Wednesday, October 24, 2018

The Kentucky Association of Counties All Lines Fund held a special Board of Directors' meeting, pursuant to proper notice given in accordance with KRS 61.823, at 12:30 p.m. on Wednesday, October 24, 2018 at 400 Englewood Drive in Frankfort, Kentucky.

The roll was called. The following Directors were present: Chairman Robert Carpenter, Greenup Co. Judge/Executive; Vice-Chair Karen Bushart, Clark Co. PVA; John Wilson, Garrard Co. Judge/Executive; Bruce Todd, Henderson Co. Magistrate; and Tony Carriss, Shelby Co. Magistrate (via phone).

Others present were: Temple Juett, Director of Insurance; Brian Roy, Executive Director/CEO; Jim Henderson, Deputy Director; Kris Dunn, Underwriting Manager; Michael Ray, Safety & Loss Control Manager/Interim Claims Manager; Bruce Lawson, Senior Accountant; Karen Basham, Chief Financial Officer; Crystal Hellard, Litigated Claims Specialist; Marie Skinner, Accountant/UI Manager; Rich Ornstein, Staff Attorney; Clint Combs, Peel & Holland/KACo Marketing Agent; Rob Brown and Joe Greathouse, Local Government Insurance Agency/KACo Marketing Agents; Sue Porter and David Livingston, Roeding Insurance/KACo Marketing Agent; Greg Sisson, Ed Meredith and Terry Banaszak, Underwriters Safety & Claims; Rob Miller, Crash Analysis & Reconstruction, LLC; Steve Bolton, Board Counsel; Andrea Morse, Customer Service Representative; Grant Satterly, Director of Financial Services; John Logan and Kristie Whistle, Marsh, Inc.; Jeff McCaffrey, Deming, Malone, Livesay & Ostroff, PLLC; Paul Harnice, Stoll, Keenon, Ogden, PLLC; Roger Recktenwald, Director of Planning & Infrastructure; and Sonya Chesser, Executive Secretary.

Chairman Carpenter called the meeting to order at 1:05 p.m.

Motion made by Karen Bushart, seconded by John Wilson, to approve the minutes of the September 26, 2018 meeting. Motion carried.

Ms. Basham presented and discussed the following reports: FY 2018/19 budget detail for the three months ending September 30, 2018; balance sheet as of September 30, 2018; FY 2018/19 PAF budget for period July 1, 2018 - September 30, 2018; FY 2018/19 addition and deletions for September 1 - 30, 2018; FY 2018/19 agent commissions as of September 30, 2018; and FY 2018/19 investment portfolio summary as of September 30, 2018.

Ms. Basham presented the final FY 2018/19 budget for the board's approval.

Motion made by John Wilson, seconded by Bruce Todd, to adopt the FY 2018/19 budget as presented.  Motion carried.

Motion made by John Wilson, seconded by Karen Bushart, to accept the financial reports as presented.  Motion carried.

Mr. Ray presented and discussed the following claims activity reports: summary of losses valued as of September 30, 2018; graphs of opened and closed claims during FY 2018; total open claims for all years as of September 30, 2018; and a chart comparing the number of claims from the last three to five to ten years. There were a total of 205 newly reported claims totaling an incurred value of $950,899.15 for the month of September 2018 as compared to 166 reported claims totaling an incurred value of $863,241.54 for the month of September 2017.

Ms. Hellard provided an update on the defense attorney training that was held October 4th at the KACo offices.  She reported that the training was a success and received positive reviews from the attendees.

Mr. Miller provided an overview of the services that Crash Analysis & Reconstruction, LLC provides to the Fund's members.

Mr. McCaffrey presented and discussed the draft audited financial statement for years ended June 30, 2018 and 2017. He said there were no changes to the accounting policy as compared to the prior year and there were no audit adjustments.

Motion made by John Wilson, seconded by Bruce Todd, to approve the audited financial statement as presented. Motion carried.

Mr. McCaffrey presented and discussed the annual statement as of June 30, 2018 and the quarterly statement as of September 30, 2018. Both financial reports will be filed with the Kentucky Department of Insurance.
Motion made by John Wilson, seconded by Karen Bushart, to approve the annual statement as presented.  Motion carried.
Motion made by John Wilson, seconded by Bruce Todd, to approve the quarterly statement as presented. Motion carried.

The board members who were present signed the Trustee Confirmation of Receipt for the Fund's Quarterly Financial Statement for quarter ended September 30, 2018. 

Mr. Satterly presented and discussed investment report as of September 30, 2018 including the quarterly security position changes for period July 1, 2018 through September 30, 2018.  He also offered his opinion on the economic outlook.

Motion made by John Wilson, seconded by Karen Bushart, to approve the investment report and ratify the quarterly security position changes.  Motion carried.

Mr. Juett presented the board with a copy of the Fund's current investment policy as adopted December 18, 2013.

Motion made by Karen Bushart, seconded by Bruce Todd, to make no changes to the investment policy.  Motion carried.

Mr. Ornstein requested approval to send out a request for qualifications for Regional Agent Territory A, currently with Peel & Holland and expires June 30, 2019.  He said this will be the first time Territory A has gone out to bid.  The proposal would include a three year term with (2) three year options to renew.

Motion made by Karen Bushart, seconded by Tony Carriss, to send out a request for qualifications for Territory A. Motion carried.

Mr. Ornstein said Territory C, currently marketed by Local Government Insurance Agency, will expire June 30, 2019.  He said the board has the option to renew for another three year term or issue a request for qualifications.

Motion made by Karen Bushart, seconded by Bruce Todd, to exercise the option to renew the contract for Territory C for another three year term with Local Government Insurance Agency per the terms of the contract. Motion carried.

Mr. Juett presented a proposed dividend policy for the board's review. He explained the criteria for considering a dividend and the conditions on which a member would qualify to receive a dividend. Mr. Juett noted that, under Member Qualification for Dividend, the language "paid a premium of no less than $5,000" has since been stricken from the policy. Mr. Juett recommended that the dividend be paid after July 1, 2019. Ms. Basham said the Fund has met the standards to provide a dividend. She presented the formula to determine the amount of the dividend to be declared. The maximum dividend allowed is $2.4 million based on her calculations for 2007.  Mr. Carriss asked if a county could sue if they were not a member in that particular year that the dividend was declared.  Mr. Ornstein said the board has the right to set the policy and there is no discriminatory manner by which the board determines which year it deems is appropriate based on the amount of its excess funds. Ms. Basham said another option would be to split the $2 million by offering a $1 million dividend and $1 million rate reduction in a premium so all members could benefit, Mr. Juett suggested going back five years rather than ten. More information will be presented at the next meeting regarding the potential distribution of a dividend among members.

Motion made by Karen Bushart, seconded by Bruce Todd, to adopt the dividend policy as amended striking language as noted by Mr. Juett related to the $5,000 and to limit it to a 5 year look back.  Motion carried.

The next scheduled board meeting will be held November 28th at 1:00 p.m.

Motion made by Karen Bushart, seconded by Bruce Todd, to go into closed session at 2:15 p.m. to discuss proposed or pending litigation involving the board as authorized by KRS 61.810 (1)(c). Motion carried.

Motion made by Bruce Todd, seconded by Karen Bushart, to return to open session at 2:45 p.m.  Motion carried. No action was taken in closed session.

Motion made by Bruce Todd, seconded by Karen Bushart, to authorize Chairman Carpenter to execute the Tender and Release Agreement and Assignment of Claims between Fulton County Fiscal, the KACo and the KACo All Lines Fund. Motion carried.

Motion made by Karen Bushart, seconded by Bruce Todd, to adjourn the meeting at 2:46 p.m.  Motion carried.