Item T1* 3:00 P.M. PUBLIC BEARING *
BOARD OF COUNTY COMMISSIONERS
AGENDA ITEM SUMMARY
Meeting Date: 7/15/2015 - KW
Bulk Item: Yes No X
Division: County Attorney's Office
Staff Contact: Christine Limbert-Barrows 292-3470
AGENDA ITEM WORDING: A Public Hearing to consider an Ordinance amending Section 2-
347(e)(5) of the Monroe County Code to provide an exemption to competitive bidding procedures for
certain insurance policies and coverages. This public hearing is to be heard with the item on this
meeting agenda to consider approval of multiple revisions to the County's Purchasing Policy,
including revisions to Chapter 11 which are contingent on the Board's adoption of this ordinance.
ITEM BACKGROUND: Due to the National Flood Insurance Plan (NFIP), unavailability of
coverage from Citizen Insurance and other market considerations, the purchase of builder's risk
insurance by general contractors for County projects has become burdensome for combined wind and
flood policies. Due to this change and in order to maintain insurance protection and attain better control
of coverage, the County will acquire builder's risk insurance instead of the general contractors for
County projects. It is expected that premiums for larger County projects will exceed $50,000 thereby
currently requiring competitive bidding for the purchase of each policy as per Section 2-347 of the
Monroe County Code (MCC). Given that insurance agent(s) customarily seek several competitive
premiums quotes as part of obtaining such insurance policies in order to obtain the most favorable rates
and given that it is expected that by purchasing the builder's risk polices itself the County will pay less
then it currently pays to the contractor for such coverage, County staff seeks revisions to the MCC and
purchasing policy to address this matter. It is important to mention that the cost of builder's risk
insurance is included in the overall budget for County projects, which is approved by the BOCC.
Additionally, it has also become apparent that certain insurance policies, due to the uniqueness of the
terms and conditions and/or details of the policy coverage required by the County, are extremely
limited in the insurance market place there by rendering competitive bidding procedures futile as they
regularly result in one response or ultimately respondents are unable to provide the necessary insurance
coverage called for in the solicitation. These type of policies are not benefited by the competitive
bidding process and consequently should be considered for an exemption under the Section 2-347(e)(5)
of the MCC.
At the Board's direction, the County's Risk Consultant Sid Webber will be present at the meeting to
respond to questions and concerns regarding this public hearing, and the item on this meeting agenda to
consider approval of proposed revisions to Chapter 11 of the County's Purchasing Policy. Please see
Mr. Webber's memorandum located directly behind this Agenda Item Summary.
PREVIOUS RELEVANT BOCC ACTION:
BOCC 3/21/12: approval of Section 2-346 and 2-347 of the Monroe County Code (MCC) regarding
competitive bidding procedures.
BOCC 6/10/15: BOCC approved a Public Hearing on July 15, 2015 at 3:00 p.m. in Key West, FL
CONTRACT/AGREEMENT CHANGES:
Please see Mr. Webber's memorandum located directly behind this Agenda Item Summary.
The proposed changes to the existing ordinance are reflected with StFikethough text for deletions and
underlined text for additions.
STAFF RECOMMENDATIONS:
Approval
TOTAL 1 INDIRECT I' ' 1 BUDGETED: No
SOURCE OF FUNDS:
`7 7ENUE PRODUCING:No AMOUNT PER MONTH—
APPROVED BY: �I-
�,
- OMB/Purchasing Risk Management
DOCUMENTATION: Inclu♦ ♦ ♦ ,'
I1 " i 1AGENDA
OVERVIEW BY SID WEBBER
COUNTY'S INSURANCE CONSULTANT
RE: Amendment of
Sec. 2-347(e)(5), Monroe County Code
INFORMATION PROVIDED FOR THE
DISCUSSION OF
MONROE COUNTY, FLORIDA
AMENDMENT OF SECTION
2-347 (e) (5) OF THE
MONROE COUNTY CODE
(COMPETITIVE BIDDING PROCEDURES)
Background
Monroe County purchases a variety of insurance policies to protect themselves from
the financial implications of claims arising out of their operations and damage or
destruction to County owned property. The cumulative premiums for these policies
exceed $2 million annually. The County's Property insurance is provided by Lloyds of
London and Landmark American Insurance Company. Both Lloyds and Landmark
enjoy a favorable rating from the A.M. Best Company, the leading evaluator of
insurance company operations. Marsh USA, the world's largest insurance broker,
serves as the County's agent/broker for its Property insurance. The County currently
pays an annual premium of $615,480 for its Property insurance, which has a policy
term of May 1, 2015 to May 1, 2016.
Lloyds provides the first $5 million of limits and Landmark provides additional limits
amounting to $223,412,832 for total limits of $228,412,832. These limits correspond
to the most recent appraisal of the value of the County's property that was performed
in 2011.
As with any insurance, the County's Property program contains a number of
limitations and exclusions with some of the more notable being:
Significant deductibles
➢ Limits of $5 million per occurrence for Wind losses
➢ Limits of $5 million per occurrence and annual aggregate for Flood losses
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The primary deductible associated with the County's property program is $50,000.
However, wind losses are subject to a $1 million deductible and a deductible of 5% of
the damaged structure, subject to a $1 million minimum will be imposed for all Flood
losses. The County purchases supplemental insurance coverages from Citizens
Property Insurance Company and the National Flood Insurance Program (NFIP) to
reduce the financial impact associated with the Wind and Flood deductibles contained
in their master Property program.
The County's master Property insurance program includes Builders Risk coverage for
property under construction with a limit of $2,500,000. Builders Risk losses are
subject to the same deductibles.
Builders Risk Issues
In the past the County has required the General Contractor for construction projects
to purchase Builders Risk coverage, to include Wind and Flood coverage. It has come
to the County's attention that only the extremely large contractors are able to secure
Wind and Flood coverage from Builders Risk insurers. Marsh was approached by the
County and was asked if they could obtain Builders Risk coverage (to include Wind
and Flood) coverage for the County's construction projects. They responded that
such coverage was available and provided the estimated premium for "stand alone"
policies for the following 3 projected projects.
Project
Projected Cost of the
Estimated Premiums
Project
Sugarloaf Fire Station
$2,200,000
Between $14,300 and
$20,900
Marathon Library
$2,500,000
Between $16,250 and
$23,750
PK Courthouse
$15,500,000
Between $100,750 and
$147,250
Losses under each of these programs would be subject to a $5,000 deducible except
for Wind and Flood losses. Wind and Flood losses would be subject to a deductible
amounting to 5% of the completed value of the structure being constructed, subject
to a minimum of $100,000.
K
Risk Management was then advised that Builders Risk coverage was needed for the
Crawl Key Training Facility that has a projected construction cost amounting to
$1,818,835. Risk Management was not comfortable with the estimated premiums for
the Sugarloaf, Marathon and PK projects and initiated discussions with Marsh in an
attempt to find an alternative approach to provide the required Builders Risk
coverage. Attention turned to the County's master Property program. The program
automatically includes Builders Risk coverage with a sublimit of $2,500,000 and
deductibles consistent with all other losses. Despite this attractive feature of the
County's Property program, it did contain some limitations.
1. The program only offered Builders Risk limits of $2.5 million
2. The program had significant deductibles
3. Flood losses would exhaust the Annual Flood Aggregate ($5 million) of the
County's Master Property program potentially leaving the County with only the
NFIP policies for protection from future losses.
Marsh was asked to approach Lloyds to see if the County could obtain higher Builders
Risk limits for specific projects and obtain more favorable deductibles. Lloyds
advised that they would be willing to offer higher Builders Risk limits for specific jobs
and also offered to provide Builders Risk coverage (to include Wind and Flood) for
the Crawl Key Training Facility with a reduced deductible of $10,000 for all losses
except Wind and Flood losses that would be subject to a deductible of 5% of the
value of the completed project ($90,942). Lloyds proposed an annual premium of
$4,180 for this enhanced coverage. Marsh was instructed to bind this coverage with
Lloyds effective June 1, 2015.
While the approach taken for the Crawl Key Training Facility was viewed as a
reasonable and cost effective solution to the County's Builders Risk needs, it does
have one limitation. Any flood losses at the Facility during its construction will erode
the Flood Aggregate limit ($5 million) of the County's Master Property program. Risk
Management and Marsh are currently in negotiations with Lloyds to have this
limitation removed. The County is still hopeful that their negotiations will be
successful.
It should be noted that Citizens will provide Wind coverage and the NFIP will
provide Flood coverage for structures under construction. However, considerable
time and effort is required by both organizations to perfect the coverage and Citizens
only offers limits of $1 million and the NFIP only offers limits of $500,000. This will
leave the County self -insuring a significant portion of each project.
Reason for Requesting Amendment to County Code
While incorporating the Builders Risk coverage (with the more favorable terms and
conditions) in the County's Master Property policy, each project will have to be
individually approved and priced by Lloyds. There is no certainty that Lloyds will
continue to agree to provide the coverage and what price they will charge for the
coverage.
If Lloyds does not agree to offer the Builders Risk coverage for future projects or the
terms, conditions or pricing of the coverage are unacceptable, the ground work has
been laid to secure "stand alone" coverage. Obtaining competitive proposals for this
coverage (as will be the case for the PK Courthouse) presents several concerns.
1. Marsh is the County's agent/broker for its Property Insurance. Since Builders
Risk coverage is a form of Property Insurance, the successful proposer (if it is
not Marsh) will have to coordinate with Marsh and Lloyds to ensure there are
no conflicting provisions in either policy.
2. Marsh has already laid the ground work that is projected to make the process
of obtaining the Builders Risk coverage easier and less costly.
3. Marsh has served as the County's Property agent/broker for a number of years
and is intimately familiar with the County's operations and needs. If a different
agent/broker were to place the Builders Risk coverage, they may be subject to a
significant learning curve that could delay or impact the terms and conditions
of the coverage.
Competitive bids for the County's Property insurance are obtained every 3 years with
the most recent being for the 2015/16 policy term.
:l
Miscellaneous Insurance Issues
The County also purchases 3 smaller policies that have resulted in confusion as to the
need of these policies being competitively bid. They include:
➢ Emergency Physical Damage Insurance
➢ Portable Equipment Insurance
➢ General and Professional Liability Insurance for Bayshore Manor
Emergency Physical Damage Insurance
The County's Emergency Physical Damage policy is provided by American
Alternative Insurance Company and has a policy term of October 1st through
September 30th. The current premium for this policy is $53,572.
While the coverages provided by this policy resemble those that are provided by a
standard "Automobile Physical Damage" policy, there is one exception. Standard
"Automobile Physical Damage" policies will reimburse the Insured (the County) on
an "Actual Cash Value" basis for the destruction of a vehicle. "Actual Cash Value" is
defined as "Replacement Cost" less depreciation. Assume a 7 year old vehicle valued
at $30,000 is destroyed. Also assume the useful life of the vehicle is 10 years. The
insurer will only reimburse the Insured approximately $9,000. This is calculated by
dividing the age of the vehicle (7) by the useful life of the vehicle (10) and multiplying
the results (70%) by the value of the vehicle ($30,000). The results of this calculation
($21,000) become the depreciation. Therefore, $30,000 less $21,000 equals $9,000.
The American Alternative policy is structured to provide Physical Damage coverage
for the County's Emergency Vehicles. Currently, there are 43 different vehicles
scheduled on the policy. The value of these vehicles ranges from $50,000 to
$689,949. Unlike a standard "Automobile Physical Damage" policy, the American
Alternative policy provides coverage on a "Scheduled Value" basis. This means that if
the vehicle valued at $689,949, American Alternative will reimburse the County
$689,949 less a deductible of $500 if this vehicle is destroyed. It is believed that
American Alternative is the only insurer that offers such coverage.
5
Portable Eauzment Insurance
The County's Portable Equipment policy is provided by American Alternative
Insurance Company and has a policy term of October 1, 2015 through September
30th. The current premium for this policy is $5,769.
This policy provides coverage for damage, destruction or loss to the County's
communication equipment used for firefighting, ambulance or rescue operations. The
unique feature of this policy it has no policy limits and will reimburse the County on a
"Guaranteed Replacement Value" basis. The policy does contain a $250 per claim
deductible. Normally property type policies contain specific limits.
General and Professional Liability Insurance for Baysbore Manor
To provide insurance protection for the operation of Bayshore Manor, the County
purchases General and Professional Liability coverage from Colony Insurance
Company. The current coverage has a policy term of April 30, 2015 to April 30, 2016.
The annual premium is $12,587.
There are few insurers that offer insurance coverage for assisted living facilities and
fewer that offer it for a 16 bed facility. Attempts to locate similar coverages that is
being offered by Colony have proved unsuccessful. When the policy last renewed,
Arthur J. Gallagher did obtain a proposal from Lloyds of London for an annual
premium of $14,278. However, the terms and conditions of the coverage was not a
broad as those being offered by Colony.
The above information is provided by Interisk Corporation on June 15, 2015 to assist
in the decision to amend Monroe County Code 2-347(e)(5).
Sid Webber
,ORDINANCE NO. -20111
WHEREAS, due to the National Flood Insurance Program (NFIP), unavailability of coverage
from Citizen Insurance and other market conditions, the purchase of builder's risk insurance by general
contractors for County projects has become burdensome; and
WHEREAS, the County in order to maintain insurance protection and attain better control of
coverage should acquire builder's risk policies for County projects; and
WHEREAS, it is expected that premiums for larger County projects will exceed $50,000
thereby currently requiring competitive bidding for the purchase of each policy; and
WHEREAS, the insurance agent(s) customarily seek several competitive premium quotes as
part of obtaining such insurance policies in order to obtain the most favorable rates; and
WHEREAS, the cost of insurance is currently included in the overall budget for County projects
and it is expected that by purchasing the builder's risk policies itself the County will pay less then it
currently pays to the contractor for such coverage; and
WHEREAS, risk administration has also found that certain insurance policies, given the
uniqueness of the terms and conditions and/or the details of the policy coverage required by the County,
are extremely limited in the insurance market place thereby rendering the competitive bidding
procedures futile as they regularly result in one response or ultimately respondents are unable to provide
the necessary insurance coverage called for in the solicitation; and
WHEREAS, risk administration is seeking to obtain such insurance policies without having to
competitively bid each such insurance policy; and
WHEREAS, Section 2-347 Competitive bidding procedures does not provide an exception for
insurance and generally the purchase of insurance is competitively bid, but in order to manage this
change in the market with builder's risk policies and the purchase of other limited insurance policies,
County staff seeks to amend the Code to allow for such an exemption;
Page 1 of 2
NOW THEREFORE, BE IT ORDAINED BY THE BOARD OF COUNTY
COMMISSIONERS OF MONROE COUNTY, FLORIDA:
SECTION 1: Section 2-347(e)(5) is hereby amended to add the following:
All builder's risk insurance policies; or policies which due to the terms and
conditions required by the County are exclusive in the market and thus not
benefitted by the competitive bidding procedures.
SECTION 2: SEVERABILITY. If any portion of this ordinance is for any reason held invalid or
declared to be unconstitutional, inoperative or void, such holding shall not affect the remaining portions
of this ordinance. If this ordinance or any provision thereof shall be held to be inapplicable to any
person, property or circumstances, such holding shall not affect its applicability to any other person,
property or circumstances.
SECTION 3; CONFLICT WITH OTHER ORDINANCES. All ordinances or parts of ordinances in
conflict with this ordinance are hereby repealed to the extent of said conflict.
SECTION 4: TRANSMITTAL AND EFFECTIVE DATE. This Ordinance shall be filed with the
Department of state and shall be effective as provided in section 125.66(2), Florida Statutes.
PASSED AND ADOPTED by the Board of County Commissioners of Monroe County, Florida,
at a regular meeting of said Board held on the day of 2015.
Mayor Danny Kolhage
Mayor Pro Tem Heather Carruthers
Commissioner George Neugent
Commissioner David Rice
Commissioner Sylvia Murphy
(SEAL) BOARD OF COUNTY COMMISSIONERS
Attest: AMY HEAVILIN, Clerk OF MONROE COUNTY, FLORIDA
By:
By:
Deputy Clerk Mayor/Chairperson
Page 2 of 2
Sec. 2-347(e)(5), Monroe County Code:
(5) The competitive bidding procedures are not required to apply to the following:
a. Professional service covered by the Consultants' Competitive Negotiation Act (F.S.
§ 287.055). Other professional services may be exempted by the BOCC from the
competitive bidding process when price is only a minor concern compared to
qualitative considerations;
b. All purchases of services controlled by the public service commission or other
governmental authority including but not limited to utility/local telephone services
as defined in section 2-346
c. Cellular telephone services; on -going payments and fees for maintenance and
support of existing software technology which has been purchased in accordance
with existing procurement requirements; software packages for personal computers
approved by the county's technical services department;
d. Legal services, lobbying services, interpreter services, court reporter services, and
advertising services;
e. Change orders authorized under a lawfully executed county/contractor contract;
and
f. All solid waste services including but not limited to collection franchise agreements
and operations and maintenance agreements.
g. All builder's risk insurance policies or policies which, due to the terms and
conditions required by the County, are exclusive in the market and thus not
benefitted by the competitive bidding_ procedures.
NOTICE OF INTENTION TO CONSIDER
ADOPTION OF COUNTY ORDINANCE
NOTICE IS HEREBY GIVEN TO WHOM IT MAY CONCERN that on July 15, 2015 at
3:00 P.M., or as soon thereafter as may be heard, in the Commission Chambers located in the
Harvey Government Center, 1200 Truman Avenue, Key West, Monroe County, Florida, the
Board of County Commissioners of Monroe County, Florida, intends to consider the adoption of
the following County ordinance:
AN ORDINANCE OF THE MONROE COUNTY BOARD OF
COUNTY COMMISSIONERS AMENDING SECTION 2-347
OF THE MONROE COUNTY CODE; PROVIDING AN
EXEMPTION FROM THE COMPETITIVE BIDDING
PROCEDURES FOR THE PURCHASE OF CERTAIN
INSURANCE OR COVERAGES; PROVIDING FOR
SEVERABILITY; PROVIDING FOR REPEAL OF ALL
ORDINANCES INCONSISTENT HEREWITH; AND
PROVIDING FOR AN EFFECTIVE DATE.
Pursuant to Section 286.0105, Florida Statutes, notice is given that if a person decides to appeal
any decision made by the Board with respect to any matter considered at such hearings or
meetings, he will need a record of the proceedings, and that, for such purpose, he may need to
ensure that a verbatim record of the proceedings is made, which record includes the testimony and
evidence upon which the appeal is to be based.
ADA ASSISTANCE. If you are a person with a disability who needs special accommodations in order to
participate in this proceeding, please contact the County Administrator's Office, by phoning (305) 292-
4441, between the hours of 8:30 a.m. - 5:00 p.m., no later than five (5) calendar days prior to the
scheduled meeting; if you are hearing or voice impaired, call "711':
Dated at Key West, Florida, this 12th day of June, 2015.
(SEAL)
Publication dates:
KW Citizen (Wed) 6/17/15
Keynoter (Wed) 6/17/15
Reporter (Fr) 6/19/15
AMY HEAVILIN, Clerk of the Circuit Court
and ex officio Clerk of the Board of County
Commissioners of Monroe County, Florida