McDonough trims its liability insurance

By Valerie Baldowski


The City of McDonough is adjusting a key insurance policy to save itself $42,000 per year in premiums, a savings which could be passed on to taxpayers.

City Administrator Billy Beckett's proposal to reduce the city's Government Interlocal Risk Management Agency (GIRMA) liability insurance was approved Monday during a city council meeting.

"We have $5 million currently under our government interlocal insurance policy, but we're protected by virtue of having sovereign immunity," said Beckett. "Five million dollars liability coverage is excessive for a city this size."

The 2000 U.S. Census figures put McDonough's population at close to 20,000, said Beckett. The city will drop some of the insurance, he said.

"In consultation with a number of experts, we've reduced that to $3 million, and that results in a savings to the city of $42,000 a year in insurance premiums," he said. "Indirectly, the taxpayers will save, in that we will not have to pay the expected premium now, or in the future."

The city was overinsured in this area, he said. "We're buying sufficient insurance," added Beckett. "We were overcovered."

Beckett did not have an exact date as to when the city will officially drop the additional insurance. The reduction will take place, he said, "as soon as we possibly can. As soon as we can work out the paperwork for GIRMA."

All cities need the liability insurance to protect themselves, said George Van Leuven, a risk manager for the Georgia Municipal Association (GMA). "Just like a corporation, or an individual, they can get sued by anybody who thinks they've been injured by something the city has done, or failed to do," said Van Leuven. "It's the same reason you have homeowners' insurance."

GIRMA is an intergovernmental risk-sharing fund administered by the GMA. It was created in 1987 to provide property and liability coverage to local government entities in Georgia, said Van Leuven. The fund was created in response to the membership's request to provide an alternative to the conventional insurance market for property and liability coverage, due to hardships experienced by cities in the mid-1980s in obtaining property and liability insurance, he continued.

GIRMA has a membership of nearly 330 members, whose premiums are pooled to pay claim defense, claim losses, insurance to limit exposure and administrative expenses, added Van Leuven.

In addition to protecting against lawsuits, the liability insurance also reimburses cities for property damage incurred from a weather-related event, he said.