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.