Garden Grove : School District Facing Crisis in Insurance Costs

The carrier of the Garden Grove Unified School District’s liability insurance has canceled the district’s policy, effective April 2, and new insurance could cost four times as much, school officials said Monday.

Elmer Clute, the district’s assistant superintendent of business services, said he has received one quote that is four times higher than the terminated policy’s $61,200 premium.

“We know we can do better than that,” he said, adding that the district’s broker is gathering estimates from other carriers. Tonight’s Board of Education meeting is the last one scheduled before April 2, and “we will have to have something to take to the board,” Clute said.

The canceled policy would have been effective until June 30. Clute said the district will receive a refund for the unused portion of the premium.

District spokesman Alan Trudell said the policy was terminated because the carrier, Twin City Fire Insurance, no longer insures municipalities and school districts.

Losses suffered by one insurer are often underwritten by other firms, thanks to a special arrangement of “reinsurance treaties,” Trudell said. Because of the “high risks” involved in insuring local governments, the reinsuring companies dropped their backing of Twin City policies, he said.

Under terms of the current policy, the district is liable for the first $100,000 of damages, and Twin City would pay the rest, up to $20 million annually, officials said.

The district’s insurance costs rose from $174,000 in 1973 to a peak of $419,000 in 1979. Since then, premiums have declined steadily, and the district spent $140,000 this year, including the $61,200 for liability insurance.

Administrators will present a preliminary 1985-86 budget to the board at tonight’s meeting. The $118.5-million plan reflects the 5.9% cost-of-living spending increase suggested by the governor. Last year’s budget was $112.3 million.