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HomeMy WebLinkAboutItem 4.6 Revised Risk Coverage Agreement (2) h CITY OF DUBLIN AGENDA STATEMENT CITY COUNCIL MEETING DATE: June 8, 1992 SUBJECT: Approval of Revised Risk Coverage Agreement - ABAG PLAN and Authorization to Participate in Self- Insured Property Insurance Coverage Program (Prepared by: Paul S. Rankin, Assistant City Manager) EXHIBITS ATTACHED: 1. Revised Risk coverage' .X reement, dated July 1, 1992 with Appendices (Memorandum of Coverage and Liability Program Procedures) 2 . Memorandum from City Attorney 3. Resolution Approving the Revised Risk Coverage Agreement 4. Resolution Approving Participation in the Self-Insured Property Insurance Program RECOMMENDATION: Receive Report; Adopt Resolutions and Authorize 44V the Execution b Staff of the Revised Coverage age Agreement. FINANCIAL STATEMENT: The adoption of revised documents will allow the City to obtain a decrease in its Property Insurance of approximately $1,275 for Fiscal Year 1992/93. Future cost savings and/or equity refunds may also be achieved. DESCRIPTION: Background In 1986, the commercial insurance industry drastically reduced the provision of insurance to public agencies. At that time some agencies, including the City of Dublin, were without insurance. In order to respond to this crisis and in an attempt to stabilize the long term provision of liability insurance, cities jointly formed self-insured pools. The City Council approved the City of Dublin's participation in ABAG PLAN on June 26, 1986. Success of ABAG PLAN In 1986, the program began with 20 member cities. Over the past four years, six additional cities have joined. Recently, the Board of Directors approved applications from 2 cities, brining the total membership to 28 for Fiscal Year 1992-93. It is anticipated that the program will have reserves of over $20 million in Fiscal Year 1992-93. The City of Dublin has had very favorable experience with this program. Prior to 1986, the City paid insurance premiums with very little input on the management of claims. Under a commercial insurance policy, the City did not have an opportunity to receive equity distributions. Since 1990, ABAG PLAN has distributed equity distributions. The following chart identifies the City's experience: ABAG PLAN Liability Insurance Program Equity Dis.J.Cion Program Year Premium Paid Received 1986-87 $ 49,360 $ 0 1987-88 87,745 0 1988-89 144, 125 0 1989-90 126, 053 0 1990-91 96, 166 33,962 1991-92 110,862 39, 099 Est 1992-93 96,844 60, 059 Total $ 711, 155 $ 133,120 --------------------------------------------------- -- -A COPIES TO: CITY C L ITEM NO. 44- / n 0 The distribution of equity is only provided for after an actuarial study determines whether anticipated expenses can be covered by existing reserves. As a matter of policy, the Board of Directors has attempted to assure that funding remains at the 90% confidence level. This means that the actuaries believe adequate funds would be available 90% of the time. This is considered to be a conservative reserve policy. It must also be noted that prior year equity distributions do not guarantee future disbursements. The excess reserves have accumulated as a result of favorable claims experience and interest earnings on the program portfolio. Obviously, changes in either of these factors will affect the availability of excess equity. The benefit of the arrangement to the City is the fact that we have an opportunity to share in this equity, rather than making payments to a private company. Current ABAG Pool Structure The following gives an overview as to how the pool is organized: ■ Rather than set up a new JPA in 1986, ABAG utilized its JPA as an umbrella to provide insurance pooling to the members. ■ Those involved in the insurance pool did not want cities not involved in the insurance program to have direct input on the program. Therefore, ABAG PLAN Corporation, a non-profit corporation, was formed. ■ The ABAG PLAN Corp. Board of Directors consists of one representative from each of the member cities participating in the insurance program. ■ ABAG (JPA) , as the provider of the insurance coverage, has entered into an Agency Agreement, whereby ABAG PLAN (non-profit corporation) shall act irrevocably as the agent for ABAG. e Currently ABAG PLAN only self-insures liability insurance. There is a group purchase of commercial property insurance and employee bond coverage. However, these programs do not currently involve self- insurance or risk sharing among the members. Reasons for Modification The following are the primary reasons for modifying the agreement. (1) The 1986 document was designed to accommodate a debt issuance. This is no longer being pursued and therefore a lot of the language in the current agreement was included at the request of underwriters and bond counsel. Given the significant program reserves, providing for a debt issuance is no longer necessary. (2) Over the past six years, the organization has adapted its operation and some of the current practices are not consistent with the document; for example, the dates by which premiums are calculated or certain formulas. (3) The current document is difficult to amend since it requires unanimous consent of all City Councils on issues affecting the type of coverage provided. Since the program continues to gain members, this becomes important. A single city could keep the other 27 cities from making a change. (4) The group is now interested in providing a self-insured property insurance program, which cannot be done without an amendment. A complete description of the Property Insurance Program is discussed later in this report. Proposed Documents The proposed format is significantly different than the current documents; therefore, Staff has not tried to provide a line-by-line comparison. Under the proposed program, the following structure would be used: Coverage Agreement ■ Each member City Council approves a Revised Coverage Agreement (Exhibit 1) . This document requires the agency to participate in the Liability Program (Section 6.2) . ■ The Board of Directors is authorized to establish each insurance program, provided that it is actuarially sound and there is a legal basis (i.e. property, workers comp, etc. ) (Article V) . The 'pool has always operated with an annual actuarial report and, as a policy, the Board of Directors has recommended funding at a high confidence level to reduce potential risk. ■ The Coverage Agreement also defines the general terms and conditions for expulsion or withdrawal and other aspects of operating the pool. ■ In order to amend the Coverage Agreement, it will continue to require approval by all member entities. The Board would be authorized to amend the Appendices (i.e. Memorandum of Coverage or Program Procedures) with a 2/3 vote of the Board. Memorandum of Coverage The Memorandum of Coverage for the Liability Program is largely the same as the current document. This document will be an appendix to the Coverage Agreement. The most significant change is the ability of the Board of Directors to amend the coverage. This is important since some of the agencies have suggested that the PLAN consider providing coverage now listed under exclusions. As noted in the memorandum from the City Attorney (Exhibit 2) , the City Council should be aware of this change. As a matter of local policy, Staff has typically brought changes in insurance to the attention of the City Council. For example, the following proposal for property insurance is presented for consideration by the City Council. The ability to amend coverage without unanimous action by each City Council will provide flexibility in addressing these issues. Proposed Self-Insured Property Insurance As noted in the reasons for undertaking the change to the program, ABAG PLAN is considering offering self-insured property insurance for member agencies. The Board of Directors has commissioned an Actuarial Study which indicates that provision of this coverage would be a benefit to member agencies. Current Property Insurance Coverage Currently, the City purchases this coverage with several other cities in the ABAG PLAN program. The policy has a $5,000 deductible and there is not any risk sharing among the members. For example, if a building is destroyed in one community, the other participants do not contribute financially towards a particular loss. All losses are paid by the Insurance Company. The City currently insures all buildings and contents for loss due to fire, theft or vandalism. The City does not currently carry earthquake or flood insurance on any of the structures the City owns. In addition, the City has boiler and machinery coverage for mechanical systems owned (i.e. the Civic Center hot water system boiler) . In the past, the City has typically relied on the Internal Service Fund for replacement of vehicles owned by the City. All of these vehicles are used by Police .Services personnel.. Proposed Self-Insured Property Insurance Coverage The proposed coverage is comparable to the current coverage carried by the City. The primary difference is the fact that all of the participants will be sharing in the first layer of coverage. Also, the new coverage will cover vehicles; however, there is a separate deductible. The following describes how this works: Type of Loss Non-Vehicle Losses Agency Deductible: Each agency will be responsible for a $5, 000 deductible for all covered losses except vehicles. Vehicle Losses Agency Deductible: Each agency will have a $10, 000 deductible for any vehicle loss. The purpose of the higher deductible is to reduce administrative costs in processing claims, while encouraging agencies to use vehicle replacement funds for this type of coverage. Several agencies have heavy equipment or fire engines which could be involved in a significant loss where a $10,000 deductible would be appropriate. Deductible up to This is a pooled layer which means that all of the $100, 000 participants share in losses contained in this category. The actuary has identified the premiums necessary to reserve for anticipated losses. It is assumed that a minimum of 8 agencies will participate. $100,000-$100 Million These losses would be covered by a commercial insurance policy purchased by ABAG PLAN. Each City would continue to provide a schedule listing insured property and an estimated value. As noted, ABAG PLAN has had an actuary review this plan. The Insurance Broker has also obtained coverage which will limit the financial risk of the pooled layer. This has been limited through a stop loss provision, which limits the total amount of all claims over $10,000. The limit caps the total exposure at $250, 000 plus a $10, 000 deductible. If, during the policy year, losses between $10,000 and $100,000 reach a total of $250,000, then each subsequent loss above $10, 000 will be fully covered by the insurance company. This provision would not apply to boiler and machinery losses. Structure of Property Insurance Program At this time, the Board of Directors has approved a premium schedule which results in a 10% decrease in cost for most members. Despite the reduced premium, it appears sufficient monies would be collected to pay for the excess insurance policy and begin to reserve for expected losses. The operation of the program will be subject to procedures developed by a committee of representatives from participating agencies. The estimated premium savings for the City of Dublin is anticipated to be $1,275 in the first year. In the event that this program eventually generates adequate reserves, equity distributions may occur in the future. Recommendation Staff recommends that the City Council approve of the changes and adopt the proposed resolutions. PSR/lss a:ABAGPLAN PSR/lss a:ABAGPLAN.doc.agenda#9 REVISED RISK COVERAGE AGREEMENT Dated as of July 1, 1992 among the Association of Bay Area Governments and Cities of: Atherton Town of Los Gatos Belvedere Millbrae Benicia Milpitas Brisbane Morgan Hill Burlingame Newark .Campbell Pacifica Cupertino Town of Portola Valley Dublin San Bruno Foster City San Carlos Gilroy Saratoga Half Moon Bay South San Francisco Hillsborough Suisun City Los Altos Town of Tiburon Los Altos Hills Town of Woodside WIT TABLE OF CONTENTS ARTICLEI - PURPOSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 ARTICLE II - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 ARTICLE III - PARTIES TO AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . 6 ARTICLE IV - TERM OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 7 ARTICLE V - ESTABLISHMENT AND GOVERNANCE OF PROGRAMS . . . 7 ARTICLE VI - MEMBER ENTITY RESPONSIBILITIES . . . . . . . . . . . . . . . . 8 ARTICLE VII - OBLIGATION TO PAY PREMIUM . . . . . . . . . . . . . . . . . . . 8 ARTICLE VIII - NEW MEMBERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 ARTICLE IX - CLAIMS FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 ARTICLE X - WITHDRAWAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 ARTICLE XI - EXPULSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 ARTICLE XII - TERMINATION AND DISTRIBUTION . . . . . . . . . . . . . . . . 11 ARTICLE XIII - INDEMNIFICATION AND RELEASE . . . . . . . . . . . . . . . . . 12 ARTICLE XIV - PROHIBITION AGAINST ASSIGNMENT/FUND ACCESS . . . . 13 ARTICLE XV - AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 ARTICLE XVI - SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 ARTICLE XVII - ATTORNEYS' FEES AND EXPENSES . . . . . . . . . . . . . . . . 13 ARTICLE XVIII - NO ADDITIONAL WAIVER IMPLIED BY ONE WAIVER . . . . 14 ARTICLE XIX - CORPORATION TO EXERCISE RIGHTS . . . . . . . . . . . . . . . 14 ARTICLE XX - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 -i- TABLE OF CONTENTS APPENDIX I MEMORANDUM OF LIABILITY COVERAGE APPENDIX II LIABILITY PROGRAM PROCEDURES -ii- REVISED RISK COVERAGE AGREEMENT THE RISK COVERAGE AGREEMENT (Coverage Agreement), dated as of June 2, 1986, by and among the ASSOCIATION OF BAY AREA GOVERNMENTS (ABAG), a joint exercise of powers agency duly organized and existing under the laws of the State of California, including, without limitation, Section 6500, et sew., of the Government Code of the State of California, (ABAG), and the cities listed in Appendix III, each a municipal corporation duly organized and existing under the Constitution and laws of said State (each a "Member Entity" and collectively, the "Member Entities"), is hereby amended and replaced in its entirety by this Revised Risk Coverage Agreement (Agreement) effective July 1, 1992, as follows: RECITALS I. The following state laws, among others, authorize the Member Entities to enter into the Revised Risk Coverage Agreement ("Agreement"): A. Labor Code Section 3700 allowing a local public entity to fund its own workers' compensation claims; B. Government Code Sections 989 and 990, and Education Code Section 15802, permitting a local public entity to insure itself against liability and other losses; C. Government Code Section 990.4 permitting a local public entity to provide insurance and self-insurance in any desired combination; D. Government Code Section 990.8 permitting two or more local public entities to enter into an agreement to jointly fund such expenditures under the authority of Government Code Sections 6500-6515; and E. Government Code Section 6500-6515 permitting two or more local public entities to jointly exercise under an agreement any power which is common to each of them. II. Each Member Entity has the power to acquire, operate and maintain personal and real property and to self-fund for casualty losses to its property. III. ABAG is a joint exercise of powers agency of which Member Entity is a member -1- July 1, 1992 Revised Coverage Agreement and ABAG is authorized to exercise necessary powers to implement the purposes of this Agreement. IV. Each Member Entity desires to contract with the other Member Entities and such additional Member Entities which may be added during the term of this Agreement and ABAG for the purposes of: A. Developing effective risk management and loss control programs to reduce the amount and frequency of their losses; B. Pooling their self-insured losses; and C. Jointly purchasing excess insurance and purchasing or providing administrative services. V. The governing board of each Member Entity has determined that it is in the Member Entity's best interest and in the public interest that this Agreement be executed. Now, therefore, the Member Entities and ABAG, by, between and among themselves, in consideration of the mutual benefits, promises and agreements set forth below, hereby agree as follows: ARTICLE I PURPOSES 1.1 This Agreement is entered into by Member Entities and ABAG in order to do one or more of the following: A. Develop self-insurance programs; B. Develop effective risk management and loss control programs to reduce the amount and frequency of their losses; C. Share the risk of self-insured losses; and D. Jointly purchase excess insurance and purchase or provide administrative and other services including, but not limited to: claims adjusting, data processing, risk management, loss control and prevention, accounting services, actuarial services, and legal services in connection with the Programs. 1.2 It is also the purpose of this Agreement to provide procedures for the addition, at -2- July 1, 1992 Revised Coverage Agreement a subsequent date, of public entity members of ABAG to become parties to this Agreement and to provide for the removal of Member Entities for cause or upon request. ARTICLE H DEFINITIONS In this Agreement unless the context otherwise requires: A. "Actuarial Consultant" means.an accredited actuary of national repute in the area of municipal risks. B. "Administrative Premium" means the amount charged to each Member Entity by ABAG and by the Board of Directors for ABAG's administrative costs and expenses for a Program. An Administrative Premium charged for a specific Program is identified as "Administrative Premium (Name of Program)." Administrative Premium shall not include any cost, expense or loss reserve chargeable to a Member Entity under a Program Premium. C. "Agency Agreement" means the Agency Agreement between ABAG and the Corporation. D. "Board" or "Board of Directors" is the governing body of the ABAG PLAN Corporation; E. "Corporation" is the ABAG PLAN Corporation. F. "Coverage" is the scope of a Program. G. "Coverage Period" is the term of a Memorandum and, excepting the first coverage period of a Program, shall be July 1 to June 30. H. "Excess Insurance" is insurance purchased by the Corporation for the benefit of Member Entities to cover losses in excess of the Coverage provided by ABAG under a Memorandum. I. "Member Entity" includes each public entity which is a party to this Agreement, except ABAG. J. "Memorandum" is the agreement between ABAG and Member Entities describing a specific Program, the terms and conditions for a Member Entity's participation -3- July 1, 1992 Revised Coverage Agreement therein, and the amount and/or the method for determining the amount of Program Premium for such Program. A Memorandum for a specific Program is identified as "Memorandum (Name of Program)." K. "Premium" is the total of all Program Premiums and Administrative Premiums payable by a Member Entity to ABAG for said Member Entity's participation during a Coverage Period. L. "Program" is the specific type or area of self-funded loss protection offered under this Agreement and defined in a Memorandum, which may include without limitation, the funding of loss reserves, pooled insurance purchase, claims adjustment and management, legal defense, risk management and loss control. A Program may encompass, but not be limited to, areas such as comprehensive general liability, property, worker's compensation, or employee benefits. M. "Program Committee" is a committee of the Board comprised of one representative from each Program Participant in the Program and an alternate who may vote and exercise all powers of the representative in the representative's absence. A committee for a particular Program is identified as "Program Committee (Name of Program)." N. "Program Participant" is each Member Entity which participates in a Program. References to Member Entity in its capacity as a participant in a Program shall be to "Program Participant (Name of Program)." O. "Program Premium" is the sum of money determined pursuant to this Agreement and the Bylaws of the Corporation for a specific Program, as the amount due from each Program Participant for the Coverage Period. A Program Premium for a specific Program is identified as "Retained Equity Program Premium (Name of Program)." ARTICLE III PARTIES TO AGREEMENT Each Member Entity hereby contracts with ABAG, every other Member Entity who is -4- July 1, 1992 Revised Coverage Agreement a signatory to this Agreement and, in addition, with such other Member Entity as may later be added as a Member Entity under ARTICLE VIII. The deletion of any Member Entity from this Agreement does not affect this Agreement nor each Member Entity's intent to contract with the Member Entities then remaining. ARTICLE IV TERM OF AGREEMENT This Agreement became effective as of July 1, 1992 and continues in full force until terminated in accordance with ARTICLE XII. ARTICLE V ESTABLISHMENT AND GOVERNANCE OF PROGRAMS 5.1 A Program may be established by the approval of(a) a Memorandum describing the Coverage available under such Program, (b) initial Program Premiums and, (c) initial Administrative Premiums by a two-thirds (2/3) vote of the Board. The Board's action shall be based upon an Actuarial Consultant's recommendation that such a Program is, or within a reasonable period of time can become, actuarially sound. 5.2 A validly established Program becomes operational upon the approval, execution and delivery of the Memorandum by each of the actuarially determined minimum number of Program Participants and their payment of the Program Premium and the Program Administrative Premium. 5.3 Once a Program is operational, its Memorandum; Program Premiums; standards for admission, expulsion, and withdrawal of Program Participants; and its operating policies shall, subject to policies adopted by the Board, be determined by its Program Committee, except the Liability Program which shall be determined by the Board. 5.4 The Liability Program described in Appendices I and II and Member Entities described in Appendix III are affirmed. -5- July 1, 1992 Revised Coverage Agreement ARTICLE VI MEMBER ENTITY RESPONSIBILITIES 6.1 Each Member Entity has the obligations and responsibilities set forth in this Agreement, the Articles and Bylaws of the Corporation, the Agency Agreement, and each Memorandum to which it is a signatory. 6.2 At a minimum, each Member Entity shall: A. Participate in the Liability Program and be a member of ABAG during the term of its participation in any Program; B. Pay all Premiums promptly to ABAG when due; C. Provide the Corporation with loss experience, statistical data and other information as may reasonably be required; and D. Cooperate with and assist the Corporation and any insurer, claims adjuster or legal counsel retained by the Corporation in matters relating to this Agreement, any pertinent Memorandum(a), Corporation Articles and Bylaws, and policies and procedures adopted by the Board. ARTICLE VII OBLIGATION TO PAY PREMIUM 7.1 Notwithstanding any dispute between or among ABAG, the Corporation or any Member Entity(ies), including a dispute as to the scope or nature of Coverage provided under a Memorandum or the sufficiency of amounts in the Claims Fund, or for any other reason, each Member Entity shall make all Premium payments when due and shall not withhold any Premium payments pending the final resolution of such dispute. 7.2 In the event a Member Entity fails to pay any Premium, the amount in default shall continue as an obligation of the Member Entity until the amount in default shall have been fully paid, and, in addition to any other remedies available hereunder with respect to such default, the Member Entity agrees to pay the same with interest thereon, at the highest rate permitted under California Civil Code Section 3289, as it may be amended from time to time, from the date such amount was originally due. -6- July 1, 1992 Revised Coverage Agreement 7.3 Each Member Entity understands that pursuant to the Agency Agreement ABAG has assigned its right to receive and collect all Premiums, to the Corporation and each Member Entity consents to such assignment. ARTICLE VIII NEW MEMBERS 8.1 A new public entity may be admitted as a Member Entity only upon a two-thirds (2/3) vote of the Board. Admission as a Member Entity shall automatically admit the Member Entity into the Liability Program. 8.2 A Member Entity may participate in any other Program upon approval by the Program Committee. 8.3 Each applicant for membership shall pay all costs and expenses incurred by the Corporation or ABAG in processing the application and any application fee set by the Board. ARTICLE IX CLAIMS FUND 9.1 Program Premiums for a Program shall be deposited into a Claims Fund for the Program and shall not be commingled with any other funds or moneys. A Claims Fund for a Program shall be identified as "Claims Fund (Name of Program)." 9.2 Each Claims Fund, is irrevocably held in trust for the benefit of the Program Participants and for the purposes specified in the Program Memorandum, and such moneys, and any income or interest earned thereon, shall be expended only as provided in the Memorandum and as directed by the Program Committee, and shall not be subject to levy or attachment or lien by or for the benefit of any creditor of ABAG, the Corporation or any Member Entity. ABAG shall be the trustee of all Claim Funds. 9.3 Moneys in Claims Fund shall be invested and reinvested on maturity by ABAG subject to investment guidelines adopted by the Board and applicable state law. 9.4 Any income, profit or loss on the investment of moneys held by ABAG in a Claims -7- July 1, 1992 Revised Coverage Agreement Fund(s) shall be held in and credited to the same Claims Fund. 9.5 ABAG shall furnish to the Board an accounting of all investments made by ABAG as required under Cal. Gov't. C. Section 53687. ABAG shall obtain a fidelity bond in an amount approved by the Board. ABAG shall not be responsible or liable for any loss suffered in connection with any investment of funds made by it in accordance with this section. ARTICLE X WITHDRAWAL 10.1 A Member Entity may not withdraw from the Liability Program for a three (3) year period commencing on the date of its entry or reentry into said Program. After the three (3) year period, a Member Entity may withdraw from the Liability Program only at the end of a Coverage Period, provided it has given ABAG one hundred and eighty (180) days prior written notice of its intent to withdraw and has complied with all conditions and requirements of this Agreement, the Program Memorandum and applicable procedure. 10.2 Withdrawal from the Liability Program shall automatically, and simultaneously, result in the withdrawal of the Member Entity from all other Programs in which it may be a participant. 10.3 Any and all notices of withdrawal shall include a report by an actuarial consultant approved by the Board containing all of the following: A. A finding that withdrawal of the Member Entity shall not cause the Program to become actuarially unsound; and B. A formula for determining, or a determination of the amount of all payments necessary to cover any claims for which the withdrawing Member Entity is responsible under all pertinent Memoranda (withdrawal assessment); and C. A formula for determining, or a determination of, the amount of retained equity to be credited to the withdrawing Member Entity. 10.4 The difference between a withdrawing Member Entity's withdrawal assessment and its retained equity shall be paid to or by the withdrawing Member Entity within ninety (90) days -8- July 1, 1992 Revised Coverage Agreement of final determination of both amounts. 10.5 Withdrawal of a Member Entity from any other Program shall be effected pursuant to the same procedures set forth above excepting only that a Member Entity may withdraw after an initial one (1) year period. ARTICLE XI EXPULSION 11.1 A Member Entity may be expelled by a two-thirds (2/3) vote of the Board for a material breach of this Agreement or the Corporation's Articles or Bylaws. Whether the breach is material shall be determined by the two-thirds (2/3) vote of the Board. Such expulsion shall automatically, and simultaneously, terminate the Member Entity's participation in any and all Programs in which it may be a Program participant. 11.2 The procedure for hearing and notice of expulsion and conditions which must be met prior to expulsion of a Member Entity shall be as provided in the Corporation Bylaws. 11.3 Any and all notices of expulsion shall include a report by an actuarial consultant approved by the Board containing all of the following: A. A finding that expulsion of the Member Entity shall not cause any Program to become actuarially unsound; and B. A formula for determining, or a determination of the amount of, any payment necessary to cover any claims for which the expelled Member Entity is responsible under all pertinent Memoranda (expulsion assessment); and C. A formula for determining, or a determination of, the amount of retained equity to be credited to the expelled Member Entity. 11.4 The difference between expelled Member Entity's expulsion assessment and its retained equity shall be paid to or by the expelled Member Entity within ninety (90) days of final determination of both amounts. ARTICLE XII TERMINATION AND DISTRIBUTION 12.1 This Agreement may be terminated by the written consent of two-thirds of the -9- July 1, 1992 Revised Coverage Agreement Member Entities. However, this Agreement and the Corporation shall continue to be in force and to exist after termination for the purpose of disposing of all claims, distribution of assets and all other functions necessary to conclude the obligations and affairs of the Corporation. 12.2 Upon termination of this Agreement, the Corporation shall cause an actuarial consultant to prepare a report setting forth each Member Entity's retained equity and a formula for determining, or a determination of, the amount due from each Member Entity to cover all claims for which such Member Entity is responsible for each Program in which it is a participant plus all costs reasonably determined by the Board to be necessary to wind up. 12.3 The difference between the Member Entity's termination assessment and its retained equity shall be paid by or to it within ninety (90) days after the final determination of both amounts. ARTICLE XIH INDEMNIFICATION AND RELEASE 13.1 Each Member Entity shall and hereby agrees to indemnify and save ABAG and the Corporation harmless from and against all third party claims, losses and damages, including legal fees and expenses, arising out of (i) any breach or default on the part of such Member Entity in the performance of any of its obligations under this Agreement, the Articles and Bylaws of the Corporation, or any Memorandum; or (ii) any act or negligence of such Member Entity or its agents, contractors, servants, employees or licensees with respect to any Program. No indemnification is made under this Section or elsewhere in this Agreement for claims, losses or damages, including legal fees and expenses arising out of the willful misconduct, negligence, or breach of duty under this Agreement by ABAG or the Corporation or any of their officers, agents, employees, successors or assigns. 13.2 NONE OF ABAG, THE CORPORATION OR ANY MEMBER ENTITY MAKES ANY WARRANTY OR REPRESENTATION, EITHER EXPRESSED OR IMPLIED, AS TO THE ADEQUACY OF THE COVERAGES OR THE PROGRAM PROVIDED THROUGH THIS AGREEMENT FOR -THE NEEDS OF THE MEMBER ENTITIES. -10- July 1, 1992 Revised Coverage Agreement ARTICLE XIV PROHIBITION AGAINST ASSIGNMENT/FUND ACCESS No Member Entity may assign any right, claim, or interest it may have under this Agreement. None of the Member Entities nor ABAG nor any creditor, assignee or third party beneficiary of a Member Entity or ABAG has a right, claim or title to any part, share, interest, fund, premium or asset of any other Member Entity or ABAG. ARTICLE XV AMENDMENTS This Agreement may be amended by a vote of all the Member Entities and ABAG approving the amendment. A proposed amendment must be submitted to each Member Entity at least thirty (30) days in advance of the date when the Member Entity considers it. An amendment is to be effective immediately unless otherwise designated. Proposed amendments not approved within one hundred eighty (180) days after submission shall be withdrawn. Appendices to this Agreement may be amended by a two-thirds (2/3) vote of the Board without separate action by the Member Entities. ARTICLE XVI SEVERABILITY If a section, term, condition or provision of this Agreement is determined by a court to be illegal or in conflict with a law of the State of California, or is otherwise rendered unenforceable or ineffectual, the validity of the remaining sections, terms, conditions and provisions is not affected. ARTICLE XVII ATTORNEYS' FEES AND EXPENSES In the event any party to this Agreement should default under any of the provisions hereof and the nondefaulting party(ies) should employ attorneys or incur other expenses for the -11- July 1, 1992 Revised Coverage Agreement collection of moneys or the enforcement of performance or observance of any obligation or agreement on the part of the defaulting party contained herein, the defaulting party agrees that it will on demand therefor pay to the nondefaulting party the reasonable fees of such attorneys and such other expenses so incurred by the nondefaulting party. ARTICLE XVIII NO ADDITIONAL WAIVER IMPLIED BY ONE WAIVER In the event any agreement contained in this Agreement should be breached by either party and thereafter waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder. ARTICLE XIX CORPORATION TO EXERCISE RIGHTS Certain rights and remedies given to ABAG under this Agreement have been assigned by ABAG to the Corporation under the Agency Agreement, to which assignments the Member Entities hereby consent. Such rights and remedies shall be exercised by the Corporation as provided herein. ARTICLE XX MISCELLANEOUS 20.1 Except as otherwise provided herein, all notices, certificates or other communications hereunder shall be sufficiently given and shall be deemed to have been received five (5) business days after deposit in the United States mail in certified form, postage prepaid, to the Member Entities ABAG and the Corporation at the following addresses: If to the Member Entity: See Appendix III -12- July 1, 1992 Revised Coverage Agreement Rem, t If to ABAG: Association of Bay Area Governments MetroCenter P.O. Box 2050 Oakland, California 94604 Attn: Executive Director If to the Corporation: ABAG PLAN Corporation c/o Association of Bay Area Governments MetroCenter P.O. Box 2050 Oakland, California 94604 Attn: President ABAG, the Corporation and the Member Entities, by notice given hereunder, may designate different addresses to which subsequent notices, certificates or other communications will be sent. 20.2 This Agreement shall inure to the benefit of and shall be binding upon ABAG and the Member Entities and their respective successors and assigns. 20.3 This Agreement may be executed in any number of counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. -13- July 1, 1992 Revised Coverage Agreement 20.4 This Agreement shall be governed by and construed in accordance with the laws of the State of California. In Witness Whereof, ABAG has caused this Agreement to be executed in its name by its duly authorized officers; and the Member Entities have caused this Agreement to be executed in its name by its duly authorized officers, as of the date first above written. ASSOCIATION OF BAY AREA GOVERNMENTS, By: Name Title MEMBER ENTITY By: Name Title coverage.rev -14- July 1, 1992 Revised Coverage Agreement Rev . APPENDIX I MEMORANDUM OF LIABILITY COVERAGE FOR THE ABAG PLAN Authority Throughout this Memorandum, words and phrases that are capitalized have special meaning; they are defined in DEFINITIONS. Words that appear entirely in capital letters have reference to the like titled section in this Memorandum. DECLARATIONS ENTITY COVERED: (See Endorsement No. 1 for a listing of additional entities covered) MAILING ADDRESS: COVERAGE PERIOD: FROM: TO: 12:01 AM, Pacific Time DEPOSIT PREMIUM: DEDUCTIBLE AND LIMITS OF COVERAGE: The layer of Coverage provided by this Memorandum shall be the layer which exceeds the deductible indicated below by an X in the adjacent space, and which does not exceed. Five Million Dollars ($5,000,000) per occurrence ("Limits of Coverage"). Deductible $25,000 per occurrence $50,000 per occurrence $100,000 per occurrence $250,000 per occurrence $500,000 per occurrence -1- July 1, 1992 Appendix I - Memorandum of Coverage COVERAGE PROVISIONS In consideration for the payment of the premium, ABAG and the Entity agree as follows: SECTION I - COVERAGES ABAG will pay on behalf of the Covered Party the Covered Ultimate Loss which the Covered Party shall become legally obligated to pay as damages because of: A. Bodily Injury or Property Damage; or B. Personal Injury; or C. Public Officials Errors and Omissions to which this Memorandum applies, caused by an Occurrence. SECTION H - DEFINITIONS When used in this Memorandum (including Endorsement 1 forming a part hereof): A. "Additional Covered Party" - means any person, organization, trust or estate to whom or to which the Entity is obligated by virtue of a written contract to provide coverage such as is afforded by this Memorandum, but only with respect to operations performed by or on behalf of the Entity or facilities owned or used by the Entity; B. . "Aircraft" - means a vehicle designed for the transport of persons or property principally in the air; C. "Automobile" - means a land motor vehicle, trailer or semi-trailer; D. "Bodily Injury" - means bodily injury, sickness or disease sustained by any person, including death resulting from any of these at any time; E. "Covered Individuals" - means persons who were or are now elected or appointed officials, employees or volunteers of the Entity, whether or not compensated, while -2- July 1, 1992 Appendix I - Memorandum of Coverage Rev I- acting for or on behalf of the Entity, including while acting on outside boards at the direction of the Entity; F. "Covered Layer" - means the layer of coverage between the deductible indicated by an X in the DEDUCTIBLE AND LIMITS OF COVERAGE and the Limits of Coverage; G. "Covered Party" - means any person, organization, trust or estate qualifying under COVERED PARTIES. The coverage applies separately to each Covered Party against whom claim is made or suit is brought, as if a separate policy were issued to it, except with respect to ABAG's LIMITS OF LIABILITY; H. "Covered Ultimate Loss" - means that portion of Ultimate Net Loss not covered by other available insurance or coverage and which falls within the Covered Layer; I. "Dam" - means any artificial barrier, together with appurtenant works, which does or may impound or divert water, and which either (a) is twenty-five (25) feet or more in height from the natural bed of the stream or watercourse at the downstream toe of the barrier, or from the lowest elevation of the outside limit of the barrier, if it is not across a stream channel or watercourse, to the maximum possible water storage elevation; or (b) has an impounding capacity of fifty (50) acre-feet or more. Any such barrier which is not in excess of six (6) feet in height, regardless of storage capacity, or which has a storage capacity not in excess of fifteen (15) acre-feet, regardless of height, shall not be considered a "Dam". No obstruction in a canal used to raise or lower water therein or divert water therefrom, no levee, including but not limited to a levee on the bed of a natural lake the primary purpose of which levee is to control floodwaters, no railroad fill or structure, tank constructed of steel or concrete or of a combination thereof, no tank elevated above the ground, and no barrier which is not across a stream channel, watercourse, or natural drainage area and which has the principal purpose of impounding water for agricultural use shall be considered a "Dam". In addition, no obstruction in the channel of a stream or watercourse -3- July 1, 1992 Appendix I - Memorandum of Coverage which is fifteen (15) feet or less in height from the lowest elevation of the obstruction and which has the single purpose of spreading water within the bed of the stream or watercourse upstream from the construction for percolation underground shall be considered a "Dam". Regardless of the language of the above definition, however, no structure specifically exempted from jurisdiction by the State of California Department of Water Resources, Division of Safety of Dams shall be considered a "Dam", unless such structure is under the jurisdiction of any agency of the federal government. J. "Defense Costs" - means all fees and expenses incurred in connection with the adjustment, investigation, defense and appeal of a claim or suit covered hereunder, including attorney's fees, court costs and interest on judgments accruing after entry of judgment. However, "Defense Costs" shall not include the office expenses of the ABAG or the Covered Party nor the salaries of employees or officials of the ABAG or the Covered Party nor expenses of any claims administrator engaged by the Covered Party; K. "Entity" - means the ENTITY COVERED in the DECLARATIONS of this Memorandum and includes any and all commissions, agencies, districts, authorities, boards (including the governing board) or similar entities coming under the Entity's direction or control or for which the Entity's council members sit as the governing body. "Entity" also includes all members of the Entity and any and all commissions, agencies, districts, authorities, boards (including the governing board) or similar entities coming under the member's direction or control or for which the member's council members sit as the governing body; L. "Memorandum" - means the Memorandum of Liability Coverage for the ABAG PLAN Authority; M. "Nuclear Material" - means source material, special nuclear material, or byproduct material. "Source Material", "Special Nuclear Material", and "Byproduct Material" -4- July 1, 1992 Appendix I - Memorandum of Coverage have the meanings given them in the Atomic Energy Act of 1954 or in any law amendatory thereof; N. "Occurrence" - means: 1. With respect to Bodily Injury or Property Damage, an accident, or event, including continuous or repeated exposure to substantially the same generally harmful conditions, which results during the COVERAGE PERIOD stated in the DECLARATIONS, in Bodily Injury or Property Damage neither expected nor intended from the standpoint of the Covered Party, except that assault and battery committed by, at the direction of or with the consent of the Covered Party for the purpose of protecting persons or property from injury or death shall be considered an "Occurrence"; 2. With respect to Personal Injury, the commission during the COVERAGE PERIOD stated in the DECLARATIONS of an offense described in the definition of Personal Injury. 3. With respect to Public Officials Errors and Omissions, actual or alleged conduct as described in the definition of Public Officials Errors and Omissions during the COVERAGE PERIOD stated in the DECLARATIONS. O. "Personal Injury" - means injury, other than Bodily Injury, Property Damage or Public Officials Errors and Omissions, as a result of one or more of the following offenses: 1. False arrest, detention or imprisonment, or malicious prosecution; 2. Wrongful entry or eviction or other invasion of the right of private occupancy; 3. The publication or utterance of a libel or slander, including disparaging statements concerning the condition, value, quality or use of real or personal property, or a publication or utterance in violation of rights of privacy; 4. Unlawful discrimination or violation of civil rights; 5. Shock, fright, mental anguish or mental injury; P. "Pollutants" - means without limitation any solid, liquid, gaseous or thermal irritant -5- July 1, 1992 Appendix I - Memorandum of Coverage or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes without limitation materials to be recycled, reconditioned or reclaimed. The term "Pollutants" as used herein shall not include potable water or agricultural water or water furnished to commercial users or water used for fire suppression, raw sewage, combined sewage, storm water run-off, partially treated sewage, fully treated sewage (as defined by the applicable NPDES permit) and residual streams of waste water treatment; Q. "Property Damage" - means: 1. Physical injury to or destruction of tangible property which occurs during the COVERAGE PERIOD, including the loss of use thereof at.any time resulting therefrom; or 2. Loss of use of tangible property which has not been physically injured or destroyed provided such loss of use is caused by an Occurrence during the COVERAGE PERIOD; R. "ABAG" - means the ABAG PLAN Authority; S. "Public Officials Errors and Omissions" - means any actual or alleged misstatement or misleading statement or act or omission or neglect or breach of duty including misfeasance, malfeasance or nonfeasance by any Covered Party individually or collectively in the discharge of duties for the Entity, or any matter claimed against any Covered Party solely by reason of their being or having been public officials of the Entity; T. "Special Event" - means an event of leisure, recreational or public interest value lasting a specific period of time not to exceed seventy-eight (78) hours and which occurs no more than twice in a one (1) year period. U. "Ultimate Net Loss" - means the sums for which the Covered Party is legally liable as damages by reason of a judgment or a settlement made with the written consent of the claimant, the Covered Party and ABAG and shall include Defense Costs. -6- July 1, 1992 Appendix I - Memorandum of Coverage SECTION III - SETTLEMENT With respect to claims or suits for damages to which this Memorandum applies, the ABAG shall have the duty to defend any claim or suit against the Covered Party even if any allegations are groundless, false or fraudulent. If the Ultimate Net Loss is under the Covered Party's Covered Layer, then the Covered Party shall be obligated to pay the entire Ultimate Net Loss. If the Ultimate Net Loss falls within the Covered Layer, the Covered Party shall be obligated to pay, or cause to be paid, the difference between the Covered Ultimate Loss and the Ultimate Net Loss. ABAG shall not be obligated to pay any judgment or settlement or to participate in the defense of any claim,or suit after ABAG'S LIMITS OF LIABILITY in each of the Covered Layers have been totally exhausted by the payment of judgments or settlements plus defense costs. SECTION IV - ABAG'S LIMITS OF LIABILITY Regardless of the number of (1) Covered Parties under this Memorandum, (2) persons or organizations who sustain injury or damage, or (3) claims made or suits brought on account of Bodily Injury, Property Damage, Personal Injury or Public Officials Errors and Omissions, for each Occurrence ABAG's liability is limited to the amount of the Covered Layer. For the purpose of determining the limit of ABAG's liability, all damages arising out of continuous or repeated exposure to substantially the same general harmful conditions shall be considered as arising out of one Occurrence. In the event that any combination of the COVERAGES applies to the same Covered Party for a loss, claim or suit, ABAG's liability shall be limited to the amount(s) of the Covered Layer for one Occurrence. SECTION V - COVERAGE PERIOD AND TERRITORY This Memorandum applies to Bodily Injury, Property Damage, Personal Injury, or Public -7- Jul 1, 1992 Appendix I - Memorandum of Coverage Officials Errors and Omissions which occurs anywhere in the world during the COVERAGE PERIOD stated in the DECLARATIONS. SECTION VI - COVERED PARTIES A. The Entity; B. The Covered Individuals; C. With respect to any Automobile owned or leased by the Entity or loaned to or hired for use by or on behalf of the Entity, any person while using such Automobile and any person or organization legally responsible for the use thereof, provided the actual use is with the permission of the Entity, and with respect to any automobile owned or leased by an employee of the Entity or by a member of the Entity's governing board, if the Entity reimburses or pays the employee or governing board member for use of such automobile, and only such automobile is operated by said employee or governing board member and only to the extent that the Coverage provided hereunder shall be in excess of any other insurance for said automobile. The foregoing notwithstanding, this coverage does not apply to: 1. Any person or organization, or any agent or employee thereof, operating an Automobile sales agency, repair shop, service station, storage garage or public parking place, with respect to an Occurrence arising out of the operation thereof; or 2. The owner or any lessee,'other than the Entity, of any Automobile hired by or loaned to the Entity or to any agent or employee of such owner or lessee; D. Any Additional Covered Party. SECTION VII - EXCLUSIONS A. This Memorandum does not apply to: -8- July 1, 1992 Appendix I - Memorandum of Coverage 1. Bodily Injury, Property Damage, Personal Injury or Public Officials Errors and Omissions arising out of the actual, alleged or threatened discharge, dispersal, release or escape of Pollutants: a. At or from premises owned, leased to or occupied by the Entity, but this exclusion (la) does not apply if an actual discharge, dispersal, release or escape of Pollutants arises out of an Automobile not owned by, leased to, hired by or loaned to the Entity while being used on a public street or road owned or maintained by the Entity; b. At or from any site or location used by or for the Entity or others for the handling, storage, disposal, processing or treatment of waste; C. Which are at any time transported, handled, stored, treated, disposed of or processed as waste by or for the Entity or any person or organization for whom the Entity may be legally responsible; or d. At or from any site or location on which the Entity or any contractors or subcontractors working directly or indirectly on the Entity's behalf are performing operations: i. If the Pollutants are brought on or to the site or location in connection with such operations; or ii. If the operations are to test for, monitor, clean up, remove, contain, treat, detoxify or neutralize the Pollutants. 2. Any loss, cost or expense arising out of any governmental direction or request that the Entity test for, monitor, clean up, remove, contain, treat, detoxify or neutralize Pollutants; 3. Loss of salary, wages or any related employee benefits, whether past or future, arising out of unlawful discrimination, wrongful termination or the violation of civil rights of any employee or official of the Covered Party; 4. Bodily Injury or Personal Injury to: a. Any employee of the Covered Party arising out of and in the course of -9- July 1, 1992 Appendix I - Memorandum of Coverage his/her employment by the Covered Party; or b. The spouse, child, parent, brother, sister, or other relative of such employee as a consequence of a. above; but this exclusion does not apply to liability assumed by the Covered Party under any written contract; 5. Any obligation for which the Covered Party or any insurance company as its insurer may be held liable under any workers' compensation, unemployment compensation or disability benefits law, or under any similar law; 6. Liability arising out of the ownership, use, or operation of any hospital or airport; 7. Liability arising out of medical professional services performed by or on behalf of the Covered Party; but this exclusion does not apply to such services performed by emergency medical technicians, paramedics and other similar classes of personnel; 8. Liability arising out of the partial or complete structural failure of any Dam; 9. Fees, penalties, punitive damages or exemplary damages; 10. Bodily Injury or Property Damage arising out of the hazardous properties of Nuclear Material; 11. Claims for loss or damage or any liability arising out of or in connection with the principles of eminent domain, condemnation proceedings or inverse condemnation, by whatever name called, regardless of whether such claims are made directly against the Covered Party or by virtue of any agreement entered into by or on behalf of the Covered Party; 12. Injury to or destruction of: a. Property owned by the Covered Party; or b. Property rented to or leased to the Covered Party where it has assumed liability for damage to or destruction of such property, unless the Covered Party would have been liable in the absence of such assumption of -10- July 1, 1992 Appendix I - Memorandum of Coverage liability; or C. Aircraft or watercraft in the Covered Party's care, custody or control; 13. Bodily Injury or Property Damage arising out of the ownership, operation, use or maintenance of any aircraft; 14. Bodily Injury or Property Damage arising out of any transit authority, transit system or public transportation system owned or operated by the Covered Party, but this exclusion does not apply to any transit system operating over non-fixed routes, including dial-a-ride, senior citizen transportation, or handicapped transportation; 15. Liability arising out of the failure to supply or provide an adequate supply of gas, water or electricity; and 16. As respects liability imposed upon a Covered Party (or which is imputed to a Covered Party) under the Employee Retirement Income Security Act of 1974 and any law amendatory thereof. 17. Liability arising out of any Special Event not sponsored solely by the Entity. B. This Memorandum does not apply under COVERAGE B - Personal Injury to: 1. Personal Injury arising out of the willful violation of a penal statute or ordinance committed by or with the knowledge or consent of the Covered Party; 2. Personal Injury arising out of a publication or utterance concerning any organization or business enterprise, or its products or services, made by or at - the direction of any Covered Party with knowledge of the falsity thereof. C. This Memorandum does not apply under COVERAGE C - Public Officials Errors and Omissions to: 1. Bodily Injury, Property Damage or Personal Injury as defined in this Memorandum; 2. Injury to, destruction or disappearance of any tangible property (including money) or the loss of use thereof; -11- July 1, 1992 Appendix I - Memorandum of Coverage I Benefits payable under any employee benefit plan (whether the plan is voluntarily established by the Covered Party or mandated by statute) because of unlawful discrimination; 4. Refund of taxes, fees or assessments; 5. Liability of a Covered Party (a) arising in whole or in part out of any Covered Party obtaining remuneration or financial gain to which the Covered Party was not legally entitled or (b) arising out of the willful violation of a penal code or ordinance committed by or with the knowledge or consent of any. Covered Party; 6. Liability of a Covered Party arising out of estimates of probable costs or cost estimates being exceeded or for faulty preparation of bid specifications or plans, including architectural plans, or failure to award contracts in accordance with statute or ordinance which under law must be submitted for bids, provided such liability arises from the bidding or contracting process; 7. Failure to perform, or breach of, a contractual obligation. SECTION VIII - CONDITIONS A. Covered Party's duties in the event of Occurrence, claim or suit: 1. In the event of an Occurrence, written notice containing particulars sufficient to identify the Covered Party and also reasonably obtainable information with respect to the time, place and circumstances thereof, and the names and addresses of the injured and of available witnesses, shall be given by or for the Covered Party to ABAG or any of its authorized agents as soon as practicable. 2. If claim is made or suit is brought against the Covered Party, the Covered Party shall, upon demand by ABAG, forward to ABAG every demand, notice, summons or other process received by such Covered Party or such Covered Party's representative. -12- July 1, 1992 Appendix I - Memorandum of Coverage 3. The Covered Party shall cooperate with ABAG and upon its request assist in making settlements, in the conduct of suits and in enforcing any right of contribution or indemnity against any person or organization who may be liable to the Covered Party because of Bodily Injury, Personal Injury, Property Damage or Public Officials Errors and Omissions with respect to which coverage is afforded under this Agreement; and the Covered Party shall attend hearings and trials and assist in securing and giving evidence and obtaining the attendance of witnesses. The Covered Party shall not, except at its own cost, voluntarily make any payment, assume any obligation or incur any expense; however, in the event that the amount of Ultimate Net Loss becomes certain either through trial court judgment or agreement among the Covered Party, the claimant and ABAG, then ABAG shall pay on behalf of the Covered Party the Covered Ultimate Loss. B. Bankruptcy or insolvency of the Covered Party shall not relieve ABAG of any of its obligations hereunder. C. If collectible insurance with any insurer, coverage with any other joint powers - authority or other self-funding mechanism, or specific self-insurance is available to the Covered Party covering a loss also covered hereunder (whether on a primary, excess or contingent basis), the coverage hereunder shall be in excess of, and shall not contribute with, such other insurance or coverage; provided that this clause does not apply with respect to excess insurance or coverage purchased specifically to be in excess of this Memorandum. D. An Occurrence taking place over more than one COVERAGE PERIOD covered by ABAG shall be deemed to have taken place during the first COVERAGE PERIOD and only that limit of liability shall apply. E. This Memorandum may be canceled at any time in accordance with the provisions of the Liability Risk Coverage Agreement. F. No action shall lie against ABAG with respect to any one Occurrence unless, as a -13- July 1, 1992 Appendix I - Memorandum of Coverage condition precedent thereto, the Covered Party shall have fully complied with all the terms of this Memorandum, nor until the amount of the Covered Party's obligation to pay a Ultimate Net Loss shall have been finally determined either by judgment against the Covered Party after actual trial or by written agreement of the Covered Party, the claimant and ABAG. Any person or organization or the legal representative thereof who has secured such judgment or written agreement shall thereafter be entitled to recover under this Memorandum to the extent of the coverage afforded by this Memorandum. No person or organization shall have any right under this Memorandum to join ABAG as a party to any action against the Covered Party to determine the Covered Party's liability, nor shall ABAG be impleaded by the Covered Party or its legal representative. G. ABAG shall be subrogated to the extent of any payment hereunder to all the Covered Party's rights of recovery therefor; and the Covered Party shall do nothing after loss to prejudice such rights and shall do everything necessary to secure such rights. Any amount so recovered shall be apportioned as follows: 1. Any interest (including the Covered Party's) having paid an amount in excess of the Ultimate Net Loss hereunder shall be reimbursed first to the extent of actual payment. ABAG shall be reimbursed next to the extent of its actual payment hereunder. If any balance then remains unpaid, it shall be applied to reimburse the Covered Party. 2. The expenses of all such recovery proceedings shall be apportioned in the ratio of respective recoveries. If there is no recovery in proceedings conducted solely by ABAG, it shall bear the expenses thereof. H. The DEPOSIT PREMIUM for the COVERAGE PERIOD stated in the DECLARATIONS shall be computed in accordance with the provisions of the Liability Risk Coverage Agreement and such DEPOSIT PREMIUM shall be adjusted in accordance with the Coverage Agreement (Coverage Agreement) attached to this Memorandum. The Covered Party named as the ENTITY COVERED in the -14- July 1, 1992 Appendix I - Memorandum of Coverage ��v.1 DECLARATIONS is authorized to act on behalf of all Covered Parties with respect to all matters pertaining to premium under this Memorandum. I. In the event the Covered Party elects not to appeal a judgment for Ultimate Net Loss, ABAG may elect to do so at its own expense, but in no event shall the liability of ABAG for Covered Ultimate Loss exceed the applicable amount of the Covered Layers plus all Defense Costs necessary and incident to such appeal. -15- July 1, 199? Appendix I - Memorandum of Coverage (Zay.1 APPENDIX II LIABILITY PROGRAM PROCEDURES 1. Premium Setting 1.1 Approval of Premium Formulas. Formulas for setting premiums, and all supporting documentation, shall be submitted to the Board of Directors by the Chief Financial Officer no later than immediately preceding commencement of the fiscal year in which the formulas will first become effective. Upon approval by two-thirds (2/3) of the membership of the Board of Directors, the formulas shall be used to set and allocate Program Premiums (Liability), commencing in the fiscal year designated by the Board of Directors. 1.2 Determination of Premiums and Adjustments. No later than immediately preceding commencement of the fiscal year in which the premiums will be charged, an Actuarial Consultant shall submit a schedule, or schedules, of Program Premiums (Liability) to the Board of Directors. Upon approval by two-thirds (2/3) of the membership of the Board of Directors, a schedule of Program Premiums (Liability), as submitted, or as modified by the Actuarial Consultant pursuant to the direction of the Board, shall be adopted and levied against each Member Entity. 1.3 Notice. Each Member Entity shall receive written notice of its Program Premiums (Liability) no later than the immediately preceding commencement of the fiscal year. 1.4 Deposit of Premiums. All amounts attributable to the Member Entity's Program Premiums (Liability) shall be deposited into the applicable Claims Payment Fund except for the portions, if any, of the Program Premium (Liability) attributable to premiums or premium adjustments resulting from the purchase of commercial insurance or reinsurance, or excess insurance shall be deposited in the operations fund. 2. Claims Management, Legal Defense, Risk Management Programs and Administrative Premium 2.1 Administrative and Legal Defense Programs. The Board of Directors shall -1- July 1, 1992 Appendix II - Liability Program Procedures cause to be created an administrative program consisting of the claims management and risk management programs as set forth in Sections 2.2 and 2.4, and a legal defense for the Liability Program as set forth in Section 2.3. The Board of Directors shall also establish administrative premiums for all administrative costs including the costs of the administrative program but not including legal defense costs which shall be paid from the Claims Fund (Liability). 2.2 Claims Management Pro ram (Liability Program). (a) Settlement by Member Entity. (i) A Member Entity, or its designee, may settle any claim against it which is for property damage only and demands an amount equal to or less than ten percent (10%) of its deductible. (ii) If any legal defense is necessary, Member Entity may use only attorneys and law firms on the latest Defense Counsel List in settling such claims. (iii) For each claim described in Subsection (a)(i), each Member Entity shall provide a written report to the Corporation setting forth the claimant, nature of claim, demand, reserves amount or settlement and such other information as the Corporation may, from time to time, request. (iv) Paragraph (d) of this Section 2.2 shall also apply to all claims described in Subsection (a)(i). (v) All other claims may only be settled pursuant to the provisions of the rest of this Section 2.2. (b) Notification of Corporation. Except for claims described in Subsection (a)(i) of this Section 2.2, each Member Entity shall immediately forward to the Corporation at the address designated by it, all claims against the Member Entity with such information as the Corporation may from time to time request. (c) Claimant Contact. Except for claims described in Subsection (a)(i)of this Section 2.2, all contact with the claimant or a claimant's employees, agents, representatives and attorneys regarding the claim or the events giving rise to the claim shall be referred to the Corporation, or its designee. -2- July 1, 1992 Appendix II - Liability Program Procedures (d) Subrogation. The Corporation shall be subrogated to all rights of a Member Entity arising out of a claim paid in whole or in part by the Corporation, and such Member Entity shall cooperate fully with the Corporation in the prosecution of subrogated claims. If a subrogated claim is against another Member Entity, all such claims arising out of the same occurrence which have not been reduced to a final judgment shall be submitted to arbitration, and such arbitration shall comply with and be governed by the provisions of the California Arbitration Act, Sections 1280 through 1294.2 of the California Code of Civil Procedure. (e) Claims Committee Approval. Any claim against a Member Entity which the Corporation proposes to settle for an amount which, in addition to defense costs, exceeds the Member Entity's deductible shall be submitted to the Claims Committee for approval. All claims against a Member Entity which the Corporation settles on its behalf for an amount which, in addition to defense costs, is less than or equal to such Member Entity's deductible shall be reported to the Member Entity and the Claims Committee. For such Settlement, the Member Entity or the Corporation may, upon written notice delivered within seven (7) days after receipt of the notice identifying the proposed settlement, require consideration and approval by the Claims Committee. 2.3 Legal Defense Program. (a) Scope. Legal defense of all covered claims, except those described in Subsection (a)(i) of Section 2.2 shall be governed by this Section 2.3. (b) Defense Counsel List. Legal defense of all covered claims may only be provided by attorneys or law firms listed on the latest Defense Counsel List. (c) Determination of Defense Counsel List. The Corporation's claims manager shall circulate an initial Defense Counsel List to each director and alternate director who shall be given a reasonable opportunity to recommend the addition of defense counsel not on the list or request the deletion of defense counsel. The director or alternate shall set forth the qualifications of each defense counsel nominated for addition to the List and the reasons for requesting deletion of defense counsel currently on the List. The Defense Counsel List, with -3- July 1, 1992 Appendix II - Liability Program Procedures the comments of directors and alternates, responses by the claims manager and recommendation for the final Defense Counsel List, shall be submitted to the Claims Committee for review and approval. The Defense Counsel List shall be updated at the direction of and upon approval by the Claims Committee. (d) Selection of Defense Counsel. Once the Corporation's claims manager determines that defense counsel should be engaged for a particular claim, the Corporation shall so notify the Member Entity against whom the claim has been made. The Member Entity shall be given a reasonable opportunity to request specific defense counsel and to set forth the reasons for such request. Final selection of the defense counsel shall be at the Corporation's sole discretion, provided that approval of a Member Entity's request for specific defense counsel shall not be unreasonably withheld. (e) Management of Legal Defense. Except as provided in (f) of this Section 2.3, legal defense of all claims shall be directed by the Corporation. (f) Legal Defense Under Reservation of Right. In all instances where the Corporation provides legal defense under a reservation of right to dispute the Corporation's obligation to pay a claim, legal defense shall be directed by the Member Entity against whom the claim is made. However, the Corporation shall have the right to associate into the action attorneys or law firms who shall act at the Corporation's direction. 2.4 Risk Management Program. (a) Each Member Entity shall appoint an employee of the Member Entity to be responsible for the risk management function within that Member Entity and to serve as liaison between Member Entity and the Corporation as to risk management. (b) Each Member Entity shall supply the Corporation with information regarding Member Entity's physical facilities, maintenance procedures, operational procedures and any other information regarding the conduct of Member Entity's operations as may be reasonably requested by the Corporation in auditing the Member Entity's risk management practices. (c) Each Member Entity shall consider all recommendations of the -4- July 1, 1992 Appendix II - Liability Program Procedures Corporation regarding Member Entity's risk management practices and shall reply in writing describing its acceptance or rejection of the recommendations and any action taken thereon. (d) Each Member Entity shall maintain its own set of records as a loss log in all categories of loss and shall permit the Corporation to review or obtain a copy of same. (e) Each Member Entity shall comply with risk management policies and procedures as adopted by the Board of Directors upon a two-thirds (2/3) vote of the members of the Board. 2.5 Administrative Premium. (a) Administrative Costs Allocation Formula. Administrative Costs Allocation formula may be adopted by a two-thirds (2/3) vote of the members of the Board of Directors. Any proposed revision to the Administrative Costs Allocation formula, and all supporting documentation shall be submitted to the Board of Directors by the Chief Financial Officer no later than prior to the commencement of the fiscal year in which the revised formula will first become effective. Upon approval by the Board of Directors, the revised formula shall become the formula for allocating Administrative Costs, commencing in the fiscal year designated by the Board of Directors. (b) Administrative Premiums. No later than prior to commencement of the fiscal year in which the Administrative Costs shall be paid, a budget for Administrative Costs shall be submitted to the Board of Directors by the Chief Financial Officer. Upon approval by a majority of the membership of the Board of Directors, the Administrative Costs shall become the costs to which the Administrative Costs Allocation formula shall be applied to yield each Member Entity's Administrative Premium. (c) Notice. Each Member Entity shall receive written notice of its Administrative Program Premium by prior to the commencement of the fiscal year in which it is charged. 3. Purchase of Insurance Upon a majority vote of the membership of the Board of Directors the Corporation may purchase commercial insurance or reinsurance or terminate commercial insurance or -5- July 1, 1992 Appendix II - Liability Program Procedures reinsurance. 4. Cancellation of Coverage 4.1 Cancellation. For any Program in which a Member Entity is in default with respect to its obligation to pay Program Premiums (Liability), the Board of Directors may cancel all coverage rights of the defaulting Member Entity upon a two-thirds (2/3) vote of the other Member Entities. 4.2 Reinstatement. For any Member Entity whose coverage has been canceled pursuant to Section 4.1, Coverage may be retroactively or prospectively reinstated upon two- thirds (2/3) vote of the other Member Entities and payment by said Member Entity of all premiums due and payable upon the date of reinstatement with interest thereon at the rate set forth in Civil Code Section 3289 and the payment of all costs incurred by the Corporation, including but not limited to fees for actuarial consultants, attorneys and insurance consultants, incurred by the Corporation in canceling and reinstating said Member Entity. -6- July 1, 1992 Appendix II - Liability Program Procedures MAY 1 MICHAEL R.NAVE 1•�ZYERS, NAVE, RIBACK & SILVER CITY Or DUBLIN STEVEN R.MEYERS A PROFESSIONAL LAW CORPORATION PENINSULA OFFICE ELIZABETH H,SILVER GATEWAY PLAZA 1220 HOWARD AVE.,SUITE zso MICHAEL S.RIBACK 777 DAVIS STREET, SUITE 300 BURLING'AME,CA 94010-4211 MICHAEL F,RODRIQUEZ SAN LEANDRO,CALIFORNIA 94$77• TELEPHONE:)413)348.7120 KATHLEEN FAUBION TELEPHONE:(510)351-4300 FACSIMILE:(416)342.0986 FREDERICK S.ETHERIDGE WENDY A.ROBERTS FACSIMILE:(510)351-4481 DAVID W.SKINNER STEVEN T.MATTAS MEMORANDUM OF COUNSEL ANDREA J.SALTZMAN REPLY TO: San Leandro TO$ Paul Rankin DATES May 19, 1992 Assistant City Manager FROM$ Elizabeth H. Silver, City Attorney RES Liability Insurance Coverage Mike Riback reviewed the documents attached to your memorandum of May 7, 1992, and finds no problems with any of them. He has no suggested revisions. As you have noted, the significant change in both the Coverage Agreement (Article V) and the Memorandum of Coverage (App. 11, S S 1, 2 and 3) is the authority given to the "Board of Directors" to institute now insurance programs and to amend coverage, respectively. While this change is for the purpose of streamlining the process, we believe it is important that the City Council understand the authority being transferred to the "Board of Directors. " MEYERS, NAVE, RIBACK & SILVER Elizabeth H. Silver, City Attorney 114\Memo\rank1n2.ehs 4 Q, EXHIBIT' ` RESOLUTION NO. - 92 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF DUBLIN APPROVING A REVISED RISK COVERAGE AGREEMENT FOR LIABILITY INSURANCE COVERAGE PROVIDED BY ABAG PLAN WHEREAS, The City of Dublin is empowered under Government Code Sections 989 et sec . , 6500 et sec . and Labor Code Section 3700 to insure itself against liability and other losses, workers, compensation claims and to provide insurance and self-insurance in any desired combination; and WHEREAS, the City of Dublin is a member of the Association of Bay Area Governments (ABAG) ; and WHEREAS, the City of Dublin desires to contract with ABAG and other members of ABAG to pool their self-insured losses; jointly purchase excess insurance; and to develop effective risk management and loss control programs to reduce the amount and frequency of its losses (hereafter referred to as the "PLAN Program" ) ; and WHEREAS, the Dublin City Council previously adopted Resolution No. 59-86 which authorized the execution and delivery of the Risk Coverage Agreement dated as of June 2, 1986, by and among ABAG and other cities participating in the PLAN Program including the City of Dublin; and WHEREAS, the Revised Risk Coverage Agreement dated as of July 1 , 1992, is on file with the City Clerk and was presented for review by members of the City Council and members of the general public as part of the agenda for the City Council meeting of June 8, 1992; and WHEREAS, the Revised Risk Coverage Agreement provides for the continuation of the PLAN Program in a more flexible form with potential for a wider range of insurance coverages; and WHEREAS, the changes will allow the Board of Directors with a 2/3 vote to change the coverage or determine new programs without individual approval by the member City Councils; and WHEREAS, the Board of Directors of the ABAG PLAN Corporation representing participating cities/towns in the PLAN Program have recommended approval of the Revised Risk Coverage Agreement. EX1681y 3 NOW, THEREFORE, BE IT RESOLVED that the City Manager or his designee is hereby authorized and directed to execute and deliver the Revised Risk Coverage Agreement in substantially the form on file with the City Clerk to the Association of Bay Area Governments and to execute and deliver such other documents as may be reasonably necessary to effectuate the Revised Risk Coverage Agreement. PASSED, APPROVED AND ADOPTED this 8th day of June, 1992 . AYES: NOES: ABSENT: Mayor ATTEST: City Clerk a:resoabag.agenda#9 R RESOLUTION NO. - 92 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF DUBLIN **************** RESOLUTION AUTHORIZING PARTICIPATION IN A SELF-INSURED PROPERTY INSURANCE PROGRAM OFFERED BY ABAG PLAN WHEREAS, since 1986, the City of Dublin has been a charter member of the ABAG PLAN Liability Program; and WHEREAS, ABAG PLAN has previously made arrangements for the City to purchase property insurance as part of a group purchase; and WHEREAS, ABAG PLAN has designed a new program which combines commercial property insurance with a self-insured layer; and WHEREAS, the participating cities in the Property Insurance Program would share the risk of any losses in the self-insured layer; and WHEREAS, ABAG PLAN has developed premiums based upon the cost of the commercial insurance plus an actuarially determined reserve to fund losses; and WHEREAS, the program as designed would offer the City premium savings and an opportunity to generate equity in the Property Insurance Program. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Dublin does hereby approve participation in the ABAG PLAN Self-Insured Property Insurance Program as described in the Staff Report of the City Council meeting of June 8, 1992. BE IT FURTHER RESOLVED that the City Council does hereby direct the City of Dublin representative on the ABAG PLAN Corporation Board of Directors to complete all necessary documents to enroll the City in this program effective July 1, 1992. PASSED, APPROVED AND ADOPTED this AYES: NOES: ABSENT: ABSTAIN: Mayor ATTEST: City Clerk UNBIT 4