HomeMy WebLinkAboutTR-83-81 i✓- 7 (6)
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Report to the Chairman and Members of the General Purpose and Administration
Committee meeting held on October 26, 1981.
Report No. TR-83-81
Subject: Insurance Coverage
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Recommendation:
It is repectfully recommended:
1. That this report be received; and
2. That the insurance coverage be amended for the 1981 - 1982 premium
year as follows:
(a) Insurance coverage on all property-buildings and contents be at
replacement value, with a $2,500.00 deductiblity limit; and
(b) Limit for excess liability insurance be increased from
$3,000,000.00 to $5,000,000.00; and
(c) Insurance coverage on the automobile fleet be at replacement value,
with a deductibility limit of $1,000.00; and
(d) The fidelity bond be increased to $100,000.00 from $50,000.00;
and
(e) The errors and ommissions liability insurance be extended to in-
clude errors, ommissions, or neglience in the administration of
employee benefits; and
(f) The weekly indemnity coverage for members of Council be increased
to $300.00 for total disability and $150.00 for partial disability; and
,,�1't- .( Ir .
(g) Firefighters' accident insurance be increased to $20,000.00 from
$10,000.00; and
(h) Accident insurance for appointed board members be removed from
<- our coverages; and
3. That the attached by-law be approved to establish a Reserve for Self-
Insured Losses; and
4. That the annual sayings realized from higher deductiblity levels, good
claim records, and such funds as may be provided for insurance and
unused in any given current year's budget be used to establish and
maintain the Reserve for Self-Insured Losses; and
5. That in any given year any departmentAmay request funds from the
Reserve for Self-Insured Losses to cover espenditures incurred because
of an insurable loss which is not reimbursed by the Towns ' insurer; and
6. That the remainder of the insurance program be endorsed per the previous
coverages for 1981-82 premium year. 1
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Background:
As of July 1st. each year the insurance coverage of the Town expires
and at that time a general review of the year is undertaken by our insurer,
Frank Cowan Company Limited. This year a decision to perform a comprehensive
insurance review was made as our coverages in many instances required updating
to current values of replacement.
In September Mr. Dave Reed of the Frank Cowan Company Limited met
with all departments and reveiwed all municipal assets under their control .
Accompanied by representatives of each department and Peter Nielsen, Planning
Department, the following survey was conducted:
(a) Physical inspection of all buildings and properties;
(b) Revaluation of all licensed and unlicensed equipment;
(c) Re-calssification of employees as it related to Fidelity
Bonding;
(d) Review of checks and balances of cash exposures; and
(e) Revaluation of inventories.
On the basis of this review a second Insurance Audit and Risk
Management Report was produced outlining the replacement values of the various
municipal assets and other coverages which required updating.
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Comment:
The increased cost of the addtional coverages which have been
recommended will provide the Town with much inproved insurance coverage. These
increases will bring all buidlings and equipment to replacement value coverage.
Previously certain buildings i .e. Town Hall Annex (private dwelling) ; Community
Hall , Orono; Municipal Offices, Newcastle; etc. were only insured for a value
somewhat less than the replacement value. In addition most of the equipment
was insured at actual cost rather than replacement value.
The escalating costs of replacing equipment and buildings should
they be damaged or destroyed through an insurable loss indicates that the Town
cannot afford to carry anything less than replacement value insurance on these
assets. The addtional annual cost to carry these coverages is as follows:
(a) Buildings and Contents - Revaluation from $13,350,000.00 to
$15,025,000.00 - $1,384.00 ($1,000.00 deductible)
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TR-83-81
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Comments - Continued
(b) Automobile Fleet - Revaluation from $439,506.00 to $1,880,000.00 -
$1,815.00 ($500.00 deductible)
It is the general concenses of staff that the deductibility levels
remain at their current rates as higher levels would exclude most of our
claims. It is the Treasurer's opinion that an increase in the deductibility limits
for the automobile fleet and the buildings and contents be considered and the
annual saving be set aside in a reserve account to cover the unisured portion
of the losses. In the case of the automobile fleet with $1,000.00 deductible,
the additional annual premium would be reduced to $882.00, a savings of $933.00.
In the case of the buildings and contents insurance the annual premium with
$2,500.00 deductible would be reduced by $4,121.00.
Our claims history, particularly for buildings and contents indicates
that, had a $2,500.00 deductible level been in effect for the past three years,
the Town might have saved $12,363.00 in premiums and had to pay out of a self-
insurance loss reserve for losses under $2,500.00 a maximum of $4,228. This would
give a net savings of $8,135.00. For the automobile fleet the Town might have saved
$2,799.00 and had to pay out of a self-insured loss reserve for losses under $1,000,
a maximum of $983.00. This would give a net savings of $1,816. We will monitor the
effects of increased deductibility limits for one year and review it in 1982-1983.
The excess liability insurance for non-owned automobiles, the automobile
. fleet and municipal liability be increase to $5,000,000.00 from $3,000,000.00 is
an additional annual cost of $3,020.00. In light of recent court judgements and
the awards made on behalf of the claimants a $5,000,000.00 liability limit appears
to be the mininum necessary to adequately indemnify the municipality against these
losses. As the Risk Management Report indicates our exposure in this area is very
great given the size of the Town and the numbers of locations which the Town
operates and maintains. Some municipalities have, in fact, purchased protection
much in excess of the $5,000,000.00 level . Our claims history does not presently
indicate a need for coverage in excess of $5,000,000.00 at this time but should
be a matter for consideration in future years.
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Under the Crime Insurance, Fidelity Bonding the recommendation of an
increase to $100,000.00 from $50,000.00 should be implemented, at an additional
annual cost of $119.00. Consideration should be given to increasing this in the
future to $500,000.00 to more adequately cover any losses which might occur.
As Council members are aware a number of significant frauds have been uncovered
in other municipalities within the past year. Our increased coverage would pay
for reasonable audit fees to investigate any such losses should they occur as well
as further protect the municipality from such losses.
The Errors and Ommissions liability insurance extension of coverage
at an annual cost of $163.00 should be implemented. It will provide coverage for
all sums which might be payable by an individual as a result of a civil action
arising out a negligent act, error or ommission on the part of staff in the
administration of an employee benefit programme. Increasingly with more complex
benefit progams being introduced, it is possible that an error or ommission in
establishing an employee's coverage might occur. In such a situation the Town
should protect its employees from personal loss which might arise out of such
errors or ommissions by including this coverage in its insurance programm.
In recognition of the service provided by the following groups and the
personal loss suffered if an injury occurs, it seems appropriate to increase the
accident insurance to the levels outlined in the risk management report.
(a) For Council , increase the weekly indeminity to $300.00 from $200.00
should a member of Council be totally disabled. Also, increase the
weekly indemity to $150.00 from $100.00 should a Council member be
partially disabled. This coverage is in effect on a twenty-four
hour a day basis for all types of activities, at an additional annual
cost of $406.00.
(b) Volunteer Firefighters' Accidental Death and Dismemberment benefit
be increased to $20,000,00 from $10,000,00 at an additional annual
cost of $840.00.
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The insurance coverage for Loss of Revenue at Arenas due to physical
damage or breakdowns at an annual cost of $680.00 not be considered at this time.
We have not experienced any significant shut downs in the arenas and therefore
this coverage is considered excess to our present needs.
Finally, the recommendation has been made that the accident insurance
coverage for appointed board members be removed from the Town's insurance
portfolio. This coverage costs $1,043.00 per year and is a coverage which
municipalities generally have ceased to carry. It is very difficult to keep
the list of persons covered on an accurate basis and the costs associated with
this coverage do not seem justified.
In summary I present a summary cost analysis of the result of the
recommendations within this report.
Respectfully submitted,
Kathryn A. Campbell , C.A. , B.Com. ,
Treasurer
10 16 81
Y.81-IN-12
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Schedule "A"
Summary Cost Analysis
July 1st, 1980-81 Expiring Annualized
Insurance Costs $89,231.00
July 1st, 1981-82 Renewal Billed Insurance
Costs 87,039.00
Annual Reduction $(2,192.00)
COVERAGE AMMENDMENTS COSTS
Property - Buildings & Contents
(replacement value, $2,500 deductible) (4,12:1.00)
Excess liability insurance 3,020.00
Automobile Fleet
(replacement value, $1 ,000 deductible) 882.00
Crime Insurance
($100,000 Fidelity Bond) 119.00
Errors and Ommissions Liability
Insurance - Employee benefits extension 163.00
Councillor's Accident Insurance 406.00
Firefighters ' Accident Insurance 840.00
Appointed Board Members Accident Insurance (1,043.00)
Net Reduction in the Premium for improved coverage . . . . . . . . . . . . . . . . . $(1,926.00)