IS THE TML RISK MANAGEMENT POOL AN INSURANCE COMPANY?
No. The Tennessee Municipal League Risk Management Pool is a non-profit, risk sharing organization of Tennessee municipalities and local public agencies - not an insurance company. A pool is a cooperative arrangement that works in many ways like a traditional insurer. Participating members pay a contribution (premium), receive coverage, and make claims against that coverage. Members, banding together to pool their risks, gain several advantages over traditional insurance. For example, premiums are determined using rates based on municipal loss experience only, loss control programs are specifically tailored to the needs of municipalities, and claims are settled with consideration for prior municipal court cases and awards.
IS THE TML POOL GOVERNED BY THE INSURANCE DEPARTMENT?
No. Since the TML Pool is not an insurance company, it is not governed by the Insurance Department. However, the TML Pool was formed by Tennessee Statute and that Statute requires that certain financial documents and annual reports be filed with the Insurance Department.
DOES THE TML POOL HAVE AN A.M. BEST RATING?
No. The TML Pool is not rated by A.M. Best. The latest audited financial statements are made available to members, showing that the Pool is financially sound. Rates are actuarially projected to provide adequate funding to cover loss reserves and expenses, as well as building contingency reserves. Loss reserves are actuarially certified in accordance with sound risk financing practices. For added financial protection, various layers of reinsurance, purchased from different commercial market reinsurers, are in place and all of these reinsurers are rated by A.M. Best.
IS THERE ANY EXPOSURE TO MY CITY OVER THE TORT LIMITS?
The Tort Limits are set by the Tennessee Legislature. 1992 was the sixth year that Tennessee has held these Tort Limits constant. These limits have also been consistently upheld in Court; therefore, based on historical records, the city's exposure in the State of Tennessee has been held to the Tort Limits outlined in the Tort Liability Act and for which coverage is provided by the TML Pool. Approximately 7-10% of Liability claims are taken to Federal Court, which is outside the jurisdiction of the Tennessee Tort Limits. For this purpose, the TML Pool offers a variety of limits for the non-tort Each Other Loss Liability limit as well as for the Errors or Omissions Liability limit.
WILL THE TML POOL WORK WITH A LOCAL SERVICING AGENT?
Yes. The TML Pool is structured so that members can designate a local servicing agent. The agent's responsibilities will be the same as they would with a conventional insurance company and a commission or service fee will be paid to the agent for these services.
HOW ARE VOLUNTEERS COVERED?
The General Liability policy provides coverage for the actions of volunteers and volunteer organizations acting on behalf of and at the direction of the municipality. The Workers Compensation coverage provided by the TML Pool does not extend coverage to any volunteer except Volunteer Firefighters, Auxiliary Police Officers, and Elected Officials – referred to as "Non-paid employees". See Coverages Offered for details.
DOES THE TML POOL SUBSCRIBE TO THE NCCI WORKERS COMPENSATION RATES AND/OR MODIFICATIONS?
No. The TML Pool does not subscribe to the NCCI rates and mods nor does it file rates with the State. The services of independent actuaries are enlisted, to promulgate rates that are specifically tailored to the exposures and loss histories of the TML Pool clients. Since we write the coverage for approximately 93% of the cities and towns in Tennessee, we believe that our rate structure is certainly credible for the exposures that are rated.
The TML Pool is not part of the Tennessee Assigned Risk Workers Compensation Pool and for this reason does not have to accept a share of the Residual Market (Assigned Risk clients). This helps to keep premiums down, as the Pool does not have to cover any residual market losses.
WHAT HAPPENS IF AN EMPLOYEE DRIVES THEIR PERSONAL AUTO ON CITY BUSINESS AND HAS AN ACCIDENT?
If an employee uses their personal auto on city related business, then their personal auto insurance would be primary and the TML Pool coverage would be excess under Hired and Non-Owned Automobile liability coverage. The insurance rule is that the auto liability coverage follows the vehicle. Therefore, it is imperative that all employees are checked concerning valid driver’s licenses and personal auto insurance at minimum limits equal to the Tort Liability limits.
WHAT HAPPENS IF THE CITY BORROWS OR LEASES A VEHICLE?
If a city borrows a vehicle from another city, the "borrowee" city's insurance coverage would be primary and the "borrower" city's insurance coverage would be excess.
In the case of a formal lease agreement, the city would take legal care, custody, and control and the TML Pool coverage would be primary. The leased vehicle would need to be endorsed onto the policy, with the applicable premium charge.
HOW IS COVERAGE AFFORDED TO VARIOUS GROUPS USING CITY-OWNED PROPERTY?
Any group that uses city-owned property should provide the city with a Certificate of Insurance naming the city as an Additional Insured on their Liability policy as respects the groups use of the city-owned property. This action allows the city to be covered under the group's insurance coverage should there be bodily injury or property damage as a result of negligence on the part of the independent group. Coverage would still be in place for the city under the Liability policy with the TML Pool for any occurrence as a result of negligence on the part of the city. In no instance would there be coverage afforded to the outside group under the city's policy.
These suggestions and circumstances would also apply to any contractor hired by the city to perform work for the city. With contractors, it is also imperative that Workers' Comp coverage is verified through the receipt of a Certificate of Insurance. In the event of no Workers' Comp coverage or evidence of coverage, the TML Pool auditor will use 90% of the contract price in setting a payroll limit for the provision and payment of Workers' Comp coverage.
WHAT ARE THE DIFFERENCES IN "CLAIMS MADE" OR "OCCURRENCE"
POLICY FORMS?
These two terms are simply coverage triggers that determine which policy or policy period will respond to a claim when presented for coverage.
"CLAIMS MADE" FORM OF COVERAGE
The "claims made" coverage form states that the policy in effect at the time the claim is made (presented for payment) is the policy that will respond to the claim. Under this form, policy limits and coverages are kept up to date based on current claims trends as well as any legal changes or precedents set by court cases. Policy records need not be kept indefinitely because claims reported in the future are covered only by the policy currently in effect at the time the claim is presented for settlement. This eliminates the uncertainty as to the amount of money and the time frame that will be needed to settle claims. As a result, loss reserves can be more accurately determined, proper premiums can be charged, and dividends can be returned to the members.
"OCCURRENCE" FORM OF COVERAGE
The "occurrence" coverage form states that the policy in effect at the time the claim "occurred" provides coverage for the loss, no matter when the claim is presented for payment. This means that claims for injury or damage that occurred some time ago will be assigned back to a previous policy which may have inadequate limits or coverages. For this reason, policy records must be maintained over long periods of time because of the possibility of future claims occurring during these past policy periods. A multiple injury incident or a claim involving a minor dependent may take years before it surfaces as a claim. Therefore, consideration would need to be given to the proper limits of insurance to be applicable at an indefinite time in the future and to the potential for having more than one policy having to respond to an injury or damage due to continuous or repeated exposure.
WHY DOES THE POOL ONLY OFFER "CLAIMS MADE" COVERAGE?
Based on the above considerations and the fact that the TML Pool was created to provide long-term market stability for governmental entities, the coverages offered by the TML Pool are on a "claims made" form. Leaving coverage in force with the same carrier for a period of time rather than changing carriers each year creates a stable insurance market.
The additional expenditure for changing carriers arises only when changing from a "claims made" to an "occurrence" policy form or to another carrier's "claims made" form. This is due to the fact that coverage must be purchased for any claims occurring under the previous "claims made" policy form. The "claims made" policy will only respond to claims presented for settlement prior to its expiration date and the "occurrence" policy will only respond to claims occurring after its effective date. This could potentially leave claims with no coverage. The premium charged for this endorsement to prevent a gap in coverage is based on the prior loss experience for the entity. It can be a minimal charge if there is historically good experience.
WHAT IS A RETROACTIVE DATE?
A retroactive date simply defined is an exclusion for any claims occurring prior to a specified date listed in the policy declarations. The policy will not cover any claim for injury or damage prior to this date, even though the claim is made during this policy period. It is recommended that the retroactive date be left as originally stated on the first "claims made" policy. The second policy will then cover not only claims made during this second policy period, but under the first policy period as well. By leaving this original date in place, each subsequent renewal policy will provide more coverage than the first. Over a period of time, the program will mature and eventually no claims will be excluded by the retroactive date. If this date is moved forward, on renewal a coverage gap could be created. This date is also used to prevent duplicate coverage when an "occurrence" policy is changed to a "claims made" policy.
WHAT IS AN EXTENDED REPORTING PERIOD?
The extended reporting period ("tail" coverage) is the opposite of the retroactive date. "Tail" coverage extends the period in which to report claims for injury or damage that occurred before the termination of a "claims made" policy. This protection is the second important option in the "claims made" coverage program, but is needed only if coverage ends and (1) isn't replaced: (2) is replaced with an "occurrence" policy; or (3) if the retroactive date is moved forward. Continuous protection, for a stated period of time, is provided by the Basic Extended Reporting Period, without additional charge. A Supplemental Extended Reporting Period ("Full Tail") is an optional reporting period coverage, which may be purchased. Neither of the tail coverages change the coverage limitations nor extend the policy period. They apply only to injuries or damages that occurred after the retroactive date and before the termination of the policy period.
The above are answers to generic questions. An answer may vary slightly due to the specific circumstances of each individual situation and/or claim.
