The Naked City: Dallas’ Risky Business

They’re calling it “self-insurance” and “risk management,” but what it really means is that the City of Dallas is without a stitch of liability insurance. The city has been uncovered since last May, when officials decided that spiraling liability insurance costs made paying an insurance company seem ridiculous.

Here’s why. For fiscal year 1984, $50 million worth of liability insurance cost the city $I53,000, according to Mark Ferraro, the city’s risk manager. But when the bids came in the following year, the price tag jumped a whopping 1.128 percent, to $1.7 million. “The premium request, quite frankly, was laughable,” says Ferraro.

Certainly, Dallas isn’t the only big city with liability insurance blues. But what is particularly troublesome, says Ferraro, is that the rates are sky high even though Big D has an enviable claim record, especially when compared with many other large cities. The reason: “Good clean government.” says Ferraro. The men-and women who conduct Dallas city government business are career types, not political campaigners rewarded with City Hall jobs by victorious candidates. I’m not trying to tell you this is the Good Ship Lollypop,” he says. “But when things do go wrong, you see police officers fired and department heads changed.”

Dallasites even sue less, says Ferraro. ’”We really don’t believe here that we live in a risk-free environment,” he says.

So what happens when a city bus crushes a small foreign automobile or a luxury sedan breaks its suspension negotiating the city’s potholes? The claims are paid by the city, not by an insurance company. The idea of self-insurance dates back to the Fifties, when American oil companies drilling in the Middle East were unable to find liability insurance carriers. In effect, a self-insurance plan is nothing more than a formalized process to deal with the fact that the city has no insurance. Instead of paying insurance premiums, each department is budgeted a specific amount, based on a dollar estimate of the claims expected to be filed against the department. City officials have budgeted $3.8 million for paying off claims for fiscal year 1985.

Ferraro says $3.2 million is the most the city has ever paid for claims in a one-year period. The largest claim the city has paid in recent years: $387,000 to a former city worker in a civil rights dispute. “We’ve just not had any of the horror claims like other cities,” says Ferraro.