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HomeMy WebLinkAbout03/03/1992, C-12 - RISK MANAGEMENT PROGRAM IIIIN�`�1II�IIIIIn�IAII�IN "J MEETING DATE 992 Cl O $d1'1 LLU$ OBl$p0 larch 3, 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 Page 2 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: 1 ZC i i is ve O cer y orn 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. 5 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. 7 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. 8 C � Ia - S 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. 9 CO- Ia- � 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 10 RISK MANAGEMENT MANUAL 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. i 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. 11 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 12 RISK MANAGEMENT MANUAL 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 13 C- I**L- 13 RISK MANAGEMENT MANUAL 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. 14