Report to Carson Reclamation Authority
Tuesday, June 04, 2019
Consent
SUBJECT:
Title
AUTHORIZE EXECUTIVE DIRECTOR TO APPROVE AND BIND COVERAGE ON A PUBLIC ENTITY LIABILITY POLICY FROM CHUBB COMPANIES USA, WRITTEN BY ACE AMERICAN INSURANCE COMPANY, PROCURED THROUGH JLT SPECIALTY INSURANCE SERVICES, INC. IN AN AGGREGATE LIMIT OF NO MORE $10,000,000 AND A PREMIUM AMOUNT NOT TO EXCEED $85,000 INCLUDING ANY APPLICABLE SURPLUS LINES TAXES
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I. SUMMARY
This action authorizes the Executive Director to approve and bind a renewal of a Public Entity Liability Policy on behalf of the Carson Reclamation Authority offered by Chubb Companies USA, underwritten by ACE American Insurance Company. As in previous years, JLT recommended placing such a policy instead of a standard Directors and Officers Liability (D&O) policy to ensure that the public officials are adequately covered for their D&O exposure ― personal liability as well as Errors and Omissions exposure (E&O) and Employment Practices Liability (EPL) exposure.
This policy is a much broader D&O type coverage and tailored to CRA in its capacity as a quasi-governmental agency making development decisions on environmentally contaminated property, and includes both E&O and EPL in one policy form.
II. RECOMMENDATION
Recommendation
TAKE the following action:
AUTHORIZE the Executive Director to bind coverage under the ACE American Insurance Company Public Entity Liability Policy on behalf of the CRA, procured from Chubb Companies USA through JLT Specialty Insurance Services, Inc., which has an aggregate limit of liability of no more than $10,000,000 and a premium amount not to exceed $85,000 including any applicable surplus lines taxes.
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III. ALTERNATIVES
TAKE another action deemed acceptable by the Authority Board.
IV. BACKGROUND
Attached is a renewal proposal for coverage for a Public Entity Liability Policy (instead of standard D&O), Errors & Omissions (E&O), and Employment Practices Liability (EPL). This policy is a much broader D&O type coverage and tailored to CRA in its capacity as a quasi-governmental agency making development decisions on environmentally contaminated property, and includes both E&O and EPL in one policy form.
JLT worked to assemble a tower of limit options so that CRA can select which limit they feel most comfortable with and which best addresses the concerns of CRA’s board. This action would authorize the CRA Executive Director to approve and bind the renewal of the Public Entity Liability Policy on behalf of the Carson Reclamation Authority.
This policy is broad and covers not just directors, and officers, but anyone employed or contracted to do work for CRA, if CRA indemnifies them. It is also retroactive and covers all of the officials who have served on the CRA Board since its formation in early 2015.
The aggregate limit is shared for all D&O, E&O and EPL losses that occur within a policy period. Because CRA uses contractors there is third party EPL exposure; however, since the CRA does not have any employees of its own the EPL risk is lower.
One challenge for the CRA is that the Public Entity Liability marketplace is limited due to the severity of these types of claims. Insurers are hesitant to provide capacity in California because most carriers are in the red and have paid more in claims than they’ve collected in premiums for the past 5 years ― and, the greater Los Angeles area is particularly avoided as it is the single most litigious area in the entire U.S. according to market data provided by the largest insurers.
JLT marketed the program to 7 of the strongest markets in the Public Entity Liability space.
Chubb is the market leader, and is JLT’s recommendation for the primary $10 million based on pricing and terms. The CRA saved roughly $100k by going with Chubb for the primary $10M. JLT used the thorough set of submission documents that the Authority Special Counsel put together, along with their market leverage to present CRA as “the” sought-after risk. They also created competition through marketing and significantly drove prices down.
JLT then used their D&O expertise to achieve best in class terms tailored specifically to CRA’s unique exposures.
JLT significantly broadened coverage particularly in areas that impact insured persons. Allegations of fraud and misconduct are material and could be uninsurable without the changes JLT negotiated.
• Full prior acts coverage
• Coverage for Public Officials Directors and Officers liability, Errors and Omissions, and Employment Practices defense and indemnity
• Covers personal liability and provides broad entity protection
• Only includes one E&O exclusion: Incidental medical malpractice
• Insurer’s duty to defend (panel council requirements)
• Broad policy form and significantly enhanced coverage via negotiated manuscripted endorsements
V. FISCAL IMPACT
Funds for this service are included in the adopted FY 2018/19 budget of the Authority. The actual quoted premium is $82,304; JLT was able to negotiate a renewal quote from Chubb with an increase in premium of only $920, or 1.1%.
VI. EXHIBITS
1. Chubb USA $10 Million Executive Risk Renewal Proposal (pgs. 4-17)
Prepared by: John S. Raymond, Executive Director