Costa Mesa : Insurance Firms Won’t Renew Liability Policy

Two of the five companies that insure Costa Mesa against liability lawsuits have informed the city this week that their coverage, which expires July 1, will not be renewed, said Robert Oman, city finance director.

Oman said the companies, Planet Insurance Co. and Fireman’s Fund, cited the rising number of claims and amounts of settlements as their reason for not renewing the policies. Because Planet Insurance provides the first two levels of the city’s six-level, $37-million insurance package, Oman said he fears that the other three companies will also pull out, leaving the city unprotected against a rising tide of liability suits.

“Once the primary carrier pulls out, the rest of the package doesn’t make any sense,” he said, “unless one of those other companies wants to insure the primary layers. But I don’t think they are willing to do that.”

He said that when it comes to primary coverage, Planet Insurance “is the only game in town.” Costa Mesa pays $318,000 for $500,000 worth of coverage for the first layer, which bears the brunt of the judgments made against the city.

The number of liability suits filed against Costa Mesa has risen from 13 in the 1980-81 fiscal year to 158 in 1984-85. He said the amounts of the awards and expenses have risen nearly 39% a year during the same period, from about $137,000 five years ago to more than $505,000 last year. The city pays a total of about $660,000 a year for liability coverage.

Oman said that if the city cannot find a company to insure it by July, it will “tighten up” its risk management and try to go without insurance as the cities of San Jose and Orange have done.

However, he acknowledged that going without insurance would not be easy. “In today’s litigious society, we get sued for a lot of things that we have no responsibility for.”