Consultant Suggests Reduction In Jemez Insurance Coverage

    An insurance consultant for Jemez Mountains Electric Cooperative said it may be time for the Co-op to reduce its overall insurance coverage in the growing legal aftermath of the 2011 Las Conchas wildfire.

    Leonard Herring, a risk management services consultant for the Co-op for 12 years, said the Co-op has been well-served by its principal insurer, Zurich in North America, headquartered in Schaumburg, Ill.

    Herring said Zurich stayed with the Co-op through a period of high frequency, general liability claims.

    “Zurich stayed with you, and I think they’re to be commended for that,” Herring told the Co-op Board in November.

    Herring said 15 insurance companies declined to cover the Co-op because of prior losses. He said insurers look at the last five years of performance when evaluating potential policies.

    “Your last four look fairly bad,” Herring told the Co-op Board. “In the past year, it appeared to insurers you’ve turned the corner.”

    Herring said general liability claims against the Co-op dropped to 13 in 2013.

    “Which is a downward trend from previous years,” Herring said.

    The Co-op’s insurance policies have several categories, Herring explained. The directors and officers liability insurance policy covers claims brought against board members and officers, such as wrongful termination and sexual harassment claims, while the property and casualty insurance covers claims from customers, such as those resulting from power surges and power outages.

    At Herring’s recommendation, the Co-op board approved purchasing a total of $42 million in liability coverage for 2014.

    The coverage purchased includes an initial $2 million general liability policy with Zurich for a premium of $152,680; a $25 million primary umbrella policy with Zurich, for a premium of $91,800; and a $15 million excess umbrella policy with Navigators Insurance Co. of New York, N.Y., for a premium of $25,406.

    Since the Las Conchas fire, the Co-op Board has increased the liability coverage for the state’s largest cooperative from $22 million to $40 million.

    Board Vice President John Tapia asked at the Board’s Nov. 22 meeting if the current insurance coverage levels are consistent with other co-ops.

    “The $40 million is probably high in average,” Herring said. “At some point in time, you might want to consider reducing that.”

    Former Co-op General Manager Wayne Sowell said the Co-op faces more than $200 million of damage claims from the 2011 Las Conchas fire, the state’s largest wildfire at the time.

    Sowell said the dozens of lawsuits filed in district court in Sandoval County, related to the fire, could bankrupt the Co-op and potentially place its management in the hands of a bankruptcy court.

    The Co-op had $22 million of total liability coverage at the time of the fire, Herring said.

    Some of the claims and lawsuits from individuals, trusts, insurance companies, the U.S. Forest Service, Jemez Pueblo and Pueblo de Cochiti, also name as defendants, the Co-op’s provider of electricity, Tri-State Generation and Transmission Association of Denver, and the Co-op’s Española-based tree trimmer, Allied Tree Service.

    The plaintiffs’ insurance companies are seeking monetary damages and attorney fees and costs, for property damages and business interruptions resulting from the June 26, 2011 fire that burned 156,000 acres over five days and threatened Cochiti, Los Alamos and the Los Alamos National Laboratory, while encroaching upon 16,000 acres of land owned by Santa Clara Pueblo. A total of 63 residences and 49 outbuildings were destroyed by the fire that also resulted in 15 injuries and closed the lab for about two weeks.

    The Co-op has denied responsibility for the Las Conchas fire, claiming the Aspen tree that fell on an energized electric line in the Santa Fe National Forest and is suspected of causing the electrical failure and vegetation fire, had fallen from private property, about 50 feet outside of the Co-op’s forest right-of-way.

    The Co-op’s attorneys have admitted the Co-op had general duties regarding maintenance and operation of its electrical equipment, but denied allegations of negligence or responsibility for starting the fire, attributing the fire to high winds and “an act of God.”

    A jury trial in district court for the consolidated lawsuits, excluding the tribal lawsuits, has been scheduled for September 2014.