"LAX insurance costs will skyrocket next year due to Sept. 11"

Saturday, May 25, 2002

LAX insurance costs will skyrocket next year due to Sept. 11 
By Ian Gregor 
THE TORRANCE (CA) DAILY BREEZE 


Los Angeles International Airport's insurance costs will nearly triple
next year while coverage will shrink as a result of the Sept. 11
terrorist attacks and last summer's sickly stock market, reports show.

Overall, the airport department will spend $14.9 million on insurance
policies in 2002-03, compared with $5.3 million this year, according to
airport staff reports. The Board of Airport Commissioners approved
buying the policies on Tuesday.

The department's basic insurance premium, which covers everything from
personal injuries to fires and storm damage, will leap eightfold, from
$746,000 to $5.8 million. At the same time, the amount of coverage will
drop to $1 billion from $1.4 billion - which is the estimated value of
the assets owned by the city department that runs LAX and airports in
Ontario, Van Nuys and Palmdale.

The department's $100 million earthquake policy, which comes with a 5
percent deductible for each damaged building, will jump from $3.2
million to $5 million.

Additionally, it will spend another $2.1 million on a $500 million
aviation liability policy, which covers aircraft accidents, and $2
million for a $150 million policy covering damage from terrorist
attacks, reports show. The liability policy cost $1.3 million this year
and included terrorist coverage.

But insurers announced soon after Sept. 11 that they were dropping
coverage for terrorist acts at airports, said Bill Bruce, the
department's director of administration.

The new terrorism policy comes with a $1 million deductible, reports
show.

It would cost about $300 million to rebuild a blown-up terminal at LAX
and $15 million to rebuild a parking garage, said Kim Day, the airport's
deputy executive director of project and facilities development.

The department's insurance brokers kept premiums from soaring even
higher by making presentations to major underwriters showing the
airports' excellent claims and safety record, Bruce said. The department
has successfully defended every claim that went to trial since 1984,
according to a report.

"We have an excellent safety program combined with an aggressive claims
management program that has substantially reduced the cost for our
insurers," Bruce said. "By virtue of this, we're looking at very
competitive rates."

As a result, the department's liability policy costs jumped just 64
percent, compared to increases of 100 percent or more at airports in
Chicago, Miami, New York and San Francisco, according to a report. And,
while most insurers were offering $50 million terrorism policies for $3
million, the department got three times as much coverage for two-thirds
the price, Bruce said.

Insurance companies estimate the terrorist attacks cost them $50 billion
to $70 billion, Bruce said.


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