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9.a) Renewal of Insurance 2012 Meeting Date: 11/15/2011 Agenda Item: � � City Council Agenda Report City of Scandia 14727 209�' St. North Scandia, MN 55073 (651) 433-2274 Action Requested: Discuss annual renewal of insurance coverage from League of Minnesota Cities Insurance Trust (LMCIT) and decide whether or not to waive the monetary limits on tort liability established by Minnesota Statutes for 2012. Deadline/ Timeline: The renewal date for all insurance coverage provided by LMCIT is December 1, 2011. Background: • The City purchases all of its insurance coverage through the League of Minnesota Cities Insurance Trust(LMCIT). LMCIT is a cooperative, member-owned organization founded in 1980 that provides property, liability, workers' compensation and employee benefit needs to Minnesota cities. Members contribute premiums to a jointly-owned fund rather than paying premiums to buy insurance from a private insurance company. The funds are used to pay for members' claims, losses and expenses. LMCIT's property/casualty program has more than 1,100 members. • LMCIT coverage is designed specifically for Minnesota Cities. Attached is a publication from the League of Minnesota Cities about how to compare coverage and quotes. The city has not recently looked for other quotes. There are few, if any, insurance companies that could provide comparable coverage. • Rates for 2012 are not yet available. The final cost will be determined based on coverage selected by the City. In 2011, the total premium was $31,039. Each year, LMCIT returns dividends to its members. The dividends vary significantly year-by-year(in 2010, Scandia's dividend was $5,864.) • The City Council must decide each year whether to waive the statutory monetary limit on tort liability. If the city does not waive the limit, an individual claimant would be able to recover no more than $500,000 on any claim to which the limits apply, with a total limit on a single occurrence of$1.5 million. If the city does waive the limit, an individual claimant could potentially recover an amount up to $1.5 million, plus any excess liability insurance coverage (Scandia currently cames $1 million.) Page 1 of 2 11/08/11 • Most communities (about 70%) do not waive the limit. Previously, Scandia waived the limit,but decided not to do so in 2009, 2010 and again in 2011. Last year, it was estimated that the city saves approximately$450 per year on liability insurance premiums by not waiving the limit. LMCIT's publication on liability coverage and waivers is attached for your information. • The City currently has a deductible of$500 for all claims. Staff investigated the possibility of increasing the deductible to $1,000 and found that it would save about $1,800 in annual premiums. Increasing the deductible to $2,500 would save about $3,570. Updated estimates for possible premium savings are not available,but could be about the same. • Over the last 4 policy years, the city has submitted 7 insurance claims, 6 of which were paid for a total deductible cost of$3,000. Assuming roughly the same premium savings, if the deductible had been $1,000 instead of$500 during those 4 years, the net savings over that time would have been $1,200. If the deductible had been $2,500 instead of$500 during those 4 years, the city's cost would have been an extra $720. • JoAnn Buse of Security State Agency will be available at the November 15 meeting to answer any questions that the Council may have. Recommendation: I recommend that the Council renew insurance coverage with LMCIT for 2012, and pass a motion to not waive the tort liability limits. The Council should discuss whether or not to increase the deductible from $500 to $1,000 for the new policy year. Attachments/ • Letter dated November 3, 2011 from JoAnn Buse, Security State Materials provided: Agency • "LMCIT Liability Coverage Options", LMCIT • Premium and Dividend History • LMCIT History and Overview Contact(s): JoAnn Buse, Agent Security State Agency(433-5753) Prepared by: Anne Hurlburt, Administrator (insurance renewal 2012) Page 2 of 2 11/08/11 SECURITY STRTE RGENCY � November 3, Zo11 RECEIVED NOV —� 2011 City of Scandia 14727 209`h Street CITY OF SCANDIA Scandia, MN 55073 Attn: Anne Hurlburt City Administrator Re: League of MN Cities Insurance Trust Insurance Renewal - 12/1/2011 Dear Anne: As we discussed, the Mayor and City Council will be reviewing the Liability Coverage Waiver Form for this year's renewal application at the Council Meeting on November 15`h. I have included a Risk Management Memo prepared by LMCIT which explains waive or not to waive the monetary tort limits the statutes provide. In the past,the City does not waive the statutory tort limits. In doing so, this provides an annual premium savings of approximately$450.00. I have been in contact with LMCIT to see if they are planning on declaring a dividend for this year and they plan to declare a dividend. Last year's dividend for the City was$5,864.00. I have attached a chart which outlines the dividends the City has received since 2001. I am also including a memo regarding the history of LMCIT. As you review this information, LMCIT provides a comprehensive insurance package for their member Cities. Our agency is in the process of obtaining the renewal quotation and we have asked LMCIT to provide quotations to include deductible options. If you have any questions, please do not hesitate to contact our office. incerely, �,,: Gl2 D oAnn Buse Agency Manager 21190 Ozark Avenue North, Box 190 Scandia, Minnesota 55073 PH 651-433-5753 FAX 651-433-3205 ,,o-� �.o LEAGUEc�F CONNECTING & 1NNOVATING [V�WNESOTA s�Nc:r'. �`��3 CITI ES RISK MANAGEMENT INFORMATION LMCIT LIABILITY COVERAGE OPTIONS Liability Limits, Coverage Limits, and Waivers LMCIT gives cities several options for structuring their liability coverage. The city can choose either to waive or not to waive the monetary limits the statutes provide;and the city can select from among several liability coverage limits. This memo discusses these options and identifies some issues to consider in deciding which of the options best meets the city's needs. Statutory Limits on Municipal Tort Liability The statutes limit a city's tort liability to a maximum of$500,000 per claimant and $1,500,000 per occurrence. These limits apply whether the claim is against the city, against the individual officer or employee, or against both. Coverage Limits for LMCIT's Basic Primary Liability Coverage LMCIT's liability coverage provides a limit of$1,500,000 per occurrence, matching the per- occurrence part of the statutory municipal tort liability limit. Beside the overall coverage limit of $1,500,000 per occurrence, there are also annual aggregate limits (that is, limits on the total amount of coverage for the year regardless of the number of claims), for certain specific risks. Aggregate limits apply to the following: Products $2,000,000 annuall Failure to su 1 utilities $2,000,000 annuall EMF $2,000,000 annuall Limited ollution* $2,000,000 annuall Mold $2,000,000 annuall Land use liti ation** $1,000,000 annual] Em lo ers liabili work com $1,500,000 annuall * Includes sudden and accidental releases of pollutants; herbicide and pesticide application; sewer ruptures,overflows and backups; and lead and asbestos claims. Dredging or More Information excavation claims are subject to a$250,000 sublimit. These For more information about land limits apply to both damages and defense costs. use litigation coverage, please see ** Coverage is provided on a sliding scale percentage basis, the memo LMCIT Covera�e for which is based on participation in LMCIT's online land use Liti�ation RelatinQ to Land Use. training. Coverage applies to both damages and litigation costs. 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