Convention Hall Had Some Flood Insurance Before Hurricane Sandy

CAPE MAY – City Manager Bruce MacLeod told the public at a special meeting Nov. 14, the city had some flood insurance coverage on Convention Hall prior the recent hurricane.
At a Nov. 7 meeting, MacLeod said the city did not have flood insurance on Convention Hall but made application for flood insurance which would provide $500,000 of maximum coverage for the hall.
The Nov. 14 meeting opened with a 90 minute closed session of which the legality was questioned by two audience members and Deputy Mayor Jack Wichterman.
City Solicitor Tony Monzo said the closed session was justified because City Council would discuss if local, state and federal codes were followed in the construction of the new Convention Hall. He said if codes were not followed, it needed to be determined who was responsible which was a legal matter.
Following the closed session, MacLeod said he met Nov. 7 and Nov. 9 with the city’s contracted risk management consultant Marsh and McLennan who invited a Harleysville Insurance representative.
MacLeod said he wanted to make clear to the public and news media that through the Atlantic County Municipal Joint Insurance Fund (JIF), and part of the coverage under the Municipal Excess Liability (MEL), the city has had $2.5 million of flood insurance coverage on Convention Hall since April.
He said the building was covered even though it is located in a 100 year flood zone. MacLeod said the coverage has a $500,000 deductible on both the building and the contents.
The deductible is in recognition that the city may first procure coverage from FEMA which is maxed out at $500,000, he said. MacLeod said the city has received a proposal from FEMA to be able to purchase flood insurance which carries several options for deductibles ranging from $1,000 to $50,000.
The quote is based on the maximum amount of coverage of $500,000 on the building and $400,000 on the contents, he said. MacLeod said different levels of coverage were available.
He said the city needed to make a decision by Nov. 28 “to invoke some level of coverage based on the proposal.” Council is scheduled to meet Nov. 20 and is expected to render a decision on the level of coverage it wishes to have for Convention Hall.
He said the FEMA coverage had a 30-day waiting period before taking effect.
MacLeod said the first $500,000 of coverage would come from FEMA and then $2.5 million in coverage through the MEL.
He said Marsh and McLennan requested quotes from three insurance companies for purchasing additional coverage beyond $3 million. While Convention Hall was built for a cost of $10.5 million, MacLeod said it would be insured at a probable value of a maximum of $8.5 million.
MacLeod said council will evaluate if the city should consider some level of self-insuring Convention Hall.
“We are able to create a reserve, I talked with our city auditor about this, we can put money aside through annual budget appropriations and put that into the reserve that is specifically held and dedicated to this purpose of the flood insurance if we so desire as we move in that direction,” he said.
During public comment, resident Charles Hendricks asked how Mayor Edward J. Mahaney Jr. became aware Convention Hall had no flood insurance. Mahaney said he was informed by MacLeod.
Hendricks questioned why the mayor made no public announcement that the hall was lacking flood insurance. Mahaney replied it was an administrative matter and was under the purvey of the city manager.
Jerry Gaffney, a former mayor, councilman and insurance salesman, said the city self-insuring some of the coverage on Convention Hall “scared him to death.”
“Because self-insurance means we the public are the self-insurers and I don’t like that because I know how costly insurance is,” he said.
He also questioned council waiting until Nov. 28 to obtain coverage. Councilman William Murray said council needed to make a logical rational decision.
Gaffney said it was possibly the worst time in history to purchase insurance.