March 20, 2006

Time and Location

MVRMA Office, 4625 Presidential Way, Kettering, Ohio.  The meeting began at 9:07 am.

The following individuals were present when the meeting was called to order: Terry Klein, Beavercreek; Dave Helling, Bellbrook; Jim Pfeffer, Blue Ash; Mark Schlagheck, Centerville; Janine Cooper, Englewood; Nancy Gregory, Kettering; Bruce Snell, Mason; Dody Bruck, Miamisburg; Wayne Davis, Montgomery; Gary Lucas, Piqua; Tom Judy, Sidney; Sue Knight, Troy; Julie Trick, Vandalia; Tom Reilly, West Carrollton; Terry Godbold, Godbold, Malpere & Co.; Rick Steddom, Driver Alliant Insurance Services; and Kathy St. Pierre, Craig Blair, Starr Markworth and Michael Hammond, MVRMA. 

Laura Curliss, Wilmington; Derrick Parham, Springdale; Dave Couch, Indian Hill; Kim Lapensee, Madeira and Dick Drennen, Tipp City arrived a few minutes after the meeting started.

Consent Agenda Approval

Motion by Ms. Gregory, seconded by Mr. Davis, to approve the Consent Agenda.  Motion carried.

Membership & Marketing Committee Report

Mr. Reilly introduced Mr. Godbold of Godbold, Malpere & Co. who, along with his wife,  conducted the Impact Study of Potential Growth for MVRMA.  As noted, Mr. Godbold is very familiar with MVRMA because he has served as MVRMA’s actuary since the inception of the pool. 

Mr. Godbold explained he interviewed staff, surveyed trustees and obtained financial data from various pools in order to determine the impact of adding additional cities to MVRMA.  His study offered four alternatives, adding the two cities identified in the Dayton/Cincinnati area, adding the four cities that comprise CORMA, adding the two cities in the Dayton/Cincinnati area and the four cities that comprise CORMA, and alternative 4 envisioned adding the two cities in the Dayton/Cincinnati area and the six cities identified in the Columbus area.  The summary concluded that:  

            l MVRMA has had a history of controlled growth.

            l Financial results demonstrate the success of MVRMA philosophy.

            l Growth for the sake of growth is not consistent with MVRMA philosophy. 

           l Financial advantages for growing and expanding into the Columbus area

                        include spreading the pool’s risk geographically, reducing expenses per      

revenue dollar and providing back-up for staff in critical areas. 

Mr. Godbold noted current staff could handle the additional workload of expanding into Columbus during the transitional period, but ultimately, MVRMA would need to add one full time or two part time employees to assist with Claims and Loss Control activities.  He recommended entering the Columbus market only if all four cities that formed CORMA were able to join MVRMA.  Adding fewer than four cities in that area would not be cost effective. 

Motion by Mr. Parham, seconded by Ms. Bruck, to accept the Management Review and Impact Study of Potential Membership Growth.  Motion carried.

Motion by Mr. Judy, seconded by Mr. Parham, to add only the four cities that make up CORMA (Dublin, Upper Arlington, Westerville and Pickerington) to the Approved List for marketing.  Motion carried.

Risk Management Committee Report

Ms. Markworth reviewed the training calendar provided in the agenda packet.  She noted 75-80 people attended the Ethics/Open Records seminar held March 15.

Cindy-Ann Thomas, a trainer who came highly recommended by both Blue Ash and Springdale, will conduct an upcoming Sexual Harassment seminar.  Ms. Thomas is a Cincinnati attorney with a background in human resources.  Ms. Markworth, in cooperation with MVCC, is working with Ms. Thomas to develop a human resources track, which will include legal terminations, an employee’s right to know, etc. for later in the year.

Ms. Markworth noted she has completed six of nineteen SPEC evaluations, which are scheduled through the end of April.  She has appreciated the opportunity to meet with the various departments, rather than just the Trustee, in each city.  These meetings provide an opportunity to share information internally as well as explaining the role MVRMA can play in the city’s loss control efforts. 

Ms. Lapensee briefed the Board about recent risk management consultations provided by MVRMA staff.  They included a leash-free dog park and a volunteer handbook and waiver of liability.  Mr. Hammond promised to update the Board about these activities on a regular basis. 

Mr. Blair discussed the dismissal of the LY 13 Carder v. Kettering lawsuit which involved injuries to claimants who drove into the path of a police car on an emergency run.  Two weeks before the trial, the only claim remaining against MVRMA was dismissed.  Cincinnati Insurance, the claimants’ insurance carrier, settled the UM/UIM claim for $300,000.  Mr. Hammond and Mr. Blair expressed their appreciation for the way our attorneys, Bob Surdyk and Nick Subashi, handled this claim.  It had been previously reserved at $415,000, which included $250,000 for a jury verdict.  In 2004, MVRMA transferred $350,000 from the Shock Loss Fund to cover the shortfall in LY 13.  It is anticipated that much of that amount will be available for transfer back to the Shock Loss Fund when LY 13 is closed. 

Mr. Blair reviewed the Claims Watchlist.  Included in that discussion were:

l Sexton v. Mason claim – (Allegations of damages from excessive storm water) The court ruled in favor of the city’s motion for summary judgment, but the claimant recently appealed that ruling. 

l McCaughey v. Blue Ash claim – (Plaintiff alleges police illegally confiscated his car) This claim may be with us for awhile because of the delay created by the plaintiff’s filing for bankruptcy.

l Woods v. Miamisburg – (Plaintiff alleges her civil rights were violated) The judge has allowed this claim for excessive force by a police officer who broke up an altercation between two girls at the high school.  Judge Rice has not filed his written opinion yet, but we will appeal once it is filed. 

l Adams v. Mason – (Plaintiff alleges defective fire hydrant caused damage) The fire hydrant in question was alleged to have been repaired with faulty parts (possibly by the city’s public utilities department).

l Lerner v. Madeira – (Allegations of damages from improperly installed sewer line) The work has been done on this claim, and we are waiting to go to trial.

l Brown v. Madeira – (Plaintiff alleges false arrest) The attorneys believe this claim will be settled later this summer.

l Speers v. Springdale – (Claimant injured when police vehicle turned into her car) The city is clearly liable and mediation has been scheduled.

l Dennis v. Miamisburg – (City truck rearended claimant’s car) Two accidents were involved, and it may be awhile before mediation is scheduled.

Mr. Hammond informed the Board that Am Re, the reinsurance carrier for GEM, recently spent two days at the MVRMA office conducting a claims audit.  The auditor was very positive when discussing his findings with Mr. Blair and Mr. Hammond.  Mr. Hammond noted the audit bodes well for the possibility that Am Re will be a long term player on the GEM account.

Finance Committee Report

Mr. Schlagheck reported Bond-Tech outperformed the traditional short term agency investments in 2005 (2.692%) but yielded slightly less than Star Ohio.  The Finance Committee will reevaluate Bond-Tech’s performance at the end of 2006.

Mr. Hammond reported that GEM is totally reinsuring MVRMA for $9 million excess $1 million in 2006.  GEM is then retroceding $8 million of that coverage to Am Re.  GEM is requiring clarification from each pool it reinsures regarding whether an occurrence involving more than one member is considered one occurrence or multiple occurrences.  More than 60% of GEM members consider such situations one occurrence.  MVRMA staff, with the support of the Finance Committee, recommended these situations continue to be considered one occurrence with one SIR.  The $10 million limit would be shared by all members involved.  A deductible, however, would apply to each member.  The Board concurred with the recommendation.  No action was required on this issue because it would be included in approval of the Liability Coverage Document 2006LY18A. 

Mr. Schlagheck reviewed the questions that arose from an Ohio Civil Rights complaint brought against the City of Kettering.  The city had three concerns: the exclusion of back wages and front pay, the exclusion of punitive damages and MVRMA’s right to settle.  Since the exclusion of punitive damages is consistent with statutory enactments, and MVRMA bylaws determine MVRMA’s right to settle, the real issues involved back wages and front pay.  In past coverage documents, back wages have not been covered, but the documents were silent regarding front pay.  The Committee’s recommendation was to continue excluding coverage for back pay and tighten up the language to exclude coverage for front pay as well.  Mr. Hammond then referred to the page in the agenda packet labeled “Employment Practices Liability Issues.”  He stated pools generally do not cover either back or front wages, although a stand alone EPL policy probably would.  He noted that even though back and front wages would not be covered, MVRMA would still provide a defense.  He further stated that claimants generally demand compensatory damages, rather than back and front pay, to avoid paying taxes on the settlement.  It becomes a philosophy issue as to what the pool wants to cover.  The Board concurred with the recommendation to continue excluding coverage for back wages, front pay and punitive damages and to make no changes in the bylaws affecting MVRMA’s right to settle.  No action was required on these issues because they would be included in approval of the Liability Coverage Document 2006LY18A. 

Mr. Hammond provided a review of the Liability Coverage Document 2006LY18A with recommended changes provided by coverage counsel.  The changes included the following:

Since it is not an insurance policy, the word “insured” was replaced with “member” throughout the document.

On page 1, a more explicit explanation of the coverage being occurrence based was added.

On page 2, Under “Members’ Deductible,” Public Officials Errors and Omissions and Employee Benefit Liability are combined for the aggregate limit of liability, and multiple member claims or suits are considered one occurrence.  Under “Coverage Period – Territory,” the fact that the elected or appointed official, employee or agent “was acting within the course and scope of his/her employment or office” was added.

On page 3, under “Persons or Entities Covered, B and C, “within the course and scope of their employment” was added.  

On page 4, E-2, in the sentence: “Loading” and “unloading” of aircraft as set forth above shall not apply to paramedics, nurses or emergency medical technicians, the words “employed or acting on behalf of the Member” were added.

On page 6, P-2 and on page 7, Q-4 were re-written as follows: “Demands due to back wages and benefits, front wages, or overtime, future benefits, severance obligations, or similar demands, even if liquidated damages under any federal, state, or local statute, rule or regulation; or demands due to any collective bargaining agreements;”

On page 10, L-7, the last line was re-written to specify “in violation of criminal law.”

On page 11, S, the definition of “wrongful act” expands coverage by changing negligent act to “breach of duty.”

On page 12, V, the definition of “Unfair Employment Practices,” the second paragraph was expanded to “Unfair Employment Practices shall include…common or statutory, including but not limited to Equal Employment Opportunity Commissions and Ohio Civil Rights Commission complaints.”  Mr. Hammond noted MVRMA can assign defense in these situations, but it is not mandated until a suit is received by the city.

On page 13, 2-C, the statement was changed to note “covered” claims.  Later in C, it was noted “all settlements of claims are to be made by the Association.”  It then called out the rights of the members as set forth in Article XIV of the MVRMA Agreement and Bylaws.

On the Declaration Page, under Item 5-Limits, the limit was increased to $10 million, and #2 (b) denotes the aggregate applies separately for “Coverage C and Coverage E combined.” 

Motion by Mr. Parham, seconded by Mr. Davis, to approve the Liability Coverage Document 2006LY18A.  Motion carried. 

Mr. Hammond explained that GEM is an association sponsored captive and is domiciled in Washington, D.C.  NPX, the sponsoring association, is domiciled in California.  For ease of administration, the Board decided NPX should also be located in D.C.  Since NPX is a non-profit, it had to be dissolved and reformed.  The new association was titled the National Association of Governmental Entity Programs (NAGeP).  In order to dissolve NPX, its members are requiring a financial audit that is currently underway.  Once the audit is completed, the assets of NPX will be transferred to NAGeP. 

Ms. St. Pierre reported she is working with Carol Riggle to complete the GAAP conversion and develop a trial balance for use by the new auditing firm, Clark, Schaefer & Hackett.  The first meeting with the auditors is scheduled for April 18.

Mr. Hammond informed the Board MVRMA received its thirteenth consecutive GFOA Certificate of Achievement for Excellence in Financial Reporting for its 12/31/04 CAFR. 

Driver Alliant Insurance Services Report

Mr. Steddom notified the Board that as of January 1, Driver Alliant changed ownership and is now owned by a different capital venture firm.  Tom Corbett, formerly the CEO of Driver Alliant, is now the CEO of the entire organization.  Driver Alliant will continue to do business as usual but may have a name change in the next nine months, dropping the “Driver” and emphasizing “Alliant.”

Regarding the liability marketplace, Mr. Steddom noted two new entrants, Markel Re with $5 million capacity and CV Star, which will be wholesaling for a company other than AIG.  CV Star has a capacity of $10 million.  Mr. Steddom expects the liability market to soften slightly over the next 12 months.  If GEM continues its current relationship with Am Re, he forsees a flat renewal for MVRMA 1/1/07.    

Because of Katrina and other wind storm losses, Mr. Steddom has seen a hardening of the property market, particularly for specialty carriers excess $10 million.  After the 9/11 catastrophe, a lot of additional capital rushed the marketplace, but that situation has not materialized this time.  Investors are taking a wait and see attitude.  PEPIP, which provides MVRMA’s property program, places its first $10 million with Lexington and pays premiums of $70-80 million.  Lexington’s losses from Gulf wind exposures were negligible, and Mr. Steddom anticipates a flat renewal for the 60-65% of our premium that goes there.  The other part of our premium goes to carriers that have exposures from wind, flood and earthquake, and those premiums are going up. Overall, Mr. Steddom predicted MVRMA’s property rates would increase 10-15% at renewal July 1.   

Executive Director’s Report

Mr. Hammond referred to the April issue of Risky Business which will include an article from Bob Surdyk regarding sign ordinances and their constitutionality.  Attorney Surdyk is currently defending several local jurisdictions against claims of “content-based” restrictions which treat signs differently based upon their message.  The jurisdictions are sued for loss of revenue during the time the sign permits are denied, and settlements can easily exceed $1 million.  In the article, attorney Surdyk recommends a review of each member’s sign regulations.  Ms. Lapensee noted that Madeira had already undergone the review process and offered to share a copy of her city’s regulations with other MVRMA members.  Mr. Hammond stated that attorney Surdyk is trying to arrange for a professor from Ball State, who is an authority on this issue, to conduct a ½ day seminar for MVRMA.

Mr. Hammond passed out the March issue of the GEM newsletter and noted the article on the front page that refers to GEM’s 2005 financial results.  Net income for the year was $562,760.  Total member equity as of 12/31/05 was $13,865,596, which reflected a 29% increase.  The rate of return on member contributions was 4.7%.  A list of the current GEM membership was listed on the back page of the newsletter. 

Regarding professional development, Mr. Hammond stated he and Ms. St. Pierre will be attending Training for Public Investment Management sponsored by the Treasurer of State on May 31.  He will be attending the GEM Board Meeting in Washington, D. C. April 19 and will be joined the following day by Ms. Knight for the GEM Governance Summit.  Mr. Blair just returned from the Spring AGRIP Conference in Tampa where he attended an interesting panel discussion on pool surplus and reserving practices.  Mr. Reilly, Ms. Chavarria and Ms. Markworth will be attending the PRIMA Annual Conference in Las Vegas in June, and Mr. Davis will be attending the Fall Governance Conference in New York with Mr. Hammond and Ms. St. Pierre.

At the end of the meeting, Ms. St. Pierre reminded anyone who had not forwarded a copy of the city’s Workers’ Comp Payroll Report to do so as soon as possible.

Having concluded its business for the day, the meeting adjourned at 11:45 am.