Lost Insurance Stops Santa in His Tracks

Santa Claus was coming to town, but in Villa Park his appearance has been canceled.

The city lost its insurance Thursday, and officials say they can’t afford to take a chance on being sued--for anything.

Cancellation of Santa’s annual ride through town atop a fire engine, which had been set for Saturday, is the first blow this small northeast Orange County community has suffered since it lost its liability coverage.

Unlike its neighbor, the City of Orange, which chose Tuesday to become self-insured rather than pay a steep premium increase, Villa Park didn’t want to drop its insurance. The insurance company dropped the city.

A large successful lawsuit “could be catastrophic to the city,” said City Manager Carolyn Veregge, who on Thursday called off Santa’s traditional ride across town with its several stops for gatherings of children.

“We’re such a little, identifiable community that something like that is a big deal to everyone.”

But canceling the Santa Claus parade and another annual parade featuring decorated boats on trailers doesn’t compare in scope to the potential problems Villa Park faces without insurance.

“We’re going to try to be very, very careful,” Veregge said. “We’re a small city. We’re hoping to get something reinstated by the middle of February.”

The city lost its coverage when its policy expired at midnight Wednesday. The Chicago Insurance Co., which covered the city for a $27,000 annual tab, refused to renew. The Chicago firm went out of the municipality coverage business, said Ray Morgosh, marketing manager for Knox General Insurance Brokers in Orange.

“Chicago Insurance is not writing municipalities any longer. . . . There’s no market available in the state to write municipality general liability coverages,” Morgosh said. “We’ve tried and tried for the last two months to get some municipality coverage (for Villa Park), but we were unsuccessful.”

Villa Park, which has a population of about 7,300, has not been the target of multimillion-dollar lawsuits, which have driven the cost of insurance up to three and four times more than last year in other Orange County cities.

In the past eight years, the city has paid two claims, Veregge said. This year, city officials paid about $250 to repaint a car that was damaged during a street resurfacing, she said. Last year, the city paid $150 to someone who was hurt after stepping in a hole on a city right-of-way.

“Villa Park has no suits of any significance in its history,” Veregge said. “However, we’re still unable to get insurance liability coverage.”

Other cities have faced more claims and for higher stakes, such as Laguna Beach, which last summer was ordered to pay $2 million in a drunk-driving accident.

Cities sometimes become the targets of lawsuits as a result of a doctrine known as “deep pockets,” which allows a plaintiff to collect an award from any one of the defendants. Under the doctrine, a party who is found only 1% negligent could theoretically be forced to pay 100% of the damages. Since cities often are able to pay more than individuals, they are named as co-defendants.

A group of 10 Orange County cities that make up the Orange County Cities Risk Management Authority had considered dropping its insurance this week but decided instead to renew the policy at a cost of $2.6 million, almost three times the old price.

Villa Park also was a member of the authority until last year but dropped out because the city’s deductible would have been increased from $7,500 to possibly $25,000, Veregge said.

Dave Barrett, Cypress assistant city manager and president of the authority, said Villa Park went on its own during “a bad time.”

Barrett said he recently discussed coverage for Villa Park with the Pennsylvania-based Planet Insurance Co., which covers the 10 cities left in the authority, but no exceptions could be made until at least the first of the year.

For Villa Park, a successful multimillion-dollar claim against the city could lead to bankruptcy, Barrett speculated.

Villa Park’s annual budget is $1.25 million, Veregge said.

Had Villa Park stayed in the authority, it probably would not have been able to cover the higher deductible and any accompanying premium increase, Veregge said.

“It’s a situation where, if you can get insurance, you can’t afford the premiums,” Veregge said.