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At the December 16, 2002 Quarterly Board Meeting,
the following actions were taken:
- Approved the 2003 Final Budget and Objectives/Work
Plan and authorized the Finance Committee to approve the final liability
insurance placements
- Reelected the current slate of officers for 2003
- Approved the property, bond, staff crime and
member crime placements
- Approved the internal "Auto Physical Damage
Policy," which will provide the same terms and conditions as defined in
the 2002 Business Auto Policy issued to MVRMA by Chubb. It will cover
actual cash value or cost of repair, whichever is less. Limits of
liability will be $400,000 per vehicle for any one occurrence and will
include a $1M pool aggregate.
- Approved amending the current Employment Practices
Liability Policy by adding "Prior to December 31, 2002" to the title.
- Approved the new internal "EPL Policy for Claims
Reported after December 31, 2002," which will provide coverage as defined
by the 2002 AIG EPL policy. It will insure the first $1M of a claim
occurring 1/1/02-12/31/02 but reported after 1/30/03.
- Approved the following Board Meeting dates for
2003:
Monday, March 17
Monday, June 16
Monday, September 22
Monday, December 15
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- Surdyk, Dowd & Turner
How to Deal with Improper Behavior
by a Parent
A recent case out of the Eleventh District Court of
Appeals involved egregious behavior on the part of a parent and the City
of Mentor's response thereto. The Court ruled in Kelly v. City of
Mentor (2002), 2002 WL 31895122 that the plaintiff's due process
rights were violated when Mentor's Director of Parks, Recreation and
Public Lands banned plaintiff from entering the Mentor Civic Arena for a
period of five years because of that behavior.
Plaintiff was the coach of a youth hockey league
team in Mentor, and his son was a member of that team. Plaintiff was
removed as coach due to allegations that he was too physically and
verbally rough with the children. Approximately one month later, the
manager of the Mentor Civic Arena, where the youth league team played its
home games, held a meeting with parents to allow them to air their
differences. The parents were warned that poor behavior in the future
could result in removal from the arena, not allowing a parent to watch
games or practices or disbanding of the team. Thereafter, on February 28,
2000, after a game at the Garfield Heights Ice Arena in which the youth
team lost, the plaintiff entered the team's locker room and threatened to
physically harm the coaches once they returned to Mentor. After this
incident, the manager of the Mentor Civic Arena requested statements from
everyone present. Ultimately, Mentor's Director of Parks, Recreation and
Public Lands decided to ban plaintiff from the arena for a period of five
years. Plaintiff was permitted to drop off and pick up his son and wife,
but if he attempted to enter the arena, he would be arrested and
prosecuted for trespassing.
The Court noted the Director was delegated the
authority to be responsible for the maintenance and operation of municipal
public lands and related programs. The Director was not given unilateral
authority to gather evidence, hold quasi-judicial proceedings, punish
patrons for bad behavior or prohibit someone from entering the public
properties under his control. At the time of the incident, Mentor had not
established a conduct policy or guidelines as to what the consequences
would be if the policy were violated. Even though a zero tolerance policy
promulgated by Skate USA, the organization that sanctioned the youth
hockey league, was posted inside the arena, there was no evidence that
Mentor or the Department of Parks, Recreation and Public Lands ever
formally adopted that policy. Furthermore, this policy only stated that a
patron could be asked to leave the arena. The Court also stated the
Director lacked the power to punish a parent for behavior that occurred
outside the city.
Given the recent tragedies involving out-of-control
parents and spectators at youth sporting events, it is important to
safeguard against this type of egregious behavior. As a result of this
decision, it would be prudent for members to ensure they have some sort of
conduct policy in place and delegate authority to enforce that policy.
Without a conduct policy, a restraining order could be sought in order to
prevent an offending parent from entering the premises.
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- Craig Blair
After four years with no new members, MVRMA added
the City of Piqua to its ranks in 2002. Situated along I-75 between Troy
and Sidney, it was a perfect geographic fit. With its sound management
practices and accredited police department, the City of Piqua compliments
the MVRMA program well.
With a new member you might think the number of
claims would increase substantially, but the claim count for 2002 remained
consistent with past years. Of course the severity (monetary value) of the
claims is the most important factor, and losses to date prescribe a
guarded outlook for this loss year. At this juncture, however, MVRMA
appears adequately funded, and even though there are already ten lawsuits
pending for 2002, they appear to hold no great significance for the
future.
Last year, we reported that 2001 did not have a
positive outlook, and that trend continues. 2001, at the 24-month mark,
ranks as MVRMA's worst loss year ever. There are nine lawsuits open with
at least two that could result in substantial losses.
Litigation activity in 2002 increased for the second
straight year with 26 new complaints filed against our members. At this
time, however, 2001, which was discussed previously, is the only year of
any consequence.
The good news is MVRMA expects to close two loss
years during 2003, which should return close to $1M to the members who
participated in those loss years. These refunds are the "ownership"
benefit of joining a risk pool. In addition to saving on insurance costs
and having access to value added services (i.e. loss control, training,
in-house claims service, etc.), MVRMA members are rewarded with refunds
when a good loss year closes. With these projected refunds, MVRMA will
have returned approximately $2.7 million while paying offsetting special
assessments during that time of only $600,000. These refunds exemplify the
quality of our member cities and their commitment to good risk management.
Subrogation Update
Subrogation, filing for reimbursement against third
parties that damage city property, is one MVRMA's value added services.
Please call the MVRMA Claims Department or refer to the "Subrogation
Policy" in the MVRMA Handbook if you have any questions on correct
procedure. The chart below shows the history of subrogation activity:
Loss Year
Claims Per Year
Average Collected
1996-2001
58
$ 803
2002
60
$1,385
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-Starr Markworth
Increase Employee Safety Awareness
Through a Safety Poster Program
How many injuries occur because people were "just
not thinking?" How often do we get into a work routine involving a
sequence of behaviors that we perform unconsciously? We take our mind off
the process and put ourselves on automatic pilot. The most effective means
to reduce losses and expenses is with safety awareness, training and
inspections.
Developing awareness and understanding of health and
safety issues can prevent many workplace accidents. MVRMA has identified a
rotating safety poster program as a key element in workplace safety
awareness.
Our annual Safety Performance Evaluation Checklist,
more affectionately known as SPEC, awards 3 points for a safety poster
program. In order to be in compliance in this area, posters must be placed
in employee high-traffic areas, such as offices, lunchrooms, as well as
exits and entrances to the work area. To be effective, posters should be
placed at eye level and should be rotated at least quarterly so that the
information remains current and interest remains high.
In preparing for the upcoming SPEC visits, it was
brought to my attention that the safety poster component would be more
effective if MVRMA could implement a group-purchasing program that would
reduce the cost and minimize the hassle to the member cities.
After researching the suggestion, a program was
introduced at the December Board Meeting. The program will provide members
the following two options:
1. Sign up for an annual safety poster subscription
that will provide one poster per month/12 per year
2. Sign up for an annual subscription that will
provide 96 posters per year/2 per week.
MVRMA will be responsible for placing all orders and
initial payments for the subscriptions; in turn, we will bill each
subscribing city the corresponding amount for the subscription chosen.
We are planning to place the 2003 subscription order
in March, so please contact me at 937/438-8878 or smarkworth@mvrma.com for
further information or to subscribe to this new program MVRMA is offering
its members.
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-MARSH USA Inc.
Right Place at the Right Time
Being in the right place at the right time is more
about strategic planning then being fortunate or lucky. Members of MVRMA
should be congratulated for the foresight to participate in a public
entity risk sharing and pooling group. The insurance marketplace continues
to skyrocket in premiums, restrict coverage and reduce needed services.
Contradictory to the marketplace, MVRMA’s recent renewal had palatable
premium increases while maintaining essential coverage and services.
Perhaps reviewing the history of pooling will further illustrate why being
a member of a pool is beneficial to the community you represent.
Pooling is a process of sharing risks or management
among a group of similar entities. Members contribute funds (premiums) to
the pool, which in turn pay losses, buy reinsurance, and handle
administrative functions, the same as an insurance company. Pooling is
most common in the public sector.
Background
In the mid 1970s, liability suits against cities and
other municipal bodies mushroomed. Plaintiffs found new bases for claims
in law such as the Civil Rights Act and the doctrine of "joint and several
liability." Under this doctrine, if two or more entities are responsible
for an injury, and one is unable to pay, the others must pay the entire
claim, even if only minimally at fault. This was easy to apply against
municipal bodies because an environmental factor could be alleged in many
kinds of injuries. For example, an auto accident could be partially
attributed to imperfect road design and thus bring in a deeper pocket.
Because these legal concepts caused an explosion of
claims, insurers could not raise rates sufficiently to break even, so most
dropped out of municipal business. Those that remained were forced to
charge unacceptably high rates because of the uncertainty of the legal
system. The result was a movement for governmental bodies to pool risks
among related entities. It began in earnest in the late 1970s and
accelerated through the 1980s, enabling public entities to do without
insurance entirely or, more often, eliminate it at lower levels. MVRMA was
formed in 1988.
In the mid-1990s, commercial insurers overcame their
fear of public entity risks and aggressively cut rates to the point where
they reclaimed some business from pools. However, this tactic of gaining
market share has backfired on the insurance companies as they are again
severely increasing premiums to cover losses.
Benefits of being a member of MVRMA include:
w Since premiums are most volatile at the
primary level, pooling (which covers the primary level) provides stability
of year-to-year costs.
w Investment income can be realized from
investing money retained for reserves.
w Entities with particularly bad hazards are
excludable because they are subject to scrutiny and evaluation by their
peers in the pool.
w Each member has a voice in claims-making
decisions and an opportunity to create a rating system to encourage
activities pool members believe are important.
w Professional risk and claims management is
provided for entities too small to afford it on their own. Familiarity of
the staff with pool members leads to better risk analysis, loss
prevention, claims handling and excess insurance placement.
w Spreading loss prevention costs over a
broad base allows more complete programs of safety, training and other
loss prevention programs.
w Record keeping and claims data are usually
much improved.
w The combined purchasing power of many
entities leads to more effective purchase of excess insurance.
The recent renewal completed by MVRMA's
administration team is proof of the success of the pooling concept. Many
individual cities either had to accept astronomical increases in their
premiums or go with watered down coverage. MVRMA maintained a cost
competitive program with sound coverage and supporting risk manage-ment
services. Being in the right place at the right time is being a member of
MVRMA during a hard insurance cycle.
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February 12
Confined Space Management, Lockout Tagout and Ladder Safety
8:30 am - 3:15 pm, MVCC
February 19
OSHA Overview
8:30 am - 3:30 am
MVCC
March 12-14
AGRIP Spring Conference
Houston, TX
March 17
MVRMA Quarterly Board Meeting
9:00 am, MVRMA Training Center
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-Michael Hammond
As we looked toward the 2003 renewal, we were
prepared for a sizable increase in the cost of MVRMA's casualty program.
2002 was the final year of a 3-year fixed premium for the primary layer of
coverage that attaches to our self-insured retention (SIR). So, while the
insurance market had hardened substantially during this period, MVRMA was
enjoying the benefit of no premium increases in this layer. It came as no
surprise when the 2003 renewal proposals increased considerably.
In the October 2002 Risky Business article, I
outlined the steps MVRMA was prepared to take to control its costs in this
ever hardening insurance market. Possible options included increasing the
self-insured retention and utilizing alternative risk financing
techniques. As we approached the insurance markets for renewal proposals,
it became even clearer that these steps were going to be necessary.
Although MVRMA had a long relationship with Discover Re, its incumbent
carrier for the primary layer of casualty coverage, it was no longer a
viable alternative because of increased premium costs created by the hard
market.
Working with our actuary at Godbold, Malpere &
Company, MVRMA explored the possibility of increasing its self-insured
retention for liability from $500,000 to $1,000,000. After re-examining
our loss history as well as looking at industry standards, the actuary
advised we could make the move to the higher SIR by increasing our loss
funding amount $236,402. This amount was actually less than the cost of
insuring this layer with Discover Re! And, by contributing to the loss
fund rather than paying a premium, members will share any remaining funds
once the loss year is closed.
The MVRMA Board had been considering the move to a
higher SIR for some time. In 1996, the Board established a shock loss fund
(SLF) in lieu of purchasing stop loss insurance. Each year members
contribute an amount equivalent to 15% of the current year's loss fund.
The goal is to accumulate a balance, comparable to the loss fund, which
would cover special assessments as determined by the Board. At the end of
2002, the SLF had accumulated nearly $1.2 million. With the availability
of these funds and the current year's loss funding, timing seemed right to
take the next step of increasing MVRMA's SIR.
As part of the casualty placement, the Finance
Committee approved increasing our SIR for casualty coverage to $1 million
rather than renewing our primary layer of coverage with Discover Re. With
this move, we are further distancing ourselves from the insurance market,
which is so volatile at this time. Additionally, we are retaining control
of the funds set aside to pay losses in this layer. The investment
earnings are retained by MVRMA, and funds that are not needed will be
returned to our members once all claims have been paid.
Another significant change in casualty coverage for
2003 occurred in our excess liability layer. MVRMA is one of the founding
members of an insurance purchasing group, the National Public Entity
Excess Program (NPX*) formed in 1997. Also responding to the need of
keeping insurance costs under control, the NPX* Board initiated the
formation of a captive (an insurance company owned by its insureds) known
as the Government Entities Mutual, Inc. (GEM). A captive has the same
advantage for its insureds that MVRMA has for its members.
Eleven governmental pools contibuted over $8 million
in capital to allow GEM to begin operation. The captive was officially
launched January 1, 2003. Understanding the importance of exploring its
options for meeting the long term risk financing needs of the pool, the
MVRMA Board approved participation in GEM as an associate member. The
Finance Committee subsequently approved GEM's proposal to provide $1
million in liability coverage excess of MVRMA's SIR as well as an
additional $10 million secured through GEM's reinsurance contract with
Endurance Specialty Insurance Limited. With this decision, we have
increased our liability coverage to $12 million and further decreased our
reliance on the insurance market.
As many municipalities are struggling with declining
revenues and increased citizen expectations, we recognize the importance
of maintaining as much control as possible over insurance costs in an
effort to keep your budgets on track. Allowing the MVRMA liability program
to move up to the next level will help our members control their cost and
at the same time provide a much needed level of protection from liability.
As the insurance industry works to regain its former
position and continues
to experience cyclical changes, MVRMA's 2003
liability renewal clearly demonstrates why membership in MVRMA is well
worth the investment.
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