| | | | | | | | | City of Independence | | AGENDA ITEM COVER SHEET |
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| | | | | | | | Agenda Title:
Council action is requested on the approval of the 2023-2024 casualty (liability) renewal, with an estimated annual cost of $803,391. |
| | | | | | | | Recommendations:
Staff recommends approval. The renewal proposal was submitted by Lockton Companies, Inc., who has been the City’s insurance broker since 2005. The proposal was also reviewed by Charlesworth Consulting, LLC, the City’s risk management consultants. |
| | | | | | | | Executive Summary:
The 2023-2024 renewal proposal is the result of an effort by Lockton, Charlesworth, and staff to maintain a very broad coverage liability program (inclusive with Sovereign Immunity verbiage when available) at a realistic marketplace price. The casualty insurance premium effective 4/1/2023 is proposed at $803,391 representing a 19.8% premium increase (expiring at $670,795 which was a 9% increase over the prior year and 5% the past previous year). The quote summary is attached with deductible options reviewed. |
| | | | | | | | Background:
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, employment practices liability, and automobile liability. The total policy limit insured under this program is $10,000,000 for the policy year. 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 the City reached the State’s RRG minimum of $250,000 per occurrence retention level in 2021. Similar to other carriers, States RRG issued a mid-pandemic liability exclusion last year and has only made two policy changes for 2023 which was a more specific PFAS exclusion (essentially a toxic release liability exclusion) as well as a 120-day claim notice period for any sexual misconduct allegations. The City’s loss experience has been at an insurer “breakeven” level (around 60% losses to premiums) over the last four years, but nationally the public entity insurance market continues to deteriorate. Social inflation continues to drive 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 thirty-six months. 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. Renewal proposal for the current $250,000 Per Claim Retention was originally requested at a 30% increase but Lockton was able to negotiate this down to 19.8%. Moving to a higher retention saves some premium, but we believe moving to a higher retention should have more financial reward to accepting the higher risk. Also, it will be anticipated in the future that even the Law Enforcement Liability risk may move to a higher retention on its own due to so many public incidents in the US of recent. Not the case today, but an item we believe the City needs to prepare for possibly as early as next year. Lockton approached four other insurers last year regarding possible comparisons and monitored possible options for this year. Results were not favorable for the City as many would either offer lower limits with twice the premium or double the retention levels. However, we believe that monitoring the financial stability of States RRG as well as looking at higher retention levels (with the City making a planned budget decision on funding such levels), will open possible plan and carrier alternatives for next year’s consideration. This will be the focus for 4/1/2024. 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.
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Fiscal Impact:
The States RRG premium is under budget and was included in the 2023-2024 Risk Management Fund Budget No. 73 in account 5207. The Risk Management Fund is an Internal Service Fund. The Fund is accounted for as an Insurance Company to the City. It makes all payments for Risk Management purposes. The source of funds for the Risk Management Fund are Premiums that are charged to each department determined at the beginning of each fiscal year. The premiums are based on exposure to risk of the department plus historical claims.
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| | | | | | | | | Department: Finance | Contact Person: Cindy Gray |
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| REVIEWERS: | | Department | Action | | Finance Department | Approved | | Finance Department | Approved | | City Managers Office | Approved | | City Clerk Department | Approved |
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| Council Action: | Council Action: |
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