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.)
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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)
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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
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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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