City’s liability premium $20,000 higher than predicted

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Mitchell’s liability insurance premium increased about $26,000 this year, forcing the City Council to provide a supplement to the budget to cover it.

“The premiums were $20,000 higher than we budgeted,” said Human Resources Director Billie Kelly.

The city paid $279,604 in 2011 but saw the premium increase to $305,600 in 2012, according to Kelly.

“What we did not get is what’s called a ‘loss ratio credit,’ “ she said. “That was because of our claims experiences. And I’m sure part of that is just general cost increases.”

The premiums are based on a three-year average of claims made by a customer.

The city had three auto liability claims in 2009, five in 2010 and six in 2011, Kelly said.

“Yes, it was more, but they weren’t real significant claims,” she said.

The city had 65 employees take defensive driving classes in 2012, she said. It’s a four-hour class.

“We do take measures when we see a trend like this,” she said.

In addition, there was extensive property damage in a wind storm in 2010, which also cost the city in the insurance ranking.

On Nov. 19, the Mitchell City Council adopted Ordinance 2417, which included a supplemental appropriation of $20,000 for liability insurance.

Kelly said the city received the insurance bill in January and paid it months ago, but the Finance Department asked for the supplement now to balance its books.

She said the premium will probably remain at or near that level next year, since the city is unlikely to receive the loss ratio credit.

“We’ve had several situations in 2012; the hailstorm was over $600,000 in damages,” she said. “When we get our rates for 2013, I’m sure that will be reflected.”

A legal case that went against the city this year will also likely impact the insurance rate.

A Kansas couple who were injured when they were knocked down by a Palace Transit bus in 2009 won a claim against the city earlier this year.

Richard “Rex” and Mary Ellen Russell, of Sabetha, Kan., were awarded $57,756 by a Davison County jury on April 18.

The Russells were injured when they were hit by the bus while walking in a crosswalk toward the Corn Palace on June 18, 2009.

The settlement with former Palace Transit drivers is not linked to the city’s liability coverage, and Kelly said she did not think it would impact the rates in 2012.

“No, I don’t think so,” she said.

The city has liability insurance through the South Dakota Public Assurance Alliance risk pool, a consortium of cities and counties. Two other firms are also involved. Hagan Benefits, of Sioux Falls, writes the policies, and Claims Associates administers the claims.

The settlement with the former drivers will come from a separate Claims Associates risk pool that Mitchell belongs to along with several cities and counties, Kelly said.

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