In April 2019, the City joined the States Risk Retention Group (RRG), which provides liability protection to participating public entities. Coverage lines included law enforcement liability, general liability, public official errors and omissions liability, and automobile liability. The City has a self-insured retention within which it must pay and administer its own claims within the retention amount. In 2019 the retention started at $150,000 per occurrence and has increased $50,000 each year until now, when the City will reach the maximum of $250,000 per occurrence retention level. Similar to other carriers, States RRG issued a mid-pandemic liability exclusion, but all other policy terms remain the same.
The City’s loss experience has been good in the last two years, but nationally the public entity insurance market has deteriorated. Social inflation is driving up the cost of jury verdicts and settlements against public entities, particularly law enforcement. States RRG procures their own excess insurance to cover large losses, and the costs of States RRG’s excess coverage has increased significantly over the last twelve months. In order to remain fiscally sound and not deplete its reserves, States RRG passes the increased cost of excess insurance on to its members, which is reflected in higher premiums. The actual rate increase for States RRG members for this year was 15%, but the City receives a discount for the retention step-up to $250,000, so the City’s premium only increased 5%. After this year, there will be no more discounts, and the City will have to pay any rate increase (or decrease).
To fund losses, the City has established a Risk Management fund which is administered by Finance and Administration. The City uses outside legal counsel on all litigated claims and a third party administer for any claim involving personal injury or significant property damage. Charlesworth Consulting, Legal, and Finance and Administration work together in the administration of the claims handling process.
The City also procures specialty insurance coverage for unique risks, like cyber liability insurance and police drones. The anticipated renewal premiums of these ancillary lines will be within the City Manager’s authority.