HomeMy WebLinkAboutA001 - Council Action form dated June 20, 1986 . + , ITEM # _4 /
DATE: JUNE 30, 1986
COUNCIL ACTION FORM
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SUBJECT: TRANSIT LIABILITY
BACKGROUND:
The transit liability insurance does not expire until December 21, 1986.
The excess transit policy with Sentry Insurance, however, expires on July
1, 1986. Staff obtained a renewal proposal from Sentry as well as pricing
for additional coverage in the assigned risk pool.
On December 21, 1985, Cy-Ride's transit liability insurance policy written
by Transit Casualty was cancelled. Transit Casualty was forced to cancel
all insurance policies by the Missouri Department of Insurance due to Tran-
sit's perilous financial condition. Currently, Transit Casualty is in the
process of being liquidated. Transit Casualty, prior to their downfall,
was the largest liability underwriter of public transit systems in Iowa.
Several transit systems, including Cy-Ride, scrambled to replace the lost
coverage as a result of Transit's demise. For many systems, the only alter-
native was the Iowa Automobile Insurance Plan (assigned risk pool) . The
assigned risk pool is a voluntary organization composed of all the insur-
ance companies writing automobile insurance in Iowa. The purpose of the
assigned risk pool is to provide automobile insurance to those who cannot
purchase it otherwise. The assigned risk pool primarily insures individ-
uals with bad driving records for very small limits of coverage (e.g.,
$20,000 to $40,000) . The assigned risk pool insures vehicles, including
fleets up to liability limits as required by federal law, state statute, or
city ordinance. City Council previously passed an ordinance requiring
Cy-Ride to purchase and maintain one million dollars worth of liability
insurance. Cy-Ride was able to obtain one million dollars of liability
insurance through the assigned risk pool.
As staff anticipated, the renewal proposal for one million dollars of
excess transit coverage has risen dramatically in price. The expiring
policy premium was $44,000 and the renewal premium is $75,000.
The current premium for the one million dollar policy in the assigned risk
pool is approximately $50,000. Exact premium is adjusted by (1) changes in
the size of the Cy-Ride fleet, (2) changes in drivers, (3) changes in
Cy-Ride's loss experience, and (4) changes in drivers' motor vehicle
records.
Staff has obtained pricing to increase the assigned risk pool limits of
liability for the remainder of the assigned risk pool policy term to Decem-
ber 21, 1986. The price on an annual basis for five million dollars of
coverage is $88,594. The City has paid almost all of the assigned risk
policy premium for the period December 21, 1985, to December 21, 1986, for
one million dollars of coverage. Taking into account the premiums paid and
the pro rata portion of the $88,594 annual increased limits premium, brings
the balance due for the increased coverage to approximately $20,000 for
July 1, 1986, to December 21, 1986. The $20,000 assumes no further rate
increases by the assigned risk pool. Should rates change and premium
exceeds $20,000, staff will seek the direction of the Council.
Attached is a memorandum from the City Attorney and a proposed ordinance
raising the insurance requirement for the Transit System from one million
to five million dollars. This ordinance is necessary to enable the City to
obtain five million dollars of coverage through the assigned risk plan.
ALTERNATIVES:
1. Adopt the proposed ordinance raising the insurance requirement for the
Transit System from $1,000,000 to $5,000,000 and authorize up to a $20,000
additional premium payment to the assigned risk plan for increased transit
liability coverage for the period July 1, 1986, to December 21, 1986.
2. Reject the proposed ordinance for the Transit System.
3. Authorize payment of $75,000 to Sentry Insurance for $1,000,000 of
excess transit liability insurance for the period July 1, 1986, to July 1,
1987.
MANAGER'S RECOMMENDED ACTION:
It is the recommendation of the City Manager that the City Council approve
Alternative #1, adopting the proposed ordinance raising the insurance
requirement for the Transit System from $1,000,000 to $5,000,000 and author-
izing up to a $20,000 additional premium payment to the assigned risk plan
for increased transit liability coverage for the period July 1, 1986, to
December 21, 1986.
COUNCIL ACTION: