FYI:

- Michael Hammond, Executive Director

You may have read about the recent allegations concerning the insurance industry and the way it conducts its business. Many of our members have asked about the impact of these allegations upon MVRMA and their effect upon our relationship with Marsh USA as our insurance broker. I thought it would be helpful to address those questions in this column.

New York Attorney General Eliot Spitzer has made public recently some very serious allegations concerning the insurance industry. Marsh & McLennan Cos. has been at the center of these allegations which claim it steered unsuspecting clients to certain insurers and reaped huge fees as a result. The allegations appear to involve the practice of brokers receiving contingent commissions, or market service agreements, and price fixing with insurers.

Under the practice suspended by Marsh effective October 1, 2004, which is known as market service agreements, insurers pay brokers if the brokers’ overall book of business achieves a predetermined volume or profit based objectives within a specified time. These fees are not based upon the placement of a particular policy or in connection with any individual buyer but rather on the overall book of business. Though the practice of contingent commission agreements was common and long standing in the insurance industry and not illegal when fully disclosed, NY AG Spitzer charged Marsh with collecting payments by rigging bids and fixing prices that inflated costs for clients.

These are very serious charges and will no doubt bring about changes in the business practices of the insurance industry. In fact, those changes are already taking place.

Marsh has responded that it takes these charges seriously. It has pledged to take decisive action to discover any wrongdoings and to correct any problems that are identified. Effective October 15, 2004, a new Chairman and CEO was appointed. Five individuals have been suspended and Marsh is conducting an independent external review. The company is cooperating with the NY AG's investigation. Marsh is implementing significant reforms to its business model to insure every transaction is executed in the best interest of the clients. Those reforms include permanently eliminating the practice of receiving any form of contingent commissions from insurers and providing transparency to its clients regarding negotiations with insurers on their behalf.

MVRMA has a long standing practice of using brokerage service agreements that are based upon a flat fee for services rather than a commission based upon a percentage of the premium. Since our broker provides services other than insurance placement, the fee basis is more appropriate. Additionally, it helps to remove the worries a buyer may have over the possible conflict of interest between the broker and the insurer. It also protects the buyer from paying increased brokerage service fees during a hard insurance market when costs are rising dramatically. Thus, with a fee for services basis of remuneration, we are much less at risk to market pressures or conflict of interest issues.

Before agreeing to insurance placements, MVRMA has had a practice of checking the market rates from a number of various sources. Insurance journals provide quarterly market changes and conditions that may impact rates. Additionally, benchmarking data is requested to compare our renewal rates with other similarly situated programs. MVRMA also monitors insurance rate changes with other governmental insurance pools. Finally, MVRMA does not deal exclusively with one insurance broker and utilizes other brokerage service arrangements that are available through Government Entities Mutual, Inc.

MVRMA’s brokerage service agreement is not structured under the same arrangement as those that are currently under scrutiny in this investigation. MVRMA does not use the New York office of Marsh, which is at the center of these allegations, for its insurance placements. Marsh has pledged 100 percent transparency and full accounting of all revenue earned, including fees and commissions if any, for each client. MVRMA staff will explore with legal counsel the incorporation of a full disclosure and conflict of interest provision for inclusion in the current and any successive brokerage service agreements. Finally, we will continue to closely monitor insurance market changes to provide the most cost effective insurance placement for our members.

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Counselors' Comments

 - Dinsmore & Shohl

The Good and Bad of Recent Decisions Regarding Statutory Immunity

The recent decision in the Third District Court of Appeals demonstrates how effective statutory immunity is when applied appropriately.1

In that case, Bruce Willis was leaving his job and heading home for the day. Mr. Willis was operating his motorcycle along U.S. Route 33 in the city of Marysville. As he was traveling, he came upon a section of the roadway that was covered with grain that had spilled from a truck. About 20-30 feet of both lanes were covered with grain. Attempting to minimize the delay, the police officer at the scene decided to allow the heavy traffic to proceed through the spilled grain. Mr. Willis drove through the spill, fishtailed, and sustained injuries to his arms and legs.

Mr. Willis alleged the City was liable for failing to keep its roadway free of nuisance. The Court, however, found the grain did not constitute a nuisance because the City had no part in creating the impediment and, more importantly, the City took immediate necessary steps to clean up the spill. In the decision, the Court followed precedent that a nuisance has some element of permanency.

Additionally, the Court found that even if the grain had represented a nuisance, the City still had immunity under R.C. 2744. The police officer exercised his discretion in allowing traffic to continue. The Court found that Mr. Willis failed to show that the police officer should have closed the entire road until clean-up crews were finished. The officer’s discretion is a defense to any exception to immunity. The defense could have reinstated the city of Marysville’s statutory immunity had the Court found the spilled grain constituted a nuisance.

A different decision demonstrates the Second District’s disdain for statutory immunity provided to political subdivisions under R.C. Chapter 2744.2  R.C. 2744.02 (B) (1) provides that if a police officer, fireperson or EMT is responding to an emergency, neither the political subdivision nor the individual employee is liable for damages unless the individual’s actions were wanton or reckless.

Officer Aldrich was traveling at a high rate of speed with his lights and siren activated as he responded to a robbery in progress. Enroute to the scene, the officer was involved in an accident. The plaintiffs claimed not to hear the siren or see the lights but admitted to seeing the officer’s vehicle when they entered the intersection. The Court held there was a question of fact as to whether Officer Aldrich acted recklessly by driving at such a rate of speed in a residential neighborhood with limited visibility.

A similar decision was reached previously in Fitzgerald, where a police officer responding to an emergency claimed to use his lights, siren and air horn, and slowed down upon approaching an intersection.3 Because so many different witnesses, including the plaintiffs, had conflicting views about which devices the officer used and when, the Court denied summary judgment on the basis the officer’s actions could be determined reckless.

It appears the Second District is chipping away at an important defense available to a political subdivision and its emergency personnel, as well as creating a higher standard of care for emergency personnel responding to emergencies. This is a precedent that should concern all political subdivisions.

1 Willis v. Commodity Specialists Co., 158 Ohio Spp.3d444, 2004-Ohio-4807.

2 Carder v. Kettering, 2004-Ohio-4260, 2004 WL 1802045

3 Fitzgerald v. Spencer, 2004-Ohio-1940, 2004 WL 829945.

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The Claims File

- Craig Blair

Because it has been a few years since my last review of MVRMA's claim files, a more current update is in order.

Presently, about half our litigation is police related. Due to the nature of their work, our member police departments regularly generate the most litigation activity.

Employment practice and ADA lawsuits have become more common in recent years. At this time, we have two ADA complaints and five open employment practice lawsuits. Four years ago employment practice lawsuits accounted for 35% of the total, whereas today they account for only 18%. However, we are on notice of three employment related grievances, EEOC or Ohio Civil Rights Commission complaints which may create additional litigation. Historically, we have settled over half of these complaints.

MVRMA members have always believed tax dollars are best protected by an aggressive approach to the defense of their claims. Unless there is clear evidence of negligence or liability against one of our members, MVRMA will defend a claim or lawsuit through motions or trial. Our litigation costs compared to claims paid would shock most insurance companies, but paying off nuisance suits is not what MVRMA does.

Taking a look at our litigation expense, we found the average defense costs for suits, other than employment practices, was $7,800. The average defense costs for employment related cases was $20,098, which is down about 20%. While the decline is good, you can see the cost to defend this type of claim is about 2.5 times more than other litigation. The courts continue to take a lenient approach to the plaintiffs in these cases, which makes it difficult to get them dismissed. In fact, the dismissal rate for these claims is only 35% compared to 60% for other MVRMA lawsuits.

Defense is key in this type of case. To be successful, we need documentation of the city's proper care, attention, training and discipline of the plaintiff before termination.

From a risk management standpoint, each city needs to start with detailed job descriptions, provide a copy of the city's employment related policies to all employees, provide yearly performance evaluations along with necessary training for any deficiencies noted in said evaluations, follow all disciplinary policies and document all meetings regarding employment issues.

Documentation can not be emphasized enough when dealing with employment matters. If you need assistance with supervisor training in these areas, please contact MVRMA's Loss Control Manager.

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Loss Control Lowdown

- Starr Markworth

We Need Your Input

In early 2005, MVRMA will be working cooperatively with the Miami Valley Communications Council to establish several focus groups comprised of employees from the member cities. These groups are being assembled to gain information on training programs and other needs the member cities may have.

The objective of a focus group is to engage in a carefully planned discussion designed to obtain a selected group of individuals’ perceptions regarding a defined area of interest. Our focus group sessions will involve 8-12 employees from similar departments in MVRMA/MVCC member cities. These sessions will be scheduled for 1 ½ hours, and facilitators will be conducting each session. The focus group participants will be asked to provide input regarding the following areas:

The input from the focus groups will be analyzed, and a report will be formulated.  This information will ensure the needs of the member cities are being met when developing future training and education programs.

We will be contacting each member city to ask employees in certain departments to participate. Several potential focus groups have been identified: fire training officers, tax/utility billing clerks, clerks of council, zoning/building inspectors, public works and a few others to be determined.

I look forward to working with your employees on this project.

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Brokers Beat

- Marsh USA Inc.

Safety and Ergonomic Programs for High-Risk Employees

Specialized body-mechanics safety training for high-risk professions, including firefighting, EMT, EMS and law enforcement, can have a major impact in reducing costs related to workers' compensation.

Risk exposures and work circumstances, including time constraints and awkward positions, make standard ergonomic practices and accepted safe-body positioning serious challenges.

Firefighters, EMTs and paramedics perform life-saving activities daily: administering CPR in a moving ambulance, extricating a victim from a vehicular accident, transporting an agitated cardiac patient on a backboard down flights of stairs or cutting a ventilation hole while perched on the inclined roof of a burning building.

Law enforcement and corrections officers face survival-based, physically demanding tasks: restraining and subduing a suspect or inmate in a sudden struggle, pursuing a suspect on foot over obstacles or using defensive compliance tactics (e.g., batons) in confrontations in the second tier of response after communication has failed.

Public works and utility employees perform labor-intensive tasks in constantly changing, awkward environments: digging inside narrow trenches, shoveling asphalt off a pick-up truck, or working a 90-lb. paving breaker.

Employers seeking to improve employee safety and effectiveness should ask these questions:

After completing the one-day intensive training course, clients have experienced significant reductions in many preventable workers’ compensation injuries. For example, a number of medium to large municipal fire departments were able to reduce lost days due to musculoskeletal injuries by 25–50 percent and reduce the number of lost days due to back injuries by 40–80 percent.

Each training session is customized to meet an organization’s real-world needs. Training specialists use career- specific equipment, tools and situations to recreate realistic circumstances in a controlled environment. Through the hands-on training clinic, employees learn:

This specialized training improves employees’ ability to professionally manage their physical responses in routine and extreme work environments. The goal is to make the safe physical responses automatic.

This intensive hands-on training program, which is available through various vendors, can help public entities reduce worker’s compensation costs as well as injury frequency, severity and recurrence.

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15-Passenger Vans: NHTSA Issues Safety Advisory

In 2003, there were several tragic 15-passenger van rollover crashes involving religious groups on trips. The National Highway Traffic Safety Administration (NHTSA), the arm of the U.S. Department of Transportation responsible for keeping people safe on American's roadways, has reissued a cautionary warning specifically to alert users of 15-passenger vans. Under certain conditions, these vans exhibit a higher likelihood of rollover.

The safety agency previously issued these warnings in 2001 and 2002. The earlier warnings appear to be working as the number of fatalities, which peaked in 1999, has steadily declined in recent years. Fatalities in crashes involving 15-passenger vans have dropped 16 percent through 2002, the most recent year for which data is available.

NHTSA reissued its warning again this year to notify organizations who may use these vans on trips that the chance of rollover increases dramatically as the number of occupants increases. The agency's new research has shown that 15-passenger vans have a rollover risk that increases dramatically as the number of occupants increases to full capacity. In fact, 15-passenger vans with a full passenger load have a rollover rate in single vehicle crashes that is five times greater than a vehicle containing only a driver.

The analysis also shows that the risk of rollover increases significantly at speeds over 50 miles per hour and on curved roads.

"It is vitally important that users of 15-passenger van be aware of these risks," Dr. Jeffrey Runge, NHTSA's Administrator, said. "Thankfully, there are safety precautions that can be taken to significantly reduce the likelihood of a rollover and injury."

These precautions include:

1. Require all occupants to use their seat belts or the appropriate child restraint. Nearly 80% of those who have died nationwide in 15-passenger vans were not buckled up. Wearing seat belts dramatically increases the chances of survival during a rollover crash.

2. If possible, seat passengers and place any cargo forward of the rear axle and avoid placing any loads on the roof. By doing so, you'll lower the vehicle's center of gravity and lower the chance of rollover.

3. If your organization owns 15-passenger vans, check that the van's tires are properly inflated and the tread is not worn down, at least once per month. Excessively worn or improperly inflated tires can lead to a loss-of-control situation and a rollover.

4. Use caution on both interstates and rural roads to avoid running off the road. If your van's wheels should drift off the roadway, gradually slow down and steer back on the road when safe to do so. Most 15-passenger van rollovers occur at high speeds as a result of a sudden steering maneuver such as an overcorrection.

5. As a driver, ensure you are well rested and alert. Always maintain a safe speed for weather and road conditions. The agency recommends that only trained and experienced drivers should operate 15-passenger vans.

For more information, including copies of safety flyers and vehicle hangtags and the NHTSA analysis, please visit the agency's web site at: www.safercar.gov. Hangtags can be ordered at no cost by directly contacting NHTSA's Auto Safety Hotline at 888-327-4236.

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