On Probation
The League of Minnesota Cities Insurance Trust board met on April 8th, and one of the topics before them was whether and on what terms to renew insurance coverage of the City of Maplewood. As the Pioneer Press reported on April 9th, the LMCIT did decide to continue our coverage, but with some harsh consequences for past behavior.
Late this week the Council and City received a letter from the LMCIT laying out those consequences in more detail. It states:
Even if we stay out of trouble going forward, it appears that we still run the risk that future claims stemming from past incidents (say, if someone filed a suit this summer that was the result of alleged actions of the city in 2006 or 2007) will be subject to these new deductibles as well. This is because, as I understand it, our LMCIT policy is the "claims made" variety. An article on Claims Made vs. Occurrence notes, "If coverage terms ever become more restrictive on subsequent renewal of a 'claims-made' policy, the new terms apply retroactively to the original retroactive or inception date."
It's clear that Maplewood is on probation going forward. The letter stresses that the LMCIT is "only committing to offer coverage to Maplewood for the coming year. Whether the LMCIT will be willing to renew Maplewood's coverage again in 2009 will depend entirely on what happens over the next year."
Late this week the Council and City received a letter from the LMCIT laying out those consequences in more detail. It states:
In other words, if we get into future litigation similar to the kind that arose from the December 2006 reorganization plan, we can expect a substantial portion of the expenses and any settlement costs to come directly out of the pockets of Maplewood taxpayers.
The Board approved offering Maplewood continued coverage, subject to a $200,000 per occurrence deductible for any employment liability claims, and any claims made by any City officer, employee, or volunteer against the City or another officer, employee, or volunteer. These claims will not be counted towards the City's aggregate deductible. In addition to the higher deductibles, the City can also expect a sizable increase in insurance premiums as a direct result of its loss experience.
Even if we stay out of trouble going forward, it appears that we still run the risk that future claims stemming from past incidents (say, if someone filed a suit this summer that was the result of alleged actions of the city in 2006 or 2007) will be subject to these new deductibles as well. This is because, as I understand it, our LMCIT policy is the "claims made" variety. An article on Claims Made vs. Occurrence notes, "If coverage terms ever become more restrictive on subsequent renewal of a 'claims-made' policy, the new terms apply retroactively to the original retroactive or inception date."
It's clear that Maplewood is on probation going forward. The letter stresses that the LMCIT is "only committing to offer coverage to Maplewood for the coming year. Whether the LMCIT will be willing to renew Maplewood's coverage again in 2009 will depend entirely on what happens over the next year."
Labels: finance
Post a Comment