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HomeMy WebLinkAboutAgenda - 12-19-1986 EXHIBIT B ADVANTAGE/DISADVANTAGE COMPARISON CHARTER HOUSE FRED S. JAMES ADVANTAGE DISADVANTAGE ADVANTAGE DISADVANTAGE Pool is 100% reinsurance. Stability of reinsurers Defense costs included First $ coverage by insurance = in limit. company. Good situation if No annual audit and subsequent = reinsurance market remains back biting. stable. However, if = reinsurance is insolvent Acquisitions during the year are liability would revert automatically covered. back to the pool for satisfaction of the loss. The following separately held = policies could be cancelled: Vehicle deductions are lower. Liability deduction is RT.ICY NAME B D®AMT. Maintenance deductible $5000. Blanket Bond $4,000 _ = Telephone/ 4,000 $2500 each and every loss Defense costs separate from Computer Equip. limit. communications/ 4,000 Equipment (Radios, Towers) EMS Malpractice 6,500 Total 18,500 Quote less than renewal quote 6,733 Total estimated savings 25,233 claims office set up in Raleigh to handle only claims for the NaCo policy holders. Policy would be pro-rated to expire annually on June 30. This would mean estimates for S budget would be more accurate Since they would be given during the same quarter as the renewal was due. Broader coverage under General Liability would include medical payment for accident or auto accident. No withdrawal penalty if terminated at anniversary date. PREMIUM SUMMARY COVERAGE PREMIUM kiAa- Property $26,998. -1`L - •UU`-`{+ General Liability - .-°--.. Without Deductible: $97,056. With $5,000. Deductible: p.c..a`c2 u.∎:.:c.c-�- $84,924. - Automobile Liability and Physical Damage: Without Liability Deductible: $84,921. With $5,000. Liability Deductible: $74,306. NOTE: The General Liability, Automobile Liability and Automobile Physical Damage coverages are offered by dRrter House, Inc. Their reinsurer and state law require that there be a program of loss control and prevention. They utilize the engineering services of the Travelers. Your portion of the engineering fee will be $2,500. diKiittiHat� j9�,'7Ji V I. (�°.CLu a • .211 , 4/' Law Enforcement Professional Liability $11,32. J C"....4 ,,,J,_, ;oral ) COLLIER 0088&ASSOCIATES.INC. w� INSURANCE PROPOSAL James For Orange Provided through North Carolina Counties Liability and Property Joint Risk Management Agency. COVERAGES Section I - Property Insurance A. All real and personal property $25,000,000 each and every loss and/or occurrence and (Pool Limit) $1,000,000 in the aggregate annually for Flood and Quake (Pool Limit) B. Automobile Physical Damage - Included Above - Actual Cash Value Section II - Casualty Insurance A. Comprehensive General Liability $1,000,000 any one claim B. Automobile Liability $1,000,000 any one claim C. (i ) Premises Medical Payments $1,000 each person $50,000 each accident C. (ii ) Automobile Medical Payments $5,000 each person Section III - Crime Insurance A. Money and Securities (within premises) $250,000 B. Money and Securities (outside premises) $250,000 C. Commercial Blanket Bond (employee dishonesty) $250,000 D. Depositor's Forgery, Money Orders, Counterfeit Current $250,000 Maintenance Deductible Each and every Loss $2,500 Windstorm Deduction applies to each building $nil Total Premium $176,105 Service Fee $ 5,850 Grand Total $181,955 12-15-86 f/ FSJ-8003 ,:;'fie"� a - '4-"f r , t F. 'z , § 58-495 GENERAL STATUTES OF NORTH CAROLINA • ..13 § 58-495. Audit. -,t- ' Each pool must be audited annually at the expense pool yi ' .* p y xpense of the ool b a cent' _ _ -x:.: `' public accounting firm, with a copy of the report available to the gove :; body or chief executive officer of each member of the pool and to the Co sinner. The board of trustees of the pool must obtain an appropriate actu: ` "-- evaluation of the loss and loss adjustment j expense reserves of the pool,includ- __- �. _ ing an estimate of losses and loss adjustment expenses incurred but not_ie ••-= : -_ ported. The Commissioner must examine each pool once every three yea's-- ;= -=- The costs of such examination expenses will be paid by the pool that is subj= -.-.- = �r to the examination.The Commissioner may examine a pool earlier than three T 7. s years after a previous examination if he has reason to believe that the pool i$ :_ insolvent or financially impaired. (1985 (Reg. Sess., 1986), c. 1027, s. 26.. I.-r _ _ `' § 58-496. Insolvency or impairment of pool. - 1:....,-.:,= r.:f - __�_—..— r _ tit= = ', (a) If, as a result of the annual audit or an examination by the Commis 1;-' sioner,it appears that the assets of a pool are insufficient to enable the pool to •- discharge its legal liabilities and other obligations, the Commissioner m -. notify the administrator and the board of trustees of the pool of the deficiency,;`.. 11 and his list of recommendations to abate the deficiency, including a recom�:" ; = mendation not to add any new members until the deficiency is abated.If the :_= '=• - = pool fails to comply with the recommendations within 60 days after the date of::_:-- _ ffi the notice, the Commissioner must notify the chief executive officers or the 7, governing bodies of the members of the pool, the Governor, the President _ the Senate,and the Speaker of the House of Representatives that the pool has-:: - u failed to comply with the recommendations of the Commissioner. ` ,: . -..: ., (b) If a pool is determined to be insolvent,financially impaired, or is other- `" wise found to be unable to discharge its legal liabilities and other obligations, -- each pool contract will provide that the members of the pool shall be asse ,_' . on a pro rata basis as calculated by the amount of each member's average = y .,i annual contribution in order to satisfy the amount of'deficiency. The assess _•.I ment may not exceed the amount of each member's average annual contribu- - : tion to the pool. (1985 (Reg. Sess., 1986), c. 1027, s. 26.) W - § 58-497. Immunity of administrators and boards-=O trustees. ! ' There is no liability on the part of and no cause of action arises against= ' ._ =_ = board of trustees established or administrator appointed pursuant to G; - 58-492, their representatives, or any pool, its members, or its employ- ,_ - .. agents, contractors,or subcontractors for any good faith action taken by them`i ;tY in the performance of their powers and duties in creating or administe •''r -- any pool under this Article. (1985 (Reg. Sess., 1986), c. 1027, s. 26.) .:: . Tiir.•. _ • -may `yam ,T 446 - !/ Afte— ••per w s ■ (...._ COUNTY of ORANGE Department of Purchasing and Central Services Pamela K.Jones,Director TO: Ken Thompson, County Manager FROM: Pam Jones, Purchasing & Central Services Director RE: Liability Insurance DATE: December 17, 1986 In session with the Commissioners on December 16, I understand action was passed to bind General Liability, Property, and Auto Property Damage and Liability to Charter House through Collier Cobb and Associates in Chapel Hill. I further understand the reasoning behind the action was, in part due to local agency preference and the fact that the other proposal had not yet been received. While both of these are indeed relevant factors, I wish to present information that should likewise be considered. First, a brief look at where we have come from. At renewal time in 1985 we took proposals to approximately 30 markets and were turned down by all but Charter House, which at that time was a new company writing coverage in North Carolina. My memo, dated November 19, indicated we had verbal commitments but nothing in , writing on the policy that was scheduled to renew on November 28. We did in fact not get a firm quotation until three days prior to renewal, since that was the only option we had, we chose to bind to Charter House with the Illinois Insurance Exchange carrying the paper. One year later we are 100% better off because we have received two quotes. One is from Charter House and one is from Fred S. James. The quotation from Charter House has some subtle differences from last year's policy, such as the increased deductible on some of our big equipment. The major difference however, falls in a much more critical area - the strength of the reinsurers. Illinois Insurance Exchange determined they had consumed too much capacity in the N.C. market and pulled out of Charter House. They were replaced with three (3) companies (listed on Exhibit A) whose strength is considerably less than the Exchange and far below the capacity of those reinsurers listed for Fred S. James. I would likewise call to your attention that since the pool is 100% reinsured, ie. the first dollar of a claim is covered by some insurer, that the strength of these companies becomes even more important, especially since State Statute dictates that if a pool is deemed to be insolvent it can come back to it's subscribers to participate in the loss. The pool with Fred S. James was set up at the request of NACO to Human Services Building • 300 West Tryon Street • Hillsborough, North Carolina 27278 Telephones: 919 732-8181 • 919 967-9251 • 919 688-7331 • 919 227-2031 V allow counties who had lost coverage to get insurance and to hopefully save premium dollars for other Counties. This coverage was first available July 1, 1986. Currently 14 counties are participating the Plan and six (6) others including Orange County, are considering proposals. As you can see from Exhibit A, the reinsurer's for this coverage are extremely large, well-known companies, rated A+ by Best's. I would like to call to your attention the major, if not only, drawback of the James plan. There is a $2500 maintenance deductible applicable to each and every loss. This amount is lower than the liability and property deductible to which we've been accustomed ($5000) , but considerably higher than the $500 deductible currently on Motor vehicles. After analysis of the 1986 claims it is determined we would have been reimbursed approximately $7000 less on the James plan than what was acutally received from Charter House. However, Charter House has modified their deductible in 1987 such that with like accidents we would have received approximately $6500 rather than $11,000. For the difference in premium amounts the higher deductible would seem a wise trade-off. The advantage/disadvantage comparison (Exhibit B) and the policy data sheet (Exhibit A) will indicate that for stability and cost the recommendation for acceptance must be in a favor of the proposal from Fred S. James. I cannot stress enough the importance of strong reinsurance companies and from that stand point alone James is miles ahead of the other company, There would also be advantages to consolidating some of our smaller, specialized property policies, such as computer and communications equipment. This coverage is provided in the James proposal under the blanket property section. !I Last, but not least, is the cost factor. Up front the cost appears to have only a $6773 difference. However, when you consider the above mentioned policies that could be dropped as a result of the coverage being provided in the James proposal, the difference soars to approximately $25,233. That's 14% of the total policy! Whichever policy is finally selected, I would suggest a reserve account be set up with the funds from the premium savings and be designated for payment of deductibles. This will serve a two fold purpose: 1. ) It will ease the strain likely to be placed on the budgetary account when deductibles are charged and, 2. ) It would provide a better tracking method for payments of deductibles and would alert us early on if claims were getting out of hand. Ii I would further suggest that County designate approximately $3000 of surplus funds in the insurance account to set up a data base to track claims activity and coverage information and to begin a safety program with primary focus on driver and worker safety. Since the deductible is substantial, a learning process of how to avoid accidents seems in order. Mr. Thompson, I appreciate the consideration both you and the Board members have given this matter. I assure you I have evaluated the proposals very carefully and I am quite pleased to make the recommendation to bind to Fred S. James. Hopefully this will be a step in the right direction to stabilizing the County's insurance costs. EXHIBIT B ADVANTAGE/DISADVANTAGE COMPARISON CHARTER HOUSE FRED S. JAMES ADVANTAGE DISADVANTAGE ADVANTAGE DISADVANTAGE Pool is 1008 reinsurance. Stability of reinsurers Defense costs included First $ coverage by insurance = in limit. company. Good situation if No annual audit and subsequent = reinsurance market remains back biting. stable. However, if = reinsurance is insolvent Acquisitions during the year are liability would revert automatically covered. back to the pool for = satisfaction of the loss. The following separately held policies could be cancelled: Vehicle deductions are lower. Liability deduction is POLICY WM3 BiDGEIED AMr• Maintenance deductible $5000. Blanket Bond $4,000 $2500 each and every loss Telephone/ 4,000 = Defense costs separate from Computer Equip. limit. communications/ 4,000 Equipment (Radios, Towers) EMS Malpractice 6,500 Total 18 Quote less than renewal quote 6,733 Total estimated savings 25,233 Claims office set up in Raleigh to handle only claims for the Naco policy holders. Policy would be pro—rated to expire annually on June 30. This would mean estimates for i budget would be more accurate Since they would be given during the same quarter as the renewal was due. Broader coverage under General Liability would include medical payment for accident or auto accident. No withdrawal penalty if terminated at anniversary date. PREMIUM SUMMARY COVERAGE PREMIUM Property $26,998. -t'- ` , _ t..-��'` General Liability `4V Without Deductible: $97,056. With $5,000. Deductible: 4.,0-L c EL,-tz y<<�-- $84,924. - Automobile Liability and Physical Damage: Without Liability Deductible: $84,921. With $5,000. Liability Deductible: $74,306. NOTE: The General Liability, Automobile Liability and Automobile Physical Damage coverages are offered by Carter House, Inc. Their reinsurer and state law require that there be a program of loss control and prevention. They utilize the engineering services of the Travelers. Your portion of the engineering fee will be $2,500. la,=( dariLtuti 18g,'7?1 i L'1 (0-0.. .211 , 41s Law E4orcement Professional Liability J $11,38.2. Cr R INIALLI Alf&,s ) COLLtER COBB&ASSOCIATES.INC + 1 r ' INSURANCE PROPOSAL JamEs For Orange Provided through North Carolina Counties Liability and Property Joint Risk Management Agency. COVERAGES Section I - Property Insurance A. All real and personal property $25,000,000 each and every loss and/or occurrence and (Pool Limit) $1,000,000 in the aggregate annually for Flood and Quake (Pool Limit) B. Automobile Physical Damage - Included Above - Actual Cash Value Section II - Casualty Insurance A. Comprehensive General Liability $1,000,000 any one claim B. Automobile Liability $1,000,000 any one claim C. (i ) Premises Medical Payments $1,000 each person $50,000 each accident C. (ii ) Automobile Medical Payments $5,000 each person Section III - Crime Insurance A. Money and Securities (within premises) $250,000 B. Money and Securities (outside premises) $250,000 C. Commercial Blanket Bond (employee dishonesty) $250,000 D. Depositor's Forgery, Money Orders, Counterfeit Current $250,000 Maintenance Deductible Each and every Loss $2,500 Windstorm Deduction applies to each building $nil Total Premium $176,105 Service Fee $ 5,850 Grand Total $181,955 12-15-86 r-sJ—eons +x o = . _x yLL_ tiY fir_ _ :31 T. `°:i § 58-495 GENERAL STATUTES OF NORTH CAROLINA § 58- 58-495. Audit. - , k Each pool must be audited annually at the expense of the pool by a cent' x _ = public accounting firm, with a copy of the report available to the Bove ' body or chief executive officer of each member of the pool and to the Commis. bod p =. ':':i sioner. The board of trustees of the pool must obtain an appropriate ac . e :, evaluation of the loss and loss adjustment expense reserves of the pool,includ- - �; ing an estimate of losses and loss adjustment expenses incurred but not ice`_° ``�` _k. : ported. The Commissioner must examine each pool once every three e ,.._,.. q ars, The costs of such examination a enses will be aid b the ool that is sub 414 xP P Y P i :a to the examination.The Commissioner may examine a pool earlier than three __:' t. �; years after a previous examination if he has reason to believe that the pool is . - insolvent or financially impaired. (1985 (Reg. Sess., 1986), c. 1027, s. 26 :-=- i -6- § 58-496. Insolvency or impairment of pool. -tit:-T. =.'T (a) If, as a result of the annual audit or an examination by the Comims.. r-.:' sioner,it appears that the assets of a pool are insufficient to enable the pool to • :- discharge its legal liabilities and other obligations, the Commissioner m .*:- ; `: notify the administrator and the board of trustees of the pool of the deficiency - - -=yiy and his list of recommendations to abate the deficiency, including a recom- mendation not to add any new members until the deficiency is abated.11th ^7,.. y - -- pool fails to comply with the recommendations within 60 days after the dated -; - f3, the notice, the Commissioner must notify the chief executive officers or the' - governing bodies of the members of the pool, the Governor, the President .; ;`' ., the Senate,and the Speaker of the House of Representatives that the pool , _ ,.- failed to comply with the recommendations of the Commissioner. .`._- �_} (b) If a pool is determined to be insolvent,financially impaired,or is other-_ --i. wise found to be unable to discharge its legal liabilities and other obligations, • -- each pool contract will provide that the members of the pool shall be a ,,- �F�=_-: ' on a pro rata basis as calculated by the amount of each member's average ':;i annual contribution in order to satisfy the amount ofodeficiency. The assess- -i ment may not exceed the amount of each member's average annual contribu-:. tion to the pool. (1985 (Reg. Sess., 1986), c. 1027, s. 26) r,. § 58-497. Immunity of administrators and boards To trustees. �' _ There is no liability on the part of and no cause of action arises against °' - __ board of trustees established or administrator appointed pursuant to G.. - 58-492, their representatives, or any pool, its members, or its employ- _ agents, contractors,or subcontractors for any good faith action taken by them:::._ I: in the performance of their powers and duties in creating or administe '-f any pool under this Article. (1985 (Reg. Sess., 1986), c. 1027, s. 26.) -; • .. Y/g C - • a.i, 446 _ _ ar APPROVED ON 1/5/87 MINUTES ORANGE COUNTY BOARD OF COMMISSIONERS SPECIAL MEETING DECEMBER 19, 1986 The Orange County Board of Commissioners met in Special Session on Friday, December 19, 1986 at 2: 00 p.m. in the Commissioners Room, Orange County Courthouse, Hillsborough, North Carolina to consider additional information about liability insurance coverage for the County of Orange. BOARD MEMBERS PRESENT: Chair Shirley E. Marshall and Commissioners John Hartwell and Stephen Halkiotis. ATTORNEY PRESENT: Geoffrey Gledhill. STAFF PRESENT: County Manager Kenneth R. Thompson, Assistant County Manager Albert Kittrell, Clerk to the Board Beverly A. Blythe and Purchasing Director Pamela Jones. The meeting was called to order by Chair Shirley E. Marshall. Purchasing Director Pamela Jones presented information on the two general liability, property and auto property damage and liability proposals received by Orange County. The only drawback of the plan presented by the Fred S. James Company was the $2500 maintenance deductible applicable to each and every loss. She compared the two proposals and recommended that the Board consider giving priority to the proposal from Fred S. James. Motion was made by Commissioner Hartwell, seconded by Commissioner Halkiotis to rescind the action taken at the December 16 Board meeting with regard to liability insurance and accept the proposal from Fred S. James for general liability, property, and auto property damage and liability insurance from December 20, 1986 to June 30, 1987. VOTE: UNANIMOUS. The Board requested that further information be provided at the January 5, 1987 meeting on the allocation of money that may be required to cover the $2500 maintenance deductible in the Fred S. James policy. ADJOURNMENT Chair Shirley E. Marshall adjourned the special meeting. The next regular meeting is scheduled for Monday, January 5, 1987 in the Courtroom of the Old Courthouse, Hillsborough, North Carolina. Shirley E. Marshall, Chair Beverly A. Blythe, Clerk �.I cools. COUNTY of ORANGE Department of Purchasing and Central Services Pamela K.Jones.Director TO: Ken Thompson, County Manager FROM: Pam Jones, Purchasing & Central Services Director RE: Liability Insurance DATE: December 17, 1986 In session with the Commissioners on December 16, I understand action was passed to bind General Liability, Property, and Auto Property Damage and Liability to Charter House through Collier Cobb and Associates in Chapel Hill. I further understand the reasoning behind the action was, in part due to local agency preference and the fact that the other proposal had not yet been received. While both of these are indeed relevant factors, I wish to present information that should likewise be considered. First, a brief look at where we have come from. At renewal time in 1985 we took proposals to approximately 30 markets and were turned down by all but Charter House, which at that time was a new company writing coverage in North Carolina. My memo, dated November 19, indicated we had verbal commitments but nothing in writing on the policy that was scheduled to renew on November 28. We did in fact not get a firm quotation until three days prior to renewal, since that was the only option we had, we chose to bind to Charter House with the Illinois Insurance Exchange carrying the paper. One year later we are 100% better off because we have received two quotes. One is from Charter House and one is from Fred S. James. The quotation from Charter House has some subtle differences from last year's policy, such as the increased deductible on some of our big equipment. The major difference however, falls in a much more critical area - the strength of the reinsurers. Illinois Insurance Exchange determined they had consumed too much capacity in the N.C. market and pulled out of Charter House. They were replaced with three (3) companies (listed on Exhibit A) whose strength is considerably less than the Exchange and far below the capacity of those reinsurers listed for Fred S. James. I would likewise call to your attention that since the pool is 100% reinsured, ie. the first dollar of a it claim is covered by some insurer, that the strength of these companies becomes even more important, especially since State Statute dictates that if a pool is deemed to be insolvent it can come back to it's subscribers to participate in the loss. The pool with Fred S. James was set up at the request of NACO to Human Services Building • 300 West Tryon Street • Hillsborough, North Carolina 27278 Telephones: 919 732-8181 • 919 967-9251 • 919 688-7331 • 919 227-2031 I _ I allow counties who had lost coverage to get insurance and to hopefully save premium dollars for other Counties. This coverage was first available July 1, 1986. Currently 14 counties are participating the Plan and six (6) others including Orange County, are considering proposals. As you can see from Exhibit A, the reinsurer's for this coverage are extremely large, well-known companies, rated A+ by Best's. I would like to call to your attention the major, if not only, drawback of the James plan. There is a $2500 maintenance deductible applicable to each and every loss. This amount is lower than the liability and property deductible to which we've been accustomed ($5000) , but considerably higher than the $500 deductible currently on Motor vehicles. After analysis of the 1986 claims it is determined we would have been reimbursed approximately $7000 less on the James plan than what was acutally received from Charter House. However, Charter House has modified their deductible in 1987 such that with like accidents we would have received approximately $6500 rather than $11,000. For the difference in premium amounts the higher deductible would seem a wise trade-off. The advantage/disadvantage comparison (Exhibit B) and the policy data sheet (Exhibit A) will indicate that for stability and cost the recommendation for acceptance must be in a favor of the proposal from Fred S. James. I cannot stress enough the importance of strong reinsurance companies and from that stand point alone James is miles ahead of the other company, There would also be advantages to consolidating some of our smaller, specialized property policies, such as computer and communications equipment. This coverage is provided in the $ James proposal under the blanket property section. Last, but not least, is the cost factor. Up front the cost appears to have only a $6773 difference. However, when you consider the above mentioned policies that could be dropped as a result of the coverage being provided in the James proposal, the difference soars to approximately $25,233. That's 14% of the total policy! Whichever policy is finally selected, I would suggest a reserve account be set up with the funds from the premium savings and be designated for payment of deductibles. This will serve a two fold purpose: 1. ) It will ease the strain likely to be placed on the budgetary account when deductibles are charged and, 2. ) It would provide a better tracking method for payments of deductibles and would alert us early on if claims were getting out of hand. I would further suggest that County designate approximately $3000 of surplus funds in the insurance account to set up a data base to track claims activity and coverage information and to begin a safety program with primary focus on driver and worker safety. Since the deductible is substantial, a learning process of how to avoid accidents seems in order. Mr. Thompson, I appreciate the consideration both you and the Board members have given this matter. I assure you I have evaluated the proposals very carefully and I am quite pleased to make the recommendation to bind to Fred S. James. Hopefully this will be a step in the right direction to stabilizing the County's insurance costs. 9