La Canada Obtains Insurance : Joins Pool of Cities to Get $10 Million in Coverage

The insurance woes of La Canada Flintridge, a city without liability coverage for more than a month, are over for the time being.

The city’s policy expired Dec. 8 and the insurer refused to renew it. But, last week, the city was accepted into the Joint Powers Insurance Authority, a group of Southland cities that pool their resources to buy insurance from a private firm. La Canada Flintridge’s coverage started Jan. 16.

Under the group’s terms, La Canada Flintridge can get up to $10 million in coverage, with a $10,000 deductible that must be met by the city, according to City Manager Don Otterman. An initial annual premium of $35,000 goes into a pool of funds to cover claims of $10,000 to $300,000.

Premium Could Change

Larger claims go to a private insurance company under contract to the group. The city’s yearly premium may increase or decrease, depending on its claims history at the end of the year.

During the six weeks La Canada Flintridge went without liability coverage, the city had to rely on $10 million in general funds to cover any claims. Otterman said no claims were filed against the city during that time, but that the general fund could still be liable for claims for 100 days after Jan. 16.

“We have not heard from anyone anticipating filing a claim, but you don’t know how that can go,” Otterman said.

Otterman said La Canada Flintridge was lucky to get into the joint powers group, which has since stopped accepting applications because of uncertainty about the future of municipal liability insurance. “We just made it,” Otterman said.

Widespread Problem

Like many municipalities in California, La Canada Flintridge had trouble obtaining liability coverage from private insurance companies because of the “deep pockets” legal doctrine, under which the defendant with the most money can end up paying the bulk of a settlement, regardless of degree of blame. The rule has made insurance companies increasingly reluctant to cover clients with “deep pockets,” such as governments.

La Canada Flintridge’s former insurance carrier, Chicago Insurance Co., would not renew the city’s coverage because it had stopped offering liability coverage to municipalities.