MEMORANDUM

KENAI PENINSULA BOROUGH

LEGAL DEPARTMENT

144 N. Binkley Street Tel. (907) 262-8609

Soldotna, Alaska 99669 Fax (907) 262-8686

Members of the Kenai Peninsula Borough Assembly

FROM: Colette G. Thompson, Borough Attorney

Jeff Sinz, Finance Director

Todd Syverson, KPBSD Assistant Superintendent for Administrative Services

Richard Campbell, General Services Director

Gary Lamb, Risk Manager

DATE: August 8, 2002

SUBJECT: Ordinance 2002-36, Amending KPB chapter 2.34, the risk management office and providing a workers' compensation coverage update

This memorandum describes the accompanying ordinance and provides the assembly with updated information regarding workers' compensation coverage.

The accompanying ordinance makes several revisions to the risk management code chapter primarily for housekeeping purposes. Since the chapter was last revised in 1996 the title for the school district member of the committee has changed, and this ordinance modifies the code accordingly.

Also, although it is our understanding that meetings of the risk management committee are exempt from the Open Meetings Act because they are staff meetings, this ordinance clarifies that they are exempt, and requires the meetings to be held monthly. If these meetings were treated as subject to the Open Meetings Act, virtually every discussion held by the risk management committee would qualify for an executive session and accordingly no public participation would be allowed. The risk management committee reviews and makes decisions concerning claims against the borough and school district. Public discussion of such matters would seriously impair the committee's ability to effectively negotiate any settlements or handle litigation. Some matters could not be discussed publicly as they involve private medical issues. Other discussions relate to the procurement of insurance which are matters typically handled by staff and not subject to public participation or notice, except through the standard procurement process. Again, the discussions would fall within the executive session provisions of the Open Meetings Act.

The code currently allows the insurance and litigation fund to be used for insured losses and claims up to the amount of the deductible. However, as we learned when the Ninilchik School was partially burned a few years ago, some insurance companies take a significant time to pay the claim. This is typically because the full amount of the claim is not known until the repairs are complete. In order to allow the borough to use this fund to pay covered claims beyond the deductible but before insurance proceeds are received, the code needs to be amended. This would clearly allow the borough to use the fund for covered repairs exceeding the deductible amount, while waiting for the insurance company to pay the claim.

Health insurance is not specifically addressed in the risk management section except under the procurement provision. Health insurance benefits are currently administered by human resources for the borough and a health insurance committee for the school district. To eliminate questions regarding this responsibility, this ordinance clarifies that the risk management committee is not responsible for purchasing or administering employee health insurance.

Finally, the risk management committee wishes to update the assembly regarding recent developments in worker's compensation coverage. Last spring, when soliciting quotes for workers' compensation insurance for the borough and school district, responses reflected increases in excess of 300% over prior rates. The increase in cost is due to a significant tightening in the workers' compensation market and is being experienced nationwide. Accordingly, the committee hired a consultant to investigate options and give advice as to alternative means for providing coverage. The committee has decided to proceed with self-insuring workers' compensation coverage up to $250,000 per claim for now. It is evaluating the appropriate long-term exposure level and also intends to obtain excess coverage. The risk management committee has hired Willis of Alaska, Inc. to perform actuarial studies to assist with this decision and ensure the long-term viability of this program. In the interim, the borough has been forced to purchase a three-month extension of the prior coverage due to statutory requirements related to self-insurance. The three-month renewal rate is substantially greater than was budgeted, and it is expected that a supplemental appropriation will be requested later this year to cover any shortfalls. Committee members will attend assembly committee meetings and be available to answer any questions regarding this ordinance and workers' compensation coverage.