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About Local Government Insurance Trust

What is LGIT?

Since 1987, many local government entities in the State of Maryland have covered their primary and excess liability, auto, environmental, property, boiler & machinery through the Local Government Insurance Trust (LGIT). LGIT was founded by the Maryland Association of Counties (MACo) and the Maryland Municipal League (MML) in answer to difficulties towns, cities and counties then faced in securing affordable insurance.

LGIT is a non-profit association authorized by state law, wholly-owned and managed by its local government members. The Trust’s main purpose is to provide joint self-insurance programs or "pools" for towns, cities and counties in the State of Maryland. The concept is simple: rather than paying premiums to buy insurance from an insurance company, local governments contribute those premiums into a jointly-owned fund. The money in that fund is used to pay for the members’ claims, losses, and expenses. Below are answers to frequently raised questions about LGIT.

Why was LGIT created?

The private insurance market runs in "hard" and "soft" cycles. During a soft cycle, insurance is relatively cheap and easy to acquire. During a hard cycle, insurance is very expensive and hard to obtain because insurance companies tend to view local government losses as risks that are undesirable or unpredictable. In the hard cycle of the late 1980s, a majority of Maryland towns, cities and counties suffered from the high cost of insurance premiums and loss of insurance coverage. Because of the existence of LGIT, Maryland local governments know they now have coverage available to them at stable rates and predictable costs — regardless of private insurance industry cycles.

How does LGIT differ from an insurance company?

In some ways, LGIT functions like an insurance company. Maryland local governments pay a premium to LGIT, LGIT gives the member government a coverage document that looks like an insurance policy, and LGIT pays claims and losses on the member’s behalf. However, there are a few important differences.

LGIT is owned and managed by its member local governments. Its purpose is to meet local government risk management needs — not to make a profit by selling insurance. Because LGIT is a not-for-profit organization, if the Trust’s income from fees and investments is more than is needed to pay for losses and expenses, the excess funds may be returned to the members.

What kinds of coverage does LGIT offer?

The Trust operates five major coverage programs: primary liability, property, equipment breakdown, excess liability, and environmental impairment liability. A brief explanation of each program’s function is explained below.

Primary Liability - The Primary Liability Pool consists of coverage for general liability, public officials legal liability, police legal liability, automobile liability and automobile physical damage.

Property - The Property Pool provides coverage for buildings and contents, combined with optional coverage for Flood and Earth Movement. The Property Pool continues to provide members with the opportunity to customize coverage to meet individual needs. The Property Pool further spreads its risk by purchasing insurance (i.e., reinsurance) from NLC-MIC and Royal Insurance. During FY97, the Trust developed and offered new coverages and services to members, including K-9 (police dogs), Employee Fidelity, and Accidental Death and Disability.

Property / Equipment Breakdown - The Equipment Breakdown (Boiler and Machinery) coverage provides a $30,000,000 limit combining property damage, business interruption, and extra expense coverage.

Excess Liability Program - The Excess Liability Pool provides members with excess coverage over LGIT’s Primary Liability Pool. Members in the Excess Pool must either be a member of LGIT’s Primary Liability Pool or self-insure for the first $1,000,000 - the Trust will not provide excess coverage over commercial insurance. Limits of liability range from a minimum of $1,000,000 to a maximum of $5,000,000 of the Primary Liability limit. The Excess Pool further spreads its risk by purchasing insurance (i.e., reinsurance) from the National League of Cities Mutual Insurance Company.

Environmental Impairment Liability - Pollution Legal Liability is an environmental insurance policy that helps cover the environmental risks associated with owning or operating a facility or site. It can provide environmental coverage for losses due to on- or off-site pollution conditions from an owned or operated property, coverage for pollution conditions resulting from transportation of wastes or products and coverage for non-owned disposal site-related environmental liabilities. The Storage Tank Liability Insurance policy provides coverage for third-party bodily injury and property damage, and also provides coverage for corrective action and cleanup as required by applicable federal and state regulations.

How safe and secure is LGIT?

To ensure that LGIT will be able to meet its responsibility to pay local government claims, LGIT’s Board of Trustees have always seen it as critical that the organization be strong and financially sound. A conservative approach to rates and reserves, spreading the risk via reinsurance with some of the strongest re-insurers in the world, and regular actuarial reviews help ensure that the Trust will remain sound.

For the fifth year in a row we were awarded the Certificate of Achievement for Excellence in Financial Reporting from the Government Finance Officers Association for our Comprehensive Annual Financial Report (CAFR). This prestigious award is the highest form of recognition in governmental accounting and financial reporting.

Why does LGIT put so much emphasis on loss control?

Remember, the funds LGIT uses to pay claims belong to the member towns, cities and counties of Maryland. Every loss that is avoided saves money. LGIT’s loss control seminars, Risk Management Bulletin and other publications, and visits by Trust loss control representatives, all have the purpose of helping local governments minimize risks and avoid losses.

Who runs LGIT?

LGIT is governed by the Board of Trustees which is composed of a combination of elected and appointed county and municipal officials who have experience in local government operations and are members of the Trust.  The composition of the Board of Trustees ensures that the policies, operating procedures and quality services of the Trust are designed with LGIT members’ needs in mind.

Superior Coverage

LGIT’s coverage is specifically designed for Maryland local government risks.

Low Cost

LGIT’s rates are designed to raise what’s needed to pay projected claims and expenses. Unneeded funds go back to the members through future lower fees or enhanced services.

Responsive Service

LGIT listens and responds to member’s requests and needs (i.e., Training Seminars, Employment Law Hotline, K-9 Coverage, Fidelity Bonds).

Stability

LGIT’s financial strength stabilizes premiums and protects against catastrophic losses. Rate increases have been marginal. Reserves continue to grow.

Expertise

LGIT understands Maryland local governments and provides them with superior in-house claims management, defense, loss control assistance, and coverage.

To whom should I talk if I have a complaint?

If you have a problem with service from LGIT, whether from a LGIT staff person or service provider — we want to hear about it! Call Jon Burrell (Executive Director) at 443-561-1700 or 1-800-673-8231 and tell him about it.

We can’t guarantee that we’ll never make a mistake or that we’ll always be able to deliver everything you need exactly when you need it, but we can guarantee that, if you tell us about a problem, we will listen and we will fix it just as quickly as we can. We can’t emphasize strongly enough that we want to hear about problems that you run into. The worst problem is the one we couldn‘t fix because we didn’t hear about it.

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