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HomeMy WebLinkAboutTR-42-85 -S 6C-) File, NO-2 ........ CORPORATION OF THE TOWN OF NEWCASTLE TREASURY DEPARTMENT K. CAMPBELL, C.A.,TREASURER 40 TEMPERANCE STREET TEL.(416) 623-3379 BOWMANVILLE, ONTARIO L1C 3A6 REPORT TO THE GENERAL PURPOSE AND ADMINISTRATION COMMITTEE MEETING OF JUNE 17, 1985 REPORT NO. : TR-42-85 SUBJECT: INSURANCE RISK MANAGEMENT REPORT 1985-86 RECOMMENDATION: It is respectfully recommended that the General Purpose and Administrative Committee recommend to Council the following: 1 . That this report be received, and 2. That Frank Cowan Company Limited, Princeton, Ontario be retained to provide insurance coverage for the Town of Newcastle from July 1st 1985 to June 30th 1986 with a premium renewal rate of $128,842, and 3. That the updating of the Fleet and Property Schedules be undertaken by the staff and the insurer be advised of the necessary amendments, and 4. That consideration be given to an increase in the Weekly Income Benefits from $300 to $400 for Members of Council at an additional annual cost of $203; and 5. That the Fidelity Bond not be increased at this time, and V1 3 cc) TR-42-85 - 2 - 6. That Excess Liability Insurance in the amount of $5,000,000 be approved at an additional annual cost of $11,229, and 7. That the insurance coverage as it relates to the EDP System be reviewed for any necessary amendments, and 8. That changes in the deductible limits for the automobile fleet and the boiler and machinery coverage not be considered at this time, and i 9. That the change in the deductible limit for property from $5,000 to $10,000 resulting in a premium credit of $1,796 be approved, and 10. That the change in the deductible limit for municipal liability coverage from nil to $1,000, resulting in a premium credit of $8,497 not be considered at this time, and 11. That the $15,274 expenditure above the 1985 Budget provision of $100,000 be accomodated throughout the budget as necessary, and 12. That 50% of the additional premiums resulting from any changes in the insurance coverage be accomodated throughout the budget as necessary. BACKGROUND AND COMMENT: As Council is aware insurance renewal premiums for municipalities throughout the province have experienced significant increases. A number of press clippings and correspondence from the Town' s insurer have been circulated to Council and Staff indicating the reasons for such increases. TR-42-85 U 1' 3 Cc, The prime culprit is the third party liability coverage which has experienced a $31,035 premium increase for the 1985-86 premium year. This increase is a direct result of recent court awards, resulting claims loss ratios and the shrinking insurance marketplace. The Town has had excellent service from the Frank Cowan Company throughout its long association. The company has shown itself to have the sound financial management which an insurance company needs to meet its losses. The Insurance Risk Management Report 1985-86 which presents the Town' s current coverage and recommendations has been distributed to Council under separate cover. Each of the recommendations within report TR-42-85 are discussed briefly below: Recommendation 2: The Frank Cowan Company Limited has recently been recommended by the Region of Durham Finance Committee -to be retained to provide the Region' s insurance coverage. An independant study of the Region' s insurance needs was undertaken in 1984 before a tender call was made in 1985. This extensive study and subsequent tender call appear to have confirmed the Frank Cowan Company as the insurance broker for the Region. With the shrinking number of insurance companies willing and able to provide municipal liability coverage, the Frank Cowan Company has shown itself to be a solid risk in that marketplace. Based on the above circumstances staff feel confident in recommending the renewal of the Town' s insurance coverage with the Frank Cowan Company. Recommendation 3: The annual review of the fleet and property schedules by staff will be performed and the necessary amendments made know to the insurer. This is an on-going process as equipment and properties are purchased or dispositions made. Recommendation 4: This weekly income benefit is to provide income replacement to a Member of Council should he be injured and be unable to continue in his normal employment. vi3Ce� TR-42-85 - 4 - Recommendation 5 : The $500,000 Fidelity Bond currently carried by the Town covers all employees, Council and Board Members. Giving consideration to the way the Town' s main source of cash (tax collection) is handled directly through the bank and the remote possibility of cheque forgery, this coverage appears adequate. This opinion has been confirmed by the municipality' s auditors. Recommendation 6 & 10: Staff have previously reported to Committee (TR-28-85) on the matter of increased liability coverage. With the recent awards and the move to an increasingly litigious society the total of $10,000,000 coverage may only be the beginning of our needs for such insurance. Consideration of this additional coverage has been deferred for two premium years. In today' s judicial atmosphere we may be placing the municipality in substantial risk by not including this coverage in the Town' s insurance program. There is no recommendation for a change in the deductible limit for the third party liability coverage. A review of the claims experience indicates that the Town has had 56 claims during the last 5 years totalling $115,622 for an average $2,065 per claim. Although some claims were substantially larger than $2 ,065, the majority of claims fall below that level . A change in the deductible level could mean a direct cost to the Town well in excess of the potential $8,497 annual premium savings. If consideration was given to this change in the deductible limit, the Self-Insured Losses Reserve balance would have to increase substantially. The current balance of the reserve is $26,194.41 . To protect the Town' s interest in the case of a lower deductible limit, this balance should rise to a minimum of $100,000. Recommendation 7 : The matter of the coverage for the existing EDP equipment is TR-42-85 - 5 - Recommendation 7 - continued: reviewed on an annual basis. When the Town moves onto an in-house system, then this coverage will have more importance. Presently, our information is stored off-site with the service bureau. Recommendation 8: The potential premium savings from the increase in those deductible limits do not justify the change. The repair costs for that equipment are such that a single occurrence could eliminate the annual savings. Recommendation 9 : The change in the property limit to $10,000 will have very little impact on the Town' s risk exposure. The few claims experienced during the last five years have been under the $5 ,000 deductible limit, so the Town has been self insuring in all of those instances. Recommendation 11 & 12: The funding of the insurance coverage is provided within the budget up to a maximum of $100,000. Since the premium year straddles two fiscal years the absolute impact of the increase in 1985 will be softened. Including the proposed changes in coverage, the Town will realize a $19,991 expenditure above 1985 budget provision. Those monies will be accomodated within the current budget. In conclusion, staff feel that the existing insurance coverages plus the two proposed amendments will adequately protect the Town for the 1985-86 term. Respectfully submitted, a t w t,-z /0, Kathryn A. Campbell , C.A. , B.Comm. , *gf Treasurer att: under separate cover (1985-86 Insurance Risk Management Report)