Memorandum

City of Lawrence

City Manager’s Office

TO:	David L. Corliss, City Manager
FROM:	Michael Bennett,  Risk Manager
CC:	Cynthia Wagner, Assistant City Manager Diane Stoddard, Assistant City Manager Jonathan Douglass, City Clerk/Assistant to the City Manager
Date:	June 15, 2010
RE:	July 1, 2010 Insurance Policy Renewals Property/Casualty Insurance Fire and Medical Auto/Professional Liability Insurance

Introduction

On July 1, 2010 at 12:01 a.m., the City’s property/casualty and – auto/professional liability/portable equipment liability coverage for the Lawrence/Douglas County Fire/Medical Department will expire.  This memo contains staff’s recommended actions and requests your approval to bind coverage in advance of the expiration. 

Brokerage Fee

The City worked with Arthur J. Gallagher in brokering these coverages. The brokerage fee paid to Gallagher will remain the same as the last two years for a total of $16,510.  Gallagher initially sought a slight increase but agreed to reduce its commission to last year’s figure.

Property/Casualty

Property and Casualty insurance is the largest component of our insurance portfolio with insurable assets of nearly $269 million.  The premium reflects a 4.6% percent decrease over last year.  Early in the second quarter of 2010, the City requested bids from multiple brokers and multiple insurance carriers.  This included the current broker Arthur J. Gallagher and local broker HRH Willis. 

In 2008, 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 to 2010.  The fact the City has not submitted a property damage claim in several years allowed the broker to negotiate with several carriers including, but not limited to, Affiliated FM, The Hartford, Chubb, Great American and Beacon One.  The only two carriers submitting comparable bids were Affiliated FM and The Hartford.

The coverage deductible remains at $25,000.  Flood coverage for those properties located within Zone B is included. 

Significant savings have been achieved over last year’s property and casualty premium.  This reduction includes the addition of property valuation for the West Labs Facility to the City’s portfolio.   This savings is created by switching carriers from Affiliated FM to The Hartford.  Both carriers are top rated insurance carriers, but the premium from the Hartford is $6,196 less than the Affiliated FM bid as shown below:

                             Affiliated FM            $116,120

                             Hartford                  $109,924

Fire/Medical Auto/Professional Liability/Portable Equipment

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.  The City has repeatedly switched between VFIS and Emergency Services Insurance Program (ESIP) over the last few years.  The policy provides coverage of Fire and Medical Department’s emergency vehicles, professional liability, and portable equipment.  Bids were sought from both companies. 

ESIP submitted a renewal bid of $61,090.  The VFIS bid was not competitive as it exceeded $77,000.  Renewing/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 7/1/10 to 7/1/11 is recommended.  This policy will increase slightly, from $58,947 to $61,090, due to two minor accidents occurring during the current plan year. 

Total Cost

The total cost of the insurance policies will fall from $192,577 to $187,524, as follows:

                             Property/Casualty               $109,924

                             Fire/Medical                       $ 61,090

                             Brokerage Fee                   $ 16,510

                             TOTAL                             $187,524

In addition, $3,780 of the property/casualty premium will be paid by the occupants of the West Lab Building.  The total savings are $8,833.

Recommended Action

Staff recommends the following actions, if appropriate:

• Bind coverage for Property/Casualty Insurance from the Hartford for the insurance period of 7/1/10 to 7/1/11 for a premium of $109,924. 

• Bind coverage for Fire/Medical Auto/Professional Liability/Portable Equipment with ESIP for the insurance period of 7/1/10 to 7/1/11 at a premium of $61,090. 

• Payment of brokerage fee of $16,510 to Arthur J. Gallagher.