|
<br />Nine frequently asked questions from cities
<br />
<br />funds LMCIT uses to pay claims
<br />belong jointly to member cities.
<br />By reviewing each city's Y2k
<br />preparations, we make sure your
<br />city isn't being forced to help pay
<br />for losses because some other city
<br />ignoredY2k. '
<br />It's not accurate to think of
<br />these underWriting criteria as "extra
<br />stuffwe gottado to get the cover':"
<br />age." The real reason to take these,
<br />steps to prepare forY2k isn~t to
<br />qualify for coverage; it's so you'll.
<br />be ready to protect your citizenS.:<
<br />, How much Will it cost? The
<br />extracost forthe expanded Y2k
<br />coverage will equal 5% of the city's
<br />liability premium plus 2% of the
<br />property premium. For example,
<br />in one city of about 600 population,
<br />itworks ouqo $260; in another city
<br />of about 10,000 population with a
<br />utilities operation it's about$4,500.
<br />(For a quick-and dirty estimate, .
<br />figure 3% of your total property!'
<br />casualty premium.)This charge
<br />will apply to the city's coverage
<br />for two years. ' ,
<br />What if we get sued on a Y2k-
<br />related matter five years from now?
<br />'Would it be covered? Yes; Once the
<br />expandedY2k coverage is'in place,
<br />it remains in place and appliesre:"
<br />gardless of when the Y2k-related .
<br />claim is made-unless you've either
<br />left LMCIT or exhausted the cover-
<br />age limits. ,
<br />Isn't expanded Y2kcoverage
<br />really something you'd only need.
<br />if you're not ready forY2k? If you're
<br />not reasonably ready for Y2k, you
<br />wouldn't qualify for the expanded
<br />coverage. Buying coverage isn't
<br />something you do instead of manag-
<br />ing a risk; it'sjust one part of how
<br />you manage the risk. Even the best-
<br />prepared city needs to think about
<br />two possibilities:
<br />· There's always the po~sibility
<br />you'missed something--some '
<br />microchip buried inside some
<br />
<br />piece of equipment that malfunc-
<br />tions because of a Y2k problem,
<br />or sO,me problem you didn't
<br />. anticipate and weren't ready for.
<br />· . Even if your own systems work
<br />flawlessly, the city could still be
<br />dragged into a suit for damages
<br />caused by aY2k problem in
<br />someone else's equipment. Even
<br />if the suit is groundless, deferise
<br />costs alone could easily exceed
<br />that $25,OOOlirnit.For exalllple,.
<br />, . 'imagiIle ci,le coiinty's~9f1systeIl1"
<br />)nialfunctions.becauseof a Y2k.' c
<br />. ..... problenl in their equipment.'; '.
<br />,There's a fire in your city, the
<br />homeowner.c:allS91l butcan;t
<br />get thiough, so the home is
<br />destroyed. Thehonieowner sues
<br />the' city, saying yogshould have.
<br />warned citizenS that 911 might
<br />not work, and exPlained what
<br />to do if 911 failed.)
<br />. Saying, "We. thinkwe're ready,
<br />so we don't need liability coverage"
<br />is a little like saying, "We've got a
<br />pretty good fire department, so we
<br />don't need fire insurance onthe
<br />City Hall."
<br />
<br />.
<br />
<br />.Suppose the Y2k problem turns
<br />ouito be nothing. Wouldn't we have
<br />wasted our money buying the ex-
<br />'panded toverage?By the same token,
<br />I suppose you. could say your auto
<br />liability premium was wasted if you
<br />didn't run into anyone. More seri-
<br />ously, it's no different from ,any, other
<br />risk LMCIT c~vers. If thepremiums
<br />cities pay aren't needed for losses,
<br />expenses or reserves, those funds
<br />will be returnedtocities as divi-
<br />dends~ The' premiu~the,city paid
<br />for expanded Y2kcovc;:ragewould
<br />figure iI1tbthe allocati?l1 formula
<br />for future dividends just as premi-
<br />ums forany other risk would;
<br />Who can I talk to about the
<br />expandedY2k coverage?Yotir local
<br />agent is one resource. Or feel free
<br />" to contact Mike Wozni.ak. ~t (651)
<br />215-4090or mWozniak@lmnc.org,
<br />or PeteTritz at (651)2~1-12650r
<br />ptritz@h.1E1c.orgat.theLeague.', ".
<br />office.~.ii " ,
<br />
<br />
<br />.
<br />
<br />
<br />- '- ' .
<br />
<br />Pete Tritz is administrator of the League
<br />of Minnesota Cities Insuranfe Trust.
<br />
<br />IMPORTANT Y2K DEFINITIONS
<br />
<br />The following definitions are used in the LMCIT liability .coverage document:
<br />Year 2000 claim means any claim for damages arising directly or indirectly out of:
<br />Any' actual or alleged failure, malfunction, or inadequacy of any. system or system
<br />component, whether belonging cto the city or to others, which is due to any year
<br />2000 problem; ..... .'. '. ' ,.' ........ ....
<br />Any actual or alleged failure, malfunction, or iriadequacy of any product, service,
<br />data, or function that directly or indirectly uses or relies on any system or system
<br />component, which is due to any year 2000 problem; or ,
<br />Any advice, consultation, design, evaluation, inspection; installati()~, maintenance,
<br />repair, replacement, or supervision done by a covered party to determine, rectify,
<br />or test for any potential or actual year2000 problem. ., .
<br />, ;
<br />
<br />Year 2000 problem means the inability of any system or system component to correctly
<br />~cognize, process, distinguish, interpret, or accept the year 2000 a~d beyond.
<br />
<br />System or system component means any of thefollowing:
<br />Computer hardware, including microprocessors; ,
<br />Computer application software;
<br />Computer operatiI1g systems and related software;
<br />Computer networks; ".
<br />. !vticroprol=essors or other computer chips not part of any computer system;
<br />. . C Any other computerized Or electronic equipment or components.
<br />
<br />
<br />.
<br />
|