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Workers' Compensation Exc InsMEMORANDUM July 1, 2003 TO: FROM: SUBJECT: The Honorable Mayor and City Council Members Michael C. Van Miliigen, City Manager Worker's Compensation Excess Insurance Personnel Manager Randy Peck and Finance Director Ken TeKippe recommend continuation with Safety National as our excess worker's compensation carrier effective July 1, 2003, at an estimated annual premium of $26,532. I concur with the recommendation and respectfully request Mayor and City Council approval. MCVM/jh Attachment cc: Barry Lindahl, Corporation Counsel Cindy Steinhauser, Assistant City Manager Randy Peck, Personnel Manager Ken TeKippe, Finance Director CITY OF DUBUQUE, IOWA MEMORANDUM June 30, 2003 TO: FROM: SUBJECT: Michael C. Van Milligen City Manager Randy Peck Personnel Manager Worker's Compensation Excess Insurance Cottingham & Butler presented to me the Workers Compensation Excess Insurance Renewal Options for coverage effective July 1, 2003. I have attached the renewal proposal for your review. Quotes were obtained from our current carrier, Safety National, Employers RE, and Midwest Employers Casualty Company. Safety National presented a proposal to maintain the same rate as we are currently paying. The rate is $.155 per $100 of payroll. The renewal proposal provides for an estimated premium of $26,532. The current annual premium is $24,942. The increase is related to the increase in payroll. The estimated payroll will be reduced based on the proposed wage freeze for non-bargaining unit employees. If we were to include sworn police officers and firefighters for medical-only claims, under the $400,000 retention, Safety National would charge a premium of $35,000. Safety National would also provide an aggregate protection option with a $1 million aggregate limit. The additional premium would be approximately $11,500. Finance Director Ken TeKippe and I have discussed whether there would be any financial advantage to include sworn police officer and firefighter medical claims under the $400,000 retention limit and whether the aggregate protection of $1 million would be of value. Since we would be liable for the first $400,000 of medical expenses and we would have to incur $1 million in claims before the aggregate protection would begin covering claims, it is our recommendation that we should continue to exclude sworn police officers and firefighters from the workers compensation policy and not purchase the aggregate protection option. Ken and I recommend that we continue with Safety National as our excess worker's compensation carrier effective July 1, 2003, at an estimated annual premium of $26,532. The requested action is for the City Council to pass a motion approving the renewal rates submitted by Safety National effective July 1,2003 for the Worker's Compensation Excess Insurance. If you have questions, please feel free to call. RP/bf CC; Ken TeKippe, Finance Director Pauline Joyce, Administrative Services Manager I I I I I I ! I I I Insurance Renewal for CITY OF DUB UQ UE Coverage: Excess Workers' Compensation Presented by: John M. Link Account Executive Effective Date: July 1, 2003 I I This is a convenient coverage summary not a legal coniract. This proposal is provided to faciHtate your understanding Qf your insurance program. Please refer to the actual policies for specific terms conditions limitations and exclusions that will govern in the event ora loss. Specimen copies of all policies are available for review prior to the binding of coverage. In evaluating your exposures to loss. we have been dependent upon information provided by you. If there are any other areas that need to be evaluated prior to binding of coverage, please bring the~e areas to our attention. Should any of your exposures change after coverage is bound, such as your beginning new operations, hiring employees in new states, buying additional property, etc., please let us know so proper coverage can be discussed. I I I I Cottingham & Butler C&B Insurance ] SISCO ] HealthCorp [ Safety Management £stablished I887 City of Dubuque Excess Workers' Compensation COVERAGE TERMS Limits: Workers' Compensation (each accident) Employers Liability (each accident) Self-Insured Retention (each accident) Aggregate Protection Estimated Payroll Rate per $100 of payroll Estimated Annual Premium Minimum Premium SAFETY NATIONAL 7/1/2002'03 SAFETY NATIONAL 7/1/2003-04 Statutory Statutory $1,000,000 $1,000,000 $400,000 $400,000 None None $16,091,610' $17,117,579' .155 .155 $24,942 $26,532 $24,942 $26,532 *the payroll estimate does NOT include payrolls for Fire/Police Department employees, coverage is excluded for these classes of employees. Safety National CAN provide coverage for these classes, if interested. Approximate rate of $0.135 based on $25,817,579 for medical only equals $35,000 estimated annual premium. Payment Terms: Annual Payment Aggregate Protection Option: $1,000,000 aggregate limit Estimated annual premium: $38,000 "Please refer to the policyfor specific terms, conditions, limitations, and exclusions. A specimen copy of the policy is available for review." Cottingham & Butler City of Dubuque Excess Workers' Compensation Additional Quotation - Comparison COVERAGE TERMS (7/1/03-04) Limits: Workers' Compensation (each accident) Employers Liability (each accident) Self-lnsured Retention (each accident) Estimated Payroll Rate per $100 of payroll Estimated Annual Premium Minimum Premium AM Best Ratings SAFETY NATIONAL EMPLOYERS RE MIDWEST EMPLOYERS CASUALTY COMPANY MIDWEST EMPLOYERS CASUALTY COMPANY Statutory Statutory Statutory Statutory $1,000,000 $1,000,000 $1,000,000 $1,000,000 $400,000 $400,000 $400,000 $400,000 $17,117,579' $17,117,579' $17,117,579' $25,817,579'* · 155 .2124 .2546 .2002 $26,532 $36,358 $43,581 $51,687 $26,532 $36,358 $39,223 $46,518 "A" VIII "A+' XV "A" XI "A" XI *payroll estimate does NOT include payrolls for Fire/Police Department employees (coverage would be excluded for these employees) **payroll estimate INCLUDES payrolls for the Fire/Police Department employees for medical only coverage. "Please refi, r to the policy Jbr specific terms, conditions limitations, and exchtsions. A specimen copy qf the polic:v is available fi : review." Cottingha_m.. & Buff_e_[ .... City of Dubuque AM Best Rating & Analysis The objective of Best's rating system is to provide an opinion as to an insurer's financial strength and ability to meet ongoing obligations to policyholdem. AM Best's opinions are derived from an evaluation of a company's balance sheet strength, operating performance and business profile as compared with Best's quantitative and qualitative standards. SECURE BEST~S RATINGS Aq-~- and A+ (Superior) Assigned to companies that have in AM Best's opinion, a superior ability to meet their ongoing obligations to policyholders. A and A- (Excellent) Assigned to companies that have in AM Best's opinion, an excellent ability to meet their ongoing obligations to policyholdem. B++ and B+ {Very Good) Assigned to companies that have in AM Best's opinion a good ability to meet their ongoing obligations to policyholders. VULNERABLE BEST~S RATINGS B and B- (Fair) Assigned to companies that have in AM Best's opinion, a fair ability to meet their current obligations to policyholders, but are financially vulnerable to adverse changes in underwriting and economic conditions. C++ and C+ {Marginal) Assigned to companies that have in AM Best's opinion, a marginal ability to meet their current obligations to policy holders, but are financ/ally vulnerable to adverse changes in underwriting and economic conditions. C and C- (Weak) Assigned to companies that have in AM Best's opinion, a week ability to meet their current obligations to policyholders, but are financially very vulnerable to adverse changes in underwriting and economic conditions. 0 (Poor) Assigned to companies that have in AM Best's opinion, may not have the ability to meet their current obligations to policyholders, but are financially and are financially extremely vulnerable to adverse changes in underwriting and economic conditions. E (Under ReRulator~ Supervision) Assigned to companies (and possibly their subsidiaries/affiliates) that have been placed by an insurance regulatory authority under a significant form of supervision, control or restraint, whereby they am no longer allowed to conduct normal ongoing insurance operations. This would include conservator ship or rehabilitation, but does not include liquidation. It may also be assigned to companies issued cease and desist orders by regulators outside their home state or country. F (In Liquidation) Assigned to companies that have been placed under an order of liquidation by a court of law or whose owners have voluntarily a~eed to liquidate the company. Note: Companies that voluntarily liquidate or dissolve their charters are generally not insolvent. "Please refer to the policy for specific terms, conditions, litnitations, and exclusions. A specimen copy of the policy is available for review. ' Cottingham & Butler City of Dubuque AM Best Rating & Analysis (continued) S (Rating Suspended) Assigned to rated companies that have experienced sudden and significant events affecting their balance sheet strength or operating performance whose rating implications cannot be evaluated due to a lack of fimely or adequate information. NOT RATED CATEGORIES NR-1 (Insufficient Data) Assigned predominately to small companies for which AM Best does not have sufficient financial information required to assign rating opinions. The information contained in these limited reports is obtained from the several sources, which include the individual companies, the National Association of Insurance Commissioners (NAIC) and other data providers. Data received from the NAIC, in some cases, is prior to the completion of the crosschecking and validation process. NR-2 (Insufficient Size and/or Operating Experience) Assigned to companies that do not meet AM Best's minimum size and/or operating experience requirements. To be eligible for a letter rating, a company must generally have a minimum of $2 million in policyholder's surplus to assure reasonable financial stability and have sufficient operating experience to adequately evaluate its financial performance, usually two to five years. General exceptions to these requirements include: companies that have financial or strategic affiliations with Best's rated companies; companies that have demonstrated long histories of financial performance; companies that have achieved significant market positions; and newly formed companies with experienced management that have acquired seasoned books of business and/or developed credible business plans. NR-3 {Rating Procedure Inapplicable Assigned to companies that are not rated by AM Best, because our normal rating procedures do not apply due to a company's unique or unusual business features. This category includes companies that are in mn-off with no active business writings, are effectively dormant, underwrite financial or mortgage guaranty insurance, or retain only a small portion of their gross premiums written. Exceptions to the assignment of the NR-3 category to mn-offcompanies relate to those that commenced mnoffplans in the current year or are inactive companies that have been structurally separated from active affiliates within group structures that pose potential credit, legal or market risks to the group's active companies. NR-4 (Company Request) Assigned to companies that were assigned a Best's Rating but request that their ratings not be published because the companies disagree with Best's rating conclusion. The NR-4 will be assigned at the request of the company following the dissemination by AM Best of the latest rating assignment. NR-5 (Not Formally Followed) Assigned to insurers that request not to be formally evaluated for the purpose of assigning a rating opinion. It is also assigned retroactively to the rating history of traditional US insurers when they provide prior year(s) financial information to AM Best and receive a Best's Rating or another NR designation in mom recent yearn. Finally, it is assigned currently to those companies that historically had been rated, but no longer provide financial information to AM Best because they have been liquated, dissolved, merged out of existence. Rating Modifiers and Affiliation Codes Under Review (u) Rating Modifiers are assigned to Best's Ratings to identify companies whose rating opinions are Under Review and may be subject to near-term change. Best's Public Data (pd) Rating Modifiers may be assigned to Health Maintenance Organizations (HMOs), Canadian, UK and other European insurers that do not subscribe to our interactive rating process. Best's Public Data Ratings reflect both qualitative and quantitative analysis using publicly available data and public information. Syndicate (s) Rating Modifiers are assigned to syndicates operating at Lloyds. Affiliation Codes are based on a Group (g), Pooling (p) or Reinsurance (r) affiliation with other insurers. "Please refer to the policy for specific terms, conditions, limitations, and exclusions. A specimen copy of the policy is available for review. ' Cottingham & Butler City of Dubuque Financial Size Categories (FSC) Assigned to all companies and reflects their size based on their capital, surplus and conditional reserve funds in millions o£US dollars, using the scale below. To enhance the usefulness of our ratings, AM Best assigns each company a Financial Size Category (FSC). The FSC is designed to provide the subscriber with a convenient indicator of the size of a company in terms of its statutory surplus and related accounts. Many insurance buyers only want to consider buying insurance coverage from companies that they believe have sufficient financial capacity to provide the necessary policy limits to insure their risks. Although companies utilize reinsurance to reduce their net retention on the policy limits they underwrite, many buyers still feel more comfortable buying from companies perceived to have greater financial capacity. FSC I Less Than 1 FSC II 1 To 2 FSC III 2 To 5 FSC IV 5 To 10 FSC V 10 To 25 FSC VI 25 To 50 FSC VII 50 To 100 FSC VIII 100 To 250 FSC IX 250 To 500 FSC X 500 To 750 FSC XI 750 To t,000 FSC XII 1,000 To 1,250 FSC XIII 1,250 To 1,500 FSC XIV 1,500 To 2,000 FSC XV Greater Than 2,000 "Please refer to the policy for specific terms, conditions, limitations, and exclusions. A specimen copy' of the poffcy is available for review. ' Cottingham & Buffer City of Dubuque Coverage Specifications ADDITIONAL COVERAGES Additional coverages that may be available but not limited to the following: Auto Liability Auto Physical Damage Uninsured/Underinsured Motorist Coverage General Liability Property Equipment Breakdown Flood Earthquake Directors & Officers Liability Crime/Employee Dishonesty Fiduciary Liability- (The responsibility on trustees, employers, fiduciaries, professional administrators, and the plan itself with respect to errors and omissions in the administration of employee benefit programs as imposed by the Employee Retirement Income Security Act of 1974) Kidnap & Ransom Higher Liability Limits Higher Umbrella Limits Deductible Options Pollution Employment Practices Liability - (Wrongful termination, sexual harassment, sexual discrimination, etc.) Business Income Extra Expense Professional Errors and Omissions Intemet Liability Product Recall If you are interested in pricing for any of the above coverages or any other coverages, please contact our office. In evaluating your exposures to loss, we have been dependent upon information provided by you. If there are any other areas that need to be evaluated prior to binding of coverage, please bring these areas to our attention. Should any of your exposures change after coverage is bound, such as your beginning new operations, hiring employees in new States, buying additional property, etc., please let us know so proper coverage can be discussed. "Please refer to the policy for specific terms, conditions, limitations, and exclusions. A specimen copy of the policy is available for review. ' Cottingham & Butler City of Dubuque Cottingham & Butler, Inc. Service Contacts Phone: (563) 587-Ext. # E-mail Address: first name.last name~cb-sisco.com JOHN M. LINK - ACCOUNT EXECUTIVE john.link~cb-sisco.com Responsible for all aspects of service including new lines of coverage and questions on coverage specifications. EXT. 5288 IAN R. HAPP - ACCOUNT ADMINISTRATOR ian.happ~cb-sisco.com Responsible for coverage changes (i.e., increasing or decreasing limits or values on existing coverages, adding or deleting vehicles and locations, etc) and overall account questions. EXT. 5577 KIM A. I-lEss - CLIENT SERVICE REPRESENTATIVE kim.hess~cb-sisco.cora Responsible for special certificates (i.e., those that require additional insured, loss payee or mortgagee status, waiver of subrogation, etc), owner operator changes and monthly reports. Certificates~cb-sisco.com Unit responsible for issuing regular certificates of insurance (i.e., those certificates that require no special wording) EXT. 5562 SHERI A. R1SLEY - CLAIMS REPRESENTATIVE sheri.risley~cb-sisco.com Con*act to report all claims except for those pertaining to workers' compensation, or with claims questions. EXT. 5245 "Please refer to the policy for specific terms, conditions, limitations, and exclusions. A specimen copy of the policy is available for review." Cottingham & Butler