Memo       

TO:                   Mike Wildgen – City Manager

                        David Corliss – Assistant City Manager, Legal Services Director

                        Debbie Van Saun – Assistant City Manager

Frank S. Reeb – Administrative Services Director, City Clerk

FROM:              Jennifer Harvey – Risk Manager

DATE:               June 11, 2004

RE:                   July 1, 200 4 Insurance Policy Renewals

Building/Property Insurance

                        Fire & Medical Auto/Professional Liability Insurance

Introduction

On July 1, 2004 at 12:01am, insurance policies for City buildings/property and Fire/Medical auto and professional liability coverage will expire.  This memo is written to advise you of the renewals provided for both coverages and seek your approval to bind coverage in advance of the expiration.  While the insurance industry remains in the third year of hardened market, certain lines of insurance such as property and auto are beginning to stabilize.  Therefore, renewals are generally presenting increases from 0 to 5% rather than the double digit increases we have seen previously.  Opinions forecasting the end of the hard market remain mixed anywhere from the end of 2004 to continuing in 2005.        

Building/Property

We are poised to begin the third year of our relationship with Travelers Insurance for coverage of the City’s buildings and facilities.  Since last year’s renewal, Travelers, a leading company in the property insurance market, has merged with St. Paul Insurance, a leading public entity market insurer.  St. Paul –Travelers, as it is now known, has retained an AM Best Insurance Rating of A++ XV which equates to a superior rating in the financial size category of $2,000,000 or more surplus conditional reserves reported.  

As you may recall, we currently secure a blanket insurance policy with a $25,000 deductible and payout limit based upon our total property values.  Our broker, Darrel Robertson of Charlton Manley Insurance, negotiated a renewal with no increase to our rate of per $100 of property value.  However, in order to ensure that properties were valued sufficiently, it was recommended that we increase property values by 4% for inflation, which may actually be conservative considering significant cost increases seen in building materials such as lumber and steel.  In addition to the across the board 4% adjustment to property values, additions, deletions, and corrections to our property database were submitted.    

For coverage from 7/1/04 to 7/1/05 with total properties and contents valued at $196,153,717 the premium will be $142,206 payable in four quarterly installments.  That represents an increase in premium of $6,221 from the 7/1/03 premium. 

Fire & Medical Emergency Vehicles and Professional Liability Coverage

You may recall that last year we secured new insurance coverage for the Fire and Medical Department emergency vehicles and professional Liability with VFIS (Volunteer Fireman’s Insurance Services/American Alternative Insurance Corporation).  This new insurer provided improved coverage and a premium cost savings of over $32,000 compared to renewal with the current insurer at the time, CNA.

Our one year loss history with VFIS has been excellent.  VFIS Loss Control has conducted two onsite program audits, made only minor loss control recommendations, and continues to be very pleased with the operation of the Lawrence-Douglas County Fire and Medical Department.  VFIS/AAIC retains an AM Best Insurance Rating of A+ XV which equates to a superior rating in the financial size category of $2,000,000 or more surplus conditional reserves reported.  

VFIS has provided a renewal quote for coverage from 7/1/04 to 7/1/05 in the amount of $77,302.  This represents a 5% premium increase from last year’s premium of $74,039 which they attribute to continued insurance market conditions.  As VFIS was introduced to us by the brokerage office of Arthur J. Gallagher they retain a brokerage fee in the amount of $10,500 which is included in the total premium.

This policy provides Professional Health Care Liability coverage to protect against claims alleging bodily injury and/or property damage as a result of the actions of Fire & Medical activities.  The auto policy provides a $1,000 deductible on each vehicle and protection against the loss of a vehicle paid at an agreed amount rather than at actual cash value.  Agreed amount coverage pays the lesser of the cost to repair or replace the vehicle without deduction for depreciation or the agreed value shown on the policy.

Recommendation and Request for Approval to Bind Coverage

I am pleased to recommend renewing coverage with both St.Paul-Travelers and VFIS for the insurance period of 7/1/04 to 7/1/05.  Should you agree, I request your approval to proceed in binding the renewal coverage prior to the expiration on 7/1/04.  Should you have further questions, please do not hesitate to contact Frank or me.  Thank you for your consideration.