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HomeMy WebLinkAboutAgenda Item No. 7 CITY OF LAKE 5 LSINOR DREAM EXTREME. REPORT TO CITY COUNCIL TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: ROBERT A. BRADY CITY MANAGER DATE: DECEMBER 13, 2011 SUBJECT: CONSIDERATION OF PARTICIPATION IN THE CALIFORNIA JOINT POWERS INSURANCE AUTHORITY'S WORKERS' COMPENSATION SELF - INSURANCE PROGRAM Background The purpose of this request is for the City Council to authorize participation in the California Joint Powers Insurance Authority's (California JPIA) workers' compensation self- insurance program. Workers' Compensation Workers' compensation coverage provides benefits for employee injuries arising out of and in the course of employment, as well as employers' liability coverage. The City is currently commercially insured for all workers' compensation exposures with State Compensation Insurance Fund. The City's 2011 premium was $198,879. The City's policy does not provide workers' compensation coverage to volunteers. Discussion It is necessary to ensure workers' compensation coverage is in place on January 1, 2012. The City has only purchased coverage from the State Compensation Insurance Fund. The average premium cost over the past five years has been $196,095. Staff has explored a variety of other options to ensure the City and its employees are protected and receive exceptional service. Analysis: Self- Insurance Pools In nearly all cases, pools offer more favorable coverage, terms, conditions, and limits tailored to the needs of the public entity participants. If a pool has a favorable loss experience, funds not spent on claims are refunded or retained specifically for the AGENDA ITEM NO. 7 Page 1 of 9 PARTICIPATION IN THE CALIFORNIA JPA WORKERS' COMPENSATION PROGRAM DECEMBER 13, 2011 PAGE 2 benefit of the members. In the long term, pools are generally more cost - effective for pool members. In addition to these favorable aspects of pools, however, there are disadvantages to consider before electing pool membership. Some pools require multi -year program commitments. Monies collected in the pool are shared in the payment of losses for all members, and most pooling agreements contain assessment provisions if funds are not available to pay claims or expenses. After a participating member separates from the pool, they are still responsible for losses experienced while participating as a member. Non - Pooled (Traditional) Insurance Commercial insurance policies for workers' compensation have been difficult to obtain in the recent years, and few carriers are willing to write the coverage for public entities. If a policy can be acquired, the premium is set for the coverage period, usually one year, and is not subject to assessments. Coverage can be terminated at anytime, allowing the City to take advantage of competitive pricing or changes in the insurance world. Once separated from a traditional policy there is no further obligation to pay assessments. One disadvantage of purchasing traditional insurance is that premiums are not insulated from the fluctuations of the insurance market. As the market expands and contracts, premiums follow. Some agencies have experienced doubling or tripling of premiums from one year to the next„ Additionally, the traditional insurance market continues to be disinclined to offer coverage to entities that provide police and fire services due to their inherent risk. Since September 11, 2001, cities have been migrating away from traditional insurance to the point that it is no longer the most common risk management solution for cities. Staff contacted the California Joint Powers Insurance Authority (California JPIA) since the City currently participates in the pool's liability self- insurance program. A coverage quote was obtained from the California JPIA. After review of the quote and comparison to the current coverage, Staff believes participation in the California JPIA's self - insurance pool for workers' compensation will be of great benefit to City. Based on the current California JPIA proposal, the City's workers' compensation coverage costs will decrease by $31,979 for fiscal year 2011 -2012. The City will also gain volunteer workers' compensation coverage that will protect the City from future losses. Page 2 of 9 PARTICIPATION IN THE CALIFORNIA JPA WORKERS' COMPENSATION PROGRAM DECEMBER 13, 2011 PAGE 3 About the California JPIA: The California JPIA is a joint powers insurance authority located in La Palma. Formed in 1977, the California JPIA provides self- insurance and commercial insurance services to 122 Member agencies (97 cities and towns and 25 joint powers authorities and special districts). A Board of Directors, consisting of one elected official appointed by each member agency, governs California JPIA. In addition to insurance services, the California JPIA provides additional services to its member agencies including employee training and assistance in risk management organization, Toss control, operational audits, and general insurance advice. Due to its size, the California JPIA provides high limits and is able to provide the same coverage to each member agency. California JPIA's size and diverse membership also allow the pool to buy comprehensive excess insurance coverage and provide low self - insured retentions and /or deductibles to the members. Each year Member agencies remit an annual contribution to the California JPIA for liability and workers' compensation coverage. In the event of a claim, California JPIA charges each member's annual contribution for the costs associated with the occurrence. The workers' compensation program has a $50,000 self- insured retention for each member, which is also charged against the annual contribution. Member agencies share costs, via the pool, above $50,000. The workers' compensation program includes statutory coverage and employer's liability limits of $10 million. Every claim, regardless of the anticipated value, is reported to the California JPIA. The California JPIA pays for all costs associated with the processing of workers' compensation claims throughout the year and handles the administration of all claims. The California JPIA Underwriting Committee reviewed the City's request for participation in the workers' compensation program on November 14, and on November 16 the California JPIA Executive Committee approved the City's participation by unanimous vote. Conclusion: It is critical that the City procure comprehensive Toss coverage to protect the City and its employees. Based on considerable research, staff has concluded there are substantial advantages to joining the California JPIA workers' compensation self- insurance program. It is staffs belief that the City's annual insurance costs will decrease by approximately $32,000 if the City joins the California JPIA.The City would join a stable mix of other public entities and enjoy broader coverage and program enhancements in the areas of safety, training, and loss prevention. Page 3 of 9 PARTICIPATION IN THE CALIFORNIA JPA WORKERS' COMPENSATION PROGRAM DECEMBER 13, 2011 PAGE 4 Benefits include: • Workers' compensation coverage limits increase from $(enter limit) to statutory (unlimited), as provided by California workers' compensation law. • The City will gain workers' compensation coverage for volunteers Implementation: If membership is approved by the City Council, the following Resolutions must be adopted: Fiscal Impact Approval of the recommended action would result in a six -month prorated 2011 -12 fiscal year expenditure of $83,450 for workers' compensation coverage. The current budget has allocated $99,440 for worker's compensation insurance for the same period. Approval of this change in workers' compensation providers would be a savings of $15,990 for fiscal year 2011 -12. Recommendation It is recommended that the Council adopt the following Resolutions to secure membership and loss coverage for workers' compensation coverage to be effective January 1, 2012, and authorize staff to complete applications and sign documents as required: 1. Resolution 2011 -065: Approves participation in California JPIA Workers' Compensation Program 2. Resolution 2011- 066:Approves Workers' Compensation Coverage to City volunteers 3. Resolution 2011 -067 :Authorizes application for a Certificate of Consent to Self Insure for workers' compensation liabilities Prepared by: James Rile is Director of Air inist :tive Services Approved by: Robert A. Brady► City Manager Attachments: Resolution No. 2011 -065 Resolution No. 2011 -066 Resolution No. 2011 -067 Page 4 of 9 RESOLUTION NO. 2011- 065 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE, CALIFORNIA, TO AUTHORIZE AND APPROVE POOLING OF SELF - INSURANCE THROUGH THE WORKERS' COMPENSATION PROGRAM OF THE CALIFORNIA JOINT POWERS INSURANCE AUTHORITY. THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE, CALIFORNIA, HEREBY DOES FIND AND RESOLVE AS FOLLOWS: WHEREAS, pursuant to the provisions of Section 6500 et seq. and also Section 3700, et. seq., of the California Labor Code, the California Joint Powers Insurance Authority ( "California JPIA ") was created in 1977; and WHEREAS, the City of Lake Elsinore has executed the Joint Powers Agreement to become a member of the California JPIA; and WHEREAS, the California JPIA has established and administered a successful Workers' Compensation Self- insurance and Loss Pooling Program for its members since January 1, 1980; and WHEREAS, there are significant financial and administrative advantages for the City of Lake Elsinore to provide workers' compensation coverage for its employees through the Workers' Compensation Protection Program of California JPIA. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE DOES HEREBY RESOLVE, ORDER AND DETERMINE THE FOLLOWING: Section 1. Workers' compensation coverage for employees of the City of Lake Elsinore through the Workers' Compensation Protection Program of the California JPIA is hereby authorized and directed, effective January 1, 2011, pursuant to the terms of the Memorandum of Coverage in effect at the time of any occurrence covered by the Memorandum of Coverage. Section 2. The City Manager or his /her designee of the City of Lake Elsinore is authorized and directed to apply to the Department of Industrial Relations for a Certificate of Consent to Self- insure, and to take such other actions as be necessary to effectuate self - insurance of workers' compensation for employees of the City of Lake Elsinore. Section 3. That an initial annual Workers' Compensation Annual Contribution of $166,900, or such pro -rata part thereof as the California JPIA might determine for coverage of Tess than a fiscal period, is approved and the appropriate officers of the City of Lake Elsinore are authorized to pay the same to the California JPIA. Section 4. That City of Lake Elsinore will subsequently be required to make annual contributions and contribution adjustments as provided in Articles 17 and 21 of the Joint Powers Agreement. Page 5 of 9 City Council Resolution No. 2011 -065 December 13, 2011 Page 2 of 2 Section 5. That a Self- Insured Retention level of $50,000 per occurrence is approved for all employees, or as may be amended subsequently. The Self- Insured Retention Level is reviewed periodically by the California JPIA and may be changed or amended in subsequent Program years. Section 6. That the Mayor shall sign and the City Clerk of Lake Elsinore shall certify to the passage and adoption of this Resolution, and thereupon the same shall take effect and be in force. Section 7. That the City's Clerk is directed to forward a certified copy of this Resolution to California JPIA, 8081 Moody Street, La Palma, California 90623. PASSED AND APPROVED by the City Council of the City of Lake Elsinore this thirteen day of December, 2011. Brian Tisdale Mayor ATTEST: Virginia J. Bloom City Clerk APPROVED AS TO FORM: Barbara Zeid Leibold City Attorney Page 6 of 9 RESOLUTION NO. 2011- 066 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE, CALIFORNIA, PROVIDING WORKERS' COMPENSATION COVERAGE FOR CERTAIN CITY VOLUNTEERS PURSUANT TO THE PROVISIONS OF SECTION 3363.5 OF THE LABOR CODE. WHEREAS, the City of Lake Elsinore finds its best interest will be served by utilizing volunteers in the provision of certain government services; and WHEREAS, said volunteers should be eligible for workers' compensation coverage while on duty; NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Lake Elsinore does hereby: 1. Find and determine that the public interest is best served by providing workers' compensation coverage for City volunteer workers as specified by the City Manager; and 2. Provide eligibility for said volunteers for workers' compensation benefits which will be applicable during the time the person actually performs volunteer services, provided, however, that the rights of volunteers shall be limited as set forth in the Labor Code. PASSED, APPROVED AND ADOPTED this 13 day of December, 2011. Brian Tisdale Mayor ATTEST: Virginia J. Bloom City Clerk APPROVED AS TO FORM: Barbara Zeid Leibold City Attorney Page 7 of 9 Page 8 of 9 RESOLUTION NO. 2011- 067 A RESOLUTION AUTHORIZING APPLICATION TO THE DIRECTOR OF INDUSTRIAL RELATIONS, STATE OF CALIFORNIA FOR A CERTIFICATE OF CONSENT TO SELF INSURE WORKERS' COMPENSATION LIABILITIES WHEREAS, at a regular meeting of the City Council of the City of Lake Elsinore, California, a City organized and existing under the laws of the State of California held on the 13 day of December 2011, the following actions were taken: WHEREAS, the City Council of the City of Lake Elsinore has executed the Joint Powers Agreement to become a member of the California JPIA and adopted Resolution No. 2011 -065 approving the same. WHEREAS, the City Council of the City of Lake Elsinore has elected to provide Workers' Compensation coverage for certain City volunteers pursuant to the Provisions of Section 3363.5 of the Labor Code and adopted by Resolution No. 2011 -066. NOW THEREFORE, BE IT RESOLVED that the Human Resources Administrator or the Director of Administrative Services are hereby severally authorized and empowered to make application to the Director of Industrial Relations, State of California, for a Certificate of Consent to Self Insure Workers' Compensation liabilities on behalf of the City of Lake Elsinore and to execute any and all documents required for such application. IT IS FURTHER RESOLVED that this resolution has never been revoked, rescinded, or set aside and is now in full force and effect. PASSED AND APPROVED by the City Council of the City of Lake Elsinore this thirteen day of December, 2011. Brian Tisdale Mayor ATTEST: Virginia J. Bloom City Clerk APPROVED AS TO FORM: Barbara Zeid Leibold City Attorney Page 9 of 9