Alliance of Schools for Cooperative Insurance ProgramAlliance of Schools for Cooperative Insurance Program 16550 Bloomfield Avenue, Cerritos, California 9070316550 Bloomfield Avenue, Cerritos, California 90703

Phone (562) 404Phone (562) 404--80298029 Fax (562) 404Fax (562) 404--80388038

Alliance of Schools for Cooperative Alliance of Schools for Cooperative Insurance ProgramsInsurance Programs

PASADENA UNIFIED SCHOOL DISTRICTOwner Controlled Insurance Program (OCIP)

Overview and Proposal Presentation

SEPTEMBER 30, 2009

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TodayToday’’s Agendas Agenda

Overview of ASCIP’s Owner-Controlled Insurance Program for School Construction

What is the traditional approach to insurance and safety in school construction?

How does an Owner Controlled Insurance Program (OCIP) differ from traditional insurance and safety programs for school construction?

How does ASCIP’s OCIP partnership uniquely support the school district, its community, and save money?

GC 4420.5 “…minimize the expenditure of public funds on the project in conjunction with the exercise of appropriate risk management.”

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ASCIP OCIPASCIP OCIP Program HighlightsProgram Highlights

Largest Rolling Scholastic OCIP in California

Approximately $2 Billion in Total Active/ Completed Project Values

26 Member Districts Participating

9% Loss Ratio as of December 2008

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Alliance of School for Alliance of School for Cooperative Insurance ProgramsCooperative Insurance Programs

Formed in 1980, ASCIP is a public agency joint powers authority (JPA)

Provides risk sharing pools to 154 California public school districts, community colleges, charter schools and subsidiary JPAs

Not for profit

Formed OCIP in 2000 to offer JPA members a quality, cost effective alternative for construction projects

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ASCIP OCIP Loss RatioASCIP OCIP Loss Ratio

Compare to 65%

0%10%20%30%40%50%60%70%

Loss Ratio 65% 22% 9%

Traditional Contractor Program ASCIP OCIP I (Zurich) ASCIP OCIP III

(Liberty Mutual)

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Traditional Insurance ProgramTraditional Insurance Program

Contractors/Subs all have own insurance carriers

District/CM manage insurance and safety compliance while supervising construction efforts

District/CM is responsible:

Manage insurance documents for contract compliance for all parties

Verifying insurance/certificates/endorsements

Track coverage certificates/endorsements at renewal

Providing oversight of safety plan compliance and implementation

Ultimate responsibility for accidents and injuries (deep pocket)

Typical Challenges:

Insurance not in compliance with contract and/or lapse at renewal

Safety may be sidelined when time/cost pressures occur

Finger pointing by various insurance carriers with loss occurs

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OCIP ConceptOCIP Concept

Single insurance program -

one major carrier

OCIP covers the entire construction project including district (owner), contractors, and all subs

OCIP Administrator responsibilities:

Enroll all contractors/sub-contractors for coverage

Verify insurance/certificates/endorsements

Ensure safety compliance with contractors

Provide safety training and incentives

Manage all claims and litigation arising from the project

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OCIP BenefitsOCIP Benefits

Completes Projects Safely and On Time

Provides Broad Coverage and Deductible Limits

Offers access to WeTip, a safe means to report crime information for cash reward

Provides insurance fraud prevention through verification of enrolled subcontractors’

certificates of insurance

Encourages Small and Local Business Participation

Supports Project Labor Compliance Efforts

Reduces the Potential for Cross-Litigation

Cost Savings

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Broad Coverage & Broad Coverage & Dedicated LimitsDedicated Limits

LIMITS PER PROJECT

Workers’

Compensation/

Statutory/$26 Million

Employer’s Liability

General Liability $29 million

Ten (10) year completed operations

Crisis Intervention Coverage $250,000

Builders’

Risk

Optional**As an ASCIP member, the district currently has $50MM in Builder’s Risk coverage per

occurrence at no additional costs. Optional Excess builder’s Risk coverage should be considered for those projects greater than $50MM in value.

LIMITS PER PROJECT

Workers’

Compensation/

Statutory/$26 Million

Employer’s Liability

General Liability $29 million

Ten (10) year completed operations

Crisis Intervention Coverage $250,000

Builders’

Risk

Optional**As an ASCIP member, the district currently has $50MM in Builder’s Risk coverage per

occurrence at no additional costs. Optional Excess builder’s Risk coverage should be considered for those projects greater than $50MM in value.

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Maintenance DeductiblesMaintenance Deductibles

General Contractor

We recommend the district consider the use of a minimum maintenance deductible ($5,000-

$25,000) per occurrence because it will ensure that contractors will take affirmative responsibility for securing property at construction site and can help fully or partially offset the district’s Builders’

Risk coverage deductible by the general contractor’s maintenance deductible. (No Deductible applies to Builders’

Risk Coverage)

Multi-Prime

Special consideration should be made when determining maintenance deductibles on multi-

prime projects so that overlapping and duplicative costs are not incurred by the district.

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Coverage ExcludedCoverage Excluded

Automobile Liability & Automobile Physical Damage

Contractor’s Equipment

Hazardous Abatement

Earthquake

Flood

Blasting

Crane Ball Operated Demolition

Demolition over 25% of Project Value

Surety Insurance (Bonding for Contractors precluded by GC 4420 in an OCIP)

**Note –

Districts do not generally have Earthquake or Flood on any other buildings.

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OCIP Supports Small & Local OCIP Supports Small & Local BusinessBusiness

Avoid costs of minimum insurance premium obligations

Enhance insurance coverage/limits and terms/conditions

Provide safety support and expertise

Coordinate and advocate claims handling activities with carrier and legal counsel

Avoid costs of minimum insurance premium obligations

Enhance insurance coverage/limits and terms/conditions

Provide safety support and expertise

Coordinate and advocate claims handling activities with carrier and legal counsel

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OCIP Support Project Labor OCIP Support Project Labor Compliance EffortsCompliance Efforts

Consulting services to review Project Labor Compliance plan and implementation

Providing consolidated payroll data to the Labor Compliance Officer as a secondary confirmation of overall payroll incurred

Cross-referencing of construction employees confirmed on school jobsite

Consulting services to review Project Labor Compliance plan and implementation

Providing consolidated payroll data to the Labor Compliance Officer as a secondary confirmation of overall payroll incurred

Cross-referencing of construction employees confirmed on school jobsite

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Cost Savings ExampleCost Savings Example

Hard Construction Costs: $ 25,000,000Project Duration: TBD

Hard Construction Costs: $ 25,000,000Project Duration: TBD

Modernization/New Construction Project

OCIP Premium: $700,000

(2.8% of Hard Cost)

Actual Contractor

$1,025,000Insurance Cost: (4.1% of Hard Cost)

Savings

$325,000

OCIP Premium: $700,000

(2.8% of Hard Cost)

Actual Contractor $1,025,000Insurance Cost: (4.1% of Hard Cost)

Savings

$325,000

Final Premium is based on Final Hard Costs including change orders.

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Broker CompensationBroker Compensation

The OCIP Rate is equal to 2.8% of theProject Hard Construction Value and the rate includes

the following sub-percentage compensation:

Arthur J. Gallagher & Co. Insurance Brokers’

of California, Inc. receives .4% of the Hard Construction Value as a fee for their role as ASCIP’s OCIP Program Administrator, which includes program administration, brokerage, safety and loss control, and claims management services/oversight.

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Are Cost Savings Real?Are Cost Savings Real?

Evaluating Costs Through the Bidding Process

Prepare construction bid language to include bidding net of insurance costs

Award bid to winning contractor

Winning contractor to provide insurance costs to construction project for all contractors/sub-

contractors for comparison to OCIP cost. The general contractor or prime contractor will be required to submit their declaration pages for Workers’

Compensation and General Liability

Construction project to proceed with or without OCIP program at District’s discretion

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Safety & Loss PreventionSafety & Loss Prevention

A Master Safety Plan can be adopted and used by all contractors throughout the project

Planning a safe project in the earliest phases insures that safety shall be viewed as part of the job

OSHA 10-Hour Outreach Classes offered to contractors for free

Safety inspections and consulting support by OCIP administrative team and insurance carrier

Loss control included

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Safety & Loss Prevention Safety & Loss Prevention

Loss control consultants are assigned to the project based on project size.

Loss control manager provides incentives for safety i.e. free lunch, prizes, Z87.1 Safety Glasses.

PIZZA!

100 Work Days With No Medical Claims – Lunch is on Us!

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Gallagher OCIP Materials

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Program Safety RequirementsProgram Safety Requirements

Drug Program –

Initial Hire and Post-Accident

6’

Fall Protection, harnesses and lanyards required if other protective means are not used

OSHA “Serious”

Violations –

No more than 5 serious violations within 5 years with no more than 2 serious repeats in 5 years

OSHA “Willful”

Violations –

NONE

Hardhats & Safety Glasses are required at all times & other Personal Protective Equipment (PPE) required by work being conducted

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Program Safety Recommendations Program Safety Recommendations

Experience Modifier –

1.25 composite project average measured over a 5 year history.

Any “paper contractors”

participating on a project should participate and pass the 10-hour OSHA Construction Safety training course.

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Claims ManagementClaims Management

Claims management and oversight provided by the OCIP Administrator

Comprehensive registration methods to ensure workers on our District’s site are covered

Clinics, claim forms and processes are approved prior to the start of construction

Workers’

compensation and liability claims are handled by ONE insurer, thereby eliminating the “finger pointing”

among insurers that takes place on a traditional project (reduces stoppages)

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AdministrationAdministration

CipWorks is a web based tool that will help you track the success of your OCIP and ease the expense and time associated with administration of a OCIP.

It is real time, 24/7 and available from anywhere.

CipWorks won A.M. Best’s first E-Fusion Award for internet based programs for managing construction OCIP’S.

For the administrator and the General Contractor, CipWorks provides up-to-the minute details of:

Contractor enrollment documents

Automated follow-up for missing documents

Off-Site Certificate compliance

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JOB OVERVIEW PAGE

CIPWORKS allows the OCIP team members to easily stay in touch. Click on a team member name and send them an email from your own email system.

CIPWORKS allows the OCIP team members to easily stay in touch. Click on a team member name and send them an email from your own email system.

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ASCIP/Gallagher Wrap Up ASCIP/Gallagher Wrap Up ExpertiseExpertise

Construction Industry Experience

Over 6,000 contractor clients in California

50 Active Wrap Up programs nationally

School Construction Experience –

147 projects

Scholastic Experience –

ASCIP 170 members plus

Innovative Ideas

Safety Tool Box Kit

Hard Hat Sticker Program

State of the Art RMIS “CipWorks”

Strong Carrier Relationships

Commitment to Partnering

Minority Business Enterprises & Women Owned Businesses

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Ensuring OCIP Partnership Ensuring OCIP Partnership SuccessSuccess

Outstanding support from the Board of Trustees and other oversight committees

Clear communication, understanding and commitment of the entire construction team including district personnel, consultants and contractors

Involvement of the ASCIP/Gallagher OCIP Team early in the planning process

Project safety and timely completion must be the primary goal and focus

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ReferencesReferences

Construction Managers Business Officials Facilities Directors

Tomas P. Lynch, Project ExecutiveSeville Construction Services, Inc.(714) 768-1220

Bill Sylvia, DirectorLos Rios CCD (916) 568-3048

Matt CovellaPalos Verdes Peninsula USD(310) 378-9966

Jaime PaceMcCarthy (949) 500-0735

Pearl IizukaPalos Verdes Peninsula USD(310) 378-9966

Buck Weinfurther Downey Unified School District(562) 469-6520

Atta H. Alsaleh, CCM CEOAPM, Inc.(909) 305-2332

Michael Bishop, Asst. Superintendent Business Services -

Paramount USD(562) 602-6025

Darryl A. Odum, DirectorRancho Santiago CCD (714) 480-7513

Tom Lavia, Senior Project ManagerDouglas E. Barnhart(562) 904-0518

Kris Olafsson, Dpty. SuperintendentBusiness Services –

El Monte CSD(626) 453-3790

John M. Didion, Exec. Vice ChancellorRancho Santiago CCD(714) 480-7489

Gus Gonzales,

Rio Hondo CCD(562) 9008-7088

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APPENDIXCalifornia Government Code Section 4420