Insurer threatens to pull coverage
Immigrant proposal prompts agency move

By John Keilman
Tribune staff reporter
Published October 12, 2006


An insurer has warned the Village of Carpentersville that it could lose liability coverage if it enacts an ordinance targeting illegal immigrants.

The Intergovernmental Risk Management Agency, an insurance pool shared by 75 Illinois municipalities and taxing districts, told village officials in a letter that the proposal has "clear liability exposure" that could provoke the agency to deny coverage for legal expenses.


The warning has become part of an increasingly tense showdown over the measure, which would penalize employers who give jobs to illegal immigrants and landlords who rent apartments to them.

Village President Bill Sarto has threatened to throw the proposal's authors, Trustees Paul Humpfer and Judy Sigwalt, off Carpentersville's Audit and Finance Commission if they did not withdraw the ordinance by Thursday.

"They're showing very bad judgment from a fiscal standpoint, and that's what the Audit and Finance Commission is all about," he said. "They're putting the village itself at financial risk."

But Humpfer said he and Sigwalt have changed the proposal to cut down on legal concerns. "To try and intimidate us by trying to remove us [from the commission] is really unfortunate," he said. "It's not going to work. I'm not going to pull it based on this. There are too many residents who want us to do this."

The ordinance has yet to be formally introduced. When 3,000 people showed up for a discussion of it last week, officials decided to postpone the session until they could get a larger meeting place.

The village has yet to announce a date and location for the meeting.

Ten other communities around the country have passed ordinances cracking down on illegal immigrants, and some have been sued. Sarto said Carpentersville would invite certain litigation if it went ahead with the plan.

He said not only could that cost the village its liability coverage but it also could hurt its bond rating and prevent Carpentersville from entering a health insurance pool.

An Oct. 3 letter from the risk management agency does not explicitly threaten to take away coverage if the ordinance is passed but strongly suggests that would be a consequence.

The author of the letter, legal services director Susan Garvey, did not return a call seeking comment Wednesday, but she wrote that the agency had "serious concerns" about the measure.

She said the village needed to review the ordinance to make sure it did not violate state and federal law and noted that the agency can deny liability coverage if a community fails to "mitigate exposure" to lawsuits over its policies.

A lowered bond rating seems less likely. Jonathan North of Moody's Investors Service, which rates Carpentersville's bonds, said the impact of a lawsuit probably would be "pretty limited and probably distant."

Even if a village is tied up in lengthy and expensive litigation, it would not affect the bond rating as long as the town covers the cost by raising revenue or cutting spending, North said.

The proposed ordinance's effect on the village's health insurance coverage is murkier. Carpentersville is shopping for a new policy for its employees, and one option is to join a self-insuring co-op of 43 Chicago suburbs.

The group can bar a prospective member for any reason and does not look kindly on internal turmoil, said Marty Lyons of Gallagher Benefits Services, which does consulting work for both the co-op and Carpentersville.

"This could be a law that governs whether dogs should be leashed or not," he said. "We don't care about [an ordinance's] subject matter. It's how they handle it."

Lyons added, though, that Carpentersville has not formally sought to join the co-op and might find cheaper insurance elsewhere.

Humpfer said the village president's concerns could prove unfounded because he and Sigwalt have changed the ordinance.

The new version mirrors alterations made in Hazleton, Pa., which passed the nation's first ordinance that penalizes people who employ or rent to illegal immigrants.

After a coalition of attorneys sued Hazleton, officials changed the measure to soften penalties against employers and require all would-be tenants to obtain a rental permit from the city. They must prove their legal status to get the document.

Hazleton has not tried to enforce the law, but when it does, further litigation appears certain, said Foster Maer, attorney for the Puerto Rican Legal Defense and Education Fund.

"We think the revised version has serious flaws, and we will be going to court," he said.

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jkeilman@tribune.com



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