Memorandum
City of Lawrence
Administrative Service Department
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TO: |
David L. Corliss – City Manager
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FROM: |
Michael Bennett – Risk Manager
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CC: |
Frank S. Reeb – Administrative Services Director, City Clerk Cynthia Boecker – Assistant City Manager Diane Stoddard – Assistant City Manager Jonathan Douglass-Assistant to the City Manager
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Date: |
June 17, 2009
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RE: |
July 1, 2009 Insurance Policy Renewals Building/Property Insurance Fire and Medical Auto/Professional Liability Insurance
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Introduction
On July 1, 2009 at 12:01 a.m., insurance policies for the City’s Buildings/Property and Fire and Medical Auto and Professional liability coverage will expire. This memo contains staff’s recommended actions and requests your approval to bind coverage in advance of the expiration. I am pleased to recommend renewing building/property coverage with Affiliated FM. In addition, I recommend binding coverage for auto/professional liability/portable equipment coverage for the Fire and Medical Department with ESIP- ARCH Insurance Company (A Division of McNeil and Company) for the insurance period of 7/1/09 to 7/1/10. The overall cost of the insurance policies will rise by approximately one-half of one percent from the prior plan year; $191,437 to $192,577
Background Building/Property
Property and Casualty insurance is the largest component of our insurance portfolio with insurable assets of over $262 million. This is a five percent gain over last year. Property valuation was determined using Marshall and Swift.
Early in the second quarter of 2009, the City requested bids from multiple brokers and multiple insurance carriers. This included the current broker Arthur J. Gallagher and local broker HRH Willis.
Last year, due to a soft market, the City received a 13% discount from the prior policy period. The carrier lowered the City’s rate from .0517 to .045 per $100 of insured value. The soft market has continued into 2009. Affiliated FM has agreed to keep the rate at .045. However, due to the increased value of the City’s assets the premium increased slightly from $110,500 to $113,200. We did secure the from the vendor to right to have City properties appraised, at City cost, with a pro rata reduction in the premium should the appraisals come in lower than the current value.
The best bid is a renewal bid secured from Gallagher with the policy issued by Affiliated FM. Unfortunately, several carriers contacted by both brokers refused to quote a bid. According to both Gallagher and HRH Willis, the other carriers refused to offer a quote because they knew they could not match the rate offered by Affiliated FM. Companies refusing to quote a bid include The Hartford, Travelers & OneBeacon Government Risks.
The coverage deductible remains at $25,000. Flood coverage for those properties located within Zone B is included. The annual engineering fee will remain at $4,000 again due to negotiation by our broker.
Background Fire and Medical Emergency Vehicles, Professional Liability, and Portable Equipment Coverage
Several years ago the City sought out specialized insurers as opposed to commercial auto insurers and achieved significant premium savings as well as coverage enhancements. Last year the City switched from Emergency Services Insurance Program (ESIP) to VFIS for Coverage of Fire and Medical Department’s emergency vehicles, professional Liability, and portable equipment. It is my understanding the switch was made mainly because VFIS submitted a lower bid.
ESIP is funded by ARCH Insurance Company. This organization specializes in the coverage of Fire and Medical Departments.
ESIP has decided it wants back the City’s business. VFIS submitted a renewal bid of $61,706 for an increase of $1,300 from last year’s premium. ESIP submitted a proposal of $58,947. This is approximately $2,800 less than the bid from VFIS. In addition, ESIP is willing to provide $8,000,000 more in aggregate coverage than VFIS. ESIP is offering $10,000,000 in aggregate coverage while VFIS’ aggregate coverage is just $2,000,000.
Brokerage Fee
The brokerage fee paid to Gallagher will remain the same as last year for a total of $16,510. Gallagher initially sought a slight increase but agreed to reduce it’s commission to last year’s figure.
Recommended Action
Staff recommends renewing coverage for Building/Property with Affiliated FM for the insurance period of 7/1/09 to 7/1/10 for an estimated premium of $113,020. Staff further recommends binding coverage for Fire and Medical Auto/Portable Equipment/General, Management, and Professional Liability coverage with ESIP for the insurance period of 7/1/09 to 7/1/10 at an estimated premium of $58,947, the engineering fee of $4,000 and the associated brokerage fee of $16,510 for a total of $192,577. Should you have further questions, please do not hesitate to contact my office at 832-3009.
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1999-2000 |
2000-2001 |
2001-2002 |
2002-2003 |
2003-2004 |
2004-2005 |
2005-2006 |
2006-2007 |
2007-2008 |
2008-2009 |
2009-2010 |
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Insurer |
C N A |
C N A |
C N A |
Travelers |
Travelers |
St.Paul-Travelers |
Affiliated FM |
Affiliated FM |
Affiliated FM |
Affiliated FM |
Affiliated FM |
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Insured Schedule Property Value Total |
$ 108,325,729 |
$128,670,158 |
$136,270,158 |
$180,335,089 |
$190,502,081 |
$196,153,717 |
$204,444,292 |
$223,136,236 |
$234,501,775 |
$244,483,616 |
$260,164,21 |
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Deductible |
$ 10,000 |
$ 10,000 |
$ 10,000 |
$ 25,000 |
$ 25,000 |
$ 25,000 |
$ 25,000 |
$ 25,000 |
$ 25,000 |
$ 25,000 |
$25,000 |
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Rate per $100 Scheduled Property Value |
0.0395 |
0.0407 |
0.0489 |
0.0666 |
0.0714 |
0.0725 |
0.0580 |
0.0538 |
0.0517 |
0.045 |
0.045 |
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Premium |
$ 42,824 |
$ 52,305 |
$ 66,631 |
$ 120,026 |
$ 135,985 |
$ 142,206 |
$ 118,500 |
$ 120,000 |
$ 121,227 |
$ 114,018 |
$113,020 |
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1999-2000 |
2000-2001 |
2001-2002 |
2002-2003 |
2003-2004 |
2004-2005 |
2005-2006 |
2006-2007 |
2007-2008 |
2008-2009 |
2009-2010 |
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C N A |
National Indemnity |
National Indemnity |
National Indemnity |
VFIS |
VFIS |
ESIP |
ESIP |
ESIP |
VFIS |
ESIP |
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Auto/Professional Liability |
$ 40,909 |
$ 107,171 |
$ 140,000 |
$ 182,000 |
$ 63,397 |
$ 66,802 |
$ 51,988 |
$ 43,685 |
$ 48,330 |
$ 60,427 |
$58,947 |
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Portable Equipment (Inland Marine) & Engineering fee |
Auto Policy Only |
Auto only policy |
Auto only policy |
Auto only policy |
Not Elected |
Not Elected |
Not Elected |
$ 9,544 |
$ 11,667 |
$4,000 |
$4,000 |
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Premium |
$ 40,909 |
$ 107,171 |
$ 140,000 |
$ 182,000 |
$ 63,397 |
$ 66,802 |
$ 51,988 |
$ 53,229 |
$ 59,997 |
$ 64,427 |
$62,947 |
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Brokerage Fee |
Percentage of premium |
Percentage of premium |
Percentage of premium |
Percentage of premium |
$ 10,000 |
$ 10,500 |
$ 14,000 |
$ 15,000 |
$ 15,575 |
$ 16,510 |
$16,510 |
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Total |
$ 40,909 |
$ 107,171 |
$ 140,000 |
$ 182,000 |
$ 73,397 |
$ 77,302 |
$ 65,988 |
$ 68,229 |
$ 75,572 |
$ 80,936 |
$78,457 |