R2014-112 BINDER COVERAGE WITH ARTHUR J. GALLAGHER RISK MANAGEMENT SERVICES, INC.

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DEPARTMENT OF FINANCIAL MANAGEMENT RISK MANAGEMENT DIVISION MEMORANDUM NO. 2014-015 DATE: September 9, 2014 TO: Honorable Mayor Michael T. McElroy and City Council FROM: Ryan McCrady, City Manager Gregg Zientara, Director of Financial Management Scott Clark, Risk Manager SUBJECT: CITY PROPERTY, LIABILITY AND WORKERS COMPENSATION INSURANCE SUMMARY RECOMMENDATION: Staff recommends that City Council approve the purchase of excess insurance from Munich RE, Liberty Mutual and Travelers Indemnity for the period October 1, 2014 through September 30, 2015 and purchase independent professional claim administration, loss prevention services and loss reporting from Gallagher Bassett Services for the period October 1, 2014 through September 30, 2018. BACKGROUND: On March 17, 2014, Council awarded a contract to A. J. Gallagher for the marketing of excess insurance, selection of professional claims administrations, loss prevention services and loss reporting for the period October 1, 2014 through September 30, 2019. The A. J. Gallagher team includes individuals from their Itasca, Illinois office as well as the A. J. Gallagher Decatur office. A. J. Gallagher secured quotations for the policy year October 2014 thru September 2015 from insurance companies that are willing to provide excess insurance coverage for the City and this year's quotes are competitive and do represent the insurance market place for public entities. The City's current program of self insured retention (similar to deductible) and insurance includes liability to limits of $10,000,000 with a $150,000 self insured retention (SIR), property insurance for full replacement value for real property, high valued vehicles and equipment to limits of over $212,000,000 with a $150,000 SIR on real property and a $75,000 SIR on replacement value on high valued vehicles and equipment, and statutory workers compensation limits with a $500,000 SIR. The quotations received for liability and property insurance include the same limits of insurance and SIR as the City's current program. The current worker's compensation insurer offered the same limits of SIR's of $500,000 and an optional SIR of $750,000. The premium savings that would be from selecting higher self-insured retentions does not offset the higher risk the City would be taking on the workers compensation claims. The recommendation is for the current SIR of$500,000 offered by Liberty Mutual, the current carrier. The recommended companies offer the best combination of insurance with the self-insured retentions remaining the same.