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SPECIAL MEETING OF THE COUNCIL OF THE CITY OF NOVI
Mayor Clark called the meeting to order at 7:05 p.m.
PLEDGE OF ALLEGIANCE
ROLL CALL Mayor Clark, Mayor Pro Tem Bononi, Council Members Capello, Csordas, Landry – Absent/Excused, Lorenzo, Sanghvi
ALSO PRESENT: Rick Helwig – City Manager
Craig Klaver – Chief Operating Officer
Gerald Fisher – City Attorney
Kathy Smith-Roy – Finance Director
APPROVAL OF AGENDA
Mayor Clark noted that the evening’s meeting featured a one-item agenda, the consideration of the property and liability insurance coverage for the City of Novi for the next fiscal year. Mayor Clark wanted to add two additional items of informational value to the community. One was the use of Eleven Mile Road by cement trucks, with an update from Mr. Helwig. The second item was Member Sanghvi’s petition for the rebuilding and construction of the I-96/Beck Road interchange.
Mayor Pro Tem Bononi noted that she would need to be excused following the initial item, in order to attend a meeting for the Stormwater Management and Watershed Stewardship Committee.
CM-03-06-203 Moved by Bononi, seconded by Csordas; CARRIED UNANIMOUSLY: To approve the agenda as amended
Mr. Klaver informed Council and the public that there was not a live video feed of the meeting to television, but would instead record the meeting for later broadcasting. If the feed was restored during the meeting, it would be immediately broadcasted.
Roll Call Vote on CM-03-06-203 Yeas: Clark, Bononi, Capello, Csordas, Lorenzo, Sanghvi
PURPOSE OF SPECIAL MEETING
1. Update on the use of Eleven Mile Road by cement trucks
Mr. Helwig said he became aware of the citizen concern via Member Lorenzo. Unfortunately, he learned about the concern during a trip to Waterford to testify about the Beck Road/I-96 interchange project. The previous Wednesday, June 18, there were construction blockages on Grand River Avenue. Permission had been granted at the end of May to Spartan Concrete to use
Eleven Mile Road during this time. The trucks’ use of the road "kicked in en masse," and there were many vehicles using the road. Now that the road usage permission has been removed due to the construction timetable, the issue of speeding is a primary concern. He said that as of today (June 24), the use of the road by cement trucks has ended, in order to facilitate construction at the Taft and Grand River intersection. The issue of Spartan Concrete trucks being on Eleven Mile between Taft and Beck is over. If those trucks should appear on the road, it is in violation.
Mr. Helwig said the issue of speeding came to light recently due to removal of the Grand River bridge and construction on Grand River Avenue. He said he called Police Chief Shaeffer and asked him to apply extra police attention to Eleven Mile Road. Mr. Helwig said administration appreciated the oversight of the neighborhood. He said that the problem with the concrete trucks should be done, and the speeding issue will be monitored very closely. Mayor Clark thanked Mr. Helwig.
2. Petition for the rebuilding and construction of the I-96/Beck Road interchange.
Mayor Clark called on Dr. Sanghvi to address this issue. He noted that the City has attempted to get an improved intersection at I-96 and Beck Road that would allow access both west and east-bound for traffic. This would improve traffic flow, increase public safety, and benefit increased traffic in that area which features Providence Hospital and will feature the new Expo Center. Mayor Clark said the improved interchange makes sense for economic and public safety issues. He noted that there have been many accidents at the interchange in the past, and the State has paid multiple judgments as a result of these. Novi is the only community in all of the road projects stalled in Lansing where the community has come forward and put up a large amount of its own money to resolve the problem. There still has been no resolution of this in Lansing, and Dr. Sanghvi had approached Mayor Clark with the idea of immediately starting a petition drive to alert Lansing that the road project affects not only Novi residents, but also many people who pass through or visit Novi for any number of reasons during the day. Mayor Clark said he supported the petition drive and would be the first person to sign the petition.
Member Sanghvi said that Mayor Clark had covered the main issue of discussion. As far as he sees it, canceling the Beck Road interchange is "a breach of promise," and the government should not renege on its commitments. Dr. Sanghvi said that people of the area are entitled to the project, and it should be completed without question. He said the issue has become a political football, and the community simply wants the project finished. He said that by collecting signatures for 4-6 weeks, there will be enough petitions to show the Governor what the people have to say about the project, and maybe force reconsideration of the issue. He said the issue is not political, but rather an issue of need for the people of the area.
Dolores Vedro, 46800 Eleven Mile Rd., noted that she provided Council with a letter, but did not read this letter because the session was not on live television. She said it was odd that Dr. Sanghvi mentioned a breach of trust from the government, because that was what she felt from the City of Novi. She said that residents were not informed of decisions made about Eleven Mile Road, including the decision regarding Spartan Concrete trucks on the road in late May. Ms. Vedro complained that Novi City Hall is difficult to reach. She said that of all the phone calls made to City Hall, only two were returned, and none of these was from Chief Shaeffer. After speaking with about 50 neighbors, she was even more upset about the issue, even though the
problem has stopped. She asked if Eleven Mile would now be a "no through truck" street, because that is what the road is supposed to be. She said large trucks have been using the street for about a year, and the road shows the wear from these vehicles. The permit that was issued was given without regard for the residents in the Eleven Mile Road area, and those residents were not notified of the decision. On a daily basis, children and adults can be found jogging, walking and biking along Eleven Mile. There is no continuous sidewalk between Wixom Road and Clark Street, and the residents are therefore forced to use Eleven Mile for any such form of recreation. She said that people were not only forced off of Eleven Mile, but residents needed to close their windows as well. Ms. Vedro said she did not allow her grandchildren to play in her front yard for safety fears stemming from the trucks’ use of the road. She said that the extra traffic from the Grand River construction is not acceptable, and the detour route does not include Eleven Mile Road. A representative from Spartan Concrete told her that cement must be used before it goes bad, which she researched and discovered takes 6 to 8 hours. Ms. Vedro said that in an emergency situation such as an accident, it is very reasonable to expect the large trucks to use Eleven Mile Road or any other street in the City. She said the hardship that Spartan Concrete claimed it was burdened by was invalid, because the weight of a truck with cement is not within the City’s ordinance. She expressed appreciation for the City’s police officers who patrol the road. She said that she and neighboring residents expected the permit to be revoked. She knows that the problem will not go on, but she does not want to see the same problem happen again.
Tami Bethune, Arcadia Dr., noted that she was on the Board of Walden Woods I subdivision, and has been involved with that subdivision for 9 years. She brought with her a special guest, Gregory Kolis, who was another resident of Arcadia Drive. She began by thanking Council for their time and efforts serving the City. She noted that she had recently received a mailing, which she hailed as an excellent form of communication, which pertained to wetlands and woodlands. Ms. Bethune noted that she had recently emailed Steve Printz, the City’s Forester, thanking him for the communication of how to identify and care for these areas. She appreciated the quality and timeliness of the publication. She said that she and Mr. Kolis were there to request an escalation of priority regarding repairs to their subdivision streets. Ms. Bethune noted that a number of other subdivisions likely had similar feelings and interests in getting their street repairs taken care of.
Gregory Kolis read a letter that he had written to Council, in which he said that he and a number of other children live in Walden Woods. He said that kids are not able to ride their bikes in the streets, cannot play street hockey, or play other sports involving the streets. Last year at Easter, he fell in a large hole in front of his house which is about 5-6 inches deep. He asked Council to consider repaving the streets in the Walden Woods subdivision.
PURPOSE OF SPECIAL MEETING – Part II
3. Consideration of property and liability insurance proposals
Mayor Clark asked the representative from the Municipal Insurance Alliance to first present their proposal and pertinent remarks to Council, followed by the representatives from the Michigan Municipal League Liability and Property Pool.
Bob Bucko, a representative of the Municipal Insurance Alliance, said that he and Mr. Klaver had examined figures and agreed upon a savings of $198,591.00 for the fiscal year of July 1, 2003-
2004, through Municipal Insurance Alliance. Both programs are providing the City of Novi with a $10,000,000 limit of coverage. During last year’s insurance policy bidding, the Alliance was brought in because of their ability to provide coverage for takings within zoning coverage. In addition to this, coverage has been included for sewer backups with the proposal. This option has been rejected in the past, and a nominal savings would be incurred to the City if Council chose to refuse this.
Mr. Bucko noted that he provided Mr. Klaver with several references of municipalities represented by the Alliance. He noted that Council had had a difficult time getting in touch with representatives from Grosse Pointe Park and Grosse Pointe Woods, and Mr. Bucko suggested talking with Mr. Cliff Mason of the City of Grosse Pointe Woods, who called switching to the Alliance one of the best decisions that the municipality had made.
Ms. Judy Thomson-Torosian, a representative from the Michigan Municipal League Liability and Property Pool (MML), noted that she had been the City’s representative from the Pool for the past 5 years. She said that in any business, relationships are critical. It is important to know that the insurance carrier used today will be around to pay claims when the payment is due in 3, 5, 10 or more years. Many types of claims take several years to pay out. The Pool began in 1982 at a time in the market when municipalities were not able to purchase coverage, especially for police or public officials’ liability. The standard market had basically walked away from covering basic risks. At the time, several Michigan Municipal League members approached the MML and asked for help in establishing an insurance pool. Since that time, the Pool has grown to 400 members.
Ms. Thomson-Torosian said the Pool is a stable insurance program that has been around for municipalities for 21 years. The main goal of the Pool is to provide a stable insurance product for its loyal municipal members, at a fair insurance premium. The Pool’s renewal quote for the City of Novi included only a 5% increase, inclusive of the Michigan Catastrophic Claim Association assessment which had an increase of $31.20 per vehicle. The quote also was inclusive of the $6,298,000 increase of additional property values that the City had for this year. This increase was very small when considering the overall increases most insured’s are experiencing in today’s marketplace. The Pool’s renewal quote includes all expenses, including claims handling and loss control service. The Pool does not charge extra fees to handle claims or provide loss control, and also does not ask that the City setup a claims fund in advance of claims. As stated earlier, the premium includes the $31.20 per vehicle. For Novi, with 194 vehicles, this amounts to an additional $6,000. In addition, the Pool’s policy includes the claims handling service for any sewer and drain backup claims. Since the year 2000, the Pool has handled 22 sewer backup claims for no additional charge to the City. This has been done even though the City has not purchased the offered sub-limit. One of the key ways that the Pool has maintained its stability is by keeping the same group of re-insurers involved with the Pool. The lead re-insurer is American Reinsurance Corporation, which has a Best rating of A++ superior, and a class 15, which means that their surplus is at least $2 billion. They have been involved with the Pool since inception. Since the Pool retains a small portion of each claim and relies on its re-insurers to pay for catastrophic claims, it is critical that the Pool’s re-insurers be financially strong and supportive of municipal risk. This is also important because the Pool is also financially stable, and in a tough marketplace having a strong relationship with a strong and loyal re-insurer is critical. Without a strong relationship, carriers have no problem with dumping an insured and leaving them without a source of renewal coverage.
Ms. Thomson-Torosian said the Pool’s insurance policy has been specifically written to meet the needs of all municipalities. This is an ongoing process: for example, last year, the Pool enhanced the property portion of coverage to delete a limitation that only covered member property located within 1000 feet of scheduled locations. This enhancement allows that any property owned by members is covered, regardless of whether it has been scheduled or not, even if it is outside of city limits. This has significantly broadened the Pool’s property coverage, and is unique in the State of Michigan. This benefited the City of Novi the past year when the Pool picked up a property claim that was not scheduled. The City of Novi and the Pool have developed goodwill over the handling of a large and difficult claim. Ms. Thomson-Torosian said she had been with the Pool since 1998; during this time, she has seen the Golf program, the Kemper program, and now the Arch program, all under the so-called name of the Alliance program. This does not show a stable relationship with carriers. The Pool does not pay commissions. Her interest is the same as the Pool’s, and each of the Pool’s members want to be around to pay claims. Some of the benefits of the Pool are the service team. The service provided by the Pool and the Workers Comp Fund are provided by a dedicated staff of employees at Meadowbrook Insurance, who only work on the MML’s two programs. Meadowbrook handles thousands of municipalities across the country and others within Michigan. However, the Pool does not share its staff among different municipal programs. As an example, the supervisor of the Southfield claims service has been with the Pool since its inception in 1982. The Pool has a proven track record of paying claims for the City of Novi. The Pool has a great resource of loss control consultants. This includes the Pool’s Law Enforcement Action Forum, or the LEAF Committee. The LEAF Committee has developed a unique tool to guide law enforcement professionals in mitigating exposure to loss. This LEAF tool has been nationally recognized by the National League of Cities, the Public Risk Management Association, and the Michigan Commission on Law Enforcement Standards. All of these organizations have touted the LEAF manual as one of the best loss control tools in the country for police officers.
Ms. Thomson-Torosian said the Pool is consistently audited by its re-insurers and the State, and continues to receive high ratings for claims handling, loss control, and financial stability. The Pool is a long-term solid program that has more-than-adequate surplus to pay its share of large claims, which is where the strength of the re-insurers is also important. She noted that Council and the public may wonder why there is a significant difference between the cost of the Pool’s program and the cost of the Arch program. The Pool has 21 years of experience with municipal risk exposure, but the Arch program appears to have none. Arch’s website does not list municipal risk as an area of expertise. Also, the only information that a carrier could be provided with is from a previous program, with carriers that no longer exist because of under-pricing. The question is not why the Pool’s quote is high, but rather why Arch’s quote is so low. She said Arch has no experience determining the City’s price, and it is likely that next year after Arch has had a chance to become familiar with municipal exposures, the City will see a major change in price. Ms. Thomson-Torosian said that the Pool originally allowed members to help in the selection of its counsel, but had several negative experiences with counsels that were appointed by member cities. Generally, those counsels did not communicate with the Pool’s claims staff or re-insurers, creating situations where litigation could not be managed. Often, the city-appointed council was not familiar with defending the City and the Pool, which resulted in significantly higher defense and indemnity costs. Pool-appointed attorneys are monitored according to the group’s litigation management manual, which ensures minimized and properly managed legal expenses. The Pool provides coverage for liability claims, and has paid out millions of dollars for zoning-related claims. The Pool excludes claims that are based solely on takings, condemnation, eminent
domain, or non-monetary damages; however, most of these claims also allege a constitutional violation such as due process or civil rights, and these claims are covered.
Mr. Klaver thanked Council for taking the time to schedule a special meeting. He clarified that Mr. Bucko’s quote of $198,591.00 was technically correct for the premium; however, the $10,000 claims charge through Midwest Claims Service must also be considered. Thus, he calculated the actual savings from the Alliance plan would actually be $188,591.00. Mr. Klaver said the average number of claims with the League over the past 8 years was slightly deceptive, although accurate, regarding the potential for exceeding the 15 claims per year limit covered by the $10,000, because this only applies to the coverages where the City has more than a $100,000 deductible under the Alliance program. This would include errors of omission and law enforcement liability, and he is very comfortable that the City would not exceed this limit. Mr. Klaver said that the City has received insurance quotes from the League in the past, but these were so high that they were not accepted. In further discussions with Mr. Bucko, he indicated that he could break out the quote for that particular coverage, so the City would have the option to accept or decline this. Mr. Klaver said administration felt that stability of both the program and personnel is very important. Also, as a pool of municipalities, the Board of Directors being elected and appointed officials is also an interesting point. Some of the references that were checked, including those on Mr. Bucko’s list, indicated that there were significant increases after they had joined the program. Many of the other references had good experiences to relay as well. These were reasons explaining administration’s recommendation of the League.
Member Csordas said there was a letter in Council’s packet from a Mr. Kevin Murphy of the Pool, which in a condescending tone stated that he was at quarterly meetings and did not have time to see Council, and criticized the City for considering another carrier. Member Csordas said he found the tone of the letter to be very unprofessional. He asked if, at the peak of the Sandstone negotiations, this entity contributed to the Sandstone settlement. Mr. Helwig answered that the entity contributed to the settlement. The insurance settlement between the two carriers totaled about $750,000. Member Csordas asked if the group did this willingly, or if legal action was needed by the City. Mr. Helwig said legal action was not needed, but the settlement was rather an "11th hour" decision by both carriers to resolve the matter so that the potential claim would not increase to $9 million. The City had 30 days from the date of the agreement to resolve that matter. He said he did meet with Mr. Murphy later in the proceedings. Member Csordas said he remembered the settlement being difficult, and thought the City had to sue them. He asked if this was the entity that had a publication with an article stating that the City of Novi was out of line and the claims against the organization were inappropriate. Mr. Helwig answered that this was the entity that printed the publication and said what their absolute limit would be. Member Csordas said he recalled that the tone of that publication was also very critical of the City, and did not portray the organization as impressive. Member Csordas noted that he understood the recommendations for why the City should save money with the League. He said the proposals were not directly comparable between the two groups, and asked if there was a spec provided for the Pool quote. Mr. Klaver answered that it was discussed with all of the brokers that the City desired to match its current program. Member Csordas asked if the brokers all had copies of the current program, which Mr. Klaver said they did. Mr. Klaver noted that the other two vendors had also participated last year, and were provided with information at that time as well. He said administration emphasized to the providers that comparable coverage was desired, though alternates to that basic coverage would also be considered. He noted that Mr. Updike from Secrest, Wardle was in attendance and could answer technical questions regarding the policies,
as he prepared the comparative reports for Council. Member Csordas said that he had some appreciative comments for Mr. Updike, because the reports were excellent, succinct summaries.
Member Csordas said the sewer backup coverage was interesting in that the MML said the City had $75,000 worth of coverage for a $41,000 premium. He asked how many sewer backup issues the City had experienced in the past year or two. Mr. Klaver said the City averaged perhaps five or six per year. Member Csordas asked if the City exceeded the maximum benefit amount annually. Mr. Klaver answered the amount was not exceeded, and most end up as small claims in residential settings. The last claim the City experienced was covered entirely by Oakland County because of a failure by their system. Member Csordas said he agreed that a $41,000 premium for a $75,000 benefit is silly. He said the Alliance has a $50,000 per year maximum benefit aggregate with a $20,000 per occurrence. He noted that this was a spec, but asked if this was the extent of the benefit that was included in that policy. Mr. Klaver answered that Mr. Bucko had stated he would separate the premium for the City so that it can evaluate the policy, as Mr. Bucko had offered to make this an "ala carte" feature. Once administration evaluates what the cost is, it can make a more informed decision about that proposal. Member Csordas asked that if the ratio of premium to benefit was as "ludicrous" as the MML policy that administration consider declining it, which Mr. Klaver answered would certainly be done.
Member Csordas asked what the level of benefit of coverage was for the Ice Arena. Mr. Bucko said that Ms. Smith-Roy had asked him to increase the limit by $8.5 million for the Ice Arena, which gave an overall limit of property coverage of just over $51 million. Member Csordas noted that the MML had an additional $21,000 premium, and asked Ms. Thomson-Torosian what this was for. She responded that in the past, the Ice Arena had been covered outside of the Pool. This would be a premium to include the Arena with full limits and deductibles, as the rest of the program has.
Member Csordas noted that another consideration was the cost of claims services. He asked Mr. Klaver to provide a brief description of what a claims service is. Mr. Klaver said the definition varies on the nature of the claim, but in essence is an investigation of an incident, preparation for the initial defense, and involves a variety of things. On property, it involves reviewing reports, documenting items, taking photographs, and related tasks. Member Csordas asked if this was built into the MML proposal, and was a separate line item for $10,000 in the Alliance proposal. Mr. Klaver said this was correct. Member Csordas asked what the final difference between the two proposals was with the $10,000 line item included in the Alliance proposal. Mr. Klaver answered that the difference would amount to $188,591.
Member Csordas asked who the primary insurer for Arch was. Mr. Bucko responded that Arch was its own primary insurer, as it is an insurance contractor and not a pool of any sort. Member Csordas said he was aware that the company was an insurance contractor, but asked if it had a re-insurer. Mr. Bucko answered that he knew the company did have a re-insurer but was not certain who it was. Member Csordas said the Sandstone issue was closed as it related to the MML. He brought this up because it was noted that changing insurance carriers in the middle of a multi-year litigation case can cause major problems, which he agreed with. Member Csordas, looking at the comparisons between premiums, said the difference in cost to insure the library was "very curious" as it varied greatly between the two programs - $7,000 for the Pool, $41,000 for the MML. Referring to the "helpful" report from Mr. Updike, he noted that there were differences in the methodology by which the deductibles were calculated. Although the methodology of determining each figure was different, the end results were accurate, which Mr.
Updike agreed with. Member Csordas said that on page 2 of Mr. Updike’s memorandum, the premium increase in the Pool’s 2002-2003 policy and the policy proposed at a higher deductible/lower cost proposal alone is $31,000, or 4.8%. He asked what this year’s deductible was. Mr. Updike said he was not referring to the cost of the deductible in the memo, but rather to the total cost of the premium. Member Csordas asked for an explanation of "per expiring." Mr. Updike said he could not explain this, as he had not encountered the term before in his practice. Member Csordas asked if this term was in the Alliance proposal, which Mr. Updike said was correct. Mr. Bucko said that "per expiring" was in reference to the sewer backup coverage, and was a typographical error. Member Csordas asked if "per expiring" had anything to do with the benefit level of coverage, or if was a legal "catch-all" term, which Mr. Bucko said it was not. Member Csordas said he agreed with Mr. Updike that the two proposals were not directly comparable, which is why his report was very enlightening. He said it was great to hear from Mr. Klaver that the specs were built on the City’s existing policy and level of benefits, but it was disheartening to hear the City get proposals that don’t compare to what it currently has.
Member Csordas said it would be interesting to know if the Alliance had ever submitted a "low-ball" proposal to get a client, and then substantially increased policy premiums the next period. Mr. Updike said he meant no disrespect to Arch, but only mentioned it in the report because he had encountered it before. Mr. Bucko said that last year’s proposal was $464,000, and the company only increased the coverage for the Arena and made some additional coverages in the area of zoning for regulatory takings. In terms of increases, he said the City saw a minimal amount from last year to this year. Member Csordas commented that Arch did not have the City’s business last year. Mr. Bucko noted that Arch insures 1,500 public entities in Michigan, and will insure another 1,000 in Michigan, Ohio, and Indiana with this product. He said the company would not represent that many clients if it practiced the above noted practices. Member Csordas asked if Sterling Heights was Arch’s biggest client, which Mr. Bucko said was correct in Michigan. Member Csordas asked who the second largest client in Michigan was, which Mr. Bucko answered was Holland. Member Csordas asked where Novi would rank if it accepted Arch’s proposal. Mr. Bucko said it would probably be the fourth or fifth largest in the state. Member Csordas asked Mr. Bucko if he was indicating that the company had larger clients outside the State of Michigan, which Mr. Bucko said was correct, including some counties.
Examining the A.M. Best Ratings for re-insurers, Member Csordas asked who was associated with Muenchener Rueckversicherungs. Mr. Updike said that Muenchener Rueckversicherungs is the group name for the group that American Re-Insurance Company is part of. This shows that there are resources behind American Re-Insurance Company. Member Csordas said that a letter received by Council that afternoon referenced a mid-year premium rate action that he believed referred to the Alliance group. Mr. Klaver answered that the letter referred to a regular rate increase for Grosse Pointe, which received a 34% premium increase. Member Csordas asked Mr. Bucko to comment on this increase. Mr. Bucko responded that Grosse Pointe Park’s premiums did not increase 34%, and Arch does not implement mid-year changes to policies. Member Csordas asked if this was a one-year guaranteed contract, which Mr. Bucko said was correct. Member Csordas asked if there was any possibility that there would be a mid-year rate action if the City accepted this program, which Mr. Bucko said there would not unless the City increased its number of exposures, such as the number of vehicles, as with any insurance. Member Csordas asked if the new fire station was covered in the Arch proposal, which Mr. Bucko said was covered. Member Csordas asked Mr. Klaver if he was comfortable that all of the City’s property was included in this proposal. Mr. Klaver answered that he was. Member Csordas thanked the speakers for their time. He said he appreciated all of the responses, but did not
appreciate the negative letter from the MML representative. He said that relationships are a very important thing and should be treasured, but other things must also be examined such as the quality of a company and price.
CM-03-06-204 Moved by Csordas, seconded by Lorenzo; CARRIED UNANIMOUSLY: To accept Alliance as the City’s P & C carrier for the 2003-2004 fiscal year
Mayor Pro Tem Bononi asked Mr. Updike if the same liability coverage with different liability limits was what was being discussed, one with a limit of $5,000,000, one with a limit of $10,000,000. Mr. Updike said this was correct, and that in his opinion there was nothing wrong with this. The Pool assigned a $10,000,000 limit, period. The Alliance plan decided to break the policy into two parts, a $5,000,000 tier of coverage for the basic liability categories, and a $5,000,000 internal umbrella policy. He has seen this before, and suspected that the split occurred for internal financing reasons or re-insurance reasons, but there is nothing wrong with this since the coverage is still for a total of $10,000,000. Mayor Pro Tem Bononi asked if this had anything to do with the attractiveness of people examining the coverage from the outside, which Mr. Updike said was not the case.
Mayor Pro Tem Bononi asked if when discussing sewer backups, this meant storm drain flooding and sanitary sewer issues both, or separately. Mr. Klaver answered that the majority of claims received are for sewer backups, meaning that sanitary sewer issues are referred to. Mayor Pro Tem Bononi said that in that category, there was a difference in coverage of $75,000 versus $50,000 that was previously mentioned. She asked if the City had an ordinance covering sewer backups, if the City would be required to pay the 5 or 6 sewer backup claims that it receives a year. Mr. Klaver said he was not certain about this concept. The Mayor Pro Tem said this was something that had been discussed in the past that she would be interested in investigating. She asked Mr. Klaver if he knew the amount of deductibles that the City paid out annually. Mr. Klaver said he could not answer the question off the top of his head. Mayor Pro Tem Bononi said the Alliance proposal would have an independent contractor handle claims. She asked how many claims the City sends out annually. Mr. Klaver said that 17 ½ has been the experience the past 8 years with the League. The Mayor Pro Tem asked Mr. Updike if he had concerns about confidentiality with information being handled by an independent contractor, or the provision in the agreement that the City would pay to retrieve its own files should it cancel the agreement. Mr. Updike said he did not have a problem with the confidentiality agreement, and suggested that it would probably not be a large cost for the City to incur if it needed to retrieve its files if needed, though he had not seen this provision before in a policy. He guessed that the cost of retrieving those files would not exceed $10,000 for the 17 ½ claims a year.
Mayor Pro Tem Bononi said she saw coverage in the MML policy that she did not see in the Alliance policy. She asked if TV operations and online claims service were provided by both policies. Mr. Bucko said the Alliance offered cable TV operations, and also provided online claims service. Mayor Pro Tem Bononi asked if Alliance covered employee discharge claims and cemetery claims, which Mr. Bucko answered the company did. Mayor Pro Tem Bononi said she understood that MML did not cover cemetery claims. Ms. Thomson-Torosian said MML does cover cemetery claims, offers online claims service, and covers claims unless specifically excluded. The MML covers broadcasting unless the persons are not acting under the authority of the City. Mayor Pro Tem Bononi asked if the MML covered harm or damage claims caused by non-employees on City property. Ms. Thomson-Torosian said the City would be covered for any
claim that was filed against it for the actions of someone else, though these claims would likely be dismissed because there would be no liability to the City. Mayor Pro Tem Bononi asked if Oak Park and Birmingham were the only two municipalities in Oakland County to be represented by the MML. Ms. Thomson-Torosian said she simply tried to list larger represented communities on the list that the Mayor Pro Tem referred to, as the Pool represents many municipalities around the area. Mayor Pro Tem Bononi asked if the Pool represented any other municipality that is built out to the point that Novi is. Ms. Thomson-Torosian replied that Birmingham is changing, and Macomb Township is one of the fastest growing communities in Michigan. Mayor Pro Tem Bononi noted that a point Ms. Thomson-Torosian made in her materials was that she was committed to learning and understanding the needs of the communities that the MML represents, and that she is interested in education. The Mayor Pro Tem asked Ms. Thomson-Torosian if she offered any information or workshops to employees of the represented communities on the subject of risk management, and if there would be a charge for this. Ms. Thomson-Torosian said the MML has a training video library with a number of videos available to members for free on a wide variety of topics. The League also plans to offer regional training seminars.
Mr. Klaver noted that last year the City had one claim that hit its $100,000 deductible, and several others of about $10,000.
Member Lorenzo asked what attorneys were used under the Alliance program. Mr. Bucko said the Alliance has attorneys throughout the state, and has attorneys that specialize in police and zoning, and also hired a planning firm to assist attorneys on planning issues. Member Lorenzo asked for an example. Mr. Bucko said Hox Hodgman out of Troy would be the lead law firm, and has a division that handles all of the program’s police litigation as well. Member Lorenzo asked what attorneys handle the program’s zoning matters. Mr. Bucko replied that Tom McGraw leads zoning litigation matters for Alliance. He continued by saying that the Alliance also offers award-winning videos dealing with matters such as sexual harassment and whistle blower issues. The company is setting up a risk control schedule with Mr. Klaver. Member Lorenzo said that choosing the insurance policy is a business decision, and while she agrees that relationships are valuable, in business they can sometimes get in the way of a good business decision. She was disappointed by the Sandstone issue with the MML, and the resources and time needed to reach an agreement on that settlement. She suggested giving the Alliance a chance for a year, in order to try out that group’s policy for evaluation.
Member Sanghvi asked Mr. Klaver why he would recommend purchasing insurance from the MML Pool, which costs $188,591 more, if the two programs are very similar in their coverage. Mr. Klaver said this was largely because of uncertainty and unfamiliarity with the Alliance program, and also due to changes and some experiences of that program in the past, compared to the 20-year stability of the League. Dr. Sanghvi asked Mr. Klaver if he had changed his opinion after hearing Mr. Bucko’s testimony. Mr. Klaver answered that he had not. Member Sanghvi said that the $188,591 savings spoke quote a lot by itself, especially since the policies were not very different. He said he has no hesitation about trying the Alliance policy.
Member Capello said that Member Csordas had covered all of his concerns very well, and had no questions.
Mayor Clark asked why there was such a large difference between the premium costs to cover the library, as the Alliance’s quote was for $7,416 and the Pool’s quote was $41,530. Ms. Thomson-Torosian said that ratings are determined by looking at property values, payroll, and a
number of other factors. The Pool rates differently than some other groups, but includes the limits and the entire risk exposure. Their program is a package, and the breakdowns are a courtesy to the entire program, but these are not normally done. Mayor Clark said that most of his questions were also addressed by Member Csordas. He said both companies have good ratings with A.M. Best and other services. He was concerned that Alliance did not know who their re-insurer was, as this is a very important consideration. The Mayor noted that a company cannot get the ratings that the Alliance received without proper re-insurance. He appreciated Mr. Updike’s comment that apples and oranges are not truly being compared with the two policies. Under either proposal the City would have the protection that it needs, though it would not necessarily have the previous experience with a particular carrier that it has had with the Pool.
Roll Call Vote on CM-03-06-204 Yeas: Capello, Csordas, Lorenzo, Sanghvi, Clark, Bononi
Wayne Hogan, 20923 Woodland Glen Dr., noted that though the vote had already taken place on the insurance item, he wished to place his comments on record. He has had a fair amount of experience working with insurance and watching related litigation himself. Mr. Hogan asked if anyone had checked what the City’s errors and omissions insurance coverage was, and the limits on that.
There being no further business to come before the Council, the meeting was adjourned at 8:31 p.m.
Richard J. Clark, Mayor Nancy Reutter, Deputy Clerk
Transcribed by: Steve King
Date approved: July 7, 2003