MISSOURI INTERGOVERNMENTAL RISK MANAGEMENT ASSOCIATION BOARD OF DIRECTORS MEETING FRIDAY, MAY 9, 2014 MINUTES. Board Members

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1 MISSOURI INTERGOVERNMENTAL RISK MANAGEMENT ASSOCIATION BOARD OF DIRECTORS MEETING FRIDAY, MAY 9, 2014 GENERAL AND ATTENDANCE MINUTES A regular meeting of the Board of Directors of the Missouri Intergovernmental Risk Management Association was held on the above date at the Hilton Garden Inn in Columbia, Missouri. The Chairman of the Board called the meeting to order at 10:12 a.m. Those in attendance were as follows: Board Members Alan Winders - Vandalia David Dews - De Soto Russell Rost - Union Greg Hodge - Moberly Derek Brown - Albany Vicky McLeland - Macon Phillip Shatzer - Paris Matt Harline - Fulton Rodney Bourne - Rolla Official Representatives Mark Hickerson - Hannibal Frank Tennant - Hermann Danette Henderson - Perry Lee Barker - Higginsville J.J. Wiseman - Jackson Alternate Representatives Dennis Klusmeyer - Shelbina Rick O Halloran - Chillicothe Jeanette Dobson - Higginsville Jeanette Yount - Arnold Other Representatives Travis Dierker - St. Clair Carl E. Gordy - Huntsville MIRMA Staff Matthew Brodersen - Executive Director Ray Lentz - Claims and Litigation Director

2 MIRMA Staff (cont.) Patrick Bonnot - Loss Control and Member Services Director Jeff Arp - Loss Control Specialist Kelly Beets - Senior Loss Control Consultant Jenne Auck - Finance Director Terri Crane - Finance Assistant Gina Viertel - Senior Workers Compensation Adjuster Susan Cannady - Claims Administrator Guests Scott Curtis - Lockton Companies Cassandra Scheer - Lockton Companies Denise Pedrotti - Lockton Companies Mike Greco - CCMI Absentees Jennifer Schmidt - Tipton OLD BUSINESS Item #1: Approval of the minutes of the Board of Directors Meeting held January 31, 2014 was brought before the Board. Copies of these minutes had been distributed to the Board prior to this meeting for their review. David Dews of De Soto made a motion to approve the minutes as presented. Vicky McLeland of Macon seconded the motion and it carried unanimously. Item #2: Approval of the minutes of the Closed Session of the Board of Directors Meeting held January 31, 2014 was brought before the Board. Copies of these minutes had been distributed to the Board prior to this meeting for their review. Matt Harline of Fulton made a motion to approve the minutes of the Closed Session as presented. Phillip Shatzer of Paris seconded the motion and it carried unanimously. NEW BUSINESS Item #1: Adoption of a resolution accepting a proposal by Lockton Companies of St. Louis for excess insurance coverage and airport liability placements for FY15 was brought before the Board. The Executive Director stated Lockton Companies have been providing our brokerage services for 2

3 ten years and that he feels they have good placements to present to us today. He stated that there is some additional pricing for an additional layer of coverage for federal and out-of-state claims, and claims involving motor vehicle operation. He stated that it is the staff recommendation that MIRMA purchase the additional coverage. At this time, The Executive Director turned the floor over to Denise Pedrotti with Lockton Companies to review their proposal. Ms. Pedrotti first introduced Scott Curtis and Cassandra Scheer, as new members of the team that works on MIRMA s account. She then stated that with regard to the casualty side of MIRMA s coverage, flat renewals were received from all carriers. She stated that there was a slight increase in airport liability. She stated that overall; she was very pleased with what they were able to propose. She then turned the floor over to Mr. Curtis to address the property placements. He stated that the property market is very competitive at this time, and that MIRMA s long time carrier, Travelers, responded to that by lowering their cost 4.5%. He stated that the boiler and earthquake coverage have flat renewals. The Executive Director asked Mr. Curtis to address an option for FY16, that MIRMA has been looking into, which would form sub-limits on earthquake coverage. Mr. Curtis stated that Missouri earthquake data is not quite as scientific as California data. He stated that insurers rely on models and that they have been using them for years. He stated that it appears MIRMA would be able to save between $30,000 and $100,000, with per member limits of $25 million and $10 million respectively, but that carriers are approaching their minimum premium. The Executive Director stated that there would be a two-fold benefit to these limits; one being the reduced premium and the second, that the coverage would be more evenly spread among the membership. He stated that currently, in the event of a loss, the New Madrid area would exhaust most of MIRMA s limit. He stated that those areas hardest hit would most likely have disaster assistance from FEMA, thereby decreasing their dependence on MIRMA s coverage and allowing it to be spread more evenly among other members that might be affected by a large event. It was asked by a member of the Board, how well MIRMA plays in the marketplace. Ms. Pedrotti stated that she thought very well as we ve had good relationships with long term carriers and that she feels Travelers response to the marketplace indicates how much they want to stay on MIRMA s account. The Executive Director stated that boiler reinsurers are less interested in MIRMA as members pull back the maintenance on the units that they will be phasing out due to new regulations. It was stated that a new online training program will also become available July 1 st through Lockton. It was stated that these safety and human resources topics will be presented in a web-based power point format. Russell Rost of Union made a motion to adopt Resolution Number and the Lockton proposal with a cost for reinsurance, excess insurance and bonds not to exceed $1,759,151, airport liability not to exceed $49,530 and a service fee of $160,000. Rodney Bourne of Rolla seconded the motion and it carried unanimously. Item #2: Adoption of a resolution accepting a proposal by Corporate Claims Management, Inc. for claims administration services for FY15 was brought before the Board. The Executive Director stated that MIRMA has a favorable, long term relationship with CCMI and that he feels they are proposing very favorable pricing. He stated that even with the increases proposed this year; MIRMA is paying CCMI less than any of their other clients and below the market average. He stated that this is the first year of a proposed new five-year contract. He stated that this year s fee increase is about 14%, with additional increases for the remaining years. He stated that in 2008, when all claims were being handled by a third party administrator, MIRMA was paying $617,000 for claims handling. He stated that the 3

4 projected total MIRMA will be paying CCMI by the end of this five year agreement is $569,000, still a savings from He stated that staff would recommend acceptance of this proposal. Mike Greco of CCMI stated that MIRMA is a great account for CCMI and they want to continue the relationship. He stated that this proposal is underpriced and really only almost breaks even with the salaries needed to service the account. David Dews of De Soto made a motion to adopt Resolution Number and the Corporate Claims Management, Inc. proposal for services with a total expected cost of $307,637. Vicky McLeland of Macon seconded the motion and it carried unanimously. Item #3: Adoption of a resolution accepting a proposal by Professional Claims Managers, Inc. for employment practices liability claims administration services for FY15 was brought before the Board. The Executive Director stated that Professional Claims Managers is a specialty third party administrator that has been doing an excellent job with MIRMA s EPLI claims. He stated that even though we have seen increased activity in this area, the proposal was for a flat rate, with no increase. Rodney Bourne of Rolla made a motion to adopt Resolution Number and the Professional Claims Managers proposal for services in the amount of $35,000. Russell Rost of Union seconded the motion and it carried unanimously. Item #4: Adoption of a resolution accepting a proposal by Tiller Consulting Group, Inc. for actuarial services to be provided for FY15 was brought before the Board. The Finance Director stated that Tiller Consulting Group provides actuarial services, which is an analysis of our claim reserves, as well as a rate methodology review, which reviews our expected losses. She stated that this is the first year of a new three year contract and includes a fee increase of 9% for the first year and additional increases the following years. She stated that these increases average about 3.6% over the three years. She stated that she is very comfortable working with Tiller Consulting and feels they do a good job for us. Phillip Shatzer of Paris made a motion to adopt Resolution Number and the Tiller Consulting Group, Inc. proposal for services in the amount of $14,760 for actuarial services and $4,305 for rating methodology review. Greg Hodge of Moberly seconded the motion and it carried unanimously. Item #5: Adoption of a resolution approving and adopting an administrative budget for FY15 was brought before the Board. It was stated that this budget was reviewed by the Executive Committee in April. It was stated that the budget includes a 7.97% increase, which amounts to $155,240. Of this $155,240, $105,500 is attributable to self- insurance tax increases, which includes a doubling of the rate for the Second Injury Fund, which has been in dire financial condition. It was stated that these taxes are calculated on a calendar year, which means they cross two of MIRMA s fiscal years. The full impact of this tax increase will result in approximately $162,000 of additional taxes for the indefinite future. It was stated that the new online training is now included in the budget as well as some increased loss control measures. Greg Hodge of Moberly made a motion to adopt Resolution Number and an administrative 4

5 budget in the sum of $1,424,480. Vicky McLeland of Macon seconded the motion and it carried unanimously. Item #6: Adoption of a resolution approving assessments for the FY15 fiscal year to include the establishment of the rate per $100 of payroll, the Interest Revenue and Loss Fund Credits, and the establishment of FY15 expected losses to be used in the debit/credit formula was brought before the Board. The Executive Director gave a little history of the rate, stating that it has been $9.01 for the past four years, and that $9.76 has been the all-time high. He stated that the projected costs for this year are actually less than last year. He stated that last year the actual rate was $9.25, but that interest revenue was used to decrease the rate, instead of being given back to members as a credit on their assessment. He stated that staff is recommending a rate of $9.21 this year and not utilizing interest revenue credits to decrease it. He explained that when determining rates, projections for losses have to be made and reserves have to be established. He stated that the current year s claims are shaping up to be more than anticipated, which makes staff hesitant to release the interest revenue, as it might be needed for claims payment. He stated that loss fund credits would be released for fiscal years 2007 ($50,000) and 2008 ($100,000) to those who were members those years, reducing their assessments. One member of the Board stated that, while they understand the need for a rate increase, they would like to see the rate go up in smaller increments, with fewer credits after the gross assessment. He suggested a rate of perhaps $9.12, by using interest revenue, and giving no interest revenue credits after the rate. Several other Board Members expressed that they would support this change. The Executive Director stated that there was an increase in member payrolls, as well as the addition of new members, which have helped cover administrative costs. He stated that the main driving force for this rate increase is the increased self-insurance taxes that were discussed as part of the administrative budget. It was asked if the new property debit/credit put into place last year is having an effect on the rate. The Executive Director stated that the process is definitely making the members take a closer look at their property values and it makes MIRMA more marketable, however, it has very little effect on the rate. The Chairman of the Board stated that he would like to see a lower increase in the rate, with less interest revenue credits given. Rodney Bourne of Rolla made a motion to decrease the rate established in Section 1 of Resolution Number 14-10, from $9.21 to $9.12, applying an interest revenue credit in Section 2, and eliminating the interest revenue credit in Section 3. Matt Harline of Fulton seconded the motion and it carried unanimously. Rodney Bourne of Rolla made a motion to adopt amended Resolution Number and the rate per $100 of payroll of $9.12. Matt Harline of Fulton seconded the motion it carried unanimously. Item #7: Discussion of coverage packet changes for FY15 was brought before the Board. The Executive Director stated that the coverage packet for the upcoming fiscal year will be adopted at the Board of Directors Meeting held in July. However, he stated that he wanted to make the Board and membership aware of coming changes. The Executive Director reviewed each of the proposed changes in detail. The changes reviewed include: defining cyber-liability and providing coverage for third party damage with an annual aggregate limit of $3 million; excluding mesothelioma under liability coverage; providing coverage for pedestrian bridges outside of a park or golf course, with the exception of those exposed to vehicular traffic, which 5

6 would have a $10,000 deductible; lowering the deductible on property in the Special Flood Hazard Area from $500,000 per building to $50,000 per occurrence for properties that federal flood insurance cannot be purchased for; and establishing a tiered (instead of flat 10%) deductible of $10,000, $25,000 or $50,000 for Employment Liability Claims, based on each members claim activity in this regard; and increased liability limits for federal and out of state claims that are not subject to sovereign immunity. It was asked if the $3 million limit for the cyber-liability coverage could be exhausted by one member. The Executive Director stated yes, but that he hoped to be able to change that in the future. Requiring members to have some sort of protection policies for this matter was also discussed. The Executive Director also discussed where the recommendation for the deductible change on Employment Liability claims came from. He stated that these losses are growing steadily; with as many claims received since January as we normally receive in one full year. He stated it is felt that the tiered deductible will increase awareness within the membership and give members a higher stake in the human resources decisions they make. He stated that loss of public sector jobs and legal levels of proof dropping have played a part in higher numbers of and harder to defend cases. He stated that no level of the deductible is as high as the deductibles in place before this coverage was first brought in house. At this time the Chairman encouraged anyone with comments or suggestions to contact the staff prior to the Annual Meeting at which these changes will be approved. Item #8: Discuss the Association s guidance on FMLA for members with less than 50 employees. The Executive Director stated that is has been determined that every public employer is subject to FMLA and it s postings, however, there are some that will never have an employee eligible for FLMA. He stated that at MIRMA s recent employment practices seminar, the speaker suggested that everyone provide FMLA in order to avoid lawsuits. He stated that there are conflicting opinions and that one member has asked for some guidance from MIRMA. It was stated that this is a subject that needs to be followed closely, as it is changing rapidly. One Board Member stated that if there is no agreement on the applicability among those in the courts, Department of Labor, etc., he did not feel that the Association should be providing advice on the matter. It was stated that since there are conflicting opinions, employers should be especially concerned that they are treating employees equally. The Executive Director had provided to the Board and members present a recent article on this matter that was published by the Missouri Municipal League. It was suggested that an article be placed in MIRMA s newsletter regarding this topic and showing the MML article, as well. Item #9: Appointment of a Nominating Committee to prepare nominations for election to the Board of Directors at the Annual Meeting of the General Membership in July 2014 was brought before the Board. The Chairman of the Board appointed Russell Rost of Union, Phillip Shatzer of Paris and Greg Hodge of Moberly. REPORTS AND PRESENTATIONS Item #1: A review of the status of large, outstanding claims was brought before the Board. 6

7 The Claims and Litigation Director presented to the Board a list of current Workers Compensation and Property and Casualty claims that MIRMA is handling with a total incurred loss of over $250,000. The Claims and Litigation Director stated that there are no additions to the list since the last Board of Directors Meeting. He stated that the employment practices and boiler claims listed should resolve in the next days and drop off the list. He further reported to the Board that a six month follow up on the audit conducted by the Division of Workers Compensation has recently taken place and that they were very complementary about our response to the concerns that they had expressed. He stated that this process is now concluded. Item #2: Conveyance of the third quarter Loss Control Services Report was brought before the Board. The Loss Control and Member Services Director stated that going forward in the next quarter loss control staff will be busy with firearm s simulator training and swimming pool audits. He stated that job site inspections will also increase with the improved weather. It was asked by a Board Member if the loss control department is adequately staffed with the addition of several new members. The Loss Control Director stated that he feels it is for now. Item #3: Conveyance of Sewer Backup Deductibles for FY15 was brought before the Board. A written report was presented showing the members affected and their deductible percentages. It was stated that one member is able to be removed from the list, four are staying at the same deductible level, one member is decreasing their deductible level and two members are new to the list. Item #4: A report on new member marketing activity was brought before the Board. The Executive Director reported that MIRMA had a booth at the most recent Missouri City Clerks and Finance Officers Association meeting, and held a dinner for members and potential members. He stated that MIRMA also participated in the City Managers Conference for the first time this year and also held a small dinner during that event. He stated that he attended one day of the Governmental Finance Officers Association s recent conference and that they are considering having vendors next year, at which we would participate. He stated that there is an upcoming Elected Officials Conference at which MIRMA will participate and probably also conduct a dinner. The Executive Director stated that the City of Gallatin joined MIRMA effective April 1. He stated that the City of Platte City is currently conducting a bid process in which MIRMA participated, and that they will be making their decision soon. He stated that MIRMA was 15% less than the next lowest bidder. He stated that he has been contacted by a few other cities that either were not bidding all of their coverages or were too small for MIRMA to be beneficial. Item #5: A report on the dates of the FY15 Board of Directors Meetings was brought before the Board. Those dates are: July 24, 2014, October 31, 2014, January 30, 2015 and May 8, The Board of Directors Strategic Planning Retreat is scheduled for January 14-16,

8 CONCLUSION With no further items of business to come before the Board, Rodney Bourne of Rolla made a motion to adjourn. Phillip Shatzer of Paris seconded the motion and it carried unanimously. The meeting was adjourned at 12:02 p.m. Chairman of the Board ATTEST: Secretary 8