Corona Council Votes to ‘Go Bare,’ Without Costly Liability Insurance

CORONA — Meeting just hours before the city’s liability coverage expired at midnight, the City Council voted 3 to 2 Thursday to “go bare,” joining 57 other cities in California that have opted to do without liability insurance.

The decision came two days after California voters approved Proposition 51, a ballot initiative that backers claimed would ease a statewide liability insurance crisis that has made coverage expensive or unattainable for many public agencies, businesses and professionals.

“I think the choice was very obvious,” said Councilman William Miller, who cast the swing vote on the previously deadlocked council. “We would undoubtedly be faced with the same thing next year and in future years.”

The vote to become self-insured came at an unusual Thursday afternoon meeting that was called because the council, with Miller absent, failed to get a majority vote on any course of action at its regular meeting Wednesday night.

Motion Failed

On Wednesday, a motion to go without insurance failed on a 2-2 vote. The alternative, buying an insurance policy that one councilman termed “lousy,” was never offered for a vote because it was clear to council members that it, too, would have failed on a 2-2 vote.

“I don’t want to ‘go bare’ . . . as long as we can get an insurer with a reasonable policy at all,” said Mayor Pro Tem William Franklin, who, with Mayor S. Lopez, favored purchasing the policy.

The only policy available to Corona, from Planet Insurance Co., would have covered losses between $200,000 and $1 million, leaving the city responsible for a $200,000 deductible and essentially self-insured for amounts over $1 million, said James D. Wheaton, city manager.

“It doesn’t really cover anything,” said Wheaton. “Our deductible is too large . . . and the maximum coverage too small.”

Paid on 224 Claims

Over the last 10 years, Corona has paid $506,224 on 224 claims, none exceeding $100,000, Wheaton said. Sixty-seven open claims, dating back to 1980, have not yet been settled.

“The insurance policy that has been offered provides coverage that the city wouldn’t have used in the last 10 years, inasmuch as the deductible is larger than the largest settlements experienced, and provides little protection against the catastrophic event,” Wheaton wrote in a report to the council.

The coverage for 1986-87 would have cost Corona $206,757, a 35.23% increase over last year’s premium, which bought greater coverage--up to $5 million.

Until May 31, the city also had a policy with Firemen’s Fund Insurance Co. covering losses between $5 million and $10 million, but Firemen’s Fund “has declined to offer a policy for the coming year,” Wheaton said.

The council followed Wheaton’s recommendation to put the money that would have paid the 1985-86 premium into the city’s liability reserve, thus boosting it to $1,140,000.

Three-Minute Meeting

Thursday’s special meeting was concluded in three minutes, including the Pledge of Allegiance. “In recent memory, it’s the shortest meeting we’ve had,” said Diedre D. Lingenfelter, city clerk.

After the vote, Wheaton promised to “continue to examine whatever other alternatives come our way. We will ask our broker to keep testing the insurance market,” he said.

City officials will also look into liability pools that have been formed by other cities that are unable to get coverage.

The 57 cities statewide that have chosen to go without insurance are relying on their own reserves to cover potential lawsuits in liability cases, said Victoria Clark, communications director for the League of California Cities.

About 150 others have joined self-insurance pools, sharing liability reserves with other cities, but have been unable to buy “excess insurance coverage” to pay awards for large damages that the pools might be unable to cover.

And most other members of the League of California Cities are at least looking at alternatives to buying liability insurance, Clark said. “The insurance industry is a very cyclical industry and we end up being very vulnerable.”

Officials in Corona, at least, are skeptical that this week’s passage of Proposition 51--the so-called “deep pockets” initiative--will have much effect on cities’ ability to get affordable liability insurance.

The measure, which passed with 62% of the vote, limits defendants’ liability for certain damage awards, based on the degree to which their actions contributed to the injury.

“It’s fairly early to say” what effect the measure will have on cities’ insurance woes, Clark said. “We think it’s going to improve the availability of insurance, and eventually it’s going to contribute to reducing the cost of insurance.”