WALLA WALLA - The Port of Walla Walla is paying nearly triple the cost to insure its property and equipment after being terminated from its risk sharing pool last week.
Spokane-based government risk pool Enduris ended the Port's coverage at midnight Wednesday. A new plan took effect immediately Thursday. It had been unanimously approved by the three Port commissioners in a special meeting three days earlier in anticipation of the change.
The switch comes after $2.5 million in claims from fires at Gen-X Energy and Reiff Manufacturing and wind damage at the former Crown Cork & Seal building and former Cliffstar plant, now known as Cott, over the last three years.
Enduris said last week it had been willing to work with the Port in mid-2010, after the claims were filed, to continue coverage if its risk-management requests were met.
"We have a stellar reputation for working with our members," Enduris Executive Director Mark Kammers said.
But Port officials say they had no idea of any noncompliance on their part. In its notice of termination to the Port in late May - two months after Enduris board members voted to terminate the Port's membership - Enduris did not specify reasons for the decision.
Furthermore, Port officials say the relationship with Enduris was more likely fractured because the Port was the first agency to ever challenge the risk pool's initial settlement proposals through arbitration. The bill for that went to Enduris, too.
"The Port Commission has an obligation to the taxpayers of Walla Walla County to obtain fair settlements," Port Executive Director Jim Kuntz said via email. "In the process of fighting for fair settlements we alienated Enduris, and they determined our loss history was disproportionate to our contributions. We were terminated."
The new premium for Port and airport property and equipment from provider AXIS Insurance is $218,074 - up from $77,138 under Enduris. That coverage includes all major airport and Port buildings, Kuntz said. He said the agency's smaller buildings will be self-insured for the time being. The Port's new deductible is $500,000 - a 2,000 percent increase from the $25,000 per-occurrence deductible offered by Enduris.
The new rates are more than two and a half times the previous cost of coverage from Enduris, but significantly cheaper than earlier quotes by companies willing to take on the Port as a client. The agency's three-year loss history posed a challenge in finding competitive rates.
Representatives of the Seattle office of brokerage firm Hugh Wood Inc. invited 19 potential providers across the globe to submit coverage proposals for the Port. Eleven of those, they said, declined to participate because of the Port's loss history. Two were dismissed because their proposals included deductibles of $1 million or more.
Just a little more than a week ago, AXIS's initial premium proposal stood at $365,000. That rate would have come with a $100,000 deductible. Hugh Wood Inc. officials negotiated the new terms with AXIS before last Monday's special Port meeting.
Port Commission President Mike Fredrickson has said the termination from Enduris was not necessarily a surprise given the unusually high number of claims since the Port joined the risk pool four years ago. He was surprised, however, to read that Enduris' meeting minutes hint at a possible other reason for termination.
An initial story more than a week ago reported the risk pool listed five reasons for dropping the Port in its March 10 meeting minutes: undue exposure to the pool; a loss history disproportionate to the member's contributions; failure to comply or cooperate with risk management requests; decision-making that is contrary to good government and/or professional behavior; and failure to conform to Enduris' underwriting guidelines.
To clarify, termination of membership can be based on those five factors. Kammers said the Port did not necessarily meet all five. However, he said the Port did pose undue exposure to the pool; had a loss history disproportionate to its contributions; failed to comply with requests; and failed to conform to underwriting guidelines.
The latter two were a surprise to Port officials who said they were learning of it through the Union-Bulletin.
Kammers referenced a July 6, 2010, letter to the Port as evidence. He said the Port was expected to hire a risk management consultant to review a transfer of risk in the Port's lease agreements. The letter said it would be helpful if the Port provided Enduris a copy of the contract with the consultant and the scope of work.
In the letter Kammers said the Port's deductible could remain at $25,000 per occurrence for all properties except the Crown building. That property would have a $100,000 deductible. Kammers continued to say in the letter that even that deductible likely wouldn't go up if the Port could provide a mitigation plan for the roof's replacement.
According to the letter, the Port's property rate would increase 25 percent - a rate that would be capped and remain in effect for five years.
"We don't see property values increasing much in the foreseeable future, so we anticipate your premium will remain fairly stable for the next few years," the letter continued.
"We believe there are times when members just have a difficult time with losses," Kammers wrote. "Enduris has a history of working with our members to assist them in getting through difficult times. Most insurance companies traditionally cancel the policy, raise the deductible or price the policyholder out of the market."
Kammers said the Port did not respond to the letter. But Fredrickson and Kuntz said that's not true.
The Port hired Greg Skorheim of Seattle risk management and claims firm Kibble & Prentice and proceeded with the scope of work.
"The work was done as requested by Mark Kammers," Kuntz wrote in his email to the U-B. "What is not clear in my records was if he or other Enduris staff members received the scope of services."
He said he had no reason to believe Kammers hadn't received it because Enduris renewed the Port for another year last September at the increased rate. "I am at a complete loss why now, September 2011, it is an issue to Enduris," Kuntz said.
Conversely, he said the July 2010 letter also indicated Enduris would be contacting the Port to arrange some appraisals. Kuntz said Enduris never followed through on those.
Despite the frequency of claims in the last few years, Enduris' decision to terminate the Port did appear to come as a surprise to at least two of the commissioners.
"We figured the rate would go up, but we didn't figure we would be dropped," Commissioner Ron Dunning said in the Port's regular meeting Aug. 25.
Commissioner Paul Schneidmiller said last week he was surprised to receive a certified letter dated May 23 from the risk pool, informing the Port it was being terminated.
Kuntz said that correspondence was the first letter from Enduris the Port had received since the July 6, 2010, letter.
Kammers was out of the office Friday and could not be reached to ask about the timing.
He was, however, surprised earlier in the week to hear about the cost of the Port's new premiums.
"It's unfortunate," he said. "We didn't want to do this."