Los Angeles County
Contract Cities
Liability Trust Fund
History and Update
California Contract Cities Association
Fall Con...
Overview
• History of Liability Trust Fund
– 1954 to 1977: The Insured Years
– 1977 to 1989: Assumption of Liability
– 198...
History 1954 to 1977
The Insured Years
• “Lakewood Plan” ushers in concept of
contracting for municipal services
• Costs o...
History 1977 to 1989
Assumption of Liability
• Insurance market makes commercial
insurance very expensive
• County self-in...
History 1989 to 1996
Joint Indemnification
• County-authorized audit is critical of County’s
decentralized administration ...
History 1989 to 1996
Joint Indemnification (continued)
• Following discussions with the CCCA, in 1991 the
County puts in p...
History 1989 to 1996
Joint Indemnification (continued)
• County Counsel expressed that rate should likely be
as high as 13...
History 1996 to 1998
SAFER
• Under Joint Indemnification Agreement, cities
continued to monitor claims administration, but...
History 1996 to 1998
SAFER (continued)
• 1996 -- CCCA and California JPIA discuss management of a
new Joint Powers Authori...
History 1999 to Present
Liability Trust Fund Oversight Committee
• CCCA meets with County regarding improved
cooperation i...
Liability Trust Fund
Oversight Committee and Claims Board
Members
– Curtis Morris, San Dimas
– Margaret Finlay, Duarte
– S...
LTF Administration
Memorandum of Understanding
• 11 key points of
understanding
– Committee established
with settlement au...
LTF Administration
Financial Issues
Actuarial Status of LTF
(75% Probability Level)
– Sept. 1997: $46.0 million in liabili...
LTF Administration
Financial Issues
Excess Insurance
– Current coverage $50 million in excess
of $2 million self-insured r...
LTF Administration
Risk Management Issues
• County Administrative Office Commitment
– Personnel
– Information Systems Impr...
Current Issues
• Sex Crimes Issue
– Losses due to crimes committed by Deputy
charged to LTF
– Cities dispute charge and fi...
Current Issues
• Surcharge Rate Adjustment
– Actuary preparing study as of June 30, 2009
– Anticipated reduced funding nee...
Future of the
Liability Trust Fund
• Excess insurance protects cities from catastrophic
losses such as Talamaivao and Hers...
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Jon Shull - LTF History And Update

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Jon Shull - LTF History And Update

  1. 1. Los Angeles County Contract Cities Liability Trust Fund History and Update California Contract Cities Association Fall Conference September 26, 2009
  2. 2. Overview • History of Liability Trust Fund – 1954 to 1977: The Insured Years – 1977 to 1989: Assumption of Liability – 1989 to 1996: Joint Indemnification – 1996 to 1999: SAFER – 1999 to present: LTF Oversight Committee • LTF Administration – Memorandum of Understanding – Financial and Data Issues – Risk Management Issues • The Future of the LTF
  3. 3. History 1954 to 1977 The Insured Years • “Lakewood Plan” ushers in concept of contracting for municipal services • Costs of service are very reasonable for cities • County provides Sheriff’s services in exchange for “Fines & Forfeitures” • Liabilities are covered by commercial insurance and paid for as part of the contract
  4. 4. History 1977 to 1989 Assumption of Liability • Insurance market makes commercial insurance very expensive • County self-insures Liability Trust Fund • Cities and County enter into Assumption of Liability Agreement • LTF Surcharge set at 2% for all contracted services
  5. 5. History 1989 to 1996 Joint Indemnification • County-authorized audit is critical of County’s decentralized administration of LTF • LTF administration assigned to County Counsel • LTF Administrator hired – Sal Reza • CCCA forms City Managers subcommittee to review LTF administration and claims handling • Significant under-funding of liabilities discovered
  6. 6. History 1989 to 1996 Joint Indemnification (continued) • Following discussions with the CCCA, in 1991 the County puts in place a new Joint Indemnification Agreement with 3% rate for Sheriff and Public Works, and a 2% rate for all other services • Board Letter expressed that cities that did not agree would be charged 4.5% for all services • This was said to be an interim rate • Several significant issues from the discussions were left out of the Agreement, but cities agreed (in order to lock in the 3%/2% rate) • CCCA immediately sought to renegotiate the Agreement
  7. 7. History 1989 to 1996 Joint Indemnification (continued) • County Counsel expressed that rate should likely be as high as 13% • Discussions led to elimination of the $7 million “Valentine” case from the LTF so rate could be lowered • Revised Joint Indemnification Agreement was reached in 1993 – Ultimately not approved by Board • New agreed rates 6.5% for Sheriff, 3% for all other services • As implemented, rates were 6% for Sheriff, 3% for other services
  8. 8. History 1996 to 1998 SAFER • Under Joint Indemnification Agreement, cities continued to monitor claims administration, but truly only had a sideline role in the decision-making • Talamaivao and Hershey cases were appealed to exhaustion -- final judgments and interest exceeded $22 million, and determined to be a liability of the LTF • Negotiations begin between CCCA and County to create a method to handle LTF that is more inclusive of the cities
  9. 9. History 1996 to 1998 SAFER (continued) • 1996 -- CCCA and California JPIA discuss management of a new Joint Powers Authority to administer LTF obligations • 1997 -- CCCA and County discuss and refine JPA concept with County • 1998 -- Self-Insurance Authority For Effective Risk Management (SAFER) was formed by most of the cities contracting for Sheriff services in preparation for transfer of administration • County will only allow transfer of LTF responsibility to SAFER if all cities contracting for Sheriff services agree • December 1998 -- CCCA City Managers Committee determines that unanimous participation by cities contracting for Sheriff services cannot be achieved, but greater oversight of LTF is desirable
  10. 10. History 1999 to Present Liability Trust Fund Oversight Committee • CCCA meets with County regarding improved cooperation in management of LTF and claims • May 1999 CAO/County Counsel/Sheriff/PW sign MOU with CCCA recognizing Liability Trust Fund Oversight Committee and committing to partnership • February 2000 -- Board of Supervisors approves LTFOC as Claims Board • LTF Claims Board has settlement authority for claims up to $100,000 • LTF Claims Board recommends action for claims over $100,000 to County Claims Board
  11. 11. Liability Trust Fund Oversight Committee and Claims Board Members – Curtis Morris, San Dimas – Margaret Finlay, Duarte – Susan Dever, Lomita – Mark Alexander, La Canada Flintridge – Jerry Groomes, Carson – Mike Egan, Bellflower – Sam Olivito, CCCA Alternates – Dave Spence, La Canada Flintridge – Harold Hofmann, Lawndale – Randy Bomgaars, Bellflower – Darrell George, Duarte – Paul Arevalo, West Hollywood – Howard Chambers, Lakewood Regional representation -- Council Members, City Managers, and CCCA Executive Director
  12. 12. LTF Administration Memorandum of Understanding • 11 key points of understanding – Committee established with settlement authority for contract cities’ claims – Actuarial analysis – Financial audits – Claims reserving practices – Claims audit – Approval of defense panel – Defense litigation plans – Reliable data collection and availability – Reporting of severe cases for direction – Purchase of excess insurance – Risk management and training recommendations of the Committee will be accepted by County
  13. 13. LTF Administration Financial Issues Actuarial Status of LTF (75% Probability Level) – Sept. 1997: $46.0 million in liabilities, $6.2 million in assets = ($39.8 million) – June 2004: $27.0 million in liabilities, $30.0 million in assets = $3.0 million (data issues) – June 2007: $42.8 million in liabilities, $49.7 million in assets = $6.9 million (data issues) – June 2009: $56.2 million in assets, anticipated continued actuarially sound condition - Perhaps time to discuss change to surcharge
  14. 14. LTF Administration Financial Issues Excess Insurance – Current coverage $50 million in excess of $2 million self-insured retention – Premium $1.2 million (2009-2010) – Premium increased due to added exposure of “County-City Special Indemnity Agreement”
  15. 15. LTF Administration Risk Management Issues • County Administrative Office Commitment – Personnel – Information Systems Improvements • County Counsel Commitment – Personnel – Sharing of information – Modifying procedures • Sheriff’s Department Commitment – Personnel – Demonstrations – Committee training – Acceptance and dissemination of Committee’s feedback and recommendations
  16. 16. Current Issues • Sex Crimes Issue – Losses due to crimes committed by Deputy charged to LTF – Cities dispute charge and file claim against the County – County plays hard-ball – Negotiations result in “County-City Special Indemnity Agreement”
  17. 17. Current Issues • Surcharge Rate Adjustment – Actuary preparing study as of June 30, 2009 – Anticipated reduced funding need – Process to be determined for rate reduction • Modernization of Assumption of Liability Agreement and Joint Indemnity Agreement
  18. 18. Future of the Liability Trust Fund • Excess insurance protects cities from catastrophic losses such as Talamaivao and Hershey • LTF Claims Board ensures claims decisions are made with the interest of the cities in mind • County departments respond to recommendations of the LTF Oversight Committee • CCCA and County treat relationship as a partnership in administering the LTF • Cities control their destiny

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