ITEM NO. 7.5
AGENDA REPORT
 
Meeting Date: October 10, 2017 Budgeted: Yes
    Total Budget: $230,000
To: Board of Directors Cost Estimate: $227,720.17
    Funding Source: All Funds
From: Marc Marcantonio, General Manager Account No: 1-7020-0690-20
Presented By: Gina Knight, HR/Risk and Safety Manager Dept: Human Resources/Risk Management
    Reviewed by Legal: N/A
Prepared By: Gina Knight, HR/Risk and Safety Manager
Subject: Renewal of Auto and General Liability Insurance Policy with Association of California Water Agencies Joint Powers Insurance Authority (ACWA-JPIA)
SUMMARY:
The District received the invoice for both the Auto and General Liability deposit premium for the 2017-2018 policy year.
STAFF RECOMMENDATION:
That the Board of Directors approve payment to ACWA-JPIA in the amount of $227,720.17 for renewal of the District's auto and general liability insurance policy through October 1, 2018.
DISCUSSION:
Each year the District receives the liability insurance premium invoice from ACWA-JPIA for the upcoming policy year.  The deposit premium is for the period October 1, 2017 through September 30, 2018.  This year's premium is $227,720.17, an increase of $18,543 from last year's premium of $209,177.  The premium is based on an estimated payroll and subject to change depending on the District's Experience Modifier (E-MOD).

The District's Basic premium is $218,606 with an E-MOD of 1.31 equaling a Gross Premium of $286,374.  After applying the Multiple Program Discount Factor of .95, the District's Adjusted Deposit Premium is $272,055.

ACWA-JPIA calculates the E-Mod using three consecutive years worth of losses.  The three-year period moves each year with the earliest year dropping off and a new year coming on.  Therefore, a particular loss will affect the E-MOD calculation for a total of three years.  Losses below $15,000 or the Retrospective Allocation Point (RAP), are not used in the E-MOD calculation.  The RAP is similar to a Self-Insured Retention (SIR).

The District's RAP is $25,000.  The RAP is that portion of the loss for which the District is ultimately responsible for.  It also designates the point at which the District begins to participate in the pooled losses.  When the Retrospective Premium Adjustment (RPA) is calculated (45 months after the first coverage period), all losses are deducted from the deposit premium.  The remaining losses go into the pool and are shared by all of the members of the program.  Each member is charged a proportionate share of the total losses of the pool according to its deposit premium.  Adjustments continue annually thereafter until all claims in the pool for that specific policy year are closed.  Finally, if the costs are below the deposit premium, a debit is applied against the Retrospective Premium Adjustment Fund.

The Retrospective Premium Adjustment (RPA) was created in 1999 to stabilize retrospective premium adjustments and reduce or eliminate billing members for prior policy years by banking member refunds.  The funds are used to offset any amounts due to the member for prior years.  The RPA fund was established with a cap of 50% of the basic premium.  Once a member's fund balance exceeds 50% of its deposit premium, the difference is refunded to the member.  This year $44,334.83 was taken from the District's RPA Stabilization Fund and applied as a credit towards the Adjusted Deposit Premium of $272,055 to end up with a final invoice for $227,720.17.
 
The deposit premium is due October 1, 2017 and will be delinquent and subject to penalty and interest charges if not paid or post marked by October 31, 2017.

The District has the option of increasing the Retrospective Allocation Point (RAP) from $25,000 to $50,000 or $100,000.  Increasing the RAP will not affect the premium.  If an agency experiences a high frequency of losses, the minimum deductible is financially safer.    
PRIOR RELEVANT BOARD ACTION(S):
The annual auto and general liability program renewal rates are presented to the Board of Directors for approval on an annual basis.
ATTACHMENTS:
Name: Description: Type:
2017_Auto_and_General_Liability_Invoice.pdf 2017 Auto and General Liability Invoice Backup Material