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HomeMy WebLinkAbout08 AMEND JT PWRS AGMNT W/CIPA 08-07-07Agenda Item 0 ! Reviewed: --- ~ AGENDA REPORT City Manager t ~;t~ Finance Director ,~ MEETING DATE: August 7, 2007 TO: William A. Huston, City Manager FROM: Ronald A. Nault, Finance Director SUBJECT: PROPOSED CHANGES TO JOINT POWERS AGREEMENT ESTABLISHING THE CALIFORNIA INSURANCE POOL AUTHORITY SUMMARY: The Board of Directors of the California Insurance Pool Authority (CIPA) is recommending various changes to the Joint Powers Agreement to reflect the transition from a claims made to an occurrence form coverage -and the initiation of a Workers' Compensation pooled program. RECOMMENDATION: Authorize the Mayor to execute the Amended Joint Powers Agreement for the California Insurance Pool Authority. FISCAL IMPACT: No immediate fiscal impact but moving to occurrence form coverage significantly improves coverage on future claims. DISCUSSION: The City of Tustin was one of the original members signing the first Joint Powers Agreement established in 1978. The Authority was created for the purpose of reducing the overall cost of insurance through the joint purchase of liability insurance. Over the years the Authority expanded its joint purchase opportunities to include coverage for property, bond/crime, elected officials, boiler and machinery, employment practices and excess workers' compensation. In 1986 the Authority created a pooled liability program by maintaining a portion of liability risk for all its members and increasing coverages through the purchase of excess insurance, greatly expanding members' limits at reasonable cost. In response to the shrinking workers' compensation market in 2002, the Authority created a workers' compensation pool program to protect the interests of its members. In addition, the Authority has moved from a claims made to an occurrence form policy which provides enhanced coverage to its members. In order to properly reflect these changes the Authority's Board of Directors is recommending the Joint Powers Agreement be amended by the following. 1. Various definitions have been added or revised to reflect the transition to occurrence form coverage and the initiation of the workers' compensation pool program. 2. Require the participation in the basic liability program in order to participate in other programs. This will maintain the integrity of the JPA by requiring participation in the primary pool by all members. 3. Gave the Authority the option to appoint an outside Treasurer if desired by the Board. 4. Recognizing the change to an occurrence form of coverage, the responsibilities of a withdrawing member have been broadened. 5. Disputes between the California Insurance Pool Authority and its members may be submitted to arbitration. This is merely a formalization of past practice. 6. New language clarifies the obligation of the California Insurance Pool Authority to defend and indemnify its Officers and Directors. 7. Language has been added to protect members from joint and several liability exposure. The proposed changes to the Joint Powers Agreement have been reviewed by the City's Attorney, Doug Holland, and his comments have been incorporated in the final draft before you. The Authority has a long history, thirty years, of service and financial strength for its members. The proposed changes to the JPA are intended to add to the benefit the members have come to expect, and Staff recommends approval of these changes to the CIPA Joint Powers Agreement. Ronal . Nault Finance Director Attachments: 1) Summary of Changes Memorandum from Joint Powers Authority Attorney 2) Amended Joint Powers Agreement JointPowersAgreementProposedChangesStaffReport. doc Procopio Cory Har~reavesl1 ~~ S avitCri ~ ru~i~l~cl ~~~~+c, LLP MEMORANDUM TO: Members of the Board of Directors, California Insurance Pool Authority FROM: Gregory V. Moser, General Counsel DATE: July 23, 2007 FILE NO: 114695.000000 CC: Janet Kiser, General Manager RE: Summary of Significant Proposed Changes to joint powers agreement establishing California Insurance Pool Authority For the past 6 months, we have worked with the Executive Committee, General Manager, and the Board to update and clarify the joint powers agreement and other documents which the California Insurance Pool Authority operates. A number of city attorneys have made valuable suggestions which have been included in this version of the agreement. The Board of Directors of the Authority has already adopted changes to the bylaws, coverage agreements for both liability and workers compensation, and the policies guiding day- to-day operations, effective as of July 1, 2007. However, changes to the joint powers agreement establishing the Authority require approval by the member agencies. Your Board took action on June 25, 2007, recommending approval of the accompanying joint powers agreement to the member cities. We summarize here the most significant changes to the joint powers agreement. 1. The Amendment Approval Process The joint powers agreement can only be amended by approval by 2/3 of the member agencies. As drafted, the new joint powers agreement would be effective as of July 1, 2007, to be consistent with the fiscal year of the Authority. We recommend that each city council adopt a motion or resolution approving the revised agreement, authorizing the city manager or other city official to execute a copy of the agreement. It is requested that each city forward a copy of the signed agreement, with its minutes or resolution approving the joint powers agreement to Janet Kiser, General Manager of the Authority. 2. Changes to the Joint Powers Agreement Article 1. Various definitions in the agreement were changed to reflect the transition from claims-made to occurrence form coverage for liability, and also to reflect initiation of a workers compensation program. Thus, the definition of "claims" is added, and the definition of "insurance program" has been broadened. The definition of "risk management" was broadened 114695.000000/721792.01 Members of the Board of Directors, California Insurance Pool Authority July 23, 2007 Page 2 and clarified to reflect permissible activities of the Authority in connection with its insurance programs. Board members, who must be an officer or employee of a member agency, will automatically lose eligibility to serve once they leave the agency, under this agreement. Article 3. We have defined the risk management program of the Authority to require continuation of the liability coverage program, on which the Authority was founded. Other areas of coverage, like workers compensation liability, are optional, and maybe added as approved by the Board of Directors of the Authority. Article 10. We provide that the treasurer/auditor of the Authority is the treasurer of a member agency, unless the Board of the Authority elects another option allowed bylaw. Article 12. In recognition of the fact that the occurrence form offered for liability coverage continues to respond to claims made after a city leaves the Authority, we have broadened a withdrawing member's obligations to require compliance with the Authority's rules as to such claims. Previously, these rules arguably applied only to claims "outstanding" at the time of withdrawal. Article 14. The amended Agreement provides that almost all disputes between CIPA and its members are to be first referred to its administrative dispute resolution process and then submitted to arbitration. The JPA previously required only that disputes under the joint powers agreement be arbitrated. However, the Authority's coverage contracts have long required alternative dispute resolution and arbitration. Thus, this amendment is not a change in existing practice. In fact, these procedures have been used several times to address coverage questions under the liability program. As amended, the agreement would expressly allow the Authority's Board to waive these alternative dispute resolution processes when a coverage dispute that involves other insurance providers and it will be more efficient and in the best interest of the parties that all disputes be handled in a single litigation or other proceeding. Unchanged is the provision allowing CIPA to pursue claims to recover unpaid contributions or premiums without going through alternative dispute resolution processes-authority which has never been used. Article 17. The proposed Agreement clarifies the obligations of CIPA to defend and indemnify its officers and directors to the extent permitted by law. Article 20. Since the Agreement was last amended, California law has changed to allow pool members to avoid joint and several liability for the liabilities of an insurance pool authority if certain conditions are met. The proposed Agreement reflects the actions taken by CIPA to take advantage of this statute to protect the member agencies, and requires the Board to maintain that protection. We believe these changes to the joint powers agreement strengthen and clarify it, and therefore recommend its approval. _2_ 114695.000000/721792.01 JOINT POWERS AGREEMENT FOR CALIFORNIA INSURANCE POOL AUTHORITY 114695.000000/708740.05 JOINT POWERS AGREEMENT FOR CALIFORNIA INSURANCE POOL AUTHORITY This Agreement is entered into pursuant to the provisions of Chapter S (beginning with Section 6500) of Division 7 of Title 1 of the Government Code authorizing specified local public entities to exercise jointly the power to provide Risk Management, including insurance, pursuant to the provisions of Chapter 3 (beginning with Section 989) of Part 6 of Division 3.6 of Title 1 of the Government Code. WITNESSETH: WHEREAS, the public interest requires and it is in the mutual interest of the parties hereto to join together to establish and operate a cooperative program of risk management; and WHEREAS, the operation of such a cooperative program is of such magnitude that it is necessary for the parties to this Agreement to join together to accomplish the purposes hereinafter set forth; and WHEREAS, each of the local public entities which is a party to this Agreement has the power to establish and operate a program of risk management; and WHEREAS, Title 1, Division 7, Chapter 5 of the California Government Code authorizes the joint exercise by two or more local public entities of any power which is common to each of them; and WHEREAS, each of the parties to the Agreement desires to join together with the other parties for the purpose of minimizing risk through any, all or any combination of the following: pooling of risk, joint funding of insurance or risk reserves in any legal manner, formation or rental of a captive insurer, establishing certain self-insured reserves against losses and jointly purchasing insurance, excess insurance, reinsurance and administrative services in connection with a cooperative program of risk management; NOW, THEREFORE, for and in consideration of the mutual advantages to be derived from and in consideration of the execution of this Agreement by other local public entities, each of the parties hereto does agree as follows: ARTICLE 1. DEFINITIONS The following definitions shall apply to the provisions of this Agreement and its Bylaws (a) "Agreement" or "Joint Powers Agreement" shall mean this "Joint Powers Agreement for California Insurance Pool Authority," as it may be amended. -1- 114695.000000/708740.05 techniques may include, but not be limited to, loss prevention and reduction, transferring losses, self-insurance, pooling, commercial insurance, and other funding mechanisms. ARTICLE 2. SEPARATE ENTITY There is hereby created a separate public entity, the full legal name of which shall be "California Insurance Pool Authority", and may be referred to herein as "CIPA" or the "Authority." The Authority is a public entity separate from the parties to this Agreement. The debts, liabilities and obligations of the Authority shall not be the debts, liabilities or obligations of the parties to the Agreement. ARTICLE 3. PROGRAM A risk management program is hereby established by the parties to this Agreement. This cooperative program of Risk Management, which may include the joint purchase of primary or excess insurance, pooling of self-insured claims or losses, or purchased insurance, shall include liability coverage, and may include any or all the following risk areas: worker's compensation, accident and health, property damage and such other areas as agreed upon by the Board. ARTICLE 4. CIPA POWERS (a) CIPA shall have the power and the duty to establish and operate a program of risk management and provide for its execution either directly by CIPA or by contract. (b) CIPA is authorized to make and enter into contracts; to employ agents and employees; to acquire, construct, manage, maintain or operate any building, works or improvements; to acquire, hold or dispose of property, liabilities or obligations; establish risk management related lines of credit, to incur indebtedness, liabilities or obligations, to sue and be sued in its own name, and to exercise all powers necessary and proper to carry out the terms and provisions of this Agreement, or otherwise authorized by law. The foregoing powers include, but are not limited to, those relative to contracting for excess insurance or reinsurance, risk pooling, including formation of an owned or use of a non-owned captive insurance company, funding of self-insurance in any legal manner, claims administration services and consulting services. (c) The operations of CIPA shall be subject to, and governed by the Bylaws adopted by the Board. (d) The powers exercised by the Authority shall be subject to the restrictions upon the manner of exercising the powers of a general law city. ARTICLE 5. MEMBERS; BOARD OF DIRECTORS (a) Each Member Agency is entitled to the rights and privileges and is subject to the obligations as provided for in this Agreement and the Bylaws. 114695.000000/708740.05 _3_ specify as requiring atwo-thirds vote of the Board must be decided by a vote of two-thirds of all representatives on the Board. (c) Each Eligible Member may vote on each matter brought before the Board for decision. ARTICLE 9. EXECUTIVE COMIVIITTEE The Board shall establish an Executive Committee of the Board of Directors as provided in the Bylaws. The Executive Committee shall exercise general supervisory and policy control over the General Manager, and may exercise any and all powers of the Board between Board meetings and when delegated by the Board, as provided in this Agreement and the Bylaws. ARTICLE 10. CIPA FUNDS The Treasurer of the Authority shall receive and receipt for all of the funds of CIPA. The treasurer of a Member Agency shall be the Treasurer and Auditor of CIPA unless another Treasurer or Auditor is designated by CIPA. The Treasurer will cause an annual audit of the financial affairs of CIPA to be made by a certified public accountant at the end of each fiscal year in accordance with generally accepted auditing principles. Except for those duties prescribed by Government Code sections 6505 and 6505.5, the Treasurer's selection, responsibilities, compensation and related matters shall be governed by the Bylaws. The Treasurer shall be the disbursing officer of CIPA and shall draw warrants against the funds of CIPA in the treasury when demands are presented and authorized as designated in the Bylaws. The Treasurer and any other person authorized to be in charge of any CIPA funds shall be bonded . ARTICLE 11. TERM OF AGREEMENT This Agreement shall continue in effect until it is rescinded by mutual consent of the parties or terminated by the written consent of two-thirds of all Member Agencies; provided that this Agreement and CIPA shall continue to exist for the purpose of disposing of all claims, distributing assets and performing all other functions necessary to wind up the affairs of CIPA. The Executive Committee shall be vested with all powers of CIPA for the purpose of winding up and dissolving the business affairs of CIPA. ARTICLE 12. MEMBERSHIP TERM; WITHI)RAWAL; TERNIINATION (a) A party to this Agreement shall remain a Member Agency for two years from the date it first joined CIPA; thereafter the Member Agency may withdraw by giving written notice to the Board or its designee, on or before the next succeeding March 1, of the intent to withdraw as of 12:01 a.m. on the next July 1. (b) On the July 1 specified in the notice the withdrawing party shall cease to be a Member of CIPA; however, the withdrawing party shall remain responsible to contribute its 114695.000000/708740.05 _5 _ but not any proceeds therefrom. Net contributions shall include any interest actually earned thereon. by the Authority. The Authority may adjust the interest earnings attributable to the contributions of a Member whose net contribution is zero or less based on a reasonable estimate of any periods during which no interest was earned. ARTICLE 14. ENFORCEMENT AND DISPUTE RESOLUTION CIPA shall have the authority to enforce this Agreement. Any dispute regarding the interpretation of this Agreement, the Bylaws, a Memorandum of Coverage, or any other CIPA documents, or the collection or return of funds, between or among CIPA and any Member Agency or Agencies, shall be addressed. in accordance with the administrative procedures established by CIPA. If unresolved, any such disputes shall then submitted to final and binding arbitration, except in the case of a dispute exclusively for the collection or return of assessments, contributions or premiums for a given year of coverage. However, where there is a coverage dispute between CIPA and any Member Agency or Agencies between such Member Agency or Agencies and one or more third party insurance providers concerning the same common nucleus of operative facts, the Member Agency or Agencies may request, and the Board of CIPA may, in its sole, reasonable discretion, approve or conditionally approve waiver of these dispute resolution procedures to permit adjudication of the disputes in a single forum. Such arbitrations shall be conducted in accordance with the procedures established in the California Code of Civil Procedure and referred to the Judicial Arbitration and Mediation Service or other arbiter as may be agreed by the parties, and such other procedural rules as the CIPA Board may establish. The decision of the arbitrator(s) may be entered as a judgment in any court of the State of California or elsewhere. Cost of such arbitration proceedings shall be allocated by the arbitrators. As to disputes exclusively for the collection or return of assessments, the Authority may sue, or any affected Member may sue provided it has timely presented a claim therefore to the Authority. As to such a claim for the collection or return of funds, the prevailing party shall be entitled to reasonable attorney's fees. ARTICLE 15. INVALIDITY Should any portion, term, condition or provision of this Agreement be determined by a court of competent jurisdiction to be illegal and in conflict with any law of the State of California or be otherwise rendered unenforceable or ineffectual, the validity of the remaining portions, terms, conditions and provisions shall not be affected thereby. ARTICLE 16. AMENDMENTS No amendments to this Agreement shall be effective unless accomplished by written agreement executed by the governing bodies of at least two-thirds of the parties to this Agreement. This Agreement may be executed in one or more counterparts, and shall be deemed effective as to all signatories as though .signed in one document. Reasonable prior notice of any Board meeting in which amendments are to be voted upon must be given to each Member in writing. Such notice must include mention of the nature of the amendments to be voted upon. Any party that has failed to approve an amendment which has become effective shall be bound by such amendment. 114695.000000/708740.05 _7_ ARTICLE 21. AGREEMENT COMPLETE The foregoing constitutes the full and complete Agreement of the parties. There are no oral understandings or agreements not set forth in writing herein. ARTICLE 22. DATE AGREEMENT EFFECTIVE This Agreement shall become effective as of July 1, 2007 upon approval in accordance with its terms. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their proper officers thereunto duly authorized. Executed before me this day of , 2007 CITY OF ARCADIA City Clerk Executed before me this day of 2007 City Clerk Executed before me this day of City Clerk Executed before me this day of City Clerk Executed before me this day of . 2007 2007 . 2007 By CITY OF BREA By CITY OF BUENA PARK By CITY OF CYPRESS By - CITY OF IRVINE 114695.000000/708740.05 _9_ Executed before me this day of City Clerk Executed before me this day of City Clerk 2007 CITY OF WHITTIER By 2007 CITY OF YORBA LINDA By 114695.000000/708740.05 - l l -