california joint powers risk management authority...

Board of Directors Meeting Agenda March 18, 2010

CALIFORNIA JOINT POWERS RISK MANAGEMENT AUTHORITY

BOARD OF DIRECTORS MEETING

March 18, 2010– 9:30 A.M.

Bishop Ranch Conference Center

Bishop Ranch 3 2623 Camino Ramon, Suite 175

San Ramon, CA 94583

(925) 543-7700

AGENDA

I. CALL TO ORDER: 9:30 a.m.

II. ROLL CALL

III. PRESENTATIONS

None

IV. THIS TIME IS RESERVED FOR MEMBERS OF THE PUBLIC TO ADDRESS THE BOARD OF DIRECTORS ON MATTERS OF BOARD BUSINESS. STATE LAW PROHIBITS ACTION BY THE BOARD ON NON-AGENDA ITEMS.

V. COMMUNICATIONS

A. Board Members

B. General Manager/Secretary

C. Next Scheduled Meetings: Executive Committee (TBD)

Board of Directors (04/28/2010-04/30/2010)

VI. APPROVAL OF MINUTES

Minutes of the Board of Director’s Meeting held on December 10, 2009

VII. CONSENT CALENDAR

1. Financial Reports of CJPRMA for the periods ending October 31, November 30 and December 31, 2009

2. Additional Covered Party Certificates Approved by the General Manager

Board of Directors Meeting Agenda March 18, 2010

3. Notification of New Claims Received

4. Notification of Claims Closed

5. New Board Members/Alternates

6. Business Calendar for 2010

VIII. ACTION CALENDER

7. “HITECH” HIPAA Provisions

8. Report From Broker

9. DIC Coverage for CJPRMA Main Office

10. Closure and Redistribution of Worker’s Compensation Equity

11. Risk Management Issues

IX. CLOSED SESSION

1. Government Code Section 54956.9 (a) Conference with Legal Counsel - Pending Litigation

Name of Case: Eaton v. City of Rocklin Court: United States Court of Appeal for the Ninth Circuit Case No.: 07-80144

2. Government Code Section 54957.6 Conference with Labor Negotiators

Unrepresented Employees: General Manager and Assistant General Manager/Risk Manager

X. ACTION ON CLOSED SESSION ITEMS

XI. ADJOURNMENT

BOARD OF DIRECTORS MEETING

December 10, 2009 – 10:00 A.M.

Carr America Conference Center Tassajara Room

4400 Rosewood Drive Pleasanton, CA 94588

(925) 737-1900

Minutes

I. CALL TO ORDER:

President Henderson called the meeting to order at 10:02 a.m.

II. ROLL CALL

PRESENT

1) Darrell Handy, Alameda 11) Stacy Haney, Roseville 2) Jessica Henry, Chico 12) Mary Ann Perini, San Leandro 3) Bill Henderson, Livermore 13) Pan Waterston, San Rafael 4) Kimberly Greer, Fairfield 14) Lynn Margolies, Santa Rosa 5) Janet Hamilton, Lodi 15) Roger Carroll, SCORE 6) Dixon Coulter, NCCSIF 16) Kathleen Williams, Stockton 7) Ron Blanquie, Petaluma 17) Anthony Giles, Sunnyvale 8) Chris Carmona, Redding 18) Harry Maurer, Vallejo 9) Jeff Davis, REMIF 19) Jeff Tonks, YCPARMIA 10) Robyn Kain, Richmond

ABSENT

Fremont, Vacaville

Board of Directors Meeting Minutes December 10, 2009 Page 2 of 6

OTHERS PRESENT 20) Mujtaba Datoo, ARM Tech 26) Anna Swanson, CJPRMA21) David Clovis, CJPRMA 22) Lola Deem, CJPRMA 23) Robert German, CJPRMA 24) Saima Kumar, CJPRMA

25) Byrne Conley, Gibbons & Conley 26) Brian Cooney, Marsh 27) Pat Clark, Marsh 28) Lisa Achen, Roseville

III. PRESENTATIONS

None.

IV. THIS TIME IS RESERVED FOR MEMBERS OF THE PUBLIC TO ADDRESS THE BOARD OF DIRECTORS ON MATTERS OF BOARD BUSINESS

V. COMMUNICATIONS

A. Board Members B. General Manager/Secretary C. Next Scheduled Meetings: Executive Committee (01/21/2010)

Board of Directors (03/18/2010)

VI. COMMITTEE REPORTS

A. Coverage & Claims Committee

The Coverage and Claims Committee discussed what their goals and objectives should be and how it would benefit its members effectively. Director Tonks announced that the committee is planning on holding their meeting in January.

B. Education & Training Committee

The Education and Training Committee announced that their next meeting will be held on January 14th, 2010 via teleconference at 10.00 a.m. They also asked the Assistant General Manager/Risk Manager to prepare the Agenda.

C. Risk Management Committee

The Risk Management Committee announced that their first meeting was held earlier that morning. The Committee presented their mission statement to the Board.

“The Risk Management Committee will identify and evaluate best risk management practices and make recommendations to the Executive Committee of CJPRMA.”

Director Carmona announced that the Risk Management Committee will meet four times a year and that their central meeting location will be in Vacaville. He also stated that the next committee meeting will be held at PARMA in February.


VII. APPROVAL OF MINUTES

A motion by Director Davis, seconded by Director Blanquie, to approve the minutes of the October 15, 2009 Board of Director’s meeting, passed unanimously.

VIII. CONSENT CALENDAR 1. Financial Reports of CJPRMA for the periods ending July 31, August 31 and

September 30, 2009

2. Additional Covered Party Certificates Approved by the General Manager

3. Notification of New Claims Received

4. Notification of Claims Closed

5. New Board Members/Alternates

A motion by Director Carmona, seconded by Director Kain, to approve the consent calendar, passed unanimously.

IX. ACTION CALENDER

6. 2010 Business Calendar

The General Manager distributed the 2010 Business Calendar to the Board for informational purpose. He also informed the Board that the next Executive Committee will be held in Lodi on January 21, 2010. The next Board meeting will be held on March 18, 2010 at Bishop Ranch.

7. Status Update on General Manager’s Goals & Objectives

The General Manager provided status update on the goals and objectives plan to the Board. He also informed the Board that the Annual Meeting date has been moved to April 28 thru the 30th, 2010 due to requests from of the Board members.

He informed the Board about the water leakage at the new building and the necessary steps that are being taken to fix the issue. The Board had some concerns to if the building would be ready for the Annual Meeting. They suggested that the staff take a look at different facilities for the Annual Meeting as an option and the cost that would be associated.


The President asked the Board to provide staff with recommendations of meeting facilities within their cities by Wednesday December 16th, 2009. And have the Executive Committee approve a new location based on the information provided by staff.

8. 2009 Actuarial Study

ARM Tech conducted the 2009 Actuarial Study. Mr. Mujtaba Datoo was present to discuss the results of the study, including the proposed rates for 2010/2011 and a redistribution plan.

Mr. Datoo gave a thorough explanation of the methodology used to complete the actuarial study and determine the proposed rates for the coming year.

A motion by Director Maurer, seconded by Director Carroll, to approve (1) the 2009 actuarial study, (2) the proposed rates for 2010/2011, and (3) the proposed redistribution of approximately $4.7 million, passed unanimously.

9. 2008/2009 Annual Report

The General Manager provided a presentation on 2008/2009 Annual Report. He also stated that the hard copies of the Annual Report will be mailed out to each member.

10. Risk Management Issues

1) Hired and non-owned auto insurance (Bill Henderson, Livermore)

President Henderson brought up issues related to hired and non-owned auto insurance. He provided the Board with a supplement form for information purposes.

2) Recommend policy change for use of tasers (Byrne Conley)

The Board Counsel provided a memo summarizing the proposed policy changes to the Taser Targeting Policy. Director Davis provided the board with a flyer from Lexipol on use of tasers and risk involved with them.

.


X. CLOSED SESSION

1) Government Code Section 54956.9 (a) Conference with Legal Counsel - Pending Litigation

Name of Case: Attari v. City of Alameda Court: Alameda County Superior Court Case No.: RG-06-29671


Name of Case: Jackson v. City of Vacaville Court: Solano County Superior Court Case No.: FCS 028084


Name of Case: Ward v. City of Desert Hot Springs (PERMA) Court: Riverside County Superior Court Case No.: INC 057130


Name of Case: Dagdagan v. City of Vallejo Court: United States District Court, Eastern District of California, Sacramento Division Case No.: 2:08-CV-00922-GEB-GGH


Name of Case: Beecham v. City of West Sacramento (YCPARMIA) Court: United States District Court, Eastern District of California Case No.: 2:07-CV-01115-JAM-EFB


XI. ACTION ON CLOSED SESSION ITEMS

None

XI. ADJOURNMENT

A motion by Director Davis, seconded by Director Coulter to adjourn the meeting at 2:04 p.m., passed unanimously.

CALIFORNIA JOINT POWERS

RISK MANAGEMENT AUTHORITY

AGENDA BILL

Item #: 1 Title: FINANCIAL REPORTS OF CJPRMA FOR THE PERIODS

Meeting: 03/18/2010 ENDING OCTOBER 31, NOVEMBER 30 AND

General Manager: DECEMBER 31, 2009

Recommended Action:

Approval of the financial reports for October 31, November 30 and December 31, 2009. Item Explanation: Attached hereto are the financial reports for the periods ending October 31, November 30 and December 31, 2009. Staff recommends that the financial reports be approved. Fiscal Impact: None Exhibits:

Financial reports for the periods ending July October 31, November 30 and December 31, 2009.

Board Action:



AGENDA BILL

Item #: 2 Title: ADDITIONAL COVERED PARTY CERTIFICATES

Meeting: 03/18/2010 APPROVED BY THE GENERAL MANAGER

General Manager:

Recommended Action: Approval of the additional covered party certificates that have been issued by the General Manager. Item Explanation: Attached hereto, as Exhibit 1, is a list of the 66 additional covered party certificates that have been approved by the General Manager and issued since the last board meeting. Fiscal Impact: None. Exhibits:

1) List of additional covered party certificates approved by the General Manager.

Board Action:

Member Entity Sub Member IssuedTo Event Expiration S.I.R. Coverage

Certificates of CoverageApproved by the General Manager

Program Year: 2009-2010

Excess

Alameda Alameda Unified School District, its officers, employees, agents and volunteers

Use of School District's facilities for before and after school recreational programs and day care

6/30/2010 $500,000 $1,500,000

Alameda BMR-Gateway Boulevard -LLC Alameda Police Department Tactical Training

2/3/2010 $500,000 $1,500,000

Alameda County of Alameda, its Board of Supervisors, the individual members thereof, and all County officers, agents, employees and volunteers

Utility Payment Assistance Program 6/30/2010 $500,000 $500,000

Alameda The East Bay Regional Park District, its officers, employees, and agents

Use of facilities for Summer Day Camp

7/16/2010 $500,000 $500,000

Fremont County of Alameda Health Care Services Agency

Healthy Choice - Youth and Family Services

6/30/2010 $500,000 $500,000

Fremont Ohlone Community College District California Constitution Convention-Public Forum- Rental of Room

1/26/2010 $500,000 $500,000

Livermore County of Alameda, Contracts Office Grant agreement with the County of Alameda for funding a Homeless Assistance Program (TANF ECF funds)

6/30/2010 $500,000 $500,000

Livermore Doc Bailey Construction Equipment Rental Boom Truck 12/2/2009 $500,000 $500,000

Livermore Peterson Power Systems Rental Department

Rental of Equipment 2/12/2010 $500,000 $500,000

Lodi GFLIP III Limited Partnership Members of the Lodi Police Department Canine Unit will use a vacant facility for training purposes.

7/1/2010 $500,000 $500,000

Lodi Lodi Grape Festival and National Wine Show, Inc. the County of San Joaquin, the State of California, their agents, officers, directors, servants and employees

Use of facilities for Greater Lodi Youth Commission Valentines Day dance.

2/21/2010 $500,000 $500,000

NCCSIF Lincoln Lincoln Public Financing Authority Lease of Property 6/30/2010 $500,000 $2,500,000

NCCSIF Rio Vista National Railroad Passenger Corporation Amtrak Bus Operations

As respects the Ticketing Agreement between National Railroad Passenger Corporation and the City of Rio Vista for services provided by the Certificate Holder.

6/30/2010 $1,000,000 $4,000,000

Wednesday, March 10, 2010 Page 1 of 6




Excess

Redding Gateway Unified School District, it’s officials, employees, agents and volunteers

All sports practice events held at all Gateway Unified School District Schools during 2010

6/30/2010 $500,000 $500,000

REMIF Cloverdale County of Sonoma, Sonoma County Community Development Commission, its officers and employees.

Use of funds for CDBG, HOME FESG funds, Sidewalk and Housing Rehab programs.

6/30/2010 $500,000 $500,000

REMIF Eureka Bayshore Mall II LLC, GGP Limited Partnership, Bay Shore Mall Partners, Bay Shore Mall Inc., General Growth Properties, Inc., GGPLP LLP

St. Joseph's Hospital Wellness Fair 2/7/2010 $500,000 $500,000

REMIF Eureka County of Humboldt, its officers, employees and agents

Headwaters Grant for broadband deployment

6/30/2010 $500,000 $500,000

REMIF Eureka County of Humboldt, its officers, employees and agents

Step Up For Youth Jobs 6/30/2010 $500,000 $500,000

REMIF Eureka Eureka City Schools, its officers and employees

Use of facilities for Hoopsters youth basketball games and practices.

4/4/2010 $500,000 $500,000

REMIF Eureka Eureka First Church of the Nazarene Use of facilities for Hoopster's Basketball practice

3/13/2010 $500,000 $500,000

REMIF Eureka First Covenant Church of Eureka Hoopsters Youth Basketball Practice 3/13/2010 $500,000 $500,000

REMIF Eureka First Covenant Church of Eureka Use of facilities for Hoopsters Youth Basketball practice

3/30/2010 $500,000 $500,000

REMIF Eureka White House Finance Affiliates Use of Facilities for non-destructive Fire Department training.

12/19/2009 $500,000 $500,000

REMIF Healdsburg Healdsburg Unified School District, its governing board, officers, agents and employees, individually and collectively

After School Education and Safety (ASES) Program

6/30/2010 $500,000 $500,000

REMIF Healdsburg State of California, its officers, agents, employees and servants are included as additional insured, but only with respect to the use for the facility and related activities under this license

Use of facility for meetings 6/30/2010 $500,000 $500,000

REMIF Lakeport The State of California, The District Agricultural Association, County Fair, The County of Lake, their agents, directors, officers, servants, and employees

Employee Training 4/1/2010 $500,000 $500,000





Excess

REMIF Rohnert Park The County of Sonoma, its officers and employees.

Use of Taxiway W at Sonoma County Airport for Public Safety Driver Training.

6/30/2010 $500,000 $500,000

REMIF Sonoma County of Sonoma, its officers and employees

Use of facilities for Employee Recognition Event

1/23/2010 $500,000 $500,000

REMIF Sonoma Speedway Sonoma, LLC aka Infineon Raceway, Speedway Motorsports Inc, Speedway Children's Charities and each of their officers, managers, directors, employees and agents.

Ambulance Standby Service 6/30/2010 $500,000 $4,500,000

REMIF Sonoma Westerbeke Ranch Use of facilities for "Every 15 Minutes" Workshop

3/27/2010 $500,000 $500,000

REMIF St. Helena Rianda House Use of facilities for Library program for adults

4/8/2010 $500,000 $500,000

REMIF Ukiah State of California , the 12th District DAA, County Fair, County of Mendocino, Citrus Fruit Fair, or California Exposition and State Fair, their directors, officers, agents, servants, and employees

Use of Facilities for Law enforcement training

6/30/2010 $500,000 $500,000

REMIF Ukiah Trinity Youth Services, a California Corporation

Use of Ukiah School gym for youth basketball and rec activities

6/30/2010 $500,000 $500,000

REMIF Ukiah Ukiah Unified School District its officers and employees

Use of facilities for Adult League basketball games.

4/23/2010 $500,000 $500,000

REMIF Ukiah Ukiah Unified School District, its officers and employees

Use of facilities for Girls youth softball league practices and games

6/5/2010 $500,000 $500,000


Use of facilities for Girls youth softball league practices and games

6/5/2010 $500,000 $500,000


Use of facilities for Youth Basketball Camp

12/31/2009 $500,000 $500,000


Use of facilities for Youth basketball camp.

1/1/2010 $500,000 $500,000


Youth Basketball Camp 3/20/2010 $500,000 $500,000


Youth Basketball league games 3/21/2010 $500,000 $500,000





Excess

Richmond Contra Costa County/ Employment & Human Services Department

Grant funding for operation of a youth employment training program in the City of Richmond

6/30/2010 $500,000 $500,000

Richmond Suntrust Equipment Finance & Leasing Corporation

Lease Financing for Fire vehicles under Lease No. 00972, Equipment Schedule:05

6/30/2010 $500,000 $500,000


Lease Financing for Street Sweepers and trucks under Lease No. 00972, Equipment Schedule:06

6/30/2010 $500,000 $500,000


Lease Financing for various vehicles under Lease No. 00972, Equipment Schedule: 07

6/30/2010 $500,000 $500,000

Roseville County of Placer, its officers, agents, employees & volunteers

Right of Entry 6/30/2010 $500,000 $500,000

San Rafael San Rafael City School District Use of facilities for City of San Rafael Firefighter Recruitment (written examination).

3/28/2010 $500,000 $500,000

San Rafael T. Max Kniesche, Nancy A. Kniesche,1099 D. Street, San Rafael, CA

Lease between the City of San Rafael and 1099 D Street, LLC of premises in office building for use by City's Police Department

6/30/2010 $500,000 $500,000

Santa Rosa EMI Santa Rosa LP, its Managing Agent, Simon Property Group, Inc., and their respective officers, directors, shareholders, members, partners, parents, subsidiaries, related and affiliated entities, agents, servants and employees

Use of facilities for an informational booth

4/1/2010 $500,000 $1,500,000

Santa Rosa The Department of Housing and Community Development and its officers, agents, employees, and servants

Homeless Shelter and Community Center Regulatory Agreement.

6/30/2010 $500,000 $500,000

SCORE Ione Union Pacific Railroad Company Lease of Train Depot 6/30/2010 $500,000 $1,500,000

SCORE Shasta Lake Union Pacific Railroad Company Private Crossing Agreement Folder No: 02597-11: Mile Post 271.05, Valley Subdivision/Branch

7/2/2010 $500,000 $800,000





Excess

SCORE Susanville State of California , the District of Agricultural Association, County Fair, County of Lassen, Citrus Fruit Fair, or California Exposition and State Fair, their directors, officers, agents, servants, and employees

Use of facilities for Retirement Party 1/24/2010 $500,000 $500,000

Stockton Union Pacific Railroad Company New Public Highway Overpass Crossing Agreement - covering the Construction, Maintenance and Use of the New 8 mile Road Overpass Grade Separation Crossing at Railroad 101.32 - Sacramento Subdivision DOT No: 834 003A; UPRR Folder No: 2589-67

6/30/2010 $1,000,000 $4,000,000

Stockton Union Pacific Railroad Company New Public Highway Overpass Crossing Agreement - covering the Construction, Maintenance and Use of the New 8 Mile Road Overpass Grade Separation Crossing at Railroad 76.84- Fresno Subdivision DOT No; 752 904U; UPRR Folder No. 2589-64

6/30/2010 $1,000,000 $4,000,000

Stockton Union Pacific Railroad Company New Public Highway Overpass Crossing Agreement-covering the Construction, Maintenance and Use of the New Lower Sacramento Road Underpass Grade Separation Crossing DOT No: 834-002T at Railroad 100.45 -Sacramento Subdivision; UPRR Folder No. 2589-68

6/30/2010 $1,000,000 $4,000,000

Stockton Yamaha Motor Corporation, U.S.A. Master Lease Agreement- Lease of 45 golf carts for Van Buskirk Golf Course

6/30/2010 $1,000,000 $1,000,000

Sunnyvale County of Santa Clara, and members of the Board of Supervisors of the County of Santa Clara, and the officers, agents and employees of the County of Santa Clara

Construction and maintenance of traffic signal improvements in the County of Santa Clara right of way

6/30/2010 $500,000 $1,500,000

YCPARMIA County of Yolo Explorit Science Center Davis Branch Library use of meeting room for story time programs and other meetings

6/30/2010 $500,000 $500,000





Excess

YCPARMIA County of Yolo Penske Truck Leasing Co., LP d/b/a Penske Utility Rental

Rental Agreement #A36204 for Unit #271002 GMC 3500 HD Altec -34' Non-Insul SD

12/17/2009 $500,000 $500,000

YCPARMIA County of Yolo State of California, California Exposition & State Fair its agents, officers, directors, employees and servants

Exhibit at 2010 State Fair 8/7/2010 $500,000 $500,000

YCPARMIA County of Yolo Williams Scotsman, Inc. Lease Agreement #652372 for Equipment #SPI-27292

6/30/2010 $500,000 $500,000

YCPARMIA County of Yolo Yolo County Housing, its elected representatives, officers, agents, and employees.

Lease of Meadowlark property and Trinity property

6/30/2010 $500,000 $500,000

YCPARMIA County of Yolo Yolo County Office of Education Probation Department use of Esparto Lab Room for Training

1/16/2010 $500,000 $500,000

YCPARMIA Davis Davis Joint Unified School District Use of High School for the 2010 Yolo County Child Development Conference

3/21/2010 $500,000 $500,000

YCPARMIA Davis SunEdison Origination3, LLC Solar Power and Services Agreement 6/30/2010 $500,000 $500,000

YCPARMIA Winters Winters Joint Unified School District Use of High School Gymnasium for Youth Basketball

2/28/2010 $500,000 $500,000

Total Entries: 66




AGENDA BILL

Item #: 3 Title: NOTIFICATION OF NEW CLAIMS RECEIVED

Meeting: 03/18/2010

General Manager:

Recommended Action: None. This item is for information purposes only. Item Explanation: Attached hereto, as Exhibit 1, is a list of the 25 new claims which have been received by CJPRMA since the last board meeting. It should be noted that items 11 and 12 are the same claim but involved two members. Item 26 is a re-opened claim. A couple of claims are listed because they were inadvertently left off of prior agenda bills Fiscal Impact: None. Exhibits:

1) List of new claims received by CJPRMA.

Board Action:

New Claims Received by CJPRMA

Date of Incident: 7/3/2009

Date of Claim: 12/14/2009

Date of Notification: 12/21/2009

Type of Claim: Bodily Injury

This matter arose as the result of a traffic collision, between a vehicle and a pedestrian, which occurred in the City of Sebastopol. Apparently, a 15 year old girl was crossing Highway 116, in a marked crosswalk, when she was struck by a car driven by a 70 year old woman. That vehicle then crossed over into oncoming traffic and struck another vehicle. The pedestrian sustained serious head injuries, as well as a fractured neck and numerous broken bones.

Nature of Claim:

2009-2010-0002 BERTOLI, JULIA ANNA (a minor) v. City of Sebastopol (REMIF)1




Type of Claim: Bodily Injury, Personal Injury

This matter arose as a result of the arrest of the claimant by police officers of the City of Marysville. Apparently, the officers were dispatched to investigate a report of a man who was running around in the street in his underwear and acting in a bizarre manner. When they arrived, they found the claimant. His legs were bleeding and he was acting strangely. When they attempted to interview him, he became combative and had to be tased several times. He was taken to the street, handcuffed, and placed in leg restraints. He claims that he suffered burns from the hot asphalt. He was convicted of resisting arrest.

Nature of Claim:

2009-2010-0001 HALL, WILLIAM JOSEPH v. City of Marysville (NCCSIF)2


Date of Claim:


Type of Claim: Personal Injury

This matter arose as the result of a confrontation between private citizens and numerous off duty police officers of the City of Pomona. Apparently, the citizens were meeting at a church to complain about the location of several sobriety checkpoints being utilized by the Pomona P.D. They felt that they were discriminatory because they were being placed in locations that were predominantly Hispanic. Approximately 18 off duty Pomona police officers attended the meeting, at the request of their union, and became confrontational with the other attendees. Several people became fearful and left. Others called dispatch and requested the presence of uniformed officers. The off duty officers were escorted from the scene.

Nature of Claim:

2008-2009-0023 ORNELAS, EFRAIN v. City of Pomona3





This matter arose as a result of the arrest of the claimant by police officers of the City of Fairfield. Apparently, the officers had been dispatched to the claimant's home on a report of him being the drunken driver of a golf cart that had struck at least two parked vehicles. When they arrived at his home, they were admitted and, subsequently, arrested the claimant. On their way back to their vehicle, the claimant went limp and refused to walk. The officers dragged him the rest of the way. He allegedly sustained deep abrasions and cuts as the result of road rash.

Nature of Claim:

2008-2009-0022 CYR, DOUGLAS JAMES v. City of Fairfield4

Page 1 of 7

Notification of New Claims Selection Dates:

3/18/2010 thru 3/18/2010





Type of Claim:

This matter arose as a result of the arrest of the claimant by police officers of the City of Stockton. Apparently, the claimant was stopped for ridding his bike after dark without a light. He granted the officers permission to search his pockets. When a syringe was removed, the claimant became combative and had to be tased three times in order to bring him under control. He was arrested and transported to jail.

Nature of Claim:

2008-2009-0021 RAMIREZ, GILBERT RAY v. City of Stockton5


Date of Claim:



This matter arose as a result of the detention of the claimant by police officers of the City of Stockton. Apparently, while driving a rented vehicle, the claimant was the subject of a vehicle stop. After allegedly being restrained, placed in the back of a police vehicle, and having is rented vehicle searched, the claimant was released. He has alleged that the stop was the result of racial profiling.

Nature of Claim:

2008-2009-0020 ANYANWU, FREDRICK v. City of Stockton6





This matter arose as a result of the arrest of the claimant by police officers of the City of Stockton. Apparently, a uniformed officer, on a bicycle, was dispatched to an area where juveniles had been reported fighting. When he arrived, he observed numerous juveniles crossing illegally in the street, blocking traffic. When he approached, the claimant became aggressive, combative, and verbally abusive. The officer had to radio for assistance. Eventually, the claimant was arrested and taken into custody.

Nature of Claim:

2008-2009-0019 MADKINS, KIMBERELY v. City of Stockton7




Type of Claim: Bodily Injury, Property Damage

This matter arose as the result of a traffic collision, between a car and a motorcycle, which occurred in the City of Vacaville. Apparently, the car, driven by an 80 year old male, made a turn direcly in front of the motorcycle driven by the claimant. He struck the car broadside. The claimant sustained multiple fractures, internal injuries, and possible brain damage.

Nature of Claim:

2008-2009-0018 EATON, HENRY A. v. City of Vacaville8

Page 2 of 7


3/18/2010 thru 3/18/2010






This matter arose as the result of a vehicle collision between a truck pulling a boat and trailer and a pedestrian. Apparently, the driver of the vehicle was DUI. He allegedly ran over the pedestrian intentionally, fled the scene as a hit and run, or both. The pedestrian died as the result of injuries sustained in that incident.

Nature of Claim:

2008-2009-0017 HORNBROOK, DIANE L. v. City of Stockton9





This matter arose as a result of the arrest of the claimant by police officers of the City of Rocklin. Apparently, the officers had responded to a burglar alarm at a Big K Store. They found the roll-up door partially open. When they looked underneath, they observed the claimant attempting to crawl out while pulling a bicycle. When they identified themselves, the claimant turned toward them with what appeared to be something in his hands. The area was dark so the officers could not see what it was. One officer fired at the claimant, striking him in the foot.

Nature of Claim:

2008-2009-0016 McKIE, CODY LEE v. City of Rocklin (NCCSIF)10





This matter arose as a result of the arrest of the claimants by police officers of the City of Sacramento. Apparently, the claimants had bee mistakenly identified as suspects in a home invasion assault. When Sacramento police officersattempted to make a vehicle stop, the claimants led them on a high speed pursuit through Yuba County. No Yuba City or Marysville officers were involved. It is unknow why they were named in the complaint.

Nature of Claim:

2008-2009-0015 COX, CHANZIE KRISTINA v. City of Marysville (NCCSIF)11





This matter arose as a result of the arrest of the claimants by police officers of the City of Sacramento. Apparently, the claimants had bee mistakenly identified as suspects in a home invasion assault. When Sacramento police officersattempted to make a vehicle stop, the claimants led them on a high speed pursuit through Yuba County. No Yuba City or Marysville officers were involved. It is unknow why they were named in the complaint.

Nature of Claim:

2008-2009-0015 COX, CHANZIE KRISTINA v. City of Yuba City (NCCSIF)12

Page 3 of 7


3/18/2010 thru 3/18/2010



Date of Claim:


Type of Claim: Bodily Injury, Personal Injury, Employment Practices

This matter arose as a result of the alleged forced retirement of the claimant from her position with the City of San Rafael. She has alleged that she was subjected to sexual harassment, discrimination, and retaliation during the course of her employment.

Nature of Claim:

2008-2009-0014 LeVEQUE, LYNDA v. City of San Rafael13





This matter arose as a result of the arrest of the claimant by police officers of the City of Vallejo. Apparently, during the course of a vehicle stop, the claimant exited, pulled a handgun and fled on foot. During the pursuit, the claimant turned towards the officers and was shot.

Nature of Claim:

2008-2009-0013 WOODARDS, DVONDRE v. City of Vallejo14




Type of Claim: Property Damage

This matter arose as the result of a dispute between the claimant and the City over the development of a parcel of land. The claimant has alleged that the City has violated its duty to complete and process the environmental impact report.

Nature of Claim:

2008-2009-0012 REGENCY CENTERS v. City of Petaluma15


Date of Claim:



This matter arose as the result of a traffic collision between a car and a bicycle. Apparently, approximately one hour prior to this collision, another collision had occurred at the same intersection, knocking out the traffic signals. At the time of this collision, the signals were still inoperative. The driver of the car failed to stop at the intersection, pursuant to the requirements of the Vehicle Code, and struck the bicyclist. The bicyclist suffered major head injuriesas a result of the incident.

Nature of Claim:

2008-2009-0011 LOPEZ, MARCELLO GONZALEZ v. City of Pomona16

Page 4 of 7


3/18/2010 thru 3/18/2010






This matter arose as the result of a traffic collision between a car and a pedestrian which occurred in the City of Petaluma. Apparently, the pedestrian was in a marked crosswalk when she was struck by an oncoming car. The driver of the car was returning from a volunteer training class being held at the City. The claimant sustained major injuries as a result of that incident.

Nature of Claim:

2008-2009-0010 GONZALEZ-FUENTES, NATALIA v. City of Petaluma17





This matter arose as the result of a traffic collision between a vehicle and a motorcycle which occurred in the City of Norco. Apparently, the vehicle made a u-turn in front of the motorcycle, causing the motorcycle to strike the vehicle broadside. The signalized intersection had been deactivated by the City some time prior to the collision. The driver of the motorcycle died as the result of injuries sustained in that incident.

Nature of Claim:

2007-2008-0046 GONZALES, SYLVIA v. City of Norco (PERMA)18





This matter arose as the result of a single vehicle traffic accident which occurred in the City of Banning. Apparently,after meeting in a bar, the plaintiff was being given a ride home on the motorcycle when it struck a speed bump and the handlebars came loose. She was ejected, striking the pavement and sustaining serious head injuries.

Nature of Claim:

2007-2008-0045 MOLLEDA, MAUDIE MARGARET v. City of Banning (PERMA)19




Type of Claim: Personal Injury

This matter arose as a result of the arrest of the claimants by police officers of the City of Vacaville. Apparently, while in a Starbuck's parking lot, one of the claimants had recognized a Vacaville police officer who had assisted in arresting him two days prior. He began shouting obscenities at the officer and tossed a lit cigarette at him. The officer told him to pick it up because of nearby gas pumps. He refused and got into a vehicle. When the officer opened the vehicle's door, a passenger got out and challenged the officer to a fight. The officer requested backup and the claimants were arrested.

Nature of Claim:

2007-2008-0044 GOSS, ROBERT TERRANCE v. City of Vacaville20

Page 5 of 7


3/18/2010 thru 3/18/2010





Type of Claim: Property Damage, Personal Injury

This matter arose as the result of a zoning dispute with a mobile home park. The purchasers of the mobile home park were advised that it was a nonconforming use and filed suit against the City.

Nature of Claim:

2006-2007-0066 WILLOW BEND, LLC v. City of Holtville (PERMA)21




Type of Claim: Property Damage, Personal Injury

This matter arose as the result of numerous nuisance abatement actions which have been taken against the claimant's property.

Nature of Claim:

2006-2007-0065 DAYTON, EDWARD R. v. City of Fairfield22





This matter arose as the result of a three vehicle traffic collision which occurred in the City of Vallejo. Apparently, the claimant was a driving instructor sitting in the passenger seat of the training vehicle. The driver made a left turn, directly into the path of a City police vehicle. The police vehicle struck the training vehicle and the training vehiclecontinued forward, striking a third vehicle.

Nature of Claim:

2006-2007-0064 BECKER, STACEY LYNN v. City of Vallejo23





This matter arose as a result of the detention of the two claimants by police officers of the City of Fairfield. Apparently, officers had been dispatched to the same street, earlier in the evening, in response to complaints of a loud party. They were dispatched again later in response to a complaint of underage drinking. Unfortunately, on the second response, they went to the wrong house. The officers ended up in a confrontation with several people and had to call for backup. The claimants had been restrained and placed in the back of a police vehicle when the officers discovered that they were at the wrong address. The claimants were released at the scene.

Nature of Claim:

2006-2007-0063 BERRY, ETHAN v. City of Fairfield24

Page 6 of 7


3/18/2010 thru 3/18/2010





Type of Claim: Personal Injury, Employment Practices

This matter arose as a result of the termination of the plaintiff from his position as a police officer with the City of Rocklin.

Nature of Claim:

2005-2006-0074 EATON, RICK v. City of Rocklin (NCCSIF)25




Type of Claim: Property Damage

This matter arose as a result of the claimants being exposed to pollutants in the water table below their residences and in their wells. Apparently, pollutants from a dry cleaning business leached into the underground water table through the City's sewer lines.

Although the case has been settled, the file has been reopened in order to monitor the recovery of funds from the bankruptcy of the Reliance Insurance Company. The approved recovery amount is $69,672.91. The recovery will take place over several years, commencing in late 2010.

Nature of Claim:

1986-1987-0074 CLARK, CARLA M. v. City of Santa Rosa26

Page 7 of 7


3/18/2010 thru 3/18/2010



AGENDA BILL

Item #: 4 Title: NOTIFICATION OF CLAIMS CLOSED

Meeting: 03/18/2010

General Manager:

Recommended Action: None. This item is for information purposes only. Item Explanation: Attached hereto, as Exhibit 1, is a list of the 11 claims which have been closed since the last board meeting. Items 9 and 10 are the same claim but involved two members.

Fiscal Impact: None Exhibits: 1) List of claims closed by CJPRMA

Board Action:

Claims Closed by CJPRMA





This matter arose as the result of a traffic collision between a pedestrian and a vehicle which occurred in the City of Desert Hot Springs. Apparently, the decedent was crossing a street when she was struck by an oncoming vehicle. She died as the result of injuries sustained in that incident.

Nature of Claim:

2007-2008-0011 MEDLIN, MARY LOUISE v. City of Desert Hot Springs (PERMA)

This matter was dismissed, so the file has been closed.

Current Status:

1





This matter arose as the result of a traffic collision between an 80 year old pedestrian and a vehicle. Apparently, he was attempting to cross several lanes of a highway, to reach a restaurant on the other side. When he reached the opposite curb, he encountered foliage and decided to walk along the curb way. He either fell or tripped into the traffic lane and was struck and killed by a vehicle.

Nature of Claim:

2006-2007-0015 WOLFF, JOYCE v. City of Rancho Mirage (PERMA)

This matter was settled for the amount of $30,000, without contribution from CJPRMA, so the file has been closed.

Current Status:

2





This matter arose as a result of the arrest of the claimant by Santa Rosa police. She was allegedly injured during a confrontation with another individual. She claims that Santa Rosa police officers failed to properly direct her for treatment of her fractured jaw.

Nature of Claim:

2006-2007-0007 SYBYL, DEBRA v. City of Santa Rosa

The claimant failed to file a lawsuit, within the allotted time period following rejection of the claim, so the state courtactions are barred. Although there is a two year statute, under federal law, that time has run as well. As a result, the file has been closed.

Current Status:

3

Page 1 of 5

Notification of Claims Closed Selection Dates:

3/18/2010 thru 3/18/2010






This matter arose as the result of a traffic collision which occurred in an unincorporated portion of San Bernardino County. Apparently, an Animal Control Officer of the City of Adelanto was responding to a report of a dead dog in a roadway. When she steered around the carcass, staying within her portion of the roadway, she was struck head on by an oncoming vehicle that had careened into her lane. Both the driver and passenger of the other vehicle died as the result of injuries sustained in that collision.

Nature of Claim:

2005-2006-0063 AYALA, WILRONALD v. City of Adelanto (PERMA)


Current Status:

4





This matter arose as a result of the shooting of the claimant's decedent by police officers of the City of Banning. Apparently, they had responded to a report of vandalism and were searching the area for the alleged suspects when they came upon the claimant's decedent. He allegedly ran from them through a nearby school. The officers stated that he turned and pointed a handgun at them and that that was when they fired at him. He allegedly did this twice during the course of the foot pursuit. He died as the result of injuries sustained in that confrontation.

Nature of Claim:

2005-2006-0029 JONES, SHERMAN v. City of Banning (PERMA)


Current Status:

5





This matter arose as a result of the death of the claimant's husband while he was struggling with police officers of theCity of Santa Rosa. Apparently, the officers responded to his home, after his wife had contacted them, via the 911 line, to report that he was delirious. When they arrived on the scene, a confrontation ensued in which the officers had to use pepper spray, a taser and a carotid hold. The claimant's husband started to have trouble breathing and then stopped completely. Attempts to revive him were unsuccessful.

Nature of Claim:

2005-2006-0001 FERNANDEZ, KARLA v. City of Santa Rosa


Current Status:

6

Page 2 of 5


3/18/2010 thru 3/18/2010



Date of Claim:


Type of Claim: Bodily Injury, Personal Injury, Employment Practices, Wrongf

This matter arose as a result of the alleged wrongful termination of the claimant from his employment as a police officer with the City of Desert Hot Springs.

Nature of Claim:

2004-2005-0060 ROBINSON, MATT v. City of Desert Hot Springs (PERMA)

At the time of the incident, PERMA did not provide EPL coverage. As a result, the file has been closed.

Current Status:

7




Type of Claim: Bodily Injury, Property Damage, Personal Injury

This matter arose as a result of the execution of a search warrant on the premises of the claimant. Apparently, the officers executed the warrant on the wrong location. They allegedly used a battering ram to open the door. The claimant allegedly suffered a head injury during this incident. CJPRMA has three members involved in this matter. They are Vacaville, Fairfield and Dixon (NCCSIF).

Nature of Claim:

2004-2005-0058 MENDOZA, ADOLFO v. City of Fairfield

This matter was settled for the amount of $567,500. Three members of CJPRMA (Vacaville, Fairfield and Dixon (NCCSIF)) were involved in this matter. Pursuant to the Memorandum of Coverage, in this situation, only one SIR applies and that is the lowest of the members involved. In this case, the SIR was $500,000. After totaling the amount of the expenses of all three members, CJPRMA reimbursed the amount of $135,681.24. The file is now closed.

Current Status:

8






Nature of Claim:

2004-2005-0058 MENDOZA, ADOLFO v. City of Dixon (NCCSIF)


Current Status:

9

Page 3 of 5


3/18/2010 thru 3/18/2010







Nature of Claim:

2004-2005-0058 MENDOZA, ADOLFO v. City of Vacaville


Current Status:

10





This matter arose as a result of the arrest of the claimant by police officers of the City of Santa Rosa. Apparently, police officers had been dispatched to the school where one of the claimants was in attendance. This related to the fact that there had been a confrontation and a possible fight was brewing. The officers were aware of the history of the individuals involved because they had had prior confrontations and had made prior threats against each other. When they arrived at the school, the father of the student had already returned home. The officers transported the student to his house and asked to speak to his father. They were advised that he was in his work shed. When they attempted to talk to him, he made various threats and started yelling, while holding a hunting knife in his hand. A confrontation ensued and he was eventually tased and taken into custody. Because two of his sons attempted to intervene as well, and ended up in confrontations with other officers, all were subsequently arrested.

Nature of Claim:

2004-2005-0032 FERREL, KYLE GILBERT v. City of Santa Rosa


Current Status:

11

Page 4 of 5


3/18/2010 thru 3/18/2010






This matter arose as the result of a traffic collision which occurred in the City of Victorville. Apparently, a vehicle traveling in excess of 100 miles per hour entered an intersection and struck another vehicle that was attempting to make a left turn. The speeding vehicle careened out of the control and struck a light pole. The driver of the speeding vehicle, a minor, died as the result of injuries sustained in that incident. One of the passengers, a minor, suffered traumatic injuries that resulted in the amputation of both of her legs.

Nature of Claim:

2002-2003-0012 LAABS, TINA v. City of Victorville (PERMA)

The City's Motion for Summary Judgment was granted. The Court of Appeal affirmed that decision. The file is now closed.

Current Status:

12

Page 5 of 5


3/18/2010 thru 3/18/2010



AGENDA BILL

Item #: 5 Title: APPOINTMENT OF NEW BOARD MEMBERS/

Meeting: 03/18/2010 ALTERNATES

General Manager:

Recommended Action: None. This item is being provided for information purposes only. Item Explanation: Notifications regarding a change in director/alternate designation that have been received since the last meeting are indicated herein.

1) San Rafael Alternate – Eric Davis, Deputy City Attorney II

2) Vacaville Board Member – Sandy Hess, Human Resources Analyst II

3) Vacaville Alternate – Celeste Garrett, Human Resources Analyst

Fiscal Impact: None. Exhibits:

1) Letter from San Rafael, Dated 02/04/2010 2) Letter from Vacaville, Dated 02/09/2010

Board Action:



AGENDA BILL

Item #: 6 Title: 2010 BUSINESS CALENDAR

Meeting: 03/18/2010

General Manager:

Recommended Action:

None. This item is being provided for information purposes only. Item Explanation:

The CJPRMA 2010 Business Calendar will be provided as a standing agenda item for all future Board Meetings. This calendar provides Board Members and Staff with a listing of key business items and the required dates for completion. The General Manager will be available to discuss questions regarding the calendar.

Fiscal Impact: None Exhibits:

CJPRMA 2010 Business Calendar

Board Action:

CALIFORNIA JOINT POWERS RISK MANAGEMENT AUTHORITY

2010 BUSINESS CALENDAR

January

Claims Audit in process Distribution of Executive Committee Agenda – 01/14/2010 Executive Committee Meeting – 01/21/2010

February

FPPC Form 700 Filing Requests Sent Out PARMA Conference (02/16/2010 - 02/19/2010) Deadline for Members to submit Agenda items for March Meeting – 02/25/2010

March

Distribution of Board of Directors Meeting Agenda – 03/11/2010 Board of Directors Meeting – 03/18/2010 Annual Meeting Room Requests Distribution of Summary of Property Values Distribution of Summary of APD Values

April

FPPC Form 700 Filing Deadline April 1 Distribution of Executive Committee Meeting Agenda – 04/08/2010 Executive Committee Meeting – 04/15/2010

o Bi-annual review of staff salaries and benefits Distribution of Certificate of Coverage Renewals Lists Requests for Nominations for President/Vice President (Bi-annually) Deadline for Members to submit Agenda items for April Meeting – 04/07/2010 Distribution of Board of Directors Annual Meeting Agenda– 04/21/2010 Board of Directors Annual Meeting – 04/28/2010 - 04/30/2010

o Commercial Insurance Renewals o Bi-annual Review of Staff Salaries and Benefits o Proposed Budget for 2010-2011 o Claims Audit Presentation *

May

Return Certificate of Coverage Renewals Lists to Staff Deadline for Members to submit Agenda items for June Meeting – 05/27/2010

June

Distribution of Board of Directors Meeting Agenda – 06/10/2010 Board of Directors Meeting – 06/17/2010

o Bi-annual election of President and Vice President o Election of Executive Committee Members

Certificates of Coverage Renewals mailed to certificate holders Risk Management Plan Revisions Requests for reimbursement of liability training expenses due by June 30

July Distribution of Executive Committee Meeting Agenda – 07/08/2010 Executive Committee Meeting – 07/15/2010 General Liability Premiums Billed Auto Physical Damage Program Premiums Billed Property Program Premiums Billed Boiler & Machinery Premiums Billed

August

Financial Audit in process Actuarial Study in process

September

Distribution of Executive Committee Agenda – 08/31/2010 Executive Committee Meeting – 09/07/2010 CAJPA Conference 09/08/2010 - 09/10/2010 Distribution of Summary of Property Values Distribution of Summary of APD Values Deadline for Members to submit Agenda items for October Meeting – 09/29/2010

October

Distribution of Board of Directors Meeting Agenda – 10/13/2010 Board of Directors Meeting – 10/20/2010 -10/21/2010

o Financial Audit Presented o Approval of Annual Meeting and Holiday Calendars o Annual Review of Investment Policy o Bi-annual Review of Conflict of Interest Code (even numbered years)

November

Distribution of Executive Committee Meeting Agenda – 11/10/2010 Executive Committee Meeting – 11/18/2010 Deadline for Members to submit Agenda items for December Meeting – 11/23/2010

December

Distribution of Board of Directors Meeting Agenda – 12/09/2010 Board of Directors Meeting – 12/16/2010

o Annual Report Presented o Actuarial Study Presented

Deadline for change to SIR or withdrawal from any CJPRMA program - 12/31/2010



AGENDA BILL

Item #: 7 Title: “HITECH” HIPAA PROVISIONS

Meeting: 03/18/2010

General Manager:

Recommended Action: None at this time. Item Explanation:

“The Health Insurance Portability and Accountability Act (HIPAA) privacy and security rules require employer group health plans to assess and document compliance, secure business associate agreements, develop policies and procedures and train personnel. Starting in 2009, “HITECH” HIPAA provisions expanded penalties and enforcement and added new breach notice duties.

Ms. Kathleen Murphy, JD and Mr. Dard Hunter, both of Mercer, will provide a presentation on the

effects of the 2009 “HITECH” HIPAA provisions. The presentation will also provide an overview of Mercer and the services available to CJPRMA

members.


1) CJPRMA Employee Benefits Discussion

Board Action:



AGENDA BILL

Item #: 8 Title: REPORT FROM BROKER

Meeting: 03/18/2010

General Manager:

Recommended Action: None at this time. Item Explanation:

Mr. Brian Cooney, of Marsh, and Ms Patricia Clark of Marsh, will be present to discuss issues relating to the renewal of the commercial property and casualty programs. They will be providing a recap of the current insurance program and will update the Board on the 2010 renewal efforts. The information is being provided as an update in anticipation of the renewal discussions at the April Meeting. Fiscal Impact: None. Exhibits:

Casualty and Property Reinsurance Programs Overview

Board Action:

1

Casualty and Property Reinsurance Programs OverviewCalifornia Joint Powers Risk Management Authority

March 18, 2010 - Board Meeting

www.marsh.com

Placement Summary: 2009 - 2010California Joint Powers Risk Management Authority

Liability Programs

Excess Reinsurance Liability: July 1, 2009-2010

o Munich Reinsurance America, Inc. – Best Rating: A+ XV Primary Property: July 1, 2009-2010

Property Programs

o SCOR Reinsurance Co. – Best Rating: A- XV

Automobile Physical Damage: July 1, 2009-2010

o National Surety Corp (Fireman’s Fund) – Best Rating: A XV

Office Package Policy – General Offices: June 24, 2009-2010

oMunich Reinsurance America, Inc. – Best Rating: A+ XV

Excess Property: July 1, 2009-2010

oFederal Ins. Co. (Chubb Group) – Best Rating A++XV

1Marsh

o Federal Insurance Company (Chubb Group) – Best Rating A++ XV

Crime Shield – General Offices: February 1, 2009-2012

o Hartford Fire Insurance Company A XV

Boiler and Machinery: July 1, 2009-2010

oHartford Steam Boiler – Best Rating: A++ X

2

Casualty Reinsurance

Casualty Reinsurance Program California Joint Powers Risk Management Authority

3Marsh

3

Historical Reinsurance Program – July 1, 1999/2009California Joint Powers Risk Management AuthorityParticipation Excess Cedant (CJPRMA) Retention (SIR)

$40MM

$15MM

SCOR R

$15MM $15MM $15MM

SCOR Re

$10MM x $10MM11-16-01 / 7-1-02

$10MM

Di

$10MM

Di

$20MM

AM Re

$10MM

$20MM

AM Re

$20MM

SCOR Re SCOR Re SCOR Re

$20MM

MunichRe

SCOR Re

$10MM

Di

$10MM X $10MM

AM Re

$10MM

$10MM X $10MM

AM Re

$10MM X $10MM

AM Re

$10MM X $10MM

Munich Re

$10MM $10MM

$10MM X $10MM

AM Re

4Marsh

Discover Re Program $10MM x $5MM SIR3 Year Term 7-1-99/02

Discover Re

$5MM SIRCJPRMA

7-1-99/00

Discover Re

$5MM SIRCJPRMA

7-1-00/01 7-1-01/02

$5MM SIRCJPRMA

7-1-02/03

AM Re

$5MM SIRCJPRMA

7-1-04/05

2 Year Term 7-1-02/04

$5MM SIRCJPRMA

7-1-03/04 7-1-05/06

$10MM

$5MM

7-1-06/07

$5MM SIRCJPRMA

$5MM SIRCJPRMA

$5MM SIRCJPRMA

7-1-07/08

$4MM SIR with $1m occ/agg Corridor

RetentionCJPRMA7-1-08/09

Discover Re

$5MM SIRCJPRMA

AMRe$AMRe

$Munich

Re

Reinsurance Program Structure July 1, 2009-2010 – Option BCalifornia Joint Powers Risk Management Authority$5MM Self Insured Retention

Excess Reinsurance Layer

$15 MMx

$25 MM

GL AL & POL

Reinsurance Layer

SCOR Re

$20 MMx

$5 MM

GL, AL & POL

GL, AL & POL

5Marsh

Underlying Retention

Pool Layer

$1MM

$4 MMx

$1 MM$4.5 MM

x$500,000

$500,000

Munich Re

(ALAE – Inside SIR)

4

Reinsurance Renewal Program ComparisonCalifornia Joint Powers Risk Management Authority$20MM X Cedant Retention (SIR)Munich Reinsurance America, Inc. (A+ XV)

July 1, 2009/2010

$1,969,875*$1,969,875*

July 1, 2008/2009

$2,051,416$2,051,416Final Annual Premium Final Annual Premium

.2060

$1,645,677,042 **$1,645,677,042 **PayrollPayroll

.1197 Excess Reinsurance

Rate

$ 1,560,011,929$ 1,560,011,929PayrollPayroll

Excess Reinsurance Rate

.1315

Final Annual Premium

6Marsh

$4MM SIR with $1MM occ/agg Corridor Retention

CJPRMA

$5 SIR CJPRMA

July 1, 2008-2009

Reinsurance Liability Renewal: July 1, 2009/2010California Joint Powers Risk Management AuthorityRate Summary: Munich Reinsurance America, Inc.

July 1, 2009-2010 Difference

Munich Re

$20MM x $5MM SIR* .1315 .1197 (8.95)

Comment:

7Marsh

* Final premium – June 2009

Comment:

* 2008/2009 Excess Liability had a $4,000,000 SIR with a $1,000,000 corridor

5

Excess Reinsurance Liability Renewal: July 1, 2008 / 2010California Joint Powers Risk Management Authority$15MM x $20MM x Cedant’s SIR

July 1, 2009/2010July 1, 2008/2009

$10MM X $10MM

AM R

Scor ReinsuranceCompany

(A- IX)

$15MM x $20MM

$401,980* Flat

Scor ReinsuranceCompany(A- XV)

$15MM x $20MM

$351,733* Flat

8Marsh

AM Re$401,980 Flat

* Includes TRIA

$ ,

* Includes TRIA

12.5% Reduction

2 Year Premium Guarantee

Excess Liability Program – Optional Excess LayerCalifornia Joint Powers Risk Management Authority$10MM x $35MM x Cedant’s SIR

July 1, 2009/2010

Recommended program based upon the following points of interest:

$87 479* Fl t

Scor ReinsuranceCompany(A- XV)

$10MM x $35MM

g p

Excess Reinsurance

Follows terms of the MOC

Includes Terrorism

Collateral Business with Scor Re

Long Term Underwriting Relationship

9Marsh

$87,479* Flat

•Includes TRIA

Long Term Underwriting Relationship

Net Underwriting Capacity

t

6

California Joint Powers Risk Management AuthorityCasualty Insurance ProgramJuly 1, 2008 to July 1, 2010

Strong Financial Stability of underwriting capacity

Munich Reinsurance America, Inc. / Scor Re

g y g p y

Domestic Reinsurance Excess CJPRMA SIR

Direct Reinsurance of Memorandum of Coverage (MOC)

10Marsh

Following Form Excess

CJPRMA retains control over claims settlement

Multi-year rate guarantee - Primary

Avoids market cycle fluctuations

California Joint Powers Risk Management AuthorityCasualty Insurance Program

Maintains broad policy terms and conditions

Protects against adverse loss experience

Excellent Underwriting Relationship – Long Term Relationship

Underwriting Flexibility

Munich Re has a dedicated Public Entity Division which has been in existence for over 25 years.

11Marsh

y

7

Auto Physical Damage

Automobile Physical Damage Program—July 1, 2009-2010California Joint Powers Risk Management Authority

13Marsh

8

Automobile Physical Damage Program—July 1, 2009-2010California Joint Powers Risk Management AuthorityParticipating Members

The City of Alameda

The City of Chico

The City of Fremont

The City of Lodi

The City of Petaluma

Redwood Empire Municipal Insurance Fund (REMIF), comprised of the following members:

Arcata Fort Bragg Rohnert Park UkiahCloverdale Fortuna Sebastopol WillitsCotati Healdsburg Sonoma WindsorEureka Lakeport St. Helena

The City of San Leandro

14Marsh

City of Stockton

The City of Sunnyvale

The City of Vacaville

The City of Vallejo

Automobile Physical Damage ProgramCalifornia Joint Powers Risk Management AuthorityHistorical Program Review July 1, 2001 / July 2010

1 586

1,600

1,800

1,466

1,5861,478

724 767

892

1,2151,268

1,399

Rat

es

400

600

800

1,000

1,200

1,400

Units

15Marsh

$0.3086$0.3086$0.2982$0.2787$0.2633 $0.3086 $0.2777 $0.2475 $0.2200

$0.0010

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-100

200

400

Rates Units

- Values & Units Reported by CJPRMA

11%reduction @

$10,000 Deductible

9

$296,894

$259,082$250,000

$300,000

12

14

Automobile Physical Damage ProgramCalifornia Joint Powers Risk Management AuthorityHistorical Losses Excess $10,000: July 1, 2003 – March 18, 2010

$130,000$100,4068

6 6

$50 000

$100,000

$150,000

$200,000

,

Tot

al I

ncur

eed

4

6

8

10

12

Claim

Count

16Marsh

$13,982$26,351

10 1 1$0

$50,000

7/1/03-04 7/1/04-05 7/1/05-06 7/1/06-07 7/1/07-08 7/1/08-09 7/1/09-10

0

2

Total Incurred Claim Count@ 3-18-10

$130,000 is estimated Loss Ratio’s:

07/08 84% 08/09 32%09/10 58.%

Automobile Physical Damage Program—July 1, 2009/2010California Joint Powers Risk Management AuthorityRenewal Options – Fireman’s Fund

7/1/08-09 Expiring 7/1/09-10 Renewal Options

Carrier National Surety Corp. National Surety Corp.(Fireman's Fund) (Fireman's Fund)

Best: A XV Best: A XV(Incumbent)

Limit per occurrence $5,000,000 $5,000,000 $5,000,000 $5,000,000

Deductible per occurrence $10,000 $10,000 $20,000 $25,000

Covered Vehicles excess $25,000 excess of $25,000 excess of $25,000 excess of $25,000

Rate per $100 of value $0.2475 $0.2200 $0.2000 $0.1900

Vehicle Values - Estimate $135,334,204 $135,334,204 $135,334,204 $135,334,204

Deposit Premium * $334,952 $297,735 $270,668 $257,135S l li t & f N/A N/A N/A N/A

17Marsh

Values as of 1-1-09. Updated values will be provided as of 6-30-09.

Surplus lines taxes & fees N/A N/A N/A N/A$334,952 $297,735 $270,668 $257,135

Optional Terrorism Premium Declined $15,073 $13,566 $12,616

Comments: Includes EQ & Flood Includes EQ & FloodAutomatic roll on Automatic roll onAudit: 7/1/09 - as expiring Audit: 7/1/10 - as expiringClaims adjuster: Fireman's Fund Claims adjuster: Fireman's Fund

*Fireman’s Fund + $250 Property Floater

(11%)

Rate Reduction

10

General Office Programs

OFFICE PACKAGE Policyand Non-Owned AutoJune 24, 2009 - 2010

CJPRMA General Office1) Office Package Policy – June 24, 2009 – 20102) Non-owned Auto Policy – June 24, 2009 – 20103) Public Employee Blanket Bond – February 1, 2009 – 2012

CRIME SHIELD Program

February 1, 2009 - 2012

Carrier

Limit of Liability

Deductible

Federal Insurance Company (A++XV)

$1MM Per Occurrence -General Liability & Non-owned Auto. Office Contents Values on file with carrier.

$1,000 – Per Occurrence OfficeContents – Property

No Deductible GL/AL

Harford Fire Insurance Co. (A+XV)

$4MM Employee Dishonest$4MM Theft, Disappearance & Destruction$4MM Depositors Forgery$4MM Computer Fraud

$40,000 each loss

19Marsh

Premium

Coverage

$2,975 - Annual

General Liability – Office PremisesProperty Insurance – Office ContentsNon-owned Auto

$15,962 – Three Year Pre-Paid

Employee Dishonesty Computer FraudDepositor Forgery

11

Property Reinsurance

20Marsh

21Marsh

12

Property Program Structure 2009-2010California Joint Powers Risk Management Authority

$290,000,000

$300M Federal InsuranceCompany (Chubb)AM Best A++XV

$290,000,000excess of

$10,000,000

22Marsh

Deductible$25,000

$10,000,000Primary

Munich Reinsurance America, IncAM Best A XV

$10M

California Joint Powers Risk Management AuthorityProperty Insurance ProgramJuly 1, 2008 to July 1, 2010

Strong Financial Stability of underwriting capacity

Munich Reinsurance America, Inc. / Federal Insurance Co. (Chubb)

g y g p y

Domestic Reinsurance Primary

Admitted Excess – Following Form - Pending

Direct Reinsurance of Memorandum of Coverage (MOC) – Primary

Extremely Broad Manuscript Policy Form

No policy sublimits

23Marsh

Single Deductible Clause

CJPRMA retains control over claims settlement

13

Multi-year rate guarantee - Primary

Avoids market cycle fluctuations

California Joint Powers Risk Management AuthorityProperty Insurance Program

Maintains broad policy terms and conditions

Protects against adverse loss experience

Excellent Claims handling experience.

Excellent Underwriting Relationship

Underwriting Flexibility

M i h R h d di t d P bli E tit Di i i hi h h b i

24Marsh

Munich Re has a dedicated Public Entity Division which has been in existence for over 25 years.

Master Property Program – $10M Primary Property LayerCalifornia Joint Powers Risk Management Authority

Munich Re $10M Rate Stabilization Plan –Two Year Cumulative Earned Loss Ratio July 1, 2008 to July 1, 2010

July 1, 2008 to July 1, 2010 Loss Ratio based upon Paid and Reserved Claims

2008 2009 2010

Program Inception

25Marsh

2008 - 2010 Rate Stabilization Feature is based upon Loss Ratio not exceeding 58%

2010 Stabilization feature can contain up to $2,515,425 in losswithout rate adjustment subject to treaty reinsurance

*

14

7 Year Primary Rate AnalysisJuly 1, 2004 - July 1, 2011

Program Rate Analysis

0.05

California Joint Powers Risk Management Authority

0.03

0.04

26Marsh

0.02

RATE 0.04 0.038 0.038 0.037 0.0307 0.0307 0.0307

2004-05 2005-06 2006-07 2007-08 2008-09 2009-2010 2010-2011

$5M $5M $5M $5M $10MPrimary Limit: $10M$10M

Boiler & Machinery

27Marsh

15

Boiler & Machinery Program

28Marsh

Boiler and Machinery Program StructureCalifornia Joint Powers Risk Management Authority

Loss Limit $21.25M Hartford Steam Boiler (AIG)AM Best A++

Various Program Sublimits

29Marsh

Deductible:$5,000 except: $3.00/KVA, $10K minimum on Transformers; $30/HP, $10K minimum on ICE Generator

Units; $30/KW, $50K minimum on Water Turbine Units; 24 Hours Business Interruption

Deductibles

16

Boiler & Machinery Program—July 1, 2009 to July 1, 2011California Joint Powers Risk Management AuthorityHartford Steam Boiler Rate Stabilization Plan –Two Year Cumulative Earned Loss Ratio July 1, 2009 to July 1, 2011

July 1, 2009 to July 1, 2011 Loss Ratio based upon Paid and Reserved Claims

2009 2010 2011

Program Inception

30Marsh

2010 - 2011 Rate Stabilization Feature is based upon Loss Ratio not exceeding 40%

2010 Stabilization feature can contain up to $269,640 in losswithout rate adjustment subject to treaty reinsurance

2010 Property and Casualty Marketing Report

Priority No. 1 Marsh Delivering Value to CJPRMAClient Knowledge / Understanding CJPRMA Goals and Objectives

Historical Understanding the Risks and Exposures

Si ifi t M k t LSignificant Market Leverage

Fosters a Long Term Partnership (CJPRMA – Munich – Marsh)

Unique Program Design Features

Eliminate Premium Volatility

Benefit to CJPRMA MembersReduced Premiums

Maintain Broad Terms and Conditions

31Marsh

Maintain Broad Terms and Conditions

Rate / Premium Stabilization Features

Proven Track Record

Responsive Claims Handling

17

2010 Property and Casualty Marketing ReportIncumbent Underwriters

Excess Casualty

Munich Re – $20,000,000 excess $5,000,000

Scor Re - $15,000,000 excess of $25,000,000

Auto Physical Damage

Fireman’s Fund - $5,000,000

Property

Munich Re – $10,000,000 Primary

32Marsh

Federal Ins. Co. (Chubb) $290,000,000 excess of $10,000,000

Boiler & Machinery

Hartford Steam Boiler (Munich Re)


Casualty Multi-Year Program Stabilization FeatureRate Reduction - PendingRate Reduction PendingPremium Redistribution – No Claims Bonus Pending

Auto Physical Multi-Year - PendingStabilization Feature - PendingRate Reduction 9%

Property

33Marsh

Multi-Year Program Stabilization Feature - 2010 Rate Lock based on $2,515,425 in Net

Losses Rate Reduction - PendingPremium Redistribution – No Claims Bonus - Pending

18


Boiler & Machinery

Multi-Year Program

Stabilization Feature 2010 Rate Lock based on $269,640 in net Losses

Premium Redistribution – No Claims Bonus (Pending)

34Marsh

Questions

35Marsh



AGENDA BILL

Item #: 9 Title: DIC COVERAGE FOR CJPRMA MAIN OFFICE

Meeting: 03/18/2010

General Manager:

Recommended Action: Authorize the General Manager to purchase DIC coverage for the CJPRMA main office. Item Explanation:

The new CJPRMA main office is located in Alameda County, near areas identified as potential earthquake zones. Mr. Brian Cooney of Marsh provided CJPRMA with two options for DIC coverage. The quotations are as follows:

QBE Specialty Insurance

Company (Non-Admitted) Mt. Hawley Insurance

Company Limit $3,300,000 $3,300,000 Perils DIC including EQ, Flood and

Building Ordinance Earthquake and Flood

Deductibles EQ & FL 5% per unit of insurance, $25,000 minimum

EQ & FL 5% per unit of insurance, $100,000 minimum

Exclusions 100 Year Flood; Terrorism; Cyber Risk; Mold; Time

Element

100 Year Flood; Absolute Pollution; Asbestos; Time

Element Premium $14,980.54 w/o TRIA $20,150.00

The quote provided by QBE Specialty, without TRIA, is $5,169.46 less than the quote provided by

Mt. Hawley. In addition to the lower cost, this policy provides a minimum $25,000 deductible per occurrence,

which is $75,000 less than the minimum deductible provided by Mt. Hawley. The quote provided by QBE Specialty is therefore the best option of the two quotes provided. The potential loss exposure to CJPRMA in the event of earthquake or flood would be significant if

uninsured. The purchase of DIC coverage provides CJPRMA with financial protection from this exposure.

Staff recommends the Board approve the purchase of DIC insurance coverage from QBE Specialty

Insurance Company.

Fiscal Impact: Annual Premium of $14,980.54 Exhibits:

None.

Board Action:



AGENDA BILL

Item #: 10 Title: CLOSURE AND REDISTRIBUTION OF WORKERS’

Meeting: 03/18/2010 COMPENSATION EQUITY

General Manager:

Recommended Action: Approval of the closure of the Workers’ Compensation fund and redistribution of the equity. Item Explanation: The Authority began providing excess workers’ compensation coverage on July 1, 1987. This program was in effect for three years. For the first year 1987/1988, a self-funded layer between $200,000 and $250,000 was maintained. Subsequently this layer was eliminated and all participants maintained a $250,000 per occurrence self-funded retention with coverage being provided by an excess workers’ compensation carrier. Funding for the program was provided by a pro-rata payment by each participant based upon its workers’ compensation payroll. The workers’ compensation program was terminated on June 30, 1990. Until now, the equity in the fund has been maintained in the event a claim incurred during program year 1987/1988, by a member entity that participated in the risk sharing layer, exceeded its self-funded retention. In addition, investment income has been accumulating in the program because of the positive fund balance remaining from the 1987/1988 program year. Attached is a spreadsheet that shows premiums paid by member entity during the three years the program was in effect. It also shows a balance of $245,579 as of December 31, 2009 with a pro-rata distribution based on the premiums paid into the fund. The program has been closed for 9 ½ years and there are no open or potential claims. Staff recommends the closure of the fund and redistribution of the equity based upon the attached spreadsheet. Fiscal Impact: Reduction in assets of $245,578.90 Exhibits:

Workers’ Compensation Equity Redistribution

Board Action:

CJPRMAWorkers' Compensation Fund

Equity Redistribution

WC Eq Bal @ 12-31-09.xlsx

Member PY 87-88 PY 88-89 PY 89-90 TOTAL% ofPool

EquityBalance

Alameda 36,857.00$ 31,851.09$ 38,256.00$ 106,964.09$ 4.3% 10,562.58$ CSJVRMA 93,826.00 107,525.36 132,144.00 333,495.36 13.4% 32,932.29 Fremont 33,185.00 56,207.80 65,035.00 154,427.80 6.2% 15,249.57 Livermore 28,244.00 20,204.66 23,195.00 71,643.66 2.9% 7,074.73 Lodi 28,139.00 19,485.37 23,788.00 71,412.37 2.9% 7,051.89 Manteca 23,782.00 13,066.54 15,297.00 52,145.54 2.1% 5,149.31 Petaluma 12,953.00 14,530.88 16,331.00 43,814.88 1.8% 4,326.67 Redding 23,010.00 32,787.88 38,233.00 94,030.88 3.8% 9,285.44 REMIF 60,233.00 49,860.33 58,215.00 168,308.33 6.8% 16,620.26 Roseville 22,485.00 25,106.15 31,873.00 79,464.15 3.2% 7,846.99 San Leandro 38,244.00 37,693.02 41,630.00 117,567.02 4.7% 11,609.61 San Rafael 24,405.00 25,845.53 28,230.00 78,480.53 3.2% 7,749.86 Santa Rosa 57,420.00 48,974.68 55,054.00 161,448.68 6.5% 15,942.87 Stockton 80,598.00 97,802.98 108,093.00 286,493.98 11.5% 28,290.95 Sunnyvale 60,361.00 58,940.25 54,822.00 174,123.25 7.0% 17,194.47 Vacaville 26,380.27 18,852.35 24,289.00 69,521.62 2.8% 6,865.18 Vallejo 60,784.00 37,992.95 44,764.00 143,540.95 5.8% 14,174.51 YCPARMIA 63,798.00 97,390.48 118,832.00 280,020.48 11.3% 27,651.70 Totals 774,704.27$ 794,118.30$ 918,081.00$ 2,486,903.57$ 100% 245,578.90$

Fund balance @ 12/31/09:Reserve for loss - workers' comp 57,670.00 Retained earnings - workers' comp 181,077.93 2009/2010 interest income 6,830.97 Total fund balance 245,578.90$

Premiums Paid



AGENDA BILL

Item #: 11 Title: RISK MANAGEMENT ISSUES

Meeting: 03/18/2010

General Manager:

Recommended Action: None. This item is being provided for information purposes only. Item Explanation:

This item is reserved for the discussion of risk management issues that are of concern to the members and for the provision of status updates on the risk management program.

Issues that have been requested to be listed for discussion are set forth below. 1) Risk Management for Supervisors (David Clovis, CJPRMA)

2) Medicare Secondary Payer Mandatory Reporting (Jeff Davis, REMIF & Ron Blanquie, Petaluma)

3) Certificates of Insurance (Jeff Davis, REMIF) 4) Forecast Homes, Inc. v. Steadfast Insurance Co. (Steve Schwarz, Fremont) 5) Preservation of Electronic Evidence (Tony Giles, Sunnyvale)


1) Risk Management for Supervisors Training Information 2) Medicare Changes Article 3) CPCU eJourmal Article, November 2009 4) Forecast Homes, Inc., et al., v. Steadfast Insurance

Board Action:

California Joint Powers Risk Management Authority Training Announcement

Risk Management for Supervisors

Presented by David Patzer, Risk Management Solutions &

David Clovis, CJPRMA

FACT: A supervisor’s actions can either create risk or reduce risk for their organization FACT: Supervisors are often the first line of defense in identifying and managing risks that, if left

unchecked, can affect critical operations, such as agency reputation, employee welfare, program performance, financial integrity, legal liability, and management performance

This CJPRMA-Provided Seminar Addresses:

1. Supervision: Basic Concepts of Supervision 2. Risk Management 101: The Process

a. Risk Control 101 – How to Identify and Control Risk b. Risk Transfer 101 – Basic Insurance Concepts Supervisors Need to Know

3. Supervisors as Risk Managers: The Supervisor’s Role In Managing: a. General Liability b. Employment Practices Liability c. Workers’ Compensation Liability d. Personal Liability

4. A Supervisor’s Responsibilities and Liabilities in the Eyes of CalOSHA WHO SHOULD ATTEND: New and existing supervisory personnel COST: No fee for CJPRMA Members, $75 per person for Non-members TIME: 9:00 a.m. to 3:00 p.m. Registration & Continental Breakfast start at 8:30 a.m. Lunch will

be provided

When Where Time March 23, 2010 Le Rivage Hotel

Sacramento, Ca 9am to 3pm

April 20, 2010 CJPRMA Livermore, Ca

9am to 3pm

How Do I Register?

Go to http://www.cjprma.org/training_registration.php

Questions? Contact David Clovis, CJPRMA Assistant General Manager/Risk Manager at

[email protected] or at (925) 290-1316

Introduction

A certificate of insurance is an informational document issued by or, more commonly, on behalf of, an insurance company. The certificate indicates that an insurance policy exists of a certain type and limits. Certificates are

simply snapshots of basic policy coverages and limits at the time of certificate issuance. Certificates are not intended to modify coverages or change the terms of the insurance contract and they convey no contractual rights to the certificate holder.

At least that’s the way it used to be.Unfortunately, today there is an effort to make certificates do more than they were

ever intended to do and, increasingly, require insurance agents to do more than has ever been necessary in the past. As evidenced by the evolving nature of certificate demands, agents are all too often viewed as public service agencies and are expected to provide free services to parties with which they have no business relationship and to assume increased risks for the same.

Businesses frequently enter into construction or service contracts, loan agreements, leases, and other contracts that include certain insurance and indemnity requirements that must be evidenced by a certificate of insurance. If the certificate holder desires status as an additional insured under a policy, this can only be done by an endorsement to the policy. A certificate alone will not change the policy.

In fact, not only does the certificate say it doesn’t amend or alter the policy, the policy itself usually says this. For example, the ISO IL 00 17 Common Policy Conditions form says, “This policy’s terms can be amended or waived only by endorsement issued by us and made a part of this policy.”

At least that’s the way it used to be.Today certificate requestors insist on certificate wording or agent warranties that

the certificate confers specific policy coverages or rights. Problems often arise when a contract makes demands that are, for all practical purposes, impossible to meet. These problems include: (1) requests for insurance for losses or damages that are uninsurable, (2) requests that agents do not have authority to execute or cannot legally comply with, (3) requests that require inappropriate certificate wording, and (4) requests that are impractical from a markets or coverage availability standpoint. These four broad categories will be examined later.

As a result, insurance agents are sometimes asked to provide a certificate of insurance that cannot comply with the contract an insured has been asked to sign or has already signed. In fact, the insured may have completed the job and needs a modified certificate in order to be paid. This puts a great deal of pressure on agents to do something they should not and, often, cannot do.

AbstractInsurance agents have become increasingly burdened with third-party requests for certificates of insurance, additional insured status, agent coverage “affidavits” or compliance checklists, and other sometimes onerous demands. Those that are cost accounting these demands are learning that they are operating at a loss for many insureds. In addition, regulators are imposing constraints on what agents can legally do in fulfilling these requests. As a result, agents are having to increasingly decline many of them. This article examines the nature of these increasing costs and identifies four basic reasons why agents may be unable to comply with requests from third parties.

Certificates of Insurance, Insurance Agents and Rolling Stone Syndromeby Bill Wilson, CPCU, ARM, AIM, AAM

CPCU eJournalPublished by the CPCU Society

November 2009

1NOVEMBER 2009

Certificates of Insurance, Insurance Agents and Rolling Stone Syndrome

The purpose of this article is to first examine the magnitude of the problem in the form of agency costs, then to illustrate how certificate problems can arise, explain why agents cannot always comply with third-party demands, and to explore what solutions are available, in a broad sense, to address the most common problems. The simple fact is, as the Rolling Stones put it, “You can’t always get what you want.”

Operational CostsAt one time in most agencies, certificates were probably a rarity, particularly outside

the construction industry. Today, it seems like everybody is on the certificate bandwagon. Just recently, a lender on a commercial building wanted a certificate confirming additional insured status on the property insurance, general liability, auto policy, and (no kidding) workers compensation.

Industry technology expert Steve Anderson (www.steveanderson.com) estimates the cost to issue a plain vanilla ACORD 25 certificate at $6–$7 and if some customization is required, as much as $15–$18. This could be even higher when you get into requests that some third parties make that involve lists of questions in addition to the certificate. One Nebraska agent was given a 40-question checklist he was required to complete, along with an “affidavit” warranting that coverage was in place and conformed to the construction contract (of which he had seen 2 of 88 pages). This affidavit was to be notarized and witnessed by a disinterested third party and sent to the certificate holder via certified mail — all for free and with great urgency.

An Illinois agency producer and CSR spent a total of two and a half hours on one certificate that had to be redone four times. The last time they had to reissue it because a field on the form was not applicable and they had entered “NA,” whereas the certificate holder would only accept an entry of “N.A.” — so they had to reissue the certificate and add the two periods after the “N” and “A.” The contractor was due $300,000 on a job and the general contractor refused to pay until the certificate met his satisfaction to the letter (or better, punctuation mark).

Many agencies are issuing upwards of 30,000 certificates a year (one medium-sized agency was doing more than 40,000) and sometimes 3,000–4,000 for an individual insured annually, i.e., close to a dozen a day for some accounts. A significant number of agencies have full-time staff devoted to this function.

A Texas agent estimated that 3 percent of their commercial lines revenue went to pay for their certificate operation. That’s a big chunk of agency profit being invested in an activity that is being provided to third parties free of charge in most states. It was estimated that their cost of issuing certificates is double the cost just three years ago due to the increase in number and the complexity of requests.

With estimates of the number of certificates issued annually being as high as 100 million, certificate processing represents a billion-dollar operation for agencies. Unlike insurers who can increase premiums when expenses rise, agents have no way of passing along these costs unless they can (and are willing to) charge a fee for this service.

In addition to direct operational costs, certificate processing opens agencies to errors and omissions (E&O) claims from their customers and even certificate holders.

E&O CostsClearly, for many agencies, certificates have become a costly black hole that takes

valuable time away from servicing clients while creating unnecessary expense for the agency, not to mention increasing its E&O exposure. Consider these E&O claim statistics from Swiss Re, the leading writer of insurance agents E&O in the country:

2 CPCU eJOURNAL

Bill Wilson, CPCU, ARM, AIM, AAM, is the associate vice president for Education and Research for the Independent Insurance Agents & Brokers of America (IIABA). He is also the director of the IIABA’s Virtual University. He can be contacted at [email protected]. Additional information on certificates of insurance can be found on their web site at www.independentagent.com/VU.


• In 2007, E&O claim frequency was up 28 percent for certificate-related claims.

• 1 in 25 E&O claims involve certificates (higher in some states).

• 36 percent of these claims involve additional insured status (or lack thereof).

• CSRs are most often responsible for certificate claims.

• Certificates issued on lapsed coverage are more common in larger agencies.

If those don’t grab your attention, consider three recent E&O claims reported by Swiss Re:

• The insured requested an additional insured endorsement as required by the construction contract but the agent failed to request it: $180,000 settlement cost.

• An agent used a blanket additional insured endorsement. However, it required that additional insured status requests arise from written contracts. There was no written contract so the blanket endorsement was not triggered: $445,000 settlement cost.

• An account was nonrenewed and the agent could not find another market. The insured found an E&S carrier but the carrier couldn’t or wouldn’t issue certificates of insurance. As a favor to his former client, the agent used the agency’s agency management system to issue 4,000 certificates. As it turned out, the coverage was not actually in force. Following several accidents, including a fatality, an E&O lawsuit was filed: $10,290,000 settlement cost.

So, in addition to incurring often unnecessary, even unconscionable, expenses, agents also undertake significantly higher risks when performing a function for another party that views them largely as guarantors of a business risk that party has assumed. Increasingly, by choice or legal edict, many agencies are refusing to comply with certificate demands. The nature of these demands and denials can be categorized as: (1) uninsurable requests, (2) illegal requests, (3) inappropriate requests, and (4) impractical requests.

Uninsurable Certificate RequestsOften indemnity agreements will attempt to transfer risks and liabilities that are

largely uninsurable. For example, a construction contract may require the downstream party to be responsible, under a commercial general liability (CGL) policy, for “any negligent acts, errors or omissions” or “any and all liabilities” that result in “any claim, cost, expense, liability, penalty, or fine.”

Sometimes an indemnity agreement will include a requirement to insure, such as “contractor must insure all claims, demands, and causes of action of every kind and character, without limit, and without regard to the cause or causes thereof. ...”

Needless to say, such agreements are virtually impossible to insure, yet agents are often asked to sign notarized “affidavits” warranting that the insurance program complies with the contract the insured has signed. Any such sworn statement would almost always be inaccurate, to say the least. In one case, a risk manager required that the certificate include language that the policy would “... cover contracts without exception that the Subcontractor has signed with Contractor or is going to sign.”

While insurance policies are very precise, highly litigated contracts where coverage can hinge on the tense of a verb or a punctuation mark, other contracts insureds encounter in the marketplace frequently contain vague, ambiguous and undefined terms.

3NOVEMBER 2009


Yet, again, agents are often presented with checklists that ask whether policies meet the requirements of a contract so poorly constructed that even the drafter does not understand the terms.

One of the most common requests made when additional insured status is requested on a CGL policy is that the certificate of insurance includes a statement from the agent that such coverage is provided on a “primary and noncontributory” basis. The problem with complying with this request is that it is the additional insured’s CGL policy that governs whether insurance is primary and noncontributory. Therefore, the downstream party’s agent cannot make such a statement without knowing what the additional insured’s CGL policy says ... which is almost never the case.

In addition, contracts often require notice of things like “material change” and ask for this to be shown on the certificate or endorsement, yet terms like this are never defined. One certificate request included a questionnaire that asked, “Does Personal Injury Insurance include coverage for personal property injury sustained by any person as a result of an offense directly or indirectly related to the employment of such a person by the insured?” When asked, the requestor had no idea what this question meant, yet the agent was expected to reply in the affirmative that the insurance coverage complied.

The end result is that any attestation by the agent that such notice will be provided is simply a guess as to what “material change” or other terms mean. Even with the common request for notice of cancellation, few contracts stipulate whether this notice must be provided if the insured cancels, though you can be assured in some cases that this is exactly what the certificate holder will say was intended after the fact.

Finally, the contracts being used are often mutations of contracts that have been used for decades. They may request coverage be provided by a “Comprehensive General Liability Policy” or that cross liability coverage be endorsed or that a “broad form” property damage endorsement be provided. These are all antiquated terms no longer used in the industry.

“Illegal” Certificate RequestsIncreasingly, states are enacting certificate-specific statutes or regulations or their

insurance departments are issuing regulatory directives that govern the use of certificates of insurance.

Kansas and Minnesota are two states that have legislated how certificates can (or can’t) be used. Louisiana recently enacted criminal statutes that include up to five years in prison at hard labor for the issuance of a fraudulent certificate. Alabama is a state that addressed certificate problems by regulations that govern the filing of certificates and the issuance of erroneous “agent affidavits.”

More commonly, though, most states are taking a regulatory directive approach via insurance department bulletins as a first measure in combating onerous requests and certificate abuses. A current listing of states that have certificate-specific statutes, regulations or directives can be found at http://www.iiaba.net/VU/NonMember/WilsonCertLawsRegs.htm.

In addition to these efforts, many states have existing unfair trade practices and insurance fraud laws that govern certificates of insurance broadly or even by name. For example, Nebraska’s insurance fraud law applies to anyone who, “Knowingly and with intent to defraud or deceive issues or possesses fake or counterfeit insurance policies, certificates of insurance, insurance identification cards, or insurance binders. ...”

As a result, common requests to strike the “endeavor to” cancellation language from the ACORD 25 certificate of insurance, enter a number of days notice that is

4 CPCU eJOURNAL


not granted by the policy itself, or otherwise modify the language of the certificate are increasingly illegal in many states.

Also keep in mind that ACORD forms are copyrighted and their use is licensed. These forms are, for the most part, designed to be completed, not altered. One can potentially encounter federal copyright law violations, particularly when proprietary certificates are being used. In one case, a form provided by a requestor looked exactly like an ACORD form except that it had added four words: “This certificate does not amend, extend or alter the coverage afforded by the policies below except as shown below.” It is important to note that alteration of certificates may violate federal copyright law, state insurance laws, a licensing agreement, or the agency/company agreement, which specifies what policy processing forms can and cannot be issued by the agent.

Inappropriate Certificate RequestsContracts commonly specify that the certificate of insurance provide for a notice of

cancellation to the certificate holder. The problem is that no “ISO standard” additional insured endorsements provide for cancellation notice to an additional insured. In fact, under ISO’s Commercial Package Policy, only the first named insured is entitled to notice of cancellation. Yet, insurers or their agents are expected to extend this policy right to dozens of additional insureds or even lowly certificate holders.

Under the laws or regulatory authority of a number of states, a certificate of insurance cannot make a promise of notification unless notice of cancellation is provided for in the policy or endorsement. In those states, not only are such requests inappropriate, they’re illegal.

However, our focus in this section is more on requests that agents get that are simply unreasonable and inconsiderate demands. To illustrate, a CSR in an Iowa agency had 13 requests for certificates from 13 different banks in the first hour of a Monday morning. Why? The banks were all being audited and it was easier to call the agency for copies of the certificates previously issued than locate them in their own files.

Shortly after this series of requests, a contractor stopped by the agency to pick up a certificate that he had picked up the previous week and hand delivered to a general contractor. Why? The general contractor said they were setting up a new file and didn’t want to make a copy of the certificate. They refused to pay him until he gave them another original certificate. These requests cumulatively took the CSR out of commission for a half day simply for the convenience of the certificate requestors.

In a construction contract for a Georgia insured, an HVAC subcontractor with two employees, the insurance requirements were ten pages long and specified that, “For those policies containing an aggregate, as soon as loss activity (paid or reserve) depletes the aggregate by 50 percent or more, written notice must be sent to the Contractor by certified mail.” Agents are usually not aware of reserve activities at this level.

A Wisconsin agency insured a hotel. The hotel received demands from two trucking companies and a railroad to be named on the hotel’s CGL policy as additional insureds because their employees stayed there on business. The threat of noncompliance was that these companies would take their business elsewhere. Imagine if all hotels were required to add every guest’s employer as an additional insured and you were the agent for those hotels.

To further illustrate that point, it is very common for the mortgagees on condo units to request additional insured (or even mortgagee) status on the condo master policy. A Maryland agency insures a condo association with 800 units. Imagine if 800 mortgagees want to be named on the condo master policy ... until they sell the mortgage to another lender who wants the former mortgagee to be removed and their name added. Imagine

5NOVEMBER 2009


further that you’re this agency and you also insure 694 other condo associations that are being bombarded with these types of requests.

Sometimes, in order to retain a valuable client, an insured must overhaul its entire insurance program to comply with requests. In one case, a furniture store’s best customer decided they needed additional insured status including products and completed operations. The furniture store was written on a Business Owners Policy and the available additional insured endorsements only covered ongoing operations. The policy was loaded with “bells and whistles,” including 12 months of otherwise unlimited business income coverage, at a very low price. In order to add the insured’s customer as an additional insured, the account had to be rewritten on a Commercial Package Policy that provided less coverage at a greater price.

These are not rare examples. They occur daily in agencies across the country and cost cumulatively billions of dollars in direct expenses and lost opportunity costs.

Impractical Certificate RequestsConstruction contracts may require the removal of exclusions for pollution liability,

care, custody or control, faulty workmanship, etc., that simply cannot be effected by any insurer the agent represents, at least for that client. There may be instances where a particular insurer can make an accommodation for an important customer but not “Joe the Plumber.” In other instances, no insurer can modify a filed form to meet a contract requirement.

One thing that many contractors, owners, lenders, and others do not understand is the highly regulated nature of the insurance industry. Insurers often cannot modify filed forms and manuscript endorsements on the fly. An insurance policy is not like an indemnity agreement or lease that the parties can modify as they see fit.

Third parties are asking for coverages that are not readily available, appropriate to the risk, or affordable. For example, one three-man plumbing operation signed a construction contract that required the provision of Employment Practices Liability insurance. The reason given was that there are an increasing number of workplace sexual harassment lawsuits because of the changing makeup of construction workers.

More commonly, outdated insurance requirements cite policy forms that are no longer available, such as the November 1985 version of ISO’s CG 20 10 additional insured endorsement. In some states, some insurers may have this form available, but most insurers in most states do not. Current ISO additional insured endorsements don’t cover the sole negligence of the additional insured, yet contracts are still being used that demand this, even in states where prohibited by anti-indemnity laws.

Finally, some requests are just downright impossible. A frequent one is the demand that coverage on a business auto policy, like the CGL, be provided on a “primary and noncontributory” basis. The Other Insurance clauses of auto policies typically do not work as they do with CGL policies. Even more outrageous are the occasional demands for additional insured status on workers compensation policies.

Lenders all too often want to be additional insureds or loss payees on every policy the insured possesses whether that policy has anything to do with the loan or not. They want that status on business income forms not because the coverage is relevant to their insurable interest in the property, but because it is a financial resource that backs up the loan. In response, ISO just recently provided a special endorsement to meet this demand.

Summary and ConclusionsCertificate and additional insured requests have escalated exponentially out of

control. Some agencies are devoting full-time staff to the certificate processing

6 CPCU eJOURNAL


operation. Literally billions are being spent by all parties in issuing and monitoring certificates and endorsements, not counting the lost opportunity costs of agents who could be spending their time more productively servicing their own customers.

In addition to being increasingly and often unnecessarily burdened by requests for endorsements and certificates of insurance, agents are increasingly faced with professional liability lawsuits from certificate holders. Perhaps most important, agents are increasingly asked to assume risks, perform tasks for which they are unqualified (e.g., contract review), and provide uncompensated services whose benefits accrue largely to parties with which they have no business relationship. In doing so, agents are increasingly hamstrung by legal and regulatory restrictions.

There is a need to improve education and understanding of certificates of insurance issues among the parties requesting them - contractors, project owners, lenders, attorneys, risk managers, government entities, large corporations, and others. This need exists within our own industry as well. Where do many of these onerous requests originate? From carriers and brokers who benefit by having their insureds transfer as much risk downstream as possible. What is too often created, though, is a vicious cycle where these processing operations become an end in and of themselves.

There is a great need for standardization, for acceptance of ACORD and ISO standard forms and for policy rights such as cancellation as outlined by law and standard forms. Automation can play an important role in streamlining the need for information. By returning to reasonableness in our business relationships and using technology to streamline the necessary processes, certificate requestors should find that they can get the coverage assurances they desire without excessive and onerous demands.

As the Rolling Stones put it, “You can’t always get what you want ... but if you try sometime, you just might find, you get what you need.”

7NOVEMBER 2009

© 2009 CPCU SocietyCPCU eJournal, Vol. 62 No. 11November 2009www.cpcusociety.org(800) 932-CPCU, option 4

Filed 1/12/10; pub. order 2/11/10 (see end of opn.)

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

FORECAST HOMES, INC., et al., Plaintiffs and Appellants, v. STEADFAST INSURANCE COMPANY, Defendant and Respondent.

G040876 (Super. Ct. No. 06CC00060) O P I N I O N

Appeal from a judgment of the Superior Court of Orange County, David C.

Velasquez, Judge. Affirmed.

Ulich & Terry; Andrew K. Ulich, Timothy A. Gravitt and Lori M. Cullman

for Plaintiffs and Appellants.

Horvitz & Levy, David M. Axelrad, Peter Abrahams; Sinnott, Dito, Moura

& Puebla, Randolph P. Sinnott and Gail Orr for Defendant and Respondent.

Housing developers, Forecast Homes, Inc., and K. Hovnanian Forecast

Homes, Inc. (referred to collectively and in the singular as Forecast), appeals from the

judgment entered in its declaratory relief action in favor of Steadfast Insurance Company

(Steadfast). Forecast contractually required all its subcontractors to defend and hold it

harmless against any liability arising out of the subcontractors’ work. Subcontractors

were required to add Forecast to their general liability insurance policies as an additional

insured. Several subcontractors obtained their required insurance coverage from

Steadfast, who later refused to indemnify Forecast when a lawsuit was filed by several

homeowners against Forecast for construction defects. Steadfast maintained the

subcontractor did not pay the policy’s self-insured retention (SIR), which was a

precondition for coverage. It argued only the named insured, not Forecast, could satisfy

the policies’ SIR and trigger coverage. The trial court agreed and concluded the policies

were unambiguous, not against public policy, and not illusory. We agree and affirm the

judgment.

I

Forecast develops and sells single family homes. Forecast ordinarily hires

subcontractors to build the homes, and it requires subcontractors to maintain general

liability insurance policies naming Forecast as an additional insured. Forecast’s contract

with each subcontractor specified in great detail the required insurance policy language

and coverage specifications.

However, Forecast’s contract did not require any specific language

regarding the insurance policies’ SIR provisions. The sole issue on appeal relates to the

interpretation of the SIR endorsements. Consequently, we must discuss these provisions

in greater detail.

Although there were over a dozen subcontractors, there were essentially

only four different kinds of Steadfast policies at issue in this case (referred to in the briefs

and by the trial court as the 98 form, the Rev. form, the 01 form, and the B form).

2

However, the parties agree there are really only two different versions, which we will

refer to as Form-A (containing the 98 and Rev. form endorsements) and Form-B

(containing the 01 and B form endorsements).

All the endorsements contain the following: On the top of the page in

capital letters is the statement, “This endorsement changes the policy. Please read it

carefully.” (Original capitalization omitted.) This warning is followed by a large box,

titled “Schedule. [¶] SELF-INSURED RETENTION AMOUNTS.” The amounts varied

depending on the policy but, for example, in one policy the amount was listed as “$2,500

[p]er [o]ccurrence [¶] $[0] [p]er [c]laim [¶] AGGREGATE $[0].” Under the schedule

box in italicized lettering was the notation, “throughout this policy the words ‘you’ and

‘your’ refer to the [n]amed [i]nsured shown in the declarations, and any other person or

organization qualifying as a [n]amed [i]nsured under this policy. The words ‘we,’ ‘us,’

and ‘our’ refer to the company providing this insurance.” (Original italics omitted.)

After the schedule box, Form-A’s endorsement provisions provided, inter

alia:

“I. Self-Insured Retention and Defense Costs – Your Obligations.

“A. The self-insured retention amounts stated in the Schedule of this

endorsement apply as follows:

“1. If the [p]er [o]ccurrence self-insured retention amount is shown in the

Schedule of this endorsement, you shall be responsible for payment of all damages and

defense costs for each occurrence or offense, until you have paid self-insured retention

amounts and defense costs equal to the [p]er [o]ccurence amount shown in the Schedule,

subject to the provisions of A. 3. below, if applicable. The [p]er [o]ccurrence amount is

the most you will pay for self-insured retention amounts and defense costs arising out of

any one occurrence or offense, regardless of the number of persons or organizations

making claims or bringing suits because of the occurrence or offense. [¶] . . . [¶]

3

“4. Except for any defense costs that we may elect to pay, you shall pay all

such defense costs as they are incurred until you have paid defense costs and damages for

bodily injury, property damage, personal injury . . . or any other such coverages which

may be included in the policy, equal to the applicable self-insured retention amount. If

any final judgment or settlement and defense costs is less than the self-insured retention

amount stated above, we shall have no obligation to reimburse you or pay defense costs

under this policy.” (Internal quotation marks omitted.)

The endorsement contained additional provisions forbidding settlement

without written permission, requiring notification of an occurrence or offense that may

result in a claim, seeking reporting of SIR incurred amounts, and announcing Steadfast’s

right to deny payment if the rules are not followed.

The last section of the endorsement provided only two definitions:

(1) “A. Self-insured retention means: [¶] the amount or amounts which you or any

insured must pay for all compensatory damages which you or any insured shall become

legally obligated to pay because of bodily injury, property damage . . . or any other such

coverage included in the policy, sustained by one or more persons or organizations[]”;

and (2) “B. Defense costs means: [¶] expenses directly allocated to specific claims and

shall include but not be limited to all [s]upplementary payments as defined under the

policy(ies); all court costs, fees and expenses; costs for all attorneys, witnesses, experts

. . . and any other fees, costs or expenses reasonably chargeable to the investigation,

negotiation, settlement or defense of a claim or a loss under the policy(ies).” (Internal

quotation marks omitted.)

The parties agree this endorsement permitted SIR damages and defense

costs to be used separately or in tandem to satisfy the per occurrence amount set forth in

the schedule. For example, if the per occurrence amount was $2,500, the payment of any

combination of damages or defense costs that add up to $2,500 would trigger Steadfast’s

duty to defend both the named insured subcontractor and Forecast, the additional insured.

4

In a nutshell, what the parties dispute on appeal is who is permitted to activate coverage

by paying the specified SIR per occurrence amount.

Section 1 of Form-B, like Form-A, is titled, “Self-Insured Retention and

Defense Costs – Your Obligations.” We have highlighted in bold the additional language

found in Form-B, which is not contained in Form-A. In all other respects, the provisions

are identical.

“A. The self-insured retention amounts stated in the Schedule of this

endorsement apply as follows: 1. If the [p]er [o]ccurrence self-insured retention amount

is shown in the Schedule of this endorsement, it is a condition precedent to our liability

that you make actual payment of all damages and defense costs for each occurrence or

offense, until you have paid self-insured retention amounts and defense costs equal to the

[p]er [o]ccurence amount shown in the Schedule, subject to the provisions of A. 3. below,

if applicable. Payments by others, including but not limited to additional insureds or

insurers, do not serve to satisfy the self-insured retention. Satisfaction of the self-

insured retention as a condition precedent to our liability applies regardless of

insolvency or bankruptcy by you. The [p]er [o]ccurrence amount is the most you will

pay for self-insured retention amounts and defense costs arising out of any one

occurrence or offense, regardless of the number of persons or organizations making

claims or bringing suits because of the occurrence or offense.”

In all the policies, Forecast became an insured under the subcontractor’s

policy through issuance of an additional insured endorsement (AIE) by either the

insurance carrier or by an agent/broker acting on behalf of the insurance carrier. The AIE

amended the policy to include Forecast as an insured party under the policy.

In 2001 through 2003, Forecast was served with five different lawsuits for

construction defects by homeowners living throughout Southern California (the

underlying actions). After being served with the complaints in the underlying actions, it

tendered its defense to several insurance carriers, including Steadfast who had insured

5

many of the subcontractors. In the underlying actions, the only named defendant was

Forecast, not the subcontractors.

Steadfast denied Forecast’s tender on the grounds that only the named

insured under each policy was able to satisfy the bargained for per occurrence amounts

set forth in the SIR endorsements, and none of the subcontractors (the named insureds)

had satisfied the SIR to trigger Steadfast’s obligation to defend. It did not dispute

Forecast was an additional insured party under each policy, and Forecast had proof it

incurred defense costs sufficient to satisfy the per occurrence amounts in the SIR

endorsements.

Forecast filed an action against Steadfast for declaratory relief, breach of

contract, and breach of the covenant of good faith and fair dealing. It asserted the

endorsements permitted an additional insured to satisfy the SIR through payment of

defense costs in the underlying action. It also asserted Steadfast’s position violated

public policy and rendered the coverage illusory by precluding the additional insured

from having a chance to invoke the insurance coverage it expected. The trial court

bifurcated the declaratory relief action.

Prior to trial, the parties stipulated to the admissibility of the insurance

policies and the SIR endorsements. The parties also stipulated to the fact Forecast

tendered its defense, and Steadfast denied coverage. The court received into evidence the

testimony of Douglas Kaufman regarding industry practices as parol evidence. The court

ruled it would only consider his testimony if it found ambiguity in the SIR endorsements.

After considering briefs and argument, the court took the matter under submission.

The court ruled that in both the A and B Forms, only the named insured

subcontractors, not Forecast, had the right to satisfy the SIR per occurrence amounts and

Steadfast’s defense obligation had not been triggered. It concluded the SIR endorsements

did not violate public policy and were not illusory.

6

II

A. Standard of Review

“The interpretation of an insurance policy is a question of law subject to

our independent review. [Citation.] To the extent the facts below were undisputed and

capable of only one reasonable inference, we will independently review them as well to

determine their legal effect. [Citation.]” (Vons Companies, Inc. v. United States Fire Ins.

Co. (2000) 78 Cal.App.4th 52, 57-58 (Vons).)

B. Self-Insured Retention or SIR

“Liability insurance polices often contain a ‘deductible’ or a ‘self-insured

retention’ (SIR) requiring the insured to bear a portion of a loss otherwise covered by the

policy.” (Croskey et al., Cal. Practice Guide: Insurance Litigation (The Rutter Group

2008) ¶ 7:378, p. 7A-121.) A deductible is a portion of an insured loss for which the

insured is responsible. (Id. at ¶ 7:379, p. 7A-121.) It generally is “a specific sum that the

insured must pay before the insurer owes its duty to indemnify the insured for a covered

loss.” (Ibid.) A deductible relates only to the “damages for which the insured is

indemnified, not to defense costs. The insurer is fully responsible for defense costs

regardless of the amount of the deductible so long as there is a potential for coverage

under the policy.” (Ibid.)

“The term ‘retention’ (or ‘retained limit’) refers to a specific sum or

percentage of loss that is the insured’s initial responsibility and must be satisfied before

there is any coverage under the policy. It is often referred to as a ‘self-insured retention’

or ‘SIR.’” (Croskey et al., Cal. Practice Guide: Insurance Litigation, supra, ¶ 7:384,

p. 7A-126.) Unlike a deductible which generally relates only to damages, an SIR also

applies to defense costs and settlement of any claim.

“It is well recognized that self-insurance retentions are the equivalent to

primary liability insurance, and that policies which are subject to self-insured retentions

7

are ‘excess policies’ which have no duty to indemnify until the self-insured retention is

exhausted. [Citations.]” (Pacific Employers Ins. Co. v. Domino’s Pizza, Inc. (1998)

144 F.3d 1270, 1276 -1277, applying California law.) The distinction between excess

and primary insurers is significant because “[d]ifferent rules govern the obligations of

excess and primary insurers. . . . Defense obligations of excess insurers arise only when

primary insurance coverage is exhausted. [Citations.]” (City of Oxnard v. Twin City Fire

Ins. Co. (1995) 37 Cal.App.4th 1072, 1077, fn. omitted.)

However, as noted by one respected legal treatise, “The analogy between

‘primary’ and ‘excess’ insurance should not be carried too far. An SIR is not the same as

primary insurance for all purposes.” (Croskey et al., Cal. Practice Guide: Insurance

Litigation, supra, ¶ 7:387, p. 7A-128.) For example in Montgomery Ward & Co. v.

Imperial Casualty & Indemnity Co. (2000) 81 Cal.App.4th 356, 370, the court rejected

“‘stacking’” of SIRs in other triggered policies as this practice would furnish the insured

far less coverage than it purchased. The court rejected the argument an SIR was the same

as primary insurance and was not subject to the “horizontal exhaustion rule,” i.e., the rule

stating all primary policies in effect must be exhausted before any excess policy is

triggered. (Id. at p. 365.)

“The insured may purchase other insurance to cover the SIR unless the

policy clearly requires the insured itself, not other insurers, to pay this amount. [(Citing

Vons, supra, 78 Cal.App.4th at pp. 63-64, . . . fact that policy referred to ‘other valid and

collectible insurance’ indicated other insurance could be used to exhaust SIR).]”

(Croskey et al., Cal. Practice Guide: Insurance Litigation, supra, ¶ 7:385.5, p. 7A-127.)

As noted by the court in Vons, some policies may specifically preclude other insurance

and “require the insured to be at risk for the retention amount.” (Id. at ¶ 7:385.6,

p. 7A-127.)

Similarly, a codefendant’s payment may satisfy the SIR. “Where the

insured and another defendant are jointly and severally liable for the injury or damage, an

8

SIR under the insured’s liability policy may be satisfied by payments made by the other

defendant or its liability insurer . . . unless the policy clearly provides otherwise.”

(Croskey et al., Cal. Practice Guide: Insurance Litigation, supra, ¶ 7:387.3, p. 7A-128;

Vons, supra, 78 Cal.App.4th at pp. 63-64.)

However, the Vons court, and other courts interpreting SIRs are all careful

to note an SIR, like any insurance provision, must be enforced according to its plain

terms. Who may satisfy the SIR depends on each policy’s express provisions.

Accordingly, we turn to the basic rules of contract interpretation to determine the unique

issue raised in this appeal, i.e., can an additional insured satisfy this SIR?

C. General Rules Regarding Insurance Contract Interpretation

“While insurance contracts have special features, they are still contracts

subject to the ordinary rules of contract interpretation. The fundamental goal of contract

interpretation is to give effect to the parties’ mutual intentions, which, if possible, should

be inferred solely from the written terms of the policy. If that language is clear and

explicit, it governs. [Citation.] Policies must be interpreted as a whole, giving force and

effect to every provision where possible. [Citation.]” (Vons, supra, 78 Cal.App.4th at

p. 58.)

“Policy provisions are ambiguous only if they are capable of two or more

reasonable constructions. We will not adopt a strained or absurd interpretation to create

an ambiguity where none exists. The policy terms must be construed in the context of the

whole policy and the circumstances of the case and cannot be deemed ambiguous in the

abstract. [Citation.] If an ambiguity cannot be eliminated by the language and context of

the policy, then we invoke the principle that ambiguities are construed against the party

who caused the uncertainty—the insurer—in order to protect the insured’s reasonable

expectations of coverage. [Citation.]” (Vons, supra, 78 Cal.App.4th at p. 58,

fn. omitted.)

9

Forecast asserts SIR endorsements, like deductibility clauses, are subject to

a heightened level of scrutiny and are to be interpreted narrowly and strictly construed

against the insurer. For this purported rule, it relies on Beaumont-Gribin-Von Dyl

Management Co. v. California Union Ins. Co. (1976) 63 Cal.App.3d 617 (Beaumont),

disapproved on other grounds by Bay Cities Paving & Grading, Inc. v. Lawyers’ Mutual

Ins. Co. (1993) 5 Cal.4th 854, 865), which contains a statement, the thrust of which is

that a deductibility clause must be treated as any other limitation in the policy. The

context of that statement is, however, that ambiguities, wherever they appear in an

insurance policy, will be construed against the insurer. The Beaumont case does not

announce a new rule regarding how courts should approach interpreting an unambiguous

exclusionary clause.

On a final note: “A contract extends only to those things which it appears

the parties intended to contract. Our function is to determine what, in terms and

substance, is contained in the contract, not to insert what has been omitted. We do not

have the power to create for the parties a contract that they did not make and cannot

insert language that one party now wishes were there. Finally, words used in a certain

sense in one part of a contract are deemed to have been used in the same sense elsewhere.

[Citation.]” (Vons, supra, 78 Cal.App.4th at pp. 58-59.)

D. Form-B Plainly Provides Only a Named Insured May Satisfy the SIR

The Form-B’s SIR endorsement starts off with the boilerplate sentence

“‘you’ and ‘your’ refer to the [n]amed [i]nsured . . . .” Thereafter, the first full paragraph

of the endorsement (provision I. A. 1.) titled “Your Obligation” contains a statement

plainly and clearly limiting who can satisfy the SIR (by making payment of damages

and/or defense costs). It states in relevant part, “it is a condition precedent to our liability

that you [the named insured] make actual payment . . . until you [the named insured] have

paid” the SIR amount. It clarifies, “Payments by others, including but not limited to

additional insureds or insurers, do not serve to satisfy the self-insured retention.

10

Satisfaction of the self-insured retention as a condition precedent to our liability applies

regardless of insolvency or bankruptcy by you.” Later section I, subdivision 4, reiterates

the previous sections, stating, “you shall pay all such ‘defense costs’ as they are incurred

until you have paid” costs equal to the SIR. (Italics added.) Because the word “you” was

previously defined to be the named insured, it logically follows the named insured must

pay defense costs to satisfy the SIR. This section of the policy regarding who can make

the payment to satisfy the SIR is clear and unambiguous.

Forecast argues these statements are contradicted and rendered ambiguous

by a paragraph in the endorsement’s last section (section IV), titled simply “Definitions.”

One definition describes what are “defense costs.” It defines defense costs as “expenses”

related to litigation claims, and it provides a lengthy list of possible litigation related

expenses. The second definition describes what qualifies as SIR. It defines SIR as “the

amount or amounts” that “you or any insured must pay for all compensatory damages

which you or any insured shall become legally obligated to pay because of . . . ‘property

damage’ . . . or any other such coverage included in the policy . . . .”

Forecast focuses on the phrase “you or any insured” and argues “any

insured” necessarily includes an additional insured. It then leaps to the conclusion the

definition of SIR creates ambiguity as to who can pay the SIR. Steadfast replies the

premise of this conclusion is fatally flawed as it is based on a misreading of section IV.

We agree. The definitions must be read in context of the entire policy and the intended

purpose of the policy. (Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1265

(Bank of the West).) Section I plainly relates to describing who is obligated to pay the

SIR. Both definitions in section IV are devoted to describing what amounts and expenses

qualify for the named insured’s SIR payment. When read in context of the surrounding

provisions of the endorsement, it would be a strained interpretation to view section IV as

simply a duplicative provision or worse, conflicting surplusage, to section I. A layperson

would reasonably look to section I and section IV for different pieces of information

11

regarding the SIR obligation. “We will not adopt a strained or absurd interpretation to

create an ambiguity where none exists. The policy terms must be construed in the

context of the whole policy and the circumstances of the case and cannot be deemed

ambiguous in the abstract. [Citation.]” (Vons, supra, 78 Cal.App.4th at p. 58.)

As correctly noted by Steadfast, a broad definition of the amounts

qualifying as SIR payments benefits the insured (the subcontractor) and supports the

intended function of the policy. When a court is “faced with an argument for coverage

based on assertedly ambiguous policy language [it] must first attempt to determine

whether coverage is consistent with the insured’s objectively reasonable expectations. In

so doing, the court must interpret the language in context, with regard to its intended

function in the policy. [Citation.] This is because ‘language in a contract must be

construed in the context of that instrument as a whole, and in the circumstances of that

case, and cannot be found to be ambiguous in the abstract.’ [Citations.]” (Bank of the

West, supra, 2 Cal.4th at p. 1265, italics omitted.)

Section IV defines SIR as any “amounts” the named insured or any other

insured “must pay” or “shall become legally obligated to pay” because of any damages

covered by the policy.1 This broadly-worded definition was designed to include debts

incurred by the additional insured, and not just those obligations belonging to the named

insured. This expansion was necessary for the parties’ reasonable expectations that

lawsuits naming only the additional insured, Forecast, would still be covered by the

subcontractor’s policy. The endorsement purposefully defined the “amounts” to include

debts and obligations arising from Forecast’s lawsuit, in which the subcontractors were

not named. If Forecast requested the subcontractor to make payments (pursuant to its

1 As correctly noted by Steadfast, section I states the SIR will be satisfied when the expenses and damage amounts “have” been paid by the named insured. Whereas, section IV uses the future tense, stating amounts that must be paid or amounts that shall become legally obligated to pay qualify as SIR amounts.

12

hold harmless agreement with the developer) this would satisfy the subcontractor’s SIR

obligation and trigger further insurance coverage for an additional insured, like Forecast.

We conclude the purpose of the policy is satisfied by this interpretation of the

unambiguous language of the SIR endorsement.

We reject Forecast’s theory the insurer was required to specifically list who

was precluded from paying the SIR out of their pocket. It asserts Steadfast could have

easily inserted language to the effect that only the named insured may pay, or specifically

precluded payment by other insurance or by any additional insured (such as Forecast).

Forecast maintains it reasonably expected it would not be treated any differently than the

named insured subcontractor, and either insured could trigger insurance coverage.

We conclude Forecast’s theory would turn the law of contract interpretation

on its head. The parties’ mutual intentions must first be determined, if possible, from the

written terms of the policy. If it is “clear and explicit, it governs.” (Vons, supra,

78 Cal.App.4th at p. 58.) The endorsement clearly defines “you” and “your” to mean the

named insured. Section I, concerning “Your Obligation” explicitly and plainly refers to

the named insured’s obligation. The paragraph below this title, warning, “it is a

condition precedent to our liability that you make actual payment of all damages and

‘defense costs’ for each ‘occurrence’ . . . until you have paid [SIR] amounts” clearly

describes who pays. It is only the named insured. Steadfast could not have been clearer,

without being repetitive. It was not necessary to envision, and then create a list of who

possibly could not satisfy the condition precedent.

The cases Forecast relies upon do not support its theory. Fireman’s Fund

Ins. Cos. v. Atlantic Richfield Co. (2001) 94 Cal.App.4th 842, 852 (Fireman’s Fund), is

but one of many cases illustrating the consistently broad interpretation given by

California courts to coverage phrases such as “arising out of” or “arising from” and

“resulting from.” In Fireman’s Fund, an employee of a construction company was

injured in the course of work he was doing for an oil company. The injury occurred

13

when a step owned and maintained by the oil company collapsed. The employee sued the

oil company, and it sought a defense under a contractor’s liability policy to which the oil

company had been added as an additional insured. The endorsement provided that the oil

company’s coverage was limited to “‘“liability arising out of”’” the contractor’s work for

the oil company. (Id. at pp. 845-846.) The court concluded insurance coverage was

triggered because the policy language broadly “connotes only a minimal causal

connection or incidental relationship” between the factual situation with the event

creating liability. (Id. at p. 849.)

The court rejected the insurer’s public policy argument, explaining, “With

respect to the words used to express the mutual intent of the parties, several courts have

observed an insurance company’s failure to use available language to exclude certain

types of liability gives rise to the inference that the parties intended not to so limit

coverage. [Citations.] For example, in Merchants Ins. Co. of New Hampshire, Inc. v.

USF&G (1st Cir. 1998) 143 F.3d 5, 10, the court stated: ‘After all, if [the insurer] had

really intended to limit coverage under the additional insured Endorsement to those

situations in which an added insured . . . was to be held vicariously liable only for the

negligence of a principal insured such as Great Eastern, USF&G was free to draft a

policy with qualifying language that expressly implemented that intention. [Citation.]”

(Fireman’s Fund, supra, 94 Cal.App.4th at p. 852.)

The case is not at all like ours. Clearly an insurer cannot use broad

coverage language such as “liability arising out of” if it desires to limit coverage of an

additional insured to a particular standard or causation or theory of liability. It does not

follow that an insurer who uses specific language to designate the named insured as

obligated to make the SIR payment to trigger coverage, to also list the other foreseeable

payees who it will not accept payment from. As noted in Fireman’s Fund, public policy

generally favors freedom of contract. Forecast contractually required specific language

14

be used in the subcontractors’ policies. It was certainly free to require modification of

the SIR endorsement to permit payment by any additional insurance or insured.

Likewise, the Vons case does not support Forecast’s argument. That case

concerned whether the named insured (Vons) could use other insurance proceeds to

satisfy Vons’ SIR obligation. (Vons, supra, 78 Cal.App.4th at p. 59.) The insurer,

United States Fire Insurance Co. (USF) argued that to be self-insured under an SIR

means, as a matter of law, the insured must pay the SIR from its own pocket. (Ibid.) The

court concluded this argument failed for two reasons. First, the SIR “expressly stated that

it was ‘subject to’ all of the policy’s terms and conditions, which remained unchanged.

[Citations.]” (Id. at p. 62.) The court concluded, “There is nothing ambiguous about this

language, which meant that the SIR was controlled by the various terms and conditions of

the Vons policy.” (Ibid.) Among the conditions in the USF policy was a provision

stating the policy was excess to any other valid insurance that covered the same

occurrence. (Id. at pp. 62-63.) The court noted USF could not explain why the SIR

provided excess coverage which precluded payment by other insurance, but it was also

subject to the terms stating the policy was excess if any other insurance was available.

The court held the only reasonable construction of the SIR, “in light of the other

insurance provisions to which it was subject,” permitted payment of the SIR through

other insurance. (Id. at p. 52.) Second, it concluded any conflict between USF’s

interpretation and the other policy provisions rendered the SIR ambiguous. Turning to

the rules for interpreting ambiguous contract provisions, the court reasoned, “Nowhere

does the SIR expressly state that Vons itself, not other insurers, must pay the SIR amount.

Because the SIR was subject to the other insurance provisions, which also made the Vons

policy excess if there were another policy covering the accident, Vons as a reasonable

insured could read the policy as permitting the use of other insurance proceeds to cover

the SIR amount. [Citation.]” (Id. at p. 64.)

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The Vons case is distinguishable from ours because the SIR endorsement in

Steadfast’s policy does not state the terms were “subject to” all of the policy’s terms and

conditions. To the contrary, in highlighted language the insured is clearly warned the

terms of the endorsement “shall control” if there is a conflict with other policy language.

In other words, in the event a policy provision was found to conflict with an SIR term,

the endorsement provisions would prevail. Thus, under the terms of the Steadfast policy,

the endorsement trumps all other provisions.

Moreover, the Vons court’s resolution of its ambiguous SIR, by noting

there was no express language forbidding payment by other insurance, is not applicable

to this case. The SIR in our case is not ambiguous. It plainly provides the named insured

must pay the SIR. Steadfast was not required to further clarify only the named insured

could pay or predict and name all entities and parties who are not the named insured and

therefore not permitted to pay the SIR. Forecast’s lengthy discussion of its reasonable

expectations as a developer would be relevant only if the SIR endorsement is ambiguous.

It simply is not.

E. Form-A Plainly Provides Only a Named Insured May Satisfy the SIR

Form-A is identical to Form-B discussed above, except it is an earlier

version not containing the clarifying sentence, “Payments by others, including but not

limited to additional insureds or insurers, do not serve to satisfy the self-insured retention.

Satisfaction of the self-insured retention as a condition precedent to our liability applies

regardless of insolvency or bankruptcy by you.” Forecast argues that Steadfast modified

Form-A by adding this sentence because it recognized Form-A allowed an additional

insured to satisfy the SIR retention. We disagree.

The endorsement in Form-A still contains section I. A. describing who’s

obligation it is to pay the SIR. It plainly states “you,” the named insured, must “make

actual payment” of defense costs and/or damages. Section IV in the old and new version

is the same. The definition of SIR states what amounts owed by either the named insured

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or other insured (additional insured) qualify. Although the modification in section I. A.

further clarifies the question of who pays, it does not prove the prior version permitted

satisfaction of the SIR by an additional insured. In light of the amount of growing

litigation regarding this point, it was likely a remedial measure. It is against public policy

to view modification of the policy as creating a negative inference. (See Tzung v. State

Farm Fire and Cas. Co. (9th Cir. 1989) 873 F.2d 1338, 1341; Suarez v. Life Ins. Co. of

North America (1988) 206 Cal.App.3d 1396, 1406 [“the fact that [policy] language could

be more explicit does not render it ambiguous”].)

F. Public Policy Considerations

Forecast argues interpreting the insurance policy to allow only the named

insured to satisfy the SIR obligation violates public policy and is not enforceable. Citing

cases regarding the public-policy-created implied covenant of good faith and fair dealing,

Forecast summarizes the “precise nature and extent of the duty [to act fairly and in good

faith] depends on the contractual purposes, that is, the nature of the bargain struck and the

legitimate expectations arising from the contract.” It concludes courts must invalidate or

restrict policy provisions that frustrate the purpose behind the coverage.

Applying these legal principles, Forecast asserts, “There is no question that

Steadfast’s coverage position has frustrated the reasonable expectations of Forecast, has

frustrated the purposes of Forecast being named as an additional insured under the

policies, and is therefore contrary to the public policy principles inherent in insurance

policies issued in this state.” Forecast points to the fact it insisted on being named as an

additional insured because its liability would likely be derivative and arising from a

problem with the subcontractor’s work. Forecast stated it took commercially reasonable

steps to assure itself it would be provided a defense against claims, and ultimately be

indemnified. It explains Steadfast’s coverage position means Forecast will be left

without a defense “if the named insured decides it does not want Steadfast to defend it,

refuses to pay defense fees to trigger the defense obligation, is not named in a lawsuit, or

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even if it wants to pay defense costs but is financially incapable of doing so . . . .” It adds

Steadfast’s coverage position interferes with the developer-subcontractor relationship and

undermines their bargained for arrangement.

This public policy argument invites the question, if Steadfast could require

its subcontractors to carry certain insurance, why didn’t it require a policy permitting the

additional insured to satisfy the SIR obligation? As Forecast told us at the beginning of

its brief, “given our litigious society, Forecast is also in the ‘business’ of getting sued

over the homes that it builds. It is not too much of an exaggeration to say that as soon as

the last nail in a project is hammered and the keys are handed over to the homeowners,

the ink on the first lawsuit over the construction of the homes is starting to dry.” Forecast

asserts that given this “unfortunate reality” it will “insist that each subcontractor not only

obtain one or more commercial general liability insurance policies . . . . but also that

Forecast be named as an additional insured party under each of these policies” to assure

Forecast it will be covered in the event of lawsuit. (Italics added.)

We have reviewed Forecast’s contract with the subcontractors, and it

contains several paragraphs providing detailed instructions on the scope, language and

extent of required insurance coverage. For example, Forecast specified the insurance

“shall provide coverage with limits not less than combined single limit of $1,000,000 for

bodily injury and property damage.” In addition, it specifies “[T]he required insurance

shall be subject to the approval of the [c]ontractor . . . .”

Given Forecast’s bargaining position with the subcontractors, it is difficult

to fathom what public policy would be advanced by requiring the court to rewrite an

unambiguous policy provision and essentially insert an additional phrase permitting the

additional insured to satisfy the SIR obligation. As noted by Steadfast, our Supreme

Court consistently admonishes against rewriting insurance policy language to deny

parties their general freedom to contract. Where policy provisions are unambiguous, and

18

not contrary to any statute, they generally will not be deemed unenforceable as contrary

to public policy. (See, e.g., Rosen v. State Farm General Ins. Co. (2003) 30 Cal.4th 1070

(Rosen) [court refused to rewrite coverage provision based on notions of sound public

policy where coverage extended only to instances of actual collapse, rather than

imminent collapse of a building].)

The record shows the subcontractors had sound reasons for wanting to

control whether and when coverage under the policy would be triggered. Forecast

acknowledged the primary purpose of an SIR provision is to allow the named insured to

contain its insurance costs. As with deductibles, the more risk the named insured claims

for itself, the lower the premiums will be. In addition, Steadfast asserted the endorsement

protects a subcontractor anticipating several claims as it may choose to preserve the

coverage offered in later policies, and satisfy the SIR in earlier policies to obtain the

maximum benefit.

It cannot be overlooked that the subcontractor, not Forecast, formed the

insurance contract with Steadfast. “[B]y agreeing to this contract of insurance, the

insurer made promises, and the insured paid premiums, against the risk of loss. To

rewrite the provision [limiting who can satisfy the SIR obligation] would compel the

insurer to give more than it promised and would allow the insured to get more than it paid

for, thereby denying their freedom to contract as they please. [Citation.]” (Rosen, supra,

30 Cal.4th at p. 1080.)

Indeed, Forecast could have required its subcontractors to obtain insurance

policies listing Forecast as a named insured but this likely would have resulted in higher

insurance premiums, which would have increased the cost of the subcontracts and the

overall bid price, jeopardizing Forecast’s chances to gain the development contract.

19

Presumably, the parties took all this into account in deciding what course to follow.

Under these circumstances, public policy does not allow a reviewing court to interfere

and change the bargain the parties reached merely because certain recognizable risks

come to pass.

On a final note, we question why Forecast apparently never asked the

subcontractors to activate their policies by funding the SIR. Its argument on appeal is

entirely premised on “if” the subcontractors refused to pay. Forecast does not assert this

is actually what happened. The record is silent as to whether Forecast also filed a lawsuit

against the subcontractors pursuant to their agreed upon hold harmless clause. No public

policy supports a lawsuit that could have been rendered moot if Forecast had in the first

instance simply requested the subcontractors activate their policies by paying the required

SIR.

G. The Policy is Not Illusory

Forecast argues that because only the named insured can satisfy the SIR

obligation, the coverage afforded by the policy to additional insured is illusory. We

disagree. A contract is illusory if performance is “conditional on some fact or event that

is wholly under the promisor’s control and bringing it about is left wholly to the

promisor’s own will and discretion.” (Asmus v. Pacific Bell (2000) 23 Cal.4th 1, 15.)

The condition of requiring the named insured to pay the deductible amount before

coverage is triggered is not a fact or event under Steadfast’s control or discretion. After

the payment is made, Steadfast must cover the named and additional insured. Forecast is

protected by its hold harmless agreements with its subcontractors, which will require the

subcontractors to provide a defense and pay damages regardless of insurance coverage.

Steadfast’s policy is not illusory.

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III

The judgment is affirmed. The respondent shall recover its costs on appeal. O’LEARY, J. WE CONCUR: BEDSWORTH, ACTING P. J. ARONSON, J.

21

Filed 2/11/10

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

FORECAST HOMES, INC., et al, Plaintiffs and Appellants, v. STEADFAST INSURANCE COMPANY, Defendant and Respondent.

G040876 (Super. Ct. No. 06CC00060) ORDER DIRECTING PUBLICATION OF OPINION

Respondent Steadfast Insurance Company has requested that our opinion filed

January 12, 2010, be certified for publication. It appears that our opinion meets the

standards set forth in California Rules of Court, rule 8.1105(c). The request is

GRANTED. The opinion is ordered published in the Official Reports.

O’LEARY, J. WE CONCUR: BEDSWORTH, ACTING P. J. ARONSON, J.

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