FYI:

-Mike Hammond

In 2007, MVRMA began its fifth year of reinsuring its liability coverage document with Government Entities Mutual Inc. (GEM). GEM is an association sponsored reinsurance captive licensed under the captive insurance statutes of Washington, DC. Its sponsor is the National Association of Government Entity Programs, Inc. (NAGeP). Controlled and capitalized by member public entity pools, GEM has an estimated $13.7 million in contributed surplus. Its primary goal is to provide stable and affordable liability, property and workers' compensation reinsurance for its members. In 2003, MVRMA became one of 14 founding members of GEM.

For the first $1 million of liability coverage (excess MVRMA's $1 million self-insured retention), our premium increased $8,177 or 3.4%. This increase was due to a change in MVRMA's exposures (net operating expenses and vehicles) as well as an increase in GEM's rates. Specifically, MVRMA's NOE increased 2.1% and its number of vehicles increased 0.4%, whereas the GEM rates increased 1.9% for general liability and 5.5% for automobile liability.

To determine the rates for each member, GEM uses a methodology based on the actuarial loss rate, changes in exposure base and a scheduled rating process. MVRMA's favorable premium for 2007 can be attributed to overall good loss experience and operations. Out of a potential 15% credit in the rating process, MVRMA received 14%!

For the second straight year, GEM was able to retrocede liability, excess $2 million, to Munich Reinsurance America, Inc. Using this approach, GEM was able to issue MVRMA's full policy limits in a single reinsurance agreement. Thus, MVRMA is able to avoid the problems associated with multiple agreements and the reporting of claims to multiple reinsurers.

Munich Reinsurance America, Inc. has an AM Best's rating of A with strong security. It is considered one of the premier public entity liability insurers. MVRMA is pleased to reinsure its liability coverage document with GEM and its partner Munich Reinsurance America.

For the $8 million in coverage retroceded to Munich Re, the premium increased 4.3% ($11,984) resulting in an overall increase for liability coverage of $20,161 or 3.9%. The 2007 liability premium illustrates the true benefits of MVRMA's relationship with GEM: very competitive pricing for liability limits of $10 million per occurrence.

Alliant Insurance Services, Inc., MVRMA's insurance broker, was able to obtain favorable pricing, terms and conditions for the renewal of our crime coverage with National Union Fire Insurance Co. (AIG), an AA+ rated insurer. The 2007 premium is slightly lower than the previous year, and limits remain unchanged from expiring. National Union will again include MVRMA staff at no additional cost.

The policy includes coverage for employee theft, forgery or alteration, theft of money and securities, robbery, safe burglary, computer fraud and money orders and counterfeit paper currency. Endorsements to the policy include treasurers and tax collectors as employees, faithful performance of duty for governmental employees and the deletion of the bonded employee exclusion.

With these changes, the crime policy generally negates the need for separate named surety bonds, resulting in further savings to our members. The crime policy provides a limit of $1,000,000 per occurrence for employee theft.

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Counselors' Comments

 - Dinsmore & Shohl

On December 27, 2006, the Ohio Supreme Court resolved a conflict within appellate districts, and ruled that political subdivisions may be liable for a nuisance that exists on public ground within the political subdivision even when the actual injury, death, or loss caused by the nuisance occurs outside the political subdivision. Sherwin-Williams Company v. Dayton Freight Lines (2006), 113 Ohio St. 3d 52. The case before the Court stemmed from a multiple-vehicle accident occurring on I-70 near the Village of Lewisburg. Plaintiffs alleged that a mixture of smoke and fog created visibility problems on the highway, which in turn caused a number of collisions and injuries. Earlier on the day of the accident, Village employees had been burning scrap lumber, tree limbs and discarded Christmas trees approximately 2,000 feet north of I-70 and within the Village limits. Late in the afternoon, a Village employee covered the piles with dirt and left the area. Several hours later, complaints about smoke were reported to the Preble County Sheriff's Office and the accidents then occurred on the interstate.

Specifically at issue was the statutory exception to immunity which stated that "political subdivisions are liable for injury, death, or loss to person or property caused by their failure to keep...public grounds within the political subdivision open, in repair, and free from nuisance." The heart of the issue was whether or not the injuries, as opposed to the nuisance which caused the injuries, must have occurred "within the political subdivision" in order for the exception to apply. The trial court agreed with the Village and granted summary judgment, however, the appellate court reversed that decision. The appellate court reasoned that the "within the political subdivision" limitation referred only to the cause of the injury, not the location where the injury itself occurred. This decision was in direct conflict with an earlier case decided within another appellate district, which held that a political subdivision's liability would not extend to areas outside its territorial limits because the political subdivision lacks possession and control of such areas. Kareth v. Toyota Motor Sales (Sept.. 28, 1998), Clermont App. CA 98-01-011.

The Ohio Supreme Court certified the question and ultimately held that the exception to immunity within the statute opened political subdivisions to liability when the cause of the injuries originated within the jurisdictional limits regardless of where the actual injuries took place. The Court reasoned that although the area where the injuries occurred was outside the Village's possession or control, the area where the nuisance arose was under the Village's control, and therefore, liability may exist.

The current version of Ohio's sovereign immunity statute would allow for a similar result. Whether by design or neglect, today's statute contains no territorial limitation with regard to public roads. Furthermore, the rational used in Sherwin-Williams could also be applied to the immunity exception involving negligence that occurs on public grounds. Given this decision and current statute, municipalities must consider events occurring both inside and outside their borders in evaluating the full scope of potential damages and injuries for which they may be liable.

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The Claims File

- Craig Blair

1996-2005                        35                                  $2,223

2006                                  46                                  $1,913

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Loss Control Lowdown      Under the bark of an EAB infested ash tree, are S-                                                                                                                                                            shaped, sawdust-packed galleries.

Starr Markworth                   

Emerald Ash Borer - Coming to an Ash Tree Near You!!

Emerald Ash Borer (EAB) is an insect from Asia that is attacking the Midwest's ash trees. EAB is a member of the metallic wood boring beetle family. It attacks all native, North American ash trees regardless of the tree's health. Once an EAB infestation occurs, it kills the tree in three to five years.

EAB is believed to have arrived in the United States in shipping pallets or cargo from eastern Asia approximately ten years before it was discovered. It was first identified in the Detroit, Michigan area in July 2002 and then in Lucas County Ohio in February 2003. EAB has since also been discovered in Indiana, Illinois and Ontario Canada.

To date, infestations have been identified in the following Ohio counties: Auglaize, Cuyahoga, Defiance, Delaware, Erie, Franklin, Fulton, Hancock, Hardin, Henry, Huron, Logan, Lorain, Lucas, Marion, Medina, Mercer, Miami, Ottawa, Paulding, Sandusky, Seneca, Warren, Williams, Wood and Wyandot.

EAB is a slightly illusive insect because it spends the majority of its life under the bark. The larvae are flat, creamy white, have bell-shaped segments and are about an inch long. Adult EAB are dark metallic green and a half-inch long.

From late spring through autumn, adult beetles mate, and the female lays 60-90 individual eggs on ash tree bark. The eggs hatch seven to ten days later, and the larvae tunnel into the tree just beneath the bark where they feed on the live tissue of the tree. The larvae's S-shaped feeding pattern, called galleries, disrupts the transport of water and nutrients, eventually killing the tree. Over the winter, the larvae remain under the bark. When warmer weather arrives, larvae enter the pupal stage and then transform into adults. The beetles emerge through the bark leaving behind 1/8 inch, distinctive D-shaped exit holes. The adults feed on leaves before mating and laying eggs, starting the cycle over again.

There are several things that may indicate your ash tree has EAB:

1. Branch dieback at the top of the tree

2. Vertical splits in the bark

3. Sprouting on the trunk and at the base of the tree

4. Scratched bark from woodpeckers feeding on the larvae

5. Distinct 1/8 inch, D-shaped exit holes in the bark

6. S-shaped, sawdust-packed galleries under the bark

EAB is very difficult to detect until a tree has been infested for at least a year because the larvae feed from the top of the tree first. When looking for EAB, it is important to peel off the bark to look for the larvae and the galleries.

An informative DVD, "Emerald Ash Borer - The Green Menace," is available free of charge through the Ohio Department of Agriculture, as are other public education materials. Please visit http://www.ohioagriculture.gov/eab/ to request these items.

The Ohio Department of Natural Resources - Division of Urban Forestry recommends an EAB Management Plan be adopted by each municipality.

An EAB Management Plan is a written document outlining a municipality's objective and the approaches it will use to meet the current or anticipated impact of the Emerald Ash Borer on its urban forest resource.

Implementation of a plan is important due to the liability issues associated with not managing dead trees in the public right of way. A city's failure to remove known potential public safety hazards could create liabilities for the city. When the EAB kills an ash tree, the tree becomes extremely brittle and has the potential of falling very easily.

A sample plan can be found on the ODNR website: http://www.dnr.ohio.gov/forestry/eab.

Each MVRMA city is encouraged to adopt an EAB Management Plan. Please contact me if you need further information or resources.

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Brokers Beat

As a stand alone insurance coverage, environmental insurance is a highly specialized class of business. It requires specialized underwriting expertise and a high degree of technical expertise as a part of the claims adjustment process.

Currently, MVRMA members enjoy liability coverage for pollution from hostile fires, upset or overturn of vehicles, chlorine leaks and pesticide/herbicide applications. In addition, there is $250,000 per occurrence under the property policy for first party pollution that is subject to a variety of restrictions.

Environmental Coverage that would be available to MVRMA and its members as a separate policy would include both first and third party coverage for scheduled locations. Landfills, transfer stations and recycling facilities can be scheduled on the policy, however, these types of environmental exposures require special underwriting and often times are rejected by underwriters. As long as locations are scheduled, they can include vacant land, park or forest land and recreational land that may have no associated structures. Coverage can also be extended on an unscheduled basis for water products coverage and storm and sewer drain pipes.

These policies are generally written on a multi year basis with "per occurrence" limits in addition to aggregate limits that are effective over the multi year policy term. These policies generally have substantial "per occurrence" deductibles. The amount of coverage extended to a claim is generally dictated by the cleanup levels required by the applicable government agency. Asbestos and mold coverage are generally excluded.

The basis for triggering a claim under the typical environmental or pollution policy is the point in time when knowledge or discovery of a pollution condition becomes known to senior officials of an insured entity.

The typical claim will be a situation where a pollution condition is discovered as a result of an environmental study. These studies are often required by a pending real estate transaction. Once discovered, the condition generally requires a cleanup before the transaction can be completed.

There are other situations when the public entity may already be aware of a known environmental condition and desires additional coverage for the unknown pollutant conditions that may be discovered as a part of the clean-up process. This is a fairly typical coverage situation where the public entity may be acquiring land as a part of a closed military base or other redevelopment project.

Environmental or Pollution as a class of coverage has emerged and matured in the insurance industry over the last 20 years. While there are a limited number of carriers that actively engage in writing environmental coverage, there are enough to provide a competitive marketplace. As already mentioned, it is a highly specialized class of coverage that can be available at an affordable price.

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Woman Gets $1.5 Million in Bullying Case

Bullying has become a big problem for almost all types of businesses. And companies can be in big trouble, and get hit in their corporate wallets, if they don't appropriately protect their employees from being bullied.

The following case shows that judges can be sympathetic to victims of emotional abuse in the workplace. Helen Green, a former Deutsche Bank employee, recently won a whopping $1.5 million in damages after a judge ruled she had been the victim of bullying by staff. The judge called the bullying a "deliberate and concerted campaign," in a CNN.com story.

Green worked for the Deutsche Bank in London between 1997 and 2003. Her lawsuit was based on remarks made to her that were characterized as lewd, crude and that often reduced her to tears.

The judge found the company was remiss in its duty to protect and care for its employee. Green suffered two mental breakdowns and was then fired for being off work.

This particular case may or may not constitute a hostile work environment in the United States, but such situations are not to be taken lightly. Employment practice violations are an area of concern for all businesses. MVRMA addressed this very topic at its December Board Meeting by approving development of model employment practice policies which may be adopted by its member cities. The policies, which will be reviewed by legal counsel every two years, included anti-discrimination, anti-harassment, ADA, workplace violence and sexual misconduct.

By adopting such policies, MVRMA hopes to protect members' employees from a hostile work environment. But, our aim is also to deter employment practice lawsuits, which can be high dollar claims. Already, the insurance underwriters have questioned whether we have certain employment practice policies in place. Eventually, these policies may be required, or at a minimum, our rates may be tied to the existence of such policies.

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From the Board Room

At the December 18, 2006 Quarterly Board Meeting, the following actions were taken:

- Approved a settlement in the Manley v. Kettering claim

- Approved the development by staff of model anti-discrimination, anti-harassment, ADA, workplace violence, sexual misconduct and child molestation policies. These policies will be reviewed and updated by legal counsel every two years and may be adopted by member cities.

- Approved participation in a pilot program for on-line loss control training by TargetSafety

- Approved MVRMA's submission to the AGRiP Advisory Standards Recognition program

- Approved the 2007 Liability Coverage Document

- Approved the 2007 renewal for liability, crime and bonds

- Approved the 2007 Final Expenditure Budget, PCF and Workplan

- Re-elected MVRMA's 2006 officers to the same positions for 2007 (see above)

- Approved the following Quarterly Board Meeting dates for 2007: Monday, March 19, Monday, June 18, Monday, September 24 and Monday, December 17. The Strategic Planning Retreat (site to be determined) will be Monday, May 7.

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