09 - Earthquake Insurance Coverage
Costa Mesa Sanitary District
Memorandum
To:
Board of Directors
Via:
Scott Carroll, General Manager
From:
Anna Sanchez, Administrative Service Manager
Date:
April 15, 2014
Subject: Earthquake Insurance Coverage
Summary
The District does not currently carry any earthquake insurance coverage through the
Special District Risk Management Authority (SDRMA). Given the recent seismic events,
staff would like to re-policies and consider purchasing
earthquake coverage for District facilities.
Staff Recommendation
The Board of Directors provides direction to staff regarding earthquake insurance
coverage.
Analysis
The Costa Mesa Sanitary District currently carries at $10 million general liability coverage
coverage limit to $20 million. For this coverage, the District currently pays approximately
$75,000 in an annual premium to the SDRMA.
The coverage currently provided to the District specifically excludes earthquakes. Given
the recent seismic activity, the District may want to give consideration to purchasing an
earthquake insurance policy. Earthquake coverage is handled a little differently than
normal property coverage. Premiums for earthquake policies are largely based on
location, infrastructure insured, and the limit amounts.
solid waste and sewer collection services.
www.cmsdca.gov
Board of Directors
April 15, 2014
Page 2 of 3
Prior to obtaining an estimate for the annual premium, the Board should consider:
The District currently pays approximately $75,000 in annual premiums for $20
million liability coverage. This coverage explicitly excludes earthquakes. However,
in a region-wide disaster, provided a state of emergency is declared, the District
would be eligible for disaster recovery funds available through FEMA or CalOES.
Does the Board desire more coverage than what we currently have in place? If so,
earthquake coverage would include:
Deductible is 5% of the annual premium, no less than $25,000
o
Each unit is subject to the deductible
o
A unit is defined per structure, or location. Example: a building is 1
unit, contents are 1 unit, a tank is 1 unit (even if at the same location)
What property would the Board like covered under the earthquake coverage?
Please see the attachment of all existing property currently covered by the SDRMA
general liability.
What limits does the Board want to set? The higher the limit amounts, the higher
the premium.
There are only a few districts within the SDRMA service area that purchased earthquake
insurance because it is very costly. In order to obtain a cost estimate for the annual
premium, SDRMA relies on underwriters from excess carriers to research information
regarding what is proposed to be insured. For this reason, it can take up to four weeks to
get an estimate on the annual premium.
If the Board desires to move forward with obtaining a cost estimate for the annual
premium, it would be prudent to narrow the scope of coverage by considering the points
above in order to give SDRMA adequate direction and get a timely response from the
excess carrier underwriters.
Strategic Plan Element & Goal
This item complies with the objective and strategy of Strategic Element 5.0, Administrative
Management, which states:
Objective: To create, maintain and implement policies and procedures to ensure
sound management of the District
Strategy: We will conduct periodic reviews, refine and implement policies and
procedures, and assure the General Manager has the direction and tools necessary for
Board of Directors
April 15, 2014
Page 3 of 3
Legal Review
Not applicable at this time.
Environmental Review
Consideration of whether to obtain earthquake coverage is exempt from the requirements
of the California Environmental Quality Act (CEQA) (Public Resources Code Section
21000 et. seq.). Section 15300.4 of CEQA allows an agency while establishing its own
p
tenance
Financial Review
Not applicable at this time, but depending on the property the Board wishes to cover for
premium could double from $75,000 to $150,000.
Public Notice Process
Copies of this report are on file and will be included with the entire agenda packet for the
April 15, 2014 Board of Directors study session at District Headquarters and on District's
website.
Alternative Actions
1. Do not elect to obtain a premium estimate from the Special District Risk
Management Authority for earthquake insurance coverage.
2. Refer the matter back to staff.
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