The insurance authority for the Central Basin Municipal Water District is threatening to pull its coverage, over its concern that "dysfunction" on the agency’s board of directors has spawned numerous legal claims that could lead to substantial financial losses.
The Association of California Water Agencies Joint Powers Authority (ACWA/JPIA) sent a letter to Central Basin General Manager Tony Perez on Wednesday notifying him that authority staff will recommend cancellation of Central Basin’s coverage at a meeting of ACWA/JPIA’s executive committee next Wednesday.
The letter, signed by CEO Walter Sells, said a review of Central Basin’s claim history dating back to 1997 showed 22 claims were submitted against the district, half of which were based on employment practices.
"What has us most concerned is that many of these claims stem from actions of the District’s Board of Director’s [sic}," Sells wrote. He referred to a number of news stories in which Central Basin "is not portrayed in a favorable light," giving the appearance to "an outsider that there is a sense of dysfunction on the District’s Board. This dysfunction is resulting in an inordinate increase in litigation against the District."
The insurance authority's staff "believes that Central Basin's exposure of additional losses is too great a risk to the pool" of clients it insures, the letter added.
In an interview with KPCC, Sells said "the losses have exceeded the premiums for the last few years."
It is rare for ACWA/JPIA to cancel coverage for a public agency it insures. It has only happened two other times in the authority’s 35-year history, Sells said.
KPCC has reported on several problems at Central Basin, including missing millions in a trust fund, mounting legal bills and most recently, the agency’s handling of a car accident involving board member Art Chacon.
Chacon received $63,000 in worker’s compensation payments through ACWA/JPIA, but the authority refused to pay legal judgments against Chacon related to the accident. Central Basin is currently appealing that rejection and is scheduled to meet with ACWA/JPIA in August to make its case, although it’s unclear if that will take place.
Sells said the coverage under threat involves liability and worker’s compensation. When asked if he will revisit AWCA/JPIA’s payout of Art Chacon’s worker’s compensation claim, Sells said, "not at this point."
Central Basin is facing a sexual harassment claim filed against Board Member Bob Apodaca. It’s also dealing with claims of wrongful termination by former General Manager Chuck Fuentes and former Assistant General Manager Ron Beilke. In addition, the agency is embroiled in an ongoing federal criminal investigation involving contracts and Tom Calderon.
If ACWA/JPIA cancels Central Basin's coverage, the water district would need to find another carrier willing to take it on. If it is unable to do so, "we will have to get our own checkbook out" to pay for employment-related lawsuits and worker's compensation, said Central Basin Director of Finance Rick Aragon.
KPCC reported last month that Central Basin has spent millions on legal bills.
Aragon is trying to avoid increasing those legal costs.
"We are actively working on alternatives with JPIA," he said.
After the ACWA/JPIA executive committee discusses its staff recommendation next Wednesday, the matter could come before the authority’s full board at its next meeting on May 5th.
The Central Basin board is planning on discussing the matter at its meeting on Monday.