Council locked at 3-3 vote on liability insurance; will ask for extension

The Hillsboro City Council was not able to come to a decision on liability insurance bids after more than three hours of discussion and a 3-3 vote on the matter during a special session of council held Wednesday.

       The city's current liability insurance plan runs out on Aug. 1, and according to city officials, has not been put out for bid in 13 years. Because the city is unfamiliar with the process, council and administration members had many question on protocol and how to compare the individual bids.

Council's finance committee met Wednesday with the intent of examining the issue and making a recommendation to council for their approval. However, the committee could not reach a decision, so the full council continued the discussion.

       When the bids were put to a vote, the six members in attendance considered a motion to accept a plan presented by Nationwide Insurance Agent Russ Newman. Council President Lee Koogler declined to break the 3-3 tie, and opted to seek an extension on the current insurance plan.

       The city will ask current insurance agent Todd Heskett, who also submitted a bid, for a one-month extension on the Aug. 1 deadline, so that they can further investigate the four bids that were submitted, discuss how the bids are comparable, and discuss a rebidding process.

       Council member Rod Daniels made the motion to accept the bid from Newman, for one year, at a bid cost of $79,983. The motion was seconded by finance committee member Dave Shoemaker. Daniels, Shoemaker and finance committee member Bill Alexander voted in favor of the motion. Finance committee chairperson Peter Pence voted against it, as did council members Bonnie Parr and Mary Brown Turner. Councilman Brian Waller was not in attendance at the meeting due to work conflicts.

       The vote came after more than three hours of intensive discussion into the insurance bids, the process and specifications on which the bids were submitted, how the different bids could be compared accurately, what constituted the lowest bid, if the city had to accept the lowest bid, and the justifications for choosing a more expensive bid.

       During a tie vote, it is up to the council president to cast the deciding vote. Koogler explained that he had discussed with Hillsboro Law Director Fred Beery what he would do if Wednesday's vote was a draw.

       "He indicated to me that if I felt the issue was not right for me to make a decision to go forward, that I could choose not to cast a vote in that scenario and put it back to the drawing board," Koogler said. "That is what I am going to do at this time. I am not going to cast the deciding vote."

       Koogler asked Hillsboro Safety and Service Director Ralph Holt to investigate an extension, and if it is not granted, council will have to meet prior to Aug. 1 to choose coverage from one of the four agents.

       The discussions on insurance began at 5 p.m. with council's finance committee. The only item on their agenda was to consider the bids, which were opened on July 21. The committee reviewed the bid packets and heard 10-minute explanations from the agents, including: Newman; Jeff Markovic of Pillar Insurance; and Niren Shah of Argonaut Insurance. Heskett was not in attendance.

       As each agent spoke about the bids they had submitted, they began discussing that some of the bids were did not represent the same things from each agent. While the bid specifications stated that the bids had to match or exceed what was provided by the current insurance, some agents included items that others did not. As they began to list what was included and not included in the plans, they said that the overall costs considered by the committee would change. They did not all submit the same options, they said, because some items were not expressly required in the the bid specs put out by the city.

       It was explained that Pillar, Argonaut and the Ohio Plan submitted by Newman were "traditional" insurance plans in that they had an aggregate limit (cap) on how much could be paid out in one year. Each of the three had a $12 million aggregate cap.

       Heskett represents Public Entity Risk Services of Ohio, which is a "pool" form of insurance and does not have an aggregate limit.

       The three agents who were present also questioned an incident that occurred following the bid openings. As indicated on the bid tab form, due to a clerical error, Heskett bid $78,658, but there was another bid from him in the amount of $72,142. Newman said the amount had been changed after the bids were open, and he didn't think that it was fair the amount was allowed to be changed after all the bid amounts had been made public.

       Kirby Ellison, an administrative assistant  who works in the Hillsboro mayor's office and prepared the specifications for the bids, said that an error was made on the part of Heskett's insurance underwriter. When he found out about the error, according to Ellison, he corrected it and submitted the $72,142 figure; however, that was after the bids were opened.

       Pence recessed the meeting so he could consult with Beery over the phone on the matter. When the meeting was called back into session, Pence said Beery indicated if the numbers in the bid "came out to the $72,000 number, then that's fine. But if the numbers in the bid packet actually equal $78,689, then that's the number we have to use."

       Ellison said if that was the case, it would be the $78,689 figure.

       The committee discussed the benefits of "pool" vs. "traditional" insurance plans, whether or not the city was overinsured or underinsured, and if the difference in price between the agents was worth changing to a new agency from their existing carrier, and if there were benefits of having a local agent (Heskett and Newman are local agencies, while Pillar and Shah are both located in Cincinnati).

       Ellison and Holt said that the last time the city accepted bids on liability insurance was 1998.

       Holt said that Beery has been telling the city that they needed to bid out liability insurance; however, the city was never in a position to bid them out due to questions on continuing coverage.

       "Every time we would get ready to do that (bid out liability insurance), with our amount of liability in previous years, we couldn't do that," Holt said.

       Shoemaker said, "We're not comparing apples to apples and oranges to oranges; we can't do that."

       Koogler said, "If everything was identical, you could just say, 'This is the lowest price and that's it;' but as things were bid, we know everything is not identical That's why we've got to make some decisions as to what we think is the best coverage for the best price."

       The committee and other council members discussed the possibility of bidding the insurance out again so that they could receive more consistent bids.

       Ellison said that because a lot of the information she utilized when compiling and submitting the specifications for the bids was old, that might have led to some of the inconsistencies in the bids received.

       "I'll be totally honest with you," Ellison said. "We haven't bid this out in 13 years. Any information I had was so out of date that I had nothing to work with. I would need somebody with more knowledge about insurance than myself to help me prepare more detailed bid specs. I gave them what I could based on what we had with our prior insurance.

       Holt suggested that Hillsboro Auditor Gary Lewis assist Ellison in developing the specifications for the next time it is bid.

       Shoemaker then made a motion to go with the Ohio Plan as the committee's recommendation to council. That motion ultimately died for lack of a second.

       Koogler and Holt said that was not the lowest bid. Shoemaker asked if Beery indicated it had to be the lowest bid. Koogler said it did not have to be the lowest, but Beery said there should be a "substantive" or "material" reason for going with a bid that was not the lowest.

       Holt asked, after all the numbers were adjusted, what the lowest bid would be. Lewis said that the lowest, with the "nose" factored, in would be Pillar "at $75,917, spread across a three-year period. Shoemaker pointed out that the city was intending to bid insurance from year to year. Lewis said if that was the case, Pillar was higher at $83,803. Holt said they had to go with the lowest bidder if they were "conforming" bids.

       Daniels said that there were more factors to look at than cost.

       "You have to look at the quality, you have to look at the company ... The ratings performance of the company ... There's a lot of factors to consider," Daniels said.

       Pence made a motion that there be no recommendation from the committee and that they meet again Friday. Pence said he didn't want to rush such a decision.

       Pence's motion died for a lack of a second.

       Shoemaker then made a motion that the committee not make a recommendation so that a full council could decide. That was seconded by Alexander. Pence said that he would not vote to accept an insurance bid Wednesday.

       "That is your privilege," Shoemaker said.

       The committee voted 2-1 to let a full council decide.

       By the time the finance committee adjourned at 6:55 p.m., discussion had taken so long that the special council meeting was delayed by nearly an hour.

       Koogler called the special council meeting to order at 7 p.m. and opened the floor for continued discussion on insurance.

       "I don't see why if we wait until Friday it would be the end of the world," Pence said. "I'm sorry, but I can't make a decision tonight."

       Council discussed the multiple issues that were raised with the bids during the finance meeting, including if the city could ask for a 30-day extension on their existing coverage so that they could further investigate and not have to worry about the Aug. 1 deadline.

       Daniels wanted to know if council could vote on which form of insurance they wanted to go with, a "pool" provider like the currently have or one of the more traditional forms. Koogler said council could discuss their opinions, but that they couldn't take a "straw vote"

       Lewis said that while the bids and specs were different, he didn't think it was "apples to oranges."

       "I think you have apples of a different color," Lewis said.

       Daniels said that there was a lot of gray area on the bids.

       "In my mind, there's no gray area," Lewis said. "It's all pretty transparent."

       Shoemaker said that it was hard to determine who was really the lowest bidder when some savings were on a one-year basis, while another savings was spread out over three years. Lewis said that council was not supposed to base the decision just on the spec tab, but rather the entire bid packet.

       Daniels said that if he were going to make a decision based on the information he had Wednesday, he felt that picking a provider for one year would be the best thing.

       "I'm ready to make a decision now," Daniels said.

       Council member Mary Brown Turner said she would like another meeting because, "In good conscience, I could not give you my opinion now."

       Some council members began to get agitated at the discussion.

       When Daniels recommended one provider, Holt asked him if he could go before a judge and explain in court why there was a good reason for not going with the least expensive provider.

       "I would have no problem defending it to a judge," Daniels said.

       In response to Daniels' statement, Pence exclaimed, "Oh, for the love of God."

       At one point, during the discussion Bonnie Parr put her head down on the table.

       Before putting the matter to a vote, Koogler recessed the meeting for several minutes so that he could contact Beery regarding several issues that had been raised. Once the meeting had been called to order again and after the motion had been made by Daniels, Koogler said that Beery had determined that a non-majority vote of council would not be considered a complete rejection of the bid. Were the vote to fail, that individual bid could still be on the table for consideration by the city.

       When Daniels made his motion recommending the Ohio Plan, Koogler asked him to give a material reason. Daniels said that he felt it conformed with most of the specs that were given, and that by accepting it for one year it would give the city the opportunity to understand their needs, what they needed to include in specs, and to seek outside opinions.

       Council then cast the 3-3 vote. The meeting was adjourned at 8:19 p.m.