February 9, 2006
(For Board: February 24, 2006)

REPORT OF THE FINANCE-AUDITING COMMITTEE/
COMMITTEE OF THE WHOLE

Honorable Board of Directors
Golden Gate Bridge, Highway
   and Transportation District

Honorable Members:

A meeting of the Finance-Auditing Committee/Committee of the Whole was held in the Board Room, Administration Building, Toll Plaza, San Francisco, California, on Thursday, February 9, 2006, at 11:05 a.m., Acting Chair Boro presiding.

Committee Members Present (7): Acting Chair Boro; Directors Cochran, Eddie, Murray, Reilly and Shahum; President Middlebrook (Ex Officio)
Committee Members Absent (2): Chair Stroeh; Vice Chair Pahre
Other Directors Present (4): Directors Hernández, Kerns, Moylan and Newhouse Segal

Committee of the Whole Members Present (11): Directors Cochran, Eddie, Hernández, Kerns, Murray, Newhouse Segal, Reilly and Shahum; Second Vice President Boro; First Vice President Moylan; President Middlebrook
Committee of the Whole Members Absent (8): Directors Ammiano, Brown, Dufty, Martini, McGoldrick, Pahre, Sandoval and Stroeh

Staff Present: General Manager Celia G. Kupersmith; Auditor-Controller Joseph M. Wire; Secretary of the District Janet S. Tarantino; Attorney Madeline Chun; Deputy General Manager/Bus Division Susan C. Chiaroni; Deputy General Manager/Ferry Division James P. Swindler; Deputy General Manager/Administration and Development Teri W. Mantony; Planning Director Alan R. Zahradnik; Principal Planner Ron Downing; Executive Assistant to the General Manager Amorette Ko; Assistant Clerk of the Board Patsy Whala

Visitors Present: Gregory W. Wessel and Erik Kreins, Marsh Risk and Insurance Services

     
1. Approve Renewal of the Marine Insurance Program
     
 

In a memorandum to Committee, Risk Management/Safety Director William Stafford, Deputy General Manager/Administration and Development Teri Mantony, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith reported on the annual renewal of the District’s Marine Insurance Program, which renews on February 28, 2006.

The report stated that the Marine Insurance Program is comprised of Hull and Machinery/Protection and Indemnity Insurance, Vessel Pollution Insurance and Marine Liability Insurance (including Terminal Operator’s Legal Liability and Excess Protection and Indemnity Insurance). The report stated that the Marine Insurance Program provides coverage in amounts equal to the approximate replacement costs of the ferry vessels, with primary Protection & Indemnity limits of $1,000,000. The current limits of liability for the Excess Protection and Indemnity Insurance and Marine Liability Insurance is $75 million. For this year’s renewal, given the scope of potential loss from Ferry operations compared with potential losses from Bridge and Bus operations, staff recommends that the District pursue an additional excess layer of $25 million for the Marine Insurance Program, bringing the excess liability limit to $100 million.

The report described the current market conditions in the Marine Insurance class of insurance, noting that the market is leveling off after several years of increases. The report also stated that the District has worked aggressively over the last several years to reduce its loss experience in the Ferry Division and has succeeded in claims reduction. The Ferry Division has undertaken the following measures to achieve these goals by: 1) establishing an active Safety Committee who meets once a month to discuss and evaluate safety incidents to raise awareness of safety-related matters; and, 2) taking a proactive role as relates to all incidents, whether or not they result in injuries.

The report also included a letter from the District’s Insurance Advisor, Marsh Risk & Insurance Services (Marsh), dated February 3, 2006, which included the following exhibits:

  • Exhibit 1 – Schedule of Insured Vessels and Values for 2006
  • Exhibit II – 2006 Renewal Options Comparison (as of January 26, 2006)
  • Exhibit III – Fifth Layer Excess Program Options
  • Exhibit IV – Five-Year Loss History
  • Exhibit V – 2005 Marketing Results

Marsh has advised that it would be in the District’s best interest to renew the policies in the Marine Insurance Program with the incumbent carriers, maintaining the same terms, conditions and deductibles as in the expiring policies. The report noted that the recommended renewal options include terrorism exclusions, and that the District must purchase separate terrorism insurance endorsements offered in accordance with the Terrorism Risk Insurance Act (TRIA).

Staff is recommending that the District renew the Hull and Machinery/Protection and Indemnity Insurance with St. Paul Travelers, renew the Excess Marine Liability Program with AIG and various underwriters, including an increase in limits from $75 million to $100 million, renew the Vessel Pollution Liability policy with Water Quality Insurance Syndicate and approve TRIA endorsements for the above policies, for a total premium of $500,324 for the Marine Insurance Program. A copy of the report is available in Office the District Secretary and on the District’s web site.


At the meeting, Mr. Wire summarized the staff report, noting the overall renewal for the Marine Insurance Program will be $500,324, an 8% increase from last year’s premium.

Staff recommended and the Committee concurred by motion made and seconded by Directors MURRAY/COCHRAN to forward the following recommendation to the Board of Directors for its consideration:

     
 
RECOMMENDATION
     
 
The Finance-Auditing Committee recommends that the Board of Directors approve actions relative to the renewal of the District’s Marine Insurance Program, as follows:
  a.
Renew the Hull and Machinery/Protection and Indemnity Insurance policy with St. Paul Travelers, with an annual aggregate deductible of $350,000 and a limit of liability of $1,000,000 at a premium of $357,701, for a one-year term, effective February 28, 2006;
  b.
Renew the Excess Marine Liability policy with American Home (AIG), New York Marine and General Insurance Company, ACE/CAN and Houston Casualty, at a premium of $122,267.50, which includes an increase in the limit of liability  from $75 million to $100 million, for a one-year term, effective February 28, 2006;
  c.
Renew the Vessel Pollution Liability policy with Water Quality Insurance Syndicate, at a premium of $4,367, for a one-year term, effective February 28, 2006; and,
  d.
Renew terrorism endorsements for the Hull & Machinery/Protection & Indemnity, with St. Paul Travelers and for the Excess Marine Liability policy, with various underwriters, for a total premium of $15,988.47, for a one-year term, effective February 28, 2006;
 

with the understanding that requisite funds are available in the FY 05/06 Ferry Division Operating budget and that requisite funds will be budgeted in the FY 06/07 Ferry Division Operating budget.

Action by the Board – Resolution
NON-CONSENT CALENDAR

     
 
AYES (11):  Directors Cochran, Eddie, Hernández, Kerns, Murray, Newhouse Segal, Reilly and Shahum; Second Vice President Boro; First Vice President Moylan; President Middlebrook
NOES (0):   None
     
 
[Note:  The above recommendation was forwarded to the Board of Directors meeting of February 10, 2006, for action.]
     
2.
Authorize a 76-Day Extension of the Professional Services Agreement with Claims Management, Inc., Relative to RFP No. 2001-D-1, Workers’ Compensation Third Party Administrator Services for the Self-Insured Claims Workers’ Compensation Program
     
 

In a memorandum to Committee, Risk Management/Safety Director William Stafford, Deputy General Manager/Administration and Development Teri Mantony, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith reported on staff’s recommendation to authorize a 76-day extension of the Professional Services Agreement with Claims Management, Inc., (CMI) to provide workers’ compensation claims adjustment and claims handling services for the District.

The report stated the Board of Directors, by Resolution No. 2001-051 at its meeting of March 23, 2001, authorized a Professional Services Agreement with CMI relative to RFP No. 2001-D-1, Workers Compensation Third Party Administrator Services for the Self-Insured Claims Workers’ Compensation Program, for a three-year term, with two one-year options. CMI conducts claim adjustments and investigative services for the District and is responsible for the adjustment of all workers’ compensation and Jones Act claims that have been filed against the District. The current Agreement with CMI is based on a three-year term, commencing on April 16, 2001, with two one-year options. The original Agreement was supposed to start July 1, 2001, concurrent with the District’s fiscal year, but due to difficulties with the incumbent workers’ compensation adjusting company, the decision was made to begin the services on April 16, 2001.

The seventy-six day Agreement extension is recommended for the following reasons:

  • To allow the District to adequately prepare a new Request for Proposal (RFP);
  • To identify and contact a vendor pool whose capabilities are aligned with the Districts needs and future workers’ compensation goals;
  • To research current best practices that would be integrated into the new RFP;
  • To allow time for vendors to adequately respond, and if the District selects a new vendor, allow time to begin claims migration to a new vendor; and,
  • To align the new Agreement, effective July 1, 2006, in the budgeting process with the District’s fiscal year.

The report also stated that CMI has agreed to a seventy-six day pro-rata extension of the current Agreement at a cost not to exceed $84,000. In conjunction with the extension of this Agreement, the District will advertise an RFP for the workers’ compensation program in early 2006 with award and implementation by the end of June 2006. This recommendation has no fiscal impact since the compensation remains the same and is included in the District’s FY 05/06 Operating Budget. A copy of the report is available in Office the District Secretary and on the District’s web site.

Staff recommended and the Committee concurred by motion made and seconded by Directors EDDIE/SHAHUM to forward the following recommendation to the Board of Directors for its consideration:

     
 
RECOMMENDATION
     
 

The Finance-Auditing Committee recommends that the Board of Directors authorize execution of an amendment to the Professional Services Agreement with Claims Management, Inc., Sacramento, CA, relative to RFP No. 2001-D-1, Workers’ Compensation Third Party Administrator Services for the Self-Insured Claims Workers’ Compensation Program, to provide workers’ compensation claims adjustment and claims handling services for the Golden Gate Bridge, Highway and Transportation District, at a pro-rata fee not to exceed $84,000, for a seventy-six day extension from April 16, 2006, through June 30, 2006, under the same terms and conditions as the current agreement.

Action by the Board – Resolution
NON-CONSENT CALENDAR

     
 
AYES (11):  Directors Cochran, Eddie, Hernández, Kerns, Murray, Newhouse Segal, Reilly and Shahum; Second Vice President Boro; First Vice President Moylan; President Middlebrook
NOES (0):   None
     
 
[Note:  The above recommendation was forwarded to the Board of Directors meeting of February 10, 2006, for action.]
     
3. Public Comment
     
  There was no public comment.
     
4. Adjournment
     
  All business having been concluded, the meeting was adjourned at 11:15 a.m.
     

Respectfully submitted,

/s/ Albert J. Boro, Acting Chair

Finance-Auditing Committee