Report: City should rein in huge claims with ‘risk management’

Chicago shelled out $457.8 million in claims over a two-year period, nearly half of it to compensate city workers injured on the job, but lacks a “comprehensive risk management program” to rein in those costs, Inspector General Joe Ferguson has concluded.

In an advisory issued Thursday, Ferguson urged Mayor Rahm Emanuel to create a “chief risk officer with sufficient authority and resources” to pinpoint safety risks and reduce payouts, including $146.3 million for police misconduct and public safety claims. That would follow the lead of New York City and Los Angeles County.

“Fiduciary responsibility to the taxpayers impels the city to move from its historical paradigm of reacting to claims in a fragmented manner as a cost of doing business to a proactive model. A model that identifies trends and implements operational reforms that reduce the number of events giving rise to claims,” Ferguson wrote, pointing to the New York model.

The Emanuel administration answered the inspector general’s challenge with a promise to establish a “cross-departmental risk management working group” charged with producing an analysis that includes workers’ comp claims that cost Chicago taxpayers $203.1 million in 2013 and 2014.

In its response, the city acknowledged the workers’ comp claims are “related to workers safety and mitigating the risk of on-the-job injury.” That’s why the working group will focus on “safety and accident and injury prevention, taking a proactive role in this area,” the city wrote.

Police misconduct claims will be “excluded” from the working group’s mission “at the outset” to avoid “pre-supposing the results” of the U.S. Justice Department’s sweeping civil rights investigation of the Chicago Police Department.

The investigation, the largest of its kind undertaken by the Justice Department, was triggered by the video played around the world of white police officer Jason Van Dyke pumping 16 rounds into the body of black teenager Laquan McDonald.

Ferguson called the working group a “good first step.” But he encouraged Emanuel to “include in its mission the completion of regular reports to City Council and the public on claims trends, recommendations for corrective actions and progress towards risk reduction. In addition, police misconduct is a critical and expensive area of risk. I urge the mayor to plan for its regular examination and inclusion in the working group.”

The inspector general noted that, “to the extent that the city undertakes risk management and claims-related” monitoring at all, responsibility is “fragmented” between the city Departments of Law and Finance and the City Council’s Finance Committee.

Data needed to conduct a comprehensive analysis of claims “resides in different forms and at least three separate databases” while “voluntary cooperation of other city departments” is required to identify risks, he said.

“The lack of complete and accurate claims data organized through a centralized program prevents comprehensive analysis,” the inspector general said.

Ferguson touched a nerve by homing in on the $100 million-a-year workers’ compensation program administered by Finance Committee Chairman Edward M. Burke (14th).

In 2012, Burke clashed with Ferguson over access to workers’ compensation claims administered by the Finance Committee.

At the time, Burke denied the inspector general access to databases related to the workers’ comp program for civilian employees on grounds that “duty disability” is governed by state law, not city ordinance; that Ferguson’s investigative powers are limited to misconduct, and Finance Committee staffers fell under the jurisdiction of the now-departed Legislative Inspector General.

Ferguson countered by referring to Chicago Sun-Times stories that identified waste, abuse and mismanagement in the $45 million-a-year disability program for police officers and firefighters.

Fast-forward to what happened earlier this year.

Before empowering Ferguson to investigate aldermen and their employees, the City Council voted 25-23 to limit Ferguson to investigating potential violations of the law by aldermen and their employees.

Program audits that Ferguson routinely conducts to determine whether taxpayers’ money is being wasted were placed off-limits when it comes to the City Council. The workers’ comp program was walled off from Ferguson’s scrutiny.

In February, the maverick son of former longtime Ald. Bernard Stone (50th) filed a complaint asking Ferguson to investigate Burke.

Jay Stone accused Chicago’s most powerful alderman of violating the Shakman decree by allowing “political hacks” to administer a $100 million-a-year workers’ compensation program that belongs in the executive branch.

Sources said Ferguson was unable to pursue the complaint because City Council employees are exempt from the Shakman decree banning political hiring and firing.

Of the $457.8 million in claims paid by the city over the two-year period Ferguson examined, $54.9 million was used to compensate the company that leased city parking meters for spaces taken out of service. An additional $53.5 million in claims stemmed from property damage and vehicle accidents, including repairs tied to potholes.

In his report, Ferguson noted that collision avoidance training in an Arizona county cut statewide accident claims nearly in half. And a rigorous review of old claims to identify which new ones to settle helped New York City cut its annual tab for personal injury and property damage claims by $27 million, he said.