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City Council Regular
Meeting Date: 01/15/2019  
Subject:    Consider Resolution 19-25 Authorizing 2018-2019 Insurance Renewals
From: Francine Hanson, Accounting Manager

Staff recommends accepting the quote from the League of Minnesota Cities Insurance Trust (LMCIT) for property and liability insurance for the period December 1, 2018 through November 30, 2019.
Mr. Mark Lenz, North Risk Partners, formerly Bearence Management Group, the City's insurance agent, has presented a quotation for the property and liability policy, which includes a $50,000 deductible up to an aggregate of $200,000 as in previous policies.  The annual premium savings, by utilizing the $50,000 deductible rather than a $1,000 deductible, will be roughly $217,300.  The City paid approximately $95,000 in property and liability losses in 2018 plus approximately $66,100 in net losses for physical damage to City owned vehicles.   

Property/Automobile Rates  The property premium increased by 18.4 percent.  Coon Rapids is insuring $137.9 million in buildings, contents, and property in the open (parks) compared to $131.8 million in the prior year.  This increase is primarily due to the completion of the Riverwind recreation center and playground, Crooked Lake Beach improvements, and the new Boulevard Plaza and splash pad. 

For automobiles, the City currently covers 207 vehicles compared to 201 in the prior year.  The number of vehicles is dependent on how quickly older vehicles are deleted from the fleet.  In prior years, the City has opted to only insure vehicles for liability, not physical damage due to high deductibles.  This does not include heavy equipment such as dump trucks and fire trucks which do carry physical damage/collision coverage dependent on overall value.  This year, a new optional coverage was offered to the City for police vehicles only.  This coverage offers a $1,000 deductible per occurrence for comprehensive and collision insurance at an annual cost of $26,310.  The City has added this new option to the 2018-2019 renewal.  Over the past several years, out of pocket costs for police vehicles have been well over the cost of this new premium so it will result in a cost savings for the City.

Liability Premium  The LMCIT's liability rating system is designed to be simple, do a good job of allocating premium costs to members, and uses just five key factors: number of households, sewer connections, city employees, police officers and overall city expenditures.  This rating system is used to rate municipal liability and auto liability premiums.  This premium increased by approximately 16.8 percent primarily due to an increase in the experience factor based on the City's past claim history.

The experience rating factor is based on six categories of losses:  police, land use, employment, sewer backups, automobile and all other.  Actual losses are compared to expected losses in cities with comparable numbers over the past three years.   For the 2018-19 renewal, the experience modification factor increased from .895 to .980.  This year's premium is based on 2015, 2016 and 2017 losses. Police liability claims impacted the City's experience modification factor negatively for this policy year resulting in a higher premium cost to the City. 

Legal Limit  Statutory limits are $500,000 per claimant and $1.5 million per occurrence.  The City has the option to waive these limits, allowing the LMCIT to pay claims in excess of the statutory limit.  Waiving the limit does increase the premium.  Staff recommends the City not to waive the statutory limit.  The additional cost of adding another $1,000,000 in coverage would be $83,492.

No Fault Sewer Back-up Coverage  The City carried this coverage from 2002 through 2010 but declined in 2011 and 2012.  The City Council did request that the City carry the insurance starting again in 2013-14.  The premium cost for the 2018-2019 renewal is $16,301.   No fault sewer back-up coverage would supplement a homeowner's personal insurance up to $10,000 per sewer back-up claim no matter who is at fault.  Without the added coverage, the City's insurance would only cover the claim if it were determined to be the City's negligence that caused the back-up.  In 2018, the City paid two $10,000 claims under the sewer no fault coverage.
Staff recommends authorization for the following:
  •  Purchasing insurance through the LMCIT with a $50,000 deductible up to an annual aggregate of $200,000.
  •  Maintaining statutory legal limits of $1.5 million per occurrence.
  •  Authorize Resolution 19-25 purchasing sewer backup liability insurance.

Resolution 19-25 Approve Purchase of Sewer Backup Coverage
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