SR-02-27-1979-6VAgenda Item 6 -V: Presented at this time was a contract renewing a
contract for adjusting and investigating services with Brown Brothers
Adjusters for the 1979 calendar year in the amount of $47,500. After
discussion, Councilmember Trives moved to award Contract No. 3135(CCS)
to Brown Brothers Adjusters renewing a contract for adjusting and -
investigating services for the 1979 calendar year in the amount of
$47,506' by Councilmember Bambrick.
Council Vote: Unanimously approved 6 -0
Absent: Mayor Swink
CITY COUNCIL MINUTES - FEBRUARY 27, 1979
# CHAMBERS OF FEB The uperiar Tnurt 7 1979
1725 MAIN STREET
or•��.' SANTA MONICA, CALIFORNIA 90401
m MARIO L. CLINCO, JUDGE TELEPHONE
(2131 870 -0170-01
31
February 26, 1979
Honorable Donna Swink
Mayor, City of Santa Monica
City Hall
1685 Main Street
Santa Monica, CA 90401
Dear Mayor Swink:
The records of my court, Department C, West District of the Superior
Court, show that eight personal injury cases involving the City
of Santa Monica were settled in 1978. These cases had an esti-
mated total jury trial time of 60 days. I have thus been in a
position to know and evaluate Richard Knickerbocker and the other
attorneys of the office who appeared before me.
May I therefore report the following observations. These attorneys
have always been prepared for the settlement conference. Their
discussions and me- oranda showed that they adequately investigated
the facts and the law. They also conducted themselves with
expertise, and settlements were made at amounts far less than
demanded by plaintiffs' counsel and on occasion the amount paid
was much less than the costs of preparing for trial. Without pre-
judging or speculating on the outcome of cases, settlements were
also e_rfected at the area at which the case was reasonably worth,
thus elircinating the exposure of high verdicts against the City.
I ar^ convinced that cases were settled by the City Attorney's
Office only when it was in the best interests of the City to settle.
Overall, the performance by the Santa Monica City Attorney's Office
has been !;arr;ed wits, diligence and distinction.
Sincerely,
Mario L. Clinco / l
1rLC : e c / _ V
FE9 2 7 1979
x;
CA RI,K:SSS:mc
Council Mtg. 02 -27•
TO: Mayor and City Council
FROM: City Attorney
Santa Mc ca, California
SUBJECT: Adjusting and Investigating Services For Civil
Liability Claims
Introduction
FED 2 `i 1979
This staff report recommends renewal of the contract with
Brown Brothers Adjusters for adjusting and investigating services
for civil liability claims at a contract price of $47,500.00 for
the calendar year 1979.
The report contains a brief background of the basis upon
which Brown Brothers was initially chosen, its current performance,
and the reason for the increase in contract price.
Background
At the December 14, 1976 City Council meeting, the City
was authorized to enter into a contract with Brown Brothers Adjusters
for the calendar year 1977 at a total contract price of $34,500.00
This award followed a recommendation contained in a staff
report prepared by the City Manager's Office, which analyzed the
City's current and projected needs and compared the merits of propo-
sals submitted by Brown Brothers ($34,500..00 for 3 stages), Bay Cities
Adjustment Company, ($45,000.00 for 2 stages) and other adjusters.
The report concluded that the cost of developing an in -house adjust-
ing department within the City outweighed the procedural advantages
of self- administration, that the cost of retaining Bay Cities Adjust-
ment Company outweighed the advantage of continuity of service (and
M 2 7 19711 .
CA RLK:SSS:mc
Council Mtg. 02 -27- Santa N. ica, California
additionally noted that Bay Cities withdrew its bid), and recommended
Brown Brothers as providing the most complete service at best overall
cost.
on January 10, 1978, the City Council moved to authorize
the City Manager to award Contract No. 2440 (CCS) to retain the firm
of Brown Brothers Adjusters for the 1978 calendar year at a price of
$43,500.00 to provide adjusting and investigative services necessary
to maintain an effective claims control program for the City of Santa
Monica.
Brown Brothers Performance
Brown Brothers has performed their adjusting and investi-
gative services in a highly competent manner. Paul Robbins, their
Claims Manager, adjuster, and investigator, devotes 900 of his time
to the City of Santa Monica; Investigator Jim Pasco, devotes 700 of
his time; a Secretary devotes 500 of her time. The intensive attention
given to the City of Santa Monica and the high quality of work per-
formed by Brown Brothers is reflected in the low claims figures for
the past two (2) years.
In 1977, Brown Brothers paid from their trust account
$51,343.00 in settlement of 181 cases, an average of $283.67 per case.
Included within this figure are seven cases settled for an amount
over $1,000.00 (with City Attorney approval), representing a payment
of $11,850.00. Thus, Brown Brothers' average for cases, excluding
those requiring City Attorney approval, is $226.00 per case.
In 1978, Brown Brothers settled 274 cases for a total sum
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CA RLR:SSS:mc
Council Mtg. 02 -27• Santa Mo. _ca, California
of $112,540.00, an average of $410.73 per case. Twenty -eight of those
cases were settled for over $1,000.00 for a total amount of $45,038.00.
Thus Brown Brothers 1978 average for cases without City Attorney
approval is $274.00 per case.
Brown Brothers' average settlement for 1977 and 1978 is
$250.00 per case. Considering inflation and the large number of cases
received, the City Attorney's Office feels that this figure is relatively
low and reflective of the high quality of work and attention to the
City of Santa Monica given by Brown Brothers.
A detailed summary of the service rendered by Brown Brothers
is set forth below:
1. Claim Control. Brown Brothers has undertaken a highly
assertive role in resolving claims and potential claims. The compar-
ison from January lst to June 30th for the years 1975 through 1978
is as follows:
Year No. of Claims No. of Claims Settled
1975 106 15
1976 152 19
1977 167 36
1978 182 65
This represents a 43.4% increase in the number of claims
from 1975 to 1976 with a corresponding 26.66% increase in the number
of claims settled. When Brown Brothers took over the contract in 1977,
with a 9.86% increase in the number of claims received, there was a
89.4% increase in the number of claims settled before a lawsuit was
involved. Similarly, in 1978 there was an 8.98% increase in the num-
ber of claims received with a corresponding 80.55% increase in the
number of claims settled before a lawsuit was involved.
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RLK:SKS:ms 1/31/79
Council Mtg: 2/27;
Santa onica, California
The statistical picture does not tell the whole story,
of course. A reasonable hypothesis based upon the sampling would
indicate that it is probable that the number of claims will eventually
decrease, that the number of claims settled will increase, and that
there will be a lower cost ultimately both with regard to litigation
and with regard to settlement.
2. Immediate Investigation. From our experience we have
found that a fully developed factual investigation of an incident
provides the best weapon with which to obtain advantageous settle-
ments and to prepare effective trial strategy. Robert Whipple,
Claims Litigation Manager for Transit Casualty Company, the excess
carrier for the municipal bus lines, undertook their annual audit
of investigative files at Brown Brothers' offices this January.
Mr. Whipple was very satisfied with Brown Brothers' performance in
all areas, particularly in their investigation of claims.
3. Setting Reserves. Brown Brothers has applied the
full expertise of a professional adjusting staff in setting realistic
reserves on claims. At the direction of the City Auditor, the City
Attorney's Office, and Robert Whipple at Transit Casualty, the Citv
has been instructed to increase its reserves on all of its cases.
Although Brown Brothers' analysis has resulted in an increase in
reserves, this has no bearing except to insure that the City has
sufficient amounts of capital to cover any and all judgments that
may be held against it. It is the belief of the staff that the
reserves are more realistic thereby establishing a more competently
evaluated fiscal position for the Citv.
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U:A RLK:SSS:mc
Council Mtg. 02 -27 -7
4. Pretrial Inves
Santa jni-ca, California
tion. The City Attorney's Office
has found the performance of Brown Brothers with reference to pre-
trial investigation to be very satisfactory. Pretrial investigation
includes locating hard -to -find witnesses, re- interviewing witnesses
initially contacted, and making recommendations both as to medical
or technical experts whose testimony may be needed. Before Brown
Brothers was hired, these services were rarely provided by our
previous adjusting firm and had to be obtained through the Police
Department or contracted out to a private investigating firm.
The staff therefore concludes that Brown Brothers has
provided a very satisfactory performance in each of the pivotal
areas of adjusting and investigative services during this past
calendar year.
Proposed Contract and Cost
Brown Brothers has proposed to provide adjusting and in-
vestigative services for the 1979 calendar year at a contract cost
of $47,500.00. This proposed contract cost represents a 9.190 or
$4,000.00 increase over the 1978 contract cost of $43,500.00. The
basis for the contract price increase are the following:
(a) Increased salaries and administrative cost associ-
ated with the increase in the cost of living during the past year;
(b) Projected 39% increase in workload based upon the
current year's experience.
(c) Increase in Brown Brother's rates effective
November 27, 1978, their first raise in over two (2) years. The raise
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u
RLK:SKS:ms 1/31/79
Council Mta: 2/27j
Santz ionica, California
represents approximately 14% increase based on the accelerated
inflation and cost of doing business.
Brown Brothers has indicated to the City of Santa Monica
that they are still experiencing a continued loss on the 1977 con-
tract. Originally, their increase proposal centered on out -of-
contract service for cases prior to 1977, attorney negotiations
on suit cases be handled out -of- contract, the change in the de-
scription of catastrophe from twenty (20) claimants to five (5)
claimants, and the change from the subrogation hourly rate from
$17.00 to $19.00, with a total proposed 1979 contract price of
$49,500.00.
The City Attorney's Office called the investigation firm
that handles the account for Culver City, R. L. Kautz, and spoke
with Mr. Patrick Kelley, Senior Vice President, who indicated that
in his opinion the Brown Brothers' contract price was highly favorable to
the City of Santa Monica.
Contract negotiations with Brown Brothers resulted in the
elimination of all of the requested changes except the new defin-
ition of catastrophe and the change in the subrogation hourly rate.
Recommendation
Staff recommends that the City Council authorize the City
Manager to retain the firm of Brown Brothers Adjusters for the 1979
calendar year at the price of $47,500.00 to provide adjusting and
investigative services necessary to maintain an effective claims
control program for the City of Santa Monica. Funding for this con-
tract will be provided through the existing self- insurance funds.
PREPARED BY:
RICHARD L. KNICKERBOCKER
ADJUSTING, INVESTIGATING AND COLLECTION SERVICES
AGREEMENT
THIS AGREEMENT is made this day of ,
1979, between the CITY OF SANTA MONICA, a municipal corporation,
hereinafter referred to as "City," and BROWN BROTHERS ADJUSTERS,
a corporation in the State of California, hereinafter referred to
as "Adjuster." The parties hereto agree as set forth herein below:
I
INITIAL PROVISIONS
A. Legal Status of the City. The City is a municipal cor-
poration duly organized and validly existing under the laws of the
State of California with the power to carry on its business as it is
now being conducted under the statutes of the State of California and
the Charter of the City.
B. Legal Status of Adjuster. The Adjuster is a corpora-
tion, duly organized, validly existing, and in good standing under
the laws of the State of California with corporate power to own pro-
perty and carry on its business as it is now being conducted.
C. Term of Agreement. This Agreement shall become effective
as of the first day of January 1979 and shall continue in effect for a
period of twelve (12) months, unless sooner terminated by the City
as provided for herein.
II.
ADJUSTING AND INVESTIGATING SERVICES
A. Adjusting and Investigating Services to be Performed
by Adjuster. Adjuster shall provide and perform an all- inclusive
program of adjusting and investigating services for all incidents
and accidents which may give rise to the imposition of legal liabil-
ity upon the City, its officers, employees and /or agents because of
injury to the person or property of another. Said program shall in-
clude all adjusting and investigating from the occurrence of each
such incident or accident through the conclusion of litigation and
shall be of such nature as to minimize the amount paid on potential
claims and claims filed against the City, its officers, employees
and /or agents, and to assist the City in the preparation of litiga-
tion and trial of lawsuits.
Professional Skill Required. All such services re-
quired to be provided and performed hereunder shall be in accordance
with the highest degree of professional skill.
C. Example of Services to be Performed. Adjusting and
investigating services to be provided and performed hereunder shall
include, but not be limited to, the following: immediate investi-
gation of all incidents or accidents involving the City; evaluation
of furnished incident reports regarding possible claims; taped in-
terviews with potential claimants; taped interviews with City employees.
City department heads and other possible witnesses; taped or written
-2-
interviews with known witnesses, development of alternative witness
addresses and evaluation of witness for possible follow-up, location
of other witnesses and taped or written interviews with all witnesses;
procurement and evaluation of all appropriate and relevant reports,
i.e., Fire Department report, ambulance call report, towing service,
Police Department, Index Bureau, DMV report, et. al.; contact with
claimant or claimant's attorney regarding claimant's versions, suppor-
ting witnesses, medical reports, medical billing, property damage,
exact location of incident, nature of City involvement, etc.; veri-
fication of aforementioned information by mail, telephone, or personal
contract; evaluation of medical reports; location of vehicle(s) in-
volved in incidents and pictures of same; provide City with a check
list of necessary additional investigation required or recommended
when suit is filed; provide immediate notification to the City
Attorney's Office where hospitalization of the potential claimant
is indicated, where a potentially serious loss is indicated, where
there exists a wide variance between the City version and other
witnesses' version of the incident, or when new information is ob-
tained which changes the reserve; and immediate on -scene investigation
of incidents and accidents with on -scene photographs, if appropriate,
when contacted for same.
D. Settlement Authority. The City authorizes Adjuster
to negotiate, adjust, and effect settlement of claims and potential
claims against the City, and to make settlement payments on behalf
of City in an amount not to exceed Two Thousand Five Hundred ($2,500)
Dollars on any one claim or potential claim when, in the opinion of
Adjuster, there exists liability on the part of City or such liability
as exists is sufficiently certain that a compromise of the claim or
-I-
potential claim is advisable, and further provided that Adjuster
shall obtain the approval of City prior to settling any claim
or potential claim in an amount between One Thousand ($1,000)
Dollars and Two Thousand Five Hundred ($2,500) Dollars and that
Adjuster shall not effect any settlement for more than Two Thousand
Five Hundred ($2,500) Dollars without the written approval of
the City Council of the City of Santa Monica having first been ob-
tained.
E. Special Investigative Assistance. Upon written request
of City, the Adjuster shall provide or arrange for sub rosa inves-
tigation and surveillance, medical and other expert consultants,
diagrams and other exhibits, independent medical examination, medi-
cal reviews, and such other special legal /investigative assistance
as is deemed necessary by the City. The cost of such special legal/
investigative assistance which is rendered, provided or arranged for
by Adjuster pursuant to this paragraph shall be paid directly by the
City or reimbursed to Adjuster by City, provided that Adjuster shall
not charge City an amount in excess of the actual cost or expense
which Adjuster has incurred in rendering, providing, or arranging
for the provision of such assistance.
III.
COLLECTION SERVICES
A. Collection Services to be Performed. Adjuster shall
provide and perform collection services for City as set forth herein-
below.
W
B. Evaluation for Collection
Adjuster shall review all
incident and police reports provided to Adjuster by City to determine
(1) whether the City suffered property damage, and to evaluate (2)
whether or not City has a cause of action against a third party for
property damage suffered by City.
C. Collection Efforts. If there is verifiable damage to
City property and if Adjuster determines that
exists in City's favor, Adjuster shall reques
a copy of the formal work /job order, estimate
documentation supporting the amount of damage
Adjuster shall send three separate letters to
third parties demanding payment of the amount
a cause of action
t and City shall provide
of damage, or other
suffered by City.
potentially liable
of such damage.
D. Funds Collected. An_v and all funds collected by
Adjuster pursuant to this section shall immediately be remitted to
City.
E. Uncollected Accounts. Adjuster shall return to City
all uncollected accounts within six (6) months of the date of the
incident giving rise to the account.
F. Reporting. Adjuster shall prepare and provide City
with a quarterly collection report listing all current collection
accounts, and for each account the following information: (a) the
date and control number of the incident giving rise to the account;
(b) the date the Adjuster requested supporting documentation of City;
(c) the date of the last collection letter sent; (d) the amount of
damages involved; and (e) the date and amount, if any, that Adjuster
of City received as payment on the account, with the name of the payee.
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IV
REPORTING REQUIREMENTS
A. Reporting Requirements. Adjuster shall provide a
reporting program with respect to adjusting and investigating services
to be provided and performed hereunder as set forth hereinbelow:
B. Reserves. Within thirty (30) days of receipt of a
City Incident Report, Adjuster shall set a reserve on the subject
incident and immediately advise City of this reserve. Upon receipt
of a claim on any incident and /or upon knowledge of any further infor-
mation concerning an incident, accident or other potential liability
situation which would effect the established reserve, Adjuster shall
re- evaluate the reserve status and advise City of any change in the
reserve.
C. Statistical Review. Adjuster shall provide City with
a monthly statistical review which shall list for all oven and current
incidents, claims and lawsuits the status, current reserve amounts
paid out by City or Adjuster on claims settled or closed during the
preceeding month, and such other information as is required by City.
At the end of each calendar year, the statistical report shall be
arranged so that each incident arising within the year is compiled
by category with all other incidents arising within that year with
all accompanying informational data. The monthly statistical review
shall be provided in a form to the City's satisfaction.
D. Other Reports. In addition to the reporting require-
ments provided for herein, Adjuster shall provide a monthly loss
report showing the losses paid out and the reserves set per City
departments, and the type of accident and settlement amount, if the
incident is settled, during the preceeding month
conform to the City's satisfaction.
W
COMPENSATION
A. Compensation for Collection Services
Said report shall
As compensation
for collection services required to be performed under Section III
herein, Adjuster shall receive the amount of Nineteen ($19.00) Dollars
per hour for each hour of service expended, plus the cost actually
expended by Adjuster in obtaining reports and materials which are
appropriate and necessary for effective collection. Adjuster shall
bill City on a quarterly basis for any such amounts to be received
under this paragraph.
B. Compensation for Special Investigative Assistance.
Adjuster shall be entitled to the cost and expense of special investi-
gative assistance as is delineated in Paragraph F of Section II herein.
C. Compensation for Adjusting and Investigating Services.
As compensation for all other services rendered under this Agreement,
Adjuster shall be entitled to receive from the City the sum of
Forty -Seven Thousand, Five Hundred ($47,500.00) Dollars, payable in
equal quarterly installments of Eleven Thousand, Eight Hundred Seventy -
Five ($11,875.00) Dollars on or before the fifteenth (15th) day
following each three (3) month period on the term of this Agreement.
The only exception to this paragraph would be if the City suffered
a loss which could be termed a catastrophe. A catastrophe is defined
as a single accident, occurrence, or event which has resulted in
five (5) or more individual claimants. In the event of a catastrophe,
the first five (5) claimants would be handled by the Adjuster pursuant
to and under the Agreement without additional compensation; however,
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adjusting an investigation required for an additional claimants, an
excess of the first five (5) claimants, is to be handled at an
additional compensation rate of Nineteen ($19.00) Dollars per hour.
In addition thereto, Adjuster shall submit to the City all costs for
the procurement of police reports, index bureau reports, and for such
other reports and documents which are appropriate and necessary, and
the City shall pay such costs directly.
VI
TRUSTEE ACCOUNT
City shall establish a special Trustee Account in a local
banking institution, and said account shall be used only for the
payment of settlements which are made by Adjuster. Adjuster shall
designate certain of its employees to have authority to issue warrants
against said account for the payment of settlements. At the conclusion
of each month, Adjuster shall provide City with a written list of
disbursements which have been issued against the Trustee Account
during said month. The settlement payments will then be submitted
to the City Council of the City of Santa Monica for ratification, and
upon such ratification, the Trustee Account will be reimbursed appropri-
ately.
VII
MISCELLANEOUS PROVISIONS
A. Ownership of Files. All files, documents, tapes,
diagrams, exhibits, pictures and such other material which Adjuster
prepares or otherwise obtains with regard to adjusting and investi-
gating services under this Agreement shall be the property of the
City and shall be turned over to the City within thirty (30) days of
the termination of this Agreement.
B. Administration and Interpretation of Agreement. The
office of the City Attorney of the City of Santa Monica shall be
charged with the responsibility of administering this Agreement on
the part of the City and Adjuster shall immediately be responsible
to the City Attorney, or his designee, with respect to Adjuster's
performance under this Agreement. Any question of interpretation
of this Agreement which cannot be resolved by the parties shall be
submitted to the American Arbitration Association for binding arbitra-
tion pursuant to their rules and procedures.
C. Qualification of Personnel. Qualified and trained
personnel directly employed and supervised by Adjuster shall perform
all the services required by the terms and conditions of this Agree-
ment. Adjusters agree that each of its employees shall have an ex-
tensive background in the adjusting and investigative fields and will
be properly qualified and shall use reasonable care in the performance
of his duties. Furthermore, each employee shall be provided with con-
tinuing education to insure that each is up -to -date on recent court
decisions, proposed legislation, and administrative decisions affect-
ing the liability of chartered cities and is able to take necessary
action that may be indicated or required to continue and maintain
control of the program. The City reserves the right to approve and/
or disapprove of personnel provided by Adjuster and to require a change
in personnel so provided.
D. Indemnification. Adjuster agrees to indemnify and hold
harmless and defend the City, its employees and /or agents from any and
all liability of financial loss resulting from any suits, claims, losses
or actions brought against the City, its employees and /or agents which
results directly or indirectly from the wrongful or negligent acts of
the Adjuster, its officers, employees, agents or others employed by
Adjuster while engaged by the Adjuster in the performance of this
Agreement.
E. Termination by City for Default. The Citv shall have
the option, at its sole discretion, of terminating this Agreement by
giving thirty (30) days written notification of termination to Adjuster
as provided for hereinafter.
Upon termination of this Agreement, Adjuster shall be
relieved of any futher obligation under this Agreement upon the re-
turn to the City of all files, etc., as set forth in Section A of this
Article VII.
F. Notices. All notices, demands, requests, or approvals
which are required under this Agreement, or which either City or
Adjuster may desire to serve upon the other, shall be in writing and
shall be conclusively deemed served when delivered personally, or
forty -eight (48) hours after the deposit thereof in the United States
Mail, postage prepaid, registered, or certified, addressed as herein-
after provided.
All notices, demands, requests, or approvals from
Adjuster to City shall be addressed to the City Attorney at 1685 Main
Street, Santa Monica, California 90401.
All notices, demands, requests, or approvals from City
to Adjuster shall be given to Brown Brothers Adjusters at 3407 West
Sixth Street, Suite 500, Los Angeles, California 90020.
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G. Warranty of Services. Adjuster warrants and guarantees
that all services performed hereunder for the City shall be performed
in a manner commensurate with the highest professional standards.
H. Specific Authority. Except as is specifically provided
under this Agreement, in the rendition of services hereunder, Adjuster
shall act solely as an independent contractor and shall not act or
purport to act as a agent with any authority to represent or bind the
City.
I. Entirety of Agreement. This instrument contains the
entire Agreement between the parties relating to the rights herein
granted and the obligations herein assumed. Any oral representations
or modifications concerning this instrument shall be of no force or
effect except as a subsenuent modification in writing, signed by the
party to be charged.
J. Partial Invalidity. If any provisions of this Agreement
is held by any competent court to be invalid, void or unenforceable,
the remaining provisions shall nevertheless continue in full force
and effect.
K. Governing Law. The validity of the Agreement and any
of its terms or provisions, as well as the rights and duties, shall
be interpreted and construed pursuant to the laws of the State of
California.
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Executed at
the date and year first above written.
BROWN BROTHERS ADJUSTERS
By
THOMAS T. BEASLEY
Assistant Vice President
APPROVED AS TO FORM:
RICHARD L. KNICKERBOCKER
City Attorney
ATTEST:
JOYCE SNIDER
City Clerk of the City of
Santa Monica
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, California, on
CITY OF SANTA MONICA
CHARLES K. McCLAIN
City Manager
CA RLK:SSS:mc
Council Mtg. 02 -27 -7"
TO: Mayor and City Council
FROM: City Attorney
Santa Mor ia, California
SUBJECT: Adjusting and Investigating Services For Civil
Liability Claims
Introduction
Ft@ 2 7 1979
This staff report recommends renewal of the contract with
Brown Brothers Adjusters for adjusting and investigating services
for civil liability claims at a contract price of $47,500.00 for
the calendar year 1979.
The report contains a brief background of the basis upon
which Brown Brothers was initially chosen, its current performance,
and the reason for the increase in contract price.
Background
At the December 14, 1976 City Council meeting, the City
was authorized to enter into a contract with Brown Brothers Adjusters
for the calendar year 1977 at a total contract price of $34,500.00
This award followed a recommendation contained in a staff
report prepared by the City Manager's Office, which analyzed the
City's current and projected needs and compared the merits of propo-
sals submitted by Brown Brothers ($34,500.00 for 3 stages), Bay Cities
Adjustment Company, ($45,000.00 for 2 stages) and other adjusters.
The report concluded that the cost of developing an in -house adjust-
ing department within the City outweighed the procedural advantages
of self- administration, that the cost of retaining Bay Cities Adjust-
ment Company outweighed the advantage of continuity of service (and
� J
7 P P. 2 7 19171
CA RLK:SSS:mc
Council Mtg. 02 -27 -7-
Santa Mc ca, California
additionally noted that Bay Cities withdrew its bid), and recommended
Brown Brothers as providing the most complete service at best overall
cost.
On January 10, 1978, the City Council moved to authorize
the City Manager to award Contract No. 2440 (CCS) to retain the firm
of Brown Brothers Adjusters for the 1978 calendar year at a price of
$43,500.00 to provide adjusting and investigative services necessary
to maintain an effective claims control program for the City of Santa
Monica.
Brown Brothers Performance
Brown Brothers has performed their adjusting and investi-
gative services in a highly competent manner. Paul Robbins, their
Claims Manager, adjuster, and investigator, devotes 900 of his time
to the City of Santa Monica; Investigator Jim Pasco, devotes 700 of
his time; a Secretary devotes 50o of her time. The intensive attention
given to the City of Santa Monica and the high quality of work per-
formed by Brown Brothers is reflected in the low claims figures for
the past two (2) years.
In 1977, Brown Brothers paid from their trust account
$51,343.00 in settlement of 181 cases, an average of $283.67 per case.
Included within this figure are seven cases settled for an amount
over $1,000.00 (with City Attorney approval), representing a payment
of $11,850.00. Thus, Brown Brothers' average for cases, excluding
those requiring City Attorney approval, is $226.00 per case.
In 1978, Brown Brothers settled 274 cases for a total sum
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CA RLK:SSS:mc
Council Mtg. 02 -27 -7, Santa Mon.-_,a, California
of $112,540.00, an average of $410.73 per case. Twenty -eight of those
cases were settled for over $1,000.00 for a total amount of $45,038.00.
Thus Brown Brothers 1978 average for cases without City Attorney
approval is $274.00 per case.
Brown Brothers' average settlement for 1977 and 1978 is
$250.00 per case. Considering inflation and the large number of cases
received, the City Attorney's Office feels that this figure is relatively
low and reflective of the high quality of work and attention to the
City of Santa Monica given by Brown Brothers.
A detailed summary of the service rendered by Brown Brothers
is set forth below:
1. Claim Control. Brown Brothers has undertaken a highly
assertive role in resolving claims and potential claims. The compar-
ison from January lst to June 30th for the years 1975 through 1978
is as follows:
Year
No. of Claims
of Claims Settled
1975
106
15
1976
152
19
1977
167
36
1978
182
65
This represents a 43.4% increase in the number of claims
from 1975 to 1976 with a corresponding 26.66% increase in the number
of claims settled. When Brown Brothers took over the contract in 1977,
with a 9.86% increase in the number of claims received, there was a
89.4% increase in the number of claims settled before a lawsuit was
involved. Similarly, in 1978 there was an 8.98% increase in the num-
ber of claims received with a corresponding 80.55% increase in the
number of claims settled before a lawsuit was involved.
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Council Pitg: 2/27//
Santai pica, California
The statistical picture does not tell the whole story,
of course. A reasonable hypothesis based upon the sampling would
indicate that it is probable that the number of claims will eventually
decrease, that the number of claims settled will increase, and that
there will be a lower cost ultimately both with regard to litigation
and with regard to settlement.
2. Immediate Investigation. From our experience we have
found that a fully developed factual investigation of an incident
provides the best weapon with which to obtain advantageous settle-
ments and to prepare effective trial strategy. Robert Whipple,
Claims Litigation Manager for Transit Casualty Company, the excess
carrier for the municipal bus lines, undertook their annual audit
of investigative files at Brown Brothers' offices this January.
Mr. Whipple was very satisfied with Brown Brothers' performance in
all areas, particularly in their investigation of claims.
3. Setting Reserves. Brown Brothers has applied the
full expertise of a professional adjusting staff in setting realistic
reserves on claims. At the direction of the City Auditor, the City
Attorney's Office, and Robert Whipple at Transit Casualty, the Citv
has been instructed to increase its reserves on all of its cases.
Although Brown Brothers' analysis has resulted in an increase in
reserves, this has no bearing except to insure that the City has
sufficient amounts of capital to cover any and all judgments that
may be held against it. It is the belief of the staff that the
reserves are more realistic thereby establishing a more competently
evaluated fiscal position for the City.
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CA RLK:SSS:mc
Council Mtg. 02- 27 -79,
4. Pretrial Investigation.
Santa, nica, California
The City Attorney's Office
has found the performance of Brown Brothers with reference to pre-
trial investigation to be very satisfactory. Pretrial investigation
includes locating hard -to -find witnesses, re- interviewing witnesses
initially contacted, and making recommendations both as to medical
or technical experts whose testimony may be needed. Before Brown
Brothers was hired, these services were rarely provided by our
previous adjusting firm and had to be obtained through the Police
Department or contracted out to a private investigating firm.
The staff therefore concludes that Brown Brothers has
provided a very satisfactory performance in each of the pivotal
areas of adjusting and investigative services during this past
calendar year.
Proposed Contract and Cost
Brown Brothers has proposed to provide adjusting Fn,? in-
vestigative services for the 1979 calendar year at a contract cost
of $47,500.00. This proposed contract cost represents a 9.190 or
$4,000.00 increase over the 1978 contract cost of $43,500.00. The
basis for the contract price increase are the following:
(a) Increased salaries and administrative cost associ-
ated with the increase in the cost of living during the past year;
(b) Projected 39% increase in workload based upon the
current year's experience.
(c) Increase in Brown Brother's rates effective
November 27, 1978, their first raise in over two (2) years. The raise
RLK:SKS:ms 1/31/79
Council Mta: 2/27/79;
Santai nica, California
represents approximately 14% increase based on the accelerated
inflation and cost of doing business.
Brown Brothers has indicated to the City of Santa Monica
that they are still experiencing a continued loss on the 1977 con-
tract. originally, their increase proposal centered on out -of-
contract service for cases prior to 1977, attornev negotiations
on suit cases be handled out -of- contract, the change in the de-
scription of catastrophe from twenty (20) claimants to five (5)
claimants, and the change from the subrogation hourly rate from
$17.00 to $19.00, with a total proposed 1979 contract price of
$49,500.00.
The City Attorney's Office called the investigation firm
that handles the account for Culver City, R. L. Kautz, and spoke
with Mr. Patrick Kelley, Senior Vice President, who indicated that
in his opinion the Brown Brothers' contract price was highly favorable to
the Citv of Santa Monica.
Contract negotiations with Brown Brothers resulted in the
elimination of all of the requested changes except the new defin-
ition of catastrophe and the change in the subrogation hourly rate.
Recommendation
Staff recommends that the City Council authorize the City
?4anager to retain the firm of Brown Brothers Adjusters for the 1979
calendar year at the price of $47,500.00 to provide adjusting and
investigative services necessary to maintain an effective claims
control proaram for the City of Santa Monica. Funding for this con-
tract will be provided through the existing self- insurance funds.
PREPARED BY: