Letter confirms, Municipal Risk Pool dumps Quartzsite

Police Chief Jeff Gilbert was reinstated on September 25th. On the morning of September 27th, Interim Town Manager Laura Bruno received a phone call from Ann Gergen, President of  the Arizona Municipal Risk Retention Pool (AMRRP) notifying Bruno that the town's insurance coverage was indeed cancelled. Bruno's desperate pleas for reconsideration were clearly heard by Public Works Director Emmett Brinkerhoff, and a formal letter was sent to the town on October 5th (see below). Despite false claims from other media sources, The Desert Freedom Press was the only news source to correctly state that this was an unavoidable reality.

Given that Councilman Mark Orgeron's choice to replace Town Manager Alexandra Taft was Laura Bruno, it is unlikely that the Risk Pool will reinstate or that another firm would offer affordable coverage when the town chose not to hire a manager certified for the position who was properly vetted and approved by the insurer. What happens next is anyone's guess.




October 5, 2012

Laura Bruno
Interim Town Manager
Town of Quartzsite
P.O. Box 2812
Quartzsite, AZ 85346

Dear Ms. Bruno,

I am writing to inform you the Arizona Municipal Risk Retention Pool (AMRRP) has made the difficult decision to terminate the Town of Quartzsite's coverage under its Property and Liability Coverage Agreements because the Town is failing to satisfy underwriting requirements. This letter is the Town's notice of coverage termination effective midnight on January 6, 2013. The Town's workers' compensation coverage with AMRRP will continue under the existing Workers' Compensation Coverage Agreement.

The Town of Quartzsite's Membership Agreement includes the following provision:

5. Termination of Agreement.

5.1 With Cause. The Board may at any time during the term of this
Agreement or any extensions thereof suspend or terminate coverage for
(i) nonpayment of the Coverage Fees or any other breach by the Member of the terms of this Agreement; or (ii) the failure to satisfy underwriting requirements established by the Pool. In such case, coverage shall be suspended or terminated and membership shall be terminated pursuant to Section 8 of this Agreement.

AMRRP is invoking its right to terminate Quartzsite's Property and Liability Coverage pursuant to this provision. AMRRP has made every effort to avoid the need for this action. The Town received letters dated September 7, September 25 and September 27, all of which communicated the seriousness of underwriting concerns in Quartzsite. In those letters, AMRRP cited the following specific concerns which to date have not been effectively addressed:

• Failure to provide adequate Town management to ensure that typical governmental and administrative controls are properly in place for the prote.ction of the public and the Town's employees.
• Failure to maintain and effectively manage a loss control program.
• Full utilization of AMRRP's Personnel Assistant Lifeline (PAL) for employment decisions.
• Leadership and management action to reduce risk and improve the risk profile of the Town.
• Solicitation and following of advice from the League regarding appropriate Town management and decision making processes.

Ongoing factional disputes within the Quartzsite Town Council and resulting employment decisions have created numerous claims and the potential for additional losses. AMRRP has received more than thirty claims against Quartzsite since early 2010, many related to the factional decision-making practices of the Town Council and ensuing employment disputes. In its history, AMRRP has never received so many claims against a municipality in so short a time and of such a nature as in Quartzsite.

Quartzsite's actions and operating environment have created a very serious financial drain on resources contributed to AMRRP by other Arizona cities and towns, and will continue to do so if the Pool does not take immediate action. Quartzsite's continued failure to rectify these circumstances and take effective corrective measures means the Town is not able to meet AMRRP's underwriting requirements for coverage.

Section 5.1 of the Membership Agreement affords Quartzsite with certain rights that are set forth in
Section 8 of the Agreement. Section 8 states:

Suspension. In the event the Member (i) fails to pay its Coverage Fees as specified herein; (ii) fails to comply with any of the other terms of this Agreement; or (iii) fails to satisfy underwriting requirements established by the Pool, the Board may, if such failure is not cured after ten (10) days' written notice, terminate the Member's coverage under the applicable Coverage Agreement. The date of such termination shall be referred to as the "Coverage Termination Date" Notwithstanding such termination of
coverage, the Member shall retain its rights to the return of any surplus or
other distributions from or assets of the Pool for a ninety (90) day period (the "Ninety Day Reinstatement Period") following such notice by the Pool. To retain this right, the Member must notify the Pool in writing during the Ninety
• Day Reinstatement Period of the Member's election (the "Reinstatement
Election") to reinstate coverage by delivering to the Pool a payment in an amount equal to any outstanding Coverage Fees and otherwise curing the failure giving rise to the termination of coverage. Upon the Pool's receipt of such payment and evidence documenting that the Member has cured the failure giving rise to the termination of coverage, together with such underwriting data and other information as the Pool may reasonably request, and provided that the Administrator determines (in the exercise of the • Administrator's sole and absolute discretion) that the reinstatement of coverage is appropriate based on sound business judgment, loss control and underwriting criteria, and loss experience during the Ninety Day Reinstatement Period (or applicable portion thereof), coverage under the applicable Coverage Agreement will be reinstated, effective as of the Coverage Termination Date. If the Member fails to provide the Pool the Reinstatement Election (together with such documentation, data and other information as required pursuant to this Section 8) during the Ninety Day Reinstatement Period, or if the Member provides the Reinstatement Election (together with such documentation, data and other information as required pursuant to this Section 8) during the Ninety Day Reinstatement Period and the Member's coverage reinstatement is denied pursuant to this Section 8, upon the expiration of the Ninety Day Reinstatement Period, the Member shall cease to be a member of the Pool and shall lose all rights as a member of the Pool including (without limitation) the right to return of any surplus or other distributions from or assets of the Pool and coverage under any Coverage Agreement. In the event of such termination, the Member shall be relieved of any liability for ordinary Coverage Fees under Section 7 for fiscal years after the year of the Member's termination. The Member's liability for additional assessments shall continue to the extent provided in Section 9 below.

Pursuant to Sections 5 and 8 of the Membership Agreement, AMRRP hereby gives notice of its intent to terminate Quartzsite's Property and Liability coverage effective on midnight, January 6, 2013. Quartzsite has the right to correct its current failure to meet underwriting guidelines within the next ninety days, which will serve as Quartzsite's "Ninety Day Reinstatement Period." Quartzsite may seek reinstatement of its coverage within this period by presenting AMRRP with evidence demonstrating that it has cured all of its failures giving rise to this termination of coverage. If after Quartzsite has provided evidence of correction AMRRP determines, in the exercise its sole and absolute discretion, reinstatement of coverage is appropriate based on sound business judgment, loss control and underwriting criteria, and loss experience during the Ninety Day Reinstatement Period, coverage under the Coverage Agreement will be reinstated.

Please let me know if you have any questions regarding this termination notice.

Sincerely,

Ann Gergen
President for-AMRRP