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-Mike Hammond
More than Insurance
MVRMA members understand their participation in the
association means they are "owners" and benefit by sharing in the pool's
financial success. Member participation is much more than just purchasing
insurance. This point was again illustrated at the September 28, 2009
Quarterly Board Meeting, when Loss Year 15 (2003) was declared "closed."
Per the Surplus Loss Reserves Disbursement Policy, the Board then directed
the remaining funds of $1,611,448 be distributed to the members who
participated in that loss year.
To date, MVRMA has been able to close 14 of its 21
loss years and has refunded $5,778,890 to its members. That amount
represents a return of 49.7% of the loss funding contributed during those
loss years.
Each year, as part of the MVRMA annual budget, a
loss funding amount is established specifically to pay claims within our
self-insured layer. This amount is determined by studies conducted by our
independent actuary. It is based on our loss cost experience and exposures
for the coming year. The selected funding amount provides for a confidence
level of 60-70%. For example, the loss funding amount contributed for LY
15 was $1,762,231 and provided a confidence level of 65%. This amount
represented a little more than half of the overall member contributions
for 2003.
Since members and pool contribution factors (PCF)
may vary from year to year, all loss funds are segregated by loss year.
Claims are paid according to occurrence date from the funds contributed
for that loss year. Likewise, quarterly deductibles and all other claim
receipts are credited to the appropriate loss fund by occurrence date.
Interest earnings are credited monthly according to each loss fund's share
of MVRMA's total portfolio. Following these procedures maintains the
integrity of each loss fund.
For example, LY 15 earned $326,685 in interest
income, while net claim payments, after quarterly deductibles and other
receipts, totaled $477,468. The refund of $1,611,448 represents a return
of 91.44% of the monies originally contributed to the LY 15 loss fund!
The action to close a loss year is only taken after
all known claims and lawsuits for that particular year have been settled
and/or paid. Additionally, the loss year must have been in existence at
least four years to insure the statute of limitations has expired. The
normal life span of a loss year is 5-9 years.
Unlike a commercial insurance company or other
insurance pooling arrangement, MVRMA refunds surplus loss reserves to
contributing members when a loss year is declared closed. These refunds
are distributed in the same proportion as originally contributed. Per the
Surplus Loss Reserves Disbursement Policy, MVRMA deposits each member's
share in the member's General Reserve Fund (GRF) account. The member then
has 30 days to notify MVRMA of its decision to leave the funds on deposit
in the GRF or to:
1) Apply all or a portion of its surplus to any
outstanding MVRMA invoice or 2) Receive all or portion of its surplus in
the form of a refund.
Members are encouraged to maintain a significant
balance in the GRF. Being able to access those funds to supplement an
unexpected spike in the annual contribution provides for stable funding
from year to year.
The potential for surplus loss reserves in any given
loss year should provide a real incentive for our members to practice good
loss control measures and transfer risk whenever possible. By focusing on
safety training, effective management and policy development, we can all
benefit from reduced loss expense. Making risk management a priority is
essential to the success of the MVRMA program.
During this difficult economic period, we are
pleased that that our members are able to benefit from the closure of a
loss year and the return of the surplus funds. This is one of the many
benefits of being an "owner" in MVRMA.
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- Surdyk, Dowd & Turner
Ohio Supreme Court Upheld as Constitutional ORC
2744.05(C)(1)
On October 1, 2009, the Ohio Supreme Court in
Oliver v. Cleveland Indians Baseball Co. Ltd. Partnership upheld as
constitutional Ohio Revised Code Section 2744.05(C)(1), which places a
$250,000 cap on non-economic damages awards against cities and other
political subdivisions of the state. Non-economic damages include pain,
suffering, loss of companionship and/or loss of consortium; they do not
include economic damages, such as lost wages, medical bills and damages to
property.
In Oliver, the plaintiffs were arrested in
connection with the detonation of an explosive device during a baseball
game. The plaintiffs were jailed for four days and claimed to have been
subjected to poor treatment by corrections officers. Although charged with
aggravated arson and felonious assault, the claims were later dismissed by
the prosecutor's office. The plaintiffs then brought suit against the City
of Cleveland for malicious prosecution, false arrest and imprisonment and
intentional infliction of emotional distress.
The plaintiffs' case proceeded to a jury trial. The
jury awarded each plaintiff $400,000 in compensatory damages. Pursuant to
R.C. Section 2744.05(C)(1), the City moved the court to reduce the damages
award to $250,000 (per plaintiff). The trial court denied the City's
motion.
The City appealed the trial court's decision to the
Eighth District Court of Appeals. The Court of Appeals affirmed the
$400,000 award on the basis that R.C. Section 2744.05(C)(1) is
unconstitutional as it violates a plaintiff's right to a jury trial and
the equal protection clause of the U.S. Constitution. The City appealed to
the Ohio Supreme Court.
The Ohio Supreme Court determined the right to a
jury trial ensures that a jury's fact finding function is not invaded, but
this right does not extend to questions of law. Thus, the Court reasoned
that while a jury may determine the amount of damages as a matter of fact,
the actual award may be reduced by the Court, as a matter of law, via
application of a statute. The court thus concluded that a trial court does
not intrude upon a jury's fact finding when it applies R.C. Section
2744.05(C)(1) to reduce a jury award of non-economic damages in excess of
$250,000.
In addition, the Ohio Supreme Court held that the
equal protection clause did not render R.C. Section 2744.05(C)(1)
unconstitutional. The Court determined that because the issue did not
involve a fundamental right nor did plaintiff belong to a protected class,
the R.C. section 2744.05(C)(1) would be upheld if rationally related to a
legitimate governmental purpose. The Court held that the state has a valid
interest in preserving the financial soundness of its political
subdivisions and that a limitation on non-economic damages is rationally
related to this objective. Therefore, the Ohio Supreme Court held that the
$250,000 cap on non-economic damages proscribed by R.C. Section
2744.05(C)(1) did not run afoul of the equal protection clause.
The Supreme Court's decision in Oliver
resolves any doubt regarding the validity and constitutionality of the R.C.
Section 2744.05(C)(1) non-economic damages cap placed on claims against
political subdivisions.
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- Craig Blair
Employment Practices Liability (EPL)
Coverage
MVRMA provides EPL coverage for its members. This
coverage refers to claims that can be presented by former or current
employees, or even individuals who, although not hired, completed
applications for jobs with the city. These actions include claims of
discrimination (race, gender, etc), harassment, wrongful termination,
retaliation/whistle-blowing and disability-related issues to name a few.
While our members do not generate a lot of these claims, they are usually
the most difficult to work through for the city and MVRMA.
When an employee is terminated, emotions run high
for everyone involved. Coworkers of the terminated individual may not
always agree with management's decision. This can lead to disruption of
the workplace and morale problems. That's why it's essential for
management to thoroughly investigate and review each termination and to
adhere to city policy.
When EPL lawsuits are filed against our members,
demands will range from lost benefits (back and front pay) to damages for
emotional/mental distress, defamation and pain and suffering. (MVRMA does
not cover lost benefits.)
A recent issue of Public Risk reported that
plaintiffs prevail 61% of the time in EPL actions. (Remember, most jurors
are "employees," so they may feel sympathy for the plaintiff and see him
as a "victim.") Fortunately, MVRMA's success rate is higher than the
average, with only 45% of its cases settled in the plaintiff's favor.
As with any review of claims, we must consider the
cost to our members. During the past 15 years, EPL claims have accounted
for 20% of our total litigation files, but they comprise 33% of the monies
spent for litigation. The average cost of an EPL claim is $39,400 while
all other claims average $17,800. Defense of these claims generally costs
three times more than other claims.
Due to the sensitive nature of EPL claims, MVRMA
works closely with defense counsel to carefully monitor and review any EPL
action. To properly protect the member and MVRMA, staff must consider the
city's position, the allegations and facts that will go to a jury and of
course, we can't ignore the insurance industry's history with EPL claims.
All these factors are taken into account before deciding to mediate,
settle or defend an EPL action.
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-Starr Markworth
Snowplow Rodeo
On Thursday, October 1, the Public Works Officials
of Southwest Ohio put on their 23rd annual snowplow rodeo. The Snowplow
Rodeo Committee meets regularly throughout the year to gain the support of
vendor sponsors and to plan the all-day event. The committee is made up of
city, county, township and village officials from various communities and
included several officials from MVRMA cities.
This event brings together some of the best snowplow
drivers in southwest Ohio. More than 60 drivers competed in the road
course designed by MVRMA's own Conrad Flowers from the City of Mason
Public Works Department.
The following seven MVRMA cities participated in the
event: Blue Ash, Centerville, Indian Hill, Mason, Miamisburg, Springdale
and Vandalia. Congratulations to the MVRMA drivers placing in the top 30:
Marty Tackett, Centerville - 12th place; Keith Cooper, Blue Ash - 19th
place; Chris Harold, Vandalia - 22nd place; David Smith, Indian Hill -
25th place; Brandon Slater, Springdale - 26th place and Jim Noel, Blue Ash
- 28th place.
The Snowplow Rodeo provides an excellent opportunity
to prepare for the upcoming snow and ice season. Many participating
departments conduct their own similar events to determine which employees
earn the privilege of representing their cities at the SW Ohio Snowplow
Rodeo.
This event takes place annually on the first
Thursday in October. If your city has not participated in the past, mark
it on your calendars for next year - it is a great time and a great
training opportunity!
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As MVRMA prepares the 2010 budget, this is probably
a good time to address the conditions of the commercial insurance
marketplace. These conditions influence the pricing of the reinsurance and
excess insurance that MVRMA purchases collectively on behalf of its
members and will ultimately impact the bottom line of the budget.
In 2008, the commercial insurance marketplace
experienced deteriorating financial results and underwriting performance,
with the underwriting performance being dominated by Hurricane Ike losses.
In 2009, these trends have reversed and stabilized to some degree.
Investment losses actually improved in the first half of 2009, and
underwriting performance also improved but remains at marginal levels.
Industry capital and surplus increased slightly to
$463 billion in the first half of 2009. While this indicator dipped in
2008 due to investment losses and poor underwriting ratios, we suspect it
will stabilize over the next 12 months. Because of continuing difficult
economic conditions, credit is still scarce and recapitalization in the
event of a catastrophic event would be very difficult. We are seeing
scarce credit having a negative impact on many underwriting decisions.
Industry underwriting results for the first half of
2009 reveal an industry combined underwriting ratio of 100.9%, down from
$105% in 2008. We predict a flat trend for underwriting performance for
the balance of 2009 with the caveat that a significant catastrophic event
would have a considerable influence on this ratio. Using Alliant's results
from our 7/1/09 renewals, we would describe the current marketplace as
flat for liability. While we experienced a slight hardening of the
property marketplace in the spring of 2009, conversations with property
underwriters since July 1st have indicated a flattening trend in this
market segment.
In summary, we see a marketplace that is being
driven by marginal underwriting performance and the realization that
additional deterioration of capital and surplus generated by catastrophic
events could be very difficult to replace. We see these factors
influencing industry underwriting operations with underwriters still
attempting to write new business while being cautious in the selection of
risks. We see this cautious underwriting being characterized more by
restrictive terms as opposed to increased pricing or rates. In absence of
a major catastrophic event, we see liability and property markets in a
flat trend for the balance of 2009 and into 2010. As we get closer to the
end of the hurricane season on November 30, and the outlook for 2010
renewals becomes clearer, we will be updating specific forecasts for MVRMA
renewals.
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PRIMA Cybrary
Because of its PRIMA membership, MVRMA is able to
research various risk management-related topics for its members through
the PRIMA Cybrary. Just contact Starr Markworth at the MVRMA office, and
she will forward whatever information is available on the PRIMA website.
Topics include Safety and Loss Control, Risk Management Practices, Public
Safety, Legislation and Compliance, Parks & Recreation, Job Descriptions,
Sample RFPs and much more. See Page 6:05:01 of the MVRMA Handbook
for a more complete listing.
For help with a risk management-related question or
assistance with developing a policy or procedure, the PRIMA Cybrary may be
the best resource. Let our membership dollars work for you.
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The Safety Performance Evaluation Checklist Program
was developed as a tool to be used by member cities, as well as MVRMA
staff, to determine what safety and loss control areas require
improvement. Annually, the MVRMA Loss Control Manager meets with each
city's safety coordinator to determine compliance with the "best
practices" of loss control and risk management detailed in the SPEC
document. Awards are given each year as part of this compliance audit.
For 2009, we would like to congratulate the Pinnacle
Award winners: the cities of Centerville, Indian Hill,
Kettering and Troy for achieving 100% compliance. The city of
Madeira received the Ascension Award for most improved compliance.
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At the September 28, 2009 Quarterly Board Meeting,
the following actions were taken:
- Approved appealing the McCaughey v. Blue Ash
verdict
- Approved the Open Claims & Incurred Losses Report
- Approved an agreement with Alliant Insurance
Services for a review of the SPEC document
- Accepted MVRMA's Financial Report and CAFR for the
Year Ending 12/31/08
- Accepted the actuary's Loss Funding Study for LY22
(2010)
- Approved a one-year agreement with Carol Riggle
for preparation of financial statements for the year ending 12/31/09
- Approved a three-year agreement with Godbold
Malpere & Co. for actuarial services
- Approved the 2010 Preliminary Expenditure Budget
and PCF
- Approved MOC Endorsement 11-09, which provides
liability coverage for EMS Medical Directors with regard to their
administrative duties or acts while acting on behalf of the member by whom
they were contracted
- Approved deletion of the Voluntary UM/UIM Coverage
Policy effective 1/1/2010
- Approved closure of LY 15 (2003) which will return
$1,611,448 to the members who participated in that loss year
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