9.d Discussion on Liability and Property Insurance renewal
Staff Report
Date of Meeting: November 20, 2018
To: City Council
From: Neil Soltis, City Administrator
Re: 2019 Insurance Coverage Renewal
Background:
The City purchases liability and property 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. The city has not
recently solicited other quotes since the coverage provided to by LMCIT is specifically tailored
to the cities risk exposures.
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 $2.0 million, plus any excess liability insurance coverage
(Scandia currently carries $1 million). It is estimated that the City saves approximately $500 per
year on liability insurance premiums by not waiving the limit.
In 2012, the Council raised the deductible from $500 to $1,000 for liability and property
insurance. The deductible is proposed to remain at $1,000 for 2018.
In the past the City has not insured property in the open. This would include items such as
playground equipment, bleachers, fences, and lighting. The cost of this coverage is $1 per $100
of coverage, which is an expensive coverage. Pursuant to the memorandum agreement with
the Scandia Veteran Memorial Committee and the Scandia Lions Foundation, the City will
provide for property coverage for the memorial.
Issue:
Should the City renew with LMCIT for 2019?
Should the tort liability limit be waived?
Proposal Details:
Fiscal Impact:
Rates for 2019 are not yet available. The proposed budget provides for $30,600 as the total
premium spread over the various cost centers. The final cost will be determined based on
coverage selected by the City. In 2018, the total premium paid to date for liability ($10,246),
auto & equipment ($5,061), bonds ($385), and property coverage (12,136) was $27,828. The
premium amount is subject to audit at the end of the year based on the City’s actual
expenditures. Each year, LMCIT returns dividends to its members. The dividends vary
significantly year-by-year.
Options:
1) Renew insurance coverage with LMCIT for 2019, and pass a motion to not waive the tort
liability limits.
2) Renew insurance coverage with LMCIT for 2019, and pass a motion to waive the tort
liability limits.
3) Seek other quotes
4) Take no action
Recommendation:
Staff is recommending the City renew liability insurance with LMCIT for 2019. The renewal date
is 1/1/19 and the rate information will be available in mid-December.
Staff is further recommending the Council not waive the limit on tort liability.