HomeMy WebLinkAbout03/03/1992, C-12 - RISK MANAGEMENT PROGRAM IIIIN�`�1II�IIIIIn�IAII�IN "J MEETING DATE 992
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COUNCIL AGENDA REPORT ITEM NUMeERr��
FROM: Ann McPike, Personnel Director ame
PREPARED BY: Wendy George, Personnel Analyst W�
SUBJECT: Risk Management Program
CAO RECON31ENDATION: Adopt a resolution establishing a written Risk Management
Program for the City of San Luis Obispo
DISCUSSION:
BACKGROUND
Almost two years ago the excess insurer to the Central Coast Cities Self Insurance Fund notified
the member cities of the Joint Powers Authority (JPA) that in order for it to continue providing
excess liability insurance for the Fund the cities needed to develop a written risk management
program. A subcommittee of the JPA's Risk Management Committee met over a period of
about nine months with a representative of Sedgwick James of California, the JPA's
administrator, to develop a model Risk Management Manual. The model manual was presented
to the Board of Directors of the Central Cost Cities Self Insurance Fund in October, 1990, and
was adopted at that time. The Board of Directors then asked each city to take the model
manual and personalize it as appropriate, changing the program itself as little as possible.
The manual was then edited to reflect the forms and documents used by the City of San Luis
Obispo in its risk management practices. The edited form of the manual was then presented
to all departments in individual sessions and further refinements were made. Finally, those
aspects of the manual that affect conditions of employment were discussed with all employee
groups and additional changes were made.
PROGRAM OVERVIEW
The manual provides written documentation of the City of San Luis Obispo's Risk Management
Program. It contains a policy statement, objectives and a definition of risk management. The
bulk of the manual is devoted to identifying risk exposures and providing risk control techniques
and programs to be used by departments and the designated risk manager. Numerous examples
of forms and programs are presented as exhibits.
The manual is broken into seven sections. The first three sections contain the policy statement,
objectives and definition. These sections are followed by ones covering tort liability, contract
liability, workers compensation and property damage.
In many cases, the manual merely formalizes existing risk management policies, particularly
for accident reporting procedures, workers compensation injuries and liability waivers for
recreation programs. It also establishes standardized insurance requirements for all types of
contracts, raising the limit to $1 million as suggested by the JPA. Similarly, a range of
insurance requirements are established for special events occurring on City property. Insurance
limits are set for employees using their personal vehicles on City business, defensive driving
training is required for employees regularly driving City vehicles, and standards for monitoring
Risk Management Program
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employees' driving records are established. Finally, the manual points out potential liability in
various City programs and activities so that departments will have a higher level of awareness
when working in these areas.
CONCURRENCES:
The Management Team and mid-management employees have all reviewed the manual and
found it acceptable. All employee associations have reviewed the manual and found it
acceptable also. The Central Coast Cities Self Insurance Fund's Board of Directors approved
the model upon which the manual is based.
FISCAL E%IPACT:
The Risk Management Program will not result in any significant financial impact to the City,
other than the costs associated with reproducing the manual for each department, since it mainly
formalizes existing risk management practices. Costs of printing should not exceed $250 and
are covered in the Risk Management Program Budget. However, failure to adopt the Program
could increase the expense of purchasing excess liability insurance.
ALTERNATIVES:
1. Rewrite the proposed program. The program as presented has undergone extensive
review, meets the requirements of our excess insurer and is close to the model approved •
by the CCCSIF Board of Directors.
2. Fail to adopt a Risk Management Program. If the City does not adopt a program, we
risk the disapproval of the CCCSIF, and may cause an increase in the cost of our excess
liability premiums. Additionally, departments will continue to lack formal direction on
appropriate risk management practices.
ATTACHMENTS:
1. Resolution establishing a written Risk Management Program for the City of San Luis
Obispo.
2. Risk Management Policy Statement and Objectives
3. Risk Management - The Purpose, Process and Organization
Note: The Risk Management Manual is on file in the City crnmcil Office for review (56 pages
plus 21 exhibits).
RESOLUTION NO. (1992 Series)
RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO
ESTABLISHING A WRITTEN RISK MANAGEMENT PROGRAM
WHEREAS, the City of San Luis Obispo's excess liability insurance carrier has required
the establishment of a written Risk Management Program, and.
WHEREAS, the Central Coast Cities Self Insurance Fund Board of Directors responded
to this requirement by adopting a model Risk Management Manual to be used by all its member
cities, and
WHEREAS, the City of San Luis Obispo recognizes its responsibility to protect its
assets and employees by establishing strong risk management practices,
NOW, THEREFORE, BE IT RESOLVED, the City Council of the City of San Luis
Obispo does hereby establish a written Risk Management Program.
Upon motion of ,seconded by and
on the following roll call vote:
AYES:
NOES:
ABSENT:
the foregoing resolution was adopted this day of 1992.
Resolution No. (1992 Series)
Page 2
Mayor Ron Dunin
ATTEST:
Pam Voges, City Clerk
APPROVED:
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RISK MANAGEMENT MANUAL
I. RISK MANAGEMENT POLICY STATEMENT
While recognizing that it is impossible to eliminate all risk, it
is the policy of the City of San Luis Obispo to prevent, as far as
economically possible, the conditions, practices, and attitudes
that give rise to unforeseen or accidental losses of all types.
The City will work towards the prevention of injuries to its
employees, protection of its property from damage, and the safety
of the public in connection with its operations and when using the
City's facilities.
When the risk of exposure to losses cannot be eliminated, the risk
shall be managed through a combination of funded self-insurance,
and/or transfer to a financially sound insurer.
The Risk Management Program organization structure is designed to
bring together many diverse elements and individuals that have
knowledge, skills, and experience to identify, evaluate and
coordinate various risk exposures.
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RISK MANAGEMENT MANUAL
II. RISK MANAGEMENT OBJECTIVES
The City's Risk Management Program has the following objectives:
• Preservation of the City's assets and public service
capabilities from loss, destruction and depletion.
• Systemized internal procedures for identifying and constantly
re-assessing the fluctuating exposures to risks, and
implementing courses of action to minimize or eliminate those
risks.
• The establishment, to the extent possible, of an
exposure-free work and service environment in which City
personnel and members of the public can enjoy safety and
security in the course of their daily pursuits.
• Protection against the financial consequences of catastrophic
loss through avoidance, risk transfer, and/or purchased •
insurance.
RISK MANAGEMENT MANUAL
III. RISK MANAGEMENT - THE PURPOSE, PROCESS AND ORGANI2ATION
A. DEFINITION
Risk management is a process that helps identify the
areas of an organization at risk, analyze and select the
techniques that are most appropriate to cope with that
risk, implement the techniques, and monitor the results.
Risk management consists of problem solving.
Risk management can be thought of as: Planning for the
negative consequences of any decision, process, action,
or lack of action.
H. RISK MANAGEMENT STEPS
The classic steps of risk management are: _
1. Risk identification: identifying the services and
assets that could cause a financial loss to your
community.
2. Risk evaluation: determining how often particular
losses can occur and how severe they may be.
3 . Risk treatment: examining ways to handle the risks
by preventing accidents and minimizing losses after
an accident, as well as by exploring ways to cover
a loss financially.
4 . selection and implementation of treatments:
determining which risk treatment measures are most
appropriate for your community, then putting them
into place.
5. Monitoring the results of treatment actions:
making sure that the risk management steps are
effective.
6. Modify the Procedures to reflect experience.
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RISK MANAGEMENT MANUAL
C. METHODS OF TREATING RISK
There are two methods of treating risk:
1. Risk Control
a. Avoid the risk altogether.
b. Transfer risk to an outside party through
contracts.
C. Control the risk through training programs,
inspections, rules, safety equipment, etc.
2. Risk Financing
a. Retain the risk when the annual potential loss
is so small that it can be treated as normal
operating expense.
b. Transfer the risk by purchasing insurance.
}
D. RISK MANAGEMENT PHILOSOPHY
It shall be the City of San Luis Obispo's philosophy to
handle risks in the following manner absent extenuating
circumstances which deem it wise to deviate from this
philosophy.
1. Avoid
All accidental losses which occur with a high
freauencv and a high severity shall be avoided,
except where deviation is clearly in the best
interest of the City.
2. Transfer
In all contractual relationships, unless special
exception is made by the Risk Manager, it shall be
the City' s policy to transfer to others the
responsibility of all risks of loss. A Certificate
of Insurance and an endorsement specifically naming
the City as an "additional insured" shall be
required of all contractors. Hold Harmless clauses
will be included in all contract documents.
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RISK MANAGEMENT MANUAL
3. Self Insure
Losses which occur with a predictable high
frequency and a low severity shall be self-insured
when such losses have no significant impact on the
City's fiscal position, or when the cost of
commercial purchase of such insurance coverage
would be financially prohibitive. This
self-insurance shall be established through a
funded reserve system which shall be funded on a
yearly basis taking into account previous year's
losses, present reserves, and future losses as
predicted on a sound actuarial basis. These losses
can be categorized as those which occur often but
do not have a severe effect on the City's financial
position. An example would be sewer backups and
chip-seal damage.
4 . Retain
All accidental losses which occur with a low
frequency and a low severity shall be retained as
A normal business expense when such losses can be
_1 readily absorbed with no significant impact on the
City's financial position. Examples of this type
of loss would be plate glass coverage and
automobile physical damage.
5. Purchase Insurance
All accidental losses which occur with a low
frequency and a high severity shall be covered
through the purchase of excess insurance. This is
an area of loss that does not occur often but when
it does, it could be extremely serious if not
properly funded. This includes such areas as
property, casualty, and fidelity.
E. RISK MANAGEMENT ORGANIZATION
Responsibility for the major areas of risk management
(Tort Liability, Workers' Compensation, Property,
Contracts and Safety) is a coordinated function and
falls throughout all the levels of the organization.
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RISK MANAGEMENT MANUAL
Tort Liability
1. City Clerk - All claims for damages filed against
the City must be filed with the City Clerk's
office. The City Clerk stamps, records and
distributes the claims to the Personnel Analyst who
is designated as Risk Manager.
2. Risk Manager - The City's designated Risk Manager
receives all claims against the City, coordinates
handling of claims with the City's outside Claims
Administrator and all appropriate City departments;
maintains an insurance policy register.
3 . City Attorney - The City Attorney coordinates with
legal counsel assigned to claims by the City's
outside Claims Administrator or resolves and/or
defends claims and suits as appropriate.
4. City Council - The City Council accepts or denies
claims and approves settlements as appropriate.
5. City Administrative Officer - The City ,
Administrative Officer approves settlements as
allowed by Council.
6. Department Heads - Department Heads review all tort
liability incidents involving their area of
responsibility and cooperate with other staff in
the disposition and resolution of claims and
recommendations for improvements.
7. City Safety Committee - The Safety Committee
reviews all accident reports and makes
recommendations regarding safety issues.
8. All Employees - All employees must report promptly
to their supervisors any incident which they
believe might cause a claim against the City. They
must also cooperate with and assist in the
investigation of accidents to identify correctable
causes and to prevent their recurrence.
Workers' Compensation
1. Risk Manager - The City's designated Risk Manager
receives all workers' compensation claims from the
departments and coordinates the handling of claims
with the City's outside Claims Administrator and
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the appropriate department.
2. City Attorney - The City Attorney coordinates with
legal counsel assigned to claims by the City's
outside Claims Administrator. The City Attorney
may also act as an advisor to the Risk Manager.
3 . City Council - The City Council approves
settlements as appropriate.
4. City Administrative Officer - The City
Administrative Officer approves settlements as
allowed by Council.
5. Department Heads - Department heads maintain and
promote safe and healthful working conditions
throughout the department. They also review all
workers ' compensation claims in their area of
responsibility and make recommendations for
prevention. They review the department's loss
experience and cost analysis figures and evaluate
the progress of the City's accident prevention
efforts.
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6. City Safety Committee - The City Safety Committee
reviews all accident reports and makes
recommendations regarding the preventability of
accidents. The committee also promotes safe
working conditions and practices.
7. All Employees - All employees must report promptly
to their immediate supervisor any industrial
accident, injury or occupational illness,
regardless of the degree of severity.
Propert9
1. Risk Manager - The City Risk Manager should conduct
Facility Inspections at each of the City's
locations for the purpose of identifying any
potential hazards that the City may be exposed to
in it's daily business of providing services to the
public.
The City Risk Manager is responsible for notifying
each Department Head of the potential exposure in
the city's various operational areas, and to
suggest mitigating means to those Department Heads.
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RISK MANAGEMENT MANUAL
It is essential that the Risk Manager maintain
accurate records on the city's assets, for purposes
of accurate property appraisals to ensure proper
limits of coverage.
The Risk Manager needs to work closely with all
Department Heads and the JPA Administrator to
ensure that each property type is correctly insured
(i.e. , vehicle program delineation, specialized
facilities such as Wastewater Treatment Plants) ,
and that adequate specialized insurance such as
Flood and Earthquake (DIC) , is provided.
The Risk Manager needs to be aware of unusual
circumstances involving city properties. This can
be effectively accomplished through open lines of
communication in the organization. The Risk
Manager should be included in any Board of Review
process screening the construction of new city
facilities.
2. Department Heads - Department Heads need to keep
the Risk Manager involved and informed whenever
they acquire new property, such as vehicles, to
ensure proper coverage and protection of property
and personnel.
3. City Attorney - The City Attorney should be
involved in any dispute that arises which exceeds
the Risk Manager's settlement authority to settle
claims.
4. City Finance Director - The Finance Director may
conduct Claims Audits on an irregular basis to
ensure the City has the Financial ability to
sustain the claims reserves, should they be called
upon to quickly resolve an issue.
5. All Employees - All City Employees should be
trained to be a "second set of eyes" for the Risk
Manager. They are in the field continually and are
thus exposed to changes in conditions as they
occur, therefore they should be utilized as a
resource to assist the City in its risk avoidance
efforts.
Contracts
1. Risk Manager - The City's designated Risk Manager
is responsible for providing all departments with
the insurance, hold harmless and indemnification
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standards of the agency. The Risk Manager is
responsible for assuring that these standards are
being met.
2 . City Attorney - The City Attorney advises
departments on agreements, contracts, deeds,
easements and other legal documents for form and
compliance to the insurance, hold harmless and
indemnification standards of the agency.
3 . City Council - The City Council approves contracts
as appropriate.
4. City Administrative Officer - The City
Administrative Officer approves contracts as
appropriate.
5. Department Heads - Department Heads review all
agreements, contracts, deeds, easements and other
documents arising from departmental operations for
compliance to the insurance, hold harmless and
indemnification standards of the agency.
6. All Employees - All employees who have occasion to
draw up contracts, easements and other documents
will make sure they do so in compliance with the
insurance, hold harmless and indemnification
standards of the agency.
Safety
1. Risk Manager - The City' s designated Risk Manager
is responsible for the overall implementation of
the City's safety practices and procedures. The
Risk Manager serves as staff to the City's Safety
Committee.
2. City Administrative Officer - The City
Administrative Officer exercises the authority of
the City for carrying out the provisions of
Federal, State and municipal safety requirements
placed upon the City by law.
3 . Department Heads - Department Heads are responsible
for maintaining and promoting safe and healthful
working conditions throughout the department.
They must assure that equipment, facilities and
programs have safety measures built into them, and
that appropriate OSHA and Consumer Safety Product
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Commission guidelines are considered. They meet
with other department heads to discuss top level
policies concerning safety problems, recommend
directives for their elimination, when possible,
and make recommendations for necessary policy
changes to the City Administrative Officer when
required. These discussion may take place in the
form of an Executive Risk Management Committee.
4 . City Safety Committee - The City must have a City
Safety Committee. The City Safety Committee meets
each month to make recommendations regarding health
and safety issues. It promotes safe working
conditions and practices. Its members serve as
primary contacts for risk management and loss
control activities in their departments and assist
in risk identification inspections and audits.
5. All Employees. - All employees must promote safety
among co-workers and ensure that good
communications on all risk and safety matters are
achieved. They should apply the principles of
accident prevention in their daily. work, and. care
for and use proper safety devices and protective
equipment as required by their employment. They
should report promptly to their immediate
supervisor all unsafe actions, practices or
conditions they observe and obey safety rules and
follow established work procedures in their own
work.
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