Loading...
HomeMy WebLinkAbout05/18/2004, C5 - RESOLUTION TO JOIN THE WORKER'S COMPENSATION PROGRAM OF THE CALIFORNIA JOINT POWERS INSURANCE AUTHO i counat aGEnba Repoizt CITY OF SAN LUIS OBISPO FROM: Monica Moloney, Director of Human Resource' Prepared by: Karen Jenny, Risk Managerdq SUBJECT: RESOLUTION TO JOIN THE WORKERS' COMPENSATION PROGRAM OF THE CALIFORNIA JOINT POWERS INSURANCE AUTHORITY CAO RECOMMENDATION Adopt a resolution approving participation in the workers' compensation program of the California Joint Powers Insurance Authority (CJPIA). DISCUSSION On June 17, 2003, the Council adopted a resolution to join the California Joint Powers Insurance Authority and participate in the Authority's general liability program, effective July 1, 2003. The California Joint Powers Insurance Authority is an insurance pool of 107 member agencies, including 93 cities, based in Southern California. CJPIA also offers a workers' compensation program in addition to the general liability program. The City of San Luis Obispo has been a member of the Central Coast Cities Self Insurance Fund (CCCSIF) for general liability and workers' compensation since 1978. CCCSIF is comprised of eleven Central Coast cities that do not share risk, but joined together to share administrative costs and to obtain excess worker's compensation and, until July 1, 2003, liability coverage over a set amount per claim occurrence that is "self-insured". The majority of representatives to the February 18, 2004, CCCSIF Board of Directors' meeting voted to move the workers' compensation program to CJPIA. The 2003-05 Financial Plan included an estimate of $2.5 million for workers' compensation in fiscal year 2004-05. The primary deposit for the CJPIA's worker's compensation program for 2004-05 is $1.8 million. After taking into account the City's share of costs to wind down the CCCSIF and the cost to leave the CCCSIF's excess insurance pool one year early, staff estimates a savings of $347,000 ($277,000 in the general fund) for 2004-05. Without a change in insurance coverage, we would likely see a significant increase in the current program based on current unfunded liabilities and recent loss experience. The CJPIA premium will be constant for the first three years of the program. Unlike the CCCSIF, where members do not share risk, membership in CJPIA means sharing risk with other member agencies. However, the risk is shared among a large number of agencies, who share common goals of risk avoidance, claims control and transfer of risk in order to eliminate or reduce exposure. By following proven practices of risk management, member agencies assist each (S - I I California Joint Powers Insurance Authority Workers' Compensation Program Page 2 other in keeping the cost of claims down. By sharing risk, the cost to an agency for a year with significant claims experience is somewhat mitigated and spread out over a four-year period. Each member's cost of coverage is determined by its exposures and its actual loss experience. Similar to our current practice with CCCSIF, a premium deposit is made at the beginning of the fiscal year and retrospective adjustments are made based on the claims history following the close of the coverage period. Retrospective adjustments are made over a four year period. The City's experience so far in the first year of the liability program has been positive in terms of establishing working relationships with CJPIA staff. The cost allocation formula used by CJPIA for workers' compensation charges each member agency for the first $50,000 in costs for each claim. Currently the City is "self-insured" for the first $300,000 of each claim. Costs per claim from $50,000 to $100,000 are pooled based on each members share of the under-$50,000 costs. So, by exercising good risk management practices, member agencies can positively impact loss experience and help to reduce their share of the program costs. Costs from $100,000 to $2,000,000 are pooled based on the member's share of the total payroll of all the members, on the theory that larger agencies will have more workers' compensation exposure. Costs from $2 million to $50 million per claim are transferred to an insurance company providing excess insurance. Finally, the cost for claims exceeding $50 million are shared based on payroll. Through this balanced approach to allocating costs, member agencies are encouraged to be pro-active in loss prevention and yet are protected from catastrophic losses. FISCAL IMPACT The cost to join CJPIA's workers' compensation program for 2004-05 and to fund claims filed prior to June 30, 2004, is $347,000 less than previously estimated. Funding for the workers' compensation program costs will be included in the 2004-05 Financial Plan Supplement. ALTERNATIVES Status Quo: The City could choose to remain in the CCCSIF's workers' compensation program and pay significantly higher costs to avoid sharing risk. Since the savings are significant, the risk- sharing is spread over a large number of agencies who share common risk management goals, and the cost allocation formula is multi-faceted, this alternative is not recommended. ATTACHMENTS Resolution G:\Agenda ReportACaljpiawork Comp Program Membership.Doc cs- a RESOLUTION NO. (2004 Series) A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO TO AUTHORIZE AND APPROVE SELF-INSURANCE OF WORKERS' COMPENSATION FOR ITS EMPLOYEES THROUGH THE SELF-INSURANCE AND LOSS POOLING PROGRAM OF CALIFORNIA JOINT POWERS INSURANCE AUTHORITY WHEREAS, pursuant to the provisions of Section 6500 et seq. and also Section 990.4 and 990.8 of the California Government Code, the CALIFORNIA JOINT POWERS INSURANCE AUTHORITY was created in 1977; and WHEREAS, the City of San Luis Obispo has become a member of the CALIFORNIA JOINT POWERS INSURANCE AUTHORITY, and also of its General Liability Program; and WHEREAS, CALIFORNIA JOINT POWERS INSURANCE AUTHORITY 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 San Luis Obispo to provide workers' compensation coverage for its employees through the said Self- insurance and Loss Pooling Program of CALIFORNIA JOINT POWERS INSURANCE AUTHORITY. NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis Obispo as follows: SECTION 1. Workers' compensation coverage for employees of the City of San Luis Obispo through the Workers' Compensation Self-insurance and Loss Pooling Program of CALIFORNIA JOINT POWERS INSURANCE AUTHORITY is hereby authorized and directed effective July 1, 2004. SECTION 2. That an Initial Annual Workers' Compensation Primary Deposit of $1,798,230 plus an Excess Pool Deposit of$10,349, is approved and the appropriate officers of the City are authorized to pay the same to the CALIFORNIA JOINT POWERS INSURANCE AUTHORITY. SECTION 3. That a Loss Retention level of $50,000 per occurrence is approved for all employees. SECTION 3. That the Mayor shall sign and the City Clerk shall certify to the passage and adoption of this resolution, and thereupon the same shall take effect and be in force. SECTION 5. That the City Clerk is directed to forward a certified copy of this Resolution to CALIFORNIA JOINT POWERS INSURANCE AUTHORITY 8081 Moody Street, La Palma, California 90623. Upon motion of seconded by and on the following roll call vote: AYES: NOES: ABSENT: R- US '3 Resolution No. (2004 Series) Page 2 The foregoing resolution was adopted this day of , 2004. David F. Romero, Mayor ATTEST: Lee Price,C.M.C. City Clerk APPROVED AS TO FORM: Jon P. Lowell City Attorney