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CITY OF WEIRTON SPECIAL COUNCIL MEETING FEBRUARY 10, 2005 MINUTES ATTENDANCE Councilman DeMasis, Councilman Miller, Councilman Moore, Councilman Dorich, Councilman Dalrymple, Councilman Veltri, and Councilman Kondik. NEW BUSINESS Resolution Authorizing the City Manager to Enter into Contract for Renewal of Property and Liability Insurance for the City of Weirton. Gary DuFour, City Manager, introduced this resolution explaining that the City received a quote from St. Paul Travelers for renewal for the City's lines of coverage, generalized each of these. The City had another offer, but they did not send a detailed breakdown of their offer. They did indicate an aggregate that they were interested in a premium and the lines of coverage that we had at $725,000, which was substantially higher than what the St. Paul Travelers offer. At this point, the best scenario, in a bad situation, is the St. Paul Travelers package. George Gresko and John Frankovitch were there from Assure America, to answer questions. As everyone looks at these, try to realize some level of reduction of premium and in looking at the possible areas where there are some options for saving. The only one, which he thinks, would be potentially positive for the City is on Auto Liability to increase the deductible to $5,000, which would reduce the premium by $44,132. Mr. DuFour asked Mr. Gresko or Mr. Frankovitch for any comments that they may have. Mr. Gresko responded with the only recommendation that they would have, at that point in time, would be with cost savings. There are potential issues for additional cost savings and that would be with property and liability deductibles, which is not a significant difference, but for the dollar savings for the exposure that the City is going to take on by participating in the claims process. We analyze that based on the history of the City in terms of liability claims and property claims. Councilman Kondik asked if Mr. Gresko had a figure from last year, what the liability was to the City? He responded that it was in the first column of the spreadsheet; your existing liability premium is $116,292 (under Current Liability/Option 1). That is with the $2,500 per claim, per occurrence deductible with a sublimate of $5,000 per sewer and drain backup. Councilman Moore asked Valerie Mean, Financial Director, how much does the Water and Sanitary contribute to this premium? She responded that with the new rates it would be $54,000 each, annually, and then the Park Board would be another $33,000, and the Library about $13,000. What he is curious about is Marland Heights, because there have been problems up there. Are these appropriate numbers? Ms. Means put an across the board increase into effect. His curiosity is with where the claims are coming from? Are they getting substantial increases in claims from Sanitary, because of problems on Marland Heights? Are we subsidizing those boards, as they may be one of the drivers that is behind the problem? Mr. Gresko said that St. Paul's do not break down specifically a calculation of liability premiums. There is a specific coverage that did increase this year, and that is in response to the increase in claims, with related to Marland Heights, and other areas are in regard to sewer/drain backups. They did take the occurrence deductible from $50 to $100,000, and they are supposed to give them that premium at least, which we can share with you. They also provided us with a 4-year loss summary, which they have hi-lighted for you in terms of the over all claims. We could look through all these lawsuits and analyze what has been paid. Mayor Miller asked Mr. Gresko to do that, because there must be a better way to do this. If it is in the water and sewer, where most of our liability is, in regard to various risk payouts then Council can take a look at it to see if they want to split it up the proportionality rate of the amount of money that is supposed to be paid in, they may increase the amount to Sanitary and Water. Mr. Gresko looked quickly at the spreadsheet and replied that there is an increase in activity there. He doesn't know the sum of claims that have been paid, but there are other issues with regard to liability claims within the City, that are impacting your losses. There are issues with various departments of water and sewer, as well as, sanitation… Mr. Frankovitch said that they will check and possibly have St. Paul's break this down further to give them some idea how they are rating various lines and complete this information. Mayor Miller is requesting information on any entity that has a part and partial of the total cost, and where are we having most of the activity that is resulting in a spectacular increase. Mr. Frankovitch thought it was a good point that these issues should be checked into as it is hard to tell what is driving them. Mr. DuFour interjected that this reflects a change in coverage from $50,000 to $100,000? We need to get that as proportionality, as well, to allocate. It doesn't work as a 5%? Mr. Frankovitch replied that St. Paul caps the occurrence benefit for all claimants for sewer and drain backups. It is a sub limit. It factors into your General Liability. The City has technically $2M worth of sewer/drain backup coverage, in a given policy period, but it is $100,000 per event, and with the recent case that is out there with five (5) claimants, on Marland Heights, the potential is there to exceed the $50,000, at least the initial reports are, to that amount. Councilman Miller asked Mr. Gresko to explain their conversation, yesterday, about the City taking back the responsibility for coverage for the off street parking lots form AMPCO, and if there is an effect? There is a charge, at some level, in this policy for that, but it is based on the fact that the City is the property owner. Lesser and technically with AMPCO providing that service and evidence that they have insurance; they are first in line. If the City assumes that, St. Paul reinsurance carrier will take the liability rate calculation from an acre of land over to a parking type code, where they would base the liability premium on the revenue that would be generated. That rate, from his experience, is greater than an owner lesser rate. Mayor Miller commented that there would be no revenue generated, because there would be no parking meters. As he understands the whole scenario, to eliminate the parking meters on Main Street and to further eliminate the parking meters, in these other parking lots. Perhaps the City would lease the lots or retain portions of them. Mr. Gresko answered that if that was the case, the parking is eliminated altogether, the ownership still exists; the exposure is still there. The next operator/tenants or whoever would be utilizing the land; get assurances that they have liability. As far as it impacting the City, the charge is still there. Although it is not parking, the City still owns the land, and you would be next in line or potentially included in litigation, if something would happen. The Mayor asked if there was some way to back into a number, approximately, because that was some of the concern from the liability aspect right now, as AMPCO has it right now, and if the lease is broken, then all of a sudden it backed out and we have all these partial of parking lots, as well as, Main Street. Is there a fragmented increase there, with the responsibility towing on the City? Mr. Gresko replied that it would not increase the liability one-way or the other. Councilman Miller asked if there was a savings if the City sold 14 of the 15 lots? Mr. Gresko commented that unless the land was sold, there would not be a significant decrease. That is not where your exposure is and St. Paul recognizes that. It is with the various departments and the operations of the City. Councilman Dalrymple asked if Mr. Gresko was familiar with any other of the municipalities having such a jump in their premium or having as many claims against them? The Mayor interjected that if Mr. Gresko could look at just West Virginia, because they may or may not have the increases proportionally. Mr. Gresko said that the fact was there is limited marketed availability in West Virginia. In real alternative options for most public entities and municipalities is BRIM, and they have experienced numerous rate increases every year, yet their coverage is not as comprehensive as St. Paul. A lot of it is specific to the losses that each municipality incurs. He isn't sure if a comparison can be made from a number of standpoints, but there is no insurance program that is going down. Councilman Dalrymple is questioning whether another municipality, not necessarily in the panhandle, but if they are experiencing the same type of increase due to litigation that is hanging out there that this City is experiencing? Mr. Gresko is familiar with the underwriters being involved with the city of Huntington, who have similar situations to Weirton, in terms of loss experience, and the rating did increase, but he doesn't know if it was the same percentage, but it was comparable. They did elect to go to another market for the short term to save money, but they did continue to experience adverse claims history, and that carrier dropped them. St. Paul will now take them back but their only option is the border risk. Possibly two or three years ago, BRIM was asked to give them a number and that number was close to double to what the premium was. Mayor Miller said it was $1.2M right now, and he asked someone to look into it, but… Mr. Frankovitch said what was driving this is regardless of being insured, if you see that your gross written premium for three-years, is around $1.4M. If you look at the expense ratio, 29%, that is pretty much industry standard, whether St. Paul or whomever. The loss number is what is driving these rates. The City is in a 110% of premium, so that, as Councilman Dalrymple said, is what is driving this thing, so regardless, what compounds it is that there is just no markets in West Virginia. So, what we have is a very difficult loss ratio compounded by the fact that no one wants to write it in West Virginia. Proactively, from the City's stand point they are going to get a letter out to all of the Councilmembers and there are two particular things that they think is a wise course of action and they are going to continue to work with the Mayor and City Manager on loss control recommendations, and look at what St. Paul and other people have suggested that the City can do internally to try to bring the claim number down, because that is what will do it at the end of the day. The claim number has to come down in order to push that number down. We don't want to leave you with any misconceptions that it could be thrown out there and maybe there was a market out there, but in West Virginia that is just not the case. The other thing we talked about is that there are four (4) Bad Faith Law Suits, in states, that is in the United States and one of them is West Virginia. How this impacts specifically is that insurers, in West Virginia, because they can be sued for not settling a claim, they have a predisposition, at times, to settle small, what they would call Questionable Merit Claims. Now that does not necessarily push your numbers through the roof, but it impacts how the claims process is approached, and that is the same for every municipality in West Virginia. They are getting an advocate in this legislative session and we would hope that you would help us through the municipal league, very strongly, because our legislators look at bad faith, because it is absolutely affecting your liability premium, without question. Mr. Gresko affirmed this, in that there was reference to this in the Governor's speech last evening. It is an undetermined legislation that is out there, but they recognize that this is part of the problem here. The other impact too is, that Mr. DuFour is right in that he is rightfully requesting in the past that there be some participation in legal council on behalf of the City, with regard to the settlement of claims. The reason why all insurers won't do that, in West Virginia, is because they are ultimately responsible, so if they subjugate that responsible to the City and the City want to fight the claim, at the end of the day, the insurer gets two, not the City for bad faith. That is why no insurer will do that, not just St. Paul, because of the West Virginia Law. Mr. Gresko had a conversation about the weighing of their offer. There may be some participation in terms of panel selection or at least, as Attorney Guida, had requested, that the City be kept apprised of the status of the claims, with copies of interrogatories or whatever is there, so to impute other facts and figures that council doesn't know, that local council may assist to help the City get the claims. Mayor Miller appreciates that and thinks it only fair that they do share whether the City has any say in it or not. At least they would know the activity and background of claims being made and cost is up, maybe they could understand it a little better. Mr. DuFour is missing one thing. If we look at the text of the Resolution, it shows the number $68,203.33, there is a coverage that is not included, and we do need to include it. That would be the Terrorism coverage at $7.600, additional, so we need to consider that $ 689,628.33. That would be the Terrorism coverage and the surcharge. With the various offers that we have here, the best of them, in terms of, both our exposure and in looking at automobile, it vastly improved last year. If looking at in the high deductible, the Option 1 - Auto increasing the deductible to $5,000 from 0, would have met our deduction of $44,133. Mr. Gresko said there was a recommendation from St. Paul, or an Option given to lower the Uninsured/Underinsured Motorist, as well. This could result in significant savings. He is not an advocate to reduce or restrict coverage. In West Virginia where the public entities may be protected from litigation from an employee, would try to make claim under Uninsured Motorist situation. Mr. Frankovitch said that they had this same situation in another municipality. The way the Law is written, and they batted this with their legal council, if you have an employee that is covered under Workmen's Compensation, that employee is prohibited under Law from going back and bringing suit against their employer, unless it is determined to be gross negligence. Basically, what that coverage applies to someone who is in a City vehicle that is not an employee or you don't pay a Workmen's Compensation Premium for him or her. Those are the only people, technically, that fall under that coverage; everyone else would fall under Workmen's Compensation. Mr. DuFour commented on, "What is gross negligence". Mr. Frankovitch said that is the issue right now. There are various Judges' who are interpreting this differently. There is not an consensus of the interpretation. That being the case he doesn't think they would recommend that the City reduce their Uninsured Motorist, if the Judge is going … You can not buy that coverage under BRIM, it is point blank exclusion. There is savings up wards to $80,000, if you would elect to do that, but at this point in time, due to the uncertainty of the interpretation of the Law, we would not recommend you do that. Councilman Moore clarified the statement in saying, that if the City would take a $10,000 deductible and reduce the limit. If we take the $5,000 deductible, there is really only a $20,000 difference between taking a $5,000 deductible and keeping our $1M limit and taking the $5,000 deductible and increasing our limit to $50,000. (Which was confirmed) Councilman Moore doesn't think the incremental increase in savings is not worth giving up $950,000 in protection. Councilman Moore asked if this needed amended or to agree to Option I? Mr. DuFour responded that he thinks all that would have to be done is change the amount and subtract the $44,133; it would be $645, 495.33. Mr. Gresko said that was the number that they had. Mr. DuFour responded that they would amend the total amount. Mr. Gresko said that there would be other savings in the State Tax, which would be approximately $400. A motion was made by Councilman Dorich and second by Councilman Dalrymple to accept this Resolution. It was moved to accept to amended Councilman Moore and second by Councilman Miller. Councilman Moore moved to amend the Resolution to read: Liability Insurance Coverage and annual amount not to exceed $645,495.33, Mayor Miller asked for a Roll Call Vote: Councilman DeMasis - Yes Councilman Miller - Yes Councilman Moore - Yes Councilman Dorich - Yes Councilman Dalrymple - Yes Councilman Veltri - Yes Councilman Kondik - Yes It was moved to accept the Resolution as amended by Councilman Dorich and second by Councilman DeMasis. It was unanimously accepted. ADJOURNMENT
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