Growing Insurance Crisis Jolts Agencies

The first thing Will Stokes looked for last week when he tore open sealed bids for a Westlake Village pipeline construction project was not the bidders’ lowest price.

Instead, the chief engineer for the Las Virgenes Municipal Water District quickly scanned the paper work for proof that each bidding contractor carried liability insurance.

“It’s especially important, now that we’re not insured,” Stokes told the six contractors who gathered last Tuesday at the water district’s Calabasas headquarters to watch him open the bids.

Stokes’ district became the latest victim in a growing insurance crisis facing public agencies when the district’s underwriters refused three weeks ago to renew its $40-million, general liability insurance policy.

Jolted by Rejection

The rejection was a jolt to Las Virgenes officials, who say their insurance claims record has been virtually spotless for the past three years.

“Everybody said: ‘Thanks, but no thanks,’ ” said Richard E. Brown, the water district’s insurance broker for the past nine years. He said agents surveyed about 300 insurance companies without finding one that was willing to take on Las Virgenes’ coverage.

The underwriters think Las Virgenes’ potential for major claims losses--like that of most other public agencies--is too great to risk coverage, Brown said in an interview last Wednesday.

Insurers are being frightened off by increasing numbers of lawsuits in which public agencies have had to pay huge judgments to accident victims. The joint-and-several liability doctrine allows victims to collect from heavily insured defendants who may share only a small part of the blame for the accident.

‘Deep Pockets’

Such suits have prompted a June 3 ballot initiative aimed at buttoning up what lawyers say are the “deep pockets” of well-insured public agencies.

But now, “empty pockets” is a better description of the Las Virgenes water district, said Richard B. Baird, general manager of the district.

Baird said future claims against the water district will have to be paid by its 12,500 residential and business customers scattered between Woodland Hills and Thousand Oaks.

A $1-million judgment, for example, would mean a 20% water rate increase for each customer for about a year, he said. The average Las Virgenes homeowner now pays about $25 per month for water.

Mindful of that, Baird said, the district’s elected five-member board of directors has decided to “vigorously” oppose future claims. Such opposition will probably include countersuits against those who file “frivolous” lawsuits against Las Virgenes, he said.

Directors voted a week ago to deny claims from two Westlake Village companies and an Agoura Hills motorist allegedly harmed by recent pipeline project accidents.

The two firms, State Farm Insurance Co. and Delphi Systems, claimed they suffered “losses in productivity” of more than $20,400 when pipeline workers severed an electric line and knocked out power to company computers. The motorist claimed damages of $20,522 after his Corvette was hit by a dump truck that was working on the project.

District officials said the claims are the responsibility of insurance carriers for two contractors who have been involved in early phases of the project.

The bids opened last Tuesday were for the final segment of that $12-million project, which eventually will pipe reclaimed water throughout the Las Virgenes area.

Stokes said Las Virgenes district directors will review the bids--which ranged from $335,645 to $436,616--on March 10.