Last Modified on 05/07/2009 09:06:07Chapter 42 RISK MANAGEMENT*
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Cross references: Administration, ch. 2; execution of memorandum of understanding regarding insurance needs of City, § 2-9; Finance Department, § 2-19; finance, ch. 13; liability of City for damages or injuries arising out of defective or obstructive highways or sidewalks, § 31-20.
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Sec. 42-1. Definitions.
Sec. 42-2. Duties and responsibilities of the Director and CityAttorney.
Sec. 42-3. Insurance.
Sec. 42-4. Self-insurance– Scope; fund; special risk claim provisions.
Sec. 42-4.1. Effect of other valid and collectible insurance.
Sec. 42-5. Claims payment.
Sec. 42-6. Authorization for approval of claims.
Sec. 42-6.1. Offers of judgment; binding effect.
Sec. 42-7. Imprest checking account payment authority.
Sec. 42-8. Agent for service of claims and process.
Sec. 42-9. Claims review and analysis; claims committees.
Sec. 42-10. Representation and indemnification of the City, Cityemployees, covered corporations, covered City entities and other persons, corporations or entities.
Sec. 42-11. Payment of judgments.
Sec. 42-12. Additional insurance.
Sec. 42-13. Contract provisions; indemnification prohibition.
Sec. 42-14. Risk management loss control.
Sec. 42-15. Additional SIR Fund reserves– Public entity exception.
Sec. 42-16. Limitation of provisions.
Sec. 42-1. Definitions.
As used in this chapter, the following definitions shall apply.
City. The City of Phoenix.
City Attorney. The City Attorney of the City of Phoenix, or his designee.
Claim. Any insured claim, SIR claim or Special Risk claim as defined herein.
Claim cost. Any internal or external cost or expense incurred by the City, in response to any claim against the City, and any covered corporation, entity or individual as defined herein, including claim adjustment costs; contractual services costs; legal defense costs; and attorneys' fees awarded against the City.
Covered corporation. Any corporation created for the purpose of assisting the City in capital acquisitions and other exclusively municipal purposes.
Covered City entity. Any board, commission, committee, or subcommittee created by any City Charter provision, City ordinance or resolution, or other formal action of the City Council created for or in the course of carrying out the exercising of powers and duties for and on behalf of and for the exclusive benefit of the City as a public municipality.
Covered individual. Any individual falling within the following classes as of any applicable date of loss:
A. any elected official of the City,
B. any individual appointed to any covered City entity or as a Board Member of a covered corporation,
C. any employee of the City, including any officer of the City, carried on the City payroll and subject to City Personnel Rules, whether full-time, part-time, permanent or temporary,
D. any individual contracting to perform services for and on behalf of the City and regularly performing such services on City property or City controlled sites and performing such services under the continuing actual direction and control of an individual described in subsections A., B. or C. of this definition.
E. any individual who, at the time and place of the occurrence, event, act or omission alleged to have formed the basis of any claim, was acting as a volunteer for or on behalf of the City, and further who was at such time and place acting under the actual direction and control of an individual described in subsections A., B. or C. of this definition.
Director. The Finance Director of the City of Phoenix or his designee.
Insured claim. Any claim falling within the coverage provisions of any insurance policy indemnifying the City, covered City entity, covered corporation, or any covered individual.
Public entity. Includes, but is not limited to, a nation, state, county, City and county, City, district, public authority, public agency, public board, public commission, any Indian Tribe recognized by the United States or any political subdivision thereof or authorized agents thereof.
Risk fund. Any fund or account established by the Director for the purpose of paying claims and claim costs.
Risk management cost. Any internal or external cost associated with the purchase and maintenance of any commercial property or liability insurance policy or bond for or on behalf of the City or any covered corporation, covered entity or covered individual, including consulting, brokerage and actuarial fees; and all other internal and external costs, fees and expenses incurred in connection with the management of the Risk Management Fund and the Risk Management Division.
SIR. Self-insurance retention.
SIR claim. Any demand including any legal action and counter demand or counterclaim in the nature of a tort claim or employment law claim made by any person or entity for the payment of money damages from the City. The following types of claims are excluded from the definition of "SIR claim": any claim alleging damages through loss of any property, business advantage or economic interest through inverse eminent domain or through governmental action; any demand based solely on the assertion of a claim within the jurisdiction of the Civil Service Board; any demand relating solely to salary or employment benefits; any demand based solely on contract rights or issues; any demand arising solely out of any right or claim of right to property, its use or transfer; any demand based on taxes; any solely non-monetary demand; or any insured claim.
SIR costs. Any claim cost arising from an SIR claim.
Special risk claim. Any demand including any legal action and any counter demand or counterclaim made by any person or entity for injunctive relief, declaratory relief or the payment of money damages from the City, excluding any SIR claim or insured claim as defined herein, and further excluding any demand based on taxes or contractual claim arising out of or in connection with a capital construction project for which a separate funding source has been established.
Special risk costs. Any claim cost arising from a special risk claim.
(Ord. No. G-3536, § 1; Ord. No. G-4186, §§ 1, 2, passed 6-2-1999, eff. 6-2-1999; Ord. No. G-4408, § 1, passed 1-30-2002, eff. 3-1-2002; Ord. No. G-4421, § 1, passed 4-3-2002, eff. 5-3-2002)
Cross references: Definitions and rules of construction generally, § 1-2.
Sec. 42-2. Duties and responsibilities of the Director and City Attorney.
A. The Director shall have the responsibility for the fiscal and administrative management of all claims against the City defined herein, including SIR claims, special risk claims and insured claims, responsibility for the management and budgeting of all risk funds, the control of the Risk Management Division; the use and implementation of alternative dispute resolution methods involving any claim; the selection, acquisition of and payment for commercial insurance policies, alternative risk financing measures and surety bonds purchased for the benefit of the City and covered corporations, entities and individuals; and the payment of claim costs and risk management costs.
B. The City Attorney shall have the responsibility for management of all legal actions against the City, including selection of legal counsel for defense of any claim, and shall further have the responsibility determining the legal liability of the City with respect to any claim, including any decision to file suit, defend a suit or prosecute an appeal.
C. Notwithstanding the foregoing, the Director shall have the authority for management and determination of the City's responsibility for any claim for damages in which the claim is less than fifteen thousand dollars; under the directions provided by the City Attorney with respect to determining legal liability.
(Ord. No. G-3536, § 1; Ord. No. G-4186, §§ 1, 2, passed 6-2-1999, eff. 6-2-1999; Ord. No. G-4408, § 2, passed 1-30-2002, eff. 3-1-2002)
Sec. 42-3. Insurance.
A. The Director, acting for the City Manager, is authorized to enter into, on behalf of the City, any appropriate commercial insurance, alternative risk financing and surety bonding contracts to provide such risk insurance as he determines to be in the best interests of the City; and upon the approval of the City Attorney, to execute all such contracts.
B. In addition, the Director may enter into agreements for the purchase of owner controlled insurance policies by and on behalf of the City as owner of any construction project where the construction project call for bids has specifically directed the bidders to delete any specific or all insurance costs from bid computation, and as part of such owner controlled insurance program, may, notwithstanding the provisions of section 42-13, agree to indemnify parties contracting with the City to provide services in connection with the construction project, for only the amounts not covered by the lower coverage limit (deductible portion) of such insurance policy.
C. In addition, the Director may, notwithstanding the provisions of section 42-13, enter into agreements for the purchase of uninsured/underinsured personal injury coverage up to but not to exceed the minimum requirements under state law, with automobile insurance carriers, such payments to be available only as available under general uninsured/ underinsured provisions of law.
(Ord. No. G-3536, § 1; Ord. No. G-4186, §§ 1, 2, passed 6-2-1999, eff. 6-2-1999; Ord. No. G-4408, § 3, passed 1-30-2002, eff. 3-1-2002)
Sec. 42-4. Self-insurance– Scope; fund; special risk claim provisions.
A. The City shall act as a self-insurer for all claims and claim costs against the City other than those falling within the coverage provisions of an insurance policy, or surety bond. The liability of the City for claims and claim costs shall be established by law. The Director shall cause the City to comply with all requirements for self-insurers as such may be contained in appropriate law to obtain for the City all benefits of any such self-insurance status, and to maintain such status for as long as it is in the interests of the City to do so.
B. There shall be established an SIR fund which shall be administered by the Director and shall be considered an insurance reserve fund. This fund shall be funded as part of the annual budgetary and appropriation process of the City of Phoenix in such amounts as to provide sufficient monies to pay all reasonably anticipated lawful SIR claims and claim costs against the City for the ensuing fiscal year.
C. The SIR fund appropriation shall be allocated as determined by the Finance Director and the Budget and Research Director among appropriate budget units of the City on an actuarial underwriting accounting basis consistent with appropriate risk underwriting methodology.
D. There shall further be established a special risk account, under the management of the Director, which shall be used to pay claim costs other than SIR claims and any judgments or settlements arising from special risk claims. Funding for the special risk account shall be provided from appropriate budget units responsible for the risk as the Director and Budget Director shall determine.
(Ord. No. G-3536, § 1; Ord. No. G-4186, §§ 1, 2, passed 6-2-1999, eff. 6-2-1999; Ord. No. G-4408, §§ 4, 5, passed 1-30-2002, eff. 3-1-2002)
Sec. 42-4.1. Effect of other valid and collectible insurance.
If other valid and collectible insurance is available to apply to any claim against the City, a covered corporation, covered City entity, or a covered individual, the application of the self-insured retention (SIR) shall be limited as follows:
A. When the SIR is primary: The SIR is primary and applies to all SIR claims according to section 42-4 except when subpart B. below applies.
B. When the SIR is excess: The SIR shall apply in excess over:
1. Any other insurance, whether primary, excess, contingent or on any other basis that covers any covered corporation or covered City entity, whether purchased by the City or by the corporation or entity;
2. Any automobile liability coverage on a private motor vehicle driven by a covered individual on City business.
3. Any insurance, whether primary, excess, contingent or on any other basis, that is purchased by any other person or entity and is available to cover a claim against the City by reason of the City's having been listed as a "person insured," additional insured or additional named insured on the other person's or entity's insurance.
(Ord. No. G-4408, § 6, passed 1-30-2002, eff. 3-1-2002)
Sec. 42-5. Claims payment.
Upon receipt of the approval for payment as set forth in this chapter, the Director shall be authorized and shall have the authority to pay all claims, and all claim costs for which the City is legally liable; subject to the Charter, ordinances, and other provisions of law.
(Ord. No. G-3536, § 1; Ord. No. G-4186, §§ 1, 2, passed 6-2-1999, eff. 6-2-1999)
Sec. 42-6. Authorization for approval of claims.
A. The Director, acting within the parameters set by the City Attorney for determining that the City has exposure to legal liability, and upon further determining that the proposed expenditure of City funds is reasonable, may authorize and pay any SIR claim or any special risk claim, whether or not in litigation, in an amount not to exceed the sum of fifteen thousand dollars in the aggregate for any single demand for any single claim. The Director shall consult with the City Attorney prior to any determination to pay any claim for which the exposure to legal liability is unclear. No SIR claim in litigation can be settled or paid by the Director without a prior determination by the City Attorney that the City has exposure to legal liability.
B. The Director may, with the concurrence of the City Attorney, authorize the payment of any claim, in an amount between fifteen thousand dollars and twenty-five thousand dollars for any single demand for any single claim.
C. No claim in excess of twenty-five thousand dollars for any single demand for any single claim may be paid without the express authorization of the City Council, unless such claim or demand has been reduced to a legal judgment against the City and processed pursuant to or under section 42-11.
(Ord. No. G-3536, § 1; Ord. No. G-4186, §§ 1, 2, passed 6-2-1999, eff. 6-2-1999; Ord. No. G-4408, § 7, passed 1-30-2002, eff. 3-1-2002)
Sec. 42-6.1. Offers of judgment; binding effect.
A. In addition to the settlement authority provided herein, the City shall have the authority to file any offer of judgment with respect to the City and any covered corporation, covered City entity or covered individual for whom the City has undertaken the defense and indemnification without reservation, following notice to but without requiring the approval of such corporation, entity or individual; upon condition that such offer shall constitute the irrevocable obligation of the City to pay such offer if properly accepted under applicable statutes or court rules, and shall further constitute the obligation of the City to, upon payment of such offer, secure the dismissal or satisfaction of judgment in complete indemnification of any individual or entity for whom such offer was filed.
B. The level of authorization for any offer of judgment shall be the same as for settlement of a claim or demand under section 42-6.
(Ord. No. G-4186, §§ 1, 2, passed 6-2-1999, eff. 6-2-1999)
Sec. 42-7. Imprest checking account payment authority.
Pursuant to the provisions of Chapter 18, sec. 15 of the City Charter of the City of Phoenix, a check purchase order system, using one or more imprest checking accounts, is established for use by the Director in administering cost and claim payments arising under this chapter. The City Controller is authorized to issue City warrants in an amount sufficient to fund and to maintain the funding in each such checking account at the amount of three hundred thousand dollars. The Director and Risk Management Administrator are authorize to issue system checks in payment of claims, costs, attorneys' fees, expert witness fees, costs of trial exhibits and trial preparation materials, and other ordinary and proper expenses appropriate to carry out the purposes of this chapter. The account may also be used to pay claims and judgments not in excess of twenty-five thousand dollars (excluding interest and costs) for any single claim or judgment, and shall be a subfund of the SIR fund created under section 42-4.
(Ord. No. G-3536, § 1; Ord. No. G-4186, §§ 1, 2, passed 6-2-1999, eff. 6-2-1999; Ord. No. G-4408, § 8, passed 1-30-2002, eff. 3-1-2002)
Sec. 42-8. Agent for service of claims and process.
The City Clerk of the City of Phoenix is hereby designated as the proper and appropriate party upon whom claims against the City shall be served under the provisions of A.R.S. sec. 12-821.01, or and upon whom service of process in litigation shall be served to comply with the provisions of State and Federal Rules of Civil Procedure, as such statutes and Rules now exist or as they may be hereafter amended.
(Ord. No. G-3536, § 1; Ord. No. G-4186, §§ 1, 2, passed 6-2-1999, eff. 6-2-1999; Ord. No. G-4408, § 9, passed 1-30-2002, eff. 3-1-2002)
Sec. 42-9. Claims review and analysis; claims committees.
The Director may create a formal or informal, claims committee to assist in the evaluation of claims and the presentation of recommendations to the City Manager or the City Council. The City Attorney shall be a fully participating member of such committee.
(Ord. No. G-3536, § 1; Ord. No. G-4186, §§ 1, 2, passed 6-2-1999, eff. 6-2-1999; Ord. No. G-4408, § 10, passed 1-30-2002, eff. 3-1-2002)
Sec. 42-10. Representation and indemnification of the City, City employees, covered corporations, covered City entities and other persons, corporations or entities.
A. The City shall provide legal defense and indemnification for any covered individual subject to a civil litigation claim in which a colorable claim is made that the civil liability of such individual arises from acts or omissions of such individual acting in the course and scope of employment or duties performed on behalf of the City. The City shall not provide defense in any litigation for or on behalf of any such individual against whom a claim is directed where the actual activities of such individual giving rise to the claim were outside the course and scope of employment of such an individual as an employee, or beyond the duties of such an individual as an officer of the City.
B. The City shall further provide legal defense and indemnification to any covered corporation or covered City entity (collectively "entity") subject to a civil litigation claim or action in which a colorable claim is made that the civil liability of such entity arises from acts or omissions of such entity acting in furtherance of the scope of duties and responsibilities being performed for or on behalf of the City by such entity. The City shall not provide defense or indemnification where the acts or activities giving rise to the claim were not within the duties or responsibilities of such entity acting for or on behalf of the City.
C. In the event that an action is brought against a legal entity other than the City (including any covered corporation or covered City entity), or against an officer, director or employee of such entity, alleging acts, omissions or activities of said entity of [or] its officers, directors, agents or employees, as being acts omitted or performed for or on behalf of the City of Phoenix; the City Attorney shall determine the possibility of the City's civil liability and the colorability of such claim as a claim against the City of Phoenix, and the City shall provide legal defense and indemnification to such entity or individual where a colorable claim has been made.
D. If at any time during the course of such litigation, after the defense of such litigation has been undertaken by the City, it appears to the satisfaction of the City Attorney that the acts, omissions or activities of any of the parties to whom the City has been providing a defense, were in fact outside the course and scope of the employment, duties or responsibilities of such individuals as covered individuals, or beyond the authority of covered corporations, covered City entities or other defended entities, or their respective officers, directors or corporate employees alleged to have been acting for or on behalf of the City; and that by reason thereof a conflict of interest exists between the City and any of said persons or entities for whom a defense has been previously provided; the City Attorney shall take such appropriate steps as are consistent with the provisions of law and legal ethics to withdraw from the representation of such individuals or entities and to advise them of the necessity that they obtain independent legal counsel to continue their representation in such litigation at their own expense.
E. If during the course of representing one or more defendants in the course of litigation, the City Attorney determines that a conflict may exist between defendants, even though all defendants have or colorably may be claimed to have incurred liability in the course and scope of their employment as covered employees or their positions as officers or directors of legal entities acting on behalf of the City of Phoenix, or as covered entities or other entities acting on behalf of the City, the City Attorney shall resolve such conflict by retaining appropriate other counsel to represent conflicting defendants as may be consistent with the provisions of legal ethics and the rules of procedure of the courts of the State of Arizona.
(Ord. No. G-3536, § 1; Ord. No. G-4186, §§ 1, 2, passed 6-2-1999, eff. 6-2-1999; Ord. No. G-4408, §§ 10, 11, passed 1-30-2002, eff. 3-1-2002)
Sec. 42-11. Payment of judgments.
Upon a determination made by the City Attorney and the City Manager, or his designee, that no further judicial review is recommended or possible, and upon presentation to the City of a judgment or order of a court directing payment of any claim or cost, upon which interest is accruing, the Director may direct the payment of the judgment forthwith from City funds, consistent with decisions of the courts of the State of Arizona relative to the payment of judgments notwithstanding budgetary and other provisions of law, and reflect such judgment payment upon a subsequent payment ordinance to be adopted by the Council.
(Ord. No. G-3536, § 1; Ord. No. G-4186, §§ 1, 2, passed 6-2-1999, eff. 6-2-1999)
Sec. 42-12. Additional insurance.
In addition to insurance purchased for or on behalf of the City pursuant to section 42-3, the Director, with the approval of the City Council, as part of a compensation plan for employees, may purchase and pay from City funds premiums on policies of insurance which would provide liability protection to employees of the City when acting outside the course and scope of their employment (but with the approval of the City as to such outside employment); or provide liability insurance to officers, directors and members of corporations created at the City's request; upon a finding that the purchase of such insurance and the premium payments thereof by the City is an appropriate condition of obtaining the employment or services of employees or the services of individuals as officers and directors of such corporations. The purchase of such policies of insurance shall in no way be construed as an admission of liability of the City for any acts or events giving rise to a liability claim covered under the terms of any such policy.
(Ord. No. G-3536, § 1; Ord. No. G-4186, §§ 1, 2, passed 6-2-1999, eff. 6-2-1999)
Sec. 42-13. Contract provisions; indemnification prohibition.
A. Unless expressly authorized by law, or otherwise authorized by section 42-15, no City contract or agreement shall contain any provision, and the City shall not be bound by any provision of any such agreement, whereby the City of Phoenix, its agents, officers or employees agree to provide any indemnity or assume any liability for any omission, act or activity of the City, its agents, servants or employees, beyond such liability as may be imposed as a matter of law upon the City by reason of such omission, act or activity existing in the absence of any contractual provision relating thereto.
B. The City shall not enter into any contract or agreement, nor be bound by any provision of any such contract or agreement whereby the City limits its rights to obtain legal redress, damages or compensation whatsoever, other than such limitations as may be imposed by law in the absence of any such provision; for any act constituting negligence, product liability, design defect or similar conduct exposing the City to a potential loss of property, personal injury liability or damages recoverable by law as direct and special damages for such conduct, or omission or activity. The provisions of this subsection shall not be construed to affect the ability of the City by contract or agreement to enter into terms or conditions relative to product warranty, guaranty or merchantability. The provisions of this subsection shall further not be construed to limit the ability of the City to obtain property or the use of any property through the acceptance of any conveyance other than a full bill of sale or warranty deed.
C. The City shall include in all contracts in which any person, firm, corporation or entity is acting or may act to provide goods or services or perform contracts on behalf of the City, including but not limited to public works contracts, on behalf of the City; such terms and conditions requiring indemnification of the City or insurance providing coverage for the City with or without a policy or bond, as in the judgment of the Director and upon the recommendation of the contracting department of the City, shall be sufficient to provide adequate protection consistent with reasonable business requirements of the City in performance of a contract or work on behalf of the City. The City Attorney may publish and distribute to the various departments, divisions and functions of the City appropriate contract language and policy requirements to form part of City contracts and agreements.
D. Notwithstanding the foregoing, where it appears that there may be a colorable claim against the City of Phoenix which arises by reason of the acts or omissions of any legal entity, or other individual including the officers, directors or employees of such entity, acting for or on behalf of the City, the City Attorney may, where appropriate, tender the defense of such claim to such entity, or individual or the insurance or indemnity provider for such individual or entity, where the best interests of the City indicate.
(Ord. No. G-3536, § 1; Ord. No. G-4186, §§ 1, 2, passed 6-2-1999, eff. 6-2-1999; Ord. No. G-4408, §§ 12, 13, passed 1-30-2002, eff. 3-1-2002)
Sec. 42-14. Risk management loss control.
A. The direction of the risk management loss control function of the City and all of its departments, divisions and functions shall be vested in the Risk Management Division of the Finance Department and under the direction of the division head of the Risk Management Division established under section 2-19(b)(4) of the Phoenix City Code.
B. Risk Management Division shall have responsibility for coordination and control of all efforts of the City of Phoenix to protect against personal injury liability and property damage loss control. The division may establish by appropriate regulation promulgated by the Director, regulations and requirements designed to protect the City from personal injury liability claims and property damage claims.
(Ord. No. G-3536, § 1; Ord. No. G-4186, §§ 1, 2, passed 6-2-1999, eff. 6-2-1999)
Sec. 42-15. Additional SIR Fund reserves– Public entity exception.
A. Notwithstanding the provisions of Section 42-13, and in addition to or apart from any insurance provided under Section 42-3, the Director may, with the concurrence of the City Council, enter into an agreement or agreements with any outside corporation or entity regularly performing services or functions for or on behalf of the City, including but not limited to public transit services or facilities infrastructures, whereby the City shall provide commercial insurance or SIR Fund coverage for legal defense and indemnification of any claim brought against said corporation or entity for acts and activities arising out of and in the course and scope of the contract with such corporation or entity on behalf of and in accordance with its agreement with the City or as part of any regional public activity intergovernmental agreement or compact.
B. A Public Entity, upon approval of the City Council, may be excepted from the requirements of Section 42-13(A) and (B).
(Ord. No. G-3536, § 1; Ord. No. G-4186, §§ 1, 2, passed 6-2-1999, eff. 6-2-1999; Ord. No. G-4408, § 14, passed 1-30-2002, eff. 3-1-2002; Ord. No. G-4421, § 2, passed 4-3-2002, eff. 5-3-2002; Ord. No. G-5036, § 1, adopted 12-5-2007, eff. 1-4-2008)
Sec. 42-16. Limitation of provisions.
Nothing in this chapter shall be construed to have any effect or impact on, or derogate from any other power given elsewhere in the Charter or this Code to other departments or entities of the City with respect to any health, disability, life, workers' compensation, or unemployment insurance or coverage. Nothing in this chapter shall be deemed to have any effect upon any bonds provided in connection with a public works contract, any fidelity bonding contracts, provisions or requirements, or any performance or delivery agreements which include performance or delivery bond or insurance provisions.
(Ord. No. G-3536, § 1; Ord. No. G-4186, §§ 1, 2, passed 6-2-1999, eff. 6-2-1999)