On March 23, 2017, City Council approved Agreement No. LW7-953-3735 with Arthur J. Gallagher Risk Management Services, Inc. for insurance broker services. Arthur J. Gallagher Risk Management Services, Inc. acts as the Insurance Broker of Record for the City of Chandler’s workers’ compensation, casualty/liability, property, and automobile insurance coverage. They also advise and coordinate with the City’s Risk Management Administrator and City Attorney to obtain bids from insurers and negotiate the best terms and coverage for the various exposure areas.
The City self-insures and carries excess coverage in the areas and at the levels indicated below. The total premium cost of recommended coverage through commercial carriers for FY 2024-25 is estimated at $3,929,813, compared to FY 2023-24 which was $2,874,962. The estimated increase in rate premium is due primarily to a 62% rise in City’s property values. This includes updated valuations at the water treatment facilities.
Excess Workers’ Compensation:
Excess Workers’ Compensation Insurance is carried through Safety National. In FY 2023-24 the City was self-insured (“SIR”) for the first $3,000,000 for Police and Fire, and $1,500,000 for the remainder of the City employees. For the 2024 renewal, the City received a quote from Safety National. Details are included in the attachment to this memorandum.
Safety National provided a renewal quote with a 15.5% increase in premium. This increase is being driven primarily by an 15% increase in payroll costs and does not include any increases to SIR for any category.
Property Insurance:
Property Insurance is carried through The Travelers Indemnity Company which provides broad coverage for buildings, water facilities, well sites, business personal property, fine arts, Electronic Data Processing (EDP), mobile equipment, as well as boilers and machinery. This policy has various deductibles including $100,000 per occurrence for most losses, $100,000 for earth movement, $500,000 for Flood Zone A, $250,000 for Flood Zone B, and $100,000 occurring anywhere else in the policy territory where flood coverage applies, in any one occurrence. Premium for FY 2024-25 is not to exceed $1,251,000. Premium for FY 2023-24 was $699,000. As stated before, the City’s 62% increase in property values is the main factor in the increase in the premium.
Due to the catastrophic losses that have occurred in the United States as well as internationally, the property insurance market has hardened, resulting in significant increases in premiums. As a result of the hard market, Travelers Insurance Company, who had written the City's property and Auto Physical Damage (ADP) policy up to FY 2019/2020, will no longer write the City’s ADP and equipment. The City has been unable to find a carrier that will write over the road coverage for ADP and equipment that is licensed for road use. The City continues to self-insure all City owned autos and equipment until a carrier is willing to write over the road coverage.
Excess Liability Coverage:
Excess Liability Coverage is carried through Safety National, Gemini, Arch, StarStone, Westchester, and Great American in $5 million increments, for a total of $30 million excess liability coverage for FY 2024-25.
• $5 million excess of $1,750,000 Self-Insured Retention – Insurance is carried through Safety National. Premium for FY 2024-25 is not to exceed $615,859. Premium for FY 2023-24 was $518,949.
• $5 million excess of $6,750,000 – Insurance is through Gemini. Premium for FY 2024-25 is $341,334. Premium for FY 2023-24 was $278,020.
• $5 million excess of $11,750,000 – Insurance was through Genesis. New insurance carrier is Arch. Premium for FY 2024-25 is $201,240. Premium for FY 2023-24 was $238,392.
• $5 million excess of $16,750,000 – Insurance is through StarStone. Premium for FY 2024-25 is $135,192. Premium for FY 2023-24 was $129,000.
• $5 million excess of $21,750,000 – Insurance is through Westchester. Premium for FY 2024-25 is $131,064. Premium for FY 2023-24 was $122,550.
• $5 million excess of $26,750,000 – Insurance is through Great American. Premium for FY 2024-25 is $118,000. Premium for FY 2023-24 was $110,000.
Crime Insurance:
Crime Insurance is carried through National Union Fire Insurance Co. of Pittsburgh, PA. Coverage includes state required bonds for the City’s Management Services Director and Accounting Manager. This policy also provides coverage for members of the City’s boards and commissions. Premium for FY 2024-25 is $15,520. Premium for FY 2023-24 was $15,679.
Network Security and Privacy Liability Insurance (Cyber Insurance):
Network Security and Privacy Liability Insurance also known as Cyber Liability Insurance was carried this past fiscal year through Cowbell with $5 million coverage. For the upcoming fiscal year, the Cyber Liability is carried through Tokio Marine, AmTrust and Crum & Forster in $5 million increments, for a total of $15 million aggregate coverage for Liability, Data Restoration and System Failure, Premium for FY 2024-25 should not exceed $357,273. Premium for FY 2023-24 was $184,055. The increase in the premium reflects the increase in coverage.
Storage Tank Liability Insurance:
The City has one remaining fuel storage tank at the Chandler Airport that will be decommissioned as it is 38 years old. Storage Tank Liability Insurance is no longer available in Arizona. As was done last year, the City has opted to submit a letter of the use of the financial test for self-compliance from the City of Chandler Deputy City Manager and Chief Financial Officer (CFO). When the City had coverage, Policy limits were $1,000,000 per tank, with a $25,000 per incident deductible. Premium for FY 2024-25 is $0. Premium for FY 2023-24 was $0.
Airport Liability Insurance:
Airport Liability Insurance is carried through ACE Property & Casualty. Airport Owners and Operators Liability policy provides $50 million in coverage per occurrence. Premium for FY 2024-25 is $16,030. Premium for FY 2023-24 was $16,030.
Fine Arts Insurance:
Fine Arts Insurance is carried through Axis Insurance Company. This is purchased to cover the City’s Museum collection and temporary loans. Deductible per occurrence is $1,000 and for Deductible for outdoor art is $2,500. Premium for FY 2024-25 is not to exceed $8,996. Premium for FY 2023-24 was $8,996.
Pollution Liability:
Pollution Insurance is carried through Ascot Insurance Company and provides a policy aggregate limit of $5 million over a three-year period. This is a new coverage purchased by the City, to cover, Third Party Bodily Injury and Property Damage for New and for Pre-Existing Conditions, Cleanup Costs for Pre-Existing Conditions, Unlimited Defense outside the Limits of Liability, Non-Owned Disposal Site, Mold, Legionella, Emergency Response, Asbestos and Lead-Based Paint, Sudden and Accidental. Three-year Premium for FY 2024-25 through FY 2026-27 is $102,374.
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