Loading...
Exhibit 1 - Agenda Information SheetCity of Denton _____________________________________________________________________________________ AGENDA INFORMATION SHEET DEPARTMENT: Procurement and Compliance ACM: David Gaines DATE: January 5, 2021 SUBJECT Consider adoption of an ordinance ratifying the expenditure of funds by the City Manager and the Purchasing agent for the purchase of excess workers’ compensation insurance coverage for the City of Denton, and authorizing the expenditure of additional funds for such purpose, through the City’s sole broker of record, Lockton Companies, LLC, ; and providing an effective date (File 7594 – awarded to Midwest Employers Casualty Company for a three (3) year not-to-exceed amount of $830,170.00). INFORMATION/BACKGROUND The City of Denton currently has an excess workers’ compensation insurance policy through Midwest Employers Casualty Company (MECC). The City’s expiring policy has a $600,000 per occurrence Self- Insured Retention (SIR) and insurance coverage up to the statutory benefit levels under workers’ compensation. Although the City is self-funded for our workers’ compensation exposures, since the City is still liable for all reasonable and necessary medical expenses, indemnity benefits, impairment benefits, and other related expenses if an employee is injured on the job while in the course and scope of employment, and since there is no cap on the potential costs of a workers’ compensation claim, the City has purchased the excess policy to provide an added layer of protection to our self-funded program. Given the complexities of this insurance product solicitation as described in greater detail below, the City utilized the services of our sole broker of record, Lockton, Companies, LLC (“Lockton”), to assist us in procuring these coverages. Lockton was appointed the broker of record for the City of Denton on August 6, 2020, and information about the City’s current programs was provided to Lockton to begin their review shortly afterward. The request for the workers’ compensation exposures and applications was made on October 7, with final applications submitted on November 11. Underwriting for such insurance coverage typically takes a minimum of thirty days; despite the strict time constraints due to the delay in providing required information to Lockton and the expiration of the current coverage on December 31, 2020, Lockton was able to get the current quote faster than would normally be expected. While Lockton has access to markets all over the world, there are specific Public Entity insurance markets that Lockton does not have access to. To access these markets, Lockton works with an intermediary named CRC. CRC has a specific Public Entity division and has worked for the City of Denton for the past two years, alongside Denton’s prior retail broker(s). City Hall 215 E. McKinney Street Denton, Texas www.cityofdenton.com The current excess insurance market has “hardened” significantly in recent years, which means that annual premiums for this product have increased significantly, and many insurance carriers have left the market entirely. Those insurance carriers who remain in the market are seeking higher SIRs, especially for public entities with fire and law enforcement exposures. Also, underwriters for these excess insurance companies require much more information from a prospective insured than they have in the past. Additionally, since 2017, the City has had three workers’ compensation injuries that exceeded the City’s SIR. As a result, Lockton received two (2) excess workers’ compensation renewal options from the City’s current excess workers’ compensation carrier, Midwest Employers Casualty Company: • $217,750 for a $1,000,000 SIR; and • $195,473 for a $1,250,000 SIR The total annual premium for excess insurance is a function of the total payroll number for the City. The proposed rate from Midwest Employers Casualty Company represents a 0% rate increase with a 7% increase in total payroll compared to last fiscal year; however, the SIR has increased from the current $600,000.00 SIR. Midwest Employers Insurance Company is an A+ rated carrier by AM Best with a financial strength rating of XV (over $2,000,000,000 in assets). Based on the evaluation of the proposals, both staff and our broker of record, Lockton, recommend the purchase of excess workers’ compensation insurance from Midwest Employers Casualty Company with the $1,000,000 SIR, for the rate of $0.178 per $100 of payroll, for an estimated one year premium of $217,750.00. RECOMMENDATION Award a contract with Midwest Employers Casualty Company, for the purchase of excess workers’ compensation insurance for the City of Denton, in a three (3) year not-to-exceed amount of $830,170. PRINCIPAL PLACE OF BUSINESS Lockton Companies, LLC Kansas City, MO Midwest Employers Casualty Company Chesterfield, MO ESTIMATED SCHEDULE OF PROJECT Services under this contract will begin on December 31, 2020. FISCAL INFORMATION These services will be funded from the Risk Retention Fund. EXHIBITS Exhibit 1: Agenda Information Sheet Exhibit 2: MECC Excess Workers’ Compensation Proposal Exhibit 3: Broker Recommendation Letter Exhibit 4: LLC Members Exhibit 5: Ordinance Respectfully submitted: Lori Hewell, 940-349-7100 Purchasing Manager For information concerning this acquisition, contact: Deby Skawinski, 940-349-7810. Legal point of contact: Marcella Lunn at 940-349-8333.