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HomeMy WebLinkAbout30-City Administrator CITY OF SAN BERNOblNO - REQUEST FC)R COUNCIL ACTION From: Fred Wilson, Assistant City Administrator Subject: General Liability Claims Administration Audit Dept: Administration August l2, 1992 Date: Synopsis of Previous Council action: 7/20/92 -- Mayor and Common Council continued item to 8/17/92. Recommended motion: That the General Liability Administration Audit be continued to September 8, 1992 in order to allow the auditor to reconcile differences contained in the report. /i;' if; ~V)I YAI. /Sr:r- ;, Signature Conta~ person: Vic Lorch Phone: 5103 Supporting data attached: Yes Ward: FUNDING REQUIREMENTS: Amount: Source: (Acct. No.! (Acct. DescriPtion) Finance: Council Notes: 75-0262 Agenda Item No :3 0 1- CITY OF SAN BERNMDINO - REQUEST FCA COUNCIL ACTION STAFF REPORT At the Council Meeting of July 20, 1992, the General Liability Claims Administration Audit was referred to the city Administrator's Office to coordinate a meeting with the City Attorney's Office and Risk Manager to work out the differences that exist in the report and report back to the Council on August l7, 1992. On August 3 and August 11, 1992, meetings were held and the City Attorney's concerns were discussed. These issues were referred to the auditor for reconciliation. Due to the auditor's vacation schedule, these issues have not been fully resolved. It is therefore recommended that this matter be continued to September 8, 1992. 75-0264 CITY OF SAN BERNCRDINO - REQUEST .oR COUNCIL ACTION F( De~ Vi ctor F. Lorch Director of Risk Management Risk Management Subject: City of San Bernardino General Liability Claims Administration Audit Date: July 15, 1992 Synopsis of Previous Council action: None Recommended motion: ( " ,,,",, That the attached report entitled "City of San Bernardino - General Liability Claims Administration Audit" be received and filed. ~=tf~ Signature Contlct plrson: Vi c to r F. L 0 rc h Supporting dltllttlched: Phone: x5308 Ward: FUNDING REQUIREMENTS: Amount: N / A Source: (ACCT. NO.) (ACCT. DESCRIPTION) Finance: 1 "'\ '.~.)cll Notes: LI..dI...J"m'.:t~ / r~~Z. H.yr ~ Agenda Item NO.a-. CITY OF SAN BERNCRDINO - REQUEST ~R COUNCIL ACTION (/ ( " "", ( " , ;I 75-0264 STAFF REPORT puroose - The General Liability Claims Administration Audit of Risk Management was done at my request for the following reasons: * Identify uncollected sources of revenue from prior years * Evaluate liability reserves in conjunction with the actuarial study of the City's self insurance program for compliance with GASB 10 , tentatively scheduled for implementation June l5, 1993 * Analysis of Risk management Liability operation after two years Backaround - When I was hired as Director of Risk Management two years ago the department had no means of tracking reserves, claim payments and expenses on litigated files, other than what was passed on to Tom Cain from City Attorney staff. Risk Management did not have a complete loss history of all the City's liability since self insuring in the late 1970's. Last year, with the aid of the City Attorney's Office, we completed an inventory of all claims and updated our records. After reviewing the City's loss history and retrieving liability policies from storage, we sent a letter to our prior insurance broker, Robert Driver, indicating payment was made of $139,000 of a claim occurring in 1982. the City's SIR at the time was $100,000. After months of follow up, Mead Insurance Company responded. They offered to pay $25,000 of the $39,000 paid by the City over and above their SIR. Their offer was received in May 1992. At that time, I suggested a complete Risk Management liability claims audit to aid in the identification of other uncollected claims reimbursements. Heyenrath and Associates was suggested, since they audit for BICEP, our liability pool. o (\ V (~ City of San Bernardino - General Liability Claims Administration Audit Recommendations Recommendation C-l Provide Tom Cain with dedicated part-time clerk. ResDonse - Risk Management presently has a SBETA part-time hire. We have applied for SBETA part-time help in the Fall, in addition to the Cal state Intern Program if available. This should free up the unit's Clerk Typist II to do some of Tom's clerical work. C-2 Recommendation Require reinsurance reimbursements City. Risk Management to solicit for insured claims paid by the ResDonse - We are currently reviewing all liability insurance policies available to us in the office as we are missing some years and applicable forms; we will ask for copies when putting carriers on notice of pending claims either exceeding the SIR or the aggregate. ( " ./ Last week we met with Bob Burns, CNA representative, to discuss the aggregate for the years 1983-l984. Bob is handling claims for that year. For policy year, 1985-l986, we'll be contacting CNA in Chicago, Illinois. CNA will review claims paid against our aggregate and reimburse the City per policy conditions. Those claims involving prior carriers are being reviewed and Risk Management is placing them on notice. At the present time, there is no need to engage legal counsel. If legal counsel is necessary, we'd recommend to the City Attorney and City Administrator that the services of a law firm specializing in insurance contracts be retained. This is a highly specialized field and litigation costs can be contained due to attorney knowledge of the field of insurance. C-3 Recommendation - Forward excess policies to ARMTech for evaluation. ResDonse - We have contacted ARMTech and will meet with them within the next week. C-4 Recommendation - Allow Tom Cain to continue to negotiate case dispositions on certain litigated cases. ResDonse - Recently, Tom has received a case back from City Attorney's Office to settle. Case concluded for $3,000. ("' C-5 Recommendation - Require the City Attorney's Office to forward ",,1 all pertinent reports from outside law firms to the Risk (.; (~ <: o --. '-..) Management Department for review and evaluation. ResDonse The ultimate responsibility for the General Liability Management programs rests with Risk Management for proper reserving, while the City Attorney's office is responsible for litigation. We are working on details to solve this problem with the city Attorney's Office for reserving practices. C-6 Recommendation - Require the city Attorney's Office to provide Risk Management Department with detailed quarterly reports on litigated files handled in-house. ResDonse - At present time, files handled in=house are discussed with Tom Cain on an individual case basis. We need to expand in this area and are currently working on a means to streamline reserve reporting with the City Attorney's Office and MIS. C-7 Recommendation - Require the Risk Management Department to evaluate all claims for reserve adequacy. ResDonse - Director of Risk Management and Liability Claims Specialist to review open files on a monthly basis. C-8 Recommendation - Require the Data Processing Department to provide monthly claims management reports. ResDonse - Risk Management and MIS to meet within 30 days to work out details. C-9 Recommendations - Conduct claims audit by 7/l/93 to ensure that the recommendations have been implemented. ResDonse - We anticipate a follow-up audit in July 1993. Item to be budgeted FY 93/94. General Comments - Heyenrath's report (ref. pp l-5 of report) indicates a lack of reporting on file status. This area needs clarification. During the last two years, communication between the City Attorney's office and Risk Management has improved. Tom Cain meets with City Attorney staff to discuss cases, and during the last six months I have met monthly with Rick Morillo to discuss areas of mutual concern in our offices. Risk Management is responsible under the City Administrator for maintaining up to date reserve and expense figures for liability claims. The city Attorney's Office is responsible for the litigation of all claims. Both departments work together on cost containment and exchanging financial information on liability claims impacting the City budget for reporting to the Mayor and Common Council. c; <: <: o C) staffina - Comments were made as to the number of litigated liability claims handled by the City Attorney staff and work load of Tom Cain. Page 7 of the Heyenrath report shows 935 open claims. Approximately 560 are related to the 1989 pipeline explosion and train wreck. these are being handled by Southern Pacific and Cal- Nev directly. This leaves a balance of 375 pending claims. As part of the claims management process, analysis of essential to monitor dollars paid out by the city. increase claim dollars also increase. work loads is As pendings Mr. Heyenrath's comments on work loads are related only to liability claims. Neither Mr. Heyenrath or Risk Management can comment on the other duties of the City Attorney's staff. Our concerns are limited to liability claims exposure only.