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HomeMy WebLinkAboutAgr 2003-07-01 (Bay Cities JPA) MEMORANDUM OF COVERAGE FOR THE CALIFORNIA AFFILIATED RISK MANAGEMENT AUTHORITIES (CARMA) TABLE OF CONTENTS SECTION I - COVERAGE........... ....... ........ ................. ...... .............. .... ....... ............. ........................ 1 SECTION II - DEFINITIONS..... ......... .... .... ....................... .............. ........... .......... .... ....... ..,.......... .... 1 SECTION III - DEFENSE AND SETTLEMENT ............................................................................ 7 SECTION IV - CARMA'S LIMIT OF COVERAGE........................................................................ 7 SECTION V - COVERAGE PERIOD AND TERRITORy............................................................. 8 SECTION VI - EXCLUSIONS...... ......... .................... ...................................................................... 8 SECTION VII - CONDITIONS........................................................................................................ 15 FORM NUMBER -CARMA 200~m-l OGL MEMORANDUM OF COVERAGE FOR THE CALIFORNIA AFFILIATED RISK MANAGEMENT AUTHORITIES (CARMA) In consideration of the payment of the deposit premium, the Authority agrees with the Covered Parties as follows: SECTION I - COVERAGE The Authority will pay up to the Limit of Coverage those sums for Ultimate Net Loss in excess of $1,000,000 that the Covered Parties payout of their own funds, unless otherwise provided herein, as Damages because of Bodily Injury, Property Damage, Personal Injury, or Public Officials Errors and Omissions as those terms are herein defined and to which this agreement applies, caused by an Occurrence during the Coverage Period, except as otherwise excluded. This Memorandum of Coverage does not provide insurance, but instead provides for pooled risk sharing. This Memorandum is a negotiated agreement amongst the Members of the Authority and none of the parties to the Memorandum is entitled to rely on any contract interpretation principles that require interpretation of ambiguous language against the drafter of such Memorandum. This Memorandum shall be applied according to the principles of contract law, giving full effect to the intent of the Members of the Authority, acting through the Board of Directors in adopting this Memorandum of Coverage. As the Authority is not an insurer, it has no obligation to provide "Cumis" counsel to a Covered Party in disputed coverage situations under Civil Code 92860. SECTION II - DEFINITIONS 1. "Aircraft" means a vehicle designed for the transport of persons or property principally in the aIr. 2. "Authoritv" means the California Affiliated Risk Management Authorities. 3. "Automobile" means a land motor vehicle, trailer, or semi-trailer. 4. "Bodilv Iniurv" means bodily injury, sickness, disease, or emotional distress sustained by a person, including death resulting from any of these at any time. Bodily Injury includes Damages claimed by any person or organization for care, loss of services, or death resulting at any time from the Bodily Injury. 5. "Coveraf!e Period" means that term prescribed for coverage by the Authority as set forth in the Declarations page. 6. HCovered Indemnity Contract" means that part of any contract or agreement pertaining to the Covered Party's routine governmental operations under which the Covered Party assumes the tort liability of another party to pay for Bodily Injury or Property Damage to a third person or organization. This definition applies only to tort liability arising out of an Occurrence to which this agreement applies. Tort liability means a liability that would be imposed by law in the absence of any contract or agreement. 7. "Covered Party" means: (a) A Member of the Authority. This includes all entities named in its Declarations page, including any and all commissions, agencies, districts, authorities, boards (including the governing board), or similar entities coming under the Member's direction or control, or for which the Member's board members sit as the governing body, except a hospital board or commission, regardless of how such body is denominated. (b) A member of a joint powers authority (JP A) which is a Member of the Authority herein, which participates in said JP A's liability program. This includes ail entities named in its Declarations page, including any and all commissions, agencies, districts, authorities, boards (including the governing board), or similar entities coming under the Member's direction or control, or for which the Member's board member sits as the governing body, except a hospital board or commission, regardless of how such body is denominated. (c) Any person or Member identified as a Covered Party in a certificate of coverage to third parties duly issued by the Authority for Occurrences during the Coverage Period identified in the certificate of coverage, the person or Member is a Covered Party only for Occurrences arising out of the described activity. (d) Any person who is an official, employee, or volunteer of a person or Member covered by (a), (b), or (c) herein, whether or not compensated, while acting in an official capacity for or on behalf of such person or Member, including while acting on any outside board at the direction of such person or Member, except a hospital board or commission, regardless of how such a body is denominated. (e) The Authority itself and its Board of Directors individually. (f) With respect to any Automobile owned or leased by a Member, or loaned to or hired for use by or on behalf of the Member, any person while using such Automobile and any person or organization legally responsible for the use thereof, provided the actual use is with the express permission of the Member, but this protection does not apply to: 1. Any person or organization, or any agent or employee thereof, operating an Automobile sales agency, repair shop, service station, storage garage, or public parking place, with respect to an Occurrence arising out of the operation thereof; J: \CARMA \Admin \Documents\Liabi I i ty\M DC s\2003-04\Liabmoc.03 .doc Effective July 1, 2003 2 11. The owner or any lessee, other than the Member, of any Automobile hired by or loaned to the Member or to any agent or employee of such owner or lessee. (g) No person or Member is a Covered Party with respect to the conduct of any current or past partnership, joint venture, or joint powers authority that is not shown as a named Covered Party in the Declarations; however, for any person (1) who is an official, employee, or volunteer ofa Member covered by (a) or (b) herein, (2) who participates in the activities of the partnership, joint venture, or joint powers authority (or any separate agency or Member created under any joint powers agreement by the named Member), and (3) who is acting for or on behalf of a Member covered by (a) or (b) herein at the time of the Occurrence, then coverage is afforded by this agreement. Such coverage will be in excess of and shall not contribute with any collectible insurance or other coverage provided to the other joint powers authority, agency, or Member. (h) Notwithstanding sections (d) and (e) above, the defense and indemnity 'coverage afforded by this agreement to a past or present official, employee, or volunteer of a Member (including a member entity of a Member joint powers authority) is not broader than the Member's duty to defend and indemnify its official, employee, or volunteer pursuant to California Government Code Section 815, 815.3, 825 to 825.6, 995 to 996.6, inclus,ive, and any amendments thereof. If the Member which employs the official, employee, or volunteer is not obligated under the California Government Code to provide a defense, or to provide indemnity for a claim, or if said Member refuses to provide such defense and/or indemnity to said official, employee, or volunteer, then this agreement shall not provide any such defense or indemnity coverage to said official, employee, or volunteer. All immunities, defenses, rights, and privileges afforded to a Member under California Government Code Section 815,815.3,825 to 825.6, 995 to 996.6, inclusive, and any amendments thereof, shall be afforded to the Authority to bar any defense or indemnity coverage under this agreement to that Member's official, employee, or volunteer. 8. "Dam" means any artificial barrier, together with appurtenant works, which does or may impound or divert water, and which either (a) is 25 feet or more in height from the natural bed of the stream or watercourse at the downstream toe of the barrier, or from the lowest. elevation of the outside limit of the barrier, if it is not across a stream, channel, or watercourse, to the maximum possible water storage elevation; or (b) has an impounding capacity of 50 acre-feet or more. Any such barrier which is not in excess of6 feet in height, regardless of storage capacity, or which has a storage capacity not in excess of 15 acre-feet, regardless of height, shall not be considered a Dam. No obstruction in a canal used to raise or lower water therein or divert water there from, no levee, including but not limited to, a levee on the bed of a natural lake the primary purpose of which levee is to control floodwaters, no railroad fill or structure, no road or highway fill J :\CARMA \Admin \Documents\Liability\M OCs\2003-04\Liabmoc.03 .doc Effective July 1,2003 3 or structure, no circular tank constructed of steel or concrete or of a combination thereof, no tank elevated above the ground, no water or waste water treatment facility, and no barrier which is not across a stream channel, watercourse, or natural drainage area and which has the principal purpose of impounding water for agricultural use or storm water detention or water recharging or use as a sewage sludge drying facility shall be considered a Dam. In addition, no obstruction in the channel of a stream or watercourse which is 15 feet or less in height from the lowest elevation of the obstruction and which has the single purpose of spreading water within the bed of the stream or watercourse upstream from the construction for percolation uriderground shall be considered a Dam. Nor shall any impoundlnent constructed and utilized to hold treated water from a sewage treatment plant be considered a Dam. Nor shall any wastewater treatment or storage pond exempted from State regulations and supervision by Water Code Section 6025.5 be considered a Dam. 9. "Damaf!es" means compensation in money recovered by a third party for loss or detriment it has suffered through the acts of a Covered Party. Damages include (1) attorney fees not based on contract awarded against the Covered Party, (2) interest on judgments, or (3) costs, for which the Covered Party is liable either by adjudication or by compromise' with the written consent of the Authority, if the fees, interest, or costs arise from an Occurrence to which this coverage applies. 10. "Defense Costs" means all fees and expenses incurred by any Covered Party, caused by and relating to the adjustment, investigation, defense, or litigation of a claim to which this coverage applies, including attorney's fees, court costs, and interest on judgments accruing after entry of judgment. Defense Costs shall include adjusting expenses of a third party claims administrator that are specifically identifiable with a claim subject to this coverage. Defense Costs shall include reasonable attorney fees and necessary litigation expenses incurred by or for a party other than the Covered Party, that are assumed by the Covered Party in a Covered Indemnity Contract where such attorney fees or costs are attributable to a claim for Damages covered by this Memorandum. Defense Costs shall include fees and expenses relating to coverage issues or disputes that arise after a written denial of coverage, between any Covered Party named in the Declarations and the Authority, if the Covered Party named in the Declarations prevails in such dispute. Defense Costs shall not include the office expenses, salaries of employees and officials, or expenses of the Covered Party or the Authority, or attorney fees or costs awarded to a prevailing plaintiff against the Covered Party. 11. "Limit of Coveraf!e" shall be the amount of coverage stated in the declaration page or certificate of coverage, or sublimits as stated therein for each Covered Party per Occurrence, subject to any lower sublimit stated in this Memorandum. For each Occurrence, there shall be only one Limit of Coverage regardless of the number of claimants or Covered Parties against whom a claim is made. In the event that a structured settlement, whether purchased from or through a third-party, or paid directly by the Covered Party in installments, is utilized in the resolution of a claim or suit, the Authority will pay only up to the an10unt stated in the Declarations or certificate of coverage in present value of the claim, as determined on the date of settlement, regardless of whether the full value of the settlement exceeds the amount stated in the Declarations or certificate of coverage. J: \CARMA \Admin \Documents\Liabil i ty\M OCs\2003-04 \Liabmoc. 03 .doc Effective July 1,2003 4 12. "Medical Malvractice" means tbe rendering of or failure to render any of the following servIces: (a) Medical, surgical, dental, psychiatric, psychological counseling, x-ray, or nursing service or treatment or the furnishing of food or beverages in connection therewith; or any services provided by a health care provider as defined in Section 6146 (c), (2), (3), of the California Business and Professions Code. (b) Furnishing or dispensing of drugs or medical, dental, or surgical supplies or appliances. Medical Malpractice does not include emergency medical services or first aid administered by employees, nor does it include advice or services rendered by a 911 emergency dispatcher. 13. "Member" shall mean any organization that is a party to the Agreement creating the California Affiliated Risk Management Authorities. 14. "Nuclear Material" means Source Material, Special Nuclear Material, or Byproduct Material. "Source Material". "Svecial Nuclear Material", and "Bvvroduct Material" have the meanings given to them by the Atomic Energy Act of 1954 or in any law amendatory thereof. 15. "Occurrence" means: (a) With respect to Bodily Injury or Property Damage: an accident, including continuous or repeated exposure to substantially the same generally harmful conditions, which results in Bodily Injury or Property Damage neither expected nor intended from the standpoint of the Covered Party. Loss of use of tangible property that is not physically injured shall be deemed to occur at the time of the Occurrence that caused it. (b) With respect to Personal Injury: an offense described in the definitions of those terms in this coverage agreement. (c) With respect to Public Officials Errors and Omissions: any actual or alleged misstatement or misleading statement or act or omission as described in the definitions of the term in this coverage agreement. 16. "Personal In;urv" means injury arising out of one or more of the following offenses: (a) False arrest, detention or imprisonment, or malicious prosecution; (b) Abuse of legal process; (c) Wrongful entry into, or eviction of a person from, a room, dwelling, or premises that a person occupIes; (d) Publication or utterance of material, including continuous or repeated, that slanders or libels a J: \CARMA \Admin \Documents\Liability\MOCs\2003-04\Liabmoc.03.doc Effective July 1,2003 5 person or organization or disparages a person's or organization's goods, products or services, or oral or written publication of material that violates a person's right of privacy; (e) 'Discrimination or violation of civil rights; and (f) Injury resulting from the use of reasonable force for the purpose of protecting persons or property . 17. "Pollutants" means any solid, liquid, gaseous or thermal irritant or contaminant, including, but not limited to, smoke, vapor, soot, fumes, acids, alkalis, chemicals, airborne particles, or fibers and waste. Waste includes materials to be recycled, reconditioned, or reclaimed. The term Pollutants as used herein does not mean potable water, agricultural water, water furnished to commercial users, or water used for fire suppression. 18. "Provertv Damaf!e" means: (a) Physical injury or destruction of tangible property, including all resulting'loss of use of that property; or (b) Loss of use of tangible property that is not physically injured or destroyed. 19. "Public Officials Errors and Omissions" means any (including continuous or repeated) actual or alleged misstatement or misleading statement or act or omission by any Covered Party (individually or collectively) arising in the course and scope of their duties with the Covered Party or claimed against them solely by reason of their being or having been public officials or employees, and which results in damage neither expected nor intended from the standpoint of the Covered Party. All c1ain1s involving the same misstatement or misleading statement or act or omission or a series of contiguous or interrelated misstatements or misleading statements or acts or omissions will be considered as arising out of one Occurrence. 20. "Retained Limit" means the amount, identified in the applicable Declaration or certificate, of Ultimate Net Loss for which the Covered Party pays out of its own funds, unless otherwise provided herein, before the Authority is obligated to make payment, subject to the following: (a) For each Occurrence, there shall be only one Retained Limit regardless of the nUlnber of claimants or Covered Parties against whom a claim is made. (b) Payment of the Retained Limit shall be apportioned among the Covered Parties in accordance with their proportionate shares of liability. If the payment is for a settlement, the Retained Limit shall be apportioned among the Covered Parties, in accordance with the respective parties' agreed upon or court-determined share of liability. In the event that the apportionment requires court determination, the Covered Parties will pay all costs of the Authority in seeking such determination, including its attorney's fees in proportion to the court's determination of liability. 21. "Ultimate Net Loss" means the sums actually paid by the Covered Parties comprising the total of all J: \CARMA \Admin \Documents\Liability\M OCs\2003-04 \Liabmoc. 03 .doc Effective July I, 2003 6 Defense Costs and all Damages. SECTION III - DEFENSE AND SETTLEMENT The Authority shall have no duty to assume charge of investigation or defense of any claim. However, the Authority, at its own expense, shall have the right to assume the control of the negotiation, investigation, defense, appeal, or settlement of any claim the Authority determines, in its sole discretion, to have reasonable probability resulting in an Ultimate Net Loss in excess of the applicable Retained Limit. The Covered Party shall fully cooperate in all matters pertaining to such claim or proceeding. If the Authority assumes the control of the handling ofa claim, the Covered Parties shall be obligated to pay at the discretion of the Authority any sum necessary for the defense and settlement of a claim, or to satisfy liability imposed by law, up to the applicable Retained Limit. No claim shall be settled for an amount in excess of the Retained Limit without the prior written consent of the Authority, and the Authority shall not be required to contribute to any settlement to which it has not consented. ' SECTION IV - CARMA'S LIMIT OF COVERAGE Regardless of the number of(1) Covered Parties under this Memorandum, (2) persons or organizations who sustain injury or damage, or (3) claims made or suits brought, the Authority's liability is limited as follows: (a) With respect to coverage provided, the Authority's liability for anyone Occurrence shall be limited to the Ultimate Net Loss that is in excess of $1,000,000, which shall be the Covered Party's Retained Limit, but then only up to the sum set forth in the Declarations as the Authority's limit of liability for anyone Occurrence. In the event that a structured settlement, whether purchased from or through a third-party, or paid directly by the Covered Party in installments, is utilized in the resolution of a claim or suit, the Authority will pay only up to the amount stated in the Declarations or certificate of coverage in present value of the clain1, as determined on the date of settlement, regardless of whether the full value of the settlement exceeds the amount stated in the Declarations or certificate of coverage. (b) The Limit of Coverage for any additional Covered Party as defined in Section 2, Paragraph 4, Subparagraph (c), subject to the per Occurrence limitation above, shall not exceed the lin1it stated in its additional Covered Party certificate regardless of the limit which applies to the Member. Nothing contained herein shall operate to increase the Authority's limit of liability under this Memorandun1. SECTION V - COVERAGE PERIOD AND TERRITORY This agreement applies to Bodily Injury, Property Damage, Personal Injury, or Public Officials Errors and Omissions that occurs anywhere in the world during the Coverage Period identified in the applicable declaration or certificate of coverage. J :\CARMA \Admin \Documents\Liability\M OCs\2003-04\Liabmoc.03 .doc Effective July 1,2003 7 SECTION VI - EXCLUSIONS This agreement does not apply to: 1. With respect to Pollution: (a) Any liability arising out of the actual, alleged, or threatened discharge, dispersal, seepage, migration, release, or escape of Pollutants anywhere in the world. (b) Any loss, cost or expense arising out of any governmental direction or request that the Authority, the Covered Party or any other person or organization test for, monitor, clean-up, remove, contain, treat, detoxify, neutralize, or assess the effects of Pollutants; or (c) Any loss, cost, or expense, including but not limited to costs of investigation or attorneys' fees, incurred by a governmental unit or any other person or organization to test for, monitor, clean-up, remove, contain, treat, detoxify, or neutralize Pollutants. However, this exclusion shall not apply to Bodily Injury or Property Damage caused by a Covered Party's response to contamination caused by a third party unrelated to a Covered Party. Response includes clean up, removal, containment, treatment, detoxification, and neutralization of Pollutants. In addition this exclusion does not apply to direct and immediate Bodily Injury or Property Damage arising out of operations involving the use, application, or spraying of any pesticide at or from any site or location not owned or controlled by the Covered Party on which the Covered Party or any contractors or subcontractors working directly or indirectly on behalf of the Covered Party, are performing operations if the operation(s) performed meet all standards of any statute, ordinance, regulation, or license requirement of any federal, state, or local government which apply to those operations. (d) The exclusions set forth in (a), (b), or (c) above do not apply if said discharge, dispersal, release, or escape of Pollutants meets all of the following conditions: 1. It was accidental and neither expected nor intended by the Covered Party; and 11. It was demonstrable as having commenced on a specific date during the term of this policy; and iii. Its commencement became known to the Member within seven (7) calendar days; and IV. Its commencement was reported in writing to the Authority within forty (40) J :\CARMA \Admin \Documents\Liability\M OCs\2003-04\Liabmoc.03 .doc Effective July 1,2003 8 calendar days of becoming known to the Member; and v. Reasonable effort was expended by the Member to terminate the discharge, dispersal, release, or escape of Pollutants as soon as conditions permitted. (e) The exclusions set forth in (a), (b), or (c) above do not apply if said discharge, dispersal, release, or escape arises from materials being collected as part of any drop off or curbside recycling program implemented and operated by the Covered Party, unless the materials have been stored by the Covered Party or parties for a continuous period exceeding ninety (90) days. (f) Nothing contained in this agreement shall operate (to provide any coverage with respect to: 1. Any site or location principally used by the Covered Party, or by others in the Covered Party's behalf, for the handling, storage, disposal, dumping, processing, or treatment of waste material; except as provided in Section VI, paragraph 1, subparagraph ( e) 11. Any fines or penalties; 111. Any clean-up costs ordered by the Superfund Program, or any federal, state, or local governmental authority. However, this specific exclusion (c) shall not serve to deny coverage for third party clean-up costs otherwise covered by this endorsement simply because of the involvement of a governmental authority; IV. Acid rain; or v. Clean-up, removal, containment, treatment, detoxification, or neutralization of Pollutants situated on premises the Covered Party owns, rents, or occupies at the time of the actual discharge, dispersal, seepage, migration, release, or escape of said Pollutants. 2. Claims, including attorney's fees or salary or wage loss claims, by any potential, present, or' former employee or official of the Covered Party, arising out of, but not limited to, a violation of civil rights or employment-related practices, policies, acts, or omissions, including termination, coercion, demotion, evaluation, reassignment, discipline, defamation, harassment, humiliation, or discrimination directed at that person. This exclusion extends to claims of the spouse, child, unborn child or fetus, parent, brother, or sister of that person as a consequence of injury to the person at whom any of the employment-related practices, policies, acts, or omissions described above are directed. 3. Bodily Injury to: (a) An employee of the Covered Party arising out of and in the course of: J: \CARMA \Admin \Documents\Liability\M OCs\2003-04\Liabmoc.03 ,doc Effective July 1,2003 9 1. Employment by the Covered Party; or 11. Performing duties related to the conduct of the Covered Party's business; or (b) The spouse, child, Unborn child or fetus, parent, brother, or sister of the employee as a consequence of paragraph (1) above. This exclusion applies to any obligation to share Damages with or repay someone else who must pay Damages because of the injury. However, this exclusion does not apply to liability assumed under contract. 4. Any obligation under any workers' compensation, unemployment compensation, or disability benefits law or any similar law. These exclusions 2, 3 and 4 apply whether the Covered Party may be liable as an employer or in any other capacity. ' 5. Claims arising out of ownership, maintenance, management, supervision, or the condition of any hospital. 6. Claims because of Bodily Injury, Personal Injury, or Property Damage arising out of ownership, maintenance, management, supervision, or the condition of any airport. 7. Claims arising out of any professional Medical Malpractice: (a) Committed by a doctor, osteopath, chiropractor, dentist, or veterinarian; or (b) Committed by any health care provider, as defined in Business & Professions Code Section 6146(c)(2), working for any hospital or hospital operated out-patient, in- patient, or other clinic at the time of the occurrence giving rise to the loss. 8. Claims arising out of the hazardous properties of Nuclear Material. 9. Claims arising out of: (a) Land use regulations or planning policies, annexation, or eminent domain by whatever name called, no matter how or under what theory such claims are alleged. Notwithstanding this exclusion, coverage is provided for the following: (1) Property Damage resulting from weather conditions, such as rainfall, overflow of watercourses or flooding, wind, snow, hail, or ice, acting upon or with the Covered Party's property or equipment; (2) Property Damage resulting from the accidental failure of Covered Party's property or equipment; J: \CARMA \Admin \Documents\Liability\M OCs\2003-04 \Liabmoc.03 .doc Effective July 1,2003 10 (3) Property Damage resulting from negligent design or maintenance of a public work or public improvement; (4) Property Damage resulting from inadequate design of a public work or public improvement; and (5) Resultant Property Damage that is neither expected nor intended from the standpoint of the Covered Party. With respect to Property Damage resulting from exception (1) of exclusion 9, notwithstanding what is stated in the applicable declarations, the Limit of Coverage for claims described in this exception to the exclusion will be subject to a sub limit of $2,500,000 per occurrence, and to an aggregate limit of $2,500,000 per Member. With respect to Property Damage resulting from exceptions (4) and (5) of yxclusion 9, notwithstanding what is stated in the applicable declarations, the Limit of Coverage for claims described in this exception to the exclusion will be subject to a sub limit of $500,000 per occurrence, and to an aggregate limit of $1,000,000 per Member. Notwithstanding (1) through (5) above, this agreement shall not apply to any claim arising out of the design, construction, ownership, maintenance, operation, or use of any water treatment plant or waste water treatment plant, no matter how or under what theory such claim is alleged, unless it is a claim based upon the accidental failure of the equipment utilized or contained within the water treatment plant or waste water treatment plant. (b) The initiative process, whether or not liability accrues directly against any Covered Party by reason of any agreement to which a Covered Party has entered. 10. Property Damage to: (a) Property owned by the Covered Party; (b) Property rented to or leased by the Covered Party where it has assumed liability for damage to or destruction of such property, unless the Covered Party would have been liable in the absence of such assumption of liability; and (c) Aircraft or watercraft in the Covered Party's care, custody, or control. 11. Claims arising out of the ownership, operation, use, maintenance, or entrustment to others of: (a) any Aircraft or (b) any watercraft being used for commercial purposes. Ownership, operation, use, or maintenance as used herein does not include static displays of aircraft in a park or museum setting. J: \CARMA \Admin \Documents\Liability\M OCs\2003-04 \Liabmoc .03 ,doc Effective July 1,2003 11 12. Claims arising out of the failure to supply or provide an adequate supply of gas, water, electricity, or sewage capacity when such failure is a result of-the inadequacy of the Covered Party'sfacilities to supply or produce sufficient gas, water, electricity, or sewage capacity to meet the demand. This exclusion does not apply if the failure to supply results from direct and immediate accidental injury to tangible property owned or used by any Covered Party to procure, produce, process, or transmit the gas, water, electricity, or sewage. 13. Claims arising out of the ownership, maintenance, or use of any trampoline or any other rebound tumbling device. 14. Claims arising out of a Covered Party's sponsored or controlled skateboard activities or facilities unless those activities or facilities are covered by the Member joint powers authority . 15. Claims arising out of bun gee jumping or propelling activities sponsored or controlled by the Covered Party. 16. Claims arising out of a failure to perform or breach of a contractual obligation. 17. Claims arising out of liability assumed under any contract or agreement, except liability that would be imposed by law in the absence of the contract or agreement, or when such assumption is the subject of a duly issued Certificate of Additional Covered Party; but such assumption is covered only up to the Limit of Coverage stated in the certificate. This exclusion does not apply to liability assumed in a contract or agreement that is a Covered Indemnity Contract, provided the Bodily Injury or Property Damage occurs subsequent to the execution of the contract or agreement. 18. Fines, assessments, penalties, restitution, disgorgement, exemplary or punitive Damages. This exclusion applies whether the fine, assessment, penalty, restitution, disgorgement, exemplary or punitive damage is awarded by a court or by an administrative or regulatory agency. Restitution and disgorgement as used herein refer to the order of a court or administrative agency for the return of a specific item of property or a specific sum of money, because such item of property or sum of money was not lawfully or rightfully' acquired by the Covered Party. 19. Ultimate Net Loss arising out of relief, or redress, in any form other than money Damages. 20. Claims arising out of the manufacture of, mining of, use of, sale of, installation of, removal of, distribution of or exposure to radon, asbestos, asbestos products, asbestos fibers, asbestos dust, or other asbestos containing materials, or: (a) Any obligation of the Covered Party to indemnify any party because of such claims, or J :\CARMA \Admin\Documents\Liability\M OCs\2003-04\Liabmoc.03 .doc Effective July 1,2003 12 (b) Any obligation to defend any suit or claims against the Covered Party because of such claims. 21. Claims for injury or Damages caused by intentional conduct done by the Covered Party with willful and conscious disregard of the rights or safety of others, or with malice. However, where the Covered Party did not authorize, ratify, participate in, consent to, or have knowledge of such conduct by its past or present employee, elected or appointed official, or volunteer, and the claim against the Covered Party is based solely on its vicarious liability arising from its relationship with such employee, official, or volunteer, this exclusion does not apply to said Covered Party. 22. Claims arising out of partial or complete structural failure of a Dam. 23. Claims by any Covered Party against its own past or present elected or appointed officials, employees, volunteers, or additional covered parties where such claim seeks Damages payable to the Covered Party. 24. Claims arising out of oral or written publication of material, if done by or at the direction of the Covered Party with knowledge of its falsity. 25. Claims arising out of liability imposed on any Covered Party under any uninsured/underinsured motorist law or Automobile no-fault law. 26. Th~ cost of providing reasonable accommodation pursuant to the Americans with Disabilities Act, Fair Employment and Housing Act, or similar law. 27. Refund or restitution of taxes, fees, or assessments. 28. Claims for refund, reimbursement, or repayment of any monies to which a Covered Party was not legally entitled. 29. Claims arising in whole or in part out of the violation of a statute, ordinance, order, or decree of any court or other judicial or administrative body, or rule oflaw, committed by or with the knowledge or consent of the Covered Party. 30. Claims arising out of estimates of probable cost or cost estimates being exceeded or faulty preparation of bid specifications or plans including architectural plans. 31. Under Public Officials Errors and Omissions Coverage: (a) Bodily Injury, Personal Injury, or physical injury to tangible property, including all resulting loss of use of that property. (b) Benefits payable under any employee benefit plan. J: \CARMA \Admin \Documents\Liability\M OCs\2003-04 \Liabmoc. 03 .doc Effective July 1,2003 13 SECTION VII - CONDITIONS 1. Covered Partv's Duties in the Event of Occurrence. Claim. or Suit The following provisions are conditions precedent to being afforded coverage under this Memorandum. The Covered Party's failure to comply with any of these provisions shall void the coverage provided herein. ( a) The Covered Party shall notify the Authority within 30 days upon receipt of notice of a claim, or the establishing of a reserve on any claim or suit (including multiple claims or suits arising out of one Occurrence), such claim or reserve amounting to fifty percent or more of the Retained Limit; Title 42 USC 1983 cases in which a complaint has been served and with reserves of twenty- five percent or more of the Retained Limit; or regardless of reserve, any claim involving: 1. 11. 111. IV. v. V1. Vll. viii. IX. X. XL One or more fatalities, Loss of a limb or amputations, Loss of use of any sensory organ, Spinal cord injuries (quadriplegia or paraplegia), Third degree burns involving ten percent or more of the body, Serious facial disfigurement, Paralysis, Closed head injuries, Loss of use of any sensory organ, Serious loss of use of any body function, or Long-term hospitalization. Writt~n notice containing particulars sufficient to identify the Covered Party and also reasonably obtainable information with respect to the time, place, and circumstances thereof, and the names and addresses of the Covered Party and of available witnesses, shall be given to the Authority or any of its authorized agents as soon as possible. (b) Ifa claim is made or suit is brought against the Covered Party and such claim or suit' falls within the descriptions in paragraph (a) above, the Covered Party shall be obligated to forward to the Authority every demand, notice, summons, or other process received by it or its representative. ( c) The Covered Party shall cooperate with the Authority and upon its request assist in making settlements, in the conduct of suits and in enforcing any right of contribution or indemnity against any person or organization who may be liable to the Covered Party because of Bodily Injury, Personal Injury, Property Damage, or Public Officials Errors and Omissions with respect to which coverage is afforded under this agreement; and the Covered Party shall attend hearings and trials and assist in securing and giving evidence and obtaining the attendance of witnesses. The Covered Party shall not, except at its J: \CARMA \Admin \Documents\Liability\MOCs\2003-04\Liabmoc.03 .doc Effective July 1,2003 14 own cost, voluntarily make any payment, assume any obligation, or incur any expense toward the settlement of any claim for which the Authority has accepted responsibility and has so notified the Covered Party. (d) As to any claim for which the Authority has accepted responsibility and has so notified the Covered Party, if the Covered Party prevents settlement of the claim for a reasonable amount, defined as the amount the Authority is willing to pay and the claimant is willing to accept, and increases the Covered Party's potential liability for Damages and continued Defense Costs, the Covered Party shall payor shall reimburse the Authority for those Defense Costs incurred after the claim could have been settled, and for any Damages awarded or settlement agreed upon in excess of the amount for which the claim could have been settled. (e) The Authority shall be entitled to complete access of the Covered Party's claim file, the defense attorney's complete file, and all investigation material and reports, including all evaluations and information on negotiations. The Covered Party shall be responsible to report on the progress of the litigation and any significant developments at least quarterly to the Authority, and to provide the Authority with simultaneous copies of all correspondence provided to the Covered Party by its defense attorneys and/or agents. 2. Bankruptcy or Insolvency Bankruptcy or insolvency of the Covered Party shall not relieve the Authority of any of its obligations hereunder. 3. Other Coverage (a) Except as provided in 3(b), in order for coverage herein to apply, the Covered Party must pay the full amount of its Retained Limit. Payment of the Retained Limit by the Covered Party is required in addition to, and regardless of, any payment or payments from any other source for or on behalf of that Covered Party. If insurance or any other coverage with any insurer, joint powers authority or other source is available to the Covered Party covering a loss also covered hereunder (whether on a primary, excess or contingent basis), the coverage hereunder shall be in excess of, and shall' not contribute with, such other insurance or coverage. This coverage shall be in excess of, and shall not contribute with, any insurance or coverage which names a Covered Party herein as an additional Covered Party or additional insured party, where coverage is extended to a loss also covered hereunder. (b) Commercial coverage purchased directly by a Covered Party for the sole purpose of insuring all or a portion of its Retained Limit may be utilized to pay all, or a portion' of, a Covered Party's Retained Limit. J: \CARMA \Admin \Documents\Liabil i ty\M OCs\2003 -04 \Liabmoc. 03 .doc Effective July 1,2003 15 4. Severability of Interests The term Covered Party is used severally and not collectively, but the inclusion herein of more than one Covered Party shall not operate to increase the limits of the Authority's liability or the Retained Limit applicable per Occurrence. 5. Accumulation of Limits A claim which contains allegations extending to a duration of more than one Coverage Period shall be treated as a single Occurrence arising during the first Coverage Period when the Occurrence begins. 6. Termination This agreement may be terminated at any time in accordance with the Bylaws of the Authority. 7. Changes Notice to any agent or knowledge possessed by any agent of the Authority or by any other person shall not effect a waiver or a change in any part of this Memorandum of Coverage, nor shall the terms of this Memorandum of Coverage be waived or changed, except by endorsement issued to form a part of this Memorandum of Coverage. 8. Subrogation The Authority shall be subrogated to the extent of any payment hereunder to all the Covered Parties' rights of recovery thereof and the Covered Parties shall do nothing after loss to prejudice such right and shall do everything necessary to secure such right. Any amounts so recovered shall be apportioned as follows: (a) The highest layer of coverage shall be reimbursed first and if there are sufficient recoveries then the next highest layer shall be reimbursed until all recoveries are used up. (b) The expenses of all such recovery proceedings shall be paid before any reimbursements are made. If there is no recovery in the proceedings conducted by the Authority, it shall bear the expenses thereof. 9. Arbitration Decisions by the Authority whether to assume control of the negotiation, investigation, defense, appeal, or settlement of a claim, or whether or not coverage exists for a particular claim or part ofa claim shall be made by the Board of Directors of the Authority. J :\CARMA \Admin\Documents\Liability\MOCs\2003-04\Liabmoc.03 ,doc Effective July I, 2003 16 Any dispute concerning a decision of the Authority to deny coverage for all or part of a c1ailTI shall not be subject to any court action, but shall instead be submitted to binding arbitration. The Covered Party must exhaust the right to appeal to the Board of Directors before requesting arbitration of a dispute. Arbitration shall be conducted pursuant to the California Code of Civil Procedure. Arbitration shall be conducted by a three-person panel. The Covered Party or parties shall select one arbitrator and the Authority shall select one arbitrator, and the two arbitrators shall select a third arbitrator upon mutual agreement. No arbitrator shall be employed or affiliated with the Authority or the Covered Party or parties. The selection of arbitrators shall take place within twenty (20) calendar days from the receipt of the request for arbitration. The arbitration hearing shall commence within forty-five (45) calendar days from the date of the selection of the arbitrators. Each party shall bear the cost of its selected arbitrator and one-half the cost of the third selected arbitrator. In addition, each party shall be responsible for its own costs and expenses of arbitration. Except for notification of appointment and as provided in the California Code of Civil Procedure, there shall be no communication between the "parties" and the arbitrator(s) relating to the subject of the arbitration other than at oral hearings. The procedures set forth in California Code of Civil Procedure Section 1293.05 relating to depositions and discovery shall apply to any arbitration pursuant to this paragraph 9. Except as provided otherwise above, arbitration shall be conducted as provided in Title 9 of the Code of Civil Procedure (commencing with Section 1280). The decision of the panel of arbitrators shall be final and binding, and shall not be subject to appeal. J: \CARMA \Admin \Documents\Liabil ity\M OCs\2003-04 \Liabmoc.03 .doc Effective July I, 2003 17 CALIFORNIA AFFILIATED RISK MANAGEMENT AUTHORITIES (CARMA) LIABILITY MASTER PROGRAM DOCUMENT CALIFORNIA AFFILIATED RISK MANAGEMENT AUTHORITIES (CARMA) LIABILITY MASTER PROGRAM DOCUMENT TABLE OF CONTENTS A. LIABILITY PROGRAM............................................................ Page 1 B. COVERAGE PROVIDED... ... ... .... ..... ......... .... ........ ... ... .... ......... Page 1 C. DEFINITIONS........................................................................ Page 2 D. DEPOSIT PREMIUM ........ ...... ............................ ................... ... Page 3 E. ACTUARIALL Y SOUND yEARS................................................ Page 4 F. DIVIDENDS AND ASSESSMENTS.............................................. Page 4 G. ADMINISTRATION.................................................................. Page 5 H. CLAIMS AUDIT...................................................................... Page 6 1. MEMBERS PARTICIPATION ... ........ .... ... ......... ...... ......... ............ Page 6 J. AMENDMENTS TO THE PLAN ................................................. Page 10 K. SEVERABILITY ..................................................................... Page 10 L. SUBORDINATION ......... ......................................................... Page 10 M. DISPUTES ............................................................................. Page 10 CALIFORNIA AFFILIATED RISK MANAGEMENT AUTHORITIES (CARMA) LIABILITY MASTER PROGRAM DOCUMENT A. LIABILITY PROGRAM The Joint Powers Authority created by the California Affiliated Risk Management Authorities (CARMA) offers participation in a risk sharing pool covering excess losses of affiliated joint powers authorities and other public agencies in accordance with the Agreement adopted by the Members. The assets of the pooled program shall be maintained at all times as the assets of the Members. Such assets of the Members shall be held in trust for the Member and disbursed by CARMA on ,behalf of the Member. Member assets may be di~bursed only on the authority of the Board, and no Member shall have an individual right to exercise control over said assets except as provided in the Joint Exercise of Powers Agreement creating CARMA. B. COVERAGE PROVIDED The Liability Program provides coverage for Bodily Injury and Property Damage, Personal Injury and Public Officials Errors and Omissions under the terms and conditions set forth in the M~morandum of Coverage. Initially, CARMA intends to provide coverage for a limit of$9,000,OOO excess of $1 ,000,000 through a combination of pooling and purchasing of coverages. The type of liability coverage, and/or limits of coverage, may be modified and changed upon Board approval. The amount of coverage to be pooled or purchased is at the discretion of the Board. J:\ WP\CARMA \Documents\MPD\LlABMPD.03 draft. doc Effective 7//1/03 Page 1 C. DEFINITIONS 1. "Assessment" shall mean an amount determined by the Board to be paid by each Member as necessary to meet CARMA's obligations. 2. "Board" or "Board of Directors" shall mean the governing body of CARMA composed of a representative of each Member. 3. "CARMA" shall mean the California Affiliated Risk Management Authorities, an agency created by the Agreement. 4. "Devosit Premium" shall mean the annual dollar amount determined by the Board which is payable by each Member as its established share of the funding required to cover the financial obligations of this coverage program. 5. "Member" shall mean any organization that is a party to the Agreement. 6. "Management Contract" means that written agreement entered into between CARMA and its administrator. 7. O.ff:Balance Ad;ustment" shall mean any difference in dollar amounts between the Deposit Premium before adjustments for the experience modification and after. 8. "Prof!ram Year" shall mean a period of time determined by the Board, usually 12 months, into which this coverage program shall be segregated for purposes of accounting and record-keeping. J:\ WP\CARMA \Documents\MPD\LIABMPD.03 draft.doc Effective 7//1/03 Page 2 D. DEPOSIT PREMIUM The Liability Program is funded through deposit premiums, and assessments (if necessary). The Liability Program funding is determined as follows: 1. Deposit Premiums On or before March 31 of each year, the Board shall adopt the deposit premium rate for the next following program year. Each Member shall pay a deposit premium to CARMA each program year. Such deposit premiums shall consist of the amount needed to cover administrative expenses, purchased insurance and/or reinsurance, and expected losses, plus a margin for added confidence as determined by the Board. Except for administrative expenses and purchased insurance and/or reinsurance, the deposit premium shall be calculated for each Member by taking the Member's expected annual payroll multiplied by the Board adopted rate per $100 of payroll and then multiplied by the experience modification factor. An off-balance adjustment to the calculation shall be made whenever the amount calculated for experience modification varies from the amount calculated by the payroll/adopted rate. That portion of the deposit premium for administrative expenses shall be spread dividing 40% of the Management Contract and 100% of all other administrative costs equally and dividing the remaining 60% of the Management Contract using the uncapped experience modification factor. Any purchased insurance and/or reinsurance shall be spread based strictly on the rate per $100 of payroll for each Member. 2. Experience Modification Factor The most recent six years of loss experience will be collected to determine the experience modification for each program year. However, only the oldest four years, years 3, 4, 5 and 6 will be used in the calculation. This will be accomplished by utilizing the rolling six-year method, whereby the experience of the most recently . completed program year for which data is available is added, and the oldest year is dropped annually. Only the oldest four of the six years will be utilized in the experience calculation. The experience modification factor shall be calculated annually using the incurred amount of each loss exceeding $100,000 limited to $500,000 per occurrence. Losses shall be valued as close as possible to December 31 each year. J:\ WP\CARMA \Documents\MPD\LIABMPD.03 draft.doc Effective 7//1/03 Page 3 The minimum experience modification factor shall be .75 for those Members with an average loss rate better than the group average, and the maximum experience modification factor shall be 1.25 for those Members that have an average loss experience worse than the group average. A credibility factor will be used in the experience modification calculation that will be calculated by using the square root of the payroll of each Member divided by the combined payroll of CARMA as a group. This factor will then be multiplied by the deviation from the norm of the Member experience ratio. Finally, the sum of 1 minus the deviation calculation will be used to come up with the factored experience modifier. 3. Rate Settine The rates used for determining deposit premiums shall be set by the Board after considering the recommendations of the actuary. Such rate shall ensure that sufficient funds are collected by CARMA to cover administrative expepses and expected losses, plus a margin for greater confidence as determined by the Board. E. ACTUARIALL Y SOUND YEARS The Board of Directors shall strive to maintain each program year actuarially sound and assure that the Liability Program is actuarially sound as a whole. A deposit premium based on the findings of an actuarial sound study shall be charged annually and allocated to the Members in accordance with the individual Member's exposure. to loss. To maintain'actuarial soundness, actuarial studies shall be performed every year, and action shall be immediately taken by the Board of Directors to make up the deficit funding, if the Liability Program as whole should be found to be actuarially deficient. F. DIVIDENDS AND ASSESSMENTS 1. Dividends Dividends may be declared and paid solely at the discretion of the Board after a program year is at least 5 years old and reaches a 80% confidence level and provided that the combined assets of the program years after the dividend shall equal or exceed a 80% confidence level. Each share of the dividend declared shall be allocated based on deposit premiums. 2. Assessments J:\ WP\CARMA \Documents\MPD\LIABMPD.03 draft.doc Effective 7//J/03 Page 4 Assessments in the amount of and against a program year as determined by the Board shall be levied on the Members at such time that an actuary finds that the assets of the Liability Program, as a whole, do not meet the expected losses of the 'Program, inclusive of claims Incurred But Not Reported (IBNR) and Unallocated Loss Adjustment Expenses (ULAE). Each Member's share of the assessment shall be based upon the deposit premiums collected for the program year being assessed provided that the amount of any assessment levied may not exceed 25% of the deposit premium paid during the assessed program year. If such assessment is not sufficient to relieve the pool of its actuarial deficit in the year of the assessment, such assessment shall be levied each subsequent year until the actuarial deficit is relieved. 3. Freauencv of Dividends or Assessments More than one dividend or assessment may be declared for each program year, however, such dividend or assessment shall not occur more often than once every fiscal year. G. ADMINISTRATION CARMA shall engage an administrator by written agreement to act as the Manager of the Liability Program. The Manager shall: 1. General a. use his/her best efforts to administer the Liability Program to achieve the objectives and goals of the Liability Program and of CARMA; b. administer the Liability Program in a manner that will provide claim and cost accountability for each program year, separate and apart from all other program years, and from other programs of CARMA; 2. Claims Administration a. prepare, or cause to be prepared, a report annually which shows ' claims activity, paid claims, case reserves, obligated reserves, and status of program funds of each program year; b. obtain the services of a claims auditor to review claim activities of Member and present the findings to the Board, provided the cost of these services are within the approved annual budget; J:\ WP\CARMA \Documents\MPD\LIABMPD.03 draft.doc Effecti ve 7// 1/03 Page 5 c. oversee performance of the Member's claims adjusters on the handling of open claims which may penetrate the Liability Program, including but not limited to: (1) review, specifically, all open reportable claims and, if necessary, recommend action on such claims; (2) periodically, review Member's claim reports and relay findings to the Board of any significant trends that may be developing; 3. Financial and Actuarial a. ensure dividend or assessment allocations for previous program years, and rates and deposit premiums for each new program year are calculated as set forth in this document; b. obtain actuarial services and present the findings to the Board, provided the cost of these services are within the approved annual budget; and c. evaluate and present to the Board the recommendations of the actuarial studies with recommended actions where program years are, or are likely to be, in the near future actuarially unsound. H. CLAIMS AUDIT The Board shall cause at least biennial claims audit to be made on each Member and a report of such audit shall be filed with each Member. All costs of such claims audit shall be paid by CARMA and shall be charged against the Members in the same manner as all other administrative costs. I. MEMBERS PARTICIPATION 1. Eligibility and Application a. Eligibility (1) Only Members may participate in the Liability Program. (2) The Member must initially commit to at least three full program years of participation in the Liability Program. J:\ WP\CARMA \Documents\MPD\LIABMPD.03 draft.doc Effective 7//1/03 Page 6 (3) Any applicant wishing to become a Member must submit an application with an application fee which shall be determined by the Board, and provide a completed and signed Resolution obligating the Member to participate for the required three (3) program years and accepting the rules and regulations set forth in the governing documents of CARMA. The Member requesting to participate in the Liability Program shall submit at least five (5) years of liability loss experience, complete an Exposure Analysis Questionnaire, and provide copies of the last four (4) quarterly DE-6 or Federal 941 payroll reports of each of its members. (4) The applicant shall provide the obligatory Resolution, the experience information, and the DE-6 or Federal 941 payroll reports at least sixty (60) days prior to the inception of the program year in which the applicant will commence participation, or the date the applicant desires coverage to begin. (5) In the event the applicant is not accredited by the California Association of Joint Powers Authorities (CAJP A), the applicant shall, at its own expense, be evaluated by a consultant to be chosen by the Board for an evaluation and recommendation. b. Approval of Application (1) The Board shall, from a review of the Resolution, other underwriting criteria, and the advice of the Manager, determine the acceptability of the exposures presented by the requesting applicant. (2) The Manager shall advise, in writing, the requesting applicant of the decision of the Board to accept or reject the request within ten (10) working days after the decision. c. Date of Membership It is desirable that a new Member enter the Liability Program at the commencement of a new program year. If the new applicant enters at any other time, the deposit premium may be pro rated for the remainder of the program year, and covered losses of the new Member which occur on or after the date of membership will be paid; however, the new Member shall be required to share losses for the pool for the entire program year, just as if it had begun its membership in the pool at the beginning of the program year. J:\ WP\CARMA \Documents\MPD\LIABMPD,03 draft,doc Effective 7//1/03 Page 7 2. Member Duties a. Cooperation with CARMA (1) Each Member shall provide a payroll report for the calendar year, detailed by quarter, by February 1. Each Member shall also provide copies its member's DE-6 or Federal 941 payroll report quarterly within thirty (30) days after filing with the State. (2) 'Each Member shall disclose the addition of any new member( s) to the Program. (3) Each Member shall cooperate with CARMA in the claim management, loss control, underwriting, and actuarial activities of CARMA. b. Payment of Devosit Premiums and Other Charges (1) Annual Billings - Each year, not later than June 1, CARMA shall bill each Member for a Liability deposit premium for the next program year. The annual billing shall be due and payable on July 1, and shall be delinquent if not paid on or before the last working day in July. (2) Assessment Billings - A Member may be billed an Assessment for a program year. This billing is due and payable upon receipt and delinquent if not paid on or before thirty (30) calendar days after receipt. The date of receipt shall be determined as the date the billing was presented in person to the representative of the Member or the date the billing was posted in the U. S. Mail. (3) Failure to Pay Billings. Penalties. or Interest - Failure to pay billings, penalties, or the accrued interest shall be considered grounds for removal of the Member from the Liability Program and may result in expulsion of the Member from CARMA in accordance with the, CARMA Agreement. (4) Duties of Withdrawn or Expelled Members - Withdrawn or expelled Members which have formerly participated in the Liability ProgrmTI shall be required to pay all applicable billings for the program years in which they participated. Delinquent billings shall be treated in the same manner as set forth above as if the withdrawn or expelled Member still participated in the Liability Program. J:\ WP\CARMA \Documents\MPD\LIABMPD.03 draft. doc Effective 7//1/03 Page 8 3. Termination of Participation a. V oluntary Termination (1) A Member which has completed its mandatory three-year commitment to CARMA may terminate participation in the next Program Year by providing to CARMA, at least six months before the initiation of the next Program Year, a written request to terminate participation. Such termination from CARMA shall terminate the Member's membership in CARMA pursuant to the Joint Powers Agreement and Bylaws effective at the end of the current program year. (2) CARMA reserves the right to withhold from the sums due to the withdrawing member, in addition to any other remedies available to CARMA Bylaws, an amount sufficient to cover administrative costs associated with such untimely withdrawal but not less than 10% of the renewal premium contribution. (3) A participating Member that has not completed its mandatory three- year commitment to CARMA shall not be permitted, at its request, to withdraw from CARMA prior to the end of its commitment period. b. Involuntary Termination (1) The Board may, by 2/3rds vote of the representatives of the Members participating in this program, tern1inate future participation by a Member for, but not limited to, the following reasons: 1. Declination to cover the Member by the entity providing excess coverage; 11. Nonpayment of past premiums, assessments, retrospective adjustments, or other charges; 111. Habitual late payment of premiums, assessments, retrospective adjustments, and/or other charges; IV. Failure to provide requested underwriting information; v. Development of an extraordinarily poor loss history; V1. Substantial change in exposures which are not acceptable in ]:\ WP\CARMA \Documents\MPD\LIABMPD.03 draft.doc Effecti ve 7111/03 Page 9 CARMA; and/or Vll. Financial impairment which is likely to jeopardize CARMA's ability to collect amounts due in the future. (2) The Board may terminate future participation by a Member with or without cause with 2/3rds vote of the representatives of the Members participating in this Program. (3) The President shall send a notice of termination to the Member at least thirty (30) days prior to termination. c. Termination of participation, whether voluntary or involuntary, does not relieve the terminated Member of any benefits or obligations of those Program Years in which the terminated Member participated. These obligations include payment .of administrative overhead, assessments, retrospective adjustments, continuing administration costs, or any other amounts due and payable. When termination of participation, whether voluntary or involuntary occurs, all positive account balances for that Member, will be withheld from redistribution and applied to future years with negative balances until such time as the Member's account balances for all Program Years in which the Member participated are positive. J. AMENDMENTS TO THE PLAN The provisions of this Document may be amended or repealed by a two-thirds vote of the representatives of the Members participating in the Program provided prior written notice has been given to the Members. K. SEVERABILITY Should any portion, term, condition or provision of this document be decided by a court of , competent jurisdiction to be illegal or in conflict with any law of the State of California, or the United States, or be otherwise rendered unenforceable or ineffectual, the validity of the remaining portions, terms, conditions and provisions shall not be affected thereby. J:\ WP\CARMA \Documents\MPD\LIABMPD.03 draft.doc Effective 7//1/03 Page 10 L. SUBORDINATION If this Document is in conflict with the Joint Powers Agreement, Bylaws, and/or the Memorandum of Coverage, the terms of the Master Program Document will be subordinate to the Joint Powers Agreement, Bylaws, and/or the Memorandum of Coverage. M. DISPUTES Claims disputes between Members and CARMA will be resolved according to procedure as described in the Memorandum of Coverage. J:\ WP\CARMA \Documents\MPD\LIABMPD.03 draft.doc Effective 7//1/03 Page 11 EMPLOYMENT RISK MANAGEMENT AUTHORITY (ERMA) MEMORANDUM OF COVERAGE FOR THE PERIOD JULY 1,2003, TO JUNE 30, 2004 EFFECTIVE JULY 1, 2003 MEMORANDUM OF COVERAGE FOR THE EMPLOYMENT RISK MANAGEMENT AUTHORITY (ERMA) TABLE OF CONTENTS SECTION I - COVERAGE......... ......... ....... ........... ........................................ ..... ....... ....................... 1 SECTION II - DEFINITIONS........................................................................................................... 2 SECTION III - DEFENSE AND SETTLEMENT ........ ....... ........................... .................... .............. 10 SECTION IV - ERMA'S LIMIT OF COVERAGE........................................................................... 11 SECTION V - COVERAGE PERIOD AND TERRITORy............................................................. 12 SECTION VI - EXCLUSIONS....................... ................................................ .................................. 13 SECTION VII - CONDITIONS.... ...... .............. ......... ........................................ .............. ................. 16 FORM NUMBER ERMA 2003-1 EPL J :\ERMA \Admin\Documents\Employment Practices Liability\MOCs\2003-04\MemorandumOfCoverage 2003.doc Effective July 1, 2003 MEMORANDUM OF COVERAGE FOR THE EMPLOYMENT RISK MANAGEMENT AUTHORITY (ERMA) In consideration of the payment of the deposit premium, the Authority agrees with the Covered Parties as follows: SECTION I - COVERAGE The Authority will pay up to the Limit of Coverage those sums on behalf of the Covered Party for the Ultimate Net Loss, less the Retained Limit, that the Covered Party becomes legally obligated to pay as Damages because of Wrongful Employment Practice, as that term is herein defined and to which this Memorandum applies, caused by an Occurrence during the Coverage Period, except as otherwise excluded. This Memorandum of Coverage does not provide insurance, but instead provides for pooled risk sharing. This Memorandum is a negotiated agreement amongst the Covered Parties of the Authority and none of the parties to the Memorandum is entitled to rely on any contract interpretation principles which require interpretation of ambiguous language against the drafter of such Memorandum. This Memorandum shall be applied according to the principles of contract law, . giving full effect to the intent of the Covered Parties of the Authority, acting through the Board of Directors in adopting this Memorandum of Coverage. J :\ERMA \Admin\Documents\Employment Practices Liability\MOCs\2003-04\MemorandumOfCoverage 2003.doc Effective July I, 2003 2 SECTION II - DEFINITIONS 1. HAuthoritv" means the Employment Risk Management Authority. 2. HClaim" means: (a) a written demand or notice which is made or brought by an Employee, or an oral demand or notice by an Employee which is memorialized by the Covered Party in writing within fifteen (15) days of the oral demand or notice, and (b) seeks or alleges Damages or alleges other injury, harm, or invasion of rights, and (c) which contains an allegation that a Wrongful Employment Practice or a series of Wrongful Employment Practices has been committed during the Coverage Period. Claim includes a civil action, an administrative proceeding or charge commenced before the Equal ElTIployment Opportunity Commission or similar state or other agency having jurisdiction over the Covered Party, or an alternative dispute resolution proceeding, or action brought by a person or entity acting on behalf of an Employee of the Covered Party. Claim does not include a Union Grievance, or any type of criminal proceeding. A Claim shall be deemed to be made on the earliest date such written demand or notice is received by a Covered Party. 3. "Coveraf!e Period" means that term prescribed for coverage by the Authority as set forth in the Declarations page. 4. "Covered Partv " means: (A) All entities named in the Declarations page, including any and all commissions, agencies, districts, authorities, boards (including the governing board). (B) Any person who is an Employee ofa Covered Party identified in Section (A) herein, whether or not compensated, while acting in an official capacity for or on behalf of such Covered Party, including while acting on any outside board at the direction of such Covered Party. J :\ERMA \Admin\Documents\Employment Practices Liability\MOCs\2003-04\MemorandumOfCoverage 2003.doc Effective July I, 2003 3 Covered Party shall not include any person, whether or not compensated, who is not acting in the course and scope of his or her employment or whose conduct, as a matter of law, is not within the course and scope of his or her employment by the Covered Party at the time of the act or acts alleged in a Claim. (C) Notwithstanding section (B) above, the defense and indemnity coverage afforded by this Memorandum to a past or present Employee of a Covered Party is not broader than the Covered Party's duty to defend and indemnify its Employee, pursuant to California Government Code Section 815, 815.3, 825 to 825.6, 995 to 996.6, inclusive, and any amendments thereof. If the Covered Party which employs the Employee is not obligated under the California Government Code to provide a defense or to provide indemnity for a Claim, or if said Covered Party refuses to provide such defense and/or indemnity to said Employee, then this Memorandum shall not provide any such defense or indemnity coverage to said Employee. All immunities, defenses, rights, and privileges afforded to a Covered Party under California Government Code Section 815, 815.3, 825 to 825.6, 995 to 996.6, inclusive, and any amendments thereof, shall be afforded to the Authority to bar any defense or indemnity coverage under this Memorandum to that Covered Party's Employee. 5. "Damages" means compensation in money which a Covered Party is legally obligated to pay as a result of a Claim. Damages include: (1) attorney fees not based on contract, awarded against the Covered Party, (2) interest on judgments, or (3) costs for which the, Covered Party is liable either by adjudication, or by compromise with the written consent of the Authority, if the fees, interest, or costs arise from an Occurrence to which this coverage applies. Damages shall not include those sums determined to be owed by a Covered Party as contract Damages, including but not limited to retroactive or prospective benefits, or any Damages determined to be owing for breach of an express contract of employment or under an express obligation to make payments in the event of termination of employment. J : \ERMA \Admin\Documents\Employment Practices Liability\MOCs\2003-04\MemorandumOfCoverage 2003.doc Effective July I, 2003 4 Damages also shall not include sums paid pursuant to any judgment or agreement, whether injunctive or otherwise, to undertake actions to correct past discriminatory or unlawful conduct or to establish practices or procedures designed to eliminate or prevent future discriminatory or other unlawful conduct, or any non-monetary relief. 6. "Defense Costs" means all fees and expenses incurred by any Covered Party, caused by and relating to the adjustment, investigation, defense, or litigation of a Claim to which this coverage applies, including attorney's fees, court costs, and interest on judgments accruing after entry of judgment. Defense Costs shall not include the office expenses, salaries of Employees, or ex?enses of the Covered Party or the Authority. Defense Costs shall not include any fee or expense relating to coverage issues or disputes between the Authority and any Covered Party, or attorney fees or costs awarded to a prevailing plaintiff against the Covered Party. Defense Costs shall not include investigation costs incurred by investigators or adjusting expenses that were not approved by ERMA prior to the costs being incurred. Defense Costs are included within, and are not in addition to, the applicable Limit of Cover.age. 7. HDiscrimination " means termination of the employment relationship, a demotion, a failure or refusal to hire or promote, denial of an employment benefit, or the taking of any adverse or differential employment action becauseofrace, color, creed, religion, age, sex, disability, pregnancy, sexual orientation, national origin, AIDS, or other protected category or characteristic established pursuant to any applicable federal, state, or local statute or ordinance. 8. HEmplovee" means any person whose labor or services is engaged and directed by a Covered Party, whether past, present or future, including a volunteer, official, or applicant for employment. This includes part-time, seasonal, and temporary labor or services, as well as any person employed in a supervisory, managerial, or confidential position. Employee shall not include leased employees, independent contractors or subcontractors, agents, or servants of any Covered Party, unless the Covered Party has the right to and does control J:\ERMA \Admin\Documents\Employment Practices Liability\MOCs\2003-04\MemorandumOfCoverage 2003.doc Effective July 1, 2003 5 and directJhe details of their work rather than the result of that work. Employee also shall not include the spouse, child, unborn fetus, parent, brother, or sister of the Employee. 9. "Harassment" means: (A) unwelcome sexual advances, requests for sexual favors, or other verbal, visual or physical conduct of a sexual nature, including those which: (1) are made a condition of employment with the Covered Party; (2) are used as a basis for employment decisions by the Covered Party; or (3) create a work environment by a Covered Party that interferes with performance or creates an intimidating, hostile or offensive working environment; or (B) workplace conduct (i.e. Harassment of a non-sexual nature) committed by a Covered Party in violation of law or because of any protected category or characteristic which creates a work environment that interferes with perforn1ance, or creates an intimidating, hostile, or offensive working environment. 10. "Limit of Coveraf!e II shall be the amount of coverage stated in the Dec~arations Page, or sublimits as stated therein for each Covered Party per Occurrence, subject to any lower sub limit stated in this Memorandum. The Limit of Coverage shall include the Covered Party's Retained Limit. For each Occurrence, there shall be only one Limit of Coverage regardless of the number of claimants or Covered Parties against whom a Claim is made. In the event that a structured settlement, whether purchased from or through a third-party, or paid directly by the Covered Party in installments, is utilized in the resolution of a Claim or suit, the Authority will pay only up to the amount stated in the Declarations in present value of the Claim, as determined on the date of settlement, regardless of whether the full value of the settlement exceeds the amount stated in the Declarations. J :\ERMA \Admin\Documents\Employment Practices Liability\MOCs\2003-04\MemorandumOfCoverage 2003.doc Effective July l, 2003 6 11. "Occurrence" means an act, policy, or course of conduct by the Covered Party during the Coverage Period which results in a Claim for Wrongful Employment if the last act, policy or course of conduct by the Covered Party, without regard to any review process or appeal relating to such act, policy or course of conduct, occurred during the Coverage Period. All allegations by the same Employee in the same Claim shall be considered one Occurrence for the purpose of the Limit of Coverage, and such Occurrence shall be deemed to exist on the date of the allegation of the last act, policy, or conduct, in the event of an allegation of multiple acts, policies, or course of conduct. All Claims by all Employees arising from the same act, policy, or course of conduct by the same Covered Party shall be considered as one Occurrence for the purpose of the Limit of Coverage. 12. HRetained Limit" means the amount of Ultimate Net Loss, identified in the applicable Declaration which the Covered Party becomes liable to pay before the Authority is obligated to make payment. For each Occurrence, there shall be only one Retained Limit regardless of the number of claimants or Covered Parties against whom a Claim is made. 13. HRetaliation" means retaliatory treatment against an Employee of the Covered Party on account of such Employee's exercise or attempted exercise of his or her rights under the law. 14. "Ultimate Net Loss" means the total of all Defense Costs incurred by the Covered Parties and all Damages for which the Covered Parties are liable either by adjudication or by compromise with the written consent of the Authority, arising from an Occurrence to which this coverage applies. J:\ERMA \Admin\Documents\Employment Practices Liability\MOCs\2003-04\MemorandumOfCoverage 2003.doc Effective July I, 2003 7 15. HUnion Grievance" means any labor negotiation with respect to wages or working conditions, any union organizing effort or unfair labor practice charge within the jurisdiction of the National Labor Relations Board. 16. HWorkplace Tort" means any of the following acts alleged to have been committed in violation of law or because of any protected category or characteristic: (A) actual or constructive termination of an employment relationship in a manner which is alleged to have been against the law or wrongful, or in breach of an implied employment contract or breach of the covenant of good faith and fair dealing in the employment contract; (B) allegations of negligent or wrongful evaluation, wrongful demotion, wrongful discipline, failure to promote, failure to grant tenure, or wrongful deprivation of career opportunity; (C) allegations of misrepresentation or defamation made by an Employee which arise from an employment decision to hire, fire, promote or demote; (D) allegations of infliction of emotional distress, mental injury, mental anguish, shock, sickness, disease or disability made by an Employee which arise from an employment decision to hire, fire, promote or demote; (E) allegations of false imprisonment, detention, or malicious prosecution made by an Employee which arise from an employment decision to hire, fire, promote or demote; (F) allegations of libel, slander, defamation of character, invasion of privacy made by an Employee which arise from an employment decision to hire, fire, promote or demote; and J:\ERMA \Admin\Documents\Employment Practices Liability\MOCs\2003-04\MemorandumOfCoverage 2003.doc Effective July I, 2003 8 (G) other personal injury allegations made by an Employee which anse from an employment decision to hire, fire, promote or demote. Workplace Torts do not include Damages determined to be owing under a written contract of e~ployment or obligation to make payments, including but not limited to severance payments, in the event of the termination of employment. Workplace Torts shall not include any allegations other than those set forth above. 17. HWronf!ful Emplovment Practice II means any actual or alleged Wrongful Termination, Discrimination, Harassment, Retaliation, or Workplace Tort. 18. IIWronf!ful Termination" means termination of an employment relationship in a manner which is alleged to have been committed in violation of law or because of any protected category or characteristic or in breach of an implied agreement to continue employment. Wrongful Termination shall not include Damages determined to be owing under an express contract of employment or an express obligation to make payments in the event of the termination of employment. J :\ERMA \Admin\Documents\Employment Practices Liability\MOCs\2003-04\MemorandumOfCoverage 2003.doc Effective July 1, 2003 9 SECTION III - DEFENSE AND SETTLEMENT The Authority shall have no duty to assume charge of investigation or defense of any Claim. However, the Authority shall have the right to assume the control of the negotiation, investigation, defense, appeal, or settlement of any Claim the Authority determines, in its sole discretion, to have reasonable probability of resulting in an Ultimate Net Loss in excess of the applicable Retained Limit. The Covered Parties shall fully cooperate in all matters pertaining to such Claim or proceeding. If the Authority assumes the control of the handling of a Claim, the Covered Parties shall be obligated to pay at the discretion of the Authority any sum necessary for the defense and s~ttlement of a Claim, or to satisfy liability imposed by law up to the applicable Retained Limit. No Claim shall be settled for an amount in excess of the Retained Limit without the prior written consent of the Authority, and the Authority shall not be required to contribute to any settlement to which it has not consented. J :\ERMA \Admin\Documents\Employment Practices Liability\MOCs\2003-04\MemorandumOfCoverage 2003.doc Effective July I, 2003 10 SECTION IV - ERMA'S LIMIT OF COVERAGE Regardless of the number of (a) Covered Parties under this Memorandum, (2) persons or organizations who sustain injury or damage, or (3) Claims made or suits brought, the Authority's liability is limited as follows: With respect to coverage provided, the Authority's liability for anyone Occurrence shall be limited to the Ultimate Net Loss which is in excess of the Covered Party's Retained Limit, but then only up to the sum set forth in the Declarations as the Authority's Limit of Covera!!e for anyone Occurrence. In the event that a structured settlement, whether purchased from or through a third party, or paid directly by the Covered Party in installments, is utilized in the resolution of a Claim or suit, the Authority will pay only up to the amount stated in the Declarations in present value of the Claim, as determined on the date of settlement, regardless of whether the full value of the settlement exceeds the amount stated in the Declarations. The Authoritv 's Limit ofCoveraf!e is composed of two layers. The first layer consists of the Covered Partv's Retained Limit and then the Authoritv's pooled funds for a total of $1.000.000. The second laver is reinsured. and is in the amount of $3 .000.000 per Occurrence in excess of the first layer of $1.000.000 Ultimate Net Loss. regardless of the number of Covered Parties. The reinsurer is liable for 100% of the amount by which the Ultimate Net Loss exceeds $1.000.000 in anyone Occurrence per Covered Partv. but shall not exceed $3.000.000 for Ultimate Net Loss for anyone Occurrence. regardless of the number of Covered Parties. In addition. the reinsurer's liability shall not exceed $6.000.000 Ultimate Net Loss in the aggregate per Covered Partv in anyone CoverafJe Period regardless of the number of Occurrences. and shall not exceed $6.000.000 Ultimate Net Loss in the aggregate in anyone Coveraf!e Period regardless of the number of Occurrences or Covered Parties. With regard to class action suits. the liability of the reinsurer shall not exceed $6.000.000 Ultimate Net Loss in the aggregate regardless of the number of Occurrences or Covered Parties. Nothing contained herein shall operate to Increase the Authority's Limit of Coverage under this Memorandum. J :\ERMA \Admin\Documents\Employment Practices Liability\MOCs\2003-04\MemorandumOfCoverage 2003.doc Effective July I, 2003 11 SECTION V - COVERAGE PERIOD AND TERRITORY This Memorandum applies to Wrongful Employment Practice that occurs anywhere in the world during the Coverage Period identified in the applicable Declaration. J: \ERMA \Admin\Documents\Employment Practices Liabi Iity\MOCs\2003-04\MemorandumOfCoverage 2003.doc Effective July 1,2003 12 SECTION VI - EXCLUSIONS This Memorandum does not cover: 1. Bodily Injury. We do not cover Claims: (A) for bodily injury, sickness, disease or death of any person; or (B) brought by the person's domestic partner, spouse, child, parent, brother or sister as a result of such bodily injury, sickness, disease or death. This does not apply to Claims for emotional distress, mental anguish or humiliation that arise from a Wrongful Employment Practice. 2. Compliance with ADA Requirements. We do not cover any costs or expenses incurred to make premises accessible to persons with disabilities as required by: (A) the Americans with Disabilities Act of 1990; (B) any similar federal, state or local law; (C) any amendments to such laws; or (D) any regulations promulgated under any such laws. 3. Contractual Liability. We do not cover the liability of others assumed by the Covered Party in a contract or agreement. This does not apply to liability that the Covered Party would have had in the absence of the contract or agreement. J :\ERMA \Admin\Documents\Employment Practices Liability\MOCs\2003-04\MemorandumOfCoverage 2003.doc Effective July 1,2003 13 4. ERISA, C.OBRA and WARN Act Liability. We do not cover any liability imposed on the Covered Party under: (A) the Employee Retirement Income Security Act of 1974; (B) the Comprehensive Omnibus Budget Reconciliation Act; (C) the Worker Adjustment and Retraining Notification Act; (D) any similar federal, state or local laws; (E) any amendments to such laws; or (F) any regulations promulgated under any such laws. 5. Fines, Multiplied Damages, or Non-Monetary Relief. We do not cover: (A) fines, taxes, penalties, or liquidated Damages; (B) the multiplied portion of any damage award that is subject to a multiplier; (C) non-monetary relief; or (D) any other uninsurable amounts. 6. Intentional Conduct Done with Willful and Conscious Disregard. We do not cover Claims for injury or Damages caused by intentional conduct done by the Covered Party with willful and conscious disregard of the rights or safety of others, or with malice. However, where the Covered Party did not authorize, ratify, participate in, consent to, or have knowledge of such conduct by its Employee, and the Claim against the Covered Party is J :\ERMA \Admin \Documents\Employment Practices Liability\M OCs\2003-04\MemorandumOfCoverage 2003.doc Effective July I, 2003 14 based solely on its vicarious liability arising from its relationship with such Employee, this exclusion does not apply to said Covered Party. 7. Intentional Violations of Laws and Orders. We do not cover Claims that arise out of a Covered Party's intentional failure to comply with, or reckless disregard of, any law, order or regulation relating to employment practices. 8. Prior Wrongful Employment Practices. We do not cover liability arising out of any Claim, fact, circumstance, situation, transaction or event concerning a Wrongful Employment Practice of which any Covered Party had received a prior Claim, or which was the subject of any notice given under any insurance policy or coverage prior to the Covered Party obtaining coverage under this Memorandum. 9. Property Damage. We do not cover Claims for damage to or destruction of any tangible property, including loss of its use. 10. Strikes and Lockouts. We do not cover Claims that arise out of a lockout, strike, picket line, replacement or other similar actions resulting from labor disputes or labor negotiations. 11. Ultimate Net Loss. We do not cover Ultimate Net Loss arising out of relief, or redress, in any form other than money Damages or seeking only injunctive or non-monetary relief, regardless of whether a prevailing claimant may be entitled to recover attorney's fees and costs. 12. Workers' Compensation or Similar Law. We do not cover obligations under a workers' compensation law, disability benefits or unemployment compensation law, or any similar law. This exclusion does not apply to Retaliation or Discrimination for filing a workers' compensation Claim or a Claim for disability benefits. J :\ERMA \Admin\Documents\Employment Practices Liability\MOCs\2003-04\MemorandumOfCoverage 2003.doc Effective July 1, 2003 15 SECTION VII - CONDITIONS 1. Covered Partv's Duties in the Event of Occurrence. Claim. or Suit The following provisions are conditions precedent to coverage under this Memorandum. The Covered Party's failure to comply with any of these provisions shall void the coverage provided herein. (A) The Covered Party shall notify the Authority within 30 days upon receipt of notice of a written Claim by an Employee. Written notice containing particulars sufficient to identify the c1aimant(s), the Covered Party(ies), and also reasonably obtainable information with respect to the time, place, and circumstances thereof, and the names and addresses of the Covered Party and of available witnesses, shall be given to the Authority or any of its authorized agents as soon as possible. (B) Ifa suit is brought against the Covered Party, in addition to the information required by subparagraph(A), the Covered Party shall be obligated to forward immediately to the Authority every demand, notice, summons, or other process received by it or its representative. (C) The Covered Party shall cooperate with the Authority and upon its request assist in making settlements in the conduct of suits and in enforcing any right of contribution or indemnity against any person or organization who may be liable to the Covered Party because of Wrongful Employment Practice with respect to which coverage is afforded under this Memorandum; and the Covered Party shall attend hearings and trials and assist in securing and giving evidence and obtaining the attendance of witnesses. ]:\ERMA \Admin\Documents\EmpJoyment Practices Liability\MOCs\2003-04\MemorandumOfCoverage 2003.doc Effective July 1, 2003 16 (D) The Authority shall be entitled to complete access of the Covered Party's Claim file, the defense attorney's complete file, and all investigation material and reports, including all evaluations and information on negotiations. The Covered Party shall be responsible to report on the progress of the litigation and any significant developments at least quarterly to the Authority, and to provide the Authority with simultaneous copies of all correspondence provided to the Covered Party by its defense attorneys and/or agents. 2. Bankruptcy or Insolvency Bankruptcy or insolvency of the Covered Party shall not relieve the Authority of any of its obligations hereunder. 3. Other Coverage Ifinsurance or any other coverage with any insurer, joint powers authority or other source is available to the Covered Party covering a loss also covered hereunder (whether on primary, excess, or contingent basis), the coverage hereunder shall be in excess of, and shall not contribute with, such other insurance or coverage. This coverage shall be in excess of, and shall not contribute with, any insurance or coverage which names a Covered Party herein as an additional Covered Party or additional insured party, where coverage is extended to a loss also covered hereunder. In order for the coverage herein to apply, the Covered Party must pay the full amount of its Retained Limit. Payment of the Retained Limit by the Covered Party is required in addition to and despite any payments from any other source for or on behalf of that Covered Party. 4. Severability of Interests The term Covered Party is used severally and not collectively, but the inclusion herein of more than one Covered Party shall not operate to increase the limits of the Authority's liability or the Retained Limit applicable per Occurrence. 5. Termination This Memorandum may be terminated at any time in accordance with the Bylaws of the Authority. 6. Changes Notice to any agent or knowledge possessed by any agent of the Authority or by any other person shall not effect a waiver or a change in any part of this Memorandum of Coverage, nor shall the terms of this Memorandum of Coverage be waived or changed, except by endorsement issued to form a part of this Memorandum of Coverage. 7. Subrogation The Authority shall be subrogated to the extent of any payment hereunder to all the Covered Parties' rights of recovery thereof and the Co'vered Parties shall do nothing after loss to prejudice such right and shall do everything necessary to secure such right. Any amounts so recovered shall be apportioned as follows: (A) The highest layer of coverage shall be reimbursed first and if there are sufficient recoveries then the next highest layer shall be reimbursed until all recoveries are used up. (B) The expenses of all such recovery proceedings shall be paid before any reimbursements are made. If there is no recovery in the proceedings conducted by the Authority, it shall bear the expenses thereof. 8. Arbitration Decisions by the Authority whether to assume control of the negotiation, investigation, defense, appeal, or settlement of a Claim, or whether or not coverage ,exists for a particular Claim or part of a Claim shall be made by the Board of Directors of the Authority. Any dispute concerning such decisions shall be submitted to binding arbitration. The Covered Party must exhaust all rights to appeal as established by the Bylaws prior to requesting arbitration of a dispute. Arbitration shall be conducted pursuant to the California Code of Civil Procedure. Arbitration shall be conducted by a three-person panel. The Covered Party or parties shall select one arbitrator and the Authority shall select one arbitrator, and the two arbitrators shall select a third arbitrator upon mutual agreement. No arbitrator shall be employed or affiliated with the Authority or the Covered Party or parties. The selection of arbitrators shall take place within twenty (20) calendar days from the receipt of the request for arbitration. The arbitration hearing shall commence within forty-five (45) calendar days from the date of the selection of the arbitrators. Each party shall bear the cost of its selected arbitrator and one-half the cost of the third selected arbitrator. In addition, each party shall be responsible for its own costs and expenses of arbitration. Except for notification of appointment and as provided in the California Code of Civil Procedure, there shall be no communication between the parties and the arbitrator( s) relating to the subject of the arbitration other than at oral hearings. The procedures set forth in California Code of Civil Procedure Section 1293.05 relating to depositions and discovery shall apply to any arbitration pursuant to this paragraph 8. Except as provided otherwise above, arbitration shall be conducted as provided in Title 9 of the Code of Civil Procedure (commencing with Section 1280). The decision of the panel of arbitrators shall be final and binding, and shall not be subject to appeal. BAY CITIES JOINT POWERS INSURANCE AUTHORITY POOLED PROPERTY PROGRAM MASTER PLAN DOCUMENT BAY CITIES JOINT POWERS INSURANCE AUTHORITY MASTER PLAN DOCUMENT FOR THE PROPERTY PROGRAM TABLE OF CONTENTS ARTICLE I-GENERAL.................................................................................................................. 1 A. AUTHORITy..................................................................................................................... 1 B. PURPOSE.................. .................................... ................................................ ..................... 1 C. RESPONSIBILITY AND AUTHORITY. ......... ................................................................. 1 D. PROGRAM YEARS ..... ....... ................ ........ ....... ............ .................................................... 2 E. LIMITS OF LIABILITy..................................................................................................... 2 F. DEDUCTIBLES ..... ....... ..... ................................ ................................................................ 2 G. FINANCING THE PROGRAM .................... .................................... ...... ...... ........ ............. 2 H. AMEND MENTS TO THIS DOCUMENT......................................................................... 3 ARTICLE II -PREMIUMS AND ASSESSMENTS ................................................... ............. ........ 4 ARTICLE III-COVERAGE .............................................. .................. ............................................ 6 ARTICLE IV-ADMINISTRATION.. .... .... .......... .... ............. ...... .... ........... .... ....... ........ ...... ............ 7 ARTICLE V-PARTICIPATION ............... ........ ............... ......................... ......... ...... .................... 10 A. ELIGIBILITY AND APPLICATION.... ............ ...... ............... ....... ........ ...... ........ ............. 10 B. PARTICIPANTS' DUTIES........................ ............... .................................. ...................... 10 C. TERMINATION OF PARTICIPATION .......................................................................... 11 ARTICLE VI-DEFINITIONS...................................................................................................... 12 BAY CITIES JOINT POWERS INSURANCE AUTHORITY POOLED PROPERTY PROGRAM MASTER PLAN DOCUMENT ARTICLE I GENERAL A. AUTHORITY 1. The MPD for the Pooled Property Program is intended to be the primary operational guide for the conduct of the Authority's Pooled Property Program. 2. AUTHORITY AND STANDARDS The Authority's Pooled Property Program has been organized under authority granted by, and shall be conducted in accordance with, the laws of the State of California and the standards set forth by the California Association of Joint Powers Authorities (CAJP A) in its accreditation standards for pooled programs. B. PURPOSE The Authority, as a part of its overall objectives, provides a Pooled Property Program which has been designed to provide for the needs of its Member Entities for protection against physical injury to the Member Entities' real and personal property, including contractor's equipment. C. RESPONSIBILITY AND AUTHORITY 1. The Board of Directors shall have the responsibility of establishing policies and remaining informed as to the financial strength and viability of the Pooled Property Program. The Board has the authority, within the parameters of the Agreement and Bylaws of the Authority and this MPD, to act as needed to maintain and develop the financial strength of the Pooled Property Program. The Board of Directors shall have the authority to enter into insurance contracts for the insurance coverages within the budgeted costs of such insurance. 2. The Executive Committee shall have the responsibility and authority to effect the general policies established by the Board of Directors. 3. The Authority Administrator shall have the responsibility to manage the daily activities of the Pooled Property Program and shall be given the authority to Pooled Property Program Master Plan Document Page 1 implement the policies established by the Board. The Administrator shall report to the Executive Committee and to the Board of Directors, as necessary. D. PROGRAM YEARS 1. A program year is defined by the term of the coverage period, generally a period of twelve (12) months. The program years generally will begin at 12:01 a.m. on July 1, and end at 12:01 a.m. on the following July 1 except the first program year which will begin on May 15,2003. 2. The income and expenses of this Pooled Property Program shall be accounted for and the funds maintained separately from any other program of the Authority. An annual contribution may be charged to each participating Member Entity at the inception of the program year to fund the losses and expenses anticipated during that program year. 3. Any excess funds at the end of the program year shall be retained by the Pooled Property Program to pay claims and expenses which may be incurred in the future. E. LIMITS OF LIABILITY The Board of Directors shall establish an initial limit of liability for the Pooled Property Program which may be amended from time to time for subsequent program years. This limit of liability shall apply to each real and/or personal property claim as described in the Memorandum of Coverage for this Pooled Property Program. F. DEDUCTIBLES 1. A deductible, applicable to claims incurred by each Member Entity, may be established by the Board of Directors. 2. A deductible, applicable to purchased insurance and applying to each claim for loss, shall be established by the Board of Directors based on the ability of the Pooled Property Program to assume such deductibles for the participating Member Entities' and the savings in premiums with such assumption of risk of loss. G. FINANCING THE PROGRAM 1. A reserve fund shall be established and maintained to fund adverse loss history which may develop during the program year. 2. The deposit premiums may be used to fund the claims against the Pooled Property Program, pay premiums for purchased coverage for participating member cities, and pay program administrative expenses for participating Member Entities. Any remaining deposit premiums shall be a contribution to the establishment or maintenance of the reserve fund. Pooled Property Program Master Plan Document Page 2 3. If the Board of Directors determines that the Pooled Property Program lacks sufficient funds to complete a program year, the Board of Directors, upon a two- thirds (2/3rds) vote of the Board of Directors present and voting at a regular or special meeting, may assess the participating Member Entities based on property values, an amount sufficient to fund incurred costs and the completion of the program year, or may temporarily suspend the coverage under the Pooled Property Program until such time as the Board of Directors may vote to terminate or continue the Pooled Property Program pursuant to Article VLC. of the Bylaws. H. AMENDMENTS TO THIS DOCUMENT The provisions of this document may be amended from time to time by a two-thirds (2/3rds) vote of the Board of Directors, provided prior written notice has been given to the members of the Board of Directors. Any provision of this document which is so amended may be modified or repealed by a majority vote of the Member Entities which participC\te in this program. This action must be taken within thirty (30) days after notice of the amendment to the MPD. The appeal process may be by mail with a majority of the Member Entities signing the appeal notice. The repeal process may also be conducted at any subsequent regular or special meeting of the Board of Directors. Pooled Property Program Master Plan Document Page 3 BAY CITIES JOINT POWERS INSURANCE AUTHORITY POOLED PROPERTY PROGRAM MASTER PLAN DOCUMENT ARTICLE II PREMIUMS AND ASSESSMENTS A. DEPOSIT PREMIUMS 1. Each year, the Authority shall include in the annual billing, as described in the Authority's Bylaws, the deposit premium for this Pooled Property Program. The due dates and delinquency dates are the same as tho~e for the annual billing. 2. The annual deposit premium for each participating Member Entity shall be calculated by multiplying the appropriate premium rate times the values of the covered properties for each participating Member Entity, plus an administrative charge and the expected costs of insurance. 3. The values of the properties to be used in the calculation of the deposit premium shall be the values collected prior to the preparation of the annual budget each program year. 4. Deposit premiums may be established and charged to the individual Member Entities such that, with the addition of funds raised from other sources and the balance in the Pooled Property Program, there shall be sufficient funds to meet expected losses, other expected expenses, and desired contributions to the reserve fun4. B. INTEREST AND PENALTIES 1. Members with delinquent amounts due shall be assessed a penalty which shall be 1 percent of the unpaid an10unt due and payable to the Authority 30 days after the initial invoice due-date. A penalty of another one percent shall accrue after an additional 45 days. Interest shall accrue on all delinquent amounts due and payable to the Authority at the rate of 10% per annum from the due date of the billing until the date finally posted by the designated financial institution. Each participant shall indemnify the Authority from any expense resulting from its failure to pay the sum due on or before the due date. The Board may elect to temporarily suspend coverage if a member Pooled Property Program Master Plan Document Page 4 fails to pay its contribution. For the purpose of assessing interest, each part of a calendar month shall be treated as a whole month. C. ASSESSMENTS 1. Any other charges, including assessments, are due and payable in accordance with Article XIV(7)(C) of the Bylaws. Pooled Property Program Master Plan Document Page 5 BAY CITIES JOINT POWERS INSURANCE AUTHORITY POOLED PROPERTY PROGRAM MASTER PLAN DOCUMENT ARTICLE In COVERAGE A. GENERAL DESCRIPTION '1. The coverage provided under this Pooled Property Program shall be defined in a Memorandum of Coverage, which shall be adopted by the Board of Directors. The Board of Directors may alter or amend the limit of liability and deductibles applicable to the program year under the Memorandum of Coverage prior to such program year. 2. The Board of Directors may determine to provide coverage in excess of the limit of liability established in the Memorandum of Coverage by obtaining excess coverage attaching at the Pooted Property Program's limit of liability. This coverage may be obtained from an insurance company, by participating in another pool established under the Government Code as a joint powers agency, or offered through another Pooled Property Program pooling procedure. If the coverage is purchased from an insurance company, such insurance company shall have an A.M. Best Rating Classification of A- or better and an A.M. Best financial rating of VII or better. Pooled Property Program Master Plan Document Page 6 BAY CITIES JOINT POWERS INSURANCE AUTHORITY POOLED PROPERTY PROGRAM MASTER PLAN DOCUMENT ARTICLE IV ADMINISTRATION A. RESPONSIBILITY AND AUTHORITY 1. RELATION TO AUTHORITY STRUCTURE a. This Master Plan Document (MPD) is incorporated into the Bylaws of the Bay Cities Joint Powers Insurance Authority. As such, it shall be treated as one of the Authority's governing documents. The MPD shall have ,the same effect as the Agreement, Bylaws, or Memorandum of Coverage; however, any conflict between the MPD, the Agreement, Bylaws, or Memorandum of Coverage for property shall be determined in favor of the Agreement, Bylaws, or Memorandum of Coverage for property. b. The Authority's Pooled Property Program has been organized under authority granted by, and shall be conducted in accordance with the laws of the State of California and the standards set forth by the California Association of Joint Powers Authorities (CAJP A) in its accreditation standards for pooled programs. 2. BOARD OF DIRECTORS a. The Board of Directors retains unto itself the authority to: (1) Establish policies for the Pooled Property Program; (2) Approve the annual budget for the Pooled Property Program; (3) Act as needed to maintain and develop the financial strength of the Pooled Property Program; (4) Terminate any Member Entity from the Pooled Property Program pursuant to Article V(C); and (5) Terminate the Pooled Property Program. Pooled Property Program Master Plan Document Page 7 3. EXECUTIVE COMMITTEE a. The Authority's Executive Committee shall have the responsibility and authority to' carry out and perform all functions of the Pooled Property Program not otherwise reserved to the Board of Directors. 4. ADMINISTRATOR a. The Administrator shall use his or her best efforts to administer the Pooled Property Program so as to achieve the objectives and goals of the Pooled Property Program and the Authority. b. The daily operation of the Pooled Property Program shall be administered by the Authority's Administrator who shall report to the Authority's Board of Directors and Executive Committee. c. The Administrator shall be assisted by the Authority's Board Secr~tary and Finance Manager who shall provide the technical oversight of the Pooled Property Program, maintenance of this document, and the accounting systems which support this Pooled Property Program. d. The Pooled Property Program shall be administered in a manner which will provide claim and cost accountability for the Pooled Property Program and each participating Member Entity, separate and apart from all other programs of the Authority. e. The Administrator shall: (1) Assist the participating Member Entities in training their personnel in the correct procedures for timely and accurately reporting of claims; (2) Accept loss notices and supporting documents; (3) Evaluate and pay claims in accordance with the Memorandum of ' Coverage; (4) Determine the possibility of recovery through subrogation and coordinate such action with the Member Entity where appropriate; (5) Act as liaison between the insurance broker, claims adjusting firm, and the Member Entities; (6) Prepare and submit a budget for each program year to the Executive Committee for review and to the Board of Directors for approval prior to the program year; Pooled Property Program Master Plan Document Page 8 (7) Prepare and submit an annual report to the Board of Directors; (8) Recommend rates and deposit premiums for each new program year in the manner described in Article II; (9) Invoice participating Member Entities for deposit premiums and other amounts due; (10) Report to the Board of Directors any delinquent billings not paid and outstanding in excess of 60 days; , (11) Prepare demands for payment on claims against the Pooled Property Program; (12) Present timely annual financial statements to the Board of-Qirectors and the Executive Committee; (13) Provide other services as may reasonably be requested by the Board of Directors, the Executive Committee, or a Member Entity; (14) Have the authority to engage outside legal counsel for the purpose of providing an opinion regarding the scope of coverage provided under this program, as necessary; (15) Secure the services of an actuarial consultant, as necessal}'; and ( 16) Work with the Board of Directors in securing the services of a claims adjusting firm. 5. CLAIM SETTLEMENT AUTHORITY a. The Administrator and the claims adjusting firm shall review all claims properly submitted and make a determination as to applicability of coverage' and amount of the loss. Upon such determination, the Administrator shall advise the Member Entity experiencing the loss and process a payment to the Member Entity where appropriate. b. Any decision of the applicability of coverage or amount of the loss by the Administrator may be appealed to the Board of Directors within thirty (30) days after notice of the decision to the Member Entity. The decision of the Board of Directors shall be final. Pooled Property Program Master Plan Document Page 9 BAY CITIES JOINT POWERS INSURANCE AUTHORITY POOLED PROPERTY PROGRAM MASTER PLAN DOCUMENT ARTICLE V PARTICIPATION A. ELIGIBILITY AND APPLICATION 1. To participate in the Pooled Property Program, the applicant must be a member of the Authority. All Member Entities are eligible for participation in the Pooled Property Program. 2. An applicant may apply for participation at any time during a program year. 3. The applicant must apply for participation in the Pooled Property Program by providing all information requested by the Administrator. 4. Upon receipt of the requested information, the Authority Administrator shall prepare a quote for coverage for the applicant Member Entity. 5. Once the applicant Member Entity accepts the quote for coverage, a letter from the applicant Member Entity shall be sent to the Authority Administrator indicating the date on which the Member Entity is requesting coverage. 6. The applicant must commit to at least three full program years of participation' in the Pooled Property Program. B. PARTICIPANTS' DUTIES 1. Each participating Member Entity shall be responsible for providing the data ' required by the Authority to determine the values of covered properties. This data shall be factual and provided in a timely manner. 2. After completion of the initial three-year period, a participating Member Entity who requests withdrawal from the Pooled Property Program shall be obligated to remain in the Pooled Property Program until the end of a program year. 3. A participating Member Entity requesting to withdraw from the Pooled Property Program shall give written notice to the Authority at least six months prior to the end of a program year. Pooled Property Program Master Plan Document Page 10 C. TERMINATION OF PARTICIPATION 1. A participating Member Entity shall be obligated to remain in the Pooled Property Program until the end of the initial three-year period. 2. A participating Member Entity shall participate in the next program year unless: a. At least six months prior to the end of the program year a request to terminate participation is received from the participating Member Entity, or b. At least thirty (30) days prior to the end of the program year a termination notice has been sent to the participating Member Entity. 3. The Board may initiate termination offuture participation for the following reasons: a. Termination as a member of the Authority; b. Non-payment of premiums, assessments, or other charges; c. Frequent late payment of premiums, assessments, and/or other charges, subject to interest and penalty charges; d. Failure to timely provide requested underwriting information; e. Consistent poor loss history relative to the pool; f. Substantial change in exposures which are not acceptable in this program; and/or g. Financial impairment that is likely to jeopardize this program's ability to collect amounts due in the future. Pooled Property Program Master Plan Document Page 11 BAY CITIES JOINT POWERS INSURANCE AUTHORITY POOLED PROPERTY PROGRAM MASTER PLAN DOCUMENT ARTICLE VI DEFINITIONS The words in bold print are defined in the Authority's governing documents. Pooled Property Program Master Plan Document Page 12 RESOLUTION NO. 7-2002/2003 RESOLUTION OF THE BOARD OF DIRECTORS OF THE BAY CITIES JOINT POWERS INSURANCE AUTHORITY ESTABLISHING ADMINISTRATOR'S DUTIES REGARDING THE PROSPECTIVE MEMBER APPLICATION PROCESS WHEREAS, the Authority Board of Directors desires to provide additional guidance to the Authority Administrator regarding the prospective member application process; NOW, THEREFORE, BE IT RESOLVED by the Board of Directors as follows: 1. In implementing the prospective member application process, the Authority Administrator shall follow these procedures: a. Upon request from an eligible entity (applicant), the Administnltor shall obtain the necessary information from the applicant to prepare an initial price indication for coverage. b. The Administrator shall also send a letter with the prospective member packet. This packet generally contains all the relevant documents such as governance, budget, membership, program data, and services to be provided. In addition, this letter will include an explanation of the Authority's process for admission of prospective member districts as outlined in the Bylaws, including the requirement for a $1,000 application fee which must be submitted to further process the application. It will be described that the fee is only refundable upon Board approval of admission as a new member. c. Upon receipt of the $1,000 application fee, the Administrator may do the following: (l) Meet and explain fully the Authority's insurance and self-insurance programs and respond to related inquiries of applicant; (2) Advise applicants in compiling and submitting underwriting data to the Authority; ( 3) Review all underwriting data and make recommendations to the Authority Board of Directors regarding applications; (4) Conduct a limited risk exposure review by the BCJPIA Risk Control Manager; and ( 5) Send notification to the applicant upon acceptance/rejection from the Authority Board of Directors. 3. These procedures may be amended from time to time by subsequent resolution of the Authority Board of Directors. 4. If there is any inconsistency between any provisions of the Authority Joint Exercise of Powers Agreement, Bylaws, master plan documents, or memoranda of coverage (the "governing documents") and this Resolution, the provisions of the governing documents shall prevail. This Resolution of the Board of Directors was adopted this 8th day of May, 2003 in Emeryville, California by a majority vote of the Board of Directors then present at a regular meeting of the Board: AYES 16 NOES 0 ABSTAIN 0 ABSENT 1 SIGNED: PRESIDENT ATTEST: SECRETARY TO THE BOARD OF DIRECTORS RESOLUTION NO. 8-2002/2003 RESOLUTION OF THE BOARD OF DIRECTORS OF THE BY CITIES JOINT POWERS INSURANCE AUTHORITY AMENDING THE BYLAWS DETAILING MANAGEMENT POSITIONS WHEREAS, the Authority desires to amend its Bylaws to provide in detail those management positions acceptable as representatives or alternate representatives to the BCJPIA Board of Directors; and WHEREAS, Article VI, Section I.A. of the Bylaws currently states the following: "Each director shall be the Chief Administrative Officer of each Member Entity or his or her designee which must be from within the ranks of management and from an appropriate area of management. " NOW, THEREFORE, BE IT RESOLVED by the Board of Directors as follows: The Bay Cities Joint Powers Agency Bylaws, are hereby amended to define "appropriate area of management" to mean the following the positions or their equivalent: City Attorney Assistant City Attorney Financial Officer City Administrator City Manager Assistant/Deputy City Manager Human Resources Manager Administrative Services Director This Resolution of the Board of Directors of the Bay Cities Joint Powers Insurance Authority was adopted this 8th day of May 2003 in Emeryville, California by a majority vote of the Board members then present at a regular meeting of the Board. AYES 16 NOES 0 ABSTAIN 0 ABSENT 1 SIGNED: President ATTEST: Secretary to the Board of Directors BAY CITIES JOINT POWERS INSURANCE AUTHORITY MASTER PROGRAM DOCUMENT FOR THE WORKERS' COMPENSATION PROGRAM (WCP) ARTICLE I: GENERAL A. AUTHORITY 1. The Workers' Compensation Program (WCP) Master Program Document of the Bay Cities Joint Powers Insurance Authority (Authority), shall be treated as one of the Authority's governing documents. However, any conflict between the WCP Master Program Document, the Authority's Joint Exercise of Powers Agreement (Agreement), or the WCP Memorandum of Coverage (MOC) shall be determined in favor of the Agreement or the MOC. 2. The WCP Master Program Document is intended to be the primary source of information, contain the rules and regulations, and serve as the operational guide for the conduct of the WCP. 3 The WCP has been organized under authority granted by, and shall be conducted in accordance with, the laws of the State of California; regulations prescribed by the Department of Industrial Relations (DIR) and the State of California Audit Unit; and the accreditation standards set forth by the California Association of Joint Powers Authorities (CAJPA). B. PURPOSE The Authority, as a part of its overall objectives, has designed the WCP to provide for the varied needs of its member cities in the area of workers' con1pensation liability. C. PARTICIPATION 1. All member cities of the Authority may become a participant (Participant) in the WCP, and are encouraged to do so. However, the terms and conditions which may be imposed on a member city which desires to join the WCP may be different, depending upon payroll, number of employees, the size of the city, its loss record, and other pertinent information. J :\BCJPIA \Admin\Documents\Goveming\Bylaws\ WCP Bylaws.doc Approved 5/8/03 D. GOVERNANCE Each member city's appointed primary representative and one alternate representative shall be the representative for the WCP. The member city will be entitled to one vote on all issues or decisions that involve the WCP. It is expected, but not mandatory, that the primary representative from each member city will be the individual designated as the member city's appointee to the Governing Body and that the alternate representative(s) will be the individual(s) designated as the member city's alternate representative on the Governing Body. E. GOALS AND OBJECTIVES 1. The Authority offers its member cities this WCP designed to provide coverage for the liabilities imposed by the workers' compensation laws of California as well as those imposed by common law upon employers. 2. The WCP shall provide workers' compensation coverage for the Participants utilizing an optimum mix of risk retention and risk transfer. The WCP shall provide various levels of retentions for the Participants, provide a risk sharing pool for losses above individual retention levels up to the Authority's Self-Insured Retention (SIR), and obtain excess coverage for the amount of the loss which exceeds the Authority's SIR. Additionally, the WCP shall provide for the sharing of operating costs and payment of the excess coverage by charging all Participants their share of such costs. 3. Although the WCP is provided to the Participants under those terms and conditions which prevail at' the time of the Participant's joining the WCP, the Governing Body shall have the right to alter, from time to time, the terms and conditions of the excess coverage and the pooled underlying coverage in response to the needs and abilities of the WCP and the participating cities, as well as in response to availability of coverage from outside sources. 4. The Authority offers participation in a risk sharing pool, covering losses of Participants in accordance with the Agreement adopted by the member cities. The assets of the pooled program shall be maintained at all times as the assets of the ' Participants collectively. The assets may be disbursed only pursuant to the provisions of this Master Program Document, and no Participant shall have an individual right to exercise control over said assets except as provided in the Agreement. 5. The WCP will provide coverage for injuries and illnesses to the Participants' employees under the terms and conditions set forth in the MOC. In addition to the coverage provided by the MOC, the Authority may purchase excess insurance or reinsurance. The amount of coverage to be pooled and/or purchased is at the discretion of the Governing Body. 2 J :\BCJPIA \Admin\Documents\Goveming\Bylaws\ WCP Bylaws.doc Approved 5/8/03 ARTICLE II: PROGRAM ELEMENTS A. PROGRAM YEARS 1. \ A program year is defined by the term of the coverage period, generally a period of 12 months. The WCP will have program years which begin at 12:01 a.m. on July 1 and end at midnight on the following June 30. 2. Each program year shall be accounted for separately. The income and expenses of each program year shall be accounted for separately from any other program years' income or expenses. 3. A program year shall not be closed until such time that the Governing Body authorizes closure, being convinced that known claims for the year are all closed and the probability of further claims being discovered is minimal. Any clo~ed years, however, may be reopened if deemed necessary and approved by the Governing Body. B. RETAINED LIMITS The WCP shall annually establish the limit of coverage for the pool. The underlying coverage of the WCP shall provide Participants retained limits of $150,000, $250,000, $350,000, and $500,000 per occurrence, or other limits as modified by resolut~on. The Participants may annually select their retained limit as approved. The amount of each loss, including expenses, which is less than the retained limit chosen by the applicable Participant, shall be paid by the Participant. C. DEPOSIT PREMIUMS 1. Annually, each Participant shall pay a deposit premium to the Authority for each program year. Such Deposit Premiums shall consist of the amount needed to cover excess insurance or reinsurance premiums (if any), administrative expenses and actuarially-determined losses, plus a margin for added confidence as determined by , the Governing Body. 2. The deposit premium shall be initially calculated for each Participant by taking the Participant's expected annual payroll, as determined by the State DE-6 form provided by each Participant, multiplied by the Governing Body adopted rate per $100 of payroll. After the end of the program year, adjustments from expected to actual payroll shall be made. Debit adjustments shall be billed to the Participant, and credit adjustments will apply to next year's billings. An annual audit of a Participant's payroll may be conducted by the Authority. 3 J :\BCJPIA \Admin\Documents\Goveming\Bylaws\ WCP Bylaws.doc Approved 5/8/03 3. The deposit premium shall also include: (a). All volunteers declared or otherwise required to be covered. The value of the volunteers' service shall be based upon a flat rate per volunteer; and (b). All other persons engaged in work that could make the Authority liable under Part One (workers' compensation insurance) of the MaC. If the Participant does not have payroll records for these persons, the contract price remuneration for their services and materials may be used as the premium basis. This paragraph will not apply if the Participant gives the Authority proof that the employers of these persons lawfully secured their workers' compensation obligations. 4. EXPERIENCE MODIFICATION ( a) Each member entity shall be evaluated each year for an experience modification adjustment that shall be applied to the deposit premIum. (b) The calculation of the adjustment shall include the actual loss experience of the individual member entity as it relates to the average loss experience of the group as a whole. Such loss experience shall not consider loss years that are more than three years old. The criteria that shall be used is the relationship of actual average loss experience over the period being rated as it relates to the average payroll for the same period. D. DIVIDEND AND ASSESSMENTS 1. DIVIDENDS (a). Five years after the end of the program year, the first dividend calculation shall be performed. Each year thereafter there shall be an additional dividend calculation made until such time as the program year is closed. Any dividends available to be declared and returned to the Participants will be at, the discretion of the Governing Body. (b). Calculation 1. Dividends are available to be declared only at such time as the WCP has equity, with liabilities actuarially stated discounted at an 80% confidence level. The calculated amount shall represent the maxin1um dividend available to be declared. 11. This amount shall be reduced if the two succeeding years (after the fifth year of the program year reaches eligibility) have negative 4 J :\BCJPIA \Admin\Documents\Goveming\Bylaws\ WCP Bylaws.doc Approved 5/8/03 equity, with liabilities actuarially stated at an expected confidence level. 111. Each Participant's share of any refunds shall be allocated based upon the method in which they were collected, beginning with the oldest program year. However, until the last claim of a program year has been paid and the program year has been closed, the program year must maintain sufficient funds to satisfy the 80% confidence level discounted requirement. 2. ASSESSMENTS (1) Assessments may be levied for the risk sharing layer of any program year( s), as approved by the Governing Body, on the Participants at such time that an actuary finds that the assets of the WCP, as a whole, do not meet the expected un discounted losses of the WCP. Each Participant' s sh~re of the assessment shall be allocated based upon the deposit premiums collected for the risk sharing layer of each respective program year being assessed. If such assessment is not sufficient to relieve the pool of its actuarial determined deficit in the year of the assessment, such assessment shall be levied each subsequent year until the actuarial determined deficit is relieved. The timing of payment shall be determined by the Governing Body at the time of assessment. (2) Equity, from the risk sharing layer, may be exchanged between eligible program years if sufficient funds are available. The transfer of equity will be performed such that the individual Participant's share of equity is separately applied so as to maintain the integrity of each Participant's balance. E. EXCESS COVERAGE 1. The Governing Body shall ensure that each program year is provided with excess workers' compensation coverage for the Participants. It is the intent and purpose of the Authority to continue to provide such coverage to the Participants, provided that such coverage can be obtained, and the coverage is not unreasonably priced. This coverage may be obtained from an insurance company, by participating in another pool established under the Government Code as a joint powers authority, or offered through another WCP pooling procedure. If the coverage is purchased from an insurance company, such insurance company shall have an A.M. Best Rating Classification of A- or better and an A.M. Best Financial Rating of VII or better or their equivalents. 2. The Authority, through the WCP, shall provide, where economically practical, at least $10,000,000 of total combined limits. Total combined limits is the maximum this WCP will pay for each injury or illness, regardless of whether the liability arises from Workers' Compensation Laws, Employer's Liability, or a combination ofthese. 5 J :\BCJPIA \Admin\Documents\Governing\Bylaws\ WCP Bylaws.doc Approved 5/8/03 3. Premiums for such coverages shall be paid by the WCP from the proceeds received as deposit premiums from the Participants. 4. The Governing Body may, from time to time, alter excess coverage based on insurance market conditions, available alternatives, costs, and other factors. The Governing Body shall place excess coverage with the two competing objectives of security and minimizing costs to the WCP as a whole. 6 J :\BCJPIA \Admin\Documents\Governing\Bylaws\ WCP Bylaws.doc Approved 5/8/03 ARTICLE III: ADMINISTRATION A. GOVERNING BOARD 1. Discussion of developments and performance of the WCP may occur as part of any scheduled Governing Body meeting. 2. The Governing Body retains unto itself the authority as consistent with the Agreement. 3. The Governing Body shall have the responsibility and authority to carry out and perform all functions, and make all decisions affecting the WCP, consistent with the powers of the Authority and not in conflict with the Agreement, the Bylaws, or the MOC. ' B. EXECUTIVE COMMITTEE 1. The Executive Committee shall have the responsibility and authority to carry out and perform all other functions, and make all decisions affecting the WCP, provided that such functions and decision are consistent with the powers of the Authority and are not in conflict with the Agreement, the Bylaws, or the Memorandum of CoveFage. 2. The Executive Committee shall meet at least twice a year to review the developments and performance of this WCP. The Executive Committee shall review, study, advise, make recommendations to the Governing Body, or take any action which the Committee believes to be in the best interests of the WCP and its member entities, provided that such action is not prohibited by law or is not an action reserved unto the Governing Body of Directors. C. ADMINISTRATOR The Administrator shall be responsible for: 1. The overall operation of the WCP; 2. Monitoring the status of the WCP and its operations, the development of losses, the program's administrative and operational costs, service companies' performance, and brokers' performance; 3. Assisting the Board in selecting brokers, actuaries, auditors, and other service companIes; 4. PrOlTIoting the programs to prospective new Participants; 5. Preparing, distributing, and maintaining all records of the WCP, including its Master 7 J :\BCJPIA \Admin\Documents\Goveming\Bylaws\ WCP Bylaws.doc Approved 5/8/03 Program Document and MOC as these may be amended from time to time; and 6. Preparing Certificates of Coverage and Waivers of Subrogation as may be required by the Participants in the WCP. 8 J :\BCJPIA \Admin\Documents\Governing\Bylaws\ WCP Bylaws.doc Approved 5/8/03 D. WORKERS' COMPENSATION PROGRAM MANAGER'S DUTIES The Workers' Compensation Program Manager (WCPM), unless otherwise modified by resolution, shall: 1. Generally, oversee all workers' compensation claims administration and management and report to the Administrator; 2. Develop for Board approval of performance standards third party administrators; 3. Maintain files on all claims reported to the Authority; 4. Recommend to the Governing Body the setting of reserves for those cases that are likely to penetrate to pooled funds; 5. Upon the reporting of each claim that has an expectation of exceeding the minimum incurred loss threshold set by the Governing Body, review said claim for the Authority and report said claims to the Governing Body at the next scheduled meeting; 6. Review the progress of all reported claims for the Authority and, if directed by the Governing Body, propose reserve changes, and/or take control and assume settlement authority for the claim; 7. Recommend claim settlements to the Governing Body for approval; 8. Annually, prepare a detailed report on the WCP, showing the activity by program year and the cumulative activity of all years, including number of claims, losses which have been incurred by each Participant, and the losses which have been shared through pooling; 9. Assist the Participants in training their personnel in the correct procedures for timely and accurately reporting claims; 10. As required, provide advice and assistance to Participants; 11. Periodically review third party claims administrators' claims files. The review should include the new indemnity claims reported, claims currently open and reported twelve months prior, and those claims for which a Participant has requested a specific review; (a). Provide guidance to the claims adjuster on the management of problem or complex claims; (b). Advise, where needed, on the selection of legal representation in anticipation of litigation; 9 J :\BCJPIA \Admin\Documents\Goveming\Bylaws\ WCP Bylaws.doc Approved 5/8/03 ( c). Monitor and evaluate the effectiveness of the defense firms and the management of the litigation; (d). Monitor and evaluate the effectiveness of medical treatment as respects claims costs, especially those involving complex medical issues; ( e). Evaluate, where needed, recommendations. for settlement of claims; (f). Mediate differences, if any, between the claims adjuster and a Participant; and (g). Review the performance of the claims adjusters' personnel assigned to the Authority's account with special emphasis in the handling of "open claims." 10 J :\BCJPIA \Admin\Documents\Goveming\Bylaws\ WCP Bylaws.doc Approved 5/8/03 ARTICLE IV: CLAIMS ADMINISTRATION A. CLAIMS PROCEDURES MANUAL 1. A Workers' Compensation Claims Procedures Manual (Manual) including reporting procedures, forms, and other vital information shall be adopted by the Governing Body and provided to all Participants. 2. All Participants shall be held accountable for understanding and abiding by the procedures stated in the manual, as well as any changes thereto. B. CLAIMS AUDIT 1. At least once every two years, the adequacy of claims adjusting for both the Authority and the Participants shall be examined by an independent au~itor who specializes in claims auditing. 2. The Governing Body shall approve the claims auditor. The costs of such claiIns audit shall be paid by the Authority. 3. The claims audit report shall address the issues of both adequacy of claims procedures and accuracy of claims data. The report shall be filed with the Authority and sent to each Participant. C. CLAIM SETTLEMENT AUTHORITY 1. Participants - Each Participant shall have settlement authority for all claims, including attorney fees and other costs, which do not exceed 100% of the Participant's Retained Limit. The WCPM will review these claims from time to tin1e and may offer hislher recommendation to the Participant's Third Party Administrator (TP A) and the Participant regarding settlement. 2. The WCPM shall have settlement authority for all claims which exceed 100% of the ' Participant's retained limit, but only up to $50,000. The Executive Committee shall have settlement authority above $50,000 and up to $250,000 above each Participants' Retained Limit. The Governing Body shall have settlement authority above $250,000 up to the Self-Insured Retention of the Authority. The administrator and the WCPM will ensure that the Participant is kept informed regarding these claims, and will take into consideration the Participant's desires in any settlement process; however, the Administrator and the WCPM shall keep the best interests of the Participants paramount in any decision. Any claims settlement decision made by the Administrator or WCPM may be appealed to the Governing Body within 30 days after notice of the decision to the Participant. The decision of the Governing Body shall be final. 11 J:\BCJPIA \Admin\Documents\Governing\Bylaws\WCP Bylaws.doc Approved 5/8/03 D. DISPUTES BETWEEN PARTICIPANTS AND ADMINISTRATOR OR WORKERS' COMPENSATION PROGRAM MANAGER, OR COMMITTEE 1. Any matter in dispute between a participating Participant and the Administrator or WCPM shall be heard by the Executive Committee whose decision may be appealed to the Governing Body within thirty (30) days of the Committee's decision. The decision of the Governing Body shall be final. 12 J :\BCJPIA \Admin\Documents\Goveming\Bylaws\ WCP Bylaws.doc Approved 5/8/03 ARTICLE V: PARTICIPATION A. ELIGIBILITY AND APPLICATION 1. ELIGIBILITY (a). The applicant city must commit to at least three full program years of participation in this WCP. (b). Any member of the Authority may apply to participate in the WCP by providing an adopted resolution of its city council and such other information/materials as may be required. The city's resolution shall commit the applicant city to three full years of participation in the WCP, if accepted, and consent to be governed for workers' compensation matters in accordance with the Master Program Document, the approved MOC ~nd other documents and policies adopted by the Governing Body. The resolution may also state the retained limit desired by the applicant city. (c). It is recommended that a city only enter the WCP at the commencement ofa new program year. If a city chooses to enter the WCP at any other time, the deposit premium for the remainder of the program year will be pro rated. The new member city will begin coverage on the date that is mutually acceptable to the city and the Governing Body; however, the new Participant will be required to share losses with the other members of the WCP for the entire program year. The application for participation shall be submitted at least 60 days prior to the date the city wishes coverage to begin to ensure that the State Certificate of Consent to Self-Insure is received prior to the inception date, and that the Governing Body may have adequate time to review and evaluate the acceptability of the applicant. 2. APPROVAL OF APPLICATION (a). The Governing Body shall, after reviewing the resolution and other underwriting criteria, determine the acceptability of the exposures presented by the applicant city. (b). The Governing Body shall, after a review of the resolution and other underwriting criteria, advise in writing, the applicant city of its decision to accept or reject the request within 10 days after the decision has been made. B. PARTICIPANTS'DUTIES 1. The Participants shall provide payroll, using the State DE-6 form, and all other requested information in conformance with the policies adopted by the Governing Body. 13 J:\BCJPIA \Admin\Documents\Goveming\Bylaws\ WCP Bylaws.doc Approved 5/8/03 2. The Participants shall disclose activities not usual and customary in their operation. 3. The Participants shall at all times cooperate with the Authority's Administrator, WCPM, claims adjusting company, and loss control personnel, in regards to underwriting activities of the Authority. 4. Each year the Authority shall bill Participants for a workers' compensation deposit premium for the next program year. The billings shall be due and payable in accordance with the Bylaws. 5. Billings may be made to Participants for a program year found to be actuarially unsound. All billings for payments to bring a program year into an actuarially sound condition are due and payable upon receipt. 6. Participants that have formerly participated in the WCP, but have withdrawn as a Participant, shall be required to pay all applicable billings for the program years in which they participated. Delinquent billings, together with penalties and interest, shall be charged and collected from the Participant in accordance with the policies adopted by the Governing Body. 7. Penalties and interest shall be charged against any amounts delinquent in accordance with the policies adopted by the Governing Body. C. TERMINATION 1. VOLUNTARY TERMINATION (a). A Participant which has maintained its participation in the WCP for three full program years, may terminate its participation if, at least six months before the next program year, a written request to terminate participation is received from the Participant. (b). A Participant that has not maintained its participation in the WCP for three, full program years shall not be permitted to withdraw from the WCP prior to the end of its commitment period and shall be obligated for payment of premiums for these three years. 14 J: \BCJPIA \Admin \Documents\Goveming\Bylaws\ W CP Bylaws.doc Approved 5/8/03 2. INVOLUNTARY TERMINATION (a) The Governing Body may initiate termination of future participation for the following reasons: (i) Termination as a member of the Authority; (ii) Declinati~n to cover the Participant by the entity providing excess coverage; (iii) Nonpayment of premiums, assessments, or other charges; (iv) Frequent late payment of premiums, assessments, and/or other charges, subject to interest and penalty charges; (v) Failure to timely provide requested underwriting informa~ion; (vi) Consistent poor loss history relative to the pool; (vii) Substantial change in exposures which are not acceptable in this WCP; (viii) Financial impairment that is likely to jeopardize this WCP's ability to collect amounts due in the future; and/or (ix) Revocation of Certificate to Self-insure. (b) The Governing Body shall have the authority, upon a two-thirds approval, to authorize a termination notice be sent to a Participant. Such notice shall be sent at least 60 days prior to termination. 3. Termination of participation, whether voluntary or involuntary, in future program years does not relieve the terminated city of any benefits or obligations of those program years in which the city participated. These obligations include payment of assessments, retrospective adjustments, or any other amounts due and payable. 15 J :\BCJPIA \Admin\Documents\Goveming\Bylaws\ WCP Bylaws.doc Approved 5/8/03 ARTICLE VI: TERMINATION AND DISSOLUTION The WCP may be terminated and dissolved any time during the first three years by the written consent of all Participants, and thereafter by the written consent of two-thirds of the Participants. However, this WCP shall continue to exist for the purpose of disposing of all claims, distributing assets, and all other functions necessary to conclude the affairs of the WCP. Upon termination of the WCP, all assets of the WCP shall be distributed only among the Participants, including any of those parties which previously withdrew pursuant to Article V, in accordance with and proportionate to their deposit premiums and assessments paid during the term of participation. The Governing Body shall determine such distribution within six months after the last pending claim or loss covered by the WCP has been finally resolved and there is a reasonable expectation that no new claims will be filed. 16 J :\BCJPIA \Admin\Documents\Governing\Bylaws\ WCP Bylaws.doc Approved 5/8/03 ARTICLE VII: AMENDMENTS This Master Program Document may be amended or repealed by a two-thirds (2/3rds) vote of the Participants' representatives of the Governing Body present and voting at the meeting provided prior written notice, as provided within the Agreement, has been given to the Governing Body. 17 J :\BCJPIA \Admin\Documents\Goveming\Bylaws\ WCP Bylaws.doc Approved 5/8/03 BAY CITIES JOINT POWERS INSURANCE AUTHORITY MASTER PROGRAM DOCUMENT FOR THE WORKERS' COMPENSATION PROGRAM BAY CITIES JOINT POWERS INSURANCE AUTHORITY MASTER PROGRAM DOCUMENT FOR THE WORKERS' COMPENSATION PROGRAM TABLE OF CONTENTS ARTICLE I: GENERAL.................. ....................... ..... ................. .................................................. 1 A. A UTH 0 RITY .......................................................................................................................... 1 B. PURPOSE ................. .......... .... .... ................ .................. .................. ............... ..........................1 C. PARTICIPATION..... ........... ...... ................. ........ ...... ....... ...... ........................... ......................1 D. GOVERNANCE.................... .... .............. ........... ........ ......... ...... ................... ...........................2 E. GOALS AND OBJECTIVES..................................................................................................2 ARTICLE II: PROGRAM ELEMENTS..................................................... .................................. 3 A. PROGRAM yEARS........... ........... ................ ........ ..... .......... ............................... ....... .............3 B. RETAINED LIMITS.................. ....... ....................................... ....................... ........................3 C. DEPOSIT PREMIUMS............................. ................ ....................................... ..... ..................3 D. DIVIDEND AND ASSESSMENTS........................................................................................4 E. EXCESS COVERAGE............................................................................................................5 ARTICLE III: ADMINISTRATION.. ........................... .......... ............... .......... ................. ....... ...... 7 A. GOVERNING BOARD........................................................................................................... 7 B. EXECUTIVE COMMITTEE ........... ....................................................................................... 7 C. AD MINI S TRA TO R ................................................................................................................1 D. WORKERS' COMPENSATION PROGRAM MANAGER'S DUTIES .................................9 ARTICLE IV: CLAIMS ADMINISTRATION........... .......... ............................... ........................ 11 A. CLAIMS PROCEDURES MANUAL ...................................................................................11 B. CLAIMS AUDIT ... ...... .......... ........... ............. .................. ..... .............. ........... .................. .... ..11 C. CLAIM SETTLEMENT AUTHORITy............................ ................ .................................. ..11 D. DISPUTES BETWEEN PARTICIPANTS AND GENERAL MANAGER OR WORKERS' COMPENSATION PROGRAM MANAGER, OR COMMITTEE ..............................................12' ARTICLE V : PARTICIPATION .......................... ..... ......... ......................................................... 13 A. ELIGIBILITY AND APPLICATION ........ ............................. ............................................. .13 B. PARTICIPANTS' DUTIES... ............. ........ ................... ..... ..... ......... .... ........ ...... ............. .... ..13 C . TERMINATION. . . . . . . . . . .. . . .. . . . . . . . . .. . .. . . . . .. . . .. .. .. . .. .. .. .. .. . . .. .. . . . . . . . . . . . .. .. . . .. .. . . .. .. . . . . . . . . . . . . . .. .. .. .. .. . . . . . . 14 ARTICLE VI: TERMINATION AND DISSOLUTION............................................................. 16 AR TI CLE VII: AMENDMENTS................................................................................................ 1 7 BCJPIA LIABILITY COVERAGE SIR's 2003/2004 Retained Limits applicable to each member entity are as follows: Member Retained Limit City of Albany City of Berkeley City of Brisbane City of Emeryville Town of Fairfax City of Larkspur Menlo Park City of Mill Valley City of Monte Sereno City of Novato City of Piedmont City of Pleasanton City of Redwood City Town of San Anselmo San Francisco Redevelopment Agency City of Sausalito City of Union City $ 25,000 $ 250,000 $ 25,000 $ 10,000 $ 50,000 $ 250,000 $ 100,000 $ 100,000 $ 5,000 $ 250,000 $ 10,000 $ 100,000 $ 250,000 $ 100,000 $ 50,000 $ 50,000 $ 25,000 BCJPIA WORKERS' COMPENSATION COVERAGE SIR's 2003/2004 Retained Limits applicable to each member entity are as follows: Member City of Albany City of Belvedere Belvedere/Tiburon JRC City of Brisbane City of Emeryville Town of Fairfax City of Larkspur City of Menlo Park City of Mill Valley City of Nova to City of Piedmont City of Pleasant on City of Redwood City Town of San Anselmo City of Sausalito Town of Tiburon Twin Cities Police Authority City of Union City Retained Limit $ 150,000 $ 150,000 $ 150,000 $ 150,000 $ 250,000 $ 150,000 $ 150,000 $ 250,000 $ 150,000 $ 150,000 $ 150,000 $ 500,000 $ 350,000 $ 150,000 $ 150,000 $ 150,000 $ 150,000 $ 150,000 BCJPIA EMPLOYMENT PRACTICES LIABILITY COVERAGE SIR's (ERMA) 2003/2004 Retained Limits applicable to each member entity are as follows: Member Retained Limit City of Albany City of Brisbane City of Emeryville Town of Fairfax City of Larkspur City of Menlo Park City of Mill Valley City of Piedmont City of Pleasanton Town of San Anselmo San Francisco Redevelopment Agency City of Sausalito City of Union City $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 100,000 $ 75,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000