FYI:

Professional Service Contracts

- Michael Hammond

If you are contracting for the services of consultants such as architects, engineers, IT consultants, surveyors, auditors and others, you need to make sure they have professional liability insurance. Professional liability insurance protects against losses that occur when a professional fails to practice his or her art to the standards usual and customary to that profession. The types of losses that can occur under professional service contracts are often excluded in general liability policies. These losses are typically low frequency / high severity claims. In other words, there are not a lot of claims filed, but the ones that are tend to be very expensive.

Professional liability insurance is specialty coverage and is underwritten to cover only the professional practitioner. Your city will not be made an additional insured under a professional liability policy.

When contracting for professional services, you should ensure that the consultant carries both sufficient professional and general liability insurance to protect against losses that may result from his negligent acts or omissions. Personal injury liability lawsuits arising out of work done for your city will name the consultant, your city and any other connected party as defendants. Even though the consultant may be the party liable under the law, your city, in the event of joint liability, could be required to pay part of the loss, if the consultant carried insufficient insurance.

Because general liability, professional liability or both types of insurance may ultimately pay for the loss, you should require both types of coverage from the consultant. While reviewing the professional services contract, it is important that you understand the hold harmless/indemnification and insurance clauses. Also, you need to look carefully into all provisions of the agreement to effectively manage the risks you may be assuming.

Special care is needed in drafting indemnification requirements for the contract with the consultant. Many professional liability insurers exclude liability assumed under contract by their insured. On the other hand, most general liability policies provide coverage for bodily injury and property damage assumed under contract. Therefore, the indemnity agreement should be carefully worded so that the consultant agrees to indemnify your city for bodily injury or property damage arising out of the consultant's negligent acts or omissions in performance of the work. This assumption of liability is insurable under general liability policies.

Contracts prepared by consultants will frequently limit their liability to a specific dollar amount or the dollar amount of the contract. These lesser limits of liability should be avoided if possible. The minimum liability limit should typically be $1,000,000. On larger projects or those with significant potential for loss, such as bridges or dams, higher limits are appropriate.

Because professional liability insurance is almost always written on a claims-made basis, when you hire architects or engineers, you should have concern about coverage for defects or design errors that may result in future claims after the current coverage period has expired. One solution is to require the design professional to agree to maintain coverage for a specified period after the project has been completed, usually 3-5 years.

The area of professional liability does not lend itself to the application of hard-and-fast rules. Flexibility and the exercise of discretion are needed to protect your city. Although there are no absolute guarantees, the practices described above can help provide a reasonable measure of protection that the risk has been appropriately transferred in professional services contracts.

Much of this information was adopted from a procedure manual provided by Alliant Insurance Services, titled "Insurance Requirement in Contracts." Please contact MVRMA to review the insurance and indemnification requirements in your professional services contracts and to request sample insurance requirements for contracts with consultants.

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Counselors' Comments

 - Dinsmore & Shohl

Fears of Litigation Not Enough to Justify Reverse Discrimination

The Supreme Court ruled on June 29, 2009 that when a City discarded promotional examination results where white candidates outperformed minority candidates on the examinations, white firefighters and one Hispanic firefighter were unlawfully discriminated against based on their race. The firefighters who scored highest on the exam, but were denied the opportunity of promotion, sued the City and respondent officials for violations of their Civil Rights under Title VII. In response, the City unsuccessfully argued that it justifiably refused to certify the test results because it feared claims for Title VII liability for adopting a practice having a disparate impact on minority firefighters. Ricci v. DeStafano, _U.S._, 129 S.Ct. 2658 (June 29, 2009).

Title VII prohibits intentional acts of employment discrimination based on race, color, religion, sex and national origin, 42 U.S.C. Section 2000e-2(a)(1) (disparate treatment), as well as policies or practices that are not intended to discriminate but in fact have a disproportionately adverse effect on minorities, 42 U.S.C. Section 2000e-2(k)(1)(A)(i) (disparate impact). Once a plaintiff has established a prima facie case of disparate impact, the employer may defend by demonstrating that its policy or practice is "job related for the position in question and consistent with business necessity." If the employer meets that burden, the plaintiff may still succeed by showing that the employer refused to adopt an available alternative practice that has less disparate impact and serves the employer's legitimate needs.

In Ricci, all the evidence demonstrated that the City rejected its promotional test results because the higher scoring candidates were white. Thus, the question for the Court to decide was whether the purpose -- i.e., to avoid potential disparate-impact liability -- excused what otherwise would be prohibited disparate-treatment discrimination. In answering this question, the Court set a new standard for determining whether an employer can engage in intentional discrimination for the purpose of avoiding or remedying an unintentional, disparate impact. In that regard, the Court held that an employer must have a strong basis in evidence (i.e., more than a mere fear of litigation) to believe it will be subject to disparate-impact liability if it fails to take the race-conscious, discriminatory action.

The Court, who ultimately held that the City of New Haven, Connecticut did not meet this standard ruled that the City could not make a "strong" showing that it would be subject to disparate-impact liability because the City could not "strongly" show that the City's selection method was: (1) "not job related and consistent with business necessity;" or (2) that it refused to adopt "an equally valid, less-discriminatory alternative." Based on this decision, the Court has essentially created a "catch 22" by holding that to make a race-based decision to discard objective test results, a City bears the burden to prove a disparate-impact violation against itself. Time will tell how the lower federal courts interpret this new Supreme Court decision.

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The Claims File

- Craig Blair

Because of ongoing turnover at our member cities, we are again posting guidelines for an employee to follow when involved in a vehicular accident:

1) Make sure everyone is ok. If there are injuries, keep the injured party as still as possible until the police and emergency service personnel arrive.

2) If no one is hurt, sometimes an exchange of information is all that's required. All member vehicles should have "Auto ID Cards" provided by MVRMA. This card was developed to assist employees when an accident occurs, and it is to be given to the other party. It contains information on whom insures the vehicle (MVRMA) and who to contact at the city to discuss the claim. Even though it's human nature to discuss the accident or apologize to the other party, the employee should make no statements regarding liability.

3) Since most employees have phones with cameras, they could take a few pictures of the scene while they wait for the police, especially if the vehicles need to be moved out of the way of oncoming traffic.

4) Later the same day, while the details are still fresh, the employee involved should write a report detailing how the accident occurred and what transpired after the accident, even if it was just a minor fender bender. A case in point: MVRMA has a pending lawsuit involving an accident between an employee and another driver who wanted to leave the scene before the police arrived, stating there was no damage or injury. Luckily, this particular city required the police to be called on all employee accidents. Initially, the other driver returned no calls and made no contact. About a month later we heard from his attorney who stated his client had been injured in the accident.

5) Lastly, report the accident to MVRMA by the next business day, even if the police report is not complete. MVRMA will then contact all parties and process the claim accordingly.

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Loss Control Lowdown

-Starr Markworth

Usually, the first thing out the window during an economic downturn is training and development. Most organizations have cut back on sending people to training and conferences and looked hard at cutting other expenses.

Training, education and degree completion programs have become one of the most desired employee benefits available. Among younger job seekers, the opportunity to learn new skills is the number one benefit.

Satisfying this desire with training accomplishes personal and organizational goals. Well-trained employees are more capable and willing to assume more control over their jobs. They need less supervision, which frees management for other tasks. Employees are more capable to answer the questions of residents, which leads to better customer service. Employees who understand their jobs complain less, are more satisfied and are more motivated. All this leads to better management-employee relationships.

Employee training and development initiatives can transform organizations by increasing skill levels, safety and productivity. Additionally, it leads to greater job satisfaction, which shows up in better performance.

If your city isn't investing in training, think about the organizations you admire as models for doing business right. You'll find they not only have a good training program, but training is a part of their culture.

MVRMA has an extensive video/CD ROM library available to all members free of charge. Using this multimedia is a great way to complement your training program in these times when budgets are tight. The multimedia library listing is available on MVRMA's website at www.mvrma.com under training and loss control.

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Brokers Beat

Property Business Interruption Coverage

Under MVRMA's property insurance, coverage is provided for Business Interruption. Business Interruption coverage is a first party property coverage known by a number of different names including Business Income, Loss of Rents and Time Element coverage. Regardless of the name, it is designed to provide coverage for the loss of revenue generated by the property prior to a loss.

Business Interruption insurance provides recovery for the revenue stream of a structure from the time it is damaged from a covered peril until repairs or replacement can be completed. The revenue stream can take many forms such as rent or lease receipts, tuition in the case of schools or loss of production value in the case of a manufacturing facility. While most municipal structures do no generate revenue, some of the exceptions for MVRMA members could be parking structures, sports stadiums, community theaters, performing arts centers, swimming pools, office space rented or leased to others and smaller exposures such as rents from local community rooms. Normally, insurance carriers do not anticipate large Business Interruption values from municipal accounts and will provide a fair amount of coverage without any special provisions. In the case of MVRMA, coverage is provided up to $500,000 each occurrence without listing specific values on your schedule of values.

If you have a structure or series of structures that could be damaged in a single occurrence, and their revenue would be in excess of $500,000, it is necessary to schedule those values under the appropriate column in your schedule of values. Remember that weather related perils such as wind and flood can strike simultaneously as part of a single occurrence over a period of 72 hours.

In order to trigger the Business Interruption coverage, the insured property must be physically damaged by a covered peril under the property coverage. Fire, wind, flood, theft and water damage or sprinkler leakage would be examples of covered perils. Financial or business circumstances would not be considered covered perils and would not meet the physical damage condition necessary to trigger coverage. In determining whether to schedule Business Interruption values, you must first determine if the property or structure generates revenue. This can be determined with an examination of the income section of your financial statement. You should then estimate the amount of time it will take to rebuild the structure or replace personal property. Often times the replacement of a structure involves an extraordinary amount of time to draw plans and pull the necessary permits, not to mention the actual construction time. Generally, one year is not enough for the entire process, and two years and possibly three years in the case of larger structures are better estimates. Then, the appropriate revenue value associated with the rebuilding time should be listed on your schedule of values.

The actual loss gets calculated by determining the actual expenses that continue on during the rebuilding process starting from the time the building is damaged until the time it is fully rebuilt and ready for occupancy. The MVRMA Business Interruption coverage also has an enhancement that provides coverage for an additional 120 days beyond completion time while the revenue stream is recovering to pre-loss levels.

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2008 Safety Awards

Each May MVRMA's Awards committee meets to determine the Risk Management/Safety Award winners for the loss year completed the previous December. To be eligible, a member must have completed one full year of MVRMA membership.

The Overall Award is presented to the city with the lowest dollar losses per full-time employee. A plate engraved with the overall winner's name and the year of the award is added to a plaque which rotates to the winning city. The city may then display the plaque for one year. The runner-up city is presented with a smaller plaque honoring its accomplishment. Congratulations to this year's winners. The Overall Winner, with losses of $5.06 per employee, is the Village of Indian Hill. The runner-up, with losses of $33.67 per employee, is the City of Springdale.

There are also Departmental Awards. These are given to the department with the lowest dollar losses per full-time employee. There are usually several departments in each category with zero losses. The winner is then determined by the department with the most full-time employees. The department categories and winners for 2008 (all with zero losses) are listed below:

Police - City of Mason - 43 full-time employees

Fire & EMS - City of Troy - 41 employees

Water & Wastewater - City of Sidney - 34 employees

Parks & Recreation - City of Montgomery - 14 employees

Streets & Refuse - Village of Indian Hill - 22 employees

We would also like to recognize the many other zero-loss departments in each of these categories. Although they will not be receiving a plaque as the winning department, each employee will receive a certificate, and the department will be entitled to a check for $250 to use toward any safety related training or a breakfast or other celebration. The following departments are to be congratulated for their efforts regarding safety and loss control:

POLICE

Bellbrook, Indian Hill, Madeira, Sidney, West Carrollton

FIRE & EMS

Bellbrook, Mason, Piqua, Tipp City, Wyoming

WATER & WASTEWATER

Bellbrook, Indian Hill, Mason, Tipp City, Vandalia, Wyoming

PARKS & RECREATION

Beavercreek, Madeira, Springdale, Tipp City, West Carrollton

STREETS & REFUSE

Springdale, Wyoming

Additionally, any department with three or more consecutive zero-loss years is recognized with a Safety Performance Award plaque. The 2008 awards recognized the period 2006-2008 or longer. Plaques will be presented to the following cities:

POLICE

2005-2008: Bellbrook, Indian Hill & Madeira

FIRE & EMS

2005-2008: Bellbrook

WATER & WASTEWATER

2005-2008: Bellbrook & Indian Hill

2004-2008: Wyoming

1994-2008: Vandalia

PARKS & RECREATION

2005-2008: Springdale & Tipp City

2001-2008: Montgomery

1995-2008: Madeira

At the June Board Meeting, winners of the Award of Excellence were recognized with the presentation of plaques. In 2008, these cities' dollar losses per employee were 50% less than the expected average dollar loss, ($100 or less per full-time employee). The seven cities honored at the meeting were:

Indian Hill - $5.06/ employee

Springdale - $33.67/employee

Tipp City - $61.40/employee

Miamisburg - $64.87/employee

Madeira - $75.13/employee

Bellbrook - $76.57/employee

Troy - $92.76/employee

As part of the Safety Awards program, each member city is asked to submit a nomination for the Special Achievement Award. This award recognizes a special achievement program or activity related to risk management, safety or loss prevention. Cities or departments chosen for this award receive special recognition for their efforts. The 2008 winners are the City of Springdale for its 1, 2, 3 Swim! program and the City of Miamisburg for its Job Safety Analysis program (see articles titled for each program).

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From the Board Room...

According to the Center for Disease Control and Prevention, drowning remains the second leading cause of unintentional injury-related death for children ages 1-14, averaging 10 deaths per day. Equally disturbing is the fact that drowning rates have stopped declining. If there is water, there is a risk. Due to the alarming statistics, the importance of water safety and swimming lessons is paramount.

In April of 2008, the Springdale Parks and Recreation aquatic staff members recognized the need to emphasize the importance of water safety to the public. The desire was to implement a free program for children ages 3-12 that would introduce the basics of swimming, water safety and the existing swim lesson program. The event tagged 1, 2, 3 Swim! would also serve as a means to evaluate individual swimming abilities and help insure accurate placement of every participant into the regular swim lesson program.

The idea of 1, 2, 3 Swim! sounded relatively simple at first, but, in reality, it was more complicated than originally thought. The idea of offering a free swim lesson to pre-school and grade-school age children raised some concern. Odds were that most of the children had little, if any, swimming ability, and the comfort levels of three to twelve year olds would probably run the gamut. Safely managing a large group of presumably non-swimmers was a major concern. Those safety concerns were eliminated by establishing a pre-registration process and a limited enrollment. Additionally, predetermined times were set for the pre-school age children, as well as a separate time for the grade-schoolers. The day of the lesson, the children were grouped by age and assigned one instructor to five swimmers. All instructors were Red Cross certified Water Safety Instructors and were capable of adapting their lesson plans based on the age of the group.

The weather cooperated on the day of the event, and swimmers and parents were anxious to get started. The Aquatic Director welcomed everyone and introduced the instructors. Some of the swimmers were eager to jump right in, and others were hesitant. Grouping the kids by age proved to be helpful, in that each group had an instructor who was prepared to ease the nerves of timid swimmers while providing an upbeat and fun lesson that kept the kids' interest. During the lesson, the Aquatic Director spoke to the parents about the regular swim lesson program, registration process, water safety and general pool rules.

At the conclusion of the lesson, each swimmer was presented a participation certificate and the instructors' recommended class level for regular swim lessons. Immediately following 1, 2, 3 Swim!, parents, with certificate in hand, simply went to the front desk of the Community Center and registered their child for swim lessons.

1, 2, 3 Swim! provided children an introduction to swimming fundamentals, water safety and a sample of the regular lesson program along with an accurate assessment of their swimming ability. Parents had the opportunity to meet the instructors and learn about the importance of swim lessons and water safety and were encouraged to enroll their children in a swim lesson program.

As a result of the innovative program, regular swim lessons saw an overall participation increase of 30%, and group swim lessons for the three-five year olds filled for the first time in years.

Staff cautioned parents and children that no amount of swim lessons drown-proof any child or adult, but an all-inclusive approach to water safety can make a big difference in saving lives. The Aquatic Director summed it all up, "1, 2, 3 Swim! was very gratifying. The kids had fun, parents were happy and the instructors actually enjoyed teaching! Anytime we can achieve all of that plus make our kids a little safer in or around the water, we all win."

Anyone desiring more information about this program may contact Sharon Casselman or Jackie O'Connell, Assistant Parks and Recreation Directors for the City of Springdale, 513/346-3910.

In 2008, Miamisburg's Safety Team spent much of the year developing skills on Job Safety Analysis (JSA). We began early in the year with specialized on-site training from Craig Smith of the BWC. We are one of the few communities that still has in-house refuse collection, and with the high exposure to injuries due to the extreme physical and repetitive nature of the job requirements, Smith video-taped one of our refuse drivers "at work." The team then completed a JSA as part of its training.

A customized, user-friendly JSA form, to be used throughout the City, was created. The safety team then determined multiple jobs through all City departments that could benefit from a JSA. We divided into smaller subgroups of approximately four, and during the summer months (June, July and August of 2008), the teams completed their JSAs. At the September Safety Team meeting, the subgroups made presentations to the entire team, and the JSAs were critiqued.

Now, each time there is an accident or injury, a JSA is completed to determine if the job could or should have been completed differently to prevent, or at least diminish, the chance for an accident or injury.

Anyone desiring more information about this program may contact Kathy Weisgarber, Human Resources Director at the City of Miamisburg, 937-847-6465.