AGENDA DATE: 8/3/2016
TITLE:
Title
Blue Ridge Heritage Project
BODY
SUBJECT/PROPOSAL/REQUEST: Consideration of a Proposed Agreement with the Blue Ridge Heritage Park for Improvements to Byrom Park
ITEM TYPE: Consent Action Item
STAFF CONTACT(S): Foley, Letteri, Kamptner, Herrick, Crickenberger, Burrell, Kriebel
PRESENTER (S): N/A
LEGAL REVIEW: Yes
REVIEWED BY: Thomas C. Foley
BACKGROUND: The Blue Ridge Heritage Project (BRHP) is a volunteer group dedicated to preserving the memory of those displaced by the creation of the Shenandoah National Park. The BRHP plans to construct memorial chimneys in each of the eight counties represented in the National Park. The BRHP approached the County for permission to construct the Albemarle chimney in the County-owned Patricia Ann Byrom Forest Preserve Park (Attachments A and B).
While the County welcomes donations that enhance County facilities and the quality of life, the County must also be mindful to avoid assuming unnecessary risks or liability for construction that it has not procured or directly managed. To limit its risks, the County has entered into agreements with prior volunteer groups that have donated improvements on County property. These prior agreements have provided several protections for the County:
• Both the project plans and the proposed contractor are subject to the County’s review and prior approval.
• The contractor is required to insure not only itself, but also the County and the volunteer group.
• The volunteer group has agreed to indemnify (or defend) the County against any claims and provide the primary insurance that covers both the County and the volunteer group, both during and after construction.
In this case, the BRHP has agreed to the first two of the above provisions, but not the third. In other words, the BRHP has agreed (a) that both its project plans and proposed contractor are subject to the County’s review and prior approval, and (b) that BRHP’s contractor will insure not only itself, but also the County and the BRHP. However, the BRHP has asked to be relieved of the County’s customary indemnification and insurance requirements, both during and after construction, citing the group’s limited resources. If the County should agree to this, it would in effect be treating this project like it would any other County run project, assuming the risk through existing coverage. Given the groups agreement to the other two provisions and the low level of risk with this type structure, the question is whether or not the value of what is being provided at no cost, through volunteer action is worth the trade-off of treating it like any other County project in terms of liability. While staff has worked cooperatively with BRHP representatives, the requested indemnification and insurance waivers cannot be granted by staff, but require Board approval.
STRATEGIC PLAN: Critical Infrastructure: Prioritize, plan and invest in critical infrastructure that responds to past and future changes and improves the capacity to serve community needs.
DISCUSSION: County contracts where a third party is involved, typically require third parties to indemnify the County and to provide liability insurance both during and after construction. An indemnification agreement is a contractual promise by a person or organization to protect the other party to the contract against loss or damage. A liability insurance policy provides financial support to the indemnifying organization in the event of loss or damage: many organizations are not able to otherwise finance a large loss. While the contractor is required to provide coverage for this project during construction, the indemnification agreement, which is on top of the contractor’s coverage, transfers the risk away from the County to the volunteer organization. The insurance policy provides the risk financing to the volunteer organization contracting with the County.
In typical cases, the County’s own insurance would be secondary to other parties’ required insurance. In other words, the County would need to tap its own policy only after all other parties’ required insurance had been exhausted. In that scenario, the other parties and/or their insurance would cover the County’s insurance deductible and/or legal defense, instead of the County having to do so on its own.
However, if the Board decides not to require indemnification and insurance from the BRHP, in the unlikely event of a future loss, the County’s own insurance would serve as the primary policy. In effect, the Board is being asked to treat this facility (memorial structure) as it would any other County facility or structure. As a result of providing coverage, similar to any other County facility or structure, the County may have to pay the cost of its own legal defense, a higher deductible, increased premiums, or a combination of all three should there be some accident or loss . Additionally, as with any other County facility, if an accident or loss should occur, the County’s insurer could potentially alter the County’s insurance coverage terms in a way that negatively impacts the County, transferring more financial risk directly to the County. Again, however, those negative outcomes would likely occur only in the unlikely event of an accident or loss and would occur as they would with any other County insured facility. Given the nature of the memorial structure, staff believes the additional risk assumed by the County is very minimal. The Board is being asked to weigh the value of the volunteer effort and funding, along with the other value of the memorial itself, against the minimal risk of taking this memorial on as another insured County facility.
In this case, the BRHP’s proposed improvements are to be constructed at no cost to the County and donated to the County upon their completion. Assuming that all goes well and no incidents occur, staff does not anticipate these improvements to significantly affect the County’s insurance premium.
The County Attorney has reviewed and approved the attached proposed Agreement (Attachment C).
BUDGET IMPACT: If the Board decides not to require indemnification and liability insurance provisions in the proposed agreement with the BRHP, staff does not anticipate a significant budget impact, but cautions against the greater County exposure to future risks, as detailed above. In effect, the County would be treating this facility as it would any other County facility and the risks it may present.
RECOMMENDATION:
Recommendation
Staff recommends that the County continue to obtain indemnification and insurance from volunteer groups donating improvements, whenever possible and based on the circumstances. In this particular case, staff believes the historic and memorial value of what is being provided through volunteer action, at no cost to the County is worth the trade-off of treating it like any other County project in terms of liability. If the Board wishes to waive the customary insurance and indemnification requirements for the BRHP and to accept the ownership of the proposed improvements in the Patricia Ann Byrom Forest Preserve Park, staff recommends that the Board adopt the attached Resolution (Attachment D) approving the attached Agreement and authorizing the County Executive to sign an Agreement once the County Attorney has approved the Agreement as to form and substance.
ATTACHMENTS:
A - Blue Ridge Heritage Park request letter
B - Picture of sample memorial chimney
C - Proposed Agreement between County and BRHP
D - Resolution
E - BRHP Brochure