The URL can be used to link to this page

Home My WebLink About5B 2015 Insurance Policy Renewals OiPR/O+P 4",iU tri 4646 Dakota Street SE '1 sols* Prior Lake,MN 55372 CITY COUNCIL AGENDA REPORT MEETING DATE: MAY 11, 2015 AGENDA#: 5B PREPARED BY: CATHY ERICKSON, ACCOUNTING MANAGER PRESENTED BY: CATHY ERICKSON AGENDA ITEM: CONSIDER APPROVAL OF A RESOLUTION AUTHORIZING THE 2015 INSURANCE POLICY RENEWALS DISCUSSION: Introduction The purpose of this agenda item is to consider approval of the 2015 insurance policy renewal with the League of Minnesota Cities Insurance Trust. History By virtue of our membership in the League of Minnesota Cities, we are eligible to obtain insurance coverage through the League of Minnesota Cities Insurance Trust (LMCIT). The City of Prior Lake participates in the LMCIT for the purpose of securing its liability, property, casualty, automobile, volunteer and workers compensation insurance coverage. Current Circumstances The City has been insured by the LMCIT since 1987. The LMCIT is a self- insurance pool of cities formed to meet cities' coverage and risk management needs. They currently service over 90% of Minnesota cities. The LMCIT also provides a prorated dividend when claims for their long- time members are favorable and the members are successful in avoiding and controlling losses. This practice is unusual in the insurance industry. During 2014, the LMCIT provided the City a $32,654 dividend on the general insurance coverage. There was no 2014 dividend on the workers compensation insurance coverage. The City usually receives a workers comp retro adjustment of varying amounts each year, and the City had a refund LMCIT adjustment of$51,335 during 2014 due to better than average 2013 workers comp claims experience. Several years ago, Staff determined that it would be appropriate to have the Council approve the insurance policies since the total premiums exceed the $20,000 threshold which the City Manager is authorized to approve. This approval is being requested on an annual basis. City staff requested an extension for filing the general liability and property renewal application for 2015 due to other staff time commitments. The period covered by the renewal is 02/01/2015—02/01/2016. ISSUES: Years ago, before the LMCIT offered insurance, cities found that in some years they could purchase insurance at reasonable costs. In other years, one or two companies would insure municipalities and the costs increased as a consequence. The coverage included in the City policy is municipal liability, property, automobile, open meeting law, public employee faithful performance required by State Statutes. The City has historically carried a $10,000/$20,000/$1,000 deductible amount for liability coverage. For 2011, the City Council approved increasing the aggregate deductible amount to $40,000. For 2014, the City Council approved increasing the deductible to $25,000 per occurrence/$50,000 annual aggregate/ $1,000 per occurrence thereafter. The LMCIT also provides workers compensation insurance coverage for the City. Maintaining the same $25,000/$50,000/$1,000 deductible amount for liability coverage, the following table provides a comparison for the 2015 and 2014 insurance premiums: Insurance Type Chang, Change Property& $230,302 $217,601 -$12,701 -5.5% Casualty, Etc. Workers Compensation Premium $188,614 $203,636 $15,022 8.0% *Starting in 2013, the City pays a $9,000/year fixed fee for insurance agent of record services versus a commission based on the premium which amounted to about $20,000 yearly. The agent also provides services related to the workers compensation insurance which was not the case in prior years. The Workers Compensation premium cost increase occurred in two areas: experience modification increased from .83 to .85 (1.00 considered average), and LMCIT rate increases due mainly to higher medical treatment costs. Northern Capital Insurance Group prepared the following summary of the primary drivers of the renewal premium change: Property/Casualty Premium Rates, renewals effective after November 15, 2014 • Property rates: 4% decrease. • Liability rates: 4% decrease, but variation by City based on new Liability rating method transition. • Auto Physical Damage rates: 6% decrease. • Auto Liability rates: unchanged (except Fire vehicles, which decreased). • All other rates were unchanged. • A new liability rating system used to allocate liability and auto premium costs more equitably among members based on the most costly loss exposure hazards, including: Land Use Litigation (# households), Police Liability (#officers), Sewer Backup (# connections), Employment Claims (#employees). The new rating system will tend to shift premium costs somewhat toward members that have police departments. Property Replacement Cost Inflation Factor, renewals effective after November 15, 2014 • Buildings +1.25% • Personal Property (Contents) +1.5% • Mobile Property +1.5% • Property In Open +1.25% City of Prior Lake Property/Casualty Renewal Factors • Property: Buildings, Contents, Property In Open Replacement Cost Values from $67,057,373 to $68,173,228 (including lift stations). • Municipal/Auto Liability Experience Rating Modifier improved from a 1.036 debit to a 0.955 credit (7.82% decrease). Workers Compensation Premium Rates, renewals effective after November 15, 2014 • Overall premium rates increased 5%. • Volunteer fire fighters rates increased an additional 2%. • Prior Lake's WC Experience modification increased from a .83 credit to a .85 credit (1.00 is considered average). FINANCIAL Northern Capital Insurance and staff is recommending the following IMPACT: changes to the insurance policies: typoi Rectomersktd Property & $230,302* $217,601* -$12,701 -5.5% Casualty, Etc. Workers $188,614 $203,636 $15,022 8.0% Compensation Premium "Based on$25,000/$50,000!$i,000 Deductibles The 2015 budget (all funds) includes approximately $242,000 for general liability, property, automobile and bond insurance. Based on the current quote for Property/Casualty ($217,601) at the recommended $25,000/ $50,000/$1,000 deductible, the premium would be less than what was budgeted by approximately $24,000. Staff had budgeted for an increase, and the quote came in with a 5.5% decrease from the prior year. The 2015 budget (all funds) includes approximately $203,000 for workers compensation insurance. The City budget is equal to the current quote. ALTERNATIVES: 1. As part of the consent agenda, approve the resolution authorizing the 2015 insurance policy renewals incorporating the modifications recommended herein. 2. Deny this agenda item for a specific reason and provide staff with direction. 3. Table this item to a future date certain. RECOMMENDED Alternative#1. MOTION: P�O6001 tri 4646 Dakota Street SE 4onimsolP Prior Lake,MN 55372 RESOLUTION 15-xxx A RESOLUTION AUTHORIZING THE 2015 INSURANCE POLICY RENEWALS Motion By: Second By: WHEREAS, The City of Prior Lake participates in the League of Minnesota Cities Insurance Trust(LMCIT) for the purpose of securing its liability, property, casualty, automobile, employee faithful performance (bond), open meeting law defense, equipment breakdown and workers compensation insurance coverage; and WHEREAS, The insurance renewal period is 02/01/2015 through 02/01/2016; and WHEREAS, Premium costs for the respective coverage are as set forth in the May 11, 2015 agenda report; and WHEREAS, The insurance includes a$25,000/$50,000/$1,000 deductible amount for liability coverage. NOW THEREFORE, BE IT HEREBY RESOLVED BY THE CITY COUNCIL OF PRIOR LAKE, MINNESOTA as follows: 1. The recitals set forth above are incorporated herein. 2. The City Council hereby approves the 2015 insurance policy renewals. 3. Staff is authorized to amend the 2015 budgets to reflect the premium savings the city has realized. PASSED AND ADOPTED THIS 11th DAY OF MAY 2015 VOTE Hedberg Keeney McGuire Morton Thompson Aye ❑ ❑ ❑ ❑ ❑ Nay ❑ ❑ ❑ ❑ ❑ Abstain ❑ ❑ ❑ ❑ ❑ Absent ❑ ❑ ❑ ❑ ❑ Frank Boyles, City Manager