HomeMy WebLinkAbout13 SOLICITATION FOR ENVIRONMENTAL INSURANCE COVERING TUSTIN LEGACY •_ 0 Agenda Item 1 3
G. k Reviewed:
AGENDA REPORT aty Manager
l_ �%5PFinance Director N/A
MEETING DATE: JANUARY 5, 2016
TO: JEFFREY C. PARKER, CITY MANAGER
FROM: CITY MANAGER'S OFFICE
SUBJECT: CONSULTANT SERVICES AGREEMENT WITH AON RISK
INSURANCE SERVICES WEST, INC. FOR SOLICITATION OF
ENVIRONMENTAL INSURANCE COVERING PROPERTIES AT
TUSTIN LEGACY
SUMMARY
Request for authorization to execute a Consultant Services Agreement with Aon Risk
Insurance Services West, Inc. for the purposes of marketing and soliciting proposals for
environmental insurance for properties at Tustin Legacy.
RECOMMENDATION
It is recommended that the City Council authorize the City Manager to execute a Consultant
Services Agreement with Aon Risk Insurance Services West, Inc. for the purpose of
marketing and soliciting proposals for environmental insurance covering properties at Tustin
Legacy.
FISCAL IMPACT
The insurance broker will bear costs to market and solicit for insurance proposals. Once
proposals are received and reviewed, staff will return with information on the full fiscal impact
of the insurance purchase and a recommendation. A request to appropriate the potential
costs, including the insurance premium, broker commission, and any other fees will
accompany the recommendation later this year.
ALIGNMENT WITH STRATEGIC PLAN
The solicitation, and ultimately binding, of an environmental insurance policy for properties at
Tustin Legacy will contribute to "Goal A: Economic and Neighborhood Development" by
continuing to facilitate development of critical phases of Tustin Legacy.
BACKGROUND/DISCUSSION
The City currently has two environmental insurance policies for portions of the Tustin Legacy
project that involve properties owned by the City and certain other agencies. The first policy
was secured in December of 2001 with a ten (10) year term and five (5) year extending
Agenda Report •
January 5, 2016
Page 2
to pre-existing pollution conditions created at the former MCAS Tustin by the federal
government and other coverages. The City also solicited proposals in 2011 in an attempt to
replace the original policy but was unsuccessful in obtaining any proposals for a policy for
pre-existing pollution conditions due to the state of the environmental insurance market at
that time. As a result, the City bound a second five year policy covering new pollution
conditions that will also expire in December 2016.
Based upon recent discussions with Barry Steinberg of Kutak Rock LLP, the City's special
base closure counsel for environmental and insurance matters, and Dan Sisler of Aon Risk
Insurance Services West, Inc., there is a reasonable level of certainty that a number of
carriers would provide proposals in 2016. Dan Sisler is an environmental insurance broker
who has had recent success in securing other environmental liability policies for developers
at Tustin Legacy. Staff is requesting authorization to execute the attached Consultant
Services Agreement with Mr. Sisler to commence marketing and solicitation for new
insurance at Tustin Legacy.
The federal government is generally responsible for remediation of contamination at former
military bases and for providing limited indemnification against subsequently discovered
environmental contamination at Tustin Legacy. An indemnification was provided to the City
in the Navy's conveyances to the City (the Section 330 indemnification under the Defense
Authorization Act), in which they indemnified property transferees, like the City,for third party
claims for personal injury or property damage which result from, or are in any manner
predicated upon, environmental contaminants. However, the Navy is not timely in response
to situations where unknown contamination is subsequently discovered and in many cases
they also argue whether they are actually the responsible party.
The risk/challenge is to protect recipients of property that the federal government has
conveyed to the City by ensuring that known exposures are contained and limited and the
risk of unknown or future exposures is transferred to an insurance carrier, thus allowing
redevelopment to proceed in a timely manner. An environmental insurance policy protects
the City and other parties that have or will receive former MCAS Tustin property. It will also
cover losses that occur due to pre-existing and newly created pollution conditions. It is
particularly important for the following reasons:
• The Navy's environmental liability is limited by statute and sovereign immunity;
• The timing of the Navy's response to notification of any found contamination is not
statutorily set;
• The availability of Navy and Federal government clean-up funds is not assured.
• Current Section 330 indemnities only address third party claims—with no coverage for
transferees;
• Construction delays can be significant if immediate response to an environmental
contamination find is not pursued, also potential migration and exacerbation of the
contamination;
Agenda Report
January 5, 2016
Page 3
• Insurance coverage avoids the debate over whether contamination is pre-existing or
newly created; it is no fault—with no need for blame;
• There is no need for a recovery action against the Federal Government since the
insurance underwriter would pursue recovery; and,
• Coverage can address catastrophic losses, claims and expenses.
We have found over the last fourteen years that environmental insurance is critical to
marketing property at Tustin Legacy and to providing assurance to lending institutions which
are generally unwilling to finance projects on "high risk" land where potential contamination
issues may arise during development. We expect to be able to offer other agencies and
developers an opportunity to purchase from us the ability to be named as an additional named
insured on any future policy, as has been the practice over the last fourteen years. Using this
process, we entered into agreements in the past that generated sufficient income to
completely pay the full cost of our current policy's premiums.
•
Over the last fourteen years various environmental insurance policies which cover the Tustin
Legacy project have been extremely helpful in recovering over $9 million dollars in claims
incurred as a result of the discovery of unknown contamination during grading and
construction.
We would anticipate the insurance solicitation process to include submittal of environmental
information forms to prospective carriers. The proposal process would be supported by Mr.
Steinberg and Mr. Sisler. Upon approval by the City Council, we plan to market the renewal
of our Pollution Legal Liability Insurance Policy to the markets. Some of these carriers may
consider the primary policy while some may wish to participate only on an excess basis and
some may ultimately choose not to participate at all.
Staff will bring back to the City Council in later November or early December, 2016,
information on the recommended policy(ies). Attached is the proposed Consultant Services
Agreement with Aon Risk Insurance Services West, Inc., including the scope of work,
schedule, and a broker commission due upon binding a policy. The negotiated broker
commission is at the lowest end of the industry standard and is consistent with the City's prior
solicitation.
Staff will be available to answer questions the City Council may have.
ettailP 5 WO—
thew S. West
Assistant to the City Manager
Attachment: Consultant Services Agreement with Aon Risk Insurance Services West, Inc.
CONSULTANT SERVICES AGREEMENT
This Agreement for Consultant Services (herein "Agreement"), is made and entered
into by and between the CITY OF TUSTIN, a municipal corporation ("City"), and AON RISK
INSURANCE SERVICES, INC. ("Consultant").
WHEREAS, Consultant desires to perform certain professional consulting services
required by City, on the terms and conditions set forth in this Agreement, related to
marketing and soliciting for environmental insurance for property at the former Marine Corps
Air Station (MCAS) Tustin; and
WHEREAS, Consultant is qualified to provide the necessary services and has
agreed to provide such services; and
WHEREAS, Consultant has submitted to City a proposal, dated December 21, 2015,
a copy of which is attached hereto as Exhibit "A" and incorporated herein by this reference
("Proposal"); and
WHEREAS, City desires to engage Consultant to render the services required by the
City on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the promises and mutual agreements
contained herein, City agrees to employ and does hereby employ Consultant and
Consultant agrees to provide consulting services as follows:
1. SERVICES OF CONSULTANT
1.1 Scope of Services. In compliance with all terms and
conditions of this Agreement, Consultant shall provide those services
identified in the Proposal attached hereto as Exhibit "A" (the "services"
or the "work"). Consultant warrants that all services shall be performed
in a competent, professional and satisfactory manner in accordance
with all standards prevalent in the industry. In the event of any
inconsistency between the terms contained in Exhibit"A"and the terms
set forth in the main body of this Agreement, the terms set forth in the
main body of this Agreement shall govern.
1.2 Compliance with Law. All services rendered hereunder
shall be provided in accordance with all laws, ordinances, resolutions,
statutes, rules, and regulations of the City of Tustin and of any federal,
state or local governmental agency of competent jurisdiction.
1.3 Licenses and Permits. Consultant shall obtain at its sole
cost and expense such licenses, permits and approvals as may be
required by law for the performance of the services required by this
Agreement.
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1.4 Familiarity with Work. By executing this Contract,
Consultant warrants that Consultant (a) has thoroughly investigated
and considered the work to be performed, (b) has investigated the site
of the work and become fully acquainted with the conditions there
existing, (c) has carefully considered how the work should be
performed, and (d) fully understands the facilities, difficulties and
restrictions attending performance of the work under this Agreement.
Should the Consultant discover any latent or unknown conditions
materially differing from those inherent in the work or as represented
by the City, Consultant shall immediately inform City of such fact and
shall not proceed with any work except at Consultant's risk until written
instructions are received from the Contract Officer.
1.5 Care of Work. Consultant shall adopt and follow
reasonable procedures and methods during the term of the Agreement
to prevent loss or damage to materials, papers or other components of
the work, and shall be responsible for all such damage until
acceptance of the work by City, except such loss or damages as may
be caused by City's own negligence.
1.6 Additional Services. Consultant shall perform services
in addition to those specified in the Proposal when directed to do so in
writing by the Contract Officer, provided that Consultant shall not be
required to perform any additional services without compensation. Any
additional compensation not exceeding ten percent (10%) of the
original Contract sum must be approved in writing by the Contract
Officer. Any greater increase must be approved in writing by the City
Manager.
2. COMPENSATION
2.1 Compensation of Consultant. For the services rendered
pursuant to this Agreement, the Consultant shall be compensated and
reimbursed only such amounts as are prescribed in Exhibit "A", in an
amount not to exceed 15% of the final bound policy premium.
2.2 Method of Payment. In any month in which Consultant
wishes to receive payment, Consultant shall no later than the first
working day of such month, submit to City in the form approved by
City's Director of Finance, an invoice for services rendered prior to the
date of the invoice. City shall pay Consultant for all expenses stated
thereon which are approved by City consistent with this Agreement, no
later than the last working day of said month.
2.3 Changes. In the event any change or changes in the
work is requested by City, the parties hereto shall execute an
addendum to this Agreement, setting forth with particularity all terms of
such addendum, including, but not limited to, any additional
Consultant's fees. Addenda may be entered into:
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A. To provide for revisions or modifications to
documents or other work product or work when documents or
other work product or work is required by the enactment or
revision of law subsequent to the preparation of any documents,
other work product or work;
B. To provide for additional services not
included in this Agreement or not customarily furnished in
accordance with generally accepted practice in Consultant's
profession.
3. PERFORMANCE SCHEDULE
3.1 Time of Essence. Time is of the essence in the
performance of this Agreement. Consultant will perform their services
as expeditiously as is consistent with professional skill and care and
the orderly progress of a project of this scope.
3.2 Schedule of Performance. All services rendered
pursuant to this Agreement shall be performed within any time periods
prescribed in the Proposal, attached hereto as Exhibit "A". The
extension of any time period specified in the Exhibit "A" must be
approved in writing by the Contract Officer.
3.3 Force Majeure. The time for performance of services to
be rendered pursuant to this Agreement may be extended because of
any delays due to unforeseeable causes beyond the control and
without the fault or negligence of the Consultant, including, but not
restricted to, acts of God or of a public enemy, acts of the government,
fires, earthquakes, floods, epidemic, quarantine restrictions, riots,
strikes, freight embargoes, and unusually severe weather if the
Consultant shall within ten (10) days of the commencement of such
condition notify the Contract Officer who shall thereupon ascertain the
facts and the extent of any necessary delay, and extend the time for
performing the services for the period of the enforced delay when and
if in the Contract Officer's judgment such delay is justified, and the
Contract Officer's determination shall be final and conclusive upon the
parties to this Agreement.
3.4 Term. Unless earlier terminated in accordance with
Section 7.5 of this Agreement, this Agreement shall continue in full
force and effect until satisfactory completion of the services but not
exceeding one (1) year from the date hereof, unless extended by
mutual written agreement of the parties.
4. COORDINATION OF WORK
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4.1 Representative of Consultant. The following Principal of
the Consultant is hereby designated as being the principal and
representative of Consultant authorized to act in its behalf with respect
to the work specified herein and make all decisions in connection
therewith: Daniel Sisler, Managing Director, Aon Environmental
Services Group.
It is expressly understood that the experience,
knowledge, capability and reputation of the foregoing Principal is a
substantial inducement for City to enter into this Agreement.
Therefore, the foregoing Principal shall be responsible during the term
of this Agreement for directing all activities of Consultant and devoting
sufficient time to personally supervise the services hereunder. The
foregoing Principal may not be changed by Consultant without the
express written approval of City.
4.2 Contract Officer. The Contract Officer shall be the
Matthew West, Assistant to the City Manager, unless otherwise
designated in writing by the City Manager. It shall be the Consultant's
responsibility to keep the Contract Officer fully informed of the progress
of the performance of the services and Consultant shall refer any
decisions which must be made by City to the Contract Officer. Unless
otherwise specified herein, any approval of City required hereunder
shall mean the approval of the Contract Officer.
4.3 Prohibition Against Subcontracting or Assignment. The
experience, knowledge, capability and reputation of Consultant, its
principals and employees were a substantial inducement for the City
to enter into this Agreement. Therefore, Consultant shall not contract
with any other entity to perform in whole or in part the services required
hereunder without the express written approval of the City. In addition,
neither this Agreement nor any interest herein may be assigned or
transferred, voluntarily or by operation of law, without the prior written
approval of City.
4.4 Independent Contractor. Neither the City nor any of its
employees shall have any control over the manner, mode or means by
which Consultant, its agents or employees perform the services
required herein, except as otherwise set forth herein. Consultant shall
perform all services required herein as an independent contractor of
City and shall remain at all times as to City a wholly independent
contractor with only such obligations as are consistent with that role.
Consultant shall not at any time or in any manner represent that it or
any of its agents or employees are agents or employees of City.
Consultant shall be solely responsible for compliance with State and
Federal Law with respect to the wages, hours, benefits, and working
conditions of its employees, including requirement for payroll
deductions for taxes. Employees or independent contractors of
Consultant are not City employees.•
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5. INSURANCE / INDEMNIFICATION
5.1 Insurance.
A. Consultant shall maintain in full force and
effect during the term of these Agreement policies of
commercial general liability and automobile liability insurance
(each of which shall include property damage and bodily injury)
and each with limits of at least$1,000,000 combined single limit
coverage per occurrence.
B. Consultant shall maintain in full force and
effect during the term of this Agreement a policy of professional
liability insurance coverage with limits of at least $1,000,000
combined single limit coverage per claim or per occurrence. If
Consultant provides claims made professional liability
insurance, Consultant shall also agree in writing either (1) to
purchase tail insurance in the amount required by this
Agreement or to cover claims made within five (5) years of the
completion of Consultant's service under this Agreement, or(2)
to maintain professional liability insurance coverage with the
same carrier in the amount required by this Agreement for at
least five (5) years after completion of Consultant's services
under this Agreement. Consultant shall also provide evidence
to the City of the purchase of the required tail insurance or
continuation of the professional liability policy by executing the
attached Letter Agreement on Consultant's letterhead.
C. Consultant shall carry and pay for such
workers' compensation insurance as is required fully protect
Consultant and its employees under California Worker's
Compensation Insurance Law. The insurance company shall
agree to waive all rights of subrogation against the City for
losses paid under the policy, which losses arose from the work
performed by the named insured.
D. Other applicable insurance requirements
are: (1) Name the City, its officials and employees as an
additional insured on the commercial, general and automobile
policies. (2) The insurance shall be issued by a company
authorized by the Insurance Department of the State of
California and rated A, VII or better(if an admitted carrier) or A-
, X (if offered, by a surplus line broker), by the latest edition of
Best's Key Rating Guide, except that the City will accept
workers' compensation insurance rated B-VIII or better or from
the State Compensation Fund. (3) The Insurance shall not be
cancelled, except after thirty(30)days written prior notice to the
City; and (4) The commercial general and automobile liability
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insurance shall each be primary as respects the City, and any
other insurance maintained by the City shall be in excess of this
insurance and not contribute to it.
E. Upon execution of this Agreement,
Consultant shall provide to City certificates of insurance and
insurer endorsements evidencing the required insurance.
Insurer endorsements (or a copy of the policy binder if
applicable) shall be provided as evidence of meeting the
requirements of Subsections (1), (3)and (4)of Section D above
and the waiver of subrogation requirement in Section C above.
If self-insured for worker's compensation, Consultant shall
submit to City a copy of its certification of self-insurance issued
by the Department of Industrial Relations.
5.2 Indemnification. The Consultant shall defend, indemnify
and hold harmless the City, its officers and employees, from and
against any and all actions, suits, proceedings, claims, demands,
losses, costs, and expenses, including legal costs and attorneys'fees,
for injury to or death of person or persons, for damage to property,
including property owned by City, arising from errors and omissions of
Consultant, its officers, employees and agents, and arising out of or
related to Consultant's performance under this Agreement, except for
such loss as may be caused by City's sole negligence or that of its
officers or employees.
The Consultant shall also defend, indemnify and hold the
City harmless from any claims or liability for City health and welfare,
retirement benefits, or any other benefits of part-time or fulltime City
employment sought by Consultant's officers, employees, or
independent contractors, whether legal action, administrative
proceeding or pursuant to State statue.
6. RECORDS AND REPORTS
6.1 Reports. Consultant shall periodically prepare and
submit to the Contract Officer such reports concerning the
performance of the services required by this Agreement as the
Contract Officer shall require.
6.2 Records. Consultant shall keep such books and records
as shall be necessary to properly perform the services required by this
Agreement and enable the Contract Officer to evaluate the
performance of such services. The Contract Officer shall have full and
free access to such books and records at all reasonable times,
including the right to inspect, copy, audit and make records and
transcripts from such records.
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6.3 Ownership of Documents. All drawings, specifications,
reports, records, documents and other materials prepared by
Consultant in the performance of this Agreement shall be the property
of City and shall be delivered to City upon request of the Contract
Officer or upon the termination of this Agreement, and Consultant shall
have no claim for further employment or additional compensation as a
result of the exercise by City of its full rights or ownership of the
documents and materials hereunder. Consultant may retain copies of
such documents for its own use. Consultant shall have an unrestricted
right to use the concepts embodied therein.
6.4 Release of Documents. All drawings, specifications,
reports, records, documents and other materials prepared by
Consultant in the performance of services under this Agreement shall
not be released publicly without .the prior written approval of the
Contract Officer.
7. ENFORCEMENT OF AGREEMENT
7.1 California Law. This Agreement shall be construed and
interpreted both as to validity and to performance of the parties in
accordance with the laws of the State of California. Legal actions
concerning any dispute, claim or matter arising out of or in relation to
this Agreement shall be instituted in the Superior Court of the County
of Orange, State of California, or any other appropriate court in such
county, and Consultant covenants and agrees to submit to the
personal jurisdiction of such court in the event of such action.
7.2 Waiver. No delay or omission in the exercise of any right
or remedy of a non-defaulting party on any default shall impair such
right or remedy or be construed as a waiver. No consent or approval
of City shall be deemed to waive or render unnecessary City's consent
to or approval of any subsequent act of Consultant. Any waiver by
either party of any default must be in writing and shall not be a waiver
of any other default concerning the same or any other provision of this
Agreement.
7.3 Rights and Remedies are Cumulative. Except with
respect to rights and remedies expressly declared to be exclusive in
this Agreement, the rights and remedies of the parties are cumulative
and the exercise by either party of one or more of such rights or
remedies shall not preclude the exercise by it, at the same or different
times, of any other rights or remedies for the same default or any other
default by the other party.
7.4 Legal Action. In addition to any other rights or remedies,
either party may take legal action, in law or in equity, to cure, correct
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or remedy any default, to recover damages for any default, to compel
specific performance of this Agreement, to obtain injunctive relief, a
declaratory judgment or any other remedy consistent with the
purposes of this Agreement.
7.5 Termination Prior to Expiration of Term. The City
reserves the right to terminate this Agreement at any time, with or
without cause, upon thirty (30) days written notice to Consultant,
except that where termination is due to the fault of the Consultant and
constitutes an immediate danger to health, safety and general welfare,
the period of notice shall be such shorter time as may be appropriate.
Upon receipt of the notice of termination, Consultant shall immediately
cease all services hereunder except such as may be specifically
approved by the Contract Officer. Consultant shall be entitled to
compensation for all services rendered prior to receipt of the notice of
termination and for any services authorized by the Contract Officer
thereafter.
7.6 Termination for Default of Consultant. If termination is
due to the failure of the Consultant to fulfill its obligations under this
Agreement, City may take over the work and prosecute the same to
completion by contract or otherwise, and the Consultant shall be liable
to the extent that the total cost for completion of the services required
hereunder exceeds the compensation herein stipulated, provided that
the City shall use reasonable efforts to mitigate damages, and City may
withhold any payments to the Consultant for the purpose of set-off or
partial payment of the amounts owed to City.
7.7 Attorneys Fees. If either party commences an action
against the other party arising out of or in connection with this
Agreement or it subject matter, the prevailing party shall be entitled to
recover reasonable attorneys' fees and costs of suit from the losing
party.
8. CITY OFFICERS AND EMPLOYEES; NON-DISCRIMINATION
8.1 Non-Liability of City Officers and Employees. No officer
or employee of City shall be personally liable to the Consultant, or any
successor-in-interest, in the event of any default or breach by the City
or for any amount which may become due to the Consultant or its
successor, or for breach of any obligation of the terms of this
Agreement.
8.2 Covenant Against Discrimination. Consultant covenants
that, by and for itself, its heirs, executors, assigns, and all persons
claiming under or through them, that there shall be no discrimination or
segregation in the performance of or in connection with this Agreement
regarding any person or group of persons on account of race, color,
creed, religion, sex, marital status, national origin, or ancestry.
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Consultant shall take affirmative action to insure that applicants and
employees are treated without regard to their race, color, creed,
religion, sex, marital status, national origin, or ancestry.
9. MISCELLANEOUS PROVISIONS
9.1 Notice. Any notice, demand, request, consent, approval,
or communication either party desires or is required to give to the other
party or any other person shall be in writing and either served
personally or sent by pre-paid, first-class mail to the address set forth
below. Either party may change its address by notifying the other party
of the change of address in writing. Notice shall be deemed
communicated forty-eight (48) hours from the time of mailing if mailed
as provided in this Section.
To City: To Consultant:
CITY OF TUSTIN AON RISK SERVICES
300 Centennial Way Environmental Services Group
Tustin, CA 92626 100 Bayview Circle
Newport Beach, CA 92660
9.2 Integrated Agreement. This Agreement contains all of
the agreements of the parties and cannot be amended or modified
except by written agreement.
9.3 Amendment. This Agreement may be amended at any
time by the mutual consent of the parties by an instrument in writing.
9.4 Severability. In the event that any one or more of the
phrases, sentences, clauses, paragraphs, or sections contained in this
Agreement shall be declared invalid or unenforceable by valid
judgment or decree of a court of competent jurisdiction, such invalidity
or unenforceability shall not affect any of the remaining phrases,
sentences, clauses, paragraphs, or sections of this Agreement, which
shall be interpreted to carry out the intent of the parties hereunder.
9.5 Corporate Authority. The persons executing this
Agreement on behalf of the parties hereto warrant that they are duly
authorized to execute this Agreement on behalf of said parties and that
by so executing this Agreement the parties hereto are formally bound
to the provisions of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the dates
stated below.
"City"
Dated: CITY OF TUSTIN, a municipal corporation
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By:
Jeffrey C. Parker
City Manager
APPROVED AS TO FORM:
David E. Kendig,
City Attorney
"Consultant"
AON RISK INSURANCE SERVICES WEST, INC.
By:
Daniel Sisler
Managing Director
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EXHIBIT "A"
AON PROPOSAL TO MARKET AND SOLICIT FOR ENVIRONMENTAL INSURANCE
(DATED DECEMBER 21, 2015)
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•
•
AON Daniel E.Sisler Managing Director I Daniel.sisler@aon.com
December 21, 2015
Matthew S.West
Assistant to the City Manager
City of Tustin
300 Centennial Way •
Tustin, CA 92780
Barry P. Steinberg
Partner
Kutak Rock LLP
1101 Connecticut Avenue, N.W., Suite 1000
Washington, District of Columbia 20036
RE : Environmental Insurance
Tustin Marine Corps Air Station ("MCAS")
Matthew/ Barry;
I am pleased at this time to present to you Aon's initial approach on (a) compensation and
(b) timelines in preparation for the December 21, 2016 renewal of the in force
environmental insurance policy ("PLL") underwritten by Catlin. The policy as I know it to
date covers a significant portion of the Tustin Marine Corps Air Station ("MCAS") located in
Tustin, California. Aon has yet to review fully the terms offered within the current policy
(which has since been provided) nor spoken with the current Catlin underwriter but
understand voiced concerns about the carrier position on renewal, especially the resulting
merger between XL and Catlin. XL has had an extensive working knowledge of this parcel of
land at an engineering, underwriting and unfortunately a claims standpoint as well. Aon has
been approached to begin the search for a new carrier past the December 21, 2016 as well
as negotiations with Catlin on their renewal positions. This letter details on our approach for
a renewable insurance policy as well as compensation to achieve this.
Aon Services
Aon's compensation is based off efforts that will be needed to procure this PLL insurance
past the December 21, 2016 date which include but are not limited to ;
✓ Renewal Planning and Preparation — Aon will supply a Renewal Request package
within (TBD) days prior to renewal to assist the Client in the gathering and
preparation of the underwriting information and will provide guidance to complete
Aon Risk Services I Environmental Services Group 100 Bayview Circle I Newport Beach,CA 192660
1+1.949.608.6302 I m+1.949.395.7984 I I f+1.949.608.6451 I aon.com
Ao
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the insurance applications. Aon and The Ct will agree on renewal strategy, including
specific market review.
• ✓ Submissions — Provided that Client has submitted complete renewal information at
least (TBD) days prior to renewal, Aon will create underwriting submissions to
insurers (TBD) days prior to renewal.
✓ Communication —Aon will inform Client of insurance renewal developments and the
desirability of insurer meetings.
✓ Risk Analysis — Aon will review with Client the appropriateness of coverages, limits
and retentions/deductibles at renewal of the program.
✓ Negotiations — Aon will employ appropriate resources and personnel in the
negotiation process.
✓ Premium Cost Management —Aon will seek competitive premium costs for policies
through insurers agreed upon with Client.
✓ Insurer Quality —Aon will market Client's program to insurance companies reviewed
by Aon in accordance with paragraph 10 (Market Security) of the Service Fee
Agreement. If insurance companies that do not meet Aon's standards must be used,
prior Client approval will be obtained.
✓ Renewal Terms—Aon will use best efforts to provide renewal terms to Client prior to
the expiry date of the current coverages.
✓ Analysis of Quotations—Aon will review insurer quotations and compare to coverage
specifications set with Client.
✓ Implementation — Aon will effect insurance coverage with insurers in accordance
with Client's instructions
✓ Claims Processing - Aon will assist on the administration and handling of claims. An
Aon Claims representative (Claire Juliana, BIO provided) will establish a reporting
protocol so Client's claims are handled promptly and efficiently. For claims Aon
reports on Client's behalf, Aon will determine with the insurer the appropriate
policies and their applicable coverages where Aon has placed the policies and will
notify the insurers accordingly.
✓ Advocacy - Aon can provide claims advocacy services including interpretation of
coverage, negotiation with insurers, if required, and assistance in the preparation of
Client's claim submission in order that the Client's policy responds appropriately.
These claims advocacy services are included in the Fee unless previously agreed to in
writing.
Our compensation structure that will be that of a policy placement and servicing fee paid
direct by the City of Tustin in lieu of standard carrier paid commission. As discussed, Aon's
standard pre-agreed commission amount with a majority of our carriers is 15% of the policy
premium with a few exceptions offering 17.5%. Aon will agree to "cap" our commission at
the 15% amount for our placement efforts as well as policy term servicing need based on
the final bound policy premium (excluding California Surplus Lines Taxes and Fees of 3.2%).
E0
Placement Timelines
"Responsibility" — Aon (Daniel Sisler), City (City of Tustin), All (Aon, City and KutakRock),
Underwriters (considering underwriters for the policy);
DRAFT
Date
Activity
Responsibility
Comments Completion Date
Week of
Review and agree on Fee
All
12/15/2015
December 7th
Timeline
underwriters
December 14th
Current Catlin Policy
12/8/2015
carriers narrowed down
provided to Aon
City
by initial responses
Week of January
Agreement on Aon to
City
Underwriters
4th
proceed as Insurance
Aon
by carriers
Broker
Week of January
Aon to prepare initial
Coverage
18th
specifications based on
Aon
enhancement
current program
requests will also be
included
Week of
Initial discussions with
February 1st
potential with Aon
pricing, terms and
environmental insurers
Week of
Listing of initial Aon
February 8th
interested insurers
Webinar or face to
Week of Insurance Carrier All face visits at City
February 15th engagement offices with insurers
for introductions to
MCAS
Initial underwriter
March 28th feedback on data review Aon
and additional
underwriting needs
Week of May 2nd Response back to these All
data and inquiry needs
Week of June 6th
Initial thoughts of
pricing, terms and
Underwriters
conditions provided by
underwriters
Week of June
Listing of interested
20th
carriers narrowed down
All
by initial responses
Week of August
Formal pricing, terms
Underwriters
1st
and conditions received
Aon
by carriers
Week of Aon formal proposal to
September 1" City of Tustin
Week of
Review of Aon proposal
September 19th
complete
Week of October
Final carrier selection
3rd
and program
November
Binding Instructions
provide to Aon and
selected carrier
November
Aon Invoice issued
Week of
Correctly issued policy
December 51h
delivered to the City
Carrier quotes and
All policy specimens
provided for review
All Negotiation with
carriers on terms
All
City City of Tustin Board
of Directors decision
process
Aon
Aon
I hope this provides you both with our initial thoughts on compensation and approach for
the insurance process towards the December 2016 expiration. I am happy to discuss this in
more detail when you have had a chance to review this letter.
I once again thank you for your consideration of Aon for these services and eagerly await
the approval to proceed as proposed above.
Sincerely,
Daniel Sisler
Managing Director, Aon Environmental Services Group
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