Melvindale, which has been facing a rash of legal issues connected to its police department for years, now has a new problem: Its liability insurance has been canceled. That could — when the policy lapses ― expose taxpayers to additional risk.
This week, the city took steps that may help address the worry.
After years of controversy, criminal charges and civil lawsuits, the city’s new police chief, Chris Egan, fired Lt. Matthew Furman, according to WXYZ-TV (Channel 7). Furman has been connected to multimillion-dollar lawsuits against the city and charged with crimes.
The Free Press — which covered allegations against the Melvindale police going back to 2018, when an ex-police chief claimed in a lawsuit that the city used Furman to help eliminate a $1 million debt through car impounds — left messages with several city officials this week.
In a letter, the TV station said, Egan informed Furman that the dismissal was “for cause” and that “without question” it was related to his conduct on the force, which “warrants termination.”
In addition, WXYZ added, the city’s mayor, Nicole Shkira, confirmed the firing.
The Free Press also left a message with Furman’s criminal attorney, Dennis Whittie.
The news of the termination came a day after WXYZ reported that late last year, Melvindale agreed to settle a lawsuit filed by Drakkar Williams for $1 million, an amount covered by its insurance.
How serious of problem it is that Melvindale is losing its insurance coverage, experts say, is difficult to determine. But it underscores how accusations of bad policing and other claims against the government can cost a city more than money.
Your insurance is canceled
Whether or not Melvindale, the Downriver suburb of 12,500-something people, will be able to get a new policy is unclear, and even if it does, experts note, there may be specific liabilities that the insurer declines to cover.
But the cost of municipal insurance has risen, with growing concerns about liability stemming from lawsuits, natural disasters and cyberattacks, and increased costs overall that require higher insurance payouts.
There is, however, some hope for Melvindale, which still faces other lawsuits.
Mike Forster, Michigan Municipal League’s director of risk management, said he was unfamiliar with Melvindale’s insurance policy woes and could not comment on them, but said liability coverage is more available now than it has been the past.
Forty years ago, insurance coverage had become so scarce that Time magazine published a cover report, “Sorry, America, Your Insurance Has Been Cancelled,” which characterized the problem as a “national crisis.”
However, now, in addition to buying policies from commercial carriers, communities also have the option of joining groups of municipalities to combine their money and are essentially self-insured, Forster said.
The league ― a statewide association representing hundreds of cities, villages and urban townships ― even operates a property and liability insurance pool, for example, to which more than 400 Michigan municipalities contribute.
Too many civil lawsuits
WDIV-TV (Channel 4) and the Times Herald Newspapers were the first to report that Melvindale’s liability insurance was canceled ― or would be soon. WDIV said that Shkira confirmed the news.
The insurance policy, the Times Herald said, is set to end in April.
The reason for the cancellation: too many lawsuits. But, the station added in its report, the mayor — along with other officials — had declined to publicly discuss the issue in more detail.
Officials did not return calls from the Free Press.
It’s unclear whether the cancellation came as a surprise to officials or othe recent actions were taken to make the city more appealing to a new carrier. But an earlier news report from WXYZ-TV (Channel 7) suggested the civil lawsuits caused insurance premiums to rise.
In June, WXYZ-TV reported that a trio of misconduct lawsuits against Melvindale police officers led to a surge in the city’s insurance premiums. The suits, the report said, also led some carriers “to view the town as too risky to cover.”
Two civil lawsuits, filed last year against the city, named Furman.
At a City Council meeting, WXYZ said, the Melvindale insurance broker Steven Saigh pointed out the city’s annual insurance premiums soared to $633,000, up 24% from $510,000 the year before, a 28% jump from the year before that.
City Attorney Lawrence Coogan warned of “financial ruin.”
The Free Press left a message with Coogan.
In the WXYZ report, Saigh also told officials that the city should let insurance companies know that it had taken steps to review, educate and train its police officers. Furman’s firing appears to show that the city may be taking some of that advice.
Signs of industry trouble
While Forster did not express concerns about rising insurance costs for municipalities, an insurance brokerage and consulting firm, BCU Risk Advisors, based in Chicago, warned there may be signs of trouble elsewhere in the insurance market.
And, it said, as in the 1980s, the insurance market could find itself in distress again. Back then, the 1986 Time report raised concerns about the potential collapse of the U.S. commercial liability insurance market.
The magazine said the “litigious nature of American society these days, just about any kind of business, profession or government agency is likely to become the target of a suit alleging malpractice or negligence resulting in personal injury.”
The report added that liability insurance was “about as vital as oil in keeping the economy functioning,” but it had become “the kind of resource that oil was in the 1970s: prohibitively expensive, when it can be bought at all.”
BCU, which specializes in high-end personal — not municipal — insurance, told the Free Press that a segment of the industry is emerging from a challenging market marked by rising rates.
A 2024 research note from Moody’s ― a firm that helps institutions manage risk ― also noted property insurance coverage cost and availability had become “an increasing pain point” for commercial real estate participants.
And, BCU added, in the past five years, losses from events causing significant insured property loss have expanded beyond hurricanes and earthquakes on the coasts, to include more wildfires and Midwest storms.
Melvindale’s legal problems
But the settlement and termination may not fix the city’s problem.
Melvindale — which calls itself “The Little City with a Big Heart” ― still faces losing its insurance coverage as a result of ongoing legal woes connected to its police department going back at least a decade.
In 2018, the Free Press reported that ex-Melvindale Police Chief Chad Hayse accused the city of wrongful termination and Furman — who had, at the time, been suspended twice for excessive force — of running a towing scam.
Hayse also accused city officials of turning a blind eye.
The lawsuit, filed in U.S. District Court, claimed the ex-police chief was fired in 2016 for failing to meet ticket and towing quotas and for trying to rein in Furman. In response, Furman accused Hayse of being racist.
In May, the Free Press reported that another lawsuit was filed in Wayne County Circuit Court. A Muslim police officer, Cpl. Hassan Hammoud, accused supervisors and colleagues of targeting him because of his religion and ethnicity.
Others on the force, Hammoud said in the suit, tried to get him to quit.
The then-police chief, Robert Kennaley, denied the allegations.
Then in August, the Free Press reported Furman was back in court — again. This time, he was accused by the prosecutor of using excessive force on the job and charged with new misconduct and assault and battery charges.
He has been cited for using excessive force at least seven times during his career.
By the end of the year, Kennaley ― who was appointed chief in 2024 but diagnosed with squamous cell carcinoma, which required treatment ― submitted his resignation. His last paycheck, the Times Herald reported in November, was to be Tuesday.
It’s unclear whether Melvindale will be able to find another liability insurance carrier before its policy runs out. If not, there’s a risk that the taxpayers could be on the hook for a judgment against the city or settlement the city pays out.
Contact Frank Witsil: 313-222-5022 or fwitsil@freepress.com
This story has been updated with new information.
This article originally appeared on Detroit Free Press: In Melvindale, lawsuits against city threaten its insurance coverage
Reporting by Frank Witsil, Detroit Free Press / Detroit Free Press
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