HomeMy WebLinkAbout6.c. Accept Tort Liability Insurance Limits and Authorize Deductible Change to $100,000 per Claim / $200,000 Annual Aggregate LimitRCUSEMOUNTEXECUTIVE SUMMARY
CITY COUNCIL
City Council Meeting Date: November 16, 2010
AGENDA ITEM: Accept Tort Liability Insurance Limits and
Authorize Deductible Change to
AGENDA SECTION:
$100,000 per Claim / $200,000 Annual
Consent
Aggregate Limit
PREPARED BY: Jeff May, Finance Director
AGENDA NO. � l
ATTACHMENTS: Recommendation Letter from Dan
Peterson, Risk Management Consultant;
APPROVED BY:
LMCIT Liability Coverage — Waiver Form;
Liability Insurance Spreadsheet
Q1
RECOMMENDED ACTION: Motion to waive the monetary limits on tort liability established
by Minnesota Statutes 466.04, to the extent of the limits of the liability coverage obtained
from LMCIT; and to authorize the change in the insurance deductible to a $100,000 per
claim / $200,000 annual aggregate limit.
ISSUES
Approve the annual selection of tort liability insurance limits and change the insurance deductible level.
BACKGROUND
Issue 1: Cities obtaining liability coverage from the League of Minnesota Cities Insurance Trust (LMCIT)
must decide whether or not to waive the statutory tort liability limits. In the past, The City has waived the
$500,000 / $1,500,000 tort cap limit and has elected the $1,500,000 / $1,500,000 limit. Last year the
premium for the additional coverage was $3,434. By waiving the statutory tort limit cap and getting the
"better coverage ", the City is better protecting itself in the event of a serious accident or unusual claim. In
switching, the feeling is that the additional premium is money well spent by the City to protect itself and
ultimately, its citizens.
The City Council has to annually take the action to waive the statutory tort liability limits and to accept the
LMCIT's higher coverage. Attached is a form that the Mayor will then have to sign and we will return to
LMCIT for the institution of this coverage. Also attached is a letter from Dan Peterson, our risk
management consultant, recommending that we increase the coverage to $1,500,000 / $1,500,000 for the
plan year 12/1/10 through 11/30/11.
Issue 2: At the City Council Work Session on August 11, 2010, information was presented that reduced
the tax levy for City liability insurance in 2011 by $30,000. To accomplish this, the City would move from
its current $500 per claim deductible to a $100,000 per claim / $200,000 annual aggregate deductible. By
utilizing a strong balance in the Insurance Fund (about $550,000 currently) to offset potential claims, the
City will save a substantial amount each year in insurance premium reductions. Attached is the liability
insurance spreadsheet presented to Council in August showing that the City would have had a net savings
of about $50,000 per year over the past five years had a high deductible plan been in place during those
years. The reduction in the tax levy was based on estimated premium savings and taking a conservative
approach in budgeting for estimated claim losses.
SUMMARY
Recommend the above motion.
IA
INC. INSURANCE ADVISORS INC.
1511 East Minnesota Street • PO Box 1017 • St. Joseph, MN 56374
(320) 363 -0007 • (800) 969 -7364 • Fax (320) 363 -8581
Mr. Jeff May
Finance Director
City of Rosemount
2875 145th Street West
Rosemount, MN 55068 -4997
Re: Maximum Tort Liability
Dear Jeff,
October 22, 2010
The Minnesota statute regarding the maximum tort liability limit for any municipality changed
effective July 1, 2009 to:
- $500,000 when the claim is for death by wrongful act or omission and,
- $500,000 to any individual claimant in any other case and,
41,500,000 for any number of claims arising out of a single occurrence.
You do have the option of waiving the $500,000 limitations by selecting a higher limit of
liability through the League of Minnesota Insurance Trust (LMCIT) which you have done for
many years. You currently have insurance coverage in the amount of
41,500,000 when the claim is for death by wrongful act or omission and,
41,500,000 to any individual claimant in any other case and,
-
41,500,000 for any number of claims arising out of a single occurrence,
which allows an individual claimant to recover up to $1,500,000. This does not subject the City
of Rosemount to any additional risk because, by statute, your liability will not exceed the extent
to which valid and collectible insurance exceeds the tort limitations and covers the claim.
Because:
-your exposure is the limit you select
-a person injured seriously due to the City's negligence stands a better chance of
being more adequately compensated
-a loss may fall under federal statutes and not be limited by this Minnesota
statute
I recommend that you continue to select the $1,500,000 per claimant limit to coincide with the
$1,500,000 per occurrence limit and sign the waiver form provided by the League of Minnesota
Tnanranno Trr,e4
Risk Management
"ADVISING YOU ON INSURANCE"
PROPERTY /CASUALTY - LIFE - HEALTH - INVESTMENTS
LEAGUE OF MINNESOTA CITIES INSURANCE TRUST
SECTION I; LIABILITY COVERAGE WAIVER FORM
Cities obtaining liability coverage from the League of Minnesota Cities Insurance Trust must decide
whether or not to waive the statutory tort liability limits to the extent of the coverage purchased. The
decision to waive or not to waive the statutory limits has the following effects:
If the city does not waive the statutory tort limits, an individual claimant would be able to recover no
more than $500,000. on any claim to which the statutory tort limits apply. The total which all claimants
would be able to recover for a single occurrence to which the statutory tort limits apply would be
limited to $1,500,000. These statutory tort limits would apply regardless of whether or not the city
purchases the optional excess liability coverage.
If the city waives the statutory tort limits and does not purchase excess liability coverage, a single
claimant could potentially recover up to $1,500,000. on a single occurrence. The total which all
claimants would be able to recover for a single occurrence to which the statutory tort limits apply would
also be limited to $1,500,000., regardless of the number of claimants.
If the city waives the statutory tort limits and purchases excess liability coverage, a single claimant
could potentially recover an amount up to the limit of the coverage purchased. The total which all
claimants would be able to recover for a single occurrence to which the statutory tort limits apply would
also be limited to the amount of coverage purchased, regardless of the number of claimants.
Claims to which the statutory municipal tort limits do not apply are not affected by this decision.
This decision must be made by the city council. Cities purchasing coverage must complete and
return this form to LMCIT before the effective date of the coverage. For further information, contact
LMCIT. You may also wish to discuss these issues with your city attorney.
The City of Rosemount accepts liability coverage limits of $1,500,0001 $1,500,000 from the League of
Minnesota Cities Insurance Trust (LMCIT).
Check one:
❑ The city DOES NOT WAIVE the monetary limits on municipal tort liability established by
Minnesota Statutes 466.04.
® The city WAIVES the monetary limits on tort liability established by Minnesota Statutes 466.04,
to the extent of the limits of the liability coverage obtained from LMCIT.
Date of city council meeting November 16, 2010
Signature
Date
Position Mayor
Retum this completed form to LMCIT, 145 University A ve. W., St. Paul, MN. 55103 -2044
Pg 1 of 1
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