06-18-2019 - Item 10 - Consideration of Membership In The California State Associatioin of Counties Excess Insurance AuthorityAGENDA ITEM NO. 10
AGENDA STAFF REPORT
City of West Covina | Office of the City Manager
DATE:June 18, 2019
TO:Mayor and City Council
FROM:David Carmany
Interim City Manager
SUBJECT:CONSIDERATION OF MEMBERSHIP IN THE CALIFORNIA STATE
ASSOCIATION OF COUNTIES EXCESS INSURANCE AUTHORITY
RECOMMENDATION:
It is recommended that City Council take the following action
1.Authorize the City's withdrawal from the Big Independent Cities Excess Pool (BICEP)
effective June 30, 2019;
2.Authorize the City to join the California State Association of Counties (CSAC) Excess
Insurance Authority for Excess Liability G L-1, Optional Excess Liability and Excess
Workers' Compensation Programs;
3.Authorize the Interim City Manager or designee to execute the related Joint Powers
Agreements and Memorandums of Coverage for the EIA Excess Liability G L-1, Optional
Excess Liability and Excess Workers' Compensation programs;
4.Designating the City Manager or designee to act in all matters relating to the member and the
Joint Powers Authority; and
5.Adopt the following resolutions:
RESOLUTION NO. 2019-52 - A RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF WEST COVINA, CALIFORNIA, ESTABLISHING MEMBERSHIP IN THE
CALIFORNIA STATE ASSOCIATION OF COUNTIES EXCESS INSURANCE
AUTHORITY
RESOLUTION NO. 2019-51 - A RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF WEST COVINA, CALIFORNIA, DECLARING SPECIFIC VOLUNTEERS
TO BE EMPLOYEES FOR THE PURPOSE OF WORKERS' COMPENSATION AND
INSURANCE LAW
BACKGROUND:
The Big Independent Cities Excess Pool (BICEP) Joint Powers Authority was established in 1988 in
accordance with the California Government Code. The goal of BICEP is to provide member
agencies competitive and stable insurance coverage by pooling risk and insurance purchases among
medium-to-large Cities. BICEP was formed as a result of the municipal liability insurance crisis of
1985-86, when Cities had difficulty purchasing affordable coverage in the traditional insurance
marketplace.
Membership in the Big Independent Cities Excess Insurance Pool is declining. There were six-
member cities (Huntington Beach, Santa Ana, West Covina, Oxnard, San Bernardino and Ventura).
San Bernardino has since withdrawn from BICEP. Due to declining membership, increasing claims,
and administrative and insurance costs being spread over fewer cities, the BICEP Board
commissioned a study to determine whether BICEP would remain a viable pool should one or more
of the remaining five-member cities withdraw their membership in the pool. The study, authored by
Independent Consulting and Risk Management Services, LLC, concluded that should another
member withdraw, BICEP would not be financially viable. After that study was released, every
member, including the City of West Covina, noticed BICEP of its provisional intent to withdraw. In
April 2019, Oxnard made the decision to withdraw their membership from BICEP, and therefore it is
anticipated that BICEP will dissolve. As such, it is necessary that the City find an alternative source
for the Excess Liability Program. BICEP is no longer a viable option for the City for the
procurement of an Excess Liability Program and Excess Workers' Compensation Program. The
City's Human Resources & Risk Management Department with the assistance of the City's insurance
broker, Alliant Insurance Services (Alliant), solicited indications for alternative placement of the
Excess Liability programs.
DISCUSSION:
Severe increases in liability claims against public entities is driving up insurance prices for cities in
California. Some insurers have pulled out of the market, and others are limiting their lines for public
entities, are inserting exclusions, or writing higher excess layers as they adjust to the changing loss
environment. The four (4) entities that expressed interest in adding the City to their programs
included, California State Association of Counties Excess Insurance Authority (CSAC-EIA or EIA)
EIA GL-1, California Joint Powers Insurance Authority (CJPIA), the Independent Cities Risk
Management Authority (ICRMA), and Travelers Insurance Company, returning the following
results:
EIA GL-1
City Retention Option Annual Contribution (Indication Only)
$ 1,000,000 $ 450,000
•Program Limit - $25,000,000 in GL1 Program with Optional Excess limits available through
the OEL program up to $25,000,000 (for a total limit of $50,000,000)
•CSAC-EIA GL1 Pooled Coverage: $5,000,000 less the Member’s Retention
•Retention options available from $0 (first dollar in primary GL program) to $1,000,000 (GL1
program); EIA will allow SIR’s higher, at the member’s discretion, through the GL2 program.
CJPIA (withdrew)
City Retention Option Annual Contribution (Indication Only)
$ 250,000 $ 1,389,400
$ 500,000 $ 1,190,000
$ 750,000 $ 1,069,500
$ 1,000,000 $ 987,200
Program coverage limit features include:
•Program Limit - $50,000,000
•CJPIA’s Pooled Coverage: $5,000,000 less the Member’s Retention
•Retention options available from $0 (first dollar) to $1,000,000
RPA/ICRMA’s
City Retention Option Annual Contribution (Indication Only)
$ 500,000 $ 1,087,000
$ 750,000 $ 880,000
$ 1,000,000 $ 771,000
$ 2,000,000 $ 671,000
Program coverage limit features include:
•Program Limit - $30,000,000
•ICRMA’s Pooled Coverage: $3,000,000 less the Member’s Retention
•Retention options available from $250,000 to $2,000,000
TRAVELERS (withdrew)
Non-Pooling Option Annual Contribution (Indication Only)
$ 10,000,000 Limit excess of $1,000,000 Retention $ 450,000
Although California Joint Powers Insurance Authority (CJPIA) initally submitted the above
indication they ultimately felt the timing was not right to add the City to their pool at this time and
would consider our membership in the future. Also, Traveler’s Insurance Company withdrew their
interest in insuring the city based on loss history.
The program which is the most economical and best fits the City’s needs at this time is the EIA
GL-1 program. The GL-1 program combines risk retention, risk pooling, and the purchase of excess
reinsurance. The program offers coverage for claims from third parties alleging damages due to
negligence arising out of bodily injury, personal injury, property damage, public officials’ errors and
omissions, employment practices liability, and automobile liability. The EIA GL-1 program came in
at a significant savings (Approximately $400,000) to prior year premiums for excess liability
insurance.
EIA has been accredited with excellence continuously since 1989 by the California Association of
Joint Powers Authority (CAJPA). EIA includes 55 California counties, 344 other California public
entities, including cities, school districts, special districts, and other Joint Powers Authorities (JPAs).
The GL-1 program currently has 125 members.
Prepared by: Eva Sahagun, Management Analyst
Additional Approval: Nikole Bresciani, Assistant City Manager/Public Services Director
Fiscal Impact
FISCAL IMPACT:
General Liability
The City would remain self-insured for the first $1 million of each loss. A combination of risk
pooling and insurance would provide coverage up to $25 million. GL-1 funds a $5 million pool and
purchases $20 million in reinsurance to achieve a $25 million limit. Staff is recommending that the
City purchase an additional layer of optional excess liability insurance to bring the total limits up to
$50 million. The estimated cost of the excess insurance program with the increased limits of $50
million is $550,000 (Indication Only) subject to final approvals by CSAC EIA Committees and
carriers. The cost of the expiring $27 million of excess liability coverage provided through BICEP
for FY 2018-2019 is $865,364. EIA Coverage would commence July 1, 2019.
Workers’ Compensation
The City’s excess workers’ compensation program has been purchased from EIA since July 1, 2002.
When the City became a member of BICEP, this remained the case, except that the City purchased
this excess coverage from EIA through BICEP. After the City withdraws from BICEP, the City will
continue to purchase the excess workers' compensation through EIA. In addition, it is recommended
the City update its policy to include any volunteers who are performing work on behalf of the City
to be covered under the workers’ compensation program by manner of attached Resolution No.
2019-51. Coverage would commence July 1, 2019. These items have been budgeted in the FY
2019-20 proposed budget in the General Fund.
Attachments
Attachment No. 1 - CSAC Proposal
Attachment No. 2 - Resolution No. 2019-52 CSAC Membership
Attachment No. 3 - Resolution No. 2019-51 Workers' Compensation Volunteers