Submitted by Suanne Z. Thamm
Reporter – News Analyst
On January 16, 2014, Fernandina Beach City Commissioners (FBCC) convened in workshop session to learn about self-insurance possibilities for the city. Commissioner Johnny Miller was unable to attend.
Commissioner Pat Gass had requested the workshop to discuss the possibility of the city moving from its current insurance policies with Preferred Government Insurance Trust (PGIT), a pool of about 200 Florida public sector entities, to total self-insurance. At the request of City Manager Joe Gerrity, Mr. Shaun Woleshin of Harden and Associates, Inc., the city’s insurance agent, delivered a slide presentation that examined the city’s current insurance coverage, its recent claims record, and possibilities for increasing deductibles in certain categories to lower premiums. Following the briefing, some commissioners seemed satisfied that the city has moved toward self insuring by increasing deductibles resulting in lower premiums and excluding certain structures from the property insurance policy. However, Commissioner Pat Gass and local resident Lynn Williams expressed opinions that Woleshin had skirted the issue of self-insurance.
Currently, the city spends approximately $768K in annual insurance premiums for policies that cover $40M-worth of structures, a $10M payroll and the city’s auto fleet. Also included are $3M of general liability, $1M of public officials and employment practices liability, $2M of law enforcement liability and $250K to cover internal crime. Other ancillary lines of coverage are also included to cover youth accidents, marina and airport operators’ liability, public officials bond, environmental liability, accidental death and dismemberment, liquor liability and flood.
Woleshin explained that each year the city’s track record on claims is reviewed to determine whether deductibles should be increased or decreased. Because of ongoing discussions with the city an estimated $11M worth of water facilities are currently self-insured by the city. The city has also opted to go with lower auto and general liability limits this year. Sovereign Immunity as stated in Florida Statute 768.28 limits city liability by tort caps of $200K per person and $300K per incident.
The city re-evaluates its insurance each fall. Woleshin said that a “Stop Loss Aggregate Endorsement” with the PGIT program might be evaluated at the next renewal. Such an option requires a Self Insured Retention for Workers’ Comp in the $250K-$350K range and a substantial Self Insured Retention for the remaining liability lines in the $50K-$200K range. He reported that currently 7 members of the insurance pool have utilized this option with PGIT.
Woleshin said that the city currently insures all vehicles for both liability and physical damage. He suggested evaluating at renewal the option of only insuring the newer vehicles for physical damage and begin a cycling process of rolling off the older vehicles.
He reported that governmental entities can elect to self-insure Workers’ Compensation pursuant to section 440.38(6) Florida Statutes.
With respect to Workers Compensation premium and loss, Woleshin explained that the city’s current experience mod is valued at 1.39 resulting in an annual premium of $531,599. The mod is calculated on the city’s claims experience over the past 3 years. Because of the low claim rates for the city over the past 3 years, the projected mod for the 10/01/2014 renewal is 1.21. This means that city’s premium for this insurance will drop significantly, possibly by as much as $200K.
Woleshin commended the city for its leadership to change its culture and lower accidents and workers comp claims. He pointed to the work of the city’s Safety Committee. He said that during the first quarter of this fiscal year, there has been only one workers comp claim, and that was for less than one thousand dollars. He reminded commissioners that according to OSHA calculations the indirect cost of a workers comp claim is 2-3 times the direct cost. Lowering claims results in savings on many levels for the city.
Local resident Lynn Williams, who asked questions during the presentation, seemed unsatisfied by Woleshin’s presentation. “I thought we were going to hear about self insurance,” he said. He related personal experiences with self-insurance and small firms of 20 and 60 people during the 1980’s. He said that self-insuring resulted in an easier process. “Insurance companies play on paranoia,” he said. “Doing it ourselves we could save a lot, build a reserve that would make money for us.”
City Manager Joe Gerrity replied that the higher the city raises its deductibles, the more it takes on self-insurance. He said that commissioners need to decide where they find a comfort level.
Commissioner Gass said, “I’d love to work toward what Mr. Williams is talking about.”
Woleshin replied that he and his company do what’s best for the city, adding that under the law there are costs. In response to a question he said that there are no cities or counties in Florida “with no insurance.”
Vice Mayor Sarah Pelican said that being part of PGIT, a large public insurance pool, gives the city some flexibility. Mayor Ed Boner added that the city is self-insuring to a certain degree (raising deductibles, excluding water facilities from coverage, etc.)
The meeting adjourned after an hour with no indication that the topic would be revisited in the near future.
Editor’s Note: Suanne Z. Thamm is a native of Chautauqua County, NY, who moved to Fernandina Beach from Alexandria,VA, in 1994. As a long time city resident and city watcher, she provides interesting insight into the many issues that impact our city. We are grateful for Suanne’s many contributions to the Fernandina Observer.
January 17, 2014 1:08 p.m.
Insurance is a risk avoidance tool. Like health insurance, if you are young and in great health then a high deductible, catastrophic like policy is probably a good bet; but then there is the risk that should that young person be struck with a major illness or surgery, it could easily spell financial ruin. Being in a large municipal pool with high deductibles seems like the prudent way to go with annual reviews to see where limits and deductibles need to be tweaked based on risk factors.