CITY OF SAN MATEO
CITY OF SAN MATEO
Agenda Report
City Hall
330 W. 20th Avenue
San Mateo CA 94403
www.cityofsanmateo.org
Agenda Number: 4 Section Name: CONSENT CALENDAR Account Number: 87-2314 File ID: 25-10722 TO: City Council
FROM: Alex Khojikian, City Manager
PREPARED BY: Human Resources Department
MEETING DATE: December 15, 2025
SUBJECT:
Excess Workers' Compensation Insurance Policy for CY 2026, and CY 2027 – Approval RECOMMENDATION:
Approve the purchase of excess workers' compensation insurance from Midwest Employers' Casualty Company in an amount projected to be $574,924 ($287,462 annually) for the two-year period commencing January 1, 2026, and ending December 31, 2027.
BACKGROUND:
Excess workers' compensation coverage protects the self-insured employer financially for workers’ compensation claims that exceed the specified dollar limit. Currently, the City’s dollar limit (or retention) for workers’ compensation claims is $1,000,000. The City has been insured for excess workers' compensation coverage with Safety National Casualty Corporation (“Safety National”) since 2009. Such policy will expire on January 1, 2026.
As the City’s broker, Keenan & Associates solicited quotes from three insurance companies for excess workers’ compensation coverage. Safety National and Midwest Employers' Casualty Company (“Midwest”) were the only two companies that responded and provided their terms of coverage.
Safety National provided 2 options:
1) 1-Year Term at $1,000,000 Retention/$500,000 Corridor Retention/$25,000,000 Limit: Premium $324,445 with a rate guarantee for CY 2027/28.
2) 1-Year Term at $1,250,000 Retention/Statutory Limit: Premium $219,751.
Midwest provided 4 options:
1) 1-Year Term at $1,000,000 Retention/Statutory Limit: Premium $287,462. 2) 2-Year Term at $1,000,000 Retention/Statutory Limit: Premium $574,924 ($287,462 annually). 3) 1-Year Term at $1,250,000 Retention/Statutory Limit: Premium $264,862. 4) 2-Year Term at $1,250,000 Retention/Statutory Limit: Premium $529,724 ($264,862 annually).
Keenan & Associates recommended we keep retention at $1,000,000 because by selecting option 3 or 4 there is potential risk of paying an additional $250,000 on a claim compared to only saving approximately $22,600 on the annual premium.
Based on the analysis of available options, it was determined that the option offered by Safety National comes at a much higher cost, $324,445 versus $287,462 quoted by Midwest. Furthermore, Midwest provided more favorable terms regarding corridor retention and policy limit as outlined above.
CITY OF SAN MATEO
Also, Keenan & Associates recommended obtaining a multi-year policy, which is supported by staff. This helps with budget forecasting and reduces costs for market research.
Staff recommends that the City selects a 2-Year Term Policy at $1,000,000 Retention/Statutory Limit at the cost of $574,924 ($287,462 annually) with Midwest. Staff requests for approval of the purchase pursuant to Municipal Code
3.60.050(c), which allows the City to forgo the competitive bidding process related to the placement of insurance coverage.
BUDGET IMPACT:
The premium quoted by Midwest Employers' Casualty Company for CY 2026 and 2027 is calculated at a rate of $0.3218 per $100 of covered estimated payroll, which results in an expected expenditure of $287,462 for each year, over the next two years (total for two years is $574,924). This rate per $100 of covered estimated payroll is a 15% decrease from our 2025 rate. Despite the reduction in rate, our annual premium of $287,462 represents an increase of 7.23%, which is due to increased payroll costs, going from $72,338,127 in actual payroll costs in CY 2024 to $89,329,485 in estimated payroll costs in CY 2026. There are sufficient funds budgeted in the Workers' Compensation Fund for this expense.
ENVIRONMENTAL DETERMINATION:
This agreement is not a project subject to CEQA, because it is an organizational or administrative activity that will not result in direct or indirect physical changes in the environment. (CEQA Guidelines Section 15378(b)(5).)
NOTICE PROVIDED
All meeting noticing requirements were met.
ATTACHMENTS
Att 1 – Proposed Resolution
Att 2 – Coverage Summary
STAFF CONTACT
Yuliya Shukhat, Senior Risk Management Analyst
[email protected]
(650) 522-7263