California City Warned It May Lose Its Insurance Coverage

By | September 7, 2011

A Southern California city has been told that it could lose its insurance if city officials and staff don’t start getting their act together soon.

That was the warning from the California Joint Powers Insurance Authority, an insurance pool for municipalities in the state. The authority issued a warning to the city, La Puente, with a caution that it may face a situation similar to that another Southern California city found itself in. In 2009, after failing to heed a warning from the CJPIA, Maywood was forced to disband its police department and lay off almost all employees because it lost insurance through the authority.

‘The potential is there if they don’t take corrective action now to end up similar to what Maywood ended up with,’ said Bob May, senior risk consultant for the CJPIA. ‘We put the city of Maywood on performance improvement plan in 2009. They didn’t clean their act up. The result of that was they lost their joint protection programs with us.’

Losing liability and workers’ compensation is ‘what could happen to La Puente, too,’ May added.

La Puente Mayor John M. Solis, whose term is set to expire April 10, 2012, did not immediately return a call and an email seeking comment. A call for comment placed to interim City Manager Raul Romero went unreturned.

The Los Angeles Times first reported on Saturday that the CJPIA had told La Puente that it must meet certain conditions by the end of 2012 or it could lose its insurance. Among the conditions, the city of 40,000 must hire a permanent city manager, give notice of any harassment and retaliation complaints and send council members to etiquette classes to learn how to get along.

According to May, the warning to La Puente is part the authority’s ‘healthy members program’ criteria, which outlines what members of the authority should be doing to stay within risk management guidelines.

‘To be a member of our pool you have to do certain things to maintain sound risk management practices and principles,’ May said. ‘Their questionable governance on the city council, their lack of stabilization in the city manager position and lack of key management staff alerted us to things that are probably not consistent to sound governance for that particular city.’

According to the CJPIA, La Puente’s annual contribution for the 2011-2012 insurance period is $279,261 for liability and workers’ compensation, with liability being the lion’s share of that payment.

The CJPIA has roughly 122 members in its insurance pool, mostly cities, special districts and other JPA’s.

If La Puente doesn’t comply, it will have to either self-insure or go into the commercial insurance marketplace and buy insurance, May said, adding, ‘We’re just intervening early on because we see signs and symptoms of things that can go bad.’

The Associated Press contributed to this report.

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