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
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Insurance Renewal
for
CITY OF DUB UQ UE
Coverage:
Excess Workers' Compensation
Presented by:
John M. Link
Account Executive
Effective Date:
July 1, 2003
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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.
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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