Coverage Slashed by Half : Liability Insurance Level Cut to Save Grand Prix

Defusing a crisis that threatened to bring the upcoming Long Beach Grand Prix to a screeching halt, the City Council agreed Tuesday to slash in half the liability insurance requirement for the race’s promoters.

The council voted unanimously to allow the Long Beach Grand Prix Assn. to provide $10 million in insurance instead of the $20 million required in previous years.

Christopher Pook, association president, said the group’s insurance troubles could have forced cancellation of the Grand Prix, set for April 11-13 along a serpentine racecourse on downtown streets.

It’s an all-too-familiar tale. Cities, companies and individuals throughout the nation have been hit in recent months by increasingly stringent requirements and higher rates as the insurance industry raises liability premiums nationwide.

Pook said race promoters worked diligently for the past six months to secure a $20-million policy, but could only get coverage of $10 million. That premium is coming from K & K Insurance Agency Inc., a Fort Wayne, Ind., firm owned by the giant Lincoln Life Insurance Co.

‘Just Not Available’

“I apologize to you for making this request” for the insurance reduction, Pook told the council, saying that a $20-million policy is “something that’s just not available.”

Pook noted that other race tracks and promoters have also been hit hard by the nationwide insurance increases. The City of Miami recently agreed to allow race promoters there to hold an event with only $5 million in coverage, while the Daytona International Speedway in Florida has also been unable to secure a policy of more than $5 million, Pook said.

Pook also said the Long Beach Grand Prix, which features 700-horsepower Indy-type race cars, has been relatively free of risk. Since the event began 11 years ago, no race driver has sued the promoters because of an accident, he said. The largest damage award was the $150,000 paid to a spectator who was hit by a passenger car in a racecourse parking lot, Pook said.

Finally, the Grand Prix promoter promised to “do everything within my power” to obtain additional insurance and help bring the event’s total coverage closer to the $20-million level.

Although Long Beach is vulnerable to damage claims in excess of $10 million, City Manager John Dever said the reduced insurance premium still represents “reasonably acceptable” coverage against large lawsuits.

Dever, however, had a note of caution. The city has coverage for damage awards above $15 million, but is self-insured below that level, paying claims out of a reserve fund in the municipal budget.

That, Dever said, means the city has “a window of exposure” of $5 million between the race association’s $10-million policy and the city’s insurance coverage for damages in excess of $15 million.

Council members expressed some concern about the reduction of liability insurance, but said the tremendous benefits of the Grand Prix outweigh the risks.

“It’s a risk we’re taking, but the event is something that is important to the city,” Councilman Thomas Clark said, noting that the liability insurance problem is hitting “all sorts of events” in Long Beach and other cities.

Mayor Ernie Kell said the Grand Prix had been “a positive event” for Long Beach, pumping revenue into the tourist industry and helping to point a national spotlight on the city.

“It’s an event that has put the city on the map,” Councilwoman Eunice Sato said.

‘Deal Creatively’

Other council members agreed. “If the city is going to make it as a major tourist attraction, it’s going to have to have more events like the Grand Prix,” Councilman Marc Wilder said. Wilder also expressed concern about the insurance mess creating headaches for other groups seeking to hold events in Long Beach, and urged the city manager to search for possible solutions.

“We’ve got to realize that we have to deal creatively with this situation,” Wilder said.

Dever said officials have been “looking at everything possible” to solve the problem, considering such actions as selling bonds, pooling with other cities or creating an insurance fund to help ease the burden. So far, however, such ideas have been found to be fraught with “all kinds of legal problems” that have made them impractical, he said.