Sept. 13, 2002 – In an unusual move, two St. Croix insurance executives have spoken out publicly about the layoff of 800 Hovensa workers due to the refinery's inability to secure personal injury liability insurance for seven of its maintenance contractors.
Insurance people tend to be conservative about talking with the press for fear of incurring the ire of regulators. But the two industry leaders went on the record Friday to offer warnings about the need for legislative reform.
"We need tort reform," Tom Fitzsimmons, president of St. Croix Insurance, said. David C. Ridgway, president of Marshall & Sterling Insurance, agreed.
"We have reached the point that few insurance companies are interested in writing in the Virgin Islands," Ridgway said in a release from his office. "Eight hundred people could not report to work today … as the direct result of the inability to attract carriers to the V.I."
The crux of the problem, according to Fitzsimmons and Ridgway, is the monumental jury awards given for minor injuries in the Virgin Islands. "For every $1 million collected in premiums, $10 million is paid out in settlements," Fitzsimmons said. "The thing is — it's time for the Senate to address tort reform."
In neighboring Puerto Rico, Fitzsimmons said, awards are determined by a panel of judges.
In the Virgin Islands, he said, insurance companies make excessive payments to avoid going to court.
"Our juries are not necessarily sophisticated," Fitzsimmons said on Friday, and yet the degree of negligence as well as the seriousness of the injury is left to them to decide. "If we don't get some kind of tort reform, the Virgin Islands is done."
Fitzsimmons added, "If we charge our businesses five times more for liability insurance," it won't be long before they start going elsewhere — like the British Virgin Islands, Puerto Rico or "even Cuba when it opens up."
At a public meeting in June, Richard Doumeng, general manager of Bolongo Bay Beach Club and Villas, gave a graphic example of what Fitzsimmons was referring to. Doumeng said he had watched his liability policy premium at the hotel go "from $60,000 to $90,000 to $118,000," and that was without "one claim until this year."
That one claim, he said, involved a "slip and fall" which resulted in a "simple broken arm — no compound fractures" or other complications. The claimants "had an attorney in the states and were asking for $75,000," he said. "They got a local attorney, and they are now asking for $600,000." (See "Insurance crisis seen as big threat to economy".)
In the early '80s, auto insurance companies began an exodus from the territory, citing the same type of extreme jury awards as the reason. Those who remained greatly reduced their coverage caps, leaving property and business owners to scramble to protect themselves from lawsuits where jury awards could greatly exceed their policy limits.
Ridgway recalled a similar crisis "15 years ago when physicians in the Virgin Islands could not get insurance."
On Friday, he said, "The next time someone is on a jury, maybe they will realize that they are not just giving way someone else's money; this has direct consequences at home. There is no free lunch. Ultimately, we all end up paying for it."
In a release from his office late Friday, Lt. Gov. Gerald Luz James II, who is running for governor, announced he will hold a press conference at 10 a.m. Monday at St. Croix's Government House to "discuss the recent insurance coverage issue encountered by contractors at Hovensa."
James, who serves as Insurance commissioner by virtue of his position as lieutenant governor, and Maryleen Thomas, his director of Banking and Insurance and his running mate, have both said local carriers and agents are portraying an insurance crisis as a way to push for requested rate increases. James and Thomas have insisted there are new insurance companies waiting to come to the territory.
Fitzsimmons differs. "I have been amazed that carriers are found to do it," he said, referring to the writing of insurance coverage in the Virgin Islands.
Hovensa officials declined to identify the company whose liability policy expired Thursday at midnight, but it was not a local company. "Nobody on island could handle losses of that magnitude," Fitzsimmons said.
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