OCTD Will Carry Its Own Liability Insurance

Faced with mounting liability insurance costs, Orange County Transit District directors voted Monday to go “bare” and make OCTD one of the nation’s largest self-insured public transit agencies. The Chicago Transit Authority--second largest in the country--took similar action last year.

OCTD, which operates the nation’s 19th-largest public transit system, has a 575-bus fleet and carries 37 million passengers annually.

Many cities, counties and public agencies have become self-insured because they have been unable to obtain liability insurance or find the cost prohibitive. Some carriers have dropped out of the business or have raised premiums so high that officials believe it is better to assume the financial risk of insuring their own agencies through existing revenues and cash reserves.

Monday’s action by the Transit District directors is not expected to have a major effect on claims filed against the agency, officials said. OCTD was already self-insured for the first $5 million in losses, and total claims have never reached that amount, even over a five-year period, officials said.

“I say let’s call their bluff and go bare,” OCTD Chairman Ralph Clark told his colleagues, referring to insurance carriers.

Transit District officials cited statistics showing that only six claims have exceeded $100,000 during the past five years, and those averaged $262,000 each. Some were settled, but others were not. Officials declined to specify what the average settlement cost the district. Meanwhile, the number of claims declined 25% during the past year, they added.

OCTD officials said Monday’s move was prompted by recent price quotes on insurance premiums for renewing the agency’s prior coverage. That policy covered the first $15 million in losses above the transit agency’s $5 million, self-insured deductible, with the district picking up any other losses.

The best offer received this year involved a reduction in coverage to only the second $5 million in losses, with the price increasing from the current $412,500 to $483,500 per year.

In other business, the five-member OCTD board reelected Clark chairman for the 14th consecutive year.

Clark was one of the agency’s founding directors in 1971 and became chairman in 1973.