Sparks City Council Meeting 6/10/2013 2:00:00 PM

    Monday, June 10, 2013 2:00 PM
    City Council Chambers, Legislative Building, 745 Fourth St, Sparks, NV

General Business: 6.4

Title: Consideration and possible approval to purchase various commercial insurance policies to protect the financial interests of the City for the next policy periods and authorization for the Contracts and Risk Manager to execute agreements for those policies.
Petitioner/Presenter: Dan Marran, CPPO, C.P.M. – Contracts and Risk Manager/Dan Marran, CPPO, C.P.M. – Contracts and Risk Manager
Recommendation: Recommend approval to purchase commercial insurance policies to protect the financial interests of the City of Sparks for the next policy periods.
Financial Impact: $266,458 for all policies recommended within this staff report. The remaining policies will be presented for possible approval on June 24, 2013.
Total Costs: $266,458.00
Fund: Municipal Self-Insurance    Account: 603065
Program: Admin/Premium (Non Claim) Transactions in Muni Ins Fund (050515)
Amount: $266,458.00    Budget Status: Over Budget (See Budget Correction Plan)
Budget Correction Plan:
The expenditure on these insurance policies will occur in the 2014 fiscal year. Approval at this time is required to get the policies drawn up for signature.
Business Impact (Per NRS 237):
A Business Impact Statement is not required because this is not a rule.
Agenda Item Brief: While most primary layers of risk exposure are self-insured, the City purchases commercial insurance policies to protect its financial interests against unpredictable, catastrophic losses. These policies include: Property & Contents (including boiler & machinery), general liability, automobile liability, auto physical damage, employee crime and tenant users liability. This agenda item authorizes the Contracts and Risk Manager to execute the necessary paperwork associated with these policies.

Background: The City self-funds loss exposures that are predictable, where it is not cost effective to purchase commercial insurance, and where losses do not threaten its financial stability. However, there are potential issues that present significant exposure to the City's financial stability, are somewhat unpredictable, and lend themselves to being commercially insured. The lines of coverage which are commercially insured include: property and contents, general liability, auto liability/physical damage, employee dishonesty, and Tenants User Liability (to protect the city and protect those renting our facilities for specific events). With the assistance of its broker (Wells Fargo Insurance Services, USA), Management Services has marketed these coverages with an eye on value (broadest coverage for the most competitive premium). This staff report includes coverage in three (potentially four) areas with two more to be covered at the City Council meeting scheduled for June 24, 2013. This report includes rates for coverage in the areas of General Liability, Tenant User Liability and Employee Dishonesty. Additionally, the City Council has the option of picking up a new policy specific to “Cyber Liability” which covers risks associated with personal data stored and transmitted across electronic systems managed by the City. Property/boiler coverage rates and availability have significantly changed for the next policy year as most insurers have adjusted their risk models associated with earthquake coverage, resulting in significantly higher premiums to maintain coverage at lower levels than are available in the current policy year. This issue has impact insurance coverage for all the public agencies in Northern Nevada and the solution to this issue continues to evolve as new solutions are sought. There will be a separate staff report presented at the City Council Meeting on June 24, 2013 to address the property/boiler policies for the City and TMWRF as well as the associated auto physical damage policy.

Analysis: The city continues to work to control losses and limit exposure through the Risk Committee and working with departments to identify potential exposures. In marketing the City policies this year, staff was challenged with an insurance market that has increased premium rates from 5-10% on average. A spreadsheet detailing those commercial policies is attached. In Summary, premium changes from the previous policy period are as follows: Public Entity General Liability: Up $9,225 or 4% Employee Dishonesty: Up $4,826 (Premium change due to revised employee count) Tenant User Liability: Down $6,546 The total estimated premium depicted on the attached spreadsheet may be adjusted upward or downward, depending on variations in actual exposures throughout the course of the policy year. COVERAGE CHANGES Employee Dishonesty: The rate for this policy is based upon employee count in the organization. For some reason, temporary employees had not been included in previous calculations for this policy but were specifically included in this calculation this year, resulting in the higher premium. This impact could be mitigated through changing deductibles or coverage limits, but this option is not recommended. Tenant User Liability: This policy is made available to people/organizations that rent City facilities for private events in cases where they do not carry their own insurance. The previous policy required the City to make a deposit payment to keep the policy in place and available to potential users. The City’s insurance brokers have presented a new policy model that does not require this deposit and all costs associated with the policy are absorbed by the user taking out the policy. The application process will also be changed to be entirely electronic, providing better safeguards for the City. Potential New Coverage Cyber Liability: Risks associated with maintaining or communicating personal data across electronic networks are being identified and exploited daily. While the City has been fortunate with respect to any instances of data breaches or losses, a policy that would help to absorb some identified risks is becoming much more common in the marketplace and is recommended in cases where the loss or breach of data may result in financial loss for the organization, its employees or its customers. The policy offered here provides a $1,000,000 coverage limit with a $25,000 self-insured retention. Adding this or a similar policy to the City’s insurance portfolio is recommended.

Alternatives: 1. The City Council may approve the item as recommended. 2. The City Council may reject the recommendation of staff. 3. The City Council may choose not to approve the purchase of insurance policies for 2013-2014, but direct the City Manager further.

Recommended Motion: I move to approve purchase of recommended insurance policies for 2013-2014 and authorize the execution of required policy documents as recommended by the Contracts and Risk Manager.

Attached Files:
     Ins Cost Grid-Combined Fiscal 2014-Pt 1.pdf
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