Portola Valley: Town risks losing liability insurance Portola Valley: Town risks losing liability insurance (April 06, 2005)

By David Boyce

Almanac Staff Writer

The ice got a little thinner recently for the town of Portola Valley, which is in danger of losing liability insurance because several occupied buildings at the Town Center sit within a seismically unstable zone. They could collapse in a major earthquake, geologists have said.

The Association of Bay Area Governments (ABAG) -- from which Portola Valley obtains its insurance -- has implied that coverage could be canceled if the town doesn't act.

A group of residents has suggested letting coverage lapse and finding insurance elsewhere, but such an effort would likely prove fruitless, according to a March 12 letter from ABAG's insurance broker.

The building complex -- used regularly by adults and children -- includes an art gallery, artist studios, after-school classrooms, multi-use room and library. Library staff have complained about unsafe conditions; the county library system is investigating the building's structural integrity. Town Hall was moved to a temporary building in mid-2004.

The Town Council plans to replace the complex on ground considered safer at a cost of about $15 million. With the minimum of a new library and Town Hall habitable by September 2007, ABAG's risk manager said ABAG might see that as a good-faith effort, implying that liability coverage might continue in the interim and definitely afterward.

The town will have spent about $853,000 by June and has $4.25 million reserved for the building project. The council and town volunteers are considering how to raise the other $10 million.

The plan's opponents, including some residents and a group known as the Portola Valley Committee for a Safe Town Center, have said they would rather upgrade the existing buildings and avoid the cost of building new. They have asked the council to spend no more money on the project and put the financing questions to a referendum.

In a February 2005 letter sent to many town residents, the committee also called for a new council that will "negotiate for insurance coverage in the open market." The insurance broker's letter addressed that option.

"We have discussed this topic with several general liability underwriters very knowledgeable with public entity risks," said Dennis Mulqueeney, a vice president at Driver Alliant Insurance Services of San Francisco. "Not only were they not interested in entertaining such coverage, they could not imagine a scenario where anyone with an underwriting background would."

Allan Brown, a committee member and one of the cosigners of the letter to residents, described Mr. Mulqueeney's letter as "one person's opinion."

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