shall address the issues of both adequacy of claims procedures
and accuracy of claims data. The report shall be filed with the Authority and sent to
each Participant.
C. CLAIM SETTLEMENT AUTHORITY
l . Participants - Each Participant shall have settlement authority for all claims, including
attorney fees and other costs, which do not exceed 100% of the member city's
Retained Limit. The WCPM will review these claims from time to time and may offer
his/her recommendation to the Participants' Third Party Administrator (TPA) and the
Participant regarding settlement.
2. The WCPM shall have settlement authority for all claims which exceed 100% of the
Participant's retained limit, but only up to $50,000. The WCP (or other identified)
Committee shall have settlement authority above $50,000 and up to $250,000 above
each Participants' Retained Limit. The Board shall have settlement authority above
$250,000 up to the Self -Insured Retention of the Authority. The General Manager
and the WCPM will ensure that the Participant is kept informed regarding these
claims, and will take into consideration the Participant's desires in any settlement
process; however, the General Manager and the WCPM shall keep the best interests
of the Participants paramount in any decision. Any claims settlement decision made
by the General Manager or WCPM may be appealed to the Board within 30 days after
notice of the decision to the Participant. The decision of the Board shall be final.
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ICRMA Bylaws for the Workers' Compensation Program (WCP)
GB Approved 11.19.02
1
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D. DISPUTES BETWEEN PARTICIPANTS AND GENERAL MANAGER OR
WORKERS' COMPENSATION PROGRAM MANAGER, OR COMMITTEE
l . Any matter in dispute between a participating Participant and the General Manager
or WCPM shall be heard by the appropriate Committee whose decision may be
appealed to the Board within thirty (30) days of the Committee's decision. The
decision of the Board shall be final.
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ICRMA Bylaws for the Workers' Compensation Program (WCP)
GB Approved 11.19.02
ARTICLE V: PARTICIPATION
A. ELIGIBILITY AND APPLICATION
1. ELIGIBILITY
(a). The applicant city must commit to at least three full program years of
participation in this WCP.
(b). Any member of the Authority may apply to participate in the WCP by
providing an adopted resolution of its city council and such other
information/materials as may be required. The city's resolution shall commit
the applicant city to three full years of participation in the WCP, if accepted,
and consent to be governed for workers' compensation matters in accordance
with these Bylaws, the approved MOC and other documents and policies
adopted by the Board. The resolution may also state the retained limit desired
by the applicant city.
(c). It is recommended that a city only enter the WCP at the commencement of a
new program year. If a city chooses to enter the WCP at any other time, the
deposit premium for the remainder of the program year will be pro rated. The
new member city will begin coverage on the date that is mutually acceptable
to the city and the Board; however, the new Participant will be required to
share losses with the other members of the WCP for the entire program year.
The application for participation shall be submitted at least 60 days prior to
the date the city wishes coverage to begin to ensure that the State Certificate
of Consent to Self -Insure is received prior to the inception date, and that the
Board may have adequate time to review and evaluate the acceptability of the
applicant.
2. APPROVAL OF APPLICATION
(a). The Board shall, after reviewing the resolution and other underwriting criteria,
determine the acceptability of the exposures presented by the applicant city.
(b). The Board shall, after a review of the resolution and other underwriting
criteria, advise in writing, the applicant city of its decision to accept or reject
the request within 10 days after the decision has been made.
B. PARTICIPANTS' DUTIES
1. The Participants shall provide payroll, using the Federal W-3 form and all other
requested information in conformance with the policies adopted by the Board.
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ICRMA Bylaws for the Workers' Compensation Program (WCP)
GB Approved 11.19.02
2. The Participants shall disclose activities not usual and customary in their operation.
3. The Participants shall at all times cooperate with the Authority's General Manager,
WCPM, claims adjusting company, and loss control personnel, in regards to
underwriting activities of the Authority.
4. Each year the Authority shall bill Participants for a workers' compensation deposit
premium for the next program year. The billings shall be due and payable in
accordance with the Bylaws.
5. Billings may be made to Participants for a program year found to be actuarially
unsound. All billings for payments to bring a program year into an actuarially sound
condition are due and payable upon receipt.
6. Participants that have formerly participated in the WCP, but have withdrawn as a
Participant, shall be required to pay all applicable billings for the program years in
which they participated. Delinquent billings, together with penalties and interest, shall
be charged and collected from the Participant in accordance with the policies adopted
by the Board. Any Participant which voluntarily withdraws from the WCP shall not
be permitted to apply for participation in the WCP until the expiration of three years
from the date of the Participant's withdrawal.
7. Penalties and interest shall be charged against any amounts delinquent in accordance
with the policies adopted by the Board.
C. TERMINATION
VOLUNTARY TERMINATION
(a). A Participant which has maintained its participation in the WCP for three full
program years, may terminate its participation if, at least six months before the
next program year, a written request to terminate participation is received
from the Participant, or
(b). A Participant that has not maintained its participation in the WCP for three full
program years shall not be permitted to withdraw from the WCP prior to the
end of its commitment period and shall be obligated for payment of premiums
for these three years.
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ICRMA Bylaws for the Workers' Compensation Program (WCP)
GB Approved 11.19.02
2. INVOLUNTARY TERMINATION
(a) The Board may initiate termination of future participation for the following
reasons:
(i)
Termination as a member of the Authority;
(ii)
Declination to cover the city by the entity providing excess coverage;
(iii)
Nonpayment of premiums, assessments, or other charges;
(iv)
Frequent late payment of premiums, assessments, and/or other
charges: subject to interest and penalty charges;
(v)
Failure to timely provide requested underwriting information,
(vi)
Consistent poor loss history relative to the pool;
(vii)
Substantial change in exposures which are not acceptable in this WCP;
(viii)
Financial impairment that is likely to jeopardize this WCP's ability to
collect amounts due in the future; and/or
(ix)
Revocation of Certificate to Self -insure.
(b) The Board
shall have the authority, upon a two-thirds approval, to authorize
a termination notice be sent to a Participant. Such notice shall be sent at least
60 days prior to termination.
3. Termination of participation, whether voluntary or involuntary, in future program
years does not relieve the terminated city of any benefits or obligations. of those
program years in which the city participated. These obligations include payment of
assessments, retrospective adjustments, or any other amounts due and payable. Any
Participant which voluntarily withdraws as a Participant from the WCP shall not be
permitted to renew participation in the program until the expiration of three years
from the date of the Participant's withdrawal.
14
ICRMA Bylaws for the Workers' Compensation Program (WCP)
GB Approved 11.19.02
ARTICLE VI: TERMINATION AND DISSOLUTION
The WCP may be terminated and dissolved any time during the first three years by the written consent
of all Participants, and thereafter by the written consent of two-thirds of the Participants. However,
this WCP shall continue to exist for the purpose of disposing of all claims, distributing assets, and all
other functions necessary to conclude the affairs of the WCP.
Upon termination of the WCP; all assets of the Authority shall be distributed only among the
Participants, including any of those parties which previously withdrew pursuant to Article V, in
accordance with and proportionate to their deposit premiums and assessments paid during the term
of participation. The Board shall determine such distribution within six months after the last pending
claim or loss, covered by the WCP, has been finally resolved and there is a reasonable expectation
that no new claims will be filed.
15
ICRMA Bylaws for the Workers' Compensation Program (WCP)
GB Approved 11.19.02
ARTICLE VII: AMENDMENTS
These WCP Bylaws may be amended or repealed by a two-thirds (2/3rds) vote of the representatives
of the Board present and voting at the meeting provided prior written notice, as provided within the
Agreement, has been given to the Board.
16
ICRMA Bylaws for the Workers' Compensation Program (WCP)
GB Approved 11.19.02
INDEPENDENT CITIES RISK MANAGEMENT AUTHORITY
(ICRMA)
MEMORANDUM OF WORKERS' COMPENSATION PROGRAM COVERAGE
February 1, 2003 to June 30, 2004 PROGRAM YEAR
TO BE EFFECTIVE FEBRUARY 1, 2003
INDEPENDENT CITIES
RISK MANAGEMENT AUTHORITY
MEMORANDUM OF COVERAGE
FOR SELF-INSURANCE OF
WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY
TABLE OF CONTENTS
GENERAL SECTION .................... ................1
..............................................................................
A. The Memorandum..............................................................:...................................................................1
B. Who Is Covered...................................................................................................................................... l
C. Workers' Compensation Law................................................................................................................. l
D. State.................................................................................................................................................... I
E. Qualified Self-Insurer.............................................................................................................................2
PART ONE - WORKERS' COMPENSATION COVERAGE
.................................................... 2
PART TWO — EMPLOYER LIABILITY COVERAGE.............................................................
3
PART THREE - THE COVERED MEMBER' S RETENTION AND AUTHORITY'S LIMIT OF
LIABILITY..............................................................
................:................................................
3
A. The Covered Member's Retained Limit...............................................................................................43
B. Authority's Limit of Liability ...................................... ....... 53
...................................................................
C. Attachment of Coverage by Authority ...................................................................................................4
D. Labor Code Section 4850.......................................................................................................................4
PART FOUR - CLAIMS...................
.................................................4
A. The Covered Members Claim Reporting Duties....................................................................................
4
B. Settlement.............................................................................................................................................
5
PART FIVE - PREMIUM ........................
..............................................................
...................... 5
A. Deposit Premium....................................................................................................................................
5
PART SIX - CONDITIONS ............................................
..............6
A. Acceptance..............................................................................................................................................6
B. Notice of Accident........................................................................................
.......................................... 6
C. Subrogation — Recovery from Others.....................................................................................................
6
D. Memorandum Conforms to Law............................................................................................................
6
E. Cancellation......................................................
F. Inspection................................................................................................................................................ 7
G. Records.................................................................................. ... 7
..............................................................
H. Transfer of the Covered Member's Rights and Duties.......................................................................... 7
I. Financial Audit .................................................................................... 7
ICRMA 2
A. PAYMENTS THE COVERED MEMBER MUST MAKE 2
INDEPENDENT CITIES RISK MANAGEMENT AUTHORITY
MEMORANDUM OF COVERAGE
FOR SELF-INSURANCE OF
WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY
The Independent Cities Risk Management Authority ("Authority") in consideration for the payment
of the contribution and subject to all terms of this Memorandum of Coverage ("Memorandum"), does
hereby agree to provide coverage to the Covered Members (an ICRMA member city electing to
participate in the workers' compensation program) named in Endorsement 1 subject to the terms and
conditions set forth in the Memorandum:
GENERAL SECTION
A. The Memorandum
This Memorandum includes at its effective date the Declaration Page and all endorsements
listed on the Declaration Page. This Memorandum is the coverage document between the
Covered Member and the Authority. The terms of this Memorandum may not be changed
or waived except by endorsement issued by the Authority to be part of this Memorandum.
B. Who Is Covered
The Covered Members are named in Endorsement 1 and are. Members of the Authority. If
a Covered Member loses its status as an active member of the Authority, the coverage under
this Memorandum shall terminate immediately upon such change in status.
C. Workers' Compensation Law
Workers' Compensation law means the workers' or workmen's compensation law and
occupational disease law of the State of California and such other state laws as may be
applicable. It includes any amendments to that law that are in effect during the term of this
Memorandum. It does not include any federal workers' or workmen's compensation law, any
federal occupational disease law, or the provisions of any law that provide non -occupational
disability benefits.
D. State
State means any state of the United States of America and the District of Columbia.
E. Qualified Self -Insurer
The Covered Member shall provide evidence that it is a duly qualified self -insured under the
Workers' Compensation Law of the State of California and will continue to maintain such
qualifications during the term this Memorandum is in effect. If a Covered Member fails to
qualify or fails to maintain such qualifications, the coverage provided under this Memorandum
shall automatically terminate the first date of such failure.
PART ONE — WORKERS' COMPENSATION COVERAGE
The Authority will provide coverage for workers' compensation losses in the same manner as the
excess insurance carrier up to the Authority's Limit of Liability stated in Item 3 of the Declaration
Page. In addition, the Authority will provide coverage for salary benefits listed in Labor Code section
4850 up to the Limit of Liability stated in item 3 of the Declaration Page.
This coverage applies to bodily injury, including resulting death by accident or by disease, provided
that:
1. Bodily injury by accident must occur during the coverage period.
2. Bodily injury by disease must be caused or aggravated by the conditions of employment by
the Covered Member. The employee's employment period and exposure to the conditions
causing or aggravating such bodily injury by disease must occur during the coverage period.
A. PAYMENTS THE COVERED MEMBER MUST MAKE
The Authority is not responsible for any payments in excess of benefits regularly provided
by the Workers' Compensation Law, including those required because:
l . Of the Covered Member's serious and willful misconduct;
2. The Covered Member knowingly employs an employee in violation of law;
3. The Covered Member knowingly fails to comply with a health or safety law or
regulation;
4. The Covered Member discharges, coerces, or otherwise discriminates against any
employee in violation of the Workers' Compensation Law;
5. The Covered Member violates or fails to comply with any Workers'
Compensation Law; or
6. Of salary benefits listed in Labor Code Section 4850 for any claim that exceeds
the Limit of Liability stated in Item 3 of the Declaration Page.
If the Authority makes any payments in excess of the benefits regularly provided by the
Workers' Compensation Law on the Covered Member's behalf, the Covered Member will
reimburse the Authority promptly.
PART TWO — EMPLOYER LIABILITY COVERAGE
The Authority will provide coverage for employer's liability losses in the same manner as the excess
insurance carrier.
This coverage applies to bodily injury, including resulting death by accident or bodily injury by
disease. This coverage will apply to damages awarded against the Covered Member, over the
amount of the Covered Member's retained limit and subject to the Limit of Liability set forth herein,
provided those damages are the direct consequences of bodily injury that arise out of and in the
course of the injured employee's employment by the Covered Member, and are claimed against the
Covered Member in a capacity other than as employer. Provided that:
The bodily injury by accident must arise out of and in the course of the injured employee's
employment by the Covered Member and occur during the coverage period.
2. Bodily injury by disease must be caused or aggravated by the conditions of employment by the
Covered Member. The employee's employment period and exposure to the conditions causing
or aggravating such bodily injury by disease must occur during the coverage period.
PART THREE - THE COVERED MEMBER'S RETENTION AND AUTHORITY'S LIMIT OF
LIABILITY
A. The Covered Member's Retained Limit
The Covered Member shall pay from its own account any loss up to the amount stated in
Endorsement No. 2 as the Covered Member's Retained Limit.
B. Authority's Limit of Liability
The Authority will indemnify the Covered Member for loss under Workers' Compensation
Laws, but will not exceed the Limits of Liability stated in Item 3 of the Declaration Page on
any one loss. Coverage will include all benefits required under Workers' Compensation
Laws, including full salary benefits listed in Labor Code Section 4850. The authority will pay
on behalf of the Covered Member for Employer's Liability losses but will not exceed the
Limits of Liability stated in Item 3 of the Declaration Page on any one loss.
C. Attachment of Coverage by Authority
The coverage provided by this Memorandum shall not apply to any claim until the amount
paid by or on behalf of the Covered Member shall have equaled or exceeded the Covered
Member's per occurrence limit. The Authority shall then only be liable for the amount
actually incurred that is in excess of the Covered Member's per occurrence retained limit,
regardless of whether the Covered Member has other insurance, has other pooled coverage,
or pays the per occurrence retained limit itself. Amounts to be paid on a claim otherwise
covered under this Memorandum shall not be paid until such time that the underlying per
occurrence retained limit has been paid.
Nothing contained herein shall operate to increase the Authority's Limit of Coverage under this
Memorandum.
D. Labor Code Section 4850
This coverage applies to the cost of salary benefits listed in Labor Code Section 4850; however, for any
claim that exceeds the Limit of Liability stated in Item 3 of the Declaration Page, any costs not covered
by any excess coverage obtained by the Authority shall be paid exclusively by the Covered Member.
In no event will the Authority pay any amount in excess of the Limit of Liability stated in Item 3 of the
Declaration Page.
PART FOUR - CLAIMS
A. The Covered Member's Claims Reporting Duties
The Covered Member must immediately notify the Authority in writing of any claim, either
paid or reserved, for 50% or more of the Covered Member's Retained Limit stated in
Endorsement No. 2 (Retained Limit) due to any of the following events: claim, award,
verdict, action, suit, proceeding, or judgment.
The Covered Member must also give the Authority immediate written notice of any injury
involving the following types of accidents:
l . a fatality;
2. an amputation of a major extremity;
3. any serious head injury (including skull fracture or loss of sight of either or both eyes);
4. any injury to the spinal cord;
5. any second or third degree burn of 25% or more of the body;
6. any accident which causes serious injury to two or more employees; or
7. any disability of more than one year or when it appears reasonably likely there will be a
disability of more than one year.
Notice of accident given to the Authority shall contain complete details of the injury, disease,
or death. If a suit, claim, or other proceeding is commenced because of an injury listed in
above Section 2 or of any injury that appears to involve coverage by the Authority, the
Covered Member shall give the Authority:
1. all notices and legal papers related to the claim, proceeding or suit, or copies of these
notices and legal papers; and
2. copies of reports on investigations made by the Covered Member on such claims,
proceedings, or suits.
B. Settlement
Claims in excess of the Covered Member's Retained Limit shall not be settled without the
written consent of the Authority. The Authority has the right to participate with the Covered
Member in the settlement, defense, or appeal of any claim, suit, or proceeding that might
involve a loss to the Authority. Settlement authority above the Covered Member's Retained
Limit will be as described in the Bylaws.
PART FIVE - PREMIUM
A. Deposit Premium
At the beginning of each Program Year, the Covered Member must pay the Authority
the Deposit Premium subject to the provisions in the Bylaws and;
2. The Deposit Premium will be based on the payroll as defined in the Bylaws, and all
other remuneration payable during the Program Year for the services of:
a. all the Covered Member's officers and employees engaged in work covered
by this Memorandum;
b. all volunteers declared or otherwise required to be covered. The value of the
volunteers' service shall be based upon a flat rate per volunteer; and
C. all other persons engaged in work that could make the Authority liable under
Part One (workers' compensation insurance) of this Memorandum. If the
Covered Member does not have payroll records for these persons, the
contract price remuneration for their services and materials may be used as the
premium basis. This paragraph will not apply if the Covered Member gives the
Authority proof that the employers of these persons lawfully secured their
workers' compensation obligations.
If the Authority cancels this Memorandum, final premium will be calculated pro rata based
on the time this Memorandum was in force.
PART SIX - CONDITIONS
A. Acceptance
By acceptance of this Memorandum, the Covered Member agrees that the statements made
on the Declaration Page are the Covered Member's agreements and representations, that this
Memorandum is issued in reliance upon the truth of such representations, and that this
Memorandum embodies all agreements existing between the Covered Member and the
Authority or any of the Authority's agents relating to this coverage.
B. Notice of Accident
l . The Covered Member shall give prompt written notice to the Authority if a claim for an
injury or disease occurs which appears to involve coverage by the Authority.
2. Notice of accident given to the Authority shall contain complete details on the injury,
disease, or death. If a suit, claim, or other proceeding is commenced which appears to
involve coverage by the Authority, the Covered Member shall give the Authority:
(a) All notices and legal papers related to the claim, proceeding, or suit, or copies of
these notices and legal papers; and
(b) Copies of reports on investigations made by the Covered Member on such claims,
proceedings, or suits.
3. If written notice is not provided by the Covered Member to the Authority within thirty (30)
days of knowledge of such claim, coverage will not be provided under this Memorandum.
This requirement is a condition precedent to coverage under this Memorandum.
C. Subrogation — Recovery from Others
The Authority has the Covered Member's rights, and the rights of persons entitled to compensation
benefits from the Covered Member, to recover the Authority's loss from any third party liable for the
injury. The Covered Member will do everything necessary to protect those rights for the Authority and
to assist in enforcing them. Any recovery, after deducting the Authority's recovery expenses, will first
be used to reduce the Authority's loss. The balance, if any, will be returned to the Covered Member.
D. Memorandum Conforms to Law
If terms of this Memorandum are in conflict with any laws applicable to this Memorandum, the
Authority's Agreement or the Authority's Bylaws, then this Memorandum is amended to conform to
such law or document.
E. Cancellation
The Covered Member may not withdraw from this Memorandum during the Program Year.
F. Inspection
The Authority has the right, but is not obligated, to inspect the Covered Member's
workplaces at any time. The Authority's inspections are not safety inspections, instead they
relate only to the insurability of the workplaces and premiums to be charged. The Authority
may give the Covered Member reports on the conditions the Authority finds. The Authority
may recommend changes. While they may help reduce losses, the Authority does not
undertake to perform the duty of any person to provide for the health or safety of the Covered
Member's employees or the public. The Authority does not warrant that the Covered
Member's workplaces are safe or healthful or that they comply with law, regulations, codes,
or standards.
G. Records
The Covered Member will keep records of information needed to compute premium. The
Covered Member will provide the Authority with copies of those records upon the
Authority's request.
H. Transfer of the Covered Member's Rights and Duties
The Covered Member's rights and duties under this Memorandum may not be transferred
without the Authority's written consent.
I. Financial Audit
The Covered Member agrees that the Authority may examine and audit all of the Covered
Member's records that relate to this Memorandum. These records include ledgers, journals,
registers, vouchers, contracts, tax reports, payroll and disbursement records, and computer
programs for storing and retrieving data. The Authority may conduct the audits during
regular business hours during the Program Year and within three years after the Program
Year ends. Information developed by audit will be used to determine final premium.
INDEPENDENT CITIES RISK MANAGEMENT AUTHORITY
INDEPENDENT CITIES RISK MANAGEMENT AUTHORITY
(ICRMA)
WORKERS' COMPENSATION PROGRAM
COVERAGE DECLARATION
MEMORANDUM # ICRMA2003-1WC
1. NAMED COVERED PARTY
2. POLICY PERIOD:
3. LI IITS OF LIABILITY:
Workers' Compensation Coverage
Employer's Liability Coverage
FORMS AND ENDORSEMENTS:
FORMING PART OF THE POLICY
AT INCEPTION
Independent Cities Risk Management Authority,
et. al., as per Endorsement No. 1
5777 W. Century Blvd., Ste. 665
Los Angeles, CA 90045
From 2/l/03 to 6/30/04
12:01 a.m. Pacific Standard Time
$1,000,000 any one loss
$1,000,000 any one loss
Form ICRMA2003-1 WC, Endorsement No. 1,
Endorsement No. 2
ON BEHALF OF THE INDEPENDENT CITIES RISK MANAGEMENT AUTHORITY
Authorized Signature
INDEPENDENT CITIES RISK MANAGEMENT AUTHORITY
WORKERS' COMPENSATION COVERAGE
ENDORSEMENT NO. 1
IT IS UNDERSTOOD THAT THE NAMED COVERED PARTY OF THE DECLARATIONS IS
COMPLETED AS FOLLOWS:
City of Baldwin Park
City of Bell
City of Culver City
City of El Segundo
City of Monterey Park
ATTACHED TO AND FORMING PART OF POLICY NO. ICRMA2003-1WC
EFFECTIVE DATE: February 1, 2003
City of Alhambra
ATTACHED TO AND FORMING PART OF POLICY NO. ICRMA2003-1WC
EFFECTIVE DATE: April 1, 2003
ON BEHALF OF INDEPENDENT CITIES RISK MANAGEMENT AUTHORITY
Authorized Representative
INDEPENDENT CITIES RISK MANAGEMENT AUTHORITY
WORKERS' COMPENSATION COVERAGE
ENDORSEMENT NO.2
RETAINED LIMITS APPLICABLE TO EACH MEMBER ENTITY ARE AS FOLLOW:
Member Retained Limit
City of Alhambra
$
350,000
City of Baldwin Park
$
500,000
City of Bell
$
500,000
City of Culver City
$
500,000
City of El Segundo
2/l/03 - 6/30/03
$
500,000
7/l/03 - 6/30/04
$ 350,000
City of Monterey Park
$
350,000
ATTACHED TO AND FORMING PART OF POLICY NO. ICRMA2003-1WC
EFFECTIVE DATE: February 1, 2003
ON BEHALF OF INDEPENDENT CITIES RISK MANAGEMENT AUTHORITY
Authorized Representative
SUPPORTING
DOCUMENTS
CITY COUNCIL
LEONIS C. MALBURG
Mayor
THOMAS A. YBARRA
Mayor Pro-Tem
WM. 'BILL" DAVIS
Councilman
H. "LARRY" GONZALES
Councilman
W. MICHAEL MCCORMICK
Councilman
BRUCE V. MALKENHORST
City Administrator/City Clerk
FAX (323) 826-1438
City Council
City of Vernon
Honorable Members:
J EDUARDO OLIVO
^ City Attorney
FAX: (562) 869-1883
^� KEVIN WILSON
' \ Director of Community Services & Water
FAX: (323) 826-1435
CITY HALL
4305 SANTA FE AVENUE, VERNON, CALIFORNIA 90058
TELEPHONE (323) 583-8811
June 25, 2003
KENNETH J. DeDARIO
Director of Utilities
FAX: (323) 826-1425
STEVEN E. PARKER
Fire Chief
FAX: (323) 826-1407
BRUCE W. OLSON
Police Chief
FAX: (323) 826-1481
Due to the recent insurance crisis the Independent Cities Risk
Management Authority (ICRMA) Board approved the exploration of a self -
funded excess Workers Compensation Program (WCP). In order for the
WCP to secure workers' compensation coverage for the City of Vernon it
is necessary that a resolution be approved and executed.
This has been reviewed by the Risk Manager and the City Attorney. It
is hereby recommended to approve participation in the Workers'
Compensation Program of the Independent Cities Risk Management
Authority and that a resolution be approved and executed.
Very truly yours,
Bruce V. Malkenhorst
City Administrator/City Clerk
BVM/gm
TO:
FROM:
It .
MEMORANDUM
Bruce V. Malkenhorst, City Administrator -J
ro
Joan Francone, Risk Manager/Personnel Assistant
June 23, 2003
SUBJECT: Independent Cities Risk Management Authority (ICRMA) Self -Insured Workers'
Compensation Program
ICRMA is a joint powers agency with 28 member cities throughout Southern California. It has
provided the City with public entity liability coverage above a self -insured retention since 1986. The
City has enjoyed the benefits of pooling risk with other member cities, including:
• Ability to mitigate the impact of changing insurance markets,
• Risk management and loss control services,
• Claims and litigation management,
• Return of premiums when program costs are lower than projected, and
• Lower cost of excess insurance or reinsurance due to economies of scale.
The City has historically procured coverage for excess workers' compensation (W.C.) on a group
purchase basis through ICRMA until 2002. In June 2002 member cities of ICRMA were hit with the
realities of the insurance crisis upon receipt of their W.C. renewal quotes for the policy year
beginning July 1, 2002. The quotations for all ICRMA member cities were dramatically higher than
the previous year, some with rate increases five to six times greater, and all at higher self -insured
retentions.
ICRMA members were faced with few options, as little time was available to renew coverage and
there were very few commercial insurance markets willing to underwrite municipal risks. As such
ICRMA decided that each member would be afforded the opportunity to negotiate its own
placement. The City of Vernon went with Hartford Insurance Co. for 2002/2003. Hartford has since
pulled out of the California market.
Because of the negative budgetary consequences of the marketplace the ICRMA Board approved the
exploration of a self -funded excess Workers Compensation Program (WCP). An ad hoc committee
was formed, the Program Development Committee (PDC), consisting of members from all of the
ICRMA standing committees, and the President and Vice -President of ICRMA (nine memberstotal).
ICRMA Self -Insured Workers' Compensation Program
Page 2
To date quotes for 2003/2004 have ranged from $155,000 to $325,000 with a $1,000,000 SIR. The
ICRMA workers compensation pool has quoted $110,237 with a $500,000 SIR.
Risk Management has reviewed the program provisions, terms of coverage, and financial
implications of the WCP and bases its recommendations on:
• A desire to participate in a self -funded program similar to the liability program,
• Concern over further rate increases to rates due to the worsening conditions of the insurance
market and new legislation beginning January 1, 2003 (AB 749),
• Enhanced ability to provide loss control measures, and
• Increased oversight of our claim administrator.
In order to participate in the WCP, the attached resolution must be approved and signed.
It is recommended that Council approve participation in the ICRMA WCP effective July 1, 2003.
This is based upon an estimated annual premium of $110,237 and at a self -funded retention of
$500,000.
JF/cc
Enclosure
cc: Eduardo Olivo, City Attorney
JUL-0� 2003 TUE 03:25 PM OLIVQ,& PLASCENCIA
Vie PaCsl` W1e and U.S Mail
TO: Mice V. Malkonhorst, City Adnunistro:or
C:(",: Joan Francono, Risk Manager
FROM: Hdrru9do Olive, City Attorney
1;.AX NO, 562 869 1883
CI�"ST OF VERI\TON
Cit�7 Atto><•ney's Office
DATE,: )uiy 1, 20U3
RE: dc )endent Cities Risk Management Authority (ICRMA) Self -Insured
Wormers' C olnnensation I�roara�n
The City of Vernon is currently a member of ICRMA, a joint powers agency witli 28
Inernber eltics Ah oup)lout Soother Califforiim Since 1986, ICRMA has provided the City with public
entity liability covaingc above a self-insumi retention (SIR) limit. ICRMA is now offering a member
IIiridM exWorkers' Compensation Program (WCP).11ie WC' provides workers' compensation
covo,ni ;e for nwrtibers above a SJIt for ille liabilities unposed by the workers' compensation laws of
Calironii.t.
In a piernoTandum dated huie 23, 2003 from Risk Manager Joan Francone to you, Ms.
1�raE�c�►�ae recorrnneruls tlae City b�:con�e a r.rrcmber of the ICRMA WCP. Prior to approval, Ibclievc
ilia City Council should note m-tain aspects about the program and the coverage it provides.
According to the tncmorandrrm, approval for die prb9arn is based upon ari estimated
ajmoi J prctriir m of $110,237 witli a. Silt by the City of $500,000, This means that the City nitr5t spend
$500,000 por oc.currancc, that is, per claim, before ICRMA bermes Iiable and must provide excess
covcrag;c. This SIR is extraordinarily high surd is probably in line with tho SIR ICRMA requires of
rnerlkbe.rs for its liability coverage, The diffelorice orcotvrse is that the damage exposure and litigation
expon sos the City facos in public entity liabi lily cases is far greater then in workers' compensation
JUL-01,-2003 TUE 03:26 PM OLIVO & PLASCENCIA FAX NO. 562 869 1883 P. 03
1''qg, - 2
eases. '11113s, out-31do of the rare workers' compensation claim involving the inost serious of injuries, it
ire c106tful the City would ever exhaust $500,000 in costs on a claim before coverage wider the
IC RNIA WCP could be higgere].
The ICftMA WCP Coverage Declaration and Mcnaotandum of Coverage; states that
the JCR MA will provide covcragc for workers' coinlxxisation losses in the saine inannor as the excess
insurance carrier up to tlic Authority's Unit of Liability stated in Item 3 of tlae Declatation Page. Item
3 on the (.;overage l)agc lisls Liaraits of Liability for Woi3cers' Compensation Coverage $1,000,000 atay
oata, loss, -Employer's Liability Coverage $1,000,000 any one loss,
'flag Excess Covomage section of the Bylaws for the 1CRMA WCP states the Board
s11111011surc tlaut each program year is provided with excess workers' compensations covetago for the
Pal Tiac Authority, tliroul li tlao WCP, shall provide, where economically feasible, at
le;asl $10,000,000 of total combined limits. Total combined limits is the maximum this WCP will pay
for 6113cli injury or illness, regardless of wlaettter the liability arises form Workers' Compensation
T-Raw;, Employer's Liability, or << combination of these,
>:ZNUI together thuw two provisions state that the ICRMA is liable as all excess
ira::tat 4a¢u+,� carrier only for $1,000,000 for any one loss. The ICRMA need only provide excess
coveraagc of at least $10,000,006 for P:uticipants '`where economically feasible". Economically
kasible is nowhere defitaW in Ole Bylaws, Coverage Declaration or the Mcrnorandtum of Coverage for
tho WCP. �f'lau?>, the Prognim tassurr.�s the City of only $1,000,000 of excess coverage per occurrence
for a l>wtatiatna Payment of $110,237 per year.
To bo fair, the WCP has features that are unavailable wader coverage obWned ftnm a,
ref ul,ar instat:ance company, traost promineatlybeing Ole return ofpromiums when program costs are
lc�cvice tlaeara l�trwjrctcd. Addition ally, according to my general understanding and personal experience
will) away yawn Nvoiter's compensation coverage, premiums have skyrocketed. I am not stare that tlac
City laar� any oilacr reason;�Ulc altenra[ives. We laavo safety persotmcl that, in a worst ease scenario,
lit'Ly bc; cxposc d to significant work-relfated injuries. However, the City Council should be made
tro,are of1,110 fact tlaat tltc Program is liablo only for $1,000,000 of excess coverage per claim for the
premium of$110,237,