MINUTES OF THE ADMINISTRATIVE AND FINANCE COMMITTEE MEETING
JANUARY 17, 2008
1. CALL TO ORDER
Chair Wornham called the Special Meeting of the Administrative and Finance Committee
to order at 1:33 p.m.
2. ROLL CALL
Committee members present were Vice Chairs Hogan and Price, Directors Bond,
Hilliker, Johnson, Lewis, Petty, Pocklington*, Smith, Thompson, and H. Williams.
Committee member absent was Directors Quist and Saunders. At that time there
was a quorum of the committee. Also present were Directors Arant, Bowersox,
Brammell, Croucher, Dailey, Knutson, Lewinger, Linden, Martin, McMillan, Morrison,
Muir, Parker, Steiner, and Watton. Staff present was General Counsel Hentschke,
Deputy General Managers Lanspery and Belock, Acting Director of Finance Sandler,
Director of Administrative Services Young, and Risk Manager Homer. Also present
was Kathleen McKenna and William Beason of Marsh USA, Andy Sells and John Gilstrap
of ACWA-JPIA, as well as James Towns and Dennis Timoney of Special District
Risk Management Authority (SDRMA).
3. PUBLIC COMMENT
There were no members of the public that wished to address the committee.
*Director Pocklington arrived at 1:34 p.m.
4. WORKSHOP ON WATER AUTHORITY’S BUSINESS INSURANCE
Chair Wornham thanked staff for their hard work on the insurance issue.
Director of Administrative Services Young provided background on the item
and introduced Risk Manager Homer.
Mr. Homer clarified that the insurance to be discussed in the meeting was
the Water Authority’s Business Insurance, which is distinct from the Capital
Improvement Program Insurance or the Owner Controlled Insurance Program.
Mr. Homer provided a brief presentation which included answers to questions
raised during the December 6, 2007 Board meeting. Mr. Homer’s presentation
addressed limits of liability, inverse condemnation, deductible versus self
insured retention, ACWA-JPIA’s rate stabilization fund, landslides and
mudslides coverage, as well as subsidence coverage.
John Gilstrap, Director of Member Services, and Andy Sells, Chief Financial
and Operations Officer, of ACWA-JPIA presented on their property and liability
programs. Directors asked questions and Messrs. Sells and Gilstrap provided
answers.
James Towns, Chief Executive Officer, and Dennis Timoney, Chief Risk Officer,
of SDRMA presented on their property and liability programs. Mr. Towns stated
that liability coverage limits could be increased by $35 million raising the
limits from $10 million to $45 million with no aggregate. Directors asked questions
and Messrs. Towns and Timoney provided answers.
Chair Wornham asked if all lines of business insurance mature on the same
date under SDRMA. Mr. Towns confirmed that all lines of business insurance mature
on the same date to minimize the administrative effort and to allow its members
to exercise their due diligence in reviewing their insurance needs.
Director Lewinger commented that SDRMA’s premium for the $45 million
liability coverage limits would be higher than ACWA-JPIA’s premium for
$50 million coverage limits.
Director McMillan inquired about SDRMA’s credit incentives and the amount
of credit rebate the Water Authority could expect on a premium in the range
of $400,000. Mr. Towns replied that the Credit Incentive Program’s maximum
was 15-percent of the premium and an agency the size of the Water Authority
could expect a refund in the range of $45,000 to $50,000.
Chair Wornham thanked both ACWA-JPIA and SDRMA for their time and effort.
Chair Wornham introduced Kathleen McKenna of Marsh USA. Ms. McKenna provided
a summary of the coverage comparisons and costs of both programs, and the marketing
process. Ms. McKenna stated changes and clarifications to both ACWA-JPIA’s
and SDRMA’s information were made after the Marsh report dated November
16, 2007 was prepared. Ms. McKenna reviewed the handout of Property and Liability
Coverage and Limit Comparison Summary.
Chair Wornham requested that staff work with Marsh USA to craft a one-page
briefer incorporating the recent changes in exposures, costs, and coverage limits,
with coverage limits prioritized by importance. Chair Wornham requested the
briefer be provided to the Board prior to the January 24, 2008 Board meeting.
Director Watton requested an assessment from staff as to whether the additional
$35 million of liability coverage through the SDRMA program was necessary and
justified the additional estimated premium of $75,000.
Director Johnson moved that there be further discussion on the item at the
January 24, 2008 board meeting, seconded by Vice Chair Price. The motion carried
unanimously.
Director Steiner inquired how important flexibility was of the three focus
areas of the insurance review: 1) cost, 2) coverage, and 3) flexibility. Ms.
Young replied that flexibility was a very important consideration and would
ensure fair competition in the commercial markets when competing our insurance
in the future.
Director Bond stated he thought the flexibility issue was key and asked that
staff evaluate the coverage limits to determine what insurance was actually
needed.
Director Morrison asked ACWA-JPIA to explain the rationale in setting staggered
renewal dates. Mr. Gilstrap replied the system was established by ACWA-JPIA’s
founding members in 1979, which included the Water Authority, to address cash
flow concerns. Mr. Gilstrap stated although the system may create difficulties
for agencies in packaging lines of coverage for quotes to potentially move to
another carrier, it benefited ACWA-JPIA’s business needs. Mr. Gilstrap
explained it was easier for ACWA-JPIA to process renewals scattered over the
year, rather than process its three-hundred members in all three programs on
one renewal date.
5. AUTHORITY BUSINESS INSURANCE – PROPERTY AND LIABILITY
(Continued from the December 6, 2007 Board meeting)
Staff recommendation: Authorize the purchase of property and liability
business insurance from the Special Districts Risk Management Authority in the
amount of $431,829 and confirm withdrawal from ACWA-JPIA property program and
liability program effective April 1, 2008 and October 1, 2008 respectively.
Action was continued to the January 24, 2008 Board meeting.
6. ADJOURNMENT
There being no further business to come before the Administrative and Finance
Committee, Chair Wornham adjourned the meeting at 4:06 p.m.
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Tom Wornham, Chair
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