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CITY OF SAN BERNODINO - REQUEST FeR COUNCIL ACTION
Approve purchase of Excess Worker's
Subject: Compensation Insurance for Losses
in Exces. of $500,000 from
Employers' Reinsurance Corporation
through Marsh McClennan at an
Estimated Annual Cost of $82,000
From: James E. Robbins,
Acting City Administrator
Dept: City Administrator
Deta: January 4, 1989
Synopsis of Previous Council action:
Recommended motion:
~~hat the purchase of Excess Workers' Compensation insurance from
Employers' Reinsurance Corporation, through Marsh McC1ennan, for
losses in excess of $500,000, be approved.
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Signature
C,ontact person: James E. Robbins
Phone:
5122
S,Jpporting data attached: Yes
Ward: N/A
Est~mated-Annual
Amount: $82,000 Cost
fUNDING REQUIREMENTS:
Source: (Acct. No.)
001-452-53505
(Acct. Descriotion) Workers' Compensation Premium
Finance:_~ ~UI
Council Notes:
AQenda Item No.
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C:ITY OF SAN BERN"'DINO - REQUEST ~ COUNCIL ACTION
STAFF REPORT
We have been able to reduce the city's exposures in liability
by helping to create and by joining the Big Independent
cities Excess Pool (BICEP). We were also able to lessen the
city's exposure to loss by restructuring coverages and by
soliciting competitive bids on property insurance. only one
other area of significant exposure to loss exists. This is
Excess Workers' Compensation.
As you know, the city has been self insured for Workers'
Compensation insurance for seventeen years. Fleming and
Associates of La Canada, California has been our claims
administrator since the program's inception. In the early
years of the program, the City purchased Excess Workers'
Compensation and setup cash reserves. This provided prudent
protection to any excessive losses the City might incur. with
the economic crunch caused by Proposition 13 and a crisis in
insurance availability, the City was left without adequate
cash reserves and no insurance.
Excess insurance is different than most coverages, just as
Workers' Compensation is different than most coverages. The
basic concept is that the City will cover the first dollar of
loss for any injury to any City employee if the loss arises
from city employment or is in the course of City employment.
This loss covers both unlimited medical expenses and wages
lost. Lost wages are subject to limitations contained in
state statutes. It is the unlimited medical expenses that
can cause real problems. Head, spine and burn injuries can
easily reach the million dollar mark these days. Under
Workers' Compensation law, injuries that occur to several
employees as a result of a single cause or incident, are
treated as a single loss. One explosion, one fire, or any
one of a dozen other scenarios is all that is needed to
create significant loss. To protect the City from this kind
of loss, we need to again purchase Excess Workers' Compensa-
tion insurance. since the coverage is now available at a
reasonable price, this seems very prudent.
Five different companies were asked to quote, note that this
is probably most if not all the companies writing this kind
of insurance, two declined and three quoted. Based on the
quotes it is respectfully recommended that the Mayor and
Council approve the purchase of Excess Workers' Compensation
insurance for losses in excess of $500,000 with an estimated
annual cost of $82,000, based on a rate of $00.2622 per $100
of payroll, from Employers' Reinsurance Corporation through
Marsh McClennan.
L~ROc2!f :."
Acting city Administrator
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