Statement of Benefits 05-06 - ABAG PLAN Risk Management ...

Association of Bay Area GovernmentsPooled Liability Assurance NetworkSTATEMENT OFBENEFITSANDPROGRAMHIGHLIGHTS2005-2006

Chairman’s MessageDear Membersand Friends:I am very pleased toserve as 2005-2006Chairman of theAssociation of BayArea Governments(ABAG) PooledLiability Assurance Network(PLAN). We provide cities, towns,and other municipal organizationswith cost-effective pooled insuranceservices. As with any dynamicorganization, ABAG PLANcontinues to evolve and adapt tochanging conditions both in terms ofthe insurance market and in claimtrends among our members.ABAG PLAN provides shared riskprograms, including pooled property,and purchasing pools as well as claimsadministration, recovery services andrisk management services. Detailsabout activities and future plans aredetailed in this report.During the Program Year 2004-2005,ABAG PLAN both paid outsubstantial funds for the Shared RiskPrograms and found success withstrategic planning activities in allareas. A significant change in ourRisk Management Program is thenew Risk Management Policy,adopted after four years of strategicplanning activities.The new Risk Management Policyencourages members to provide astrong risk management frameworkfor city/town operations by effectivelyidentifying and analyzing risks,establishing recommended strategies(best practices), monitoringeffectiveness, and providing incentivesto maintain and improve results. ThePolicy criteria govern all aspects ofour pooled insurance program, fromnew members to performancestandards. The new policy isCelebrating20 Yearsin 2006designed to reduce member claims inthe liability and property poolprograms. Members who meet theestablished standards are allowed topick and choose from availablefinancial resources to support theirindividual activities.ABAG PLAN has settled all of oursignificant outstanding claims, andthe last two Program Years have sofar seen a return to relatively stableresults. These successes come afterpayments totaling over twice ouraverage during 2004-2005, due tosignificant loss development in the2002 Program Year. In addition tothe high level of 2002 sewer claims, wealso settled our largest single claim of$3.5 million, water damage claims over$2 million, and sidewalk claims over $1million.The good news is we’ve weatheredthe storm. As a result of our strategicplanning activities and associatedpractices, ABAG PLAN has beenable to absorb these payments andstill maintain the SIR Fund at almost$20 million. In addition, we have seena reduction in a number of keyexposures, including sidewalk andsewer claims.ABAG PLAN provides defensivedriving and sidewalk liability trainingsessions, planning for storm events,contract management ideas, and otherrisk management assistance. The “BeSewer Smart” public awarenesscampaign continued with the first“Sewer Summit” with participantsfrom the regulatory, plumbing, andsystem operation fields sharing ideasfor working together to prevent andreduce the impact of backflows.The campaign and ABAG PLANreceived national recognition in 2005by receiving the top AchievementAward in the Pool category from thePublic Risk and InsuranceManagement Association (PRIMA).We will continue our efforts in thisimportant area to assist our membersto reduce backflows.ABAG PLAN provides shared riskprograms, including pooled property,and purchasing pools as well as claimsadministration, recovery services andrisk management services. Detailsabout activities and future plans aredetailed in this report.I look forward to this year and knowthat ABAG PLAN will be able to“weather” the challenges of the futureas adeptly as our history reflects.Jim Steele, ABAG PLAN Chairman,Finance Director, City of South SanFranciscoAssociation of Bay Area Governments-Statement of Benefits and Program Highlights 2005-20061ABAG PLAN Corporation

ABAG PLAN Grant Programs 2005-2006The following grant programs and services are available to ABAG PLAN members in 2005-2006.Risk Management Framework &Best PracticesGrants up to $10,000 are available forany purpose related to riskmanagement, for completing the riskmanagement framework items($5,000) and at least 50 percent of thebest practices related to riskexposures ($5,000).Risk Management Services CreditTo make it easier for members tocomplete the framework and bestpractices, we have established creditsranging from $3,600 (members withpopulations less than 20,000) to$9,600 (members with populationsmore than 34,000 to 54,000) andabove. This will provide theresources needed to address therecommendations in each member’srisk assessment and to assist inmeeting the framework and bestpractices standards.Defensive Driver TrainingABAG PLAN pays for defensivedriver classroom instruction andbehind-the-wheel training formembers. We use the State SafetyCenter for our training, and arewilling to try other vendors, includingon-line training, as recommended bymembers.Risk Management TrainingUp to $1,000 each year is available formembers to attend training or can beused for conferences, or to providetraining in-house via personal or onlinedelivery. Conferences andtraining include PARMA(www.parma.com), CAJPA(www.cajpa.org), PRIMA(www.primacentral.org), or other riskmanagement related organizations,such as (www.ieatraining.com).Risk Management Fund – Sidewalkor Pilot ProgramABAG PLAN provides a maximumof $5,000 a match for sidewalk repairoffsets that may be trip hazards. Thegoal is to repair at least 200 offsetsand the match applies to contractedor in-house work. Members can alsomake funds available to homeownersthrough 50 percent grant matchingprograms.For members who do not needsidewalk repair, the fund is availablefor other projects related to riskmanagement programs. New ideasfor a pilot program that may behelpful for other members arewelcomed.Police Risk ManagementGeneral orders are grants to assistmember departments in meeting ourbest practices recommendations,including subscribing to a service forregular updates (at least annually) of adepartment’s general orders. Once amember meets this requirement thefollowing grants are available:Equipment grantsEquipment grants provide up to$10,000 per year as a matching grantfor in-car video cameras, tasers, digitalrecorders, or other risk managementrelated equipment.Training grantsTraining grants can pay for reserveofficer perishable skills training notcovered by POST and other trainingprograms as suggested by members toaddress their risk managementconcerns.Sewer Risk ManagementABAG PLAN’s on-going SewerSmart Program(www.sewersmart.org), will includenew public education materials, backflow devices, and assistance formembers in a variety of operationalareas, including system maintenance,overflow response, and ordinancerevision.Please contact Marcus Beverly at (510) 464-7969 or marcusb@abag.ca.gov to apply,make recommendations for training or grant programs, or with any questions.Statement of Benefits and Program Highlights 2005-20062ABAG PLAN Corporation

Pooled Liability ProgramThe 32 members of ABAG PLANself-insure their general and autoliability claims by contributing to ashared risk pool. Each memberchooses a self-insured retention (SIR)from $25,000 to $250,000. The poolpays claims up to $5,000,000, and anexcess insurance policy provides$5,000,000 of additional coverage, fora $10,000,000 per occurrence limit.Coverage provides protection forBodily Injury, Property Damage,Personal Injury, and Public OfficialsErrors and Omissions (E&O) claims.As of July 1, 2004, ABAG PLAN alsoprovides coverage for EmployeeBenefit Plan Administration Liability,with a limit of $250,000, to coverdamages related to acts, errors oromissions in the administration of aqualified plan.Shared Risk ProgramsClaim trends during 2004-2005 weremostly unfavorable, due to significantloss development in the 2002 ProgramYear. This year saw highest level ofsewer claims, settlement of a $3.5million claim, water damage claimsover $2 million, and sidewalk claimsover $1 million. In total, paymentswere twice the average in Fiscal Year2004. 2002 became our worst year byover $4 million.ABAG PLAN has now settled thesesignificant outstanding claims. Thelast two Program Years have so farseen a return to relatively stableresults as seen prior to 2002. Pastfunding practices proved to beeffective, as we absorbed thesepayments and still maintained the SIRFund at almost $20 million. Inaddition, we have seen a reduction ina number of our key exposures,including sidewalk and sewer claims.While sewer backflows continue to bea challenge, both the total incurredand average paid have decreased byover 70 percent in the last two years totheir lowest levels in over five years.Our comprehensive sewer lossprevention program, including aproperty claims specialist, membertraining, and our “Be Sewer Smart”public awareness campaign is largelyresponsible for this favorable trend.The “Be Sewer Smart” programreceived national recognition in 2005from the Public Risk and InsuranceManagement Association (PRIMA)as the top Achievement Award in thePool category. We also hosted ourfirst “Sewer Summit” in June of 2005.Participants from the regulatory,plumbing, and system operation fieldscame together to share ideas forworking together to prevent andreduce the impact of backflows.IncurredNumber of ClaimsTotal Incurred and Number of ClaimsStatement of Benefits and Program Highlights 2005-2006 5 ABAG PLAN Corporation

Shared Risk ProgramsWe will continue our efforts in thisimportant area to assist our membersin reducing backflows.Pooled Liability AccomplishmentsIn 2004-2005, ABAG PLAN:❖ Maintained FundingStability with:• Loss rate decrease of 6.8percent• Total funding increaseconsistent with total payrollincrease• Stable limit and retentionlevels❖ Maintained Financial Security bykeeping SIR Fund at almost 4times our retention. Activitiesincluded:• Funding $350,000 for 2004-05Risk Management Programs• Revising Memorandum ofCoverage and Bylaws• Adding coverage forEmployment BenefitAdministration Errors andOmissions (E&O)• Completing Risk ManagementAssessments for all membersPooled Liability Planned Activities❖ During 2005-2006 ABAGPLAN will:• Implement Risk ManagementPolicy• Adopt recommended riskmanagement policies andprocedures• Revise long-term fundingstrategiesCity of NewarkCity Administration BuildingSeverityFrequencySewer ClaimsFrequency and SeverityStatement of Benefits and Program Highlights 2005-20066ABAG PLAN Corporation

Pooled Property ProgramThe ABAG PLAN Pooled PropertyProgram began in 1992 with theformation of a risk-sharing pool tocover losses above the $5,000deductible. The members purchase acomprehensive property insurancepolicy for losses above $100,000. Byself-insuring the pool layer andcombining property values, membersare able to significantly reduce theirinsurance costs. The program alsoprovides physical damage coverage formember autos, with a deductible of$10,000.Replacement cost coverage isprovided for all scheduled high-valuevehicles, such as fire trucks, tominimize the impact of replacingShared Risk Programsspecialized equipment. The pool hasconsistently exceeded expectedresults, allowing the members to fundvarious risk management programsand providing a hedge against futuremarket conditions or catastrophiclosses.Covered losses are valued based onthe repair or replacement cost of thedamaged property. Other coveragesprovided, per the member’s propertyschedule and terms of the policy,include:• Flood Coverage• Rental Income and TaxInterruption• Landscaping and Athletic Fields• Course of Construction• Building Code Upgrade Costs• Boiler and & MachineryPooled Property AccomplishmentsIn 2004-2005, ABAG PLAN:• Increased insured values toover $1.6 billion• Increased coverage with10 percent rate decrease• Reviewed and updated data foreach member’s insured property• Conducted appraisals for keyfacilities and new propertiesPooled Property PlansDuring 2005-2006, ABAG PLANwill:❖ Complete property appraisalsConduct Boiler and Machineryinspections as scheduledAmount RecoveredNumber of ClaimsRecovery Amounts and Number of ClaimsStatement of Benefits and Program Highlights 2005-20067ABAG PLAN Corporation

Purchasing PoolsABAG PLAN offers a variety ofgroup purchasing plans that allowmembers to customize their programsat group rates. These include:❖ Bond ProgramAll members share in the grouppurchase of a Public EmployeeCommercial Crime Bond,providing a $1,000,000 limit with a$5,000 deductible. The coverageincludes faithful performance/employee dishonesty, forgery/alteration, theft, disappearance anddestruction, robbery and safeburglary, and computer fraud.Shared Risk Programs❖ Earthquake and FloodDifference in Conditions (DIC)Insurance is offered to memberswho choose to protect key facilitiesor who must maintain thiscoverage for publicly financedbuildings.❖ Employment Practices LiabilityMembers can purchase coveragefor claims including wrongfultermination, discrimination, sexualharassment, and other allegationsof employment-related civil rightsviolations.*Photo bottom left: City of NewarkSilliman Activity Center❖ Special Events and ServicesLiabilityThis insurance is offered topersons or organizations that rentor use public facilities for specialevents, including festivals,concerts, carnivals, and weddings.Coverage is also available forcontractors, consultants, vendors,and recreational programinstructors that provide services tothe members and community.❖ Excess Liability OptionsMembers may purchase additionalexcess liability insurance limitsabove the total of $10 millionprovided by the pool to allmembers.Largest Causes of Losses 1999 - 2005Statement of Benefits and Program Highlights 2005-20068ABAG PLAN Corporation

Other ServicesABAG PLAN provides additionalservices as part of our approach toproviding complete insurance servicesto local governments. These servicesare described below.Claims AdministrationWe assign a claims examiner to eachmember to investigate, evaluate,negotiate, and settle both liability andproperty claims. Working closely withthe member allows us to gatherinformation quickly and respondpromptly to reduce the impact ofclaims.Litigation ManagementABAG PLAN maintains a list ofpreferred counsel specializing in theunique civil claims our members face.They agree to use our casemanagement guidelines under thesupervision of a professional whoprovides over twenty years ofexperience in public entity litigation.As a result, our members havesuccessfully defended a large numberof lawsuits at a reasonable cost.Recovery ServicesProperty pool members receiveassistance in obtaining reimbursementfrom persons who cause damage topublic property, whether due to anauto accident, vandalism, or othercause. Since its inception in 1992,ABAG PLAN has recovered over$1,700,000 on behalf of ourmembers–money that goes back toservicing community members.Recovery Services AccomplishmentsIn 2004-2005, ABAG PLAN:❖ Conducted member training oneffective claim response❖ Recovered over $135,000 indamage claims for members❖ Implemented electronic auditingof litigation expensesRecovery Services PlansDuring 2005-2006, ABAG PLANwill:❖ Meet with members to reviewclaims and response procedures❖ Continue to emphasize riskmanagement approach to claimshandling❖ Provide in-house technicaltraining❖ Evaluate effectiveness of legalaudit programRisk Management ServicesIn addition to managing the insuranceand claims programs, ABAG PLANprovides a variety of risk managementand pool administration servicesdesigned to meet our members’ needs.Risk Management AccomplishmentsIn 2004-2005, ABAG PLAN:❖ Completed comprehensive riskassessment for each member❖ Passed Risk Management Policyand recommended member bestpractices❖ Conducted training in sewer lossprevention, contract analysis, andrisk management basics❖ Provided grants for customizedmember risk managementtraining, sidewalk repair, policeequipmentRisk Management PlansIn 2005-2006 ABAG PLAN will:❖ Follow up with each member toimplement Risk ManagementPolicy❖ Continue sewer loss preventiontraining and public educationprograms❖ Conduct Defensive Drivingtraining❖ Provide risk managementeducation grants❖ Offer sidewalk repair grants❖ Implement other riskmanagement programs as neededStatement of Benefits and Program Highlights 2005-20069ABAG PLAN Corporation

Related ABAG ResourcesABAG Hazard MitigationProgramEarthquakes are a fact of life inCalifornia. ABAG has beenpublishing geologic and hazard mapsfor the Bay Area since the 1960s.However, earthquakes are not theonly natural disasters for whichCalifornia, its residents, andjurisdictions need to be prepared.Natural hazard mitigation planning isbeing done on a regional level tomaintain and enhance a disasterresistant region by reducing thepotential loss of life, property damage,and environmental degradation fromnatural disasters, while acceleratingeconomic recovery from thesedisasters.ABAG has adopted “Taming NaturalDisasters,” a regional HazardMitigation Plan for the Bay Area.Forty cities, two counties, and tenspecial districts have preparedannexes to this plan to meet therequirements of the DisasterMitigation Act of 2000 (DMA 2000),which mandates local governments toprepare such plans.Sixteen cities in ABAG Plan havecompleted annexes. The overall plan,and each local government annex,includes specific strategies formitigation of natural hazards. Thefinal planning tasks, includingestimates of loss exposure andassociated risk, will be completed inearly 2006 in conjunction with the100th anniversary of the 1906 SanFrancisco earthquake. Earthquakeplanning for the San Francisco BayArea is also the subject of ABAG’sSpring General Assembly. For moreinformation about the Multi-Jurisdictional Local GovernmentHazard Mitigation Plan for the SanFrancisco Bay Area, please contactJeanne Perkins at (510) 464-7934 orjeannep@abag.ca.gov.Online Hazmat SchoolThis program is an effort of theABAG Training Center, run by theAssociation of Bay Area Governmentsand ABAG, Inc. Online HazmatSchool provides online hazardouswaste, hazardous materials, and safetytraining in full compliance withOSHA and DOT requirements,issuing OSHA and DOT certificatesand continuing education units.Classes include hazardous wasteoperations, general hazardousmaterials, and industrial safetytraining for busy, time-constrainedprofessionals. Course information andregistration is available online athttp:/www.hazmatschool.com.Shared Agency Risk PoolSince 1986, ABAG has managed aWorkers’ Compensation risk-sharingpool, Shared Agency Risk Pool(SHARP). It is designed to providesmall to medium-sized municipalitiesand agencies the benefits typically onlyavailable to larger self-insured entities.Pooling gives SHARP members thebenefits of primary coverage and theflexibility of self-insurance without theadded expense of a traditionalinsurance company. The end result isa Workers’ Compensation programthat provides clients with moreflexibility and control of the claimsprocess, higher quality claims service,more stable pricing, and thesatisfaction of knowing that this is apool, working with similar agencies tomanage claims. For more informationabout SHARP, please contactMarcus Beverly at (510) 464-7969 ormarcusb@abag.ca.gov.Statement of Benefits and Program Highlights 2005-200610ABAG PLAN Corporation

Member Cities and Towns 2005-2006American CanyonAthertonBelvedereBeniciaBurlingameCampbellColmaCupertinoDublinEast Palo AltoFoster CityGilroyHalf Moon BayHillsboroughLos AltosLos Altos HillsLos GatosMillbraeMilpitasMorgan HillNewarkPacificaPortola ValleyRossSan BrunoSan CarlosSan MateoSaratogaSouth San FranciscoSuisun CityTiburonWoodsideHenry Gardner, PresidentJoseph Chan, Finance DirectorKenneth Moy, Corporate CounselJim Steele, ChairmanFinance Director,City of South San FranciscoLarry Anderson, Vice ChairmanCity Attorney,City of BurlingameABAG PLAN StaffMarcus BeverlyDirector of Risk Management(510) 464-7969marcusb@abag.ca.govAngela M. SalsburyClaims Manager(510) 464-7954angelas@abag.ca.govTerry HickmanLitigation Supervisorterryh@abag.ca.govEileen BarrClaims Examinereileenb@abag.ca.govBruce CareyProperty Damage SpecialistBrucec@abag.ca.govChantelle Coleman-DoanClaims Examinerchantelled@abag.ca.govLori HardacreClaims Examinerlorih@abag.ca.govJim S. NagalClaims Examinerjimn@abag.ca.govBrenda BrownSecretarybrendab@abag.ca.govCarol JohnsonSecretarycarolj@abag.ca.govPhotos provided by:cliparttoday.com,pedbike/images.org/DanBurden, and ABAG PLAN staffABAG PLAN CorporationMetroCenter101 Eighth Street, Oakland94607-4756(510) 464-7900www.abag.ca.gov/planAssociation of Bay Area GovernmentsMission StatementThe purpose of the ABAG Pooled Liability Assurance Network (PLAN) Corporation is to benefit the citizens of each member community byestablishing stable and cost-effective self-insurance, risk sharing, and risk management programs for each member.