Title: IN2 Self-Insuring Excess Workers' Compensation Liability & Excess General Liability

Recommendation:

 I recommend the School Board stop purchasing Excess Workers' Compensation Liability and Excess General Liability insurance and self-insure these exposures effective July 1, 2005.

Description:

• The cost benefit analysis does not seem to support the premium payment for this excess coverage.
  •The District self-insures its Workers' Compensation obligation but has purchased stop loss (excess insurance) protection against catastrophic loss.

• Three years ago the District added Excess General Liability insurance to this combination policy, which was significantly less expensive than any workers' compensation only quote. This carrier did not offer workers' compensation as a stand-alone policy.  

•The expiring policy provides a $1 million per occurrence limit and $10 million aggregate limit with self-insured retentions of $500,000 for General Liability and $650,000 for Workers' Compensation at a premium cost of $285,000.

• There are three renewal options which all include the self-insured retentions (deductibles) of $500,000 General Liability and $650,000 Workers' Compensation:

A) $1 million each occurrence, $10 million aggregate; $293,000 premium
B) $1 million each occurrence, $20 million aggregate; $316,000 premium
C) $2 million each occurrence, $10 million aggregate; $370,000 premium

• The deductible applies once for each occurrance, however the $1 million per occurrance maximum, even in a catastrophic incident negates a primary reason for a recommendation to purchase this coverage.

• A Workers'  Compensation claim would have to exceed $943,000 ($293,000 premium plus $650,000 retention)  before the District would be eligible for any reimbursement.  Claims analysis over the last five years indicates that the District has had no claims, which would result in an insurance recovery under these proposed terms and conditions.  We had one claim exceed the retention in 1999.

•The main purpose of this insurance is to protect the District from a catastrophic loss involving multiple employees injured at one time.  However, after the World Trade Center catastrophe, the industry has basically stopped insuring against this type of loss by limiting the per occurrence exposure.

•Staff does not recommend any of the proposals received as being in the best financial interest of the District.  Staff will continue to monitor the insurance market for any favorable movement in price or terms and conditions for this insurance.

Financial Impact:
The financial impact to the District cannot be determined at this time. The number of qualifying  claims, if any, will determine the financial impact to the District. There will be a premium savings of $293,000.

For Additional Information, contact:
Joseph M. Moore (moorej@palmbeach.k12.fl.us) \Dianne L. Howard

Attachments (list):
ins2.doc