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Committee forwards Central Subway insurance amendments after staff explain retroactive premium and tail coverage
Summary
The committee forwarded to the full board two amendments to the Central Subway insurance brokerage contract: a retroactive $684,382 premium (amendment #3) and a prospective $6,321,304 premium and two-year extension to reactivate a 10-year tail (amendment #4). Acting program manager Albert Ho explained the need is driven by higher final contract bids and schedule delays.
The Government Audit and Oversight Committee on Oct. 3 forwarded two amendments to the Central Subway OCIP insurance brokerage contract to the full Board of Supervisors after hearing from Central Subway program staff and the Budget and Legislative Analyst.
Albert Ho, acting program manager for the Central Subway program, told the committee the Owner-Controlled Insurance Program (OCIP) established in 2012 aims to make program insurance more economical. Ho said one amendment (amendment #3) covers additional premium charges tied to final contractor bid amounts and is retroactive; the second (amendment #4) would extend the insurance and pay a premium that would reactivate 10 years of "tail" coverage after substantial completion.
"So that's really what we're trying to target... that tail is what we're really looking for," Ho said, describing why the extension is sought. Supervisor Aaron Peskin pressed whether coverage had lapsed after June 2018; staff confirmed that the excess coverage expired in June and that amendment #3 requires retroactive approval while amendment #4 had not yet been executed and would be needed prospectively to maintain continuous coverage.
Severn Campbell, Budget and Legislative Analyst, said the original Aon brokerage contract was entered in February 2012 and that amendment #3 (entered in February 2014) requires retroactive approval for $684,382. Campbell recommended approval of amendment #4, which would increase the contract term and a premium payment of $6,321,304 to reactivate the tail coverage and maintain excess insurance through the extended construction schedule.
Supervisor Peskin moved to forward the amendments with recommendation; the committee did so without objection and will send the item to the full Board of Supervisors for action.
