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U 1
. CITY OF SAN BERICARDINO - REQUEST QR COUNCIL 'Qi-ION
From:
ARTHUR J. SCHUBERT, DIRECTOR
Subject:
AUTHORIZE RISK MANAGEMENT-
DIRECTOR, THROUGH BICEP
BROKER, FRANK B. HALL &
COMPANY TO CHANGE EXCESS
WORKERS' COMPENSATION
INSURANCE CARRIERS TO
GENERAL REINSURANCE COMPANY
Dept:
Date:
RISK MANAGEMENT
JULY 24, 1989
Synopsis of Previous Council action:
At the meeting. of the Mayor and Common Counc il held January 17, 1989,
authorization was given to purchase Excess Workers' Compensation
Insurance to protect the City from catastrophic losses in the area of
workers' compensation liability.
Recommended motion:
That the Risk Management Director be directed to change excess workers
compensation insurance carriers through BICEP broker, Frank B. Hall.&
Company, to General Reinsurance Company (with an annual premium of
$54,500, a savings of $25,000 which includes a short rate cancellation
penalty of approximaterly $4,000).
/) .'~'" f f
~402-7)' /'1cl.v~
, Signature
Contact penon: Arthur J. Schubert
Supporting data attached: Staff Report
Phone:
5308
Ward:
FUNDING REQUIREMENTS:
Amount: $54,500.00
Source:
(ACCT.
(ACCT.
NO.) 001-452-53505
DESCRIPTlON)workers'
~bi~ms
Finance:
Council Notel:
75.0262
Agenda Item No.
q
A-
CITY OF SAN BERQRDINO - RI!QUEST .QR COUNCIL ACTION
STAFF REPORT
In order to help you evaluate the insurance quotations for
Excess Workers' Compensation, the following outlines some
significant differences be~ween Gen~~al ietD~ce Coroora-
tion (9~~) and Employers Re~nsurance ompany~:
1. A. M. Best Rating
Improved rating from A+ll for ERe to A+14 for GRC.
2. Policy Period
GRC offers a continuous policy form with no expiration
datel ERC has a specified termination date.
3. Self Retained Limit
GRC has a combined single limit for
diseases in the policy limit. GRe also
retention for accidents and diseases.
ace idents and
has a comb ined
ERC applies the limit separate for accidents and
diseases. ERe applies the reten tion on a comb ined bas is
for accidents and diseases.
4. Late Reporting Period
Similar for both GRC and ERe; if a claim is not reported
within one year as required, ERC reduces the amount of
loss payable by 15%, or, if more than 3 years, by 40%.
5. Def in it ion of Ace ident
GRC defines that an accident ends 72 hours afteran event
commences. Each subsequent 72-hour period is deemed to
be a separate accident. Thus, a series of accidents
arising from the same event, over a protracted period,
enables the City to tap into GRC's limits several times,
subject to the policy aggregate. After GRC's limits are
depleted, Fireman's Fund begins to pay.
6. Payroll Audit
ERe imposes a 45-day limit for Payroll Audit Reports;
GRC has no defined limitation.
7. Policy Conditions
GRC policy cond itions are more comprehensively defined.
8. Claims Expenses
75-0264
, ..
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o
Allocable Claims Expenses such as defense costs are
included in the definition of Self REtained Limit on the
ERe policy form. GRC pays allocated claims expenses in
the proportion that its share of loss bears to the total
value of the loss. GRC's allocated claims expenses are
'in addition to limits. and not 'part of limits' as
ERC's are.
CONCLUSION:
We are currently insured through Employers Reinsurance Co.
for statutory coverage in excess of $500,000 for an annual
premium of $83,507. The new quotation offers the City the
opportunity to switch carriers to General Reinsurance Corp.
for an annual premium of $54,500, a potential savings of
$29,007. (A short rate cancellation penalty of $4,000 can be
expected).
In addition to cost reduction, the new insurance policy
offers significant improvements in coverage. I recommend
that we excercise our option and switch to General Reinsurance
Corp. at the earliest possible date.