ERMAC: Beaumont ‘Self Insurance’

By: Libi Uremovic, August 16, 2014 | Original Article at Patch.com

ERMAC is Owned By Risk Manager James Gregg and City Manager Alan Kapanicas

The City of Beaumont is ‘Self Insured’ through ERMAC; Exclusive Risk Management Authority of California. (ERMAC) is a Member of the Excess Insurance Authority (EIA). From the EIA website:

“The CSAC Excess Insurance Authority (EIA) is a member directed insurance risk sharing pool. The EIA has developed effective risk management solutions to help California public entities proactively control losses and prepare for different exposures.” http://www.csac-eia.org/index.cfm

ERMAC is owned by Beaumont City Manager Alan Kapanicas and Risk Manager James Gregg. ERMAC uses the same Long Beach Address as General Government Management Services.

The requirements for an Agency to be Self Insured are:

$5 Million Shareholder Equity

Average Net Profits of $500,000 per year for the last five years

Certified, Independently Audited Financial Statements

Assets + Liabilities = Owners Equity. The City of Beaumont has over $1/2 Billion in Liabilities due TODAY and owns a few million in buildings.

The City has operated at a Net Loss for the past five (5) years. The Financial Statements show a loss of $1 Million Loss FYE 2009; a $354,000 Loss FYE 2010; a $1 Million Loss FYE 2011; $2 Million Loss FYE 2012; and a $4.6 Million Loss FYE 2013.

The Financial Statements prepared by the Auditing Firm of Moss Levy Hartzhiem has proven to be full of Material Misstatements. The Auditors’ past Internal Controls Reports have never reported the numerous Conflict of Interests within the City such as the City Manager and Risk Manager owning the Company ERMAC that is Self Insuring the City.

The recent ERMAC Invoice totals $379,881.00 broken down into four (4) types of coverage:

General Liability Premium + Administration Fee $376,502

Extended Limits $25 Million Premium + Administration Fee $ 20,178

Property Coverage Premium + Administration Fee $ 79,324

Crime Coverage Premium + Administration Fee $ 3,877

Aside from the revolution in seeing another venue for Beaumont Officials to pillage the City; the problem with the above coverage is that the CSAC website only lists ERMAC Program Participation in General Liability II, Crime Bond, and Pollution. If ERMAC does not participate in Extended Limit or Property Coverage they should not be collecting the fees from the City of Beaumont.

Gregg and Kapanicas are selling the City of Beaumont ‘Self Insurance’ while they are the Officers that authorize the purchase of the City’s Insurance. This is a clear conflict of interest violations of California Government Code 1090, Government Code 8920, and Government Code 1125 et seq.

Insurance companies make their money by collecting Premiums and NOT paying out Claims. It is the City Manager and Risk Manager’s job to file Insurance Claims on behalf of the City. What are the odd that the City Manager and Risk Manager will utilize the City’s Insurance when the Claims would literally be coming out of their pockets?

From the EIA website:

The General Liability II Program (GLII) provides coverage for claims from third parties alleging damages due to negligence on the part of the member arising out of:

  • Personal injury
  • Property damage
  • Public officials errors and omissions
  • Automobile liability
  • Employment practices liability

The blinding of Hernandez is expected to cost the City $50 Million and is covered by Insurance, but Kapanica and Gregg will not filed a Claim.

WRCOG Judgment IOU is $70 Million with Interest Incurring. The City could settle and file a Claim with ERMAC, but in all fairness ERMAC and EIA could refuse to pay based on evidence of fraudulent activity by Kapanicas and Urban Logic.