Resolution No. 100021
2
3
4
6
6
7
8
9
10
11
12
13
N=
15
16
17
18
20
21
22
23
24
25
26
27
28
RESOLUTION NO. 10,002
A RESOLUTION OF THE CITY COUNCIL .OF THE CITY OF
VERNON APPROVING AND AUTHORIZING THE PURCHASE OF
COMMERCIAL INSURANCE POLICY (EXCESS LIABILITY AND
WORKERS' COMPENSATION) THROUGH ARTHUR J. GALLAGHER
& Co.
WHEREAS, the City's current Commercial Insurance Program
consisting of a Property Policy (including earthquake and equipment
breakdown), General Liability and first and second excess liability
policies, Employee Benefit and Excess Workers' Compensation insurance
policies expire on July 1, 2009; and
WHEREAS, the City employed the services of Arthur J.
Gallagher & Co. Insurance Brokers of California, Inc. ("Arthur J.
Gallagher") to act as the City's broker to structure and obtain the
appropriate insurance coverages for the period July 1, 2009 through
July 1, 2010; and
WHEREAS, by Resolution No. 9987 adopted on June 29, 2009,
the City approved the purchase of the property insurance policies
portion of the Commercial Insurance Program through Arthur J.
Gallagher; and
WHEREAS, in light of the current economy and the need to
reduce our current fiscal year budget, the Director of Human Resources
by memo dated June 11, 2009, has recommended that the City maintain
the same levels of excess insurance with the reduced annual premiums
that are being offered by Everest National Insurance Company for
excess liability in the sum of $132,000.00 and New York Marine for
excess workers' compensation in the sum of $133,657.00 for a total of
$265,657.00; and
1 WHEREAS, the excess insurance portion of the Commercial
2 Insurance Program for liability and workers' compensation are
3 collectively referred to herein as the "Excess Policies;" and
4 WHEREAS, the City desires to purchase the Excess Policies to
5 protect the City; and
6 WHEREAS, the City Council of the City of Vernon has
7 determined that, pursuant to the provisions of subsection (a) of
8 Section 2.27 of the Vernon City Code, it is in the public interest and
9 necessity to approve the purchase of the Excess Policies through
10 Arthur J. Gallagher.
11 NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
12 CITY OF VERNON AS FOLLOWS:
13 SECTION 1: The City Council of the City of Vernon hereby
14 finds and determines that the recitals contained hereinabove are true
15 and correct.
16 SECTION 2: The City Council of the City of Vernon hereby
17 approves the purchase of the Excess Policies portion of the Commercial
18 Insurance Program through Arthur J. Gallagher and authorizes the City
19 Administrator, or his designee, to execute any and all documents
20 necessary for the purpose of securing the Excess Policies and to
21 implement and carry out the purposes specified in this Resolution on
22 behalf of the City of Vernon.
23 SECTION 3: The City Council of the City of Vernon hereby
24 approves the payment of the annual premium for the Excess Policies in
25 accordance with the terms of the insurance purchase in an estimated
26 amount of $265,657.00 plus fees, if applicable.
27
28
2
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
.27
28
SECTION 4: The City Council of the City of Vernon hereby
directs the City Clerk, or her designee, to send a copy of this
Resolution to:
Arthur J. Gallagher & Co.
Insurance Brokers of California, Inc.
Attn. Nasreen Kopecky, Account Manager
15 Enterprise, Suite 200
Aliso Viejo, CA 92656
SECTION 5: 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 29th day of June, 2009.
ATTEST:
UELA GIRON, City Clerk
91
Name• Hilario Gonzales
Title: Mayor Pre TlepC=
- 3 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
STATE OF CALIFORNIA )
) ss
COUNTY OF LOS ANGELES )
I, MANUELA GIRON, City Clerk of the City of Vernon, do hereby
certify that the foregoing Resolution, being Resolution No. 10002, was
duly adopted by the City Council of the City of Vernon at a regular
meeting of the City Council duly held on Monday, June 29, 2009, and
thereafter was duly signed by the Mayor or Mayor Pro-Tem of the City of
Vernon.
(SEAL)
MANUELA GIRO , City Clerk
4 -
--41W, _ .
4305 Santa Fe Avenue, Vernon, California 90058
Telephone (323) 583-8811
June 29, 2009
Arthur J. Gallagher & Co.
Insurance Brokers of California, Inc.
ATTN: Nasreen Kopecky, Account Manager
15 Enterprise, Suite 200
Aliso Viejo, CA 92656
Re: Commercial Insurance Policy (Excess Liability and Workers'
Compensation)
Dear Ms. Kopecky:
Transmitted herewith is a copy of Resolution No. 10,002 that was
approved by City Council on June 29, 2009.
If you have any questions regarding this matter, please call Ms.
Avigal Horrow at (323) 583-8811 ext. 315.
Very truly yours,
Nel y Gi on(
CityClerk
NG:dj
c: Willard Yamaguchi
Karina Rueda
Resolution No. 10,002
Exclusively Industrial
DATE: June 11, 2009
TO: Honorable'Mayor and City Council.
FROM: Avigal Horrow
04--
RE: General Liability and Worker's Compensation Renewals on July 1, 2009
At this time, I am seeking your guidance and approval to renew our General Liability and Worker's
Compensation policies which commence July 1, 2009.
The City currently is self insured for both General Liability (2 million SIR 'self -insured retention') and
Worker's Compensation (1 million SIR) with excess policies up to 20 million on both. Eric Fresch, when
he was the City Administrator, requested that I explore the option of reducing our self -insured retentions
so that the City's risk factor would be reduced which in turn, would impact our ratings. Over the last 8
months I have met with many underwriters as well as wholesale brokers to explain to them why the City of
Vernon is a much lesser risk to insure than that of other municipalities, in the hopes of the insurance
companies reducing our retentions.
With respect to General Liability (GL), Everest and Brit are willing to reduce our retention to 250k, the
details of which are set forth in greater detail, below.
With respect to Worker's Compensation (WC), insurance companies are less inclined to reduce the SIR
because of the costs associated with safety. According to California law, any safety personnel injured on
the job is entitled to full salary and benefits for up to one full year. (Labor Code Section 4850). Despite
their reluctance, we were able to get two insurance companies to reduce the SIR but not by much, 1
million down to either 750k or 650k, the details of which are also set forth below.
The cost of reducing these SIRs is quite expensive relative to the actual benefit received. The reason for
this is because the majority of our claims will fall below the reduced SIR levels on both the GL and WC
claims. If we decide to maintain the current coverages in Worker's Compensation and General Liability
the quotes for insurance premiums have actually come down from last year. The cost associated with the
reduced SIR options is basically and overall increase of 300k in premiums over last.
Attached are the incumbent provider numbers as well as what we received market wide for this year's
renewals. If you have any questions of concerns, I am at your disposal to review with you.
My recommendation, in light of the economy and the need to reduce our current fiscal year budget, it to
maintain the same levels of insurance (excess only) with the reduced premiums that are being offered by
Everest for General Liability and New York Marine for Worker's Compensation.
At this time
Thank you.
Cc: Donal O'Callaghan
Willard Yamaguchi
INTER -DEPARTMENT MEMORANDUM
TO: Donal O'Callaghan, City Administrator
FROM: Avigal Horrow, Director of Human Resources
DATE: June 4, 2009
RE: General Liability and Worker's Compensation renewals'JWy 1, 20091'
Donal,
Please consider this memorandum a pre -cursor to a City Council Staff Report with my
recommendations for the General Liability and Worker's Compensation renewals effective July
1, 2009. Just to bring you up to speed, The City currently is self insured for both General
Liability (2 million SIR `self -insured retention') and Worker's Compensation (1 million SIR)
with excess policies up to 20 million on both. Eric requested that I explore the option of
reducing our self -insured retentions so that the City's risk factor would be reduced which in turn,
directly impacts our ratings. Over the last 8 months I have met with many underwriters as well
as ,wholesale brokers to explain to them why Vernon is a much lesser risk to insure than that of
other municipalities, in the hopes of the insurance companies reducing our retentions.
With respect to General Liability (GL), Everest and Brit are willing to reduce our retention to
250k, the details of which are set forth in greater detail, below.
With respect'to Worker's Compensation (WC), insurance companies are less inclined to reduce
the SIR because of the costs associated with safety. According to California law, any safety
personnel injured on the job is entitled to full salary and benefits for up to one full year. (Labor
Code Section 4850). Despite their reluctance, we were able to get two insurance companies to
reduce the SIR but not by much, 1 million down to either 750k or 650k, the details of which are
also set forth below.
The cost of reducing these SIRs is quite expensive relative to the actual benefit received. The
reason for this is because the majority of our claims will fall below the reduced SIR levels on
both the GL and WC claims. However, we still need to explore whether the cost is warranted
when compared against the benefit to our ratings.
RECEIVED
JUN 1 1 �OOa
IBY:
If we decide to maintain the current -coverages in Worker's Compensation and General Liability
the quotes for insurance premiums have actually come down from last year (which is basically
unheard of and I am very -ex bout it). If we decide to go with the reduced SIR options we
are basically looki at a 300k" rease in premiums over last. This amount is currently NOT in
the budget for Risk Management for 2009-2010 and would need to be added.
Attached are the incumbent provider numbers as well as what we received market wide for this
year's renewals. If you have nay questions of concerns, I am at your disposal to review with
you.
Thank you.
CC Willard Yamaguchi, Risk Manager
Eric Fresch, Assistant City Attorney
2
In July, the City will be renewing General Liability and Worker's Compensation
effective, July 1, 2009:
CURRENT COVERAGES
I. Excess Liability
July 1, 2008-2009
We are currently insured for excess liability coverage only
Carrier: AIG
Self -Insured Retention (SIR): 2,000,000.00
Limits: 20,000,000.00
Premium - $150k (plus fees) = $159,437.88
Proposals for 2009-2010
AIG - Incumbent
Option 1 2 million SIR with 20 million in limits (keep same coverage)
$157,905 (basically flat)
Option 2 1 million SIR with 20 million in limit
$262,037
v
Option 1: 250k SIR for GL and 500k EPLI with 20 million in limits $323k
(premium slightly over current and likely to incur the same costs)
Option 2: 1 million SIR with 20 million in limits$
$177k
Option 3: 2 million SIR with 20 million in limits (maintain the same) $132k
(reduced from last year which
$150k)
II. Workers Compensation
July 1, 2008-2009
We are currently insured for excess worker's compensation coverage only.
Carrier: Ace (excess only)
SIR: 1,000,000
Limits: 50,000,000
Premium: $148,351
Third Party Administrator (TPA) SCRMA - $70,000
Insurance-July-09-Renewals
Proposals for 2009-2010
Ace- Incumbent
Option 1: 1 million SIR with 50 million limit: $166,657k
Option 2: 1 million SIR with statutory limit: $185,064k
New York Marine
Option 1: 1 million SIR with up to statutory limits: $177,100k
Option 2: 1 million SIR with 50 million limit: $134,657k (reduction from
last year which was $148k)
Safety National
Option 1: 1 million SIR for Safety and $750 SIR for all others, with 100
million limit: $206,492k
Option 2: 1 million SIR for Safety and 750 SIR for all others with 50 million
limit: $196,489k
Arch — Declined due to exposures
III COMBINED CONVERAGE PROPOSAL FROM BRIT, A SYNDICATE
OF LLOYD'S
In London, I met with the underwriters for Brit Insurance, a syndicate of
Lloyd's of London who do combined coverage for General Liability and
Worker's Compensation. They were willing to meet the reduced SIR of 250k
being offered by Everest and were willing to reduce the Worker's
Compensation SIR to 650k for a cost of $240k (we would still owe excess
coverage premiums on top of that amount) and I could probably negotiate the
240k to 225k because they want our business. Additionally, the advantage of
working with BRIT is that they would eventually reduce the SIR in worker's
comp to about 500k and their reduced SIR, unlike Safety National's reduced
SIR, includes Fire and Police.
RECOMMENDATIONS:
If we stay with the same coverages I would recommend Everest for General
Liability and New York Marine for Worker's Compensation strictly on a cost
benefit analysis.
If we are going to move in the direction of reduce SIR I would recommend BRIT
for both coverages.
Insurance-July-09-Renewals
COMPARISON CHART
EXCESS LIABILITY
2008-200:9
200%-2010
% DIFFERENCE
PREMIUM
$150,136
$132,000
12.07% DECREASE
ESTIMATED PAYROLL
$26,500,000
$29,771,700
12.34% INCREASE
Exc.Ess WORKER$ 200&2009 2009-2010 % o DIFFERENCE
COMPENSATION'
PREMIUM $148,351 $133,657 9.9% DECREASE
ESTIMATED PAYROLL 1 $26,500,000 1 $29,771,700 1 12.34% INCREASE
Notes and Highlights:
1.. Premiums for the above policies are due and payable as billed, in full or as insurance company installments.
Premiums may be financed, subject to acceptance by an approved finance company. Note: Following
acceptance, completion (and signature) of a premium finance agreement with the specified down payment is
required.
2. Quote is valid until June 30, 2009.
Public FWsy 4wd Scholastc Division
10
W
a
a
W
U
cn
0
a
CJ
A
0
W
pq
O
V
Cx7
x
c�
c7
z
0
a
a
2
P�
z
z0
W
w
0
v
z
U
n.
v O O
O
O
!Rf
hr)
En
Q Q
3
Z Z
Coll
0
o On 0
q
0
0
o4
o u a
c C p v
o b
0 a• u'
N O
a UO
0 0 � a
u N
� 'I7 �+ a
cv �` O
4-4 o
a
�
-0 � o.
�
O
o
v
q
N
A"
�
U �
a
-�
o
uO a
C
v
Uo
Q
c�
o
o o
c� `N
o
~1
a�ai
R
�o
- a a
Q
qj
O +•� a
id
'd
'cl O
H
U
oV
o y
O
O O
�
ti
y
O
a
V)
++ 'd bA
U U 44
0ed°q
O
U'
O Cl
C
q q o '� 0
u
o .
cn V
°
c � '0 o a
q u
w
1x 4o _0Up0
z
a +� ctl
a. uo � a
O
v '0
qj
P.
, 8 il il
WV
to w o 0 0
v ro
o
0 q
0 O
O
u
a" o
.o
U
N .4 b
a o
u u �,
ca a
0 a
a
.� O O O
a'
a o o pp
'q
O
l
cd
O
-d o
o a. ao ;� a
o�o'�x 0 a
o
C
u •a o q� � O a
�-+ a � ° � C
o �' (� o.
w 48 0 v u y
d :8u 0 ,a O a -0
�qa q
cl
(- u 'd ou
q V � y a
U `a v o a
O
aao�
ti a �. Fiq
�+ y� o
Q)
H
�.`
Ou O
ov
O•yL td wo
p �
bou
otu i �4-4
o
o Uu�so, aO0i
..24
a 0 u ,0
o,
a
': N * * Ki •d=
A
n
ExcEss LIABILITY OPTION I
INSURANCE COMPANY OF THE STATE OF PENNSYL VANiA (A.W)
A.M. BEST RATING: A XV .
EFFECTIVE DATE
July 1, 2009 to July 1, 2010
FORM
70108 —Special Excess Liability Policy for
Public Entities and Attachments
AGGREGATE LIMITS
Products/Completed Operations Hazard
$20,000,000
Aggregate
Errors & Omissions Liability Aggregate, other
$20,000,000
than personal & advertising injury offense
wrongful acts
Employee Benefit Liability Aggregate
$20,000,000
Per Occurrence or Wrongful Act or Employee
$20,000,000
Benefit — Any one occurrence or wrongful act
or employee benefit wrongful act or series of
continuous, repeated, or related occurrences or
wrongful acts or employee benefit wrongful acts
in excess of your retained limit
SELF INSURED RETENTIONS
'Any one occurrence or wrongful act, or
$2,000,000
employee benefit wrongful act or series of
continuous, repeated or related occurrences or
wrongful acts or employee benefit wrongful acts
CONDITIONS
25% Minimum Earned Premium
Subject to Annual Audit
RATE
.482
Based on an Payroll
PREMIUM
$157,905
Annual Premium
OPTIONAL QUOTE
$262,037
$1,000,000 SIR
ENDORSEMENTS
Pi Violation of Communication & Information
Economic & Trade Sanctions
No Fault UM/UIM Motorist Exclusion
Failure to Supply Exclusion
Time Element Pollution Exclusion
0 Fungus Exclusion
Crisis Management
Silica Exclusion
Fublu FWiy 4wd Scholasdc DMslon
14
ExCEs3 LIABILI'T'Y OPTION 2
EVEREST NATIONAL INSURANCE COMPANY
A,M. BEST RATING: A XV
EFFECTIVE DATE
July 1, 2009 to July 1, 2010
FORM
Public Entity Excess liability 1?olicy.._s,.�____�
AGGREGATE LIMITS
Products/Completed Operations Hazard
$20,000,000
Aggregate
Errors & Omissions Liability Aggregate, other
$20,000,000
than personal & advertising injury offense
wrongful acts
Employee Benefit Liability Aggregate
$20,000,000
Per Occurrence or Wrongful Act or Employee
$20,000,000
Benefit — Any one occurrence or wrongful act
or employee benefit wrongful act or series of
continuous, repeated, or related occurrences or
wrongful acts or employee benefit wrongful acts
in excess of your retained limit
Employment Practice Liability Aggregate
$20,000,000
SELF INSURED RETENTIONS
Any one occurrence or wrongful act, or
$2,000,000
employee benefit wrongful act or series of
continuous, repeated or related occurrences or
wrongful acts or employee benefit wrongful acts
CONDITIONS
125% Minimum Earned Premium
Subject to Annual Audit
RATE
Flat
PREMIUM
$132,000
Annual Premium
OPTIONAL QUOTES
$322,900
$250,000 EXCEPT $500,000 for EPL SIR
$254,400
$500,000 SIR
$177,000
$1,000,000 SIR
ENDORSEMENTS
0 Nuclear Energy Liability Exclusion
Pollution Changes
Time Element Pollution
0 Reimbursement of Defense Costs for EPL
Additional Insured — Insured Contract
Public DWly 4wd Scholastic aiuision
15
PACKAGE POLICY
Brit Insurance and Lloyd's ofLondon Syndicates
A.M. Best Ratings: A XI
EFFECTIVE DATE
July 1,,2009 to July 1, 2010
Excess Liability including Auto Liability, Law Enforcement
Liability, Host Liquor, Public Official Errors & Omissions,
Sexual Harassment, Sexual Abuse, Employee Benefits
COVERAGE
Liability
FORM
Public Entity Occurrence EXCEPT
Sexual Harassment, Sexual Abuse — CLAIMS MADE
PREMIUM
$240,000
Terrorism Premium
$12,000
LIMITS
General Liability
$750,000
Per Occurrence
Automobile Liability.
$750,000
Per Occurrence
Public Official Errors & Omissions
$750,000
Per Occurrence/ Annual Aggregate
Workers Compensation/ Employers
$350,000
Per Occurrence
Liability
Employment Benefits Liability
A $750,000
Per Occurrence/ Annual Aggregate
SELF -INSURED RETENTIONS (SIR)
General Liability
& $250,000
Automobile Liability
$250,000
E&O/Employment Practices Liability
$250,000
Workers Compensation/ Employers
$650,000
Liability
Employment Benefits Liability
P $250,000
Publk & fy 4wd Scholask DMSirm
irp
RETRO ACTIVE DATES
PACKAGE POLICY
Brit Insurance and Lloyd's ofLondon Syndicates
A.M. Best Ratings: A XI
July 1, 2009
Sexual Abuse/ Sexual Farassment
TERMS & CONDITIONS Mold will be excluded by endorsement for all lines of business
Sexual Harassment and Sexual Misconduct are subject to
satisfactory policies and procedures and completed applications
Please confirm that Employment Practice/Civil
Rights/Discrimination claims have been reported to current carrier
including pending litigation
Law Enforcement Liability - Reimbursement of Defense Costs
incurred prior to denial or declination of coverage subject to the
following sublimits::
$25,000 — ground up any one Assured
$50,000 — Aggregate per Occurrence
$100,000 Annual Aggregate
x Agosnet Service FREE
Pwblic F. aiiy 4wd Scholastu Dnrislon
17
or-4
O
t2
0
o 0
(U
u
o
u
(U u �J
U u
-li� m u
CD
§ (::, x w 0
u 00
m "P 110
Lr) —4
CD W t-
4-4 LO cl�
u =u � I C:) cq
C) '7� (=) (� . m
C) 0 Lr)
dig CD Q p gg CD Q)
(::� I C5 CD 0 9
Op
(=> 'D (=� CD C� -0 0
U 4-4
CD CD ia4
(=� Cl.
CIS
ow-
0
CII
ti0
as
ti cu
0 0
(U rl 0
u
zi
(U Q C) U
ti 14 --44
U ce
C4 U u U
C13 r- u
o C) 0 ou
Cd
A.
.9 'n
C)
U r) .0 U
CIS 7L vy
CD 4(n V) (D
Cl� C
V) O O N C) C: 0 ti 0 0 '8 '-r-
C)O O Q p lr CD (U Iy -V u :J
C)
c) C-) -!? -0 cd
0 CIS 4j
C) ::�, C� — '—
CD Z) C) 44
0 U ;i5 VU 4-4
(U C--) C) V), C) u u cl q(M u
u m
W, (Al C5 u v
w CZ) Qj ,:j 4-4
C) uC a,
CII
En
o o o o 101-
> u u P, V, P� u C/)
0
0
m
P14
a
(U 4.
lull
P-4 44