HomeMy WebLinkAbout05/18/2004, C5 - RESOLUTION TO JOIN THE WORKER'S COMPENSATION PROGRAM OF THE CALIFORNIA JOINT POWERS INSURANCE AUTHO i
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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
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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
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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:
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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