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COUNTY OF HAWAII
<br /> Notes to the Basic Financial Statements
<br /> June 30,2006
<br /> insurance on selected structures,medical malpractice insurance for emergency medical
<br /> technicians,general liability insurance for water safety officers,aviation liability for
<br /> helicopter operations,automobile coverage on transit buses,and no-fault insurance coverage
<br /> for privately owned police vehicles. There was no reduction in insurance coverage during the
<br /> year from coverage in the prior year. During the past three fiscal years,the amount of
<br /> settlements in cases covered by insurance have not exceeded the insurance coverage. The
<br /> County is substantially self-insured for its vehicles as well as for all other perils including
<br /> workers'compensation and general liability.
<br /> Liabilities are reported when it is probable that a loss has occurred and the amount of that loss
<br /> can be reasonably estimated. These losses include an estimate of claims that have been
<br /> incurred but not reported(IBNR). Claim liabilities,including IBNR,are based on the
<br /> estimated ultimate cost of settling the claims,and include incremental costs for the hiring of
<br /> special counsel and expert witnesses. Claims liabilities are estimated by a case-by-case
<br /> review of all claims and the application of historical experience to outstanding claims.
<br /> Estimates of IBNR are based on historical experience. The liability for claims and judgments
<br /> is reported on the government-wide statement of net assets. At June 30,2006,the amount of
<br /> this liability was$21,340,393. This is the County's best estimate based on available
<br /> information. Changes in the reported liability since June 30,2004 are given below.
<br /> General Workers' Total
<br /> Liabili Compensation Liabili
<br /> Balance at June 30,2004 $6,838,384 $13,190,616 $20,029,000
<br /> Incurred claims(including IBNR)* 4,669,502 6,764,323 11,433,825
<br /> Claim payments (1,544,734) (3,315,802) (4,860,536)
<br /> Balance at June 30,2005 $9,963,152 $16,639,137 $26,602,289
<br /> Incurred claims(including IBNR)* (412,874) 52,510 (360,364)
<br /> Claim payments (1,856,902} (3,044,639) (4,901,532)
<br /> Balance at June 30,2006 S13-647-012 $21.340.393
<br /> *Net of new claims liability and old claims resolved at less than previous estimate.
<br /> Subsequent Event
<br /> In October 2006,the island of Hawaii experienced a 6.7 magnitude earthquake followed by
<br /> several aftershocks. The series of earthquakes caused damage to various roads,bridges and
<br /> buildings owned by the County. The total damage is estimated to be$15 million. Some of
<br /> the damage is covered by insurance. In addition,funds from the Federal Emergency
<br /> Management Agency and the Federal Highway Administration are expected to help fund the
<br /> repairs. The County will pay its matching share for these funds,the insurance deductible,as
<br /> well as,any other costs not covered by these programs.
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