Memo

TO:                   Mike Wildgen – City Manager

                        David Corliss – Assistant City Manager, Legal Services Director

                        Debbie Van Saun – Assistant City Manager

FROM:              Frank Reeb – Administrative Services Director, City Clerk

Jennifer Harvey – Risk Manager

DATE:               May 10, 2004

RE:                   Public Entity Insurance Policy Renewal 5/18/2004

The Administrative Services Department, Office of Risk Management has been preparing since early 2004 for the renewal of our three public entity insurance policies with Scottsdale Indemnity Company (Public Officials, Employment Practices, and Law Enforcement).  These policies will expire at 12:00am on 5/18/2004.   This memo has been prepared to present our recommendation regarding renewal of this coverage for the policy year 5/18/2004 to 5/18/2005. 

As the table below illustrates, Scottsdale has agreed to renew our coverage with only a 4% ($2,776) overall premium increase.  The majority of the increase was assessed to the Law Enforcement portion of the policy ($2,506) while Employment Practices coverage was increased minimally ($270).  There was no increase assessed to the Public Officials coverage.  The total premium ($72,438) is below the amount of our 2004 budget ($80,000) for this expenditure by $7,562.  The increase was in part attributed to the increased number of employees of the City.  It is important to note that we do have open claims under the Law Enforcement portion of the policy, and therefore our loss history plays a role as well. 

Public Entity	2003/2004 Premium	2004/2005 Premium	2004 Budget	Dollar Increase	Percentage Increase
Public Officials	$20,205	$20,205	$20,000	$0	0%
Employment Practices	$16,064	$16,334	$20,000	$270	2%
Law Enforcement	$33,393	$35,899	$40,000	$2,506	8%
Total	$69,662	$72,438	$80,000	$2,776	4%

Scottsdale has again offered terrorism coverage.  You may recall that it was offered with last year’s renewal.  However, we recommended declining coverage at that time.  Following the Terrorism Risk Insurance Act of 2002, which became effective on November 26, 2002, we now have the option of purchasing terrorism coverage for each of these three policies.  If elected the additional premium would be $3,590.  Because the likelihood that “certified acts of terrorism” would affect these policies continues to appear remote, and because, coverage for losses caused by certified acts of terrorism may be partially reimbursed by the federal government, we continue to recommend the declination of certified terrorism coverage as an addition to the Public Entity policy.  Please note that our current Property and Excess Workers’ Compensation policies do provide coverage for loss of property and workers’ compensation claims as a result of acts of terrorism. 

Our broker for this coverage, Joe Baker CEK Insurance, did explore other markets for this coverage to ensure we are receiving the most cost effective coverage.  Four other companies were contacted and were provided information regarding our organization and loss history.  One company declined to provide coverage due to our self-insured general liability status.  The three remaining companies did provide quotes, however their premiums were not competitive with Scottsdale. 

We continue to recommend maintaining our coverage with Scottsdale.  We do have open claims with them, and they have afforded us the flexibility to use our own counsel in defense. 

Therefore, it is our recommendation to renew the City’s public entity insurance coverage with Scottsdale Insurance Company for the period of 5/18/2004 to 5/18/2005.  The current policies lapse on May 18 ^th, 2004, and because we were not able to obtain the renewal information early enough to get this on an agenda prior to the expiration date, and because the renewals were below the amounts we budgeted, we agreed to bind coverage Monday, May 10, 2003.

Should you have any questions, please do not hesitate to contact Frank or me.  Thank you for your consideration.