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CITY OF SAN BERNARDINO - REQUEST FOR COUNCIL ACTION
OR.r "" /I ~ ~ L
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Subject: ADOPT RESOLUTION AUTHORIZING THE
PURCHASE OF THE PROPERTY INSURANCE
FROM MAY 1, 2001 THROUGH APRIL 30, 2002
FOR A COST OF $228,320 FOR PROPERTY
INSURANCE, EARTHQUAKE INSURANCE AND
FLOOD INSURANCE FOR ALL CITY-OWNED
BUILDINGS AND VEHICLES.
From: Ed Raya
Dept: Human Resources
Date: April 30, 2001
Synopsis of Previous Council Action:
March 19,2001 Mayor and Common Council adopted Resolution 2001-54, authorizing the
execution of an agreement with Robert F. Driver Company to provide property insurance brokerage
services for a period of three years.
Recommended Motion:
Adopt Resolution.
v~~
Signature
Contact Person:
Tom Marek
Phone:
384-5090
Supporting Data Attached: Yes Ward:
FUNDING REQUIREMENTS: Amount: $228.320
Source: (Acct No) 629-453-5161
(Acct Description) Liability Fund. Insurance Premiums
Finance:
Council Notes:
S/1jOJ
Agenda Item No. ~O
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CITY OF SAN BERNARDINO -REQUEST FOR COUNCIL ACTION
STAFF REPORT
Subiect:
Adopt resolution authorizing the purchase of the property insurance from May 1, 2001 through Apri130,
2002 for a cost of $228,320 for Property insurance, Earthquake insurance and Flood insurance for all
City-owned buildings and vehicles.
Bacla!:round:
The City's property insurance broker, Robert F. Driver Company, has provided a firm quote for
purchasing the City's property insurance with all of the same terms, conditions, and limits as last year
except for a reduction in Earthquake and flood coverage from $75 million to $50 million. The cost for
this coverage is $228,320. This premium represents an increase of 33.4% ($57,147) over the previous
fiscal year. This increase is primarily due to an increase in the City' sproperty values and an overall
insurance market rate increase as explained below.
Premiums are based on five factors:
. Property Values
. Deductibles
. Coverage
. Insurance Market
. Broker's Fee
The City's property values increased from $94,424,498 last year to $121,314,987 this year. This is a
28.5% ($26,890,489) increase. This increase is primarily due to the City (rather than EDA) insuring the
Police Headquarters and the adjacent Police Annex Building (together valued at $22,195,000).
The deductibles remain the same.
Coverage Limits:
. All Risk - $125 million (the same coverage we have had since 1995)
. Earthquake and Flood - $50 million (was $75 million last year)
For several years we have experienced a soft insurance market where policy coverage was available and
premiums were relatively low. In a soft market, the insurance companies' high rate of return on
investments allows them to increase coverage while reducing premiums, and thus selling additional
policies. This brings more cash into the insurance companies for investment resulting in more profit for
the insurance industry. The market has turned and is beginning to harden because the cost of insurance
has been reduced to the point where the underwriter's cash flow has dwindled, even though capital
remains in relatively good supply. As the economy has weakened, the insurance industry's profit from
investments has been reduced resulting in an overall market rate increase for property insurance premiums
of 15% to 35%.
To partially compensate for the rate increase we recommend reducing our Earthquake and Flood coverage
to $50 million for the upcoming year, primarily because of cost.
Property
Values
2000
$94.4M
Property
Values
2001
Prop. Value
Percent
Chanl!e
Premiums
2000
$171,173
Premiums
2001
Premium
Percent
Chanl!e
$121.3M
28.5%
$228,320
33.4%
To keep our Earthquake and Flood coverage at $75 million our premium would increase to $259,559 (a
cost that is more than is currently budgeted). The difference in the premium between Earthquake and
Flood coverage of$50 million and $75 million is $31,239.
From 1991 through 1997, the City had $50 million of Earthquake and Flood insurance. In 1998 with no
increase in premiums, we were able to increase our Earthquake and Flood insurance to $75 million
because of the soft insurance market. In a hard market, specialty lines of insurance, i.e., Earthquake and
Flood, become difficult to obtain at a reasonable cost.
Our insurance broker has agreed to cut his broker's fee in half for this year. At the March 19th Council
Meeting, Marsh Risk and Insurance Services proposed performing property brokerage services at Y:. the
normal compensation for the first year if the City hired them. Our broker, Robert F. Driver Company, has
agreed to match their offer. The City's share of these savings is approximately $12,000 and this saving
has been incorporated into all the above calculations.
To keep our premium within the current budget, we recommend purchasing the City's property insurance
with $50 million in Earthquake and Flood Coverage as opposed to $75 million coverage for last year.
Financial Impact:
Funds to cover the premium of $228,320 are available ($240,000 was budgeted) from the FY 00-01
Liability Fund, in account 629-453-5161, Insurance Premiums.
Recommendation:
Adopt Resolution.
~(Q)l?'V
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1 Resolution No
2
3 RESOLUTION OF THE CITY OF SAN BERNARDINO AUTHORIZING THE
PURCHASE OF THE PROPERTY INSURANCE FROM MAY 1, 2001 THROUGH
4 APRIL 30, 2002 FOR A COST OF $228,320 FOR PROPERTY INSURANCE,
EARTHQUAKE INSURANCE AND FLOOD INSURANCE FOR ALL CITY-OWNED
5 BUILDINGS AND VEHICLES.
6
BE IT RESOLVED BY THE MAYOR AND COMMON COUNCIL OF THE CITY
7 OF SAN BERNARDINO AS FOLLOWS:
8
9 authorized to direct the City's insurance broker, Robert F. Driver Company, to purchase
10
11
12
13
SECTION 1: The Mayor of the City of San Bernardino or her designee is hereby
property insurance coverage from May 1, 2001 through April 30, 2002, for a cost of
$228,320 for $125 million All Risk property insurance and $50 million Earthquake and
Flood insurance.
.
14 SECTION 2: The authorization to execute the above mentioned purchase is
15 rescinded if the broker fails to initiate the purchase of the insurance within sixty (60)
16 days of the passage of this resolution.
17 11/
18
11/
19
11/
20
21 11/
22 11/
23 11/
24 11/
25 III
26
11/
. 27 Vlo. 20
11/
28
11/ 6/7/()/
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1 RESOLUTION AUTHORIZING THE PURCHASE OF THE PROPERTY
INSURANCE FROM MAY 1, 2001 THROUGH APRIL 30, 2002 FOR A COST OF
2 $228,320 FOR PROPERTY INSURANCE, EARTHQUAKE INSURANCE AND FLOOD
3 INSURANCE FOR ALL CITY-OWNED BUILDINGS AND VEHICLES.
4 I HEREBY CERTIFY that the foregoing Resolution was duly adopted by the
5 Common Council of the City of San Bernardino at a meeting thereof,
6 held on the
7
day of
, 2001, by the following vote,
to wit:
8
9 COUNCILMEMBERS:
ESTRADA
10
LIEN
11 MC GINNIS
12 SCHNETZ
13 SUAREZ
14 ANDERSON
15 MC CAMMACK
16
17
18
19
AYES
NAYES
ABSTAIN ABSENT
Rachel G. Clark, City Clerk
The foregOing resolution is hereby approved this
of
20
21
,2001.
22
23
Approved as to form and
24 Legal content:
25 JAMES F. PENMAN,
26 City Attorney
27
28
Judith Valles, Mayor
City of San Bernardino
BY!",. ,2
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** FOR OFFICE USE ONLY - NOT A PUBLIC DOCUMENT **
RESOLUTION AGENDA ITEM TRACKING FORM
Meeting Date (Date Adopted): S - '")-D \ Item # '20 Resolution #
Vote: Ayes 1-'"\ Nays'&- Abstain --er-
Change to motion to amend original documents:
Reso. # On Attachments: - Contract term: -
Note on Resolution of Attachment stored separately: -==-
Direct City Clerk to (circle 1): PUBLISH, POST, RECORD W/COUNTY
Date Sent to Mayor: 5 - ~ r G )
Date of Mayor's Signature: !S - ~ -61
Date ofClerk/CDC Signature: S 4-0 I
See Attached:
See Attached:
See Attached:
60 Day Reminder Letter Sent on 30th
90 Day Reminder Letter Sent on 45th day:
Request for Council Action & Staff Report Attached:
Updated Prior Resolutions (Other Than Below):
Updated CITY Personnel Folders (6413, 6429, 6433,10584,10585,12634):
Updated CDC Personnel Folders (5557):
Updated Traffic Folders (3985, 8234, 655, 92-389):
Copies Distributed to:
City Attorney /
Parks & Rec.
Code Compliance Dev. Services
Police Public Services Water
Notes:
2001- %.$
Absent ..e-
NullNoid After:<OO DpytS /'-"-0.1
By: -
Reso. Log Updated: V
Seal Impressed: "..-/
Date Returned:-
Yes -./ No By
Yes No .,/ By
Yes No V By
Yes No~ By
Yes No----L By
EDA
Finance./ MIS
!-Lffi~'" ~ttct3,
Others:
BEFORE FILING. REVIEW FORM TO ENSURE ANY NOTATIONS MADE HERE ARE TRANSFERRED TO THE
YEARLY RESOLUTION CHRONOLOGICAL LOG FOR FUTURE REFERENCE (Contract Term, etc.)
Ready to File: ~
Date: S-,(',-c,1
Revised 01/12/01