APPROVAL OF THE COUNTY OF McHENRY’S PROPERTY AND
CASUALTY INSURANCE PROGRAM FOR FY 2007-2008
WHEREAS, the County of McHenry’s Insurance Broker of Record, Market Financial
Group, Ltd. has solicited quotations on property, casualty and specialty insurance coverage from
various insurance markets in addition to necessary services related to the administration of the
County’s Insurance Program for FY 2007-2008; and
WHEREAS, the Management Services Committee and Finance and Audit Committee
reviewed the recommendations made by the Market Financial Group, Ltd. for causality, excess
liability, property, professional liability, excess Workers’ Compensation, employee thief,
medical (dental clinic and inmate medical) coverages and third party claims management thought
Claims One LLC; and
WHEREAS, the Management Services Committee and the Finance and Audit
Committee approved the recommendations made by the Market Financial Group, Ltd. for the
County of McHenry Insurance Program for the policy period beginning December 1, 2007
through November 30, 2008 as noted on the Attachment to this Resolution; and
WHEREAS, funding of the insurance premiums and related costs of the Insurance
Program for FY 2007-2008 in the amount not to exceed $902,000 is budgeted in Department 18
Administration Fund 320, OCA 180320 Insurance Liability Fund.
NOW, THEREFORE BE IT RESOLVED, by this County Board of McHenry County,
Illinois, that the Chairman of the Board is hereby authorized to execute the necessary
documentation to bind insurance coverages and to obtain the necessary related services for the
County of McHenry’s Insurance Program for FY 2007- 2008; and
BE IT FURTHER RESOLVED, that the County Clerk is hereby authorized to
distribute a certified copy of this Resolution to the County Auditor, County Administrator,
Deputy County Administrator, Associate County Administrator for Finance and the Purchasing
DATED at Woodstock, Illinois, this twentieth day of November, A.D., 2007
Kenneth D. Koehler, Chairman
McHenry County Board
Katherine C. Schultz, County Clerk
TO: Management Services Committee /
Finance and Audit Committee
FROM: John W. Labaj, Deputy County Administrator
DATE: October 17, 2007
SUBJECT: 2007-2008 County Insurance Program
Board/Committee Action Requested:
Staff is seeking the approval from the County Board of its recommendations for the County’s Fiscal Year
2007-2008 Insurance Program as per the attached resolution.
Market Financial Group, Ltd., the County’s broker and insurance consultant was instructed to obtain
quotes from insurance carriers for property, casualty and other specialized insurance policies per
consultation with the County on appropriate coverage levels for the 2007 through 2008 fiscal year
insurance program. Their recommendations are contained in this memorandum. In addition, Market
Financial Group, Ltd. has recommended a third party administrator, ClaimsOne LLC, to adjudicate claims
arising out of workers’ compensation and general liability claims against the County. ClaimsOne LLC will
also provide run off claims reports and reserve analysis for the County. Recommended carriers and
coverages are reviewed in the text of this memorandum.
Casualty Insurance / Excess Liability
The ICRMT is a group of over 208 members including 57 Illinois counties which have joined together to
purchase various property and casualty insurance policies covering the exposures of the group. Because
of the size of the group, premiums are more affordable and broader coverages are available. The County
is not a member of the ICRMT risk pool, however we do benefit from the purchasing size of the ICRMT
especially in the area of re-insurance. The 2007-2008 program year is the second year of a two year
frozen premium rate ICRMT has offered the County.
ICRMT’s casualty quote includes automobile, general liability, law enforcement, professional liability,
errors and omissions and excess insurance. Coverages are basically the same as last year, however
there are two notable exceptions. The Sexual Harassment limit for 2006-2007 was for $5,000,000. For
next year our excess limit of $9,000,000 will apply thereby causing the sexual harassment sub-limit to be
removed. ICRMT has provided this increase coverage in response to client requests.
A new coverage category has been created. Limited Physical and Sexual Abuse coverage is a category
for which coverage was questionable under previous policies. It is now a covered item; however it will
have a limit of $250,000 per claim/$250,000 annual aggregate. Premium cost is $1,662.
Under the ICRMT policy, Valley Hi Nursing Home maintains a $4,000,000 sub-limit maximum and a
$5,000,0000 aggregate inclusive of underlying. However for 2007-2008 ICRMT is offering to eliminate
this sub-limit for member clients and to increase coverage to the normal excess limit of $9,000,000 for an
additional premium of $35,000. The current causality cost for Valley Hi is roughly $26,670. Total cost for
$10,000,000 in coverage would therefore be $61,670 which is extremely competitive in that most stand
alone causality insurance cost we’re priced for Valley Hi have been in the six figures. We would therefore
recommend serious consideration be given to adding this enhanced coverage.
The primary insurance cost has increased by $10,568 (4%) due to increases in vehicle counts and
employees and the additional Physical and Sexual Abuse premium costs. Excess premium cost
increased by $25,650 (12%) due to increases in vehicle counts and employees and trending up of claim
incurred by the County. An additional $5,000,000 in excess of $9,000,000 excess of primary is available
for an additional premium of $75,000 or $10,000,000 excess of $9,000,000 excess of primary is available
of an additional premium of $100,000. Given the amount of jury awards throughout the Chicago region
and the County’s past and current claims profile, additional excess is not recommended at this time.
Due to the flat rate, expanded coverages and competitive pricing, Market Finance recommends retaining
ICRMT as the County causality insurer for 2007-2008.
The market for property insurance is currently soft reflecting a national trend of insurers targeting the
Midwest region for expansion. Market Finance obtained three quotes from carriers, Lexington Insurance,
Affiliated Insurance and the Travelers. Market Finance recommends the County retain coverage with the
Travelers’ due to superior coverage and lowest price offered. Travelers’ premium quotation of $115,000
is a $32,229 reduction in our current rates and also includes coverage of the new animal control facility.
Based on a 5% increase in the 2006 appraisal, the Policy Limits will be for $178 million.
Two additional lines of coverage are available from Travelers that we may wish to consider. Currently we
do not enjoy terrorism coverage under TRIA. Cost for terrorism coverage would roughly be 3% of
premium or roughly $3,450. Additionally, while the County vehicle fleet in covered under the automobile
portion of the ICRMT policy, there currently does not exist auto physical damage for a County owned
vehicle while outside County property. For example, if a snowplow should have an equipment failure
causing substantial damage to the vehicle while plowing road current causality or property policies would
not offer coverage for this event. Travelers’ has quoted Auto Physical Damage for the County in the
amount of $7,000. We would recommend adding this additional line of coverage.
The County provides Professional Liability Insurance for the State’s Attorney’s and Public Defender
through the National District Attorneys Association (NDAA). This is a long standing policy and is
underwritten by Lloyds of London. Policy cost and coverages have not changed from the last year. Other
carriers cannot meet NDAA pricing. The State’s Attorney premium is the same as last year while a
modest increase of $174 is noted for the Public Defenders’ policy. Market Financial recommends
maintaining the current policy with NDAA.
Additionally, the Insurance Liability Fund is now providing professional liability insurance for the judiciary
under a long standing policy with Columbia Casualty Company. Market Financial has not found
comparable insurance as competitively priced and therefore recommends renewal with Columbia. There
is no price over last year.
Crime and Fidelity
Market Financial has recommends transferring crime and fidelity coverage to Great American Insurance
Company for the same coverage with a reduction in premium of $1,621.
Voluntary Dentists Professional Liability
Landmark American Insurance Company has quoted same coverage at same rate for 2007-2008. Market
Financial recommends maintaining coverage with Landmark American Insurance Company.
A premium has been quoted by our current carrier, International Medical Group, at a modest of $1,022.
The quote is at the same rate we enjoy now, but reflects monthly increase prison population count.
The cost for excess Workers’ Compensation insurance continues to increase. The County received
quotes for excess from Safety National, Midwest Employers Casualty Company, ICRMT, ACE. The most
competitive rate quoted was from our current carrier, Safety National, which with our current coverage,
would account for about a $9,000 increase. However, Safety National has offered the option to increase
our self insured retention (SIR) to an across the board $500,000 for all categories of employees for a
reduced premium rate. Cost would be $71,884 or a modest increase of $2,362. Staff recommends going
with the higher SIR option given the nature of our claims history.
Surety bonds, as required under State statutes, will be renewed through State Farm for the following
public officials on 12/01/08; State’s Attorney, Recorder, Auditor, Coroner and Circuit Clerk.
Third Party Administrator (TPA)
Claims One, the County’s current Third Party Administrator (TPA), currently is under a two year contract
with the County. There is no cost increase for 2007-2008.
Insurance Consultant Fee
Market Finance is in the second year of its three year contract term with the County. There is no cost
increase for 2007-2008.
There will be no financial or personnel impacts on Human Resources as a result of the County’s
anticipated 2006 - 2007 insurance program.
Impact on Budget (Revenue, Expenses, Fringe Benefits):
The County budgeted a general overall 5% increase for its insurance premiums under the proposed 2007
through 2008 annual budget. Current quotes total $831,089.55 for a .8% increase. The Insurance
Liability Fund has sufficient funds to cover the added premium costs. If additional Valley Hi excess
coverage, terrorism coverage and Physical Auto Damage ($45,450) were added into coverage the
resultant cost would be $876,539. Sufficient funds are budgeted to purchase these additional lines of
Impact on Capital Expenditures:
There will be no impact on the County’s Capital expenditures as a result of this action.
Impact on Physical Space:
There will be no need for additional space as a result of this action.
Impact on Other County Departments or Outside Agencies:
County Departments receive the benefits of the insurance coverages in transference of risks from the
County to the insurer. Risk Management practices required by insurance providers also helps to foster a
safe and secure work environment.
Conformity to Board Ordinances and Policies:
Continuation of the current insurance program conforms to County Board policy to move away from a
totally self-insured program to one of risk transference to insurance carriers to reduce overall insurance
costs for the County.
Resolution for approval of the 2007 through 2008 Insurance Program and related chart.