Risk Management Audit Report - 12/30/2009 Risk Management Audit Report
City of Tigard
December 2009
Beecher Carlson
INTRODUCTION
The purpose of this report is to review the City of Tigard's risk management program and provide
recommendations. The City of Tigard's insurance cost and claims experience are benchmarked
against other public entities. Appreciation is extended to Kent Wyatt who was very helpful in the
development of this report.
This Risk Management Report has the following sections:
1. Overview of Risk Management
2. Cost of Risk
3. Liability (Third Party Claims)
4. Workers' Compensation Claims
5. Benchmarking
6. Recommendations
RISK MANAGEMENT OVERVIEW
The City's risk management program is directed by the risk management team with the following
members:
• Loreen Mills, Assistant to City Manager
• Kent Wyatt, Management Analyst
• Gary Smalling, Risk Management Tech
Loreen oversees the risk management program. The author of this report is very impressed with the
skills, detail and grace by which Loreen manages the risk management function along with all of her
other responsibilities.
Kent provides risk management support and Gary oversees claim processing and safety at the City.
We reviewed the following risk management functions:
Risk Management Administration
Policies
Workers' Compensation
Safety Program
Safety Committees
OSHA Compliance
Emergency Management
BEECHECARLSON
msu,nce Agency,LLC
Passion. Innovation. Accountability.
I2/2U/2n44 Pane 1
COST OF RISK
For this report, the "Cost of Risk" is defined as insurance premiums and claims within the deductible.
As defined in this report, this cost of risk does not include salaries and other risk management
expenses such as materials and travel. Care must be exercised when comparing this cost of risk to
national benchmarks which might include such other expenses. Total risk expenses are compared as
a percentage of the City's operating expenditures.
The following chart shows the cost of risk for the City.
FY 2006 FY 2007 FY 2008 FY 2009 FY 2010
Property Insurance
Deductible $1,000 $1,000 $1,000 $1,000 $1,000
- Premium $87,908 $73,548 $71,903 $97,415 $99,864
General & Auto
Liability
Each Occurrence $3,000,000 $3,000,000 $5,000,000 $5,000,000 $5,000,000
General Aggregate $9,000,000 $9,000,000 $15,000,000 $15,000,000 $15,000,000
- Deductible -Annual $0 $0 $0 $0 $0
Aggregate
Premium $190,503 $197,083 $202,756 $196,524 $195,455
Auto Physical
Damage
- Deductible $100/$500 $100/$500 $100/$500 $100/$500 $100/$500
Premium $42,070 $42,298 $34,121 $32,065 $27,668
- Crime Excess $2,980 $1,411 $2,077 $2,077
($250,000)
Workers'
Compensation
Premium $184,788 $271,629 $316,727 $347,304 $271,974
Other Insurance Premium
Highway Permit Bond $100
Flood Policy (City Hall) $1,322
Flood Policy (Storage) $280
Flood Policy (Modular) $574
Pollution $6,619
COST OF RISK
Total Cost of Risk FY 2006 FY 2007 FY 2008 FY 2009
Total Premium $563,140 $636,543 $671,397 $682,203
Total Expenditures $27.7 $27.5 $33.7 $35.9
(millions)
Cost of Risk 0.02 0.023 0.02 0.019
BEECHE .;ARLSON
Insurance Passion. innovation. Accountability.
I2Anonn9 Pane 2
LIABILITY THIRD PARTY CLAIMS
Liability claims are from third parties (such as citizens) for bodily injury, property damage, automobile
damage, or employment related claims. The City is insured through City County Insurance Services
(CIS). The City has no deductible.
Claims
The following graph shows 10 years of liability claims history.
$500,000 — — 45
=Dollar
$450,000 — Number — 40
$400,000 — —Linear(Dollar)
Linear(Number) — 35
$350,000 —
— 30
$300,000 — z. �'
— 25
'.4*"..11.""V
$250,000 —
— — 20
$200,000 —
$150,000 — •••....•■e — 15
$100,000 — — 10
$50,000 — — — — 5
$0 I I ' ' I I I I I I I 0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Forecasted Claims
Note the forecasted cost of claims is declining. Using a trend analysis, the expected claims are as
follows:
FY 2010: $124,100
FY 2011: $121,300
FY 2012: $118,400
BEECHER,<L:ARLSON
insurance'assion. Innovation. Accountability.
12i2ni2nn4 Pang.
Claims By Department
The following graph shows the dollar amount of liability claims by department over the last five years.
Dollar of Liability Claims By Department for Past 5 Years
Parks
2%
Water
20%
Wastewater
18% Police
60%
The police have the mostly costly claims, primarily due to one wrongful death claim. Only two other
city claims have exceeded $20,000 in the last five years, one employment related and one water
related.
The following graph shows the number of claims by department for the last 5 years.
Number of Liability Claims By Department for Past 5 Years
Parks
13°/
Raods
17/a
Police
Water 18%
17%
} 4° • P W
Wastewater
29%
BEECHER A ARLSON
Insurance Agency,LLC
Passion. innovation. Accountability.
�7i'ni2nno Pang 4
The following graph shows the types of liability claims common for cities insured through CIS. (Source
CIS)
Average Liability Claims By Department for Oregon Cities
(Source: City/County Insurance Services)
Employment
Roads .5% Public Works
20% 24%
•
Fire Liability
3%
Sewer/Water `
22%
Sidewalks Police Related
12% 19%
BEECHEy;CARLSOInsdrance yN
Passion. Innovation. Accountability,
12/. n/2nn4 Pang
WORKERS' COMPENSATION
Workers' Compensation covers injuries to employees.
Claims
This graph shows the number and cost of workers' compensation claims over the last 11 years.
Workers' Compensation Claims
450000 — — 50
400000 — 44 — 45
Cost — 40
350000 — •••••••Number
300000 —
34 Linear (Number) — 35
• Linear(Cost)
— 30
250000 —
26 —
200000
\ / 22 ::
150000 — 7 18
14 14 — 15
100000 — 1
— 10
50000 — — 5
0 I I I I I I I f I I 0
FY FY FY FY FY FY FY FY FY FY FY
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
While the number of workers' compensation claims is declining, the cost trend is a concern.
Note that in FY 2005, the city experienced a high number of claims and a high dollar amount of claims.
Most private and public entities will have one or two years in ten years are outliers for the number and
costs of claims.
Forecasted Claims
Note the forecasted cost of claims is increasing. Using a trend analysis, the expected claims are as
follows:
FY 2010: $96,500
FY 2011: $100,700
FY 2012: $104,900
BEECH E A,,f ARLSO\
Insurance Agency,LLC
Passion. innovation. Ar: ountability,
17/102004 Pana A
The following chart shows the cause of injuries for FY 2006 through FY 2009.
I
Infection
l ]
Altercation Common Caus4s of Injury
Push/Pull
Cut
Object Handling
Vehicle
Injured by Animal .11.111MIEh
Slip&Fall 111111111
Struck By
1
0 5 10 15 20
Claims By Department
The following chart shows the dollar of claims by department as a percentage over the last five years.
Dollar Amount of Claims By Department Over Last 5 Years
Administration
Star m✓vater Parks
2°/0 Library 3% Street 5%
Water 1% 1%
6% �.,-
—
Wastewater
—
23%
Police
— Building 54%
5%
BEECHER ,ARLSON
.,, Insurance Agency,LLC
Passion. lnnovat 'Accountability.
12nni2nna Pana 7
The following graph shows the number of claims as a percentage by department over the last five
years.
Number of Claims By Department Over Last 5 Years
Stormwater Parks
11% Street 9%
5%
Library
4%
Administration
9%
Police
Water 40%
12% Wastewater
5%
--- Building
5%
_ Experience Modification Factor
The Experience Modification Factor is a benchmark of how your entity compares with other entities
with the same classification of employees. Tigard has an experience mod under one (1)which is
excellent. One way to view this is that Tigard pays 24% less in 2009 for workers' compensation than
an average city. This is excellent.
Year Experience
Modification Factor
2009 .76
2008 .95
2007 .93
2006 .88
2005 .67
_ BEECHE 1 ARLSON
insurance Agency,LLC
Passion. Innovation At,CO ;ratability.
12/10/2n09 Pana R
BENCHMARKING
Cost of Risk Benchmark
The following benchmark is Oregon cities "cost of risk". See page 3 of this report.
_ Cost of Risk Benchmark
of Oregon Cities
2.00% I 2% 1 .7% 1.8% 1 0 0 °
1.5%
1.50%A,
1.0%
1.00%A =
0.50%
0.00% —1111115111 Apo 44/ii 09-
47,599 50,240 80,995 154,620 132,033 21,235 58,005
Tigard City City City City City City
Cities in the above graph include (in alphabetical order) Ashland, Bend, Eugene, Salem, Springfield,
and Roseburg. All the other entities in this comparison are self insured for workers' compensation,
general and auto liability, or both.
BEECHELARLSON
Insurance Agency,LLC
Passion. Innovation, Accountability,
12/.4n/2nnc Pana Q
CITIES IN OREGON BENCHMARK
General Liability
Beecher Carlson surveyed cities in Oregon and compared the number of liability claims in FY2008 to
the total population. The following graph shows the results.
Number of Claims/Population
Liability Only-Not Auto
26040
17160 I
24400
I
47150 .11111111IIIIM Tigard
10370
100655 I I
CC 21235
R 25445 I I I
Q. 76850 I I
d 9735
58005 I
I
80995 I I
20915 I
6635 ' I
9445
21485 I
0 0.2 0.4 0.6 0.8 1 1.2 1.4
This graph shows the total dollar amount of claims in 2008 divided by total population.
Dollar of Claims/Population
100655
76850
47150
17160
58005
80995 �
C 26040
o -
24400
a 9445
d 9735 I I
21485
I �
25445 I
20915
I I �
21235 I
10370 I I I
6635 �
1.00 2.00 3.00 4.00 5.00
The following graph shows the CIS loss ratio (claims/premium).
BEECHE ARLInsuranSON
gency,cI.0
Passion. Innovation. Accountability.
'I 2i.ni7nn4 Pana 1n
Om,
"'N‘ CIS Loss Ratio's
5 Year Average
100655
58005 I
47150 1111111.1111111111. Tigard
'.% 80995
21485 i
i I
9445 I
C 24400
17160 �
0-
76850
d 26040 i I
9735
20915
6635
25445 �
10370 I
21235
0 10 20 30 40 50 60 70
Three important lessons are learned from the above graphs:
1) The overall cost of risk for the City of Tigard is average as compared to other Oregon cities.
Those cities with lower cost of risk are self-insured.
2) The number of liability claims is low compared to other Oregon cities. This suggests that Tigard
has less reported claims than the average city.
3) The cost of liability claims is average as compared to other Oregon cities.
CIS BEST PRACTICES
CIS requires cities to complete a risk management best practices survey. The City of Tigard has
completed the survey and is in the top 10 percent of cities with the best practices.
CIS recommends the following in order to obtain a higher score.
1. Incorporate a functional skills test for all potential employees (those not currently tested).
2. Review job descriptions annually with each employee during performance evaluations.
3. Require post offer medical exams for safety sensitive positions.
4. Complete job descriptions for all volunteer positions (Tigard does for many volunteer
positions)
5. Eliminate all personal use of city-owned or city-leased vehicles.
6. Training in irregular and suspicious activities of employees who handle cash and finances of
city.
7. Eliminate volunteer workers under 18.
BEECHER A:ARLSON
41surance Agency,LLC
Passion. inns= t.ion. Accountability.
12/gnt2nn4 Pana 11
Tigard earns 89 percent on the CIS best practices survey. This is an excellent score and compares
favorable to other Oregon cities.
Benchmark Meter
40 ai 60
70
30 80
20 it
90
10 m
BEECHER CARLSON RISK MANAGEMENT BEST PRACTICES
-. Beecher Carlson is Tigard's agent of record. Ron Cutter from Beecher Carlson serves as the City's
primary broker. Scott Moss and Tim Clarke serve as risk management and claims consultants to
the City. Beecher Carlson provides agent of record services to over 120 public entities in Oregon.
Beecher Carlson recommends 84 best procedures and practices for cities. The City of Tigard
completes 77 of the 84 for a total of 92%. (See appendix)
From our observations, the City of Tigard does the following risk management functions better than
any other city in Oregon.
1. Driving Safety: Tigard does a better job of reducing vehicle accidents than other cities,
including:
• Checking driver records
• Making drivers accountable
• Providing driving safety courses
2. Subrogation: Gary in risk management does an excellent job of holding responsible parties
accountable for damages of city property and vehicles.
3. Emergency management: The City takes an active role in emergency management. City
leaders are trained in the Incident Command System.
The following speedometer shows the result of the risk management audit. We commend Tigard
for obtaining a 92% on our audit.
BEECHER, .:ARLSON
insurance Agency,LLC
-'assion. Innovation. Accountability.
2i1ni7nn4 Pana 12
The following speedometer shows the result of the risk management audit. We commend Tigard
for obtaining a 92% on our audit.
Benchmark Meter
40 50 60
70
30
80
20 it 406
10 ��
RECOMMENDATIONS
1) Incorporate an Executive Risk Management Committee
The Executive Risk Management Committee meets regularly to establish a risk management
vision, set objectives, find resources, set priorities, communicate action plans, review claims,
promote safety, etc
Beecher Carlson is happy to participate in these meetings.
2) Prepare a risk management procedures manual. This manual documents risk management
procedures and practices. Attached are common topics in a risk management manual.
3) Continue to look at options to take on more retention. Loreen and Beecher Carlson have
looked every year at taking on higher deductibles. Thus far, the risk/return has not been
enough to justify the higher deductibles. Yet it is important to continue to analyze the potential
savings.
4) The City may want to consider allocating premium dollars to operating departments based on
exposure and claims. This helps departments be more aware and accountable of claims
experience and would promote higher retention levels in the future.
5) We recommend the citywide safety committee review the City's safety program annually.
6) We recommend a collision review board be created to analyze all city vehicle collisions. The
Police Department currently does this type of review. The board should be separate from the
citywide safety committee.
BEECHES CARLSON
!insurance Agency,LLC
:assign. lion. Accountability.
I2Ani2nn4
Risk Management Manual
I) Risk Management Program
RM Mission Statement
RM Objectives
RM Committee
Members
Responsibilities
Department Director RM Responsibilities
Supervisor RM Responsibilities
Each Employees RM Responsibilities
RM Program Administration
Acting RM
Duties
RM Budgeting & Allocation
RM Reporting
II) Risk Management Finance
Insurance
RM Committee Role
List by policy
Deductible approval
Professional Services (actual names in attachment)
Insurance Consultant
RM Consultant
Adjustor
Actuary
Contractors
General Liability
Employees covered
Claims process (Tort Claims)
Litigation (Summons)
Vehicle
City Vehicles
Personal Vehicles
Contractor Vehicles
Rental Vehicles
Claims Process
Workers' Compensation
Coverage
Claims Process
RTW
Property
Owned property
Facility use by general public
Non-owned property
Claims Process
Public Officials Bond
Who insured
Crime Policy
Environmental Policy
Claims
Reporting
BEECHER CARLSC)N
insurance Agency,LLC
Passion. Inn= ecc untability.
12/ fl/2nn4 Pane. 14
Approval
III) RM Procedures
Special Events
Contracts
Insurance Requirements
Public Improvements
Personal Services
Professional Service
Indemnity Requirements
Bond Requirements
Additional Insured and Certification
Approval of Exceptions
New Construction
Related Ordinances (weed, sidewalk, snow, etc)
BEECHER /CARLSON
aisu;ance Agency.LLC
Passion. i Accountability.
12i.Rni2nn.Q Pang)15
Risk Management Audit
Evaluation Date: 12/30/2009
Evaluation Criteria Ranking
Yes/No
_ Enter 1 =Yes
Enter 0=No
Risk Management
1. Risk Management Program Documented(Sometimes called RM Policy) 0
2.Risk Management Executive Team 0
3.Points on CIS Best Practices 1
4. Risk Management Budget 1
5.Cost allocation system based on experience? 0
6. Ongoing RM reports to management? 1
6.Special events team? 1
7. Serious claims and all long-term abxences reveived and plans made 1
8. Vehicle schedule maintained for new and disposed 1
9. Property schudule maitained 1
10. Contract manual? 1
11.Certificate of insurance management 1
12. Vehicle use policy 1
13. Drvier training 1
14.Drying qualification and priveleges criteria 1
15.Risk identification in construction 1
16.Accident reporting 1
Policies
1.Sidewalk 1
2.Snow removal 1
3.Weed Control 1
4.Cross walks 1
5.Red flag&Consumer Protection 1
6.Volunteer 1
7. Construction projects 1
8.Workplace violence 1
9. Facility use 1
10. Utility Locates 1
11. Security-key cards 1
12.All policies reviewed every 3 years with values and immunities in mind 0
Workers'compensation
1.801 Reporting Plan 1
2.Regular claim reviews 1
3. Return to work prgram 1
4.Managed care organization N/A
5. EAIP funds 1
6.OSHA 300 Log 1
Safety Program
1.Do you have an effective safety program? 1
2. Is the program in writing? 1
3.Are managers and supervisors held accountable for 1
safety results?
4. Is Management visible in a leadership role providing 1
motivating force for an effective safety program?
5.Are accident investigations in writing? 1
1
6.Are supervisors given the appropriate forms and training? 1
7. Is there evidence that corrective action is taken? 1
8.Are all loss-producing accidents and near misses 1
investigated for root causes and corrective action taken?
9. Do you have an effective new employee safety 1
training program?
10. Is safety in performance reviews? 1
Safety Committees
1. Is there an established safety committee? 1
2. Do they recommend changes in 1
policies or procedures as deemed necessary?
3. Do they meet monthly,set agenda's&keep minutes? 1
4.Are safety committees trained? 1
5. Do safety committees review all accident investigations? 1
6. Do safety committees perform quarterly inspections? 1
7. Do safety committee review safety policy annually? 0
Inspections
1.Are routine physical inspections of the workplace and equipment 1
conducted?
2. Do supervisors dedicate time to observe work practices and other 1
safety conditions in the work area?
Emergency Action Plans
1. Does the employer have emergency response plans prepared by 1
persons with specific training?
2.Are appropriate alarm systems in place? 1
3.Are employees trained in emergency procedures? 1
4. Does the emergency response plan extend to spills and incidents 1
in routine production?
5. Is there adequate supplies of spill control and PPE available for 1
appropriate hazards?
6.Are evacuation drills conducted no less than annually? 1
7. Has the plan been reviewed by the local fire department? 1
8.Are procedures in place for terminating an emergency response 1
condition clearly defined?
9.Are personnel with certified first aid skills always available onsite ( 1
and is their level of expertise appropriate to the hazards of work?
10. Is the adequacy of first aid formally reviewed after significant incidents? 0
OSHA Policies
Safety Policy 1
Safety&Risk Employee Orientation 1
Safety Goals&Objectives Annually 0
First Aid&CPR Training 1
Fire Extinisher 1
Hearing Conservation 1
_ Hazardous Communication 1
Lockout/Tagout 1
Respirator Protection N/A
Personal Protective Equipment 1
Confined Spaces 1
Fall Protection 1
Emergncy Response 1
Bloodborne Pathogens 1
Forklift 1
Fire Drills 1
Asbestos and Lead Management 1
Fleet&Driver Safety 1
— Ergonomics 1
Bleechers Inspections 1
2
Playground Inspections 1
Posting of Labor Notices 1
SINEINIf Overall Results
Yes
No v ,
Ranking: -:::7 m $
3