Same Risk Pool Insures City County
A local business owner became very angry over a zoning decision made by city officials in Granby, Colo., and drove his armor-plated bulldozer into 13 buildings before coming to a halt and then taking his life.
It’s unsure whether either city will be found liable, but both suits reveal the extensive range of claims and lawsuits that municipalities potentially face.
To that protective end, the city of Grand Rapids and Kent County both buy their liability policies from the same source — the Michigan Municipal Risk Management Authority (MMRMA).
The Livonia-based MMRMA is a self-insurance pool that provides liability and property coverage to its membership of more than 280 local governmental units across the state. The MMRMA says its purpose is to give its members the best coverage available for the lowest cost possible.
The organization also offers risk management, claims administration, legal defense and reinsurance services to members through its in-house specialists and the private firms it has under contract.
The MMRMA policy the city has provides coverage for claims and lawsuits that might arise from bodily injury, property damage, personal injury, vehicle liability and wrongful acts. The latter can come from actual or alleged errors, misstatements, acts, omissions, neglect or breaches of official duty by a public employee or elected official.
The city began buying its liability protection from MMRMA in 1995 and has maintained a $1 million deductible-like, self-insured retention (SIR) since then. The previous policy the city had, a three-year agreement that expired on July 1, 2003, guaranteed its rates wouldn’t rise more than 3 percent in each of those years.
City commissioners agreed to a new two-year policy with MMRMA on July 2, 2003, and that coverage is good through the current fiscal year.
“The current agreement limited any increase in the second year to 10 percent, and the actual increase for this year turned out to be closer to 7.5 percent,” wrote Shelia Mahan, administrative services officer in risk management, in an e-mail to the Business Journal.
Mahan also pointed out that the city participates in the Stop Loss Program (SLP) offered by the MMRMA.
“The SLP is designed to limit the city’s actual cash payments each policy year for costs falling within its SIR. The city’s entry point into the SLP is $1.5 million,” wrote Mahan.
Kent County does not participate in the SLP. But its three-year policy with MMRMA — its first with the organization — provides coverage for auto, general and public officials’ liability, and medical malpractice, related to Health Department actions, through May 1, 2005.
Deputy Director of Fiscal Services Steve Duarte said the premium for the county’s policy has risen the past three years. Two years ago, it rose by 8.87 percent. A year later, it went up but not as steeply, at 5.87 percent. The latest premium, though, jumped by 17.65 percent in May.
The county has two other policies and both are with commercial insurers. One covers property owned by the county and the other provides liability protection for the Gerald R. Ford International Airport.
Premiums for the county’s property insurance rose by only three-quarters of a percent in 2002 and then skied by 27.4 percent in 2003. But the premium dropped by 19.22 percent for the current year.
“The primary reason why it went down in 2004 is that we increased our deductible from $50,000 to $100,000. We thought the tradeoff in premiums warranted going to the higher deductible,” said Duarte.
“What we’re really trying to prevent is catastrophic events,” he added.
The premium for the airport liability policy took off after the terrorists attacked in 2001 and then settled down two years later. In July 2001, roughly six weeks prior to those attacks, the premium rose by 5.84 percent. The following July, it soared by 55.77 percent. The most recent rise saw the airport’s premium go up by 7.9 percent.
“We got that initial shock and then it leveled back off again, a bit more realistically, and that was for basically the same limits,” said Duarte.
As for the MMRMA, it began as a joint-purchasing cooperative put together by a trio of municipalities in 1980. When the insurance market turned sour in the mid-1980s, 216 cities, townships and counties in Michigan joined the organization in 1985 and 1986. Today, the MMRMA says it has the largest contribution volume of any Michigan self-insured property and casualty pool that serves cities, counties and townships.
The MMRMA said the annual contributions it receives exceed the annual average premium earned by the 200 largest mutual insurance companies in the country.