Chairman’s Message

FRED ROWBOTHAM
Chairman

Many of our members can empower themselves to shape how their rates will look. Plan I, which most of our California member associations are enrolled in, is an “experience” or “usage”-based plan, with regard to your LDF rate. What this means is that your rate for the year going forward is based on your usage during the prior few years. The more you use, the more you will pay during the next rating cycle. Similarly, if you have a decrease in usage, you can see a decrease in rates. Plan III also utilizes experience-based rate setting in the same way.

With that in mind, there are numerous ways an association can take control of its LDF rates. First, find out what coverage you have purchased. Associations have turnover in leadership positions; some association presidents and treasurers are not aware what coverage was purchased by their predecessors. Perhaps you have Plan I, with the optional non-scope rider. I have found that many people think the only cost of the non-scope rider is the $5 fee tacked on to their rate. This could not be further from the truth. What that $5 really did was bring all kinds of new incidents into coverage for longer periods of time. Remember, these non-scope incidents receive coverage up to the Skelly hearing already under Plan I. Buying the non-scope rider means these cases may be covered for longer periods of time into the more expensive part of the disciplinary process (i.e., Civil Service hearing, arbitration). The cost of coverage for the non-scope case through the conclusion of the administrative hearing process then gets added to your “usage” or “experience” for next year’s LDF rates, as discussed above. 

Each association has to decide for itself whether this non-scope coverage is an additional cost it wants, or can afford. For those struggling with increased costs or for those who simply don’t want to pay to cover those DVs or DUIs beyond the Skelly hearing, consider dropping the non-scope rider and you can immediately realize a $5 rate drop, and more likely than not an additional decrease over time in usage.
Next, ask yourself if your attorneys are being utilized in the most efficient manner. That can take several forms.

First, do you really need an attorney to represent you for an attitude complaint or for a fender bender? Perhaps, but maybe a well-trained board member from your own association would suffice. PORAC offers fantastic Internal Affairs training classes several times a year. I would propose that the cost of sending a couple of your board members to this type of training would more than pay for itself if implemented correctly.

Second, have you developed a relationship with your primary LDF provider? By cultivating a relationship with your firm of choice, both sides might take a longer-term perspective. To an extent, they will have a vested interest in your LDF rate as well. Conversely, if you are one of the groups that designates every firm in your half of the state for use by your members, the attorneys might not concern themselves with your financial well-being.

The LDF trustees and staff are happy to expand on the concepts presented in this article. Attend a PORAC IA class — there are still two coming up this year, May 16–17 in Reno and December 12–13 in San Diego. This is the time of year to take the steps that can translate into rate relief next year.