Memorandum

City of Lawrence

Administrative Service Department

TO:	David L. Corliss – City Manager
FROM:	Michael Bennett – Risk Manager
CC:	Cynthia Wagner – Assistant City Manager Diane Stoddard – Assistant City Manager Jonathan Douglass-Assistant to the City Manager
Date:	December 3, 2009
RE:	January 1, 2010 Insurance Policy Renewal Excess Workers Compensation coverage

Introduction

On January 1, 2010 at 12:01 a.m., the City’s excess workers compensation 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 excess workers compensation coverage with Midwest Employers Casualty Company (MECC).   The cost of the insurance policy fell slightly from $41,856 to $38,900.  This does not include terrorism coverage.  Terrorism coverage is available for $1,167.00.  I do not recommend terrorism coverage.

Background on Excess Coverage

There are only two excess workers compensation carriers that will write coverage for municipalities the size of Lawrence.  The two carriers are Midwest Employers Casualty Company and Safety National.  Our broker, HRH Willis, was asked to seek bids from both carriers at multiple retention levels.  They were also asked to see if any other carrier would be willing to write the requested coverage. 

Excess workers compensation coverage begins when the payments made on a workers compensation claim exceed a predetermined retention.  The recommended policy has an excess retention of $750,000.  The City made a decision several years ago to raise the retention to $750,000.  I do not recommend that the retention be lowered.

MECC is willing to write coverage for a slightly lower retention level.  It is willing to lower the retention to $700,000 but the premium would increase to $50,604.  I do not recommend lowering the retention. 

The Safety National quote is slightly lower than MECC.  Safety National will provide the same coverage for $37,867 or $1,133.00 less than MECC.  It will also offer much lower retentions at an increased premium.  A $550,000 retention policy costs $82,188.  A $650,000 retention policy costs $62,394.

Both carriers are reputable, well respected carriers.  However, I do not recommend the Safety National policy for the following reasons.  MECC is the current carrier and provides an abundance of safety training materials at no charge to its policy holders.  These include powerpoint presentations on various OSHA Safety topics, free training webinars and policy templates.  Safety National does not provide the same level of services and materials.  In addition, MECC recently honored two claims totaling nearly $200,000 for claims occurring in 1999 and 2001.    

Brokerage Fee

HRH Willis is being paid 15% of the premium.  This fee is built into both bids.  There is an additional file maintenance fee of $250.

Recommended Action

Staff recommends renewing coverage for excess workers compensation coverage with MECC for the insurance period of 1/1/2010 to 12/31/2010 for an estimated premium of $38,900.  Staff further recommends keeping the same retention.