TO: Andrew P. Powers, City Manager
FROM: Tim Giles, Human Resources Director
DATE: June 28, 2022
SUBJECT: FY 2022- 23 Insurance Renewals
RECOMMENDATION:
1. Authorize City Manager or designee to purchase insurance policies for excess liability, deadly weapon response, special event, aircraft ( drone), excess workers' compensation insurance, government crime, property, and earthquake, for the term of July 1, 2022 through June 30, 2023.
2. Authorize expenditure in an amount not to exceed $ 596, 200 from A/C # 711- 0520- 686- 6312 ( Internal Service Fund: Liability) as follows: $ 581,900 for payment of premiums for excess liability insurance, $ 6,300 for renewal of deadly weapon response insurance, $ 6,700 for special event insurance, and 1,300 for renewal of aircraft ( drones) insurance.
3. Approve additional budget appropriation to Adopted FY 2022- 23 General Fund Budget in the amount of $31,500 from A/C #001-0000-311-1000 ( General Fund Fund Balance) to A/C # 001- 0520- 612- 6312 ( General Fund – Insurance General Liability Premium) for renewal of liability insurance.
4. Approve additional budget appropriation to Adopted FY 2022-23 Liability Fund Budget in the amount of $ 31,500 from A/C # 711-0520-486-0000 ( Internal Service Fund - Liability Revenue) to A/C #711- 0520- 686- 6312 ( Internal Service Fund - Liability) for renewal of liability insurance.
5. Authorize expenditure in an amount not to exceed $ 108, 300 from A/C # 712- 0520- 686- 6321 ( Internal Workers Compensation Fund) for renewal of excess workers’ compensation insurance.
6. Authorize expenditure in an amount not to exceed $ 4,500 from A/C #001- 0520- 612- 6340 ( Internal Service Fund: Liability) for renewal of government crime insurance.
ATTACHMENT #1
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8 7. Authorize expenditure in an amount not to exceed $ 1,409, 100 from the General Fund, Library Fund, ECTA Fund, Landscape Fund, Water Fund, Wastewater Fund, Transportation Fund, and Solid Waste Fund as follows: $ 1,035, 600 for property insurance, and $ 373, 500 for Difference in Conditions ( earthquake) insurance.
FINANCIAL IMPACT:
31,500 Increase to Adopted FY 2022- 23 General Fund and Liability Fund Budgets. $ 31,500 additional budget appropriation necessary from General Fund Fund Balance, to be transferred to the Liability Fund to fully offset increase in Liability Fund expense. $ 2,086, 600 is included in the Adopted FY 2022- 23 General Fund, Library Fund, ECTA Fund, Landscape Fund, Water Fund, Wastewater Fund, Transportation Fund, Solid Waste Fund, and Internal Service Fund Budgets for payment of excess liability, deadly weapon response, special event, aircraft drone), excess workers' compensation insurance, government crime, property, and earthquake policies. Premium costs shall be proportionately allocated to each respective fund.
BACKGROUND:
The Human Resources Department is responsible for managing the risk of City operations including the purchase of insurance policies to mitigate such risks.
Purchasing insurance helps protect the City from potential loss which could result from liability claims, automobile accidents, cyber- attacks, and/ or workers’ compensation injuries. Staff identifies opportunities to mitigate potential risk and analyzes the coverage needed to minimize adverse impacts of potential exposure.
The City is self- insured for liability up to $1.0 million per occurrence and purchases excess liability coverage up to a $25.0 million aggregate limit. The City is also self- insured for workers' compensation, assuming responsibility for the first $ 0.5 million in claim expense per injury, per employee.
Since 2003, the City has utilized Alliant Insurance Services, Inc. ( Irvine, CA) for the City’s insurance purchase needs. This year, Alliant was re-selected to serve as the City’s insurance brokerage via “piggyback” agreement utilizing the City of Torrance, CA’s competitive selection process for a six- year period beginning July 1, 2022, through June 30, 2028, with the possibility to extend for an additional one, three- year term. Alliant’s commissions are earned via insurance premiums, with a City favorable not- to-exceed percentage of 6.0%.
Alliant specializes in representing the needs of public agencies. Alliant provides the City with insurance brokerage services by assisting staff in marketing our insurance needs and identifying the best insurance options available for the City.
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8 Additionally, they help to ensure that all viable policy options are considered, and perform typical brokerage services such as underwriting, marketing, and placing various lines of insurance. With the exception of special event insurance ( expires September 29, 2022), current insurance policies, purchased via Alliant, expire either June 30, 2022 or July 1, 2022.
DISCUSSION/ ANALYSIS:
The City continues to face an increasingly complex array of risk and remains aggressive in pursuing a variety of insurance coverage to best meet the needs of the City. To assist in the analysis of policies available at the best cost and value for the City, Alliant obtains proposals directly from carriers in the insurance market, as well as provides options for insurance purchases via joint purchase agreements and risk sharing pools.
The City has received written proposals for aircraft ( drones), excess workers’ compensation, deadly weapon, government crime, property, and earthquake insurance and is currently in the process of receiving finalized, written proposals for excess liability and special events insurance. Insurance policies are proposed after Alliant completes the extensive marketing, vetting, and negotiation of bid proposals. However, to assure the ability to make timely decisions to bind insurance coverage prior to the expiration of the existing policies, staff is seeking limited delegation of contract authority to allow staff to secure insurance in a timely manner. Overall, insurance premiums are anticipated to increase by approximately 11 percent. Increasing rates are in response to insurance carriers experiencing billions of dollars in losses due to worsening climate disasters, increases in claims, and surging inflation. The following list of insurance policy renewals are proposed:
Excess Liability Insurance
Pending final, written proposals, staff is currently recommending continuing to purchase excess liability insurance through PRISM, with a coverage limit of $ 25.0 million and a self- insured retention of $ 1.0 million. Contracting authority is not to exceed $ 581, 900; an anticipated increase of approximately 11 percent. As a pooled- authority, unused premiums are returned to participating members, or a call for additional premiums would exist in the unlikely event that covered losses exceed pooled premiums collected.
Deadly Weapon Response Program
The City participates in the Alliant Deadly Weapons Response Program, which provides coverage up to $0.5 million for resources in the event of a deadly weapon incident. This includes costs such as counseling support and loss of use for vehicles or facilities that may be unavailable during a criminal investigation in a covered incident. Staff recommends continuing participation in the Alliant Deadly Weapon Response Program. Staff is requesting contracting authority not to exceed $ 6,300.
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8 Special Event
The special event liability insurance provides comprehensive liability insurance for specific events held on the City’s premises and covers items such as personal and advertising liability, fire damage, and medical payments. A special event liability insurance policy, through Alliant’s joint powers authority and with no risk sharing is recommended. Contracting authority is requested not to exceed $ 6,700.
Aircraft ( Drones) Insurance
Unmanned aircraft insurance for drones is a type of coverage intended to protect the aircraft itself as well as the aircraft owner ( City) against claims due to damage to personal property or accidental injury. The City utilizes drones for various film production and inspection needs. Staff recommends continuing to purchase unmanned aircraft insurance via Alliant with a not to exceed premium of $1,300 for FY 2022- 23. This low- cost rate is a result of a new member premium carryover, as the City initially joined this program in January of 2022.
Excess Workers' Compensation Insurance
Coverage for excess workers' compensation has been provided by Arch Insurance Company with coverage up to the limits prescribed by statute for costs exceeding the City' s self- insured retention of $ 0.5 million. The City' s excess workers' compensation insurance premium is based on the City' s payroll and will vary as the City' s payroll changes. The rate will increase by approximately 4.5 percent due to a proportional increase in projected City payroll for FY 2022- 23. Staff recommends purchasing excess workers' compensation insurance from Arch Insurance Company. Staff is requesting contracting authority not to exceed 108, 300.
Government Crime Insurance
Staff recommends continuing to purchase government crime insurance through Alliant with a standard deductible amount of $ 2,500 and a $ 1,000, 000 limit.
Government crime insurance coverage is broad and includes items such as theft, forgery, and/ or fraud. The rate has increased by 5 percent. Staff is requesting contracting authority not to exceed $ 4,500.
All Risk" Property Insurance
The insurance is currently placed with the Alliant Property Insurance Program APIP), and includes cyber, and flood hazards. APIP is a municipal joint purchasing group that combines cities/ agencies under one insurance program to provide a broad level of coverage with the benefit of premium discounts. It is recommended that the City maintain property insurance coverage through the APIP program with a standard deductible of $ 10,000, with a deductible of $ 25,000 for vehicles.
Property insurance is anticipated to increase by approximately 16 percent. Staff is requesting a contracting authority not to exceed $ 1,035, 600.
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8 Earthquake" Property Insurance
A " differences in conditions" policy covers earthquake damage to property. The insurance is placed with Arrowhead and is distributed amongst 3 carriers. It is recommended that the City maintain this separate policy for $ 50.0 million in earthquake coverage outside of the APIP program. Earthquake insurance premiums have increased by approximately 5 percent. Staff is requesting contracting authority not to exceed $ 373, 500.
COUNCIL GOAL COMPLIANCE:
Meets the following City Council goal:
C. Operate City government in a fiscally and managerially responsible and prudent manner to ensure that the City of Thousand Oaks remains one of California' s most desirable places to live, work, visit, recreate, and raise a family.
PREPARED BY: Brian O'Neill, Assistant Human Resources Analyst HRD: 180- 30\ bo\ H:\ COMMON\ Insurance\ 2022- 2023\ Staff\ Report\ 06282022Staff Report Insurance Renewals. docx