SR-06-26-1979-11KSanta Monica, Cali' rnia, June 21, 1979
TO: Mayor and City Council
FROM: City Staff
SUBJECT: Workers' Compensation Claims Administration JUN 2 6,1979
Services. "
Introduction
This report discusses workers' compensation claims administrative
services and recommends approval of an agreement for FY 1979 -$0
with Fitzpatrick Self - Insurance Administrators in the amount of
$26,$00.
Background
On June 14, 1976, the City Council approved withdrawal from the
State Compensation Insurance Fund and established a Self- Insured
Workers' Compensation Program as of July 1, 1976. The firm of
Brown Brothers' Adjusters was retained to administer the workers'
compensation claims for the City and has represented the interests
of the City in a very competent manner for the past three years.
This contract is up for renewal on July 1, 1979.
In early June, the City was advised that Mr. Larry Fitzpatrick, who
has handled the City's account and adjusted the City's claims for
the past three years, was leaving Brown Brothers' Adjusters in order
to start his own business.
The staff has explored several options with regard to the renewal
of this claims administration contract: 1) renewing with Brown
Brothers' Adjusters; 2) soliciting proposals from other firms; and
3) entering into an agreement with Fitzpatrick Self - Insurance,
JUN 2 6 197o
Mayor and City Coune"
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Administrators.
Brown Brothers' Adjusters
June 21, 1979
Brown Brothers' has submitted a proposal to the City in the amount
of $28,415, a 34% increase over the current contract. Staff has
met with representatives of the firm to determine what the intention
is regarding future handling of Santa Monica's claims. They have
indicated that, should the City desire to renew its contract, an
adjuster would be brought in on an interim basis from San Francisco
until a permanent replacement for Mr. Fitzpatrick could be found.
It was clear, however, that that permanent individual would have
responsibilities in addition to the existing claims adjusting
caseload. It is the opinion of the staff that these added respon-
sibilities will result in a lower level of service than the City
currently enjoys. There is also concern that the transition from
the existing adjuster to an interim adjuster and then to a permanent
adjuster will detrimentally affect the processing of our current
open claims for a minimum period of three months.
Solicitation of Proposals
Staff has considered soliciting proposals for adjusting services
and continuing on a month to month basis with Brown Brothers until
proposals could be received, evaluated, and a new contract awarded.
Again, this would twice disrupt the continuity of claims processing.
Further, investigation indicates that other firms are charging fees
substantially in excess of that which the City is currently paying
($21,237) and more than the renewal fee being proposed by Brown
Mayor and City Counc;' June 21, 1979
I
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Brothers. For example, proposals recently received by a city
comparable to Santa Monica varied from approximately $30,000
tn as high as $50,000,. In the opinion of the City's insurance
consultant, Don Voller of Mund McLaurin and Company, it is highly
unlikely that Santa Monica would receive a proposal below $32,000
from a responsible firm.
Fitzpatrick Self - Insurance Administrators
Mr. Larry Fitzpatrick, who currently adjusts the City's claims
has submitted a proposal for FY 1979 -80 in the amount of $26,800.
This is a 26% increase over the City's current rate but includes
additional work now required under the State's workers' compensation
rehabilitation laws.
The City's experience with Mr. Fitzpatrick has been quite satis-
factory in the past. He has maintained a good working relationship
with the City, and has processed Santa Monica's claims in a very
competent manner. Of particular importance at this time is his
knowledge of the City and of current open claims. A transition
from Brown Brothers to Fitzpatrick Self- Insurance Administrators
could be accomplished relatively easily and without a loss of
continuity in the processing of claims.
It is recognized that engaging a new firm presents some risks.
For example, there is some concern about the processing of the
City's claims should Mr. Fitzpatrick become ill for a lengthy
Mayor and City Council
June 21, 1979
period or become permanently disabled. Staff is satisfied, however,
as is the City's Insurance Consultant, that adequate back -up in the
short term has been arranged for by Mr. Fitzpatrick and that after
about six months, another individual in the firm will be fully
trained in public employee workers' compensation and capable of
taking over our account in any emergency.
Overall, it is the opinion of the staff that at the
the preferred course is to engage Fitzpatrick Self -
istrators. This will continue the level of service
accustomed to and will provide continuity in claims
cannot be otherwise provided, at a cost which staff
quite reasonable.
present time
Insurance Admin-
the City has been
processing which
believes to be
Due to the recent developments described above, a written agreement
has not yet been drafted. Such agreement would conform substantially
to the existing agreement. It is suggested that the City Manager be
authorized to execute a document subsequent to its approval by the
City Attorney.
Alternatives
1. Renew the existing contract with Brown Brothers' Adjusters in
the amount of $28,415.
2. Solicit proposals from other firms and remain with Brown
Brothers' on a month to month basis at the proposed rate
of $28,415 prorated monthly until a new contract can be
awarded.
Mayor and City Council June 21, 1979
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3. Engage the firm of Fitzpatrick Self- Insurance Administrators
in the amount of $26,$00.
Recommendation
It is recommended that Alternative #3 be adopted and that the City
Council authorize the City Manager to execute an agreement satisfactory
to the City Attorney with the firm of Fitzpatrick Self - Insurance
Administrators to provide claims administration services for FY 1979-
80 in the amount of $26,800. Funding for this contract would be
provided through the Workers' Compensation Self - Insurance Fund.
Prepared By: JEANNE L. KENNEDY
Administrative Assistant
JLK:dvl
C
Agenda Item 11 -K: Presented at this time for approval was an agreement
for provision of claims administration services for Fiscal Year 1979 -30
with Fitzpatrick Self- Insurance .administrators in the amount of
$26,300.00. Navor Pro Temnore Reed moved to approve the staff recommen-
dation, i.e., by award of Contract No. 3361(CCS) to Fitzpatrick Self_
Insurance .administrators in the amount of X26, 500.00 to provide claims
administration services for Fiscal Year 19 -9 -SO and au U:orizing the Citv
?tanager to execute such agreement satisfactory to the City .attorney.
Second by Councilmember Yannatta Goldway.
Council Vote: Unanimously approved 7 -0
CITY COUNCIL MEETING NNE 29, 1979
Reference:
Contract No. 3364
(CCS)