#21 MEMORANDUM PERSONNEL DEPARTMENT

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1 To: John C. Phillips, City Manager #21 MEMORANDUM PERSONNEL DEPARTMENT Subject: Liability Insurance Program for 2007/2008 Date: April 19, 2007 The City of Rock Island is entering its thirteenth year of a consolidated liability insurance program. The current excess liability program below covers all city departments. In order to access the excess liability insurance market the city must hire an insurance broker to shop the market on behalf of the city. The insurance broker also acts as an insurance consultant and helps select insurance policies that best protect the city in the most efficient manner. Last year, Personnel conducted a request for proposals from many local and national insurance brokers. Cleaveland Insurance (Rock Island) was chosen to be the city s insurance broker for a three-year period. Cleaveland s brokerage fee is $28,200 for this renewal. Fortunately, the insurance market continues to be soft as compared to 2002 when the city experienced a 24% premium increase because of terrorist acts. This year, most excess insurance carriers have submitted premium increases of less than 5% to their customers. The city will experience a slight decrease in liability and property premiums from last year. Last year, the city experienced a 4% premium rate increase from the previous year (05/06). Cleaveland Insurance shopped the market and requested formal bids from a several insurance companies for this year insurance self-insurance renewal period of May 1, 2007 to May 1, Cleaveland Insurance is recommending the city stay with St. Paul Fire and Marine Insurance Company s general liability package proposal due to their competitive premium rate and superior loss control programs the city utilizes. The city will experience a slight reduction in premium for this coverage category as compared to last year s package premium. It is also recommended the city stay with Selective Insurance, the incumbent property carrier who is also providing a reduction in premiums this year despite increased exposure from increased property values, increased equipment values, and increased business income exposure from last year. The chart below demonstrates the reduction in premium rates for this year s renewal rates compared to last year s premium rates. Insurance Carrier Rate Rate St. Paul Fire and Marine Insurance Co. (Liability) $191,076 $188,226 Selective Insurance (Property) $71,639 $67,974 Other areas of standalone coverage submitted by Cleaveland Insurance include marine liability, boiler machinery breakdown, and excess workers compensation. According to Cleaveland Insurance, the city will experience a premium increase for workers compensation premiums due to higher wages, claim experience, and pending State Legislation that would increase potential losses for Fire Personnel. Marina liability will also experience a slight increase in premium due to increased property values and increased revenue receipts. The city will maintain the same catastrophic coverage as last year. The specific general liability stop loss will remain at $100,000 with a maximum $1,000,000 per occurrence. Umbrella coverage will provide additional coverage to $5,000,000.

2 Property coverage will continue with Selective Insurance at the same $200,000 deductible per occurrence. Excess workers compensation coverage will continue at $400,000 retention per occurrence with a $10 million limit per claim. The general liability package will also maintain coverage against Casino revenue losses (tax and fee revenue) caused by a calamity to the Casino such as a fire or other potential losses covered under the city s insurance policy. The chart below illustrates the fees associated with last year s coverage in comparison to this years renewal coverage. Coverage 2006/ /2008 General Liability (casualty), Property, Auto Liability, Employee Benefits Liability, Law Enforcement Liability, Public Officials Liability, Tax interruption, Crime, and $260,420 $256,200 Excess Liability Umbrella (additional $4 million in coverage). Rates include tax. Boiler & Machinery Breakdown $3,540 $3,540 Scheduled Bond for Finance Director $997 $997 Excess Workers Compensation Marina Liability $21,991 $23,871 $14,000 $14,400 Total Insurance Premium Cost $300,948 $299,008 *TPA GL Claims Crawford & Company (Estimated) $5,780 $6,011 Services Work Comp Claims Crawford & Company (Estimated) $12,140 $12,555 Fixed broker fees. Cleaveland Insurance three-year contract charges are $27,300 for 06-07, $28,200 for 07-08, and $29,000 for $27,300 $28,200 Total Administrative Fees $45,220 $46,766 Total Cost for Insurance and Administration $346,168 $345,774 Notes: * All Third party administrator (TPA) fees are estimated upon an average number of claims over the past five-year claim history. TPA services from Crawford & Company include claims administration tracking for all general liability claims (property, auto and casualty) at an estimated fee of $6,011. Crawford & Company will also adjust workers compensation claims for an estimated fee of $12,555. Crawford & Company has provided excellent administrative services for both general liability and workers compensation claims at a much more competitive rate than other providers who have provided proposals for this service.

3 This self-insurance renewal premium is exceptional. During the past twelve-year history of the consolidated liability program, the insurance premium rates for this renewal are comparable to what the city paid for premiums in 1996 at a cost of $272,570. However, over the years the city has assumed more risk by eliminating a stop loss aggregate of $300,000 in May 2003 and the workers compensation deductible increased from $350,000 to $400,000 in Recommendation: Personnel is recommending the City Council approve the self-insurance package and brokerage fees outlined by Cleaveland Insurance. It is also recommended that payment be made to Cleaveland Insurance for the amount of $327,208 and payment be made to Crawford & Company for the amount of $18,566 for TPA services. Payments for the 07/08 self-insurance renewal will total $345,774. Vendor: Cleaveland Insurance Payment Amount: $327,208 Account chargeable: Fund: 621 Self Insurance Division: 1517 Insurance Cost Center: 133 General Liability Object Class: Insurance Premiums Requisition number: Vendor: Crawford & Company Payment Amount: $18,566 Account chargeable: Fund: 621 Self Insurance Division: 1517 Insurance Cost Center: 133 General Liability Object Class: Insurance Administrative Services Requisition number: Submitted by: John D. Thorson, Personnel Director Troy Larson, Risk Manager Approved by: John C. Phillips, City Manager

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