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HomeMy WebLinkAboutE-18 Staff Report - Workers Comp Excess Program - Adopt Res.No. 2017CONSENT ITEM E-18 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL VIA: STEPHAN E. HUNT, CHIEF OF POLICE/ACTING CITY MANAGER FROM: TANYA BRAGG, DIRECTOR OF HUMAN RESOURCES & RISK MANAGEMENT DATE: JULY 17, 2017 SUBJECT: ADOPT RESOLUTION NO. 2017-C58 AUTHORIZING AND APPROVING POOLING OF SELF-INSURANCE THROUGH THE EXCESS WORKERS’ COMPENSATION PROGRAM OF THE CALIFORNIA JOINT POWERS INSURANCE AUTHORITY SUMMARY: In July 2016, the City joined the California Joint Powers Insurance Authority (CJPIA) and selected the first dollar workers’ compensation coverage, which has no deductibles or member-retained limits. By selecting this option the premium increased approximately $490,900 compared to the previous years. This increase was due to the new dollar-one coverage which was the only program the CJPIA offered at the time. Recently, the CJPIA Board approved a new Self-Insured Retention (SIR) based Workers’ Compensation Program and provided the City with new premiums for the 2017/18 fiscal year with a SIR of $250K. In order to authorize the City’s Membership with CJPIA and pool the City’s self-insurance workers’ compensation insurance through CJPIA to transition to the new Excess Workers Compensation Program, a Resolution is required for adoption. The proposed actions adopts Resolution No. 2017-C58 authorizing the transition from the first dollar workers’ compensation program to the $250K SIR based Workers’ Compensation Program in the City’s Membership with CJPIA and authorizes Staff authorize to complete all the necessary certifications. RECOMMENDATION: Staff recommends the City Council take the following actions: 1) Adopt Resolution No. 2017-C58, authorizing the transition from the first dollar workers’ compensation program to the $250K SIR based Workers’ Compensation Program in the City’s Membership with CJPIA; APPROVED CITY COUNCIL 7/17/2017 Adopt Resolution Approving Pooling of Self-Insurance Excess Coverage July 17, 2017 Page 2 2) Approve the necessary certifications to authorize and approve pooling of self-insurance through the excess workers’ compensation program of the California Joint Powers Insurance Authority, effective August 1, 2017; and 3) Authorize and direct Staff to apply to the Department of Industrial Relations for a Certificate of Consent to Self-insure, and to take such actions as necessary to effectuate self-insurance worker’s compensation for employees of the City. DISCUSSION: The California Joint Powers Insurance Authority (CJPIA) is a Joint Powers Insurance Authority located in La Palma, California. Established in 1978, the CJPIA currently provides self-insurance, excess insurance, and commercial insurance services to 117 Member Agencies (93 Municipalities, 18 Joint Powers Authorities, and six Special Districts). This new Excess Workers’ Compensation program will offer a reduction in the cost of the premium significantly from $769,900 to $392,800. The program will offer the same coverage including current training programs for Staff with the exception of the SIR transition from the first dollar coverage to the $250K. A minimum commitment period of three years is required pursuant to the Excess Workers’ Compensation Program Memorandum of Coverage. Although the City will continue to manage the tail claims prior to the CJPIA though the same trust account to pay the Worker’s Compensation Third Party Administration (TPA) YORK, the CJPIA is recommending the City increase the balance from $60,000 to $120,000. After July 1, 2016 any new claims, the TPA administrative cost in built into the Excess Workers’ Compensation contributions. With the new program, the City will also be responsible for the Workers’ Compensation State Assessment fee administered by the Department of Industrial Relations. The fee is calculated based on a percentage (7.13%) of the City’s total paid indemnity of the FY 2015-16 was $316,049; the assessment fee is approximately $22,547. The City would be responsible for remitting payment to the Department of Industrial Relations. The fee will vary year-to-year based on the total paid indemnity; however, we will continue to budget between $25,000-30,000 each fiscal year. FISCAL IMPACT: The reduction in SIR for the Workers’ Compensation Program will provide a savings of $377,100. Staff believes adequate funds have been allocated in the FY 2017/18 budget, however, the savings will be used to offset the additional cost of any tail claims previously opened prior to joining membership with the CJPIA. Also, if there are any additional funds required for the tail claims, a budget amendment may be required. Prepared by: Reviewed and Approved: Lislene Ledezma Tanya Bragg Human Resources Technician Director of Human Resources and Risk Management Adopt Resolution Approving Pooling of Self-Insurance Excess Coverage July 17, 2017 Page 3 Reviewed and Approved: Reviewed and Approved: Louie F. Lacasella Stephan E. Hunt Management Analyst Chief of Police/Acting City Manager Attachments: 1) Resolution No. 2017-C58 2) Contribution Estimate from JPIA 3) Memorandum of Coverage Excess Workers’ Compensation Program RESOLUTION NO. 2017-C58 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF AZUSA, AZUSA, CALIFORNIA, TO AUTHORIZE AND APPROVE POOLING OF SELF-INSURANCE THROUGH THE EXCESS WORKERS’ COMPENSATION PROGRAM OF THE CALIFORNIA JOINT POWERS INSURANCE AUTHORITY. THE CITY COUNCIL OF THE CITY OF AZUSA, AZUSA, CALIFORNIA, HEREBY DOES FIND AND RESOLVE AS FOLLOWS: WHEREAS, pursuant to the provisions of Section 6500 et seq. and also Sections 990.4 and 990.8 of the California Government Code, the California Joint Powers Insurance Authority (“California JPIA”) was created in 1977; and WHEREAS, the City of Azusa executed the Joint Powers Agreement, and became member of the California JPIA on July 1, 2016; and WHEREAS, the California JPIA has established and administered a number of successful self-insurance and loss pooling programs since April 1, 1978; and WHEREAS, there are significant financial and administrative advantages for the City of Azusa to transition from the Primary Workers’ Compensation Program to the Excess Workers’ Compensation Program. NOW, THEREFORE, THE CITY OF THE CITY OF AZUSA DOES HEREBY RESOLVE, ORDER AND DETERMINE THE FOLLOWING: Section 1. Workers’ Compensation coverage for the City of Azusa through the Excess Workers’ Compensation Program of the California JPIA is hereby authorized and directed effective August 1, 2017, for a minimum commitment period of three years, pursuant to the terms of the Excess Workers’ Compensation Program Memorandum of Coverage in effect at the time of any occurrence covered by the Memorandum of Coverage. Section 2. The City Manager or his/her designee of the City of Azusa is authorized and directed to apply to the Department of Industrial Relations for a Certificate of Consent to Self-Insure, and to take such other actions as be necessary to effectuate self-insurance of workers' compensation for employees of the City of Azusa. Section 3. That an initial annual contribution of $ 392,800.00, or such pro-rata part thereof as the California JPIA might determine for coverage of less than a fiscal period, for the Excess Workers’ Compensation Program is approved and the appropriate officers of the City of Azusa are authorized to pay the same to the California JPIA. Section 4. That the City of Azusa will subsequently be required to make deposits and deposit adjustments as provided in the California JPIA Joint Powers Agreement. Section 5. That the Mayor shall sign and the City of Azusa’s Clerk shall certify to the passage and adoption of this Resolution, and thereupon the same shall take effect and be in force. Section 6. That the City of Azusa's Clerk is directed to forward a certified copy of this Resolution to the California JPIA, 8081 Moody Street, La Palma, CA 90623. PASSED, APPROVED and ADOPTED this 17th day of July, 2017. ___________________________________ Joseph Romero Rocha Mayor ATTEST: ___________________________________ Jeffrey L. Cornejo, Jr. City Clerk STATE OF CALIFORNIA ) COUNTY OF LOS ANGELES ) ss. CITY OF AZUSA ) I HEREBY CERTIFY that the foregoing Resolution No. _______was duly adopted by the City Council of the City of Azusa at a regular meeting thereof, held on the 17th day of July, 2017, by the following vote of Council: AYES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: ___________________________________ Jeffrey L. Cornejo, Jr., City Clerk APPROVED AS TO FORM: ___________________________________ Best Best & Krieger, LLP City Attorney Contribution Estimate Covered Party: City of Azusa Coverage Term: 07/01/17 - 07/01/18 Coverage Type: Workers' Compensation Date of Estimate: 02/16/17 Scope of Coverage Coverage Limit Statutory Statutory Statutory Statutory Employer's Liability $10M sublimit $10M sublimit $10M sublimit $10M sublimit Risk Management Support Services Risk Management Evaluation Yes Yes Yes Yes Loss Control Action Plan Yes Yes Yes Yes Root Cause Analysis Yes Yes Yes Yes White Papers and Research Articles Yes Yes Yes Yes Safety Committee Participation Yes Yes Yes Yes Training and Loss Control Services Academies and Workshops Yes Yes Yes Yes Risk Management Educational Forum Yes Yes Yes Yes Resource Center Yes Yes Yes Yes Online Training Yes Yes Yes Yes Policy Template Library Yes Yes Yes Yes Cost of Coverage Contribution: General Government 360,263$ 226,400$ 199,900$ 192,000$ Public Safety 382,416$ 166,400$ 131,800$ 121,600$ Claims Administration Fees Included Yes Yes Yes Yes California State Assessment Included Yes No No No Total Contribution 742,679$ 392,800$ 331,700$ 313,600$ SIR Discount as a percentage n/a -47%-55%-58% SIR Discount in dollars n/a (349,879)$ (410,979)$ (429,079)$ Rate per $100 of Payroll: General Government 1.90$ 1.19$ 1.05$ 1.01$ Public Safety 4.84$ 2.11$ 1.67$ 1.54$ Blended 2.76$ 1.46$ 1.23$ 1.17$ Note: This is a preliminary cost indication based on data submitted to the California JPIA,as well as written and verbal representations made by staff members of the government agency applying for membership.The amounts stated above may change, based on subsequent events, claim development,and new information regarding the risk profile of the applying agency,as it becomes available, up until the completion of the underwriting process.The exposure basis/payroll used for this contribution estimate was $7,904,761 for public safety, and $19,009,106 for general government (non-public safety). Excess Workers' Comp Program $250k SIR $500k SIR $750k SIR Primary Program: 1st Dollar Effective $XJXVW 1, 2017 – July 1, 2018, as a joint protection program authorized pursuant to Article 11(a) of the California JPIA joint powers agreement Memorandum of Coverage Excess Workers’ Compensation Program Issued to the City of Azusa Effective August 1, 2017 – July 1, 2018 Administered by the California Joint Powers Insurance Authority CALIFORNIA JOINT POWERS INSURANCE AUTHORITY MEMORANDUM OF COVERAGE EXCESS WORKERS’ COMPENSATION PROGRAM COVER PAGE MEMBER: City of Azusa MAILING ADDRESS: 213 E. Foothill Boulevard Azusa, CA 91702 MEMBER RETAINED LIMIT: $250,000 PROTECTION LIMITS: Workers’ Compensation: Statutory Employer’s Liability: $10,000,000 per occurrence ENDORSEMENT: Losses involving multiple members PROTECTION PERIOD: From "VHVTU 1, 2017 at 12:01 a.m. Pacific Time until July 1, 2018 at 12:01 a.m. Pacific Time. This Memorandum is a description of the terms and conditions of the Program through which certain specified and limited self-insured risks of liability are administered by the Authority and shared by its Members. This Memorandum is not an insurance policy. As provided in Section 990.8 of the California Government Code and appellate court cases of Orange County Water District v. Association of California Water Agencies JPIA (1997) and City of South El Monte v. Southern California Joint Powers Insurance Authority (1995), the pooling of self- insured claims or losses among the Members of the Authority shall not be considered insurance nor be subject to regulation under the Insurance Code. California JPIA By President Memorandum of Coverage EWCP Page ii July 1, 2017 – July 1, 2018 TABLE OF CONTENTS 1. INTRODUCTION __________________________________________________________ 3 2. COVERAGE ______________________________________________________________ 4 A. Workers’ Compensation _________________________________________________ 4 B. Employer’s Liability ____________________________________________________ 5 C. Other Coverages _______________________________________________________ 8 3. MEMBER RETAINED LIMIT _________________________________________________ 9 A. General Rules __________________________________________________________ 9 B. Reserving Policy ______________________________________________________ 10 C. Total Incurred Claim Value Trigger_______________________________________ 10 4. TERMS AND CONDITIONS ________________________________________________ 11 A. General Terms and Conditions __________________________________________ 11 B. Inspection and Audit __________________________________________________ 11 C. Member’s Duties in the Event of Occurrence, Claim or Suit __________________ 11 D. Transfer of Settlement Authority ________________________________________ 12 E. Trust Account For Claim Payments _______________________________________ 12 F. Authority-Designated Claims Administrator ______________________________ 13 G. Privacy and Confidentiality of Claim Records ______________________________ 13 H. Other Protection ______________________________________________________ 14 5. EXCLUSIONS ___________________________________________________________ 21 6. DEFINITIONS ___________________________________________________________ 23 ENDORSEMENT _____________________________________________________________ 26 SECTION 1 – INTRODUCTION Memorandum of Coverage EWCP Page 3 July 1, 2017 – July 1, 2018 1. INTRODUCTION This Memorandum is a description of the terms and conditions of the Program through which certain self-insured risks of workers’ compensation and employer’s liability are administered by the Authority and shared by its Members pursuant to the Joint Powers Agreement creating the Authority under the provisions of §6500 et seq. of the Government Code. As provided in §990.8 of the Government Code, pooling of losses in this Program is not insurance. The sole duty of the Authority is to administer the Program adopted by the Members. The Authority will pay on behalf of members the liability only for Claims or losses which are pooled under the terms of this Memorandum and the Joint Powers Agreement. The provisions of the Program are subject to and subordinated to the Joint Powers Agreement or any action taken by the Executive Committee or the Board of Directors in connection with the Program. This Program has been adopted pursuant to action taken by the Executive Committee, and is subject to any amendment, modification or extension by the Executive Committee or the Board of Directors at a regular meeting or at a special meeting called for that purpose. The terms of this Memorandum shall be construed in an evenhanded fashion in accordance with the principles of California contract law. If the language of this Memorandum is alleged to be ambiguous or unclear, the issue of how the protection should apply shall be resolved in a manner most consistent with the relevant terms of this Memorandum without regard to authorship of the language and without any presumption of arbitrary interpretation or construction in favor of either the Member or the Authority. Any controversy or dispute arising out of or related to an interpretation or breach of this Memorandum shall be settled in accordance with the appeals procedures as set forth in this Memorandum. Throughout this Memorandum, words and phrases that appear in bold print are defined in Section 6. Definitions. SECTION 2 – COVERAGE Memorandum of Coverage EWCP Page 4 July 1, 2017 – July 1, 2018 2. COVERAGE In consideration for Member’s payment of the required contribution for participation in this Program, and subject to all terms and conditions set forth in this Memorandum, the Program agrees to provide the following protection: A. Workers’ Compensation The Program will reimburse the Member for sums in excess of the Member Retained Limit for Loss arising from workers’ compensation benefits for bodily injury by accident or occupational disease, including resulting death, deemed compensable under the laws of the State of California, and sustained by an Employee. Coverage is subject to the following conditions: 1. Bodily injury by accident must arise out of and in the course of employment by the Member and must occur during the Protection Period. 2. Occupational disease must be caused by or aggravated by the conditions of employment, and the exposure must occur during the Protection Period. 3. Bodily injury or occupational disease from presumptive causations contained in Labor Code §3212 et seq. or other California governmental codes must occur during the Protection Period. 4. Coverage is limited to amounts the Member is legally liable to pay after apportionment to pre-existing, concurrent or subsequent injuries or illnesses as defined by law. 5. The Program will pay temporary disability, permanent disability and death benefits at the statutory rates defined in the California Labor Code (Labor Code Division 4, Part 2, Chapter 2, Articles 3, 4, 4.5 and 5). If the Member pays the Employee for periods of temporary disability per a salary continuation plan under a collective bargaining agreement, memorandum of understanding or other employment agreement, the Program will reimburse the Member at the statutory temporary disability benefit rate for those periods paid by the Member. 6. If the Employee is eligible to receive salary continuation in lieu of temporary disability under Labor Code §4850 et seq., the Program will reimburse the SECTION 2 – COVERAGE Memorandum of Coverage EWCP Page 5 July 1, 2017 – July 1, 2018 Member at the statutory rate for temporary disability benefits that the Member would be obligated to pay if Labor Code §4850 et seq. did not apply. 7. Employees on temporary assignment or traveling for Member business outside the State of California who sustain an injury or occupational disease are covered for benefits under this Program. Benefits will be paid by the Member up to the amount payable under the workers’ compensation laws of the State of California, regardless of the jurisdiction selected by the Employee. B. Employer’s Liability The Program will indemnify the Member, where permitted by law, for sums in excess of the Member Retained Limit for Loss arising from bodily injury or occupational disease, including resulting death. 1. Coverage is subject to the following conditions: (a). Bodily injury by accident must arise out of and in the course of employment by the Member. Occupational disease must be caused by or aggravated by the conditions of employment. The accident or period of exposure must occur during the Protection Period. Bodily injury does not include emotional distress, anxiety, discomfort, inconvenience, depression, dissatisfaction or shock to the nervous system, unless caused by either a manifest physical injury or a disease with physical dysfunction or condition resulting in treatment by a licensed physician or surgeon. (b). Bodily injury or occupational disease suffered by Employee is not covered by workers’ compensation law. (c). The Employee’s duties are necessary or incidental to work conducted by the Member. (d). The Member timely and fully pursues all available remedies for contribution or indemnification from any and all other available sources. (e). The original Claim or Suit and related legal actions for damages are brought in the State of California or under the laws of the State of California. SECTION 2 – COVERAGE Memorandum of Coverage EWCP Page 6 July 1, 2017 – July 1, 2018 2. Subject to the foregoing provision of B. Employer’s Liability, the Program shall, for sums in excess of the Member Retained Limit: (a). Indemnify the Member for all sums legally payable as damages under this section. Damages include: i. Amounts for which the Member is liable to a third party by reason of a Claim, Suit or proceeding against the Member to recover damages suffered by the third party; or ii. Damages for care and loss of services of an injured employee of the Member; or iii. Damages for consequential bodily injury to a spouse, child, parent, or sibling of the Employee, provided that such damages are the direct consequence of injury or disease arising out of and in the course of the Employee’s employment by Member. iv. Injury or disease to an Employee arising out of and in the course of employment, claimed against the Member in a capacity other than as Employer. (b). Reimburse the Member for the following costs, in addition to the other amounts payable under this section, as part of any Claim, proceeding or Suit the Program defends: i. Reasonable expenses incurred at the Member’s expense, but not loss of earnings; ii. Premiums for bonds to release attachments and for appeal bonds in bond amounts up to twice the maximum amount of coverage under this Program; iii. Litigation costs taxed against the Member; iv. Interest on a judgment as required by law; and SECTION 2 – COVERAGE Memorandum of Coverage EWCP Page 7 July 1, 2017 – July 1, 2018 v. Other expenses incurred by the Program in discharging the obligation of the Program or its members under this section. 3. The following are excluded from coverage under this section: (a). Loss arising out of the actual or alleged discharge; coercion; criticism; demotion; evaluation; reassignment; discipline; defamation; harassment; humiliation; discrimination against; termination of; wrongful dismissal or discharge; breach of any oral or written employment contract or quasi-employment contract; misrepresentation; violation of employment discrimination laws; workplace sexual or other harassment; wrongful failure to employ or promote; wrongful discipline; negligent evaluation; wrongful demotion; wrongful deprivation of a career opportunity; employment-related invasion of privacy, defamation or wrongful infliction of emotional distress; or any other personnel practices, policies, acts or omissions, of any Employee, including Claims brought under Americans with Disabilities Act, Family Medical Leave Act, Pregnancy Disability Leave Act, Equal Opportunities Act, Fair Employment and Housing Act, Fair Labor Standards Act; or any other such State or Federal act; (b). Any obligation of any type that is imposed by a workers’ compensation, occupational disease, unemployment compensation, occupational health and safety law, or disability benefits law, or any similar law; (c). Damages for any injury or disease for any Employee engaged in work subject to the Longshore and Harbor Workers’ Compensation Act, the Outer Continental Shelf Lands Act, the Defense Base Act, the Jones Act, the Federal Employers Liability Act, or any other Federal workers’ compensation or occupational disease law, or any international workers’ compensation law; (d). Punitive or exemplary damages, however characterized, or damages, fines or penalties imposed under the Migrant and Seasonal Agricultural Worker Protection Act, or for violation of any other Federal, state, county or other law, regulation or ordinance; SECTION 2 – COVERAGE Memorandum of Coverage EWCP Page 8 July 1, 2017 – July 1, 2018 C. Other Coverages 1. Defense of Serious & Willful Misconduct Allegation (Labor Code §4553) or Alleged Discrimination Prohibited by Labor Code §132a. The Authority may, at its own discretion, elect to reimburse for sums incurred to defend a Member against Claims alleging Serious & Willful Misconduct or a violation of §132a. Any penalties awarded for Serious & Willful Misconduct or violation of §132a will be the responsibility of the Member. SECTION 3 – MEMBER RETAINED LIMIT Memorandum of Coverage EWCP Page 9 July 1, 2017 – July 1, 2018 3. MEMBER RETAINED LIMIT A. General Rules The Member Retained Limit shall be applied to the aggregate of all covered Claims arising from an Occurrence as defined in this Memorandum. The Member Retained Limit shall be reduced by both the payment of damages and Defense Costs. The following general rules apply to claims within the member retained limit: The Member shall pay any Loss up to the amount stated in the Declarations Page as the Member Retained Limit. The Authority will reimburse the Member for Loss over the amount stated as the Member Retained Limit. The Authority’s limit of liability for Employer’s Liability coverage, Part Two of this document, will not exceed the Protection Limit stated in the Declarations Page. The coverage provided by this Memorandum shall not apply to any claim until the amount paid by or on behalf of the Member shall have equaled or exceeded the Member Retained Limit. The Authority shall then only be liable for the Loss amount actually incurred that is in excess of the Member Retained Limit, regardless of whether the Member has other insurance, has other pooled coverage, or pays the Member Retained Limit itself. Amounts to be paid on a claim otherwise covered under this Memorandum shall not be paid until such time that the underlying Member Retained Limit has been paid. Further: 1. The Member Retained Limit shall not be impaired by any Claims brought against a Member which is not covered under this Memorandum. 2. The Member agrees not to insure or otherwise reinsure the Member Retained Limit without the Authority’s written permission. 3. This Memorandum will not drop down to assume or satisfy the financial obligations of the Member for Damages or Defense Costs within the Member Retained Limit. The Member Retained Limit can be satisfied only through payments for Damages and Defense Costs actually paid by the Member, to which the Authority has agreed. 4. The Member agrees that in the event of a judgment, settlement, or any Claim payment (including Defense Costs), in excess of the Member Retained Limit, all outstanding amounts within Member Retained Limit will be due and payable to SECTION 3 – MEMBER RETAINED LIMIT Memorandum of Coverage EWCP Page 10 July 1, 2017 – July 1, 2018 the Authority upon demand. Such payment must be made before the Authority pays, tenders, or deposits in court, any part of said judgment, settlement, or defense expenditure. Failure of the Member to comply with this provision will not invalidate the Memorandum, but in the event of such failure, the Authority will be liable only to the extent that it would have otherwise been liable had the Member complied with this provision. B. Reserving Policy With regard to the case reserves of individual Claims within the Member Retained Limit, the Authority-designated Claims Administrator, with oversight from Authority staff, shall determine reserve amounts as necessary and appropriate, in a manner consistent with the Authority’s reserving policy, using reasonable estimates of probable workers’ compensation exposure, based on facts and circumstances relevant to individual Claims. The Authority-designated Claims Administrator and Authority staff shall inform the Member of large reserve changes and provide the Member with an opportunity to give input concerning the establishment of reserve estimates for large Claims, however the Member’s sole recourse for disputing reserve estimates is to appeal in writing to the Executive Committee. The Executive Committee shall make a determination by majority vote, and the Executive Committee’s determination shall be final and binding. C. Total Incurred Claim Value Trigger Total incurred Claim values, which include actual claim payments as well as reserves for defense, indemnity, and expenses shall serve as the basis for the Authority determining whether a Claim has a reasonable possibility of exceeding the Member Retained Limit, and therefore trigger the Authority’s control of settlement and disposition of the Claim. At such time as the total incurred value of a Claim exceeds the Member Retained Limit, settlement authority and control of the Claim shall transfer from the Member, and become the sole responsibility of the Authority. SECTION 4 – TERMS AND CONDITIONS Memorandum of Coverage EWCP Page 11 July 1, 2017 – July 1, 2018 4. TERMS AND CONDITIONS A. General Terms and Conditions The Member agrees to abide by all employment, equal opportunity, anti-discrimination, health and safety laws, statutes and regulations. It understands that, among other obligations, it has a non-delegable duty to provide employees with a safe place to work, and training in safe work practices. The Member agrees to abide by all applicable wage and hour laws, collective bargaining agreements, memoranda of understanding, and other statutes and regulations regarding working conditions. The Member agrees to appoint an employee or official to serve as Risk Manager and act as a liaison to the Authority for all matters relating to risk management. The Member also agrees to immediately report every occupational injury or illness which results in medical treatment, or any claim by an Employee for workers’ compensation benefits, to the Authority or the Authority’s designated administrator, but in no instance to cause the delay of such report of injury, illness or claim more than five days after date of knowledge or as otherwise required by Labor Code §6409.1. The Member agrees to give every employee a claim form pursuant to Labor Code 5401 within one working day of receiving notice or knowledge of a claim or potential claim. In the event of an injury or illness, the Member agrees to provide first aid or arrange for appropriate immediate medical care. The Member agrees to provide suitable temporary modified or alternate duty whenever possible for employees with workers’ compensation injuries, and agrees to conduct interactive accommodation meetings as required by AB 2222. B. Inspection and Audit The Authority shall be permitted but not obligated to inspect the Member’s records, property and operations at any time. Neither the Authority’s right to make inspections, nor the making thereof, nor any report hereon shall constitute an undertaking, on behalf of or for the benefit of the Member or others, to determine or warrant that such property or operations are safe or healthful, or are in compliance with any law, rule or regulations. The Authority may examine and audit the Member’s books and records at any time during the Protection Period and extensions thereof, and within three years after the final termination of this Program, as far as they relate to the subject matter of this Memorandum. C. Member’s Duties in the Event of Occurrence, Claim or Suit In the event of any Occurrence, written notice containing particulars sufficient to identify the Member and also reasonably obtainable information with respect to the time, place, SECTION 4 – TERMS AND CONDITIONS Memorandum of Coverage EWCP Page 12 July 1, 2017 – July 1, 2018 and circumstances thereof, and the names and addresses of the injured and of available witnesses, shall be given by or for the Member to the Authority’s claims administrator as soon as practicable, but no later than required by statute or regulation. If a Claim is made against a Member, the Member shall immediately forward to the Authority’s claims Administrator every demand, notice, summons or other process received by the Member or the Member’s representative. The Authority’s claims Administrator will review the Claim, and under the direction of the Authority, undertake the administration of the Claim, including investigation, defense and settlement, as appropriate. The Member shall cooperate with the Authority and, upon the Authority’s request, assist as appropriate in the resolution of the Claim, including enforcing any right of contribution or indemnity against any person or organization who may be liable to the Member because of injury or damage to an Employee or Member property. The Member shall not voluntarily make any payment, assume any obligation or incur any expense. D. Transfer of Settlement Authority Any claim, suit or proceeding with a total incurred amount in excess of the Member Retained Limit shall not be settled without the written consent of the Authority. The Authority also has the right to consult and participate with the Member in the settlement, defense, or appeal of any other claim, suit or proceeding that might involve a Loss covered by this Memorandum. Upon transfer of settlement authority from the Member to the Authority as described in Section 3.C, the Authority’s control of settlement and disposition of the Claim is inclusive of the Member Retained Limit; meaning, the Member is required to contribute up to the full amount, if necessary, of its Member Retained Limit in order to pay for Damages and Defense Costs, as those payments become due. The Member shall be notified by the Authority of the transfer of settlement authority from the Member to the Authority. E. Trust Account For Claim Payments The Member agrees to establish and maintain a trust account with a financial institution for the purpose of paying for Claims, Damages, Defense Costs, and any other covered claims expense within the Member Retained Limit. The Member further agrees to: SECTION 4 – TERMS AND CONDITIONS Memorandum of Coverage EWCP Page 13 July 1, 2017 – July 1, 2018 1. Grant appropriate authorization to the Authority-designated Claims Administrator to issue checks and/or other methods of payment as necessary; 2. Use the trust account exclusively for workers’ compensation claim payments covered under this Program; 3. Issue all claim payments through the trust account, meaning: no workers’ compensation claim payments are to be made or disbursed from other accounts, or from any other source without first providing written notice to the Authority; 4. Take reasonable steps to ensure that the trust account is adequately funded so that claim payments can be made without delay, as they become due; 5. In the event that funds in the trust account are inadequate to pay for claim expenses as they become due, the Member shall be notified and required to deposit the necessary funds. If a lack of funding in the Member’s trust account results in a delay in the payment of a settlement, judgment, or any other authorized Claim expense, which subsequently results in fees or penalties, the Member will be solely financially responsible for any and all such costs, arising from the late payment; 6. Provide read-only access for on-line banking to the Authority, to facilitate claim payment reconciliations, and other data management needs of the Authority. F. Authority-Designated Claims Administrator The Member agrees to exclusively utilize the Claims Administrator that has been approved and designated by the Authority, and to report all Claims, regardless of whether the estimated Damages fall within or exceed the Member Retained Limit. Self- administration of Claims under this Memorandum is not permitted. The Authority agrees to take reasonable and appropriate steps to ensure that the designated Claims Administrator is periodically evaluated, and either meets or exceeds performance standards for claims handling and customer service, based on industry best practices. The Authority further agrees to provide appropriate oversight, regulate adjuster caseloads, and ensure that claims administration fees remain fair and equitable. G. Privacy and Confidentiality of Claim Records All Claim records, including Claim files, examiners notes, medical reports, subpoenaed records, correspondence, tapes and films, and whether electronic or hard files, are the property of the Authority. Because these records may contain confidential or private medical and/or psychological information related to workers’ compensation Claims administered by or on behalf of the Authority, access to Claim files and the information SECTION 4 – TERMS AND CONDITIONS Memorandum of Coverage EWCP Page 14 July 1, 2017 – July 1, 2018 contained therein is restricted to the Authority and its agents and assignees, with the exception that the Member is entitled to medical information limited to the diagnosis of the mental or physical condition for which workers’ compensation is being claimed and the treatment provided for this condition, or what is necessary for the Member to have in order to provide temporary or permanent modification or accommodation of the employee’s work duties. 1. Change in conditions If a Member experiences a significant change in operations or conditions, the Member shall notify the Authority as soon as practicable, and the Authority has the right to an underwriting review and to collect additional primary deposits as may be appropriate to reflect the added exposure to the Program. The additional primary deposit must be paid within ninety days of notice. H. Other Protection If collectible insurance or any other coverage or protection with any insurer, self-insured employer, joint powers authority or any other source, is available to the Member covering a loss also protected hereunder (whether on a primary, excess or contingent basis), the protection hereunder (including any Defense obligation) shall be in excess of, and shall not contribute with, such insurance or other coverage or protection, provided that this clause does not apply with respect to any insurance purchased by a Member specifically to be in excess of this Memorandum. Under no circumstances shall the protection afforded by this Program be considered primary, pro rata, concurrent or co-existent with such insurance, coverage, or other protection. 1. Termination or Amendment This Memorandum may be terminated or amended at any time in accordance with the Joint Powers Agreement and Bylaws of the Authority. 2. Changes to Memorandum Notice to any agent or knowledge possessed by any agent of the Authority or by any other person shall not effect a waiver of or a change in any part of this Memorandum, nor shall the terms of this Memorandum be waived or changed, except by a written addendum issued by the Authority to form a part of this Memorandum. SECTION 4 – TERMS AND CONDITIONS Memorandum of Coverage EWCP Page 15 July 1, 2017 – July 1, 2018 3. Subrogation and Recovery The Authority shall be subrogated to the extent of any payment hereunder to all the Member’s rights of recovery thereof. This section applies to all recoveries from third parties or governmental agencies, including recoveries for state mandate reimbursements pursuant to SB 90 or other statute or regulation. The Member shall do nothing after loss to prejudice such rights and shall do everything necessary to secure such rights. The Authority shall have standing to seek subrogation recovery in its own name or in the name of the Member, and the Member shall cooperate with and assist the Authority in pursuing such recovery, including assigning its right to recover subrogated amounts, and if necessary, executing a written agreement to effect such assignment. Any amount so recovered shall be credited to the workers’ compensation file. Any subrogation recovery by the Authority, after deducting the Authority’s recovery expenses, will first be used to reduce the Authority’s loss. The balance, if any, will be disbursed to the Member. 4. Assignment There is no assignment of interest permitted under this Memorandum. 5. Joint Powers Agreement The provisions of this Memorandum are subject to and subordinate to the terms and provisions of the Agreement creating the Authority, and in the event of any conflict between the terms and provisions of said Agreement and this Memorandum, the terms and provisions of the Agreement shall control. 6. Appeal of Disputes Should a dispute arise between the Member and the Program, the following conditions will apply: i. No party is entitled to appeal or arbitrate Claims under this Memorandum other than the Member. ii. Any disputes concerning coverage, protection, Defense obligations, or procedures of the Program, as interpreted by the Authority’s staff, shall be appealed to the Authority’s Executive Committee in accordance with the following procedures. iii. A Member may request any determination of a lack of coverage made by the Authority to be reviewed by the Chief Executive Officer. Such a request shall be in SECTION 4 – TERMS AND CONDITIONS Memorandum of Coverage EWCP Page 16 July 1, 2017 – July 1, 2018 writing and must be made within 90 days of the date of notice from the Claims Administrator. iv. Upon request, the Chief Executive Officer shall review a determination of a lack of coverage made by the Claims Administrator or Authority staff and shall send to the Member a written determination of coverage. v. If a Member disagrees with the coverage determination by the Chief Executive Officer, the Member may appeal the decision to the Appeals Committee. The Appeals Committee consists of the Executive Committee and the chairs of the Managers and Finance Officers Committees. Appeals must be in writing within 90 days of the date of the Executive Director's written decision. The appeal request must state why the Member disagrees with the denial, and the Member should present any information that may have a bearing on the ultimate determination of coverage. vi. The appeal request shall be presented by Authority staff to the Appeals Committee, on a regularly scheduled Executive Committee meeting day, allowing time for sufficient review and agenda deadlines. Staff shall notify the Member in advance of the meeting at which its appeal will be presented. vii. If the Member would like to personally address the Appeals Committee, the Member or the Member’s representative may attend the meeting and speak to the issue. viii. The Appeals Committee may refer the appeal to the Coverage Committee and consider the recommendation of the Coverage Committee during its deliberation on the appeal. The Appeals Committee’s decision is final. Authority staff will notify the Member of the Appeals Committee’s decision in writing. ix. Following a final determination regarding a Claim, consideration of the decision may be reopened at the request of the Member if circumstances change as follows: (1) a new and distinct Claim arising out of the prior occurrence is presented to the Member, or (2) new and distinct causes of action are added to the Claim. If the new Claim or causes of action are reasonably thought by the Member to be covered, the Appeals Committee will reconsider the issue, in accordance with the procedure in section, upon request. Any request for such reconsideration must be in writing within 90 days of the notice to the Member of the new Claim or cause of action. x. If a Member disputes a coverage issue, then, during the course of the administrative and arbitration proceedings provided herein, the Authority shall defend the Claim against the Member and have the right to control any settlement of that Claim, SECTION 4 – TERMS AND CONDITIONS Memorandum of Coverage EWCP Page 17 July 1, 2017 – July 1, 2018 subject to the right of the Authority to recover from the Member any amounts paid out by the Authority for such defense or settlement which are finally determined by the Appeals Committee, or as a result of the Binding Arbitration Process, not to be owed by the Authority under the Program. 7. Arbitration If the Member has followed the coverage Appeals Procedure outlined in 4-H.6. Appeal of Disputes and disagrees with the final determination of the Appeals Committee, the Member may request consideration of the coverage issue through the Authority’s binding arbitration process. The Arbitration process shall be as follows: i. Following a decision by the Appeals Committee, the appealing Member shall notify the Chief Executive Officer in writing, within thirty days of the Appeals Committee’s final decision, that it wishes to participate in Binding Arbitration and shall submit a non-refundable $1,000 arbitration appeal fee. The written notice shall specify the grounds for the arbitration. ii. Following payment of the arbitration appeals fee, the name of each Member, other than the appealing Member and the Members represented on the Appeals Committee, shall be placed in an unmarked envelope. Each envelope shall be placed in a box and eleven envelopes shall be drawn by the Chief Executive Officer. A representative of the appealing Member may be present at the drawing. iii. The managers of the eleven Members shall be the pool of potential arbitrators. The eleven Members and the names of their managers shall be given in writing to the appealing Member. iv. The appealing Member shall have the right to strike two or less names from the pool for any reason which shall not be disclosed. The Authority shall have the right to strike two or less names from the pool for any reason which shall not be disclosed. The appealing Member and the Authority must strike names within five business days of the drawing. The right of either party to strike names shall lapse at 5:00 PM on the fifth business day following the drawing. Notice of names stricken by either party shall be given in writing to the other party prior to 5:00 PM on the fifth day following the drawing. v. The remaining managers shall be contacted by the Chief Executive Officer to determine their willingness to serve on the arbitration panel. If more than five are willing to serve, each name shall be placed in an unmarked envelope, put in a box, SECTION 4 – TERMS AND CONDITIONS Memorandum of Coverage EWCP Page 18 July 1, 2017 – July 1, 2018 and the Chief Executive Officer shall draw five envelopes from the box. The individuals whose names are drawn shall be the arbitration panel and they shall be disclosed in writing to the appealing Member. vi. If only five are willing to serve, they shall be the arbitration panel. vii. If fewer than five are willing to serve, the name of each Member not drawn in the previous selection drawing shall be placed in an unmarked envelope, put in a box, and four envelopes shall be drawn for each arbitration panel position needed to complete a five-Member panel. A representative of the appealing Member may be present at the drawing. The names drawn shall be disclosed to the appealing Member who may reject, for any reason which shall not be disclosed, one name for each four names drawn. The Authority may also reject one name for each four names drawn and shall not disclose the reason. Names rejected by the appealing Member and the Authority must be rejected within 48 hours of the drawing. The right to reject names shall lapse 48 hours following the drawing. viii. The managers or chief executive officers of the Members remaining shall be contacted by the Chief Executive Officer to determine their willingness to serve on the arbitration panel. The names of those willing to serve shall be placed in unmarked envelopes, put in a box, and the number necessary to fill out the arbitration panel shall be drawn by the Chief Executive Officer and disclosed in writing to the appealing Member. A representative of the appealing Member may be present at the drawing. ix. This process shall be repeated until five Members are obtained for the arbitration panel. x. The arbitration panel Members shall be compensated at the rate of $125 per half- day or portion thereof. If a panel Member is required to stay away from home overnight, lodging shall be paid by the Authority. Necessary meals shall be provided for all panel Members. Mileage costs shall be reimbursed by the Authority at its standard rate. xi. The cost of the arbitration panel shall be borne by the Authority. The cost of presentation by the appealing Member, including preparation, exhibits, attorneys, and all other costs of the Member shall be paid by the Member. xii. The arbitration panel may request legal counsel that shall be selected by the Chief Executive Officer and paid for by the Authority. Legal counsel shall not be the counsel for the Authority that has advised the staff and Executive Committee. However, counsel for the Authority may participate in or make the presentation to SECTION 4 – TERMS AND CONDITIONS Memorandum of Coverage EWCP Page 19 July 1, 2017 – July 1, 2018 the arbitration panel on behalf of the Authority, as requested by the Chief Executive Officer. xiii. The parties to the arbitration shall not be governed by formal rules of evidence. xiv. The arbitration panel’s decision shall be final and binding on the Member and the Authority. Decisions of the arbitration panel shall be by majority vote. xv. The decision of the arbitration panel shall be written and shall govern the issue decided but may be referred to by the Authority and future arbitration panels for precedent. SECTION 5 – EXCLUSIONS Memorandum of Coverage EWCP Page 21 July 1, 2017 – July 1, 2018 5. EXCLUSIONS This Memorandum, including any obligation to indemnify, defend or pay Defense Costs, does not apply to: A. The Member’s obligation to pay salary in lieu of temporary disability benefits under Labor Code §4850, except to the extent that the Member would be obligated to pay temporary disability benefits in the absence of the mandate of §4850. B. The Member’s obligations under Labor Code §4856 to provide health benefits. C. Injury or disease to an Employee while knowingly employed in violation of law; D. Injury or disease intentionally caused or aggravated by or at the direction of the Member; E. Penalties or fines imposed for violation of Labor Code 132a or Labor Code §4553 (Serious & Willful Misconduct); F. Penalties or self-imposed benefit increases for violations of Labor Code §5814 et seq. attributable to the Member’s actions; G. Damages arising out of, or in any way related to, operations with respect to which the Member: 1. has violated or failed to comply with any workers’ compensation law, or any provision thereof, or 2. has rejected any workers’ compensation law. H. Liability for additional compensation imposed on the Member under Labor Code Section 4557 for injury to an employee under sixteen years of age and illegally employed at the time of injury. I. Any Claim, Suit, liability, or alleged liability for punitive or exemplary damages or fines or other damages imposed primarily for the sake of example and by way of punishing the Member, including liability of a Member to defend or pay damages where the governing body thereof has elected to provide a defense or pay damages for a Claim, action or judgment for punitive or exemplary damages SECTION 5 – EXCLUSIONS Memorandum of Coverage EWCP Page 22 July 1, 2017 – July 1, 2018 J. Any liability for which the member is obligated to pay damages by reason of liability assumed in a contract or agreement SECTION 6 – DEFINITIONS Memorandum of Coverage EWCP Page 23 July 1, 2017 – July 1, 2018 6. DEFINITIONS A. Authority means the California Joint Powers Insurance Authority. B. Bodily Injury means bodily injury, sickness, or disease sustained by any person, including death resulting from any of these at any time. C. Claim means a notice, demand, or Suit against a Member to recover Damages. Claim does not include an administrative claim filed with the Equal Opportunity Employment Commission or the California Department of Fair Employment and Housing or any other administrative or regulatory agency. D. Damages means compensation in money recovered by a party for loss or detriment it has suffered. Damages do not include defense of Claims or any punitive, exemplary or multiplied damages or non-monetary relief or redress or injunctive relief. E. Defense Costs means all fees and expenses incurred in connection with the administration, investigation, defense, and appeal of a Claim covered hereunder, including attorney fees, court costs, premiums for appeal bonds, and interest on judgments accruing after the entry of judgment, and also shall include the costs of any Claims administrator or defense counsel assigned by the Authority to respond to any Claim on behalf of the Authority. Defense Costs shall not include the office expenses of the Member, nor the salaries of employees or officials of the Member, nor expenses of any Claims administrator engaged by the Member. Defense Costs also do not include any fee or expense relating to coverage issues between the Authority and any Member. F. Discrimination means injury caused by or arising out of: 1. Unlawful discrimination because of race, sex, color, age, religion, or national origin, or membership in any similarly legally protected class; or 2. Violation of the discrimination prohibitions of the Americans with Disabilities Act of 1990, any rules or regulations promulgated thereunder and amendments thereto or similar provisions of any Federal, state, or local statutory law or common law. G. Employee includes any person falling within the definition of “employee” under Labor Code Division 4, Chapter 2, Article 2, beginning with §3351. Volunteers are considered employees under this Memorandum only if the Member has a resolution in effect, and passed prior to the date of injury or illness at issue, SECTION 6 – DEFINITIONS Memorandum of Coverage EWCP Page 24 July 1, 2017 – July 1, 2018 providing workers’ compensation coverage to volunteers under Labor Code §3363.5, and while performing specific functions in the course and scope of authorized activities under the direction and control of the Member. H. Loss means amounts actually paid by the Program for statutory workers’ compensation benefits, employer’s liability Claims and allocated costs for investigation, administration and defense of Claims under this Memorandum of Coverage. I. Member means the entity, including all of its departments and constituent agencies, which has adopted a resolution to participate in the Program and become a signatory to the Joint Powers Agreement creating the Authority as may be amended from time to time, whose name appears on the Cover Page of this Memorandum. Member includes any other agency for which the Member’s governing board or council acts as the governing board, and also includes any commissions, agencies, districts, authorities, redevelopment agencies, boards, or similar entities coming under the Member’s direction and control. Member shall include any other agency authorized by the Authority’s Board of Directors. The Member must be approved for self-insurance by the Office of Self Insurance Plans and maintain its qualification for self-insurance during the Protection Period. J. Member Retained Limit means the amount per Occurrence stated on the cover page that the Member retains as its self-insurance. The Member Retained Limit includes both Damages and Defense Costs. For the purpose of settlement authority determination, the Member Retained Limit includes actual claim payments, and case reserves. K. Memorandum means this Memorandum of Coverage for Excess Workers’ Compensation authorized by the Joint Powers Agreement of the Authority specifying the terms and conditions of the Program. L. Occurrence means a single accident or event causing bodily injury to one or more employees; or occupational disease sustained by one or more employees as a result of an outbreak of the same communicable disease, or sudden and accidental exposure to the same environmental hazard. M. Program means the California Joint Powers Insurance Authority’s Excess Workers’ Compensation Program described by this Memorandum and the Agreement of the Members creating the Authority. The Program is a fund created by the Members for the purpose of pooling self-insured losses. N. Protection Period means the time period shown on the Cover Page of this Memorandum. SECTION 6 – DEFINITIONS Memorandum of Coverage EWCP Page 25 July 1, 2017 – July 1, 2018 O. Suit means a civil proceeding in which a Member is named as a defendant or cross-defendant, or an arbitration proceeding or alternative-dispute resolution proceeding to which a Member submits with the Authority’s written consent. Memorandum of Coverage EWCP Page 26 July 1, 2017 – July 1, 2018 ENDORSEMENT LOSSES INVOLVING MULTIPLE MEMBERS It is understood and agreed that this Memorandum shall apply, as follows, to losses involving multiple Members: Each Member’s final retention allocation will be calculated based on its pro rata percentage share of the “final Loss valuation” times its retention specified in this Memorandum. The retention specified will be applied until the “final loss valuation” is determined, as outlined below. The total incurred for all Members involved in the Loss will be evaluated five years from the end of the coverage period in which the Loss occurs, and will be used as the “final Loss valuation” for determination of the final retention and limits allocations. If the total Loss for all Members involved in a single occurrence exceeds the maximum Program limit of indemnity, allocation of liability for the excess amount will also be determined based on each Member’s pro rata percentage of the “final loss valuation.” It is further agreed that nothing herein shall act to increase the Authority's limit of indemnity. This endorsement is part of the Memorandum and takes effect on the effective date of the Memorandum unless another effective date is shown below. All other terms and conditions remain unchanged.