HomeMy WebLinkAboutReso 65-1979 RESOLUTION NO. 165-79
CITY COUNCIL, CITY OF SOUTH SAN FRANCISCO, STATE OF CALIFORNIA
A RESOLUTION ESTABLISHING A
SELF INSURANCE FUND
WHEREAS, the City Council of the City of South San Francisco, by
Resolution No. 64-79 dated the 6th day of June , 1979, authorized
execution of a Joint Powers Agreement for and participation in a joint lia-
bility Self insurance pool', and
WHEREAS, the City Council has duly considered the staff report
dated June 6, 1979, subject: liability insurance - Joint Powers Agreement,
a copy of which is attached hereto as Exhibit "A", and
WHEREAS, the City Council of the Ci'ty of South San Francisco has
heretofore authorized a workers' compensation self insurance fund, and
WHEREAS, the City Council of the City of SOuth San Francisco now
desires to formally establish'a self insurance fund for liability contingencies
and workers' compensation;
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of
SoUth San Francisco that'
1. Establishment-'of a Self Insurance FUnd. The Council directs the
establishment of a self insurance fund to be maintained for insurance plans
and programs which the City elects .to self insure.~
2. 'Transfer of Liability Contingency Balance. The Council hereby
appropriates and transfers the balance in the liability contingency fund,
which is presently approximately Six hundred thousand dollars ($600,000) to
said self insurance fund to be assigned as an insurance reserve.
le
3. Incorporation of Workers' Compensation Fund.~ The City
Council 'directs that the present workers' compensatiOn~self insurance fund
be incorporated in the self insurance fund created by this Resolution.
4. Maintenance of Records. The City Council directs that the
income, expenses, reserves for reported losses and for unreported losses
shall be maintained separately for each type of insurance and in accordance
with sound insurance and accounting practices.
I hereby certify that the foregoing Resolution was regularly intro-
duced and adopted by the City Council of the City of South San Francisco
at a regular meeting held on the 6th day of JUne , 1979,by
the following vote:
'AYES: Councilmembers Ronald G. Acosta, William A. Borba, Emanuele N. Damonte,
Terry J. Mi rri and Roberta Cerri Teglia
NOES: None
ABSENT :None
/~ty Clerk~ C/
.
June 6, 1979
EXHIBIT "A" TO RESOLUTION NO. 65;79
ADOP.TED 6/6/79
The Honorable City Council
Subject-
ACTI ON:
Liability Insurance - Joint Powers Agreement
.
.
.- .
Introduce and adopt'two 'resolutions,
RECOMMENDATION
It is recommended that the Council-
1. Adopt a resolution authorizing the City Manager to execute a Joint
Exercise of Powers Agreement for insurance coverage; and.
2. 'Adopt a resolution establishing a self-insurance fund.
.
DISCUSSION
At its meeting of March 21 Council reviewed a status report of a joint
venture with other San Mateo Counties cities to determine the feasibility
of creating a Joint Powers Authority for risk management services and
liability insurance coverage: Staff was authorized to continue the study.
·
On May 25 the firm of Kindler and Laucci, Who had been engaged to produce
the feasibility report, provided the cost allocation information which was
to be the final determining factor on membership in the JPA. This final'
report indicates a saving of at least $23,000 'annually or 12%. In order
to be truly comparable to the current cost of insurance it is necessarY to
account for two valuable features in the J.P,A.; $9,000 for risk management
and administration, and $4,000 to increase the overall coverage from
$5,000,000 to $10,000,000. Thus the overall value to the City of joining
the Authority is in the area of $36,000 exclusive of interest which will
be earned on the reserves held by the City. Exhibit A portrays the cost
comparison. ~ .
At this writing it is likely that 14 or 15 of the 19 cities in San Mateo
County will execute the J.P.A. and the overall savings will approach
$1,000,000 annually.
It must be recognized, of course, that in embracing the self insured
concept the City will be assuming certain risks which at the present time
are assumed by the insurance company. The experience of many cities and
counties throughout the State has been that this is a worthwhile risk and
June 6, 1979
To: The~ Honorable City Counci 1
Subject: Liability Insurance - Joint Powers Agreement
Page 2
the San Mateo County cities have in their deliberations concluded that it
is a reasonable risk. lhe major factors contributing to this conclusion
"l. A cost savings through mass buying power of excess insurance and -~ improved loss control,
'2. availability of the services of a risk manager which could ~ot
.~.,~:~. normally be afforded, -
.
3. improved loss reports for the purpose of prevention or'controlling
risks,
4. retention' and investmenl~ of reserves by the cities rather than by
the insurance companies, and
.
5. criteria and control of settlement lies primarily with the cities
rather than the. insurance companies.
In order for the City to avail itself of the cost savings and other ,
advantages of the J.P.A. it is necessary that Council approve two resolutions.
The first resolution .will.:
a) Authorize the. City Manager to execute the joint exercise of
.... powers agreement for insurance coverages.
b) Appoint.the City Manager as the City's member on the Board of
Directors of the Authority. " . ...... -
' ' : .
· ~ .. c) Authorize the City Manager to select the self-insurance
. retention' (SIR) up to $100,000 per occurrence:
.
d) Authorize the claims administrator of the Authority to' settle
claims of the City-in the amount of'
l) $2,000 or' less with the advice and counsel of the City
Attorney; and
2) Over $2,000 but not over $5,000 upon the formal approval
of the City Attorney'
3) Over $5,000 with the formal approval_ of the City Council.
Upon approval of the J.P.A., Council should recognize that the City also
became self-insured for Workers Compensation Insurance on January 1, 1977.
June 6, 1979
To: The Honorable City Council
Subject: Liability Insurance- Joint~Powers Agreement
Page 3
in recognition of these relate~l activities of self-insurance, it would
seem most appropriate that the Council should formally adopt a Resolution
outlining the basis under which the plans must operate.
Thesecond r~.sol uti on will serve the following purposes'
a) Di'rec'~'the establishment of a "self-insurance fund" which is
to be maintained for insurance plans which the City may choose
to self-insure, i;i~ ili.' / '
b) Appropriate and transfers?the balance in the Liability Contingency
Fund, approximately $600,000, to the self-insurance fund to be
assigned as a reserve for unreported claims and catastrophic losses.
c) Direct that the present 'Workers Compensation Self-Insurance Fund
be incorporated in the new self,insurance fund, -
.,
CONCLUSION
d) D~rect that the income~ expense, reserves for reported losses and
for unreported losses shall be maintained separately for each type
6f insurance and in accordance with sound insurance and accounting
practices.
Based upon all of the information which Staff has been able to gather and
evaluate, it is clearly in the City's best interest to join with other cities
of San Mateo County in a Joint Powers Agreement for insurance purposes.
It is recognized that the City will accept a greater risk through the self-
insurance retention but based on the Ci'ty~s past performance and based on the
reports of other cities in similar ventures it is a favorable calculated risk
which should prove to be of .significant benefit ..... ·
. . ·
Staf~~ ~nd a representative of Kindler and Laucci will be prepared to resPOnd
to any questions of Counci~l. ~. ~
It is recommended that the Council introduce and adopt the two resOlutions
which would provide for membership in the Joint Powers Authority and provide for
the appropriate accounting for self-insurance.
C. Walter Birkelo
Willi am R. Anderson
Director of Finance
CWB/WRA/bab
Enclosure- Exhibit A
Total Net Cost
COVERAGE ~'~
Liability Except Auto $500,000
$2,000 Deductible--
Estimated Cost of Deductible
Auto Liability $500,000
Self-Insured Retention $1.00,000
Estimated Annual Cost
Excess Insurance to $5,000,000
Sub-Total of Equivalent Costs
ExCess Insurance to $i0,000,000
Risk Management and Administration
EXHIBIT A
PRESENT PROJECTED
.COST SAVINGS
$ 97,150
JPA COST
·
10,000
· 35,500 0
0
49;000
$191,650
0
0
81,000
74,1491
$155,491
4,154
9,000
· ..
$36,159
$191,65O
_ -
$168,645
$23,005