2013 2:00:00 PM

Monday, June 24, 2013 2:00 PM
City Council Chambers, Legislative Building, 745 Fourth St, Sparks, NV

Consent Items: 5.5

Title: Consideration and possible approval to purchase an excess insurance policy for workers’ compensation 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 the policy.

Petitioner/Presenter: Shaun D. Carey, City Manager/Stephen Driscoll, CGFM, MBA, Assistant City Manager/Jill Valdez, Human Resource Analyst

Recommendation: Recommend approval to purchase the excess insurance policy for workers compensation to protect the financial interests of the City of Sparks for the next policy period.

Financial Impact: $89,706.00

Business Impact (Per NRS 237):
A Business Impact Statement is not required because this is not a rule.

Agenda Item Brief: While the primary layer of risk exposure in the workers compensation program is self-insured, the City purchases an excess insurance policy for two reasons. First, it is a requirement under Nevada law to carry excess coverage in order to have a self-funded workers’ compensation program. Second, the policy protects financial interests of the City against unpredictable, catastrophic losses. This agenda item authorizes the Contracts and Risk Manager to execute the necessary paperwork associated with this policy.

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 specific line of insurance covered here is the excess insurance policy for workers’ compensation. With the assistance of its broker (Wells Fargo Insurance Services, USA), Management Services has marketed the coverage with an eye on value (broadest coverage for the most competitive premium).

Analysis: The City continues to work to control losses and limit exposure in the workers compensation self-funded program by working closely with internal departments and meeting monthly with the third party administrator of claims and the managed care organization to manage claims and risk as efficiently and cost effectively as possible. In marketing the City excess insurance policy this year again, staff was challenged with increasing Self Insured Retention levels for Police and Fire, which has been steadily increasing across the board for public entities in Nevada. There is an extremely limited market for companies willing to offer excess insurance for workers’ compensation programs that include Police and Fire in Nevada due to the presumptive benefits (Heart/Lung/Cancer/Hep C) mandated by state law. In summary, premium changes from the previous policy period are as follows: Premium: Increase of $ 28,984.00 Self-Insured Retention: No change from prior year with this policy ($2,000,000 for police/fire per claim or occurrence; $1,500,000 for all other employees per claim or occurrence) The total estimated premium may be adjusted upward or downward, depending on variations in actual payroll throughout the course of the policy year. Coverage Changes Self-Insured Retention: The Self-Insured Retention levels offered for Police Fire has risen in response to the risk exposure from Nevada law that mandates presumptive coverage of heart disease, lung disease, and certain cancers and communicable diseases. There are a number of factors impacting the rising costs of this legislatively mandated coverage. For example, medical inflation, average monthly wage inflation, legal provision for scheduled annual increases in wage compensation, and expanded benefit coverage by legislative changes and Supreme Court case law all influence the claims liability for the City and the excess insurance carrier. Increased payroll estimates based upon the current fiscal year-to-date figures (at the time of the application for insurance renewal) do play a factor in the premium rise. In addition, the City of Sparks claims experience with heart disease, lung disease, certain cancers and communicable diseases is a factor in the premium rate quoted. When purchasing excess insurance for workers’ compensation claims in Nevada, it is important to choose a company that demonstrates ability to pay for the long life of our claims. Nevada has lifetime reopening rights for claims, and heart disease and lung disease claims, plus certain cancer claims may be filed after retirement. While the Self-Insured Retention increase for Police and Fire is significant, staff believes this is the best policy available in the limited marketplace for excess insurance for the workers’ compensation program.

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 excess insurance policy for workers’ compensation for 2013-2014 and authorize the execution of required policy documents by the Contracts and Risk Manager as recommended.

Attached Files:

City of Sparks - Excess Workers Comp Payroll Premium History 06-17-2013.pdf

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