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HomeMy WebLinkAboutCS 18-04?ICKER!NG REPORT TO EXECUTIVE COMMITTEE Report Number: CS 18-04 Date: June 2, 2004 From: Gillis A. Paterson Director, Corporate Services & Treasurer Subject: 2004/2005 Property and Liability Insurance Program Recommendation: It is recommended that Report CS 18-04 of the Director, Corporate Services & Treasurer be received and that; the City of Pickering renew effective June 15, 2004, its property, liability and other coverages through the Frank Cowan Company for the period July 1, 2004 to July 1, 2005 inclusive on terms and conditions acceptable to the Director, Corporate Services & Treasurer; the Director, Corporate Services & Treasurer, as part of the Risk Management Program, be authorized to continue the Reimbursable Deductible Program through the Insurance Adjuster and the Frank Cowan Company and further, that the Director be authorized to settle any claims including any adjusting and legal fees within the total deductible limit where it is in the City's interest to do so; the Director, Corporate Services & Treasurer be authorized to purchase additional insurance, make changes to deductibles and existing coverages, and alter terms and conditions as becomes desirable or necessary in order to protect the assets of the City and it's elected officials and staff; and, the appropriate officials of the City of Pickering be given authority to give effect thereto. Executive Summary: The City's insurance program continues to operate successfully and the above recommendations provide for a renewal of the policies basically on the same or improved terms and conditions in the past years which also provides coverage for the Library, its Board and its employees. Report CS 18-04 Date: June 2, 2004 Subject: 2004/2005 Property & Liability insurance Page 2 Financia~ implications: The premium renewal cost has been provided for in the various cost centers through the approvat of the 2004 budget by Council and the renewal premium cost is within the 2004 budgeted amount. The City's premium renewal is currently below the industry renewal trend rate of 15% due to the City's long- term business relationship with the insurance carriers ("loyalty discount") and due to the City's claims history. Staff examined increasing the current deductible from $10,000 to $25,000 but the corresponding savings in premiums did not warrant the additional risk. Background: Each year on July 1, the City's general liability and property insurance policies come up for renewal. As approved by Council at the time of the 1998 renewal, the Treasurer undertook an extensive review of all aspects of the City's insurance program. The City of Pickering embarked in a Risk Management Program, the initial phase of which involved negotiating renewing premiums with the City's broker. The result of the negotiations was a decrease of approximately $75,000 or 20 percent, in the premiums from that of the prior year. This premium was also approximately $98,000 less than the 1998 budget provision which, after claims under the increased deductible were paid, resulted in a transfer of approximately $50,000 to the Self Insurance Reserve. From 1999 to 2003, staff have reviewed the deductibles, coverages, policies and procedures to ensure that the City is financially protected. In 1999 approximately $92,000 was transferred to the Insurance Reserve as a result of the continued savings. In 2000 and 2001, the amount of $100,000 in each year was included as a revenue item in the annual budget. For the 2002 budget, $50,000 was included as revenue with the balance being used to offset premium increases. The 2003 Budget anticipated a premium increase and therefore, no savings were transferred to the Self Insurance Reserve. The 2004 budget anticipated a premium increase based on current industry trends. As a result the balance of the Reserve at December 31, 2003 was approximately $940,000. Recommendation 4 provides the Treasurer with the authority to continue to review and adjust insurance coverages where appropriate during the year to reflect current market and business environment conditions. For example, the insurance coverage for boiler and machinery has been increased from $25.0 million to $50.0 million to reflect current industry standards regarding this type of insurance. The increased cost (under the Boiler and Machinery policy), for the additional insurance coverage of $25.0 million is $666. Report CS 18-04 Subject: 2004/2005 Property & Liability insurance Date: June 2, 2004 Page 3 Current External Insurance Environment The event of September 11, 2001 event and Iow investment returns are still having an impact on the insurance industry and premiums. Traditionally, investment profits have been used to subsidize the cost of insurance. Persistently Iow interest rates have reduced the size and corresponding dollar amount of this subsidy and has placed a greater importance on the premium side of the insurance business. The chart below illustrates the loss, premium increase and profit relationship. Insurance Industry Cycle . Claim losses translates into price increases . Prices increases translates into higher profits The insurance industry is now entering an economic environment where the premium increases have translated into higher profits, which is being used to offset losses/claims. The Value of Lonq~term Business Relationship After September 11, 2001, the insurance industry was faced with a "hard" market. Some insurance companies left the municipal field and others demanded substantially higher premiums. The City found itself in the enviable position of having maintained a long standing business relationship with the Frank Cowan Company. This long standing business relationship has translated into lower premium increases or a. loyalty discount to the City in comparison to those municipalities who left the Frank Cowan Company and then rejoined in 2002. As the above chart indicates, insurance has proven to be a cyclical business. The insurance industry has experienced both hard and soft market conditions ove~' time. With the continued threat of gtobat terrorism and its impact on political stability and the globaf economic environment it appears that the Report CS 18-04 Subject: 2004/2005 Property & Liability Insurance Date: June 2, 2004 Page 4 insurance industry may continue with to be a "some what" difficult and or hard market. The City is fortunate to have as an asset a long-term business relationship with the Frank Cowan Company, which as proven to have delivered lower premium increases to the City. Attachment 1 provides a "program summary" of the various insurance coverages. Conclusion The City's Insurance and Risk Management Programs appear to be working satisfactory. The City has benefited from its long standing relationship with the Frank Cowan Company especially during the current "hard" insurance market. Therefore, renewal through the Frank Cowan Company with our present carriers is recommended. Attachments: 1. Program Summary of Insurance Coverage Prepared By: Start Karwowski Manager, Finance & Taxation Approved / Endorsed By: Director, Corporate Services & Treasurer GAP:vw Attachment Copy: Chief Administrative Officer Recommended for the consideration of Picketing City Council Tho ;' J. eui¢, Chie(~dmi~ti~e Offi~r ' PROGRAM SUMMARY SUMMARY OF COVERAGES LIMITS/AMOUNTS PART A -: CASUALTY, Municipal Liability Limit of Protection per occurrence (No Annual Aggregate Limit) Third Party Claims Deductible including expenses Sewer Backup Deductible including expenses Wrongful Dismissal (defence costs) Limit per claim Annual Aggregate Limit Deductible Voluntary Compensation Municipal Madna Liability Malpractice Liability Errors and Omissions Limit of Protection per claim (No Annual Aggregate Limit) Deductible including expenses Non-Owned Automobile Limit of Protection per occurrence (No Annual Aggregate Limit) Deductible Legal Liability for Non-Owned Vehicles (S.E.F. No. 94) All Perils Physical Damage Limit Deductible Environmental Liability Liability of Protection per claim Annual Aggregate Limit Self-insured Retention $ 25,000,000. $ $ $ $ $ $ $ $ $ 10,000. 10,000. 250,000. 250,000. 5,000. Included Included Included 25,000,000. 10,000. 25,000,000. 10,000. 500,000. 500. 1,000,000. 2,000,000. 10,000. PROG M SUMMARY SUMMARY OF COVERAGES LIMITS/AMOUNT,*; Comprehensive Cdme Commercial Blanket Bond Counterfeit Paper and Depositors' Forgery Audit Expense (Sub-Limit $100,000.) Money and Securities - Blanket any Location Excess on Securities $ 2,000,0OO. Included Included Included $ 100,000. $ 100,000. Councillors' Accident - City Mayor/Regional Councillor, Three Regional Councillors (Durham)/City Councillor, Three City Councillors and Nine Library Board Members Accidental Death & Dismemberment (24 Hour a Day Coverage) (No Annual Aggregate Limit and No Deductible) Weekly Income - Total Disability Weekly Income - Partial Disability $ $ Municipal Conflict of Interest Percentage of Legal Fees and Expenses Maximum Limit of Reimbursement per claim (No Annual Aggregate Limit) Legal Expense Percentage of Legal Fees and Expenses Maximum Limit of Reimbursement per claim Annual Aggregate Limit $ $ 100,000. 500. 250. 100% 100,000. 100% 100,000. 250,00O. PROGRAM SUMMARY SUMMARY OF COVERAGES ~-IMIT~/AMOUNT,., PART B;PROPER~ Property Insurance (including Data Processing Insurance) Total Sum Insured * Valuable Papers Accounts Receivable (other than Data Processing) Extra Expense (other than Data Processing) Business Interruption Rent or Rental Value Form Gross Revenue Form $ 118,977,800. $ 5OO,OOO. $ 500,000. $ 1,000,000. $ 500,000. $ 2,584,500. Checkroom Liability Data Processing System and Equipment Media Extra Expense Fine Arts Form Exhibition Form $ 5,000. $ 1,440,800. $ 47,000.' $ 50,000. $ 2,000. As Per Lists Provided Deductible $ Exceptions: - Checkroom Liability, Fire Trainin9 Trailer, Fine Arts Form & Exhibition Form $ - Peril of Flood $ - Peril of Earthquake, 3% or Minimum $ *Note: Please refer to the insurance contract for an itemized list of assets containing specific limits of insurance or that are excluded from the policy. 10,000. 1,000. 25,000. 100,000. PROGRAM SUMMARY SUMMARY OF COVERAGES LIMiTS/AMOUNTS Boiler and Machinery Limit per Accident - Comprehensive $ Extra Expense $ Water Damage $ Ammonia Contamination $ Expediting Expenses Hazardous Substance (including PCB Contamination) $ Business Interruption - Loss of Profits (Gross Revenue) - All Buildings & Facilities, Greenwood Museum, Picketing $ - Don Beer Arena, W/S Billingham Road, Pickering $ - Swimming Pool, Rear of Dunbarton High School, White Side $ Road at Sheppard Avenue, Pickering, Ontario - Pickering Recreation Complex, 1867 Valley Farm Road, Pickering $ Spoilage - Goods under Refrigeration $ Professional Fees $ Data and Media $ By-Law Cover Deductible 50,000,000. 500,000. 500,000. 500,000. Included 500,000. 94,500. 600,000. 100,000. 1,790,000. 50,000. 500,000. 10,000. Included 10,000. PROG SUMMARY SUMMARY OF COVERAGES Automobile Fleet Liability Limit Deductibles Section 3 (Third Party) Section 6 (Direct Compensation) No Physical Damage applicable to 1951 Antique Pumper (Parades) All Perils applicable to All Other Vehicles LIMiTS/AMOUNTS $ 25,0O0,0OO. $ 10,000. $ 10,ooo. $ 10,000. Garage Automobile Third Party Liability Limit Customer Vehicles Collision Limit Deductible Specified Perils Limit Deductible $ 3,000,000. $ 200,000. $ 5oo. $ 300,000. $ 5oo. COMPREHENSIVE INSU~NCE PROGRAM COVE~GE FEATURES 2004- 2005 PART A CASUALTY MUNICIPAL LIABILITY INSURANCE Features The Cowan Municipal Program incorporates a comprehensive and broadly worded liability policy which was designed specifically to meet the needs of municipalities and their corresponding risks which are quite different and unique from other commercial risks that are insured under a Commercial General Liability (CGL) policy. When comparing forms of coverage, it is important to note that unless the coverage is specifically excluded, it is generally covered, subject to the terms and conditions of the policy. · Liability coverage provided for Bodily Injury, Property Damage, and Personal Injury. · Separate Limit of Liability applies. · No Annual Aggregate limit is applicable · Coverage is provided on an Occurrence basis. · Broad form Definition of Insured applies, including: Councillors, Employees, Statutory Officers, Firefighters, Volunteers, Boards, Commissions, and Committees. · Cross Liability is included. · Coverage applies Worldwide. The following coverages are included to the full policy limit, unless specified otherwise: · Employers' Liability Contractual Liability · Liquor Liability · Tenants' Legal Liability · Sewer back-up Liability · Professional Liability on an Occurrence basis (e.g. Building Inspection Services, Medical Malpractice). · Malpractice Liability = Watercraft Liability = Products Liability · Wrongful Dismissal coverage is included, subject to the limits specified in the Summary of Coverage pages. ~ No exclusion for sexual, physicai or mental aDuse applies to the entity. Please refer to the insurance contract for all limits, terms, conditions and exclusions that apply. ERRORS AND OMISSIONS L ABIL TY INSUR NCE Features This is a claims-made policy that protects the municipality from liability imposed upon it by a court of civil law for compensatory damages because of a wrongful act causing financial loss to a third party. Claims for Wrongful Acts causing financial loss to a third party can range from, but are not limited to, negligence in building inspection, zoning, planning, passing by-laws, failing to enforce by-laws, to misrepresentation, abuse of power and acting in bad faith. · Separate Limit of Liability applies. · No Annual Aggregate limit is applicable. · Broad form Definition of Insured applies, including: Councillors, Employees, Statutory Officers, Firefighters, Volunteers, Boards, Commissions, and Committees. ' Administration of Employee Benefit Programs is included to the full policy limit (no aggregate limit applies). · Coverage applies Worldwide. Please refer to the insurance contract for all limits, terms, conditions and exclusions that apply. ~r~ni~: Cowa¢~ ,~";ompany Limitad NON-OWNED AUTOMOBILE INSURANCE Features This poficy provides/iabi/ity protection against claims arising out of accidents invoiving vehic/es not owned by the municipa/ity, but operated on its beha/f. The main coverage is as per S,P.F, No, 6--Non-Owned Automobile Policy. A separate limit of liability applies. Coverage is extended to provide excess automobile liability insurance, to the policy limit, for Councillors, Board Members, Officers, Employees, and even Volunteers for claims arising while ddving their own vehicles on municipal business. Physical damage coverage, as specified in the Summary of Coverage pages, is provided for the municipality's contractual and legal liability for damage to vehicles not owned by the corporation or any other insured. (Note: Unlike standard industry wordings, we do not restrict this coverage to "hired" automobiles only.) Please refer to the insurance contract for all limits, terms, conditions and exclusions that apply, - ! 4 - ENVIRONIVIENTAL LIABILITY INSURANCE Features This is a c/aims-made policy that protects the municipality from environmental liability for claims because of bodily injury, property damage and the prevention, control, repair, clean-up or restoration of environmental impairment. Cowan's comprehensive wording, among other things, does not limit a municipality to claims arising from a sudden and accidental event. · Separate limits of liability apply specifically to this coverage. · Broad form Definition of Insured applieS, including: Councillors, Employees, Statutory Officers, Firefighters, Volunteers, Boards, Commissions, and Committees. · Broad definition of Environmental Impairment applies. · Coverage is included for sudden and accidental events and for liability resulting from events that occur gradually and over a period of time (i.e. not limited to sudden and accidental claims). · Coverage is included for liability arising out of the escape of contaminants from properties previously owned, leased or operated by the municipality. · Coverage is included for impairment caused by owned watercraft. · Coverage applies Worldwide. · No exclusion for landfill sites, open or closed. · No exclusion for fuel tanks, above or underground. Please refer to the insurance contract for ali limits, terms, conditions and exclusions that apply, CRIME INSURANCE Features This po/icy provides protection to the municipa/ity for the/oss of money, securities and other property through the fraudu/ent or dishonest acts of emp/oyees and others. Coverage is provided on a Commercial Blanket Bond package, and may include: - Employee Dishonesty, - Loss of Money and Securities, Money Order and Counterfeit Paper Currency, and Depositors Forgery. · Audit expense coverage is in addition to the overall bond limit, to the maximum amount provided in the Summary of Coverage pages. The definition of "employee" is extended to include all persons holding positions in the municipality's service who are not compensated, and includes Members of Council, Members of all Boards, Commissions and Committees appointed by and under Council's jurisdiction. · The definition of "messenger" is also extended to include persons not compensated. · No deductible applies. Please refer to the insurance contract for all limits, terms, conditions and exclusions that apply, COUNCILLORS ACCIDENT NSURANCE Features This policy provides accident insurance coverage for the benefit of tl~e municipality's elected officials. All benefits are payable in addition to any other benefits that the injured person may be in receipt of. · Coverage applies while the individual is acting within the scope of their duties, including all travel required. · No aggregate limit applies. · No age restriction applies. Coverage is not limited to "authorized" travel only. Weekly indemnities are paid in full regardless of the individual's employment status (e.g. retired, self-employed, etc.). · Weekly indemnity for Total Loss of Time is payable for life. · A schedule of Dismemberment Benefits is provided and payable as set out in the policy. · Funeral expenses are included up to $10,000. Blanket Accident expenses are included up to $10,000. and include dental, chiropractic, registered nurse, podiatrist, ambulance, drugs, crutches, etc. Please refer to the insurance contract for all limits, terms, conditions and exclusions that apply. CONFLICT OF INTEREST INSUP-J NCE Features This policy provides for the reimbursement of legal fees and expenses incurred by the elected or appointed members of Council who are charged under the Municipal Conflict of Interest Act, provided that a court finds (1) there has been no contravention, or (2) contravention has occurred by reason of inadvertence, remoteness, or insignificance, or (3) contravention has occurred by reason of a bona fide error in judgement. · Coverage is provided in respect of each individual Insured's claim to the maximum limit specified in the Summary of Coverage pages. · Separate limit of insurance applies to this coverage. · No annual aggregate limit applies. · Coverage is extended to include any member of a Board, Commission, or Committee of the Insured as defined in the Municipal Conflict of Interest Act. · Coverage is also included for any subsequent proceedings under this Act. · The Insured selects and instructs legal counsel with no intervention by the insurer. Please refer to the insurance contract for all limits, terms, conditions and exclusions that apply. LEGAL EXPENSE INSURANCE Features This poiicy provides for the reimbursement of legal fees including disbursements incurred by the insured in defence of charges laid for an alleged offence under any Statute of the Province of Ontario (except for the Highway Traffic Act and the Municipal Conflict of Interest Act). Some of the more common Statutes where exposure exists include: Environmental Protection Act, Freedom of Information and Protection of Privacy Act, Occupational Health and Safety Act, Ontario Water Resources Act, and Pesticides Act. [] Broad form Definition of Insured applies, including: Councillors, Employees, Statutory Officers, Firefighters, Volunteers, Boards, Commissions, and Committees. · Separate limits of insurance apply to this coverage. [] Coverage applies to both "guilty" and "not guilty" outcomes if applicable. [] The Insured selects and instructs legal counsel with no intervention by the insurer. Please refer to the insurance contract for all limits, terms, conditions and exclusions that apply. PART B PROPERTY ~ 20 ~ PROPERTY iNSURANCE Features This policy provides "All Risk" coverage to protect the municipality's assets from direct physical loss or damage. Coverage is provided on a blanket basis, w,Sich means that the municipality will not be jeopardized should the value of an asset be undervalued in the schedule and suffer a total loss. Rather, the municipality will enjoy the protection of the blanket limit of all assets combined. Another key feature provides replacement of historical or unique buildings possible to preserve their heritage. of the Cowan wording is that the replacement cost coverage with materials as similar as Broad definition of property insured is included. · No co-insurance clauses apply. · Insured is not required to provide a signed statement of values and policy does not contain a stated amount clause. · Replacement Cost coverage is provided (unless specifically stated otherwise). · Worldwide coverage is included. · Replacement on same site is not required. · No restriction on property in transit and coverage is provided to policy limit. · Newly acquired property is automatically included with no limit other than the policy limit. · Permission is granted for the following: - to make additions, alterations and repairs (no limit other than the policy limit), - for any property to remain vacant or unoccupied, - to use any property for any purpose, and - to keep and use materials as usual and necessary. · Sewer back-up coverage is included. · By-law coverage is included to the policy limit. · Debris removal (including Environmental/Pollution Clean-up) is included to the policy limit. ~ 2i ~ Property insurance Features continued The followin9 coverages, if applicable, are included to the iimit specified in the Summary.. of Coverage pages: - Valuable Papers, Accounts Receivable, Extra Expense (including Interruption by Civil Authority), and Media (unless included under Data Processing Rider) The following coverages are also available, Summary of Coverage pages): if applicable (please refer to the Data Processing System and Equipment, along with Media and Extra Expense, Fine Arts, Exhibition Form, and Business Interruption. If a single loss involves both the Automobile and Property Insurance policies, the Property policy deductible is waived only on any insured property attached to the automobile. · One deductible applies should there be a loss involving both the Property and the Boiler and Machinery Insurance policies. Please refer to the insurance contract for all limits, terms, conditions and exclusions that apply. BOILER AND MACHINERY INSURANCE Features This policy insures sudden and accidental mechanical breakdown to boilers, pressure vessels, and other equipment including resulting damage, all of which is generally excluded under a Property Insurance policy. Examples of common types of breakdowns insured would include: cracking, bulging, burning, explosion, mechanical breakdown and electrical burnout. This insurance also provides inspections and certification services as required by law. Comprehensive Blanket coverage provided. Broad definition of Object, includes communication equipment and production machinery. Settlement is based on repair or replacement cost (no depreciation factor). Broad definition of Accident applies. New locations and newly installed objects are automatically included. Computer Control Equipment is included when used solely to control or operate an insured object. The following coverages, if applicable, are included to the limit shown on the Summary of Coverage pages: Extra Expense, - Water Damage, - Ammonia Contamination, - Expediting Expenses, - Hazardous Substance (including PCB Contamination), - Loss of Arena Revenues, - Spoilage, - Professional Fees, - Data and Media, and - By-Law Cover. One deductible applies should there be a loss involvin¢ both the Boiler and Machinery and Property insurance policies, Please refer t(~ the insurance contract for ail timits, torres, conditions and exclusions that appiy. PART C AUTOMOBILE AUTOMOBILE FLEET NSUP, ANCE Features This policy provides protection for all claims arising out of the use or operation of licensed automobiles owned or leased by the munic~oality. Coverage is provided as per the Statutory Automobile Owner's Policy. A special Cowan endorsement is added to enhance the basic policy coverage. Coverage is provided for Liability, Accident Benefits, Uninsured Automobile, and Direct Compensation - Property Damage. Loss or Damage coverages are available as requested by the Municipality to protect their licensed vehicles from physical damage caused by an insured peril. Coverage is automatically extended to include: newly acquired vehicles, inappropriately licensed drivers, - permission to carry explosives, - permission to rent or lease, - damage caused by freezing of Fire-Fighting Apparatus, and - permission to carry passengers for compensation. Our Replacement Cost coverage is unique. It provides repairs or replacement of vehicles with no deduction for depreciation. - On a partial loss, repair estimates are calculated by using all new parts to repair damage. - On a total loss, the municipality has the option of purchasing a new vehicle, or accepting a cash settlement for the amount it would cost to purchase a new vehicle. Guaranteed Amount coverage can be provided on specified vehicles. Repairs or replacement will be undertaken without deduction for depreciation up to the Guaranteed Amount shown on the automobile schedule attached to the policy. Valued coverage can be provided on specified vehicles, usually those that are obsolete, would not be replaced, or would be replaced with a used vehicle. Actual cash value (ACV) coverage can be provided on specified vehicles. If a single loss involves both the Automobile and Property insurance policies, the Property policy deductible is waived only on any insured property attached to the automobile. Please refer to the insurance contract for all limits, terms, conditions and exclusions that apply. GARAGE AUTOMOBILE NSURANCE Fsatures This po/icy provides protection for alt c/aims arising out o~ ~ municipa/ity's garage operations and its/ega/liabi/ity for customer vehicles. Coverage is provided as per the Statutory Garage Automobi/e Po/icy. Garage operations inc/ude not on/y repair garages, but a/so storage garages and parking lot operations. [] Coverage is provided for Third Party Liability for bodily injury or property damage as per the limit specified in the Summary of Coverage pages. · Coverage is also provided for Accident Benefits, Uninsured Automobile, and Direct Compensation Property Damage. Loss or Damage coverage is available as requested by the municipality to protect its legal liability for a customer's automobile from physical damage caused by an insured peril, while in the care, custody or control of the municipality. Physical damage coverage for customer vehicles can include Collision, and Comprehensive or Specified Perils coverage. Please refer to the limits and deductibles for the selected coverage as specified in the Summary of Coverage pages. Please refer to the insurance contract for ali limits, terms, conditions and exclusions that apply. Erar~: Cowar~ Corr~ar~,.- LimiteC