Title
Recommendation to Authorize the City Attorney to Execute a Five-Year Agreement with George Hills Company for Third-Party Claims Administration in an Amount Not-to-Exceed $555,009 for Five Years. (City Attorney 61123042)
Body
To: Honorable Mayor and Members of the City Council
From: Yibin Shen, City Attorney
EXECUTIVE SUMMARY
The City Attorney’s Office currently administers general liability and property claims with the assistance of a third-party administrator (TPA), George Hills Company (George Hills). The current contract expires November 15, 2023. Staff negotiated a new five-year contract with George Hills with total compensation not-to-exceed $555,009.
BACKGROUND
Prior to November 2013, the City of Alameda (City) administered the general liability and property claims in-house. In-house liability claims adjustment services included processing, establishing loss reserves, investigating and defending claims, accounting, providing loss summaries and loss-run reports and assisting the City Attorney in the evaluation, management and defense of claims from inception through disposition. In an effort to reduce costs and enhance service delivery, on July 11, 2013, the City Attorney’s Office issued a Request for Proposals (RFP) for General Liability and Claims Handling and Administration, in order to solicit competitive proposals and ensure that it is obtaining the best price for the most efficient services.
The City’s TPA selection was ultimately George Hills, a long-established Northern California provider of third-party liability claims administration for public entities. George Hills’ administration of the City’s claims has been handled efficiently, promptly and at a reasonable cost. Based on their performance and pricing, in September 2018, the City extended its agreement with George Hills for an additional five years with an expiration date of November 15, 2023.
Since the last extension, the City has continued to receive administration of its claims in a thorough and responsive manner. The City Attorney’s Office is therefore recommending that City Council authorize a new agreement which will allow George Hills to continue as the City’s third-party liability claims administrator for another five years.
DISCUSSION
Historically, George Hills Company investigates and adjusts up to 111 claims per year on behalf of the City. This includes investigating third-party liability claims, accounting, providing loss summaries and loss-run reports, establishing loss reserves and assisting the City Attorney’s Office in the evaluation, management and defense of claims from inception through disposition. The City may have over 150 open claims in need of investigation and defense at any point in time. Notably, the City has experienced an increase in claims filed and subsequently administered by George Hills. This increase in claims is consistent with the experience of other local public entities.
George Hills annual administration fee and claims management costs are fairly priced and consistent with the City’s needs. The original five-year cost from 2013-2018 was $308,400. In 2018, the five-year extension was negotiated for a total five-year cost of $404,300. Staff negotiated the five-year cost of the current proposal to be $555,009 for 2023-2028, which represents significant savings from the original quote submitted by George Hills.
George Hills will also continue to provide a team to process the City’s general liability third-party claims with a dedicated Executive Contact Liaison, Client Services Manager, Supervisor, Senior Claims Adjuster, Claims Processor and IT technical assistant to manage business servicing and data analysis needs. They will also continue to provide claims management software support to enable City staff to work collaboratively with the claims adjuster for efficient resolution of the liability claims and report documentation.
The City Attorney’s Office has considered in-house staffing of this work, and concluded that using in-house staffing to replace George Hills would not be cost effective.
ALTERNATIVES
• City Council could choose to not approve the agreement with George Hills and instruct staff to seek a different TPA provider. This alternative could result in a gap in coverage of third-party claims administration services because the current agreement with George Hills expires on November 15, 2023.
• City Council could also direct staff to further explore returning the work function to the City Attorney’s Office with the hiring of in-house claims staff. Preliminarily, staff finds that in-house staffing would not be cost effective.
FINANCIAL IMPACT
The funds for this contract are budgeted in the Risk Management Program (Fund 61123042) of the City Attorney’s Office for the current budget cycle. Future expenditures are subject to City Council appropriation of funds in future budget cycles. Subject to unexpected significant increases in claims volume, the proposed fixed annual cost is as follows:
|
YEAR |
AMOUNT |
ANNUAL ADMINISTRATIVE & REPORTING FEE |
ANNUAL COST |
|
2023-2024 |
$92,350 |
$5,500 |
$97,850 |
|
2024-2025 |
$101,100 |
$5,500 |
$106,600 |
|
2025-2026 |
$106,650 |
$5,500 |
$112,150 |
|
2026-2027 |
$111,475 |
$5,500 |
$116,975 |
|
2027-2028 |
$115,934 |
$5,500 |
$121,434 |
|
|
|
TOTAL |
$555,009 |
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
This action is consistent with the City’s policies and Alameda Municipal Code.
ENVIRONMENTAL REVIEW
This action does not constitute a “project” as defined in California Environmental Quality Act (CEQA) Guidelines Section 15378 and therefore no further CEQA analysis is required.
CLIMATE IMPACT
There are no identifiable climate impacts or climate action opportunities associated with the subject of this report.
RECOMMENDATION
Authorize the City Attorney to execute a five-year agreement with George Hills Company for Third-Party Claims Administration in an amount not-to-exceed $555,009 for five years.
Respectfully submitted,
Montague Hung, Assistant City Attorney
Financial Impact section reviewed,
Margaret O’Brien, Finance Director
Exhibit:
1. Service Provider Agreement