CALABASAS : Water District to Buy Private Insurance

Concerned over a sharp increase in premiums for liability insurance, the Las Virgenes Municipal Water District has decided to cancel its contract with a public agency that is providing coverage.

The district’s board of directors voted this week to allow its staff to withdraw from its contract with the Sacramento-based Joint Powers Insurance Authority and sign with a private firm.

“We are simply concerned that the cost has escalated to $322,000, up from $226,000” a year, said Michael Garrick, the district’s director of finance and administration.

The district’s staff will recommend the signing of a 90-day binder, or temporary agreement, with Hartford Insurance Group, he said. The firm, he said, has “given us a range, about $70,000, dependent upon the binder.”

Hartford is offering a $10-million policy with a $1-million deductible, which would make the district self-insured, said Wayne Lemieux, the district’s legal counsel. Being self-insured, he said, could actually help protect the district from being sued.

“People know that the district is really going to challenge claims if it is self-insured,” he said.

About 40% of the increase in premiums was due to the district’s losses increasing from $130,000 to about $200,000 over the last year, said Dan Klaff, assistant general manager of Joint Powers. Another factor was that the district’s payroll has risen from $6.4 million to $6.6 million, he said.

Klaff questioned whether the district will actually save money by going with a private firm.

“They can reduce premiums, but in doing so they are going to raise their self-insurance retention, which means that the district will assume a greater dollar value on each loss,” said Klaff. “They’ll assume more risk on their own.”

That’s similar, he said, to a person increasing the deductible on an auto insurance policy to save money.