9.a) Staff Report-2016 Insurance Coverage RenewalJ
SCAlVDIA
Staff RepoVt
Date of Meeting: November 17, 2015
To: City Council
From: Kristina Handt, City Administrator
Re: 2016 Insurance Coverage Renewal
Background:
The City purchases all of its 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 looked for other quotes. There are few, if any, insurance companies
that could provide comparable coverage.
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 carries $1 million.). Most communities (about 70%) do not waive the limit.
Previously, Scandia waived the limit, but decided not to do so since 2009. In 2010, it was
estimated that the city saved 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.
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 2016.
Issue:
Should the City renew with LMCIT for 2016? Should the tort liability limit be waived?
Proposal Details:
Staff is recommending the City renew liability insurance with LMCIT for 2016. The renewal
date is actually 12/1/15, for one month then we will start new coverage 1/1/16 so that the
coverage period matches the fiscal year. Rate information will be available in mid -December.
Staff is further recommending the Council not waive the limit on tort liability.
Fiscal Impact:
Rates for 2016 are not yet available. The final cost will be determined based on coverage
selected by the City. In 2014, the total premium for liability and property insurance was about
$52,136. Each year, LMCIT returns dividends to its members. The dividends vary significantly
year -by -year.
Options:
1) Renew insurance coverage with LMCIT for 2016, and pass a motion to not waive the tort
liability limits.
2) Renew insurance coverage with LMCIT for 2016, and pass a motion to waive the tort
liability limits.
3) Seek other quotes
4) Take no action
Recommendation:
Option 1.