Title
a. Approve and authorize the County Purchasing Agent to execute an Agreement with Aon Risk Insurance Services West, Inc. for insurance brokerage and risk advisory services for the County’s environmental, excess liability, fiduciary liability, and other insurance programs as directed, at no direct cost to the County, with compensation paid solely through insurer commissions, for the period of execution through June 30, 2029; and
b. Approve non-standard indemnification and limitation of liability provisions in the Agreement, as recommended by the Risk Manager.
Report
RECOMMENDATION:
It is recommended that the Board of Supervisors:
a. Approve and authorize the County Purchasing Agent to execute an Agreement with Aon Risk Insurance Services West, Inc. for insurance brokerage and risk advisory services for the County’s environmental, excess liability, fiduciary liability, and other insurance programs as directed, at no direct cost to the County, with compensation paid solely through insurer commissions, for the period of execution through June 30, 2029; and
b. Approve non-standard indemnification and limitation of liability provisions in the Agreement, as recommended by the Risk Manager.
SUMMARY:
The County purchases several insurance policies on the commercial market through a licensed broker. These programs were previously brokered by Marsh. This Agreement engages Aon Risk Insurance Services West, Inc. (Aon) as the County’s broker and risk advisor for its environmental, excess liability, and fiduciary liability insurance programs, and for other programs the Risk Manager designates in writing. Aon is paid only through commissions that insurers include in the premium. The County pays no separate fee, and Aon must disclose all of its compensation. The Agreement uses Aon’s standard terms, which limit Aon’s liability and narrow its indemnification of the County, and Board approval of those non-standard provisions is requested. There is no additional General Fund cost associated with this recommendation.
DISCUSSION:
The Risk Management Division of the Office of the County Counsel places and manages the County’s commercial insurance. For specialty lines the County does not self-insure or obtain coverage through its risk pool, the County uses a licensed insurance broker to negotiate on our behalf in the insurance market, obtain competitive quotes, and verify policies match what was negotiated. Marsh previously brokered these programs for the County.
Scope of services. Aon will act as broker for the following programs:
- Environmental (pollution) liability;
- Excess liability, meaning coverage above the amount the County pays on each claim before insurance responds;
- Fiduciary liability, which covers claims alleging mismanagement of employee benefit plans; and
- Other programs the Risk Manager requests in writing.
For each program, Aon will help identify exposures, prepare underwriting information, develop a renewal strategy, obtain and analyze quotes, place coverage on the County’s written instructions, deliver and review policies, issue certificates of insurance, and handle premium invoicing and remittance. Other services, such as actuarial analysis, claims consulting, and enterprise risk management, are not included and would require a separate written agreement.
Compensation. The County pays Aon nothing directly. Aon is compensated only through commissions that insurers pay out of the premium on policies placed for the County. Before binding each policy, Aon must disclose its commission rate and estimated amount. After each policy year, Aon must disclose all compensation it received, including compensation to affiliated intermediaries and interest earned on County premium funds held in its trust account. Surplus lines taxes and fees on non-admitted placements remain the County’s responsibility, as is standard.
Non-standard provisions. Indemnification and liability are governed by Aon’s Exhibit B, which departs from County standards:
- Aon indemnifies the County only for copyright and patent infringement claims involving Aon materials, and for losses a court finally determines were caused by Aon’s gross negligence, willful misconduct, or fraud;
- Aon’s total liability for all services is capped at $2.5 million;
- Neither party is liable for indirect, consequential, or punitive damages; and
- Notice of claims to insurers remains the County’s responsibility.
These terms are common in national brokerage agreements. The Risk Manager recommends approval because Aon must maintain errors and omissions insurance of at least $1,000,000 per claim and $2,000,000 in the aggregate, with coverage continuing three years after the Agreement ends, and because the County may terminate the Agreement for any reason on 30 days’ written notice.
Term. The Agreement runs from the date of County execution through June 30, 2029. If the Agreement is terminated, Aon will assist in transferring the County’s account to a new broker.
OTHER AGENCY INVOLVEMENT:
None.
FINANCING:
The Agreement has no direct cost to the County. Aon’s commissions are included in the premiums for the covered programs, which are paid from the Risk Management Internal Service Fund and included in the FY 2026-27 Adopted Budget.
BOARD OF SUPERVISORS STRATEGIC PLAN GOALS:
This Agreement supports sound administration by ensuring the County buys appropriate insurance on competitive terms through a qualified broker, protecting County assets from catastrophic loss.
____ Well-Being and Quality of Life
____ Sustainable Infrastructure for the Present and Future
____ Safe and Resilient Communities
____ Diverse and Thriving Economy
X Administrative
Link to the Strategic Plan:
<https://www.countyofmonterey.gov/home/showdocument?id=139569>
Prepared by: David Bolton, Risk Manager, Ext. 3006
Approved by: Susan K. Blitch, County Counsel, Ext. 5045
Attachments:
1. Agreement with Aon Risk Insurance Services West, Inc.
2. Exhibit A: Scope of Services
3. Exhibits B & C