FYI:

-Mike Hammond

Risk management can take many different forms. For example, it can include developing and implementing loss control policies or purchasing insurance to cover a loss or claim. But, it can also involve the concept of Contractual Risk Transfer. As the term indicates, the concept of contractual risk transfer involves the transferring of a certain risk to another party by means of a contract or agreement.

The transfer of risk can be accomplished in two specific ways:

Obtaining the additional insured status reinforces the risk transfer accomplished through hold harmless agreements. Thus, utilizing both of these practices is often referred to as the "belt & suspenders" approach.

There are many instances where you should verify the other party has insurance that will respond in the event of a claim. A certificate of insurance generally provides verification of the other party's types and effective dates of coverage as well as the limits for each one. As a general rule however, certificates do not confer any rights to the certificate holder and do not guarantee that coverage will remain in force or that the limits will remain the same.

The absence of this guarantee is the reason one party will often require another to add it as an additional insured on the other party’s liability policy. Being named an additional insured means you are, in essence, covered under the other party’s insurance for a specific risk. You have effectively "transferred" the risk to other party.

The following are situations in which additional insured status is often requested:

1. Property owner hires a contractor to perform work

2. Someone from outside the organization requests to use the organization's facilities

3. Owner of real estate leases property to a tenant

4. Owner of equipment leases it to another party

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Counselors' Comments

 - Dinsmore & Shohl

Ohio Supreme Court Adopts "Substantially Younger" as Threshold for Age Discrimination Claims

In Coryell v. Bank One Trust Company, N.A., 101 Ohio St. 3d 175 (2004), the Ohio Supreme Court adopted the federal standard and held that a plaintiff/employee need only demonstrate that he or she was "replaced by, or the discharge permitted the retention of, a person of substantially younger age." By so holding, the Supreme Court rejected prior decisions indicating that where the plaintiff was replaced with a person who was also in the protected class (beyond the age of 40), there could be no age discrimination claim.

Under Ohio Revised Code Section 4112.14(A), "no employer shall discriminate in any job opening against any applicant or discharge without just cause any employee aged 40 or over who is physically able to perform the duties and otherwise meets the established requirements of the job and laws pertaining to the relationship between employer and employee." Previously, in Kohmescher v. Kroger Co. (1991), 61 Ohio St. 3d 501, the Ohio Supreme Court had held that to state a claim under 4112.14(A), the plaintiff had to allege and prove that he or she was "replaced by, or that the discharge permitted the retention of, a person not belonging to the protected class." However, in 1996, the United States Supreme Court reversed a decision that held that a 56 year-old plaintiff failed to establish a prima facia case of age discrimination because he had been replaced by someone who was also within the protected class. "The fact that one person in the protected class has lost out to another person in the protected class is...irrelevant, so long as he has lost out because of his age." O'Connor v. Consol. Caterers Corp. (1996), 517 US 308, 312. The Court went on to note that because the ADEA prohibits discrimination on the basis of age and not class membership, "the fact that replacement is substantially younger than the plaintiff is a far more reliable indicator of age discrimination than is the fact that the plaintiff was replaced by someone outside the protected class." Id. 517.

The question of what constitutes "substantially younger" will be left to a case by case analysis. In Coryell, the Court noted that federal courts have held that various age differences are either substantial or insubstantial, but that most circuits have not articulated an age difference that is presumptively substantial. Rather than attempt to define "substantially younger," the Ohio Supreme Court noted that:

when considering whether a favored employee is substantially younger than a protected employee, courts must keep in mind that the purpose of R.C. 4112.14(A) is to prevent employment discrimination on the basis of age, and that whether an employee is substantially younger is but a single factor in a broader analysis. The prima facie case method involves the process of elimination, whereby the plaintiff may create an inference than an employment decision was more likely than not based on illegal discriminatory criteria. Courts must not overlook the ultimate inquiry in age discrimination cases, i.e., whether [a] plaintiff was discharged on account of age. (Quoting Kohmescher v. Kroger Co. (1991), 61 Ohio St. 3rd 501 at 505).

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The Claims File

- Craig Blair

As part of the annual budget process, I recently met with each member to conduct a claims audit. The purpose of the audit was to review the member's claim files and discuss any questions the Trustee may have regarding current claims, reserves or past settlements. More importantly, we discuss how losses will affect the member's premiums for the upcoming year. Since each member's four year average annual losses are weighted three times, it is the most significant factor in the pool calculation formula.

This year, the four year average annual losses decreased significantly for more than half our members. These decreases will result in lower PCF's. Picking up the slack, however, will be the members whose losses increased or remained static.

When I discuss with a member an increase in loss experience of 30-50%, the questions generally focus on what caused the increase. Although it could be from something unavoidable, like storm damage, most times it is from serious claims or lawsuits. While most lawsuits are dismissed, the pool still defends them, and that cost goes against the member's loss experience. When asked about improving unfavorable losses, I always respond from past experience, that good loss history correlates to the importance the city places on safety and loss related activities.

There are two key factors in attempting to establish control of claims, education and accountability. To educate your employees, the city must have written policies, training and regular safety meetings to discuss safety issues and concerns. With regard to accountability, the city needs to establish an internal reporting policy whereby every incident and accident is reported. Additionally, disciplinary procedures must be in place to correct safety violations.

We can not live by the theory "it won't happen to us." We must take the necessary steps to insure a safe work environment and safe community. If you need assistance in developing or reviving a safety committee in your city, please contact Starr Markworth, the MVRMA Loss Control Manager.

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Loss Control Lowdown

-Starr Markworth

Improve Safety Without a Safety Budget

With tighter city budgets and staff working harder to get everything done with fewer resources, it is easy for safety to become a lesser priority. Can you improve safety when you don’t have a safety director and only a small safety budget? Hopefully, there are a few tips in this article you can use to do just that.

The first step in improving safety is increasing training on a regular basis. MVRMA has several resources available for your use for little or no cost. For a minimal fee, MVRMA sponsors training throughout the year in topics that relate to safety. If there are areas of training we have overlooked, please contact me, and we can work on scheduling these programs to fit your city’s needs. MVRMA also has an extensive video library with over 250 videos that can be borrowed by the city for only the cost of return shipping. In addition, MVRMA has purchased interactive CD-ROM programs that the city can borrow and use for employee training either individually or in a large group setting. Please contact me to obtain further information.

The second step is empowering your staff to take safety seriously. When employees feel comfortable in reporting a safety hazard, they will become safer workers.

The third step is creating a positive safety culture. When employees believe in safety for themselves and others, they perform their daily tasks in a safer manner. Working in a safe manner must become an integral part of the job and not the exception. To further promote safety, some MVRMA cities sponsor annual events like safety picnics or employee safety and health fairs.

The final step is making the responsibility of safety part of every supervisor’s job description. Many of our cities have had success in including safety as an area that is evaluated during the supervisor’s annual review. This process allows the city to formally review the success of the department’s safety program through the supervisor‘s achievements.

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Brokers Beat

Insurance coverage has been available for weather events for some time, and the marketplace continues to become more sophisticated - with several permutations available for protection. The primary users of weather insurance and weather derivatives have been energy concerns. However, public entities have revenue and earnings shortfalls due to weather related risk.

Weather is one of the most observed and discussed uncertain events. Data exist for temperature, precipitation, snowfall, windspeed and other variables every day in most places in the country going back several decades. Gathered by an independent, unbiased party - government agencies - data are widely available. This compiled history results in a widely understood series of events that are seemingly random in the short run and cannot be manipulated by mere mortals. These factors create a fair and unbiased platform for risk management products. The key is to understand the exposure and the resulting impact on the organization.

We examined a small Midwestern city that provides snow removal services for its streets and pedestrian walkways. In an attempt to create a better understanding of their organization, we interviewed the budget manager and received information from the public works manager to determine how they experience expense from snow removal. Our goal was to create a weather product to significantly reduce their budget uncertainty.

The first step was to understand how a municipality budgets for snow removal services that depend on random weather events. Budgets were set for this municipality as an average of prior observations - the past three years in this example.

Implications of a random high snowfall year are even worse. As available funding is limited by budget, facilities would have to be closed, police and fire protection curtailed and other dire measures imposed as a result of the deficit. For this city, creating a level of certainty related to weather risk should be valuable.

The next step was to determine the historical snow removal expenditures and the relationship to the observed snowfall. In this case, snow removal expenditures varied by more than 350% from year to year making budgeting difficult at best.

During the same period, the annual snowfall for the season never varied more than 65% from year to year, and the years with the highest costs of snow removal did not necessarily match the years with the largest snow accumulation. Clearly, there was a disconnect between total snowfall and snow removal expense.

The next step was to estimate the average cost per event. This requires developing a standard cost for the required level of services. Cost factors include regular wages, overtime, equipment, materials and contracted work. A light snow may only require clearing of main roads and intersections that can be handled on regular time whereas a heavy snow may require clearing of side streets and residential areas, which require overtime labor, additional materials and equipment or contractors. A snow emergency may require clearing main roads and intersections several times a day, further straining resources, or it may take several days to clear, incurring added maintenance and overtime not incurred if the snow fell at a slower rate.

Snow removal protection allows the entity to refine the year-to-year budget process by exchanging the uncertain weather outcomes for a certain insurance cost plus expected budget for normal services. The entity is still exposed to risk in the event actual expenditures vary from standard costs or if standard cost, such as wages, actual time, fuel or materials (salt) change unexpectedly. Nonetheless, this approach offers municipalities and other public entities a significant and effective management tool. By minimizing the budget impact of a hard winter, the municipality can focus on delivery of snow removal services while maintaining a balanced allocation of resources to fulfil its core mission.

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Coming Events

October 7-8, October 21-22

NAPD Driver Training

Mound

Safety Program Management

8:30-11:30 AM

MVCC

Accident Investigation

8:30 - 10:30 AM

MVCC

Supervisor Training Graduation

Heatherwoode Golf Club

PERRP Safety Training

MVCC

Annual Legal Update

Time and Location to be announced

Snow & Ice Control

8:30 - 11:00 AM and 1:00 - 3:30 PM

MVCC

Trenching & Excavation

8:30 am - 3:30 PM

Novmeber 18

Snow & Ice (hands on)

8:30 am - 3:30 PM

Vandalia Justice Center

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From the Board Room

At the September 20th Quarterly Board Meeting, the following actions were taken:

- Approved transfer of $350,000 from the Shock Loss Fund to LY 13 to cover reserves

- Approved closure of LY 11 and 12 and the disposition of the funds as follows: $500,000 to replenish the Shock Loss Fund, $250,000 to GEM as a capital contribution contingent upon being able to obtain increased liability limits, and the remainder to the General Reserve Fund

- Accepted the Financial Audit and CAFR for the year ended December 31, 2003

- Approved discontinuation of the line of credit with Fifth Third Bank due to a processing fee of $325

- Approved amended Shock Loss Fund Policy which clarifies its original intent of establishing a one-to-one ratio between the SLF balance and the current year's loss fund contribution

- Authorized the Executive Director to approve changes in the GEM Bylaws clarifying the date for determining members' surplus balance

- Approved amended Endorsement 1-04 and new Endorsement 8-04 of the MVRMA Liability Coverage Document which respectively add Centerville as a named insured and provide retroactive prior acts public officials coverage for Centerville for the period 9/1/01-9/1-04

- Authorized the Executive Director to obtain a legal opinion addressing the various issues concerning the carrying of concealed weapons by off-duty and retired police officers

- Approved the draft Claims Management Policy requested by GEM

- Approved enhancements to the Awards Program effective in 2005

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MVRMA Welcomes the City of Centerville

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