California Water District Heads to Private Market in Face of Insurance Loss

By | May 2, 2014

It’s beginning look more and more like the Central Basin Municipal Water District in Southern California is going to be taking matters into its own hands in the face of being tossed out of the state’s largest insurance pool for water districts.

The district has recently been under fire by the Association of California Water Agencies Joint Powers Insurance Authority, which has threatened to cut off its insurance for high losses and several lawsuits involving Central Basin directors.

Now prior to a JPIA Board meeting on Monday in Monterey, during which the board is set to vote on whether to continue offering insurance to Central Basin, it looks like the entity is leaning toward going to the private market for insurance carriers.

Last week a Central Basin spokesman acknowledged the entity was looking at “alternatives” in the face of its insurance loss.

JPIA LogoOn Friday the spokesman responded to questions from Insurance Journal requesting details on those alternatives, including whether Central Basin was planning on seeking other insurance.

“The District is seeking employment practices liability and worker’s comp insurance from a private carrier,” was Central Basin spokesman Joseph Legaspi’s reply via email. “Depending on the JPIA Board’s decision on Monday, the District may also seek coverage for GL and Property from the private market as well.”

Like many water districts in the insurance pool, Central Basin is insured through JPIA insurance pools and ranks in size in the middle of the pack amid JPIA’s 290 water district members.

JPIA, which is self-staffed, has a liability program that is a pooled program with a $2 million retention and $60 million in limits. The workers’ comp program is also pooled with a $2 million retention and statutory limits and the property program is pooled with a $100,000 retention and $100 million limits.

The controversy-riddled water district’s problems have been noticeable enough to garner coverage local media outlets, and it has also incurred a high amount of workers’ comp claims and its directors are involved in several lawsuits, according to JPIA’s CEO Walter A. Sells.

For the past five years in the liability program Central Basin’s premiums were $303,249 paid vs. $331,699 in losses, and its workers’ comp premiums were $84,759 vs. $384,114 in losses, according to JPIA.

However, according to Legaspi, those workers’ comp losses are largely based “off an outstanding claim that is an outlier.”

He said he couldn’t discuss the claims, but that Central Basin saw no workers’ comp claims in the years prior to those claims, and the organization even had their premiums lowered because of a good track record.

Legaspi also had no comment on the ongoing lawsuits, which include a sexual harassment suit filed against the district and Central Basin Director Robert Apodaca and a whistle-blower suit filed another director against a former general manager.

Sells wasn’t immediately available to comment for this story.

According to Legaspi, Central Basin is working with Torrance-based Keenan & Associates, which is the district’s broker of record.

“We have received quotes from private carriers that indicate premiums for General Liability, Property and Worker’s Comp will be slightly less,” Legaspi wrote in an email. “Employment Practices Liability will be approximately $70,000 more.”

According to Legaspi, Central Basin pays roughly $107,000 for its insurance.

Central Basin is a public agency based in Commerce that purchases imported water from the Metropolitan Water District of Southern California. There are reportedly 24 cities in Central Basin’s service area.

The authority demands were laid out in a letter that includes paying for a negotiated settlement in the sexual harassment suit, requiring Central Basin to reimburse the authority for legal fees on another case and requiring Central Basin to agree to a six-month suspension of its EPL coverage.

Central Basin must also withdraw from the authority’s workers’ comp program, though it will be eligible to reapply within one year.

JPIA is also asking that Central Basin designate an existing employee with safety and risk management responsibilities to work with an authority risk consultant.

See related stories:

California Water Authority Mum Over Possible Loss of Insurance

California Water District Seeking Alternatives in Face of Insurance Loss

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