Most citizens don’t know that the City of Monroe doesn’t carry insurance to cover all of its tort liabilities because it is self-insured.
The idea of being self-insured was a management decision made during the administration of the late W. L. Howard. To make a long story short, it’s cheaper for the City to pay out any claims for injuries or destruction of property straight out of the city budget than to pay for a full liability policy.
Last year the Free Press covered a story of a woman whose home was literally destroyed by police who executed a warrant at the wrong house. The police broke out the windows to her home, broke down her door, and came into her home breaking things and messing up her residence. It turned out that they had a bad tip. It was a policing nightmare.
If the woman had filed suit with one of the dozens of tort attorneys in the area, she could have bought her another house and a car to go under her garage with her settlement. She would have received damages and compensation for mental suffering caused by the City’s negligence.
However, the City quickly referred her to a private attorney who handles such cases for the City. They cut the woman a check for $5,000 and got her to sign a document promising not to sue the City. She left smiling, and the City smiled, too. She had no idea that her case could have reaped her a $50,000 settlement for sure, or probably more. She didn’t know, and the City was happy to take advantage of her lack of knowledge on the subject.
Mayor Howard began the practice by allocating about $300,000 a year to pay off claims and settle suits. Unsettled claims were delayed by filing motions, exceptions, and extensions that delayed payments until the following year. Sometimes the delays took years to resolve. Very few went to court.
What Howard began, every administration that has followed him for over 40 years has used a hybrid of his method. It saves the city money, sidesteps the actual costs, or passes it off on other parties.
For example, a citizen who rents the civic center must purchase a liability policy of $1 million or more and list the City as the owner. If a person slips and falls on a stairway or slips on a wet floor, the City doesn’t pay; the person renting the facility pays through the insurance policy the renter purchased, even if the City is at fault. The City pays nothing.
The City’s latest audit reports that “The City is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; and natural disasters.”
There are a few things that the City can’t get around insuring, but much of the expected loss will be covered out of its regular budget. The report said, “Certain risks of loss, such as surety bonding, transit liability and indemnity, and activities relating to the operations of Chennault Park, Selman Field Golf Course, the Monroe Civic Center, Louisiana Purchase Gardens and Zoo and Monroe Regional Airport are insured through purchase of commercial insurance with deductibles from $0 to $10,000 and coverage limits from $50,000 (surety bonds) to $127,933,154 (buildings and contents). Other risks of loss, including fleet comprehensive and liability, long-term disability and comprehensive general liability, are entirely self insured.”
Even Worker’s compensation losses are self-insured up to $2,000,000 per occurrence.
It goes even further. “The City also administers its own health insurance plan for its employees with a combination of self insurance and stop-loss coverage. Claims are paid from charges to the City’s other funds and its plan members, and are based on 3rd party administrations recommendation,” the audit said.
The City has a few “stop-loss” policies for big claims over $250,000, but anything less than that is paid out of pocket.
Generally, the payout is charged to the budget of the department that incurred the loss.
When its target amount for paying claims is reached for any particular year, that’s when the City gets busy filing delay motions.
The City will quickly try to get citizens to take a small check to settle the case to save money. The settlement won’t nearly be enough to adequately compensate for injuries that may result, but it closes the case and saves the city money.
The woman who received the $5,000 check when the police wrecked her home didn’t get a dime for the fact that she is now a nervous wreck and jumps each time there is a loud sound in her yard, thinking the police are breaking in again.
To avoid the high cost of liability premiums, the City has to do what cities do: Settle fast and delay if all else fails.
W.L. Howard’s legacy continues.
