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HomeMy WebLinkAboutTR-47-86 TOWN OF NEWCASTLE - ' �'[1 REPORT . _; File Res t4 1- y , By-Law # METING: General Purpose and Administration Committee DATE: JULY 7, 1986 REPORT #: TR-47-86 FILE #: SMECT: INSURANCE RISK MANAGEMENT REPORT 1986-87 RECOMMENDATIONS: It is respectfully recommended that the General Purpose and Administra- -five Committee recommend to Council the following: 1 . That report TR-47-86 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 1986 to June 30th 1987 with a premium renewal rate of $199,937 (original premium of $207,972 adjusted by $8,035 for confirmed final cost of premium for the Umbrella liability) ; 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 the Fidelity Bond not be increased at this time; and 5. That approval be given to accept the Excess Liability Insurance in its restructured format as outlined in the Risk Management Report, le. $7,000,000, at an additional premium cost of $24,426 If however, the Town opts to introduce the maximum deductible limit available of $5,000 a premium savings of $17,799 can be realized, leaving a net additional annual cost of $6,627; and . . .2 P. 3 0) General Purpose & Administration Committee Meeting Page 2 TR-47-86 6. That Umbrella Liability Insurance in the amount of $3,000,000 be approved at an annual premium of $10,715 ( Included in the cost per recommendation #2) . This included with the $7,000,000 coverage noted in recommendation #5 brings the total Liability Package up to $10,000,000 which is the level of protection offered in 1985; and 7. That the insurance coverage as it relates to the EDP System be reviewed for any necessary amendments at such time as a new system is purchased and installed; and 8. That changes in the deductible limits for the automobile fleet, for property, and for the boiler and machinery coverage not be considered at this time; and 9. That Environmental Liability Insurance in the amount of $2,000,000, as an annual aggregate for all claims, be approved at an annual cost of $8,178 (this premium also is included in the total cost noted in recommendation #2) ; and /10. That the addition of the contracted Answering Service personnel J,,, = A- to the Municipal Operations Liability Insurance be -fired; and 11 . That conflict of interest insurance for the mayor and the six members of council be added to the Town's current insurance package at a premium cost of $50 per individual , totalling $350; and 12. That the 1986 Budget overprovision for insurance amounting to $34,070.67 plus the premium credit of $17,799 (noted in recommendation #5) and less the $350 cost of conflict of interest insurance be transferred to the Self- Insured Losses Reserve. . . .3 General Purpose & Administration Committee Page 3 TR-47-86 Background & Comment As stressed in the 1985 report to Council TR-28-85, premiums on liability insurance for municipalities have recently experienced significant increases. The potential for multi-million dollar awards now exists with the precedent that was set by the case of McErlean vs. the City of Brampton settlement of $6.3 million, which is of grave concern to the Municipal sector. The complexity of providing many divergent services makes municipalities vulnerable to an ever-growing number of risks. The Insurance Risk Management Report 1986-87 which addresses this concern and reflects the Town's current coverage has been distributed to council under separate cover. It should be noted here that, although the annual insurance review is not to take place until July 7, 1986, there is confirmation from Frank Cowan Company that the insurance is in place as of July 1 , 1986 subject to any changes to be made by council on July 7, 1986. Each of the recommendations within this report are discussed briefly below: Recommendation #2 The Frank Cowan Company Limited insures 70 percent of the municipalities in the province, according to the report of the Advisory Committee to the Municipal Affairs, April 1986. (which is reviewed briefly below) Given this fact and given that the supply of municipal insurance providers has diminished because of the suppliers reluctance to compete in a market that faces increasing losses, the Frank Cowan Company remains a solid risk in that marketplace. Staff therefore recommend with confidence, the renewal of the Town's insurance coverage with the Frank Cowan Company. .. .4 Vl General Purpose & Administration Committee Page 4 TR-47-86 Recommendation #3 The annual review of the fleet and property schedules by staff are currently being performed and the necessary amendments will be made known to the Onsurer. This is an on-going process as equipment and properties are purchased or dispositions made. Recommendation #4 As in the prior year, the Fidelity Bond coverage of $500,000 currently carried by the Town, covering all employees, Council and Board Members, appears adequate given that current year tax collection is handled directly through the bank and the possibility of cheque forgery is remote. Recommendation #5 & #6 The level of Municipal Liability coverage carried must be given special consideration in light of recent court awards, and because there is an increasing tendency for municipalities to be routinely named as a defendant in liability suits resulting in them often being left to make full restitution to the plaintif based on the municipality' s ability to pay. This appears to be happening even when the municipality is found to be responsible in a remote way. Because of the Municipality' s large financial base, judges are becoming Inclined to award on the high side, particularly in cases where future costs of care are difficult to predict. These facts were also brought out in the aforementioned Report of the Advisory Committee. In consideration of the above, staff feel it prudent to recommend continuance of the Town's liability insurance at $10,000,000; $7,000,000 of which is covered by Frank Cowan Company by layering the insurance ( le. the primary layer amounting to $2,000,000 is covered by Frank Cowan Company and the remaining $5,000,000 is picked up by the International Re-Insurance Market) and the balance of $3,000,000 is covered by the Umbrella liability package at an additional premium. . . .5 General Purpose & Administration Committee Page 5 TR-47-86 A review of the 1985-86 claims made and settlements paid (of approximately $305,000 in claims made, only approximately $2,000 has yet been paid, many of the claims made did not identify amounts, and many have no judgement made on them to date) leads staff to reconsider introducing a deductible limit of $5,000. The increasing annual premium cost, and the sizeable premium credit available, promotes establishing a deductible limit for the liability insurance. The introduction of the liability insurance deductible limit will necessitate the Self-Insured Losses Reserve balance increasing over the next few years. 2 propose the monitoring(The balance currently is $ 1 ,842.) Staff p p g of the fluctuations within the Self-Insured Losses Reserve over the balance of the 1986 fiscal year, and implement necessary changes through the 1987 and following year's current budgets. Recommendation #7 The current EDP system coverage is reviewed annually. When the Town purchases a new in-house system any necessary adjustments can be made at that time. Recommendation #8 The property deductible limit was adjusted in 1985 to $10,000. The adjustment does not have appeared to cause any difficulty and therefore no change is recommended for this or for boiler and machinery or automobile fleet deductible limits. The repair costs for the equipment are such that a single occurrence could eliminate the potential premium savings. . . .6 General Purpose & Administration Committee Page 6 TR-47-86 Recommendation #9 The increased public awareness of the potential municipal liability with respect to the environment as created by passing the "Spills Bill" etc., justifies consideration of adding Environmental Liability coverage to the Town's existing policy. The Town' s General Liability Policy excludes totally Environmental Liability. According to the Risk Management Report this is an overall industry exclusion. Staff feel that it is therefore essential to consider inclusion of this newly developed policy as part of the Town's insurance package. Recommendation #10 There has been some concern expressed by the Answering Service personnel as to the extent of their liability if wrong information is given out with respect to a fire-call . They are not willing to accept this responsibility and the Town has been requested to ensure they are included in the Town' s General Liability Package. . . .7 General Purpose & Administration Committee Page 7 TR-47-86 Recommendation #11 The term for Conflict of Interest Insurance for the mayor and members of Council corresponds with the term of office. This coverage provides protection for 90% of legal fees or disbursements incurred up to a maximum of $25,000 in respect of each claim but only where there has been no contravention or where contravention is by bona fide error. The insurer will be given names, positions and addresses of those to be covered by this policy. Recommendation #12 As in the past, the impact of the increase in premium is softened by the premium year straddling the two fiscal years. The 1986 budget provision of $204,496 exceeds the $170,425.33 insurance expense by $34,070.67, and with the Inclusion of the $5,000 deductible limit for Municipal Liability realizing a savings of $17,799, and deducting the $350 conflict of interest insurance cost, the net adjustment available for transfer to the Self- Insured Losses Reserve is $51 ,519.67. This concludes the review of the proposed insurance coverage, but to provide additional information, some highlights of the "Preliminary Report of the Advisory Committee to the Minister of Municipal Affairs, April 1986" are mentioned briefly below. The report deals only with liability insurance and therefore is limited in so far as its reference to the above. Some Recommendations made by the Committee: -that the Provincial Government fund a study to determine whether the current premiums are justified, given municipalities' claims experience, and to determine whether or not there are viable alternatives in the existing markets (such as reciprocal exchanges or self-insurance) . -that the feasibility be determined, establishing a fund that would remove the necessity of purchasing coverage in excess of an operative level of insurance. . . .8 General Purpose & Administration Committee Page 8 TR-47-86 -that there be established a Canadian Insurance Exchange which, with it' s capital , could insulate the municipal liability market from current foreign risks (this being international re- insurance companies) . -that consideration be given to revise the Negligence Act such that defendents would not be forced to assume a larger share of the damages than their share of the blame Justifies. -that when re-drafting the Limitations Act, concerns expressed by AMO be considered. These include: -retention of the three month limitations period for claims bases on non-repair of public highways; -"capping" of limitations period for claims brought by persons suffering a disability at 10 years; -no adverse possession of lands vested in a municipality. -that municipalities be allowed to post signs limiting or prohibiting use of municipal lands, unless otherwise posted, similar to those used by the municipality advising motorists of the limit, unless otherwise posted. This would allow exclusion from the duty of care or liability section of the Trespass to Property Act. Posting these signs would be less costly than fencing or posting signs on all vacant municipal land. (The only real benifit of excess signs, as pointed out in the report, is in the municipality' s defence of liability actions against it.) -that consideration be given to allowing the courts to have the authority to impose structured or periodic payment settlements for all , or any part, of an award. -that an informational campaign be undertaken to provide a better understanding of the Environmental Protection Act, (Part IX - Spills Bill ) and the Association Pool (the pool provides liability insurance coverage for spills but there are serious questions at this point as to whether it meets the municipal needs) . i .. .9 I I I % 3 (a) General Purpose & Administration Committee Page 9 TR-47-86 -that Municipalities be encouraged, through educational and promotional programs, to effectively implement a risk management program. -that the Provincial Government in cooperation with the AMO and the major municipal insurers, prepare mandatory standard municipal liability insurance policies. -that no move be made to cap the size of court awards, but investigate instead other ways of reducing the size of settlements, such as structured settlements which do not impinge upon individual rights to recover damages. According to the Report, the Committee has been advised that the Attorney General is willing to consider all of the concerns expressed in the Report with the exception of the capping of the limitations period for disability claims. The Report serves to inform the municipal sector of the awareness of the Provincial Government of the issues facing municipaiites regarding liability Insurance, however it will take time for all of them to be addressed and acted upon and for that effect to be felt directly by any municipality. In the mean time the Town is assuming it' s responsibility in reviewing the adequacy of it's existing insurance coverage and in implementing a Risk Management Team to identify and eliminate hazards that are conducive to potential liability claims. Respectfully submitted, J.R. Blanchard, Treasurer. i ATTACHMENT: MM/JRB/pp CONFLICT OF INTEREST NAME OF INSURED: Corporation of the Town of Newcastle (A) ELECTED NAME ADDRESS POSITION John Winter Ann Cowman R. 2 Bowmanville Ont. L1C 3K3 Mayor rlin to P- S. Oshawa L1K 1A1 Counci or Ham o Ont LOB 1JO o u-—nc-17 or -Marie Hubbard ington Bo ma ville L1C 3V2 C—ou—n c-17 T or -Hal MrKniqht- Blowmanville L1C 3V2 Councj or LOB 1M0 Counci or nx wto'li I On t. LOA 1J0 Counci or (B) You may wish to insure other appointed members of Boards or Commissions. Please complete this section if applicable.