HomeMy WebLinkAbout3I - Excess Liability Insurance Coverage
CONSENT AGENDA:
REQUESTED BY :
SUBJECT MATTER:
DATE:
Introduction:
BACKGROUND:
DISCUSSION:
CENSUS '90
.
3 (i)
RALPH TESCHNER, FINANCE DIRECTOR
CONSIDER APPROVAL OF RESOLUTION 90-12
ESTABLISHING $1,000,000 OF EXCESS LIABILITY
INSURANCE COVERAGE
FEBRUARY 20, 1990
cities obtaining excess coverage from the
League of Minnesota cities Insurance Trust
(LMCIT) must determine what dollar amount of
liability insurance they wish to carry. In
addition, they must decide whether or not to
waive the statutory liability limits to the
extent of the excess coverage purchased. These
decisions must be made either by motion or
resolution of the city Council.
~he City of Prior Lake has participated in the
lnsurance program set up by the League for the
past 4 years. The program itself has been
highly successful as evidenced by the
substantial paybacks of dividends and premium
refunds.
The League provides insurance coverage to
virtually all municipalities as evidenced by a
participation ratio of almost 90% (732 out of
a total of 854 cities). Low administrative
costs, premium maintenance and favorable
claims experience have all attributed to the
appeal of the League's self-insurance plan.
LMCIT's basic liability coverage provides
limits of $600,000 per occurrence. LMCIT also
offers cities the option of an additional $l
million, $3 million or $5 million of liability
coverage limits. Statutes provide that cities
and city officials and employees cannot be
held liable for amounts exceeding $600,000.
However, there are certain cases where the
City is exposed to particular types of
liabilities under which these limits do not
apply. Another reason to consider umbrella
coverage is for liabilitr for a zoning actions
under the theory of "l.nverse condemnation"
which is occurring more and more frequently
today. Currently our policy only provides a
maximum aggregate limit of the $600,000,
regardless of the number of occurences.
4629 Dakota St. S.E., Prior Lake, Minnesota 55372 / Ph. (612) 447-4230 / Fax (612) 447-4245
RECOMMENDATION:
BUDGET IMPACT:
Finally, there is the concern of whether the
statutory liability limits will stand up in
court. Two recent Minnesota Supreme Court
decisions have upheld the statutory limits.
However, it is difficult to predict the
outcome of future decisions.
There are seven available options for Council
consideration based upon the following
available combinations:
#1. Excess liability limit of $1,000,000 with-
out Waiver of Immunity.
#2. Excess 1iabilitr limit of $1,000,000 with
Waiver of Immunlty.
#3. Excess liability limit of $3,000,000 with-
out Waiver of Immunity.
#4. Excess liabi1itr limit of $3,000,000 with
Waiver of Immunlty.
#5. Excess liability limit of $5,000,000 with-
out Waiver of Immunity.
#6. Excess 1iabi1itr limit of $5,000,000 with
Waiver of Immun~ty.
#7. Retention of the basic underlying limit of
$600,000 as provided under the standard
policy and elect not to purchase addition-
al excess liability insurance.
Approximately one-third of all cities are
Choosing the umbrella protection which, in the
consensus of both the League and City staff,
is surprisingly low. The issue of immunity
waiver selection is running roughly 50/50.
Waiver of the statutory limits would allow
higher compensation to be paid to injured
parties beyond the maximum. A reason for
selection of this option may be whereby a City
might actually want to payout a greater
settlement in the event of a serious incident
such as an accident involving a bus and city
snow plow. While you normally would not
negotiate upwards, public pressure may demand
such consideration. Yet, the annual $5,000.00
cost associated with this feature is quite
high.
Staff recommendation is to approve Option #1
as supported by Resolution 90-12 which ~s
attached to rour agenda report. This would be
consistent wlth the amount of excess liability
insurance currently carried by the city.
The proposed cost of $20,728.00 represents a
$5,000.00 savings as compared to the projected
estimate within the 1990 budget. Also itemized
below for Council information are the premium
renewal quotations by the League for Prior
Lake's entire insurance package:
ACTION REQUIRED:
Insurance 1990 Premium 1990 Budqet
Propertr $ 14,666.00 $ 15,850.00
Automoblle $ 11,905.00 $ 12,750.00
General Liability $ 44,657.00 $ 45,400.00
Excess Liability $ 20,728.00 $ 25,825.00
Errors & Omissions $ 4,353.00 $ 4,620.00
Workman's Compo $ 65,973.00 $ 55,635.00
Grand Total $162,282.00 $160,080.00
Because of the volatility in the insurance
industry today, the above premiums compare
quite favorably with the overall Budget
projections. staff is pleased with the
outcome.
Motion to approve Resolution 90-12 as part of
the consent agenda would be in order.
RESOLUTION 90-12
CENSUS '90
OF EXCE.
A RESOLUTION ESTABLISHING $1,000,0000
LIABILITY INSURANCE COVERAGE FROM THE LEAGUE OF
OF MINNESOTA CITIES INSURANCE TRUST
MOTION
BY:
SECONDED BY
WHEREAS, The City recognizes the importance of providing
insurance ~rotection against potential losses due to
unforseen 11ability exposure; and
WHEREAS, The City of Prior Lake has determined to obtain excess
umbrella liability insurance coverage above the basic
limits of $600,000.00; and
WHEREAS, The city acknowledges the cost of the annual premium to
be $20,728.00; and
WHEREAS, The City wishes to continue participation within the
League of Minnesota Cities Trust.
NOW, THEREFORE BE IT RESOLVED by t~e Mayor and City Council that:
1. The City of Prior Lake hereby elects $1,000,000 of excess
liability covera<1e limits to be purchased from the League
of Minnesota Citles Insurance Trust.
2. The City of Prior Lake DOES NOT WAIVE the monetary limits
on tort liability insurance as established by Minnesota
Statutes 466.04.
Passed and adopted this 20th day of February, 1990.
YES
NO
Andren
Fitzgerald
Larson
Scott
White
Andren
Fitzgerald
Larson
Scott
White
David J. Unmacht
City Manager
City of Prior Lake
{Seal}
4629 Dakota 51. 5.E., Prior Lake, Minnesota 55372 I Ph. (612) 447-4230 I Fax (612) 447-4245