Changing market means paying more for less coverage
By SUE SUCHYTA
Times-Herald Newspapers
DEARBORN – The City Council met via Zoom June 24 to approve the city’s upcoming fiscal year property and casualty insurance package, paying higher premiums for reduced coverage in a changing marketplace.
The city’s insurance policies, which expire June 30, would require a 46 percent premium increase to maintain the city’s current level of coverage.
Stephen Saph, co-owner and chairman of the insurance brokerage firm of Nickel and Saph, recommended the city reduce select coverage, which would lessen the city’s premium increases to 15 percent.
Saph recommended eliminating the physical damage coverage on city-owned vehicles, eliminating insurance covering its dispatch center, increasing the property coverage deductible from $25,000 to $100,000 and decreasing the city’s general liability coverage from $15 million to $12 million.
Last year, the city paid $1.54 million for its insurance coverage. The same coverage would have cost $2.26 million in the 2022 fiscal year.
With the recommended changes, the premium would be $1.78 million for the 2022 fiscal year.
The elimination of a deductible for city vehicles was recommended based on the city having had two claims in the past 10 years: One for a fire engine that caught fire during training, and one claim for an ambulance that was damaged in a crash.
The city owns 390 vehicles, of which 139 are valued at more than $50,000, with nine vehicles exceeding $400,000 in value.
The choice to eliminate insurance coverage for the dispatch center was based on no claims occurring during the past 10 years. When the dispatch center first started covering additional communities, insurance was acquired to mitigate the possible risk of exposure.
The city increased its property deductible from $25,000 to $100,000, because the city had only experienced one significant claim in the past 10 years, which was for flooding at the former city hall building.
The city also filed claims for a wind-damaged play structure in 2018, and, in 2017, for a stolen utility vehicle which was used at the Dearborn Ice Skating Center.
The city’s reduction of general liability coverage, from $15 million to $12 million per occurrence, would result in a premium reduction of $163,693 for the 2022 fiscal year.
In the past 10 years, the city has experienced four claims in excess of the city’s $1 million self-insured retention: A police vehicle crash in 2013; police fatal shootings in 2015 and 2016; and a developer claim against city officials, which began in 2013, and is ongoing.
City insurance rates have risen nationwide as a result of claims arising from law enforcement issues, Saph said.
Saph also explained that insurance companies have raised rates aggressively throughout the country in the past year, and said companies are limiting liability coverage, increasing deductibles and raising rates, and some will no longer offer certain types of municipal coverage.
Nationwide, claims are increasingly occurring due to police interactions; claims of past sexual harassment, abuse and molestation, which have emerged in the wake of the #MeToo movement, with longer lookback windows; and an increase in legal defense costs.
The Pew Research Center found, in 2020, that more adults favor police training which supports non-violent alternatives to deadly force, federal tracking of police officer misconduct, and sanctions against the use of chokeholds. The attitudes reflected in the survey indicate potential jury outcomes, which influence judgments awarded.
It was noted that the mid-February winter storm damage in Texas caused damage exceeding $10 billion in property damage claims, which also impacted the insurance industry.
Saph also noted that some insurance carriers will not cover Dearborn because of the city’s past history of liability issues with respect to law enforcement, public officials and sexual harassment claims.