HomeMy WebLinkAbout08 BROKERAGE SERVICES AGREEMENT WITH AON RISK SERVICES WEST, INC.1z� o
.a AGENDA REPORT
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MEETING DATE: JANUARY 19, 2016
TO: JEFFREY C. PARKER, CITY MANAGER
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Agenda Item 8
Reviewed:
City Manager
Finance Director If �
SUBJECT: BROKERAGE 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 Brokerage 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 Brokerage
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, subject to any non -substantive modifications as may be deemed necessary and/or
recommended by the City Attorney.
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
Agenda Report
January 19, 2016
Page 2
was secured in December of 2001 with a ten (10) year term and five (5) year extending
reporting period, which expires in December 2016. This policy covers losses that occur due
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 Brokerage
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 19, 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. Sister. 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 Brokerage 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.
Aa* �, lo4t-
Matthew S. West
Assistant to the City Manager
Attachment: Brokerage Services Agreement with Aon Risk Insurance Services West, Inc.
BROKERAGE SERVICES AGREEMENT
This Agreement for Brokerage Services (herein "Agreement"), is made and entered
into by and between the CITY OF TUSTIN, a municipal corporation ("City"), and AON
RISK INSURANCE SERVICES WEST, INC., a California corporation ("Broker").
WHEREAS, Broker 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, Broker is qualified to provide the necessary services and has agreed
to provide such services; and
WHEREAS, Broker 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 Broker 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 Broker and Broker
agrees to provide consulting services as follows:
1. SERVICES OF BROKER
1.1 Scope of Services. In compliance with all terms and
conditions of this Agreement, Broker shall provide those services
identified in the Proposal attached hereto as Exhibit "A" (the
"services" or the "work"). Broker 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. In the event
that City's operations change substantially or if there are other
material changes in scope and nature of exposures or losses or if
there is a substantial midterm change to the Programs, the parties
will discuss the impact of such changes on the Services and the
compensation.
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.
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1.3 Licenses and Permits. Broker 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.
1.4 Familiarity with Work. By executing this Contract,
Broker warrants that Broker has carefully considered how the work
should be performed. Broker will deliver the Services based upon
the information that City and its representatives provide. City is
responsible for the accuracy and completeness of the information
and Broker accepts no responsibility arising from City's failure to
provide such information to Broker. Broker must receive promptly
the information to deliver the Services as well as City's prompt
updates to any information where there has been a material change
which may affect the scope or delivery of the Services, such as a
change in the nature of the risk, insured entities, property values
and persons or entities to be covered.
1.5 Care of Work. Broker 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. Broker shall perform services in
addition to those specified in the Proposal when directed to do so in
writing by the Contract Officer, provided that Broker 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 Broker. For the services rendered
pursuant to this Agreement, the Broker shall be compensated only
such amounts as are prescribed in Exhibit "A", in an amount not to
exceed 15% of the final bound policy premium secured by Broker,
(excluding California Surplus Lines Taxes and Fees of 3.2%). No
compensation shall be owed to Broker unless and until the City
obtains a final bound policy. (In other words, Broker is performing
services hereunder "at risk", and no compensation will be due
hereunder in the event Broker does not secure a final bound policy
for the City.
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2.2 Method of Payment. City shall pay Broker the
undisputed portion of the fee owing under Section 2.1 within thirty
(30) days of submittal to the City Director of Finance by Broker of an
invoice requesting payment hereunder.
2.3 Changes. In the event any change or changes in the
work is requested by City that is outside the scope of work set forth in
Exhibit A, the parties hereto shall execute a written addendum to this
Agreement, setting forth with particularity all terms of such
addendum, including, but not limited to, any additional or increased
Broker's fees. Addenda may be entered into:
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 fumished in
accordance with generally accepted practice in Broker's
profession.
3. PERFORMANCE SCHEDULE
3.1 Time of Essence. Time is of the essence in the
performance of this Agreement. Broker 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 Broker, 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 Broker 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
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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
4.1 Representative of Broker. The following Principal of the
Broker is hereby designated as being the principal and representative
of Broker 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 Broker and
devoting sufficient time to personally supervise the services
hereunder. The foregoing Principal may not be changed by Broker
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 Broker's
responsibility to keep the Contract Officer fully informed of the
progress of the performance of the services and Broker 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 Broker, its
principals and employees were a substantial inducement for the City
to enter into this Agreement. Therefore, Broker 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.
Broker encourages its retail brokers to approach markets directly
(without an intermediary) wherever possible. However, where
Broker believes it is in City's best interest, Broker may recommend
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the use of intermediaries, including but not limited to co -brokers,
sub -brokers, managing general agents/managing general
underwriters, wholesale brokers, or reinsurance brokers
(collectively, 'Intermediary") to assist in the procurement and
servicing of City's insurance. No Intermediary shall be used without
the written approval of the Contract Officer which writing shall set
forth any increase or additional compensation to be paid as a result
of the use of the Intermediary, as well as any allocation of risks of
injury or liability arising therefrom.
4.4 Independent Contractor. Neither the City nor any of its
employees shall have any control over the manner, mode or means
by which Broker, its agents or employees perform the services
required herein, except as otherwise set forth herein. Broker 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.
Broker 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. Broker
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 Broker are not City
employees.
5. INSURANCE / INDEMNIFICATION
5.1 Insurance.
A. Broker shall maintain in full force and
effect during the term of this 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. Broker 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 Broker provides claims made professional
liability insurance, Broker 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 Broker'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 Broker's services under
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this Agreement. AON cannot confirm that the carrier will be
the same for the full five years, however, in the event that
Broker utilizes more than one carrier, Broker's policies shall
each cover professional liability claims arising during the
performance of services hereunder if such claim is reported
within five years of the completion of Broker's services under
this Agreement. Broker shall also provide evidence to the City
of the purchase of the required tail insurance or continuation of
the professional liability policy or policies in accordance with
this section by executing the attached Letter Agreement on
Broker's letterhead.
C. Broker shall carry and pay for such
workers' compensation insurance as is required fully protect
Broker and its employees under California Workers
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 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,
Broker 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, Broker shall
submit to City a copy of its certification of self-insurance issued
by the Department of Industrial Relations.
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5.2 Indemnification. The Broker shall defend, indemnify
and hold harmless the City, its officers and employees, from and
against any and all third party 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 Broker, its officers, employees and agents,
and arising out of or related to Broker'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 Broker 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 Broker's officers, employees, or independent
contractors, whether legal action, administrative proceeding or
pursuant to State statue.
5.3 Limitation on Damages. Neither party to this Agreement shall be
liable to the other for any indirect, incidental, special, consequential,
exemplary, punitive or reliance damages (including, without
limitation, lost or anticipated revenues, lost business opportunities
or lost sales or profits, whether or not either party has been advised
of the likelihood of such damages) arising out of services provided
by Broker or its affiliates. Notwithstanding the foregoing sentence,
nothing herein limits the liability of either party in any manner for
intentional torts, including but not limited to fraud or intentional
misrepresentation.
Broker's liability to City, in total, for the duration of our business
relationship for any and all damages, costs, and expenses
(including but not limited to attorneys' fees), whether based on
contract, tort (including negligence), or otherwise, in connection
with or related to Broker's services (including a failure to provide a
service) or any other service that Broker provide shall be limited to
a total aggregate amount of US Five Million dollars
($5,000,000.00) ("Liability Limitation"), to the fullest extent permitted
by law. This Liability Limitation shall apply to City and extend to
City's parent(s), affiliates, subsidiaries, and their respective
directors, officers, employees and agents (hereinafter, each a "City
Group Member' and together, "City Group") wherever located that
seek to assert claims against Broker, and its parent(s), affiliates,
subsidiaries and their respective directors, officers, employees and
agents (each an "Aon Group Member' and together, "Aon Group").
Nothing in this Liability Limitation section implies that any Aon
Group Member owes or accepts any duty or responsibility to any
City Group Member.
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6. RECORDS AND REPORTS
6.1 Reports. Broker 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. Broker 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
access to such books and records at reasonable times and upon
prior written notice, including the right to inspect, copy, audit and
make records and transcripts from such records; provided that City
agrees that any such review or audit shall be conducted in a
manner reasonably designed to protect the confidentiality of
Broker's confidential information and to avoid interfering with
Broker's business operations and that the parties shall agree to the
review and audit procedures prior to such review and audit.
6.3 Ownership of Documents. All drawings, specifications,
reports, records, documents and other materials prepared by Broker
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 Broker 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. Broker may retain copies of such documents
for its own use. Broker 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 Broker
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 without regard for
its conflicts of law rules. 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 Broker
covenants and agrees to submit to the personal jurisdiction of such
court in the event of such action.
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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 a party shall be deemed to waive or render unnecessary
that party's consent to or approval of any subsequent act of the other
party. 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 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. Each party agrees
to waive its right to a trial by jury in any lawsuit or other legal
proceeding against the other party and/or its parent(s), affiliates, or
subsidiaries, in connection with, arising out of or relating to this
Agreement or any services provided to City by Broker or its
affiliates. It is agreed that this agreement is between the parties
hereto and is not an agreement between their respective
employees, officers and directors. As a result, in any legal action
for breach of this contract neither party shall name as a defendant
any individual employee, officer or director of the other party or its
parent(s), affiliates or subsidiaries. Nothing herein limits the rights
of a party to name as a cross-defendant any parent, affiliate,
subsidiary, individual, employee, officer or director who, in such
capacity, sues the City.
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 Broker, except
that where termination is due to the fault of the Broker 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, Broker shall immediately cease all
services hereunder except such as may be specifically approved by
the Contract Officer. Broker 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.
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7.6 Termination for Default of Broker. If termination is due
to the failure of the Broker 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 Broker 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 Broker 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 its subject matter, the prevailing party shall be entitled
to recover reasonable attomeys' fees and costs of suit from the losing
party. Reasonable attorney fees shall be calculated by multiplying
the number of hours reasonably spent by the attorneys for the
prevailing party in the action times two hundred dollars ($200) per
hour.
7.8 Rights upon Termination. In the event of termination,
Broker will work with City to transition City's account to City's new
broker. However, Broker's obligation to deliver the Services
terminates at the effective date of termination, unless otherwise
agreed in writing signed by the parties.
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 Broker, 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 Broker or its
successor, or for breach of any obligation of the terms of this
Agreement.
8.2 Covenant Against Discrimination. Broker 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. Broker 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.
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10.
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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:
CITY OF TUSTIN
300 Centennial Way
Tustin, CA 92626
To Broker:
AON RISK SERVICES
Environmental Services Group
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.
Business Terms
10.1 Surplus Lines and Other Government Taxes. Insurance may not be
available in the admitted marketplace for the terms and conditions
specified by City. In such event, Broker's insurance proposal may
include one or more insurers not licensed to transact insurance in
the states of exposure and such coverage may be placed as
surplus lines coverage pursuant to applicable insurance laws
11
governing the placement of insurance with non -admitted insurers.
Persons and entities insured by surplus lines insurers cannot avail
themselves of the protection and recovery afforded by the state
insurance guaranty funds in the event the surplus lines insurer
should become insolvent. The states do not audit the finances or
review the solvency of surplus lines insurers. In some instances,
these insurance placements made by Broker or its affiliates on
City's behalf may require the payment of state surplus lines, excise
or other taxes and/or fees in addition to the premium itself. Broker
will endeavor to identify any such tax and/or fee in advance. Only if
identified prior to the City committing to purchase the policy, the
payment of these taxes and/or fees will remain the responsibility of
City. Broker will invoice City for the payment of such taxes and
fees where it is Broker's responsibility to do so.
10.2 Claim Notification to Insurers. Unless Broker has a specific signed
agreement with City to the contrary, it is City's responsibility to take
such steps as are necessary to notify directly those insurers whose
policies may apply to any circumstances, occurrences, claims,
suits, demands and losses in accordance with the terms and
conditions of City's policies. Broker assumes no duty or
responsibility with respect to such notifications or monitoring City's
obligation to place insurers on notice unless undertaken in a
separate written agreement. City may send copies of such notices
to members of Broker staff for informational purposes only, but the
receipt of such notice by Broker shall not create additional duties or
obligations owed by Broker to City nor constitute notice to City's
insurers.
10.3 Contract Review; General Advice. In instances where Broker
provides summaries of contractual requirements or provisions, or
any suggested additional or alternative wordings to any contract at
City's request, such language must be reviewed by City's legal
advisor before City takes action based upon Broker's statements.
Nothing herein limits the rights of the City and its legal counsel to
contact any insurer or its underwriters directly to request
clarifications about a proposed policy for any purpose, including but
not limited to understanding and discussing its terms, conditions,
and exclusions; provided, however, City will make good faith efforts
to initiate such communications through Broker, so long as Broker
promptly communicates all such inquiries and all responses
received. Broker does not and cannot provide legal advice as to
whether City's insurance program covers legal obligations
contained in City's contracts or leases. All descriptions of the
insurance coverages are subject to the terms, conditions,
exclusions and other provisions of the policies or any applicable
regulations, rating rules or plans. Furthermore, it is understood that
none of the services provided by Broker are of a legal nature and
12
1133266.3
Broker shall not give legal opinions or provide legal advice or
representations.
10.4 Collection and Use of City Information. Broker gathers data
containing information about City and City's insurance placements,
as well as information about the insurance companies that provide
coverage to City or compete for City's insurance placements. In
addition to the information provided by City, Broker may collect
information from commercially available sources. Such information
may include name, address, email address and demographic data.
This information may be shared among Broker affiliated
businesses, as well as with third -party service providers acting on
Broker's behalf. In addition to being used to provide services to
Broker's customers, the information may be used for business
administration, business reporting, statistical analysis, marketing of
Broker products or services and providing consulting or other
services to insurance companies for which Broker or its affiliates
may receive remuneration. Broker takes appropriate measures to
protect the privacy and confidentiality of Broker's customers as well
as to comply with applicable laws and regulations. Broker may use
or disclose information about Broker's customers if Broker are
required to do so by law, Broker policy, pursuant to legal process or
in response to a request from law enforcement authorities or other
government officials. Due to the global nature of services provided
by Broker, the personal information that City provides may be
transmitted, used, stored and otherwise processed outside of the
country where City submitted that information. Nothing herein limits
in any way the Broker's obligation to maintain the confidentiality of
information and documents communicated to Broker and identified
as "Confidential".
10.5 Use of Logos. Unless a particular use is approved in writing by the
City Clerk, Broker will not use City's logo for any purpose. Other
publicly available information about the City may be used by Broker
to effectively market City's Programs or for use in Broker's business
records.
10.6 Premium Remittance. Premiums paid by City to Broker for
remittance to insurers and City premium refunds paid to Broker by
insurance companies for remittance to City are deposited into
fiduciary accounts in accordance with applicable insurance laws
until they are due to be paid to the insurance company or City.
Subject to such laws and the applicable insurance company's
consent, where required, Broker will retain the interest or
investment income earned while such funds are on deposit in such
accounts.
13
1133266.3
10.7 Insurance Proposals and Summaries. Broker's insurance
documents containing proposals to bind coverage, summaries of
coverages, and certificates of insurance placed are furnished as a
matter of information for City's convenience. These documents
summarize proposed and placed policies and are not intended to
reflect all the terms, conditions and exclusions of such policies.
Moreover, the information contained in these documents reflects
proposed or placed coverage as of the effective dates of the
proposed policies or the date of the summaries and does not
include subsequent changes. These documents are not themselves
insurance policies and do not amend, alter or extend the coverages
afforded by the proposed or placed policies. The insurance afforded
by the proposed or placed policies is subject to all the terms,
conditions and exclusions contained in such policies as they are
issued by the insurers.
10.8 Insurer Solvency. While Broker only engages insurers who meet
certain requirements as established by Broker from time to time,
Broker make no representation, guarantee or warranty as to the
solvency or ability of any insurer to pay any amounts for insurance
claims or otherwise. Broker shall advise City in writing of the then -
most recent financial strength rating assigned to each insurer
proposing to place a policy with the City, as such ratings are
determined by Standard & Poor's and A.M. Best, if either.
10.9 Foreign Account Tax Compliance Act (FATCA). City acknowledges
that Broker is required to act as a withholding agent on any FATCA
eligible premium payments when Broker US or its US licensed
affiliates are responsible for the remittance of premium payments to
insurers, and in such instances, Broker will be responsible for
gathering and validating appropriate FATCA form(s) from carriers
and intermediaries involved in FATCA eligible premium payments.
Broker will not act as withholding agent on premium remitted by
City to any other party, including premiums paid directly to
insurers, to non -US intermediaries, or to non -US Broker entities
which are not classified as qualified intermediaries for FATCA. If
City directs use of a carrier or intermediary that is unable or
unwilling to provide FATCA forms to Broker in instances where
Broker is to remit premium to that carrier or intermediary, City will
be responsible for paying any additional sums so that the mandated
FATCA withholdings can be made while concurrently fulfilling City's
obligation to remit the full premium amounts necessary to effect
coverage. City will be responsible for all aspects of FATCA
compliance for premium payments made to entities other than
Broker -including payments made directly to (re)insurance carriers
or intermediaries. Broker provides Broker's US W-9 form(s) to City
via Aon.com as directed to City on invoices. City agrees with and
accepts delivery of such form(s) via Aon.com. Broker will not be
14
1133266.3
responsible for issues arising from Broker withholding 30% of
premium payments in connection with its FATCA obligations. City
agrees to work with Broker to provide information required to meet
FATCA obligations.
10.10 Pricing. Broker does not and cannot guarantee the availability or
price of insurance for City's risks and is not responsible for
fluctuation in the premiums charged by insurers. Broker will rely on
City to review and approve any calculation or estimation of
premium and Broker is not responsible for any loss occasioned as
a result of Broker's calculation or estimation of premium and
statutory charges that may apply to City's insurance. Nothing
herein limits the rights of the City to communicate directly with an
insurer and its underwriter or other representative regarding the
calculation or estimation of premium amounts; provided, however,
City will make good faith efforts to initiate such communications
through Broker, so long as Broker promptly communicates all such
inquiries and all responses received.
10.11 Policy Adequacy. Broker assumes no responsibility for the
adequacy or effectiveness of programs or coverages that Broker
did not implement or place.
10.12 Loss Control Services. Any loss control services, summaries and/or
surveys performed by Broker are advisory in nature and are for the
sole purpose of assisting City in City's development of City's risk
control and safety procedures. Such services and/ or surveys are
limited in scope and do not constitute a safety inspection nor verify
that City is in compliance with federal, state and local laws,
statutes, ordinances, recommendations, regulations, consensus
codes or other standards.
10.13 Confidentiality. For Broker materials that are competitive in nature
with its competitors, City will keep confidential until the end of the
competitive proposal process to the extent permitted by law.
15
1133266.3
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
dates stated below.
"City"
Dated: CITY OF TUSTIN, a municipal corporation
APPROVED AS TO FORM:
David E. Kendig,
City Attorney
0
Jeffrey C. Parker
City Manager
"Broker"
AON RISK SERVICES
0
Jason Peery
Resident Managing Director
16
1133266.3
EXHIBIT "A"
AON PROPOSAL TO MARKET AND SOLICIT FOR ENVIRONMENTAL INSURANCE
(DATED DECEMBER 21, 2015)
17
11332663
AON
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
Daniel E. Sisler I M6n>Fe.J O,c Or} I Daniel.sisler@aon.com
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
t+1949 608 6302 1 m+1949.395.7984 11 f+1.949.608.6451 1 aon com
Am
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%).
BION
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
20th
carriers narrowed down All
December 14th
Current Catlin Policy
Week of August
12/8/2015
1st
provided to Aon
City
by carriers
Week of January
Agreement on Aon to
City
4th
proceed as Insurance
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
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 Carrier quotes and
September 1s' City of Tustin All policy specimens
provided for review
Week of Review of Aon proposal All Negotiation with
September 19th complete carriers on terms
Week of October Final carrier selection All
3rd and program
November Binding Instructions City City of Tustin Board
provide to Aon and of Directors decision
selected carrier process
November Aon Invoice issued Aon
Week of Correctly issued policy Aon
December 5th delivered to the City
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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