-Mike Hammond
2009 Liability Renewal
The insurance industry is cyclical. Rates and profits
fluctuate depending on the phase of the cycle. Highly profitable years are
needed to offset years where profits are minimal, or the industry suffers a
loss. For example, losses in 2005, associated with hurricanes Katrina, Rita
and Wilma, wiped out the profits of some insurers and forced others to raise
additional capital.
In 2008, the insurance industry's financial results
were negatively impacted by the mortgage and financial guarantee segments of
the business. They, in turn, were hurt by the bursting of the housing bubble
and the collapse of the credit markets.
According to the ISO Financial Analysis, insurers'
results through nine months of 2008 fell victim to a perfect storm: a
downturn in the economy, the crisis roiling the financial system, softening
in insurance markets and weather related catastrophe losses during the same
previous nine month period. As a result, profits were down 18%, and the
industry's annualized rate of return, at 1.1%, was down 12%.
Although financial markets are in turmoil, insurers'
balance sheets remain stable. The crisis at the American International
Group, formerly one of the largest US insurers, was due to failure of a
financial unit regulated by federal agencies. The company's insurance units,
regulated by the states in which they conduct business, are not in danger.
They continue to have adequate resources to pay claims.
MVRMA has attempted to insulate itself as much as
possible from the insurance industry's market cycles through its
participation in Government Entities Mutual, Inc. (GEM). In 2003, MVRMA was
one of 14 founding members in GEM, an association sponsored reinsurance
captive licensed under the captive insurance statutes of Washington, DC. GEM
is controlled and capitalized by member public entity pools with an
estimated $14.3 million in contributed surplus. Its primary goal is to
provide stable and affordable reinsurance coverage for its members.
Since 2003, GEM has reinsured our liability coverage
document for $1 million excess MVRMA's $1 million self-insured retention.
GEM's rating methodology for this layer is based on MVRMA's actuarial loss
rate, changes in our exposure base and scheduled rating credits or debits.
For 2009, due to our excellent loss history, GEM's pricing model decreased
MVRMA's general liability (GL) rate by 14.6% and its auto liability (AL)
rate by 25%. However, MVRMA's exposures for 2009 increased. Net operating
expenditures, the exposure used for GL, increased l2.6%, and number of
vehicles, the exposure used for AL, increased 2.1%. Combining the rate
decreases with our exposure increases and underwriting credits for pool
operations resulted in a premium of $165,208, which is 16.8% less than we
paid in 2008. In fact, our premium has steadily decreased since joining GEM
in 2003, when our premium was $272,101.
To obtain total liability limits of $10 million for
2009, MVRMA also purchased reinsurance, $8 million excess $2 million, from
General Reinsurance. General Reinsurance is the largest reinsurer domiciled
in the US and has an A.M. Best rating of A++ with strong security. The
premium for this layer of coverage was $240,000, a reduction of 10.2% from
2008
MVRMA was pleased to reinsure its 2009 liability
coverage document with both GEM and General Reinsurance. Our total premium
for the two layers was $405,208, or $93,893 less than was paid in 2003! Our
relationship with GEM and General Reinsurance has allowed MVRMA to provide
its members with $10 million in liability limits at a very competitive
price, despite what is currently happening in the insurance and financial
markets.
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- Dinsmore & Shohl
Ohio Supreme Court Strikes Down Concealed Weapon Ordinance
In a 4-3 decision, the Ohio Supreme Court held on
September 18, 2008 that a municipal ordinance prohibiting licensed handgun
owners from carrying concealed handguns in city parks is unconstitutional
because it is an "exercise of the municipality's police power that conflicts
with a general law." Ohioans for Concealed Carry, Inc. et al. v. City of
Clyde, et al., 120 Ohio St. 3d 96, 2008 Ohio 4605.
In Clyde, Ohioans for Concealed Carry, Inc. (OCCI)
filed an action seeking an order striking down the City's ordinance
prohibiting licensed handgun owners from carrying concealed handguns in city
parks and requesting injunctive relief prohibiting the city from "curtailing
gun owners' rights." The trial court granted summary judgment in favor of
the City and dismissed the Complaint, but the Sixth District Court of
Appeals reversed. The Ohio Supreme Court accepted Clyde's discretionary
appeal to determine whether the Clyde Ordinance is a valid exercise of the
municipality's home-rule power pursuant to Section 3, Article XVIII of the
Ohio Constitution.
The Ohio Constitution's "Home Rule" Amendment allows
municipalities "to exercise all powers of local self-government and to adopt
and enforce within their limits such local police...regulations" that are
not in conflict with general laws. Under the three part "home-rule"
analysis, the Court first determined Clyde's ordinance "relates to the
public health and safety as well as the general welfare of the public and
thus constitutes an exercise of local police power," not an exercise of
local self-government. The Court next considered O.R.C. Section 2923.126,
which expressly allows a licensed handgun owner to "carry a concealed
handgun anywhere in this state," except as provided by 2923.126(B)/(C),
which contains a list of exceptions and sets forth specific locations where
a licensed handgun owner may not carry a concealed weapon. Absent from this
list are city parks. Following the test laid out in Canton v. State,
2002 Ohio 2005, the Court held Section 2923.126 is a "general law" as it (1)
is part of a statewide legislative enactment; (2) is applied uniformly; (3)
represents an exercise of police power; and (4) prescribes a rule of conduct
for anyone seeking to exercise a right to carry arms. Analyzing the final
step in the "home-rule analysis," the Court then ruled the Clyde ordinance
prohibiting hand guns in a city park was in direct contradiction to a
general law, specifically, O.R.C. 2923.126, and thus, unconstitutional.
In this close call, Chief Justice Moyer and Justices
Lanzinger and Pfeifer dissented arguing O.R.C. 2923.126 is not "general law"
(as it arbitrarily treats private and public property owners differently in
regards to their ability to prevent concealed handguns on their property)
and that because the Clyde ordinance is therefore not in direct
contradiction to a "general law," the ordinance was constitutional. This
ruling provides insight as to the current Court's majority view on concealed
handguns, but the narrow victory for OCCI likewise indicates that a seat
change in the Court could result in more favorable rulings for
municipalities.
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- Craig Blair
When remnants of Hurricane Ike came through Ohio on September 14, 2008,
it redefined what we think of as a "windstorm." We are used to severe
weather that produces 40-50 mph wind gusts and the occasional tornado, but
four to five hours of steady 50-60 mph winds was something never before
experienced in this area.
The damages covered an area from Cincinnati to Columbus and the outlying
counties. Power outages lasting from a few days to a couple weeks affected
more than 2.6 million customers. Utility workers from as far as the
Carolinas came in to assist with getting the power restored. The 131,000
claims for damages filed in Ohio will total more than $553 million. To put
this situation in perspective, this is the worst storm in Ohio in more than
30 years, dating back to the Xenia tornado of 1974 which caused more than
$600 million in damages. 70% of all insurance companies writing auto or
homeowners coverage in Ohio were affected.
MVRMA's property coverage considers all storm related losses that occur
within a 72 hour period one occurrence. Coverage extends to automobiles as
well as structures. Having sustained damages to roofs, metal storage barns,
sheds and shelters, as well as auto damages from debris hitting vehicles and
the wind catching an open car door, this event will be the worst property
loss in the pool's 20 year history. This storm, which produced claims from
13 of our 20 members, surpassed the 1999 tornado that hit the Cincinnati
area. Total losses will eventually exceed $400,000, of which MVRMA will pay
the first $200,000. The excess property carrier will reimburse MVRMA for all
losses greater than $200,000.
All claims should be submitted to MVRMA for payment. Each member will be
billed only one $2,500 deductible, no matter how many structures or
automobiles were damaged. And, because the Insurance Services Organization
(ISO) issued a catastrophic serial number for this storm, these property
losses "shall be excluded for the purpose of determining average annual
losses during a four-year period" per MVRMA's Loss Capping Policy.
We realize our members have been working with FEMA to recover their
non-insured losses related to protective and clean up work. FEMA funds can
be used to cover 75% of a city's qualified storm related expenses. As a
reminder, your $2,500 deductible to MVRMA can be included in those expenses.
If any member needs a breakdown of their losses or evidence of property
coverage, please call our office.
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Starr Markworth
Improve Safety with a Small Budget
With tighter city budgets and staff working harder to
get everything done with less, safety may become a lower priority. Can you
improve safety with only a small safety budget and no safety director?
Hopefully, there are a few tips in this article that will help you do just
that.
The first step for improving safety is increasing
training on a regular basis, and MVRMA offers several resources. During
2009, MVRMA will be working with the Ohio BWC and other government agencies
to offer training at little or no cost to our members. Registration
information will be sent out through email. If you would like to be added to
our training distribution list, please forward your request to smarkworth@mvrma.com.
MVRMA also provides free access to more than 280 training videos/DVDs from
its extensive video library. Any member may borrow up to three videos for a
two week period. The only cost would be postage to return the videos to
MVRMA. Visit www.mvrma.com under training and loss control to see the
most up-to-date video listing. One additional resource available at no cost
to our members is PRIMA's Cybrary. A variety of risk management-related
topics may be accessed through this tool with the assistance of MVRMA's Loss
Control Manager.
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. Some MVRMA cities sponsor
fun and informative safety events for their employees, like a safety picnic
or safety and health fair, to promote and encourage safety.
The final step is including the responsibility for
safety in the supervisor's job description. Many of our cities now include
safety as an area evaluated during the supervisor's annual review. This
allows the city to formally assess the department's safety program through
the supervisor's achievements.
We believe adopting any of these steps for improving
safety will be a step in the right direction for your city.
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Water intrusion is the third most common claim covered
under property insurance after fire and theft. Interior flooding, broken or
leaking pipes or accidental release of automatic sprinkler systems can
create complicated claims for municipal facilities. Situations where a high
volume of water is released into an area of concentrated equipment can
result in a very expensive claim within minutes. There are other situations
where water intrusion or interior flooding events, if not discovered and
remediated in a timely way, can quickly escalate in value. This article will
provide you with some general information to identify potential areas of
high exposure and deal quickly and effectively with water intrusion or
interior flooding claims.
First, we encourage you to take a general survey of
all city facilities and identify those areas that have a high concentration
of personal property. As you go through this process, also try to identify
those areas that have a high concentration of electrical equipment which is
especially vulnerable to water damage. After identifying these areas, try to
identify sources of and vulnerability to water intrusion. Proximity to high
volume fresh water plumbing, high concentration of equipment in low lying
areas such as a basement, high concentration of values in lower elevations
or flood zones and/or the proximity to sprinkler systems are things of
concern. After identifying these situations, attempt to devise measures to
deal with the exposure in advance. These measures could be increased
awareness of staff and security personnel and/or relocation of property and
equipment away from the water intrusion or interior flooding exposure.
emphasize diligence in discovery and response. Make
employees and security personnel aware of the appropriate action to secure
fresh water pipes in a timely way. A water leak that is discovered and a
pipe that is secured and repaired before it becomes a flood can save
thousands in claim costs, not to mention the potential down time to city
operations.
l Accidental release of automatic fire
sprinkler systems is a major source of water intrusion and can lead to
serious claims within minutes. Educate employees and security personnel
about the meaning of sprinkler alarms and procedures to secure these systems
in the event of an accidental release. Also create awareness that the
release of these systems could be the first indication of a fire.
l In the education process, make sure
employees and security personnel are aware of the dangerous combination of
water and electricity and have procedures in place to secure electrical
power as necessary as a part of emergency procedures.
The second part of dealing with water intrusion or
interior flooding is rapid discovery and cleanup. With the advent of mold as
a critical part of water intrusion claims, the ability to discover these
situations as quickly as possible and then have advance procedures in place
to quickly secure the source of water, dry out the damaged area and cleanup
the damage is paramount. Educate city staff, employees and security
personnel of the importance of discovery, and have clear guidelines in place
to provide assistance in securing the source of water.
The city should maintain ongoing arrangements for
water intrusion cleanup equipment and supplies, and if necessary, maintain
an ongoing agreement with water cleanup contractors who have additional
supplies, manpower and equipment to respond quickly. The ideal response to a
water intrusion or interior flooding event is to have a cleanup contractor
on site within hours of discovery.
Being aware of this information and adopting these
procedures may save MVRMA substantial claim funds and the city unnecessary
operational down time.
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Top Five New Year's Resolutions for Dogs
5. I will not suddenly stand straight up when I'm
lying under the coffee table.
4. I will no longer be beholden to the sound of the
can opener.
3. I resolve to get a bite in on that freak who gives
me a shot every year.
2. I will break into the pantry and decide for MYSELF
how much food is "too" much.
And the number 1 new Year's Resolution made by dogs...
1. I will NOT chase the stick until I see it leave the
hand!
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At the December 15, 2008 Quarterly Board Meeting, the
following actions were taken:
- Approved the Open Claims & Incurred Loss Report
- Approved the 2009 Liability Coverage Document
- Approved the 2009 renewals for crime, liability and
bonds
- Approved the 2009 Final Expenditure Budget, PCF and
Objectives/Work Plan
- Elected the following slate of officers for 2009:
Pres. - Tom Reilly, West Carrollton; V. Pres. - Mark Schlagheck, Bellbrook;
Treas. - Tom Judy, Sidney; Sec'y. - Julie Trick, Vandalia
- Approved the following quarterly board meeting dates
for 2009: March 16, June 15, September 28 and December 21
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