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The Board of Water Commissioners for the City of Detroit Water Sewerage Department approves the Professional Service Contract # 6003835 (Project# CS-1962) between DWSD and Mackinaw Administrators, LLC, to administer claims for the June 25, 26 and July 16 rain events for 3 years and a total contract amount not-to-exceed $3,000,000 and authorizes the Director to take such other action as may be necessary to accomplish the intent of this vote.
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Agenda of August 18, 2021
Item No. 21-0576
Contract No.: 6003835
Contractor: Mackinaw Administrators LLC
Address: 5440 Corporate Drive, Suite 260, Troy, MI 48098
Contract Amount: $3,000,000
Contract Term: 8/18/21 - 8/17/24 (3 years)
TO: The Honorable
Board of Water Commissioners
City of Detroit, Michigan
FROM: Gary Brown, Director
Water and Sewerage Department
RE: Claims Administrator for June 25 and 26 and July 16, 2021 Rain Events
Mackinaw Administrators, LLC
MOTION
Upon recommendation of General Counsel, Debra N. Pospiech, Esq. the Board of Water Commissioners for the City of Detroit Water and Sewerage Department approves the Professional Service Contract # 6003835 (Project# CS-1962) between DWSD and Mackinaw Administrators, LLC, to administer claims for the June 25, 26 and July 16 rain events for 3 years and a total contract amount not-to-exceed $3,000,000 and authorizes the Director to take such other action as may be necessary to accomplish the intent of this vote.
BACKGROUND AND JUSTIFICATION
The historic rainfalls of June 25 and 26th 2021 contributed to a substantial amount of flooding and sewage backups in the City of Detroit and surrounding suburbs. On July 16th another rain event occurred that caused flooding and backups in a smaller section of the City. Under the Governmental Liability for Negligence Act (Act 170 of 1964), a governmental agency is immune from tort liability for the overflow or backup of a sewage disposal system unless:
1. The sewage disposal system had a defect.
2. The governmental agency knew, or in the exercise of reasonable diligence should have known, about the defect.
3. The governmental agency, having the legal authority to do so, failed to take reasonable steps in a reasonable amount of time to repair, correct, or remedy the defect.
4. The defect was a substantial proximate cause of the event and the property damage or physical injury (50% or more of the cause).
Claimants submit their claim as prescribed in the Act and then DWSD evaluates whether the claimant met the four-part test. If so, DWSD may offer an amount it believes is fair and reasonable for verifiable damages. To date, the Detroit Water and Sewerage Department has received approximately 30,000 claims for these two rain events from Detroit citizens, business entities, churches, etc. as well as from citizens and entities in surrounding suburbs. The current staff cannot process this volume of claims. Each claim must be inventoried, investigated, have liability assessed, and then have damages assessed. Additionally, we are aware of several class action cases filed against the City of Detroit and other parties related to the rain events. The size of the class is yet to be determined but will likely encompass many of the same claimants who filed a DWSD damage claim form. If plaintiffs prevail or the parties determine settlement is appropriate, then we will require a damages assessment for each plaintiffs’ claim.
As the Board may recall, the DWSD utilized Mackinaw Administrators, LLC to process claims for the 2016 rain events primarily affecting the Jefferson Chalmers neighborhood-approximately 3,000 claimants/plaintiffs. Mackinaw’s technology capabilities, customer service (both to DWSD and the claimants), attention to detail, and thoroughness evaluating claims were impressive. Their pricing structure is reasonable in comparison to DWSD costs to properly staff our current damage claims team to accommodate the volume of claims received from these two rain events. Thus, we submit this contract to the Board of Water Commissioners under the Exception to Competitive Bidding process. This contract is being procured as single source - the exception to competitive solicitation request was approved by Director Gary Brown on August 16, 2021.
DWSD intends to transfer all paper and electronic claims to Mackinaw for entry into their database. The scope of services includes a tiered fee structure for:
Record Only: Record Only data will consist of plaintiffs from all class action cases who did not submit a claim. This data category will be populated during the course of the class action cases. Cost is $55 per record.
Denied Claims: DWSD will set protocols and generate a list of addresses where claims will be denied. Mackinaw will generate a form letter to those claimants and handle all calls regarding denials. Cost is $110 per claim.
General Liability Complex Claims: Where DWSD determines claims at specific addresses may be candidates for settlement, claims forms and supporting documents will be sorted, entered, and uploaded to Mackinaw’s database for full processing. Cost is $355 per claim. Mackinaw will evaluate damages claimed, recommend a settlement value, set off insurance and FEMA benefits, and also set off delinquent amounts owed to DWSD. The Director will exercise his settlement authority for claims up to $50,000.
Mackinaw provides all customer call center services and provides weekly reports. This is a three-year contract anticipating we will be involved in litigation for at least the next three years.
BUDGET IMPACT
The potential budget impact is estimated at $3M to $5M, depending on the volume of claims and the volume that ultimately transition to the “General Liability Complex” categories. The cost will be spread out over the course of the litigation process, which will likely be three years.
SUMMARY
A. Contract No.: 6003835 (Project# CS-1962)
B. Contractor: Mackinaw Administrators LLC
C. Contract Term: 3 years - Anticipated start is Sept 1st, 2021
D. Contract Amount: $3,000,000
E. Fiscal Year (FY) Breakdown:
FY 21 - 22: $1,000,000
FY 22 - 23: $1,000,000
FY 23 - 24: $1,000,000
F. Funding Source 100% sewer
G. GL String:
5821-20243-497711-616100-460999-15802-0000-000000
This contract is being walked on to the full Board’s agenda on 8-18-2021. Per the DWSD procurement protocol, Mayoral Review will also be obtained.