6.6. ERMUSR 04-05-2007Elk River
Municipal Utilities
13069 Orono Parkway
F.Ik River, MN 55330
April 3, 2007
To: Elk River Municipal Utilities Commission
Jerry Takle
,Jerry Gumphrey
Jim Tralle
From: Bryan Adams
Subject: Boiler and Machine Insurance
phone: 763.441.2020
Fax: 163.441.8099
The Elk River Municipal Utilities has maintained boiler and machine insurance to cover
equipment repair or replacement in case of failure. The equipment covered is the
engine/generators at our power plant and landfill gas facility along with our station
transformers. Unfortunately, the cost of this insurance continues to rise as well as the
deductible. The deductible has gotten so high, I am not sure if it is worth carrying this
insurance for our diesel plant facility. This year we received three quotations and the
policy needed to be renewed by April 1, 2007. This policy was renewed for this year but
we need to make a decision for next year. The insurance companies always wait for the
last minute to give quotes so one does not have a lot of time to research alternatives.
Attached is a bid tabulation and cover letter for this year's renewal. We stayed with our
current carrier, AIG Global-HSB for $43,453. There are very few boiler-machine
insurance companies and if you drop their coverage, it is unlikely they will bid in the
future.
At our diesel plant, no company will cover the 2-1948 Worthington 660kw due to the
age. The deductible for the larger Cooper 300kw and Worthington SOOOkw units is
$150,000. The only thing we are insuring for is a catastrophic event on the large engine.
Staff is asking for authorization to pursue getting boiler and machine insurance
quotations without insuring the diesel engine plant for the 2008 insurance year.
The value of the diesel plant is the $350,000/yr. we receive from GRE for stand-by
generation and local source of 10 MW if the transmission system goes down.
Page 1 of 2
Adams, Bryan
From: Mary Eberley [mary.eberley@flrstnationalfinancial.comj
Sent: Thursday, March 29, 2007 7:13 PM
To: Adams, Bryan
Subject: Boiler & Machinery Renewal - 2007
Hi Bryan -
I apologize for not getting this to you earlier today. As I was putting this together, I needed a few answers & didn't
get them resolved until mid-day. Class scheduled for this afternoon, so here we are.
I'm attaching a comparison to kind of lay out some of the basic for each of the 3 choices we have this year. It's
not the complete detail, of course, but will give you a general idea of some of the differences and similarities. I
also made a few footnotes at the bottom - just a couple of the ideas we talked about yesterday by phone.
I know you wanted "pros' & "cons", but after looking at this for quite a while, it seems that there may not be as
many as I first thought. I have outlined those that I feel are most significant for ERMU to keep in mind. Please
review and call me Friday morning, as we need to get this place Friday.
I wish I could make a clear recommendation to you, but may just have to settle for an analysis of the pros & cons
with you. Perhaps after considering the pros & cons, & discussing your priorities, there may be a clearer path.
As of right now, my favorite choice, is unfortunately, the most costly!
I am hoping to hear in the morning if there is a premium penalty for mid-term cancellation of this coverage for
AIG/HSB from now until July, then cancel & go with LMCIT after we figure out the values for the property
schedule & arrive at the "Agreed Amount" coverage limits, & then also go with LMCIT/HSB Boiler & Mach. option.
This might not make any sense -too complicated & messy. Might be best to just make the decision now and be
prepared to live with it for at least until July, 2008.
Again, sorry for the short "fuse", Bryan!
Thank you,
Mary Eberley, crcu
First National Insurance Agency
812 Main St
Elk River, MN 55330
763-712-7881
mary.eberleyCa~firstnationalfinancial com
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2007 ERMU Quote Comparison 8~ Options
Renewal -April 1, 2007 - 2008
Insurance Company AIG Global-HSB Starr-Tech-ACE LMCIT/HSB
A.M.Best Rating
A++ Su erior
A+ Su erior LMCIT unrated-fully reins./HSB-
A++ Sup.
Policy Limit of Liability $12,225,000 $4,500 any occurrence Follows Pro ert
(PerAcc.Prop Dam.($95MM Max)
Loss of Revenue & Extra Expense Excluded Excluded Excluded
sublimits: Each Accident or occurrence unless noted in coverage forms
Service Interruption Excluded Excluded Excluded
Perishable Goods Not addressed Not addressed $100,000
Data Restoration Not addressed Not addressed $100,000
Demolition & ICC(Incr. Cost of Constr) Not addressed Not addressed $100,000
Expediting Expenses $100,000 $5,000 $100,000
Pollutants $100,000 $5,000 $100,000
Ammonia Cont 8 Haz. Sub Ammonia Cont &Haz. Sub
Water Damage $100,000 $5,000 Not addressed
CFC Refrigerants Not addressed Not addressed $100,000
Newly Acquired Locations Not addressed Not addressed $5,000,000-must be reported
Deductible Any One Accident $50,000 Prop Damage $50,000 per acc. $25,000 Direct Coverages
Except:
Transformers $50,000 $50,000 $1.50/KVA-$25,00 Min
ICE rated at 800 KW $40/HP $50,000 Min-
$150,000 Max $40/HP $50,000 Min-
$150,000 Max
$50,000
Cooper Bessemer ICE rated - 3000 KW $40/HP $50,000 Min-
$150,000 Max $40/HP $50,000 Min-
$150,000 Max
$150,000
Worthington ICE rated - 5000KW $40/HP $50,000 Min-
$150,000 Max $40lHP $50,000 Min-
$150,000 Max
$250,000
Excluded Equipment VO-2800 & 2801Worths. &
Bens. VO-2800 & 2801Worths. &
Bens.
VO-2800 & 2801 Worths. 8~ gens.
Limitations of Coverage: ACV @ Main Plant ACV objects >20yrs old ACV objects >25yrs old
Premium: $39,206 $36,915 $52,035
Terrorism Premium $2,747 $1,950 InCI.-see #5 below
Inspection Fee $1,500 $1,500 Included
TOTAL COST -Annual $43,453 $40,365 $52,035
'does not incl taxes & surcharges
Special Considerations:
1) LMCIT option would be placed 4/1/07 to 7/1/07, premium pro-rated- approx $13,100, then added to LMCIT regular renewal on 7/1/07.
2) If LMCIT/HSB option selected, would likely not be able to secure ACE/Star-Tech quote next July or next year, perhaps not HSB direct either.
3) Could consider option to self-insure 1 or both older units.
4) Could consider option to replace 1 or more of older engines -rates to insure new or newer units lower than on old equipment.
5) LMCIT/HSB Terrorism -Breakdown due to terrorism act covered, but ensuing damage by fire or other subject to LMCIT Prop. Max. of $1 MM Agg.
6 Deductible for dama a to either Coo er or Worthin ton would be at the Maximum of $150,000 with either HSB 8~ ACE o tions.
7 Ded.- HSB 8~ ACE on Cater illar en s. Landifll could exceed $50,000 dep. u on HP ratin s-unable to locate HP on Cat units
8 Consider sta in with AIGGlobal -HSB, work on values Sr lans fore ui ., then o with LMCIT/HSB either 7-1-07 renewal or 4-01-08.
IAIG Global-HSB Starr-Tech-ACE LMCIT/HSB
arr- ec peop a now e
PROS : Incumbent carrier acct. HSB Inspection services
LMCIT relationship already in
HSB know the a ui Best rice place-best advocate
LMCIT on Prop- no disputes
Reasonable rice between carriers
Higher & broadest sublimits
Lowest Per Accident General Ded
@$25,000
$50.000 Ded max-new engines
$50,000 Min Ded-any
CONS: accident Lowest sublimits $250,000 Ded on Worthington
Lowest olic limit Highest premium
$50,000 Min Ded per Acc.
Notes:
1 If all covera es, deductibles, etc. were identical, remiums would robabl be much closer
2 Checkin on possible remium im act if we could sta with HSB direct 8~ then make a move to LMCIT/HSB in Jul or Apri1,2008
me3-29-07