1 G 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 KERR COUNTY COMMISSIONERS COURT Emergency Session Monday, December 23, 2002 1:00 p.m. Commissioners' Courtroom Kerr County Courthouse Kerrville, Texas LAW ENFORCEMENT LIABILITY INSURANCE J PRESENT: FREDERICK L. HENNEKE, Kerr County Judge Lll H.A. "BUSTER" BALDWIN, Commissioner Pct. 1 JONATHAN LETZ, Commissioner Pct. 3 i~.n' ABSENT: WILLIAM "BILL" WILLIAMS, Commissioner Pct. 2 `~ LARRY GRIFFIN, Commissioner Pct. 9 `' 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 15 17 18 19 20 21 ~~ Lc 23 24 25 2 On Monday, December 23, 2002, at 1:00 p.m., an emergency meeting of the Kerr County Commissioners Court was held in the Commissioners' Courtroom, Kerr County Courthouse, Kerrville, Texas, and the following proceedings were had in open court: P R O C E E D I N G S JUDGE HENNEKE: All right. It's 1 o'clock in the afternoon on Monday, December 23rd. We'll call to order this emergency meeting of the Kerr County Commissioners Court, which is called pursuant to the applicable provisions of the Texas Local Government Code. Let the record reflect that all -- that a quorum of the Commissioners Court is present. The item for consideration is consider and discuss status of the law enforcement liability insurance. Tommy, are you going to present, or Jack, or whom? MR. TOMLINSON: Jack's going to present. I -- just for the record, Jack is our agent of record for -- for this coverage, and he has gone out on the market and sought some quotes, and we -- we now have all that's available or that we can find. So -- and Jack will explain the options to you. MR. FURMAN: Gentlemen, there are a number of options here, and I'll be happy to explain them. The -- the first column is limits, and the first number is per occurrence and the second number is aggregate, which means i.-zs--- ee,~; 3 per policy year. There are also a couple of deductible options on the -- on the Sheriff's Department side. And then, on top of that, just to confuse your life some, I asked for twe different policy forms to give you all an option from a money standpoint. We talked last year about occurrence and claims made forms. I think you'll find most insurance agents will recommend the occurrence form because of its permanency, but the claims made form is going to be less expensive the first year you buy it. COMMISSIONER BALDWIN: Excuse me, Jack. Trying to communicate here, sorry. MR. FURMAN: All right. SHERIFF HIERHOLZER: I didn't know if he needed this one back or if he had another one. MR. FURMAN: I think he grabbed another one. Claims made forms usually have a retroactive date, which means that policies that -- claims are covered if both the claim is made during the policy period, and the event that -- of which the claim arose occurred on or after the retroactive date. So, what happens is, on a claims made form, is that the premium is going to be lower the first year because there's less likelihood of a claim. And then, 3 with time it goes up until it's the same thing as an 1 occurrence form. That happens, depending on the company, ~ in -- in two, three, or four years. I believe she told me 1 2 3 4 5 6 7 8 a 10 11 12 13 14 1~ lE 1~ lE L 2( 2: 2: 2 2 1_ ]1-~iG EMS 4 1 2 3 9 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 23 24 25 that the claims made form was 72 percent of the occurrence form. At any rate, it's something along that line, but that's only for the first year. We would always recommend the -- the occurrence form, but I did want to show you the other. COMMISSIONEP, LETZ: Jack, what do we have right now? An occurrence form? MR. FORMAN: You've had an occurrence form -- well, I need to explain another place, so let me answer your question and then back up a little bit. You've had the occurrence form for about five years. Prior to that time, you had a claims made form with a retroactive date that went back into the '80's. This is through the National Sheriff's Association. The carrier is C.N.A. They will maintain that old retro date, even though it's an occurrence form. They will cover any claim that arose between the time the occurrence started and the claims made policy was originally written. They will maintain coverage for that, even though it's an occurrence form, but that will all disappear if we change from occurrence to claims made. We'll pick up a new retro date. If we didn't pick up a new retro date, then we'd end up with the same premium. JUDGE HENNEKE: What's our current deductible and limit? MR. FORMAN: The current deductible is 1 L 1 3 ~_ E ^7 ~; 1 2 3 9 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 ~l ~~ 23 24 ~5 5 $10,000, and the limit is $1 million/$2 million. JUDGE HENNEKE: $1 million/$2 million. That's on both the Detention renter and the jail? MR. FURMAN: Yes, that's on both. JUDGE HENNEKE: If we stay with what we have now, how much is that going to in~~rease our premium? MR. FURMAN: Well, it's a fairly significant increase. MR. TOMLINSON: It's about -- it's better -- a little better than 50 percent. JUDGE HENNEKE: So, right now we're playing -- we're paying somewhere in the neighborhood of $43,000, $44,000 for the Sheriff's Department, and it will go up to 85? MR. TOMLINSON: No, it's 53 for -- for an occurrence policy right now. JUDGE HENNEKE: For both of them, or just -- MR. FURMAN: No, just the Sheriff. The Sheriff's. MR. TOMLINSON: Just the Sheriff's. MR. FURMAN: The Sheriff's Department has, as you can see, the larger increase. The across-the-board increase for people who haven't had claims, she told me, is 40 percent -- about 40 percent. And you can see that in the Juvenile Detention. 1.'.-23-0- EMG 1 2 3 4 5 5 7 8 9 10 11 12 13 19 15 16 17 18 19 20 21 ~, 23 24 ~' S 6 JUDGE HENNEKE: So, what do we pay now for Juvenile Detention? MR. FURMAN: The Sheriff's Office has had -- over the past history, although happily nothing in 2002, has had some claims that amount to better than 80 percent loss ratio over a five-year period. SHERIFF HIERHOLZER: We were notified of one last week. MR. FURMAN: You did? SHERIFF HIERHOLZER: Motley's going to be sending it. COMMISSIONER LETZ: What -- what's the number of, I guess, claims we get a year, on average? SHERIFF HIERHOLZER: Well, we have a lot of old ones that are pending. You know, prior to 2000. COMMISSIONER LETZ: Well, I guess what's the number on average each year of the claims we get? I'm looking more on the deductible side. MR. FURMAN: Probably two or three. COMMISSIONER LETZ: Two or three a year? MR. FURMAN: I'm sorry I didn't bring any of that claims information, but probably two or three. COMMISSIONER LETZ: And the deductible is -- is a total for the year, or is it a -- MR. FURMAN: The deductible is a -- i. _;-o~ ~n~e 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 ~l 22 23 24 25 COMMISSIONER LETZ: -- per claim? MR. FURMAN: It's per claim. The deductible applies to the attorneys, as well as anything that's paid out. SHERIFF HIERHOLZER: One thing about that, we've had two or three of the old ones that have been ~~laims, and I think all those that the attorneys have worked on have averaged pretty close to anywhere from $35,000 to $45,000 that the attorney's fees and the different fees have added up to. That had to be paid even though the lawsuit was eventually thrown out. So you're still going to have those attorney fees add up between $30,000 and $40,000 easily. MR. FURMAN: I wish I had brought one. There was -- there's one -- and Rusty probably knows the when's and where's of it, but somebody died in between the time the suit was filed. The company thinks it has zero merit. In their reserving -- do I need to explain reserving? In their reserving, they have put no money for a claim payment. It's all on -- on the adjustment expenses, on the legal expenses. And it's around $92,000, my best memory. In all of this time, I think there is one claim reserved that has a little bit of money base for -- based on when you say merits, where they think there is some liability. And there was one paid where there was -- where they thought there was some ~~-_,-_= en~a 1 3 9 5 5 7 8 9 10 11 12 13 14 15 lb 17 18 19 20 21 ~~ 23 29 25 8 liability, and that's over the last five years. So many of these things that -- that the Sheriff's Department is faced with -- SHERIFF HIERHOLZER: I think there was one -- MR. FURMAN: -- are jailhouse-type suits. SHERIFF HIERHOLZER: Well, I think there was one that went all the way to a federal trial and got thrown out by the federal judge during the middle of the trial. But, if I'm not mistaken, those claims, just the attorney fees on that one were close to $60,000 or $70,000. MR. FORMAN: Could be. SHERIFF HIERHOLZER: Okay. That had to be -- had to still be paid even though the suit was thrown out. MR. FURMAN: The biggest claim in the -- in the group was a little over $70,000, after the deductible. COMMISSIONER LETZ: Tommy, what did we budget this year for that? MR. TOMLINSON: We budgeted 60 for -- for the Sheriff's -- for law enforcement alone. Juvenile, we -- we have close to what this is. I think it's $13,000, I believe, for insurance. MR. FURMAN: Because I read the paper and because I know y'all are tightly budgeted, I wanted to show the claims made, because it does cost less. But bear in mind that it comes up later with increased premiums over i. - _ S- ~i J EYIG 1 ,~ 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 ,~ L L 23 24 25 9 time. Some of that depends on the market, and the best thing that can happen is for -- is for the County to experience fewer claims. And I really think maybe that's happening now. I really think maybe that's happening now, but only time will tell. That's events that they sue over SHERIFF HIERHOLZER: And it is true we're year, we've had a lot -- a lot more probably threatened claims, you might call it, or threatened suits and that. Now, you know, 95 percent of those don't ever materialize into anything, but we do get them constantly. COMMISSIONER LETZ: But I think -- I mean, in today's society, whether we like it or not, I don't think we're going to have less suits filed. We're going the other direction -- sliding in the other direction, more suits. DODGE HENNEKE: We have more prisoners. SHERIFF HIERHOLZER: I've got about three -- three in the jail at this time that are threateninq they're going to do all this and that and everything else in the world. I've got one notification of an incident that occurred back in July that I just got the paperwork Friday on, notifying that it would be filed in the district courts here. _..-_.i -,. EM'. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 10 JUDGE HENNEKE: Basically, we had a -- we've had a 40 percent increase in the number of prisoners in the last two years. SHERIFF HIERHOLZER: If you all throw in the last couple months, we've really dropped down. But it's the threats of the claims and just wanting small settlements here and there, and that's why I don't agree with those, is we're getting more -- more of them. I think that's just the times. MR. TOMLINSON: There's one thing about this underwriter; they don't like to settle. They don't -- you know, they don't like to settle. They -- they take it to court. So -- (Discussion off the record.) MR. TOMLINSON: I was saying that these underwriters don't like to settle claims. SHERIFF HIERHOLZER: And I don't think we should, because I think that's the only way you start stopping it. MR. TOMLINSON: There's some that like to. SHERIFF HIERHOLZER: Because that defendant or that attorney is going to get tired of filing, 'cause it's not paying his part of the fees; it's just paying our attorney's part of it. Somewhere, his attorney is going to have to start collecting the fees or quit filing suits. i. ___ i-oz Er~~s 11 1 ~, 3 9 5 6 7 8 9 10 11 12 13 14 15 16 1~ 18 19 20 21 -, , 23 24 25 MR. FURMAN: Well, unfortunately, the -- realistically, it is usually economical for insurance companies to pay some money to make it go away. But Tommy's very right; it just. makes it a lot easier for the next guy that comes along to get a little bit, whether there's merit or not. COMMISSIONER LETZ: Jack, why does it take so long for us to get this? I mean, the quotes in from the underwriter. In other words, why are we meeting at the 11th hour? MR. FURMAN: You have to ask somebody that's more intelligent than me. We started over 60 days ago, and I started calling two weeks ago -- about two weeks ago, saying, "I haven't gotten anything yet." One underwriter must have looked at it the next day, because I got an e-mail asking for more information. One underwriter said, "I'm finishing one today, and yours is next on the stack." And then she came and asked for more information last week. JUDGE HENNEKE: You know, the format -- the Court made the decision to have all of the insurance policies expire at the end of the calendar year, so that's out of sync with the budget, but that's in sync with the insurance industry. They don't look at renewals until right at the end, because they want as full a claim picture as they can get. So, you push up -- there is the -- 1 2 3 4 5 6 8 9 10 11 1? 13 14 15 16 17 18 ly 20 zl ~~ <' 3 24 LS 12 MR. FURMAN: We11, and -- and, frankly, this is a tough time of the year, because staff for insurance companies find it very convenient to take vacations beginning in November all the way through December. COMMISSIONER LETZ: Well, and the -- the second number on the limit -- that's the $2 million -- the $9 million, that's the maximum for the year? Or -- JUDGE HENNEKE: That's max per claim. MR. FURMAN: The second -- the $1 million, 2 or 4 is -- the second number is an aggregate limit, and that means per policy year. Or, in your case, per calendar year. COMMISSIONER LETZ: Per calendar year. JUDGE HENNEKE: We have a $1 million limit per claim and a $2 million aggregate limit per year. MR. FURMAN: For all claims for the year. JUDGE HENNEKE: What's the N.S.A. fee? MR. FURMAN: National Sheriff's Association. JUDGE HENNEKE: Okay. And the taxing fee? Is that -- MR. FURMAN: Tax is the state tax that comes on -- on policies. Normally, you don't see it, but in this case you do. SHER.IEF HIERHOLZER: Now, the $1 million versus $4 million or whatever, most of the claims, like the last one where the man died, that claim started out -- and la .. ~ i~~ EN. ~; 1 3 4 5 5 7 8 9 10 11 12 13 19 IJ 16 17 18 1y 20 zl -~ , Lc 23 24 25 13 that's one of the higher ones I've seen, but it kind of seems like the way it's going, started out as a $5 million claim. And one I got notified of the other day would be just barely under a $1 million claim, is what their initial -- just -- that's what they want, you know, type deal. That doesn't mean anything, but -- MR. F[7RMAN: Well, if you will look at the difference in premium between the $1 million/$2 million and the $1 million/$4 million, you'll see there's not a whole lot of difference in premium there. So, the aggregate limit is not somethinq that's reached into -- or exceeded, I should say, very often. COMMISSIONER LETZ: Tommy, where are you going to find this money in the Sheriff's Department budget? (Laughter.) SHERIFF HIERHOLZER: Thank you, Jack. Only thing you will hit on -- MR. TOMLINSON: I mean, I don't know of any money available in the Sheriff's Department budget; put it that way. SHERIFF HIERHOLZER: And the only one you will hit several times probably each year, if you get two or three, it's going to be that deductible. You're going to hit that $10,000 or $25,000. COMMISSIONER LETZ: It doesn't seem to me 14 1 3 4 5 6 7 8 9 10 11 12 13 14 15 lb 17 18 19 7~ 21 22 23 24 25 that it makes sense to go the $25,000 deductible, based on our historir_al performance. You eat up the -- JUDGE HENNEKE: With one claim. SHERIFF HIERHOLZER: Once you pay attorneys. COMMISSIONER LETZ: With one -- exactly. One claim will make up that difference, so you're better off going with the $10,000 deductible. SHERIFF HIERHOLZER: I don't think, in the history of this department, they've ever gone over -- I don't think they've ever paid out a million-dollar-a-year claim, but you just -- you know, you just don't know. I can't -- COMMISSIONER LETZ: Is there a reason we use the National Sheriffs Association as the -- MR. FURMAN: It's been the best deal we've found -- excuse me. It's been the best deal we've found. JUDGE HENNEKE: In your cover letter, you said you had another quote from another underwriter, but -- MR. FURMAN: Yes, but you don't want to know what it is. JUDGE HENNEKE: What's the magnitude? You said 50 percent more? MR. FURMAN: For the Sheriff's Office, it was a little short of $129,000. (Discussion off the record.) 1.-_' 3-nL EMi; 15 1 2 3 4 5 6 7 8 9 10 11 1 L 13 14 15 16 17 18 19 20 21 22 Z3 24 15 SHERIFF HIERHOLZER: One thing on the revenue, Judge. On the revenue end, you know, I can't say. Y'all saw what happened last year. At this point, our in-county number of inmates has been running about 95 to 100, and we've been housinq anywhere from 15 to 25 out-of-county's again, so we're back up to housing a lot of out-of-county inmates. JUDGE HENNEKE: Have you talked to Bexar County at a11, since they're in such problems? SHERIFF HIERHOLZER: We've sent them a couple deals. I think they got a better deal down at Guadalupe County, and I'm not going to accept their county prisoners for $20 a day. JUDGE HENNEKE: Does the Texas Association of Counties offer this kind of insurance at all, Jack? MR.. FORMAN: Yes, they do. They offer it through Scottsdale. I tried to go to Scottsdale and couldn't get to it, because -- because the broker I was using -- or the broker has an exclusive with TAC, so they write it through Scottsdale Insurance Company out of Arizona. JUDGE HENNEKE: Okay. MR. TOMLINSON: You might -- one problem with this is the -- there's not a very large market for law enforcement liability insurance. t~-~~-... e::; 16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 15 17 18 19 20 11 ~~ ~3 24 ~5 MR. FURMAN: No. And, unfortunately, when you -- when you take better than 80 percent loss ratio to them, they don't qet out a sharp pencil. SHERIFF HIERHOLZER: Where does that 80 percent loss ratio come from? Attorney fees? Or -- MR. FURMAN: Well -- SHERIFF HIERHOLZER: -- what is that? MR. FURMAN: Yes. Yes, it is. JUDGE HENNEKE: If you have three suits, and they're costing you an average of, you know, $20,000 a year, that -- that's hitting your premium right there. SHERIFF HIERHOLZER: So, it's not necessarily a loss in a lawsuit, but it's a loss because of the attorney fees to defend the lawsuit. MR. FURMAN: That's correct. That's correct. MR. TOMLINSON: Exactly right. MR. FURMAN: All of that goes into the adjusting expenses, if you will. All of that goes into loss ratio compilation. COMMISSIONER. LETZ: The underwriter wants to try to settle it, which makes it higher the next year. SHERIFF HIERHOLZER: Yeah. MR.. FURMAN: Yeah. I don't think that that's intentional. I think the reason they settle those things, Mr. Letz, is to make them go away, without -- because I _-_ ,-., ~ EMS= 17 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 z3 24 ZS don't think that they think far enough ahead to say, if we pay this, we can raise the rates. SHERIFF HIERHOLZER: You know, when you settle those like that -- I can recall going back, not when Frances was even Sheriff; before her. There was a lawsuit filed on an inmate that the City brought into the jail, in this jail. And the lawsuit named me in the lawsuit, and I was on vacation; wasn't even here, and they settled that lawsuit with that inmate, claiming that I had abused that inmate, when I was even on vacation. MR. FURMAN: That was before my time, folks. SHERIFF HIERHOLZER: And, in reality, that's what hurts the officer's feelings, too, because it -- you know, it hurt me. I said, "What are you doing, settling a lawsuit when I wasn't even around?" But they settled it for, like, $5,000 just to get rid of it. And it's just devastating. Anyway, I don't like to see them do that. JUDGE HENNEKE: Just an aside; that's why this Court and future courts should never settle a lawsuit unless you have the terms fully explained to you, to your approval. The -- the opinion of the District -- County Attorney that he has the ability to settle lawsuits naming Commissioners Court is hooey, because you guys are named in that as having been derelict in duty. If you settle it, unless you pay real close attention to the terms of that _ - '~ e ru 1 3 4 5 6 7 8 y 10 11 12 13 14 15 16 17 18 19 20 Z1 23 ~4 25 18 settlement, you don't know you've just admitted to being derelict in duty or not for a small. sum of money. Okay, guys. It's your turn. COMMISSIONER LETZ: You make the motion. COMMISSIONER BALDWIN: Well, I can't figure out what the motion is. Are we der_laring an emergency and going into the reserves? JUDGE HENNEKE: Not at this time. This is -- this would simply be to authorize whatever form of liability policy you want. Then Tommy would have to find the money and -- COMMISSIONER BALDWIN: Come back at a later time? MR. TOMLINSON: And we'll -- I will -- when you decide, we'll know what the amount is. And we will have to make a payment before -- before the next court date. MR. F'URMAN: i don't think you'll have to pay us before the next court date. Y'all will meet sometime in Januarys MR. TOMLINSON: Right, it will be January 13th. MR. FURMAN: So, that would be plenty of time. MR.. TOMLINSON: Okay. All right. Well, as long as - - as long as I don't need a hand check to pay this _-i-'.I _' EM'S 1 2 3 9 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 2n 21 22 23 29 25 19 before -- before that date, then we're okay. COMMISSIONER BALDWIN: Do we do these separate, Sheriff's Department and juvenile? JUDGE HENNEKE: You ran do them in one motion. COMMISSIONER BALDWIN: Do them in one motion. And, Jack, you're recommending that we stay with the same schedule; i.e., $1 million/$2 million? MR. FORMAN: I'm not going to recommend limits to you, Mr. Baldwin. COMMISSIONER BALDWIN: What are you going to recommend to us? MP.. FORMAN: But I'm going to recommend the occurrence form to you. The $1 million/$2 million has been more than adequate heretofore. Let me put it that way. COMMISSIONER BALDWIN: That's the schedule we've been on for -- MR. FORMAN: That's the schedule you've been on for quite a few years. COMMISSIONER BALDWIN: Okay. That would be my motion. Occurrence form, the first line in that. COMMISSIONER LETZ: Second. JUDGE HENNEKE: Motion by Commissioner Baldwin, second by Commissioner Letz, that the Court authorize renewal of the law enforcement liability policy 1 3 4 5 6 7 8 9 10 11 12 13 14 15 15 17 18 19 20 21 23 24 25 20 for Kerr County with the National Sheriff's Association, occurrence form, with a deductible of $1 million -- limit of $1 million/$2 million, and a deductible of $l0,On0 for both the Sheriff's Department and the Detention Center. COMMISSIONER BALDWIN: That's correct. JUDGE HENNEKE: Any questions or comments? If not, all in favor, raise your right hand. (The motion carried by unanimous vote.) JUDGE HENNEKE: All opposed. (No response.) JUllGE HENNEKE: Mot ion carries. MR. FURMAN: Thank you, gentlemen. JUDGE HENNEKE: Two in one day. We're adjourned. (Commissioners Court adjourned at 1:L4 p.m.) 1 J 2 3- J ~ E M S 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 ly 20 21 22 23 2q ~5 21 STATE OF TEXAS COUNTY OF KERR The above and foregoing is a true and complete transcription of my stenotype notes taken in my capacity as County Clerk of the Commissioners Court of Kerr County, Texas, at the time and place heretofore set forth. DATED at Kerrville, Texas, this 31st day of December, ~00~. JANNETT PIEPER, Kerr County Clerk B Y : _ ~~~, --- Kathy Ban' Deputy County Clerk Certified Shorthand Reporter i,-_3-,~_~ e:~~; RU'T1-101?ILE LAW E,"dFORCEMEr.IT l_;:RP•It_I"I"Y f'Ot_ICY On this the ~=3rd day of December, c]~~T:i_, ~.apr_•n motinn made`.~y Commissioner 13aldwi.n, seconded by f.:'ommis-~ir.~~~s•r Letz, the Cc~.irt r_7nanimo~_7sly approved by ~ vote of ~-0-0, to