Mayor Vetoes Controversial Insurance Partnership

A portion of a lead service line removed from a house on S. 12th St. Photo by Jeramey Jannene.

A proposal for the City of Milwaukee to endorse a private insurance provider has sprung a major leak.

Mayor Cavalier Johnson vetoed a proposal that requested city officials negotiate with Connecticut-based HomeServe about providing an explicit endorsement of the company’s sewer and water insurance programs.

“My veto reflects concerns with accountability, transparency and commitment in regard to services provided,” wrote Johnson in a brief veto message Wednesday.

HomeServe offers warranties for water and sewer leaks not commonly covered by homeowner’s insurance. The company, endorsed by the National League of Cities, wants to use the city’s name and logo for marketing its warranty products and to have the city automatically add an up to $1 per month internal leak insurance fee to every municipal services bill.

The council, on an 8-6-1 vote Tuesday, endorsed a resolution that directed the Milwaukee Water Works and Department of Public Works to negotiate with the company about the proposal.

But the departments had already balked at the idea.

“The departments indicated that there is very few of the kinds of incidents that this warranty program actually protects against, and that has been the experience of other cities,” said Ald. Robert Bauman, the lead opponent.

The Public Works Committee spent substantial time debating the matter on Nov. 29, with Bauman calling it a “scam from top to bottom” after the discussion.

But the alderman said his real concern was not the merits, but the endorsement the city was being asked to make. “I think, as a matter of policy, we should think very hard before we allow for-profit companies to use our name as an endorsement,” said Bauman.

But the proposal has strong support from a number of council members.

“This is a benefit for the residents,” said Ald. Russell W. Stamper, II. He said constituents have been hit with bills of up to $10,000 to pay for water and repair water damage from leaks and the insurance would protect them.

“Something like this can really punch a hole in a family’s budget,” said Alderwoman JoCasta Zamarripa, a co-sponsor.

Stamper, who didn’t appear aware of the automatic charge at the November meeting, said the company had already agreed to drop the water leak issue.

“That’s one step in the right direction, but either way DPW will come back to us,” said Common Council President José G. Pérez of why he was supporting the proposal.

“We are not talking about an endorsement here. We are talking about the ability to negotiate,” said Ald. Lamont Westmoreland.

“This is for the residents to offer them some protection for something that may occur,” said Stamper.

But Bauman, Jonathan Brostoff and others said the company was welcome to sell its insurance today, without a city endorsement.

“I’ve always encouraged buyer beware, look very carefully at the terms and look very carefully if the insurance provided would actually payout in the event something would happen,” said Ald. Scott Spiker of what he tells constituents when they contact him about insurance offers.

The company, with city endorsement, would sell a water line protection program for $7 per month and a sewer line protection program for $9 per month. It is seeking the endorsement because it says its market penetration would grow from 0.5% to 10-to-12%.

The council will take up the veto at its Jan. 17 meeting. It would take 10 votes to override the veto.

Stamper, Zamarripa, Westmoreland, Pérez, Mark Chambers, Jr., Khalif Rainey, Andrea Pratt and Larresa Taylor voted for the proposal. Bauman, Brostoff, Spiker, Michael Murphy, Mark Borkowski and Marina Dimitrijevic voted against the proposal. Ald. Milele A. Coggs abstained without explanation.

The council actually had two vote twice on the matter. Taylor initially abstained from voting, causing the measure to fail on a 7-6-2 vote. After the vote, Stamper walked to her desk and she asked for the roll to be called again. She voted yes the second time.

Deja Vu?

A nearly identical situation played out 12 years ago.

From 2011 to 2013, the city participated in a similar partnership with Utility Service Partners (later acquired by HomeServe) that was endorsed by the National League of Cities and championed by then-Ald. Joe Davis, Sr. Davis, like Stamper, had learned of the agreement via the National League of Cities conference.

The council initially endorsed the 20111 agreement by a one-vote margin, and then overrode a mayoral veto on a 10-5 vote to enact the program. Bauman voted against the program initially, but flipped to vote for the veto override. Murphy voted no both times, and Coggs voted yes in each case. No other current council members were serving at the time.

In 2013, the city exited the deal on a 12-3 vote, with DPW officials and many council members desiring to pursue a request for proposals for a new vendor and better terms. The city was paid 10% of all premiums under the 2011 deal, netting a couple hundred thousand dollars. Pérez, who joined the council in 2012, voted with Davis and Ashanti Hamilton to stay in the agreement.

Related Legislation: File 231183