Loading...
HomeMy WebLinkAboutFND-019-10CI~t"1i[~~OII REPORT FINANCE DEPARTMENT Meeting: GENERAL PURPOSE AND ADMINISTRATION Date: SEPT 13, 2010 Resolution#: G~~?-~flo/-lo By-law#: N//~' Report #: FND-019-10 File#: Subject: 2 01 012 01 1 INSURANCE PROGRAM RECOMMENDATIONS: It is respectfully recommended that the General Purpose and Administration Committee recommend to Council the following: THAT Report FND-019-10 be received; 2. THAT the general insurance placement, in conjunction with the other member municipalities of the Durham Municipal Insurance Pool, with the Frank Cowan Company for an integrated pooling arrangement that includes integrated insurance coverages and common self retention deductible levels for the period July 1, 2010 to June 30, 2011 at an approximate cost the Clarington of $732,748 be confirmed; 3. THAT the Municipality of Clarington supports the Association of Municipalities in its efforts to seek joint and several liability reform in Ontario and calls on the Provincial government to pursue much needed changes to the Negligence Act; and 4. THAT AMO be advised of Council's position. ~j ~ p ~ ,v Reviewed by: ~ ~^~-x ~-- Submitted by: Nancy Taylor, BBA, C.A Director of Finance/ Treasurer NT/hjl Franklin Wu, Chief Administrative Officer CORPORATION OF THE MUNICIPALITY OF CLARINGTON 40 TEMPERANCE STREET, BOWMANVILLE, ONTARIO L1C 3A6 T (905)623-3379 REPORT NO.: FND-019-10 PAGE 2 BACKGROUND AND INFORMATION: 1.0 The purpose of this report is to provide an update to the General Purpose and Administration Committee regarding the status of the Municipality's insurance program. 1.1 This report also includes a review and update of the Durham Municipal Insurance Pool (DMIP), which is now entering its tenth year of successful operations. 1.2 Clarington is a founding member of the DMIP which was established to achieve financial savings by co-operatively purchasing insurance coverages with local and pool level deductibles and by implementing common risk management practices. Clarington has held the position as Chair of the Board of the DMIP since it's inception. 1.3 DMIP's success over its 10 years has generated surplus funds since its formation in excess of $3.5 million, set aside to offset future insurance costs resulting from unstable insurance markets in the future. 1.4 In January 2010, DMIP was successful in its litigation against Travelers/St. Paul Fire and Marine Insurance Company in a lawsuit that resulted in an award to the DMIP to compensate for damages suffered from an early cancellation of policy coverages in 2002. 2010/2011 Insurance Contract Renewal 2.0 The DMIP has negotiated with the insurer to secure the broadest and most comprehensive coverage available to municipalities. 2.1 The increase for the 2010/2011 premium year for Clarington's contribution to the DMIP to cover insurance costs and necessary contributions to claims reserves is $33,776 or a 4.8% increase. This compares favourably to insurance cost increases facing neighbouring municipalities and Regions in the GTA in the range of 10% to 30%. 2.2 The Board of Directors of the Durham Municipal Insurance Pool (of which Clarington sits as Chair), has placed coverage with the Frank Cowan Company for an integrated pooling arrangement. REPORT NO.: FND-019-10 PAGE 3 2.3 The main components of the structure of the DMIP arrangement are summarized as follows: • Each municipality retains their respective current local deductibles ranging from $5,000 to $100,000 (Clarington's deductibles are primarily $25,000); • The Pool self insures losses between these local deductibles and a per claim limit of $500,000 (on a group basis) for integrated coverages; • Under this structure, local municipalities are responsible for funding losses from $0 to their individual deductible amounts; • Between these local municipal deductibles and the pooled retention limit of $500,000, the seven members share the cost on a collective basis; and • Excess of a $500,000 per claim loss, the members purchase insurance from municipal insurers for protection on a collective basis against catastrophic claim losses. Risk Management Activities Undertake by DMIP in 2009-10 3.0 In a constantly changing world, implementing effective risk management techniques is a complex and time consuming process. However, the DMIP continues to work with the participating local municipalities to develop and administer risk management programs to identify and manage exposures to accidental loss. DMIP's goal is to successfully manage existing and emerging risks while achieving its risk management goals. 3.1 DMIP focuses on the design, implementation and communication of cost- effective compliance and loss-cost reduction programs. DMIP help pool members minimize the costs associated with third-party liabilities to help better understand how the municipalities risks are interrelated. 3.2 In 200912010, DMIP provided the following risk management services to its member municipalities: a) MFL (Maximum Foreseeable Loss): DMIP undertook a review of selected properties in order to provide the insurers with an MFL estimate for DMIP. An MFL estimate was arrived at on a site specific basis considering site specific exposures such as fire, explosion, collapse or other credible exposure. REPORT NO.: FND-019-10 PAGE 4 b) Property Valuations: DMIP tangible asset base is valued at approximately $2.5 billion. Property Valuations Services were undertaken by DMIP to quantify the key insurance and accounting standards relating to tangible assets held by DMIP. c) Information Seminars: DMIP has held a number of information sessions for staff of the participating member municipalities and the Region with respect to risk management issues. These included issues such as Risk Managing the Municipal Procurement Process, Maintenance Operations and Recreation Trails. Strategies were recommended and adopted to help reduce risk exposures. d) Contract Review: Upon request, DMIP staff have reviewed and provided feedback on the suitability and effectiveness of liability transfers, hold harmless agreements and insurance clauses in municipal contracts and agreements. Further, existing policies and procedures were reviewed to identify gaps or inconsistencies with internal. policies or existing legislation. e) Other Issues of Liability: DMIP also provided member municipalities advice regarding a range of liability issue concerns such as conflict of interest, insurance coverage for users of community buildings, the roles of Boards and Committees of Council, etc. Municipalities and the Negligence Act 4.0 Municipal risk continues to be a challenge when seeking insurance coverage. Municipal liability insurance is the main concern due to provisions under the Negligence Act regarding a municipality's liability. 4.1 The Negligence Act states that, where two or more persons have caused damages and where two or more persons are found at fault or negligent, they are jointly and severally liable to the persons suffering loss or damage. This "joint and several" liability means that even if a municipality is found to be only 1 liable and if the other persons have no assets and are unable to pay their percentage of the damages, the municipality is legally responsible to pay up to 100% of these damages, thereby exposing municipalities and their insurers to potentially huge damage awards. 4.2 Staff fully supports AMO's initiative to seek Joint and Several Liability reform. This is an important initiative and it is recommended that Council support this. REPORT NO.: FND-019-10 PAGE 5 CONCLUSION: 5.0 For the 2010/2011 year the Durham Municipal Insurance Pool has been successful in obtaining a reasonable insurance placement with an overall impact that is extremely modest. Participation in the Durham Municipal Insurance Pool has provided a successful mechanism both to control insurance costs as well as promote risk management practices to reduce claims and protect against lawsuits. Therefore Clarington proceeded with the insurance placement in conjunction with the Durham Municipal Insurance Pool with the Frank Cowan Company, pursuant to our subscribers agreement.