In a special session, January 10, Hawley Council approved ratifying a binder to a costly insurance package for the flood levee.
HAWLEY - In a special session, January 10, Hawley Council approved ratifying a binder to a costly insurance package for the flood levee. This followed an agreement entered in by the council president on December 29 in light of a looming January 1st deadline when their levee insurance was being dropped due to the U.S. Army Corps of Engineers’ “unsatisfactory” designation of the levee system.
Council held their regular session early this month, on January 2nd, when Council President Ann Monaghan announced the approval of the policy with Arch Insurance. AMSkier Insurance of Hawley had combed the market seeking a carrier with the best rates, Council was told. As it stood, the policy found has a significant premium cost of $30,920 a year, which covers the event of a levee breach or claims by anyone hurt walking on the flood levee trail or otherwise visiting Riverside Park, which occupies the levee and its floodplain.
Would be catastrophic
Dissatisfaction by members of Council over how the decision was made generated much discussion at the January 2nd meeting, noting that a minority of Council members were involved in the decision on the 29th, with no vote taken. The full Council had been well aware of the insurance dilemma facing the borough in December, however, and as Monaghan stated, the borough would have been liable if there was any gap in coverage.
“If something were to occur by way of damage or injury, it could have been catastrophic for the borough without having insurance in place,” Borough Solicitor Robert Bernathy said. “So the exposure and liability that the borough would have had with the lapse of that policy really called for immediate action.”
She stated on the 10th that she had meant to call for a vote to ratify the contract on January 2nd, but that had slipped her mind with the discussion that transpired. Solicitor Bernathy was advised of the matter by the alternate solicitor who attended the January 2nd meeting; Bernathy conducted research, and a special meeting was called.
Needed to ratify
The policy had been dropped because the planned construction had not yet started, involving replacement of deteriorating culvert pipes that extend through the earthen levee. It was the condition of these several pipes which led the unsatisfactory inspection report in 2016, launching immediate investigation of grant funding to pay for the approximately $380,000 repair project. Construction is due to start in between January and April, depending on the weather.
Having checked the Borough Code, Bernathy reported that since no formal action had been taken, the majority of Council would need to ratify the contract. Routine or administrative issues may be made between public meetings when borough council has no opportunity to vote, but only if Council had given those individuals authority, or if the action is subsequently ratified.
Council could rather seek an alternative policy, but the carriers AMSkier had checked either denied or gave more costly quotes.
$5 million liability
The policy found, however, has a list of attached issues or subjectivities which raise concerns, Bernathy said. In particular, the policy requires a “minimum liability of $5 million” for the contractor. The solicitor said that in his experience, this is an “exorbitant amount.” Currently the borough has only $1 million liability. The cost for this liability would be $13,250, which would be the borough’s responsibility.
The carrier also requires a report of “loss runs” for the past five years from the contractor, which Bernathy said is problematic.
There was also a question about the deductible.
Councilwoman Michelle Rojas, who has been instrumental in finding funding for the levee project and was seeking alternative insurance before the December 29th decision, was one of the Council members who had expressed surprise at the action on January 2nd. “I am very disappointed by what had happened. I think between all of us there should be courtesy, there should be respect,” she said, rather than having a minority make a decision without contacting the rest and ask for a vote.
“I want to make sure we understand the ramifications of doing that, how serious it is… I don’t know if I have a sense of a realization of that. I hope there is,” she said. Having contact the PA State Association of Boroughs (PSAB), she was told that under no circumstances was signing a contract “an emergency.” Rather, an emergency is a bridge collapsing or a tractor trailer flipping over on a borough street.
Rojas also asked if there was an understanding, not to usurp the rest of Council in the future in making decisions (except where authorization was given). Monaghan stated that they were understanding in that.
Monaghan stated that they are getting the same protection but because of the failed inspection, the borough “is at the mercy of the insurance company and they can charge us whatever they want…” Lou Cozza, representing the borough engineering firm Kiley Associates, stressed that it was only an “unsatisfactory” report due to the pipes; the levee itself did not “fail.”
Council has tried to argue that insurance should not be dropped based on this.
Not till construction
Monaghan stated that she was informed that the conditions on the levee policy do not come into play until construction actually starts. This was not found in writing, however, and the Solicitor was asked to seek clarification.
The binder insurance covers the first 90 days, in lieu of the policy being issued. The binder costs the borough $7,500.
Bernathy said he wants to confirm that the borough is not denied coverage because Council has not complied with the subjectivities in the meantime, while waiting for construction to begin.
Rojas said that PSAB had suggested a carrier to contact. Rojas asked Council for assurance that she was given approval to seek other options. Monaghan agreed.
Councilman Joseph Faubel advised not waiting the full 90 days to seek an alternative carrier. According to what Monaghan was told, another suitable carrier is found before construction begins, then the borough would only be liable for the minimum $7,500 from the present company.
They talked about putting up barricades to try and keep the public off the levee, but the understanding was that the borough would still be held liable if someone got in anyway, and was hurt.
Council voted to approve the binder. Before the contract starts, however, the solicitor will seek clarification of certain points, and other carriers will be researched.
Rojas, however, voted “no.” Faubel (who works for AMSkier), abstained.
They plan to have the information by the next regular Council meeting, February 14.