8.2. SR 12-19-2011~` REQUEST FOR ACTION
River
To Item Number
Ma or and Ci Council 8.2
Agenda Section Meeting Date Prepared by
Administration December 19, 2011 Tim Simon, Finance Director
Item Description Reviewed by
rove Annual Renewal of City's Insurance Policies With the
A Cal Portnex, Ci Administrator
pp
League of Minnesota Cities Insurance Trust Reviewed by
Action Requested
Approve annual renewal of the city's insurance policies with the League of Minnesota Cities Insurance
Trust (LMCIT).
Background/Discussion
For over twenty years, the City of Elk River and Elk River Municipal Utilities (ERMU) have participated
in the LMCIT. Mary Eberley of Liberty Insurance Agency will present the July 1, 2011, LMCIT renewal,
which was just received from LMCIT. Coverage has been in Binder since the official July 1 renewal date
even though the renewal documents and rates were just received. The workers' compensation insurance
renewal is included as well; that policy renewed on October 1, 2011. The policy has remained unchanged
for the most part, except that the Council is asked to consider an increase in deductible option.
Here axe a few highlights which are outlined in Mary Eberley's attached memo:
• The city continues to receive a dividend for participating in the LMCIT program.
• The recent land use claim has an impact of approximately $23,000; this will be applied in the next
two subsequent renewals.
• The property schedule has remained relatively the same as last renewal.
• The property, autos, municipal liability, and other miscellaneous policies are down .68% over last
year's renewal outside of the land use claim impact. The workers' compensation costs have
increased as our experience modification factor has increased from .93 to .95 for this renewal.
The city and ERMU continue to be proactive in promoting safety and safety standards through the
continued dedication of all city employees and the Safety Committee. These efforts result in a substantial
premium savings for the city.
We are recommending that the Council consider changing to a $20,000 deductible option and keeping the
same $40,000 aggregate. Historically, in looking at the last couple of years, the city would generate a net
savings every year going to the $20,000 deductible option. Outside the land use claims, the only other
significant claim was for hail damage in the parks. Given the good claim history and the balance in our
insurance fund, this makes sense for the city to consider. The last time the deductible was increased was
2008 when the city went from $5,000 to $10,000.
AU'
Financial Impact
See attached Premium Summary & Comparison - 2011 worksheet. Going to the $20,000 deductible the
premium would decrease $23,000 with this renewal
Attachments
• Letter from Mary Eberley -Liberty Insurance Agency
• City of Elk River Premium Summary & Comparison-2011
• .Balance Sheet (Insurance Reserve Fund)
Action Motion by Second by Vote
Follow Up
~ ~ E ~ E i B
LIBERTY INSURANCE AGENCY
1560 Hart Blvd.
Monticello, MN 55362
December 12,2011
To: Honorable Mayor & Council Persons
City of Elk River
Thank you for making time on your agenda for December 19th meeting to review the
City's 2011 League of Minnesota Cities Insurance Trust proposal.
It's been a pleasure, as always, to work with the fine City staff. Preparing the insurance
renewal for the City and ERMU is a big job, but, Tim, Lori, and Theresa make it a
smooth process. Although the official package renewal date is July 1St, coverage has been
under binder and now awaits your final approval. Workers Compensation coverage
renewed on 10/O1/11.
As you can see from the enclosed premium summary and comparison, there is a
significant increase in premium cost for this year. This is without any changes we may
recommend the Council consider. The package coverages including, Property, Autos,
Municipal Liability, etc. come with an increase of about $20,700. This is due largely to a
liability surcharge of $23,000 as a result of the landfill claim costs. These figures are at
the current deductible of $10,000 Each Occurrence/$40,000 Aggregate and $1,000
"maintenance" deductible thereafter.
Workers Compensation coverage has also increased in cost. The Experience Modifier
has increased several points and the League also took some rate increases in a number of
classes. Workers comp is now written with a $10,000 deductible which applies to
medical costs only.
Several additional points that may be of interest, and then should you have questions, I
will be happy to address them;
1) League rates did not change significantly for 2011 renewals. Property rates
decreased about 4%, auto physical damage rates also decreased. Property values did
not change much either. We are still awaiting the completion of the League's
appraisal process and will then make any needed changes in values.
2) The City received a dividend of $ 53,339 from League of Minnesota Cities Insurance
Trust in December, 2010. The City should receive the 2011 dividend any day, and
hopefully, it is equally as favorable. The League has also decided to declare a
Workers compensation dividend, which will be sent out next April.
3) The liability limit is now at the new tort limit of $1,500,000 for any one
"occurrence". The City has declined the addition of Excess Liability in the past, but
should the Council wish to reconsider, we have a quote for an additional $1 Million
in limits at a cost of $ 60,011 including Liquor Liability, and $58,025 without Liquor.
Coverage is, again, being renewed on the basis of waiver of the per claimant limit,
but this too can be changed. Statute now provides that a payment for any one
claimant can be limited to $500,000. If the Council is interested, the change is cost is
nominal. Savings would be about 2% or perhaps $2,800 to reduce the per claimant
limit to $500,000.
4) ERMU Equipment Breakdown coverage has again been included with this year's
renewal. In the past, the generation equipment coverage was purchased separately
from another company. We made the change in April, 2009. The current annual cost
for the ERMU generation equipment's Equipment Breakdown coverage is about
$42,745.
5) The City insures the YMCA facility and is reimbursed by the Y for costs. This year's
cost is approximately $8,500. We will again assist City staff in allocating this back to
the YMCA.
6) Workers Compensation coverage for the City renewed October 1, 2011. The
Experience Modification factor has increased from .93 last year to .95 for this year.
This means a 5% discount from the League's base rates. The trend for the City's
Experience Modifier has been upward for the past several years, which means greater
cost to the City. The City's Safety Committee has met and is reviewing and
modifying training and equipment to help improve safety for the City's staff. The
goal is to bring the modifier down again and save in premium costs.
7) The City changed to a special.. deductible plan three years ago - $10,000 per
`occurrence'/$50,000 aggregate/$1,000 `maintenance' after reaching the $50,000
aggregate. Results so far have been very favorable. We have been able to reduce the
Aggregate limit to $40,000 over the past several years due to favorable claim
experience, and as a result, recommend the Council consider a higher "per
Occurrence" limit of $20,000 with $40,000 Aggregate.
This would save the City approximately $23,000 in premium costs; offsetting a good
share of the increases under both the package and the workers comp. The City's
claim history has been very good, and with good safety practices in place, it could be
a good option for the City.
This year's renewal, although a good one, is greater in cost. Given the City's
history of claims, a focus on loss prevention, and an effort to save on expenses,
City staff and I am recommending the Council consider the new deductible
option. If the Council has other questions, we will, of course, be happy to address
them.
Liberty Insurance Agency and I appreciate the opportunity to work with the City of Elk
River, ERMU, and the fine staff. We thank you for the continued business.
Respectfully,
Mary
Mary Eberley, CPCU
Client Executive
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12-14-2011 04:56 PM CITY OF ELK RIVER PAGE: 1
BALANCE SHEET
AS OF: NOVEMBER 30TH, 2011
~ 291-INSURANCE RESERVE
' ACCOUNT # ACCOUNT DESCRIPTION
BALANCE
ASSETS
291-1010 Cash - Insurance Reserve
291-1310 Due From Other Funds
TOTAL ASSETS
LIABILITIES
EQUITY
291-2400 Fund Balance
TOTAL BEGINNING EQUITY
TOTAL REVENUE
TOTAL EXPENSES
TOTAL REVENUE OVER/(UNDER) EXPENSES
306,574.68
12,260.25
318,834.93
434,169.99
434,169.99
111,813.00
227,148.06
( 115,335.06)
TOTAL EQUITY & REV. OVER/(UNDER) EXP. 318,834.93
TOTAL LIABILITIES, EQUITY & REV.OVER/(UNDER) EXP.
318,834.93
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318,834.93
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