City: Liability insurance decision overturned         

Risk manager's summary in question

[APRIL 27, 2005]  In an adjourned meeting on Tuesday evening, the Lincoln City Council reversed a decision to accept a bid for property and casualty insurance and a bid for workman's compensation.

At the recommendation of the city's insurance risk manager, Deb Callahan, the council accepted two annual insurance bids last week, one for $161,595 for liability and another for $79,568 for a public risk fund for workers' compensation. The two bids, totaling $241,163, came from St. Paul's Travelers Insurance Company.

The bids were said to be almost 20 percent lower than the previous year's rates.

During the week it was brought to city officials' attention by one of the other bidders that the bid did not meet several points in the bid specs.

1. Commercial property was set at over $18 million in value. The St. Paul's bid covered a property value limit of only $14,766,576.
2. A deductible of $5,000 was set for police professional liability. Their bid substituted a deductible of $15,000.
3. Another deductible of $5,000 was set for public official liability. That was also substituted with a $15,000 deductible.
4. A medical payment under the vehicles coverage was not included. It was included in the other two bids.

Callahan is paid $4,100 a year by contract with the city to review insurance bids and consult. She supplied a written report and summary that recommended the St. Paul's bid.

City attorney Bill Bates said that this was uncommon behavior for the risk manager. Callahan has been particularly sticky about bid specs in years past.

He was told that this bid may have been made by a relation of hers.

The St. Paul's bid should have been rejected by her since it did not meet the bid specs, or the differences should have at least been pointed out in her summary, Bates said.

While Bates said he has not had opportunity to speak directly to Callahan during the week, she has been in contact with several city departments. She relayed that if the other companies were allowed to change their bids, it would constitute bid rigging in their favor.

She also communicated that withdrawal from the new contract at this time would likely result in penalties.

Bates said he couldn't understand how there could be penalties since the insurance is not in effect. It does not begin until May 1.

Insurance chair Marty Neitzel, who has been out with illness recently, asked Bates if he thought Callahan should be invited to the next meeting.

Bates replied, "I wouldn't invite her, I'd tell her to be here."

Callahan will be asked to appear at the May 10 workshop session that begins at 7 p.m.

The council unanimously passed a motion that negated the previous acceptance of the insurance bid from St. Paul's Travelers Insurance.

A new motion was made and accepted to renew the commercial liability insurance and the workman's comprehensive insurance from Selective for a total annual premium of $337,553. Their bid met all specs.

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