HUNTINGTON — In late April, Paul Davis, general manager and CEO of the Tri-State Transit Authority (TTA), received a letter from the Board of Risk and Insurance Management (BRIM), which provides casualty insurance for state agencies, notifying him the company’s insurance could be canceled because of a decision by the state Legislature.
Davis
Six weeks later, TTA was notified it had 60 days to remain insured with BRIM before it would need to find its own private insurance coverage or go uninsured.
“As soon as people saw that it was canceled, their flags went up,” TTA Assistant Manager Jennifer Woodall said of private insurers. “It was short notice. It was hurry, hurry, hurry.
“If you’re looking, shopping the market during the course of the year, planning on a non-renewal (of insurance coverage), you have more leverage. … We were in a box. We have to have insurance, so people were just throwing numbers. Outrageous (numbers).”
TTA was one of seven entities providing public services that received cancellation of coverage notices from BRIM after the Legislature passed a bill in March that gave BRIM the “avenue to cancel policies that maybe the state shouldn’t be in the business of insuring or providing,” state Sen. Eric Tarr, R-Putnam, told The Herald-Dispatch.
Those entities, according to BRIM Executive Director Melody Duke, were the Cabell County Community Services Organization (CCCSO), Logan Mingo Area Mental Health, TTA, HealthNet Aeromedical Services, Williamson Health & Wellness, City of Westover, and Monongalia County Urban Mass Transit Authority.
Senate Bill 875, which became effective March 9, imposed a moratorium on BRIM for writing new or additional insurance coverage for “permissive entities” until July 1, 2025. In an email, Duke said permissive entities include cities, towns, non-state governmental entities and nonprofits. The bill also allowed BRIM to nonrenew policies covering these entities.
After the letters were sent, TTA appealed for its renewal of coverage, along with two of the other entities on the list. But according to Duke, only one, TTA, had its cancellation rescinded, and its premium was doubled. Still, its coverage is scheduled to be non-renewed by June 30, 2025.
Letter from the West Virginia Board of Risk and Insurance Management to the Tri-State Transit Authority notifying them, although their coverage would no longer be cancelled this year, it will be non-renewed by June 30, 2025, and their premiums would increase.
Scanned letter courtesy of Paul Davis
BRIM takes on losses
According to Duke, the reasoning given to all the entities for their coverage being canceled or non-renewed was that their loss ratios, or the losses from paying out claims compared with the premiums earned by BRIM, were greater than 100% in the three or more of the past five years.
Tarr, who spoke during the legislative session following the third reading of SB 875, said in explanation of the bill, “The Board of Risk and Insurance Management has lost a lot of money in the past few years. Part of this reason is because it extends coverage to certain entities that it’s not required to.”
Last month, Tarr told The Herald-Dispatch, “The reason for this bill is just that … we had nearly 1,000 nonprofits insured by BRIM over the natural history of BRIM’s development. And one of the reasons that they start taking nonprofits in was that you would have a specialty service of nonprofit that would have difficulty boarding private sector insurance, and so the state would then take that on in order for that nonprofit to be able to provide whatever service they provide.
“But I think what was, at least in my view, what is an oversight of taking that strategy, is that if they cannot afford private sector insurance, it probably means they’re a risky person to insure or institution to insure.”
When The Herald-Dispatch asked Duke if any or all of the cancellations had to do with BRIM needing assistance to fund lawsuit settlements, she answered in the email “no.”
But BRIM has settled lawsuits totaling several millions in previous years, including $100 million paid out to former students of the now-defunct Miracle Meadows School in Salem in 2023. Previous reporting from HD Media shows BRIM provided insurance to the school and paid $27 million of the first settlement.
Duke told lawmakers then BRIM would likely need help paying the settlements.
“When you started doing the not-for-profits, they’re one that for whatever reason had a really high amount of insurance or a really high premium and couldn’t afford elsewhere or could not get coverage elsewhere,” Delegate Geoff Foster, R-Putnam, said to Duke during a joint standing committee on the judiciary meeting in April 2023.
“The issue we’re dealing with now with a high payout is, isn’t this going to happen again and again because we’re taking on the really risky insurees?”
No changes in premiums and ‘atomic lawsuits’
According to Davis and Woodall, at least in TTA’s case, Tarr and Foster weren’t entirely wrong about the risk.
“You’ve got a $7.5-$8 million operation here, and you’re driving 1.2 million miles a year, and 75 employees, plus carrying 800,000 customers a year. I mean, there’s a lot for the underwriters to have to consider when they look at insuring a company like this,” Davis said.
In the past three years, Davis said, TTA’s loss ratios had exceeded what it was paying in premiums.
Duke told The Herald-Dispatch in the email, “Premiums increase and decrease based on BRIM’s premium rating program, which takes an entity’s losses into account for the calculation of their premium.”
But within that time, Davis said BRIM never raised the cost of TTA’s premiums.
It still would have been more affordable for TTA to pay doubled premiums through BRIM than pay for a private insurer, Davis said, and it would have put its loss ratio below 100%.
BRIM lawyers were also settling insurance claims Davis said didn’t always need to be settled.
“You get these atomic lawsuits. You get a plaintiff attorney that, somebody just gets a little bump or a scratch or something like that, and the insurance company settles for like, crazy money, just because they’re afraid of a jury trial, … There needs to be limits on some of these jury awards,” Davis said.
Davis recalled an incident in which an uninsured driver who was under the influence rear-ended a TTA bus and a passenger on the bus claimed injury. While the bus was stopped and the crash was not the bus driver’s fault, Davis said the attorney through BRIM said the settlement still ended up costing $300,000.
Charles Holley, executive director of CCCSO, said the organization doesn’t get sued often but still had the same experience with lawyers from BRIM paying out settlements rather than taking cases to court.
“We did have a couple of claims that they paid that were pretty high. They didn’t seem to ever want to fight any of the issues. They just paid it off. And so it puts us in a bad position,” Holley said. “When a claim was made, they just paid it off. They never questioned them. And it was definitely questionable. Why in the world are you paying these claims? There’s no proof that we were at fault.”
Holley also said if BRIM had kept CCCSO’s insurance policy but raised its premiums, it still would have been a better situation than what the organization is in now.
Now, CCCSO pays significantly more through an insurance company called Philadelphia. While Holley said CCCSO will do its best to cover the budgetary losses, “It’s a hit to senior services.”
“We’re almost entirely grant-funded, so we can’t raise our rates. … We can’t stop serving seniors food, for instance. We can’t stop taking care of seniors in their home. We can’t stop taking them to the store. We’ve got to figure out some other way to come up with the money to cover it,” Holley said.
Maria Smith, CEO of Mountain Line Transit Authority in Morgantown, never saw raised premiums either. Smith said although Mountain Line was only considered “high risk” more recently, she found there were cases BRIM lawyers chose to pay out on that “we definitely should not have.”
Now, Smith said, Mountain Line is looking at a close to 230% increase in insurance premiums with the new insurance agency it has signed on with and is using up its emergency fund to pay them.
Once that dries up, Smith said Mountain Line will start “tightening down.”
“No one in transit wants to cut service or raise rates. But when you look at it, the increase here is about 3,700 hours worth of service, and that’s a lot, and this is, this is a big hit for our transit system, but we’ll see what we can do. But those options are not off the table. We would just hate to resort to them,” Smith said.
And when TTA’s coverage with BRIM eventually runs out, “Either I have to reduce bus service, which we don’t want to do, or I have to raise fares, which we really don’t want to do,” Davis said.
“I’ve been in this business for 36 years now, longer, and it was always my understanding that the Board of Risk was created to insure the state and the political subdivisions and so that we could have affordable insurance, so that the taxpayers are not getting stuck with (costs).”
Exploring alternatives
State Sen. Patricia Rucker, R-Jefferson, had also asked Duke during the Joint Standing Committee on the Judiciary meeting in April 2023 to clarify if there was a lot of pressure from BRIM to settle on lawsuits, even if a state agency does not want to.
Duke told Rucker BRIM does “take into account the wishes and thoughts of our insured, but ultimately we try to operate as an insurance company. So sometimes it does become more judicious to settle than not.”
Rucker asked if there was any incentive from BRIM to “fight” on behalf of the state, to which Duke responded that, although she’s “sure” there is and is “sure” the company does take some matters to court, those situations would have to be in cases where BRIM is sure the insured company did nothing wrong.
“Sometimes it’s very cut and dry. There’s no negligence. There’s nothing done wrong. And you do want to take it to court. Sometimes though, you look at it and you have to say, ‘Here’s what I’m going to spend going to court,’” Duke said.
But Tarr told The Herald-Dispatch the state insurance agency has become a “big, easy, soft target” for lawsuits, and it needs to become harder.
When The Herald-Dispatch asked Tarr why premiums may have not been increased for these entities in the past, he said constantly raising premiums for a company that’s considered “high risk” would also force up premiums for everyone else insured by BRIM.
Rucker said her ultimate concern was having to “back up” BRIM during large settlements at the expense of taxpayers.
But when Rucker asked how BRIM providing insurance to nonprofits is beneficial to taxpayers, Duke said, “My thought would be that if they cannot find competitive insurance pricing, then they would no longer be a social organization that would be helpful to the constituents of the state of West Virginia, and those people may come and need other resources through DHHR and whatnot, which would now start to be a burden on the state.”
Davis said at TTA’s hearing to appeal he heard BRIM representatives say there were 700 similar entities for which policies possible would not be renewed.
“There’s a lot of people in this state that don’t recognize that it’s coming,” Woodall said.
But Duke said in an email to The Herald-Dispatch that as of Tuesday, BRIM does not have any more cancellation notices planned.
Moving forward, Davis said he thinks there’s an opportunity for the Legislature to “take another look.”
